UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IMAX CORPORATION
(Name of Registrant as Specified In Its Charter)
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[IMAX LOGO]
IMAX Corporation
2525 Speakman Drive
Mississauga, Ontario, Canada, L5K 1B1
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Meeting") of shareholders
of IMAX CORPORATION (the "Company") will be held at the Famous Players IMAX(R)
Theatre at Paramount Festival Hall, 259 Richmond Street, West, Toronto, Ontario,
Canada, on Wednesday, June 4, 2003 at 10:30 a.m., for the purposes of:
(1) receiving the consolidated financial statements for the fiscal year
ended December 31, 2002, together with the auditors' report thereon;
(2) electing directors;
(3) appointing auditors and authorizing the directors to fix the auditors'
remuneration; and
(4) transacting such other business as may properly be brought before the
Meeting or any adjournments thereof.
By Order of the Board,
/s/ G. Mary Ruby
----------------
G. MARY RUBY
Senior Vice President, Legal Affairs
and Corporate Secretary
Mississauga, Ontario
April 30, 2003
SHAREHOLDERS WHO ARE UNABLE TO BE PRESENT AT THE MEETING ARE REQUESTED
TO COMPLETE AND RETURN THE ENCLOSED FORM OF PROXY IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE. PROXIES MUST BE DEPOSITED WITH COMPUTERSHARE
TRUST COMPANY OF CANADA, C/O STOCK AND BOND TRANSFER DEPT., 100
UNIVERSITY AVENUE, TORONTO, ONTARIO, CANADA, M5J 2Y1 OR AT THE
CORPORATE OFFICE OF THE COMPANY NOTED ABOVE ON OR BEFORE 4:30 P.M.
(EASTERN DAYLIGHT SAVING TIME) ON JUNE 3, 2003.
[IMAX LOGO]
IMAX Corporation
2525 Speakman Drive
Mississauga, Ontario, Canada L5K 1B1
PROXY CIRCULAR AND PROXY STATEMENT
TABLE OF CONTENTS
PROXY CIRCULAR AND PROXY STATEMENT.................................................................................................1
GENERAL INFORMATION................................................................................................................1
SOLICITATION OF PROXIES BY MANAGEMENT..............................................................................................1
INFORMATION ON VOTING..............................................................................................................1
Record Date for Notice of Annual Meeting and Provisions Relating to Voting....................................................1
Appointment and Delivery of Proxies...........................................................................................1
Revocability of Proxies.......................................................................................................2
Voting By Proxy...............................................................................................................2
Exercise of Discretion by Proxies.............................................................................................2
VOTING SHARES......................................................................................................................2
PRINCIPAL SHAREHOLDERS OF VOTING SHARES............................................................................................3
FINANCIAL STATEMENTS AND AUDITORS' REPORT..........................................................................................4
SHAREHOLDER PROPOSALS FOR THE COMPANY'S 2004 ANNUAL MEETING........................................................................4
ELECTION OF DIRECTORS..............................................................................................................4
NOMINEES FOR ELECTION..............................................................................................................5
Nominees for Election as Class I Directors for the Term Expiring in 2006......................................................5
Directors who Continue in Office after the Meeting............................................................................6
EXECUTIVE OFFICERS.................................................................................................................7
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT.....................................................................................9
Section 16(a) Beneficial Ownership Reporting Compliance......................................................................10
EXECUTIVE COMPENSATION............................................................................................................11
Summary Compensation Table...................................................................................................11
Options Granted..............................................................................................................12
Aggregated Option Exercises in 2002 and Year-End Option Values...............................................................13
Pension Plans................................................................................................................14
Employment Contracts.........................................................................................................14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.......................................................................16
REPORT ON EXECUTIVE COMPENSATION..................................................................................................16
Composition of Compensation Committee........................................................................................16
Base Salary..................................................................................................................16
Annual Incentive Compensation................................................................................................16
Stock Options................................................................................................................17
Compensation of Co-Chief Executive Officers..................................................................................17
Performance Graph............................................................................................................18
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE......................................................................................18
DIRECTORS' COMPENSATION...........................................................................................................18
CORPORATE GOVERNANCE..............................................................................................................19
Audit Committee..............................................................................................................19
Compensation Committee.......................................................................................................19
Governance Committee.........................................................................................................19
Option Committee.............................................................................................................20
Nominating Committee.........................................................................................................20
Standstill Agreement.........................................................................................................20
Articles of the Corporation..................................................................................................20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................................................................................21
Shareholders' Agreement......................................................................................................21
Registration Rights Agreement................................................................................................22
AUDITOR INDEPENDENCE..............................................................................................................22
Audit Fees...................................................................................................................22
Financial Information Systems Design and Implementation Fees.................................................................22
All Other Fees...............................................................................................................22
REPORT OF THE AUDIT COMMITTEE.....................................................................................................23
APPOINTMENT OF AUDITORS...........................................................................................................23
AVAILABLE INFORMATION.............................................................................................................23
APPROVAL BY BOARD OF DIRECTORS....................................................................................................23
AUDIT COMMITTEE HARTER...........................................................................................................A-1
[IMAX LOGO]
IMAX Corporation
2525 Speakman Drive
Mississauga, Ontario, Canada L5K 1B1
PROXY CIRCULAR AND PROXY STATEMENT
GENERAL INFORMATION
The Annual Meeting (the "Meeting") of shareholders of IMAX Corporation (the
"Company") will be held at the Famous Players IMAX(R) Theatre at Paramount
Festival Hall, 259 Richmond Street, West, Toronto, Ontario, Canada, on
Wednesday, June 4, 2003 at 10:30 a.m., for the purposes of: (i) receiving the
consolidated financial statements for the fiscal year ended December 31, 2002,
together with the auditors' report thereon; (ii) electing directors; (iii)
appointing auditors and authorizing the directors to fix the auditors'
remuneration; and (iv) transacting such other business as may properly be
brought before the Meeting or any adjournments thereof.
The Notice of Annual Meeting, this document and the Form of Proxy will be
mailed commencing on or about April 30, 2003 to registered holders of the
Company's Common Shares as of the close of business on April 25, 2003, the
record date for the annual Meeting.
SOLICITATION OF PROXIES BY MANAGEMENT
THIS PROXY CIRCULAR AND PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE
SOLICITATION BY THE MANAGEMENT OF IMAX CORPORATION (THE "COMPANY") OF PROXIES TO
BE USED AT THE ANNUAL MEETING OF SHAREHOLDERS (THE "MEETING") OF SHAREHOLDERS OF
THE COMPANY TO BE HELD ON WEDNESDAY, JUNE 4, 2003 AT THE FAMOUS PLAYERS IMAX(R)
THEATRE AT PARAMOUNT FESTIVAL HALL, 259 RICHMOND STREET, WEST, TORONTO, ONTARIO,
CANADA, AT 10:30 A.M., AND AT ANY ADJOURNMENTS THEREOF FOR THE PURPOSES SET
FORTH IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING. While management intends to
solicit most proxies by mail, some proxies may be solicited by telephone or
other personal contact by directors or officers of the Company. Directors and
employees will not receive any additional compensation for such activity. The
Company will, upon request, pay brokers and certain other persons who hold the
Company's Common Shares for others, their reasonable expenses for sending proxy
materials to the beneficial owners of the Company's Common Shares. The cost of
solicitation will be borne by the Company.
INFORMATION ON VOTING
RECORD DATE FOR NOTICE OF ANNUAL MEETING AND PROVISIONS RELATING TO VOTING
The Board of Directors has fixed April 25, 2003 as the record date for the
Meeting. Accordingly, each holder of Common Shares of record on that date is
entitled to one vote for each Common Share shown as registered in the
shareholder's name on the list of shareholders prepared as of April 25, 2003.
APPOINTMENT AND DELIVERY OF PROXIES
The persons named in the accompanying Form of Proxy are directors and
officers of the Company. A shareholder has the right to appoint a person, who
need not be a shareholder of the Company, other than the persons designated as
proxyholders in the accompanying Form of Proxy, to attend and act on behalf of
the shareholder at the Meeting. To exercise this right, a shareholder may either
insert such other person's name in the blank space provided in the accompanying
Form of Proxy, or complete another appropriate form of proxy.
To be valid, a proxy must be dated and signed by the shareholder or his
attorney authorized in writing. The proxy, to be acted upon, must be deposited
with the Company c/o its transfer agent, Computershare Trust Company of Canada,
c/o Stock & Bond Transfer Dept., 100 University Avenue, Toronto, Ontario,
Canada, M5J 2Y1, by 4:30 p.m., Eastern Daylight Saving Time, on Tuesday, June 3,
2003 or 4:30 p.m. on the last business day prior to the date of any adjournment
of the Meeting, or with the chairman of the Meeting on the day of the Meeting or
any adjournment of the Meeting prior to the commencement of the Meeting or the
adjournment, as the case may be.
Unless otherwise indicated, all references in this document to dollar
amounts are to U.S. dollars. All information contained in this document is as of
April 25, 2003, unless otherwise indicated.
1
REVOCABILITY OF PROXIES
A shareholder who has given a proxy may revoke it by depositing an
instrument in writing (including another proxy) executed by the shareholder or
his attorney authorized in writing at the registered office of the Company at
any time up to and including 4:30 p.m., Toronto time, on the last business day
prior to the day of the Meeting or any adjournment thereof, or with the chairman
of the Meeting on the day of the Meeting or at any adjournment thereof at any
time before it is exercised on any particular matter or in any other manner
permitted by law including attending the Meeting in person.
VOTING BY PROXY
For the purpose of voting by proxy, proxies marked as "WITHHOLD/ABSTAIN"
will be treated as present for the purpose of determining a quorum but will not
be counted as having been voted in respect of any matter to which the
instruction to "WITHHOLD/ABSTAIN" is indicated.
On any ballot that may be called for regarding the matters listed in the
Notice of Annual Meeting and in the Form of Proxy, the Common Shares represented
by the enclosed Form of Proxy will be voted or withheld from voting in
accordance with the instructions of the shareholder indicated thereon by marking
an "X" in the boxes provided for the purpose on the Form of Proxy. In the
absence of such instructions the Common Shares will be voted for: (i) the
election of directors and (ii) the appointment of auditors and authorizing the
directors to fix the auditors' remuneration, in each case, as referred to in
this Proxy Circular and Proxy Statement.
