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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<PAGE>
PRELIMINARY COPY
HEALTHCARE CAPITAL CORP.
111 S.W. FIFTH AVENUE, SUITE 2390
PORTLAND, OREGON 97204
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NOTICE OF ANNUAL AND SPECIAL
GENERAL MEETING OF SHAREHOLDERS
DECEMBER 5, 1997
----------------------------
NOTICE IS HEREBY GIVEN that the Annual and Special General Meeting (the
"Meeting") of the holders of common shares ("Common Shares") of HealthCare
Capital Corp. (the "Corporation") will be held at Atwater's, 30th Floor, 111
S.W. Fifth Avenue, Portland, Oregon, on Friday, December 5, 1997, at 10 a.m.
Pacific Time, for the following purposes:
1. To receive and consider the annual report containing financial statements for
the fiscal year ended July 31, 1997, together with the report of the auditors
thereon;
2. To fix the number of directors at six;
3. To elect directors;
4. To appoint auditors for the ensuing year and to authorize the Board of
Directors to fix the remuneration to be paid to the auditors;
5. To consider and approve a resolution authorizing the issuance of up to
15,000,000 additional Common Shares in transactions and at prices as determined
by the Board of Directors in its sole discretion;
6. To ratify an amendment to the Corporation's By-Laws adopted by the Board of
Directors increasing the quorum required at a shareholders meeting to 33-1/3% of
the Common Shares outstanding and entitled to vote at the meeting;
7. To consider and approve the Corporation's Second Amended and Restated Stock
Award Plan; and
8. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
Only holders of Common Shares of record at the close of business on October 29,
1997, are entitled to receive notice of the Meeting.
Portland, Oregon BY ORDER OF THE BOARD OF DIRECTORS
October 31, 1997
William DeJong
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 December 4, 1997, 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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ANNUAL AND SPECIAL GENERAL MEETING
OF SHAREHOLDERS TO BE HELD ON DECEMBER 5, 1997
MANAGEMENT INFORMATION CIRCULAR
AND PROXY STATEMENT
----------------------------
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
ANNUAL AND SPECIAL GENERAL 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 FRIDAY, DECEMBER 5, 1997, 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
were first mailed to shareholders on approximately October 31, 1997.
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 the
appropriate date.
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 December 4, 1997, 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
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.
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<PAGE>
OUTSTANDING VOTING SECURITIES
On October 29, 1997, the Corporation had outstanding ------ Common
Shares, without par value (the "Common Shares"), each carrying the right to one
vote per share. In addition, the Corporation has reserved for issuance: (i)
7,833,308 Common Shares upon the exercise of share purchase warrants presently
outstanding; (ii) 2,000,000 Common Shares upon the conversion of convertible
subordinated notes due October 31, 1997; and (iii) 2,642,000 Common Shares upon
the exercise of stock options presently outstanding held by employees,
directors, and officers of, and consultants to, the Corporation. Common Shares
are the only outstanding voting securities of the Corporation.
Only shareholders of record at the close of business on October 29,
1997, 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 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 November 25, 1997,
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 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 the
holders of a majority of the Common Shares entitled to vote at the Meeting are
present in person or represented by proxy. Shareholders may withhold their votes
(abstain) on all matters listed in the Notice of Meeting by so indicating on the
form of proxy. Abstentions will be counted only for purposes of establishing a
quorum. Abstentions and Common 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 October 15, 1997, by each of the Corporation's
directors and nominees for director, 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 about each person or group known to the
Corporation to own beneficially more than 5% of the outstanding Common 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.
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<PAGE>
<TABLE>
<CAPTION>
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Amount and Nature
Name and Address of Beneficial % of Common
of Beneficial Owner Ownership Shares(1)
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<S> <C> <C>
Hearing Health Services, Inc. 2,000,000(2) 6.9%
1018 W. Ninth Ave., Ste. 310
King of Prussia, Pennsylvania 19406
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Sagit Investment Management Ltd. 1,430,000(3) 5.0%
789 West Pender Street, Ste. 900
Vancouver, B.C. V6H 1H2
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Brandon M. Dawson 4,550,000(4)(5) 16.6%
111 S.W. Fifth Ave., Ste. 2390
Portland, Oregon 97204
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Douglas F. Good 2,576,600(6) 9.5%
595 Howe St., Ste. 1120
Vancouver, B.C. V6C 2T5
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Gregory J. Frazer, Ph.D. 1,711,959(4)(7) 6.3%
18531 Roscoe Blvd., Ste. 201
Northridge, California 91324
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Gene K. Balzer, Ph.D. 200,000 *
1000 East Rosser Ave., Ste. D2
Bismarck, North Dakota 58501
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Hugh T. Hornibrook 200,000(4) *
2631 West 13th Avenue
Vancouver, B.C. V6K 2T3
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William DeJong 157,200(4) *
1800 First Canadian Centre
350 7th Avenue, S.W.
