.
.
.
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
<Table>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
[X] Definite Proxy Statement
[ ] Definite Additional Materials
[ ] Soliciting Material Under Rule 14a-12
</Table>
Filing by:
TLC VISION CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
- --------------------------------------------------------------------------------
(3) Filing Party:
N/A
- --------------------------------------------------------------------------------
(4) Dated Filed:
N/A
- --------------------------------------------------------------------------------
================================================================================
TLC VISION CORPORATION
---------------------
NOTICE OF 2004 ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 14, 2004
---------------------
NOTICE IS HEREBY GIVEN THAT the 2004 annual and special meeting of the
shareholders of TLC Vision Corporation (the "Company") will be held on June 14,
2004 at 9:00 a.m. Eastern Standard Time at The TSX Auditorium, The Exchange
Tower, 130 King Street West, Toronto, Ontario, for the following purposes:
1. To approve the Company's 2004 Employee Share Purchase Plan;
2. To approve amendments to the Company's 1997 Share Purchase Plan for
Canadian Employees;
3. To approve an increase in the number of common shares reserved for
the Company's Amended and Restated Share Option Plan by 2,000,000 common
shares;
4. To elect seven directors for the ensuing year;
5. To appoint Ernst & Young LLP as auditors of the Company for the
ensuing year and to authorize the directors to fix the remuneration to be
paid to the auditors;
6. To receive the consolidated financial statements of the Company for
the fiscal year ended December 31, 2003, together with the report of the
auditors thereon; and
7. To transact such further business as may properly come before the
annual and special meeting or any adjournment thereof.
The text of the resolutions approving items 1 to 3 above is contained in
Appendix A to the accompanying management information circular.
The Board of Directors has fixed the close of business on May 5, 2004 as
the record date for determining the Company's shareholders entitled to notice of
and to vote at its annual and special meeting.
Management of the Company is soliciting the enclosed proxy. Please refer to
the accompanying management information circular for further information with
respect to the business to be transacted at the annual and special meeting. The
management information circular is deemed to be incorporated by reference in and
to form part of this notice.
The Board of Directors recommends that you vote FOR each of the above
proposals.
By Order of the Board of Directors
-s- Robert W. May
Robert W. May
General Counsel and Secretary
Mississauga, Ontario
April 29, 2004
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL AND SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE IN ORDER TO ASSURE THAT YOUR SHARES ARE REPRESENTED. IF YOU
EXECUTE A PROXY CARD, YOU MAY STILL ATTEND THE ANNUAL AND SPECIAL MEETING,
REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON. HOWEVER, ATTENDING THE ANNUAL
AND SPECIAL MEETING IN PERSON WILL NOT REVOKE YOUR PROXY UNLESS YOU FOLLOW THE
PROCEDURES EXPLAINED UNDER "REVOCATION OF PROXIES" IN THE ACCOMPANYING
MANAGEMENT INFORMATION CIRCULAR.
TLC VISION CORPORATION
MANAGEMENT INFORMATION CIRCULAR
GENERAL PROXY INFORMATION
The information contained in this management information circular is given
as at April 26, 2004, except where otherwise noted. This management information
circular is first being sent or given to shareholders on or about May 12, 2004.
All references to "$" shall mean U.S. dollars and all references to "Cdn.$"
shall mean Canadian dollars.
SOLICITATION OF PROXIES
THE INFORMATION CONTAINED IN THIS MANAGEMENT INFORMATION CIRCULAR, WHICH IS
A PROXY STATEMENT UNDER U.S. SECURITIES LAW, IS FURNISHED IN CONNECTION WITH THE
SOLICITATION OF PROXIES TO BE USED AT THE ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS OF TLC VISION CORPORATION ("TLC VISION" OR THE "COMPANY") TO BE
HELD ON MONDAY, JUNE 14, 2004 AT 9:00 A.M. AT THE TSX AUDITORIUM, THE EXCHANGE
TOWER, 130 KING STREET WEST, TORONTO, ONTARIO, AND AT ALL ADJOURNMENTS OF THE
MEETING, FOR THE PURPOSES SET FORTH IN THE ACCOMPANYING NOTICE OF MEETING. It is
expected that the solicitation will be made primarily by mail but directors,
officers and employees of the Company, without additional remuneration, may also
solicit proxies personally. TLC Vision will, if requested, reimburse banks,
brokerage houses and other custodians, nominees and certain fiduciaries for
their reasonable out-of-pocket expenses incurred in connection with the
distribution of proxy materials to their principals. THE SOLICITATION OF PROXIES
BY THIS MANAGEMENT INFORMATION CIRCULAR IS BEING MADE BY OR ON BEHALF OF TLC
VISION MANAGEMENT and the total cost of the solicitation will be borne by the
Company.
APPOINTMENT OF PROXIES
The persons named in the enclosed form of proxy are representatives of TLC
Vision management and are directors or officers of the Company. A SHAREHOLDER
WHO WISHES TO APPOINT SOME OTHER PERSON, WHO NEED NOT BE A TLC VISION
SHAREHOLDER, TO REPRESENT SUCH SHAREHOLDER AT THE MEETING MAY DO SO BY INSERTING
SUCH PERSON'S NAME IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY.
To be valid, proxies must be deposited with the Secretary of the Company,
c/o CIBC Mellon Trust Company, Proxy Dept., 200 Queen's Quay East, Unit #6,
Toronto, Ontario, M5A 4K9 not later than the close of business on June 10, 2004
or, if the meeting is adjourned, 48 hours (excluding Saturdays and holidays)
before any adjourned meeting.
The executive office of TLC Vision is located at 5280 Solar Drive,
Mississauga, Ontario, L4W 5M8. TLC Vision's registered office is located at 44
Chipman Hill, Suite 1000, P.O. Box 7289, Station "A", Saint John, New Brunswick,
E2L 4S6.
NON-REGISTERED SHAREHOLDERS
Only registered TLC Vision shareholders, or the persons they appoint as
their proxies, are permitted to attend and vote at the meeting. However, in many
cases, TLC Vision shares beneficially owned by a holder (a "Non-Registered
Holder") are registered either:
- in the name of an intermediary that the Non-Registered Holder deals with
in respect of the shares. Intermediaries include banks, trust companies,
securities dealers or brokers and trustees or administrators of
self-administered RRSPs, RRIFs, RESPs and similar plans; or
- in the name of a depository (such as The Canadian Depository for
Securities Limited or The Depository Trust Company) of which the
intermediary is a participant.
In accordance with Canadian securities law, the Company has distributed
copies of the notice of meeting, this management information circular, the form
of proxy, the annual report for the fiscal year ended
December 31, 2003 and, in the case of materials to be distributed to
Non-Registered Holders resident in Canada, financial statements of the Company
prepared in accordance with Canadian generally accepted accounting principles
and the related management's discussion and analysis of financial condition
(collectively, the "meeting materials") to the depositories and intermediaries
for onward distribution to Non-Registered Holders.
Intermediaries are required to forward meeting materials to Non-Registered
Holders unless a Non-Registered Holder has waived the right to receive them.
Typically, intermediaries will use a service company (such as ADP Investor
Communications ("ADP IC")) to forward the meeting materials to Non-Registered
Holders.
Non-Registered Holders who have not waived the right to receive meeting
materials will receive either a voting instruction form or, less frequently, a
form of proxy. The purpose of these forms is to permit Non-Registered Holders to
direct the voting of the shares they beneficially own. Non-Registered Holders
should follow the procedures set out below, depending on which type of form they
receive.
A. Voting Instruction Form. In most cases, a Non-Registered Holder will
receive, as part of the meeting materials, a voting instruction form. If
the Non-Registered Holder does not wish to attend and vote at the
meeting in person (or have another person attend and vote on the
Non-Registered Holder's behalf), the voting instruction form must be
completed, signed and returned in accordance with the directions on the
form. Voting instruction forms sent by ADP IC permit the completion of
the voting instruction form by telephone or through the Internet at
www.proxyvotecanada.com. If a Non-Registered Holder wishes to attend and
vote at the meeting in person (or have another person attend and vote on
the Non-Registered Holder's behalf), the Non-Registered Holder must
complete, sign and return the voting instruction form in accordance with
the directions provided and a form of proxy giving the right to attend
and vote will be forwarded to the Non-Registered Holder.
or
B. Form of Proxy. Less frequently, a Non-Registered Holder will receive,
as part of the meeting materials, a form of proxy that has already been
signed by the intermediary (typically by a facsimile, stamped signature)
which is restricted as to the number of shares beneficially owned by the
Non-Registered Holder but which is otherwise uncompleted. If the
Non-Registered Holder does not wish to attend and vote at the meeting in
person (or have another person attend and vote on the Non-Registered
Holder's behalf), the Non-Registered Holder must complete the form of
proxy and deposit it with the Secretary of the Company as described
above under "Appointment of Proxies". If a Non-Registered Holder wishes
to attend and vote at the meeting in person (or have another person
attend and vote on the Non-Registered Holder's behalf), the
Non-Registered Holder must strike out the names of the persons named in
the proxy and insert the Non-Registered Holder's (or such other
person's) name in the blank space provided.
NON-REGISTERED HOLDERS SHOULD FOLLOW THE INSTRUCTIONS ON THE FORMS THEY
RECEIVE AND CONTACT THEIR INTERMEDIARIES PROMPTLY IF THEY NEED ASSISTANCE.
REVOCATION OF PROXIES
A registered shareholder who has given a proxy may revoke the proxy by:
A. completing and signing a proxy bearing a later date and depositing it
with the Secretary of the Company as described above; or
B. depositing an instrument in writing executed by the shareholder or by
the shareholder's attorney authorized in writing: (i) at the
registered office of the Company at any time up to and including the
last business day preceding the day of the meeting, or any
adjournment of the meeting, at which the proxy is to be used, or (ii)
with the chairman of the meeting on the day of the meeting or any
adjournment of the meeting; or
C. in any other manner permitted by law.
2
A Non-Registered Holder may revoke a voting instruction form or a waiver of
the right to receive meeting materials and to vote given to an intermediary at
any time by written notice to the intermediary, except that an intermediary is
not required to act on a revocation of a voting instruction form or of a waiver
of the right to receive materials and to vote that is not received by the
intermediary at least seven days prior to the meeting.
VOTING OF PROXIES
The management representatives designated in the enclosed form of proxy
will vote or withhold from voting the shares for which they are appointed as
proxy on any ballot that may be called for in accordance with the instructions
of the shareholder as indicated on the proxy, and if the shareholder specifies a
choice with respect to any matter to be acted upon, the shares will be voted
accordingly. In the absence of such direction, such shares will be voted by the
management representatives FOR each of the resolutions as indicated in the
discussion of each resolution below. The scrutineers appointed for the meeting
will tabulate votes cast by proxy or in person at the meeting. The scrutineers
at the meeting will include common shares that are present and entitled to vote
but that abstain or are withheld from voting on a particular matter for purposes
of determining the presence of a quorum but not for purposes of determining
whether the required vote has been received for a particular matter. If a broker
indicates on a proxy that such broker does not have discretionary authority to
vote on a particular matter and has not received instructions from the
beneficial owner, such shares will not be considered for purposes of determining
the presence of a quorum or for the purposes of determining whether the required
vote has been received.
The form of proxy confers discretionary voting authority on those persons
designated in the proxy with respect to amendments or variations to the
resolutions identified in the notice of the meeting and with respect to other
matters that may properly come before the meeting. TLC Vision management knows
of no such amendment, variation or other matter to come before the meeting as of
the date of this management information circular. However, if such amendments or
variations or other matters properly come before the meeting, the management
representatives designated in the form of proxy will vote the TLC Vision common
shares represented thereby in accordance with their best judgment.
VOTING SHARES AND RECORD DATE
On April 26, 2004, the Company had outstanding 68,691,227 common shares.
Each holder of common shares of record at the close of business on May 5, 2004,
the record date established for notice of the meeting, will be entitled to one
vote for each common share held on all matters proposed to come before the
meeting or any adjournment thereof, except to the extent that the holder has
transferred any common shares after the record date and the transferee of such
shares establishes ownership of them and demands, not later than the close of
business 10 days before the meeting, to be included in the list of shareholders
entitled to vote at the meeting, in which case the transferee will be entitled
to vote such shares.
A quorum for the TLC Vision shareholder meeting will consist of at least
two persons present in person and each entitled to vote at the meeting and
holding at least 20% of the outstanding TLC Vision common shares.
BUSINESS TO BE CONDUCTED AT THE MEETING
APPROVAL OF THE COMPANY'S 2004 EMPLOYEE SHARE PURCHASE PLAN
Description of 2004 Employee Share Purchase Plan
On March 3, 2004, the board of directors of TLC Vision approved the
Company's 2004 Employee Share Purchase Plan (the "New Plan") subject to
shareholder and Toronto Stock Exchange ("TSX") approval. The Company is seeking
shareholder approval of the New Plan pursuant to Internal Revenue Service
regulations and stock exchange requirements.
3
Concurrently with the board of directors' approval of the New Plan, the
Company amended its 1997 Share Purchase Plan for Canadian Employees (the
"Canadian Plan") on March 3, 2004. Only Canadian employees are eligible to
participate in the Canadian Plan, and the Canadian Plan is not intended to
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code").
Reason for the New Plan
The New Plan is intended to enable the Company and its corporate
subsidiaries to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to employees, and to
promote the success of the Company's business. The Company believes that the New
Plan also increases shareholder value by further aligning the interests of its
employees with the interests of the Company's shareholders by providing an
opportunity for employees to benefit from share price appreciation that
generally accompanies improved financial performance. The board of directors
believes that the Company's long term success is dependent upon the ability of
the Company and its corporate subsidiaries to attract and retain superior
individuals who, by virtue of their ability and qualifications, make important
contributions to the Company and its corporate subsidiaries.
New Plan Benefits
The benefits to be received pursuant to the New Plan by executive officers
and employees of the Company's U.S. subsidiaries are not determinable at this
time because such benefits are based upon each individual's determination of
whether or not to participate in the New Plan and to what extent. The aggregate
number of the Company's common shares that may be purchased under the New Plan
shall not exceed 500,000 common shares.
A general description of the principal terms of the New Plan is set forth
below. This description is qualified in its entirety by the terms of the New
Plan.
General Description of the New Plan
The purpose of the New Plan is to provide employees of the Company's U.S.
subsidiaries who participate in the New Plan with an opportunity to purchase
common shares of the Company through payroll deductions. The New Plan, and the
right of participants to make purchases thereunder, is intended to qualify as an
"Employee Stock Purchase Plan" under the provisions of Section 423 of the Code.
The provisions of the New Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code. Employees of the Company's U.S. subsidiaries are eligible to
participate in the New Plan.
The New Plan can be administered by the board of directors or a committee
of at least three directors that the board of directors appoints. The board of
directors shall determine questions of interpretation or application of the New
Plan. No charge for administrative or other costs may be made against the
payroll deductions of a participant.
Any person who is employed by any of the Company's U.S. subsidiaries is
eligible to participate in the New Plan provided that the employee is employed
on the first day of the Offering Period (as defined below) and subject to
certain limitations imposed by Section 423(b) of the Code. Eligible employees
become participants in the New Plan by delivering to the Company an enrolment
form at least 30 calendar days prior to the first day of the Offering Period.
Common shares of the Company are offered for purchase through a series of
successive offering periods (each an "Offering Period"), from July 1, 2004
through December 31, 2004 and each consecutive six month period thereafter; or
such other period designated by the committee in its sole discretion. Each
eligible employee who elects to participate in the New Plan for a particular
Offering Period is granted a purchase right on the first day of the Offering
Period. The purchase right will entitle the participating employee to specify a
level of payroll deduction (between 1% and 10% of compensation) to be in effect
on each pay day during the
4
Offering Period, and the amount of these periodic deductions will be applied to
the purchase of the shares on each purchase date.
The purchase right will be exercised by applying the amount credited to the
employee's account to the purchase of shares on each semi-annual purchase date.
The option price of the share will be the lesser of (i) 85% of the fair market
value of a common share on the first day of the Offering Period, or (ii) 85% of
the fair market value of a common share on the date the purchase right is
exercised. The fair market value of a share on any relevant date under the New
Plan will be the fair market value of one share as of a particular day, which
shall be the closing price per common share on the NASDAQ National Market System
("NASDAQ") on that day, or, if such day is not a trading day, the last preceding
trading day.
Notwithstanding the foregoing, (i) no employee will be permitted to
subscribe for shares under the New Plan if, immediately after the grant of the
option, the employee would own 5% or more of the voting power or value of all
classes of stock of the Company or any of its corporate subsidiaries (including
common shares of the Company which may be purchased under the New Plan or
pursuant to any other option) and (ii) employees shall not be permitted in any
Offering Period to purchase more shares than the number obtained by dividing
$25,000 by the fair market value of a common share on the first day of the
Offering Period.
A participant's enrolment in the New Plan may be terminated by filing with
the Company a written notice of withdrawal at least 30 calendar days prior to
the beginning of an Offering Period. The failure to remain in the continuous
employ of a participating corporate subsidiary will be deemed to be a withdrawal
from the Offering Period, provided that the employee may elect to continue
participation through the last day of the Offering Period, in which case, shares
shall be purchased for such employee.
No rights or accumulated payroll deductions of a participant under the New
Plan may be pledged, assigned or transferred for any reason.
The New Plan may be amended at any time by the Company's board of
directors, although certain amendments will require shareholder approval. The
New Plan will terminate on the date on which all shares available under the New
Plan have been sold, unless earlier terminated by the Company's board of
directors.
Certain U.S. Federal Tax Consequences of the New Plan
The following discussion summarizes certain tax considerations for
participants in the New Plan and certain tax effects to the Company. State and
local tax consequences may differ.
Amounts deducted from a participant's pay under the New Plan are part of
the employee's regular compensation and remain subject to federal, state and
local income and employment withholding taxes. A participant will not recognize
any additional income at the time the participant elects to participate in the
New Plan, or purchases shares under the New Plan.
If a participant disposes of his or her shares purchased pursuant to the
New Plan within two (2) years after the first day of the Offering Period or
within one (1) year of the purchase of shares (the "Minimum Holding Period"),
the participant will recognize, for federal tax purposes, ordinary compensation
income at the time of disposition of the shares in an amount equal to the excess
of the fair market value of shares on the day the shares were purchased over the
purchase price the participant paid for the shares. In addition, a participant
generally will recognize a capital gain or loss in an amount equal to the
difference between the amount realized upon the disposition of the shares and
the participant's basis in the shares (that is, the purchase price plus the
amount taxed as compensation income).
If a participant disposes of his or her shares purchased pursuant to the
New Plan at any time after the Minimum Holding Period, the participant will
recognize, for federal tax purposes, ordinary compensation income at the time of
such disposition in an amount equal to the lesser of (a) the excess (or zero if
there is no excess) of the fair market value of his or her shares at the time of
such disposition over the amount paid of his or her shares, or (b) 15% of the
fair market value of his or her shares on the first day of the Offering Period.
In addition, the participant generally will recognize a capital gain or loss in
an amount equal to the difference
5
between the amount realized upon the disposition of his or her shares and the
participant's basis in the shares (that is, the purchase price plus the amount,
if any, taxed as compensation income).
Although the amounts deducted from a participant's pay under the New Plan
generally are tax-deductible business expenses of the Company, the Company
generally will not be allowed any additional deduction by reason of a
participant's purchase of shares under the New Plan. However, if a participant
disposes of his or her shares purchased pursuant to the New Plan within the
Minimum Holding Period, the Company should be entitled to a deduction in an
amount equal to the compensation income recognized by the participant. If a
participant disposes of shares purchased under the New Plan after the Minimum
Holding Period, the Company will not receive any deduction for federal income
tax purposes with respect to shares.
