Page 1 of 37
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of January, 2004
-------------------------------------
ATI TECHNOLOGIES INC.
(Translation of Registrant's Name into English)
1 Commerce Valley Drive East, Markham, Ontario, Canada L3T 7X6
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F Form 40-F X
---------------- -----------------
(Indicate by check mark whether the registrant by furnishing
the information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.)
Yes No X
-------------- ---------------
Page 1 of 37 Pages
Index is located on Page 2
Page 2 of 37
INDEX
Document Page Number
Notice of Annual and Special Meeting of Shareholders dated December 19, 2003 3
Management Information Circular dated December 19, 2003 4
Form of Proxy 36
Signature Page 37
Page 3 of 37
ATI TECHNOLOGIES INC.
NOTICE OF ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
This document provides formal notification of your invitation to attend the
Annual and Special Meeting of Shareholders (the "Meeting") of ATI Technologies
Inc. (the "Company"). The Meeting will be held at:
The Carlu
444 Yonge Street, 7th Floor,
Toronto, Ontario
on
Tuesday, January 27, 2004
at 2:00 p.m. (Toronto time)
As a shareholder, you are entitled to attend the Meeting and to cast one vote
for each common share that you own. If you are a registered shareholder and are
unable to attend the Meeting, you will still be able to vote on the items of
business set out below by completing the form of proxy (printed on blue paper)
included with this management information circular (the "Circular"). This
Circular explains how to complete the proxy form, and how the voting process
works. To be valid, registered shareholders must submit the proxy form to the
Company's transfer agent, CIBC Mellon Trust Company ("CIBC Mellon") at the
Toronto offices of CIBC Mellon, no later than 5:00 p.m. (Toronto time) on
Monday, January 26, 2004 or present the proxy form at the Meeting prior to
commencement of the Meeting.
If you are a non-registered beneficial shareholder, you must follow the
instructions provided by your broker, securities dealer, bank, trust company or
similar entity in order to vote your shares.
The following business will be conducted at the Meeting:
1. presentation of the financial statements of the
Company for the fiscal year ended August 31, 2003,
and the auditors' report thereon;
2. election of directors;
3. appointment of auditors and authorizing the directors
to fix the remuneration of the auditors;
4. consideration and, if deemed appropriate, approval of
amended Restricted Share Unit Plans; and
5. transaction of any other business that is properly
brought before the Meeting.
BY ORDER OF THE BOARD
//Dean Blain//
Markham, Ontario Dean J. Blain
December 19, 2003 Corporate Secretary
Page 4 of 37
==============================================================================
ATI TECHNOLOGIES INC.
NOTICE
AND
MANAGEMENT INFORMATION CIRCULAR
FOR THE
ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
to be held at
The Carlu,
444 Yonge Street, 7th Floor,
Toronto, Ontario
on
Tuesday, January 27, 2004
at 2:00 p.m. (Toronto time)
THIS BOOKLET CONTAINS IMPORTANT INFORMATION FOR SHAREHOLDERS
==============================================================================
Page 5 of 37
- ------------------------------------------------------------------------------
ATI TECHNOLOGIES INC.
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
THIS BOOKLET EXPLAINS:
o details of the matters to be voted upon at the
Meeting; and
o how to exercise your vote even if you are unable to
attend the Meeting.
THIS BOOKLET CONTAINS:
o the Notice of Annual and Special Meeting of
Shareholders;
o the Management Information Circular;
o management's request that you vote to support its
proposals; and
o a proxy form that you may use to vote your common
shares without attending the Meeting.
This Management Information Circular (the "Circular") and proxy form is
furnished in connection with the solicitation of proxies by or on behalf of the
management of ATI Technologies Inc. (the "Company") for use at the annual and
special meeting (the "Meeting") of the shareholders of the Company to be held on
Tuesday, January 27, 2004.
At this Meeting, management will report on the Company's performance in fiscal
2003 and the Company's plans for the coming year. The Meeting will deal with the
usual matters of corporate governance, including the presentation of financial
results, the election of directors and the appointment of auditors. Your
presence, or at least your vote if you are unable to attend in person, is
important because in addition to voting upon the usual items of business as
listed above, shareholders will also be voting on special business relating to
certain amendments to the Company's recently adopted Restricted Share Unit
Plans.
We would like your support for all matters to be decided at the Meeting,
including approval of amended Restricted Share Unit Plans. Voting in favour of
the amended Restricted Share Unit Plans will facilitate further growth by
permitting the Company to continue to provide appropriate incentives to attract
and retain its employees, and to align the interests of senior management and
directors with shareholders, through the ownership of shares while, at the same
time, allowing the Company to better manage both dilution, by decreasing its
reliance on the issuance of stock options, and cash flows, by providing the
Company with the discretion to manage the Restricted Share Unit Plans in the
manner most beneficial to the Company and its shareholders.
REGISTERED SHAREHOLDERS
PLEASE NOTE: A form of proxy (printed on blue paper) is enclosed with this
booklet. This proxy form may be used to vote your common shares if you are
unable to attend the Meeting in person. Instructions on how to vote using this
proxy form are found on page 2 of the Circular.
NON-REGISTERED BENFICIAL SHAREHOLDERS
PLEASE NOTE: If your common shares are held on your behalf, or for your account,
by a broker, securities dealer, bank, trust company or similar entity (an
"Intermediary"), you may not be able to vote unless you carefully follow the
instructions provided by your Intermediary with this booklet.
- -------------------------------------------------------------------------------
Page 6 of 37
ATI TECHNOLOGIES INC.
NOTICE OF ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
This document provides formal notification of your invitation to attend the
Annual and Special Meeting of Shareholders (the "Meeting") of ATI Technologies
Inc. (the "Company"). The Meeting will be held at:
The Carlu
444 Yonge Street, 7th Floor,
Toronto, Ontario
on
Tuesday, January 27, 2004
at 2:00 p.m. (Toronto time)
As a shareholder, you are entitled to attend the Meeting and to cast one vote
for each common share that you own. If you are a registered shareholder and are
unable to attend the Meeting, you will still be able to vote on the items of
business set out below by completing the form of proxy (printed on blue paper)
included with this management information circular (the "Circular"). This
Circular explains how to complete the proxy form, and how the voting process
works. To be valid, registered shareholders must submit the proxy form to the
Company's transfer agent, CIBC Mellon Trust Company ("CIBC Mellon") at the
Toronto offices of CIBC Mellon, no later than 5:00 p.m. (Toronto time) on
Monday, January 26, 2004 or present the proxy form at the Meeting prior to
commencement of the Meeting.
If you are a non-registered beneficial shareholder, you must follow the
instructions provided by your broker, securities dealer, bank, trust company or
similar entity in order to vote your shares.
The following business will be conducted at the Meeting:
1. presentation of the financial statements of the
Company for the fiscal year ended August 31, 2003,
and the auditors' report thereon;
2. election of directors;
3. appointment of auditors and authorizing the directors
to fix the remuneration of the auditors;
4. consideration and, if deemed appropriate, approval of
amended Restricted Share Unit Plans; and
5. transaction of any other business that is properly
brought before the Meeting.
BY ORDER OF THE BOARD
//Dean Blain//
Markham, Ontario Dean J. Blain
December 19, 2003 Corporate Secretary
Page 7 of 37
ATI TECHNOLOGIES INC.
MANAGEMENT INFORMATION CIRCULAR
Information for the Shareholders about the
January 27, 2004 Annual and Special Meeting of Shareholders
This Management Information Circular (referred to as the "Circular") is
furnished in connection with the solicitation of proxies by or on behalf of the
management of ATI Technologies Inc. (the "Company") to all shareholders of the
Company, for use at the Annual and Special Meeting of Shareholders (the
"Meeting"), together with a Notice of Annual and Special Meeting of the
Shareholders (the "Notice") and a proxy form. The Circular's purpose is:
o to explain how you, as a shareholder of the Company, can vote at
the Meeting, either in person or by transferring your vote to
someone else to vote on your behalf;
o to request that you authorize the Company's Chairman (or his
alternate) to vote on your behalf in accordance with your
instructions set out on the proxy form;
o to inform you about the business to be conducted at the Meeting,
including the election of directors for the coming year; and
o to give you some important background information to assist you
in deciding how to vote.
VOTING
Registered Shareholders
Each registered shareholder is entitled to one vote for each common share
registered in his or her name as of the record date. The directors of the
Company have set December 22, 2003 as the record date. If a shareholder sells
some or all of the common shares that he or she owns after the record date, the
person who purchased the common shares will become a shareholder of the Company,
but may only vote at the Meeting if he or she has asked the Company's transfer
agent, CIBC Mellon Trust Company ("CIBC Mellon"), to include his or her name on
the list of shareholders eligible to vote at the Meeting. This request must be
made at least ten (10) days before the Meeting.
Non-registered Beneficial Shareholders
You may be a non-registered beneficial shareholder of the Company (as opposed to
a registered shareholder) if your common shares are held on your behalf, or for
your account, by a broker, a securities dealer, a bank, a trust company or
another similar entity (called an "Intermediary"). If you are a non-registered
beneficial shareholder, your Intermediary will be the entity legally entitled to
vote your common shares. In order to vote your common shares, you must carefully
follow the instructions that your Intermediary delivered to you with this
Circular. Instead of completing the form of proxy that is printed on blue paper
and may be enclosed with this Circular, you will likely be asked to complete and
deliver a different form to your Intermediary. This form will instruct the
Intermediary how to vote your common shares at the Meeting on your behalf. As a
non-registered beneficial shareholder, while you are invited to attend the
Meeting, you will not be entitled to vote at the Meeting, unless you submit all
required information to your Intermediary well in advance of the Meeting and
carefully follow its instructions and procedures.
Page 8 of 37
OWNERSHIP OF SHARES
As of December 15, 2003, there were 244,458,800 common shares of the Company
issued and outstanding. As far as the directors and senior officers of the
Company are aware, no single shareholder beneficially owns, directly or
indirectly, or exercises control or direction over, more than 10% of the
Company's common shares.
QUORUM
The presence of two shareholders or proxyholders entitled to cast votes
representing at least 5% of the Company's common shares will constitute a quorum
at the Meeting. The Company's list of shareholders as of the record date has
been used to deliver to shareholders both the Notice and this Circular, as well
as to determine who is eligible to vote.
VOTING IN PERSON
If you attend the Meeting in Toronto on Tuesday, January 27, 2004 and are a
registered shareholder, you may cast one vote for each of your registered common
shares on any and all resolutions put before the Meeting. This includes the
election of directors, the other issues listed on the Notice, and any other
business that may arise at the Meeting. You may dissent from any matter proposed
at the Meeting by either withholding your vote from, or voting your common
shares against, any resolution at the Meeting, depending on the specific
resolution. If you attend the Meeting in person and are a non-registered
beneficial shareholder, you will not be entitled to vote at the Meeting unless
you contact your Intermediary well in advance of the Meeting and carefully
follow its instructions and procedures.