Proxies returned by intermediaries as "non-votes" because the intermediary
has not received instructions from the non-registered shareholder with respect
to the voting of certain shares or, under applicable stock exchange or other
rules, the intermediary does not have the discretion to vote those shares on one
or more of the matters that come before the Meeting, will be treated as not
entitled to vote on any such matter and will not be counted as having been voted
in respect of any such matter. Shares represented by broker "non-votes" will,
however, be counted in determining whether there is a quorum.
EXERCISE OF DISCRETION BY PROXIES
The person appointed as proxy has discretionary authority and may vote the
Common Shares represented thereby as such person considers best with respect to
amendments or variations to matters identified in the Notice of Annual Meeting,
and with respect to any other matter which may properly come before the Meeting.
As of the date of this Proxy Circular and Proxy Statement, management of the
Company is not aware of any such amendment, variation or other matter proposed
or likely to come before the Meeting. However, if any such amendment, variation
or other matter properly comes before the Meeting, it is the intention of the
persons named in the enclosed Form of Proxy to vote on such other business in
accordance with their judgement.
VOTING SHARES
On April 25, 2003, the Company had 32,973,366 Common Shares issued and
outstanding, each carrying the right to one vote at all meetings of the
shareholders of the Company (the "Common Shares")
A quorum for the transaction of business at the Meeting shall be at least
two persons present in person, each being a shareholder entitled to vote thereat
or a duly appointed proxyholder for such a shareholder and together holding or
representing by proxy not less than 33-1/3% of the outstanding Common Shares of
the Company entitled to be voted at the Meeting.
2
PRINCIPAL SHAREHOLDERS OF VOTING SHARES
The Company is not aware of any persons who as of April 25, 2003,
beneficially owned or exercised control or direction over more than 5% of the
Company's Common Shares except:
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OF PERCENT OF OUTSTANDING
BENEFICIAL OWNER OF COMMON SHARES COMMON SHARES (1) COMMON SHARES (2)
---------------------------------- ------------------------ -----------------------
WASSERSTEIN MANAGEMENT PARTNERS, L.P.: 10,195,384(3) 30.92
1301 Avenue of the Americas, New York, New York
Wasserstein Perella Partners, L.P.
Wasserstein Perella Offshore Partners, L.P.
WPPN, L.P.
Michael J. Biondi solely in his capacity as Voting Trustee
Wasserstein Capital, L.P.
(collectively referred to in this circular as "Wasserstein
Perella" or "WP")
PRUDENTIAL FINANCIAL, INC.: 2,050,275(4) 6.22
751 Broad Street, Newark, New Jersey
Prudential Financial, Inc.
Jennison Associates LLC
RICHARD L. GELFOND 2,326,900(5) 6.89
Suite 2100, 110 E 59th Street, New York, New York
BRADLEY J. WECHSLER 2,211,800(6) 6.55
Suite 2100, 110 E 59th Street, New York, New York
Statements as to securities beneficially owned by the above-mentioned
beneficial owners, or as to securities, over which they exercise control or
direction, are based upon information obtained from such beneficial owners and
from records available to the Company.
(1) Includes number of Common Shares owned at April 25, 2003 and Common Shares
as to which each individual had at April 25, 2003 the right to acquire
beneficial ownership through the exercise of vested options plus options
that vest within 60 days of that date.
(2) Based on dividing the number of Common Shares beneficially owned by such
person by 32,973,366 Common Shares outstanding as of April 25, 2003
adjusted for shares issuable through the exercise of vested options, held
by such person, plus options, held by such person, that vest within 60 days
of that date.
(3) Based on information contained in a Schedule 13G/A dated February 14, 2003
filed by Wasserstein Management Partners L.P.
(4) Based on information contained in a Schedule 13G/A dated February 7, 2003
filed by Prudential Financial, Inc. and information contained in a Schedule
13G dated February 14, 2003 filed by Jennison Associates LLC.
(5) Included in the amount shown are 804,000 Common Shares as to which Mr.
Gelfond had the right to acquire beneficial ownership through the exercise
of options.
(6) Included in the amount shown are 804,000 Common Shares as to which Mr.
Wechsler had the right to acquire beneficial ownership through the exercise
of options.
3
FINANCIAL STATEMENTS AND AUDITORS' REPORT
The Board of Directors will submit to the shareholders at the Meeting the
consolidated financial statements for the fiscal year ended December 31, 2002,
and the Auditors' Report thereon. A copy of these financial statements and the
Auditors' Report is included in the Annual Report to Shareholders, which is
being mailed to the Company's shareholders together with this Proxy Circular and
Proxy Statement.
SHAREHOLDER PROPOSALS FOR THE COMPANY'S 2004 ANNUAL MEETING
If a shareholder wishes to propose any matter for a vote by the Company's
shareholders at its 2004 annual meeting, he/she must send his/her proposal to
the Company's corporate office at the following address: Corporate Secretary,
IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada, L5K 1B1.
The Company may omit the proposal from next year's proxy circular and proxy
statement under applicable United States securities laws if it is not received
by the Company's Corporate Secretary at the address noted above by December 31,
2003 and may omit the proposal from next year's proxy circular and proxy
statement under applicable Canadian corporate law if it is not received by the
Company's Corporate Secretary at the address noted above by January 30, 2004.
ELECTION OF DIRECTORS
The Company's articles permit the Company to have between one and 15
directors, with the actual number determined by the Board of Directors. The
number of directors presently in office is eleven.
At the Meeting, shareholders will be asked to approve the election of
directors, as a group, by ordinary resolution, which requires that a majority of
the votes cast at the Meeting be in favour of the resolution for the election of
nominees as a group. In the absence of any instruction on the accompanying Form
of Proxy, it is the intention of the persons named by management in the Form of
Proxy to vote the Common Shares represented by the Form of Proxy in favour of
the resolution.
The Board of Directors is divided into three classes, each of which serves
for a three year term. The Board of Directors is currently composed of Kenneth
G. Copland, J. Trevor Eyton, O.C., Michael Fuchs, Richard L. Gelfond, Garth M.
Girvan, Ellis B. Jones, G. Edmund King, Murray B. Koffler, Marc A. Utay, Bradley
J. Wechsler and W. Townsend Ziebold. At the Meeting the term of Class I
directors expires. The term of Class III directors expires in 2004. The term of
Class II directors expires in 2005.
In February 1999, the Company, Wasserstein Perella, Richard L. Gelfond and
Bradley J. Wechsler entered into a Second Amended and Restated Shareholders'
Agreement (the "Shareholders' Agreement") (see description of this agreement
under "Certain Relationships And Related Transactions - Shareholders' Agreement"
below). Under the Shareholders' Agreement, each of Wasserstein Perella and
Messrs. Gelfond and Wechsler agreed that they are to be entitled, but not
required, to designate certain individuals to be nominated for election by the
shareholders as directors of the Company. When the 1999 Amended and Restated
Standstill Agreement between and among WP, the Company and Messrs. Gelfond and
Wechsler expired on June 30, 2001, WP's right to replace a designated director
in the event of the resignation, death, disqualification under the Canada
Business Corporations Act or the expiration of the term of such director
terminated. Pursuant to the July 9, 2001 Standstill Agreement between the
Company and each of Messrs. Gelfond and Wechsler (the "GW Standstill Agreement")
(see description of this agreement under "Corporate Governance - Standstill
Agreement" below), Messrs. Gelfond and Wechsler also have the right to designate
a replacement for any director designated by them pursuant to the Shareholders'
Agreement, and WP shall use its best efforts to cause each of the individuals
designated by Messrs. Gelfond and Wechsler to be elected as a director of the
Company. In connection with the election of the Class I directors, the following
are nominees of the Board of Directors: Messrs. King, Ziebold and Neil S. Braun
and the following is the nominee designated by Messrs. Gelfond and Wechsler: Mr.
Fuchs. Of the remaining directors who continue in office: Messrs. Jones, Koffler
and Utay were WP nominees and Messrs. Messrs. Copland and Girvan were nominees
of Messrs. Gelfond and Wechsler.
During the fiscal year ended December 31, 2002, the Board of Directors held
7 meetings. Committees of the Board held 11 meetings, the Audit Committee held 5
meetings, the Compensation Committee held 5 meetings and the Stock Option
Committee held 1 meeting. In light of recent developments in corporate
governance requirements and the disclosure thereof, the Company established a
formal Governance Committee in the fall of 2002. The Governance Committee did
not hold any meetings in 2002. During the fiscal year ended December 31, 2002,
no director attended fewer than 75% of the aggregate of: (i) the total number of
meetings of the Board of Directors; and (ii) the total number of meetings held
by all committees of the board on which he served.
4
NOMINEES FOR ELECTION
The individuals noted below are to be nominated for election to the Board
of Directors of the Company in Class I.
The following table lists certain information concerning the persons to be
nominated for election to the Board of Directors of the Company in Class I and
the directors whose terms continue after the Meeting.
CURRENT POSITION
NOMINEES FOR ELECTION AS CLASS I DIRECTORS FOR THE TERM EXPIRING IN 2006 WITH THE COMPANY
------------------------------------------------------------------------ -----------------
Neil S. Braun, 50, New York, New York. n/a
Mr. Braun has been President of Vanguard Animation Studio since late 2001. He was the President
of VastVideo Inc. prior to that and was President of iCast Corporation, a wholly owned
subsidiary of CMGI, Inc. during 1999. From 1994 to 1998, Mr. Braun was President of NBC
Television Network. Mr. Braun also sits on the Share our Strength and Westhampton Beach
Performing Arts Center boards of directors and is a member of the University of Pennsylvania
School of Arts and Sciences Board of Overseers, all non-profit organizations.
= Michael Fuchs, 56, New York, New York. Director
Mr. Fuchs was appointed to the Board of Directors on October 10, 2002; previously he was a
director of the Company from May 1996 to June 1999. Mr. Fuchs is the Chairman and a director of
Autobytel.com and a director of Salon.com. Mr. Fuchs held the position of Chairman and Chief
Executive Officer of Home Box Office from October 1984 until November 1995. In May 1995, he
also became chairman of Warner Music Group. Mr. Fuchs is also on the Board of Trustees of the
Simon Wiesenthal Center and a member of the board of the Alzheimer Association.