Calgary, Alberta T2P 3N9
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Kathy A. Foltner 69,000(4) *
111 S.W. Fifth Ave., Ste. 2390
Portland, Oregon 97204
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All directors and executive officers as a group (9 10,128,859(4) 35.8%
persons)
==========================================================================================================================
</TABLE>
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*Less than 1% of the outstanding Common Shares
(1) Calculated in accordance with Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934, pursuant to which 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 October 15, 1997, have been included in shares
deemed to be outstanding for purposes of computing percentage ownership
by such person.
(2) Consists of, upon conversion of convertible subordinated notes issued
by the Company, 900,000 Common Shares held by Brown's Creek, Inc.,
285,120 Common Shares held by Business Development
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<PAGE>
Capital Limited Partnership III, 743,600 Common Shares held by
Abbingdon Venture Partners Limited Partnership, and 71,280 Common
Shares held by Abbingdon Venture Partners Limited Partnership II, each
of whom is an affiliate of Hearing Health Services, Inc.
(3) Consists of 1,430,000 Common Shares to be issued upon the exercise of
share purchase warrants.
(4) Includes options to purchase Common Shares which are presently
exercisable or will become exercisable by December 14, 1997, as
follows: Mr. Dawson, 300,000 shares; Mr. Frazer, 250,000 shares; Mr.
Hornibrook, 200,000 shares; Mr. DeJong, 75,000 shares; Ms. Foltner,
62,500 shares; and all directors and executive officers as a group,
1,187,500 shares.
(5) Includes 3,900,000 Common Shares subject to an escrow agreement dated
October 7, 1994, of which 1,900,000 Common Shares are subject to an
Assignment and Novation Agreement dated August 28, 1996, between Mr.
Dawson and Roger W. Larose, a former officer of the Corporation.
(6) Includes 1,367,038 Common Shares held by Marilyn Marshall, who shares
the same household as Mr. Good.
(7) Includes 246,491 Common Shares held by Carissa Bennett, Mr. Frazer's
wife.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 ("Section 16")
requires that reports of beneficial ownership of Common Shares and changes in
such ownership be filed with the Securities and Exchange Commission ("SEC") by
Section 16 "reporting persons," including directors, executive officers, and
certain holders of more than 10% of the outstanding Common Shares. To the
Corporation's knowledge, all Section 16 reporting requirements applicable to
known reporting persons were complied with for transactions and stock holdings
during the fiscal year ended July 31, 1997, except that Douglas F. Good, a
director of the Corporation, filed one report listing three transactions after
the required due date.
FIXING NUMBER OF DIRECTORS
Under the Articles of Incorporation, as amended (the "Articles"), of
the Corporation, the Board of Directors may consist of a minimum of three and a
maximum of 11 directors. The Board of Directors may, between annual general
meetings, appoint one or more additional directors to serve until the next
annual general meeting, provided that the number of additional directors may not
exceed one-third of the number of directors elected at the most recent annual
general meeting and the total number of directors may not exceed 11.
At present, the Board of Directors consists of six directors. As
discussed below, the Board of Directors has nominated six persons for election
as directors at the Meeting. Accordingly, the shareholders will be asked to
consider and, if thought fit, to pass the following resolution:
"BE IT RESOLVED THAT the number of directors of the
Corporation be and the same is hereby fixed at six directors until such
time as the directors determine by resolution to appoint one or more
additional directors in accordance with the Corporation's Articles."
The foregoing resolution will be adopted if approved by a majority of
the votes cast on this motion by the shareholders at the Meeting.