VOTING BY PROXY FOR REGISTERED SHAREHOLDERS
The following instructions are for registered shareholders only. If you are a
non-registered beneficial shareholder, please follow your Intermediary's
instructions on how to vote your shares.
If you are unable to attend the Meeting, or if you do not wish to personally
cast your votes, you may still make your votes count by authorizing another
person who will be at the Meeting to vote on your behalf. You may either tell
that person how you want to vote, or let him or her choose for you. This is
called voting by proxy.
What Is a Proxy?
A proxy is a document that you may sign in order to authorize another person to
cast your votes for you at the Meeting. The document that is printed on blue
paper and is enclosed with this Circular is the form of proxy that you may use
to authorize another person to vote on your behalf at the Meeting. You may use
this proxy form to assign your votes to the Company's Chairman (or his
alternate) or to any other person of your choice. You may also use any other
legal proxy form.
Appointing a Proxyholder
Your proxyholder is the person that you appoint to cast your votes at the
Meeting on your behalf. You may choose the Company's Chairman (or his alternate)
or any other person that you want to be your proxyholder. Please note that your
proxyholder is not required to be another shareholder of the Company. If you
want to authorize the Company's Chairman (or his alternate) as your proxyholder,
please leave the line near the top of the proxy form blank, as the Chairman's
name and the name of his alternate, are already pre-printed on the form. If you
want to authorize another person as your proxyholder, just fill in that person's
name in the blank space located near the top of the enclosed proxy form and
cross out the name of the Company's Chairman and his alternate.
Page 9 of 37
Your proxy authorizes the proxyholder to vote and otherwise act for you at the
Meeting, including any continuation of the Meeting that may occur in the event
that the Meeting is adjourned. If you return the attached proxy form to CIBC
Mellon, and have left the line for the proxyholder's name blank, then the
Chairman or his alternate will automatically become your proxyholder.
Depositing Your Proxy
To be valid, the proxy form must be filled out, correctly signed (exactly as
your name appears on the proxy form), and returned to the Toronto office of the
Company's transfer agent, CIBC Mellon, by either delivering it to 200 Queens
Quay East, Unit 6, Toronto, Ontario M5A 4K9 or faxing it to (416) 368-2502 by
5:00 p.m. (Toronto time) on Monday, January 26, 2004 (or the last business day
prior to any reconvened Meeting in the event of an adjournment of the Meeting)
or by presenting it at the Meeting prior to commencement of the Meeting (or at
the reconvened Meeting in the event of an adjournment of the Meeting). Your
proxyholder may then vote on your behalf at the Meeting.
You may instruct your proxyholder how you want to vote on the issues listed in
the Notice by checking the appropriate boxes on the proxy form. If you have
specified on the proxy form how you want to vote on a particular issue (by
checking FOR, AGAINST or WITHHOLD), then your proxyholder must cast your votes
as instructed. By checking "WITHHOLD" on the proxy form, where applicable, you
will be abstaining from voting.
If you have NOT specified how to vote on a particular matter, your proxyholder
is entitled to vote your common shares as he or she sees fit. Please note that
if your proxy form does not specify how to vote on any particular matter, and if
you have authorized the Company's Chairman or his alternate to act as your
proxyholder (by leaving the line for the proxyholder's name blank on the proxy
form), your common shares will be voted at the Meeting as follows:
o FOR management's nominees for election as directors;
o FOR the reappointment of KPMG LLP as auditor; and
o FOR the approval of the amended Restricted Share Unit Plans.
For more information on these issues, please see the section entitled "Business
of the Meeting" beginning on page five of this Circular. If any other issues
properly arise at the Meeting that are not described in the Notice, or if any
amendments are proposed to the matters described in the Notice, your proxyholder
is entitled to vote your common shares as he or she sees fit. The Notice sets
out all the matters to be determined at the Meeting that are known to management
as of December 19, 2003.
Revoking Your Proxy
If you want to revoke your proxy after you have signed and delivered it to CIBC
Mellon, you may do so by delivering another properly executed form of proxy
bearing a later date and delivering it as set out above under the heading
"Depositing Your Proxy" or by clearly indicating in writing that you want to
revoke your proxy and delivering this written document to the Company at:
1 Commerce Valley Drive East
Markham, Ontario
L3T 7X6
Attention: Corporate Secretary
Fax: (905) 709-6950
This revocation must be received by the Company by 5:00 p.m. (Toronto time) on
Monday, January 26, 2004 (or by 5:00 p.m. (Toronto time) on the last business
day before the date of any continuation of the Meeting that may occur in the
event that the Meeting is adjourned), or by the Chairman prior to the
commencement of the Meeting on the day of the Meeting (or any continuation of
the Meeting that may occur in the event that the Meeting is adjourned), or in
any other way permitted by law.
Page 10 of 37
If you revoke your proxy and do not replace it with another form of proxy that
is deposited with CIBC Mellon on or before the deadline, 5:00 p.m. (Toronto
time) on Monday, January 26, 2004, you may still vote your own common shares in
person at the Meeting provided you are a registered shareholder whose name
appears on the shareholders' register of the Company.
SOLICITATION OF PROXIES
The Company requests that you fill out your proxy form to ensure your votes are
cast at the Meeting. If you leave the proxy form blank, and if you do not
specify how your common shares are to be voted on particular resolutions, the
Chairman (or his alternate) will vote your common shares as described above.
This solicitation of your proxy (your vote) is made on behalf of management of
the Company.
The Company will pay the cost related to the foregoing solicitation of your
proxy. This solicitation will be made primarily by mail. Regular employees of
the Company, or the representatives of CIBC Mellon, may also ask for proxies to
be returned, but will not be paid any additional compensation for doing so.
HOW A VOTE IS PASSED
All matters that are scheduled to be voted upon at the Meeting are ordinary
resolutions. Ordinary resolutions are passed by a simple majority, meaning that
if more than half of the votes that are cast are in favour, then the resolution
passes. Special resolutions require at least two-thirds of the votes cast. No
special resolutions are contemplated at the Meeting. The Toronto Stock Exchange
requires, however, that the resolution relating to the amended Restricted Share
Unit Plans be approved by a majority of the votes cast at the Meeting by
disinterested shareholders of the Company .
Page 11 of 37
BUSINESS OF THE MEETING
ELECTION OF DIRECTORS
Unless such authority is withheld, the persons named in the accompanying form of
proxy intend to vote for the election of the seven nominees to the Board of
Directors of the Company (referred to as either the "Board" or the "Board of
Directors") whose names are set forth below.
Management does not contemplate that any of the nominees named below will be
unable to serve as a director of the Company. If any nominee becomes unable to
serve as a director for any reason prior to the Meeting, and if you authorize
the Company's Chairman (or his alternate) to act as your proxyholder at the
Meeting, the Company's Chairman (or his alternate) reserves the discretionary
right to vote for other management nominees, unless directed to withhold from
voting.
At the Meeting, management will nominate the seven persons listed below for
election as directors of the Company. If elected, each director will hold office
until the next annual meeting of shareholders or until their successors are
elected or appointed. All of management's nominees are now directors of the
Company and have been since the dates indicated in the list below.
The articles of incorporation of the Company provide for a minimum of three and
a maximum of fifteen directors. In addition to re-nominating five directors who
were elected to the Board at last year's annual meeting of the shareholders of
the Company, the Company's management will also nominate two recently appointed
directors, John E. Caldwell and Robert A. Young, each of whom joined the Board
on October 2, 2003. Paul D. Fox, who had been a member of the Board since 1993,
resigned as a director on November 6, 2003 for reasons not related to decisions
or directions of the Board.
John Caldwell is a high-technology industry veteran and his qualifications to
represent the shareholders of the Company include over fifteen years' experience
in executive management positions. These positions included President and Chief
Executive Officer at CAE Inc., a world leader in flight simulation and training
systems, and President and Chief Executive Officer at GEAC Computer Corporation
Limited, a leading Canadian enterprise resource planning software company. Mr.
Caldwell brings extensive board level experience in such areas as audit,
governance and finance. He is currently serving on several boards of directors
including Cognos Inc., Faro Technologies Inc., Stelco Inc. and SMTC Corporation.
Mr. Caldwell was also recently appointed as the interim Chief Executive Officer
of SMTC Corporation.
Robert Young's qualifications include over thirty years' experience in executive
and financial management in the information technology industry. Dr. Young was
Managing Director with Dillon, Read & Co. with responsibility for technology
investment banking after having served as their Managing General Partner for
venture capital. He has also previously held a number of management and
executive positions with IBM. His last position was as President of IBM
Instruments, a fully integrated global company producing scientific
computational products. Dr. Young has recently served as Chairman and Chief
Executive Officer of Curl Corporation, an Internet infrastructure development
company and is currently Chairman and Chief Executive Officer of IRT, Inc., a
personal investment company. He is currently serving on several boards of
directors including Tessera Technologies Inc., Santa Fe Imaging, Inc. and SRC
Computers, Inc. Dr. Young holds a Ph.D. in Physical Chemistry from the
Massachusetts Institute of Technology ("MIT"), and has served on the visiting
committee of the Department of Computer Science and Electrical Engineering at
MIT.
The following table states: (i) the name and jurisdiction of residence of each
person proposed to be nominated for election as a director; (ii) the nominee's
principal occupation and employment; (iii) the year in which each nominee became
a director; (iv) and the number of common shares and deferred share units
("DSUs") (described below under the heading "Compensation of Directors") of the
Company beneficially owned or over which control or direction, directly or
indirectly, was exercised by that nominee as of December 15, 2003.
Page 12 of 37
Management's Nominees for Election as Directors of the Company
================= ====================================== ================= ======== ============= ===========
Name and Biography Year Number of
Jurisdiction of Principal Became Common Number of
Residence Occupation Director Shares Held DSUs Held
- ----------------- -------------------------------------- ----------------- -------- ------------- -----------
K.Y. Ho K.Y. Ho is one of the founders of Chairman and 1986 4,670,440 -
the Company. Mr. Ho, an electrical Chief Executive
Toronto, engineer, has more than twenty Officer,
Ontario years' experience in the management, ATI
engineering, manufacturing and Technologies
material and quality control areas Inc.
of the computer industry. Mr. Ho
previously worked at several leading
electronics manufacturers in Hong
Kong.
- ----------------- -------------------------------------- ----------------- -------- ------------- -----------
Alan D. Horn (1) Alan Horn is Vice President, Finance Vice President, 1993 170,000 6,500
and Chief Financial Officer of Finance and
Toronto, Rogers Communications Inc. Chief Financial
Ontario Officer,
Rogers
Communications
Inc.
- ----------------- -------------------------------------- ----------------- -------- ------------- -----------
James D. Fleck James Fleck is Chairman of Fleck Chairman, 1995 40,000 8,125
(1) (2) (3) (4) Management Services Ltd. and Fleck
Professor Emeritus at the Rotman Management
Toronto, School of Management, University of Services Ltd.