Approvals Required
TLC Vision management is asking shareholders to pass Resolution 1, the full
text of which is set out in Appendix A to this management information circular,
to approve the New Plan. The adoption of the New Plan is conditional upon the
approval of the amendments to the Canadian Plan, which are described below, and
the New Plan will not be implemented unless shareholders also approve the
amendments to the Canadian Plan. The affirmative vote of the majority of the
votes cast at the meeting is required to approve the New Plan. THE MANAGEMENT
REPRESENTATIVES DESIGNATED IN THE ENCLOSED FORM OF PROXY INTEND TO VOTE THE TLC
VISION COMMON SHARES FOR WHICH THEY HAVE BEEN APPOINTED FOR THE APPROVAL OF THE
NEW PLAN UNLESS THE SHAREHOLDER WHO HAS GIVEN SUCH PROXY DIRECTS OTHERWISE.
THE TLC VISION BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE NEW PLAN.
APPROVAL OF AMENDMENTS TO THE COMPANY'S SHARE PURCHASE PLAN FOR CANADIAN
EMPLOYEES
Amendments to Share Purchase Plan for Canadian Employees
On October 30, 1997, the Company's shareholders approved the adoption of
the Canadian Plan. On March 3, 2004, the Company's board of directors approved
amendments to the Canadian Plan to conform its terms to the New Plan. It is
intended that employees of the Company's U.S. subsidiaries will participate in
the New Plan and employees of the Company and its Canadian subsidiaries will
participate in the Canadian Plan.
Amendments to the Canadian Plan include:
- changing the definition of "Eligible Employee" to mean all full-time
Canadian resident employees who have completed three months' continuous
service with the Company or any subsidiary and, subject to any required
approvals, any Canadian resident consultant of the Company or any
subsidiary;
- changing the contribution periods from quarterly to semi-annually,
beginning July 1, 2004;
- changing the purchase price of common shares purchased with employee
contributions from a formula based on the weighted average trading price
of the Company's common shares on the TSX to the lesser of (i) 85% of the
closing price of the Company's common shares on NASDAQ on the first
trading day of the six month period ended just prior to the date of
purchase, and (ii) 85% of the closing price of the Company's common
shares on NASDAQ on the day immediately preceding the date of purchase;
- eliminating the Company's matching 25% contribution to employee
contributions under the Canadian Plan; and
- eliminating the Company's option to purchase common shares in the open
market for the Canadian Plan.
A maximum of 500,000 common shares were originally available for purchase
under the Canadian Plan. As of April 26, 2004, a total of 100,855 common shares
remained available for purchase under the plan.
6
Certain Canadian Income Tax Consequences of the Canadian Plan
The following discussion summarizes certain tax considerations for
participants in the Canadian Plan and certain tax effects to the Company.
The purchase of shares may give rise to a taxable employment benefit that
will be required to be included in the income for tax purposes of the employee.
The amount of the benefit will be the amount by which the fair market value of
the shares at the time of purchase exceeds the purchase price paid. Dividends
received by an employee on shares are required to be included in the income of
the employee, subject to the normal gross-up and dividend tax credit rules
generally applicable to taxable dividends paid by a taxable Canadian
corporation. The disposition of shares held by an employee as capital property
will generally give rise to the realization of a taxable capital gain or
allowable capital loss. Employee contributions, including by way of payroll
deductions, will not reduce the amount of tax withheld at source by the employer
on the employee's remuneration, nor will it reduce the amount of the employee's
income from employment for tax purposes.
No deduction will be allowed to the Company for Canadian tax purposes in
respect of any purchase of shares pursuant to the Canadian Plan.
The foregoing is of a general nature only and is not exhaustive of all
possible tax considerations.
Approvals Required
TLC Vision management is asking shareholders to pass Resolution 2, the full
text of which is set out in Appendix A to this management information circular,
to approve the amendments to the Canadian Plan. The amendments to the Canadian
Plan are conditional upon the approval of the New Plan, which is described
above, and will not be implemented if shareholders do not approve the New Plan.
The affirmative vote of the majority of the votes cast at the meeting is
required to approve the amendments to the Canadian Plan. THE MANAGEMENT
REPRESENTATIVES DESIGNATED IN THE ENCLOSED FORM OF PROXY INTEND TO VOTE THE TLC
VISION COMMON SHARES FOR WHICH THEY HAVE BEEN APPOINTED FOR THE APPROVAL OF THE
AMENDMENTS TO THE CANADIAN PLAN UNLESS THE SHAREHOLDER WHO HAS GIVEN SUCH PROXY
DIRECTS OTHERWISE.
THE TLC VISION BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE AMENDMENTS TO THE CANADIAN PLAN.
APPROVAL OF AMENDMENTS TO THE SHARE OPTION PLAN
On March 3, 2004, the Company's board of directors approved an amendment to
the Company's Share Option Plan to increase the number of common shares which
may be issued thereunder from 5,116,000 to 7,116,000. The new number will
represent approximately 11.2% of the Company's currently issued and outstanding
common shares. As of April 26, 2004, options to acquire 2,545,249 common shares
remained outstanding and unexercised under the Share Option Plan. The Company
currently has no options remaining available to be granted under the Share
Option Plan.
The Share Option Plan is administered by the Company's board of directors.
The purpose of the Share Option Plan is to advance the interest of the Company
by (i) providing directors, officers, employees and other eligible persons with
additional incentive; (ii) encouraging stock ownership by eligible persons;
(iii) increasing the proprietary interests of eligible persons in the success of
the Company; (iv) encouraging eligible persons to remain with the Company or its
subsidiaries; and (v) attracting new employees, officers or directors to the
Company or is subsidiaries. In determining whether to grant options and how many
options to grant to eligible persons under the Share Option Plan, consideration
is given to each individual's past performance and contribution to the Company
as well as the individual's expected ability to contribute to the Company in the
future.
The purpose of this amendment is to ensure that there remains for issuance
under the Share Option Plan a sufficient number of options to allow the Company
to maintain its current policy of rewarding options as an alternative to cash
compensation, and as bonus remuneration, for all corporate office employees and
directors of the Company. TLC Vision management is asking the shareholders to
pass Resolution 3, the full text of
7
which is set out in Appendix A to this management information circular, to
approve the amendments to the Share Option Plan.
Approvals Required
The affirmative vote of the majority of the votes cast at the meeting is
required to approve the amendments to the Share Option Plan. THE MANAGEMENT
REPRESENTATIVES DESIGNATED IN THE ENCLOSED FORM OF PROXY INTEND TO VOTE THE TLC
VISION COMMON SHARES FOR WHICH THEY HAVE BEEN APPOINTED FOR THE APPROVAL OF THE
AMENDMENTS TO THE SHARE OPTION PLAN.
THE TLC VISION BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE OF FOR THE
APPROVAL OF THE AMENDMENTS TO THE SHARE OPTION PLAN.
On December 19, 2002, the TLC Vision board of directors also approved an
amendment to the Share Option Plan that allows the board of directors to extend
the period of time during which options may be exercised after a participant in
the Share Option Plan ceases to be an employee of the Company or one of its
subsidiaries. Previously, such former employees could only exercise their
options for a period of 90 days after the expiration of the period during which
such former employees were provided with severance.
ELECTION OF DIRECTORS
The table below sets out the name and place of residence of each of the
individuals who are nominated for election as a director of TLC Vision to hold
office until the next annual meeting of the shareholders of TLC Vision or until
his successor is elected or appointed. The table also sets out the age of the
nominee, the position with TLC Vision that each nominee presently holds, the
principal occupation of each nominee and the date on which each nominee was
first elected or appointed as a director. See the section entitled "Security
Ownership of Certain Beneficial Owners and Management" for the number of TLC
Vision common shares that are beneficially owned, directly or indirectly, or
over which control or direction is exercised by each nominee. Information on
each nominee's business experience during the past five years is included
following the table. The TLC Vision board of directors has an Audit Committee, a
Corporate Governance Committee and a Compensation Committee. The members of such
committees are indicated in the table below.
<Table>
<Caption>
DIRECTOR OF THE
NAME AND PLACE OF RESIDENCE AGE POSITION WITH THE COMPANY PRINCIPAL OCCUPATION COMPANY SINCE
- --------------------------- --- ------------------------- -------------------- ---------------
Elias Vamvakas......................... 45 Chief Executive Officer Officer of the May 1993
Richmond Hill, Ontario and Chairman of the Board Company
of Directors
John J. Klobnak........................ 53 Director(2)(3) Corporate Director May 2002
St. Louis, Missouri
Thomas N. Davidson..................... 64 Director(1*)(2)(3) Corporate Director October 2000
Terra Cotta, Ontario
William David Sullins, Jr., O.D. ...... 61 Director(1)(2*) Optometrist June 1995
Athens, Tennessee
Warren S. Rustand...................... 60 Director(1)(3*) Management October 1997
Tucson, Arizona Consultant
Richard Lindstrom, M.D. ............... 56 Director Ophthalmologist May 2002
Minneapolis, Minnesota
Toby S. Wilt........................... 59 Director(3) Corporate Director January 2004
Nashville, Tennessee
</Table>
- ---------------
(1) Member of the Compensation Committee, * -- Chairman
(2) Member of the Corporate Governance Committee, * -- Chairman
(3) Member of the Audit Committee, * -- Chairman
8
Set forth below is biographical information relating to the nominees for
election to the board of directors of the Company.
Elias Vamvakas has served as Chief Executive Officer and Chairman of the
Board of Directors of TLC Vision since 1993. Prior to co-founding the Company in
1993, Mr. Vamvakas was the President of E.A. Vamvakas Insurance Agencies
Limited, an insurance, financial planning and benefits provider, and the
President of the Creative Planning Financial Group of Companies, a private
provider of financial planning, benefits and pension plans.
John J. Klobnak has been a director of TLC Vision since May 2002. From July
1988 to May 2002, Mr. Klobnak was Chairman of the Board of Directors and Chief
Executive Officer of LaserVision. From 1990 to 1993, Mr. Klobnak served as
LaserVision's Chairman, President and Chief Executive Officer. From 1986 to
1988, he served as Chief Operating Officer and, subsequently, President of
MarketVision, a partnership acquired by LaserVision upon its inception in 1988.
Prior to 1986, Mr. Klobnak was engaged in marketing and consulting. Mr. Klobnak
is currently the Chairman of the Board of Directors of Quick Study Radiology,
Inc.
Thomas N. Davidson has been Chairman of NuTech Precision Metals Inc. and
Chairman of Quarry Hill Group, a private investment holding company, since 1986.
NuTech Precision Metals Inc. is a manufacturer of high performance metal
fabrications for the health care, aerospace, high technology and chemical
industries. Mr. Davidson is past Chairman of Hanson Chemical Inc., a supplier of
specialty chemical products, General Trust and PCL Packaging Inc., a supplier of
plastic packaging. Mr. Davidson is the non-executive Chairman of Azure Dynamics
Corporation. He is on the board of CMA Holdings, Inc., and MDC Corporation, Inc.
and was recognized by the Financial Post as the Canadian Entrepreneur of the
year in 1979.
William David Sullins, Jr., OD has been a director of TLC Vision since June
1995. Dr. Sullins has been the President and Chief of Clinical Services of
Sullins Family Eye Care Clinics, P.C., a professional optometric corporation,
since 1991. Dr. Sullins is a founding member and distinguished practitioner of
National Academies of Practice, a Fellow and former member of the Admissions
Committee of the American Academy of Optometry, a Fellow and Admissions Chair of
the Tennessee Academy of Optometry, Adjunct Professor at the Southern College of
Optometry, former Chair of the Council on Optometric Education, and Past
President and former Chairman of the Board of Trustees of the American
Optometric Association. Dr. Sullins is a former director of First Franklin
Bankshares, Bank First Corporation and of First National Bank and Trust Company.
Dr. Sullins was inducted into the National Optometry Hall of Fame in 2002.
Warren S. Rustand has been a director of TLC Vision since October 1997.
Since October 2001, Mr. Rustand has been Chairman and Chief Executive Officer of
Summit Capital Consulting. Mr. Rustand has also been a Strategic Partner of
Harlingwood Capital Partners, a San Diego-based investment firm since January
2000. Mr. Rustand was the Chairman and Chief Executive Officer of Rural/Metro
Corporation, a U.S. public company providing ambulance and fire protection
services, from 1996 to August 1998. Mr. Rustand was Chairman and Chief Executive
Officer of The Cambridge Company Ltd., a merchant banking and management
consulting company, from 1987 to 1997. From 1994 to 1997, Mr. Rustand was also
the Chairman of 20/20 Laser Centers, Inc., which was acquired by TLC Vision in
1997.
Richard L. Lindstrom, M.D. has served as a director of TLC Vision since May
2002 and, prior to that, as a director of LaserVision since November 1995. Since
1979, Dr. Lindstrom has been engaged in the private practice of ophthalmology
and has been the President of Minnesota Eye Consultants P.A., a provider of eye
care services, or its predecessor since 1989. In 1989, Dr. Lindstrom founded the
Phillips Eye Institute Center for Teaching & Research, an ophthalmic research
and surgical skill education facility, and he currently serves as the Center's
Medical Director. Dr. Lindstrom has served as an Associate Director of the
Minnesota Lions Eye Bank since 1987. He is a medical advisor for several medical
device and pharmaceutical manufacturers. From 1980 to 1989, he served as a
Professor of Ophthalmology at the University of Minnesota. Dr. Lindstrom
received his M.D., B.A. and B.S. degrees from the University of Minnesota.
Toby S. Wilt has been a director of TLC Vision since January 2004. A
Certified Public Accountant (non-practising), Mr. Wilt currently sits on the
boards of Outback Steakhouse, Inc., a restaurant chain, and 1st Source
Corporation, a southwestern financial institution that provides consumer and
commercial banking
9
services. His past directorships include C&S Sovran, a southwestern bank holding
company, Genesco, Inc., a manufacturer and retailer of footwear and apparel,
Titan Holdings, an insurance company, and First American Corporation, a regional
bank holding company. Mr. Wilt is also the Chairman of privately held Christie
Cookie Company, a manufacturer and distributor of baked food products. From 2000
through 2001, he served as the Chairman of the World President's Organization.
The Business Corporations Act (New Brunswick) provides that each TLC Vision
shareholder entitled to vote at an election of directors has cumulative voting
rights. Such rights entitle a shareholder to cast a number of votes equal to the
number of votes attached to the shares held by the shareholder multiplied by the
number of directors to be elected. The shareholder may cast all such votes in
favour of one candidate for director or distribute them among the candidates in
any manner. If a shareholder has voted for more than one candidate without
specifying the distribution of the shareholder's votes among the candidates, the
shareholder shall be deemed to have distributed the shareholder's votes equally
among the candidates for whom the shareholder voted, disregarding fractions. The
seven nominees who receive the greatest number of votes cast for the election of
directors will be elected as directors. If a shareholder wishes to distribute
the shareholder's votes other than equally among the nominees for whom the
shareholder has directed the management representatives designated in the
enclosed form of proxy to vote, then the shareholder must do so personally at
the meeting or by another proper form of proxy.
TLC Vision 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 management representatives designated in
the enclosed form of proxy reserve the right to vote for another nominee at
their discretion unless a shareholder has specified in his or her proxy that his
or her common shares are to be withheld from voting in the election of
directors.
THE MANAGEMENT REPRESENTATIVES DESIGNATED IN THE ENCLOSED FORM OF PROXY
INTEND TO CAST THE VOTES TO WHICH THE TLC VISION COMMON SHARES REPRESENTED BY
SUCH PROXY ARE ENTITLED EQUALLY AMONG THE PROPOSED NOMINEES FOR ELECTION AS
DIRECTORS, UNLESS THE SHAREHOLDER WHO HAS GIVEN SUCH PROXY HAS DIRECTED THAT
SUCH SHARES BE WITHHELD FROM VOTING IN THE ELECTION OF DIRECTORS.
THE TLC VISION BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF THE INDIVIDUALS NAMED ABOVE AS DIRECTORS.
APPOINTMENT OF AUDITORS
The TLC Vision board of directors proposes that Ernst & Young LLP be
appointed as auditors of the Company until the next annual meeting of
shareholders of the Company. Ernst & Young LLP have been auditors of the Company
since 1997. Representatives of Ernst & Young LLP are expected to attend the
annual and special meeting of the Company, will be provided with an opportunity
to make a statement, should they desire to do so, and will be available to
respond to appropriate questions from the shareholders of the Company.
The affirmative vote of the majority of the votes cast at the meeting at
which a quorum is present is required to appoint Ernst & Young LLP as auditors
of TLC Vision for the ensuing year and to authorize the directors to fix the
remuneration to be paid to the auditors. UNLESS OTHERWISE DIRECTED, THE
MANAGEMENT REPRESENTATIVES DESIGNATED IN THE ENCLOSED FORM OF PROXY INTEND TO
VOTE THE TLC VISION COMMON SHARES FOR WHICH THEY HAVE BEEN APPOINTED FOR THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE AUDITORS OF THE COMPANY AND FOR THE
AUTHORIZATION OF THE DIRECTORS TO FIX THE REMUNERATION TO BE PAID TO THE
AUDITORS. If the TLC Vision shareholders do not approve the appointment of Ernst
& Young LLP, the TLC Vision board of directors will reconsider their
appointment.
THE TLC VISION BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF
ERNST & YOUNG LLP AS AUDITORS OF TLC VISION FOR THE ENSUING YEAR.
10
Fees Billed by External Auditors
Ernst & Young LLP billed the Company for the following fees in the last two
fiscal years:
<Table>
<Caption>
TRANSITION PERIOD
ENDED DECEMBER 31, YEAR ENDED
2002 DECEMBER 31,
(SEVEN MONTHS) 2003
------------------ ------------
Fees for Audit Services..................................... $495,000 $609,203
Fees for Audit-related Services............................. -- $ 16,115
Fees for Tax Services....................................... $110,000 --
All Other Fees.............................................. -- $ 15,000
</Table>
Audit fees for the financial year ended December 31, 2003 and the
transition period ended December 31, 2002 were for professional services
rendered for the audits of the consolidated financial statements of the Company,
quarterly reviews of the consolidated financial statements included in the
Company's quarterly filings, consents, comfort letters, and statutory audits of
the subsidiary financial statements. Audit related fees for the financial year
ended December 31, 2003 were for services related to consultation in connection
with management's documentation of internal controls. Tax fees for the
transition period ended December 31, 2002 were for services related to tax
compliance, assistance with tax audits and inquiries and tax planning services.
All other fees for the financial year ended December 31, 2003 were related to
insurance advisory services. The Company does not have any other services
provided by Ernst & Young LLP other than those stated above.
Pre-Approval Policies and Procedures
All 2003 fees were approved in advance by the Audit Committee. All audit
and non-audit services to be provided by Ernst & Young LLP are and will be
pre-approved by the Audit Committee.
Of the fees reported in this management information circular for 2003, none
of the fees billed by Ernst & Young LLP were approved by the Audit Committee of
the board of directors of TLC Vision pursuant to the de minimis exception
provided by Section (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. The Audit
Committee of the Company has concluded that the foregoing non-audit services did
not adversely impact the independence of Ernst & Young LLP.
EXECUTIVE OFFICERS
The following are brief summaries of the business experience during the
past five years of each of the executive officers of TLC Vision who are not
directors:
James C. Wachtman, age 43, became President and Chief Operating Officer of
TLC Vision in May 2002. Prior thereto, Mr. Wachtman served as Chief Operating
Officer of North America operations of LaserVision from June 1996 to May 2002
and President of LaserVision from August 1998 to May 2002. Prior to joining
LaserVision, Mr. Wachtman was employed in various positions by McGaw, Inc., a
manufacturer of medical disposables. Most recently, he served as Vice President
of Operations of CAPS (Central Admixture Pharmacy Services), a hospital pharmacy
services division of McGaw.
