SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for Use of
[ ] Definitive Proxy Statement the Commission Only (as
[ ] Definitive Additional Materials permitted by
[ ] Soliciting Material Pursuant to Rule 14a-6(e)(2))
Section 240.14a-11(c)
or Section 240.14a-12
HealthCare Capital Corp.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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HEALTHCARE CAPITAL CORP
111 S.W. FIFTH AVENUE, SUITE 2390
PORTLAND, OREGON 97204
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NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS
FEBRUARY 9, 1998
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NOTICE IS HEREBY GIVEN that a Special Meeting (the "Meeting") of the
holders of common shares ("Common Shares") and the holders of Series A
Convertible Preferred Shares (the "Preferred Shares") of HealthCare Capital
Corp. (the "Corporation") will be held at Atwater's, 30th Floor, 111 S.W. Fifth
Avenue, Portland, Oregon, on Monday, February 9, 1998, at 10 a.m. Pacific Time,
for the following purposes:
1. To consider and approve an amendment of the Corporation's
Articles to change its name to Sonus Corp.;
2. To consider and approve an amendment of the Corporation's
Articles to effect a one-for-five reverse split
(consolidation) of the Common Shares;
3. To consider and approve a resolution authorizing the issuance
of up to 15,000,000 Common Shares (3,000,000 Common Shares in
the event the reverse stock split referred to above is
approved) in transactions and at prices as determined by the
Board of Directors in its sole discretion;
4. To consider and approve an amendment to the Corporation's
Second Amended and Restated Stock Award Plan; and
5. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
Only holders of record of Common Shares or Preferred Shares at the
close of business on January 2, 1998, are entitled to receive notice of the
Meeting.
Portland, Oregon BY ORDER OF THE BOARD OF DIRECTORS
January 7, 1998
Brian S. Thompson
Secretary
We ask that you promptly sign, date and return the enclosed proxy in
the enclosed return envelope, whether or not you plan to attend the Meeting in
person. If you do attend the Meeting, you may withdraw your proxy and vote in
person. All instruments appointing proxies to be used at the Meeting must be
deposited at the offices of CIBC Mellon Trust Company, Suite 600, 333-7th Avenue
SW, Calgary, Alberta, Canada, T2P 2Z1 (P.O. Box 2517, Calgary, Alberta, Canada,
T2P 4P4), prior to 10 a.m. (Calgary time) on February 6, 1998, or delivered to
the Chairman of the Meeting prior to the commencement of the Meeting. A person
appointed as a proxy need not be a shareholder of the Corporation.
<PAGE>
HEALTHCARE CAPITAL CORP.
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SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD ON FEBRUARY 9, 1998
MANAGEMENT INFORMATION CIRCULAR
AND PROXY STATEMENT
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SOLICITATION OF PROXIES
THIS MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT (THE
"CIRCULAR") IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE MANAGEMENT
OF HEALTHCARE CAPITAL CORP. (THE "CORPORATION") OF PROXIES TO BE USED AT THE
SPECIAL MEETING (THE "MEETING") OF THE SHAREHOLDERS OF THE CORPORATION TO BE
HELD AT ATWATER'S, 30TH FLOOR, 111 S.W. FIFTH AVENUE, PORTLAND, OREGON, ON
MONDAY, FEBRUARY 9, 1998, AT 10 A.M. PACIFIC TIME, AND ANY ADJOURNMENTS THEREOF,
FOR THE PURPOSES SET FORTH IN THE ACCOMPANYING NOTICE OF MEETING.
The solicitation of proxies will be made primarily by mail, but proxies
may also be solicited personally and by telegram or telephone by directors and
officers of the Corporation without additional compensation for such services.
Brokers and other persons holding shares in their names, or in the names of
nominees, will be reimbursed for their reasonable expenses in forwarding
soliciting materials to their principals and in obtaining authorization for the
execution of proxies. All costs of solicitation of proxies by the Corporation
will be borne by the Corporation. This Circular and accompanying form of proxy
will first be mailed to shareholders on approximately January 7, 1998.
All dollar amounts included in this Circular are expressed in United
States dollars. Amounts originally expressed in Canadian dollars have been
converted using the applicable spot exchange rate (as quoted by the Federal
Reserve Bank of New York for the New York Interbank Market) as of December 31,
1997, or, where appropriate, the applicable date of the specific transaction or
payment described. THE EXCHANGE RATE FOR CONVERTING CANADIAN DOLLARS INTO U.S.
DOLLARS AT DECEMBER 31, 1997, WAS ______.
APPOINTMENT AND REVOCATION OF PROXIES
The persons designated in the enclosed form of proxy are directors of
the Corporation. A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON OTHER THAN THE
PERSONS DESIGNATED IN THE ACCOMPANYING FORM OF PROXY TO REPRESENT HIM OR HER AT
THE MEETING. THE PERSON NEED NOT BE A SHAREHOLDER. This right may be exercised
either by inserting in the blank space provided the name of the other person a
shareholder wishes to appoint or by completing another proper form of proxy.
Shareholders who wish to be represented at the Meeting by proxy must deposit
their form of proxy prior to 10 a.m. (Calgary time) on February 6, 1998, at the
offices of CIBC Mellon Trust Company, Suite 600, 333-7th Avenue SW, Calgary,
Alberta, Canada, T2P 2Z1 (P.O. Box 2517, Calgary, Alberta, Canada, T2P 4P4), or
deliver it to the Chairman of the Meeting prior to the commencement of the
Meeting.
A shareholder who has given a proxy has the right to revoke it at any
time by an instrument in writing executed by the shareholder or his attorney
authorized in writing or, if the shareholder is a corporation, by an officer or
attorney thereof duly authorized, and deposited at the offices of CIBC Mellon
Trust Company, Suite 600, 333-7th Avenue SW, Calgary, Alberta, Canada, T2P 2Z1
(P.O. Box 2517, Calgary, Alberta, Canada, T2P 4P4), addressed to the Secretary
of the Corporation, at any time up to and including the last business day
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preceding the day of the Meeting, or any adjournment thereof, at which the proxy
is to be used, or with the Chairman of the Meeting on the day of the Meeting, or
any adjournment thereof.
OUTSTANDING VOTING SECURITIES
The Corporation has two classes of securities outstanding with voting
rights, Common Shares, without nominal or par value (the "Common Shares"), and
Series A Convertible Preferred Shares, without nominal or par value (the
"Preferred Shares" and, together with the Common Shares, the "Shares"). On
January 2, 1998, the Corporation had outstanding 27,284,517 Common Shares and
13,333,333 Preferred Shares, each carrying the right to one vote per share. In
addition, the Corporation has reserved for issuance: (i) 17,833,308 Common
Shares upon the exercise of share purchase warrants presently outstanding; (ii)
900,000 Common Shares upon the conversion of convertible subordinated notes due
April 30, 1998; (iii) 1,100,000 Common Shares upon the conversion of convertible
subordinated notes due July 31, 1998; and (iv) 2,677,000 Common Shares upon the
exercise of stock options presently outstanding held by employees, directors,
and officers of, and consultants to, the Corporation. The holders of the Common
Shares and the holders of the Preferred Shares will vote together as a single
class at the Meeting.
Only shareholders of record at the close of business on January 2,
1998, will be entitled to vote at the Meeting, except to the extent that a
shareholder has transferred ownership of any of his or her Common Shares or
Preferred Shares after the record date and the transferee of those shares has
produced properly endorsed share certificates or has otherwise established that
he or she owns the shares and, in either case, has requested, not later than
January 30, 1998, that the transferee's name be included in the list of
shareholders entitled to vote at the Meeting, in which case such transferee
shall be entitled to vote such shares at the Meeting.
VOTING OF PROXIES
When a proxy in the accompanying form is properly executed and
returned, the Common Shares or Preferred Shares represented thereby will be
voted at the Meeting in accordance with the instructions specified in the spaces
provided in the proxy. IF NO INSTRUCTIONS ARE SPECIFIED, THE SHARES WILL BE
VOTED IN FAVOR OF THE MATTERS LISTED IN THE ACCOMPANYING NOTICE OF MEETING.
A quorum of shareholders will be established at the Meeting if not less
than 331/3% of the combined total of Common Shares and Preferred Shares issued
and entitled to vote at the Meeting are represented in person or by proxy.
A DIRECTION TO "WITHHOLD VOTE" (ABSTAIN) WITH RESPECT TO PROPOSALS 1
THROUGH 4 SET FORTH IN THE ACCOMPANYING NOTICE OF MEETING WILL BE DEEMED TO HAVE
THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL. Shares represented by duly
executed and returned proxies of brokers or other nominees which are expressly
not voted on any matter will have no effect on the required vote on the matter.
The enclosed form of proxy confers discretionary authority upon the
persons named therein with respect to any amendments to matters identified in
the accompanying Notice of Meeting and other matters that may properly come
before the Meeting. Management is not aware of any amendments to matters
identified in the Notice of Meeting or of any other matters that are to be
presented for action at the Meeting.
SHARE OWNERSHIP BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
BENEFICIAL OWNERSHIP TABLE
The following table gives information regarding the beneficial
ownership of Common Shares as of January 2, 1998, by each of the Corporation's
directors, by certain of the Corporation's executive officers, and by the
Corporation's present directors and executive officers as a group. In addition,
it gives information,
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including addresses, regarding each person or group known to the Corporation to
own beneficially more than 5% of the outstanding Common Shares or Preferred
Shares. Information as to beneficial stock ownership is based on data furnished
by the persons concerning whom such information is given. Unless otherwise
indicated, all shares listed as beneficially owned are held with sole voting and
investment power. The numbers in the table include Common Shares as to which a
person has the right to acquire beneficial ownership through the exercise or
conversion of options, purchase warrants or convertible securities within 60
days after January 2, 1998.
<TABLE>
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Amount and
Class Nature % of % of
of of "Beneficial Common Preferred
Name Shares Ownership"(1)(2) Shares(1)(2) Shares
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<S> <C> <C> <C> <C>
Joel Ackerman Common -- -- --
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A. Baron Cass III Common 1,633,514(3) 5.9% --
5005 LBJ Freeway, Ste. 1130
Dallas, Texas 75244
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Brandon M. Dawson Common 4,550,000 16.5% --
111 S.W. Fifth Ave., Ste. 2390
Portland, Oregon 97204
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William DeJong Common 157,200 * --
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Kathy A. Foltner Common 69,000 * --
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Gregory J. Frazer, Ph.D. Common 1,711,959(4) 6.2% --
18531 Roscoe Blvd., Ste. 201
Northridge, California 91324
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Douglas F. Good Common 1,209,562 4.4% --
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Hugh T. Hornibrook Common 200,000 * --
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Warburg, Pincus & Co.(5) Common 23,333,333(5) 46.1% --
466 Lexington Avenue Preferred 13,333,333(5) -- 100%
New York, New York 10017-3147
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All directors and executive officers as a Common 8,547,721 30.1% --
group (9 persons)
=============================================================================================================================
</TABLE>
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*Less than 1% of the outstanding Common Shares.
(1) "Beneficial Ownership" includes Common Shares that the person has the
right to acquire through the exercise or conversion of options,
purchase warrants or convertible securities within 60 days after
January 2, 1998, as follows: A. Baron Cass III, 533,832 shares; Brandon
M. Dawson, 300,000 shares; William DeJong, 75,000 shares; Kathy A.
Foltner, 62,500 shares; Gregory J. Frazer, Ph.D., 250,000 shares; Hugh
T. Hornibrook, 200,000 shares; Warburg, Pincus & Co., 23,333,333
shares; and all directors and executive officers as a group, 1,187,500
shares.
(2) Calculated in accordance with Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934, pursuant to which Common Shares as to which a
person has the right to acquire beneficial ownership through the
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<PAGE>
exercise or conversion of options, purchase warrants or convertible
securities within 60 days after January 2, 1998, have been included in
shares deemed to be outstanding for purposes of computing percentage
ownership by such person.
(3) Includes Common Shares beneficially owned by the Cass Family
Foundation, the Cass Childrens Trust, and the Prime Petroleum Profit
Sharing Trust.
(4) Includes 246,491 Common Shares held by Carissa Bennett, Mr. Frazer's
wife.
(5) Warburg, Pincus & Co. is the general partner of Warburg, Pincus
Ventures, L.P., the record owner of 13,333,333 Preferred Shares,
together with warrants to purchase 10,000,000 Common Shares. Each
Preferred Share is entitled to one vote. The Preferred Shares vote
together with the Common Shares as a single class. The Preferred Shares
held by Warburg represent approximately 33% of the combined voting
power of the Shares. Of the 23,333,333 Common Shares shown as
beneficially owned by Warburg, 13,333,333 shares represent the Common
Shares issuable upon conversion of the 13,333,333 Preferred Shares
outstanding.
ACQUISITION OF SECURITIES BY WARBURG, PINCUS VENTURES, L.P.
On December 24, 1997, the Corporation consummated the sale of
13,333,333 Preferred Shares, together with warrants to purchase 10,000,000
Common Shares for $2.40 per share (the "Warrants"), contemplated by the
Securities Purchase Agreement dated November 21, 1997, between the Corporation
and Warburg, Pincus Ventures, L.P., a Delaware limited partnership ("Warburg").