Ontario Toronto. Until August 1994, he was
Chief Executive Officer of Fleck
Manufacturing Inc. Dr. Fleck was
Chairman of Alias Research Inc. from
1992 to 1995. Dr. Fleck is a
director of Rogers Media Inc.,
Financial Models Co. Inc. and
Certicom Corp.
- ----------------- -------------------------------------- ----------------- -------- ------------- -----------
Paul Russo (2) Paul Russo is the principal founder Chairman, 2002 5,000 6,500
of Silicon Optix Inc. and serves as President and
Los Altos Hills, President, Chief Executive Officer Chief Executive
California and Chairman of the company. Prior Officer,
to Dr. Russo's founding of Silicon Silicon Optix
Optix, he was the principal founder Inc.
of Genesis Microchip Inc. and served
as Chief Executive Officer and
director from its inception in 1987
through April 2000.
- ----------------- -------------------------------------- ----------------- -------- ------------- -----------
Ronald Chwang (3) Ronald Chwang is the Chairman and Chairman and 2003 266,500 19,500
President of Acer Technology President, Acer
Los Altos Hills, Ventures, America LLP. From 1992 to Technology
California 1997, Dr. Chwang was President and Ventures (ATV),
Chief Executive Officer of Acer America.
America Corporation. Dr. Chwang is
a director of Silicon Storage
Technology Inc., ALI Corp. (Taiwan)
and Ambit Microsystems Corp.
(Taiwan).
- ----------------- -------------------------------------- ----------------- -------- ------------- -----------
Page 13 of 37
================= ====================================== ================= ======== ============= =========
Name and Biography Year Number of
Jurisdiction of Principal Became Common Number of
Residence Occupation Director Shares Held DSUs Held
- ----------------- -------------------------------------- ----------------- -------- ------------- ---------
John E. Caldwell John Caldwell is an independent Independent 2003 - 5,416
(1) (2) (3) consultant and corporate director Consultant and
and currently acts as interim Chief Corporate
Toronto, Executive Officer of SMTC Director
Ontario Corporation. From 2001 to 2002, Mr.
Caldwell was a consultant to GEAC
Computer Corporation Limited
("GEAC") and from 2000 to 2001 he
was the President and Chief
Executive Officer of GEAC. From
1993 to 1999, Mr. Caldwell was the
President and Chief Executive
Officer of CAE Inc. Mr. Caldwell
also serves on the boards of Cognos
Inc., Faro Technologies Inc., Stelco
Inc. and SMTC Corporation.
- ----------------- -------------------------------------- ----------------- -------- ------------- ---------
Robert A. Young Robert Young is the Chairman and Chairman and 2003 - 5,416
(1) Chief Executive Officer of IRT, Chief Executive
Inc. Prior to 2002, he was Chairman Officer, IRT,
New Canaan, and Chief Executive Officer of Curl Inc.
Connecticut Corporation and from 1986 to 1997,
was Managing Director with Dillon,
Read & Co. Prior to 1986 Dr. Young
was President of IBM Instruments.
Dr. Young also serves on the boards
of Tessera Technologies Inc., Santa
Fe Imaging, Inc. and SRC Computers,
Inc.
- ----------------- -------------------------------------- ----------------- -------- ------------- ---------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Governance and Nominations Committee.
(4) Lead director of the Board.
Except as noted in the biographies set out above, all of the directors of the
Company have held their principal occupation as noted opposite their respective
names throughout the past five years.
Page 14 of 37
APPOINTMENT OF AUDITORS
Unless such authority is withheld, the persons named in the accompanying form of
proxy intend to vote for the reappointment of KPMG LLP as auditors of the
Company to hold office until the next annual meeting of shareholders and to vote
to authorize the directors of the Company to fix the auditors' remuneration.
KPMG LLP have served as auditors of the Company since 1987.
Audit and Audit-Related Fees
Audit fees paid to KPMG LLP totalled $284,000 in 2003 and $207,000 in 2002.
Audit fees include fees associated with the annual audit of the Company's
consolidated financial statements and annual audits of certain statutory
financial statements.
Audit-related fees paid to KPMG LLP totalled $107,000 in 2003 and $49,000 in
2002. 2003 audit-related fees include fees for interim review procedures
performed in connection with the Company's quarterly reports and other
accounting advisory and assistance services. Audit-related fees for 2002 include
fees associated with accounting advisory and assistance services.
Non-Audit Fees
Fees paid to KPMG LLP for tax services, including tax compliance, tax advice and
tax planning, totalled approximately $195,000 in 2003 and $191,000 in 2002.
Fees paid to KPMG LLP for other services not described above totalled $845,000
in 2003. These fees related to services provided to the legal counsel retained
by the Board of Directors in connection with the notice of hearing filed by the
Ontario Securities Commission in January 2003. No fees were paid to KPMG LLP in
2002 for other services not described above.
Page 15 of 37
APPROVAL OF AMENDED RESTRICTED SHARE UNIT PLANS
In keeping with the Company's commitment at the last annual meeting of
shareholders to explore alternative forms of stock-based compensation, as well
as recognizing the changing landscape of equity based compensation programs, the
Company intends to use an effective blend of options and/or restricted share
units ("RSUs") to attract and retain its world class, highly skilled workforce.
Shareholders are being asked to approve amended Restricted Share Unit Plans (the
"RSU Plans"). Details of the RSU Plans are outlined below. The key components of
the proposal are as follows:
o to approve the amendment and restatement of the existing RSU
Plans to allow the Company to issue common shares from treasury to
satisfy all or a portion of RSU awards in the future;
o to maintain the maximum number of common shares available for
issuance under all of the Company's share compensation
arrangements at the same level as currently has been approved
(i.e., there will be NO increase in the maximum number of common
shares available for issuance under the Company's Stock Option
Plan and RSU Plans); and
o to confirm the availability for issuance under the RSU Plans of
the common shares that are available for issuance under the
Company's Share Option Plan.
This is beneficial to shareholders for two reasons. First, when RSUs are granted
from treasury, there is no cash flow impact, and second, the Company expects to
issue fewer RSUs than the number of options historically granted as a result of
the way in which RSUs are valued (the Company estimates a reduction in dilution
of up to two-thirds).
Background
Share Option Plan
The Company's Share Option Plan (the "Option Plan") operates for the benefit of
shareholders by allowing the Company to attract and retain employees in the
competitive high-tech sector and by aligning the interests of employees,
officers and directors with those of shareholders. At last year's annual
meeting, shareholders approved an increase in the maximum number of common
shares available for the grant of options under the Option Plan to 47,000,000.
Between November 23, 2002 (the date referenced in last year's Management
Information Circular) and December 15, 2003, 6,232,746 options have been
exercised. As a result, there are currently 40,767,254 common shares available
for issuance upon the exercise of options, of which 24,280,424 are reserved to
be issued pursuant to options that have already been granted (currently
representing 9.9% of the Company's issued and outstanding common shares).
16,486,830 common shares are available to be issued pursuant to the exercise of
options that may be granted under the Option Plan in the future.
The Option Plan is the only share compensation arrangement under which the
Company may grant options. In connection with the Company's acquisition of ArtX,
Inc. ("ArtX") in April of 2000, as part of the acquisition terms, the Company
assumed all options outstanding under ArtX's 1997 Equity Incentive Plan (the
"ArtX Plan"). As at December 15, 2003, under the ArtX Plan, options to purchase
2,168,628 common shares of the Company were outstanding. No further options may
be granted under the ArtX Plan.
Restricted Share Unit Plans
While stock options remain an important component of employee compensation
within the high-tech industry, in October 2003 the Company announced the
adoption of plans to grant RSUs as part of the Company's overall stock-based
compensation plan. The RSU Plans allow employees to earn actual shares of the
Company over time, rather than options that give employees the right to purchase
stock at a set price.
Page 16 of 37
The RSU Plans include: a plan for Canadian employees and directors (the
"Canadian Plan"), a plan for U.S. employees and directors (the "U.S. Plan"), and
a plan for all other employees and directors (the "Global Plan"). In accordance
with the terms of the RSU Plans, the Board of Directors approves which employees
and directors are entitled to participate in the respective plan (the
"participants") and the number of RSUs to be awarded to each participant. RSUs
awarded to participants are credited to an account that is established on their
behalf and maintained in accordance with the respective RSU Plan. Each RSU
awarded conditionally entitles the participant to the delivery of one common
share (or cash in lieu of such share under the Global Plan) upon attainment of
the RSU vesting period. RSUs awarded to participants vest in accordance with
terms determined by the Board.
Under the Canadian Plan, after RSUs are awarded to participants and prior to
vesting, the Company provides funds to a trust established for the purpose of
purchasing on the market, and holding in trust, common shares to be delivered to
Canadian participants in exchange for RSUs once the applicable vesting period
has been met. Similarly, under the U.S. Plan, the Company provides funds to a
U.S. broker, who purchases common shares for delivery to a custodian to be held
on behalf of U.S. participants pending satisfaction of the applicable RSU
vesting period.
Under the Global Plan, participants are not entitled to receive common shares
upon the vesting of their RSUs. Rather, once an RSU vests, the participant under
the Global Plan is only entitled to receive a cash payment from the Company
equal to the number of RSUs awarded to such participant multiplied by the
weighted average trading price of the common shares on the NASDAQ Stock Market
over the five trading days immediately preceding the relevant vesting date.
In October 2003, the Company awarded a total of 1,556,239 RSUs to approximately
1,500 employees in respect of the fiscal year ended August 31, 2003
(representing less than 7/10 of 1% of the current issued capital of the
Company). 953,931 RSUs have been awarded under the Canadian Plan, 513,962 RSUs
have been awarded under the U.S. Plan and 88,346 RSUs have been awarded under
the Global Plan. Of the RSUs awarded, 1,304,239 RSUs have been awarded to
employees (excluding officers) and 252,000 RSUs have been awarded to officers.
No RSUs have been awarded to members of the Board of Directors.
All RSUs awarded vest over a period of three years, with one-third of the RSUs
awarded to each participant vesting on each of the first three anniversaries of
the grant. In the event of an approved leave of absence such as disability,
maternity or parental leave, the RSUs continue to vest. On termination of
employment, all unvested RSUs are forfeited. In the event of death of a
participant while actively employed by the Company, all unvested RSUs are
immediately vested and distributed to the participant's estate.
RSUs will be accounted for as a compensation expense under the fair value method
of accounting.
