SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
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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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
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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 fix the number of directors at six;
2. To elect directors;
3. To appoint auditors for the ensuing year and to authorize the Board of
Directors to fix the remuneration to be paid to the auditors;
4. 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;
5. To consider and approve the Corporation's Second Amended and Restated
Stock Award Plan;
6. 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; and
7. 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 29, 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
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SOLICITATION OF PROXIES
THIS MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT (THE
"CIRCULAR") IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE MANAGEMENT
OF HEALTHCARE CAPITAL CORP. (THE "CORPORATION") OF PROXIES TO BE USED AT THE
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
will first be 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 October 28,
1997, or, where appropriate, the applicable date of the specific transaction or
payment described. THE EXCHANGE RATE FOR CONVERTING CANADIAN DOLLARS INTO U.S.
DOLLARS AT OCTOBER 28, 1997, WAS 1.4128.
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
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preceding the day of the Meeting, or any adjournment thereof, at which the proxy
is to be used, or with the Chairman of the Meeting on the day of the Meeting, or
any adjournment thereof.
OUTSTANDING VOTING SECURITIES
On October 29, 1997, the Corporation had outstanding ---------- Common
Shares, without nominal or 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) 2,702,000
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.
Effective October 15, 1997, the Board of Directors amended the
Corporation's By-Laws to provide that a quorum of shareholders will be
established at a shareholders meeting if the holders of 331/3% of the Common
Shares entitled to vote at the meeting are present in person or represented by
proxy. By-Law No. 1B reflecting the increased quorum requirement is being
submitted for shareholder approval at the Meeting. See "4. Approval of Increased
Quorum Requirement." The quorum requirement previously in effect provided that
two persons representing in the aggregate not less than 10% of the Common Shares
entitled to vote at a shareholders meeting must be present at the meeting to
constitute a quorum.
A DIRECTION TO "WITHHOLD VOTE" (ABSTAIN) WITH RESPECT TO PROPOSALS 1,
4, AND 5 SET FORTH IN THE ACCOMPANYING NOTICE OF MEETING WILL BE DEEMED TO HAVE
THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL. 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 29, 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.
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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. The numbers in the table include Common Shares as to which a person has
the right to acquire beneficial ownership through the exercise or conversion of
options, purchase warrants or convertible securities within 60 days after
October 29, 1997.
<TABLE>
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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>
Brandon M. Dawson 4,550,000(2)(4) 16.5%
111 S.W. Fifth Ave., Ste. 2390
Portland, Oregon 97204
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Hearing Health Services, Inc. 2,000,000(3) 6.8%
1018 W. Ninth Ave., Ste. 310
King of Prussia, Pennsylvania 19406
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Gregory J. Frazer, Ph.D. 1,711,959(2)(5) 6.2%
18531 Roscoe Blvd., Ste. 201
Northridge, California 91324
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Douglas F. Good 1,209,562 4.4%
595 Howe St., Ste. 1120
Vancouver, B.C. V6C 2T5
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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(2) *
2631 West 13th Avenue
Vancouver, B.C. V6K 2T3
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William DeJong 157,200(2) *
1800 First Canadian Centre
350 7th Avenue, S.W.
Calgary, Alberta T2P 3N9
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Kathy A. Foltner 69,000(2) *
111 S.W. Fifth Ave., Ste. 2390
Portland, Oregon 97204
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All directors and executive officers as a group (9 8,761,821(2) 30.8%
persons)
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</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
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conversion of options, purchase warrants or convertible securities
within 60 days after October 29, 1997, have been included in shares
deemed to be outstanding for purposes of computing percentage ownership
by such person.
(2) Includes options to purchase Common Shares which are presently
exercisable or will become exercisable by December 28, 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.
(3) 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 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.
(4) 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. See
"Interests of Insiders in Material Transactions."
(5) 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.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the years indicated the compensation
awarded or paid to, or earned by, the Corporation's chief executive officer and
the Corporation's other executive officers whose salary level and regular bonus
for the fiscal year ended July 31, 1997, exceeded $100,000.
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<TABLE>
Annual Long-Term
Compensation Compensation Awards
Number of Shares
Name and Principal Position Year Salary Bonus Underlying Options
<S> <C> <C> <C>
Brandon M. Dawson 1997 $130,000 $ -- --
President and Chief 1996 86,667 -- 650,000
Executive Officer
Kathy A. Foltner 1997 85,000 37,500 125,000
Vice President-Operations
Gregory J. Frazer, Ph.D. 1997 110,000 -- 400,000
Vice President-Business
Development
</TABLE>
In addition, two other executive officers of the Corporation were paid an
aggregate of $215,289 in cash compensation, including incentive compensation of
$50,454 relating to an acquisition, during the 1997 fiscal year.
OPTION GRANTS
During the fiscal year ended July 31, 1997, the Corporation granted
stock options to employees and directors under its Stock Option Plan adopted
effective November 18, 1993, and its Stock Award Plan adopted effective December
10, 1996. The Second Amended and Restated Stock Award Plan is being submitted
for approval by the shareholders at the Meeting. See "5. Approval of Stock Award
Plan." Options are granted at the discretion of the Board of Directors. Options
granted to date have a term of five years and generally vest in two or more
equal annual installments. The options are not transferable or assignable.
The following table sets forth certain information concerning grants of
options to purchase Common Shares to individuals who were directors or executive
officers of the Corporation during the fiscal year ended July 31, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
Number of Percentage of
Shares Total Options Market
Underlying Granted to Exercise Price on
Options Employees in Price Grant Date
Name Granted Fiscal Year ($/share) ($/share) Expiration Date
<S> <C> <C> <C> <C> <C>
Gene K. Balzer, Ph.D. -- -- -- -- --
Brandon M. Dawson -- -- -- -- --
William DeJong -- -- -- -- --
Randall E. Drullinger -- -- -- -- --
Kathy A. Foltner 125,000(1) 8.2% $1.45 $1.45 Feb. 5, 2002
Gregory J. Frazer, Ph.D. 400,000(2) 26.4 1.30 1.76 Oct. 1, 2001
Douglas F. Good -- -- -- -- --
Hugh T. Hornibrook -- -- -- -- --
Edwin J. Kawasaki 170,000(3) 11.2 1.12 1.12 May 8, 2002
</TABLE>
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(1) One-half of Ms. Foltner's options become exercisable on November 1,
1997, with the balance becoming exercisable on November 1, 1998.
