MOORE CORPORATION LIMITED
Suite 3501, Scotia Plaza
40 King Street West
P.O. Box 205
Toronto, Canada
M5H 3Y2
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
The annual and special meeting of shareholders of Moore Corporation Limited will
be held at the Glenn Gould Studio, Canadian Broadcasting Centre, 250 Front
Street West, Toronto, Canada on Thursday, the 12th day of April, 2001 at 10:00
a.m. for the following purposes:
1. To receive the consolidated financial statements of the Corporation for
the year ended December 31, 2000, together with the auditor's report on
those statements;
2. To elect directors for the ensuing year;
3. To appoint auditors for the ensuing year and to authorize the directors
to fix the remuneration to be paid to the auditors;
4. To consider and, if thought fit, to approve as a special resolution the
amendment of the Corporation's Articles of Amalgamation to remove the
objects for which the Corporation is incorporated, set forth in clause
10 thereof;
5. To consider and, if thought fit, approve the 2001 Long Term Incentive
Plan; and
6. To transact any other business properly before the meeting.
Dated at Toronto, Canada, this 7th day of March, 2001.
By Order of the Board,
J.M. Wilson
Vice President and Secretary
IF YOU ARE A REGISTERED SHAREHOLDER, YOUR FORM OF PROXY, IMPRINTED WITH YOUR
NAME AND ADDRESS, IS ENCLOSED IN THE ENVELOPE IN WHICH YOUR MATERIALS FOR THE
ANNUAL AND SPECIAL MEETING WERE MAILED TO YOU. PLEASE EXERCISE YOUR RIGHT TO
VOTE BY SIGNING AND RETURNING YOUR FORM OF PROXY IN THE ENCLOSED ENVELOPE OR VIA
FACSIMILE TO COMPUTERSHARE TRUST COMPANY OF CANADA (416-981-9803).
PROXIES ARE COUNTED AND TABULATED BY COMPUTERSHARE TRUST COMPANY OF CANADA,
MOORE'S REGISTRAR AND TRANSFER AGENT, TO PROTECT THE CONFIDENTIALITY OF HOW A
PARTICULAR SHAREHOLDER VOTES. A PROXY IS REFERRED TO MOORE ONLY IN CASES WHERE
IT IS CLEARLY MARKED TO INDICATE A PARTICULAR INSTRUCTION TO MANAGEMENT, OR
UNLESS IT IS NECESSARY TO REFER TO THE PROXY IN ORDER TO DETERMINE ITS VALIDITY
OR WHEN IT IS NECESSARY TO DO SO TO PERMIT MANAGEMENT TO MEET ITS LEGAL
RESPONSIBILITY TO SHAREHOLDERS.
INVESTORS WHO HAVE QUESTIONS ABOUT ITEMS BEING VOTED ON AT THE MEETING MAY
TELEPHONE TOLL FREE MOORE'S PROXY SOLICITATION AGENTS AT 1-800-890-1037.
MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT
UNLESS OTHERWISE STATED, THE INFORMATION IN THIS STATEMENT IS AS OF FEBRUARY 5,
2001, AND UNLESS OTHERWISE INDICATED, ALL DOLLAR AMOUNTS ARE EXPRESSED IN UNITED
STATES CURRENCY.
SOLICITATION OF PROXIES
THIS MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT IS FURNISHED IN
CONNECTION WITH THE SOLICITATION OF PROXIES BY THE MANAGEMENT OF MOORE
CORPORATION LIMITED (THE "CORPORATION" AND COLLECTIVELY WITH ITS SUBSIDIARIES
"MOORE") TO BE USED AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS ON APRIL
12, 2001 AND AT ALL ADJOURNMENTS THEREOF, FOR THE PURPOSES SET FORTH IN THE
ACCOMPANYING NOTICE OF MEETING. Solicitation will be made by mail commencing
March 7, 2001, but proxies may also be solicited personally by employees of the
Corporation. In addition, the Corporation will retain Georgeson Shareholder
Communications Canada of Toronto, Ontario, to aid in the solicitation of proxies
at a fee of approximately $Cdn 25,000 plus expenses. The total cost of the
solicitation will be borne by the Corporation.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the enclosed form of proxy are directors of the Corporation
and will vote or withhold from voting the shares in respect of which they are
appointed on any ballot that may be called for in accordance with the
instructions of the shareholder as indicated on the proxy. A SHAREHOLDER
DESIRING TO APPOINT SOME OTHER PERSON AS A REPRESENTATIVE AT THE MEETING MAY DO
SO either by inserting such person's name in the blank space provided in the
form of proxy or by completing another proper form of proxy and delivering the
completed form of proxy to the Secretary of the Corporation in time for use at
the meeting.
A shareholder who has given a proxy may revoke it either (a) by signing a form
of proxy bearing a later date and depositing it in time for use at the meeting
or (b) by depositing or transmitting by telephonic or electronic means an
instrument in writing executed by the shareholder or by the shareholder's
attorney authorized in writing or by electronic signature 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 adjournment thereof, at which the proxy
is to be used, or with the Chairman of the meeting on the day of the meeting, or
any adjournment thereof, or (c) in any other manner permitted by law.
The enclosed form of proxy confers discretionary authority upon the persons
named therein with respect to amendments to or variations of matters identified
in the notice of meeting, and with respect to other matters which may properly
come before the meeting or any adjournment thereof. At the date of this
circular, the management of the Corporation knows of no such amendments,
variations or other matters.
VOTING SECURITIES
On February 5, 2001 the Corporation had 88,456,940 common shares outstanding.
Shareholders of record at the close of business on March 2, 2001 (record date)
will be entitled to one vote for each common share held by them. If a person has
transferred any common shares after the record date and the transferee of such
common shares establishes proper ownership and asks, not later than April 2,
2001, to be included in the list of shareholders entitled to vote at the
meeting, the transferee will be entitled to vote such common shares. A majority
of votes cast at the meeting is required for approval of each item of regular
business. A majority of votes cast at the meeting other than votes attaching to
common shares beneficially owned by insiders of the Corporation (and their
associates) to whom common shares may be issued under the 2001 Long Term
Incentive Plan, is required for adoption of the 2001 Long Term Incentive Plan. A
special majority of 66 2/3% of the votes cast at the meeting is required for
approval of the amendment of the Corporation's Articles of Amalgamation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
On February 5, 2001, the following persons held voting control over in
excess of 5% of the common shares of the Corporation.
- -------------------------------------------------- --------------------------------- ------------------------------------
NAME NUMBER OF COMMON SHARES PERCENTAGE OF COMMON SHARES
- -------------------------------------------------- --------------------------------- ------------------------------------
AIM Funds Management Inc. 15,879,600 17.95
- -------------------------------------------------- --------------------------------- ------------------------------------
Beutel, Goodman & Company Ltd. 8,239,000 9.31
- -------------------------------------------------- --------------------------------- ------------------------------------
Caisse de depot et placement du Quebec 7,019,124 7.94
- -------------------------------------------------- --------------------------------- ------------------------------------
2
On December 21, 2000 the Corporation issued to Chancery Lane/GSC Investors L.P.
(the "Partnership") a $70.5 million subordinated convertible debenture (the
"Debenture"). As at that date the Debenture was convertible into 21,692,307
common shares or 19.7% of the outstanding common shares (assuming conversion in
full) at a rate of $3.25 per share, subject to adjustment as set out in the
Debenture. The Partnership does not own any common shares but because the
Debenture is convertible, it may be deemed to beneficially own such shares. The
Partnership may be deemed to have shared power to vote or direct the vote and
shared power to dispose or direct the disposition of 21,692,307 common shares.
The general partner of the Partnership is CLGI, Inc. ("CLGI"). Mr. R. Theodore
Ammon, a director of the Corporation, is the sole shareholder of CLGI. CLGI, as
general partner of the Partnership, and Mr. Ammon, as sole shareholder of CLGI,
may be deemed to beneficially own the 21,692,307 common shares into which the
Debenture owned by the Partnership is convertible and to have shared power to
vote or direct the vote and shared power to dispose or direct the disposition of
those common shares. Greenwich Street Capital Partners II, L.P. ("Greenwich
Street Capital") has an interest in the Partnership and the right to require the
Partnership to exchange Greenwich Street Capital's and certain related funds'
interest in the Partnership for 40% of the Debenture (or common shares issued
upon the conversion of the Debenture) and therefore may be deemed to have shared
power to vote or direct the vote and shared power to dispose or direct the
dispostion of 8,676,932 common shares or 7.88% of the outstanding common shares
of the Corporation. Mr. Alfred C. Eckert, III, a director of the Corporation, is
the Chairman and Chief Executive Officer of Greenwich Street Capital and as such
is deemed to have shared power to vote or direct the vote and shared power to
dispose or direct the disposition of the 8,676,932 common shares into which 40%
of the Debenture is convertible.
The Corporation is not aware of any other person holding in excess of 5% of the
common shares of the Corporation.
ELECTION OF DIRECTORS
The Corporation's by-laws and articles allow for the election of between nine
and fifteen directors. On February 22, 2001, the directors of the Corporation
set the number of directors to be elected at the meeting at nine. The persons
whose names are set out in the following table are proposed to be nominated as
directors at the annual and special meeting of shareholders. The management
representatives designated in the enclosed form of proxy intend to vote for the
election of such nominees. Management does not contemplate that any of the
proposed nominees will be unable to serve as a director but, if that should
occur for any reason prior to the meeting, the persons designated in the
enclosed form of proxy reserve the right to vote for another nominee at their
discretion. Each director elected will hold office until the next annual meeting
of shareholders or until a successor is elected or appointed.
Under the terms of the debenture purchase agreement (the "Debenture Purchase
Agreement") entered into between the Corporation with the Partnership on
December 12, 2000, the Corporation and the Partnership agreed that: (i) Mr. R.
Theodore Ammon and Mr. Alfred C. Eckert, III (or two other persons specified by
the Partnership as to which a majority of the Board of Directors does not have a
BONA FIDE objection) would be nominated for election as directors of the
Corporation; (ii) Mr. Robert G. Burton, as the Corporation's Chief Executive
Officer, would be nominated for election as a director of the Corporation; and
(iii) Mr. Newton N. Minow and Mr. John W. Stevens (or, if Mr. Minow or Mr.
Stevens are unable or unwilling to act, two other persons acceptable to the
Partnership, acting reasonably) would be nominated for election as directors of
the Corporation.
If, at any time, the Partnership and certain other specified entities
(collectively, the "Restricted Group") own common shares issued on the
conversion of the Debenture and/or the Debenture that on an as-converted basis
would in the aggregate equal less than 50% of the initial number of common
shares to which the Restricted Group was entitled (assuming full conversion of
the Debenture), the Partnership will lose its right to designate one of the two
nominees denoted in each of (i) and (iii) in the paragraph above. Similarly, if
at any time the Restricted Group owns common shares issued on the conversion of
the Debenture and/or the Debenture that on an as-converted basis would in the
aggregate equal less than 33 1/3% of the initial number of common shares to
which the Restricted Group was entitled (assuming full conversion of the
Debenture), the Partnership shall have no further rights with respect to the
nomination of directors.
Information is provided in the following table with respect to the persons to be
nominated for election as directors and contains the number of common shares of
the Corporation reported by such persons as being beneficially owned by them as
well as the number of share units owned by them, in each case, on February 5,
2001. For such purposes, a person who exercises control or direction over
securities is deemed to have beneficial ownership thereof.