ELECTION OF DIRECTORS
The Board of Directors has nominated six persons for election as
directors to serve until the next annual general meeting and until their
successors are elected and qualified. All of the nominees for election as
directors are members of the present Board.
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<PAGE>
A nominee will be elected if the nominee receives a plurality of the
votes cast by the Common Shares entitled to vote in the election, provided that
a quorum is present at the Meeting. Unless authority to vote for a director or
directors is withheld, the accompanying proxy will be voted FOR the election of
the nominees named below. If for some unforeseen reason a nominee should become
unavailable for election, the number of directors constituting the Board of
Directors may be reduced prior to the Meeting or the proxy may be voted for the
election of such substitute nominee as may be designated by the Board.
The following table sets forth information with respect to each person
nominated for election as a director of the Corporation, including their names,
municipality of residence, ages as of October 31, 1997, business experience
during the past five years, and year of appointment as a director. There are no
family relationships among the Corporation's directors and officers.
<TABLE>
<CAPTION>
Name and Director
Municipality of Residence Age Principal Occupation(1) Since
- ------------------------- --- ----------------------- -----
<S> <C> <C> <C>
Gene K. Balzer, Ph.D. 41 President of NeuroDynamic Systems, 1995
Bismarck, North Dakota Inc., a provider of technicians,
clinicians and consultants to
medical practices and hospitals.
Brandon M. Dawson 29 President and Chief Executive Officer 1995
Gresham, Oregon of the Corporation.
William DeJong 39 Partner in the law firm of 1994
Calgary, Alberta Ballem MacInnes.
Gregory J. Frazer, Ph.D. 45 Vice President-Business Development, 1996
Northridge, California of the Corporation.
Douglas F. Good 55 Chairman of the Board of the 1994
West Vancouver, British Corporation.
Columbia
Hugh T. Hornibrook 48 Acquisition consultant. 1996
Vancouver, British Columbia
</TABLE>
(1) During the past five years, the principal occupation and employment of
each director has been in the capacity set forth above except as
follows:
(a) Mr. Dawson has served as President and Chief Executive Officer of
the Corporation since December 1995. From May 1992 to December 1995, he
was director of U.S. sales for Starkey Laboratories, Inc., a
multi-national manufacturer, distributor and marketer of custom
"in-the-ear" hearing instruments and related hearing and diagnostic
equipment.
(b) Mr. DeJong has served as Secretary of the Corporation since 1993.
He joined the law firm of Ballem MacInnes in 1987.
(c) Mr. Frazer has served as Vice President-Business Development, of
the Corporation since October 1996, when the Corporation acquired 11
audiology based hearing clinics which were among 22 clinics in Southern
California of which Mr. Frazer was part owner and operator. The
Corporation has since
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<PAGE>
acquired six of the remaining 11 clinics. Mr. Frazer has spent his
entire career as a hearing care professional since receiving his
doctoral degree from Wayne State School of Medicine in 1981.
(d) Mr. Good has served as Chairman of the Board of the Corporation
since August 1996. From December 1995 until July 1996, he served as the
Corporation's chief financial officer. He was President of the
Corporation from October 1994 to December 1995. Prior to October 1994,
Mr. Good was chief financial officer of International Retail Systems
Inc., a software and point of sale systems company based in Dallas,
Texas.
(e) Mr. Hornibrook served as Vice President, Corporate Development, of
the Corporation from April 1996 until January 1997. From July 1994 to
April 1996, he was an independent business consultant. Prior to July
1994, Mr. Hornibrook served as director of corporate development for
The Loewen Group Inc., an operator of funeral homes and cemeteries
throughout North America.
DIRECTORS' MEETINGS AND BOARD COMMITTEES
During the fiscal year ended July 31, 1997, the Board of Directors held
three meetings. Each director attended more than 75% of the aggregate of the
total number of meetings of the Board of Directors held during fiscal 1997.
The Audit Committee reviews services provided by the Corporation's
independent auditors, makes recommendations concerning their engagement or
discharge, and reviews with management and the independent auditors the annual
financial statements of the Corporation, the results of the audit, the adequacy
of internal accounting controls, and the quality of financial reporting. The
Audit Committee did not meet during fiscal 1997. The members of the Audit
Committee are Messrs. Balzer and Hornibrook.