B. Charles Bono III, age 56, became Chief Financial Officer and Treasurer
of TLC Vision in May 2002. Prior thereto, Mr. Bono served as Executive Vice
President, Chief Financial Officer and Treasurer of LaserVision from October
1992 to May 2002. From 1980 to 1992, Mr. Bono was employed by Storz Instrument
Company, a global marketer of ophthalmic devices and pharmaceutical products
that is now a part of Bausch and Lomb Surgical, serving as Vice President of
Finance from 1987 to 1992.
Robert W. May, age 56, became Co-General Counsel of TLC Vision in May 2002,
was appointed Secretary as of June 1, 2002 and became General Counsel in
November 2002. Prior thereto, Mr. May served as Vice-Chairman and General
Counsel of LaserVision from September 1993 to May 2002. Prior to joining
LaserVision as a full-time employee, Mr. May served as Corporate Secretary,
General Corporate Counsel and
11
a director of LaserVision. Mr. May was engaged in private legal practice in St.
Louis, Missouri from 1985 until 1993.
William P. Leonard, age 39, was appointed the Executive Vice President,
Refractive for TLC Vision in January 2004. Prior thereto, he was Executive Vice
President, Operations for TLC Vision and prior to 1999, he served as Regional
General Manager for TLC Vision. Prior to joining the Company in 1997, Mr.
Leonard was a Site Manager of 20/20 Laser Centers, Inc. from 1995 to February
1997. From 1990 to 1995, Mr. Leonard was a Territory Manager for Wesley Jessen
Corporation, a division of Schering-Plough Corp.
INFORMATION ON EXECUTIVE COMPENSATION
The following table sets forth all compensation earned during the two
fiscal years ended May 31, 2001 and 2002, during the transition period ended
December 31, 2002 and during the fiscal year ended December 31, 2003 by the
Chief Executive Officer of the Company and TLC Vision's four highest paid
executive officers who were serving as executive officers at the end of the
fiscal year ended December 31, 2003 and whose annual salary and bonus exceeded
$100,000 for the fiscal year ended December 31, 2003, referred to as TLC
Vision's named executive officers.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
ANNUAL COMPENSATION(2) COMPENSATION
------------------------------ ------------------
SALARY FOR THE BONUS FOR THE COMMON SHARES
NAME AND FISCAL YEAR FISCAL YEAR UNDERLYING OPTIONS
PRINCIPAL POSITION FISCAL YEAR ENDED(1) ($) ($) (#)
- ------------------ -------------------- -------------- ------------- ------------------
Elias Vamvakas.................. December 31, 2003 375,000 337,500(4) 51,000(3)(5)
Chief Executive Officer December 31, 2002 218,750 93,750(6) 125,000(7)
May 31, 2002 384,468 -- 180,000
May 31, 2001 380,219 209,156(4) --
James C. Wachtman............... December 31, 2003 334,375 204,000 72,500(3)
President and Chief December 31, 2002 189,583 47,396 --
Operating Officer May 31, 2002(8)(9) 14,852 -- --
B. Charles Bono................. December 31, 255,625 113,594 61,000(3)
2003(10)
Chief Financial Officer December 31, 140,000 37,500 --
2002(10)
May 31, 2002(8)(9) 10,968 -- --
Robert W. May................... December 31, 258,546 105,367 51,000(3)
2003(10)
General Counsel December 31, 2002 148,750 39,844 --
and Secretary May 31, 2002(8)(9) 11,653 -- --
William P. Leonard.............. December 31, 2003 203,637 122,220 70,000(3)
Executive Vice-President December 31, 2002 117,925 26,979 --
Refractive May 31, 2002 161,070 38,900 14,000
May 31, 2001 150,198 48,571 50,000
</Table>
- ---------------
(1) TLC Vision changed its fiscal year-end from May 31 to December 31 effective
June 1, 2002. Accordingly, executive compensation is presented for both the
fiscal year (twelve months) ended May 31, 2002 and the transition period
(seven months) ended December 31, 2002.
(2) None of the named executive officers had perquisites and personal benefits
exceeding the lesser of $50,000 and 10% of his total salary and bonus.
(3) See the information under " -- Options Granted During the Fiscal Year Ended
December 31, 2003" below.
(4) Mr. Vamvakas earned performance bonuses based on the objectives described
under "-- Employment Contracts -- Mr. Elias Vamvakas."
(5) As Executive Chairman and Director of Vascular Sciences Corporation
("Vascular Sciences"), Mr. Vamvakas also received 4,583 fully exercisable
options to purchase Vascular Sciences common stock at an exercise price of
$1.30 and 500,000 options that become exercisable over a three-year period
to purchase Vascular Sciences common stock at an exercise price of $0.99.
The Company has an equity interest in Vascular Sciences.
12
(6) Mr. Vamvakas initially received a $37,500 bonus for the year ended December
31, 2002. The Compensation Committee increased this amount by $56,250 to a
total of $93,750 on May 29, 2003.
(7) Represents options reissued at Cdn.$13.69 per share which replaced options
surrendered at Cdn.$20.75 per share.
(8) Messrs. Wachtman, Bono and May became officers of the Company on May 15,
2002. Prior to that date, Messrs. Wachtman, Bono and May were officers of
LaserVision. Compensation for the fiscal year ended May 31, 2002 is based
on the 17-day period from May 15 to 31, 2002.
(9) TLC Vision did not make any option grants to Messrs. Wachtman, Bono and May
during the fiscal year ended May 31, 2002; however, options to purchase
shares of LaserVision common stock held by these officers were converted to
options to purchase TLC Vision common shares in connection with the merger
based on the exchange ratio of 0.95 TLC common shares for each share of
LaserVision common stock. These options included a grant made to each of
Messrs. Wachtman, Bono and May by LaserVision during the twelve month
period ended May 31, 2002 to purchase 150,000, 90,000 and 90,000 shares of
LaserVision common stock, respectively, with an exercise price of $3.45, an
expiration date of June 15, 2008, and a grant date present value of $1.77
per share calculated using the Black-Scholes model.
(10) On May 15, 2003, Mr. Bono and Mr. May received bonuses for their first year
of employment with the Company representing 25% of their compensation. The
amounts shown for the periods ended December 31, 2002 and December 31, 2003
represent the amounts paid in May, 2003 and the pro rata amounts accrued as
of December 31, 2003 and payable on May 15, 2004.
The following table sets forth the individual grants of TLC Vision stock
options for the fiscal year ended December 31, 2003 to the named executive
officers.
OPTIONS GRANTED DURING THE FISCAL YEAR ENDED DECEMBER 31, 2003
<Table>
<Caption>
COMMON MARKET VALUE
SHARES % OF TOTAL OF COMMON
UNDERLYING OPTIONS SHARES VALUE UNDER
OPTIONS GRANTED TO EXERCISE UNDERLYING BLACK-SCHOLES
GRANTED EMPLOYEES IN OR BASE OPTIONS ON THE OPTION PRICING
NAME (#)(1) DATE OF GRANT FISCAL YEAR PRICE DATE OF GRANT EXPIRATION DATE MODEL(2)
- ---- ---------- ------------- ------------ -------- -------------- --------------- --------------
Elias Vamvakas......... 50,000 Jan. 2, 3.0% $1.82 $1.82 Jan. 2, 2008 $27,000
2003.........
1,000 Oct. 1, 2003 $3.87 $3.87 Oct. 1, 2008 $ 1,690
James C. Wachtman...... 47,500 Jan. 2, 2003 4.2% $1.16 $1.16 Jan. 2, 2008 $25,650
25,000 Dec. 15, 2003 $6.10 $6.10 Dec. 15, 2008 $70,500
B. Charles Bono........ 41,000 Jan. 2, 2003 3.5% $1.16 $1.16 Jan. 2, 2008 $22,140
20,000 Dec. 15, 2003 $6.10 $6.10 Dec. 15, 2008 $56,400
Robert W. May.......... 40,000 Jan. 2, 2003 3.3% $1.16 $1.16 Jan. 2, 2008 $21,600
1,000 July 1, 2003 $4.94 $4.94 July 1, 2008 $ 2,080
15,000 Dec. 15, 2003 $6.10 $6.10 Dec. 15, 2008 $28,200
William P. Leonard..... 40,000 Jan. 2, 2003 4.1% $1.16 $1.16 Jan. 2, 2008 $21,600
30,000 Dec. 15, 2003 $6.10 $6.10 Dec. 15, 2008 $84,600
</Table>
- ---------------
(1) Each option is exercisable with respect to 25% of the total number of shares
underlying the option on each of the first, second, third and fourth
anniversaries of the date of grant.
(2) Assumes: 2.5% risk-free rate of interest; dividend yield of 0%; volatility
75%; options expire in 5 years and the expected life is 2.5 years. These
assumptions are for illustrative purposes only. The actual value of the
options will depend on the market value of the TLC Vision common shares when
the options are exercised.
13
The following table sets forth all TLC Vision stock options exercised by
TLC Vision's named executive officers during the fiscal year ended December 31,
2003 and the total number of shares underlying unexercised stock options of TLC
Vision's named executive officers and their dollar value at the end of the
fiscal year ended December 31, 2003:
AGGREGATE OPTION EXERCISES DURING THE FISCAL YEAR ENDED DECEMBER 31, 2003
AND FISCAL YEAR END OPTION VALUES
<Table>
<Caption>
VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL YEAR
YEAR END END(1)
COMMON SHARES ------------------------------ ----------------------------
ACQUIRED ON AGGREGATE VALUE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME EXERCISE (#) REALIZED ($) ($) (#) ($) ($)
---- ------------- --------------- ------------ --------------- ----------- --------------
Elias Vamvakas....... 152,068 728,406 45,000 186,000 165,411 758,440
James C. Wachtman.... 152,000 152,000 855,000 72,500 1,389,660 275,725
B. Charles Bono...... 103,550 103,550 513,000 61,000 833,796 234,870
Robert W. May........ 114,000 114,000 798,000 51,000 1,862,646 225,740
William P. Leonard... 28,500 78,544 26,000 85,000 63,835 310,095
</Table>
- ---------------
(1) Value is based upon the closing price of the common shares of the Company on
NASDAQ on December 31, 2003, which was $6.63.
EMPLOYMENT CONTRACTS
Elias Vamvakas
TLC Vision entered into an employment contract with Mr. Elias Vamvakas on
January 1, 1996. Mr. Vamvakas is the Chief Executive Officer and Chairman of the
TLC Vision board of directors. The employment agreement, as amended, provides
that Mr. Vamvakas will receive a base salary of $375,000 per year and the
potential to receive a bonus equal to up to 100% of his base salary if certain
criteria are met.
Mr. Vamvakas' contract provides for the payment of a cash bonus of up to
$375,000. Mr. Vamvakas' bonus is based, in part, on the Company's achieving
certain levels of budgeted earnings before interest, income taxes, and
depreciation and amortization, budgeted earnings per share and budgeted cash
flow. These financial targets are the basis for 80% of Mr. Vamvakas' bonus and
the remaining 20% is at the discretion of the board of directors. If the Company
only achieves 80% of the budgeted financial target, Mr. Vamvakas is entitled to
a partial bonus with respect to such target. Based on the Company's financial
performance in 2003, Mr. Vamvakas was entitled to 90% of the performance bonus
for 2003.
Mr. Vamvakas' employment may be terminated for just cause (as defined in
the agreement). If terminated other than for just cause, Mr. Vamvakas will be
entitled to receive 24 months' base salary and bonus and shall be entitled to
exercise all TLC Vision stock options granted but not otherwise exercisable or
forfeited.
Mr. Vamvakas' contract contains non-competition and non-solicitation
covenants which run for a period of two years following his employment and
prohibit Mr. Vamvakas from engaging in or having a financial interest in a
business involved in the financing, development and/or operation of excimer
laser eye surgery clinics or secondary eye care clinics in geographic markets
where TLC Vision carries on business and from employing or soliciting any
employee or consultant of TLC Vision. The agreement also contains
confidentiality covenants preventing Mr. Vamvakas from disclosing confidential
or proprietary information relating to TLC Vision at any time during or after
his employment.
14
James C. Wachtman
In connection with the merger with LaserVision, the Company entered into an
employment contract with Mr. James C. Wachtman providing for his employment as
President and Chief Operating Officer of TLC Vision. The term of the agreement
is two years commencing on May 15, 2002 with automatic two-year renewals unless
otherwise terminated by the parties. The base annual salary under the agreement
is, effective January 1, 2003, $340,000, with minimum annual increases equal to
the increase of the U.S. Consumer Price Index.
Mr. Wachtman's compensation also includes, effective January 1, 2004, an
annual bonus of up to 80% of his salary upon the attainment of specified
performance goals. Mr. Watchman's bonus is based, in part, on the Company's
achieving certain levels of budgeted earnings before interest, income taxes, and
depreciation and amortization, budgeted earnings per share and budgeted cash
flow. These financial targets are the basis for 80% of Mr. Watchman's bonus and
the remaining 20% is at the discretion of the board of directors. If the Company
only achieves 80% of the budgeted financial target, Mr. Watchman is entitled to
a partial bonus with respect to such target.
The agreement provides for severance payments equal to two times Mr.
Wachtman's annual base salary plus bonus in the event of Mr. Wachtman's death,
termination of his employment without cause or Mr. Wachtman's resignation for
specified reasons. Among these reasons, Mr. Wachtman may terminate his
employment with TLC Vision upon at least 90 days' written notice in the event of
a material adverse change in his job responsibilities following a change of
control of the Company. If Mr. Wachtman's employment is terminated by the
Company without cause after expiration of the initial two-year term of the
agreement, he will be entitled to receive a severance payment equal to the
greater of: (i) two times his annual base salary plus bonus, or (ii) an amount
calculated by reference to the longest time period to be used for purposes of
calculating severance that Elias Vamvakas, as Chief Executive Officer, was
entitled to receive at any time during the term of the agreement. Additionally,
the agreement provides for termination upon payment of six months' salary and
bonus in the event of disability.
B. Charles Bono III
In connection with the merger with LaserVision, TLC Vision entered into an
employment agreement with Mr. B. Charles Bono III providing for his employment
as Chief Financial Officer of the Company. The term of the agreement is three
years commencing on May 15, 2002 with automatic three-year renewals unless
otherwise terminated by the parties. The base annual salary is, effective
January 1, 2004, $265,000, with minimum annual increases equal to the increase
of the U.S. Consumer Price Index. Mr. Bono's compensation also includes an
annual bonus of up to 50% of his base salary upon the attainment of specified
performance goals, provided that Mr. Bono will receive a guaranteed bonus of at
least 25% of his base salary for the first year of his employment.
The employment agreement also provided for full vesting and immediate
exercisability for each TLC Vision stock option received in exchange for
LaserVision options or warrants as a result of the merger. Additionally, the
agreement provides for severance payments equal to three times Mr. Bono's annual
base salary plus bonus in the event of Mr. Bono's death, termination of his
employment without cause or Mr. Bono's resignation within 18 months of the
closing date of the merger, or for specified reasons. Pursuant to an amendment
dated September 30, 2003, the period of time during which Mr. Bono may resign
and be entitled to that severance payment has been extended to November 15,
2004. Among the specified reasons for resignation that will entitle Mr. Bono to
severance payments, Mr. Bono may terminate his employment with TLC Vision upon
at least 90 days' written notice in the event of a material adverse change in
his job responsibilities following a change of control of the Company. If Mr.
Bono's employment is terminated by the Company without cause after expiration of
the initial three-year term of the agreement, the severance payment will be
calculated by reference to the amount to which other senior executives of the
Company would be entitled. Additionally, the agreement provides for termination
upon payment of six months' salary and bonus in the event of disability.
15
Robert W. May
In connection with the merger with LaserVision, the Company entered into an
employment agreement with Mr. Robert W. May, J.D., the Company's General Counsel
and Secretary. The term of the agreement is three years commencing on May 15,
2002 with automatic one-year renewals unless otherwise terminated by the
parties. Mr. May's base annual salary is, effective January 1, 2004, $260,674,
with minimum annual increases equal to the increase of the Consumer Price Index.
His compensation also includes an annual bonus of up to 50% of his base salary
upon the attainment of specified performance goals, provided that Mr. May will
receive a guaranteed bonus of at least 25% of his base salary for the first year
of his employment.
The employment agreement also provided for full vesting and immediate
exercisability for each TLC Vision stock option received in exchange for
LaserVision options or warrants as a result of the merger. Additionally, the
agreement provides for severance payments equal to three times Mr. May's annual
base salary plus bonus in the event of Mr. May's death, termination of his
employment without cause or Mr. May's resignation within 18 months of the
closing date of the merger or for specified reasons. Pursuant to an amendment
dated September 30, 2003, the period of time during which Mr. May may resign and
be entitled to that severance payment has been extended to November 15, 2004.
Among the specified reasons for resignation that will entitle Mr. May to
severance payments, Mr. May may terminate his employment with TLC Vision upon at
least 90 days' written notice in the event of a material adverse change in his
job responsibilities following a change of control of the Company. If Mr. May's
employment is terminated by the Company without cause after expiration of the
initial three-year term of the agreement, the severance payment will be
calculated by reference to the amount to which other senior executives of the
Company would be entitled. Additionally, the agreement provides for termination
upon payment of six months' salary and bonus in the event of disability.
William P. Leonard
TLC Vision entered into an employment contract with Mr. William P. Leonard,
who is Executive Vice President, Refractive of TLC Vision. The term of the
agreement is three years commencing on June 1, 2000 with automatic one year
renewals unless otherwise terminated by the parties. The base annual salary
under the employment agreement is, effective January 1, 2004, $225,000 with an
annual review of salary increases by the Company based on the discretion of the
board of directors. Mr. Leonard is also entitled to receive options under TLC
Vision's stock option plan. Effective January 1, 2004, Mr. Leonard's
compensation also includes an annual bonus of up to 50% of his annual salary
based on Mr. Leonard's personal performance and the financial performance of TLC
Vision as a whole.
Mr. Leonard's employment may be terminated for just cause, as defined in
the agreement. If terminated for other than just cause, Mr. Leonard will be
entitled to receive 12 months' base salary plus an additional month of salary
for each year worked following the third anniversary of the effective date of
the agreement to a maximum of six additional months of salary.
The agreement contains change of control provisions that provide, among
other things, that Mr. Leonard may voluntarily terminate his employment with the
Company within six months following a change of control and would be entitled to
12 months' base salary on termination.
Mr. Leonard's agreement also contains non-competition and non-solicitation
covenants which run for a minimum of one year following his employment and
prohibit Mr. Leonard from engaging in or having a financial interest in, or
permitting the use of his name by, an entity engaged in the refractive laser
corrective surgery business or which competes with the Company. The agreement
also prohibits him from employing any TLC Vision employee or soliciting any TLC
Vision patient during the same time period. Additionally, the agreement contains
confidentiality covenants preventing Mr. Leonard from disclosing confidential or
proprietary information relating to the Company at any time during or after his
employment.
16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2003, the Compensation Committee
of the TLC Vision board of directors was comprised of Messrs. Davidson and
Rustand and Dr. Sullins.