3
- -------------------------------------------------------------------------------------------------------------------------------
Common
Principal Occupation or Employment During the Shares
Name, Age and Period of Past Five Years, Positions with Moore and Beneficially Share Units(2)
Service Directorships(1) Owned Total
- -------------------------------------------------------------------------------------------------------------------------------
R. THEODORE AMMON Chairman, Chancery Lane Capital LLC (private 21,692,307(3) 0 21,692,307
New York, NY equity investment firm). Chairman of Vertis
51 Holdings, Inc. (formerly known as Big Flower
Since December, 2000 Holdings, Inc.), XL Ventures, Inc. and 24/7
Media, Inc., and a director of Host Marriott
Corporation and CAIS Internet, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
ROBERT G. BURTON President and Chief Executive Officer of the 3,167(4) 0 3,167
Greenwich, CT Corporation; from May, 1991 to November, 1999
62 Mr. Burton was Chairman, President and Chief
Since December, 2000 Executive Officer of World Color Press, Inc.;
following World Color Press, Inc. and
preceding employment at Moore Mr. Burton was
Chairman, President and Chief Executive
Officer of Walter Industries, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
SHIRLEY A. DAWE President, Shirley Dawe Associates Inc. 4,100 15,057 19,157
Toronto, ON (consulting firm specializing in retail
54 management) and Corporate Director. Ms. Dawe
Since November, 1989 is a director of Gilmore's Specialty Stores,
Henry Birks & Sons Inc., National Bank of
Canada and OshKosh B'Gosh, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
ALFRED C. ECKERT, III Chairman and Chief Executive Officer of GSC 8,676,932(5) 0 8,676,932
Bernardsville, NJ Partners (private equity investment firm).
52 Mr. Eckert is a director of West Point
Since December, 2000 Stevens, Kensington Group and McKesson HBOC
Inc.
- -------------------------------------------------------------------------------------------------------------------------------
DAVID R. MCCAMUS Corporate Director. Mr. McCamus is a director 1,000 5,718 6,718
Oakville, ON of Dofasco Ltd. and Trilon Financial Ltd.
69
Since November, 1997
- -------------------------------------------------------------------------------------------------------------------------------
NEWTON N. MINOW Counsel, Sidley & Austin (legal). Mr. Minow 0 3,268 3,268
Chicago, IL is a director of Aon Corporation and Manpower,
75 Inc.
Since December, 2000
- -------------------------------------------------------------------------------------------------------------------------------
J. ROBERT S. PRICHARD, O.C., Professor of Law and President Emeritus, 1,681 17,569 19,250
O.ONT. University of Toronto and Visiting Professor
Toronto, ON of Law, Harvard Law School; prior to June,
52 2000 Mr. Prichard was President, University of
Since April, 1996 Toronto (post-secondary educational
institution). Mr. Prichard is a director of
Bank of Montreal, Four Seasons Hotels Inc.,
George Weston Limited, Onex Corporation, Tesma
International Inc. and Visible Genetics Inc.
- -------------------------------------------------------------------------------------------------------------------------------
4
- -------------------------------------------------------------------------------------------------------------------------------
Common
Principal Occupation or Employment During the Shares
Name, Age and Period of Past Five Years, Positions with Moore and Beneficially Share Units(2)
Service Directorships(1) Owned Total
- -------------------------------------------------------------------------------------------------------------------------------
LIONEL H. SCHIPPER, C.M. President, Schipper Enterprises Inc. and 0 0 0
Toronto, ON Chairman, Fallbrook Holdings Ltd. (private
68 equity investment company). Mr. Schipper is
a director of Clairvest Group Inc., Co-Steel
Inc. Four Seasons Hotels Inc. and H.O.
Financial Ltd.
- -------------------------------------------------------------------------------------------------------------------------------
JOHN W. STEVENS Executive Vice President and director of Arva 5,000 3,268 8,268
Toronto, ON Limited (private equity investment company).
44 Prior to June 2000 Mr. Stevens was a partner
Since December, 2000 of Osler, Hoskin & Harcourt LLP (legal).
- -------------------------------------------------------------------------------------------------------------------------------
NOTES
1. Membership on the various Committees of the Board of Directors is listed in
the Statement of Corporate Governance Practices below.
2. Represents deferred share units awarded to non-employee directors under a
share plan described under Compensation of Directors on page 6.
3. Mr. Ammon is the sole shareholder of CLGI, the general partner of the
Partnership, and as such may be deemed to have shared power to vote or
direct the vote and shared power to dispose or direct the disposition of
21,692,307 common shares or 19.7% of the common shares of the Corporation
assuming conversion, in full, of the Debenture.
4. Mr. Burton is a Class B Limited Partner of the Partnership with a
$2,000,000 investment. Mr. Burton does not have the right to control or
direct the conversion of the Debenture or the power to vote or direct the
vote or the power to dispose or direct the disposition of the common shares
issuable on the conversion of the Debenture.
5. Mr. Eckert is the Chairman and Chief Executive Officer of Greenwich Street
Capital which is a Class A Limited Partner of the Partnership and as such
may be deemed to have shared power to vote or direct the vote and shared
power to dispose or direct the disposition of 8,676,932 common shares or
7.88% of the common shares of the Corporation assuming conversion, in full,
of the Debenture.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
BOARD MANDATE
The Board of Directors assumes ultimate responsibility for the stewardship of
Moore and carries out its mandate directly and through considering
recommendations it receives from the five Committees of the Board and from
management.
Management is responsible for the day-to-day operations of Moore, and pursues
Board approved strategic initiatives within the context of authorized business
and capital plans and corporate policies. Management is expected to report to
the Board on a regular basis on short term results and longer term development
activities.
The Board is specifically responsible for:
(A) ADOPTION OF A STRATEGIC PLANNING PROCESS
The Board's role is to ensure a strategic planning process is in place, to
review corporate and business unit strategies annually and to approve Moore's
annual business plan. Quarterly updates on achievement of financial objectives
of the annual business plan, business development and strategic initiatives are
presented to the Board by management. During 2000 the Board undertook a review,
with the assistance of independent financial and legal advisors, of the
strategic alternatives available to the Corporation.
5
(B) IDENTIFICATION OF PRINCIPAL RISKS AND IMPLEMENTING RISK-MANAGEMENT SYSTEMS
The strategic planning process involves consideration and understanding by the
Board of the principal risks inherent in Moore's business. Committees of the
Board address specific risks. The Audit Committee reviews financial risk-
management issues and programs. During l998, the Audit Committee approved the
adoption of an integrated audit approach which involves undertaking audits based
on a risk assessment. The Environment, Health and Safety Committee monitors
risks and compliance issues related to Moore's environment, health and safety
policies and procedures.
(C) SUCCESSION PLANNING AND MONITORING SENIOR MANAGEMENT PERFORMANCE
The Management Resource Committee reviews the performance of the Chief Executive
Officer and all matters related to senior management recruitment, development,
performance, compensation, organization structure and succession planning. On an
annual basis, leadership development is reviewed with the Board.
(D) COMMUNICATIONS POLICY
The Board reviews and approves communications of a regulatory nature prior to
mailing to shareholders. The Board receives quarterly updates on reports by
analysts following the Corporation. Investor meetings are held following the
release of quarterly results. Investor inquiries are handled promptly by or
under the direction of the appropriate officer of the Corporation. Moore has
adopted a confidential shareholder voting policy and a Confidentiality,
Disclosure and Trading Policy.
(E) INTEGRITY OF INTERNAL CONTROL AND MANAGEMENT INFORMATION SYSTEMS
The Audit Committee is responsible for overseeing reporting on internal control
and management information systems. The Audit Committee meets privately at each
meeting with the representatives of the Corporation's auditors to discuss
matters of interest to the Committee.
The directors have confidence that the information provided by management is
accurate and sufficient to allow the Board to carry out its mandate.
HOW THE BOARD OPERATES
The Board currently has thirteen members who are elected annually by
shareholders. Nine nominees are standing for election as directors at the
upcoming meeting of shareholders. In light of recent changes at Moore, the Board
believes nine directors are a sufficient number to ensure that the Board will be
able to function independently of management. The Corporation's by-laws and
articles allow for the election of between nine and fifteen members. Currently,
seven of the directors are Canadian residents and six of the directors are U.S.
residents.
Robert G. Burton was appointed President and Chief Executive Officer and a
director of the Corporation in December, 2000. All current directors except Mr.
Burton are unrelated (within the meaning of that term in the l994 Report of The
Toronto Stock Exchange Committee on Corporate Governance in Canada).
Thomas E. Kierans, a director, serves as non-executive Chairman of the Board of
the Corporation. The separation of the roles of Chairman and Chief Executive
Officer enhances the ability of the Board to function independently of
management. The Corporate Governance Committee has implemented an annual review
process for evaluating the effectiveness of the Board. Directors may engage
outside advisors at the expense of the Corporation with approval from the
Chairman of the Corporate Governance Committee.
The Board has regularly scheduled quarterly meetings with special meetings to
review matters when needed. Transactions involving amounts in excess of $20
million are brought to the Board for review and approval. The Board of Directors
met 23 times in 2000. This extraordinary number of meetings was held as a
consequence of the strategic alternatives review process.
Orientation for new directors includes meetings with the Chief Executive Officer
and the Chief Financial Officer focusing on strategic direction, financial
matters and business operations. Director candidates are provided with
company-specific information during the selection process and a new directors'
manual when they join the Board.
6
To promote a greater alignment of interests between non-employee directors and
shareholders, between one third and the full amount of a director's retainer is,
at the election of each director, paid in the form of share units. Awarded share
units are held until a director is no longer serving on the Board.
BOARD COMMITTEES
All Committees report and make recommendations to the Board on matters reviewed.
Following is a brief description of the Committees of the Board that were in
place in 2000.
AUDIT COMMITTEE
The principal duties of the Audit Committee are to review annual and interim
financial statements and all legally required public disclosure documents
containing financial information prior to their approval by the directors,
review the planned scope of the examination of the annual consolidated financial
statements by the auditors of the Corporation and review the adequacy of the
systems of internal accounting and audit controls established by the
Corporation. The Audit Committee met four times in 2000. The current members of
the committee are J. Robert S. Prichard (Chairman), Shirley A. Dawe, Richard J.
Lehmann and David R. McCamus.
CORPORATE GOVERNANCE COMMITTEE
The principal duties of the Corporate Governance Committee are to review matters
relating to effective corporate governance including director recruitment,
performance, compensation and board composition. The Corporate Governance
Committee met four times in 2000. The current members of the committee are Derek
H. Burney (Chairman), Shirley A. Dawe, Barton L. Faber, Thomas E. Kierans and
Brian M. Levitt.
ENVIRONMENT, HEALTH AND SAFETY COMMITTEE
The principal duties of the Environment, Health and Safety Committee are to
review matters relating to the Corporation's environment, health and safety
policies including monitoring compliance with the policies and reviewing
responses to any related incidents. The Environmental Health and Safety
Committee met twice in 2000. The current members of the committee are Barton L.
Faber, Thomas E. Kierans, David R. McCamus and J. Robert S.
Prichard.
MANAGEMENT RESOURCE COMMITTEE
The principal duties of the Management Resource Committee are to review matters
relating to executive recruitment, performance, development, compensation,
resignations, terminations and organization planning. The duties of the
Committee include evaluating the performance of senior executives, determining
appropriate policies and levels for executive officer compensation, and
establishing and administering appropriate short and long term incentive
arrangements for executives. The Management Resource Committee met seven times
in 2000. The current members of the committee are Brian M. Levitt (Chairman),
Derek H. Burney, Richard J. Lehmann and Thomas E.