The Corporation presently does not have any other standing committees,
including a compensation committee or nominating committee. The Board of
Directors will consider suggestions submitted by shareholders regarding
potential nominees for director. Any recommendations as to nominees for election
at the 1998 annual general meeting of shareholders should be submitted in
writing by July 3, 1998, to the Secretary of the Corporation at its principal
executive offices and should include the name, address and qualifications of
each proposed nominee.
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 bonus for the
fiscal year ended July 31, 1997, exceeded $100,000.
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<PAGE>
<TABLE>
<CAPTION>
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 1997 110,000 -- 400,000
Vice President-Business
Development
</TABLE>
OPTION GRANTS
The following table sets forth certain information concerning grants of
options to purchase Common Shares to the executive officers named in the table
during the fiscal year ended July 31, 1997:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Number of Percentage of
Shares Total Options Market
Underlying Granted to Price on
Options Employees in Exercise Price Grant Date
Name Granted Fiscal Year ($/share) ($/share) Expiration Date
<S> <C> <C> <C> <C> <C>
Brandon M. Dawson -- -- -- -- --
Kathy A. Foltner 125,000(1) 8.2% $1.45 $1.45 Feb. 5, 2002
Gregory J. Frazer 400,000(2) 26.4 1.30 1.76 Oct. 1, 2001
</TABLE>
(1) One-half of Ms. Foltner's options become exercisable on November 1,
1997, with the balance becoming exercisable on November 1, 1998.
(2) One-half of Mr. Frazer's options become exercisable on October 1, 1997,
with the balance becoming exercisable on October 1, 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 the executive officers named in the table:
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<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
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>
Brandon M. 250,000 $211,420 300,000 -- $275,687 --
Dawson
Kathy A. -- -- -- 125,000 -- --
Foltner
Gregory J. -- -- -- 400,000 -- --
Frazer
</TABLE>
(1) The value realized was calculated based on the excess of the closing
sale price of the Common Shares reported on The Alberta Stock Exchange
(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 will pay 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 the development of
a training program for audiologists. The consulting arrangement may be canceled
at any
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<PAGE>
time by the Corporation. Gene K. Balzer, Ph.D., a director of the Corporation,
is president and sole shareholder of NeuroDynamic Systems, Inc.
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 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. In
addition to the options disclosed in the table under "Option Grants" above, the
following directors were granted options to purchase Common Shares since August
1, 1995: an option to Gene K. Balzer for 200,000 shares with an exercise price
of $0.28 per share, which he exercised in May 1997; an option to William DeJong
for 75,000 shares with an exercise price of $0.72 per share expiring February
14, 2001; an option to Hugh T. Hornibrook for 200,000 shares with an exercise
price of $1.99 per share expiring April 1, 2001; and an option to Gregory J.
Frazer for 200,000 shares with an exercise price of $1.30 per share expiring
October 1, 2001.
CERTAIN 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 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
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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. As of October 1, 1997, the Corporation had paid Ms. Foltner
$37,500 and will pay the remaining $12,500 of the amount owed to Ms. Foltner for
1997 on December 31, 1997.
From its inception in 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.
On August 16, 1996, Mr. Good exercised options for 225,000 Common
Shares at $0.73 per share. In connection with such exercise, Mr. Good paid the
Corporation $163,744.
Sonus-Canada Ltd. (formerly HC HealthCare Hearing Clinics Ltd.), the
Corporation's primary Canadian operating subsidiary, maintains a revolving bank
loan bearing interest at the bank's prime rate plus 1% per annum and secured by
a general security agreement covering all assets of the Corporation and the
guarantee and postponement of claim of Marilyn Marshall, who is a shareholder of
the Corporation and shares the same household as Mr. Good.
William DeJong is a partner in the Calgary, Alberta law firm of Ballem
MacInnes and Secretary and a director of the Corporation. During the period from
August 1, 1995, to September 30, 1997, total fees, disbursements and government
sales tax paid to Ballem MacInnes by the Corporation for legal services was
$-------. Mr. DeJong exercised 50,000 options at $0.07 per share on February 22,
1996. Total consideration received by the Corporation was $3,635.
On January 11, 1996, Michael G. Thomson, one of the Corporation's
original shareholders, exercised options for 200,000 Common Shares at $0.07 per
share. In connection with such exercise, Mr. Thomson paid the Corporation
$14,657.