(2) One-half of Mr. Frazer's options became exercisable on October 1, 1997,
with the balance becoming exercisable on October 1, 1998.
(3) One-half of Mr. Kawasaki's options became exercisable on August 12,
1997, with the balance becoming exercisable on August 12, 1998.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information regarding option
exercises during the fiscal year ended July 31, 1997, and the fiscal year-end
value of unexercised options held by individuals who were directors or executive
officers of the Corporation during the 1997 fiscal year:
<TABLE>
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>
Gene K. Balzer, Ph.D. 200,000 $170,741 -- -- $ -- --
Brandon M. Dawson 250,000 211,420 300,000 -- 275,687 --
William DeJong -- -- 75,000 -- 35,275 --
Randall E. Drullinger -- -- 200,000 -- -- --
Kathy A. Foltner -- -- -- 125,000 -- --
Gregory J. Frazer, Ph.D. -- -- -- 400,000 -- --
Douglas F. Good 225,000 180,118 -- -- -- --
Hugh T. Hornibrook -- -- 200,000 -- -- --
Edwin J. Kawasaki -- -- -- 170,000 -- $11,900
</TABLE>
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(1) The value realized was calculated based on the excess of the closing
sale price of the Common Shares reported on The 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
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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 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. Options
granted during the 1997 fiscal year are included in the table under "Option
Grants" above.
INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS
On October 1, 1996, the Corporation acquired 11 hearing care clinics in
Southern California through the acquisition of all of the outstanding shares of
three corporations owned by Gregory J. Frazer, Ph.D., who was subsequently
appointed Vice President-Business Development and a director of the Corporation,
his wife, Carissa Bennett, and Jami Tanihana (the "HCA Shareholders"). The
consideration paid by the Corporation consisted of $314,724 in cash and
2,389,536 Common Shares of which Mr. Frazer and Ms. Bennett received a total of
1,470,359 shares. Mr. Frazer and Ms. Bennett also received a total of $196,294
in payment for covenants not to compete.
Twenty-five percent, or 597,384, of the Common Shares issued to the HCA
Shareholders are being held by the Corporation (the "Retained Shares"). One
Common Share will be issued to the HCA Shareholders on a pro rata basis from the
Retained Shares for each dollar by which net current assets (as defined in the
acquisition agreement) of the acquired corporations exceed certain target
amounts. To the extent that such net current assets do not exceed the target
amounts, the HCA Shareholders may elect to either pay the Corporation one dollar
or cancel one Retained Share for each dollar of shortfall. A Retained Share is
also required to be canceled or a dollar paid to the Corporation for each dollar
by which long-term liabilities of the acquired corporations exceed a specified
amount, or certain accounts receivable remain uncollected after specified time
periods.
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The HCA Shareholders have the right, until September 30, 2001, to
require the Corporation to redeem an aggregate of 15,000 of their Common Shares
as of the last day of each calendar quarter at a price of $1.67 per share. The
redemption rights are noncumulative and expire if not exercised as of the end of
any calendar quarter as to such quarter. Pursuant to such redemption rights, the
Corporation has redeemed a total of 19,800 shares from Ms. Tanihana, 6,600
shares from Ms. Bennett and 1,800 shares from Mr. Frazer for consideration of
$33,066, $11,022, and $3,006, respectively.
During 1997, the Corporation has acquired six additional hearing
clinics in Southern California in which Mr. Frazer was part-owner. Of the
aggregate cash purchase price of $1,217,231 for the six clinics, Mr. Frazer and
Ms. Bennett received a total of $560,377. Mr. Frazer and Ms. Bennett also
received the sum of $147,654 in payment for covenants not to compete in
connection with the acquisitions.
On October 31, 1996, the Corporation acquired the Midwest Division of
Hearing Health Services, Inc. (the"Midwest Division"), in exchange for
convertible subordinated notes made payable to certain affiliates of Hearing
Health Services, Inc., in the aggregate amount of $2,600,000 convertible into
2,000,000 Common Shares and the assumption of a promissory note with a balance
of $360,000 payable to Kathy A. Foltner, Vice President-Operations of the
Corporation. The promissory note is payable in equal annual installments of
$120,000 beginning July 1, 1997, and bears interest at 6% per annum. The balance
of the promissory note at September 30, 1997, was $240,000. In addition to the
promissory note, the Corporation also agreed to assume an obligation of the
Midwest Division to pay Ms. Foltner $50,000 in each of 1997, 1998, and 1999, if
specified production goals are met. Ms. Foltner has met the specified production
goals for 1997. The Corporation has paid Ms. Foltner $37,500 for the period from
October 1, 1996 to July 31, 1997, and will pay her an additional $12,500 by
December 31, 1997.
Under the terms of an escrow agreement dated January 14, 1994, among
the Corporation, a trustee, and Michael G. Thomson, Craig R. Thomson, Murray
T.A. Campbell, Bruce A. Ramsay and William DeJong (the "Founding Shareholders"),
3,000,000 Common Shares were issued to the Founding Shareholders in exchange for
an aggregate of $100,000 in cash and deposited in escrow with the trustee. As of
October 21, 1997, the final 1,000,000 Common Shares were subject to release from
escrow.
Douglas F. Good, Marilyn Marshall, and Trudy McCaffery (the "Fraserview
Shareholders"), the Corporation, and a trustee are parties to an escrow
agreement dated October 7, 1994 (the "Performance Escrow Agreement"), with
respect to 4,250,000 Common Shares (the "Performance Shares") that were issued
to the Fraserview Shareholders in connection with the Corporation's acquisition
of Fraserview Hearing & Speech Clinic Ltd. The terms of the Performance Escrow
Agreement specify that one Common Share is eligible for release from escrow,
upon application to the ASE, for each $0.08 of "cash flow" generated by the
Corporation. For purposes of the Performance Escrow Agreement, "cash flow" is
defined as the Corporation's net income as shown on the Corporation's audited
financial statements, plus depreciation, depletion, deferred taxes, and
amortization of goodwill and research and development costs. All of the
Performance Shares remain subject to the Performance Escrow Agreement.
Pursuant to a purchase and sale agreement (the "Share Purchase
Agreement") dated as of April 15, 1996, between the Fraserview Shareholders and
Brandon M. Dawson, Roger W. Larose, Randall E. Drullinger and Hugh T. Hornibrook
(the "Purchasers"), the Fraserview Shareholders sold all of the Performance
Shares to the Purchasers for an aggregate consideration of $601,637. Pursuant to
an assignment and novation agreement dated as of August 28, 1996, Roger W.
