.
.
.
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
<Table>
<Caption>
[x] Filed by the Registrant [ ] Filed by a Party other than the Registrant
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive 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 2005 ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 23, 2005
NOTICE IS HEREBY GIVEN THAT the 2005 annual and special meeting of the
shareholders of TLC Vision Corporation (the "Company") will be held on June 23,
2005 at 9:00 a.m. Eastern Daylight Time at The TSX Auditorium, The Exchange
Tower, 130 King Street West, Toronto, Ontario, for the following purposes:
1. To approve the Company's Shareholder Rights Plan;
2. To confirm an amendment to the Company's By-Law 2002;
3. To elect six directors for the ensuing year;
4. 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;
5. To receive the consolidated financial statements of the Company for
the fiscal year ended December 31, 2004, together with the report of the
auditors thereon; and
6. 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 item 1 and item 2 is contained in
Appendix A to the accompanying management information circular.
The Board of Directors has fixed the close of business on May 12, 2005 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
--------------------------------------
Brian L. Andrew
General Counsel and Secretary
Mississauga, Ontario
April 19, 2005
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 19, 2005, except where otherwise noted. This management information
circular is first being sent or given to shareholders on or about May 27, 2005.
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 TO BE HELD ON THURSDAY, JUNE 23, 2005 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 our directors, officers and
employees, without additional remuneration, may also solicit proxies personally.
We will, if requested, reimburse banks, brokerage houses and other custodians,
nominees and certain fiduciaries for their reasonable out-of-pocket expenses
incurred in connection with the distribution of proxy materials to their
principals. THE SOLICITATION OF PROXIES BY THIS MANAGEMENT INFORMATION CIRCULAR
IS BEING MADE BY OR ON BEHALF OF THE COMPANY'S MANAGEMENT and the total cost of
the solicitation will be borne by the Company.
Unless the context requires otherwise, the "Company," "we,", "our," and
"us," refer to TLC Vision Corporation.
APPOINTMENT OF PROXIES
The persons named in the enclosed form of proxy are representatives of the
Company's management and are directors or officers of the Company. A SHAREHOLDER
WHO WISHES TO APPOINT SOME OTHER PERSON, WHO NEED NOT BE A SHAREHOLDER OF THE
COMPANY, TO REPRESENT SUCH SHAREHOLDER AT THE MEETING MAY DO SO BY INSERTING
SUCH 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 21, 2005
or, if the meeting is adjourned, 48 hours (excluding Saturdays and holidays)
before any adjourned meeting.
Our executive office is located at 5280 Solar Drive, Mississauga, Ontario,
L4W 5M8. Our 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 our registered shareholders, or the persons they appoint as their
proxies, are permitted to attend and vote at the meeting. However, in many
cases, the Company's 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, we have distributed copies of
the notice of meeting, this management information circular, the form of proxy
and the annual report for the fiscal year ended December 31, 2004 (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 our
registered office at any time up to and including the last business
day preceding the day of the meeting, or any adjournment of the
meeting, at which the proxy is to be used, or (ii) with the
chairman of the meeting on the day of the meeting or any
adjournment of the meeting; or
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. Our management knows of no
such amendment, variation or other matter to come before the meeting as of the
date of this management information circular. However, if such amendments or
variations or other matters properly come before the meeting, the management
representatives designated in the form of proxy will vote the common shares
represented thereby in accordance with their best judgment.
VOTING SHARES AND RECORD DATE
On April 19, 2005, we had outstanding 70,481,833 common shares. Each holder
of common shares of record at the close of business on May 12, 2005, the record
date established for notice of the meeting, will, except as otherwise described,
be entitled to one vote for each common share held on all matters proposed to
come before the meeting or any adjournment thereof, except to the extent that
the holder has transferred any common shares after the record date and the
transferee of such shares establishes ownership of them and demands, not later
than the close of business 10 days before the meeting, to be included in the
list of shareholders entitled to vote at the meeting, in which case the
transferee will be entitled to vote such shares.
A quorum for the shareholder meeting will consist of at least two persons
present in person and each entitled to vote at the meeting and holding at least
33 1/3% of our outstanding common shares.
BUSINESS TO BE CONDUCTED AT THE MEETING
APPROVAL OF THE COMPANY'S SHAREHOLDER RIGHTS PLAN
We are asking shareholders to approve a shareholder rights plan which was
adopted by our board of directors on March 4, 2005. Our previous shareholder
rights plan expired in November 2004. The material terms of the shareholder
rights plan are summarized below. The summary is qualified in its entirety by
reference to the full text of the shareholder rights plan, which is hereby
incorporated by reference to our current report on Form 8-K dated March 4, 2005
and filed with the U.S. Securities and Exchange Commission (the "SEC") and the
copy of the shareholder rights plan filed on SEDAR at www.sedar.com with the
Canadian securities regulatory authorities. A copy of our Form 8-K dated March
4, 2005 may be obtained, without charge, by requesting it in writing from TLC
Vision Corporation, 540 Maryville Centre
3
Drive, Suite 200, St. Louis, Missouri 63141, Attention: Vice President,
Corporate Communications, Tel: (888) 289-5824 ext. 8202.
Background
The rights plan is contained in an agreement dated as of March 4, 2005,
between the Company and CIBC Mellon Trust Company. The primary objective of the
rights plan is to provide our shareholders adequate time to properly assess the
merits of a take-over bid without undue pressure, to allow competing bids to
emerge and to allow our board of directors time to consider alternatives to
enable shareholders to maximize the value of their shares. The rights plan
encourages a potential acquirer to proceed either by way of a permitted bid,
which requires the takeover bid to satisfy certain minimum standards designed to
promote fairness, or with the concurrence of the board of directors.
Rights
One right has been issued and is attached to each of our outstanding common
shares. One right will also be issued and attached to each common share issued
after the adoption of the rights plan. The rights will separate from the common
shares and become exercisable ten trading days after a person acquires, or
commences a take-over bid to acquire, 20% or more of our common shares. A right
only becomes exercisable upon the occurrence of a flip-in event, which is a
transaction by which a person becomes an acquiring person and which otherwise
does not meet the requirements of a permitted bid.
When exercised, a right entitles each of our shareholders who is not then
attempting to acquire control of the Company to purchase additional common
shares at a substantial discount to market value. This purchase would cause
substantial dilution to the person or group of persons attempting to acquire
control of the Company, other than by way of a permitted bid. We anticipate that
no acquiring person will be willing to risk such dilution and so will instead
either make a take-over bid that is permitted by the rights plan or negotiate
with our board of directors for a waiver of the rights plan. The rights will
expire on the termination of the rights plan, unless redeemed before such time.
Acquiring Person
An acquiring person is generally a person who becomes the beneficial owner
of 20% or more of our outstanding common shares. Under the rights plan, there
are various exceptions, including:
1. a person who acquires 20% or more of the outstanding common shares due
to:
- a reduction in the number of outstanding common shares due to
acquisitions of common shares by us;
- pro rata distributions of common shares by us;
- the issuance of common shares pursuant to a public distribution
provided that the purchaser does not purchase a percentage of the
common shares offered under such distribution that is greater than
the percentage beneficially owned prior to the public distribution;
or
- the issuance of common shares on an exempt private placement basis,
subject to certain limits, including that the purchaser does not
become the beneficial owner of more than 25% of our common shares
outstanding immediately prior to the private placement; and
2. underwriters who obtain our common shares for the purposes of a public
distribution.
Beneficial Ownership
The thresholds for triggering the rights plan are based on the percentage
of shares that are beneficially owned by a person. This is defined in terms of
legal or equitable ownership of our common shares. In addition, a person is
deemed to be the beneficial owner of our common shares in circumstances where
that person, and
4
its affiliates or associates and any other person acting jointly or in concert
with such person, has a right to acquire our common shares within 60 days. There
are various exceptions to this rule, including our common shares held by
investment fund managers, trust companies acting in their capacities as trustees
and administrators and pension plan administrators.
Lock-Up Agreements
A bidder may enter into lock-up agreements with our shareholders whereby
such shareholders agree to tender their common shares to a takeover bid without
the occurrence of a flip-in event. Any such lock-up agreement must:
- permit the shareholder to withdraw the common shares to tender to another
takeover bid or to support another transaction that exceeds the value of
the original bid by as much or more than a specified amount, which
specified amount may not be greater than 7% of the value of the original
bid; and
- not provide any break-up fees or termination penalties except within
specified limits.