Dr. Eddison G.N. Sinanan, an advisory director of the Corporation,
exercised options for 50,000 Common Shares at $0.18 per share on January 18,
1996, and options for an additional 100,000 shares at $0.18 per share on July
31, 1996. In connection with these exercises, the Corporation received
consideration of $9,164 and $18,186, respectively.
On May 19, 1997, Gene K. Balzer, Ph.D., a director of the Corporation,
exercised options for 200,000 Common Shares at $0.28 per share. In connection
with such exercise, the Corporation loaned Mr. Balzer $56,000 to pay the
aggregate exercise price of the options. The loan, which accrues interest at the
rate of 10% per annum, is due on May 19, 1998.
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.
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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 Mr.
Dawson accrues at the rate of 9% per annum. At September 30, 1997, the
outstanding balance of the advances made by Mr. Dawson, plus accrued interest,
was $61,165.
On April 1, 1996, Brandon M. Dawson, President of the Corporation,
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.
APPOINTMENT OF AUDITORS
Unless otherwise instructed, the persons named in the enclosed form of
proxy intend to vote for the appointment of KPMG Peat Marwick LLP as auditors of
the Corporation to hold office until the next annual general meeting of
shareholders or until their successors are appointed and to authorize the Board
of Directors to fix the auditors' remuneration. KPMG Peat Marwick LLP has served
as the Corporation's independent auditors since 1996.
The Corporation expects representatives of KPMG Peat Marwick LLP to be
present at the Meeting and to be available to respond to appropriate questions.
The auditors will have the opportunity to make a statement at the Meeting if
they desire to do so.
1997 ANNUAL REPORT
The Corporation's annual report to shareholders for the fiscal year
ended July 31, 1997, including financial statements and other information with
respect to the Corporation, has been mailed to shareholders with this Circular.
Additional copies of the annual report may be obtained by writing to the
Corporation.
APPROVAL OF ADDITIONAL EQUITY ISSUANCES
In December 1996, the shareholders approved the issuance of an
additional 10,000,000 Common Shares in transactions to be approved by the Board
of Directors. Since January 1, 1997, in addition to option exercises, the
Corporation has issued 141,844 Common Shares in partial payment of the
acquisition price of Hearing Improvement Center, Inc. The Corporation is also
pursuing negotiations with an institutional investor for the purchase of up to
10,000,000 Common Shares in a private sale.
Management of the Corporation believes that, in light of current market
conditions and the Corporation's plans for future acquisitions of additional
hearing 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 general working capital. Other than the negotiations
discussed above, there are at present no firm arrangements or understandings
relating to the issuance of any additional Common Shares other than the
12,604,938 Common Shares reserved for issuance pursuant to 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 of Directors, 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
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method, structure, timing and pricing of such equity issuances will be
determined by the Board of Directors 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 of Incorporation or By-Laws. The Board
of Directors and management have no knowledge of any current efforts to obtain
control of the Corporation 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 special resolution:
"RESOLVED AS A SPECIAL RESOLUTION OF THE CORPORATION THAT the
Corporation be authorized to undertake further equity issuances of up
to 15,000,000 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 SPECIAL RESOLUTION WILL NOT TAKE EFFECT UNTIL IT IS PASSED BY AT
LEAST TWO-THIRDS OF THE VOTES CAST BY THE SHAREHOLDERS AT THE MEETING ON THE
MOTION. THE PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY, UNLESS OTHERWISE
INSTRUCTED, INTEND TO VOTE FOR THIS SPECIAL RESOLUTION AUTHORIZING ADDITIONAL
EQUITY ISSUANCES.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL
OF THE ISSUANCE OF UP TO 15,000,000 ADDITIONAL COMMON SHARES.
APPROVAL OF INCREASED QUORUM REQUIREMENT
In October 1997, the Board of Directors adopted an amendment to the
Corporation's By-Laws increasing the quorum required at shareholders' meetings
from 10% to 33-1/3% of the Common Shares issued and entitled to vote at the
meeting. The amendment to the By-Laws is attached as Schedule A to this
Circular.