Larose agreed to assign all of his right, title and interest in the Share
Purchase Agreement to Brandon M. Dawson. In addition, pursuant to an assignment
and novation agreement dated as of February 27, 1997, Mr. Hornibrook agreed to
assign all of his right, title, and interest in the Share Purchase Agreement to
Edwin J. Kawasaki. The assignments are subject to the approval of the ASE. As a
result of the Share Purchase Agreement and assignments, Messrs. Dawson,
Drullinger and Kawasaki hold 3,900,000, 250,000 and 100,000 Performance Shares,
respectively.
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From 1994 through July 31, 1996, Douglas F. Good, a shareholder and
director of the Corporation and its former chief executive officer, advanced
funds to the Corporation for short-term working capital and acquisitions.
Interest on the advances accrued at 9% per annum. The Corporation paid Mr. Good
aggregate interest of $43,001 for the three-year period ended July 31, 1996 and
the highest outstanding balance during such period was $240,167 during January
1995. As of July 31, 1996, the total of the advances and all accrued interest
had been repaid.
William DeJong is a partner in the Calgary, Alberta law firm of Ballem
MacInnes and Secretary and a director and a Founding Shareholder of the
Corporation. During the period from August 1, 1995, to July 31, 1997, total
fees, disbursements and government sales tax paid to Ballem MacInnes by the
Corporation for legal services were approximately $204,500. Mr. DeJong was
granted options to purchase 50,000 shares at $0.07 per share in November 1993,
which he exercised on February 22, 1996.
On January 11, 1996, Michael G. Thomson, a former officer and director
and a Founding Shareholder, exercised options granted in November 1993 for
200,000 Common Shares at $0.07 per share.
Under a settlement agreement between the Corporation and Roger W.
Larose, formerly the Corporation's chief operating officer, the Corporation
agreed to pay the exercise price of 200,000 options to purchase Common Shares
held by Mr. Larose. On April 1, 1996, Mr. Larose exercised options for 100,000
Common Shares at $0.28 per share and Douglas F. Good, as an advance to and on
behalf of the Corporation, paid the exercise price of $28,048 to the
Corporation. On September 30, 1996, Mr. Larose exercised options for an
additional 100,000 Common Shares at $0.28 per share and Mr. Good, as an advance
to and on behalf of the Corporation, paid the exercise price of $27,900 to the
Corporation.
Brandon M. Dawson subsequently executed promissory notes in favor of
Mr. Good equal to the amounts advanced by Mr. Good in connection with the
options exercised by Mr. Larose, and Mr. Dawson was substituted for Mr. Good as
the obligee with respect to such advances. Interest on the advances made by Mr.
Dawson accrues at the rate of 9% per annum. At September 30, 1997, the
outstanding balance of the advances made by Mr. Dawson, with accrued interest,
was $61,165.
On April 1, 1996, Brandon M. Dawson, 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.
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.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of the Corporation are KPMG Peat Marwick LLP, 1211 S.W.
Fifth Avenue, Suite 2000, Portland, Oregon 97204. The registrar and transfer
agent of the Common Shares is CIBC Mellon Trust Company, Suite 600, 333-7th
Avenue SW, Calgary, Alberta, Canada T2P 2Z1.
PARTICULARS OF MATTERS TO BE ACTED UPON
To the knowledge of the Board of Directors, the only matters to be
acted upon at the Meeting are those set forth in the accompanying Notice of
Meeting relating to the fixing of the number of directors to be elected,
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<PAGE>
the election of directors, the appointment of auditors, ratification of an
amendment to the Corporation's ByLaws, approval of its Second Amended and
Restated Stock Award Plan, and the receipt of the financial statements.
1. 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.
2. 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.
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 29, 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>
Name and Director
Municipality of Residence Age Principal Occupation(1) Since
- ------------------------- --- ----------------------- -----
<S> <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
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<PAGE>
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 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., a consolidator and 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, Good and Hornibrook.
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<PAGE>
The Corporation presently does not have a standing 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 1, 1998, to the
Secretary of the Corporation at its principal executive offices and should
include the name, address and qualifications of each proposed nominee.
OTHER EXECUTIVE OFFICERS
Randall E. Drullinger, age 34, has served as Vice President-Marketing
of the Corporation since April 1996. From August 1990 to April 1996, he was
director of financial management services at Starkey Laboratories, Inc.
Edwin J. Kawasaki, age 39, has served as Vice President-Finance of the
Corporation since August 1996. Mr. Kawasaki was a principal of Stafford Capital
Corp., an investment buy-out firm, from September 1995 to July 1996, and was a
senior vice president at Peregrine Holdings Ltd., an investment banking boutique
firm, from January 1994 to September 1995. From 1987 to 1993, he was the
controller of Lewis and Clark College. Prior to 1987, Mr. Kawasaki was a
supervising senior accountant with KPMG Peat Marwick LLP.
Kathy A. Foltner, age 44, was appointed Vice President-Operations of
the Corporation in November 1996, when the Corporation acquired substantially
all of the assets of the Midwest Division of Hearing Health Services, Inc. Ms.
Foltner served as vice president of Hearing Health Services, Inc., since January
1995 and as director of its Michigan operations from July 1994 to December 1994.
Prior to July 1994, Ms. Foltner was the owner and president of Audio-Vestibular
Testing Center, Inc.
3. APPOINTMENT OF AUDITORS
Effective December 20, 1996, upon the recommendation of the Board of
Directors and approval by the shareholders, the Corporation retained KPMG Peat
Marwick LLP as its independent auditors, replacing Shikaze Ralston. The
Corporation made the change in independent auditors due to its significant and
growing operations in the United States and its need to draw upon the services
and expertise of a large international accounting and auditing firm. The report
of Shikaze Ralston on the consolidated financial statements of the Corporation
for the year ended July 31, 1996, included in its 1997 annual report to
shareholders accompanying this Circular does not contain an adverse opinion or
disclaimer of opinion and is not qualified as to uncertainty, audit scope, or
accounting principles. In addition, there were no disagreements with Shikaze
Ralston on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Shikaze Ralston, would have caused them to make reference
to the subject matter of the disagreements in connection with their report.