Certificates and Transferability
Before the separation time, the rights will be evidenced by the
certificates for the common shares to which they are attached. Certificates
issued after the date the plan was adopted bear a legend to that effect. Rights
will not be transferable separately from the attached common shares before the
separation time. From and after the separation time, the rights will be
evidenced by rights certificates and will be transferable and traded separately
from the common shares.
Permitted Bid
If a take-over bid is structured as a permitted bid, a flip-in event will
not occur and the rights will not become exercisable. The requirements of a
permitted bid include the following:
- the take-over bid must be made to all shareholders by means of a
take-over bid circular;
- the take-over bid must not permit the bidder to take up any of our common
shares that have been tendered to the take-over bid prior to the expiry
of a period not less than 60 days after the take-over bid is made, and
then only if at such time more than 50% of common shares held by the
independent shareholders, being shareholders other than the bidder, its
affiliates and persons acting jointly or in concert with such bidder,
have been tendered to the take-over bid and not withdrawn;
- the take-over bid must contain an irrevocable and unqualified provision
that, unless it is withdrawn, common shares may be tendered at any time
during the 60-day period referred to above and that any common shares
deposited under the take-over bid may be withdrawn until they have been
taken up and paid for; and
- if more than 50% of our common shares held by independent shareholders
are tendered to the take-over bid within the 60-day period, then the
bidder must make a public announcement of that fact and the take-over bid
must then remain open for an additional 10 business days from the date of
such public announcement.
The rights plan also allows a competing permitted bid to be made while a
permitted bid is in existence. A competing permitted bid is a take-over bid that
is made after a permitted bid has been made but prior to its expiry, and which
satisfies all of the requirements of a permitted bid except that it may expire
on the same date as the permitted bid, provided that the competing permitted bid
is open for a minimum of 35 days.
The requirements of a permitted bid and competing permitted bid enable our
shareholders to decide whether the take-over bid or any competing permitted bid
is adequate on its own merits, without being influenced by the likelihood that a
take-over bid will succeed. Moreover, if there is sufficient support for a
take-over bid such that at least 50% of our outstanding common shares have been
tendered to it, a shareholder who has not yet tendered to that bid will have a
further 10 business days in which to decide whether to
5
withdraw his or her common shares from a competing take-over bid, if any, and
whether to tender to the take-over bid.
Waiver and Redemption
Our board of directors may waive the application of the rights plan to a
particular take-over bid or redeem the rights at a price of US$0.0001 per right
in the following circumstances:
- a waiver can only be given where a take-over bid is made by way of a
take-over bid circular;
- a waiver given in respect of one take-over bid constitutes an automatic
waiver in respect of all other competing take-over bids;
- a waiver may be given in the event of an acquisition of our common shares
by any person over the 20% threshold, provided that such person has
disposed of the excess shares at the time of the waiver and such
acquisition was inadvertent and without any intention to cause a flip-in
event; and
- the rights are deemed to be redeemed upon the successful completion of a
permitted bid or a competing permitted bid or a takeover bid for which
the application of the rights plan has been waived.
Our board of directors may, however, terminate the rights plan, with prior
shareholder approval or approval of the holders of rights, in the case of
termination after the separation time, at any time prior to the occurrence of a
flip-in event by redeeming all of the rights that are then outstanding at a
price of US$0.0001 per right.
Termination
The rights plan will expire at the meeting and every third anniversary
after the meeting unless the continuation of the rights plan is approved by our
shareholders at each such meeting.
Board of Directors
The rights plan does not detract from or lessen the duty of our board of
directors to act honestly and in good faith with a view to the best interests of
the Company. The board of directors, if a permitted bid is made, continues to
have the duty and power to take such actions and make such recommendations to
shareholders as are considered appropriate.
Approvals Required
Management of the Company 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 shareholder rights plan. Our board of directors adopted
the shareholder rights plan on March 4, 2005, subject to regulatory and
shareholder approval. Approval of the shareholder rights plan by our
shareholders is required by the Toronto Stock Exchange (the "TSX"). The
affirmative vote of the majority of the votes cast at the meeting is required to
approve the shareholder rights plan. THE MANAGEMENT REPRESENTATIVES DESIGNATED
IN THE ENCLOSED FORM OF PROXY INTEND TO VOTE THE COMMON SHARES FOR WHICH THEY
HAVE BEEN APPOINTED FOR THE APPROVAL OF THE SHAREHOLDER RIGHTS PLAN UNLESS THE
SHAREHOLDER WHO HAS GIVEN SUCH PROXY DIRECTS OTHERWISE.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE SHAREHOLDER RIGHTS PLAN.
CONFIRMING AMENDMENTS TO BY-LAW 2002
In order to comply with NASDAQ requirements, our board of directors has
found it necessary to amend section 51 of our by-laws, referred to as By-Law
2002, to increase the quorum at shareholders' meetings from not less than 20% to
not less than 33 1/3% of the votes entitled to be cast at any such meeting.
Management of the Company is asking shareholders to pass Resolution 2, the
full text of which is set out in Appendix A to this management information
circular, to confirm the amendment to By-Law 2002. Our
6
board of directors approved the amendment to By-Law 2002 on April 19, 2005. The
affirmative vote of the majority of the votes cast at the meeting is required to
confirm the amendment to By-Law 2002. THE MANAGEMENT REPRESENTATIVES DESIGNATED
IN THE ENCLOSED FORM OF PROXY INTEND TO VOTE THE COMMON SHARES FOR WHICH THEY
HAVE BEEN APPOINTED FOR THE CONFIRMATION OF THE AMENDMENT TO BY-LAW 2002 UNLESS
THE SHAREHOLDER WHO HAS GIVEN SUCH PROXY DIRECTS OTHERWISE.
Our board of directors unanimously recommends a vote FOR the confirmation
of the amendment to By-Law 2002.
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 the Company to hold
office until the next annual meeting of our shareholders or until his successor
is elected or appointed. The table also sets out the age of the nominee, the
position with the Company that each nominee presently holds, the principal
occupation of each nominee and the date on which each nominee was first elected
or appointed as a director. See the section entitled "Security Ownership of
Certain Beneficial Owners and Management" for the number of our common shares
that are beneficially owned, directly or indirectly, or over which control or
direction is exercised by each nominee. Information on each nominee's business
experience during the past five years is included following the table. Our 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......................... 46 Chairman of the Board of President and Chief May 1993
Ontario, Canada Directors Executive Officer of
OccuLogix, Inc.
James C. Wachtman...................... 44 Chief Executive Officer, Officer of the August 2004
Missouri, U.S.A. President and Director Company
Thomas N. Davidson..................... 65 Director(1*)(2)(3) Corporate Director October 2000
Ontario, Canada
Warren S. Rustand...................... 61 Director(1)(2)(3*) Management October 1997
Arizona, U.S.A. Consultant
Richard Lindstrom, M.D. ............... 57 Director Ophthalmologist May 2002
Minnesota, U.S.A.
Toby S. Wilt........................... 60 Director(1)(2*)(3) Corporate Director January 2004
Tennessee, U.S.A.
</Table>
- ---------------
(1) Member of the Compensation Committee, * -- Chairman
(2) Member of the Corporate Governance Committee, * -- Chairman
(3) Member of the Audit Committee, * -- Chairman
Set forth below is biographical information relating to the nominees for
election to the board of directors of the Company.
Elias Vamvakas, together with Dr. Jeffery J. Machat, co-founded the
Company, where he has been the Chairman since 1994 and was our Chief Executive
Officer from 1994 to July 2004. He has been the Chairman and Secretary of
OccuLogix, Inc. since June 2003 and the Chief Executive Officer since July 2004.
Prior to co-founding the Company in 1993, Mr. Vamvakas was the President of the
Creative Planning Financial Group of Companies, a private provider of financial
planning, benefits and pension plans.