The general partner of Warburg is Warburg, Pincus & Co.
The Preferred Shares and Warrants were issued in exchange for
$18,000,000 in cash from the liquid investment funds held by Warburg. The
Preferred Shares, which are entitled to one vote per share (or such other number
of votes equal to the number of Common Shares into which a Preferred Share shall
be convertible from time to time) in the election of directors and any other
matters presented to the shareholders of the Corporation for action or
consideration, represent approximately 33% of the outstanding voting securities
of the Corporation. Including the Common Shares issuable upon exercise of the
Warrants, Warburg "beneficially owns" approximately 46% of the equity securities
of the Corporation.
The Preferred Shares may be converted at any time, in whole or in part,
into Common Shares. The conversion rate is one Common share for each Preferred
Share surrendered for conversion, subject to adjustment for stock dividends,
stock splits, reverse stock splits, recapitalizations, and other anti-dilution
adjustments.
As long as Warburg beneficially owns a number of outstanding Shares
constituting at least 10% of the outstanding Common Shares (including for this
purpose the Common Shares issuable upon conversion of the Preferred Shares but
not the Common Shares issuable upon exercise of the Warrants), the Corporation
will be required to nominate and use its reasonable best efforts to cause to be
elected and to remain as directors two persons, reasonably satisfactory to the
Corporation and acceptable to The Alberta Stock Exchange (the "ASE"), if
applicable, designated by Warburg. On December 24, 1997, in partial satisfaction
of this requirement, the Board of Directors of the Corporation (the "Board")
elected Joel Ackerman, a vice president of E. M. Warburg, Pincus & Co., LLC, as
a director of the Corporation, filling the vacancy created by the resignation of
Gene K. Balzer, Ph.D. Warburg has not yet determined the identity of its second
nominee to the Board.
The number of directors as to which Warburg has the right to designate
nominees will increase to three if and for so long as the number of positions on
the Board exceeds eight. Such number will decrease by one if Warburg
beneficially owns a number of outstanding Shares constituting less than 10% of
the outstanding Common Shares (including for this purpose the Common Shares
issuable upon conversion of the Preferred Shares but not the Common Shares
issuable upon exercise of the Warrants) and will further decrease to none if
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Warburg beneficially owns less than 3,333,333 outstanding Shares. As long as
Warburg beneficially owns at least 3,333,333 outstanding Shares, the number of
positions on the Board may not exceed 11. The right to designate one director
may be transferred by Warburg to a single purchaser of at least 6,666,667
Preferred Shares or Common Shares issued upon conversion thereof.
Prior to consummation of the transaction with Warburg, control of the
Corporation was effectively in the hands of the Corporation's directors,
particularly Douglas F. Good, Chairman of the Board, and Brandon M. Dawson,
President and Chief Executive Officer, who together owned 20% of the outstanding
Common Shares. Messrs. Good and Dawson now hold a total of 13% of the voting
securities of the Corporation.
As a result of Warburg's significant percentage share ownership, as
well as its right to designate nominees for director as discussed above, Warburg
will be able to exercise substantial influence and control over the
Corporation's affairs. For as long as Warburg beneficially owns at least
3,333,333 outstanding Common Shares or Preferred Shares, the Corporation will
not, without Warburg's consent, (i) sell, lease, exchange or transfer all or
substantially all of its assets to any third party, (ii) amalgamate the
Corporation with another corporation such that the then existing shareholders of
the Corporation hold less than 51% of the combined voting power of the
amalgamated corporation, (iii) materially change the nature of the Corporation's
business, (iv) effect a liquidation, amalgamation or sale of the Corporation or
sell substantially all of its or its subsidiaries' assets, or (v) with certain
exceptions, redeem or pay a dividend or distribution on its Common Shares.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the years indicated the compensation
awarded or paid to, or earned by, the Corporation's chief executive officer and
the Corporation's other executive officers whose salary level and regular bonus
for the fiscal year ended July 31, 1997, exceeded $100,000.
<TABLE>
Annual Long-Term
Compensation Compensation Awards
Number of Shares
Name and Principal Position Year Salary Bonus Underlying Options
<S> <C> <C> <C> <C>
Brandon M. Dawson 1997 $130,000 $ -- --
President and Chief 1996 86,667 -- 650,000
Executive Officer
Kathy A. Foltner 1997 85,000 37,500 125,000
Vice President-Operations
Gregory J. Frazer, Ph.D. 1997 110,000 -- 400,000
Vice President-Business
Development
</TABLE>
In addition, two other executive officers of the Corporation were paid an
aggregate of $215,289 in cash compensation, including incentive compensation of
$50,454 relating to an acquisition, during the 1997 fiscal year.
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<PAGE>
OPTION GRANTS
During the fiscal year ended July 31, 1997, the Corporation granted
stock options to employees and directors under its Stock Option Plan adopted
effective November 18, 1993, and its Stock Award Plan adopted effective December
10, 1996. Options are granted at the discretion of the Board of Directors.
Options granted to date have a term of five years and generally vest in two or
more equal annual installments. The options are not transferable or assignable.
The following table sets forth certain information concerning grants of
options to purchase Common Shares to individuals who were directors or executive
officers of the Corporation during the fiscal year ended July 31, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
Number of Percentage of
<TABLE>
Shares Total Options Market
Underlying Granted to Exercise Price on
Options Employees in Price Grant Date
Name Granted Fiscal Year ($/share) ($/share) Expiration Date
<S> <C> <C> <C> <C> <C>
Gene K. Balzer, Ph.D. -- -- -- -- --
Brandon M. Dawson -- -- -- -- --
William DeJong -- -- -- -- --
Randall E. Drullinger -- -- -- -- --
Kathy A. Foltner 125,000(1) 8.2% $1.45 $1.45 Feb. 5, 2002
Gregory J. Frazer, Ph.D. 400,000(2) 26.4 1.30 1.76 Oct. 1, 2001
Douglas F. Good -- -- -- -- --
Hugh T. Hornibrook -- -- -- -- --
Edwin J. Kawasaki 170,000(3) 11.2 1.12 1.12 May 8, 2002
</TABLE>
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(1) One-half of Ms. Foltner's options became exercisable on November 1,
1997, with the balance becoming exercisable on November 1, 1998.
(2) One-half of Mr. Frazer's options became exercisable on October 1, 1997,
with the balance becoming exercisable on October 1, 1998.
(3) One-half of Mr. Kawasaki's options became exercisable on August 12,
1997, with the balance becoming exercisable on August 12, 1998.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information regarding option
exercises during the fiscal year ended July 31, 1997, and the fiscal year-end
value of unexercised options held by individuals who were directors or executive
officers of the Corporation during the 1997 fiscal year:
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
Number of Securities
Underlying
Unexercised Value of Unexercised
Options at In-the-Money Options
July 31, 1997 at July 31, 1997(2)
Shares
Acquired on Value Unexer-
Name Exercise Realized(1) Exercisable Unexercisable Exercisable cisable
<S> <C> <C> <C> <C> <C> <C>
Gene K. Balzer, Ph.D. 200,000 $170,741 -- -- $ -- --
Brandon M. Dawson 250,000 211,420 300,000 -- 275,687 --
William DeJong -- -- 75,000 -- 35,275 --
Randall E. Drullinger -- -- 200,000 -- -- --
Kathy A. Foltner -- -- -- 125,000 -- --
Gregory J. Frazer, Ph.D. -- -- -- 400,000 -- --
Douglas F. Good 225,000 180,118 -- -- -- --
Hugh T. Hornibrook -- -- 200,000 -- -- --
Edwin J. Kawasaki -- -- -- 170,000 -- $11,900
</TABLE>
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(1) The value realized was calculated based on the excess of the closing
sale price of the Common Shares reported on the ASE on the date of
exercise over the exercise price.
(2) The value shown was calculated based on the excess of the closing sale
price of the Common Shares reported on the ASE on July 31, 1997, over
the per share exercise price of the unexercised in-the-money options.
EMPLOYMENT AND CONSULTING AGREEMENTS
On October 1, 1996, the Corporation entered into a five-year employment
agreement with Gregory J. Frazer, Ph.D., its Vice President-Business
Development, that provides for a base salary of $110,000 per year and for a
bonus based on the aggregate net income of the hearing clinics acquired by the
Corporation that were previously owned in part by Mr. Frazer. The employment
agreement also provides for certain employee benefits and options to purchase up
to 200,000 Common Shares at $1.30 per share included in the table under "Option
Grants" above. Mr. Frazer has also entered into an agreement with the
Corporation which contains covenants not to compete with and not to solicit
employees, clients or customers of the Corporation on behalf of a competitor
during his period of employment and for three years following termination of his
employment.
On October 31, 1996, the Corporation entered into a three-year
employment agreement with Kathy A. Foltner, its Vice President-Operations, that
provides for a salary of $85,000 per year. The employment agreement also
provides for certain employee benefits and options to purchase up to 125,000
Common Shares at $1.45 per share included in the table under "Option Grants"
above.
Effective January 1, 1997, the Corporation entered into a five-year
consulting agreement with Hugh T. Hornibrook, a director of the Corporation,
under which the Corporation pays Mr. Hornibrook a retainer of $72 per month and
$91 per hour for consulting services on an as-needed basis.
Since January 1, 1997, the Corporation has retained NeuroDynamic
Systems, Inc., at the rate of $6,000 per month, to provide consulting services
in connection with the Corporation's Canadian operations and
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<PAGE>
the development of a training program for audiologists. The consulting
arrangement may be canceled at any time by the Corporation. Gene K. Balzer,
Ph.D., a director of the Corporation until December 24, 1997, is president and
sole shareholder of NeuroDynamic Systems, Inc.
The Corporation has entered into employment agreements with Brandon M.
Dawson, its President and Chief Executive Officer, Edwin J. Kawasaki, its Vice
President-Finance and Chief Financial Officer, and Randall E. Drullinger, its
Vice President of Marketing, effective November 14, 1997. The term of each
agreement expires on December 24, 2001, subject to automatic one-year extensions
annually unless either party gives six months' prior written notice of
non-extension. The agreements provide for annual base salaries of $195,000,
$115,000, and $104,000 to Messrs. Dawson, Kawasaki, and Drullinger,
respectively, subject to such increases (but not decreases) as are determined
from time to time by the Board or a compensation committee designated by the
Board. Each executive will be eligible to receive an annual incentive bonus
beginning with the 1998 fiscal year in an amount to be determined by the Board
up to a specified percentage of the executive's base salary as follows: Mr.
Dawson, 100%; Mr. Kawasaki, 50%; and Mr. Drullinger, 50%. In addition, upon
execution of his agreement, Mr. Kawasaki received a bonus for services performed
in the 1997 fiscal year in the amount of $42,500. The Corporation also agreed to
grant nonqualified stock options to the executives as described in the New Plan
Benefits table under "4. Approval of Amendment to Stock Award Plan." The
agreements provide that the executives will be entitled to participate in all of
the Corporation's compensation plans covering key executive and managerial
employees, including, without limitation, medical, disability and life insurance
benefits and vacation pay, as well as reimbursement for the lease of an
automobile up to $12,000 per year for Mr. Dawson and $6,000 per year for each of
Messrs. Kawasaki and Drullinger. The Corporation will also provide Mr. Dawson
with an equity split-dollar life insurance policy with a face amount of
$2,000,000, provided that the premiums paid by the Corporation per year will not
exceed $20,000, to be recovered from the death benefits, surrender value or loan
proceeds payable on the policy.
The agreements with Messrs. Dawson, Kawasaki, and Drullinger include an
agreement on the part of each executive not to compete with the Corporation for
a period of three years after the executive's employment with the Corporation is
terminated. If the executive's employment is terminated by reason of death, the
Corporation will pay to the executive's personal representative his base salary
through the date of death. In the event of the executive's termination due to
disability, the executive will be entitled to receive his base salary reduced by
any benefits paid under the Corporation's group long-term disability insurance
plan for the remaining term of the agreement and the portion of his annual bonus
relating to the period before his disability. If the executive's employment is
terminated by the Corporation for cause or the executive terminates his
employment voluntarily without good reason, the Corporation will pay the
executive his base salary through the effective date of termination, together
with any accrued benefits to which the executive is entitled under the terms of
the Corporation's compensation plans. Cause includes a material act of fraud,
dishonesty or moral turpitude, gross negligence or intentional misconduct. Good
reason includes a material demotion in the executive's status or position, a
material change in his duties that is inconsistent with his position, a
reduction in his base salary, or a failure to continue his participation in the
Corporation's compensation plans on terms comparable to other key executives. If
the executive's employment is terminated by the Corporation without cause or by
the executive with good reason, the Corporation will pay the executive's base
salary through the termination date, plus an amount of severance pay equal to,
with respect to Messrs. Kawasaki and Drullinger, one times the executive's base
salary payable in 12 monthly installments and, with respect to Mr. Dawson, two
times the sum of his base salary and his average annual bonus for the prior two
fiscal years payable in 24 monthly installments. In addition, upon such
termination without cause or with good reason, the Corporation will afford
continued participation in the Corporation's compensation plans (or, if not
permitted under the general provisions of any such plan, will provide a
substantially equivalent benefit) for two additional years in the case of Mr.