Kierans.
PENSION COMMITTEE
The principal duties of the Pension Committee are to review matters relating to
the supervision of Moore's pension and savings plans. The Pension Committee met
four times in 2000. The current members of the committee are Shirley A. Dawe
(Chair), Robert G. Burton and two management appointees, Charles E. Canfield
(Vice President, Human Resources) and Robert B. Lewis (Executive Vice President,
Chief Financial Officer). In 1999 a Management Pension Committee was established
which carries out delegated responsibilities and makes recommendations to the
Board Pension Committee.
DIRECTORS' AND EXECUTIVE OFFICERS' COMPENSATION
COMPENSATION OF DIRECTORS
In 2000 each director who was not an employee of Moore was entitled to receive
an annual retainer of $30,000. The Board of Directors has adopted the Share Plan
for Non-Employee Directors under which each director receives $10,000 of the
retainer in the form of deferred share units. Each director may then elect to
take the balance of $20,000 in cash, deferred share units or common shares
purchased on the open market. A deferred share unit is a bookkeeping entry,
equivalent in value to one common share of the Corporation. Deferred share units
awarded are held until the director is no longer serving on the Board.
7
Following termination of Board service, the fair market value of the equivalent
number of common shares is paid to a director, net of withholdings, in cash or
common shares. The Chairman of each Board Committee received an additional
retainer of $3,500. A fee of $1,000 was paid for each meeting of the Board of
Directors and each meeting of a Committee which the director attended in person.
The fee for participating in Board of Directors or Board Committee meetings by
telephone was $500. Each director is reimbursed for expenses incurred in
attending meetings.
Mr. Thomas Kierans, the Chairman of the Board, is a non-executive director. In
2000 Mr. Kierans received an annual retainer of $200,000 paid in cash. Mr.
Kierans does not receive meeting fees.
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides a summary of the compensation earned by each
individual who served as Chief Executive Officer in 2000 and the four other most
highly compensated executive officers of Moore (the "Named Executive Officers")
who served as executive officers in 2000. Specific aspects of the compensation
are dealt with further in the tables and in the narrative following the tables.
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
- ------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
- ------------------------------------------------------------------------------------------------------------------------------
Name and Principal Position Year Salary Bonus Other Securities Restricted LTIP All Other Compen-
Annual Under Shares Payouts sation
Compensation Options/ Or
SARs Restricted(2)
Granted1 Share
Units2
$ $ $ (#) (#) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------
Robert G. Burton(3) 2000 51,924 - - 1,000,000(3) - - -
President and Chief
Executive Officer
- ------------------------------------------------------------------------------------------------------------------------------
James D. Wyner 2000 275,000 215,183 - 20,000 - - 12,499(4)
Vice President and 1999 260,000 277,750 - 25,000 - - 31,848(4)
President, 1998 250,000 - 30,000 - - 88,294(4)
Peak Technologies, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
W. Ed Tyler(5) 2000 791,216 - - - 23,608 26,500,000(5)
Former President and Chief 1999 806,250 1,431,900 - 379,000 9,863 - 122,212
Executive Officer 1998 562,500 562,500 - 1,579,506 409,445 - -
- ------------------------------------------------------------------------------------------------------------------------------
Michael S. Rousseau(6,7) 2000 305,250 - - - - - -
Former Senior Vice 1999 177,686 244,200 - - - - 54,581(6)
President and Chief
Financial Officer
- ------------------------------------------------------------------------------------------------------------------------------
Gary W. Ampulski(7,8) 2000 290,945 - - - - - 4,755(9)
Former Vice President and 1999 247,500 167,063 - - - - 3,592(9)
President Moore North 1998 215,500 81,892 - - - - 2,396(9)
America, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
James B. Currie(10) 2000 291,500 - - - - - 1,714(9)
Former Senior Vice 1999 257,292 206,255 - 50,000 - - -
President, Business
Development
- ------------------------------------------------------------------------------------------------------------------------------
8
NOTES:
1. Awards are options to acquire the Corporation's common shares under the
Corporation's Long Term Incentive Plan, except for Mr. Burton (see note 3)
and Mr. Tyler who received inducement stock option grants when they joined
the Corporation.
2. In 2000, Mr. Tyler received 23,608 share units as dividend payments on
share units granted to him when he joined Moore. At December 31, 2000 no
share units were outstanding as all outstanding units vested and were paid
out in cash in accordance with their terms as a consequence of Mr. Tyler's
termination of service (see note 5).
3. Mr. Burton became President and Chief Executive Officer of the Corporation
on December 21, 2000. His 2000 compensation is shown from the date he was
employed by Moore, December 12, 2000. Mr. Burton was granted an option to
purchase an aggregate of 1,000,000 Series 1 preference shares at an
exercise price of $Cdn. 3.65.
4. Mr. Wyner received a relocation allowance of $20,360 in each of 1999 and
1998 plus moving expenses of $6,787 in 2000, $2,914 in 1999 and $42,463 in
1998. Mr. Wyner received financial counseling in the amount of $6,775 in
1999. In 1998, Mr. Wyner received $23,500 in connection with the
cancellation of 20,000 of his stock options. The amounts shown also include
matching contributions made by Moore pursuant to a Moore retirement savings
plan available to all employees.
5. Mr. Tyler resigned on December 11, 2000. Included in "All Other
Compensation" for 2000 are payments made to Mr. Tyler in accordance with
his existing employment arrangements as a consequence of the termination of
his service. See "Termination Payments" on page 11.
6. Mr. Rousseau was replaced as Chief Financial Officer on December 21, 2000.
Mr. Rousseau's employment commenced in May, 1999 and his 1999 compensation
is shown from that date. In 1999 Mr. Rousseau received a relocation
allowance of $22,917 and moving expenses of $31,664.
7. Options held by Messrs. Rousseau and Ampulski expired when they ceased to
be employed by the Corporation.
8. Mr. Ampulski resigned on December 31, 2000.
9. These amounts represent matching contributions made by Moore pursuant to a
Moore retirement savings plan available to all employees.
10. Mr. Currie resigned on January 12, 2001.
OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
The following table provides information on stock options granted to the Named
Executive Officers in 2000.
- ------------------------------------------------------------------------------------------------------------
% of Total
Options/ Market Value of
Securities SARs Granted Securities
Under to Employees Exercise Underlying
Options/SARs in Financial Or Options/SARs on
Granted (#) Year Base Price the Date of
Name ($Cdn/Security) Grant Expiration Date
($Cdn/Security)
- ------------------------------------------------------------------------------------------------------------
R.G.Burton 1,000,000(1) 38.6 3.65 3.65 Dec. 11, 2010
- ------------------------------------------------------------------------------------------------------------
J.D. Wyner 20,000(2) 0.8 3.65 3.65 Dec. 11, 2010
- ------------------------------------------------------------------------------------------------------------
W.E. Tyler 0 0 - - -
- ------------------------------------------------------------------------------------------------------------
M.S. Rousseau 0 0 - - -
- ------------------------------------------------------------------------------------------------------------
G.W. Ampulski 75,000(3) 2.9 5.925 5.925 April 26, 2010
- ------------------------------------------------------------------------------------------------------------
J.B. Currie 0 0 - - -
- ------------------------------------------------------------------------------------------------------------
NOTES:
1. Mr. Burton was granted options to purchase Series 1 preference shares.
These options are exercisable at the rate of 25% per year commencing
December 11, 2001.
2. These options are exercisable for common shares of the Corporation at the
rate of 25% per year commencing December 11, 2001.
3. Options held by Mr. Ampulski expired when he ceased to be employed by the
Corporation.
9
AGGREGATED OPTION/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR AND FINANCIAL YEAR-END OPTION/SAR VALUES
The following table provides information on the number of outstanding options
for each Named Executive Officer, whether or not the options were exercisable
and the value of the options at December 31, 2000.
- ------------------------------------------------------------------------------------------------------------------------
Name Securities Aggregate Value Unexercised Value of Unexercised
Acquired on Realized Options/SARs at In-the-Money
Exercise December 31, 2000 Options/SARs at
December 31, 2000(1)
(#) ($) (#) ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------
R. G. Burton - - 0/1,000,000(2) 0/863,275
- ------------------------------------------------------------------------------------------------------------------------
J.D. Wyner - - 22,500/77,500 0/0
- ------------------------------------------------------------------------------------------------------------------------
W.E. Tyler - - 1,958,506/0 0/0
- ------------------------------------------------------------------------------------------------------------------------
M.S. Rousseau(3) - - - -
- ------------------------------------------------------------------------------------------------------------------------
G.W. Ampulski(3) - - - -
- ------------------------------------------------------------------------------------------------------------------------
J.B. Currie - - 0/50,000 0/0
- ------------------------------------------------------------------------------------------------------------------------
NOTES:
1. The closing price of the Corporation's common shares on The Toronto Stock
Exchange on December 31, 2000 was $Cdn. 4.55.
2. Options to acquire Series 1 preference shares.
3. Options held by these individuals expired when they ceased to be employed
by the Corporation.
RETIREMENT ARRANGEMENTS
Benefit accruals ceased under the Retirement Income Plan (the "Plan") of Moore
North America, Inc. effective December 31, 2000. Mr. Wyner is the only current
Named Executive Officer participating in the Plan. The following table shows the
total estimated annual retirement benefits payable to Mr. Wyner. Remuneration is
based on three-year final average earnings including salary and bonus. The
benefits shown are assumed to be payable at age 65 as a joint survivor annuity
and are subject to reduction by any social security benefits.
ESTIMATED ANNUAL PENSION BENEFITS PAYABLE
- -----------------------------------------------------------------------------------------
Remuneration Years of Service
- -----------------------------------------------------------------------------------------
($) 10 15 20 25 30
- -----------------------------------------------------------------------------------------
300,000 48,000 72,000 96,000 120,000 144,000
- -----------------------------------------------------------------------------------------
400,000 64,000 96,000 128,000 160,000 192,000
- -----------------------------------------------------------------------------------------
500,000 80,000 120,000 160,000 200,000 240,000
- -----------------------------------------------------------------------------------------
600,000 96,000 144,000 192,000 240,000 288,000
- -----------------------------------------------------------------------------------------
Mr. Wyner has 9.2 years of credited service under the Plan as of December 31,
2000. Mr. Wyner entitlement was accruing at the rate of two years for each year
during the first five years of service. His average pensionable earnings as of
December 31, 2000 were $472,269. In the event that Mr. Wyner's employment with
the Corporation is terminated prior to completing five years of service, his
credited service will be accelerated to ten years.
Mr. Tyler's supplemental executive retirement program provided for a target
retirement income of 72% of final average earnings, upon the completion of 40
years of pension service. This target benefit was payable at age 60 and was
inclusive of any other Moore pensions. Mr. Tyler was granted 25 years of
credited service at the time of hire. Mr. Tyler terminated employment during
2000 and, in accordance with his existing employment arrangements, his accrued
benefit under the supplemental executive retirement program was paid out in a
lump sum in the amount of $13,500,000.
10
EMPLOYMENT ARRANGEMENTS
Moore's employment arrangements with its Named Executive Officers provide for
their participation in Moore's executive compensation and benefit programs which
are available to all management employees. Confidentiality and non-competition
clauses are included to protect Moore should the employment of any Named
Executive Officer be terminated. In the event of such termination, compensation
would be provided in consideration of certain non-competition covenants. Mr.