During the fiscal year ended May 31, 2002, Mr. Rustand, a director of the
Company, and J.L. Investments, Inc., an unrelated company, entered into a
consulting agreement with the Company to oversee the development of TLC Vision's
international business development project. Mr. Rustand received $60,000 under
this agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The information contained in this report shall not be deemed to be
"soliciting material" or "filed" or incorporated by reference in future filings
with the U.S. Securities and Exchange Commission (the "SEC"), or subject to the
liabilities of Section 18 of the Exchange Act, except to the extent that the
Company specifically incorporates it by reference into a document filed under
the Securities Act of 1933, as amended, or the Exchange Act.
TLC Vision's corporate philosophy on compensation is that compensation
should be tied to an individual's performance and to the performance of the
Company as a whole. TLC Vision believes that executive officers who make a
substantial contribution to the long-term success of the Company and its
subsidiaries are entitled to participate in that success.
The compensation of TLC Vision's executive officers, including its named
executive officers, is comprised of base salary, cash bonuses and long-term
incentives in the form of TLC Vision stock options. TLC Vision does not have an
executive pension plan.
TLC Vision was incorporated in 1993 and operated in an emerging market.
Consequently, its board of directors initially placed considerable emphasis upon
stock options as an incentive in determining executive compensation in order to
align the interests of the executive officers with the long-term interests of
TLC Vision's shareholders. As TLC Vision matures, there has been less emphasis
placed upon stock options as an incentive for executives.
The board of directors administers TLC Vision's stock option plan. The
purpose of the stock option plan is to advance the interests of the Company by:
- providing directors, officers, employees and other eligible persons with
additional incentive;
- encouraging stock ownership by eligible persons;
- increasing the proprietary interests of eligible persons in the success
of the Company;
- encouraging eligible persons to remain with TLC Vision or its affiliates;
and
- attracting new employees, officers or directors to TLC Vision or its
affiliates.
In determining whether to grant options and how many options to grant to
eligible persons under TLC Vision's stock option plan, consideration is given to
each individual's past performance and contribution to the Company as well as
that individual's expected ability to contribute to the Company in the future.
Compensation of Chief Executive Officer
During the fiscal year ended December 31, 2003, Mr. Vamvakas, the Chief
Executive Officer and Chairman of the Board of Directors, continued to provide
the leadership and strategic direction that has enabled the Company to diversify
its product offering and "right size" the business to reflect current economic
conditions in the North American marketplace. The Chief Executive Officer is
evaluated on the following:
17
leadership; strategic planning; financial results; succession planning; human
resources; communications; external relations; and board and shareholder
relations.
The base compensation paid to Mr. Vamvakas during the fiscal year ended
December 31, 2003 was set by his employment agreement described under
"-- Employment Contracts". In addition, as provided in his employment agreement,
Mr. Vamvakas was entitled to receive a cash performance bonus of up to $300,000
if the Company achieved certain financial results and up to $75,000 in the
discretion of the board of directors. Based on the Company's financial results
in 2003, Mr. Vamvakas received a bonus of $337,500. See "-- Summary Compensation
Table" for further information on the compensation paid to Mr. Vamvakas in the
last three fiscal years.
The foregoing report is submitted by the Compensation Committee.
Thomas N. Davidson Warren S. Rustand William David Sullins, Jr.
18
PERFORMANCE GRAPH
The information contained in this Performance Graph section shall not be
deemed to be "soliciting material" or "filed" or incorporated by reference in
future filings with the SEC, or subject to the liabilities of Section 18 of the
Exchange Act, except to the extent that the Company specifically incorporates it
by reference into a document filed under the Securities Act of 1933, as amended,
or the Exchange Act.
The following graph shows the cumulative total shareholder return (assuming
reinvestment of dividends) from May 31, 1999 through the fiscal year ended
December 31, 2003 compared to the cumulative total return on the S&P/TSX
Composite Index and the Nasdaq Health Services Stocks Index.
CUMULATIVE VALUE OF $100 INVESTMENT ASSUMING REINVESTMENT OF DIVIDENDS
LOGO
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------
5/31/1999 5/31/2000 5/31/2001 5/31/2002 12/31/2002 12/31/2003
- ----------------------------------------------------------------------------------------------
TLC Vision
Corporation $100.00 $ 17.33 $ 11.36 $ 7.07 $ 2.39 $ 15.07
S&P/TSX Composite
Index $100.00 $137.10 $122.47 $116.78 $102.08 $129.36
Nasdaq Health
Services Stocks
Index $100.00 $ 73.27 $116.22 $141.69 $119.32 $154.13
</Table>
COMPENSATION OF DIRECTORS
Directors who are not executive officers of the Company are entitled to
receive an attendance fee of $2,500 in respect of each board meeting attended in
person, $1,000 in respect of each committee meeting attended in person and $500
in respect of each meeting attended by phone. Directors also receive an annual
fee of $15,000. Non-executive directors are reimbursed for out-of-pocket
expenses incurred in connection with attending meetings of the board of
directors. In addition, outside directors are entitled to receive options to
acquire common shares under TLC Vision's stock option plan based on the
performance of the Company. As medical directors, Drs. Sullins and Lindstrom
were granted options to acquire 20,000 TLC Vision common shares at an exercise
price of $1.16 in January 2003 and 15,000 TLC Vision common shares at an
exercise price of $6.10 in December 2003. All other directors were granted
options to acquire 5,000 TLC Vision common shares at an exercise price of $1.16
in January 2003 and 10,000 TLC Vision common shares at an exercise price of
$6.10 in December 2003. The chair of each of the Audit, Compensation and
Corporate Governance Committees also receives an annual fee of $5,000.
19
STATEMENT OF CORPORATE GOVERNANCE POLICIES
The Toronto Stock Exchange ("TSX") has adopted 14 guidelines for effective
corporate governance (the "Guidelines"). The Guidelines address matters such as
the constitution and independence of corporate boards, the functions to be
performed by boards and their committees and the effectiveness and evaluation of
board members. Companies whose securities are listed on the TSX are required to
annually disclose how their governance practices conform or depart from the
Guidelines, but conforming to the Guidelines is not itself a requirement of
listing.
MANDATES OF THE BOARD OF DIRECTORS AND MANAGEMENT
The mandate of the board of directors is to supervise the management of TLC
Vision's business and affairs and to act with a view to the best interests of
the Company. The role of the board of directors focuses on governance and
stewardship rather than on the responsibility of management to run the
day-to-day operations of the Corporation. Its role is to set corporate
direction, assign responsibility to management for achievement of that
direction, define executive limitations and monitor performance against those
objectives and executive limitations.
The board of directors has developed position descriptions for the Chair of
the Board and for the Company's Chief Executive Officer. Responsibilities of the
Chair of the Board include providing overall leadership to the board of
directors, assuming primary responsibility for the operation and functioning of
the board of directors, ensuring compliance with the governance policies of the
board of directors and taking a leadership role in ensuring effective
communication and relationships between the Company, shareholders, stakeholders
and the general public.
Responsibilities of the Chief Executive Officer include the development and
recommendation of corporate strategies and business and financial plans for
approval of the board of directors, managing the operations of the business in
accordance with the strategic direction set by the board of directors, reporting
management and performance information to the board of directors and developing
a list of risk factors and informing the board of directors of the mechanisms in
place to address those risks.
When the Chief Executive Officer also holds the position of Chair of the
Board, the board of directors may elect a non-executive Vice Chair or lead
director. Dr. Sullins has been appointed Chair of the executive sessions of the
board of directors, described below, on a rotating basis for a term of one year.
COMPOSITION OF THE BOARD OF DIRECTORS
The TLC Vision board of directors is currently comprised of the seven
individuals nominated for election at the meeting. The board believes that
Messrs. Davidson, Wilt, Rustand, Klobnak and Dr. Sullins are unrelated directors
and that Mr. Vamvakas and Dr. Lindstrom are related directors, within the
meaning of the TSX Guidelines.
An unrelated director is a director who is independent of management and is
free from any interest and any business or other relationship which could, or
could reasonably be perceived to, materially interfere with the director's
ability to act with a view to the best interests of the Company, other than
interests and relationships arising from shareholding. As described under
"Certain Relationships and Related Party Transactions", Mr. Rustand provided
some consulting services to the Company during the fiscal year ended May 31,
2002. The board of directors has considered the services provided by Mr. Rustand
and the remuneration received by him and has concluded that Mr. Rustand
continues to be an unrelated and independent director. TLC Vision does not have
a significant shareholder, since there is no person who has the ability to
exercise a majority of the votes attached to the outstanding shares of TLC
Vision for the election of directors. There were six meetings of the board of
directors in the fiscal year ended December 31, 2003. Each of the meetings was
attended by all of the directors who were members of the board of directors at
the time of such meeting. In addition to attending board and applicable
committee meetings, the unrelated directors of the Company meet regularly in
executive sessions independent of management to discuss TLC Vision's business
and affairs. The Company does not have a formal process in place for the
orientation and education of
20
new directors but the Company and the board of directors do take steps to
educate new directors upon their appointment or election to the board of
directors.
During 2002, the Corporate Governance Committee reviewed the compensation
of the Company's directors and chose to maintain compensation at existing
levels.
BOARD COMMITTEES
The TLC Vision board of directors has established three committees: the
Audit Committee, the Compensation Committee and the Corporate Governance
Committee. The following is a brief description of each committee and its
composition.
The Audit Committee currently consists of Messrs. Rustand, Davidson,
Klobnak and Wilt, all of whom are unrelated directors. The Audit Committee is
responsible for the engagement, compensation and oversight of the independent
auditors of the Company and reviews with them the scope and timing of their
audit services and any other services they are asked to perform, their report on
the accounts of the Company following the completion of the audit and TLC
Vision's policies and procedures with respect to internal accounting and
financial controls. The Audit Committee reports its findings with respect to
such matters to the board of directors. During the fiscal year ended December
31, 2003, there were six meetings of the Audit Committee. Each of the meetings
was attended by all of the directors who were members of the Audit Committee at
the time of such meeting. It is expected that the Audit Committee will consist
of Messrs. Rustand, Davidson and Wilt after this annual meeting and that all
members will continue to be unrelated directors. The Audit Committee operates
under the Audit Committee Terms of Reference adopted by the board of directors,
a copy of which is attached as Appendix B. See "Audit Committee Report" below.
The Compensation Committee consists of Messrs. Davidson and Rustand and Dr.
Sullins, all of whom are unrelated directors. The Compensation Committee is
responsible for the development of compensation policies and makes
recommendations on compensation of executive officers to the Corporate
Governance Committee for approval of the board of directors. There were four
meetings of the Compensation Committee relating to the fiscal year ended
December 31, 2003. Each of the meetings was attended by all of the directors who
were members of the Compensation Committee at the time of such meeting. It is
expected that the Compensation Committee will consist of Messrs. Davidson, and
Rustand and Dr. Sullins after the meeting and that all members will be unrelated
directors. See "Information on Executive Compensation -- Compensation Committee
Report on Executive Compensation" above.
The Corporate Governance Committee consists of Dr. Sullins, Messrs.
Davidson and Klobnak, all of whom are unrelated directors. Dr. Sullins is the
Chair of the Committee. The Corporate Governance Committee has been charged with
responsibility for:
- developing and monitoring the effectiveness of the Company's system of
corporate governance;
- establishing procedures for the identification of new nominees to the
board of directors and leading the candidate selection process;
- developing and implementing orientation procedures for new directors;
- assessing the effectiveness of directors, the board of directors as a
whole and the various committees of the board of directors;
- ensuring appropriate corporate governance and proper delineation of the
roles, duties and responsibilities of management, the board of directors
and its various committees; and
- assisting the board of directors in setting the objectives for the Chief
Executive Officer of the Company and evaluating his or her performance.
During the fiscal year ended December 31, 2003, there were two meetings of
the Corporate Governance Committee. Each of the meetings was attended by all of
the directors who were members of the Corporate Governance Committee at the time
of such meeting.
21
CODE OF BUSINESS CONDUCT AND ETHICS
On April 28, 2004, the Company's board of directors adopted a Code of
Business Conduct and Ethics that applies to the Company's directors, officers
and employees and which is intended to promote honest and ethical conduct, full
and accurate reporting and compliance with laws. A copy of the Code of Business
Conduct and Ethics can be requested free of charge by writing or calling the
Company's Vice President of Investor Relations at 5280 Solar Drive, Mississauga,
Ontario, L4W 5M8, 905-602-2020, ext. 3904.
OUTSIDE ADVISORS
The Company has implemented a system which enables an individual director
to engage an outside advisor at the expense of the Company in appropriate
circumstances. The engagement of an external advisor by an individual director,
as well as the terms of the retainer and the fees to be paid to the advisor, is
subject to the prior approval of the Corporate Governance Committee.
SHAREHOLDER COMMUNICATIONS
The TLC Vision board of directors places great emphasis on its
communications with shareholders. Shareholders receive timely dissemination of
information and the Company has procedures in place to permit and encourage
feedback from its shareholders. TLC Vision's senior officers are available to
shareholders and, through its investor relations department, the Company seeks
to provide clear and accessible information about the results of TLC Vision's
business and its future plans. TLC Vision has established an investor web site
on the Internet through which it makes available press releases, financial
statements, annual reports, trading information and other information relevant
to investors. Mr. Vamvakas may also be contacted directly by investors through
the Internet.
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed to be
"soliciting material" or "filed" or incorporated by reference in future filings
with the SEC, or subject to the liabilities of Section 18 of the Exchange Act,
except to the extent that the Company specifically incorporates it by reference
into a document filed under the Securities Act of 1933, as amended, or the
Exchange Act.
The members of the Audit Committee are Messrs. Rustand, Davidson, Klobnak
and Wilt. Mr. Wilt joined the Audit Committee in January, 2004 when Mr. Riegert
retired from the board of directors. Each member of the Audit Committee is
independent in the judgment of the board of directors under applicable listing
standards of NASDAQ. Mr. Wilt is a certified Public Accountant (non-practising)
and has been designated by the board of directors as the Company's Audit
Committee financial expert. The Audit Committee operates under the Audit
Committee Terms of Reference adopted by the board of directors, a copy of which
is attached as Appendix B.
Management is responsible for preparing TLC Vision's financial statements
and the independent auditors are responsible for auditing those financial
statements. The Audit Committee's primary responsibility is to oversee TLC
Vision's financial reporting process on behalf of the board of directors and to
report the result of its activities to the board, as described in the Audit
Committee Terms of Reference. The principal recurring duties of the Audit
Committee in carrying out its oversight responsibility include reviewing and
evaluating the audit efforts of TLC Vision's independent auditors, discussing
with management and the independent auditors the adequacy and effectiveness of
TLC Vision's accounting and financial controls, and reviewing and discussing
with management and the independent auditors the quarterly and annual financial
statements of the Company.
The Audit Committee has reviewed and discussed with TLC Vision management
the audited financial statements of the Company for the fiscal year ended
December 31, 2003. The Audit Committee has also discussed with Ernst & Young
LLP, the independent auditors of TLC Vision, the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The Audit Committee has also received from the independent auditors
written affirmation of their independence as
22
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and the Audit Committee has discussed with
the auditors the firm's independence.
Based upon the review and discussions summarized above, the Audit Committee
recommended to the board of directors that the audited financial statements of
the Company as of December 31, 2003 and for the year then ended be included in
the Company's annual report on Form 10-K for the year ended December 31, 2003
for filing with the SEC. In addition, the Audit Committee recommended to the
board of directors that the audited financial statements of the Company, as of
December 31, 2003 and for the period then ended, prepared in accordance with
Canadian generally accepted accounting principles, be filed with the securities
regulatory authorities in each of the provinces of Canada.
Warren S. Rustand Thomas N. Davidson Toby S. Wilt John J. Klobnak
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
TLC Vision maintains directors' and officers' liability insurance. Under
this insurance coverage the insurer pays on TLC Vision's behalf for losses for
which the Company indemnifies its directors and officers, and on behalf of
individual directors and officers for losses arising during the performance of
their duties for which TLC Vision does not indemnify them. The total limit for
the policy is $20,000,000 per policy term subject to a deductible of $100,000
per occurrence with respect to corporate indemnity provisions and $500,000 if
the claim relates to securities law claims. The total premiums in respect of the
directors' and officers' liability insurance for the fiscal year ended December
31, 2003 were approximately $961,598. The insurance policy does not distinguish
between directors and officers as separate groups.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
INDEBTEDNESS OF DIRECTORS AND OFFICERS
No officer, director or employee, or former officer, director or employee,
of the Company or any of its subsidiaries, or associate of any such officer,
director or employee is currently or has been indebted (other than routine
indebtedness of employees and non-executive officers) at any time since January
1, 2003 to the Company or any of its subsidiaries.
INTERESTS OF INSIDERS IN PRIOR AND PROPOSED TRANSACTIONS
LaserVision, a subsidiary of the Company, has a limited partnership
agreement with Minnesota Eye Consultants for the operation of one of its
roll-on/roll-off mobile systems. Dr. Richard Lindstrom, a director of the
Company, is President of Minnesota Eye Consultants. LaserVision is the general
partner and owns 60% of the partnership. Minnesota Eye Consultants, P.A. is a
limited partner and owns 40% of the partnership. Under the terms of the
partnership agreement, LaserVision receives a revenue-based management fee from
the partnership. Subsequent to the acquisition of LaserVision, the Company
received $48,000 and $21,000 in management fees from the partnership for the
year ended December 31, 2003 and the transitional period ended December 31,
2002, respectively. In 2003, Dr. Lindstrom also received a total of $170,000 in
compensation from TLC Vision in his capacity as medical director of TLC Vision
and LaserVision and as a consultant to LaserVision and Midwest Surgical
Services, a cataract services provider and wholly owned subsidiary of
LaserVision.
In September 2000, LaserVision entered into a five-year agreement with
Minnesota Eye Consultants to provide laser access. LaserVision paid $6.2 million
to acquire five lasers and the exclusive right to provide laser access to
Minnesota Eye Consultants. LaserVision also assumed leases on three of the five
lasers acquired. The transaction resulted in a $5.0 million intangible asset
recorded as deferred contract rights that will be amortized over the life of the
agreement. Subsequent to the acquisition of LaserVision, the Company received
revenue of $1.2 million and $0.6 million as a result of the agreement for the
year ended December 31, 2003 and the transitional period ended December 31,
2002, respectively.
23
Elias Vamvakas, an executive officer and director of the Company, and Dr.
William David Sullins, Jr., a director of the Company, also serve as directors
of Vascular Sciences. Mr. Vamvakas also serves as the Executive Chairman of
Vascular Sciences. In 2002, the Company made an equity investment in Vascular
Sciences and formed a joint venture with Vascular Sciences to create OccuLogix,
L.P., a partnership focused on the treatment of a specific eye disease known as
dry age-related macular degeneration via rheopheresis, a process for filtering
blood. In 2003, the board of directors of Vascular Sciences granted Mr. Vamvakas
stock options to purchase 4,583 shares of common stock at an exercise price of
$1.30 per share, which stock options are fully vested and exercisable, and stock
options to purchase 500,000 shares of common stock at an exercise price of $0.99
per share, which stock options vest and become exercisable over a three-year
period. In 2003, Dr. Sullins received $10,250 as cash compensation for service
as an outside director and member of the audit and compensation committees of
the board of directors of Vascular Sciences. In addition, the board of directors
of Vascular Sciences has granted Dr. Sullins stock options to purchase 4,583
shares of common stock at an exercise price of $1.30 per share, which stock
options are fully vested and exercisable, and stock options to purchase 25,000
shares of common stock at an exercise price of $0.99 per share, which stock
options vest and become fully exercisable annually over a three-year period. All
such stock options granted to Mr. Vamvakas and Dr. Sullins expire ten years
after the date of grant.