Dawson and for one year in the case of Messrs. Kawasaki and Drullinger.
COMPENSATION OF DIRECTORS
The directors of the Corporation do not receive any fees for attending
Board meetings but are reimbursed for out-of-pocket and travel expenses incurred
in attending Board meetings. The Corporation has no other standard arrangement
pursuant to which directors are compensated by the Corporation for their
services in their capacity as directors. The Corporation may from time to time,
as it has in the past, grant stock options to
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directors in accordance with the policies of the ASE and the Alberta Securities
Commission and the securities laws and regulations of the jurisdictions where
the directors reside. Options granted during the 1997 fiscal year are included
in the table under "Option Grants" above.
INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS
On October 1, 1996, the Corporation acquired 11 hearing care clinics in
Southern California through the acquisition of all of the outstanding shares of
three corporations owned by Gregory J. Frazer, Ph.D., who was subsequently
appointed Vice President-Business Development and a director of the Corporation,
his wife, Carissa Bennett, and Jami Tanihana (the "HCA Shareholders"). The
consideration paid by the Corporation consisted of $314,724 in cash and
2,389,536 Common Shares of which Mr. Frazer and Ms. Bennett received a total of
1,470,359 shares. Mr. Frazer and Ms. Bennett also received a total of $196,294
in payment for covenants not to compete.
Twenty-five percent, or 597,384, of the Common Shares issued to the HCA
Shareholders are being held by the Corporation (the "Retained Shares"). One
Common Share will be issued to the HCA Shareholders on a pro rata basis from the
Retained Shares for each dollar by which net current assets (as defined in the
acquisition agreement) of the acquired corporations exceed certain target
amounts. To the extent that such net current assets do not exceed the target
amounts, the HCA Shareholders may elect to either pay the Corporation one dollar
or cancel one Retained Share for each dollar of shortfall. A Retained Share is
also required to be canceled or a dollar paid to the Corporation for each dollar
by which long-term liabilities of the acquired corporations exceed a specified
amount, or certain accounts receivable remain uncollected after specified time
periods.
The HCA Shareholders have the right, until September 30, 2001, to
require the Corporation to redeem an aggregate of 15,000 of their Common Shares
as of the last day of each calendar quarter at a price of $1.67 per share. The
redemption rights are noncumulative and expire if not exercised as of the end of
any calendar quarter as to such quarter. Pursuant to such redemption rights, the
Corporation has redeemed a total of 19,800 shares from Ms. Tanihana, 6,600
shares from Ms. Bennett and 1,800 shares from Mr. Frazer for consideration of
$33,066, $11,022, and $3,006, respectively.
During 1997, the Corporation has acquired six additional hearing
clinics in Southern California in which Mr. Frazer was part-owner. Of the
aggregate cash purchase price of $1,217,231 for the six clinics, Mr. Frazer and
Ms. Bennett received a total of $560,377. Mr. Frazer and Ms. Bennett also
received the sum of $147,654 in payment for covenants not to compete in
connection with the acquisitions.
On October 31, 1996, the Corporation acquired the Midwest Division of
Hearing Health Services, Inc. (the"Midwest Division"), in exchange for
convertible subordinated notes made payable to certain affiliates of Hearing
Health Services, Inc., in the aggregate amount of $2,600,000 convertible into
2,000,000 Common Shares and the assumption of a promissory note with a balance
of $360,000 payable to Kathy A. Foltner, Vice President-Operations of the
Corporation. The promissory note is payable in equal annual installments of
$120,000 beginning July 1, 1997, and bears interest at 6% per annum. The balance
of the promissory note at September 30, 1997, was $240,000. In addition to the
promissory note, the Corporation also agreed to assume an obligation of the
Midwest Division to pay Ms. Foltner $50,000 in each of 1997, 1998, and 1999, if
specified production goals are met. Ms. Foltner has met the specified production
goals for 1997. The Corporation has paid Ms. Foltner $37,500 for the period from
October 1, 1996 to July 31, 1997, and will pay her an additional $12,500 by
December 31, 1997.
Under the terms of an escrow agreement dated January 14, 1994, among
the Corporation, a trustee, and Michael G. Thomson, Craig R. Thomson, Murray
T.A. Campbell, Bruce A. Ramsay and William DeJong (the "Founding Shareholders"),
3,000,000 Common Shares were issued to the Founding Shareholders in
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exchange for an aggregate of $100,000 in cash and deposited in escrow with the
trustee. As of October 21, 1997, the final 1,000,000 Common Shares were subject
to release from escrow.
Douglas F. Good, Marilyn Marshall, and Trudy McCaffery (the "Fraserview
Shareholders"), the Corporation, and a trustee are parties to an escrow
agreement dated October 7, 1994 (the "Performance Escrow Agreement"), with
respect to 4,250,000 Common Shares (the "Performance Shares") that were issued
to the Fraserview Shareholders in connection with the Corporation's acquisition
of Fraserview Hearing & Speech Clinic Ltd. The terms of the Performance Escrow
Agreement specify that one Common Share is eligible for release from escrow,
upon application to the ASE, for each $0.08 of "cash flow" generated by the
Corporation. For purposes of the Performance Escrow Agreement, "cash flow" is
defined as the Corporation's net income as shown on the Corporation's audited
financial statements, plus depreciation, depletion, deferred taxes, and
amortization of goodwill and research and development costs. All of the
Performance Shares remain subject to the Performance Escrow Agreement.
Pursuant to a purchase and sale agreement (the "Share Purchase
Agreement") dated as of April 15, 1996, between the Fraserview Shareholders and
Brandon M. Dawson, Roger W. Larose, Randall E. Drullinger and Hugh T. Hornibrook
(the "Purchasers"), the Fraserview Shareholders sold all of the Performance
Shares to the Purchasers for an aggregate consideration of $601,637. Pursuant to
an assignment and novation agreement dated as of August 28, 1996, Roger W.
Larose agreed to assign all of his right, title and interest in the Share
Purchase Agreement to Brandon M. Dawson. In addition, pursuant to an assignment
and novation agreement dated as of February 27, 1997, Mr. Hornibrook agreed to
assign all of his right, title, and interest in the Share Purchase Agreement to
Edwin J. Kawasaki. The assignments are subject to the approval of the ASE. As a
result of the Share Purchase Agreement and assignments, Messrs. Dawson,
Drullinger and Kawasaki hold 3,900,000, 250,000 and 100,000 Performance Shares,
respectively.
From 1994 through July 31, 1996, Douglas F. Good, a shareholder and
director of the Corporation and its former chief executive officer, advanced
funds to the Corporation for short-term working capital and acquisitions.
Interest on the advances accrued at 9% per annum. The Corporation paid Mr. Good
aggregate interest of $43,001 for the three-year period ended July 31, 1996 and
the highest outstanding balance during such period was $240,167 during January
1995. As of July 31, 1996, the total of the advances and all accrued interest
had been repaid.
William DeJong is a partner in the Calgary, Alberta law firm of Ballem
MacInnes and a director and a Founding Shareholder of the Corporation. During
the period from August 1, 1995, to July 31, 1997, total fees, disbursements and
government sales tax paid to Ballem MacInnes by the Corporation for legal
services were approximately $204,500. Mr. DeJong was granted options to purchase
50,000 shares at $0.07 per share in November 1993, which he exercised on
February 22, 1996.
On January 11, 1996, Michael G. Thomson, a former officer and director
and a Founding Shareholder, exercised options granted in November 1993 for
200,000 Common Shares at $0.07 per share.
Under a settlement agreement between the Corporation and Roger W.
Larose, formerly the Corporation's chief operating officer, the Corporation
agreed to pay the exercise price of 200,000 options to purchase Common Shares
held by Mr. Larose. On April 1, 1996, Mr. Larose exercised options for 100,000
Common Shares at $0.28 per share and Douglas F. Good, as an advance to and on
behalf of the Corporation, paid the exercise price of $28,048 to the
Corporation. On September 30, 1996, Mr. Larose exercised options for an
additional 100,000 Common Shares at $0.28 per share and Mr. Good, as an advance
to and on behalf of the Corporation, paid the exercise price of $27,900 to the
Corporation.
Brandon M. Dawson subsequently executed promissory notes in favor of
Mr. Good equal to the amounts advanced by Mr. Good in connection with the
options exercised by Mr. Larose, and Mr. Dawson was substituted for Mr. Good as
the obligee with respect to such advances. Interest on the advances made by
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<PAGE>
Mr. Dawson accrues at the rate of 9% per annum. At September 30, 1997, the
outstanding balance of the advances made by Mr. Dawson, with accrued interest,
was $61,165.
On April 1, 1996, Brandon M. Dawson exercised options for 100,000
Common Shares at $0.28 per share. In connection with such exercise, Mr. Dawson
paid the Corporation $28,048. On May 8, 1997, Mr. Dawson exercised options for
250,000 Common Shares at $0.27 per share. In connection with such exercise, the
Corporation loaned Mr. Dawson $67,500 to pay the aggregate exercise price of the
options. The loan, which accrues interest at 10% per annum, is due on May 8,
1998.
PARTICULARS OF MATTERS TO BE ACTED UPON
To the knowledge of the Board, the only matters to be acted upon at the
Meeting are those set forth in the accompanying Notice of Meeting relating to
changing the Corporation's name to Sonus Corp., approving a reverse stock split
(consolidation) of the Common Shares, authorizing the issuance of additional
Common Shares, and approval of an amendment to the Corporation's Second Amended
and Restated Stock Award Plan.
1. APPROVAL OF PROPOSED CHANGE OF CORPORATE NAME
Management of the Corporation believes that its present corporate name
does not accurately reflect the nature of its business and services.
Accordingly, the Board has unanimously approved a change in the Corporation's
name to Sonus Corp. and has directed that the change, which requires amendment
of the Corporation's Articles, be submitted to the shareholders for approval.
The name change is subject to the final approval of the ASE.
Management believes that the proposed name change will enhance the
Corporation's marketing efforts and increase public awareness of its identity
and services. The Corporation's clinics in Illinois and Michigan already operate
under the assumed business name of Sonus. In addition, the names of the
Corporation's Canadian and U.S. subsidiaries have already been changed to
Sonus-Canada Ltd. and Sonus-USA, Inc., respectively.
At the Meeting, the shareholders will be asked to consider and, if
thought fit, to approve the following special resolution:
"RESOLVED AS A SPECIAL RESOLUTION OF THE CORPORATION THAT,
upon receipt of final approval from The Alberta Stock Exchange and
subject to the authority of the Board of Directors in its sole
discretion to elect not to pursue such action, Item No. 1 of the
Articles be amended to change the name of the Corporation to Sonus
Corp. and that any one director or officer of the Corporation be
authorized to sign the articles of amendment and to sign any other
documents and take any other actions deemed necessary or proper to give
effect to this resolution."
THIS SPECIAL RESOLUTION WILL NOT TAKE EFFECT UNLESS IT IS APPROVED BY
AT LEAST TWO-THIRDS OF THE VOTES CAST BY THE SHAREHOLDERS ON THE MOTION AT THE
MEETING, APPROVED BY THE ASE, AND CONFIRMED BY THE ENDORSEMENT BY THE REGISTRAR
OF CORPORATIONS (THE "REGISTRAR") UNDER THE BUSINESS CORPORATIONS ACT (ALBERTA)
OF A CERTIFICATE OF AMENDMENT OF THE ARTICLES OF THE CORPORATION. THE PERSONS
DESIGNATED IN THE ENCLOSED FORM OF PROXY, UNLESS OTHERWISE INSTRUCTED, INTEND TO
VOTE FOR THIS SPECIAL RESOLUTION APPROVING THE AMENDMENT OF THE ARTICLES.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED AMENDMENT
TO THE CORPORATION'S ARTICLES TO CHANGE ITS NAME TO SONUS CORP.
2. APPROVAL OF REVERSE STOCK SPLIT (CONSOLIDATION)
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<PAGE>
GENERAL
For the reasons discussed below, the management of the Corporation
believes it to be in the best interests of the Corporation to effect a
one-for-five reverse stock split (consolidation) of the presently issued and
outstanding Common Shares (the "Reverse Split"). The Reverse Split is subject to
the final approval of the ASE. If the Reverse Split is approved by the
shareholders at the Meeting and by the ASE, pursuant to the terms of the Reverse
Split, each holder of record of Common Shares on the effective date of the
Reverse Split will thereafter be deemed to hold one Common Share for every five
presently issued and outstanding Common Shares held of record on that date.
The principal effect of the Reverse Split is to decrease the number of
Common Shares outstanding from 27,284,517 to approximately 5,456,000. The Common
Shares outstanding immediately after the Reverse Split will be fully paid and
nonassessable. The voting rights and other rights that accompany the Common
Shares will not be affected by the Reverse Split.