James C. Wachtman became our Chief Executive Officer and President in
August 2004. Prior to that, Mr. Wachtman served as Chief Operating Officer of
North America operations of LaserVision Centres Inc. ("LaserVision") from June
1996 to July 1998, and as President and Chief Operating Officer of LaserVision
7
from August 1998 to May 2002 and as our President and Chief Operating Officer
from May 2002 to August 2004. Prior to joining LaserVision, Mr. Wachtman was
employed in various senior management positions by McGaw, Inc., a manufacturer
of medical disposables.
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
janitorial cleaning products, General Trust and PCL Packaging Inc., a supplier
of plastic packaging. He is on the board of CMA Holdings, Inc., a financial
services firm, HMI Industries, Inc., a manufacturer of indoor air filtration
systems, MDC Partners Inc., a marketing communications company, and Azure
Dynamics Corporation, a developer and producer of electric commercial and
military vehicles and systems.
Warren S. Rustand has been a director of the Company 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 us in 1997.
Richard L. Lindstrom, M.D. has served as a director of the Company 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 the Company since January 2004. A
Certified Public Accountant (inactive), Mr. Wilt currently sits on the boards of
Outback Steakhouse, Inc., a restaurant chain, and 1st Source Corporation, a
midwestern regional bank holding company that provides consumer and commercial
banking services. His past directorships include C&S Sovran, a southeastern bank
holding company, Genesco, Inc., a manufacturer and retailer of footwear and
apparel, Titan Holdings, an insurance company, and First American Corporation, a
regional bank holding company. Mr. Wilt is also the Chairman of privately held
Christie Cookie Company, a manufacturer and distributor of baked food products.
The Business Corporations Act (New Brunswick) provides that each of our
shareholders entitled to vote at an election of directors has cumulative voting
rights. Such rights entitle a shareholder to cast a number of votes equal to the
number of votes attached to the shares held by the shareholder multiplied by the
number of directors to be elected. The shareholder may cast all such votes in
favour of one candidate for director or distribute them among the candidates in
any manner. If a shareholder has voted for more than one candidate without
specifying the distribution of the 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
six 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 proxy representatives designated in the enclosed
form of proxy to vote, then the shareholder must do so personally at the meeting
or by another proper form of proxy.
Management of the Company does not contemplate that any of the proposed
nominees will be unable to serve as a director, but, if that should occur for
any reason prior to the meeting, the management representatives designated in
the enclosed form of proxy reserve the right to vote for another nominee at
their
8
discretion unless a shareholder has specified in his or her proxy that his or
her common shares are to be withheld from voting in the election of directors.
THE MANAGEMENT REPRESENTATIVES DESIGNATED IN THE ENCLOSED FORM OF PROXY
INTEND TO CAST THE VOTES TO WHICH THE COMMON SHARES REPRESENTED BY SUCH PROXY
ARE ENTITLED EQUALLY AMONG THE PROPOSED NOMINEES FOR ELECTION AS DIRECTORS,
UNLESS THE SHAREHOLDER WHO HAS GIVEN SUCH PROXY HAS DIRECTED THAT SUCH SHARES BE
WITHHELD FROM VOTING IN THE ELECTION OF DIRECTORS.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
THE INDIVIDUALS NAMED ABOVE AS DIRECTORS.
APPOINTMENT OF AUDITORS
Our board of directors proposes that Ernst & Young LLP be appointed as
auditors of the Company until the next annual meeting of shareholders of the
Company. Ernst & Young LLP have been our auditors since 1997. Representatives of
Ernst & Young LLP are expected to attend our annual and special meeting, will be
provided with an opportunity to make a statement, should they desire to do so,
and will be available to respond to appropriate questions from our shareholders.
The affirmative vote of the majority of the votes cast at the meeting at
which a quorum is present is required to appoint Ernst & Young LLP as our
auditors for the ensuing year and to authorize the directors to fix the
remuneration to be paid to the auditors. UNLESS OTHERWISE DIRECTED, THE
MANAGEMENT REPRESENTATIVES DESIGNATED IN THE ENCLOSED FORM OF PROXY INTEND TO
VOTE THE COMMON SHARES FOR WHICH THEY HAVE BEEN APPOINTED FOR THE APPOINTMENT OF
ERNST & YOUNG LLP AS OUR AUDITORS AND FOR THE AUTHORIZATION OF THE DIRECTORS TO
FIX THE REMUNERATION TO BE PAID TO THE AUDITORS. If our shareholders do not
approve the appointment of Ernst & Young LLP, our board of directors will
reconsider their appointment.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF ERNST &
YOUNG LLP AS OUR AUDITORS FOR THE ENSUING YEAR.
Fees Billed by External Auditors
Ernst & Young LLP billed us for the following fees in the last two fiscal
years:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2004
------------ ------------
Fees for Audit Services..................................... $647,203 $1,382,914
Fees for Audit-related Services............................. $ 16,115 $ 14,707
Fees for Tax Services....................................... $ 75,000 $ 50,000
All Other Fees.............................................. $ 15,000 $ --
</Table>
Audit fees for the financial years ended December 31, 2004 and 2003 were
for professional services rendered for the audits of our consolidated financial
statements, quarterly reviews of the consolidated financial statements included
in our quarterly filings, consents, comfort letters, and statutory audits of the
subsidiary financial statements. Fees for the audit services for the financial
year ended December 31, 2003 include fees billed after April 29, 2004, the date
of our management information circular in connection with our 2004 annual and
special meeting of shareholders. Audit related fees for the financial years
ended December 31, 2004 and 2003 were for services related to consultation in
connection with management's documentation of internal controls. Fees for tax
services for the financial years ended December 31, 2004 and 2003 were for
services related to the dissolution of a subsidiary of the Company. All other
fees for the financial year ended December 31, 2003 were related to insurance
advisory services. We do not have any other services provided by Ernst & Young
LLP other than those stated above.
9
Pre-Approval Policies and Procedures
All 2004 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 2004, none
of the fees billed by Ernst & Young LLP were approved by the Audit Committee of
our board of directors pursuant to the de minimis exception provided by Section
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X. The Audit Committee has concluded
that the foregoing non-audit services did not adversely impact the independence
of Ernst & Young LLP.
EXECUTIVE OFFICERS
The following are brief summaries of the business experience during the
past five years of each of our executive officers who are not directors:
Steven P. Rasche, age 45, became our Chief Financial Officer and Treasurer
in August 2004. Prior thereto, Mr. Rasche served as the Chief Financial Officer
of Public Safety Equipment, Inc., a marketer of safety equipment from May 1996
to July 2004. He began his professional career in 1983 with Price Waterhouse,
LLP (now PricewaterhouseCoopers, LLP) and later moved to United Van Lines, Inc.
a household goods mover, where he progressed through a variety of financial
leadership roles. Mr. Rasche is a Certified Public Accountant and holds a
Bachelors of Science degree in Accounting from the University of
Missouri-Columbia and a Master of Business Administration Degree from the J.L.
Kellogg Graduate School of Management at Northwestern University.
Brian L. Andrew, age 53, became our General Counsel and Secretary in
February 2005. Prior thereto, Mr. Andrew was the Chair of the Health Law
Practice Group and a member in the St. Louis, Missouri office of Husch &
Eppenberger, LLC, a large multi-office law firm. Mr. Andrew has also served as
Assistant Counsel to the American Optometric Association and Associate General
Counsel for MetLife HealthCare Management Corporation. He holds an undergraduate
degree from the University of Missouri-Columbia, a Masters degree from Webster
University and a law degree from the St. Louis University School of Law.
William P. Leonard, age 40, was appointed as our President, Refractive
Surgical Services in October 2004. Prior to that, he was our Executive Vice
President, Refractive and prior to 1999, he served as a Regional General
Manager. Prior to joining us 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., a research-based pharmaceuticals company.
James Tiffany, age 48, was appointed as President of Midwest Surgical
Services (MSS), a subsidiary of the Company, in August 2003. Prior to that Mr.
Tiffany served as Vice President of Sales and Marketing of LaserVision from
January 1999 to July 2000 and General Manager of MSS from July 2000 to August
2003. Mr. Tiffany received his undergraduate degree from Arizona State
University and a Master of Business Administration Degree from Washington
University in St. Louis, Missouri.