Proposal
As noted above, in accordance with the terms of the RSU Plans, all of the common
shares that are delivered to Canadian and U.S. participants upon the vesting of
RSUs are purchased in the open market. For the RSUs awarded to employees in
respect of fiscal 2003, the Company incurred an approximate total cash outlay of
U.S.$22 million to purchase the common shares required to satisfy these RSU
obligations and estimates that an expense (to record this cash outlay) of
approximately U.S.$2 million will be incurred for every complete quarter until
the end of the vesting period in October 2006. By purchasing shares in the open
market in respect of future RSU awards, the Company will avoid dilution, but
would experience a drain on its cash reserves.
The Company proposes to amend and restate the RSU Plans in order to provide the
Company with the ability to satisfy future RSU awards by issuing common shares
from treasury. If approved, the Company will, at its option, be able to
determine in advance of any vesting date in respect of RSUs granted in the
future, whether the common shares to be delivered to participants under the RSU
Plans will be purchased in the open market, issued from treasury or obtained
from a combination of market purchases and treasury issuances (or whether the
RSUs will be satisfied by a cash distribution, treasury issuance of common
shares or both under the Global Plan). With this discretion, the Company will be
able to better manage its dilution and cash flow.
Page 17 of 37
Recognizing that the treasury issuance of common shares in satisfaction of
future RSU awards will have an effect on the dilution of the Company's common
shares, the Company is not asking the shareholders to approve any increase to
the potential dilution that was approved at last year's annual meeting of
shareholders. Rather, shareholders are being asked to approve amended RSU Plans
so that the Company may issue shares from the pool of common shares that are
available to be issued under the Option Plan in order to satisfy future RSU
obligations. Shares so issued will no longer be available for issuance under the
Option Plan. In this regard, the Option Plan, as approved at last year's annual
meeting of shareholders, provides that a maximum of 47,000,000 common shares are
reserved for issuance pursuant to the Option Plan. The Company is requesting
shareholders to confirm that the common shares currently reserved for issuance
under the Option Plan may, alternatively, be issued under the RSU Plans. If the
amended RSU Plans are approved, a maximum of 47,000,000 common shares will be
available for issuance, at the Company's discretion, under either the Option
Plan or the RSU Plans. For further clarity, there would be no greater potential
dilution to the Company's shares than was approved at last year's annual
meeting.
Furthermore, if the resolution to amend the RSU Plans is approved, the Company
will also amend the RSU Plans to provide that the number of common shares
reserved for issuance and which may be issued pursuant to the RSU Plans, the
Option Plan and any other share compensation arrangements established by the
Company shall be limited so that (i) the number of common shares reserved for
issuance to any one individual shall not exceed 5% of the outstanding issue;
(ii) the number of common shares reserved for issuance pursuant to stock options
and RSUs granted to insiders (as defined in the Securities Act (Ontario)) shall
not exceed 10% of the outstanding issue; (iii) the number of common shares that
may be issued to insiders within any one-year period shall not exceed 10% of the
outstanding issue; and (iv) the number of common shares that may be issued to
any one insider and such insider's associates (as defined in the Securities Act
(Ontario)) within any one-year period shall not exceed 5% of the outstanding
issue. For the purposes of the foregoing, "outstanding issue" means on any date,
the number of common shares of the Company issued and outstanding, excluding
common shares issued pursuant to the Company's share compensation arrangements
during the one-year period immediately preceding such date.
Based on the above, the directors recommend that the shareholders vote in favour
of a resolution to: (i) approve the amended RSU Plans as described above; and
(ii) confirm the availability for issuance under the RSU Plans of the common
shares that are available for issuance under the Option Plan up to an aggregate
maximum of 47,000,000 common shares.
The persons named in the accompanying form of proxy intend to vote for the
resolution described above. In accordance with the requirements of the Toronto
Stock Exchange, in order to be effective the resolution must be passed by a
majority of the votes cast at the Meeting, excluding all shares held by insiders
of the Company (other than persons who are insiders of the Company solely by
virtue of being a director or senior officer of a subsidiary of the Company) who
are eligible to participate in the RSU Plans and their associates. Currently,
such persons hold approximately 11,485,635 common shares of the Company.
If this resolution is not approved by shareholders, the existing RSU Plans will
not be amended but will remain in effect in accordance with their current terms.
Page 18 of 37
EXECUTIVE COMPENSATION
The following table provides a summary of compensation earned during each of the
last three fiscal years by the Company's Chief Executive Officer and the four
other most highly compensated executive officers of the Company. All amounts in
the following Summary Compensation Table are expressed in United States dollars
unless otherwise specified. This is consistent with the Company's financial
reporting.
Summary Compensation Table
(All dollar amounts are stated in U.S. Dollars)
=================================== ================================= ====================================== ================
Annual Compensation Long Term Compensation
- ----------------------------------- --------------------------------- ------------------------- ------------ ----------------
Awards Payouts
- -------------------------- -------- --------- --------- ------------- ------------ ------------ ------------ ----------------
Securities
Other Under Restricted
Other Options/ Shares or
Annual SARs Restricted LTIP All Other
Name and Fiscal Salary Bonus Compensation Granted Share Payouts Compensation
Principal Position Year ($) ($) ($) (1) (#) Units ($) ($) ($)
- -------------------------- -------- --------- --------- ------------- ------------ ------------ ------------ -------------
K.Y. Ho (2) 2003 185,625 116,016 - - - - -
Chairman, 2002 188,946 70,180 - - - - -
Chief Executive Officer 2001 177,375 62,081 - - - - -
- -------------------------- -------- --------- --------- ------------- ------------ ------------ ------------ -------------
David Orton (3) 2003 300,000 200,000 95,698 (4) - - 934,037 (5) -
President, 2002 300,000 145,000 133,065 (4) 350,211 (5) - - -
Chief Operating Officer 2001 300,000 105,000 139,315 (4) - - - -
- -------------------------- -------- --------- --------- ------------- ------------ ------------ ------------ -------------
Rick Bergman (3) (6) 2003 280,000 210,000 - - 347,280 (7) - -
Senior Vice President, 2002 278,333 80,000 - 60,000 - - -
Marketing, General 2001 168,500 75,000 - 250,000 - - 70,000 (8)
Manager,
Desktop Business
- -------------------------- -------- --------- --------- ------------- ------------ ------------ ------------ -------------
Rick Hegberg (3) (9) 2003 251,955 122,000 - 250,000 - - -
Senior Vice President, 2002 - - - - - - -
Worldwide Sales 2001 - - - - - - -
- -------------------------- -------- --------- --------- ------------- ------------ ------------ ------------ -------------
Adrian Hartog (2) 2003 202,500 74,250 - - 464,373 (10) - -
Senior Vice President, 2002 202,500 54,230 - 90,000 - - -
Consumer Business, Chief 2001 174,646 54,825 - 100,000 - - -
Technology Officer
- -------------------------- -------- --------- --------- ------------- ------------ ------------ ------------ -------------
(1) Perquisites and other personal benefits are not shown if they did not exceed
the applicable disclosure threshold of the lesser of: Cdn.$50,000 and 10% of the
total annual salary and bonus of the named executive officer for the fiscal
year.
(2) Mr. Ho and Mr. Hartog were domiciled in Canada and paid in Canadian dollars.
All amounts are expressed in United States dollars converted at the exchange
rate of U.S.$0.675 to Cdn.$1.00 (2002 - U.S.$0.638; 2001 - U.S.$0.645) for the
year ended August 31, 2003.
(3) Messrs. Orton, Bergman, and Hegberg were domiciled in the United States and
paid in United States dollars.
(4) Represents amounts forgiven under a note entered into between ArtX and Mr.
Orton on May 13, 1999. See "Indebtedness of Directors, Executive Officers and
Senior Officers".
(5) These options were granted pursuant to incentive arrangements implemented in
2002. Following the Company's successful entry into the specified business
arrangements during fiscal 2003, the options become exercisable, subject to
vesting, and the first of three incentive payments was made.
(6) Mr. Bergman was an employee of the Company for approximately eight months of
fiscal 2001.
(7) Represents an award of 24,000 RSUs made in October 2003 in respect of the
fiscal year ended August 31, 2003, which RSUs are valued at $347,280 based on
the market price of the Company's common shares at the time of the grant.
(8) Mr. Bergman received a signing bonus on January 31, 2001.
(9) Mr. Hegberg was an employee of the Company for approximately eight months of
fiscal 2003.
(10) Represents an award of 36,000 RSUs made in October 2003 in respect of the
fiscal year ended August 31, 2003, which RSUs are valued at $464,373 based on
the market price of the Company's common shares at the time of the grant.
Page 19 of 37
Option/SAR Grants During the Most Recently Completed Financial Year
================ ================= =============== =============== ================== ==================
Market Value of
% of Total Securities
Options/SARs Underlying
Securities Granted to Options/SARs on
Under Employees in Exercise or the Date of
Options/SARs 2003 Base Price Grant
Name Granted (#) Financial Year ($/Security) ($/Security) Expiration Date
- ---------------- ----------------- --------------- --------------- ------------------ ------------------
K.Y. Ho - - - - -
- ---------------- ----------------- --------------- --------------- ------------------ ------------------
David Orton - - - - -
- ---------------- ----------------- --------------- --------------- ------------------ ------------------
Rick Bergman - - - - -
- ---------------- ----------------- --------------- --------------- ------------------ ------------------
Rick Hegberg (1) 250,000 27.5% (2) U.S.4.48 U.S.4.48 January 31, 2010
- ---------------- ----------------- --------------- --------------- ------------------ ------------------
Adrian Hartog - - - - -
- ---------------- ----------------- --------------- --------------- ------------------ ------------------
(1) These options vest 25% on January 31, 2004 and 6.25% every three months
thereafter commencing on April 30, 2004 until fully vested on January 31, 2007.
(2) In fiscal 2003, options were only granted to employees who were hired during
the year.
Aggregated Option/SAR Exercises During the Most Recently Completed Financial
Year and Financial Year-End Option/SAR Values
================== ============= ================= =================== =========================
Value of Unexercised
Unexercised in-the-Money Options/SARs
Options/SARs at at
Securities August 31, 2003 August 31, 2003
Acquired on Aggregate Value (#) ($) (1)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ------------------ ------------- ----------------- ------------------- -------------------------
K.Y. Ho 94,800 Cdn.422,808 40,000 / 0 Cdn.115,000 / 0
- ------------------ ------------- ----------------- ------------------- -------------------------
David Orton - - 369,415 / 262,658 U.S.4,872,964 / 2,138,036
- ------------------ ------------- ----------------- ------------------- -------------------------
Rick Bergman - - 123,125 / 101,875 Cdn.1,434,881 / 1,183,119
18,750 / 41,250 U.S.38,625 / 84,975
- ------------------ ------------- ----------------- ------------------- -------------------------
Rick Hegberg - - 0 / 250,000 U.S.0 / 2,655,000
- ------------------ ------------- ----------------- ------------------- -------------------------
Adrian Hartog 62,800 Cdn.243,664 314,375 / 105,625 Cdn.2,508,813 / 629,238
- ------------------ ------------- ----------------- ------------------- -------------------------
(1) Based on the closing price of Cdn.$20.90 and U.S.$15.10 of the Company's
common shares on the Toronto Stock Exchange and the NASDAQ Stock Market,
respectively, on August 30, 2003.