All outstanding stock options, share purchase warrants, and convertible
securities exercisable for or convertible into Common Shares will be adjusted to
reduce the number of shares subject thereto by a factor of five and to increase
the exercise or conversion price by a factor of five. Thus, following the
Reverse Split, each outstanding Preferred Share will be convertible into
one-fifth of a Common Share, or a total of 2,666,666 Common Shares, and will be
entitled to one-fifth of a vote on all matters submitted for action by the
Corporation's shareholders. The Preferred Shares will continue to represent
approximately one-third of the total voting power of the Shares until additional
Common Shares are issued and outstanding. Also, under the terms of the
Corporation's Second Amended and Restated Stock Award Plan, the Reverse Split
will reduce the number of Common Shares reserved for issuance under such plan by
a factor of five. See "4. Approval of Amendment to Stock Award Plan" below.
PURPOSE OF THE PROPOSED REVERSE SPLIT
Management has proposed the Reverse Split in an effort to enhance the
attractiveness of the Common Shares to the financial community and investing
public. The decrease in the number of Common Shares outstanding, in the absence
of any material change in the financial condition of the Corporation, is
expected to lead to an increase in the market price of the Common Shares,
although such increase may not be proportionate to the reduction in the number
of outstanding Common Shares resulting from the Reverse Split.
On December 24, 1997, the Corporation received conditional approval
from the American Stock Exchange (the "AMEX") for listing of the Common Shares
on the AMEX. The Corporation's listing application is conditional upon approval
and implementation of the Reverse Split and compliance with the AMEX's listing
requirement of a per share trading price of at least $3.00. On December 31,
1997, the reported closing sale price of the Common Shares on the ASE was U.S.
$____ per share. The Board believes that listing on the AMEX will enhance the
visibility, liquidity, and trading market for the Common Shares.
Among other factors considered by the Board in reaching its decision to
recommend the Reverse Split for approval is that many brokerage house policies
and practices tend to discourage individual brokers within those firms from
dealing with lower priced stocks. Also, brokerage commissions typically
represent a higher percentage of the sales price of a lower priced stock than
does the commission on a relatively higher priced issue. Additionally, some
investors view low-priced stock as unattractive or will not invest in such stock
as a matter of policy. On the other hand, some types of investors may be
attracted to low-priced stock due to the greater price volatility sometimes
associated with such securities. Also, for some shareholders, the Reverse Split
may result in their holding fewer than 100 Common Shares. Trading in such "odd
lots" typically entails higher brokerage commissions than do "round lots" of 100
shares.
Management believes that a higher trading price, as well as listing on
the AMEX, will have an overall positive effect on the trading market for the
Common Shares. There can be no assurance, however, that the
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Reverse Split will have a positive impact on the market price of the Common
Shares or that any such increase in market price can be sustained, or that the
marketability of the Common Shares will improve as a result of the Reverse
Split.
IMPLEMENTATION OF REVERSE SPLIT
If the Reverse Split is approved by the shareholders at the Meeting and
final approval by the ASE is received, the Reverse Split will be effected by
means of the filing of Articles of Amendment with the Registrar under the
Business Corporations Act (Alberta). The proposed form of Articles of Amendment
to effect the Reverse Split is attached as Schedule A to this Circular. When the
Articles of Amendment become effective, without any further action on the part
of the Corporation or the shareholders, the certificates representing Common
Shares outstanding immediately prior thereto (the "Old Shares") will be deemed
automatically to represent one-fifth the number of Common Shares shown on such
certificates (the "New Shares"), provided that no fractional New Shares will be
issued as a result of the Reverse Split. See "Certificates and Fractional
Shares" below.
In its discretion, the Board may elect to abandon the Reverse Split and
not take the steps necessary to effect its implementation. The decision of the
Board on when and whether to implement the Reverse Split will be based upon
prevailing market conditions, the likely effect on the market price of and
liquidity of the Common Shares, and other relevant factors.
CERTIFICATES AND FRACTIONAL SHARES
As soon as practicable after the effective date of the Reverse Split,
the Company will send a letter of transmittal to each holder of record of Old
Shares outstanding on the effective date. The letter of transmittal will contain
instructions for the surrender of certificate(s) representing such Old Shares to
the Company's exchange agent. Upon proper completion and execution of the letter
of transmittal and return thereof to the exchange agent, together with the
certificate(s) representing Old Shares, a shareholder will be entitled to
receive a certificate representing the number of New Shares into which his Old
Shares have been reclassified and changed as a result of the Reverse Split.
Shareholders should not submit any certificates until requested to do
so. No new certificate will be issued to a shareholder until he has surrendered
his outstanding certificate(s) together with the properly completed and executed
letter of transmittal to the exchange agent.
No fractional New Shares will be issued and no such fractional share
interest will entitle the holder thereof to any rights as a shareholder of the
Corporation. In lieu of any fractional share interest, shareholders holding a
number of Old Shares on the effective date of the Reverse Split which is not
evenly divisible by five and shareholders holding fewer than five Old Shares
will, upon surrender of their certificates for Old Shares, receive cash in lieu
of fractional shares. The price payable by the Corporation will be determined by
multiplying the fraction of a New Share by the closing sale price of the Common
Shares on the ASE on the effective date of the Reverse Split (or, in the event
that the Common Shares are not traded on such date, such closing sale price on
the next preceding day on which the Common Shares were traded on the ASE).
The funds required to purchase fractional shares resulting from the
Reverse Split will be paid from the Corporation's current cash reserves.
Approximately 51% of the Common Shares outstanding are registered in the names
of clearing depositaries. It is therefore not possible to predict with certainty
the number of fractional shares and the total dollar amount that the Corporation
will be required to pay to redeem such fractional share interests. However, it
is not anticipated that the funds necessary to effect the cancellation of
fractional shares will be material.
CANADIAN AND U.S. FEDERAL INCOME TAX CONSEQUENCES
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The following is only a brief summary of the principal Canadian and
U.S. federal income tax consequences to shareholders of the Reverse Split.
Shareholders are advised to consult with their own tax advisers in light of
their own particular circumstances as to the tax consequences to them of the
Reverse Split, including the effect of any state, provincial, local or foreign
tax laws.
Any Canadian or U.S. federal tax liability to shareholders resulting
from the Reverse Split is expected to be minimal. The receipt of New Shares in
the Reverse Split should not result in any taxable gain or loss to shareholders
for Canadian or U.S. federal income tax purposes. The tax basis of New Shares
received as a result of the Reverse Split (including any fractional share
interests to which a shareholder is entitled) will be equal, in the aggregate,
to the basis of the shareholder's Old Shares as of the effective date of the
Reverse Split. For Canadian or U.S. federal income tax purposes, the holding
period of such Old Shares will be included in the holding period of the New
Shares received as a result of the Reverse Split. Shareholders who receive cash
in lieu of fractional shares will recognize capital gain or loss in an amount
equal to the difference between the amount of cash received and the adjusted
basis of the fractional shares surrendered.
RECOMMENDATION AND VOTE
At the Meeting, the shareholders will be asked to consider and, if
thought fit, to approve the following special resolution:
"RESOLVED AS A SPECIAL RESOLUTION OF THE CORPORATION THAT,
upon receipt of final approval from The Alberta Stock Exchange and
subject to the authority of the Board of Directors in its sole
discretion to elect not to pursue such action, Item No. 2 of the
Articles of the Corporation be amended to effect a reverse stock split
of the Common Shares at the rate of one Common Share for every five
Common Shares presently issued and outstanding in substantially such
fashion as set forth in Schedule A to the Corporation's Management
Information Circular and Proxy Statement for the Meeting, and that any
one director or officer of the Corporation be authorized to sign the
articles of amendment and to sign any other documents and take any
other actions deemed necessary or proper to give effect to this
resolution."
THIS SPECIAL RESOLUTION WILL NOT TAKE EFFECT UNLESS IT IS APPROVED BY
AT LEAST TWO-THIRDS OF THE VOTES CAST BY THE SHAREHOLDERS ON THE MOTION AT THE
MEETING, APPROVED BY THE ASE, AND CONFIRMED BY THE ENDORSEMENT BY THE REGISTRAR
UNDER THE BUSINESS CORPORATIONS ACT (ALBERTA) OF A CERTIFICATE OF AMENDMENT OF
THE ARTICLES OF THE CORPORATION. THE PERSONS DESIGNATED IN THE ENCLOSED FORM OF
PROXY, UNLESS OTHERWISE INSTRUCTED, INTEND TO VOTE FOR THIS SPECIAL RESOLUTION
APPROVING THE AMENDMENT OF THE ARTICLES.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED AMENDMENT
TO THE CORPORATION'S ARTICLES TO EFFECT THE ONE-FOR-FIVE REVERSE SPLIT OF THE
COMMON SHARES.
3. APPROVAL OF ADDITIONAL EQUITY ISSUANCES
During 1997, the Corporation completed the sale of 13,333,333 Preferred
Shares, convertible into an equal number of Common Shares, together with
warrants to purchase an additional 10,000,000 Common Shares, to Warburg. Also
during 1997, 141,844 Common Shares were issued in partial payment of the
acquisition price of two hearing care clinics. Management of the Corporation
believes that, in light of current market conditions and the Corporation's plans
for future acquisitions of additional hearing care clinics and related
businesses, further issuances of substantial amounts of Common Shares may
continue to be in the best interests of the Corporation. The net proceeds of any
such equity issuances would be used to finance the consummation of business
opportunities in the hearing health industry pursued by the Corporation and for
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general working capital. There are at present no firm arrangements or
understandings relating to the issuance of any additional Common Shares other
than the 23,333,333 Common Shares issuable to Warburg and 12,510,308 Common
Shares reserved for issuance pursuant to other outstanding share purchase
warrants, convertible notes, and stock options held by employees, directors and
officers of, and consultants to, the Corporation.
Although the issuance of additional equity is generally within the
discretion of the Board, authorization for the issuance of an additional
15,000,000 Common Shares by the shareholders of the Corporation is being sought
in accordance with the policies of the ASE. Such equity issuances may be in the
form of Common Shares, share purchase warrants or other convertible securities
of the Corporation. The method, structure, timing and pricing of such equity
issuances will be determined by the Board in its sole discretion and without any
additional shareholder approval, subject to compliance with the requirements of
applicable law, regulatory agencies, and any exchange or other facilities on
which the Common Shares may be traded.
The Common Shares do not have preemptive rights. The issuance of
additional Common Shares may, among other things, have a dilutive effect on
earnings per share and on the equity and voting power of current shareholders.
The issuance of additional Common Shares may also potentially have an
anti-takeover effect by making it more difficult to obtain shareholder approval
of actions such as certain business combinations, removal of management, or
amendment of the Corporation's Articles or By-Laws. As discussed above under
"Share Ownership by Principal Shareholders and Management--Acquisition of
Securities by Warburg, Pincus Ventures, L.P.," Warburg, Pincus & Co. currently
controls one-third of the voting power of the Shares and has veto power over
significant corporate actions, including business combinations and the payment
of cash dividends on the Common Shares. The Board and management have no
knowledge of any current efforts by any third party to obtain control of the
Corporation or to effect large accumulations of its Common Shares and are not
submitting this proposal to the shareholders for an anti-takeover related
purpose.
At the Meeting, the shareholders will be asked to consider and, if
thought fit, to approve the following resolution:
"BE IT RESOLVED THAT the Corporation be authorized to
undertake further equity issuances of up to 15,000,000 Common Shares
(3,000,000 Common Shares following the implementation, if any, of a
one-for-five reverse stock split of the Common Shares), the method,
structure, timing, and pricing of which will be in the sole discretion
of the Board of Directors, provided that any such issuances of Common
Shares shall be conducted in full compliance with the requirements of
applicable law, regulatory agencies, and any exchange or other
facilities on which the Common Shares may be traded."
THIS RESOLUTION WILL NOT TAKE EFFECT UNLESS IT IS APPROVED BY AT LEAST
A MAJORITY OF THE VOTES CAST BY THE SHAREHOLDERS ON THE MOTION AT THE MEETING.
THE PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY, UNLESS OTHERWISE
INSTRUCTED, INTEND TO VOTE FOR THIS RESOLUTION AUTHORIZING ADDITIONAL EQUITY
ISSUANCES.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
ISSUANCE OF UP TO 15,000,000 ADDITIONAL COMMON SHARES.
4. APPROVAL OF AMENDMENT TO STOCK AWARD PLAN
GENERAL
Effective December 10, 1996, the Board of Directors adopted a Stock
Award Plan providing for the grant of options to employees of the Corporation.
The Board subsequently amended and restated the Stock Award Plan effective
February 5, 1997, and adopted a second amendment and restatement effective
October 15, 1997, which was approved by the shareholders of the Corporation on
December 5, 1997. The Second Amended and Restated Stock Award Plan is
hereinafter referred to as the "Award Plan."
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The purpose of the Award Plan is to promote and advance the interests
of the Corporation and its shareholders by assisting the Corporation in
attracting, retaining and rewarding key employees, directors and outside
advisers and linking their interests with those of the Corporation's
shareholders.
The Corporation also has in effect a Stock Option Plan adopted in
November 1993, pursuant to which options to purchase 1,600,000 Common Shares
were outstanding at December 31, 1997. No additional stock options will be
granted under the Stock Option Plan.