* G. Edmund King, 69, Toronto, Ontario. Director
Mr. King has been Deputy Chairman and a director of Rockwater Capital Corporation (formerly
McCarvill Corporation) since January 1996. Mr. King is also a director of Falconbridge Ltd.,
and Afton Food Group Ltd. From June 1994 to January 1998, Mr. King was Chairman of WIC Western
International Communications. From 1988 to 1995 Mr. King was Chairman and CEO of Wood Gundy
Ltd. and of CIBC Wood Gundy Ltd. Mr. King is a director of the Canadian Association for Mental
Health and of the Canadian Cardiovascular Academy. Mr. King has been a director of the Company
since June 1999 and is a Canadian citizen.
* + o W. Townsend Ziebold, 41, New York, New York. Director
Mr. Ziebold is currently President of the Venture Capital Practice of Wasserstein & Co., L.P.,
formerly the private equity arm of Wasserstein Perella Group Inc. Previously, Mr. Ziebold was a
Managing Director of Wasserstein Perella & Co., Inc. and head of its Venture Capital Practice.
Mr. Ziebold was a director of Maybelline, Inc. and Collins & Aikman Corporation and currently
serves on several private company boards in the media, entertainment and Internet industries.
Mr. Ziebold has been the Non-Executive Chairman of the Board since June 2001 and has been a
director of the Company since June 1999.
5
DIRECTORS WHO CONTINUE IN OFFICE AFTER THE MEETING EXPIRY OF TERM OF OFFICE
------------------------------------------------------------------------------------------------- ------------------------
Kenneth G. Copland, 65, Toronto, Ontario. 2005
Mr. Copland is the Chairman of KGC Ltd. Mr. Copland was the Vice-Chairman of BMO Nesbitt Burns
Inc. from 1994 to May 2001. Mr. Copland is Chairman of Humber College Foundation and HC
Educational Ventures Limited. Mr. Copland is a director of the Investment Dealers Association
of Canada. Mr. Copland has been a director of the Company since June 1999 and is a Canadian
citizen.
o Richard L. Gelfond, 47, New York, New York. 2004
Mr. Gelfond has been Co-Chairman of the Company since June 1999 and Co-Chief Executive Officer
since May 1996. From March 1994 to June 1999 Mr. Gelfond served as Vice Chairman of the
Company. In addition, Mr. Gelfond serves on the board of Mainframe Entertainment, Inc. Mr.
Gelfond serves as Chairman of the Board of Trustees of the Stony Brook Foundation, Inc.,
affiliated with Stony Brook University, and is on the Board of Directors for Brookhaven Science
Associates, the management company of Brookhaven National Laboratories. He is also a trustee
and a member of the Executive Committee at the New York Historical Society.
* + : = Garth M. Girvan, 54, Toronto, Ontario. 2005
Mr. Girvan is a partner of McCarthy Tetrault, Canadian counsel to the Company. Mr. Girvan is a
director of Corby Distilleries Limited. Mr. Girvan has been a director of the Company since
1994 and serves as Chairman of the Audit and Compensation Committees of the Company and is a
Canadian citizen.
Ellis B. Jones, 49, Los Angeles, California. 2004
Mr. Jones has been the Chief Executive Officer of Wasserstein & Co., LP, a merchant banking and
venture capital firm since January 2001. Prior to that he was a Managing Director in charge of
merchant banking at Wasserstein Perella & Co., Inc. Mr. Jones serves as a director for a number
of privately held companies. Mr. Ellis has been a director of the Company since June 2001.
+ Murray B. Koffler, O.C., O.Ont., 79, Toronto, Ontario. 2005
Mr. Koffler founded Shoppers Drug Mart in 1968 and presently serves as its Honorary Chairman.
Mr. Koffler co-founded Four Seasons Hotels Limited and presently serves as a director. Since
1988, Mr. Koffler has been Chairman of the International Board of Directors of the Weizmann
Institute of Science in Israel. Mr. Koffler holds numerous other directorships. Mr. Koffler is
an Officer of the Order of Canada. Mr. Koffler has been a director of the Company since May
1996 and is a Canadian citizen.
: = Marc A. Utay, 43, New York, New York. 2005
Mr. Utay has been a Managing Partner of Clarion Capital Partners since November 1999. Prior to
joining Clarion, Mr. Utay was a Managing Director of Wasserstein Perella & Co. Inc. and a
member of Wasserstein Perella's Policy Committee. Mr. Utay was co-head of Wasserstein Perella's
Leveraged Finance, Retailing and Media, Telecommunication and Entertainment groups. Until
December 2002, Mr. Utay was also a Senior Advisor to Dresdner Kleinwort Wasserstein. Prior to
his joining Wasserstein Perella, Mr. Utay was Managing Director at Bankers Trust Company where
he specialized in leveraged finance and mergers and acquisitions. Mr. Utay is a director of P &
F Industries, Inc and FONS Corp. Mr. Utay has been a director of the Company since May 1996 and
serves as Chairman of the Option Committee of the Company.
Bradley J. Wechsler, 51, New York, New York. 2004
Mr. Wechsler has been Co-Chairman of the Company since March 1994 and Co-Chief Executive
Officer with Mr. Gelfond since May 1996. Mr. Wechsler serves on the boards of Mainframe
Entertainment, Inc., NYU Hospital, the Kernochan Center for Law, Media and the Arts, and the
American Museum of the Moving Image.
* Member, Audit Committee of the Company
+ Member, Compensation Committee of the Company
= Member, Governance Committee of the Company
o Member, Nominating Committee of the Company
: Member, Option Committee of the Company
6
The Board of Directors recommends that you vote in favour of the election
of the nominees whose names are set forth above.
THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY INTEND TO VOTE FOR THE
ELECTION OF THE NOMINEES WHOSE NAMES ARE SET FORTH ABOVE. IF ANY OF THE ABOVE
NOMINEES IS FOR ANY REASON UNABLE TO SERVE AS A DIRECTOR, PROXIES IN FAVOUR OF
MANAGEMENT WILL BE VOTED FOR ANOTHER NOMINEE IN THEIR DISCRETION UNLESS THE
SHAREHOLDER HAS SPECIFIED IN THE PROXY THAT SUCH SHAREHOLDER'S SHARES ARE TO BE
WITHHELD FROM VOTING ON THE ELECTION OF DIRECTORS.
Management does not anticipate that any of the nominees for election as
directors will be unable to serve as a director. Each director elected will hold
office until the expiry of the term for which he has been elected or until his
successor is elected or appointed, unless his office is earlier vacated. Messrs.
Gelfond and Wechsler intend to vote in favour of the nominees for director put
forward by the Board of Directors, pursuant to the GW Standstill Agreement (see
description of this agreement under "Corporate Governance - Standstill
Agreement" below), and Wasserstein Perella intends to vote in favour of the
nominee designated by Messrs. Gelfond and Wechsler, pursuant to the
Shareholders' Agreement (see description of this agreement under "Certain
Relationships And Related Transactions - Shareholders' Agreement" below).
Shareholders who wish to have the Board of Directors consider the
nomination of any person for director at the 2004 meeting of shareholders should
communicate with the Company's Corporate Secretary at the Company's corporate
office.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of the Company.
Name Age Position
---- --- --------
Richard L. Gelfond.............. 47 Co-Chairman and Co-Chief Executive Officer and Director
Bradley J. Wechsler............. 51 Co-Chairman and Co-Chief Executive Officer and Director
Francis T. Joyce................ 50 Chief Financial Officer
Greg Foster..................... 40 President, Filmed Entertainment
Robert D. Lister................ 34 Executive Vice President, Business & Legal Affairs and General Counsel
Brian Bonnick................... 46 Senior Vice President, Technology
Brian Hall...................... 40 Senior Vice President, Theatre Operations
David B. Keighley............... 55 Senior Vice President & President, David Keighley Productions 70MM Inc.
Larry O'Reilly.................. 40 Senior Vice President, Theatre Development & Film Distribution
G. Mary Ruby.................... 45 Deputy General Counsel, Senior Vice President, Legal Affairs
and Corporate Secretary
Mary C. Sullivan................ 39 Senior Vice President, Human Resources & Administration
Mark Welton..................... 39 Senior Vice President, Business Affairs
Kathryn A. Gamble............... 35 Vice President, Finance and Controller
Edward MacNeil.................. 38 Vice President, Finance, Special Projects
RICHARD L. GELFOND has been Co-Chairman of the Company since June 1999 and
Co-Chief Executive Officer since May 1996. From March 1994 to June 1999 Mr.
Gelfond served as Vice Chairman of the Company. In addition, Mr. Gelfond serves
on the board of Mainframe Entertainment, Inc. Mr. Gelfond serves as Chairman of
the Board of Trustees of the Stony Brook Foundation, Inc., affiliated with Stony
Brook University, and is on the Board of Directors for Brookhaven Science
Associates, the management company of Brookhaven National Laboratories. He is
also a trustee and a member of the Executive Committee at the New York
Historical Society.
BRADLEY J. WECHSLER has been Co-Chairman of the Company since March 1994
and Co-Chief Executive Officer with Mr. Gelfond since May, 1996. Mr. Wechsler
serves on the boards of Mainframe Entertainment, Inc., NYU Hospital, the
Kernochan Center for Law, Media and the Arts, and the American Museum of the
Moving Image.
FRANCIS T. JOYCE joined the Company in March 2001 as Chief Financial
Officer. Prior to joining the Company Mr. Joyce held the position of Chief
Financial Officer of the Internet company theglobe.com from 1998 until his
employment with the Company. From 1997 to 1998, Mr. Joyce served as Chief
Financial Officer of Reed Travel Group, a division of Reed Elsevier PLC and from
1994 to 1997 served as Chief Financial Officer of the Alexander Consulting
Group, a division of Alexander and Alexander Services Inc., an international
professional services firm. Mr. Joyce is a member of Financial Executive
International and the American Institute of Certified Public Accountants.
7
GREG FOSTER joined the Company in March 2001 as President, Filmed
Entertainment. Prior to joining the Company, Mr. Foster was Executive
Vice-President of Production at MGM/UA. Prior to that Mr. Foster held other
senior positions including Senior Vice-President of Motion Picture Marketing
Research during his 15 years at MGM/UA. In 1999, Foster founded uMogul, a
financial services company offering retail investors competitive market returns
via mutual funds comprised of entertainment industry assets where he held the
positions of Chairman, Co-founder and President of uMogul.