None of the principal shareholders, senior officers or directors of the
Company or the proposed nominees for election as directors of the Company, or
any of their associates or subsidiaries, has any other interest in any other
transaction since January 1, 2003 or any other proposed transaction that has
materially affected or would materially affect the Company or its subsidiaries.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as at April 26, 2004, the number of common
shares of the Company beneficially owned by each director, nominee director and
named executive officer of the Company, the directors, nominee directors and
executive officers of the Company as a group, and each person who, to the
knowledge of the directors or officers of the Company, beneficially owns,
directly or indirectly, or exercises control or direction over common shares
carrying more than 5% of the voting rights attached to all outstanding common
shares of the Company.
<Table>
<Caption>
TOTAL NUMBER OF PERCENTAGE OF COMMON OPTIONS OPTIONS NOT
DIRECTORS, NOMINEE DIRECTORS, SHARES BENEFICIALLY SHARES BENEFICIALLY BENEFICIALLY PRESENTLY
NAMED EXECUTIVE OFFICERS AND 5% SHAREHOLDERS OWNED OWNED OWNED EXERCISABLE
- -------------------------------------------- ------------------- -------------------- ------------ -----------
Elias Vamvakas.......................... 3,527,047 5.1% 102,500 128,500
John J. Klobnak......................... 744,341 1.1% 534,500 10,000
Dr. William D. Sullins, Jr. ............ 90,545 * 55,000 15,000
Warren S. Rustand....................... 25,180 * 25,000 10,000
Thomas N. Davidson...................... 54,827 * 35,000 10,000
Dr. Richard Lindstrom................... 38,500 * 38,500 25,000
William P. Leonard...................... 17,700 * 17,500 79,500
James C. Wachtman....................... 528,615 * 506,875 60,625
Toby S. Wilt............................ -- * -- 15,000
B. Charles Bono III..................... 176,673 * 159,250 50,750
Robert W. May........................... 400,580 * 380,000 41,000
All directors and executive officers as a
group (11 persons).................... 5,604,008 7.9% 1,854,625 445,375
</Table>
- ---------------
* Less than one percent
Under the rules of the SEC, common shares which an individual or group has
a right to acquire within 60 days by exercising options or warrants are deemed
to be outstanding for the purpose of computing the
24
percentage of ownership of that individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person shown in the table.
Unless otherwise disclosed, the shareholders named in the table have sole
voting power and sole investment power with respect to all shares beneficially
owned by them.
The business address of Mr. Vamvakas is 5280 Solar Drive, Suite 200,
Mississauga, Ontario L4W 5M8. Total Number of Shares Beneficially Owned includes
1,749,516 shares held indirectly by Mr. Vamvakas through WWJD Corporation, a
corporation wholly owned by the Vamvakas Family Trust and 1,043,234 shares held
indirectly by Mr. Vamvakas through Insight International Bank Corp., which is
wholly owned by Mr. Vamvakas.
Messrs. Wachtman, May and Bono respectively beneficially own 11,103, 10,275
and 11,065 shares of the Company's common stock in their individual 401(k)
plans.
Messrs. Vamvakas, Davidson and Leonard respectively own 15,948, 9,827 and
200 shares of the Company's common stock in the employee stock purchase plan.
Dr. Sullins beneficially owns 1,645 shares of common stock of the Company held
by his spouse.
Total Number of Shares Beneficially Owned also includes the shares listed
under the column Options Beneficially Owned, which are the shares subject to
outstanding options that are presently exercisable or are exercisable within 60
days of April 26, 2004.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of December 31, 2003
with respect to each equity plan or arrangement pursuant to which warrants or
options to purchase the Company's common shares have been granted.
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2003
<Table>
<Caption>
NUMBER OF COMMON
SHARES REMAINING
NUMBER OF COMMON AVAILABLE FOR FUTURE
SHARES TO BE ISSUED WEIGHTED-AVERAGE ISSUANCE UNDER
UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION
OUTSTANDING OUTSTANDING PLANS (EXCLUDING
OPTIONS, WARRANTS OPTIONS, WARRANTS SHARES REFLECTED IN
PLAN CATEGORY AND RIGHTS AND RIGHTS COLUMN (A))
- ------------- ------------------- ------------------- --------------------
AS OF DECEMBER 31, 2003
Equity compensation plans approved by
shareholders.......................... 7,543,525 $4.80 117,093
Equity compensation plans not approved
by shareholders....................... -- -- --
Total................................. 7,543,525 $4.80 117,093
</Table>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the U.S. Securities Exchange Act of 1934, as amended,
requires TLC Vision's directors, certain officers and persons who own more than
10% of a registered class of TLC Vision's equity securities to file reports of
ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC. Such
directors, officers and 10% shareholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) reports they file. TLC
Vision assists its directors and officers in preparing their Section 16(a)
reports. To the knowledge of the Company, all Section 16(a) filing requirements
applicable to its officers, directors and 10% shareholders were complied with
during the fiscal year ended December 31, 2003.
25
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Any proposal of a TLC Vision shareholder intended to be presented for a
vote by the Company's shareholders at TLC Vision's annual meeting of
shareholders for the fiscal year ended December 31, 2004 must be received by TLC
Vision's executive office not later than March 16, 2005 to be considered for
inclusion in the management information circular for that meeting. Shareholder
proposals received after such date may not be included in the management
information circular for that meeting. Shareholder proposals not included in the
management information circular may not be considered at the meeting.
OTHER BUSINESS
TLC Vision knows of no other matter to come before the meeting other than
the matters referred to in the notice of meeting.
DIRECTORS' APPROVAL
The contents and sending of this management information circular have been
approved by the board of directors of the Company.
By Order of the Board of Directors
-s- Robert W. May
Robert W. May
General Counsel and Secretary
Mississauga, Ontario
April 29, 2004
26
APPENDIX A
TLC VISION SHAREHOLDERS RESOLUTIONS
TLC VISION CORPORATION
RESOLUTION NO. 1
RESOLVED THAT:
1. Subject to regulatory approval, the Company's 2004 Employee Share
Purchase Plan (the "New Plan"), as described in the management information
circular prepared in connection with this shareholder meeting, be and is hereby
ratified, authorized and approved.
2. The Company be and is hereby authorized to make such modifications or
amendments to the New Plan as it may determine necessary in order to finalize
and implement the New Plan in accordance with the intent of the immediately
preceding resolution.
3. The board of directors of the Company is hereby authorized to revoke
this resolution and to abandon the adoption of the New Plan at any time prior to
the implementation thereof without further approval of the shareholders of the
Company.
4. Any director or officer of the Company is hereby authorized and directed
for and in the name of and on behalf of the Company to do all acts and things
and execute, whether under the corporate seal of the Company or otherwise and
deliver or cause to be delivered all documents and instruments as in the opinion
of such director or officer may be necessary or desirable to carry out the
intent of the foregoing resolutions.
A-1
TLC VISION SHAREHOLDERS RESOLUTION
TLC VISION CORPORATION
RESOLUTION NO. 2
RESOLVED THAT:
1. Subject to regulatory approval and the approval of the New Plan, the
amendments to the Company's 1997 Share Purchase Plan for Canadian Employees (the
"Canadian Plan"), as described in the management information circular prepared
in connection with this shareholder meeting, be and are hereby ratified,
authorized and approved.
2. The Company be and is hereby authorized to make such modifications or
amendments to the Canadian Plan as it may determine necessary in order to
finalize and implement the Canadian Plan in accordance with the intent of the
immediately preceding resolution.
3. The board of directors of the Company is hereby authorized to revoke
this resolution and abandon the adoption of amendments to the Canadian Plan at
any time prior to the implementation thereof without further approval of the
shareholders of the Company.
4. Any director or officer of the Company is hereby authorized and directed
for and in the name of and on behalf of the Company to do all acts and things
and execute, whether under the corporate seal of the Company or otherwise and
deliver or cause to be delivered all documents and instruments as in the opinion
of such director or officer may be necessary or desirable to carry out the
intent of the foregoing resolutions.
A-2
TLC VISION CORPORATION
RESOLUTION NO. 3
RESOLVED THAT:
1. The Amended and Restated Share Option Plan of the Company (the "Plan")
be and is hereby amended to increase the number of common shares which may be
issued under the Plan by 2,000,000 from 5,116,000 to 7,116,000.
2. Any director or officer of the Company is hereby authorized and directed
for and in the name of and on behalf of the Company to do all acts and things
and execute, whether under the corporate seal of the Company or otherwise and
deliver or cause to be delivered all documents and instruments as in the opinion
of such director or officer may be necessary or desirable to carry out the
intent of the foregoing resolutions.
A-3
APPENDIX B
AUDIT COMMITTEE
TERMS OF REFERENCE OF
TLC VISION CORPORATION
MAY 27, 2003
The Audit Committee is appointed by the board of directors of TLC Vision
Corporation (the "Company" or "TLC") to provide independent and objective
oversight of the accounting functions and internal controls of the Company, its
subsidiaries and affiliates and to ensure the objectivity of the financial
statements.
The responsibilities of the Audit Committee include the following:
- Review with management and the independent accountants the Company's
financial disclosure documents, including all financial statements and
reports filed with the U.S. Securities and Exchange Commission or sent to
shareholders, and following the year-end review, recommend to the board
of directors the inclusion of the audited financial statements in all of
the Company's filings.
- Review with management and the independent accountants the Company's
quarterly financial results prior to the release of earnings and/or the
Company's quarterly financial statements prior to filing or distribution.
Discuss any significant changes to the Company's accounting principles
and any items required to be communicated to the independent accountants.
The Chair of the Committee may represent the entire Audit Committee for
purposes of this review.
- In consultation with management, the independent accountants and the
internal audit function, consider the integrity of the Company's
financial reporting processes and controls. Discuss significant financial
risk exposures and the steps management has taken to monitor, control and
report such exposures.
- Review significant findings prepared by the independent accountants and
the internal auditing function together with management's responses.
- Review the independence and performance of the accountants and annually
recommend to the board of directors the appointment of the independent
accountants or approve any replacement of accountants when circumstances
warrant.
- Approve the fees and other significant compensation to be paid to the
independent accountants.
- On an annual basis, review and discuss with the independent accountants
all significant relationships they have with the Company that could
impair the accountants' independence. Consider the independent
accountants' judgements about the quality and appropriateness of the
Company's accounting principles as applied in its financial reporting.
- Review the independent accountants' audit plan and discuss scope,
staffing, locations, reliance upon management and internal audit and
general audit approaches. Discuss the results of the audit with the
independent accountants prior to releasing the year-end earnings. Review
the budget, plan, activities, organizational structure and performance of
the internal audit function as needed.
- Review significant reports prepared by the internal audit function
together with management's response and follow-up on these reports.
- At least annually, review with the Company's counsel any legal matters
that could have a significant impact on the Company's financial
statements, the Company's compliance with applicable laws and regulations
and inquiries received from regulators or governmental agencies.
- Annually prepare a report to shareholders as required by the U.S.
Securities and Exchange Commission to be included in the Company's annual
proxy statement.
B-1
- Review the Company's Code of Business Conduct and Ethics and the
Company's compliance with these terms of reference.
- Review and evaluate risk management policies in light of business
strategy, capital strength and overall risk tolerance. Periodically
evaluate the Company's investments, including the procedures for
investment and trading and safeguards to ensure compliance with
procedures.
- Perform any other activities consistent with these terms of reference,
the Company's by-laws and governing law as the Audit Committee or the
board of directors deems necessary or appropriate.
B-2
EXHIBIT 1
TLC VISION CORPORATION
2004 EMPLOYEE SHARE PURCHASE PLAN
EX-1
TLC VISION CORPORATION
2004 EMPLOYEE SHARE PURCHASE PLAN
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
ARTICLE 1
INTRODUCTION.............................................................................................1
1.1 Purpose..........................................................................................1
1.2 Stock Purchase Plan..............................................................................1
1.3 Effective Date and Term..........................................................................1
1.4 Participating Subsidiaries.......................................................................1
1.5 Shares Subject to Plan...........................................................................1
ARTICLE 2
DEFINITIONS..............................................................................................2
ARTICLE 3
ENROLLMENT AND CONTRIBUTIONS.............................................................................3
3.1 Eligibility for Enrollment.......................................................................3
3.2 Enrollment Procedure.............................................................................4
3.3 Contributions....................................................................................4
3.4 Option Accounts..................................................................................5
3.5 No Funding of Accounts...........................................................................5
ARTICLE 4
GRANT AND EXERCISE OF OPTION.............................................................................5
4.1 Grant of Options; Terms..........................................................................5
4.2 Purchase of Stock; Price.........................................................................6
4.3 Option Accounts..................................................................................6
4.4 No Interest on Account Balances..................................................................6
ARTICLE 5
TERMINATION OF ENROLLMENT................................................................................7
5.1 Termination of Enrollment........................................................................7
5.2 Distributions to Employee........................................................................7
5.3 Beneficiaries....................................................................................8
ARTICLE 6
ADMINISTRATION OF PLAN...................................................................................8
6.1 Committee........................................................................................8
6.2 Committee Powers.................................................................................8
6.3 Committee Actions................................................................................9
</Table>
-i-
TABLE OF CONTENTS
(continued)
<Table>
<Caption>
PAGE
6.4 Member Who is Participant........................................................................9
6.5 Information Required from Company................................................................9
6.6 Information Required from Employees..............................................................9
6.7 Uniform Rules and Administration................................................................10
ARTICLE 7
AMENDMENT AND TERMINATION...............................................................................10
7.1 Amendment.......................................................................................10
7.2 Termination.....................................................................................10
7.3 Rights Upon Termination.........................................................................10
ARTICLE 8
GENERAL PROVISIONS......................................................................................11
8.1 No Transfer or Assignment.......................................................................11
8.2 Equal Right and Privileges......................................................................11
8.3 Rights as Shareholder...........................................................................11
8.4 Rights as Employee..............................................................................11
8.5 Costs...........................................................................................11
8.6 Application of Funds............................................................................11
8.7 Reports.........................................................................................12
8.8 Actions by Company..............................................................................12
8.9 Governmental Approval...........................................................................12
8.10 Shareholder Approval............................................................................12
8.11 Compliance with Legislation.....................................................................12
8.12 Applicable Law..................................................................................12
8.13 Gender and Number...............................................................................12
8.14 Headings........................................................................................13
</Table>
-ii-
TLC VISION CORPORATION
2004 EMPLOYEE SHARE PURCHASE PLAN
ARTICLE 1
INTRODUCTION
1.1 PURPOSE
The purpose of the TLC Vision Corporation 2004 Employee Share Purchase
Plan is to provide eligible employees of the Subsidiaries the opportunity to
acquire a proprietary interest in the Company and thereby provide employees with
an additional incentive to contribute to the long-term profitability and success
of the Company and its Subsidiaries. The Plan is for the exclusive benefit of
eligible employees of the Subsidiaries.
1.2 STOCK PURCHASE PLAN
The Plan is a stock purchase plan that is intended to satisfy all
requirements of Section 423 of the Internal Revenue Code of 1986, as amended.
Any provision of the Plan inconsistent with Code Section 423 will, without
further act or amendment by the Company, be reformed to comply with Code Section
423.
1.3 EFFECTIVE DATE AND TERM
The Plan will be effective May 1, 2004, subject to approval of the Plan
by the shareholders of the Company within twelve months of its adoption by the
Board of Directors. The Plan shall continue in effect until the earlier of the
date the Company terminates the Plan or the date all of the Shares subject to
the Plan, as amended from time to time, are purchased.
1.4 PARTICIPATING SUBSIDIARIES
A Subsidiary of the Company as of the Effective Date will be deemed to
have adopted the Plan for its eligible Employees as of the Effective Date and
any corporation that becomes a Subsidiary after the Effective Date will be
deemed to have adopted the Plan for its eligible Employees immediately upon
becoming a Subsidiary, unless the Company acts to exclude the Subsidiary and its
eligible Employees from participation in the Plan.
1.5 SHARES SUBJECT TO PLAN
1.5.1 The Shares subject to purchase under the Plan will be shares of the
Company's authorized but unissued common shares. The aggregate number of
Shares that may be purchased under the Plan shall not exceed five hundred
thousand (500,000) shares. All Shares purchased under the Plan will count
against this limitation.
1.5.2 In case of a reorganization, recapitalization, stock split, reverse
stock split, stock dividend, combination of shares, merger, consolidation,
offering of rights or other change
in the capital structure of the Company, the Committee may make such
adjustment as it deems appropriate in the number, kind and purchase price of
Shares available for purchase under the Plan, subject to Section 7.1.
ARTICLE 2
DEFINITIONS
For purposes of this Plan, the following words and phrases, whether or
not capitalized, have the meanings specified below, unless the context plainly
requires a different meaning:
2.1.1 "BENEFICIARY" means a person to whom all or a portion of the cash
amounts due to the Employee under the Plan will be paid if the Employee dies
before receiving such cash amounts.
2.1.2 "BOARD" means the Board of Directors of the Company.
2.1.3 "CODE" means the Internal Revenue Code of 1986, as amended, and all
regulations thereunder.
2.1.4 "COMMITTEE" means the Board or a committee of the Board duly appointed
by the Board for the purpose of administering the Plan and consisting of not
less than 3 directors.
2.1.5 "COMPANY" means TLC Vision Corporation.
2.1.6 "COMPENSATION" means wages, salary and commissions for services
rendered paid to an Employee by the Company or any Participating Subsidiary
during the applicable period specified in the Plan, including amounts
contributed by the Employee to any plan or plans established by the Company
or Participating Subsidiary in accordance with sections 125 or 401(k) of the
Code or to any nonqualified deferred compensation plan or plans established
by the Company or Participating Subsidiary. Bonuses, overtime and shift
premiums paid to an Employee shall not be included in Compensation.
2.1.7 "CUSTODIAN" means CIBC Mellon Trust Company or such other custodian
for the Plan as may be appointed by the Company from time to time.
2.1.8 "EFFECTIVE DATE" means May 1, 2004.
2.1.9 "EMPLOYEE" means any employee of a Participating Subsidiary.
2.1.10 "FAIR MARKET VALUE" means the fair market value of one Share as of a
particular day, which shall be the closing price per Share on NASDAQ on that
day, or, if such day is not a trading day, the last preceding trading day.
2.1.11 "NASDAQ" means the Nasdaq National Market System.
-2-
2.1.12 "OFFERING DATE" means the first day of the Offering Period.
2.1.13 "OFFERING PERIOD" means July 1, 2004 through December 31, 2004 and
each consecutive six month period thereafter; or such other period
designated by the Committee in its sole discretion.
2.1.14 "OPTION ACCOUNT" means the Account maintained on behalf of the
Employee under Section 3.4 to which contributions to the Plan are credited
and from which amounts are withdrawn to exercise options on a Termination
Date.
2.1.15 "PARTICIPATING SUBSIDIARY" means a Subsidiary which is participating
in the Plan in accordance with Section 1.4.
2.1.16 "PLAN" means the TLC Vision Corporation 2004 Employee Stock Purchase
Plan, as described in this document and as amended from time to time.
2.1.17 "SHARE" means a common share of the Company.
2.1.18 "SUBSIDIARY" means any corporation (other than the Company)
incorporated or organized under the laws of a jurisdiction of the United
States in an unbroken chain of corporations beginning with the Company if,
at the time an option is granted, each of the corporations other than the
last corporation owns 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
2.1.19 "TERMINATION DATE" means the last day of an Offering Period; provided
however, that if the last day of an Offering Period is not a business day,
the immediately preceding business day shall be the Termination Date.