The Award Plan provides for the grant of stock options and other
stock-based awards to the Corporation's officers and employees, non-employee
directors, and outside consultants or advisers. Common Shares subject to awards
granted under the Award Plan which expire or are otherwise canceled or
terminated or are settled in cash in lieu of Common Shares will again become
available for grants of new awards.
At December 31, 1997, 13 officers and employees held awards under the
Award Plan and represented the pool of persons considered eligible to
participate in the Award Plan at that date. The closing sale price for the
Common Shares on the ASE on December 31, 1997, was U.S. $____.
PROPOSED AMENDMENT TO THE AWARD PLAN
On December 18, 1997, the Board adopted, subject to shareholder
approval, an amendment to the Award Plan to increase the number of Common Shares
which may be made the subject of awards under the Award Plan from 3,000,000 to
9,000,000 Common Shares. In the event the Reverse Split described above is
implemented, the increase in the number of Common Shares issuable under the
Award Plan would be adjusted from 6,000,000 to 1,200,000 Common Shares and the
total number issuable would be adjusted from 9,000,000 to 1,800,000 Common
Shares. At December 31, 1997, no options granted under the Award Plan had been
exercised, options to purchase a total of 977,000 Common Shares were
outstanding, and 2,023,000 Common Shares were available for future grants of
awards under the Award Plan. The Corporation is presently unable to grant
additional options under the Award Plan due to numeric limitations imposed by
the ASE.
The following table presents information with respect to stock options
granted or proposed to be granted under the Award Plan. The type, number, and
value of other Awards that may be granted in the future under the Award Plan is
not known.
NEW PLAN BENEFITS-STOCK AWARD PLAN
<TABLE>
Name and Position Number of Options
<S> <C>
Brandon M. Dawson 2,700,000(1)(5)
President and Chief Executive Officer
Edwin J. Kawasaki 1,200,000(2)(5)
Vice President-Finance and Chief Financial Officer
Randall E. Drullinger 400,000(3)(5)
Vice President-Marketing
Kathy A. Foltner 125,000(4)
Vice President-Operations
Gregory J. Frazer, Ph.D. 0
Vice President-Business Development
All current executive officers as a group 4,425,000
Non-employee directors as a group 0
Non-executive employees as a group 652,000
- --------------
</TABLE>
- 16 -
<PAGE>
(1) The Corporation has agreed to grant Mr. Dawson nonqualified stock options to
purchase a total of 2,700,000 Common Shares as soon as it is permitted to do so,
which would occur in the event the Common Shares are listed on the AMEX. The
exercise price of the options would be the greater of the fair market value of a
Common Share on the date of grant and (i) $1.35 as to 1,800,000 Common Shares,
(ii) $2.00 as to 400,000 Common Shares, and (iii) $2.40 as to 500,000 Common
Shares.
(2) The Corporation has agreed to grant to Mr. Kawasaki nonqualified stock
options to purchase a total of 1,000,000 Common Shares as soon as it is
permitted to do so, which would occur in the event the Common Shares are listed
on the AMEX. The exercise price of the options would be the greater of the fair
market value of a Common Share on the date of grant and (i) $1.35 as to 640,000
Common Shares, (ii) $2.00 as to 160,000 Common Shares, and (iii) $2.40 as to
200,000 Common Shares. Mr. Kawasaki also holds an incentive stock option to
purchase 170,000 Common Shares at an exercise price of $1.12 per Common Share
and a second incentive stock option to purchase 30,000 Common Shares at an
exercise price of $1.41 per Common Share.
(3) The Corporation has agreed to grant to Mr. Drullinger nonqualified stock
options to purchase a total of 400,000 Common Shares as soon as it is permitted
to do so, which would occur in the event the Common Shares are listed on the
AMEX. The exercise price of the options would be the greater of the fair market
value of a Common Share on the date of grant and (i) $1.35 as to 220,000 Common
Shares, (ii) $2.00 as to 80,000 Common Shares, and (iii) $2.40 as to 100,000
Common Shares.
(4) Exercisable at a price of $1.45 per Common Share.
(5) Each of the options will vest in four equal annual installments beginning
one year following the date of grant and will expire 10 years after the date of
grant or such shorter period as is the maximum term allowable under the rules of
the principal stock exchange on which the Common Shares are traded on the date
of grant. The options, other than Mr. Kawasaki's existing options, will become
exercisable in full immediately upon a change in control of the Corporation,
which will be deemed to occur if (i) a person acquires beneficial ownership of
50% or more of the combined voting power of the Corporation, with certain
exceptions, (ii) a majority of the incumbent directors (or nominees approved by
a majority of the incumbent directors, including subsequently approved
directors) cease to be directors of the Corporation, (iii) a reorganization,
amalgamation or sale of substantially all the assets of the Corporation, with
certain exceptions, is consummated, or (iv) the shareholders of the Corporation
approve a complete liquidation or dissolution of the Corporation.
DESCRIPTION OF AWARDS UNDER THE AWARD PLAN
The types of awards (collectively referred to as "Awards") that may be
granted by the Board under the Award Plan include:
Options. Options to purchase Common Shares may be incentive stock
options meeting the requirements of Section 422 of the U.S. Internal Revenue
Code of 1986, as amended (the "Code"), or nonqualified options which are not
eligible for such tax-favored treatment. Options may expire not more than five
years from the date of grant. The exercise price per share must be equal to or
greater than 100% of the fair market value of a Common Share on the date the
option is granted for incentive stock options and at a discount of not more than
25% from such fair market value for nonqualified options (or such lesser
discount as may be permitted by the policies of the ASE, if applicable).
Stock Appreciation Rights. A recipient of stock appreciation rights
will receive upon exercise an amount equal to the excess (or specified portion
thereof) of the fair market value of a Common Share on the date of exercise over
the base price, multiplied by the number of shares as to which the rights are
exercised. The base price will be designated by the Board in the award agreement
and may be equal to, higher or lower than the fair market value of the Common
Shares on the date of grant. Payment may be in cash, in Common Shares or in any
other form or combination of methods approved by the Board.
- 17 -
<PAGE>
Restricted Units. Restricted units are awards of units equivalent in
value to a Common Share, which may be subject to forfeiture if the recipient
terminates employment or service as a director or consultant during a specified
period. At the expiration of such period, the restricted units vest and payment
is made in an amount equal to the value of the number of shares covered by the
restricted units. Payment may be in cash or Common Shares or in any other form
or combination of methods approved by the Board.
Performance Awards. Performance Awards are granted in units equivalent
in value to a Common Share. A performance Award is subject to forfeiture if or
to the extent the recipient fails to meet certain performance goals during a
designated performance cycle. Performance Awards earned by attaining performance
goals are paid at the end of a performance cycle in cash or Common Shares or in
any other form or combination of methods approved by the Board.
Other Stock-Based Awards. The Board may grant other Awards that involve
payments or grants of Common Shares or are measured by or in relation to Common
Shares. The Award Plan provides flexibility to design new types of stock-based
or stock-related Awards to attract and retain employees, officers, directors,
and outside advisers in a competitive environment.
Nontransferability. Awards are not transferable or assignable except by
will or the laws of descent and distribution.
ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a change in capitalization, the Board will make such
proportionate adjustments in the aggregate number of shares for which Awards may
be granted under the Award Plan, the maximum number of shares which may be
awarded to any participant, and the number of shares covered by, and the
exercise or base price of, any outstanding Awards, as the Board in its sole
discretion deems appropriate. As noted above, the numbers of Common Shares
issuable under the Award Plan and subject to outstanding options will be
adjusted upon implementation of the Reverse Split.
DURATION, TERMINATION AND AMENDMENT OF THE AWARD PLAN
The Award Plan will remain in effect until Awards have been granted
covering all available Common Shares under the Award Plan or the Award Plan is
otherwise terminated by the Board. The Board may terminate the Award Plan at any
time, but any such termination will not affect any outstanding Awards. The Board
may also amend the Award Plan from time to time, subject to approval, to the
extent required, by any regulatory authority having jurisdiction over the Award
Plan, but may not, without shareholder approval, materially increase the
aggregate number of Common Shares that may be issued under the Award Plan other
than in connection with adjustments for a change in capitalization.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
The following discussion summarizes the principal anticipated U.S.
federal income tax consequences of grants of Awards under the Award Plan to
participants and to the Corporation. All recipients of Awards under the Award
Plan to date are U.S. residents.
TAX CONSEQUENCES TO PARTICIPANTS
Incentive Stock Options. Incentive stock options under the Award Plan
are intended to meet the requirements of Section 422 of the Code. A participant
does not realize taxable income upon the grant of an incentive stock option or
upon the issuance of shares when the option is exercised. The amount realized on
the sale or taxable exchange of such shares in excess of the exercise price will
be considered a mid-term or long-term capital gain, as applicable, and any loss
will be a long-term capital loss, except that if such disposition
- 18 -
<PAGE>
occurs within one year after exercise of the option or two years after grant of
the option, the participant will recognize compensation taxable at ordinary
income tax rates measured by the amount by which the lesser of (i) the fair
market value on the date of exercise or (ii) the amount realized on the sale of
the shares, exceeds the exercise price. For purposes of determining alternative
minimum taxable income, an incentive stock option is treated as a nonqualified
option.
Nonqualified Options. No taxable income is recognized upon the grant of
a nonqualified option. In connection with the exercise of a nonqualified option,
a participant will generally realize ordinary income measured by the difference
between the exercise price and the fair market value of the shares acquired on
the date of exercise. The participant's cost basis in the acquired shares is the
fair market value of the shares on the exercise date. Any gain upon sale of the
shares is capital gain.
Stock Appreciation Rights. The grant of a stock appreciation right to a
participant will not cause the recognition of income by the participant. Upon
exercise of a stock appreciation right, the participant will recognize ordinary
income equal to the amount of cash payable to the participant plus the fair
market value of any Common Shares or other property delivered to the
participant.
Restricted Units and Performance Awards. Generally, a participant will
not recognize any income upon issuance of an Award of restricted units or
performance units that is subject to forfeiture during a restriction period or
performance cycle. Generally, a participant will recognize compensation income
upon the vesting of restricted units or performance units in an amount equal to
the amount of cash payable to the participant plus the fair market value of
Common Shares or other property delivered to the participant.
TAX CONSEQUENCES TO THE CORPORATION
To the extent participants qualify for capital gains treatment with
respect to the sale of shares acquired pursuant to exercise of an incentive
stock option, the Corporation will not be entitled to any tax deduction in
connection with incentive stock options. In all other cases, the Corporation
will be entitled to receive a U.S. federal income tax deduction at the same time
and in the same amount as the amount which is taxable to participants as
ordinary income with respect to Awards.
RECOMMENDATION AND VOTE
At the Meeting, the shareholders will be asked to consider and, if
thought fit, to approve the following resolution:
"BE IT RESOLVED THAT the amendment of the Second Amended and
Restated Stock Award Plan of the Corporation to increase the number of
Common Shares issuable thereunder from 3,000,000 to 9,000,000 Common
Shares is hereby approved."
THIS RESOLUTION WILL NOT TAKE EFFECT UNLESS IT IS APPROVED BY THE
AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF THE SHARES PRESENT, IN
PERSON OR BY PROXY, AND ENTITLED TO VOTE ON THE PROPOSAL AT THE MEETING. THE
PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY, UNLESS INSTRUCTED OTHERWISE,
INTEND TO VOTE FOR THIS RESOLUTION APPROVING AMENDMENT OF THE AWARD PLAN.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF APPROVAL OF AN
AMENDMENT TO THE AWARD PLAN TO INCREASE THE NUMBER OF COMMON SHARES ISSUABLE
THEREUNDER TO 9,000,000 COMMON SHARES.
- 19 -
<PAGE>
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals submitted for inclusion in the 1998 proxy
materials and consideration at the 1998 annual general meeting of shareholders
must be received by the Corporation by July 1, 1998. Any such proposal should
comply with the SEC's rules governing shareholder proposals submitted for
inclusion in proxy materials.
The contents and the sending of this Circular have been approved by the
Board.
Portland, Oregon BY ORDER OF THE BOARD OF DIRECTORS
January 7, 1998
Brian S. Thompson
Secretary
- 20 -
<PAGE>
SCHEDULE A
ITEM NO. 2 OF THE ARTICLES OF THE ABOVE-NAMED CORPORATION IS
AMENDED IN ACCORDANCE WITH SECTION 167(1)(a) OF THE BUSINESS
CORPORATIONS ACT OF ALBERTA BY THE ADDITION OF THE FOLLOWING
PROVISION:
Simultaneously with the effective date of this amendment (the "Effective Date"),
each of the Corporation's Common Shares, without nominal or par value, issued
and outstanding immediately prior to the Effective Date (the "Old Common
Shares") shall automatically and without any action on the part of the holder
thereof be reclassified as and changed into one-fifth (1/5) of a Common Share,
without nominal or par value (the "New Common Shares"), subject to the treatment
of fractional share interests as described below. Each holder of a certificate
or certificates which immediately prior to the Effective Date represented
outstanding Old Common Shares (the "Old Certificates," whether one or more)
shall be entitled to receive upon surrender of such Old Certificates to the
Corporation's Transfer Agent for cancellation, a certificate or certificates
(the "New Certificates," whether one or more) representing the number of whole
New Common Shares into which and for which the Old Common Shares formerly
represented by such Old Certificates so surrendered, are reclassified under the
terms hereof. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates (and, where applicable,
cash in lieu of fractional shares, as provided below) pursuant to the provisions
hereof. No certificates or scrip representing fractional share interests in New
Common Shares will be issued, and no such fractional share interest will entitle
the holder thereof to vote, or to any rights of a shareholder of the
Corporation. A holder of Old Certificates shall receive, in lieu of any fraction
of a New Common Share to which the holder would otherwise be entitled, a cash
payment therefor on the basis of the closing price of the Old Common Shares on
The Alberta Stock Exchange on the Effective Date (or in the event the Common
Shares are not so traded on the Effective Date, such closing price on the next
preceding day on which such shares were traded on The Alberta Stock Exchange).