INFORMATION ON EXECUTIVE COMPENSATION
The following table sets forth all compensation earned during the fiscal
year ended May 31, 2002, during the seven-month period ended December 31, 2002
and during the fiscal years ended December 31, 2003 and 2004 by each person who
served as our Chief Executive Officer during the year ended December 31, 2004,
by B. Charles Bono who served as our Chief Financial Officer until August 2004
and by our four highest paid executive officers who were serving as executive
officers at the end of the fiscal year ended December 31, 2004
10
and whose annual salary and bonus exceeded $150,000 for the fiscal year ended
December 31, 2004, referred to as our named executive officers.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
ANNUAL COMPENSATION(2) LONG-TERM
------------------------------ COMPENSATION
SALARY FOR BONUS FOR ------------------
THE FISCAL THE FISCAL COMMON SHARES
NAME AND YEAR YEAR UNDERLYING OPTIONS ALL OTHER
PRINCIPAL POSITION FISCAL YEAR ENDED(1) ($) ($) (#) COMPENSATION
- ------------------ -------------------- -------------- ------------- ------------------ ------------
Elias Vamvakas................ December 31, 2004 366,667(3) 366,667(3) 15,000(4) --
Chief Executive Officer December 31, 2003 375,000 337,500(5) 51,000(6) --
(until August 13, 2004) December 31, 2002 218,750 93,750(7) 125,000(8) --
May 31, 2002 384,468 -- 180,000 --
James C. Wachtman............. December 31, 2004 354,000(9) 350,000 33,000(4) --
Chief Executive Officer December 31, 2003 334,375 204,000 72,500 --
and President December 31, 2002 189,583 47,396 -- --
May 31, 2002(10)(11) 14,852 -- -- --
B. Charles Bono............... December 31, 2004 272,588(12) -- -- 1,212,909(15)
Chief Financial Officer December 31, 255,625 113,594 61,000 --
2003(13)
(until August, 2004) December 31, 140,000 37,500 -- --
2002(13)
May 31, 2002(10)(11) 10,968 -- -- --
Steven P. Rasche.............. December 31, 2004 91,269(14) 63,000 80,000(4) --
Chief Financial Officer
Robert W. May................. December 31, 2004 274,303 -- -- 1,193,109(15)
General Counsel and December 31, 258,546 105,367 51,000 --
2003(13)
Secretary December 31, 148,750 39,844 -- --
2002(13)
May 31, 2002(10)(11) 11,653 -- -- --
William P. Leonard............ December 31, 2004 232,379 146,250 27,000(4) --
President, Refractive December 31, 2003 203,637 122,220 70,000 --
Surgical Services December 31, 2002 117,925 26,979 -- --
May 31, 2002 161,070 38,900 14,000 --
James B. Tiffany.............. December 31, 2004 220,790 107,120 27,500(4) --
President of MSS December 31, 2003 196,059 20,800 58,000 --
December 31, 2002 117,716 44,832 -- --
May 31, 2002(10)(11) 9,221 -- -- --
</Table>
- ---------------
(1) We changed our 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) Mr. Vamvakas was our Chief Executive Officer until August 13, 2004. Since
that time Mr. Vamvakas has served as Chairman and Chief Executive Officer
of OccuLogix, Inc. (formerly Vascular Sciences Corporation) ("OccuLogix"),
our subsidiary which completed its initial public offering on December 16,
2004. Mr. Vamvakas' salary and bonus for 2004 includes $116,667 of salary
and $116,667 of bonus paid by OccuLogix.
(4) See the information under "-- Options Granted During the Fiscal Year Ended
December 31, 2004" below.
(5) Mr. Vamvakas earned performance bonuses based on the objectives described
under "-- Employment Contracts -- Mr. Elias Vamvakas."
(6) As Executive Chairman and Director of OccuLogix, Mr. Vamvakas also received
4,583 fully exercisable options to purchase OccuLogix common stock at an
exercise price of $1.30 and 500,000 options that are fully exercisable to
purchase OccuLogix common stock at an exercise price of $0.99.
(7) 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.
11
(8) Represents options reissued at Cdn.$13.69 per share which replaced options
surrendered at Cdn.$20.75 per share.
(9) Mr. Wachtman served as our President and Chief Operating Officer until
August 13, 2004. Since then he has been our Chief Executive Officer and
President.
(10) Messrs. Wachtman, Bono, May and Tiffany became officers of the Company on
May 15, 2002. Prior to that date, Messrs. Wachtman, Bono, May and Tiffany
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.
(11) We did not make any option grants to Messrs. Wachtman, Bono, May and
Tiffany during the periods indicated; however, options to purchase shares
of LaserVision common stock held by these officers were converted to
options to purchase our common shares in connection with the merger based
on the exchange ratio of 0.95 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.
(12) Mr. Bono served as our Chief Financial Officer until August, 2004.
(13) On May 15, 2003, Mr. Bono and Mr. May received bonuses for their first year
of employment with us representing 25% of their compensation. The amounts
shown for the periods ended December 31, 2002 and December 31, 2003
represent the amounts paid in 2003 and 2004, respectively.
(14) Mr. Rasche became our Chief Financial Officer in August, 2004.
(15) The amounts shown represent accrued severance under the terms of employment
contracts.
The following table sets forth the individual grants of Company stock
options for the fiscal year ended December 31, 2004 to the named executive
officers.
OPTIONS GRANTED IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------ VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PERCENT OF PRICE APPRECIATION FOR
NUMBER OF TOTAL OPTION TERM
SECURITIES OPTIONS ----------------------
UNDERLYING GRANTED TO 5% 10%
OPTIONS EMPLOYEES IN ---------- ---------
NAME GRANTED FISCAL YEAR EXERCISE PRICE EXPIRATION DATE $ $
- ---- ---------- ------------ -------------- --------------- ---------- ---------
Elias Vamvakas........... 15,000 1.5% $10.42 Dec. 13, 2009 43,183 95,423
James C. Wachtman........ 33,000 3.2% $10.42 Dec. 13, 2009 95,002 209,930
B. Charles Bono.......... -- N/A N/A N/A -- --
Steven P. Rasche......... 50,000 7.9% $10.80 July 19, 2009 149,192 329,675
Steven P. Rasche......... 30,000 $10.42 Dec. 13, 2009 86,366 190,845
Robert W. May............ -- N/A N/A N/A -- --
William P. Leonard....... 27,000 2.7% $10.42 Dec. 13, 2009 77,729 171,761
James B. Tiffany......... 27,000 2.7% $10.42 Dec. 13, 2009 77,729 171,761
James B. Tiffany......... 500 $11.47 Apr. 1, 2009 1,584 3,501
</Table>
- ---------------
(1) The options granted to Mr. Vamvakas are fully exercisable on the first
anniversary of the date of grant. Each other 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.
The following table sets forth all of the Company stock options exercised
by our named executive officers during the fiscal year ended December 31, 2004
and the total number of shares underlying unexercised stock options of our named
executive officers and their dollar value at the end of the fiscal year ended
December 31, 2004:
12
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
SHARES ACQUIRED ON VALUE REALIZED OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
EXERCISE $ (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
------------------ -------------- --------------------------- ---------------------------
Elias Vamvakas....... -- -- 102,750/143,250 $764,842/$990,248
James C. Wachtman.... 502,500 1,679,180 370,625/87,375 $2,505,973/$410,888
B. Charles Bono...... 528,500 2,171,865 --/45,500 --/$347,235
Steven P. Rasche..... -- -- --/80,000 --/--
Robert W. May........ 513,000 2,059,612 297,750/38,250 $2,276,470/$314,310
William P. Leonard... 34,000 180,665 26,000/83,000 $177,240/$402,475
James B. Tiffany..... 133,000 278,325 38,200/71,000 $286,764/$336,120
</Table>
- ---------------
(1) Value is based upon the closing price of our common shares on the Nasdaq
National Market System on December 31, 2004, which was $10.42.
EMPLOYMENT CONTRACTS
Elias Vamvakas
We entered into an employment contract with Mr. Elias Vamvakas on January
1, 1996. Mr. Vamvakas was Chief Executive Officer of the Company until August,
2004. He continues to serve as the Chairman of our board of directors. The
employment agreement was terminated when he resigned as our Chief Executive
Officer and Mr. Vamvakas has entered into a new employment agreement with
OccuLogix. The employment agreement with us, as amended, provided that Mr.