ARTICLE 3
ENROLLMENT AND CONTRIBUTIONS
3.1 ELIGIBILITY FOR ENROLLMENT
3.1.1 An Employee may enroll in the Plan for an Offering Period unless one
of the following applies:
3.1.1.1 The Employee would, immediately upon enrollment, own directly
or indirectly, or hold options or rights to acquire, an aggregate of
five percent (5%) or more of the total combined voting power or value
of all outstanding shares of all classes of the Company or any
Subsidiary, determined in accordance with Section 423(d) of the Code;
or
3.1.1.2 The Employee is not employed by the Company or a Participating
Subsidiary on the Offering Date; or
3.1.1.3 The terms of the Employee's employment are covered by a
collective bargaining agreement and the applicable union or other
collective bargaining unit
-3-
has refused to accept the Plan (having been specifically requested to
do so by the Company).
3.1.2 The Committee or its designee will notify an Employee that the
Employee is first eligible to enroll in the Plan and make available to each
eligible Employee the necessary enrollment forms before the Offering Date.
3.2 ENROLLMENT PROCEDURE
3.2.1 To enroll in the Plan for an Offering Period, an Employee must file an
enrollment form with the Company and elect to make contributions under the
Plan in accordance with Section 3.3. The enrollment form must be received by
the Company at least thirty (30) calendar days prior to the Offering Date
and must state the contribution rate elected by the Employee for the
Offering Period.
3.2.2 An Employee whose enrollment in and contributions under the Plan
continue throughout an Offering Period will automatically be enrolled in the
Plan for the next Offering Period unless (i) the Employee files a written
notice of withdrawal with the Company before the Offering Date for the next
Offering Period in accordance with Section 5.1.1.1 or 5.1.1.2, or (ii) on
the Offering Date for such Offering Period the Employee is described in
Section 3.1.1.1, 3.1.1.2 or 3.1.1.3. The contribution rate for an Employee
who is automatically enrolled for an Offering Period pursuant to this
Section will be the contribution rate in effect for the immediately
preceding Offering Period, unless the Employee files an amended enrollment
form with the Company at least thirty (30) calendar days prior to the next
subsequent Offering Period designating a different contribution rate.
3.3 CONTRIBUTIONS
3.3.1 To enroll for the first time in the Plan for an Offering Period, an
Employee must elect to make a contribution under the Plan, subject to the
terms and conditions prescribed below, by means of payroll deduction for
each payroll period within the Offering Period.
3.3.2 An Employee may elect to make payroll deduction contributions in
amounts not less than one percent (1%) of Compensation per payroll period
and not more than the lesser of (i) ten percent (10%) of Compensation per
Offering Period (or such other amount as the Committee may establish from
time to time and communicate to Employees before the Offering Date) or (ii)
a percentage of Compensation for each payroll period that ensures that the
limit on the purchase of Shares specified in Section 4.1 is not exceeded for
the Offering Period.
3.3.3 Payroll deductions will commence with the first payroll period that
begins within the Offering Period and will be made in conformity with the
Company's payroll deduction schedule and practices.
3.3.4 Except as provided in Section 5.1, an Employee may elect to increase,
decrease or discontinue contributions only as of the beginning of the first
payroll period in an Offering
-4-
Period by giving written notice to the Committee at least thirty (30)
calendar days before such payroll period takes effect.
3.4 OPTION ACCOUNTS
All contributions made by an Employee under the Plan will be credited
to an Option Account maintained by the Company or the Custodian on behalf of the
Employee. The Company will make the credit as soon as practicable after the
contributions are withheld from the Employee's Compensation.
3.5 NO FUNDING OF ACCOUNTS
No cash shall be set aside with respect to an Option Account until it
is credited thereto. Nothing contained in this Plan and no action taken pursuant
to the provisions hereof shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company and any Employee or any
other person with respect to an Option Account. Amounts credited to an Option
Account at any time and from time to time shall be the general assets of the
Company. To the extent that any person acquires a right to receive the benefit
of amounts credited to an Option Account, such right shall be that of an
unsecured general creditor of the Company.
ARTICLE 4
GRANT AND EXERCISE OF OPTION
4.1 GRANT OF OPTIONS; TERMS
Enrollment in the Plan for an Offering Period will constitute the grant
by the Company of an option to purchase Shares under the Plan during such
Offering Period. Enrollment in the Plan (whether initial or continuing) for each
Offering Period will constitute a new grant of an option to purchase Shares
under the Plan. All Employees granted options shall have the same rights and
privileges as required by section 423(b)(5) of the Code. Each option will be
subject to the following terms:
4.1.1 The option price will be as specified in Section 4.2.
4.1.2 Except as limited in (e) below, the number of Shares subject to the
option will equal the number of whole and fractional Shares that can be
purchased at the option price specified in Section 4.2 with the aggregate
amount credited to the Employee's Option Account as of the Termination Date.
4.1.3 The option will be exercised on the Termination Date for the Offering
Period.
4.1.4 The payment by an Employee for the Shares purchased under an option
will be made only through payroll deduction in accordance with Section 3.3.
4.1.5 The number of Shares subject to the option for any Employee (when
taken together with all other options held by such Employee under the Plan
and under any other
-5-
stock purchase plan of the Company or a Subsidiary at any time during the
calendar year in which the option is granted) will not exceed the number
derived by dividing twenty-five thousand dollars ($25,000) by the Fair
Market Value of a Share on the Offering Date for the Offering Period.
4.2 PURCHASE OF STOCK; PRICE
4.2.1 As soon as practicable after the Termination Date of each Offering
Period, the Company or Custodian will apply to the purchase of Shares the
amounts credited to each Employee's Option Account as of such Termination
Date. The Shares so purchased shall be allocated to the Option Account for
the Employee. The Shares shall be held by the Custodian on behalf of the
Employee and registered in the name of a nominee.
4.2.2 The option price of each Share purchased as of a Termination Date
shall be the lower of:
4.2.2.1 Eighty-five percent (85%) of the Fair Market Value of the Share
on the Offering Date for such offering, or
4.2.2.2 Eighty-five percent (85%) of the Fair Market Value of the Share
on the Termination Date for such offering.
4.3 OPTION ACCOUNTS
4.3.1 All whole and fractional Shares purchased on behalf of an Employee as
of a Termination Date shall be credited to such Employee's Option Account as
of such date. Any cash in lieu of fractional share remaining on distribution
of Shares or on termination of the Plan shall be distributed to the
Employee. Dividends payable with respect to Shares credited to the
Employee's Option Account will be credited to the Employee's Option Account
and used by the Custodian to purchase additional Shares as soon as
practicable after the Termination Date of the current Offering Period
pursuant to section 4.2 hereof.
4.3.2 In the event the amount withheld through payroll deductions with
respect to an Offering Period exceeds the option price of the Shares
available for purchase for such Employee for that Offering Period, the
excess of the amount so withheld over the option price of the Shares so
purchased for the Employee shall be returned to the Employee without
interest.
4.4 NO INTEREST ON ACCOUNT BALANCES
No interest or other earnings will be credited to any Option Account
with respect to (a) amounts credited thereto during an Offering Period or (b)
amounts to be returned to the Employee. Neither the Committee nor the Company
shall have any obligation to invest or otherwise manage amounts credited to an
Option Account, other than to apply such amounts to the purchase of Shares in
accordance with the terms of this Plan.
-6-
ARTICLE 5
TERMINATION OF ENROLLMENT
5.1 TERMINATION OF ENROLLMENT
5.1.1 An Employee's enrollment in the Plan will terminate under the
following circumstances:
5.1.1.1 An Employee's enrollment will terminate as of the beginning of
the Offering Period that is at least thirty (30) calendar days after
the Employee files with the Company a written notice of withdrawal;
5.1.1.2 An Employee's enrollment will terminate following the
termination of employment with the Company and all Participating
Subsidiaries, provided that the Employee may elect to continue
participation through the next following Termination Date, in which
case, Shares shall be purchased for such Employee in accordance with
Section 4.2;
5.1.1.3 An Employee's enrollment will terminate as of the date on which
the Employee would own directly or indirectly, or hold options or
rights to acquire, an aggregate of five percent (5%) or more of the
total combined voting power or value of all outstanding shares of all
classes of the Company or any Subsidiary, determined in accordance with
Section 423(d) of the Code; and
5.1.1.4 An Employee's enrollment will terminate upon termination of the
Plan or as of the date the relevant Participating Subsidiary ceases to
be a Subsidiary.
5.1.2 An Employee whose enrollment in the Plan terminates under this
Section, other than by reason of termination of the Plan, may again enroll
in the Plan as of any subsequent Offering Date if the Employee satisfies the
eligibility conditions of Section 3.1 as of such date.
5.2 DISTRIBUTIONS TO EMPLOYEE
5.2.1 As soon as practicable after an Employee's enrollment in the Plan
terminates under Section 5.1;
5.2.1.1 The Company will pay to the Employee all amounts credited to
the Employee's Option Account as of the date of termination; and
5.2.1.2 The Committee will direct the Custodian to distribute to the
Employee certificates representing any whole Shares then credited to
the Employee's Option Account and cash equal to the Fair Market Value
of any fractional share.
5.2.2 If an Employee's enrollment terminates as a result of death, or if the
Employee's death occurs before the Employee receives a distribution under
this Section, all cash amounts payable under this Section to the Employee
will be paid to the Employee's Beneficiary.
-7-
5.2.3 An Employee may, from time to time, request distribution with regard
to whole Shares then credited to the Employee's Option Account. The
Custodian shall pay to the Employee cash equal to the Fair Market Value of
any fractional share when all whole Shares have been distributed.
5.3 BENEFICIARIES
5.3.1 An Employee may designate one or more persons (concurrently,
contingently or successively) to whom cash amounts credited to the Option
Account will be distributed if the Employee dies before receiving complete
payment of such amounts. Any such designation must be made on a form
provided by the Company for this purpose, will be effective on the date
received by the Company and may be revoked by the Employee at any time.
5.3.2 If the Employee fails to designate a Beneficiary or if no designated
beneficiary survives the Employee, then any cash amounts shall be made to
the Employee's estate.
ARTICLE 6
ADMINISTRATION OF PLAN
6.1 COMMITTEE
The Plan will be administered by the Committee.
6.2 COMMITTEE POWERS
6.2.1 The Committee will have all powers appropriate to administer the Plan
including, but not limited to, the following:
6.2.1.1 To determine all questions that may arise under the Plan,
including the power to determine the rights of eligibility of an
Employee or their Beneficiaries;
6.2.1.2 To construe the terms of the Plan and to remedy ambiguities,
inconsistencies or omissions;
6.2.1.3 To adopt such rules of procedure and prescribe such forms as it
considers appropriate for the proper administration of the Plan and are
consistent with the Plan;
6.2.1.4 To enforce the Plan provisions and the rules of procedure which
it adopts;
6.2.1.5 To employ agents, attorneys, accountants, actuaries or other
persons, and to allocate or delegate to them such powers, rights and
duties as it considers appropriate for the proper administration of the
Plan.
-8-
6.2.2 The Committee will have such further powers and duties as may be
elsewhere specified in the Plan.
6.3 COMMITTEE ACTIONS
The actions of the Committee may be taken at a meeting by a majority of
its members, in writing without a meeting if all members of the Committee sign
such writing or by the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other and participation in such a meeting in this manner shall constitute
attendance and presence in person at the meeting of the person or persons so
participating for all purposes. In taking action:
6.3.1 The Committee may allocate authority to a specific member(s) of the
Committee to carry out such duties as the Committee may assign;
6.3.2 A member of the Committee may by writing delegate any or all of their
rights, powers, duties and discretions to any other member of the Committee,
with the consent of the latter;
6.3.3 The Committee may delegate to any agents such duties and powers as it
deems appropriate, by an instrument in writing which specifies which duties
are so delegated and to whom each such duty is so delegated; and
6.3.4 When there is an even division of opinion among the members of the
Committee as to a matter, the Board will decide the matter, provided,
however, that no member of the Board may vote on such a matter if it
concerns such member's individual rights, privileges or obligations under
the Plan.
6.4 MEMBER WHO IS PARTICIPANT
If a member of the Committee is an Employee, such member may not decide
any matter relating to the member's participation or Option Account or how the
Option Account is to be paid to the member that the member would not have the
right to decide in the absence of membership on the Committee, and no Employee
will receive any compensation for services as a member of the Committee.
6.5 INFORMATION REQUIRED FROM COMPANY
The Company will furnish the Committee with such data and information
as the Committee deems appropriate to administer the Plan. The records of the
company as to an Employee's Compensation will be conclusive on al persons unless
determined by the Committee to be clearly incorrect.
6.6 INFORMATION REQUIRED FROM EMPLOYEES
Each person entitled to benefits under the Plan must furnish the
Company from time to time in writing such person's mailing address, each change
of mailing address and such other data and information as the Committee deems
appropriate to administer the Plan. Any
-9-
communication, statement or notice mailed with postage prepaid to any person at
the last mailing address filed with the Company will be binding upon such person
for all purposes of the Plan.
6.7 UNIFORM RULES AND ADMINISTRATION
The Committee will administer the Plan on a nondiscriminatory basis and
will apply uniform rules to all persons similarly situated.
ARTICLE 7
AMENDMENT AND TERMINATION
7.1 AMENDMENT
7.1.1 The Company reserves the right to amend the Plan from time to time
subject to any required regulatory approval and the following limitations:
7.1.1.1 No amendment will be made without the prior approval of the
shareholders of the Company if the amendment will (1) increase the
number of Shares reserved for purchase under the Plan, or (2)
materially modify the eligibility conditions or materially increase the
benefits available under the Plan.
7.1.1.2 No amendment will make any change in an option granted
previously and outstanding which adversely affects the rights of an
Employee with respect to such option.
7.1.1.3 No amendment will reduce the amount of an Employee's Option
Account balance.
7.1.2 The Company may delegate to the Committee or its officers the power to
amend the Plan as the Company deems appropriate, subject to the limitations
of this Section.
7.2 TERMINATION
The Plan is entirely voluntary on the part of the Company and the
continuance of the Plan should not be construed as a contractual obligation of
the Company. Accordingly, the Company reserves the right to terminate the Plan
at any time. Unless sooner terminated by the Company, the Plan shall terminate
on the date all of the Shares specified in Section 1.5.1 are purchased unless
additional Shares are authorized for the Plan by the shareholders of the
Company. No option may be granted under the Plan after the Plan is terminated.
7.3 RIGHTS UPON TERMINATION
7.3.1 If the Plan terminates, the Committee may elect to terminate all
outstanding options to purchase Shares under the Plan either immediately or
upon completion of the purchase of Shares on the next following Termination
Date.
-10-
7.3.2 If the Committee terminates an option to purchase Shares prior to the
expiration of the option, all amounts contributed to the Plan which remain
in an Employee's Option Account will be returned to the Employee as soon as
practicable.
ARTICLE 8
GENERAL PROVISIONS
8.1 NO TRANSFER OR ASSIGNMENT
The rights of an Employee under the Plan may not be sold, pledged,
assigned or transferred, voluntarily or involuntarily, in any manner other than
by will or the laws of descent and distribution. Any such attempted sale,
pledge, assignment or transfer shall be without effect. An Employee's rights and
all options granted under the Plan shall only be exercisable during his or her
lifetime by such Employee.
8.2 EQUAL RIGHT AND PRIVILEGES
All Employees who are granted options under the Plan for the Offering
Period will have equal rights and privileges with respect to such option.
8.3 RIGHTS AS SHAREHOLDER
The grant of an option to purchase Shares under the Plan will not
confer upon an Employee any rights as a shareholder of the Company with respect
to Shares subject to the option. An Employee will become a shareholder with
respect to Shares subject to an option under the Plan only when the purchase of
such Shares is completed as of a Termination Date. Whole Shares allocated to an
Employee's Option Account will be voted by the nominee in whose name the Shares
are registered in accordance with the directions, if any, of the Employee and if
no direction has been received will not be voted.
8.4 RIGHTS AS EMPLOYEE
The Plan is not a contract of employment, and the grant of an option to
purchase Shares under the Plan will not confer upon any Employee the right to be
retained in the employ of the Company or any Subsidiary.
8.5 COSTS
All costs and expenses incurred in the administration of the Plan,
including, without limitation, all commissions for purchases of Shares, will be
paid by the Company and its Subsidiaries. Any brokerage fees for the sale of
Shares by an Employee will be borne by the Employee.
8.6 APPLICATION OF FUNDS
All proceeds received by the Company from the sale of Shares under the
Plan will be used for general corporate purposes.
-11-
8.7 REPORTS
The Company will provide or cause to be provided to each Employee a
quarterly report of the Employee's contributions under the Plan and the Shares
purchased with such contributions.
8.8 ACTIONS BY COMPANY
Any action taken by the Company with respect to the Plan will be by
resolution of its Board of Directors or by a person or persons authorized by
resolution of its Board of Directors.
8.9 GOVERNMENTAL APPROVAL
The Plan and any offering or sale made to Employees under the Plan is
subject to any governmental approvals or consents that are or may become
applicable in connection therewith, including the approval of the Toronto Stock
Exchange.
8.10 SHAREHOLDER APPROVAL
The Plan is subject to approval by the holders of a majority of the
shares present in person or by proxy and voting at the meeting at which the Plan
is considered and shall not be effective without such approval.
8.11 COMPLIANCE WITH LEGISLATION
The Committee may postpone or adjust the issue of any Shares pursuant
to this Plan as the Committee in its discretion deem necessary in order to
permit the Company to effect or maintain registration of this Plan or the Shares
issuable pursuant thereto under the securities laws of any applicable
jurisdiction, or to determine that the Shares and this Plan are exempt from such
registration. The Company is not obligated by any provision of this Plan to sell
or issue Shares in violation of any applicable law. In addition, while the
Shares are listed on a stock exchange, the Company will have no obligation to
issue any Shares pursuant to this Plan unless the Shares have been duly listed,
upon official notice of issuance, on a stock exchange on which the shares are
listed for trading.
8.12 APPLICABLE LAW
The Plan will be governed by the laws of the Province of Ontario and
the laws of Canada applicable therein.
8.13 GENDER AND NUMBER
When the context permits, words in the Plan used in the masculine
gender include the feminine gender, words in the singular include the plural and
words in the plural include the singular.
-12-
8.14 HEADINGS
All headings in the Plan are included solely for ease of reference and
do not bear on the interpretation of the text.
-13-
EXHIBIT 2
TLC VISION CORPORATION
AMENDED AND RESTATED 1997 SHARE PURCHASE PLAN
FOR CANADIAN EMPLOYEES
EX-2
TLC VISION CORPORATION
AMENDED AND RESTATED 1997 SHARE PURCHASE PLAN
FOR CANADIAN EMPLOYEES
MAY 1, 2004
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
ARTICLE 1.
INTERPRETATION, PURPOSE, ETC.............................................................................1
1.1 DEFINITIONS......................................................................................1
1.2 INTRODUCTION AND PURPOSE.........................................................................2
1.3 RESERVED SHARES..................................................................................2
1.4 GOVERNING LAW....................................................................................2
1.5 CURRENCY.........................................................................................2
ARTICLE 2.
SHARE PURCHASE PLAN......................................................................................3
2.1 PARTICIPATION....................................................................................3
2.1.1 Eligibility...........................................................................3
2.1.2 Enrolment.............................................................................3
2.2 CONTRIBUTIONS....................................................................................3
2.2.1 Employee Contributions................................................................3
2.2.2 Changes, Termination and Re-Enrolment.................................................3
2.3 ADMINISTRATION...................................................................................4
2.3.1 The Plan Managers.....................................................................4
2.3.2 The Administrator.....................................................................4
2.3.3 Costs and Expenses....................................................................4
2.4 INVESTMENT.......................................................................................4
2.4.1 Remittance and Holding of Employee Contributions......................................4
2.4.2 Purchase of Shares using Employee Contributions.......................................5
2.4.3 Reinvestment of Dividends.............................................................5
2.4.4 Reporting of Account Activities.......................................................5
2.5 DISTRIBUTION OF SHARES...........................................................................5
2.5.1 Ownership and Voting of Purchased Shares..............................................5
2.5.2 Delivery of Certificates..............................................................5
2.6 WITHDRAWAL FROM THE PLAN.........................................................................6
2.6.1 Voluntary Withdrawal from the Plan....................................................6
2.6.2 Withdrawal Upon Termination, Death or Disability......................................6
ARTICLE 3.