ROBERT D. LISTER joined the Company as Senior Vice President, Legal Affairs
and General Counsel in May 1999 and was appointed Executive Vice President,
Business & Legal Affairs in May 2001. Prior to joining the Company, Mr. Lister
was Vice President, General Counsel and Secretary of Clearview Cinemas, a film
exhibitor, from March 1998 until his employment with the Company. Prior to that,
Mr. Lister served as Associate General Counsel of Merit Behavioral Care
Corporation, a behavioral healthcare company, from March 1996 through March
1998. Mr. Lister is a member of the New York State Bar Association.
BRIAN BONNICK joined the Company in January 1999 as Vice President,
Research & Development and was appointed Senior Vice President, Technology in
August 2001. Prior to joining the Company, Mr. Bonnick was Vice President,
Engineering and Operations for Electrohome Corporation. Prior to that Mr.
Bonnick was Vice President and General Manager of TSB International Inc. a
telecommunications company. Mr. Bonnick is registered as a professional engineer
by the Association of Professional Engineers of Ontario.
BRIAN HALL joined the Company in 1987 in Theatre Sales and Marketing. Mr.
Hall was appointed Vice President & General Manager, Japan & Asia Pacific in
1994. Mr. Hall left the Company in 1997 to assume the position of Managing
Director and CEO of Cinema Plus Ltd. He returned to the Company in July 2000 as
Senior Vice President, Theatre Operations.
DAVID B. KEIGHLEY has been a Senior Vice President of the Company since
July 1997 and is President of David Keighley Productions 70MM Inc., a subsidiary
of the Company. From January 1995 to July 1997, Mr. Keighley was a Vice
President of the Company. He is responsible for motion picture and digital
post-production and image quality assurance for 15/70-format films.
LARRY O'REILLY joined the Company in March 1994 as the Sales Manager, Film
Distribution and was appointed Senior Vice President, Theatre Development & Film
Distribution in January 2002. Mr. O'Reilly has held various positions within the
Company including Manager, Business Development: Film; Director, Strategic
Partnerships; Director, Commercial Marketing: The Americas and Vice President,
Sales, The Americas.
G. MARY RUBY joined the Company in October 1987 as Associate General
Counsel and was appointed Senior Vice President, Legal Affairs in July 2001. Ms.
Ruby was General Counsel from February 1989 to February 1997. Ms. Ruby is Deputy
General Counsel and acts as Corporate Secretary to the Board of Directors. Ms.
Ruby is a member of the Ontario Bar Association.
MARY C. SULLIVAN joined the Company in January 1996 as Director, Human
Resources and was appointed Vice President, Human Resources and Administration
in 1998 and Senior Vice President, Human Resources and Administration in January
2000. Prior to joining the Company, Ms. Sullivan was Director, Human Resources
of Central Park Lodges. Ms. Sullivan is a director of the Women's Legal
Education and Action Fund Foundation.
MARK WELTON joined the Company in July 1997 as Director, Business Affairs
and was appointed Senior Vice President, Business Affairs in September 2001.
Previous to that Mr. Welton was Vice President, Business Affairs, a position he
held since January 2000. Prior to joining the Company Mr. Welton was an
Associate Lawyer at Stikeman, Elliot from 1994 until his employment with the
Company.
KATHRYN A. GAMBLE joined the Company in July 2001 as Vice President,
Finance and Controller. Ms. Gamble served as Vice President, Finance and Chief
Financial Officer of the Internet company Healthyconnect.com Inc. from 2000
until her employment with the Company. From 1996 to 2000, Ms. Gamble served as
Vice President and Chief Financial Officer of Med-Emerg International Inc. a
healthcare company. Ms. Gamble is a member of the Canadian Institute of
Chartered Accountants.
EDWARD MACNEIL joined the Company in April 1994 as Director, Taxation &
Treasury and was appointed Vice President, Finance, Special Projects in
September 2001. From October 1999 to August 2001, Mr. MacNeil held the position
of Director and Senior Vice President, Digital Projection Limited, a former
subsidiary of the Company. Prior to joining the Company Mr. MacNeil was a
Taxation Manager at PricewaterhouseCoopers LLP. Mr. MacNeil is a member of the
Canadian Institute of Chartered Accountants.
8
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Shares as of April 25, 2003 or as otherwise
indicated in the notes below, including (i) all persons to be nominated for
election to the Board of Directors, individually; (ii) all directors and the
Named Executive Officers, individually, and (iii) all directors and executive
officers as a group.
AMOUNT AND NATURE OF PERCENT OF OUTSTANDING
BENEFICIAL OWNERSHIP OF COMMON SHARES (2)
NAME OF BENEFICIAL OWNER OF COMMON SHARES COMMON SHARES (1)
----------------------------------------- ------------------------ -----------------------
RICHARD L. GELFOND 2,326,900(3) 6.89
BRADLEY J. WECHSLER 2,211,800(4) 6.55
KENNETH G. COPLAND 47,467(5) *
NEIL S. BRAUN - DIRECTOR NOMINEE Nil n/a
J. TREVOR EYTON 25,934(6) *
MICHAEL FUCHS 21,741(7) *
GARTH M. GIRVAN 71,636(8) *
ELLIS B. JONES 27,533(9) *
G. EDMUND KING 37,467(5) *
MURRAY B. KOFFLER 40,200(10) *
MARC A. UTAY 435,738(11) 1.31
W. TOWNSEND ZIEBOLD 72,467(5) *
GREG FOSTER 153,833(12) *
FRANCIS T. JOYCE 66,666(13) *
ROBERT D. LISTER 86,333(14) *
DAVID B. KEIGHLEY 127,500(15) *
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (23 PERSONS) 5,970,716(16) 16.74
* less than 1%
Statements as to securities beneficially owned by directors and by
executive officers, or as to securities over which they exercise control or
direction, are based upon information obtained from such directors and executive
officers and from records available to the Company.
(1) Includes number of Common Shares owned at April 25, 2003 and Common Shares
as to which each individual had at April 25, 2003 the right to acquire
beneficial ownership through the exercise of vested options plus options
that vest within 60 days of that date.
(2) Based on dividing the number of Common Shares beneficially owned by such
person by 32,973,366 Common Shares outstanding as of April 25, 2003
adjusted for shares issuable through the exercise of vested options, held
by such person, plus options, held by such person, that vest within 60 days
of that date.
(3) Included in the amount shown are 804,000 Common Shares which Mr. Gelfond
had the right to acquire beneficial ownership through the exercise of
options.
(4) Included in the amount shown are 804,000 Common Shares which Mr. Wechsler
had the right to acquire beneficial ownership through the exercise of
options.
(5) Included in the amount shown are 37,467 Common Shares which Messrs.
Copland, King and Ziebold had the right to acquire beneficial ownership
through the exercise of options.
(6) Included in the amount shown are 25,934 Common Shares which Mr. Eyton had
the right to acquire beneficial ownership through the exercise of options.
9
(7) Included in the amount shown are 21,741 Common Shares which Mr. Fuchs had
the right to acquire beneficial ownership through the exercise of options.
(8) Included in the amount shown are 45,738 Common Shares which Mr. Girvan had
the right to acquire beneficial ownership through the exercise of options.
(9) Included in the amount shown are 27,533 Common Shares which Mr. Jones had
the right to acquire beneficial ownership through the exercise of options.
(10) Included in the amount shown are 36,000 Common Shares which Mr. Koffler had
the right to acquire beneficial ownership through the exercise of options.
(11) Included in the amount shown are 195,738 Common Shares which Mr. Utay had
the right to acquire beneficial ownership through the exercise of options.
(12) Included in the amount shown are 150,833 Common Shares which Mr. Foster had
the right to acquire beneficial ownership through the exercise of options.
(13) Included in the amount shown are 66,666 Common Shares which Mr. Joyce had
the right to acquire beneficial ownership through the exercise of options.
(14) Included in the amount shown are 83,333 Common Shares which Mr. Lister had
the right to acquire beneficial ownership through the exercise of options.
(15) Included in the amount shown are 117,500 Common Shares which Mr. Keighley
had the right to acquire beneficial ownership through the exercise of
options.
(16) Included in the amount shown are 2,701,916 Common Shares as to which all
directors and executive officers as a group had the right to acquire
beneficial ownership through the exercise of options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
persons who own more than 10% of a registered class of the Company's equity
securities (collectively, the "Reporting Persons") to file reports of ownership
on Form 3 and changes in ownership on Form 4 or Form 5 with the Securities and
Exchange Commission (the "Commission"). The Reporting Persons are also required
by the Exchange Act to furnish the Company with copies of all Section 16(a)
reports they file.
Based solely upon review of Forms 3 and 4 (and amendments thereto) received
from or written representations by the Reporting Persons, in respect of the
fiscal year ended December 31, 2002, the Company believes that an initial report
on Form 3 may not have been timely filed for Wasserstein Management Partners,
L.P. and for each of the following Reporting Persons: Messrs. Copland, Eyton,
Fuchs, Gelfond, Girvan, Jones, King, Koffler, Utay, Wechsler Ziebold, Foster,
Joyce, Lister, Bonnick, Hall, Keighley, O'Reilly, Ms. Ruby and Sullivan, Mr.
Welton, Ms. Gamble, and Mr. MacNeil. Messrs. Copland, Jones, King, and Ziebold
filed a late Form 4 relating to one grant of options. Mr. Utay filed a late Form
4 relating to two grants of options. These required forms were not filed pending
the Company's most recent review of its continued status as a foreign private
issuer under applicable Commission regulations and its ultimate determination
that this designation was no longer applicable.
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the periods indicated, the compensation
paid or granted by the Company to the individuals who served during 2002 as
Chief Executive Officers and the four most highly compensated executive officers
of the Company, other than the Chief Executive Officers, who were serving as
executive officers at December 31, 2002 (collectively, the "Named Executive
Officers").