All amendments to the By-Laws are required by the Business Corporation
Act (Alberta) to be submitted to the shareholders of the Corporation for
ratification. Accordingly, the shareholders are being asked to consider and, if
thought fit, to approve the following special resolution at the Meeting:
"RESOLVED AS A SPECIAL RESOLUTION OF THE CORPORATION THAT By-
Law No. 1B of the Corporation as set forth in Schedule A to the
Corporation's Management Information Circular and Proxy Statement dated
October 31, 1997, is hereby ratified."
THIS SPECIAL RESOLUTION WILL NOT TAKE EFFECT UNTIL IT IS PASSED BY AT
LEAST TWO-THIRDS OF THE VOTES CAST BY THE SHAREHOLDERS AT THE MEETING ON THIS
MOTION. THE PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY, UNLESS OTHERWISE
INSTRUCTED, INTEND TO VOTE FOR THIS SPECIAL RESOLUTION APPROVING THE AMENDMENT
OF THE BY-LAWS OF THE CORPORATION.
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THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO RATIFY THE
BY-LAW AMENDMENT INCREASING THE QUORUM REQUIREMENT AT SHAREHOLDERS MEETINGS.
APPROVAL OF 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 --, 1997, subject to approval by the shareholders. The Second Amended
and Restated Stock Award Plan, a copy of which is attached as Schedule B to this
Circular, is hereinafter referred to as the "Award Plan."
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 1,375,000 Common Shares had
been exercised and options to purchase 1,625,000 Common Shares were outstanding
at September 30, 1997. If the Award Plan is approved by the shareholders at the
Meeting, the Stock Option Plan will be terminated and no additional stock
options will be granted thereunder. Such termination will not affect any options
previously granted thereunder.
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. The number of Common Shares
which may be made the subject of awards under the Award Plan is 3,000,000
shares, subject to adjustment for changes in capitalization, except that for so
long as the Common Shares are listed on The Alberta Stock Exchange, the total
number of Common Shares issuable pursuant to all outstanding awards granted
under the Award Plan plus all other outstanding stock options (other than
options granted as remuneration for services provided in connection with capital
raising activities) may not exceed a number equal to 10% of the Common Shares
then outstanding.
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. Also, if
Common Shares are used to pay all or a portion of the exercise or purchase price
of an award, an equal number of Common Shares will become available for future
awards under the Award Plan.
At September 30, 1997, 12 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
Alberta Stock Exchange on October 27, 1997, was $--------------.
The following table presents information with respect to stock options
granted to date under the Award Plan. Each Award was made contingent upon
approval of the Award Plan by the shareholders at the 1997 annual shareholders
meeting and, if not so approved at the Meeting, these Awards will be null and
void. The type, number, and value of Awards that may be granted in the future
under the Award Plan is not known.
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NEW PLAN BENEFITS-STOCK AWARD PLAN
Name and Position Number of Options
Brandon M. Dawson 0
President and Chief Executive Officer
Kathy A. Foltner 125,000
Vice President-Operations
Gregory J. Frazer 0
Vice President-Business Development
All executive officers as a group 295,000
Non-employee directors as a group 0
Non-executive employees as a group 622,000
DESCRIPTION OF AWARDS UNDER THE AWARD PLAN
The types of awards (collectively referred to as "Awards") that may be
granted by the Board of Directors 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 of Directors 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 of
Directors.
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 of Directors.
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 of Directors.
Other Stock-Based Awards. The Board of Directors 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.
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Individual Limits on Awards; Nontransferability. A participant may
receive only one grant of an Award under the Award Plan during any 12-month
period. Also, no participant may be granted Awards pursuant to which Common
Shares may be issued in a total number in excess of 5% (1% with respect to a
participant who is an outside adviser) of the Common Shares outstanding at the
time of grant. Awards are not transferable 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 of Directors 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.
DURATION, TERMINATION AND AMENDMENT OF THE AWARD PLAN
The Award Plan will remain in effect until Awards have been granted
covering all available shares under the Award Plan or the Award Plan is
otherwise terminated by the Board of Directors. 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 by The Alberta Stock Exchange if required, 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 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.
Payment of Exercise Price in Shares. The Board of Directors may permit
participants to pay all or a portion of the option exercise price using
previously-acquired Common Shares. If payment is made in previously held shares,
there is no taxable gain or loss to the participant other than any gain
recognized as a result of exercise of the option, as described above.