Vamvakas would 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 were
met.
Mr. Vamvakas' contract provided for the payment of a cash bonus of up to
$375,000. Mr. Vamvakas' bonus was 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 were the basis for 85% of Mr. Vamvakas' bonus and
the remaining 15% was at the discretion of the board of directors. If the
Company only achieved 80% of the budgeted financial target, Mr. Vamvakas was
entitled to a partial bonus with respect to such target. Based on our financial
performance in 2004, Mr. Vamvakas was entitled to 100% of the performance bonus
for 2004. He received an amount pro rated for the months of January to August
2004, to reflect the length of his employment with us in 2004.
Mr. Vamvakas' severance agreement provides that he will receive $100,000
per annum for his service as Chairman of our board of directors. In addition, we
have guaranteed payment of Mr. Vamvakas' severance should he be terminated by
OccuLogix without just cause. We are responsible for his entire severance should
the termination occur prior to August 31, 2006 and for a pro-rata portion,
declining ratably on a monthly basis, should the termination occur between
September 1, 2006 and August 31, 2008.
James C. Wachtman
In connection with the merger with LaserVision, we entered into an
employment contract with Mr. James C. Wachtman providing for his employment as
our President and Chief Operating Officer. The term of the agreement is two
years commencing on May 15, 2002 with automatic two-year renewals unless
otherwise terminated by the parties. The base annual salary under the agreement
was, effective January 1, 2003, $340,000, with minimum annual increases equal to
the increase of the U.S. Consumer Price Index. Effective August 2004, the base
annual salary is $375,000 to reflect his employment as our President and Chief
Executive Officer.
13
Mr. Wachtman's compensation also included, effective January 1, 2004, an
annual bonus of up to 80% of his salary upon the attainment of specified
performance goals. Mr. Wachtman'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. Effective August 2004, he became
entitled to an annual bonus of up to 100% of his salary. Financial targets are
the basis of 85% of his bonus and the remaining 15% is at the discretion of the
board of directors.
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 us upon at least 90 days' written notice in the event of a
material adverse change in his job responsibilities following a change of
control of the Company. If Mr. Wachtman's employment is terminated by us 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, we entered into an
employment agreement with Mr. B. Charles Bono III providing for his employment
as our Chief Financial Officer. Mr. Bono resigned in August, 2004, at which
time, the agreement was terminated. The base annual salary was $240,000, with
minimum annual increases equal to the increase of the U.S. Consumer Price Index.
Mr. Bono's compensation also included an annual bonus of up to 50% of his base
salary upon the attainment of specified performance goals, provided that Mr.
Bono would 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 Company stock option received in exchange for
LaserVision options or warrants as a result of the merger. Additionally, the
agreement provided 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 could resign
and be entitled to that severance payment was extended to November 15, 2004. Mr.
Bono received severance payments of $1,040,209 in 2004 and will receive an
additional $172,700 through September 2006.
Steven P. Rasche
We entered into an employment agreement with Steven P. Rasche on July 1,
2004, providing for his employment as our Chief Financial Officer. The term of
the agreement is two years commencing on July 14, 2004 with automatic one-year
renewals unless otherwise terminated by the parties. The base annual salary is
$210,000. Mr. Rasche is also entitled to receive options under our stock option
plan. Mr. Rasche's compensation also includes an annual bonus of up to 50% of
his annual salary based on his personal performance and the financial
performance of the Company as a whole.
Mr. Rasche's employment may be terminated for just cause, as defined in the
agreement. If terminated for other than just cause, Mr. Rasche will be entitled
to receive 12 months' base salary plus an additional month of salary for each
year worked following the second anniversary of the effective date of the
agreement to a maximum of six additional months of salary.
14
The agreement contains change of control provisions that provide, among
other things, that Mr. Rasche may voluntarily terminate his employment with us
within twelve months following a change of control and would be entitled to 12
months' base salary on termination.
Mr. Rasche's agreement also contains non-competition and non-solicitation
covenants which run for a minimum of one year following his employment and
prohibit Mr. Rasche from engaging in or having a financial interest in, or
permitting the use of his name by, an entity engaged in the refractive laser
corrective surgery business or which competes with us. The agreement also
prohibits him from employing any of our employees or soliciting any of our
patients during the same time period. Additionally, the agreement contains
confidentiality covenants preventing Mr. Rasche from disclosing confidential or
proprietary information relating to the Company at any time during or after his
employment.
Robert W. May
In connection with the merger with LaserVision, we entered into an
employment agreement with Mr. Robert W. May, J.D., our General Counsel and
Secretary. Mr. May retired at the end of 2004, at which time, the agreement was
terminated. Mr. May's base annual salary was $255,000, with minimum annual
increases equal to the increase of the U.S. Consumer Price Index. His
compensation also included an annual bonus of up to 50% of his base salary upon
the attainment of specified performance goals, provided that Mr. May would
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 Company stock option received in exchange for
LaserVision options or warrants as a result of the merger. Additionally, the
agreement provided 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 could resign
and be entitled to that severance payment was extended to November 15, 2004.
During the first quarter of 2005, Mr. May received his entire severance of
$1,193,109.
William P. Leonard
We entered into an employment contract with Mr. William P. Leonard, who is
our President for Refractive Surgical Services. 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, effective January 1, 2004, is $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 our 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 the Company 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 us
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 of our employees or soliciting any of our
patients during the same time period. Additionally, the agreement
15
contains confidentiality covenants preventing Mr. Leonard from disclosing
confidential or proprietary information relating to the Company at any time
during or after his employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2004, the Compensation Committee
of our board of directors was comprised of Messrs. Davidson and Rustand and Drs.
Lindstrom and Sullins.
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 SEC, or subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), except to the extent that
we specifically incorporate it by reference into a document filed under the
Securities Act of 1933, as amended, or the Exchange Act.
Our 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. We believe 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 our executive officers, including our named executive
officers, is comprised of base salary, cash bonuses and long-term incentives in
the form of Company stock options. We do not have an executive pension plan.
We were incorporated in 1993 and operated in an emerging market.
Consequently our board of directors initially placed considerable emphasis upon
stock options as an incentive in determining executive compensation in order to
align the interests of the executive officers with the long-term interests of
our shareholders. As the Company matures, there has been less emphasis placed
upon stock options as an incentive for executives.
Our board of directors administers our stock option plan. The purpose of
the stock option plan is to advance the interests of the Company by:
- 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 the Company or its
affiliates; and
- attracting new employees, officers or directors to the Company or its
affiliates.
In determining whether to grant options and how many options to grant to
eligible persons under our stock option plan, consideration is given to each
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, 2004, Mr. Vamvakas, our Chief
Executive Officer until August, 2004 and Chairman of the Board of Directors,
continued to provide the leadership and strategic direction that has enabled us
to diversify our product offering and "right size" the business to reflect
current economic conditions in the North American marketplace. Mr. Wachtman
served as our Chief Executive Officer and President from August, 2004. The Chief
Executive Officer is evaluated on the following: 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, 2004 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
16
the Company achieved certain financial results and up to $75,000 in the
discretion of the board of directors. Based on our financial performance in
2004, Mr. Vamvakas received a bonus of $250,000 as Chief Executive Officer of
the Company. This amount is pro rated for the months of January to August 2004,
to reflect the length of Mr. Vamvakas' employment with us. See "Summary
Compensation Table" for further information on the compensation paid to Mr.
Vamvakas in the last three fiscal years.
The base compensation paid to Mr. Wachtman during the fiscal year ended
December 31, 2004 was set by his employment agreement described under
"Employment Contracts". In addition, as provided in his employment agreement,
Mr. Wachtman 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 our financial performance in
2004, Mr. Wachtman received a bonus of $350,000. This amount is pro rated for
the months of January to August 2004, to reflect the length of Mr. Wachtman's
employment with us as Chief Operating Officer and the months of September to
December to reflect his employment as Chief Executive Officer. See "Summary
Compensation Table" for further information on the compensation paid to Mr.
Wachtman in the last three fiscal years.
The foregoing report is submitted by the Compensation Committee.