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------- --------------------------
OTHER SECURITIES
NAME AND PRINCIPAL ANNUAL RESTRICTED UNDERLYING ALL OTHER
POSITION OF YEAR ENDED SALARY BONUS(1) COMPENSATION(2) STOCK AWARDS OPTIONS COMPENSATION(3)
NAMED EXECUTIVE OFFICER DECEMBER 31 ($) ($) ($) ($) (#) ($)
----------------------- ----------- ------ -------- --------------- ------------ ---------- ---------------
Richard L. Gelfond 2002 500,000 750,000 -- -- 700,000(4) 4,077(5)
Co-Chairman and Co-Chief 2001 500,000 125,000 -- 1,305,000(6) 1,898
Executive Officer 2000 500,000 -- -- -- 800,000(7) 7,975
Bradley J. Wechsler 2002 500,000 750,000 -- -- 700,000(4) 4,077(5)
Co-Chairman and Co-Chief 2001 500,000 125,000 -- 1,305,000(6) 1,898
Executive Officer 2000 500,000 -- -- -- 800,000(7) 7,975
Greg Foster 2002 370,288 250,000 -- -- 200,000(8) 292(9)
President, Filmed 2001 286,057 175,000(10) -- -- 75,000(11) 176
Entertainment 2000 -- -- -- -- -- --
Francis T. Joyce 2002 275,000 84,219 -- -- -- 3,692(12)
Chief Financial Officer 2001 174,794 75,000 -- -- 100,000(11) 238
2000 -- -- -- -- -- --
Robert D. Lister 2002 240,000 90,000 -- -- 40,000 3,692(12)
Executive Vice President, 2001 230,685 157,500(13) -- -- 60,000 3,638
Business and Legal Affairs 2000 215,000 27,735 -- -- 40,000(14) 2,845
& General Counsel
David B. Keighley 2002 264,137(15) 209,250 -- -- -- 3,692(12)
Senior Vice President and 2001 251,559 122,853 -- -- 50,000 3,759
President, David Keighley 2000 239,580 288,421 -- -- 15,000 8,119
Productions 70MM Inc.
(1) These amounts are paid under annual incentive arrangements that the
Company has with each of the Named Executive Officers, as detailed under
"Employment Contracts".
(2) The value of perquisites and other personal benefits for each Named
Executive Officer does not exceed the lesser of $50,000 and 10% of his
annual salary and bonus.
(3) These amounts reflect (i) the payment by the Company of life insurance
premiums on the lives of the Named Executive Officers, and (ii)
contributions to the Company's defined contribution pension plans.
(4) The Named Executive Officer received a grant of 100,000 options to
purchase Common Shares in accordance with the Stock Option Plan with
respect of the bonus for 2001 and a grant of 600,000 options to purchase
Common Shares in accordance with the Stock Option Plan in accordance with
his employment agreement as detailed under "Employment Contracts".
(5) This amount reflects the payment of $292.80 by the Company of life
insurance premiums on the life of the Named Executive Officer, and (ii)
contributions of $3,784.59 to the Company's defined contribution pension
plans.
(6) This amount represents the dollar value of 500,000 Common Shares, which
were issued to the Named Executive Officer on April 3, 2001, of which
325,00 Common Shares were issued in exchange for the surrender by the
Named Executive Officer of 1,300,000 previously granted options, in
accordance with his employment agreement as detailed under "Employment
Contracts".
11
(7) These options, together with 500,000 other options were surrendered to the
Company by the Named Executive Officer on April 3, 2001.
(8) 175,000 of these options were granted in accordance with the Stock Option
Plan to the Named Executive Officer, in accordance with his employment
agreement, as detailed under "Employment Contracts".
(9) This amount reflects the payment of $292.80 by the Company of life
insurance premiums on the life of the Named Executive Officer.
(10) This amount also includes payment of $25,000 with respect of the Named
Executive Officer's signing bonus in accordance with his employment
agreement as detailed under "Employment Contracts".
(11) These options were granted in accordance with the Stock Option Plan to the
Named Executive Officer, in accordance with his employment agreement as
detailed under "Employment Contracts".
(12) This amount reflects (i) the payment of $292.80 by the Company of life
insurance premiums on the life of the Named Executive Officer, and (ii)
contributions of $3,400 to the Company's defined contribution pension
plans.
(13) This amount also includes payment of $107,500 with respect of the Named
Executive Officer's retention bonus.
(14) The Named Executive Officer's employment agreement, as detailed under
"Employment Contracts", required the Company to issue a minimum of 15,000
options to purchase Common Shares, in accordance with the Stock Option
Plan, in 2002.
(15) This amount also includes $5,958 paid in 2003, with respect of the Named
Executive Officer's salary earned in 2002.
OPTIONS GRANTED
The following table sets forth information relating to individual grants of
options to purchase Common Shares of the Company to Named Executive Officers
under the Stock Option Plan during the fiscal year ended December 31, 2002 in
respect of services rendered or to be rendered to the Company.
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS PARTICIPANTS EXERCISE PRICE -----------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) EXPIRATION DATE 5% ($) 10% ($)
---- ---------- -------------- -------------- --------------- -----------------------------
Richard L. Gelfond 100,000 (1) 4.5 3.51 Feb 28, 2009 217,000 436,000
532,000 (2) 23.9 4.85 April 23, 2012 920,360 2,995,160
68,000 (3) 3.0 7.00 June 5, 2012 Nil 236,640
Bradley J. Wechsler 100,000 (1) 4.5 3.51 Feb 28, 2009 217,000 436,000
532,000 (2) 23.9 4.85 April 23, 2012 920,360 2,995,160
68,000 (3) 3.0 7.00 June 5, 2012 Nil 236,640
Greg Foster 25,000 (4) 1.1 2.99 Feb. 11, 2009 67,250 122,000
75,000 (5) 3.4 3.98 March 19, 2009 127,500 291,750
100,000 (6) 4.5 4.83 Sept. 6, 2009 85,000 304,000
Francis T. Joyce Nil n/a n/a n/a Nil Nil
Robert D. Lister 25,000 (7) 1.1 2.99 Feb. 11, 2009 67,250 122,000
15,000 (8) 0.7 4.15 Aug. 15, 2009 22,950 55,800
David B. Keighley Nil n/a n/a n/a Nil Nil
(1) These options were granted with respect of the bonus for 2001 and entitle
the Named Executive Officer to purchase one common share for each option.
The market value of the Common Shares underlying the options was equal to
the exercise price on the date of the grant. These options vested on
February 28, 2002.
12
(2) These options were granted pursuant to the Named Executive Officer's
employment agreement and entitle the Named Executive Officer to purchase
one common share for each option. The market value of the Common Shares
underlying the options was equal to the exercise price on the date of the
grant. 266,000 of these options vested on July 1, 2002 and 266,000 vest on
July 1, 2003, pursuant to such employment agreement.
(3) These options were granted pursuant to the Named Executive Officer's
employment agreement and entitle the Named Executive Officer to purchase
one common share for each option. The market value of the Common Shares
underlying the options was equal to the exercise price on the date of the
grant. These options vest on July 1, 2004 pursuant to such employment
agreement.
(4) These options entitle the Named Executive Officer to purchase one common
share for each option. The market value of the Common Shares underlying the
options was equal to the exercise price on the date of the grant. 8,333 of
these options vest on each of February 11, 2003 and February 11, 2004 and
8,334 vest on February 11, 2005.
(5) These options were granted pursuant to the Named Executive Officer's
employment agreement and entitle the Named Executive Officer to purchase
one common share for each option. The market value of the Common Shares
underlying the options was equal to the exercise price on the date of the
grant. These options vested on March 19, 2003 pursuant to such employment
agreement.
(6) These options were granted pursuant to the Named Executive Officer's
employment agreement and entitle the Named Executive Officer to purchase
one common share for each option. The market value of the Common Shares
underlying the options was equal to the exercise price on the date of the
grant. 50% of these options vest on September 6, 2004 and 50% vest on
September 6, 2005 pursuant to such employment agreement.
(7) These options entitle the Named Executive Officer to purchase one common
share for each option. The market value of the Common Shares underlying the
options was equal to the exercise price on the date of the grant. 8,333 of
these options vest on each of February 11, 2003 and February 11, 2004 and
8,334 vest on February 11, 2005.
(8) These options entitle the Named Executive Officer to purchase one common
share for each option. The market value of the Common Shares underlying the
options was equal to the exercise price on the date of the grant. 5,000 of
these options vest on each of August 15, 2003, August 15, 2004 and August
15, 2005.
AGGREGATED OPTION EXERCISES IN 2002 AND YEAR-END OPTION VALUES
The following table sets forth information relating to options exercised
during the fiscal year ended December 31, 2002 and the year-end option values
for the Named Executive Officers.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED
SECURITIES FISCAL YEAR-END IN-THE-MONEY OPTIONS
ACQUIRED VALUE EXERCISABLE/ AT FISCAL YEAR-END
ON EXERCISE REALIZED UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($) (#) ($)(1)
---- ----------- -------- ----------------------- ------------------------
Richard L. Gelfond Nil Nil 804,000 / 334,000 53,000 / Nil
Bradley J. Wechsler Nil Nil 804,000 / 334,000 53,000 / Nil
Greg Foster 7,500 30,390 67,000 / 200,000 42,525 / 30,750
Francis T. Joyce Nil Nil 33,333 / 66,667 43,000 / 86,000
Robert D. Lister Nil Nil 47,000 / 128,000 10,000 / 76,250
David B. Keighley Nil Nil 100,833 / 59,667 8,333 / 41,667
(1) Calculated based on the December 31, 2002 closing price of the Common
Shares on NASDAQ of $4.04.
13
PENSION PLANS
The Company maintains defined contribution employee pension plans for its
employees, including its executive officers. The Company makes contributions to
these plans on behalf of employees in an amount up to 5% of their base salary
subject to certain prescribed maximums. During the fiscal year ended December
31, 2002, the Company contributed an aggregate of $17,769 the Company's defined
contribution employee pension plan qualified under Section 401(k) of the U.S.
Internal Revenue Code on behalf of Messrs. Gelfond, Wechsler, Foster, Joyce,
Lister and Keighley.
On July 12, 2000, the Company established a defined benefit pension plan
covering its two Co-Chief Executive Officers. The plan provides for a lifetime
retirement benefit from age 55 determined as 75% of the member's best average 60
consecutive months of earnings during the 120 months preceding retirement. Once
benefit payments begin, the benefit is indexed annually to the cost of living
and further provides for 100% continuance for life to the surviving spouse. The
benefits were 50% vested as of July 12, 2000, the plan initiation date. The
vesting percentage increases on a straight-line basis from inception until age
55. The vesting percentage of a member whose employment terminates other than by
voluntary retirement shall be 100%. Also, upon the occurrence of a change in
control of the Company prior to termination of a member's employment, the
vesting percentage shall become 100%. The Company currently estimates that the
annual benefits upon retirement at normal retirement age (as defined in the
plan) will be approximately $0.9 million for each of the Co-Chief Executive
Officers. The Company intends to use the proceeds of life insurance policies
which were taken out contemporaneously with the establishment of the plan to
satisfy, in whole or in part, benefits due and payable under the plan.