Page 20 of 37
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
The following table sets forth details of the indebtedness to, or guaranteed or
supported by, the Company or any of its subsidiaries, of each director,
executive officer, senior officer, proposed nominee for election as a director
and each associate of any such director or officer or proposed nominee.
Table of Indebtedness of Directors, Executive Officers and Senior Officers
=====================================================================================================================
Largest Amount Amount Forgiven
Outstanding During During the Fiscal
Name, Municipality of the Fiscal Year Ended Year Ended August 31,
Residence and Principal Involvement of the August 31, 2003 Amount Outstanding as 2003
Position Company or Subsidiary ($) at December 15, 2003 ($)
- ---------------------------------------------------------------------------------------------------------------------
David Orton Lender(1) U.S.93,750 - U.S.95,698(2)
Los Altos, California
President, Chief
Operating Officer
- ---------------------------------------------------------------------------------------------------------------------
(1) This arrangement was entered into between Mr. Orton and ArtX in May of
1999. The original principal amount of the note was U.S.$500,000. The rate
of interest was 5.0% per annum, compounded annually. The note matured on
May 13, 2003, and in accordance with the terms of the note, as Mr. Orton
remained employed with the Company, the obligations under the note were
forgiven in full.
(2) Includes accrued interest.
COMPOSITION OF THE COMPENSATION COMMITTEE
The Compensation Committee oversees and makes recommendations to the Board of
Directors on all aspects of compensation payable to the Chief Executive Officer
and the President and Chief Operating Officer of the Company. The Compensation
Committee is currently composed of three members of the Board of Directors who
are neither employees nor former employees of the Company. During fiscal 2003,
the members of the Compensation Committee were as follows: Paul Fox, Paul Russo
and Alan Horn. The Compensation Committee members are currently: John Caldwell,
Paul Russo and James Fleck. The Compensation Committee invites the Vice
President, Human Resources to attend most meetings to provide advice and
consultation as required.
Page 21 of 37
REPORT ON EXECUTIVE COMPENSATION
The executive compensation policy of the Company is designed to remunerate the
Company's executives with compensation that is competitive in the high-tech
market place in which the Company operates and sources talent, with a particular
emphasis on comparable hardware and semiconductor companies. More specifically,
the total compensation package is targeted at the 67th percentile of the
applicable comparator group in the country which the executive resides and is
comprised of a base salary and variable (at-risk) pay consisting of short term
and long term incentives.
Executives are given the opportunity to earn annual performance-based bonuses
and be granted stock options and RSUs at the sole discretion of the Company.
Both incentive plans are intended to motivate executives to meet and exceed
individual objectives and pre-established corporate financial objectives, as
well as to align the financial interests of the executives with the financial
interests of the shareholders of the Company. Consistent with the high-tech
market place, a heavy emphasis is placed on variable (at-risk) long-term
incentives with the objective of aligning executive interests with shareholder
interests and enhancing shareholder value.
Executives are also eligible for Company benefits consistent with other
non-officer employees. The Company does not have an employee or executive
pension plan, nor are such plans being contemplated.
The Compensation Committee reviews and assesses the competitiveness and
appropriateness of the compensation package of the Chief Executive Officer and
the President and Chief Operating Officer. In conducting the review, the
Compensation Committee considers, among other things, individual performance
assessments undertaken by the Compensation Committee, the Company's performance
and relative shareholder return, alignment with and balance between short and
longer-term performance goals, the value of incentive awards paid to similar
positions in comparable companies and previous incentive awards. The
Compensation Committee also reviews the President and Chief Operating Officer's
recommendations regarding the compensation package of the Company's other
executive officers.
Salary
Salaries for each of the Company's executive officers take into consideration
the individual's position in the Company, the individual's ability to contribute
to the Company's performance, amounts paid by companies in the same industry for
comparable positions and the individual's degree of responsibility within the
Company.
Annual Bonus
As noted above, each executive officer of the Company has an opportunity to earn
an annual performance bonus. Generally, the target bonus for each executive is
expressed as a percentage of base salary and is commensurate with bonuses which
are competitive in the industry for the position. A bonus is only payable in the
event that the Company achieves specific financial metrics.
Annually, the specific financial metrics are established by the Chief Executive
Officer and President and Chief Operating Officer for review by the Compensation
Committee and, if approved at this level, are recommended for approval by the
Board of Directors. In fiscal 2003, the Board of Directors approved specific
earnings per share ("EPS") targets and payout levels indicative of overall
Company performance. The total annual executive bonus pool is funded
proportionate to the Company's performance relative to these financial metrics.
If specific EPS targets are met, the annual bonus pool would be the sum of
individual executive target bonuses. If the Company's EPS objectives are
exceeded, then the bonus pool would be increased above the total annual target
pool. If the Company's EPS results do not meet a pre-established minimum
threshold, no bonuses are payable. The bonus payable to all executive officers,
including the Chief Executive Officer and Chief Operating Officer, is based on
the individual's target bonus subject to adjustment by an individual performance
factor reflective of the executive's achievement of specific individual
performance goals set and assessed by the President and Chief Operating Officer.
Page 22 of 37
Long Term Incentives
The Company has established the Option Plan, the RSU Plans and a Share Purchase
Plan, which are designed to encourage all eligible employees, officers
(including executive officers) and directors of the Company to align their
interests directly to those of shareholders and benefit shareholders by allowing
the Company to attract and retain employees in the competitive high-tech sector
where such compensation activities are standard.
The Compensation Committee is responsible for establishing and monitoring the
overall policy for the Option Plan, Share Purchase Plan and RSU Plans. This
responsibility includes the consideration of proposed option and RSU grants, as
required, and the making of appropriate recommendations to the Board of
Directors for approval. The Compensation Committee has specific responsibility
for reviewing the proposed grants of stock options and/or RSUs to executive
officers of the Company.
The number of stock options and/or RSUs granted to executive officers is based
upon the same factors as are relevant in setting the salary and annual bonus of
executive officers.
Share Option Plan
As noted above, the Company maintains an Option Plan under which employees,
officers (including executive officers) and directors of the Company, are
eligible to receive stock options. Over 1,700 employees of the Company have been
awarded stock options pursuant to the Option Plan. The following is a summary of
the Option Plan.
Subject to the requirements of the Option Plan, the Board of Directors has the
authority to select those employees, officers and directors to whom options are
granted, the number of options granted to each individual and the price at which
the common shares may be purchased. The exercise price for purchasing common
shares under the Option Plan is equal to the weighted average of the trading
prices of the common shares on the Toronto Stock Exchange or the NASDAQ Stock
Market for the five trading days preceding the date on which the Board of
Directors determines that the grant of the option is to be effective. The
options granted pursuant to the Option Plan are not transferable. The Option
Plan also provides that the number of common shares reserved for issuance and
which may be issued within a one-year period, pursuant to options granted to
insiders (as defined in the Securities Act (Ontario)) pursuant to the Option
Plan and all other share compensation arrangements established by the Company is
limited to 10% of the number of common shares issued and outstanding, excluding
any common shares issued pursuant to share compensation arrangements during the
immediately preceding one-year period. Furthermore, the number of common shares
which may be issued within a one-year period to any one insider and such
insider's associates (as defined in the Securities Act (Ontario)) pursuant to
the Option Plan and all other share compensation arrangements is limited to 5%
of the number of common shares issued and outstanding, excluding any common
shares issued pursuant to share compensation arrangements during the immediately
preceding one-year period.
A total of 907,550 options were granted in fiscal 2003. All were granted to
employees hired during the year.
Restricted Share Unit Plans
Details of the RSU Plans that the Company has adopted are outlined under the
heading "Background" under the preceding section titled "Approval of Amended
Restricted Share Unit Plans".
Share Purchase Plan
The Company established the Share Purchase Plan to provide employees with an
opportunity to purchase common shares of the Company, furthering participants'
alignment with the interests of shareholders and allowing them to share in the
financial success to which they contribute. Under this plan, the Company
contributes $l.50 for every $9.00 contributed by an employee to acquire common
shares of the Company. The Share Purchase Plan is currently available to
employees in Canada and the United States.
Page 23 of 37
Other Long Term Incentives
Under incentive arrangements implemented in 2002, the Company's President and
Chief Operating Officer, David Orton, among others, participates in a
performance-based incentive which is conditional upon the Company being
successful in entering into specified business arrangements with a third party
during the fiscal year ending August 31, 2003. The Committee believes that
achievement of certain pre-determined milestones relating to the third party
arrangements is consistent with the long term objectives of the Company. The
incentive payable to Mr. Orton consists of (i) cash payments of U.S.$934,037
payable upon achievement of each of three specified milestones (relating to the
third party arrangements) over an estimated period of three years, and (ii)
options to purchase up to 350,211 common shares of the Company granted under the
Option Plan at an exercise price of U.S.$6.96 per share and which are only
exercisable in the event that the Company is successful in entering into such
arrangements. During fiscal 2003, the Company successfully entered into the
third party arrangements and, as a result, the first of the three potential
incentive payments was made and the options became exercisable subject to
vesting requirements.
Chief Executive Officer's Compensation
Mr. Ho was one of the founders of the Company in 1985 and has served as its
Chief Executive Officer since August, l986. The Compensation Committee is
responsible for recommending his salary, bonus and any stock options or other
share based equity awards. As a founder of the Company, Mr. Ho has elected to
receive a salary significantly below levels paid to other chief executive
officers in the industry.
For fiscal 2003, Mr. Ho's bonus was based on the achievement of the same EPS
target set for all of the executive officers. Based on the level of achievement
of the Company, Mr. Ho earned a bonus of U.S.$116,016 for fiscal 2003.
Summary
The Compensation Committee will continue to monitor and evaluate the Company's
executive compensation policies on an on-going basis to ensure that the
Company's compensation practices and policies are consistent with the objective
of enhancing shareholder value.
The foregoing Report on Executive Compensation was submitted by the members of
the Compensation Committee - John Caldwell, Paul Russo and James Fleck.