Before engaging KPMG Peat Marwick LLP as its new independent auditors, the
Corporation did not consult with them regarding any matters related to the
application of accounting principles, the type of audit opinion that might be
rendered on the Corporation's financial statements or any other such matters.
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. 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.
4. 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 resolution at the Meeting:
"BE IT RESOLVED 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 29, 1997, is hereby
ratified."
THIS RESOLUTION WILL NOT TAKE EFFECT UNTIL IT IS PASSED BY AT LEAST A
MAJORITY 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 RESOLUTION APPROVING THE AMENDMENT OF THE
BY-LAWS OF THE CORPORATION.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO RATIFY THE
BY-LAW AMENDMENT INCREASING THE QUORUM REQUIREMENT AT SHAREHOLDERS MEETINGS.
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<PAGE>
5. 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 15, 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 October 29, 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; provided that the
maximum number of Common Shares issuable under the Award Plan may not exceed the
number permitted by any regulatory authority having jurisdiction. Common Shares
subject to awards granted under the Award Plan which expire or are otherwise
canceled or terminated or are settled in cash in lieu of Common Shares will
again become available for grants of new awards.
At October 29, 1997, 13 employees held awards under the Award Plan and
represented the pool of persons considered eligible to participate in the Award
Plan at that date. The closing sale price for the Common Shares on the ASE on
October 28, 1997, was U.S. $1.31.
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.
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, Ph.D. 0
Vice President-Business Development
All executive officers as a group 325,000
Non-employee directors as a group 0
Non-executive employees as a group 652,000
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<PAGE>
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.
Nontransferability. Awards are not transferable or assignable except by
will or the laws of descent and distribution.
ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a change in capitalization, the Board 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
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<PAGE>
Board may also amend the Award Plan from time to time, subject to approval, to
the extent required, by any regulatory authority having jurisdiction over the
Award Plan, but may not, without shareholder approval, materially increase the
aggregate number of Common Shares that may be issued under the Award Plan other
than in connection with adjustments for a change in capitalization.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
The following discussion summarizes the principal anticipated U.S.
federal income tax consequences of grants of Awards under the Award Plan to
participants and to the Corporation. All recipients of Awards under the Award
Plan to date are U.S. residents.
TAX CONSEQUENCES TO PARTICIPANTS
Incentive Stock Options. Incentive stock options under the Award Plan
are intended to meet the requirements of Section 422 of the Code. A participant
does not realize taxable income upon the grant of an incentive stock option or
upon the issuance of shares when the option is exercised. The amount realized on
the sale or taxable exchange of such shares in excess of the exercise price will
be considered a mid-term or long-term capital gain, as applicable, and any loss
will be a long-term capital loss, except that if such disposition occurs within
one year after exercise of the option or two years after grant of the option,
the participant will recognize compensation taxable at ordinary income tax rates
measured by the amount by which the lesser of (i) the fair market value on the
date of exercise or (ii) the amount realized on the sale of the shares, exceeds
the exercise price. For purposes of determining alternative minimum taxable
income, an incentive stock option is treated as a nonqualified option.
Nonqualified Options. No taxable income is recognized upon the grant of
a nonqualified option. In connection with the exercise of a nonqualified option,
a participant will generally realize ordinary income measured by the difference
between the exercise price and the fair market value of the shares acquired on
the date of exercise. The participant's cost basis in the acquired shares is
the fair market value of the shares on the exercise date. Any gain upon sale of
the shares is capital gain.
Stock Appreciation Rights. The grant of a stock appreciation right to a
participant will not cause the recognition of income by the participant. Upon
exercise of a stock appreciation right, the participant will recognize ordinary
income equal to the amount of cash payable to the participant plus the fair
market value of any Common Shares or other property delivered to the
participant.
Restricted Units and Performance Awards. Generally, a participant will
not recognize any income upon issuance of an Award of restricted units or
performance units that is subject to forfeiture during a restriction period or
performance cycle. Generally, a participant will recognize compensation income
upon the vesting of restricted units or performance units in an amount equal to
the amount of cash payable to the participant plus the fair market value of
Common Shares or other property delivered to the participant.
TAX CONSEQUENCES TO THE CORPORATION
To the extent participants qualify for capital gains treatment with
respect to the sale of shares acquired pursuant to exercise of an incentive
stock option, the Corporation will not be entitled to any tax deduction in
connection with incentive stock options. In all other cases, the Corporation
will be entitled to receive a 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.
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<PAGE>
RECOMMENDATION AND VOTE
At the Meeting, the shareholders will be asked to consider and, if
thought fit, to approve the following resolution:
"BE IT RESOLVED THAT the 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 29, 1997, with such changes as may be required
by The Alberta Stock Exchange as a condition to its approval, is hereby
approved."
THIS RESOLUTION WILL NOT TAKE EFFECT UNTIL IT IS PASSED BY THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE COMMON SHARES PRESENT, IN
PERSON OR BY PROXY, AND ENTITLED TO VOTE ON THE PROPOSAL AT THE MEETING. THE
PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY, UNLESS INSTRUCTED OTHERWISE,
INTEND TO VOTE FOR THIS RESOLUTION APPROVING 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 1, 1998. Any such proposal should
comply with the SEC's rules governing shareholder proposals submitted for
inclusion in proxy materials.
The contents and the sending of this Circular have been approved by the
Board of Directors of the Corporation.
Portland, Oregon BY ORDER OF THE BOARD OF DIRECTORS
October 29, 1997
William DeJong
Secretary
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<PAGE>
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.
A-1
<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 15, 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.
"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.
B-1
<PAGE>
"CONTINUING RESTRICTION" means a Restriction contained in
Sections 15.4, 15.6, and 15.7 of the Plan and any other Restrictions expressly
designated by the Board in an Award Agreement as a Continuing Restriction.
"CORPORATION" means HealthCare Capital Corp., an Alberta,
Canada, corporation, or any successor corporation.
"DISABILITY" means the condition of being "disabled" within
the meaning of Section 22(e)(3) of the Code. However, the Board may change the
foregoing definition of "Disability" or may adopt a different definition for
purposes of specific Awards.
"DOLLARS" OR "$" means United States dollars.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute. Where the
context so requires, any reference to a particular section of the Exchange Act,
or to any rule promulgated under the Exchange Act, shall be construed to refer
to successor provisions to such section or rule.