Wyner would receive payments of an amount equal to two times his annual salary.
Named Executive Officers may also receive vested benefits under Moore's primary
pension plans and supplemental executive retirement program.
Mr. Burton's employment arrangements are described under the section "Chief
Executive Officer's Compensation."
A deferred compensation plan is in place for senior executives of Moore North
America, Inc., the Corporation's principal U.S. subsidiary. The purpose of the
plan is to allow participating executives an opportunity to defer receipt of
their annual incentive plan compensation.
COMPOSITION OF THE MANAGEMENT RESOURCE COMMITTEE
The current members of the Management Resource Committee are Brian M. Levitt
(Chairman), Derek H. Burney, Thomas E. Kierans and Richard J. Lehmann. With the
exception of Mr. Kierans, who is Chairman of the Board, none of the Committee
members are, or have been, an officer or an employee of Moore or any of its
subsidiaries.
REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
The objectives of the executive compensation policies are to target a
competitive level of compensation which will enable Moore to attract, retain and
motivate qualified executives to create shareholder value, to carry out its
strategic objectives and to link the level of compensation to the performance of
Moore and the executive.
Moore's aim is to pay total compensation to its executives in the mid-range of
compensation paid to executives with similar responsibilities at comparable
corporations. Compensation packages at Moore consist of base salary, annual
incentive awards and equity based awards under long term incentive plans. The
compensation packages are designed to deliver up to 75th percentile compensation
for superior performance.
The Committee believes that providing an equity interest in the advancement of
Moore through the issuance of options and contingent share units, together with
the potential to achieve annual cash bonuses, serves to align effective
executive and corporate performance. In 1999 an incentive program was introduced
which focuses on improvement in Economic Value Added(R) (EVA) as a performance
measure to increase senior executive focus on creating shareholder value.
From time to time, Moore retains independent consultants to assist its human
resources staff and the Committee in obtaining competitive data and to provide
advice on meeting its overall compensation objectives.
BASE SALARY
The current executive salary structure consists of salary ranges for all
executive positions including those of the Named Executive Officers. The salary
structure is reviewed each year to determine its competitive level relative to a
group of comparable companies. In 2000 Moore's objective was to establish
salary-range mid-points at the 50th (median) percentile of the comparator group.
The Committee reviews and recommends to the Board for approval any proposed
adjustment to the salary structure. With respect to senior executives, the
Committee assesses the overall scope and level of responsibility of the senior
executive position relative to other positions within Moore and to the scope and
level of responsibility of comparable positions within the comparable group of
companies. The executive salary structure was increased by 3% for 2000.
Senior executive salary reviews are based on pay for performance and are
reviewed on an annual basis. The Committee takes into consideration Moore's
overall performance, the performance of the unit headed by the executive, the
performance of the executive, the relationship of the executive's salary to the
salary range for the position and other considerations the Committee believes
are appropriate in the circumstances. Assessment of performance takes into
consideration attainment of pre-established financial objectives including
revenues, earnings per share, cash flow and EVA targets and the relative
11
achievement of other operating objectives such as restructuring, market share
improvement, new product introduction and succession planning and development.
The Committee makes recommendations on salary adjustments for senior executives
to the Board for approval.
For 2000 the Committee recommended increases for a number, but not all, of the
incumbent senior executives. The average increase was 5.1%. Effective January 1,
2000, Mr. Tyler received a 4% increase, Mr. Currie a 6% increase, Mr. Rousseau
an 11% increase, Mr. Wyner a 6% increase and Mr. Ampulski a 4.5% increase.
ANNUAL INCENTIVE PLAN
In 2000 the annual incentive plan focused on creating shareholder value and was
based on achievement of pre-established targets for operating income and
improvement in corporate EVA. A portion of the bonus for all participants was
based on corporate EVA improvement results. The balance of the bonus was based
on either corporate or business unit operating income results as appropriate for
each executive.
Results for corporate EVA improvement and operating income were below the
threshold and no bonus was paid on these components. Business unit operating
income results varied by business unit and bonuses were paid accordingly.
LONG TERM INCENTIVE PLAN
The purpose of the long term incentive plan is to advance the interests of Moore
by providing certain of its key employees with additional equity based
incentives; encouraging stock ownership by such employees, thereby increasing
their proprietary interest in the success of Moore; encouraging them to remain
employees of Moore; and attracting new key employees.
The plan is an integral part of total executive compensation. In 2000 the
Committee recommended and the Board approved option grants at the median level
of grants extended to positions within comparable companies.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Robert G. Burton was appointed President and Chief Executive Officer of the
Corporation on December 21, 2000. An employment agreement was entered into with
Mr. Burton which provides for an annual salary of $900,000. Mr. Burton's
compensation arrangement is consistent with the Corporation's compensation
policy.
Mr. Burton is eligible to receive an annual cash bonus of $2,000,000 in respect
of each fiscal year in accordance with the provisions of the annual incentive
plan if the Corporation achieves performance objectives set by the Board of
Directors to be paid on an all-or-nothing basis. With respect to 2001, Mr.
Burton's cash bonus entitlement will be at least $2,000,000.
In the event of Termination without Cause (as defined) or a Termination for Good
Reason (as defined), Mr. Burton shall be entitled to all amounts then owing to
him plus a lump sum equal to two times his Annualized Total Compensation (as
defined). In the event such termination is the result of a Change of Control,
the multiple is increased to three times.
TERMINATION PAYMENTS
Under the terms of Mr. Tyler's employment agreement, upon termination Mr. Tyler
was entitled to all amounts then owing to him plus a lump sum equal to two times
his Annualized Total Compensation (as defined) and certain benefits for two
years. Mr. Tyler was granted 25 years of credited service at the time of hire
and his employment agreement provided for the lump sum settlement of his
Supplemental Executive Retirement Plan entitlement upon termination. In
connection with Mr. Tyler's termination on December 11, 2000, he received a
payment in the amount of $26,500,000 settling all obligations of the Corporation
to him under his employment agreement. These amounts included $13,500,000 under
the Supplemental Executive Retirement Plan; $7,170,055 for severance; $2,236,000
under the Long Term Incentive Performance Plan; $2,178,455 in settlement of
previously accrued deferred bonus payments; $800,000 in settlement of a home
loan (which was subsequently repaid to the Corporation by Mr. Tyler); $404,425
as payment for outstanding share units; $130,440 for benefit continuation; and
$80,625 as payment for accrued vacation.
MANAGEMENT RESOURCE COMMITTEE
Signed by: Brian M. Levitt (Chairman), Derek H. Burney, Thomas E. Kierans and
Richard J. Lehmann.
12
AUDIT COMMITTEE REPORT
The responsibilities of the Audit Committee are set forth in the Terms of
Reference of the Audit Committee (a copy of which is set forth in Appendix "A"
attached hereto). They include assisting the Board of Directors in fulfilling
its oversight responsibilities as they relate to the Corporation's accounting
policies and internal controls, financial reporting practices and reviewing the
financial statements of the Corporation before such financial statements are
approved by the Board. These responsibilities are carried out through quarterly
meetings with the Corporation's auditors and management to review accounting,
auditing, internal controls and financial reporting matters. The management of
the Company is responsible for the preparation and integrity of the financial
reporting information and related systems of internal controls. The Audit
Committee, in carrying out its role, relies on the Corporation's senior
management, including senior financial management, and its auditors.
The Corporation's audited financial statements included in the Annual Report to
Shareholders were reviewed and discussed with senior management. Management has
confirmed that such financial statements (i) have been prepared with integrity
and objectivity and are the responsibility of management and, (ii) have been
prepared in conformity with generally accepted accounting principles.
Discussions occurred with PricewaterhouseCoopers LLP, the Corporation's
auditors, with respect to the matters required to be discussed by SAS 61
(Communications with Audit Committee). SAS 61 requires the auditors to provide
the Audit Committee with additional information regarding the scope and results
of their audit of the Company's financial statements, including with respect to
(i) their responsibility under generally accepted auditing standards; (ii)
significant accounting policies; (iii) management judgments and estimates; (iv)
any significant audit adjustments; (v) any disagreements with management; and
(vi) any difficulties encountered in performing the audit.
PricewaterhouseCoopers LLP have provided the Audit Committee with a letter
outlining the disclosures required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees) with respect to any
relationships between PricewaterhouseCoopers LLP and the Corporation that in
their professional judgment may reasonably be thought to bear on independence.
PricewaterhouseCoopers LLP has discussed its independence with us, and has
confirmed in such letter that, in its professional judgment, it is independent
of the Corporation within the meaning of United States federal securities laws.
Based on the review and discussions described above with respect to the
Corporation's audited financial statements included in the Annual Report to
Shareholders, the Audit Committee has recommended to the Board of Directors that
such financial statements be included in the Corporation's Annual Report on Form
10-K and Annual Information Form.
It is not the duty of the Audit Committee to plan or conduct audits or to
determine that the Corporation's financial statements are complete and accurate
and in accordance with generally accepted accounting principles. That is the
responsibility of management and the Corporation's independent auditors. In
giving our recommendation to the Board of Directors, we have relied on (i)
management's representation that such financial statements have been prepared
with integrity and objectivity and in conformity with generally accepted
accounting principals, and (ii) the report of the Corporation's auditors with
respect to such financial statements.
AUDIT COMMITTEE
Signed by: J. Robert S. Prichard (Chairman), Shirley A. Dawe, Richard J. Lehmann
and David R. McCamus
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered in connection with (i) the audit of the Corporation's annual
financial statements set forth in the Corporation's Annual Report and Annual
Report on Form 10-K for the year ended December 31, 2000, and (ii) the review of
the Corporation's quarterly financial statements set forth in the Corporation's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000, June 30,
2000 and September 30, 2000, were approximately $2,150,000.
13
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by PricewaterhouseCooper's LLP, the independent
auditors, for the Corporation's most recent fiscal year for professional
services rendered in connection with (i) operating or supervising the operation
of, the Corporation's information systems or managing the Corporation's local
area network and (ii) designing or implementing a hardware or software system
that aggregates source data underlying the financial statements or generates
information that is significant to the Corporation's financial statements taken
as a whole.
ALL OTHER FEES
The aggregate fees for all other services rendered by PricewaterhouseCoopers LLP
for the Corporation's most recent fiscal year were approximately $1,700,000.
These fees include work performed with respect to the outsourcing of internal
audit activities, as well as tax planning and compliance services, audits of
employee benefit plans, due diligence services and other miscellaneous services.
The Audit Committee has advised the Board of Directors that it has determined
that the non-audit services rendered by the Corporation's during the most recent
fiscal year are compatible with maintaining the independence of such auditors.
PERFORMANCE GRAPH
The following graph and related information compares the annual changes over the
last five years in the value of $Cdn. 100 invested in Moore common shares,
assuming reinvestment of dividends in Canadian dollars, and the TSE 300 Index
which incorporates dividend reinvestment. [OBJECT OMITTED]
[Performance graph]
1995 1996 1997 1998 1999 2000
MCL $100 $116 $ 93 $ 74 $ 39 $ 22
TSE 300 $100 $128 $ 148 $145 $191 $205
14
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS OTHER THAN
UNDER SECURITIES PURCHASE PROGRAMS
As at February 5, 2001, the aggregate indebtedness (other than routine
indebtedness) of directors, executive officers, senior officers and employees
outstanding to the Corporation and its subsidiaries was $930,014. These loans
are in excess of the employee's annual salary and represent house loans provided
to employees under the corporate house loan policy following a company requested
relocation. The loans bear interest at 4.3% per annum, have a term of 7 years
and are secured by mortgages on the houses.