Page 24 of 37
COMPENSATION OF DIRECTORS
Directors' compensation was recently reviewed in the context of best practices
in order to better align director interests with shareholder interests. A
competitive benchmark analysis on directors' compensation for high-tech
companies in both Canada and the United States was completed with an independent
consulting firm. As a result of the review, it was determined that compensation
for directors of the Company should be targeted at the 50th percentile of the
U.S. technology comparator group. Director compensation was previously composed
of at-risk stock options. In keeping with the Company's change in stock-based
compensation for executives and employees, Board remuneration has been modified
by introducing a cash component and replacing at-risk stock options with
deferred share units ("DSUs", described below). Overall director compensation
has been reduced under the new compensation arrangements based upon the current
value of stock options that would have been awarded to directors in 2003 under
the previous compensation package. In addition, minimum share ownership
guidelines have been established. Based upon this review, for 2003 the following
new annual compensation package was implemented for non-management directors:
Board Member Retainer: $25,000 per annum and 6,500 DSUs
Committee Member Retainer: $3,000 per annum
Board and Committee Meeting Fee: $1,500
Lead Director Retainer: $25,000 and 1,625 DSUs
Audit Committee Chair Retainer: $7,500
Other Committee Chair Retainer: $3,000
Initial Award for New Directors: 3,250 DSUs
The cash portion of retainers and fees is payable in the currency of the
director's country of residence. Related expenses incurred by directors are
reimbursed by the Company. In addition to the compensation described above,
directors who undertook special assignments on behalf of the Board during fiscal
2003 were compensated in an aggregate amount of $104,690. The annual
compensation package for directors will be reviewed on an annual basis.
The Deferred Share Unit Plan (the "DSU Plan") has been established for
non-management directors. A DSU is a unit equivalent in value to one common
share of the Company based on the five day average trading price of the
Company's common shares on the NASDAQ Stock Market (the "Weighted Average
Price") immediately prior to the date on which the value of the DSU is
determined. DSUs may not be redeemed until such time as the director leaves the
Board, thereby providing an ongoing equity stake in the Company throughout the
director's period of Board service. On termination or retirement from the Board,
the director will be unable to redeem DSUs during the six month period following
their departure from the Board. DSUs must however, be redeemed within the
maximum time period allowed by Canada Custom and Revenue Agency (i.e., by the
end of December in the year following the year of departure from the Board).
Upon redemption, the Company will make a cash payment equal to the number of
DSUs held multiplied by the Weighted Average Price as of the redemption date. No
common shares are issuable or may be acquired by directors under the DSU Plan.
The initial DSU award for newly appointed directors noted above is in addition
to the annual DSU retainer and is subject to a one year vesting requirement.
Annual retainers in the form of DSUs will be pro-rated for directors appointed
between annual meetings, based upon the number of months of service during the
twelve months ending January 31.
For 2003, directors elected prior to 2003 each received an annual grant of 6,500
DSUs instead of 25,000 stock options which had been granted in prior years. Dr.
Fleck as lead director, also received a grant of 1,625 DSUs. As a transitional
matter, Dr. Chwang, who was appointed at the last annual meeting, received a
grant of 19,500 DSUs instead of the 75,000 stock options that had been granted
to newly elected directors in prior years. Mr. Caldwell and Dr. Young, appointed
to the Board in October 2003, each received a grant of 5,416 DSUs, including an
annual grant pro-rated for a four month period. No stock options were granted to
directors during 2003. During fiscal 2003, Mr. Fox provided legal services to
the Company for which his firm received total fees of approximately $31,285.
Page 25 of 37
To further ensure that directors' compensation is aligned with shareholders'
equity, share ownership guidelines have been adopted. Directors are required to
own at least U.S.$350,000 in Company shares and/or DSUs. For purposes of these
guidelines, the value of the shares or DSUs will be based on the higher of
current market value and the acquisition value. To facilitate the establishment
of these ownership guidelines, current directors and subsequently any new
directors will be allowed to accumulate the requisite amount of Company shares
and/or DSUs over a three year period. Once the ownership guidelines have been
met, the director will have the option to receive their annual DSU grant in RSUs
issued under the Company's RSU Plans.
DIRECTORS AND OFFICERS INSURANCE
Directors and officers are insured against liability in their capacity as
directors and officers under coverage maintained by the Company. The total
coverage has a liability limit of U.S.$20,000,000 comprised of U.S.$10,000,000
of primary coverage and U.S.$10,000,000 in secondary coverage with a deductible
of U.S.$5,000,000 (each loss). During fiscal 2003, the annualized premium was
approximately U.S.$2,100,000. No allocation of the premium is made to directors
or officers as individuals.
INVESTMENT PERFORMANCE GRAPH
The following graph shows a five year comparison of the percentage change in the
Company's cumulative total shareholder return on Cdn.$100 invested in its common
shares on August 31, 1998 with the cumulative total return of the TSX/S&P
Composite Index over the same period.
Cumulative Value of a Cdn.$100 Investment
[OBJECT OMITTED]
================= ======== ======== ========= ======== ======== =======
Aug. Aug. Aug. Aug. Aug. Aug.
31/98 31/99 31/00 31/01 31/02 31/03
- ----------------- -------- -------- --------- -------- -------- -------
TSX/S&P 100 128 209 140 127 147
- ----------------- -------- -------- --------- -------- -------- -------
ATI 100 106 85 85 55 126
- ----------------- -------- -------- --------- -------- -------- -------
Page 26 of 37
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
In fiscal 2003, the Company undertook a significant review of its corporate
governance policies and practices. The Board of Directors and management
reviewed the Company's corporate governance policies in light of existing and
proposed corporate governance requirements and best practices standards in
Canada and the United States. In addition to the corporate governance guidelines
set out in the Toronto Stock Exchange Company Manual (the "TSX Guidelines"), the
Company is, or will be, subject to many of the provisions of the Sarbanes-Oxley
Act of 2002 ("SOX") and related rules of the U.S. Securities and Exchange
Commission, proposed rules of the Canadian Securities Administrators regarding
both audit committees and the certification of certain annual and interim
filings (the "CSA Proposals") and the new governance standards of the NASDAQ
Stock Market (the "Nasdaq Rules"). The Toronto Stock Exchange has also proposed
revised corporate governance guidelines (the "TSX Proposals"), however it is
likely that these TSX Proposals will be replaced by a new policy of the Ontario
Securities Commission which, at the time of printing of this Circular, has yet
to be published. Although certain of these governance initiatives are not yet in
force, or may not be completely applicable to non-U.S. corporations, the Company
is, to the extent possible, working towards compliance with all of the
applicable final standards. In this regard, in fiscal 2003, the Board of
Directors adopted and approved the following:
o a written mandate for the Board of Directors (the "Board
Mandate");
o a set of corporate governance guidelines (the "Governance
Guidelines");
o a written mandate for the Compensation Committee (the
"Compensation Committee Mandate");
o a charter for the Governance and Nominations Committee (the
"Governance and Nominations Committee Charter"); and
o a Code of Ethics.
The Company is in the process of reviewing and revising its existing Corporate
Disclosure Policy and Stock Trading Guidelines and is implementing a new
Document Retention Policy.
BOARD MEETINGS
The Board of Directors meets regularly to review the business operations and
financial results of the Company. Meetings of the Board of Directors include
regular meetings with management to review and discuss specific aspects of the
operations of the Company. Dr. Fleck, an unrelated and independent director,
serves as lead director of the Board and chairs all meetings. The Board of
Directors also functions independent of management by holding in camera
executive sessions without management present at scheduled quarterly meetings.
During the fiscal year ended August 31, 2003, the Board of Directors met twenty
times. All directors were in attendance at eighteen of these meetings. Two
directors were each unable to be in attendance at one meeting of the Board.
BOARD MANDATE
The Board of Directors adopted the Board Mandate in fiscal 2003 to confirm and
enhance the Board's ongoing duty and responsibility for stewardship of the
Company. The Board of Directors is ultimately responsible for supervising the
management of the business and affairs of the Company and, in doing so, is
required to act in the best interests of the Company. The Board of Directors
generally discharges its responsibilities either directly or through the Audit
Committee, Compensation Committee and the Governance and Nominations Committee.
Specific responsibilities of the Board of Directors set out in the Board Mandate
include:
o Appointing Management - including final approval of all senior
management appointments and their compensation and the oversight
of succession planning programs;
o Strategic Planning - including the review and approval of the
Company's business, financial and strategic plans;
o Monitoring of Financial Performance - including the review and
approval of the Company's
Page 27 of 37
audited and interim financial statements and MD & A;
o Risk Management - including the identification of the Company's
principal business risks and the implementation of appropriate
systems to effectively monitor and manage such risks;
o Establishing Policies and Procedures - including the approval
and monitoring of all policies and procedures related to corporate
governance, ethics and confidentiality; and
o Communication and Reporting - including the oversight of the
timely and accurate disclosure of financial reports and other
material corporate developments.
CORPORATE GOVERNANCE GUIDELINES
To enhance the Company's commitment to maintaining a high standard of corporate
governance, the Board of Directors adopted the Governance Guidelines in fiscal
2003. These Governance Guidelines assist the Board with respect to meeting the
Company's corporate governance responsibilities. Among other things, the
Governance Guidelines address the following matters:
o Board Organization and Membership - including a lead director
requirement, requirements for a minimum number of unrelated
non-management directors and a prohibition on retaining unrelated
directors for consulting services without Board pre-approval;
o Board Committees - including independence and financial literacy
requirements for the Audit Committee and a requirement for a
majority of independent directors on all other standing
committees;
o Board Meetings - including a requirement that the directors meet
in camera without management or management directors present at
each scheduled quarterly Board meeting;
o Board's Relationship with Management - including a requirement
for the Board to establish general authority guidelines that place
limits on management's approval authority;
o Director Responsibilities and Performance - including the
assessment of the overall performance and effectiveness of the
Board and each committee on an annual basis; and
o Ethics and Conflicts of Interest - including a general
prohibition from permitting any waiver of the Company's ethics
policies with respect to any director or executive officer.
CODE OF ETHICS
In fiscal 2003, the Company adopted a Code of Ethics that complies with the
requirements of the Nasdaq Rules and is applicable to all of the Company's
directors, officers, employees, contractors and consultants. The Code of Ethics
generally outlines standards of conduct that must be met in the carrying out of
one's employment with the Company including: (i) guidelines on the acceptance or
offering of monetary compensation, gratuities or other advantages in the conduct
of business; (ii) guidelines relating to dealings with public officials; and
(iii) prohibitions on the inappropriate gathering of competitive information.
The Code of Ethics also provides detailed guidelines with respect to the
identification and declaration of conflicts of interest, the protection of
proprietary information and the appropriate use of the Company's computer and
communications systems. The Governance and Nominations Committee monitors
compliance with the Code of Ethics and approves all waivers from the Code of
Ethics that are granted to employees. To date, no such waivers have been
granted.
BOARD COMMITTEES
Currently, each of the Audit Committee, the Compensation Committee and the
Governance and Nominations Committee are composed of outside directors all of
whom are considered to be "unrelated" and "independent" as determined under the
TSX Guidelines, the CSA Proposals, SOX and the Nasdaq Rules, with the exception
of Dr. Chwang who serves on the Governance and Nominations Committee. Dr. Chwang
is an outside director but is not considered to be independent under the Nasdaq
Rules by virtue of his family relationship by marriage to an officer of the
Company.