"FAIR MARKET VALUE" of a Share on a particular day means,
without regard to any Restrictions, the mean between the reported high and low
sale prices, or, if there is no sale on such day, the mean between the reported
bid and asked prices, for that day, of Shares on that day or, if that day is not
a trading day, the last prior trading day, on the principal securities exchange
or automated securities interdealer quotation system on which such Shares shall
have been traded.
"INCENTIVE STOCK OPTION" or "ISO" means any Option granted
pursuant to the Plan that is intended to be and is specifically designated in
its Award Agreement as an "incentive stock option" within the meaning of Section
422 of the Code.
"NONEMPLOYEE DIRECTOR" means a member of the Board who is not
an employee of Corporation or a Subsidiary.
"NONQUALIFIED OPTION" or "NQO" means any Option granted
pursuant to the Plan that is not an Incentive Stock Option.
"OPTION" means an ISO or an NQO.
"OTHER STOCK-BASED AWARD" means an Award as described in
Section .
"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.
B-2
<PAGE>
"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.
"SHARES" means the Common Shares without nominal or par value
of Corporation or any security of Corporation issued in substitution, exchange,
or in lieu of such securities.
"STOCK APPRECIATION RIGHT" or "SAR" means an Award described
in Article 8 of the Plan.
"STOCK OPTION PLAN" means the Corporation's incentive stock
option plan adopted effective November 18, 1993.
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"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 Nonemployee Directors. In the event the Board
delegates administration to such a committee, the committee will have all the
authority of the Board with respect to administration of the Plan, other than
the authority to grant Awards to Nonemployee Directors, which authority shall
reside exclusively with the Board, and subject to any additional limits on such
delegation imposed by the Board.
3.3 Authority of the Board. The Board shall have full power
and authority to administer the Plan in its sole discretion, including the
authority to:
(a) Construe and interpret the Plan and any Award Agreement;
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(b) Promulgate, amend, and rescind rules and procedures
relating to the implementation of the Plan;
(c) With respect to Participants:
(i) Select the employees, Nonemployee Directors, and
Consultants who will be granted Awards;
(ii) Determine the number and types of Awards to be
granted to each Participant;
(iii) Determine the number of Shares, or Share
equivalents, to be subject to each Award;
(iv) Determine the option price, purchase price, base
price, or similar feature for any Award; and
(v) Determine all the terms and conditions of all
Award Agreements, consistent with the requirements of the Plan
and subject to approval, to the extent required, by any
regulatory authority having jurisdiction over Awards granted
under the Plan.
Decisions of the Board, or any delegate as permitted by the Plan, will be final,
conclusive, and binding on all Participants.
3.4 Liability of Board Members. No member of the Board will be
liable for any action or determination made in good faith with respect to the
Plan, any Award, or any Participant.
3.5 Costs of Plan. The costs and expenses of administering the
Plan will be borne by Corporation.
ARTICLE 4
DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN
4.1 Duration of the Plan. The HealthCare Capital Corp. Stock
Award Plan initially became effective December 10, 1996, subject to approval by
Corporation's shareholders as provided in Article 16 of the Plan. The Plan will
remain in effect until Awards have been granted covering all the available
Shares or the Plan is otherwise terminated by the Board.
Termination of the Plan will not affect outstanding Awards.
4.2 Shares Subject to the Plan.
4.2.1 General. The shares which may be made subject to Awards
under the Plan are Shares, which may be either authorized and unissued Shares or
reacquired Shares. No fractional Shares may be issued under the Plan.
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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 the maximum number
of Shares issuable under the Plan may not exceed the number permitted by the
regulations, guidelines or policies of any regulatory authority having
jurisdiction over the issuance of Shares pursuant to the Plan.
4.2.3 Availability of Shares for Future Awards. If an Award
under the Plan is canceled or expires for any reason prior to having been fully
Vested or exercised by a Participant or is settled in cash in lieu of Shares or
is exchanged for other Awards, all Shares covered by such Awards will be made
available for future Awards under the Plan. Furthermore, any Shares covered by a
Stock Appreciation Right which are not issued upon exercise will become
available for future Awards.
ARTICLE 5
ELIGIBILITY
Officers and other key employees of Corporation and its
Subsidiaries (who may also be directors of Corporation or a Subsidiary),
Consultants, and Nonemployee Directors who, in the Board's judgment, are or will
be contributors to the long-term success of Corporation shall be eligible to
receive Awards under the Plan.
ARTICLE 6
AWARDS
6.1 Types of Awards. The types of Awards that may be granted
under the Plan are:
(a) Options governed by Article 7 of the Plan;
(b) Stock Appreciation Rights governed by Article 8 of the
Plan;
(c) Restricted Units governed by Article 9 of the Plan;
(d) Performance Awards governed by Article 10 of the Plan;
and
(e) Other Stock-Based Awards or combination Awards governed
by Article 11 of the Plan.
In the discretion of the Board, any Award may be granted alone, in addition to,
or in tandem with other Awards under the Plan.
6.2 General. Subject to the limitations of the Plan, the Board
may cause Corporation to grant Awards to such Participants, at such times, of
such types, in such amounts, for such periods, with such option prices, purchase
prices, or base prices, and subject to such terms, conditions, limitations, and
restrictions as the Board, in its discretion, deems appropriate; provided that
all Awards granted under the Plan are subject to approval by any regulatory
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authority having jurisdiction over such grants. Awards may be granted as
additional compensation to a Participant or in lieu of other compensation to
such Participant. A Participant may receive more than one Award and more than
one type of Award under the Plan, subject to approval, to the extent required,
by any regulatory authority having jurisdiction over Awards granted under the
Plan.
6.3 Nonuniform Determinations. The Board's determinations
under the Plan or under one or more Award Agreements, including, without
limitation, the selection of Participants to receive Awards, the type, form,
amount, and timing of Awards, the terms of specific Award Agreements, and
elections and determinations made by the Board with respect to exercise or
payments of Awards, need not be uniform and may be made by the Board selectively
among Participants and Awards, whether or not Participants are similarly
situated.
6.4 Award Agreements. Each Award will be evidenced by a
written Award Agreement between Corporation and the Participant. Award
Agreements, or the form thereof, must be approved by the Board and may, subject
to the provisions of the Plan, contain any provision approved by the Board,
subject to approval, to the extent required, by any regulatory authority having
jurisdiction over Awards granted under the Plan.
6.5 Provisions Governing All Awards. All Awards will be
subject to the following provisions:
(a) Alternative Awards. If any Awards are designated in their
Award Agreements as alternative to each other, the exercise of all or
part of one Award automatically will cause an immediate equal (or pro
rata) corresponding termination of the other alternative Award or
Awards.