Indebtedness under the house loan policy of senior officers is set out in the
table following.
TABLE OF INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
-----------------------------------------------------------------------------------------------------------------------
Name and Principal Position Involvement of Moore Largest Amount Outstanding Amount Outstanding as at
During 2000 February 5, 2001
($) ($)
-----------------------------------------------------------------------------------------------------------------------
J.D. Wyner A subsidiary of Moore 349,129 344,474
Vice President and President, as lender
Peak Technologies Inc.
Potomac, Maryland
-----------------------------------------------------------------------------------------------------------------------
M.S. Rousseau A subsidiary of Moore 596,705 586,540
Former Senior Vice President and as lender
Chief Financial Officer,
Lake Forest, Illinois
-----------------------------------------------------------------------------------------------------------------------
DIRECTORS' AND OFFICERS' INSURANCE
The Corporation has purchased insurance for the benefit of the directors and
officers subject to certain limitations contained in the BUSINESS CORPORATIONS
ACT (Ontario). The premium amounts to $177,104 annually and is paid by the
Corporation. The policies provide coverage of $50 million for each director and
officer subject to a maximum of $50 million in any policy year. Each claim
against a director or officer is not subject to any deductible for the
individual director or officer or directors and officers as a group. The policy
provides for a deductible of $500,000 per occurrence for losses occurring in the
United States and $250,000 per occurrence for losses occurring elsewhere.
The by-laws of the Corporation provide for the indemnification of directors and
officers from and against any liability and costs in respect of any action or
suit against them in respect of the execution of their duties of office subject
to the limitations referred to therein. In 1999, indemnification agreements were
put in place for directors and officers of the Corporation. These agreements are
complementary to by-law and insurance policy provisions and specify the process
for indemnification claims.
APPOINTMENT OF AUDITORS
A resolution will be submitted to the meeting to appoint PricewaterhouseCoopers
LLP as auditors of the Corporation for a term expiring with the annual meeting
of shareholders in 2002 and to authorize the directors to fix the remuneration
to be paid to the auditors. To become effective, such resolution must be
approved by a majority of the votes cast at the meeting.
PricewaterhouseCoopers LLP will be represented at the meeting and will have an
opportunity to make a statement if they so desire and to answer appropriate
questions.
AMENDMENT TO THE CORPORATION'S ARTICLES
At the meeting, shareholders will be asked to approve a special resolution
(substantially in the form set out in Appendix "B" attached hereto), with or
without variation, authorizing the filing of articles of amendment to remove the
objects for which the Corporation is incorporated set forth in clause 10 of the
Corporation's Articles of Amalgamation (the "Objects"). The text of the Objects
is set forth in Appendix "C" attached hereto.
15
Moore Corporation Limited was originally incorporated by letters patent dated
November 26, l928 and continued by letters patent of amalgamation dated December
31, 1938. On March 29, 1972 the shareholders of the Corporation confirmed an
amendment to the Articles of Amendment of the Corporation to enact the most
recent revision to the Objects of the Corporation. At the time of its original
incorporation under THE COMPANIES ACT it was necessary for the Corporation's
objects to be described. This requirement is not applicable to modern business
corporations and has not been necessary since 1982. Today it is very unusual for
an Ontario business corporation to include objects in its articles as they may
restrict the business which the corporation may conduct and impair the ability
of a corporation's management and directors to exploit new business
opportunities and otherwise act in the best interests of the corporation and its
shareholders.
The purpose of removing the Objects is to eliminate any restrictions on the
business of the Corporation which the Objects impose, and to avoid any legal
uncertainty concerning the ability of the Corporation to engage in businesses
and transactions which management and the Board of Directors believe to be in
the best interest of the Corporation and its shareholders.
A special majority of 66 2/3% of the votes cast at the meeting is required for
approval of the resolution (the "special resolution") authorizing the amendment
of the Corporation's Articles of Amendment to remove the Objects set forth is
clause 10 thereof.
If the special resolution is approved at the meeting, then articles of amendment
may be filed with the Companies Branch in the Province of Ontario to give effect
to the removal of the Objects. The removal of the Objects will not be effective
until such filing is complete. The Board of Directors reserves the right to
revoke all or part of the articles of amendment at any time prior to their
becoming effective, or to not proceed with the filing of the articles of
amendment at all.
DISSENT RIGHTS
Under the provisions of section 185 of the ONTARIO BUSINESS CORPORATIONS ACT
(the "OBCA"), a registered shareholder of the Corporation is entitled to send a
written objection to the special resolution. In addition to any other right a
shareholder may have, when the action authorized by the special resolution
becomes effective, a registered shareholder of the Corporation who complies with
the dissent procedure under section 185 of the OBCA is entitled to be paid the
fair value of the shares held by the shareholder in respect of which the
shareholder dissents, determined as at the close of business on the day before
the special resolution is adopted.
The dissent procedure provided by Section 185 of the OBCA is summarized at
Appendix "D" hereto and a copy of section 185 of the OBCA is reproduced at
Appendix "E" hereto. The description of the dissent rights and procedure, as set
out in Appendix "D", is not a comprehensive statement of the procedure to be
followed by shareholders and is qualified in its entirety by the full text of
section 185 of the OBCA as reproduced in Schedule "E". Shareholders who may wish
to dissent should read Appendices "D" and "E" carefully and in their entirety.
PERSONS WHO ARE BENEFICIAL OWNERS OF SHARES REGISTERED IN THE NAME OF A BROKER,
CUSTODIAN, NOMINEE, OTHER INTERMEDIARY OR IN SOME OTHER NAME WHO WISH TO
DISSENT, SHOULD BE AWARE THAT ONLY THE REGISTERED OWNER OF SUCH SECURITIES IS
ENTITLED TO DISSENT.
A SHAREHOLDER IS NOT ENTITLED TO DISSENT IF SUCH SHAREHOLDER VOTES ANY OF THE
SHARES BENEFICIALLY HELD BY IT IN FAVOUR OF THE SPECIAL RESOLUTION. THE
EXECUTION OR EXERCISE OF A PROXY DOES NOT CONSTITUTE A WRITTEN OBJECTION FOR THE
PURPOSES OF SECTION 185 OF THE OBCA.
FAILURE TO ADHERE STRICTLY TO THE REQUIREMENTS OF SECTION 185 OF THE OBCA MAY
RESULT IN THE LOSS OR UNAVAILABILITY OF RIGHTS UNDER THAT SECTION.
2001 LONG TERM INCENTIVE PLAN
BACKGROUND
Moore has had a stock option plan in force since 1957 for its executives and key
employees. The most recent plan, the 1999 Long Term Incentive Plan (the "1999
Plan"), was approved by shareholders in 1999. The 1999 Plan expired on February
16, 2001. As of February 5, 2001, there were outstanding options to acquire
6,227,386 common shares and 1,580,000 Series 1 preference shares of the
Corporation.
16
THE PLAN
In evaluating the most appropriate equity based incentive plan to replace the
1999 Plan, the directors had special regard to the unique challenges facing
Moore and its new Chief Executive Officer as he implements the Corporation's
strategic initiatives and restructuring program. Accordingly, on February 22,
2001, the directors passed a resolution, subject to regulatory approval,
adopting the 2001 Long Term Incentive Plan (the "Plan"), to authorize and
regulate the granting of stock options, restricted stock and other special stock
awards.
The purpose of the Plan is to advance the interests of Moore by (i) providing
certain of its employees with additional incentives; (ii) encouraging stock
ownership by such employees, thereby increasing their proprietary interest in
the success of Moore; (iii) encouraging them to remain employees of Moore; (iv)
attracting new employees; and (v) continuing to align the interests of the
Corporation's directors with those of its shareholders.
No grants or awards have been made to date under the Plan, and no determination
has been made as to the total number of employees, including executives and
officers, to whom grants under the Plan will be made. Employee recipients will
be selected on the basis of their capacity to contribute to the success of
Moore. Moore has approved voluntary guidelines for the ownership of shares
acquired under the exercise of stock options held by certain executives of the
Corporation. The guidelines call for ownership of between one-half to two times
an executive's annual salary depending upon seniority. Moore also wishes to be
able to make grants or awards under the Plan to its directors who elect to
receive such grants or awards in lieu of cash compensation.
THE PLAN IS SUBJECT TO SHAREHOLDER APPROVAL PRIOR TO DECEMBER 31, 2001. THE PLAN
WILL TERMINATE ON FEBRUARY 21, 2004, AFTER WHICH DATE NO FURTHER GRANTS MAY BE
MADE PURSUANT TO THE PLAN, BUT OUTSTANDING GRANTS TO THAT DATE WILL NOT BE
CANCELLED BY TERMINATION OF THE PLAN.
The Plan will be administered by the Management Resource Committee which will
select the employees to receive grants under the Plan, determine the number of
shares to be made subject to any grant or award, and prescribe any other terms
and conditions thereof, subject to ratification by the Board. The Board will
have authority to amend, suspend or terminate the Plan as it deems advisable,
subject to regulatory approval. However, no such amendment shall, without the
approval of shareholders (a) materially increase the benefits accruing to
participants in the Plan; (b) increase the aggregate number of shares which may
be issued under the Plan (except in the case of a stock split or other
reorganization of capital); (c) change eligibility requirements for
participation in the Plan; (d) increase the maximum individual participation
limits for a fiscal year; (e) decrease the minimum option price; (f) increase
the aggregate number of shares which may be issued under the Plan to
non-employee directors (except in the case of a stock split or other
reorganization of capital); or (g) extend the maximum option period.
A total of 2,500,000 shares will be available under the Plan. The aggregate
number of shares reserved for issuance which may be issued to any one person
under the Plan must not exceed 5% of the outstanding common shares less the
number of shares reserved for issuance to such person under any other plan. The
maximum number of options or restricted stock which may be granted to any
individual during any fiscal year is 500,000 and 100,000, respectively. The
aggregate number of shares reserved for issuance for non-employee directors as a
whole must not exceed 15% of the total number of shares available under the
Plan. The total number of restricted stock or special stock awards which may be
made during any fiscal year may not exceed one percent of the outstanding common
shares. Shares subject to options which are cancelled or terminated without
having been exercised shall be available for new grants under the Plan. Shares
issued as restricted stock which is forfeited for any reason prior to vesting
shall not be available for new grants or awards under the Plan.
The Plan requires that the exercise price of all options shall not be less than
the fair market value of the shares covered by the option on the date prior to
the grant. Fair market value in the case of common shares of the Corporation
means the average of the high and low board lot prices at which such shares are
traded on The Toronto Stock Exchange at the close of business on the trading day
preceding the date of grant. The closing price of the common shares on The
Toronto Stock Exchange on February 5, 2001 was $Cdn. 7.14.
The Management Resource Committee, subject to ratification by the Board, will
determine when an option will be exercisable, except that the term of an option
cannot exceed ten years from the date of grant. Options will become immediately
exercisable in the event of death or termination of employment as a result of
retirement or disability and will remain so for a period of one year. However,
options will be cancelled upon any other termination of employment. Options will
also become immediately exercisable upon certain changes in control of the
Corporation as defined in the Plan, including
17
when any person or group becomes the beneficial owner, directly or indirectly,
of securities of the Corporation representing 30% or more of the combined voting
power of the then outstanding securities of the Corporation.
Restricted stock may be issued under the Plan. Such shares provide for
forfeiture in the event conditions imposed by the Board are not satisfied.