Thomas N. Davidson Warren S. Rustand Toby S. Wilt Dr. Richard Lindstrom
17
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, 2000 through the fiscal year ended
December 31, 2004 compared to the cumulative total return on the S&P/TSX
Composite Index and the Nasdaq Health Services Stocks Index.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG TLC VISION CORPORATION, THE S & P/TSX COMPOSITE INDEX
AND THE NASDAQ HEALTH SERVICES INDEX
LOGO
<Table>
<Caption>
- -----------------------------------------------------------------------------------
5/31/00 5/31/01 5/31/02 12/31/02 12/31/03 12/31/04
- -----------------------------------------------------------------------------------
TLC Vision
Corporation $100.00 $65.57 $40.79 $ 13.78 $ 86.95 $136.79
S&P/TSX Composite
Index $100.00 $89.33 $85.18 $ 74.46 $ 94.36 $108.02
Nasdaq Health
Services Stocks
Index $100.00 $107.92 $115.03 $102.72 $130.27 $152.49
</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 our stock option plan based on the performance of
the Company. As a medical
18
director, Dr. Lindstrom was granted options to acquire 20,000 common shares at
an exercise price of $1.16 in January 2003 and 15,000 common shares at an
exercise price of $6.10 in December 2003. All other directors were granted
options to acquire 5,000 common shares at an exercise price of $1.16 in January
2003, 10,000 common shares at an exercise price of $6.10 in December 2003, and
10,000 common shares at an exercise price of $10.42 in December, 2004. The chair
of each of the Audit, Compensation and Corporate Governance Committees also
receives an annual fee of $5,000.
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 our
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 our
day-to-day operations. Its role is to set corporate direction, assign
responsibility to management for achievement of that direction, define executive
limitations and monitor performance against those objectives and executive
limitations.
Our board of directors has developed position descriptions for the Chair of
the Board and for our Chief Executive Officer. Responsibilities of the Chair of
the Board include providing overall leadership to the board of directors,
assuming primary responsibility for the operation and functioning of the board
of directors, ensuring compliance with the governance policies of the board of
directors and taking a leadership role in ensuring effective communication and
relationships between the Company, shareholders, stakeholders and the general
public.
Responsibilities of the Chief Executive Officer include the development and
recommendation of corporate strategies and business and financial plans for
approval of the board of directors, managing the operations of the business in
accordance with the strategic direction set by the board of directors, reporting
management and performance information to the board of directors and developing
a list of risk factors and informing the board of directors of the mechanisms in
place to address those risks.
When the Chief Executive Officer also holds the position of Chair of the
Board, the board of directors may elect a non-executive Vice Chair or lead
director. In May 2004, Dr. Sullins was appointed Chair of the executive sessions
of the board of directors, described below, for a term of one year. Dr. Sullins
passed away on February 6, 2005.
COMPOSITION OF THE BOARD OF DIRECTORS
Our board of directors is currently comprised of the six individuals
nominated for election at the meeting. The board believes that Messrs. Davidson,
Wilt and Rustand are unrelated directors and that Messrs. Vamvakas and Wachtman
and Dr. Lindstrom are related directors, within the meaning of the TSX
Guidelines. The board also believes that Messrs. Davidson, Wilt and Rustand are
independent directors under the guidelines proposed by the Canadian securities
regulatory authorities and under the current listing standards of the Nasdaq
National Market System.
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 us during the fiscal year ended May 31,
19
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. We do not have a
significant shareholder, since there is no person who has the ability to
exercise a majority of the votes attached to our outstanding shares for the
election of directors. There were eleven meetings of the board of directors in
the fiscal year ended December 31, 2004. 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,
our unrelated directors meet regularly in executive sessions independent of
management to discuss our business and affairs. We do not have a formal process
in place for the orientation and education of 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 2003, the Corporate Governance Committee reviewed the compensation
of our directors and recommended the current levels.
BOARD COMMITTEES
Our 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 and
Wilt, all of whom are unrelated directors. The Audit Committee is responsible
for the engagement, compensation and oversight of our independent auditors and
reviews with them the scope and timing of their audit services and any other
services they are asked to perform, their report on the accounts of the Company
following the completion of the audit and our policies and procedures with
respect to internal accounting and financial controls. The Audit Committee
reports its findings with respect to such matters to the board of directors.
During the fiscal year ended December 31, 2004, there were ten meetings of the
Audit Committee. It is expected that the Audit Committee will consist of Messrs.
Rustand, Davidson and Wilt after this annual meeting and that all members, in
the judgment of the board of directors, will continue to be unrelated directors
and will be independent directors as defined in the current listing standards of
the Nasdaq National Market System. The Audit Committee operates under the Audit
Committee Charter adopted by the board of directors. See "Audit Committee
Report" below.
During the fiscal year ended December 31, 2004, the Compensation Committee
consisted of Messrs. Davidson and Rustand and Drs. Lindstrom and Sullins. 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, 2004. It is expected that the Compensation Committee will
consist of Messrs. Davidson, Rustand and Wilt after the meeting and that all
members, in the judgment of the board of directors, will be unrelated directors
and will be independent directors as defined in the current listing standards of
the Nasdaq National Market System. See "Information on Executive
Compensation -- Compensation Committee Report on Executive Compensation" above.
During the fiscal year ended December 31, 2004, the Corporate Governance
Committee consisted of Dr. Sullins and Messrs. Davidson, Klobnak and Wilt all of
whom were unrelated directors except Mr. Klobnak and Dr. Sullins. The Corporate
Governance Committee operates under a written charter established by our board
of directors pursuant to which it has been charged with responsibility for:
- developing and monitoring the effectiveness of the 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;
20
- ensuring appropriate corporate governance and proper delineation of the
roles, duties and responsibilities of management, the board of directors
and its various committees; and
- assisting the board of directors in setting the objectives for our Chief
Executive Officer and evaluating his or her performance.
For purposes of identifying potential candidates to serve on our board of
directors, the Corporate Governance Committee has not established specific
minimum age, education, years of business experience or specific types of skills
for potential candidates, but in general, expects qualified candidates will have
personal and professional integrity, demonstrated ability and judgment and ample
business experience. The Corporate Governance Committee will review and consider
director nominees recommended by shareholders. There are no differences in the
manner in which the Corporate Governance Committee evaluates director nominees
recommended by shareholders.
The Corporate Governance Committee received no shareholder recommendations
for nomination to the Board of Directors in connection with the annual and
special meeting. Shareholders wishing to recommend director candidates for
consideration by the Corporate Governance Committee may do so by writing to our
Secretary at 540 Maryville Centre Drive, Suite 200, St. Louis, Missouri 63141
giving the recommended nominee's name, biographical data and qualifications,
accompanied by the written consent of the recommended nominee. Nominations for
director made by shareholders must be received by the Secretary at least 90 days
prior to the anniversary date of our prior year proxy circular.
During the fiscal year ended December 31, 2004, there were no meetings of
the Corporate Governance Committee. It is expected that the Corporate Governance
Committee will consist of Messrs. Davidson, Rustand and Wilt after the meeting
and that all members, in the judgment of the board of directors, will be
unrelated directors and will be independent directors as defined in the current
listing standards of the Nasdaq National Market System.
CODE OF BUSINESS CONDUCT AND ETHICS
On April 28, 2004, our board of directors adopted a Code of Business
Conduct and Ethics that applies to our directors, officers and employees and
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 Corporate Communications at 540 Maryville Centre Drive, Suite 200,
St. Louis, Missouri, 63141, (888) 289-5824 ext. 8202.
OUTSIDE ADVISORS
We have implemented a system which enables an individual director to engage
an outside advisor at our expense in appropriate circumstances. The engagement
of an external advisor by an individual director, as well as the terms of the
retainer and the fees to be paid to the advisor, is subject to the prior
approval of the Corporate Governance Committee.
SHAREHOLDER COMMUNICATIONS
Our board of directors places great emphasis on its communications with
shareholders. Shareholders receive timely dissemination of information and we
have procedures in place to permit and encourage feedback from our shareholders.
Our senior officers are available to shareholders and, through our investor
relations department, we seek to provide clear and accessible information about
the results of our business and our future plans. We have established an
investor web site on the Internet through which we make available press
releases, financial statements, annual reports, trading information and other
information relevant to investors. Mr. Wachtman may also be contacted directly
by investors through the Internet.