If more than one Old Certificate shall be surrendered at one time for the
account of the same shareholder, the number of whole New Common Shares for which
New Certificates shall be issued shall be computed on the basis of the aggregate
number of Old Common Shares represented by the Old Certificates so surrendered.
In the event that the Corporation's Transfer Agent determines that a holder of
Old Certificates has not tendered all his certificates for exchange, the
Transfer Agent shall carry forward any fractional share until all certificates
of that holder have been presented for exchange such that payment for fractional
shares to any one person shall not exceed the value of four Old Common Shares.
If any New Certificate is to be issued in a name other than that in which the
Old Certificates surrendered for exchange are issued, the Old Certificates so
surrendered shall be properly endorsed and otherwise in proper form for
transfer, and the person or persons requesting such exchange shall affix any
requisite stock transfer tax stamps to the Old Certificates surrendered, or
provide funds for their purchase, or establish to the satisfaction of the
Corporation's Transfer Agent that such taxes are not payable. From and after the
Effective Date the amount of capital represented by the New Common Shares into
which and for which the Old Common Shares are reclassified under the terms
hereof shall be the same as the amount of capital represented by the Old Common
Shares so reclassified, until thereafter reduced or increased in accordance with
applicable law.
<PAGE>
HEALTHCARE CAPITAL CORP.
--------------
PROXY
--------------
FOR USE AT THE SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 9, 1998
The undersigned shareholder of HEALTHCARE CAPITAL CORP. (the
"Corporation") hereby appoints Douglas F. Good, Chairman of the Board of the
Corporation, or failing him, Brandon M. Dawson, President and a director of the
Corporation, or failing him, Gregory J. Frazer, a director of the Corporation,
or instead of any of the foregoing, ------------------------- as proxy for the
undersigned to attend and act for and on behalf of the undersigned at the
Special General Meeting of the Shareholders of the Corporation (the "Meeting")
to be held on the 9th day of February, 1998, and at any adjournment or
adjournments thereof, to the same extent and with the same power as if the
undersigned were personally present at the said meeting or such adjournment or
adjournments thereof and, without limiting the generality of the power hereby
conferred, the designee named above is specifically directed to vote (or
withhold or abstain from voting) the Common Shares and Preferred Shares of the
Corporation registered in the name of the undersigned as indicated below.
1. RESOLUTION APPROVING A CHANGE IN THE CORPORATION'S NAME TO SONUS CORP.
FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ]
2. RESOLUTION APPROVING A ONE-FOR-FIVE REVERSE SPLIT OF THE COMMON SHARES.
FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ]
3. RESOLUTION AUTHORIZING THE ISSUANCE OF UP TO 15,000,000 COMMON SHARES
(3,000,000 Common Shares if a one-for-five reverse stock split is
implemented).
FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ]
4. RESOLUTION APPROVING AMENDMENT TO SECOND AMENDED AND RESTATED STOCK
AWARD PLAN.
FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ]
5. To vote at the discretion of the proxy designee on any amendments or
variations to the foregoing and on any other matters (other than
matters which are to come before the Meeting and which are the subject
of another proxy executed by the undersigned) which may properly come
before the Meeting or any adjournment or adjournments thereof.
(PLEASE SIGN AND DATE ON REVERSE)
- 1 -
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE CORPORATION AT THE
DIRECTION OF THE BOARD OF DIRECTORS. SHAREHOLDERS HAVE THE RIGHT TO APPOINT A
PERSON TO ATTEND AND ACT ON THEIR BEHALF AT THE MEETING OTHER THAN ONE OF THE
PERSONS LISTED ABOVE AND MAY EXERCISE SUCH RIGHT BY INSERTING THE NAME OF SUCH
PERSON (WHO NEED NOT BE A SHAREHOLDER) IN THE BLANK SPACE PROVIDED ABOVE FOR
THAT PURPOSE. THE UNDERSIGNED REVOKES ANY INSTRUMENT OF PROXY PREVIOUSLY GIVEN
FOR THE PURPOSE OF THE MEETING IN RESPECT OF COMMON SHARES AND PREFERRED SHARES
HELD BY THE UNDERSIGNED.
DATED --------------, 1998.
- ------------------------------------------------
Signature of Shareholder(s)
NOTES:
1. Please sign exactly as your name appears below. If
the shares are jointly held, each joint owner named
should sign. When signing as attorney, personal
representative, administrator, or other fiduciary,
please give full title. If a corporation or
partnership, please sign in full corporate or
partnership name by authorized officer or person. If
the proxy form is not dated in the space provided,
it is deemed to bear the date on which it is mailed
by the management of the Corporation.
2. IN THE EVENT THAT NO SPECIFICATION HAS BEEN MADE
WITH RESPECT TO THE VOTING ON ONE OR MORE OF THE
RESOLUTIONS REFERRED TO IN ITEMS 1 THROUGH 4 ABOVE,
THE PROXY DESIGNEE IS INSTRUCTED TO VOTE THE SHARES
REPRESENTED BY THIS PROXY ON EACH SUCH MATTER AND
FOR SUCH RESOLUTION. MARKING THE "WITHHOLD VOTE" BOX
ON ITEMS 1 THROUGH 4 WILL BE DEEMED TO HAVE THE SAME
EFFECT AS A VOTE AGAINST THE PROPOSAL.
3. To be effective, proxies must be received before 10
a.m. (Calgary time) on February 6, 1998, by CIBC
Mellon Trust Company, Suite 600, 333-7th Avenue
S.W., Calgary, Alberta, Canada T2P 2Z1 or be
presented at the Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
- 2 -
<PAGE>
HEALTHCARE CAPITAL CORP.
SECOND AMENDED AND RESTATED
STOCK AWARD PLAN
(AS AMENDED DECEMBER 18, 1997)
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment; Amendment and Restatement. HealthCare
Capital Corp. ("Corporation") established the HealthCare Capital Corp. Stock
Award Plan (the "Plan"), effective as of December 10, 1996, subject to
shareholder approval as provided in Article 16 of the Plan. The Plan was
previously amended and restated effective February 5, 1997, was further amended
and restated effective October 15, 1997, and was further amended to increase the
number of Shares issuable hereunder to 9,000,000 Shares, subject to shareholder
approval.
1.2 Purpose. The purpose of the Plan is to promote and advance
the interests of Corporation and its shareholders by enabling Corporation and
its subsidiaries to attract, retain, and reward key employees, directors, and
outside consultants. It is also intended to strengthen the mutuality of
interests between such employees, directors, and outside consultants and
Corporation's shareholders. The Plan is designed to meet this intent by offering
stock options and other equity-based incentive awards, thereby providing a
proprietary interest in pursuing the long-term growth, profitability, and
financial success of Corporation.
ARTICLE 2
DEFINITIONS
2.1 Defined Terms. For purposes of the Plan, the following
terms shall have the meanings set forth below:
"AWARD" means an award or grant made to a Participant of
Options, Stock Appreciation Rights, Restricted Units, Performance Awards, or
Other Stock-Based Awards pursuant to the Plan.
"AWARD AGREEMENT" means an agreement as described in Section
6.4 evidencing an Award granted under the Plan.
"BOARD" means the Board of Directors of Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended and
in effect from time to time, or any successor thereto, together with rules,
regulations, and interpretations promulgated thereunder. Where the context so
requires, any reference to a particular Code section shall be construed to refer
to the successor provision to such Code section.
- 1 -
<PAGE>
"CONSULTANT" means any consultant or adviser to Corporation or
a Subsidiary who is not an employee of Corporation or a Subsidiary, but does not
include any person involved in a capital-raising or investor relations activity
on behalf of the Corporation.
"CONTINUING RESTRICTION" means a Restriction contained in
Sections 15.4, 15.6, and 15.7 of the Plan and any other Restrictions expressly
designated by the Board in an Award Agreement as a Continuing Restriction.
"CORPORATION" means HealthCare Capital Corp., an Alberta,
Canada, corporation, or any successor corporation.
"DISABILITY" means the condition of being "disabled" within
the meaning of Section 22(e)(3) of the Code. However, the Board may change the
foregoing definition of "Disability" or may adopt a different definition for
purposes of specific Awards.
"DOLLARS" OR "$" means United States dollars.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute. Where the
context so requires, any reference to a particular section of the Exchange Act,
or to any rule promulgated under the Exchange Act, shall be construed to refer
to successor provisions to such section or rule.
"FAIR MARKET VALUE" of a Share on a particular day means,
without regard to any Restrictions, the mean between the reported high and low
sale prices, or, if there is no sale on such day, the mean between the reported
bid and asked prices, for that day, of Shares on that day or, if that day is not
a trading day, the last prior trading day, on the principal securities exchange
or automated securities interdealer quotation system on which such Shares shall
have been traded.
"INCENTIVE STOCK OPTION" or "ISO" means any Option granted
pursuant to the Plan that is intended to be and is specifically designated in
its Award Agreement as an "incentive stock option" within the meaning of Section
422 of the Code.
"NONEMPLOYEE DIRECTOR" means a member of the Board who is not
an employee of Corporation or a Subsidiary.
"NONQUALIFIED OPTION" or "NQO" means any Option granted
pursuant to the Plan that is not an Incentive Stock Option.
"OPTION" means an ISO or an NQO.
"OTHER STOCK-BASED AWARD" means an Award as described in
Section 11.1.
"PARTICIPANT" means an employee or Consultant of Corporation
or a Subsidiary or a Nonemployee Director who is granted an Award under the
Plan.
- 2 -
<PAGE>
"PERFORMANCE AWARD" means an Award granted pursuant to the
provisions of Article 10 of the Plan, the Vesting of which is contingent on
attaining one or more Performance Goals.
"PERFORMANCE CYCLE" means a designated performance period
pursuant to the provisions of Section 10.3 of the Plan.
"PERFORMANCE GOAL" means a designated performance objective
pursuant to the provisions of Section 10.4 of the Plan.
"PLAN" means this HealthCare Capital Corp. Stock Award Plan,
as amended and restated as set forth herein and as it may be hereafter amended
from time to time.
"REPORTING PERSON" means a Participant who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
"RESTRICTED UNIT" means an Award of stock units representing
Shares described in Section 9.1 of the Plan.
"RESTRICTION" means a provision in the Plan or in an Award
Agreement which limits the exercisability or transferability, or which governs
the forfeiture, of an Award or the Shares, cash, or other property payable
pursuant to an Award.
"RETIREMENT" means:
(a) For Participants who are employees, retirement from active
employment with Corporation and its Subsidiaries at or after age 65, or
such earlier retirement date as approved by the Board for purposes of
the Plan;
(b) For Participants who are Nonemployee Directors,
termination of membership on the Board after attaining age 65, or such
earlier retirement date as approved by the Board for purposes of the
Plan; and
(c) For individual Participants who are Consultants,
termination of service as a Consultant after attaining a retirement age
specified by the Board for purposes of an Award to such Consultant.
However, the Board may change the foregoing definition of "Retirement" or may
adopt a different definition for purposes of specific Awards.
"SHARES" means the Common Shares without nominal or par value
of Corporation or any security of Corporation issued in substitution, exchange,
or in lieu of such securities.
"STOCK APPRECIATION RIGHT" or "SAR" means an Award described
in Article 8 of the Plan.
- 3 -
<PAGE>
"STOCK OPTION PLAN" means the Corporation's incentive stock
option plan adopted effective November 18, 1993.
"SUBSIDIARY" means a "subsidiary corporation" of Corporation
within the meaning of Section 425 of the Code, namely any corporation in which
Corporation directly or indirectly controls 50 percent or more of the total
combined voting power of all classes of stock having voting power.
"VEST" or "VESTED" means:
(a) In the case of an Award that requires exercise, to be or
to become immediately and fully exercisable and free of all
Restrictions (other than Continuing Restrictions);
(b) In the case of an Award that is subject to forfeiture, to
be or to become nonforfeitable, freely transferable, and free of all
Restrictions (other than Continuing Restrictions);
(c) In the case of an Award that is required to be earned by
attaining specified Performance Goals, to be or to become earned and
nonforfeitable, freely transferable, and free of all Restrictions
(other than Continuing Restrictions); or
(d) In the case of any other Award as to which payment is not
dependent solely upon the exercise of a right, election, or option, to
be or to become immediately payable and free of all Restrictions
(except Continuing Restrictions).