Page 28 of 37
Audit Committee
Currently, the members of the Audit Committee are Messrs. Horn (Chair), Fleck,
Caldwell and Young. The Audit Committee has direct communication channels with
the Company's internal finance department to review issues as appropriate and
meets directly with the external auditors of the Company on a regular basis. The
Audit Committee also oversees the implementation and operation of internal
control and financial reporting systems. During fiscal 2002, the Board adopted a
charter for the Audit Committee which outlines, among other things, the
responsibilities of the Audit Committee with respect to overseeing the Company's
relationship with the independent auditors, reviewing the annual and interim
financial statements and other financial disclosure of the Company, reviewing
the quality and adequacy of and compliance with the Company's internal controls,
reviewing proposed changes in accounting practices or policies and reviewing the
fees of the independent auditors. The Audit Committee is also responsible for
establishing policies and procedures regarding the pre-approval of all non-audit
services. In accordance with the Nasdaq Rules and CSA Proposals, the members of
the audit committee are all "financially literate". Mr. Horn and Mr. Caldwell,
both of whom are Chartered Accountants, are each considered to be a "financial
expert" as a result, in the case of Mr. Horn, of his current employment
experience as the Vice-President, Finance and Chief Financial Officer of Rogers
Communications Inc. and, in the case of Mr. Caldwell, his previous position as
Chief Financial Officer of CAE Inc.
Compensation Committee
Currently, the members of the Compensation Committee are Messrs. Caldwell
(Chair), Fleck and Russo. Among other things, the Compensation Committee
reviewed the remuneration of the Chief Executive Officer, the President and
Chief Operating Officer and all senior management who report directly to the
President and Chief Operating Officer, reviewed and made recommendations
concerning the operation of the Company's Option Plan and Share Purchase Plan
and reviewed and made recommendations with respect to the adoption of the
Company's RSU Plans. During fiscal 2003, the Board adopted the Compensation
Committee Mandate which outlines, among other things, the responsibilities of
the Compensation Committee with respect to reviewing and making recommendations
on the Company's compensation strategy, policies and process, reviewing annually
the competitiveness and appropriateness of the compensation package for the
Chief Executive Officer and other key senior management employees, assessing the
insurance policy for directors and officers, reviewing succession plans relating
to the position of Chief Executive Officer and other senior positions,
administering the share based compensation plans, recommending compensation for
directors and annually preparing the Report on Executive Compensation that is
disclosed in the annual Management Information Circular prepared in connection
with the Company's annual meeting of shareholders. The Compensation Committee is
also responsible for reviewing management's policies and practices to ensure
compliance with the prohibition contained in SOX with respect to the making of
or arranging for personal loans to directors and senior officers.
Governance and Nominations Committee
Currently, the members of the Governance and Nominations Committee are Messrs.
Fleck (Chair), Chwang and Caldwell. Generally, the Governance and Nominations
Committee oversees and assesses the functioning of the Board and the committees
of the Board and identifies and recommends qualified director candidates for
election to the Board. During fiscal 2003, the Board adopted the Governance and
Nominations Committee Charter which outlines, among other things, the
responsibilities of the Governance and Nominations Committee with respect to
identifying and recommending qualified director nominees to the Board, annually
reviewing and revising the Company's approach to governance issues, reviewing
the Code of Ethics and periodically reviewing management's systems and practices
for filing of insider reports in connection with trading in the Company's
securities. The Governance and Nominations Committee is also responsible for
conducting an annual assessment of the Board and its effectiveness and each
committee of the Board, conducting an annual evaluation of the Chair of the
Board and the Chair of each committee, and overseeing orientation programs for
new directors.
Page 29 of 37
COMPLIANCE WITH TSX GUIDELINES
The TSX Guidelines are intended to assist listed companies in their approach to
corporate governance. The TSX Guidelines address matters such as the
constitution of the Board of Directors and the functions to be performed by the
Board. Pursuant to the TSX Guidelines, listed companies must annually disclose
their approach to corporate governance. The following chart summarizes the
Company's corporate governance practices with reference to the TSX Guidelines
and TSX Proposals.
Does the
Company
TSX Corporate Governance Guideline comply? Comments
1. The Board should explicitly assume YES In fiscal 2003, the Board adopted the written Board
responsibility for stewardship of the Mandate, described in more detail above, which clearly
Company. outlines its duties and responsibilities in respect of the
stewardship of the Company. The Board also acts in
The TSX Proposals state that the Board should accordance with the Business Corporations Act (Ontario),
adopt a formal mandate setting out its the Company's constating documents and all other
stewardship responsibilities. applicable laws and Company policies. The Board
discharges its stewardship responsibilities, in part, by
reviewing, discussing and approving the Company's strategic
planning and organizational structure (i.e., overseeing
corporate performance) and supervising management. The Board
approves all significant decisions that affect the Company
before they are implemented and then monitors the results of
such decisions.
As part of the overall stewardship YES Pursuant to the Board Mandate, the Board is charged with
responsibility, the Board should assume the responsibility to oversee the Company's strategic
responsibility for the following matters: planning process and directly participates in reviewing,
questioning and approving the mission of the Company's
(a) adoption of a strategic planning business and its objectives and goals. The Board is also
process; responsible for reviewing the business, financial and
strategic plans developed by management in order to reach
the Company's objectives and goals. The Board then monitors
management's success at implementing the strategies and
plans that are approved by the Board. At least one Board
meeting each year is dedicated to the review and approval of
the Company's strategic plan. The Board reviews the
Company's performance against the strategic plan at least
quarterly. As soon as is practical, management must advise
the Board of any development that would have a significant
impact on the strategic plan.
(b) the identification of the principal YES Under the Board Mandate, the Board is responsible for
risks of the Company's business and ensuring identifying the principal risks of the Company's business
the implementation of appropriate systems to and ensuring the implementation of appropriate systems to
manage these risks; effectively monitor and manage these risks with a view to
achieving a proper balance between the risks incurred and
the potential return to the Company's shareholders. The
principal risks of the Company's business are outlined in
detail in the Company's Annual Information Form. The Audit
Committee, on behalf of
Page 30 of 37
Does the
Company
TSX Corporate Governance Guideline comply? Comments
the Board, reviews reports from the internal and external
auditor with respect to significant risk areas and monitors
the Company's risk management policies.
(c) succession planning, including YES The Compensation Committee Mandate provides that the
appointing, training and monitoring senior Compensation Committee will periodically review with the
management; Chairman and Chief Executive Officer the succession plans
relating to senior management positions and will make
recommendations to the Board with respect to the selection
of individuals to occupy these positions. The Compensation
Committee also reviews and revises the position descriptions
and performance goals for certain senior management and
evaluates the performance of these officers against such
descriptions and goals. The Board encourages senior
management to participate in professional and personal
development activities, courses and programs.
(d) a communications policy for the YES The Board of Directors requires that the Company maintain
Company; and an active investor relations program and all shareholder
and investment community inquiries are directed to the
Director of Investor Relations. The Board approves all of
the Company's major communications, including annual and
quarterly reports. The Board has also adopted a Corporate
Disclosure Policy which comprehensively addresses the
dissemination of corporate information. In this regard, the
Corporate Disclosure Policy establishes a Disclosure
Committee that meets regularly to ensure the timely and
accurate disclosure of all material corporate information
and also addresses matters such as communications with
analysts.
(e) the integrity of the Company's YES The Audit Committee monitors the Company's internal
internal control and management information controls and management information systems through
systems. reports from management and the internal and external
auditors. The Audit Committee reviews and approves all
financial statements prior to release and receives detailed
financial information quarterly or more often, if required.
The Audit Committee also directly consults the Company's
auditors periodically with respect to the Company's
financial disclosure and internal financial controls.
2. The Board should be constituted with YES At August 31, 2003, the Board was composed of six
a majority of individuals who qualify as members. The Board has concluded that, under the TSX
unrelated directors. An unrelated director Guidelines, of the six directors, four (or 662/3%) were
is a director who is independent of unrelated and independent. Subsequent to August 31, 2003,
management and is free from any interest and Mr. Caldwell and Dr. Young were appointed as directors and
any business or other relationship that Mr. Fox resigned as a director. The Board has concluded
could, or could reasonably be perceived to, that five of the seven (or 71%) current members of the
materially Board of Directors are unrelated
Page 31 of 37
Does the
Company
TSX Corporate Governance Guideline comply? Comments
interfere with the director's directors under the TSX Guidelines. The Board believes that
ability to act with a view to the best the interests of minority shareholders in the Company are
interests of the Company, other than fairly reflected in the composition of the Board.
interests arising from shareholding.
3. The Board is required to disclose on YES In determining independence, the Governance and
an annual basis the analysis of the Nominations Committee considers and analyzes all of the
application of the principles supporting the relationships, if any, between each of the directors and
conclusions in item 2 above. the Company and its subsidiaries. Mr. Ho and Dr. Chwang
were the only members of the Board during fiscal 2003 who
were not unrelated directors under the TSX Guidelines. Mr.
Ho is the Chief Executive Officer of the Company. Although
Dr. Chwang is an outside, non-management director, he is
related by marriage to an officer of the Company. All other
directors were considered to be independent of management
and free of any interest or any business or other
relationship that could materially interfere with their
ability to act with a view to the best interests of the
Company. Mr. Fox, who was a director until his resignation
in November 2003, was considered an unrelated director as
fees paid to him for legal services were not material to Mr.
Fox or the Company. The Board has determined that Mr.
Caldwell and Dr. Young, who were appointed in October 2003
as directors, do not have any material business or other
relationships with the Company or the Company's management
and are therefore unrelated directors under the TSX
Guidelines.
4. The Board should appoint a committee YES In fiscal 2003, the Board created a Governance and
of directors composed exclusively of outside Nominations Committee for the purposes of, among other
(i.e., non-management directors), a majority things, proposing new nominees to the Board and assessing
of whom are unrelated directors with the directors on an ongoing basis. All director nominations
responsibility for proposing new nominees to are approved by the Governance and Nominations Committee.
the Board to the full Board and for assessing The Governance and Nominations Committee Charter provides
directors on an ongoing basis. that in recruiting and considering candidates for
director, the Governance and Nominations Committee will take
into account the candidates' competencies, skills and
personal qualities and ensure that the candidates understand
the demands and expectations of a director of the Company.
The Governance and Nominations Committee is also responsible
for conducting annual assessments of the Board.
5. The Board should implement a process YES The Governance and Nominations Committee is charged with
to be carried out by a committee of the Board the responsibility of conducting an annual evaluation of
for assessing the effectiveness of the Board the functioning and effectiveness of the Board, the Chair
as a whole, the committees of the Board and of the Board, each committee of the Board and its Chair
the contribution of individual directors. and individual directors. The Governance Guidelines also
provide that the suitability
Page 32 of 37
Does the
Company
TSX Corporate Governance Guideline comply? Comments
of directors be reviewed when they change their principal
occupation or accept additional corporate directorships.