EMPLOYMENT CONTRACTS
On November 3, 1998 the Company entered into renewal employment agreements
(the "1998 Agreements") with each of Messrs. Gelfond and Wechsler ("the
Executives") with effect from July 1, 1998 for a three-year term. Under the 1998
Agreements, each of the Executives is to perform such services with respect to
the Company's business as may be reasonably requested from time to time by the
Board of Directors and which are consistent with his position as Co-Chief
Executive Officer. In addition, the Company is to use its best efforts to cause
the Executives to be elected to the Board of Directors. In addition, a provision
contained in their original employment agreements, dated March 1, 1994, was
continued, whereby each of the Executives is also entitled to receive, upon a
sale of the Company or the exercise after March 1, 1999 by the Executives of
their rights to require the Company to take action to liquidate their Common
Shares under a shareholders' agreement among Wasserstein Perella Partners, L.P.,
Mr. Gelfond, Mr. Wechsler and certain other investors dated as of June 16, 1994,
a cash bonus in an amount equal to the product of (a) 0.375% and (b) the amount
by which the sale or liquidation transaction imputes an equity value in excess
of Cdn. $150,000,000 to the Common Shares originally issued by the Company (on a
fully diluted basis but excluding the Common Shares issued upon the conversion
of the Class B convertible preferred shares of the Company formerly outstanding
which were converted into Common Shares on June 16, 1994 and the Common Shares
issuable upon the exercise of warrants owned by each of Messrs. Gelfond and
Wechsler). Under the 1998 Agreements, the Company is to equalize the Executives
to the taxes which each of the Executives would have paid had he earned his
employment compensation and paid taxes thereon solely in the United States. The
employment agreements also contain non-competition provisions.
On July 12, 2000, the Company entered into amendments to the employment
agreements of the Executives (the "2000 Amendments"). Under the 2000 Amendments,
the last year of the Executives' employment term under the 1998 Agreements was
cancelled, and the Executives' employment terms were extended for three
additional years, with the new term running from July 12, 2000 through June 30,
2003, with the same cash compensation as had been agreed to in the 1998
Agreements. Because no change of control of the Company was effected by the end
of 2000, however, the extension of the Executives' employment terms was
nullified, and the term of the 1998 Agreement was reinstated. Pursuant to the
2000 Amendments, the Executives were each granted 800,000 options to purchase
Common Shares in accordance with the Stock Option Plan, which options expire on
July 12, 2010, as well as 180,000 restricted shares which, in the event that
regulatory or shareholder approval is not obtained, are deemed phantom stock.
The options and restricted shares, or phantom stock equivalent, became fully
vested on June 30, 2001. Under the 2000 Amendments, the Company agreed to create
a defined benefit plan, to provide retirement benefits for the Executives (see
description of this plan under "Pension Plans" above). The 2000 Amendments
further provide for the extension of the Executives' non-competition covenants
to four years beyond termination of employment and for the agreement by the
Executives to consult with the Company for three years following the end of
their employment with the Company.
On April 3, 2001, the Company entered into amendments to the employment
agreements of the Executives (the "2001 Amendments"). Under the 2001 Amendments,
the Executives' employment terms were each extended for one additional year,
with the new term running through June 30, 2002. The 2001 Amendments also
provide that each of the Executives can receive a bonus for 2001 and the period
December 31, 2001 through June 30, 2002 of $500,000 and $250,000, respectively,
adjusted by a multiple of zero to two times, tied to the performance of the
Company and certain qualitative and quantitative measures determined by the
Board of Directors. Pursuant to the 2001 Amendments, each of the Executives
received restricted stock grants of 500,000 Common Shares, 325,000 of which were
granted in exchange for the surrender by each of the Executives of 1,300,000
previously granted options on April 3, 2001. The restrictive covenants,
including non-competition provisions, of the Executives' existing employment
agreements, as well as other provisions not modified by the 2001 Amendments,
remain in force.
14
On April 23, 2002, the Company entered into amendments to the employment
agreements of the Executives (the "2002 Amendments"). Under the 2002 Amendments,
the Executives' employment terms were each extended for two additional years,
with the new term running through June 30, 2004. The 2002 Amendments also
provide that each of the Executives will be considered for a bonus payable in
2003 and 2004 based upon performance to December 31, 2002 and December 31, 2003,
respectively, and for a further bonus payable on a pro rata basis for the period
from December 31, 2003 to June 30, 2004. Pursuant to the 2002 Amendments, on
April 23, 2002 the Executives were each granted 532,000 options to purchase
Common Shares in accordance with the Stock Option Plan, 50% of which were to
vest on each of July 1, 2002 and July 1, 2003. These options expire on April 23,
2012. The Executives were also each granted 68,000 options to purchase Common
Shares in accordance with the Stock Option Plan on June 5, 2002, which options
are to vest on July 1, 2004. These options expire on June 5, 2012. The
restrictive covenants, including non-competition provisions, of the Executives'
existing employment agreements, as well as other provisions not modified by the
2002 Amendments, remain in force.
The Company and Greg Foster entered into an employment agreement on March
9, 2001. The agreement was for a two-year term. Under this agreement, Mr. Foster
is to receive an annual base salary of $350,000 for the year ended March 9, 2002
and $375,000 for the year ended March 9, 2003. The agreement further provides
that Mr. Foster is entitled to receive a minimum annual bonus of $150,000 for
the first year of the term and a minimum annual bonus of $175,000 for the second
year of the term, as well as a discretionary bonus based on a percentage of base
salary. Pursuant to the agreement, Mr. Foster was paid a signing bonus of
$25,000. Under the agreement, Mr. Foster was granted 75,000 options to purchase
Common Shares in accordance with the Stock Option Plan on March 19, 2001. These
options expire on March 19, 2011. Mr. Foster also received an additional grant
of 75,000 options to purchase Common Shares in accordance with the Stock Option
Plan on March 9, 2002. These options expire on March 19, 2009. Mr. Foster has
agreed to restrictive covenants, including confidentiality and non-competition
covenants. The agreement provides that the employment of Mr. Foster may be
terminated at any time for cause or without cause. If Mr. Foster's employment is
terminated without cause prior to the end of the employment term, the Company
must continue to pay Mr. Foster his annual base salary and benefits for the
greater of the remainder of his employment term and six months, subject to
mitigation by Mr. Foster.
On August 8, 2002, the Company entered into an amendment to the employment
agreement with Mr. Foster, under which, Mr. Foster's employment term was
extended to March 18, 2005. Under the amended agreement, Mr. Foster is to
receive an annual salary of $400,000, and effective March 19, 2004, will receive
an annual salary of $425,000. The amendment further provides that Mr. Foster is
entitled to receive a minimum annual bonus of $200,000 for the third year of the
employment term, and a minimum annual bonus of $100,000 in respect of the fourth
year of the employment term, in the event the agreement is not renewed. Pursuant
to the amendment, Mr. Foster was granted 100,000 options to purchase Common
Shares in accordance with the Stock Option Plan on September 6, 2002, which
options shall vest as to 50% on each of September 6, 2004 and September 6, 2005
and expire on September 6, 2009. The amendment also provides for Mr. Foster to
receive a grant of 50,000 options to purchase Common Shares in accordance with
the Stock Option Plan on March 18, 2003, which options shall vest subject to
certain performance criteria and expire on March 18, 2010. The restrictive
covenants, including confidentiality and non-competition provisions, of Mr.
Foster's existing employment agreement, remain in force.
The Company and Francis T. Joyce entered into an employment agreement on
May 9, 2001. The agreement was for a two-year term. Under this agreement, Mr.
Joyce is to receive an annual base salary of $275,000, subject to annual review.
The agreement further provides that Mr. Joyce is entitled to receive a minimum
annual bonus in respect of 2001 of $75,000 as well as a discretionary bonus
based on a percentage of base salary throughout the employment term. Pursuant to
the agreement, Mr. Joyce was granted 100,000 options to purchase Common Shares
in accordance with the Stock Option Plan on May 15, 2001, which options shall
vest as to 33,333 on each of May 15, 2002 and May 15, 2003 and 33,334 on May 15,
2004. These options expire on May 15, 2008. Mr. Joyce has agreed to restrictive
covenants, including confidentiality and non-competition covenants. The
agreement provides that the employment of Mr. Joyce may be terminated at any
time for cause or without cause. If Mr. Joyce's employment is terminated without
cause prior to the end of the employment term, the Company must continue to pay
Mr. Joyce his annual salary, pro-rata bonus and benefits for a minimum of twelve
months, subject to mitigation if Mr. Joyce obtains other employment. The Company
has agreed to renew Mr. Joyce's employment agreement beyond May 2003 on terms to
be finalized.
The Company and Robert D. Lister entered into an employment agreement on
May 17, 1999. The agreement was for a two-year term. Under this agreement, Mr.
Lister is to receive an annual base salary of $200,000, subject to annual
review. The agreement further provides that in respect of 1999, Mr. Lister is
entitled to receive a minimum annual bonus of $38,100 as well as a discretionary
bonus based on a percentage of base salary. Pursuant to the agreement, Mr.
Lister was granted 25,000 options to purchase Common Shares in accordance with
the Stock Option Plan on May 19, 1999, which options vest as to 20% on each of
the first five anniversary dates of the grant date and expire on May 19, 2009.
The agreement also provided for a minimum grant of 15,000 options to purchase
Common Shares in accordance with the Stock Option Plan on May 19, 2000. Mr.
Lister has agreed to restrictive covenants, including confidentiality and
non-competition covenants. The agreement provides that the employment of Mr.
Lister may be terminated at any time for cause or without cause. If Mr. Lister's
employment is terminated without cause prior to the end of the employment term,
or his agreement is not renewed, the Company must continue to pay Mr. Lister his
annual salary, target bonus and benefits for the greater of the remainder of his
employment term and six months, subject to mitigation by Mr. Lister.
On April 4, 2001, the Company entered into an amendment to the employment
agreement with Mr. Lister, under which, Mr. Lister's employment term was
extended until December 31, 2003. The amendment provided for an annual salary of
$240,000, subject to an annual review. The amendment also provided that if Mr.