During the restricted period, the employee will have the right to exercise any
voting rights attached to the shares and to receive any dividends or dividend
equivalents with respect to the shares.
Special stock awards may be granted under the Plan in payment of the amount due
to a participant under an incentive plan sponsored by Moore which provides for
such possibility. Special stock awards may be in the form of restricted stock or
common shares.
The Plan also provides that the Committee may make other equity-based awards to
key employees in countries other than the United States and Canada where the
effectiveness of option grants is unduly restricted by exchange control
regulations, taxation, securities or other laws.
CANADIAN TAX CONSEQUENCES
The following summary of Canadian federal income tax considerations will
generally be applicable to employees who are granted an incentive award under
the Plan in connection with employment in Canada and who (i) at all relevant
times are resident, or are deemed to be resident, in Canada for the purposes of
the INCOME TAX ACT (CANADA) (the "Tax Act") and any relevant income tax treaty
or convention; (ii) hold shares of common stock of Moore (the "Shares") acquired
pursuant to the Plan as capital property within the meaning of the Tax Act; and
(iii) deal with Moore at arm's length within the meaning of the Tax Act.
This summary is based upon the current provisions of the Tax Act and the
regulations issued thereunder (the "Regulations"), all specific proposals (the
"Proposed Amendments") to amend the Tax Act and Regulations publicly announced
by or on behalf of the Minister of Finance (Canada) prior to the date hereof,
and Moore's understanding of the current published administrative and assessing
practices and policies of the Canada Customs and Revenue Agency (the "CCRA").
This summary is intended to provide a general understanding of the material
Canadian federal income tax consequences and does not take into account
provincial, territorial or foreign tax legislation or considerations.
GRANT AND EXERCISE OF OPTIONS
The grant of an option under the Plan will not result in any immediate income
tax consequences to the employee under the Tax Act.
If an employee acquires Shares upon the exercise of options, the employee will
be deemed to have received an employment benefit equal to the amount by which
the fair market value of such Shares at the time of acquisition exceeds the
price paid for the Shares. The amount of this benefit will be included in
computing the employee's income from employment for the year in which the Shares
are acquired. Under the Proposed Amendments, the inclusion of this benefit in
computing income may be deferred, subject to certain conditions and limits, to
the year in which the employee disposes of the Shares. In computing taxable
income for the year in which the benefit is required to be included in income,
the employee would generally be entitled to a deduction equal to one-quarter
(increased to one-half under the Proposed Amendments) of the employment benefit.
The cost to the employee of the Shares will be equal to the total of the amount
paid for the Shares and the full amount of any employment benefit referred to
above.
GRANT OF RESTRICTED STOCK AWARDS
If an employee receives a grant of a restricted stock award pursuant to the
Plan, the employee will be required to include in computing employment income
for the year in which the restricted Shares are issued the fair market value of
the restricted Shares comprising the award (determined at the time of issue)
less the price, if any, paid for the restricted Shares. The CCRA accepts that
the fair market value of a restricted share may be subject to a reasonable
discount from the fair market value of an unrestricted share. The amount of the
discount would depend on the nature of the restrictions. The cost to the
employee of such restricted Shares will be equal to the amount included in
income as referred to above.
18
DISPOSITION OF SHARES
If an employee disposes of any Shares, the employee will realize a capital gain
(or a capital loss) equal to the amount by which the proceeds of disposition,
net of any reasonable costs of disposition exceed (or are exceeded by) the
adjusted cost base to the employee of such Shares. Subject to proposed new rules
that apply to shares for which deferral is claimed, the adjusted cost base to
the employee of each Share at any time will be determined by reference to the
average cost of all Shares owned by the employee at that time, whether acquired
under the Plan or otherwise. Subject to the Proposed Amendments becoming law,
one-half of any capital gains ("taxable capital gains") net of one-half of any
capital losses ("allowable capital losses") realized in a taxation year will be
included in computing the employee's income for the year. Allowable capital
losses in excess of taxable capital gains for a taxation year may be carried
over and deducted from net taxable capital gains in the three preceding taxation
years or future taxation years, subject to and in accordance with the rules
contained in the Tax Act and the Proposed Amendments. A capital gain may give
rise to liability for alternative minimum tax under the Tax Act.
TAX CONSEQUENCES TO MOORE
Moore will not generally be entitled to a deduction in computing its income in
respect of awards made to employees under the Plan.
UNITED STATES TAX CONSEQUENCES
Options may be granted under the Plan as Incentive Stock Options (ISOs) or as
non qualified stock options (NQSOs). To the extent that the aggregate Fair
Market Value of shares with respect to which options designated as ISOs are
exercisable for the first time by any participant during any year (under all
plans of the Corporation and any parent or subsidiary thereof) exceeds $100,000,
such options shall be treated as not being ISOs. The foregoing shall be applied
by taking options into account in the order in which they were granted. For the
purposes of the foregoing, the Fair Market Value of any share shall be
determined as of the time the option with respect to such shares is grandee. In
the event of the foregoing results in a portion of an option designated as an
ISO exceeding the above $100,000 limitation, only such excess shall be treated
as not being an ISO. An employee will not be taxed upon the grant of an option,
but upon exercise of a NQSO he will realize ordinary income in an amount equal
to the excess of the fair market value of the shares on the date of exercise
over their option price and Moore will be entitled to a deduction in the same
amount. An employee will not be taxed upon the grant of an ISO on either the
date of the grant or (except for application of the alternative minimum tax and
assuming the necessary holding periods are complied with) on the date of
exercise and Moore will not be entitled in a deduction.
An employee's basis in shares received upon exercise of a NQSO option will be
the fair market value of such shares on the date of exercise; any further gain
or loss realized on the subsequent disposition of shares received upon exercise
of a NQSO will be a long or short term capital gain or loss, depending upon the
holding period of the shares. If an employee holds shares acquired by the
exercise of an ISO for the requisite holding period after exercise, any gain
realized on subsequent disposition over his option price will be treated as a
long term capital gain. However, if he disposes of the shares within two years
of the option grant or within one year of the transfer of the shares to him, he
will realize ordinary income to the extent that the lesser of (1) the amount
realized on disposition, or (2) the fair market value of the shares on date of
exercise, exceeds his option price and Moore will be entitled to a deduction in
the same amount. Additional gain to the employee, if any, will be long or short
term capital gain, depending upon the holding period of the shares.
With regard to both ISOs and NQSOs, the following U.S. income tax consequences
also apply: (i) any entitlement to a tax deduction on the part of Moore is
subject to the applicable tax rules (including, without limitation, Section
162(m) of the United States Internal Revenue Code of 1986, as amended (the Code)
regarding a $1 million limitation on deductible compensation); and (ii) in the
event that the exercisability or vesting of any award is accelerated because of
a change in control, payments relating to the awards (or a portion thereof),
either alone or together with certain other payments, may constitute parachute
payments under Section 280G of the Code, which excess amounts may be subject to
excise taxes.
In general, Section 162(m) of the Code denies a publicly held corporation a
deduction for federal income tax purposes for compensation in excess of $1
million per year per person to its chief executive officer and the four other
officers whose compensation is disclosed inn its proxy statement, subject to
certain exceptions. Stock options will generally qualify under one of these if
they are granted under a plan that states the maximum number of shares with
respect to which options may be granted to any recipient during a specified
period and the plan under which the options are granted is approved by
stockholders and is administered by a compensation committee comprised of
outside directors. The Plan is intended to satisfy these requirements with
respect to stock options.
19
The Plan is not subject to any of the requirements of the Employee Retirement
Income Security Act of 1974, as amended. The Plan is not, nor is it intended to
be, qualified under Section 401(a) of the Code.
The foregoing discussion is designed to provide a general understanding of the
material United States federal income tax consequences and does not include any
state or local income tax or estate tax consequences that may be applicable.
A majority of the votes cast at the meeting, other than votes attaching to
shares beneficially owned by insiders of Moore to whom awards may be made
pursuant to the Plan (and their associates), is required for its approval and
effectiveness. As of February 5, 2001 such insiders (and their associates) held
approximately 72,000 common shares of the Corporation, representing less than 1%
of the outstanding common shares. Copies of the definitive text of the 2001 Long
Term Incentive Plan may be obtained from the Secretary of the Corporation on
request.
SHAREHOLDER PROPOSALS
Any shareholder proposals for the 2002 annual meeting of shareholders must be
submitted no later than February 11, 2002 to the Secretary of the Corporation,
at Scotia Plaza, 40 King Street West, P.O. Box 205, Toronto, Canada M5H 3Y2, in
order to be considered for inclusion in the Corporation's management information
circular and proxy statement for that meeting.
DIRECTORS' APPROVAL
The contents of this circular and the sending of it to the shareholders of the
Corporation, to each director and to the auditors of the Corporation have been
approved by the Board of Directors of the Corporation.
By order of the Board.
J.M. Wilson
Vice President and Secretary
Toronto, Canada
March 7, 2001
COPIES OF THE CORPORATION'S LATEST ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND WITH THE CANADIAN
SECURITIES AUTHORITIES AS THE ANNUAL INFORMATION FORM (TOGETHER WITH THE
DOCUMENTS INCORPORATED THEREIN BY REFERENCE), MANAGEMENT'S DISCUSSION AND
ANALYSIS OF THE CORPORATION'S FINANCIAL CONDITION AND RESULTS FOR 2000,
COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS OF THE CORPORATION FOR 2000,
TOGETHER WITH THE REPORT OF THE AUDITORS THEREON AND THIS CIRCULAR ARE AVAILABLE
THROUGH SEDAR AT HTTP://WWW.SEDAR.COM AND EDGAR AT
HTTP://WWW.SEC.GOV/EDGARHP.HTM OR UPON REQUEST FROM THE CORPORATE OFFICE.
20
APPENDIX "A"
TERMS OF REFERENCE
MOORE CORPORATION LIMITED
AUDIT COMMITTEE
1. MANDATE
The audit committee shall:
(a) assist the board of directors in fulfilling its oversight
responsibilities as they relate to the Corporation's
accounting policies and internal controls, financial reporting
practices and with financial aspects of legal and regulatory
compliance;
(b) review the financial statements of the Corporation and shall
report thereon to the board of directors of the Corporation
before such financial statements are approved by the board;
(c) maintain, through regularly scheduled meetings, a line of
communication between the board of directors and the
Corporation's financial management and auditors.
The audit committee also shall perform the duties as described under
"Duties" below.
2. COMPOSITION
The audit committee shall be composed of not fewer than three members,
each of whom shall be unrelated and independent as defined by the rules
of the Toronto and New York stock exchanges. Each committee member
shall be financially literate and at least one member of the audit
committee shall have accounting or related financial management
expertise. A majority of the committee members shall be resident
Canadians.
The auditor of the Corporation is entitled to receive notice of every
meeting of the audit committee and be heard thereat.
In practice, the committee shall be composed of four to six directors.
The Chief Executive Officer, Chief Financial Officer and Controller
shall be invited to attend meetings but do not have the right to vote
on matters before the committee. The Secretary of the Corporation shall
act as the Secretary of the committee.
Under normal circumstances, it is understood that no committee member
shall be on the committee for more than five consecutive years.
3. QUORUM
The committee shall have the power to fix its quorum at not less than a
majority of its members.
4. CANADIAN RESIDENTS
A majority of the members of the committee shall be resident Canadians.
5. ELECTION AND TERM OF OFFICE
The directors shall elect annually from among their number a committee
to be known as the audit committee, to hold office until the next
annual meeting of shareholders.