2.2 Gender and Number. Except where otherwise indicated by the
context, any masculine or feminine terminology used in the Plan shall also
include the opposite gender; and the definition of any term in Section 2.1 in
the singular shall also include the plural, and vice versa.
ARTICLE 3
ADMINISTRATION
3.1 General. Except as provided in Section 3.2, the Plan shall
be administered by the Board.
3.2 Committee. The Board may delegate administration of the
Plan to a committee of two or more Nonemployee Directors. In the event the Board
delegates administration to such a committee, the committee will have all the
authority of the Board with respect to administration of the Plan, other than
the authority to grant Awards to Nonemployee Directors, which authority shall
reside exclusively with the Board, and subject to any additional limits on such
delegation imposed by the Board.
3.3 Authority of the Board. The Board shall have full power
and authority to administer the Plan in its sole discretion, including the
authority to:
- 4 -
<PAGE>
(a) Construe and interpret the Plan and any Award Agreement;
(b) Promulgate, amend, and rescind rules and procedures
relating to the implementation of the Plan;
(c) With respect to Participants:
(i) Select the employees, Nonemployee Directors, and
Consultants who will be granted Awards;
(ii) Determine the number and types of Awards to be
granted to each Participant;
(iii) Determine the number of Shares, or Share
equivalents, to be subject to each Award;
(iv) Determine the option price, purchase price, base
price, or similar feature for any Award; and
(v) Determine all the terms and conditions of all
Award Agreements, consistent with the requirements of the Plan
and subject to approval, to the extent required, by any
regulatory authority having jurisdiction over Awards granted
under the Plan.
Decisions of the Board, or any delegate as permitted by the Plan, will be final,
conclusive, and binding on all Participants.
3.4 Liability of Board Members. No member of the Board will be
liable for any action or determination made in good faith with respect to the
Plan, any Award, or any Participant.
3.5 Costs of Plan. The costs and expenses of administering the
Plan will be borne by Corporation.
ARTICLE 4
DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN
4.1 Duration of the Plan. The HealthCare Capital Corp. Stock
Award Plan initially became effective December 10, 1996, subject to approval by
Corporation's shareholders as provided in Article 16 of the Plan. The Plan will
remain in effect until Awards have been granted covering all the available
Shares or the Plan is otherwise terminated by the Board.
Termination of the Plan will not affect outstanding Awards.
4.2 Shares Subject to the Plan.
- 5 -
<PAGE>
4.2.1 General. The shares which may be made subject to Awards
under the Plan are Shares, which may be either authorized and unissued Shares or
reacquired Shares. No fractional Shares may be issued under the Plan.
4.2.2 Maximum Number of Shares. The maximum number of Shares
for which Awards may be granted under the Plan is 9,000,000 Shares, subject to
adjustment pursuant to Article 13 of the Plan; provided that the maximum number
of Shares issuable under the Plan may not exceed the number permitted by the
regulations, guidelines or policies of any regulatory authority having
jurisdiction over the issuance of Shares pursuant to the Plan.
4.2.3 Availability of Shares for Future Awards. If an Award
under the Plan is canceled or expires for any reason prior to having been fully
Vested or exercised by a Participant or is settled in cash in lieu of Shares or
is exchanged for other Awards, all Shares covered by such Awards will be made
available for future Awards under the Plan. Furthermore, any Shares covered by a
Stock Appreciation Right which are not issued upon exercise will become
available for future Awards.
ARTICLE 5
ELIGIBILITY
Officers and other key employees of Corporation and its
Subsidiaries (who may also be directors of Corporation or a Subsidiary),
Consultants, and Nonemployee Directors who, in the Board's judgment, are or will
be contributors to the long-term success of Corporation shall be eligible to
receive Awards under the Plan.
ARTICLE 6
AWARDS
6.1 Types of Awards. The types of Awards that may be granted
under the Plan are:
(a) Options governed by Article 7 of the Plan;
(b) Stock Appreciation Rights governed by Article 8 of the
Plan;
(c) Restricted Units governed by Article 9 of the Plan;
(d) Performance Awards governed by Article 10 of the Plan; and
(e) Other Stock-Based Awards or combination Awards governed by
Article 11 of the Plan.
In the discretion of the Board, any Award may be granted alone, in addition to,
or in tandem with other Awards under the Plan.
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6.2 General. Subject to the limitations of the Plan, the Board
may cause Corporation to grant Awards to such Participants, at such times, of
such types, in such amounts, for such periods, with such option prices, purchase
prices, or base prices, and subject to such terms, conditions, limitations, and
restrictions as the Board, in its discretion, deems appropriate; provided that
all Awards granted under the Plan are subject to approval by any regulatory
authority having jurisdiction over such grants. Awards may be granted as
additional compensation to a Participant or in lieu of other compensation to
such Participant. A Participant may receive more than one Award and more than
one type of Award under the Plan, subject to approval, to the extent required,
by any regulatory authority having jurisdiction over Awards granted under the
Plan.
6.3 Nonuniform Determinations. The Board's determinations
under the Plan or under one or more Award Agreements, including, without
limitation, the selection of Participants to receive Awards, the type, form,
amount, and timing of Awards, the terms of specific Award Agreements, and
elections and determinations made by the Board with respect to exercise or
payments of Awards, need not be uniform and may be made by the Board selectively
among Participants and Awards, whether or not Participants are similarly
situated.
6.4 Award Agreements. Each Award will be evidenced by a
written Award Agreement between Corporation and the Participant. Award
Agreements, or the form thereof, must be approved by the Board and may, subject
to the provisions of the Plan, contain any provision approved by the Board,
subject to approval, to the extent required, by any regulatory authority having
jurisdiction over Awards granted under the Plan.
6.5 Provisions Governing All Awards. All Awards will be
subject to the following provisions:
(a) Alternative Awards. If any Awards are designated in their
Award Agreements as alternative to each other, the exercise of all or
part of one Award automatically will cause an immediate equal (or pro
rata) corresponding termination of the other alternative Award or
Awards.
(b) Rights as Shareholders. No Participant will have any
rights of a shareholder with respect to Shares subject to an Award
until such Shares are issued in the name of the Participant.
(c) Employment Rights. Neither the adoption of the Plan nor
the granting of any Award will confer on any person the right to
continued employment with Corporation or any Subsidiary or the right to
remain as a director of or a consultant to Corporation or any
Subsidiary, as the case may be, and will not interfere in any way with
the right of Corporation or a Subsidiary to terminate such person's
employment or to remove such person as a Consultant or as a director at
any time for any reason or for no reason, with or without cause.
(d) Termination Of Employment. The terms and conditions under
which an Award may be exercised, if at all, after a Participant's
termination of employment or
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service as a Nonemployee Director or Consultant will be determined by
the Board and specified in the applicable Award Agreement, subject to
approval, to the extent required, by any regulatory authority having
jurisdiction over Awards granted under the Plan.
(e) Change in Control. The Board, in its discretion, may
provide in any Award Agreement that in the event of a change in control
of Corporation (as the Board may define such term in the Award
Agreement), as of the date of such change in control:
(i) All, or a specified portion of, Awards requiring
exercise will become fully and immediately exercisable,
notwithstanding any other limitations on exercise;
(ii) All, or a specified portion of, Awards subject
to Restrictions will become fully Vested; and
(iii) All, or a specified portion of, Awards subject
to Performance Goals will be deemed to have been fully earned.
The Board, in its discretion, may include change in control provisions
in some Award Agreements and not in others, may include different
change in control provisions in different Award Agreements, and may
include change in control provisions for some Awards or some
Participants and not for others.
(f) Reporting Persons. Notwithstanding anything in the Plan to
the contrary, the Board, in its sole discretion, may bifurcate the Plan
so as to restrict, limit, or condition the use of any provision of the
Plan to Participants who are Reporting Persons without so restricting,
limiting or conditioning the Plan with respect to other Participants.
(g) Service Periods. At the time of granting Awards, the Board
may specify, by resolution or in the Award Agreement, the period or
periods of service performed or to be performed by the Participant in
connection with the grant of the Award.
(h) Nontransferability. Each Award shall not be transferable
or assignable otherwise than by will or the laws of descent and
distribution and shall be exercisable (if exercise is required) during
the lifetime of the Participant, only by the Participant or, in the
event the Participant becomes legally incompetent, by the Participant's
guardian or legal representative.
ARTICLE 7
OPTIONS
7.1 Types of Options. Options granted under the Plan may be in
the form of Incentive Stock Options or Nonqualified Options. The grant of each
Option and the Award Agreement governing each Option will identify the Option as
an ISO or an NQO. In the event the Code is amended to provide for tax-favored
forms of stock options other than or in addition
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to Incentive Stock Options, the Board may grant Options under the Plan meeting
the requirements of such forms of options.
7.2 General. Options will be subject to the terms and
conditions set forth in Article 6 of the Plan and this Article 7 and may contain
such additional terms and conditions, not inconsistent with the express
provisions of the Plan, as the Board deems desirable, subject to approval by any
regulatory authority having jurisdiction over Awards granted under the Plan.
7.3 Option Price. Each Award Agreement for Options will state
the option exercise price per Share of Common Stock purchasable under the
Option, which will not be less than:
(a) 75 percent of the Fair Market Value of a Share on the date
of grant for all Nonqualified Options; or
(b) 100 percent of the Fair Market Value of a Share on the
date of grant for all Incentive Stock Options;
provided that at no time shall the option exercise price of an Option at the
date of grant be greater or less than that permitted under the regulations,
guidelines or policies of any regulatory authority having jurisdiction over
Awards granted under the Plan.
7.4 Option Term. The Award Agreement for each Option will
specify the term during which the Option may be exercised, as determined by the
Board, subject to approval by any regulatory authority having jurisdiction over
Awards granted under the Plan.
7.5 Time of Exercise. The Award Agreement for each Option will
specify, as determined by the Board:
(a) The time or times when the Option will become exercisable
and whether the Option will become exercisable in full or in graduated
amounts over a period specified in the Award Agreement;
(b) Such other terms, conditions, and restrictions as to when
the Option may be exercised as are determined by the Board; and
(c) The extent, if any, to which the Option will remain
exercisable after the Participant ceases to be an employee, Consultant
or Nonemployee Director of Corporation or a Subsidiary;
in each case, subject to approval by any regulatory authority having
jurisdiction over Awards granted under the Plan. An Award Agreement for an
Option may, in the discretion of the Board, provide whether, and to what extent,
the Option will become immediately and fully exercisable (i) in the event of the
death, Disability, or Retirement of the Participant, or (ii) upon the occurrence
of a change in control of Corporation.
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7.6 Method of Exercise. The Award Agreement for each Option
will specify the method or methods of payment acceptable upon exercise of an
Option. An Award Agreement may provide that the option price is payable in full
in cash or, at the discretion of the Board, by delivery (in a form approved by
the Board) of an irrevocable direction to a securities broker acceptable to the
Board (i) to sell Shares subject to the Option and to deliver all or a part of
the sales proceeds to Corporation in payment of all or a part of the option
price and withholding taxes due, or (ii) to pledge Shares subject to the Option
to the broker as security for a loan and to deliver all or a part of the loan
proceeds to Corporation in payment of all or a part of the option price and
withholding taxes due.
7.7 Special Rules for Incentive Stock Options. In the case of
an Option designated as an Incentive Stock Option, the terms of the Option and
the Award Agreement shall be in conformance with the statutory and regulatory
requirements specified in Section 422 of the Code, as in effect on the date such
ISO is granted. ISOs may not be granted under the Plan after December 9, 2006,
unless the ten-year limitation of Section 422(b)(2) of the Code is removed or
extended.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 General. Stock Appreciation Rights will be subject to the
terms and conditions set forth in Article 6 of the Plan and this Article 8 and
may contain such additional terms and conditions, not inconsistent with the
express terms of the Plan, as the Board deems desirable, subject to approval, to
the extent required, by any regulatory authority having jurisdiction over Awards
granted under the Plan.
8.2 Nature of Stock Appreciation Right. A Stock Appreciation
Right (or SAR) is an Award entitling a Participant to receive an amount equal to
the excess (or if the Board determines at the time of grant, a portion of the
excess) of the Fair Market Value of a Share on the date of exercise of the SAR
over the base price, as described below, on the date of grant of the SAR,
multiplied by the number of Shares with respect to which the SAR is exercised.
The base price will be designated by the Board in the Award Agreement for the
SAR and may be the Fair Market Value of a Share on the grant date of the SAR or
such other higher or lower price as the Board determines.
8.3 Exercise. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Board. The Board
may also provide that a SAR will be automatically exercised on one or more
specified dates or upon the satisfaction of one or more specified conditions.
8.4 Form of Payment. Payment upon exercise of a Stock
Appreciation Right may be made in cash, in installments, in Shares, or in any
other form or combination of such methods as the Board shall determine.