(b) Rights as Shareholders. No Participant will have any
rights of a shareholder with respect to Shares subject to an Award
until such Shares are issued in the name of the Participant.
(c) Employment Rights. Neither the adoption of the Plan nor
the granting of any Award will confer on any person the right to
continued employment with Corporation or any Subsidiary or the right to
remain as a director of or a consultant to Corporation or any
Subsidiary, as the case may be, and will not interfere in any way with
the right of Corporation or a Subsidiary to terminate such person's
employment or to remove such person as a Consultant or as a director at
any time for any reason or for no reason, with or without cause.
(d) Termination Of Employment. The terms and conditions under
which an Award may be exercised, if at all, after a Participant's
termination of employment or service as a Nonemployee Director or
Consultant will be determined by the Board and specified in the
applicable Award Agreement, subject to approval, to the extent
required, by any regulatory authority having jurisdiction over Awards
granted under the Plan.
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(e) Change in Control. The Board, in its discretion, may
provide in any Award Agreement that in the event of a change in control
of Corporation (as the Board may define such term in the Award
Agreement), as of the date of such change in control:
(i) All, or a specified portion of, Awards requiring
exercise will become fully and immediately exercisable,
notwithstanding any other limitations on exercise;
(ii) All, or a specified portion of, Awards subject
to Restrictions will become fully Vested; and
(iii) All, or a specified portion of, Awards subject
to Performance Goals will be deemed to have been fully earned.
The Board, in its discretion, may include change in control provisions
in some Award Agreements and not in others, may include different
change in control provisions in different Award Agreements, and may
include change in control provisions for some Awards or some
Participants and not for others.
(f) Reporting Persons. Notwithstanding anything in the Plan to
the contrary, the Board, in its sole discretion, may bifurcate the Plan
so as to restrict, limit, or condition the use of any provision of the
Plan to Participants who are Reporting Persons without so restricting,
limiting or conditioning the Plan with respect to other Participants.
(g) Service Periods. At the time of granting Awards, the Board
may specify, by resolution or in the Award Agreement, the period or
periods of service performed or to be performed by the Participant in
connection with the grant of the Award.
(h) Nontransferability. Each Award shall not be transferable
or assignable otherwise than by will or the laws of descent and
distribution and shall be exercisable (if exercise is required) during
the lifetime of the Participant, only by the Participant or, in the
event the Participant becomes legally incompetent, by the Participant's
guardian or legal representative.
ARTICLE 7
OPTIONS
7.1 Types of Options. Options granted under the Plan may be in
the form of Incentive Stock Options or Nonqualified Options. The grant of each
Option and the Award Agreement governing each Option will identify the Option as
an ISO or an NQO. In the event the Code is amended to provide for tax-favored
forms of stock options other than or in addition to Incentive Stock Options, the
Board may grant Options under the Plan meeting the requirements of such forms of
options.
7.2 General. Options will be subject to the terms and
conditions set forth in Article 6 of the Plan and this Article 7 and may contain
such additional terms and conditions,
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not inconsistent with the express provisions of the Plan, as the Board deems
desirable, subject to approval by any regulatory authority having jurisdiction
over Awards granted under the Plan.
7.3 Option Price. Each Award Agreement for Options will state
the option exercise price per Share of Common Stock purchasable under the
Option, which will not be less than:
(a) 75 percent of the Fair Market Value of a Share on the date
of grant for all Nonqualified Options; or
(b) 100 percent of the Fair Market Value of a Share on the
date of grant for all Incentive Stock Options;
provided that at no time shall the option exercise price of an Option at the
date of grant be greater or less than that permitted under the regulations,
guidelines or policies of any regulatory authority having jurisdiction over
Awards granted under the Plan.
7.4 Option Term. The Award Agreement for each Option will
specify the term during which the Option may be exercised, as determined by the
Board, subject to approval by any regulatory authority having jurisdiction over
Awards granted under the Plan.
7.5 Time of Exercise. The Award Agreement for each Option will
specify, as determined by the Board:
(a) The time or times when the Option will become exercisable
and whether the Option will become exercisable in full or in graduated
amounts over a period specified in the Award Agreement;
(b) Such other terms, conditions, and restrictions as to when
the Option may be exercised as are determined by the Board; and
(c) The extent, if any, to which the Option will remain
exercisable after the Participant ceases to be an employee, Consultant
or Nonemployee Director of Corporation or a Subsidiary;
in each case, subject to approval by any regulatory authority having
jurisdiction over Awards granted under the Plan. An Award Agreement for an
Option may, in the discretion of the Board, provide whether, and to what extent,
the Option will become immediately and fully exercisable (i) in the event of the
death, Disability, or Retirement of the Participant, or (ii) upon the occurrence
of a change in control of Corporation.
7.6 Method of Exercise. The Award Agreement for each Option
will specify the method or methods of payment acceptable upon exercise of an
Option. An Award Agreement may provide that the option price is payable in full
in cash or, at the discretion of the Board, by delivery (in a form approved by
the Board) of an irrevocable direction to a securities broker acceptable to the
Board (i) to sell Shares subject to the Option and to deliver all or a part of
the
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sales proceeds to Corporation in payment of all or a part of the option price
and withholding taxes due, or (ii) to pledge Shares subject to the Option to the
broker as security for a loan and to deliver all or a part of the loan proceeds
to Corporation in payment of all or a part of the option price and withholding
taxes due.
7.7 Special Rules for Incentive Stock Options. In the case of
an Option designated as an Incentive Stock Option, the terms of the Option and
the Award Agreement shall be in conformance with the statutory and regulatory
requirements specified in Section 422 of the Code, as in effect on the date such
ISO is granted. ISOs may not be granted under the Plan after December 9, 2006,
unless the ten-year limitation of Section 422(b)(2) of the Code is removed or
extended.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 General. Stock Appreciation Rights will be subject to the
terms and conditions set forth in Article 6 of the Plan and this Article 8 and
may contain such additional terms and conditions, not inconsistent with the
express terms of the Plan, as the Board deems desirable, subject to approval, to
the extent required, by any regulatory authority having jurisdiction over Awards
granted under the Plan.