Under normal circumstances, it is understood that no committee member
shall be on the committee for more than five consecutive years.
6. VACANCIES
Any vacancy in the audit committee may be filled by the board of
directors.
21
7. ELECTION OF CHAIRMAN
The members of the committee shall elect a chairman from among their
number.
8. ABSENCE OF CHAIRMAN
In the absence of the Chairman, the other committee members shall
appoint a member to fill that office.
9. CALLING OF MEETINGS
The auditor of the Corporation or a member of the audit committee may
call a meeting of the committee.
10. DUTIES
The audit committee will fulfil the following duties arising from its
mandate set out above:
(a) Review the annual and interim consolidated financial
statements of the Corporation following the examination
thereof by the auditors and prior to their approval by the
directors and report to the directors thereon.
(b) Review the planned scope of the examination of the annual
consolidated financial statements by the auditors of the
Corporation.
(c) Review the accounting principles and practices to be applied
and followed by the Corporation during the upcoming fiscal
year and any significant changes from those applied and
followed during the current year.
(d) Review quarterly reports from the auditor on the adequacy of
the systems of internal accounting and audit controls
established by the Corporation.
(e) Review litigation and claims involving or against the
Corporation which could materially adversely affect its
financial position and which the auditors or any officer of
the Corporation may refer to the committee.
(f) Review the Form 10-K, annual report to the shareholders, Form
10Q and interim report to the shareholders prior to approval
by the directors and report to the directors thereon.
(g) Review and report to the directors regarding the nomination,
independence, remuneration and other material terms of the
engagement of the auditors and the performance by the auditors
thereunder, including the receipt on an annual basis of a
formal written statement delineating all relationships between
the auditor and the Corporation.
(h) Review non-audit services and related fees provided by the
auditors.
(i) Review the status of taxation matters of the Corporation and
its major subsidiaries.
(j) Review results of post acquisition reviews.
(k) Review corporate risk tolerance and critical enterprise risks.
(l) Monitor the implementation of the Enterprise Resource Planning
system.
(m) Review and assess annually the Terms of Reference of the
committee and propose changes to the Corporate Governance
Committee.
11. REPORTING
The audit committee shall report on its review of the financial
statements of the Corporation and other matters reviewed by the
committee, to the board of directors of the Corporation prior to the
approval of financial statements by the board of directors.
October 27, 2000
22
APPENDIX "B"
MOORE CORPORATION LIMITED
SPECIAL RESOLUTION OF THE SHAREHOLDERS
RESOLVED AS A SPECIAL RESOLUTION THAT:
1. The Articles of Amalgamation of the Corporation be amended to remove the
objects for which the Corporation is incorporated set forth in clause 10
thereof and to provide that the other provisions (if any) of the
Corporation's articles shall be "None".
2. Any officer or director of the Corporation is authorized to sign all
documents and to do all things necessary or desirable to effect the
aforementioned amendment to the Articles of Amalgamation of the Corporation
including delivery of articles of amendment in prescribed form to the
Director under the BUSINESS CORPORATIONS ACT (Ontario).
3. The directors of the Corporation are hereby authorized to revoke this
special resolution without further approval of the shareholders at any time
prior to the endorsement by the Director under the BUSINESS CORPORATIONS
ACT (Ontario) of a certificate of amendment of articles in respect of such
amendment.
23
APPENDIX "C"
Clause 10 of the Articles of Amalgamation of Moore Corporation Limited presently
provide as follows:
"10. Other provisions (if any):
The objects for which the Corporation is incorporated are:
(a) to carry on business as a manufacturer, producer, retailer, wholesaler
and dealer of and in business forms, business systems, custom packaging
and related products of all kinds and classes including machinery and
equipment to be used in the manufacture, production, sale or other use
of business forms, business systems and custom packaging; and
(b) to acquire and hold any shares, stocks, bonds, debentures or other
securities of any other corporation or corporations organized under the
laws of Canada or any province thereof or of any country, state or
other jurisdiction outside Canada and carrying on a business which is
similar to, or is capable of being conveniently carried on in
connection with, the business of the Corporation."
24
APPENDIX "D"
SUMMARY OF PROCEDURE TO EXERCISE DISSENT RIGHT
The procedure to be followed by a shareholder who intends to dissent from the
approval of the special resolution set out in Appendix "B" hereto and who wishes
to require the Corporation to acquire the shareholder's shares and pay to the
shareholder the fair value thereof when the action approved by the special
resolution from which the shareholder dissents becomes effective, determined as
of the close of business on the day before the special resolution is adopted, is
set out in section 185 of the ONTARIO BUSINESS CORPORATIONS ACT (the "OBCA").
The following description of the rights of shareholders to dissent and be paid
fair value for their shares is not a comprehensive statement of the procedures
to be followed by such shareholders and is qualified in its entirety by the
reference to the full text of section 185 of the OBCA which is attached hereto
in Appendix "E".
THE FOLLOWING IS ONLY A SUMMARY OF THE DISSENTING SHAREHOLDER PROVISIONS OF THE
OBCA, WHICH ARE TECHNICAL AND COMPLEX. PERSONS WHO ARE BENEFICIAL OWNERS OF THE
SHARES REGISTERED IN THE NAME OF A BROKER, CUSTODIAN, NOMINEE, OTHER
INTERMEDIARY, OR IN SOME OTHER NAME, WHO WISH TO DISSENT SHOULD BE AWARE THAT
ONLY THE REGISTERED OWNER OF SUCH SHARES IS ENTITLED TO DISSENT. SHAREHOLDERS
WISHING TO EXERCISE RIGHTS OF DISSENT IN ACCORDANCE WITH THE OBCA SHALL SEEK
THEIR OWN LEGAL ADVICE SINCE FAILURE TO COMPLY STRICTLY WITH THE APPLICABLE
PROVISIONS OF THE OBCA MAY PREJUDICE THE DISSENT RIGHTS OF SUCH SHAREHOLDERS.
Section 185 provides that a shareholder may only make a claim under that Section
with respect to all the shares of a class held by the shareholder on behalf of
any one beneficial owner and registered in the shareholder's name. One
consequence of this provision is that a shareholder may only exercise the right
to dissent under section 185 in respect of shares which are registered in that
shareholder's name. In many cases, shares beneficially owned by a person (a
"Non-Registered Holder") are registered either: (a) in the name of an
intermediary that the Non-Registered Holder deals with in respect of the shares
(such as banks, trust companies, securities dealers and brokers, trustees or
administrators or self-administered registered retirement savings plans (RRSPs),
registered retirement income funds (RRIFs), registered education savings plans
(RESPs) and similar plans, and their nominees); or (b) in the name of a clearing
agency (such a The Canadian Depository for Securities Limited) of which the
intermediary is a participant. Accordingly, a Non-Registered Holder will not be
entitled to exercise the right of dissent under Section 185 directly (unless the
shares are re-registered in the Non-Registered Holder's name). A Non-Registered
Holder who wishes to exercise the right of dissent should immediately contact
the intermediary who the Non-Registered Holder deals with in respect of the
shares and either: (i) instruct the intermediary to exercise the right of
dissent on the Non-Registered Holder's behalf; or (ii) instruct the intermediary
to re-register the shares in the name of the Non-Registered Holder, in which
case the Non-Registered Holder would have to exercise the right of dissent
directly. In either case, the intermediary or the Non-Registered Holder, as the
case may be, must adhere strictly to the requirements of section 185.
A registered shareholder who wishes to invoke the provisions of section 185 of
the OBCA must send to the Corporation at or before the meeting of shareholders
at which the special resolution is to be voted on a written objection to the
special resolution (the "Notice of Dissent"). The sending of a Notice of Dissent
does not deprive a registered shareholder of the shareholder's right to vote on
the special resolution but a vote either in person or by proxy against the
special resolution does not constitute a Notice of Dissent. A vote in favour of
the special resolution will deprive the registered shareholder of further rights
under section 185 of the OBCA.
Within 10 days after the adoption of the special resolution by the shareholders,
the Corporation is required to notify in writing each shareholder who has filed
a Notice of Dissent and has not voted for the special resolution or withdrawn
the shareholder's objection (a "Dissenting Shareholder") that the special
resolution has been adopted. A dissenting Shareholder shall, within 20 days
after the shareholder receives notice of adoption of the special resolution or,
if the shareholder does not receive such notice, within 20 days after the
shareholder learns that the special resolution has been adopted, send to the
Corporation a written notice (the "Demand for Payment") containing the
shareholder's name and address, the number and class of shares in respect of
which the shareholder dissents, and a demand for payment of the fair value of
such shares. Within 30 days after sending the shareholder's Demand for Payment,
the Dissenting Shareholder shall send the certificates representing the shares
in respect of which the shareholder dissents to the Corporation or its transfer
agent. The Corporation or the transfer agent shall endorse on the share
certificates notice that the holder thereof is a Dissenting Shareholder under
section 185 of the OBCA and shall forthwith return the share certificates to the
Dissenting Shareholder.
25
A Dissenting Shareholder who fails to send to the Corporation, within the
appropriate time frame, a Notice of Dissent, Demand for Payment and certificates
representing the shares in respect of which the Dissenting Shareholder dissents
forfeits the right to make a claim under section 185 of the OBCA.
After sending a Demand for Payment, a Dissenting Shareholder ceases to have any
rights as a holder of the shares in respect of which the shareholder has
dissented other than the right to be paid the fair value of such shares as
determined under section 185 of the OBCA, unless:
(i) the Dissenting Shareholder withdraws the shareholder's Demand
for Payment before the Corporation makes an offer to the
Dissenting Shareholder pursuant to the OBCA;
(ii) the Corporation fails to make a timely Offer to Pay to the
Dissenting Shareholder and the Dissenting Shareholder
withdraws the Demand for Payment; or
(iii) the directors of the Corporation revoke the special resolution
in which case the rights of the Dissenting Shareholder will be
reinstated as of the date that the Dissenting Shareholder sent
the Demand for Payment.
Not later than seven days after the later of the day on which the action
approved by the special resolution is effective (the "Effective Date") or the
day the Corporation receives the Demand for Payment, the Corporation shall send
to each Dissenting Shareholder who has sent a Demand for Payment an offer to pay
for the shares of the Dissenting Shareholder in respect of which the shareholder
has dissented in an amount considered by the directors of the Corporation to be
the fair value thereof (an "Offer to Pay"), accompanied by a statement showing
how the fair value was determined. Every Offer to Pay made to Dissenting
Shareholders for shares of the same class shall be on the same terms. The amount
specified in an Offer to Pay which has been accepted by a Dissenting Shareholder
shall be paid by the Corporation within 10 days of the acceptance, but an Offer
to Pay lapses if the Corporation has not received an acceptance thereof within
30 days after the Offer to Pay has been made.
If an Offer to Pay is not made by the Corporation, or if a Dissenting
Shareholder fails to accept an Offer to Pay, the Corporation may, within 50 days
after the Effective Date or within such further period as a court of competent
jurisdiction (the "court") may allow, apply to the court to fix a fair value for
the shares of any Dissenting Shareholder. If the Corporation fails to apply to
the court, a Dissenting Shareholder may apply to the court for the same purpose
with a further period of 20 days or within such further period as the court may
allow. A Dissenting Shareholder is not required to give security for costs in
any application to the court.