GENERAL..................................................................................................7
3.1 AMENDMENT OR TERMINATION.........................................................................7
3.2 CAPITAL ADJUSTMENTS..............................................................................7
3.3 COMPLIANCE WITH LEGISLATION......................................................................7
3.4 FRACTIONAL SHARES................................................................................7
</Table>
-i-
TABLE OF CONTENTS
(continued)
<Table>
<Caption>
PAGE
----
3.5 MARKET FLUCTUATION...............................................................................8
3.6 CANADIAN INCOME TAX CONSIDERATIONS...............................................................8
3.7 ASSIGNMENT OF INTEREST...........................................................................8
3.8 TRADING ON UNDISCLOSED INFORMATION...............................................................8
</Table>
-ii-
ARTICLE 1.
INTERPRETATION, PURPOSE, ETC.
1.1 DEFINITIONS
In this Plan, the following words and phrases have, unless otherwise
indicated, the following meanings:
(a) "ACCRUED EMPLOYEE CONTRIBUTIONS" on a Share Purchase Date means
the aggregate of Employee Contributions remitted to the
Administrator from but excluding the previous Share Purchase Date
to and including that Share Purchase Date.
(b) "ADMINISTRATOR" has the meaning given to that term in section
2.3.2.
(c) "CONSULTANT" means (i) an individual (including an individual
whose services are contracted for through a corporation) or (ii) a
corporation, in either case, designated by the Plan Managers and
with whom the Employer has a contract for substantial ongoing
services.
(d) "ELIGIBLE EMPLOYEE" has the meaning given to that term in section
2.1.1.
(e) "EMPLOYEE CONTRIBUTION" has the meaning given to that term in
section 2.2.1.
(f) "EMPLOYEE REMITTANCE" has the meaning given to that term in
section 2.2.1.
(g) "EMPLOYER" means TLC Vision Corporation.
(h) "ENROLMENT DATE" has the meaning given to that term in section
2.1.
(i) "NASDAQ" means the Nasdaq National Market System.
(j) "NET CASH VALUE" means, with respect to a fractional interest in
Shares, the closing price of the Shares on NASDAQ on the most
recently completed trading day, multiplied by such fractional
interest;
(k) "PARTICIPANT" means an Eligible Employee who has elected to
participate in the Plan for Canadian Employees.
(l) "PLAN" means the TLC Vision Corporation Amended and Restated 1997
Share Purchase Plan.
(m) "PLAN MANAGERS" has the meaning given to that term in section
2.3.1.
(n) "PURCHASE PRICE" on a certain date means an amount equal to the
lesser of (A) 85% of the closing price of the Shares on NASDAQ on
the first trading day of the six month period then ended; and (B)
85% of the closing price of the Shares on NASDAQ on the trading
day immediately preceding the Share Purchase Date.
-2-
(o) "PURCHASED SHARES" means Shares that have been actually purchased
in the name of the Participant pursuant to sections 2.4.2 and
2.4.3.
(p) "REINVESTMENT DATE" has the meaning given to that term in section
2.4.3.
(q) "SHARE PURCHASE ACCOUNT" means the account to which the Purchased
Shares are credited.
(r) "SHARE PURCHASE DATE" has the meaning given to that term in
section 2.4.2.
(s) "SHARES" means the common shares of the Employer.
(t) "SUBSIDIARY" has the meaning given to that term in the Securities
Act (Ontario), as amended from time to time.
1.2 INTRODUCTION AND PURPOSE
The purpose of the Plan is to make available to Eligible Employees of
the Employer a means of purchasing the Employer's Shares, to more closely align
their interests with the performance of the Employer and to encourage Eligible
Employees to remain with the Employer on a long-term basis.
Participation in the Plan by any Eligible Employee is voluntary and the
Employer is not making any recommendation to its employees as to whether they
should or should not participate.
1.3 RESERVED SHARES
Effective from and including October 30, 1997, the maximum number of
Shares that are reserved for issuance from treasury under the Plan is 500,000
Shares.
1.4 GOVERNING LAW
This Plan is to be governed by and interpreted in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein.
1.5 CURRENCY
If pursuant to sections 1.1(o)(i), a Purchase Price in respect of a
Participant is to be based on the weighted average trading prices of the Shares
on NASDAQ as of a particular date (i.e., Share Purchase Date or Reinvestment
Date), then that Purchase Price will be converted into Canadian currency using
the U.S. dollar to Canadian dollar exchange rate in effect at 12:00 noon
(eastern time) on the applicable date, as posted by the Canadian Imperial Bank
of Commerce or such other Canadian chartered bank as is deemed by the Plan
Managers as appropriate for this purpose.
-3-
ARTICLE 2.
SHARE PURCHASE PLAN
2.1 PARTICIPATION
2.1.1 ELIGIBILITY
The following persons are eligible to participate in the Plan (an
"ELIGIBLE EMPLOYEE"): (i) all full-time Canadian resident employees who
have completed three months continuous service with the Employer or any
Subsidiary and (ii) subject to receiving all necessary approvals, any
Canadian resident Consultant of the Employer or any Subsidiary.
2.1.2 ENROLMENT
Eligible Employees may elect to enrol as Participants in the Plan as of
January 1 or July 1, in any year in which they are eligible (an
"ENROLMENT DATE") by signing and delivering to the Employer, at least
30 days prior to any Enrolment Date, appropriate forms provided by the
Employer.
2.2 CONTRIBUTIONS
2.2.1 EMPLOYEE CONTRIBUTIONS
Participants may contribute for investment under the Plan, an amount
which is not less than one (1%) per cent and not more than ten (10%)
per cent of their regular gross salary, excluding bonuses, deferred
compensation, overtime pay, or any special incentive compensation
payments (an "EMPLOYEE CONTRIBUTION"). For each Eligible Employee who
is compensated on an alternative basis (e.g., commissions), the Plan
Managers will determine an amount which will be deemed to constitute
that Eligible Employee's "regular gross salary".
A Participant may elect to make the Employee Contribution by way of
payment from that Participant, through payroll deductions or in such
other manner as is acceptable to the Plan Managers (an "EMPLOYEE
REMITTANCE"). If a Participant's regular salary changes, any payroll
deduction previously requested will not be changed unless and until the
Participant requests a change.
2.2.2 CHANGES, TERMINATION AND RE-ENROLMENT
By giving the Employer a written request at least 30 days in advance of
any Enrolment Date, a Participant may change the designated amount of
Employee Remittance as of that Enrolment Date. Employee Remittances may
be terminated at any time, effective as soon as practicable after the
participant's written request is received by the Employer. After
termination, an Eligible Employee may elect to re-enrol in the Plan.
However, a new Employee Remittance authorization on re-enrolment in the
Plan shall not become effective prior to the Enrolment Date next
following the six-month period beginning with the effective date of the
termination. In the event a Participant changes the designated
-4-
amount of Employee Remittance or re-enrols after termination, no
additional change shall be made within the three month period following
the effective date of such change or within a three month period
following the effective date of any re-enrolment in the plan.
2.3 ADMINISTRATION
2.3.1 THE PLAN MANAGERS
The Plan is managed by the board of directors or a committee of the
board duly appointed for this purpose by the board and consisting of
not less than 3 directors (the "PLAN MANAGERS"). The Plan Managers are
empowered to make and enforce rules with respect to the administration
of the Plan, to interpret the Plan, to resolve any ambiguities and to
decide questions of eligibility to participate. The Plan Managers may
appoint an individual and delegate to that person certain duties and
powers of the Plan Managers. This individual does not have any fixed
term and may be removed at any time by the Plan Managers. The
individual may participate in the Plan, if otherwise eligible. The
initial individual initially appointed by the Plan Managers will be the
Director of Human Resources.
2.3.2 THE ADMINISTRATOR
The Employer has designated a trust company (the "ADMINISTRATOR") to
administer the Plan in accordance with its terms. The Administrator
will open and maintain separate accounts in the names of each of the
Participants and arrange purchases of the Shares issued by the
Employer. The Administrator will hold all Purchased Shares acquired in
respect of a Participant as trustee on behalf and for the benefit of
that Participant. The Employer may, in its discretion, substitute
another entity as Administrator under the Plan and the Administrator
may terminate its services, provided such substitution or termination,
as the case may be, shall be on 60 days notice given by the party
effecting the action. The current Administrator is CIBC Mellon Trust
Company.
2.3.3 COSTS AND EXPENSES
The Employer pays all administration expenses in connection with the
operation of the Plan. Commissions and other charges in connection with
sales, withdrawals and share certificate issuing fees, including all
taxes payable on the issuance or disposition of Shares, are payable by
the Participants who order the transactions for their account.
2.4 INVESTMENT
2.4.1 REMITTANCE AND HOLDING OF EMPLOYEE CONTRIBUTIONS
Employee Contributions will be held by the Employer and remitted by the
Employer to the Administrator immediately prior to each Share Purchase
Date. All Employee Contributions held by the Employer prior to a Share
Purchase Date will be held with a Canadian chartered bank or a United
States bank and any interest earned thereon will be used by the
Employer to offset costs associated with maintaining the Plan.
-5-
2.4.2 PURCHASE OF SHARES USING EMPLOYEE CONTRIBUTIONS
All Employee Contributions are to be invested in Shares. On January 1
and July 1 of each year or as soon thereafter as is practicable (a
"SHARE PURCHASE DATE"), the Administrator will purchase on behalf of
the Participant as many Shares at the Purchase Price as can be
purchased using that Participant's Accrued Employee Contributions. The
Administrator will purchase Shares from treasury at the Purchase Price
and all such Shares will be credited to each Participant's Share
Purchase Account.
2.4.3 REINVESTMENT OF DIVIDENDS
A Participant may elect, through the enrolment form, to have all cash
dividends paid on Purchased Shares credited to a Participant's Share
Purchase Account be reinvested in additional Shares purchased by the
Administrator on behalf of the Participant from treasury at the
Purchase Price on the next Share Purchase Date. All other distributions
to holders of Shares including, without limitation, all other
securities, property or rights, will be distributed to a Participant in
such a manner as the Plan Managers, in their sole discretion, deem
appropriate. Dividends and other distributions received in respect of
Purchased Shares removed from the Plan pursuant to section 2.5.2 are
not reinvested pursuant to this section.
By written request to the Employer at least 30 days in advance of any
dividend payment date, a Participant may elect to either withdraw from
or participate in, as the case may be, the dividend reinvestment
feature of the Plan.
2.4.4 REPORTING OF ACCOUNT ACTIVITIES
The Administrator shall provide to each Participant, on a quarterly
basis, confirmation from the Administrator reflecting all changes in
the amount of Purchased Shares credited to the Participant's Share
Purchase Account.
2.5 DISTRIBUTION OF SHARES
2.5.1 OWNERSHIP AND VOTING OF PURCHASED SHARES
Participants acquire full beneficial ownership of all Purchased Shares
as of the date of the purchase. Notwithstanding any other provision of
this agreement, no fractional Share certificates will be issued.
Whole Purchased Shares allocated to a Participant's account will be
voted by the Administrator in accordance with the directions, if any,
of the Participant and if no direction has been received will not be
voted.
2.5.2 DELIVERY OF CERTIFICATES
All Purchased Shares are registered in the name of the Administrator
and held in trust by the Administrator on behalf and for the benefit of
the Participants. By giving the Employer fifteen (15) days advance
written notice, a Participant may request that the
-6-
Administrator deliver to that Participant a certificate registered in
the name of the Participant in respect of any or all of the Purchased
Shares.
2.6 WITHDRAWAL FROM THE PLAN
2.6.1 VOLUNTARY WITHDRAWAL FROM THE PLAN
Participants may withdraw from the Plan at any time by cancelling their
Employee Remittance authorizations. The Participant may request that
(i) the full Purchased Shares (and the Net Cash Value of any fractional
interest in Shares) in the Participant's Share Purchase Account be
transferred to another account maintained by that Participant, (ii) a
certificate representing the whole Purchased Shares in the
Participant's Share Purchase Account be delivered to the Participant
together with a cheque representing the Net Cash Value of any
fractional interest in Shares in the Participant's Share Purchase
Account or (iii) all whole Purchased Shares and any fractional interest
in Shares in the Participant's Share Purchase Account be sold and the
net proceeds be remitted to the Participant.
The Participant may not thereafter re-enrol in the Plan prior to the
Enrolment Date next following a period of six months commencing with
the date of such cancellation. The Administrator shall refund to the
Participant all Accrued Employee Contributions to the date the
Participant withdraws from the Plan. Any whole Purchased Shares sold to
the Employer pursuant to this section will be cancelled and will not be
held for re-issue.
2.6.2 WITHDRAWAL UPON TERMINATION, DEATH OR DISABILITY
Upon the death, disability or termination of employment of a
Participant, that Participant will be deemed to have withdrawn from the
Plan as of the date of death, disability or termination. The
Participant (or the Participant's authorized representatives) may
request that (i) the full Purchased Shares (and the Net Cash Value of
any fractional interest in Shares) in the Participant's Share Purchase
Account be transferred to another account maintained by that
Participant or for the benefit of the Participant's estate, (ii) a
certificate representing the whole Purchased Shares in the
Participant's Share Purchase Account together with a cheque
representing the Net Cash Value of any fractional interest in Shares in
the Participant's Share Purchase Account be delivered to the
Participant or the Participant's authorized representatives or (iii)
all whole Purchased Shares and any fractional interest in Shares in the
Participant's Share Purchase Account be sold and the net proceeds be
remitted to the Participant or the Participant's authorized
representatives.
If the Participant (or the Participant's authorized representative) do
not make an election within thirty (30) days after the date the
Participant is deemed to have withdrawn from the Plan, then the
Administrator will deliver to the Participant or the Participant's
authorized representatives a certificate representing the whole
Purchased Shares plus the Net Cash Value of any fractional Shares in
the Participant's Share Purchase Account.
The Participant will receive all Accrued Employee Contributions. Any
whole Purchased Shares sold to the Employer pursuant to this section
will be cancelled and will not be held for re-issue.
-7-
ARTICLE 3.
GENERAL
3.1 AMENDMENT OR TERMINATION
Subject to receiving all necessary regulatory approvals, the Employer
reserves the right to discontinue use of any form of Employee Remittance at any
time such action is deemed advisable, in its judgment, and the Employer also
reserves the right to amend or discontinue the Plan at any time. Any such
amendment or termination will not result in the forfeiture by any Participant of
any Purchased Shares, Employee Contributions, dividends or other distributions
in respect of Purchased Shares, effective before the effective date of amendment
or termination of the Plan.
3.2 CAPITAL ADJUSTMENTS
If there is any change in the outstanding Shares by reason of a stock
split, recapitalization, consolidation, combination or exchange of shares, or
other fundamental corporate change, the Plan Managers will make, subject to any
prior approval required of relevant stock exchanges or other applicable
regulatory authorities, if any, appropriate substitutions or adjustments;
provided, however, that no substitution or adjustment will obligate the Employer
to issue or sell fractional shares. In the event of the reorganization of the
Employer or the amalgamation or consolidation of the Employer with another
corporation, the Plan Managers may make such provision for the protection of the
rights of Participants as the Plan Managers in their discretion deem
appropriate. The determination of the Plan Managers, as to any adjustment or as
to there being no need for adjustment, will be final and binding on all parties.
3.3 COMPLIANCE WITH LEGISLATION
The Plan Managers may postpone or adjust the issue of any Shares
pursuant to this Plan as the Plan Managers in their discretion may deem
necessary in order to permit the Employer to effect or maintain registration of
this Plan or the Shares issuable pursuant thereto under the securities laws of
any applicable jurisdiction, or to determine that the Shares and this Plan are
exempt from such registration. The Employer is not obligated by any provision of
this Plan to sell or issue Shares in violation of any applicable law. In
addition, while the Shares are listed on a stock exchange, the Employer will
have no obligation to issue any Shares pursuant to this Plan unless the Shares
have been duly listed, upon official notice of issuance, on a stock exchange on
which the Shares are listed for trading.
3.4 FRACTIONAL SHARES
No certificates representing fractional Shares may be issued under the
Plan and nothing in this Plan will obligate the Employer to issue certificates
representing fractional Shares. In all cases, the Plan Managers may determine
the manner in which fractional Share value will be treated.
-8-
3.5 MARKET FLUCTUATION
THERE IS NO GUARANTEE UNDER THE PLAN AGAINST LOSS BECAUSE OF MARKET
FLUCTUATION. IN SEEKING THE BENEFITS OF PARTICIPATION IN THE PLAN, A PARTICIPANT
MUST ACCEPT THE RISK OF A DECLINE IN THE MARKET PRICE OF THE SHARE.
3.6 CANADIAN INCOME TAX CONSIDERATIONS
The purchase of Shares may give rise to a taxable employment benefit
that will be required to be included in the income for tax purposes of the
Employee. The amount of the benefit will be the amount by which the fair market
value of the Shares at the time of purchase exceeds the purchase price paid.
Dividends received by an Employee on Shares are required to be included
in the income of the Employee, subject to the normal gross-up and dividend tax
credit rules generally applicable to taxable dividends paid by a taxable
Canadian corporation.
The disposition of Shares held by an Employee as capital property will
generally give rise to the realization of a taxable capital gain or allowable
capital loss.
Employee contributions, including by way of payroll deductions, will
not reduce the amount of tax withheld at source by the Employer on the
Employee's remuneration.
The foregoing is of a general nature only and is not exhaustive of all
possible tax considerations. Participants are urged to consult their own
advisors in light of their particular circumstances.
3.7 ASSIGNMENT OF INTEREST
Until certificates for Purchased Shares are delivered to the
Participant, no right of a Participant under the Plan and no interest in
Purchased Shares is capable, either in whole or in part, of being sold,
assigned, pledged or hypothecated, whether by way of security or otherwise.
3.8 TRADING ON UNDISCLOSED INFORMATION
Participants in the Plan are reminded that trading based on insider or
undisclosed information is an illegal activity and that people conducting
securities transactions based on such insider or undisclosed information are
subject to prosecution.
EXHIBIT 3
TLC VISION CORPORATION
AMENDED AND RESTATED SHARE OPTION PLAN
EX-3
EXHIBIT 3
TLC LASER EYE CENTERS INC.
AMENDED AND RESTATED SHARE OPTION PLAN
MARCH 3, 2004
TABLE OF CONTENTS
ARTICLE 1.
ADMINISTRATION........................................................................................... 1
1.1 Plan............................................................................................. 1
1.2 Purpose.......................................................................................... 1
1.3 Administration................................................................................... 1
1.4 Interpretation................................................................................... 1
1.5 Numbers.......................................................................................... 3
ARTICLE 2.
SHARE OPTION PLAN........................................................................................ 3
2.1 Grants........................................................................................... 3
2.2 Exercise of Options.............................................................................. 3
2.3 Option Price..................................................................................... 4
2.4 Grant to Participant's RRSP...................................................................... 4
2.5 Termination, Retirement, Death or Departure...................................................... 4
2.6 Option Agreements................................................................................ 5
2.7 Payment of Option Price.......................................................................... 5
2.8 Amendment of Option Terms........................................................................ 5
ARTICLE 3.