8.2 Nature of Stock Appreciation Right. A Stock Appreciation
Right (or SAR) is an Award entitling a Participant to receive an amount equal to
the excess (or if the Board determines at the time of grant, a portion of the
excess) of the Fair Market Value of a Share on the date of exercise of the SAR
over the base price, as described below, on the date of grant of the SAR,
multiplied by the number of Shares with respect to which the SAR is exercised.
The base price will be designated by the Board in the Award Agreement for the
SAR and may be the Fair Market Value of a Share on the grant date of the SAR or
such other higher or lower price as the Board determines.
8.3 Exercise. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Board. The Board
may also provide that a SAR will be automatically exercised on one or more
specified dates or upon the satisfaction of one or more specified conditions.
8.4 Form of Payment. Payment upon exercise of a Stock
Appreciation Right may be made in cash, in installments, in Shares, or in any
other form or combination of such methods as the Board shall determine.
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
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as a Consultant or Nonemployee Director) for specified reasons within a
specified period of time or upon other conditions, as set forth in the Award
Agreement for such Restricted Units.
9.2 General. Restricted Units will be subject to the terms and
conditions of Article 6 of the Plan and this Article 9 and may contain such
additional terms and conditions, not inconsistent with the express provisions of
the Plan, as the Board deems desirable, subject to approval, to the extent
required, by any regulatory authority having jurisdiction over Awards granted
under the Plan.
9.3 Restriction Period. Restricted Units will provide that
such Awards, and the Shares subject to such Awards, may not be transferred, and
may provide that, in order for a Participant to Vest in such Awards, the
Participant must remain in the employment (or remain as a Consultant or
Nonemployee Director) of Corporation or its Subsidiaries, subject to relief for
reasons specified in the Award Agreement, for a period commencing on the date of
grant of the Award and ending on such later date or dates as the Board may
designate at the time of the Award (the "Restriction Period"). During the
Restriction Period, a Participant may not sell, assign, transfer, pledge,
encumber, or otherwise dispose of Shares underlying Restricted Units. The Board,
in its sole discretion, may provide for the lapse of restrictions in
installments during the Restriction Period. Upon expiration of the applicable
Restriction Period (or lapse of Restrictions during the Restriction Period where
the Restrictions lapse in installments) the Participant will be entitled to
settlement of the Restricted Units or portion thereof, as the case may be.
Although Restricted Units usually will Vest based on continued employment (or
continued service as a Consultant or Nonemployee Director) and Performance
Awards under Article 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.
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ARTICLE 10
PERFORMANCE AWARDS
10.1 General. Performance Awards will be subject to the terms
and conditions set forth in Article 6 of the Plan and this Article 10 and may
contain such other terms and conditions not inconsistent with the express
provisions of the Plan, as the Board deems desirable, subject to approval, to
the extent required, by any regulatory authority having jurisdiction over Awards
granted under the Plan.
10.2 Nature of Performance Awards. A Performance Award is an
Award of stock units (with each unit having a value equivalent to one Share)
granted to a Participant subject to such terms and conditions as the Board deems
appropriate, including, without limitation, the requirement that the Participant
forfeit such Performance Award or a portion of such Award in the event specified
Performance Goals are not met within a designated Performance Cycle.
10.3 Performance Cycles. For each Performance Award, the Board
will designate a performance period (the "Performance Cycle") with a duration to
be determined by the Board in its discretion within which specified Performance
Goals are to be attained. There may be several Performance Cycles in existence
at any one time and the duration of Performance Cycles for specific Awards may
differ from each other.
10.4 Performance Goals. For each Performance Award, the Board
will establish Performance Goals on the basis of such criteria and to accomplish
such objectives as the Board may from time to time select. Performance Goals may
be based on performance criteria for Corporation, a Subsidiary, or an operating
group or division, or based on a Participant's individual performance.
Performance Goals may include objective and subjective criteria. During any
Performance Cycle, the Board may adjust the Performance Goals for such
Performance Cycle as it deems equitable in recognition of unusual or
nonrecurring events affecting Corporation, changes in applicable tax laws or
accounting principles, or such other factors as the Board may determine.
10.5 Determination of Vested Awards. As soon as practicable
after the end of a Performance Cycle, the Board will determine the extent to
which Performance Awards have been earned on the basis of performance in
relation to the established Performance Goals.
10.6 Timing and Form of Payment. Settlement of earned
Performance Awards will be made to the Participant as soon as practicable after
the expiration of the Performance Cycle and the Board's determination under
Section , 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
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or measured by Share equivalent units, including Awards valued using measures
other than the market value of Shares. Such Other Stock-Based Awards may be
granted either alone, in addition to, or in tandem with, any other type of Award
granted under the Plan.
11.2 Combination Awards. The Board may also grant Awards under
the Plan in tandem or combination with other Awards or in exchange of Awards, or
in tandem or combination with, or as alternatives to, grants or rights under any
other employee plan of Corporation, including the plan of any acquired entity.
No action authorized by this section will reduce the amount of any existing
benefits or change the terms and conditions thereof without the Participant's
consent.
ARTICLE 12
DEFERRAL ELECTIONS
The Board may permit a Participant to elect to defer receipt
of the payment of cash or the delivery of Shares that would otherwise be due to
such Participant by virtue of the exercise, earn-out, or Vesting of an Award
made under the Plan. If any such election is permitted, the Board will establish
rules and procedures for such payment deferrals, including, but not limited to,
payment or crediting of a growth factor on such deferred amounts credited in
cash.
ARTICLE 13
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
13.1 Plan Does Not Restrict Corporation. The existence of the
Plan and the Awards granted under the Plan will not affect or restrict in any
way the right or power of the Board or the shareholders of Corporation to make
or authorize any adjustment, recapitalization, reorganization, or other change
in Corporation's capital structure or its business, any merger or consolidation
of the Corporation, any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting Corporation's capital stock or the
rights thereof, the dissolution or liquidation of Corporation or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding.
13.2 Adjustments by the Board. In the event of any change in
capitalization affecting the Shares of Corporation, such as a stock dividend,
stock split, recapitalization, merger, consolidation, split-up, combination or
exchange of shares or other form of reorganization, or any other change
affecting the Shares, such proportionate adjustments as the Board, in its sole
discretion, deems appropriate to reflect such change, will be made with respect
to the aggregate number of Shares for which Awards in respect thereof may be
granted under the Plan, the maximum number of Shares which may be sold or
awarded to any Participant, the number of Shares covered by each outstanding
Award, and the price per Share in respect of 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.