Before the Corporation makes application to the court in order to fix the fair
value of the shares or, if such application is made by a Dissenting Shareholder,
not later than seven days after receiving notice of an application to the court
made by the Dissenting Shareholder, the Corporation must give notice to each
Dissenting Shareholder who has, at the date upon which such notice is given,
sent to the Corporation a Demand for Payment and has not accepted an Offer to
Pay. This notice must set out the date, place and consequences of the
application and the Dissenting Shareholder's right to appear and be heard in
person or by counsel. A similar notice must be given to each Dissenting
Shareholder who satisfies the above conditions, within three days of satisfying
such conditions.
Upon the application to the court, all Dissenting Shareholders whose shares have
not been purchased by the Corporation will be joined as parties and be bound by
the decision of the court, and the Corporation will be required to notify each
Dissenting Shareholder of the date, place and consequences of the application
and of the right to appear and be heard in person or by counsel. Upon any such
application to the court, the court may determine whether any person is a
Dissenting Shareholder who should be joined as a party, and the court will then
fix a fair value for the shares of all Dissenting Shareholders who have not
accepted an Offer to Pay. The final order of the court will be rendered against
the Corporation in favour of each Dissenting Shareholder and for the amount of
the fair value of the Dissenting Shareholder's shares as fixed by the court. The
court may, in its discretion allow a reasonable rate of interest on the amount
payable to each such Dissenting Shareholder from the date on which the special
resolution was adopted until the date of payment.
26
APPENDIX "E"
ONTARIO BUSINESS CORPORATIONS ACT
Rights of dissenting shareholders
185. (1) Subject to subsection (3) and to sections 186 and 248, if a
corporation resolves to,
(a) amend its articles under section 168 to add, remove or change
restrictions on the issue, transfer or ownership of shares of a
class or series of the shares of the corporation;
(b) amend its articles under section 168 to add, remove or change any
restriction upon the business or businesses that the corporation
may carry on or upon the powers that the corporation may
exercise;
(c) amalgamate with another corporation under sections 175 and 176;
(d) be continued under the laws of another jurisdiction under section
181; or
(e) sell, lease or exchange all or substantially all its property
under subsection 184 (3),
a holder of shares of any class or series entitled to vote on the resolution may
dissent.
Idem
(2) If a corporation resolves to amend its articles in a manner referred to
in subsection 170 (1), a holder of shares of any class or series entitled to
vote on the amendment under section 168 or 170 may dissent, except in respect of
an amendment referred to in,
(a) clause 170 (1) (a), (b) or (e) where the articles provide that
the holders of shares of such class or series are not entitled to
dissent; or
(b) subsection 170 (5) or (6).
Exception
(3) A shareholder of a corporation incorporated before the 29th day of
July, 1983 is not entitled to dissent under this section in respect of an
amendment of the articles of the corporation to the extent that the amendment,
(a) amends the express terms of any provision of the articles of the
corporation to conform to the terms of the provision as deemed to
be amended by section 277; or
(b) deletes from the articles of the corporation all of the objects
of the corporation set out in its articles, provided that the
deletion is made by the 29th day of July, 1986.
Shareholder's right to be paid fair value
(4) In addition to any other right the shareholder may have, but subject to
subsection (30), a shareholder who complies with this section is entitled, when
the action approved by the resolution from which the shareholder dissents
becomes effective, to be paid by the corporation the fair value of the shares
held by the shareholder in respect of which the shareholder dissents, determined
as of the close of business on the day before the resolution was adopted.
No partial dissent
(5) A dissenting shareholder may only claim under this section with respect
to all the shares of a class held by the dissenting shareholder on behalf of any
one beneficial owner and registered in the name of the dissenting shareholder.
Objection
(6) A dissenting shareholder shall send to the corporation, at or before
any meeting of shareholders at which a resolution referred to in subsection (1)
or (2) is to be voted on, a written objection to the resolution, unless the
corporation did not give notice to the shareholder of the purpose of the meeting
or of the shareholder's right to dissent.
27
Idem
(7) The execution or exercise of a proxy does not constitute a written
objection for purposes of subsection (6).
Notice of adoption of resolution
(8) The corporation shall, within ten days after the shareholders adopt the
resolution, send to each shareholder who has filed the objection referred to in
subsection (6) notice that the resolution has been adopted, but such notice is
not required to be sent to any shareholder who voted for the resolution or who
has withdrawn the objection.
Idem
(9) A notice sent under subsection (8) shall set out the rights of the
dissenting shareholder and the procedures to be followed to exercise those
rights.
Demand for payment of fair value
(10) A dissenting shareholder entitled to receive notice under subsection
(8) shall, within twenty days after receiving such notice, or, if the
shareholder does not receive such notice, within twenty days after learning that
the resolution has been adopted, send to the corporation a written notice
containing,
(a) the shareholder's name and address;
(b) the number and class of shares in respect of which the
shareholder dissents; and
(c) a demand for payment of the fair value of such shares.
Certificates to be sent in
(11) Not later than the thirtieth day after the sending of a notice under
subsection (10), a dissenting shareholder shall send the certificates
representing the shares in respect of which the shareholder dissents to the
corporation or its transfer agent.
Idem
(12) A dissenting shareholder who fails to comply with subsections (6),
(10) and (11) has no right to make a claim under this section.
Endorsement on certificate
(13) A corporation or its transfer agent shall endorse on any share
certificate received under subsection (11) a notice that the holder is a
dissenting shareholder under this section and shall return forthwith the share
certificates to the dissenting shareholder.
Rights of dissenting shareholder
(14) On sending a notice under subsection (10), a dissenting shareholder
ceases to have any rights as a shareholder other than the right to be paid the
fair value of the shares as determined under this section except where,
(a) the dissenting shareholder withdraws notice before the
corporation makes an offer under subsection (15);
(b) the corporation fails to make an offer in accordance with
subsection (15) and the dissenting shareholder withdraws notice;
or
(c) the directors revoke a resolution to amend the articles under
subsection 168 (3), terminate an amalgamation agreement under
subsection 176 (5) or an application for continuance under
subsection 181 (5), or abandon a sale, lease or exchange under
subsection 184 (8),
in which case the dissenting shareholder's rights are reinstated as of the date
the dissenting shareholder sent the notice referred to in subsection (10), and
the dissenting shareholder is entitled, upon presentation and surrender to the
corporation or its transfer agent of any certificate representing the shares
that has been endorsed in accordance with subsection (13), to be issued a new
certificate representing the same number of shares as the certificate so
presented, without payment of any fee.
28
Offer to pay
(15) A corporation shall, not later than seven days after the later of the
day on which the action approved by the resolution is effective or the day the
corporation received the notice referred to in subsection (10), send to each
dissenting shareholder who has sent such notice,
(a) a written offer to pay for the dissenting shareholder's shares in
an amount considered by the directors of the corporation to be
the fair value thereof, accompanied by a statement showing how
the fair value was determined; or
(b) if subsection (30) applies, a notification that it is unable
lawfully to pay dissenting shareholders for their shares.
Idem
(16) Every offer made under subsection (15) for shares of the same class or
series shall be on the same terms.
Idem
(17) Subject to subsection (30), a corporation shall pay for the shares of
a dissenting shareholder within ten days after an offer made under subsection
(15) has been accepted, but any such offer lapses if the corporation does not
receive an acceptance thereof within thirty days after the offer has been made.
Application to court to fix fair value
(18) Where a corporation fails to make an offer under subsection (15) or if
a dissenting shareholder fails to accept an offer, the corporation may, within
fifty days after the action approved by the resolution is effective or within
such further period as the court may allow, apply to the court to fix a fair
value for the shares of any dissenting shareholder.
Idem
(19) If a corporation fails to apply to the court under subsection (18), a
dissenting shareholder may apply to the court for the same purpose within a
further period of twenty days or within such further period as the court may
allow.
Idem
(20) A dissenting shareholder is not required to give security for costs in
an application made under subsection (18) or (19).
Costs
(21) If a corporation fails to comply with subsection (15), then the costs
of a shareholder application under subsection (19) are to be borne by the
corporation unless the court otherwise orders.
Notice to shareholders
(22) Before making application to the court under subsection (18) or not
later than seven days after receiving notice of an application to the court
under subsection (19), as the case may be, a corporation shall give notice to
each dissenting shareholder who, at the date upon which the notice is given,
(a) has sent to the corporation the notice referred to in subsection
(10); and
(b) has not accepted an offer made by the corporation under
subsection(15), if such an offer was made,
of the date, place and consequences of the application and of the dissenting
shareholder's right to appear and be heard in person or by counsel, and a
similar notice shall be given to each dissenting shareholder who, after the date
of such first mentioned notice and before termination of the proceedings
commenced by the application, satisfies the conditions set out in clauses (a)
and (b) within three days after the dissenting shareholder satisfies such
conditions.
Parties joined
(23) All dissenting shareholders who satisfy the conditions set out in
clauses (22) (a) and (b) shall be deemed to be joined as parties to an
application under subsection (18) or (19) on the later of the date upon which
the application is brought and the date upon which they satisfy the conditions,
and shall be bound by the decision rendered by the court in the proceedings
commenced by the application.
29
Idem
(24) Upon an application to the court under subsection (18) or (19), the
court may determine whether any other person is a dissenting shareholder who
should be joined as a party, and the court shall fix a fair value for the shares
of all dissenting shareholders.
Appraisers
(25) The court may in its discretion appoint one or more appraisers to
assist the court to fix a fair value for the shares of the dissenting
shareholders.
Final order
(26) The final order of the court in the proceedings commenced by an
application under subsection (18) or (19) shall be rendered against the
corporation and in favour of each dissenting shareholder who, whether before or
after the date of the order, complies with the conditions set out in clauses
(22) (a) and (b).
Interest
(27) The court may in its discretion allow a reasonable rate of interest on
the amount payable to each dissenting shareholder from the date the action
approved by the resolution is effective until the date of payment.
Where corporation unable to pay
(28) Where subsection (30) applies, the corporation shall, within ten days
after the pronouncement of an order under subsection (26), notify each
dissenting shareholder that it is unable lawfully to pay dissenting shareholders
for their shares.
Idem
(29) Where subsection (30) applies, a dissenting shareholder, by written
notice sent to the corporation within thirty days after receiving a notice under
subsection (28), may,
(a) withdraw a notice of dissent, in which case the corporation is
deemed to consent to the withdrawal and the shareholder's full
rights are reinstated; or
(b) retain a status as a claimant against the corporation, to be paid
as soon as the corporation is lawfully able to do so or, in a
liquidation, to be ranked subordinate to the rights of creditors
of the corporation but in priority to its shareholders.
Idem
(30) A corporation shall not make a payment to a dissenting shareholder
under this section if there are reasonable grounds for believing that,
(a) the corporation is or, after the payment, would be unable to pay
its liabilities as they become due; or
(b) the realizable value of the corporation's assets would thereby be
less than the aggregate of its liabilities. R.S.O. 1990, c. B.16,
s. 185 (1-30).
Court order
(31) Upon application by a corporation that proposes to take any of the
actions referred to in subsection (1) or (2), the court may, if satisfied that
the proposed action is not in all the circumstances one that should give rise to
the rights arising under subsection (4), by order declare that those rights will
not arise upon the taking of the proposed action, and the order may be subject
to compliance upon such terms and conditions as the court thinks fit and, if the
corporation is an offering corporation, notice of any such application and a
copy of any order made by the court upon such application shall be served upon
the Commission.
Commission may appear
(32) The Commission may appoint counsel to assist the court upon the
hearing of an application under subsection (31), if the corporation is an
offering corporation. 1994, c. 27, s. 71 (24).