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ARTICLE 9
RESTRICTED UNITS
9.1 Nature of Restricted Units. A Restricted Unit is an Award
of stock units (with each unit having a value equivalent to one Share) granted
to a Participant subject to such terms and conditions as the Board deems
appropriate, and may include a requirement that the Participant forfeit such
Restricted Units upon termination of Participant's employment (or service as a
Consultant or Nonemployee Director) for specified reasons within a specified
period of time or upon other conditions, as set forth in the Award Agreement for
such Restricted Units.
9.2 General. Restricted Units will be subject to the terms and
conditions of Article 6 of the Plan and this Article 9 and may contain such
additional terms and conditions, not inconsistent with the express provisions of
the Plan, as the Board deems desirable, subject to approval, to the extent
required, by any regulatory authority having jurisdiction over Awards granted
under the Plan.
9.3 Restriction Period. Restricted Units will provide that
such Awards, and the Shares subject to such Awards, may not be transferred, and
may provide that, in order for a Participant to Vest in such Awards, the
Participant must remain in the employment (or remain as a Consultant or
Nonemployee Director) of Corporation or its Subsidiaries, subject to relief for
reasons specified in the Award Agreement, for a period commencing on the date of
grant of the Award and ending on such later date or dates as the Board may
designate at the time of the Award (the "Restriction Period"). During the
Restriction Period, a Participant may not sell, assign, transfer, pledge,
encumber, or otherwise dispose of Shares underlying Restricted Units. The Board,
in its sole discretion, may provide for the lapse of restrictions in
installments during the Restriction Period. Upon expiration of the applicable
Restriction Period (or lapse of Restrictions during the Restriction Period where
the Restrictions lapse in installments) the Participant will be entitled to
settlement of the Restricted Units or portion thereof, as the case may be.
Although Restricted Units usually will Vest based on continued employment (or
continued service as a Consultant or Nonemployee Director) and Performance
Awards under Article 10 of the Plan will usually Vest based on attainment of
Performance Goals, the Board, in its discretion, may condition Vesting of
Restricted Units on attainment of Performance Goals as well as continued
employment (or continued service as a Consultant or Nonemployee Director). In
such case, the Restriction Period for such Restricted Units will include the
period prior to satisfaction of the Performance Goals.
9.4 Forfeiture. If a Participant ceases to be an employee (or
Consultant or Nonemployee Director) of Corporation or a Subsidiary during the
Restriction Period for any reason other than reasons which may be specified in
an Award Agreement (such as death, Disability, or Retirement) the Award
Agreement may require that all non-Vested Restricted Units previously granted to
the Participant be forfeited and returned to Corporation.
9.5 Settlement of Vested Restricted Units. Upon Vesting of an
Award (or portion thereof) of Restricted Units, a Participant will be entitled
to receive payment for Restricted Units in an amount equal to the aggregate Fair
Market Value of the number of Shares covered by such Restricted Units at the
expiration of the applicable Restriction Period. Payment
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in settlement of a Restricted Unit will be made as soon as practicable following
the conclusion of the applicable Restriction Period in cash, in installments, in
Shares equal to the number of Restricted Units, or in any other form or
combination of such methods as the Board, in its sole discretion, determines.
ARTICLE 10
PERFORMANCE AWARDS
10.1 General. Performance Awards will be subject to the terms
and conditions set forth in Article 6 of the Plan and this Article 10 and may
contain such other terms and conditions not inconsistent with the express
provisions of the Plan, as the Board deems desirable, subject to approval, to
the extent required, by any regulatory authority having jurisdiction over Awards
granted under the Plan.
10.2 Nature of Performance Awards. A Performance Award is an
Award of stock units (with each unit having a value equivalent to one Share)
granted to a Participant subject to such terms and conditions as the Board deems
appropriate, including, without limitation, the requirement that the Participant
forfeit such Performance Award or a portion of such Award in the event specified
Performance Goals are not met within a designated Performance Cycle.
10.3 Performance Cycles. For each Performance Award, the Board
will designate a performance period (the "Performance Cycle") with a duration to
be determined by the Board in its discretion within which specified Performance
Goals are to be attained. There may be several Performance Cycles in existence
at any one time and the duration of Performance Cycles for specific Awards may
differ from each other.
10.4 Performance Goals. For each Performance Award, the Board
will establish Performance Goals on the basis of such criteria and to accomplish
such objectives as the Board may from time to time select. Performance Goals may
be based on performance criteria for Corporation, a Subsidiary, or an operating
group or division, or based on a Participant's individual performance.
Performance Goals may include objective and subjective criteria. During any
Performance Cycle, the Board may adjust the Performance Goals for such
Performance Cycle as it deems equitable in recognition of unusual or
nonrecurring events affecting Corporation, changes in applicable tax laws or
accounting principles, or such other factors as the Board may determine.
10.5 Determination of Vested Awards. As soon as practicable
after the end of a Performance Cycle, the Board will determine the extent to
which Performance Awards have been earned on the basis of performance in
relation to the established Performance Goals.
10.6 Timing and Form of Payment. Settlement of earned
Performance Awards will be made to the Participant as soon as practicable after
the expiration of the Performance Cycle and the Board's determination under
Section 10.5, in the form of cash, installments, or Shares, or in any form or
combination of such methods as the Board determines.
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ARTICLE 11
OTHER STOCK-BASED AND COMBINATION AWARDS
11.1 Other Stock-Based Awards. The Board may grant other
Awards under the Plan pursuant to which Shares are or may in the future be
acquired, or Awards denominated in or measured by Share equivalent units,
including Awards valued using measures other than the market value of Shares.
Such Other Stock-Based Awards may be granted either alone, in addition to, or in
tandem with, any other type of Award granted under the Plan.
11.2 Combination Awards. The Board may also grant Awards under
the Plan in tandem or combination with other Awards or in exchange of Awards, or
in tandem or combination with, or as alternatives to, grants or rights under any
other employee plan of Corporation, including the plan of any acquired entity.
No action authorized by this section will reduce the amount of any existing
benefits or change the terms and conditions thereof without the Participant's
consent.
ARTICLE 12
DEFERRAL ELECTIONS
The Board may permit a Participant to elect to defer receipt
of the payment of cash or the delivery of Shares that would otherwise be due to
such Participant by virtue of the exercise, earn-out, or Vesting of an Award
made under the Plan. If any such election is permitted, the Board will establish
rules and procedures for such payment deferrals, including, but not limited to,
payment or crediting of a growth factor on such deferred amounts credited in
cash.
ARTICLE 13
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
13.1 Plan Does Not Restrict Corporation. The existence of the
Plan and the Awards granted under the Plan will not affect or restrict in any
way the right or power of the Board or the shareholders of Corporation to make
or authorize any adjustment, recapitalization, reorganization, or other change
in Corporation's capital structure or its business, any merger or consolidation
of the Corporation, any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting Corporation's capital stock or the
rights thereof, the dissolution or liquidation of Corporation or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding.
13.2 Adjustments by the Board. In the event of any change in
capitalization affecting the Shares of Corporation, such as a stock dividend,
stock split, recapitalization, merger, consolidation, split-up, combination or
exchange of shares or other form of reorganization, or any other change
affecting the Shares, such proportionate adjustments as the Board, in its sole
discretion, deems appropriate to reflect such change, will be made with respect
to the aggregate number of Shares for which Awards in respect thereof may be
granted under the Plan, the maximum number of Shares which may be sold or
awarded to any Participant, the number of Shares covered by each outstanding
Award, and the price per Share in respect of
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outstanding Awards. The Board may also make such adjustments in the number of
Shares covered by, and price or other value of any outstanding Awards in the
event of a spin-off or other distribution (other than normal cash dividends), of
Corporation assets to shareholders.
ARTICLE 14
AMENDMENT AND TERMINATION
Without further approval of Corporation's shareholders, the
Board may at any time terminate the Plan, or may amend it from time to time in
such respects as the Board may deem advisable; provided that the Board may not,
without approval of the shareholders, make any amendment that would materially
increase the aggregate number of Shares that may be issued under the Plan
(except for adjustments pursuant to Article 13 of the Plan); and provided
further that any amendment of the Plan shall be subject to approval, to the
extent required, by any regulatory authority having jurisdiction over the Plan.
ARTICLE 15
MISCELLANEOUS
15.1 Tax Withholding.
15.1.1 General. Corporation will have the right to deduct from
any settlement of any Award under the Plan, including the delivery or vesting of
Shares, any taxes of any kind required by the laws of any Canadian or U.S.
jurisdiction to be withheld with respect to such payments or to take such other
action as may be necessary in the opinion of Corporation to satisfy all
obligations for the payment of such taxes. The recipient of any payment or
distribution under the Plan may be required to make arrangements satisfactory to
Corporation for the satisfaction of any such withholding tax obligations,
whether or not such recipient is an employee of Corporation or a Subsidiary on
the date of such settlement. Corporation will not be required to make any such
payment or distribution under the Plan until such obligations are satisfied.
15.1.2 Stock Withholding. The Board, in its sole discretion,
may permit a Participant to satisfy all or a part of the withholding tax
obligations incident to the settlement of an Award involving payment or delivery
of Shares to the Participant by having Corporation withhold a portion of the
Shares that would otherwise be issuable to the Participant. Such Shares will be
valued based on their Fair Market Value on the date the tax withholding is
required to be made.
15.2 Unfunded Plan. The Plan will be unfunded and Corporation
shall not be required to segregate any assets that may at any time be
represented by Awards under the Plan. Any liability of Corporation to any person
with respect to any Award under the Plan will be based solely upon any
contractual obligations that may be effected pursuant to the Plan. No such
obligation of Corporation shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of Corporation.
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15.3 Payments to Trust. The Board is authorized to cause to be
established a trust agreement or several trust agreements whereunder the Board
may make payments of amounts due or to become due to Participants in the Plan.
However, the Board has no obligation to establish such a trust or fund.
15.4 Annulment of Awards. Any Award Agreement may provide that
the grant of an Award payable in cash is provisional until cash is paid in
settlement of such Award or that the grant of an Award payable in Shares is
provisional until the Participant becomes entitled to the stock certificate in
settlement of such Award. In the event the employment (or service as a
Consultant or Nonemployee Director) of a Participant is terminated for cause (as
defined below), any Award that is provisional will be annulled as of the date of
such termination for cause. For the purpose of this Section 15.4, the term "for
cause" will have the meaning set forth in the Participant's employment
agreement, if any, or otherwise means any discharge (or removal) for material or
flagrant violation of the policies and procedures of Corporation or for other
job performance or conduct that is materially detrimental to the best interests
of Corporation, as determined by the Board.
15.5 Engaging in Competition With Corporation. Any Award
Agreement may provide that, if a Participant terminates employment with
Corporation or a Subsidiary for any reason whatsoever, and within 18 months
after the date of such termination accepts employment with any competitor of (or
otherwise engages in competition with) Corporation, the Board, in its sole
discretion, may require such Participant to return to Corporation the economic
value of any Award that is realized or obtained (measured at the date of
exercise, Vesting, or payment) by such Participant at any time during the period
beginning on the date that is six months prior to the date of such Participant's
termination of employment with Corporation.
15.6 Other Corporation Benefit and Compensation Programs.
Payments and other benefits received by a Participant under an Award made
pursuant to the Plan will not be deemed a part of a Participant's regular,
recurring compensation for purposes of the termination indemnity or severance
pay law of any state or country and will not be included in, or have any effect
on, the determination of benefits under any other employee benefit plan or
similar arrangement provided by Corporation or a Subsidiary unless expressly so
provided by such other plan or arrangements, or except where the Board expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of cash compensation. Awards under the Plan may
be made in combination with or in tandem with, or as alternatives to, grants,
awards, or payments under any other Corporation or Subsidiary plans,
arrangements, or programs. The Plan notwithstanding, Corporation or any
Subsidiary may adopt such other compensation programs and additional
compensation arrangements as it deems necessary to attract, retain, and reward
employees and directors for their service with Corporation and its Subsidiaries.
15.7 Securities Law Restrictions. No Shares will be issued
under the Plan unless counsel for Corporation is satisfied that such issuance
will be in compliance with the applicable securities laws of any Canadian or
U.S. jurisdiction. Certificates for Shares delivered under the Plan may be
subject to such stop-transfer orders and other restrictions as the Board deems
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advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, the Alberta or British Columbia Securities Commissions,
any stock exchange upon which the Shares are then listed, and any applicable
securities law. The Board may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
15.8 Governing Law. Except with respect to references to the
Code or applicable securities laws, the Plan and all actions taken thereunder
will be governed by and construed in accordance with the laws of the State of
Oregon.
ARTICLE 16
SHAREHOLDER APPROVAL
The adoption of the Plan, as amended and restated effective
October 15, 1997, and any grant of Awards under the Plan are expressly subject
to the approval of the Plan by the shareholders at the 1997 annual meeting of
Corporation's shareholders. In the event that such shareholder approval is
received, no additional stock options will be granted thereafter under the Stock
Option Plan and such plan will immediately terminate; provided that such
termination will have no effect on any options previously granted thereunder.
ARTICLE 17
OTHER APPROVALS
For so long as the Shares are listed on The Alberta Stock
Exchange, the Plan is subject to approval by such Exchange and compliance with
all conditions imposed by such Exchange from time to time with respect to the
granting and administration of Awards under the Plan.
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