We have also established an independent toll-free Values Line at
1-888-475-8376 which is available 24 hours a day, seven days a week. Any person
may submit a good faith complaint or report a concern regarding accounting or
auditing matters related to the Company or our subsidiaries or violations of any
of our policies to the Audit Committee through the Values Line. Shareholders may
also contact our
21
non-management directors by calling the Values Line or may contact our board of
directors or any of its members by writing to our Secretary at TLC Vision
Corporation, 540 Maryville Centre Drive, Suite 200, St. Louis, Missouri 63141 or
by e-mail through the Investor Relations page of our website at www.tlcv.com.
All correspondence directed to a particular board member is referred, unopened,
to that member. Correspondence not directed to a particular board member is
referred, unopened, to the Chair of the board of directors.
All directors are encouraged, but not required, to attend our annual
meeting of shareholders. All of our directors attended our last annual and
special meeting of shareholders held on June 14, 2004, except Dr. Sullins.
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed to be
"soliciting material" or "filed" or incorporated by reference in future filings
with the SEC, or subject to the liabilities of Section 18 of the Exchange Act,
except to the extent that we specifically incorporate it by reference into a
document filed under the Securities Act of 1933, as amended, or the Exchange
Act.
The members of the Audit Committee are Messrs. Rustand, Davidson and Wilt.
Each member of the Audit Committee is independent in the judgment of the board
of directors as required by the current listing standards of the Nasdaq National
Market System. Mr. Wilt is a certified Public Accountant (inactive) and has been
designated by the board of directors as our Audit Committee financial expert.
The Audit Committee operates under the Audit Committee Charter adopted by the
board of directors.
Management has the primary responsibility for the financial statements and
the reporting process, including the systems of internal control, and the
independent auditors are responsible for auditing those financial statements.
The Audit Committee's primary responsibility is to oversee our financial
reporting process on behalf of the board of directors and to report the result
of its activities to the board, as described in the Audit Committee Charter. The
principal recurring duties of the Audit Committee in carrying out its oversight
responsibility include reviewing and discussing with management and the
independent auditors our quarterly and annual financial statements, evaluating
the audit efforts of our independent auditors and evaluating the reasonableness
of significant judgments and the clarity of disclosures. The Committee also
monitors with management and the independent auditors the adequacy and
effectiveness of our accounting and financial controls, as well as the Company's
compliance with Section 404 of the Sarbanes-Oxley Act of 2002.
The Audit Committee has reviewed and discussed with management of the
Company our audited financial statements for the fiscal year ended December 31,
2004. The Audit Committee has also discussed with Ernst & Young LLP, our
independent auditors, the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). The Audit
Committee has also received from the independent auditors' written affirmation
of their independence as 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 our audited financial statements as
of December 31, 2004 and for the year then ended be included in our annual
report on Form 10-K for the year ended December 31, 2004 for filing with the
U.S. Securities and Exchange Commission.
Warren S. Rustand Thomas N. Davidson Toby S. Wilt
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
We maintain directors' and officers' liability insurance. Under this
insurance coverage the insurer pays on our behalf for losses for which we
indemnify our directors and officers, and on behalf of individual directors and
officers for losses arising during the performance of their duties for which we
do not indemnify them. The total limit for the policy is $30,000,000 per policy
term subject to a deductible of $100,000 per occurrence with respect to
corporate indemnity provisions and $500,000 if the claim relates to securities
law claims. The total
22
premiums in respect of the directors' and officers' liability insurance for the
fiscal year ended December 31, 2004 were approximately $905,056. The insurance
policy does not distinguish between directors and officers as separate groups.
INDEBTEDNESS OF DIRECTORS AND OFFICERS
No officer, director or employee, or former officer, director or employee,
of us or any of our subsidiaries, or associate of any such officer, director or
employee is currently or has been indebted (other than routine indebtedness of
employees and non-executive officers) at any time since January 1, 2004 to the
Company or any of our subsidiaries.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
LaserVision, one of our subsidiaries, 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, one of our directors, 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, we received $0, $48,000 and
$21,000 in management fees from the partnership for the years ended December 31,
2004 and 2003 and the transitional period ended December 31, 2002, respectively.
In 2004, Dr. Lindstrom also received a total of $170,000 in compensation from us
in his capacity as the medical director of the Company 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, we received revenue of
$1.4 million, $1.2 million and $0.6 million as a result of the agreement for the
years ended December 31, 2004 and 2003 and the transitional period ended
December 31, 2002, respectively.
Elias Vamvakas, Dr. Richard Lindstrom, and Thomas Davidson, all directors
of the Company, also serve as directors of OccuLogix. Mr. Vamvakas also serves
as the Executive Chairman and Chief Executive Officer of OccuLogix. The board of
directors of OccuLogix granted Mr. Vamvakas stock options to purchase 4,583
OccuLogix common shares at an exercisable price of $1.30 per share. These stock
options are fully vested and exercisable. In addition, the board granted Mr.
Vamvakas stock options to purchase 500,000 OccuLogix common shares at an
exercise price of $0.99 per share. These stock options were to vest and become
exercisable over a three year period but became fully vested upon the successful
completion of OccuLogix's initial public offering in December 2004. Dr.
Lindstrom and Mr. Davidson each received options to purchase 25,000 OccuLogix
common shares at an exercise price of $12.00 per share in 2004 in conjunction
with the OccuLogix IPO. The options issued to Dr. Lindstrom and Mr. Davidson
vest over three years and expire ten years from the date of grant. Dr. Lindstrom
and Mr. Davidson received $9,000 and $16,000, respectively, for the year ended
December 31, 2004 as cash compensation for service as outside directors of
OccuLogix.
None of our principal shareholders, senior officers or directors or the
proposed nominees for election as our directors, or any of their associates or
subsidiaries, has any other interest in any other transaction since January 1,
2004 or any other proposed transaction that has materially affected or would
materially affect the Company or its subsidiaries.
23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as at April 25, 2005, the number of our
common shares beneficially owned by each of our directors, nominee directors and
named executive officers, our directors, nominee directors and executive
officers as a group, and each person who, to the knowledge of our directors or
officers, beneficially owns, directly or indirectly, or exercises control or
direction over common shares carrying more than 5% of the voting rights attached
to all our outstanding common shares.
<Table>
<Caption>
OCCULOGIX, INC. PERCENTAGE OF
DIRECTORS, NOMINEE DIRECTORS, PERCENTAGE OF COMMON COMMON SHARES OCCULOGIX, INC.
NAMED EXECUTIVE OFFICERS AND SHARES BENEFICIALLY SHARES BENEFICIALLY BENEFICIALLY COMMON SHARES
5% SHAREHOLDERS OWNED OWNED OWNED BENEFICIALLY OWNED
- ----------------------------- ------------------- -------------------- --------------- ------------------
Galleon Group................... 7,553,537 10.7% -- *
Mason Capital................... 7,067,590 10.0% -- *
I.G. Investment Management
Ltd. ......................... 3,802,050 5.4% -- *
Elias Vamvakas.................. 3,546,050 5.0% 514,583 1.2%
Warren S. Rustand............... 15,180 * -- *
Thomas N. Davidson.............. 64,827 * 15,000 *
Dr. Richard Lindstrom........... 63,500 * 7,500 *
William P. Leonard.............. 36,591 * 7,000 *
James C. Wachtman............... 415,684 * -- *
Toby S. Wilt.................... 20,000 * -- *
B. Charles Bono III............. -- * -- *
Robert W. May................... 26,830 * -- *
Steven P. Rasche................ 2,090 * -- *
James B. Tiffany................ 57,191 * -- *
All directors and executive
officers as a group (11
persons)...................... 4,247,943 6.0% 544,083 1.3%
</Table>
- ---------------
* Less than one percent
Under the rules of the U.S. Securities and Exchange Commission, common
shares which an individual or group has a right to acquire within 60 days by
exercising options or warrants are deemed to be outstanding for the purpose of
computing the percentage of ownership of that individual or group, but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person shown in the table.