GENERAL.................................................................................................. 5
3.1 Right to Exercise Options in connection with a Proposed Transaction.............................. 5
3.2 Prohibition on Transfer of Options............................................................... 5
3.3 Prohibition on Transfer of Shares................................................................ 6
3.4 Capital Adjustments.............................................................................. 6
3.5 Non-Exclusivity.................................................................................. 6
3.6 Amendment and Termination........................................................................ 6
3.7 Compliance with Legislation...................................................................... 7
3.8 Effective Date................................................................................... 7
REGULATIONS UNDER PLAN
Schedule "A" - Option Agreement
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TLC THE LASER CENTER INC.
AMENDED AND RESTATED SHARE OPTION PLAN
ARTICLE 1.
ADMINISTRATION
1.1 PLAN
This Plan consists of a Share Option Plan.
1.2 PURPOSE
The purpose of this Plan is to advance the interests of the Corporation
by (i) providing Eligible Persons with additional incentive; (ii)
encouraging stock ownership by Eligible Persons; (iii) increasing the
proprietary interest of Eligible Persons in the success of the
Corporation; (iv) encouraging Eligible Persons to remain with the
Corporation or its Affiliates; and (v) attracting new employees,
officers and directors to the Corporation or its Affiliates.
1.3 ADMINISTRATION
(a) This Plan will be administered by the Board or a committee of
the Board duly appointed for this purpose by the Board and
consisting of not less than 3 directors. If a committee is
appointed for this purpose, all references to the term "Board"
will be deemed to be references to the committee.
(b) Subject to the limitations of this Plan, the Board has the
authority: (i) to grant Options to purchase Shares to Eligible
Persons; (ii) to determine the terms, including the
limitations, restrictions and conditions, if any, upon such
grants; (iii) to interpret this Plan and to adopt, amend and
rescind such administrative guidelines and other rules and
Regulations relating to this Plan as it may from time to time
deem advisable, subject to required prior approval by any
applicable regulatory authority; and (iv) to make all other
determinations and to take all other actions in connection
with the implementation and administration of this Plan as it
may deem necessary or advisable. The Board's guidelines,
rules, Regulations, interpretations and determinations will be
conclusive and binding upon all parties.
1.4 INTERPRETATION
For the purposes of this Plan, the following terms will have the
following meanings unless otherwise defined elsewhere in this Plan:
(a) "Affiliate" means any corporation that is an affiliate of the
Corporation as defined under the Securities Act (Ontario);
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(b) "Board" means the Board of Directors of the Corporation or a
committee thereof appointed in accordance with the Plan;
(c) "Corporation" means TLC Laser Eye Centers Inc.;
(d) "Eligible Person" means, subject to the Regulations and to all
applicable law, any employee, officer, director or Service
Provider of (i) the Corporation or (ii) any Affiliate of the
Corporation (and includes any such person who is on a leave of
absence authorized by the Board or the Board of Directors of
any Affiliate) designated as an Eligible Person by the Board;
(e) "Option" means a right granted to an Eligible Person to
purchase Shares of the Corporation on the terms of this Plan;
(f) "Participant" means an Eligible Person to whom or to whose
RRSP an Option has been granted;
(g) "Plan" means the Corporation's Amended and Restated Share
Option Plan consisting of the SOP;
(h) "Regulations" means the regulations made pursuant to this
Plan, as same may be amended from time to time;
(i) "RRSP" means a registered retirement savings plan;
(j) "Service Provider" means any person or company who provides
ongoing marketing or promotional services to or endorsements
for the Corporation;
(k) "Share Option Price" means the price at which Shares subject
to this Plan can be purchased as determined by the Board in
accordance with the SOP;
(l) "Shares" means the common shares of the Corporation;
(m) "Share Option Plan" or "SOP" means the Amended and Restated
Share Option Plan;
(n) "Termination Date" means the date on which a Participant
ceases to be an Eligible Person;
(o) "Transfer" includes any sale, exchange, assignment, gift,
bequest, disposition, mortgage, charge, pledge, encumbrance,
grant of security interest or other arrangement by which
possession, legal title or beneficial ownership passes from
one person to another, or to the same person in a different
capacity, whether or not voluntary and whether or not for
value, and any agreement to effect any of the foregoing;
(p) "Trustee" means a person appointed by the Board to act in the
capacity of trustee for the benefit of the SPP; and
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(q) "Year" means a fiscal year of the Corporation commencing on
June 1 and ending on May 31.
Words importing the singular number include the plural and
vice versa and words importing the masculine gender include
the feminine.
This Plan is to be governed by and interpreted in accordance
with the laws of the Province of Ontario.
1.5 NUMBERS
The maximum number of Shares available for purchase or issuance under
this Plan is 7,116,000, less the maximum number of Shares which may be
issued under any other "share compensation arrangement" of the
Corporation, as such term is defined under applicable rules of The
Toronto Stock Exchange excluding the Corporation's Share Purchase Plan.
Any Shares subject to an Option which has been granted under the SOP
and which for any reason have been cancelled or terminated without
having been exercised will again be available under this Plan.
ARTICLE 2.
SHARE OPTION PLAN
2.1 GRANTS
Subject to this SOP, the Board will have the authority to determine the
limitations, restrictions and conditions, if any, in addition to those
set out in this SOP, applicable to the exercise of an Option,
including, without limitation, the nature and duration of the
restrictions, if any, to be imposed upon the sale or other disposition
of Shares acquired upon exercise of the Option, and the nature of the
events, if any, and the duration of the period in which any
Participant's rights in respect of Shares acquired upon exercise of an
Option may be forfeited. An Eligible Person and the Eligible Person's
RRSP may receive Options on more than one occasion under this SOP and
may receive separate Options on any one occasion.
Subject to the Regulations, the aggregate number of securities
available for issuance under the SOP to any one person and an RRSP of
which that person is an annuitant, will be 5% of the Shares outstanding
at the time of the grant (on a non-diluted basis), or such lesser
number as may be required by applicable regulatory authorities from
time to time.
2.2 EXERCISE OF OPTIONS
(a) Options granted must be exercised no later than 5 years after
the date of grant or such lesser period as the applicable
grant or Regulations may require.
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(b) The Board may determine when any Option will become
exercisable and may determine that the Option will be
exercisable in instalments.
(c) No fractional Shares may be issued and the Board may determine
the manner in which fractional Share value will be treated.
(d) Not less than 100 Shares may be purchased at any one time
except where the remainder totals less than 100.
2.3 OPTION PRICE
The Board will establish the exercise price of an Option at the time
each Option is granted on the basis of the closing market price of the
Shares on the market with the largest trading volume of the Shares on
the last trading date preceding the date of the grant. If there is no
trading on that date, the exercise price will be the average of the bid
and ask on the date preceding the date of the grant. If there is no
trading market for the Shares, the Board will in good faith determine
the exercise price of an Option based on the fair market value of the
Shares on the date of the grant.
2.4 GRANT TO PARTICIPANT'S RRSP
Upon written notice from the Participant, any option that might
otherwise be granted to that Participant, will be granted, in whole or
in part, to an RRSP established by and for the sole benefit of the
Participant. The determination of whether and the extent to which a
Participant is entitled by applicable tax law to contribute Options to
the Participant's RRSP shall be the responsibility of the Participant.
2.5 TERMINATION, RETIREMENT, DEATH OR DEPARTURE
Subject to the Board determining that an Option shall be exercisable
for a period after termination (not to exceed, in the case of a
Participant who is a director, one year after the Termination Date, and
in the case of a Participant who is an employee, officer or Service
Provider, three years after the Termination Date), if a Participant
ceases to be an Eligible Person for any reason whatsoever other than
death, each Option held by the Participant or the Participant's RRSP
will cease to be exercisable 90 days after the Termination Date. If any
portion of an Option has not vested by the Termination Date, that
portion of the Option may not under any circumstances be exercised by
the Participant or the Participant's RRSP. Without limitation, and for
greater certainty only, this subsection (a) will apply regardless of
whether the Participant was dismissed with or without cause and
regardless of whether the Participant received compensation in respect
of dismissal or was entitled to a period of notice of termination which
would otherwise have permitted a greater portion of the Option to vest
in the Participant or the Participant's RRSP.
If a Participant dies, the legal representatives of the Participant may
exercise the Participant's Options and the participant's RRSP Options
within 180 days after the date of the participant's death but only to
the extent the Options were by their terms exercisable on the date of
death.
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2.6 OPTION AGREEMENTS
Each Option must be confirmed, and will be governed, by an agreement
(an "Option Agreement") in the form of Schedule "A" (as the same may be
amended from time to time by the Regulations) signed by the Corporation
and the Participant or an RRSP of which that person is an annuitant.
2.7 PAYMENT OF OPTION PRICE
The exercise price of each Share purchased under an Option must be paid
in full by bank draft or certified cheque at the time of exercise, and
upon receipt of payment in full, but subject to the terms of this Plan,
the number of Shares in respect of which the Option is exercised will
be duly issued as fully paid and non-assessable.
2.8 AMENDMENT OF OPTION TERMS
With the consent of any applicable regulatory authorities (as required)
and the Participant affected thereby, the Board may amend or modify any
outstanding Option in any manner to the extent that the Board would
have had the authority to initially grant the award as so modified or
amended, including without limitation, to change the date or dates as
of which, or the price at which, an Option becomes exercisable.
ARTICLE 3.
GENERAL
3.1 RIGHT TO EXERCISE OPTIONS IN CONNECTION WITH A PROPOSED TRANSACTION
Notwithstanding any other provision of this Plan, in the event of any
proposed sale or conveyance of all or substantially all of the property
and assets of the Corporation or any proposed merger, consolidation,
amalgamation or offer to acquire all of the outstanding Shares of the
Corporation (collectively, the "Proposed Transaction"), the Corporation
shall give written notice to all Participants advising that their
respective Options or the Options held by their RRSP's, shall be fully
exerciseable immediately, whether or not otherwise fully exerciseable,
vested or unvested on that date, and may be exercised only within 30
days after the date of the notice and not thereafter, and that all
rights of the Participants and their RRSP's under any Options not
exercised will terminate at the expiration of the 30-day period,
provided that the Proposed Transaction is completed within 180 days
after the date of the notice. If the Proposed Transaction is not
completed within the 180-day period, no right under any Option will be
affected by the notice, except that the Option may not be exercised
between the date of expiration of the 30-day period and the day after
the expiration of the 180-day period.
3.2 PROHIBITION ON TRANSFER OF OPTIONS
Options are personal to each Eligible Person. No Eligible Person may
deal with any Options or any interest in them or Transfer any Options
now or hereafter held by the Eligible Person except in accordance with
the Plan. A purported Transfer of any Options
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in violation of the Plan will not be valid and the Corporation will not
issue any Share upon the attempted exercise of improperly Transferred
Options.
3.3 PROHIBITION ON TRANSFER OF SHARES
No Participant will, upon exercise of an Option, deal with any Share or
any interest in it or Transfer any Share now or hereafter held by the
Participant or the Participant's RRSP except in accordance with the
Articles of the Corporation as implemented by the Board.
3.4 CAPITAL ADJUSTMENTS
If there is any change in the outstanding Shares by reason of a stock
dividend or split, recapitalization, consolidation, combination or
exchange of shares, or other fundamental corporate change, the Board
will make, subject to any prior approval required of relevant stock
exchanges or other applicable regulatory authorities, if any, an
appropriate substitution or adjustment in (i) the exercise price of any
unexercised Options under the SOP; (ii) the number or kind of shares or
other securities reserved for issuance pursuant to this Plan; and (iii)
the purchase price of those shares subject to unexercised Options
theretofore granted under the SOP, and in the exercise price of those
unexercised Options; provided, however, that no substitution or
adjustment will obligate the Corporation to issue or sell fractional
shares. In the event of the reorganization of the Corporation or the
amalgamation or consolidation of the Corporation with another
corporation, the Board may make such provision for the protection of
the rights of Eligible Persons, participants and their RRSP's as the
Board in its discretion deems appropriate. The determination of the
Board, as to any adjustment or as to there being no need for
adjustment, will be final and binding on all parties.
3.5 NON-EXCLUSIVITY
Nothing contained herein will prevent the Board from adopting other or
additional compensation arrangements for the benefit of any Eligible
Person or Participant, subject to any required regulatory or
shareholder approval.
3.6 AMENDMENT AND TERMINATION
The Board may amend, suspend or terminate this Plan or any portion
thereof at any time in accordance with applicable legislation, and
subject to any required regulatory or shareholder approval. Subject to
section 3.1, no amendment, suspension or termination will alter or
impair any Options under the SOP, or any rights pursuant thereto,
granted previously to any Participant or the Participant's RRSP without
the consent of that Participant.
If this Plan is terminated, the provisions of this Plan and any
administrative guidelines, and other rules and Regulations adopted by
the Board and in force at the time of this Plan, will continue in
effect as long as any Options under the SOP or any rights pursuant
thereto remain outstanding. However, notwithstanding the termination of
the Plan, the Board may make any amendments to the Plan or the Options
it would be entitled to make if the Plan were still in effect.
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3.7 COMPLIANCE WITH LEGISLATION
The Board may postpone or adjust any exercise of any Option or the
issue of any Shares pursuant to this Plan as the Board in its
discretion may deem necessary in order to permit the Corporation to
effect or maintain registration of this Plan or the Shares issuable
pursuant thereto under the securities laws of any applicable
jurisdiction, or to determine that the Shares and this Plan are exempt
from such registration. The Corporation is not obligated by any
provision of this Plan or any grant hereunder to sell or issue Shares
in violation of any applicable law. In addition, if the Shares are
listed on a stock exchange, the Corporation will have no obligation to
issue any Shares pursuant to this Plan unless the Shares have been duly
listed, upon official notice of issuance, on a stock exchange on which
the Shares are listed for trading.
3.8 EFFECTIVE DATE
This Plan will become effective immediately.
TLC THE LASER CENTER INC.
AMENDED AND RESTATED SHARE OPTION PLAN
REGULATIONS
1. In these Regulations, words defined in this Plan and not otherwise
defined herein will have the same meaning as set forth in this Plan.
2. A Participant will cease to be an Eligible Person on earliest of:
(a) the date of the Participant's termination, retirement or
cessation of employment with or engagement by the Corporation
or any of its Affiliates;
(b) the date of the Participant's death; and
(c) the date on which the Participant otherwise fails to meet the
criteria set forth under the definition of an Eligible Person.
3. If the legal representative of a Participant who has died exercises the
Option of the Participant or the Participant's RRSP in accordance with
the terms of the SOP, the Corporation will have no obligation to issue
the Shares until evidence satisfactory to the Corporation has been
provided by the legal representative that the legal representative is
entitled to purchase the Shares under this Plan.
4. Share certificates representing the number of Shares in respect of
which the Option has been exercised will be issued only upon payment in
full of the relevant exercise price. These share certificates will be
held for safekeeping by the Secretary of the Corporation, unless the
Participant directs the Secretary otherwise.
TLC VISION CORPORATION
PROXY
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS OF TLC VISION CORPORATION
TO BE HELD ON JUNE 14, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TLC VISION CORPORATION
The undersigned shareholder of TLC VISION CORPORATION ("TLC Vision")
hereby appoints Elias Vamvakas, Chief Executive Officer and a director of TLC
Vision, or, failing him, Robert W. May, General Counsel and Secretary of TLC
Vision, or instead of any of the foregoing, ___________________________, as
proxy of the undersigned, to attend, vote and act for and on behalf of the
undersigned at the annual and special meeting of shareholders of TLC Vision to
be held on June 14, 2004 at 9:00 a.m., Eastern Standard Time, at The TSX
Auditorium, The Exchange Tower, 130 King Street West, Toronto, Ontario, and at
all adjournments thereof, upon the following matters:
1. TO VOTE FOR [ ] AGAINST [ ] ABSTAIN [ ]
or, IF NO SPECIFICATION IS MADE, VOTE FOR a resolution approving TLC
Vision's 2004 Employee Share Purchase Plan;
2. TO VOTE FOR [ ] AGAINST [ ] ABSTAIN [ ]
or, IF NO SPECIFICATION IS MADE, VOTE FOR a resolution approving
certain amendments to TLC Vision's 1997 Share Purchase Plan for
Canadian Employees;
3. TO VOTE FOR [ ] AGAINST [ ] ABSTAIN [ ]
or, IF NO SPECIFICATION IS MADE, VOTE FOR a resolution approving the
increase in the number of common shares reserved for TLC Vision's
Amended and Restated Share Option Plan by 2,000,000 common shares;
4. TO VOTE FOR all nominees (except as marked to the contrary) [ ]
WITHHOLD all nominees [ ] or, IF NO SPECIFICATION IS MADE, VOTE FOR the
election of the following directors for the terms stated in the
accompanying management information circular:
Elias Vamvakas Dr. William David Sullins, Jr.
John J. Klobnak Warren S. Rustand
Thomas N. Davidson Dr. Richard Lindstrom
Toby S. Wilt
Provided that the undersigned wishes to withhold vote for the following
directors:
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5. TO VOTE FOR [ ] WITHHOLD [ ]
or IF NO SPECIFICATION IS MADE, VOTE FOR the continued appointment of
Ernst & Young LLP as auditors of TLC Vision and authorizing the
directors to fix the remuneration of the auditors; and
6. In the discretion of the proxy holder, such other business as may
properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS INDICATED AS TO ANY ITEM(s), THEY WILL BE VOTED FOR SUCH ITEM(s).
EXECUTED on the ___________________ day of _____________________, 2004
- ----------------------------------- -----------------------------------
Number of Common Shares Signature of Shareholder
-----------------------------------
Name of Shareholder
(Please print clearly)
* Please see other side for notes on how to use this proxy.
NOTES:
1. A shareholder has the right to appoint a person to represent the
shareholder at the meeting other than the management representatives
designated in this proxy. Such right may be exercised by inserting in
the space provided the name of the other person the shareholder wishes
to appoint. Such other person need not be a shareholder.
2. To be valid, this proxy must be signed and deposited with the Secretary
of the Corporation, c/o CIBC Mellon Trust Company, Proxy Dept., 200
Queen's Quay East, Unit #6, Toronto, Ontario M5A 4K9 (Facsimile No.
(416) 368-2502) not later than the close of business on June 10, 2004,
or, if the meeting is adjourned, 48 hours (excluding Saturdays and
holidays) before any adjourned meeting.
3. If an individual, please sign exactly as your shares are registered. If
the shareholder is a corporation, this proxy must be executed by a duly
authorized officer or attorney of the shareholder and, if the
corporation has a corporate seal, its corporate seal should be affixed.
If the shares are registered in the name of an executor, administrator
or trustee, please sign exactly as the shares are registered. If the
shares are registered in the name of the deceased or other shareholder,
the shareholder's name must be printed in the space provided, the proxy
must be signed by the legal representative with his name printed below
his signature and evidence of authority to sign on behalf of the
shareholder must be attached to this proxy.
4. Reference is made to the accompanying management information circular
(which is also a proxy statement under U.S. law) for further
information regarding completion and use of this proxy and other
information pertaining to the meeting. Before completing this proxy,
non-registered holders should carefully review the section in the
accompanying management information circular entitled "Non-Registered
Shareholders" and should carefully follow the instructions of the
securities dealer or other intermediary who sent this proxy.
5. If this proxy is not dated in the space provided, it is deemed to bear
the date on which it is mailed.
6. If a share is held by two or more persons, any one of them present or
represented by proxy at a meeting of shareholders may, in the absence
of the other or others, vote in respect thereof, but if more than one
of them are present or represented by proxy, they shall vote together
in respect of each share so held.