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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 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 special resolution:
"RESOLVED AS A SPECIAL RESOLUTION OF THE CORPORATION THAT the
adoption of the Second Amended and Restated Stock Award Plan of the
Corporation as set forth in Schedule B to the Corporation's Management
Information Circular and Proxy Statement dated October 31, 1997, is
hereby approved."
THIS SPECIAL RESOLUTION WILL NOT TAKE EFFECT UNTIL IT IS PASSED BY AT
LEAST TWO-THIRDS OF THE VOTES CAST BY THE SHAREHOLDERS AT THE MEETING ON THIS
MOTION. THE PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY, UNLESS INSTRUCTED
OTHERWISE, INTEND TO VOTE FOR THIS SPECIAL RESOLUTION APPROVING ADOPTION OF THE
AWARD PLAN.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO
APPROVE ADOPTION OF THE AWARD PLAN.
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 3, 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 of Directors of the Corporation.
Portland, Oregon BY ORDER OF THE BOARD OF DIRECTORS
October 31, 1997
William DeJong
Secretary
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SCHEDULE A
BY-LAW NO. 1B
A BY-LAW RELATING GENERALLY TO THE CONDUCT OF THE BUSINESS AND AFFAIRS
OF HEALTHCARE CAPITAL CORP. (HEREINAFTER CALLED THE "CORPORATION").
3.05 QUORUM OF SHAREHOLDERS: A quorum of Shareholders is present at a Meeting of
Shareholders if not less than 33-1/3% of the issued shares entitled to vote at
the Meeting are represented in person or by proxy.
<PAGE>
SCHEDULE B
HEALTHCARE CAPITAL CORP.
SECOND AMENDED AND RESTATED
STOCK AWARD PLAN
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, and is further
amended and restated as set forth herein effective October --, 1997.
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.
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"COMMON 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.
"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.
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"OTHER STOCK-BASED AWARD" means an Award as described in
Section .
"PARTICIPANT" means an employee or Consultant of Corporation
or a Subsidiary or a Nonemployee Director who is granted an Award under the
Plan.
"PERFORMANCE AWARD" means an Award granted pursuant to the
provisions of Article 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 of the Plan.
"PERFORMANCE GOAL" means a designated performance objective
pursuant to the provisions of Section 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.
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"SHARE" means a Common Share.
"STOCK APPRECIATION RIGHT" or "SAR" means an Award described
in Article 8 of the Plan.
"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 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 Non-Employee Directors. In the event the
Board delegates administration to such a committee, the committee will have all
the authority of the Board with
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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:
(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.
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 Plan 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
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is otherwise terminated by the Board. Termination of the Plan will not affect
outstanding Awards.
4.2 Shares Subject to the Plan.
4.2.1 General. The shares which may be made subject to Awards
under the Plan are Common 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 3,000,000 Shares, subject to
adjustment pursuant to Article 13 of the Plan; provided that for so long as the
Common Shares are listed on The Alberta Stock Exchange, the total number of
Shares issuable pursuant to all outstanding Awards granted under the Plan, plus
all outstanding options to purchase Common Shares granted under the Stock Option
Plan or otherwise (except for options granted as remuneration to a person for
services rendered in connection with a capital raising activity), shall not at
any time exceed that number of Shares which is equal to 10% of the outstanding
Common Shares listed on The Alberta Stock Exchange (on a nondiluted basis).
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 used as full
or partial payment to Corporation by a Participant of the option, purchase, or
other exercise price of an Award and 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 of the Plan;
(b) Stock Appreciation Rights governed by Article of the Plan;
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(c) Restricted Units governed by Article of the Plan;
(d) Performance Awards governed by Article of the Plan; and
(e) Other Stock-Based Awards or combination Awards governed by
Article 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.
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 The Alberta Stock
Exchange for so long as any Common Shares are listed on such exchange, as well
as by any other 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; provided that an
individual Participant may receive only one grant of an Award during any
12-month period; and provided further that no single Participant may be granted
Awards under the Plan pursuant to which an aggregate number of Shares may be
issued in excess of that number of Shares which is equal, at the time of any
such grant, to 5% of the Common Shares outstanding (on a nondiluted basis) and
listed on The Alberta Stock Exchange if any Common Shares are so listed, and
that options granted to Consultants may not exceed 1% as to any individual
Consultant or 2.5% as to all Consultants in the aggregate, in each case of the
Common Shares outstanding (on a nondiluted basis) and listed on The Alberta
Stock Exchange if any Common Shares are so listed.