Lister's employment is terminated without cause prior to the
15
end of the employment term, or his agreement is not renewed, the Company must
continue to pay Mr. Lister his annual salary, target bonus and benefits for the
greater of the remainder of his employment term and twelve months, subject to
mitigation by Mr. Lister. The restrictive covenants, including confidentiality
and non-competition provisions, of Mr. Lister's existing employment agreement,
remain in force.
The Company, David Keighley Productions 70 MM Inc. (formerly David Keighley
Productions and 70MM Inc.) ("DKP/70MM"), a wholly owned subsidiary of the
Company and David B. Keighley entered into an employment agreement on July 15,
1997. The agreement was for a five-year term. Under this agreement, Mr. Keighley
is to receive an annual base salary of $212,405 in the year ended July 15, 1998
and will receive an annual base salary of 105% of the previous year's base
salary in each of the next four years during the term of the agreement. Mr.
Keighley is entitled to receive an annual bonus of one-third of his annual base
salary if DKP/70MM meets its pre-tax profit threshold as provided in the
agreement. Mr. Keighley is also entitled to receive a further profit-based bonus
of 10% of any excess of DKP/70MM audited profit before taxes over DKP/70MM's
enumerated pre-tax profit threshold. Under the agreement, Mr. Keighley has given
restrictive covenants including confidentiality and non-competition covenants.
The agreement provides that the employment of Mr. Keighley may be terminated at
any time for cause or without cause. If Mr. Keighley's employment is terminated
without cause prior to the end of the employment term, DKP/70MM must continue to
pay Mr. Keighley his annual base salary for the remainder of his employment
term, subject to mitigation by Mr. Keighley. The Company has agreed to renew Mr.
Keighley's employment agreement beyond July 2002 on terms to be finalized.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002, three members of the Board of Directors served as members of
the Compensation Committee: Messrs. Girvan, Koffler and Ziebold.
The law firm of McCarthy Tetrault, of which Mr. Girvan is a senior partner,
provided legal services to the Company on several matters in 2002 and is
expected to provide legal services in 2003.
No executive officers of the Company serves on the board of directors or
compensation committee of any other entity that has or has had one or more of
its executive officers serving as a member of the Company's Board of Directors.
REPORT ON EXECUTIVE COMPENSATION
COMPOSITION OF COMPENSATION COMMITTEE
The Board of Directors constituted a Compensation Committee in November
1996. The members of the Compensation Committee are Messrs. Girvan, Koffler and
Ziebold. As the Compensation Committee did not participate in executive
compensation decisions in respect of 2002, other than the compensation of
Messrs. Gelfond and Wechsler, the compensation of the Company's employees was
established through guidelines set by the Board of Directors.
Compensation for all of the Company's employees, including its Named
Executive Officers, is based on each employee's job responsibilities and on his
or her individual performance over time. The Company's executive compensation
program has three principal components: base salary, annual variable incentive
compensation and stock options. The Company believes these components
collectively provide a fair and competitive pay package and an appropriate
relationship between an executive's compensation, the executive's performance
and the Company's performance.
BASE SALARY
A salary range is established for each salaried position in the Company,
including each Named Executive Officer position other than the Executives. The
midpoint of each salary range is generally equal to the average salary of
equivalent positions at other comparable companies. Each executive officer's
base salary is determined by reviewing his or her sustained job performance over
time, based on individual performance and performance of the business or staff
unit over which the executive officer exercises responsibility. Business or
staff unit performance is assessed on return on total capital, achievement of
sales or production targets, effectiveness of cost-containment measures,
progress toward implementation of process improvements and other factors
relevant to each executive officer's position. The relative weight attributed to
each factor, with respect to each executive officer, is an inherently subjective
judgement.
ANNUAL INCENTIVE COMPENSATION
Certain employees of the Company, including most of its executive officers
other than the Co-Chief Executive Officers, receive a portion of their annual
compensation in the form of bonuses under the Management Incentive Plan. Bonuses
are awarded under this plan provided annual operating objectives targets are
achieved by the Company and provided that personal performance standards are
achieved by the participating employees. An aggregate of $1,293,204 has been
paid to all employees participating in this plan in respect of 2002.
16
STOCK OPTIONS
The Company's long-term incentive compensation for executive officers and
other key managers is provided through grants of stock options. The Company has
a stock option plan (the "Stock Option Plan") under which the Company may grant
options to officers, employees, consultants and eligible directors
("Participants") to purchase Common Shares on terms that may be determined,
within the limitations of the Stock Option Plan. The Stock Option Plan has
received shareholder approval and is administered by the Option Committee of the
Board of Directors. The number of stock options granted is determined by a
competitive compensation analysis and is based on each individual's salary range
and responsibility.
All grants pursuant to the Stock Option Plan are made with an exercise
price equal to the fair market value of the Company's Common Shares on the date
of grant. An option will be exercisable for a maximum period of 10 years from
the date of grant, subject to earlier termination if the Participant's
employment, consulting arrangement or term of office with the Company
terminates. The Board of Directors determines vesting requirements. If a
Participant's employment, consulting arrangement or term of office with the
Company terminates for any reason, any options which have not vested will
generally be surrendered for cancellation without any consideration being paid
therefor. If the Participant's employment, consulting arrangement or term of
office is terminated without cause or by reason of such Participant's
resignation, death or permanent disability, the Participant (or the
Participant's estate) will generally be entitled to exercise the Participant's
vested options for a period thereafter. If the Participant's employment,
consulting arrangement or term of office is terminated for cause, such
Participant's vested options will be surrendered for cancellation without any
consideration being paid therefor. If the Participant is a party to an
employment agreement with the Company or any of its subsidiaries and breaches
any of the restrictive covenants in such agreement, such Participant will be
required to surrender all unexercised options for cancellation without any
consideration being paid therefor and will be obligated to pay to the Company an
amount equal to the aggregate profit realized by such Participant with respect
to any prior option exercises. Options to purchase 5,640,898 Common Shares have
been granted and are outstanding under the Stock Option Plan as of December 31,
2002. Of those outstanding options, 31.6%, or 1,783,472 options, have exercise
prices above $20 per option. Under the terms of the Stock Option Plan, the
maximum number of Common Shares that the Company may issue under options is
8,340.798 Common Shares as of December 31, 2002. In 2002, 1,155,581 options were
cancelled by or forfeited to the Company. During 2002, stock options were
granted to certain of the Company's executive officers and other Stock Option
Plan Participants. Certain Named Executive Officers received options to purchase
Common Shares of the Company, as detailed in the Option Grants Table above. In
determining the number of options to grant to the Named Executive Officers,
consideration was given to information about stock option grants to executive
officers in comparable companies and the number of options granted to other
executive officers.
COMPENSATION OF CO-CHIEF EXECUTIVE OFFICERS
The Compensation Committee of the Board of Directors was constituted in
November 1996 to make recommendations to the Board of Directors regarding the
compensation of the Co-Chief Executive Officers, Messrs. Gelfond and Wechsler.
The pay-for-performance philosophy of the Company's executive compensation
program applies equally to the Co-Chief Executive Officers. The compensation of
the Co-Chief Executive Officers was recommended by the Compensation Committee
and approved by the Board of Directors after careful assessment of their
personal contributions to the performance of the Company. The assessment of the
Co-Chief Executive Officers' performance was based on a number of quantitative
and qualitative factors, which included corporate financial results and
strategic planning.
The foregoing Report on Executive Compensation, dated April 30, 2003, has
been furnished by G.M. Girvan, M.B. Koffler and W.T. Ziebold, as members of the
Compensation Committee and by K.G. Copland, J.T. Eyton, M. Fuchs, G.M. Girvan,
E.B. Jones, G.E. King, M.B. Koffler, M.A. Utay and W.T. Ziebold, as members of
the Board of Directors.
17
PERFORMANCE GRAPH
The following graph compares the total cumulative shareholder return for
$100 invested (assumes that all dividends were reinvested) in Common Shares of
the Company against the cumulative total return of the NASDAQ Composite Index,
the Toronto Stock Exchange (the "TSX") S&P/TSX Composite Index and the Bloomberg
Hollywood Reporter Index from June 1994, when the Company became listed on the
Nasdaq National Market, to the end of the most recently completed fiscal year.
[PERFORMANCE GRAPH]
CUMULATIVE VALUE OF $100 INVESTMENT
BLOOMBERG
S&P/TSX HOLLYWOOD
IMAX NASDAQ COMPOSITE REPORTER
------ ------ --------- ---------
'10-Jun-94............. 100 100 100 100
'31-Dec-94............. 62.96 103.17 104.45 95.59
'31-Dec-95............. 168.52 144.35 122.83 121.99
'31-Dec-96............. 229.63 176.78 157.14 123.25
'31-Dec-97............. 325.93 216.34 173.11 173.67
'31-Dec-98............. 468.52 298.6 159.12 264.73
'31-Dec-99............. 405.56 546.91 222.26 402.21
'31-Dec-00............. 40.74 336.29 229.46 261.59
'31-Dec-01............. 29.93 265.04 189.13 223.3
'31-Dec-02............. 59.85 183.53 166.93 135.51
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
As contemplated under Section 124(4) of the Canada Business Corporations
Act, the Company has acquired insurance coverage with a yearly limit of
$70,000,000 in respect of potential claims against its directors and officers
and in respect of losses for which the Company may be required or permitted by
law to indemnify such directors and officers. The insurance, in respect of which
a $918,200 yearly premium was paid by the Company, includes a $100,000
deductible for each claim under the policy other than claims made under U.S.
securities law as to which a deductible of $500,000 applies.
DIRECTORS' COMPENSATION
Directors are reimbursed for expenses incurred in attending meetings of the
Board of Directors and Committees of the Board. In addition, members of the
Board of Directors who are not also employees of the Company receive Cdn.
$20,000 per year (or may elect to receive options to purchase Common Shares of
the Company in lieu of this payment) plus Cdn. $1,500 for each meeting of the
Board of Directors attended in person and Cdn. $750 for each telephone meeting
of the Board of Directors or meeting of any committee of the Board of Directors,
whether participating in person or by telephone. In addition, each of the
directors who are not also employees of the Company are granted options annually
to purchase 8,000 Common Shares at an exercise price equal to the market value
of the Common Shares of the Company on the date of grant which vest on the date
of grant and expire on the earlier of the date which is two years after the
termination of the Optionee's service as a director of the Company or 7 years
after the date of the grant.