6. The Company, as an integral element YES Pursuant to the Governance and Nominations Committee
of the process for appointing new directors, Charter, it is the responsibility of the Governance and
should provide an orientation and education Nominations Committee to oversee an orientation program to
program for new recruits to the Board. familiarize new directors with the Company's business and
operations (including the Company's reporting structure,
Under the TSX Proposals, the Company should strategic plans, significant financial, accounting and
also provide ongoing education for the Board. risk issues, and compliance programs and policies),
management and the external auditors. Currently, when new
members of the Board are appointed they meet with management
and other members of the Board to familiarize themselves
with the business of the Company and their responsibilities
as members of the Board. New Board members are also provided
with a manual containing a record of historical public
information as well as copies of all Board and committee
mandates and charters and corporate policies. In accordance
with the TSX Proposals, the Governance and Nominations
Committee will also oversee ongoing educational
opportunities for all directors.
7. The Board should examine its size YES The Governance and Nominations Committee is responsible
and, with a view to determining the impact of for reviewing, from time to time, the size of the Board,
the number upon effectiveness, undertake particularly in light of its annual review of the
where appropriate a program to reduce the competencies, skills and personal qualities required by
number of directors to a number which the Board in order to add value to the Company. In fiscal
facilitates effective decision-making. 2003, it was determined that the size of the Board should
be increased. As a result, Messrs. Caldwell and Young were
appointed to the Board. With the addition of Mr. Caldwell
and Dr. Young and the resignation of Mr. Fox, the Governance
and Nominations Committee has determined that Board's
current size continues to provide for the effective
functioning and decision-making of the Board as a whole.
Nevertheless, the Governance and Nominations Committee will
continue to review and assess the effectiveness of the Board
in fiscal 2004 and may recommend the appointment of
additional directors to the Board should appropriate
candidates be identified.
8. The Board should review the adequacy YES Pursuant to the Compensation Committee Charter, the
and form of the compensation of directors and Compensation Committee recommends to the Board the terms
ensure that compensation realistically upon which directors shall be compensated. The
reflects the responsibilities and risk Compensation Committee is responsible for ensuring that
involved in being an effective director. the compensation of directors, the Chair of the Board and
those acting as committee chairs adequately reflects the
responsibilities they are assuming. Director
Page 33 of 37
Does the
Company
TSX Corporate Governance Guideline comply? Comments
compensation is discussed in more detail above under the
heading "Compensation of Directors". The Compensation
Committee is also responsible for reviewing the remuneration
of the Chief Executive Officer, the President and Chief
Operating Officer and all senior management who report
directly to the President and Chief Operating Officer. For
additional information please see the "Report on Executive
Compensation" above.
9. Committees of the Board should YES During fiscal 2003, each of the Audit Committee,
generally be composed of outside directors, a Compensation Committee and Governance and Nominations
majority of whom are unrelated directors, Committee were comprised exclusively of outside
although some Board committees may include directors. All of these directors were unrelated as
one or more insider directors. determined under the TSX Guidelines with the exception of
Dr. Chwang, as noted above, who serves on the Governance and
Nominations Committee.
10. The Board should assume YES In fiscal 2003, the Board of Directors adopted written
responsibility for, or assign to a committee Corporate Governance Guidelines (discussed above) to
of directors responsibility for, developing enhance its commitment to maintaining a high standard of
the approach to governance issues. This corporate governance. Furthermore, the Board has
committee would, among other things, be established the Governance and Nominations Committee
responsible for the Company's response to which, among other things, is responsible for the
these governance guidelines. development, implementation and assessment of effective
corporate governance principles.
11. The Board, together with the Chief YES Subject to the authority of the Board, the Chief Executive
Executive Officer, should develop position Officer and President and Chief Operating Officer have a
descriptions for the Board and for the Chief mandate to generally supervise the business and affairs of
Executive Officer including the definition of the Company. It is the responsibility of the Governance
limits to management's responsibilities. The and Nominations Committee to monitor and assess the
Board should approve or develop corporate relationship between the Board and management and to
objectives that the Chief Executive Officer define the limits to management's responsibilities. In
is responsible for meeting and assess the this regard, the Board requires management to ensure that
Chief Executive Officer against these all transactions or matters of a material nature are
objectives. presented by management to the Board for approval. It is
the Compensation Committee's responsibility to review and
revise the position description of the Chief Executive
Officer and President and Chief Operating Officer and to
determine the performance goals that the Chief Executive
Officer and President and Chief Operating Officer are
responsible for meeting.
12. The Board should have in place YES The Board of Directors believes that it has functioned,
appropriate structures and procedures to and believes that it can continue to function, independent
ensure that the Board can function of management as required. Mr. Ho, who is the Chief
independently of management. An appropriate Executive Officer, currently serves as Chairman of the
structure would be to: (i) appoint a chair of Board of Directors. In fiscal 2003, Dr. Fleck was
the Board who is not a appointed as the lead director to ensure greater
Page 34 of 37
Does the
Company
TSX Corporate Governance Guideline comply? Comments
member of management with responsibility to independence of the Board from management. The Governance
ensure that the board discharges its Guidelines require directors to meet in camera without
responsibilities; or (ii) assign this management or management directors present at each
responsibility to an outside director, sometimes scheduled quarterly meeting of the Board. The
referred to as the "lead director". The chair or Compensation Committee, Audit Committee and Governance and
lead director should ensure that the Board carries Nominations Committee are each composed entirely of
out its responsibilities effectively which will outside directors.
involve the Board meeting on a regular basis
without management present and may involve
assigning the responsibility for
administering the Board's relationship to
management to a committee of the Board.
13. The audit committee of the Board YES The Board has adopted a charter for the Audit Committee,
should be composed only of outside which sets out the mandate for the Audit Committee. The
directors. The roles and responsibilities of Audit Committee is responsible for engaging and overseeing
the Audit Committee should be specifically the Company's auditor, maintaining direct communication
defined so as to provide appropriate guidance with the Company's auditor and determining the
to Audit Committee members as to their compensation of the Company's auditor. It is also the
duties. The Audit Committee should have Audit Committee's responsibility to review the quality and
direct communication channels with the adequacy of and compliance with the Company's internal
internal and external auditors to discuss and controls. The Audit Committee must approve all non-audit
review specific issues as appropriate. The work performed by the Company's auditor.
Audit Committee duties should include the
oversight responsibility for management
reporting on internal control. While it is
management's responsibility to design and
implement an effective system of internal
control, it is the responsibility of the
Audit Committee to ensure that management has
done so.
14. The Board should implement a system YES Individual members of the Board are permitted to engage,
that enables an individual director to engage at the Company's expense, outside advisors when
an outside advisor at the Company's expense necessary.
in the appropriate circumstances. The
engagement of the outside advisor should be
subject to the approval of an appropriate
committee of the Board.
Page 35 of 37
OTHER BUSINESS
Management does not know of any matters to be brought before the Meeting other
than those set forth in the Notice accompanying this Circular.
ADDITIONAL INFORMATION
Current financial information on the Company is provided in the Company's
comparative financial statements and MD&A for the most recently completed
financial year. This information and additional information relating to the
Company can be found on the SEDAR web site at www.sedar.com and on the Company's
website at www.ati.com.
Copies of the Company's latest Annual Information Form, together with any
document incorporated therein by reference, Annual Report and Financial
Statements and Management Information Circular may be obtained upon request to
the Company's Director of Investor Relations. The Company may require the
payment of a reasonable charge if the request is made by a person who is not a
shareholder of the Company.
DIRECTORS' APPROVAL
The contents and the sending of this Circular have been approved by the
directors.
DATED at Markham, Ontario, on December 19, 2003.
//Dean Blain//
Dean J. Blain
Corporate Secretary
Page 36 of 37
ATI TECHNOLOGIES INC.
FORM OF PROXY
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT OF ATI TECHNOLOGIES INC. FOR USE
AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS TO
BE HELD ON
TUESDAY, JANUARY 27, 2004.
The undersigned shareholder of ATI TECHNOLOGIES INC. (the
"Company") hereby appoints K.Y. Ho or, failing him, David Orton or, instead of
either of them appoints as _________________________________________ the lawful
attorney and proxyholder of the undersigned, with full power of substitution to
attend, vote and otherwise act for the undersigned in respect of all common
shares held by the undersigned at the above noted meeting or at any and all
adjournments thereof, to the same extent and with the same power as if the
undersigned were personally present, and hereby revokes any proxy previously
given. Without limiting the general authorization and powers hereby given, the
proxyholder is specifically directed to vote as follows:
1. Election of Directors
--- FOR or WITHHOLD FROM VOTING --- in respect of the election of each
of the following nominees: John E. Caldwell, Ronald Chwang, James
D. Fleck, K.Y. Ho, Alan D. Horn, Paul Russo and Robert A. Young as
directors of the Company.
2. Appointment of Auditors
--- FOR or WITHHOLD FROM VOTING --- in respect of the appointment of
KPMG LLP as auditors for the coming year and authorizing the
directors to fix their remuneration.
3. Amended Restricted Share Unit Plans
--- FOR or AGAINST --- the approval of the amended restricted share
unit plans as described in the Management Information Circular and
confirmation of the availability for issuance under the amended
restricted share unit plans of the common shares that are available
for issuance under the Company's stock option plan up to an
aggregate maximum of 47,000,000 common shares.
The undersigned hereby acknowledges receipt of the Notice of Annual and
Special Meeting of Shareholders and the Management Information Circular.
Dated:
------------------------------ ----------------------------------
Name of Shareholder (please print)
----------------------------------
Signature of Shareholder
INSTRUCTIONS:
1. The common shares represented by this proxy will be voted as directed by
the shareholder. If no directions are given, the proxy will be voted FOR
items 1 to 3 above. This proxy confers discretionary authority with respect
to amendments or variations to the matters set out above and any other
matters which may properly be brought before the above noted meeting and,
in any such event, the common shares represented by this proxy will be
voted in the discretion of the proxyholder named herein.
2. Shareholders have the right to appoint any person (who need not be a
shareholder) to attend and act on their behalf at the Meeting. If you
desire to exercise such right and appoint another person other than K.Y. Ho
or David Orton as your proxyholder, strike out K.Y. Ho's and David Orton's
names above and insert the name of such other person in the blank space
provided.
3. This form of proxy must be dated and signed exactly as your name appears
herein. When signing in a fiduciary or representative capacity, please give
full title of such. In the case of joint shareholders, each must sign.
Proxies from a corporation must be signed under corporate seal by an
officer thereof, or by an attorney thereof duly authorized in writing.
4. If this proxy is not dated in the space above, upon receipt it will be
deemed to bear the date on which it is mailed or delivered.
Page 37 of 37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ATI TECHNOLOGIES INC.
Date: January 2, 2004 By: //Terry Nickerson//
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Name: Terry Nickerson
Title: Senior Vice President, Finance and
Chief Financial Officer