"Galleon Group" refers to Raj Rajaratnam, Galleon Management, L.L.C.,
Galleon Management, L.P., Galleon Advisors, L.L.C., Galleon Captains Partners,
L.P., Galleon Captains Offshore, Ltd., Galleon Healthcare Partners, L.P. and
Galleon Healthcare Offshore, Ltd. The share information for Galleon Group is
based on a report on Schedule 13G filed with the SEC as of February 15, 2005.
This report indicates that Galleon Group has shared voting and dispositive power
with respect to 7,553,537 common shares. The principal address of Galleon
Management, L.P. is 135 East 57th Street, 16th Floor, New York, NY 10022 and for
each of the other Galleon group entities is c/o Galleon Management, L.P. at the
same address.
"Mason Capital" refers to Mason Capital Management LLC, Mason Capital, LP
and Mason Capital, Ltd. The share information for Mason Capital is based on a
report on Schedule 13G filed with the SEC as of December 31, 2004. This report
indicates that Mason Capital has sole voting and dispositive power with respect
to 7,067,590 common shares. The principal address of Mason Capital Management
LLC, Mason Capital, LP and Mason Capital, Ltd. is 110 East 59th Street, New
York, New York 10082.
The share information for I.G. Investment Management Ltd. is based on a
report on Schedule 13F filed with the SEC as of February 11, 2005. This report
indicates that I.G. Investment Management Ltd. has sole voting and dispositive
power with respect to 3,802,050 common shares. The principal address of I.G.
Investment Management Ltd. is One Canada Centre, 447 Portage Avenue, Winnipeg,
Manitoba, R3C 3B6.
24
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 2600 Skymark Drive, Unit 9, Suite
201, Mississauga, Ontario L4W 5B2. 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 Capital, which
is an investment firm 51% owned by Mr. Vamvakas.
Messrs. Wachtman, Leonard, Rasche and Tiffany respectively beneficially own
11,444, 391, 90 and 8,991 common shares in their individual 401(k) plans.
Messrs. Vamvakas, Davidson and Leonard respectively own 16,923, 9,827 and
200 common shares in the employee stock purchase plan.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of December 31, 2004
with respect to each equity plan or arrangement pursuant to which warrants or
options to purchase our common shares have been granted.
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2004
<Table>
<Caption>
NUMBER OF SHARES
REMAINING AVAILABLE
NUMBER OF SHARES FOR FUTURE ISSUANCE
TO BE ISSUED UPON WEIGHTED-AVERAGE UNDER EQUITY
EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OUTSTANDING (EXCLUDING SHARES
OPTIONS, WARRANTS OPTIONS, WARRANTS REFLECTED IN FIRST
PLAN CATEGORY AND RIGHTS (000'S) AND RIGHTS COLUMN) (000'S)
- ------------- ------------------ ------------------- -------------------
AS OF DECEMBER 31, 2004
Equity compensation plans approved by
shareholders.......................... 4,203 $5.08 1,076
Equity compensation plans not approved
by shareholders....................... -- -- --
Total................................. 4,203 $5.08 1,076
</Table>
At our 2004 annual and special meeting, our shareholders approved the
adoption of the 2004 Employee Share Purchase (the "New Plan"), for our U.S.
employees, and amendments to our 1997 Share Purchase Plan for Canadian Employees
(the "Canadian Plan"). The amendments to the Canadian Plan included the
elimination of our 25% matching contribution to employee contributions to
purchase our common shares and replaced the matching contribution with a
discounted purchase price of 85% of the closing price of our common shares on
NASDAQ at the beginning or end of each offering period, whichever is lower. The
amendments to the Canadian Plan were made to ensure consistency with the terms
of the New Plan.
The New Plan and the changes to the Canadian Plan will not be implemented
for our employees until July, 2005. Therefore no contributions or purchases were
made by our employees under the New Plan during 2004 and contributions and
purchases under the Canadian Plan continued on the basis of the historical terms
of that plan during 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires our directors, certain officers
and persons who own more than 10% of a registered class of our equity securities
to file reports of ownership on Form 3 and changes in ownership on Form 4 or 5
with the SEC. Such directors, officers and 10% shareholders are also required by
the SEC's rules to furnish us with copies of all Section 16(a) reports they
file. We assist our directors and officers in preparing their Section 16(a)
reports. To our knowledge, all Section 16(a) filing requirements applicable to
25
our officers, directors and 10% shareholders were complied with during the
fiscal year ended December 31, 2004 except that each of Mr. Vamvakas, Mr.
Davidson, Mr. Rustand, Dr. Lindstrom, Mr. Wilt, Mr. Wachtman, Mr. Rasche and Mr.
Leonard filed late reports on Form 4 related to options granted and transactions
during the fiscal year ended December 31, 2004.
SHAREHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Any proposal of a shareholder intended to be presented for a vote by the
Company's shareholders at our annual meeting of shareholders for the fiscal year
ended December 31, 2005 must be received by our executive office not later than
March 25, 2006 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
We know of no other matter to come before the meeting other than the
matters referred to in the notice of meeting.
DIRECTORS' APPROVAL
The contents and sending of this management information circular have been
approved by our board of directors.
By Order of the Board of Directors
--------------------------------------
Brian L. Andrew
General Counsel and Secretary
Mississauga, Ontario
April 19, 2005
26
APPENDIX A
TLC VISION SHAREHOLDER RESOLUTIONS
TLC VISION CORPORATION
RESOLUTION NO. 1
RESOLVED THAT:
1. The adoption of the shareholder rights plan agreement dated as of March
4, 2005 between the Company and CIBC Mellon Trust Company is hereby ratified,
confirmed and approved.
2. Any director or officer of the Company is hereby authorized and directed
for and in the name of and on behalf of the Company to do all acts and things
and execute, whether under the corporate seal of the Company or otherwise, and
deliver or cause to be delivered all documents and instruments as in the opinion
of such director or officer may be necessary or desirable to carry out the
intent of the foregoing resolutions.
A-1
TLC VISION SHAREHOLDER RESOLUTIONS
TLC VISION CORPORATION
RESOLUTION NO. 2
RESOLVED THAT:
1. By-Law 2002 of the Company is hereby amended by deleting the reference
in section 51 to "not less than 20%" and replacing it with the words "not less
than 33 1/3%".
A-2
TLC VISION CORPORATION
PROXY
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS OF TLC VISION CORPORATION
TO BE HELD ON JUNE 23, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TLC VISION CORPORATION
The undersigned shareholder of TLC VISION CORPORATION ("TLC Vision")
hereby appoints James C. Wachtman, Chief Executive Officer and a director of TLC
Vision, or, failing him, Brian L. Andrew, General Counsel and Secretary of TLC
Vision, or instead of any of the foregoing, ___________________________, as
proxy of the undersigned, to attend, vote and act for and on behalf of the
undersigned at the annual and special meeting of shareholders of TLC Vision to
be held on June 23, 2005 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:
<Table>
<Caption>
1. TO VOTE FOR [ ] AGAINST [ ] ABSTAIN [ ]
or, IF NO SPECIFICATION IS MADE, VOTE FOR a resolution approving TLC Vision's Shareholder Rights Plan;
</Table>
<Table>
<Caption>
2. TO VOTE FOR [ ] AGAINST [ ] ABSTAIN [ ]
or, IF NO SPECIFICATION IS MADE, VOTE FOR a resolution confirming an amendment to section 51 of By-Law 2002;
</Table>
<Table>
<Caption>
3. TO VOTE FOR all nominees (except as marked to the contrary) [ ] WITHHOLD VOTE FOR all nominees [ ]
or, IF NO SPECIFICATION IS MADE, VOTE FOR the election of the following directors for the ensuing year:
</Table>
<Table>
<Caption>
Elias Vamvakas
James C. Wachtman Warren S. Rustand
Thomas N. Davidson Dr. Richard Lindstrom
Toby S. Wilt
</Table>
Provided that the undersigned wishes to withhold vote for the following
directors:
-----------------------------------------------------------------------
4. TO VOTE FOR [ ] ABSTAIN [ ]
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
</Table>
-2-
5. 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 _____________________, 2005
<Table>
<Caption>
________________________ ________________________
Number of Common Shares Signature of Shareholder
__________________________
Name of Shareholder
(Please print clearly)
</Table>
* Please see other side for notes on how to use this proxy.
-3-
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 21, 2005,
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.