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ARTICLE 14
AMENDMENT AND TERMINATION
Without further approval of Corporation's shareholders, the
Board may at any time terminate the Plan, or may amend it from time to time in
such respects as the Board may deem advisable; provided that the Board may not,
without approval of the shareholders, make any amendment that would materially
increase the aggregate number of Shares that may be issued under the Plan
(except for adjustments pursuant to Article 13 of the Plan); and provided
further that any amendment of the Plan shall be subject to approval, to the
extent required, by any regulatory authority having jurisdiction over the Plan.
ARTICLE 15
MISCELLANEOUS
15.1 Tax Withholding.
15.1.1 General. Corporation will have the right to deduct from
any settlement of any Award under the Plan, including the delivery or vesting of
Shares, any taxes of any kind required by the laws of any Canadian or U.S.
jurisdiction to be withheld with respect to such payments or to take such other
action as may be necessary in the opinion of Corporation to satisfy all
obligations for the payment of such taxes. The recipient of any payment or
distribution under the Plan may be required to make arrangements satisfactory to
Corporation for the satisfaction of any such withholding tax obligations,
whether or not such recipient is an employee of Corporation or a Subsidiary on
the date of such settlement. Corporation will not be required to make any such
payment or distribution under the Plan until such obligations are satisfied.
15.1.2 Stock Withholding. The Board, in its sole discretion,
may permit a Participant to satisfy all or a part of the withholding tax
obligations incident to the settlement of an Award involving payment or delivery
of Shares to the Participant by having Corporation withhold a portion of the
Shares that would otherwise be issuable to the Participant. Such Shares will be
valued based on their Fair Market Value on the date the tax withholding is
required to be made.
15.2 Unfunded Plan. The Plan will be unfunded and Corporation
shall not be required to segregate any assets that may at any time be
represented by Awards under the Plan. Any liability of Corporation to any person
with respect to any Award under the Plan will be based solely upon any
contractual obligations that may be effected pursuant to the Plan. No such
obligation of Corporation shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of Corporation.
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.
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15.4 Annulment of Awards. Any Award Agreement may provide that
the grant of an Award payable in cash is provisional until cash is paid in
settlement of such Award or that the grant of an Award payable in Shares is
provisional until the Participant becomes entitled to the stock certificate in
settlement of such Award. In the event the employment (or service as a
Consultant or Nonemployee Director) of a Participant is terminated for cause (as
defined below), any Award that is provisional will be annulled as of the date of
such termination for cause. For the purpose of this Section 15.4, the term "for
cause" will have the meaning set forth in the Participant's employment
agreement, if any, or otherwise means any discharge (or removal) for material or
flagrant violation of the policies and procedures of Corporation or for other
job performance or conduct that is materially detrimental to the best interests
of Corporation, as determined by the Board.
15.5 Engaging in Competition With Corporation. Any Award
Agreement may provide that, if a Participant terminates employment with
Corporation or a Subsidiary for any reason whatsoever, and within 18 months
after the date of such termination accepts employment with any competitor of (or
otherwise engages in competition with) Corporation, the Board, in its sole
discretion, may require such Participant to return to Corporation the economic
value of any Award that is realized or obtained (measured at the date of
exercise, Vesting, or payment) by such Participant at any time during the period
beginning on the date that is six months prior to the date of such Participant's
termination of employment with Corporation.
15.6 Other Corporation Benefit and Compensation Programs.
Payments and other benefits received by a Participant under an Award made
pursuant to the Plan will not be deemed a part of a Participant's regular,
recurring compensation for purposes of the termination indemnity or severance
pay law of any state or country and will not be included in, or have any effect
on, the determination of benefits under any other employee benefit plan or
similar arrangement provided by Corporation or a Subsidiary unless expressly so
provided by such other plan or arrangements, or except where the Board expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of cash compensation. Awards under the Plan may
be made in combination with or in tandem with, or as alternatives to, grants,
awards, or payments under any other Corporation or Subsidiary plans,
arrangements, or programs. The Plan notwithstanding, Corporation or any
Subsidiary may adopt such other compensation programs and additional
compensation arrangements as it deems necessary to attract, retain, and reward
employees and directors for their service with Corporation and its Subsidiaries.
15.7 Securities Law Restrictions. No Shares will be issued
under the Plan unless counsel for Corporation is satisfied that such issuance
will be in compliance with the applicable securities laws of any Canadian or
U.S. jurisdiction. Certificates for Shares delivered under the Plan may be
subject to such stop-transfer orders and other restrictions as the Board deems
advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, the Alberta or British Columbia Securities Commissions,
any stock exchange upon which the Shares are then listed, and any applicable
securities law. The Board may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
B-15
<PAGE>
15.8 Governing Law. Except with respect to references to the
Code or applicable securities laws, the Plan and all actions taken thereunder
will be governed by and construed in accordance with the laws of the State of
Oregon.
ARTICLE 16
SHAREHOLDER APPROVAL
The adoption of the Plan, as amended and restated effective
October 15, 1997, and any grant of Awards under the Plan are expressly subject
to the approval of the Plan by the shareholders at the 1997 annual meeting of
Corporation's shareholders. In the event that such shareholder approval is
received, no additional stock options will be granted thereafter under the Stock
Option Plan and such plan will immediately terminate; provided that such
termination will have no effect on any options previously granted thereunder.
ARTICLE 17
OTHER APPROVALS
For so long as the Shares are listed on The Alberta Stock
Exchange, the Plan is subject to approval by such Exchange and compliance with
all conditions imposed by such Exchange from time to time with respect to the
granting and administration of Awards under the Plan.
B-16
<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 or abstain 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 [ ] AGAINST [ ] 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 RATIFYING BY-LAW AMENDMENT to increase shareholder quorum
requirement.
FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ]
5. RESOLUTION APPROVING SECOND AMENDED AND RESTATED STOCK AWARD PLAN.
FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ]
<PAGE>
6. 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 --------------, 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 5 ABOVE, THE PROXY DESIGNEE IS
INSTRUCTED TO VOTE THE SHARES REPRESENTED BY
THIS PROXY ON EACH SUCH MATTER AND FOR SUCH
RESOLUTION. MARKING THE "WITHHOLD VOTE" BOX ON
ITEMS 1, 4 OR 5 WILL BE DEEMED TO HAVE THE
SAME EFFECT AS A VOTE AGAINST THE PROPOSAL.
3. To be effective, proxies must be received
before 10 a.m. (Calgary time) on 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.