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.
6.5 Provisions Governing All Awards. All Awards will be
subject to the following provisions:
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(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 service as a Nonemployee Director or
Consultant will be determined by the Board and specified in the
applicable Award Agreement.
(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.
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(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
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 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 of the Plan and this Article and may contain
such additional terms and conditions, not inconsistent with the express
provisions of the Plan, as the Board deems desirable.
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 less than that permitted under (i) the regulations and
guidelines of any regulatory agency having jurisdiction or (ii) for so long as
the Common Shares are listed on The Alberta Stock Exchange, the bylaws and
policies of The Alberta Stock Exchange.
7.4 Option Term. The Award Agreement for each Option will
specify the term of each Option, not to exceed five years, during which the
Option may be exercised, as determined by the Board.
7.5 Time of Exercise. The Award Agreement for each Option will
specify, as determined by the Board:
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(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.
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.
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:
(a) In previously acquired Shares; or
(b) 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 10, 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 of the Plan and this Article and may
contain such additional
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terms and conditions, not inconsistent with the express terms of the Plan, as
the Board deems desirable.
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.
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 of the Plan and this Article and may contain such
additional terms and conditions, not inconsistent with the express provisions of
the Plan, as the Board deems desirable.
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
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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 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 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 of the Plan and this Article and may contain
such other terms and conditions not inconsistent with the express provisions of
the Plan, as the Board deems desirable.
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.
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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 , in the form of cash, installments, or Shares, or in any form or
combination of such methods as the Board determines.
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.
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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 Common Stock 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 Common Stock, 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 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 Common 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 by The
Alberta Stock Exchange, if such approval is required.
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
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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.
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)
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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
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 Common 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 --, 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.
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<PAGE>
ARTICLE 17
OTHER APPROVALS
The Plan is subject to approval by The Alberta Stock 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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<PAGE>
PRELIMINARY COPY
HEALTHCARE CAPITAL CORP.
--------------
PROXY
--------------
FOR USE AT THE ANNUAL AND SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 5, 1997
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, William DeJong, Secretary and 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 Annual and Special General Meeting of the Shareholders of the Corporation
(the "Meeting") to be held on the 5th day of December, 1997, 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 from voting) the Common Shares of the Corporation registered
in the name of the undersigned as indicated below.
1. RESOLUTION FIXING THE NUMBER OF DIRECTORS AT SIX.
FOR [ ] WITHHOLD VOTE [ ]
2. ELECTION OF DIRECTORS.
FOR [ ] WITHHOLD VOTE [ ]
all nominees listed (except as to all nominees
as marked to the contrary below) listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:)
Gene K. Balzer, Ph.D., Brandon M. Dawson, William DeJong, Gregory J.
Frazer, Ph.D., Douglas F. Good, Hugh T. Hornibrook
3. RESOLUTION APPROVING THE APPOINTMENT OF KPMG PEAT MARWICK LLP as the
auditors of the Corporation and authorizing the directors to fix their
remuneration.
FOR [ ] WITHHOLD VOTE [ ]
4. RESOLUTION AUTHORIZING THE ISSUANCE of up to 15,000,000 additional
Common Shares of the Corporation.
FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ]
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<PAGE>
5. RESOLUTION RATIFYING BY-LAW AMENDMENT to increase shareholder quorum
requirement.
FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ]
6. RESOLUTION APPROVING SECOND AMENDED AND RESTATED STOCK AWARD PLAN.
FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ]
7. 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.
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 HELD BY THE
UNDERSIGNED.
DATED this ------ day of --------------, 1997.
- ------------------------------------------------
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
6 ABOVE, THE PROXY DESIGNEE IS INSTRUCTED TO VOTE THE SHARES
REPRESENTED BY THIS PROXY ON EACH SUCH MATTER AND IN FAVOR OF SUCH
RESOLUTION.
3. To be effective, proxies must be received before 10 a.m. (Calgary time)
on December 4, 1997, 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.
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