18
CORPORATE GOVERNANCE
With shares listed on the TSX and NASDAQ, the Company reviews its
governance policies and practices against international standards under the
direction of its Board of Directors and Governance Committee.
The TSX passed a by-law in 1995 which requires companies incorporated in
Canada and listed on the TSX to disclose their corporate governance practices in
their annual meeting materials. This by-law contains a number of guidelines (the
"TSX Guidelines") relating to corporate governance practices which have been
considered in light of the unique opportunities and challenges facing the
Company, as well as the nature of its share ownership.
The Board of Directors of the Company is responsible for the supervision of
the management of the Company and for the overall strategic direction of its
business. The Board of Directors is also responsible, with the assistance of
management, for the identification of the risks and opportunities of the
Company's business and for monitoring how effectively the Company meets these
risks and capitalizes upon the opportunities. The corporate governance practices
of the Company have been designed and followed to assist the Company in meeting
its core objectives and to enhance shareholder value.
The Board of Directors is currently composed of 11 directors. Two of the
directors, Messrs. Gelfond and Wechsler are inside management directors and are
considered to be "related" within the meaning of the TSX Guidelines. Messrs.
Copland, Eyton, Fuchs Girvan, Jones, King, Koffler, Utay and Ziebold are outside
directors and are considered to be "unrelated" within the meaning of the TSX
Guidelines. The Board of Directors considers that directors who are "related"
within the meaning of the Guidelines are able to, and do, act with a view to the
best interests of the Company and that their relationships with the Company are
central to their ability to act in its best interests. If the directors
nominated in this circular are elected at the Meeting, the ratio of inside
management directors to outside directors will not change.
The corporate governance practices followed by the Company were originally
instituted prior to the time the Company went public as one aspect of the
efforts of the new owners of the Company to introduce new strategic directions
to the Company. Key elements of these corporate governance practices are
contained in the Shareholders' Agreement which contains provisions relating to
the composition of the Board of Directors and committees of the Board of
Directors (see description of this agreement under "Certain Relationships And
Related Transactions - Shareholders' Agreement" below) and the Articles of the
Corporation which contain provisions relating to the approval of certain matters
by the directors (see description of these provisions under "Articles of the
Corporation" below).
The Board of Directors appoints the Company's Audit Committee, Compensation
Committee, Governance Committee, Nominating Committee and Option Committee.
AUDIT COMMITTEE
The Audit Committee is currently composed of Messrs. Girvan, King and
Ziebold, each of whom are considered independent directors (as defined in Rule
4200 (a)(14) of the National Association of Securities Dealers ("NASD") listing
standards) and they satisfy the NASDAQ National Market's requirements relating
to the qualification of its members and their required understanding of
financial statements and financial affairs. The membership of the Audit
Committee also complies with the TSX Guidelines. The Audit Committee operates
under a written mandate, the Audit Committee Charter, adopted by the Company's
Board of Directors. A copy of the Audit Committee Charter is attached as
Appendix A to this proxy circular and proxy statement. The preceding information
in this paragraph shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates it by reference in such
filing. The Audit Committee meets with the external auditors of the Company,
both with and without management present, to review the Company's accounting
policies, its quarterly and year-end financial statement information and their
presentation, and significant financial issues which may arise for the Company.
The Audit Committee will review and assess the adequacy of the Audit Committee
Charter on an annual basis.
COMPENSATION COMMITTEE
The Compensation Committee is currently composed of Messrs. Girvan, Koffler
and Ziebold. The Compensation Committee is responsible for setting objectives
for the Co-Chief Executive Officers, assessing their performance on a periodic
basis and reviewing the Stock Option Plan, from time to time. The Report on
Executive Compensation is located above.
GOVERNANCE COMMITTEE
The Governance Committee is currently composed of Messrs. Girvan, Fuchs and
Utay. In light of recent developments in corporate governance requirements and
the disclosure thereof, the Company established a formal governance committee in
the fall of 2002. The Governance Committee is responsible for monitoring and
evaluating the Company's compliance, particularly with regard to the recently
enacted regulations in connection with the Sarbanes-Oxley Act of 2002,
monitoring and evaluating compliance with the Company's articles, bylaws and
governance agreements; monitoring and evaluating the Company's corporate
policies and practices, with particular attention to the Company's disclosure
and trading policies; and monitoring the effectiveness of the Board of Directors
in the discharge of its general oversight responsibilities.
19
OPTION COMMITTEE
The Option Committee is currently composed of Messrs. Girvan and Utay. The
Option Committee is responsible for performing the functions required of it
under the Stock Option Plan including the grant of options to Participants under
the Stock Option Plan, from time to time, subject to guidelines determined by
the Company's human resources department and the Compensation Committee.
NOMINATING COMMITTEE
The Nominating Committee is currently composed of Messrs. Gelfond and
Ziebold. The Nominating Committee is responsible for identifying and
recommending potential candidates for election to the Board of Directors. The
Nominating Committee has full discretion in considering its nominations to the
Board of Directors. The Nominating Committee recommends that the Board of
Directors nominate Messrs. Braun, King and Ziebold for election as Class I
directors at the Meeting. Messrs. Gelfond and Wechsler designated Mr. Fuchs as
their nominee for election as a Class I director pursuant to the Shareholders'
Agreement (see description of this agreement under "Certain Relationships And
Related Transactions - Shareholders' Agreement" below) and the GW Standstill
Agreement (see description of this agreement below).
If the directors nominated in this circular are elected at the Meeting, the
new Board of Directors will determine committee memberships for the next year.
The Board of Directors has not felt it necessary to add to the procedures
currently in place to ensure its independence from management. The Board of
Directors believes that the participation of those members of the management of
the Company who are on the Board of Directors has been an essential element in
the Board of Directors' ability to meet its objectives. All directors exercise
critical independent judgement and the outside directors have unrestricted
direct access to both the executives of the Company and its external auditors.
To date there has been no necessity for discussion of a system enabling an
individual director to engage an outside advisor at the expense of the Company.
The Board of Directors regards its corporate governance practices as
appropriate for its business and shareholders and as an efficient and effective
tool in the discharge of its responsibilities.
STANDSTILL AGREEMENT
On July 9, 2001 pursuant to Section 3(c)(iv) of the Shareholders' Agreement
(see description of this agreement under "Certain Relationships And Related
Transactions - Shareholders' Agreement" below) the Company and each of Messrs.
Gelfond and Wechsler entered into a Standstill Agreement (the "GW Standstill
Agreement"). Under the terms of the GW Standstill Agreement, each of Messrs.
Gelfond and Wechsler agreed to vote in any election for directors in favour of
each person nominated by the then current Board of Directors, not to participate
in or facilitate proxy contests, not to deposit into a voting trust or subject
voting securities to an agreement with respect to voting such securities, not to
acquire or affect or attempt to acquire or affect control of the Company or to
participate in a "group" as defined pursuant to Section 13(d) of the Exchange
Act, which owns or seeks to acquire beneficial ownership or control of the
Company, and not to attempt to influence the Company except through normal Board
of Directors' processes; provided, however, that the GW Standstill Agreement
does not prevent either of Messrs. Gelfond and Wechsler from taking any action
in his capacity as an officer or employee of the Company or any of its
subsidiaries, including as Co-Chief Executive Officer or Co-Chairman of the
Company. As a result of entering into the GW Standstill Agreement, in the event
of the resignation, death, disqualification under the Canada Business
Corporations Act or the removal or expiration of the term of any director
designated by Messrs. Gelfond and Wechsler pursuant to the Shareholders'
Agreement, Messrs. Gelfond and Wechsler shall have the right to designate a
replacement for such director pursuant to the terms of the Shareholders'
Agreement, and Wasserstein Perella shall use its best efforts to cause each such
designated director to be elected or appointed as a director of the Company. The
GW Standstill Agreement expires on July 8, 2003, and provides that Messrs.
Gelfond and Wechsler may, from time to time, extend the term of the GW
Standstill Agreement for additional one-year terms thereafter (but in no event
beyond March 1, 2004).
ARTICLES OF THE CORPORATION
The Articles of the Corporation set forth the requirement that certain
matters be approved by 75% of the directors then in office. These matters are:
(i) hiring or terminating the employment of the Chief Executive Officer or any
Co-Chief Executive Officer of the Company; (ii) issuing any shares of capital
stock for a purchase price, or incurring indebtedness, in an amount of $25
million or more; (iii) disposing of any material single asset, or all or
substantially all of the assets of the Company or approving the sale or merger
of the Company; (iv) acquiring a substantial interest in any other entity or
entering into any major strategic alliance; and (v) entering into or changing
the terms of any agreement or transaction with WP or Messrs. Gelfond and
Wechsler (other than agreements in the ordinary course of business, such as
employment agreements).
20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director or executive officer of the Company, nor any nominee for
election as a director or any security holder of record as of the date of this
circular who owned, of record or to the Company's knowledge, more than 5% of the
outstanding Common Shares, or any member of such person's immediate family, had
any material interest, direct or indirect, in any transaction during the last
fiscal year, or since the commencement of the current fiscal year, in any
completed or proposed transaction which has materially affected or will
materially affect the Company except:
The law firm of McCarthy Tetrault, of which Mr. Girvan is a senior partner,
provided legal services to the Company on several matters in 2002 and is
expected to provide legal services in 2003.
Mr. Utay, a director of the Company entered in to an arrangement to provide
consulting services to the Company in connection with the purchase by the
Company and a wholly-owned subsidiary of the Company of certain Subordinated
Notes in 2002 (the purchase transaction is more fully described in Recent Sales
of Unregistered Securities in Item 5 in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2002). In consideration of these services
rendered by Mr. Utay, on December 4, 2002, Mr. Utay was granted 150,000 options
to purchase Common Shares in accordance with the Company's Stock Option Plan.
The market value of the Common Shares underlying the options was equal to the
exercise price on the date of the grant. Also, in 2002 Mr. Utay provided
services to the Company in connection with a potential banking arrangement for
which he was paid a fee of $100,000. Mr. Utay is a Managing Partner of Clarion
Capital Partners, LLC which leases office space from the Company for an annual
rent of approximately $150,000.
SHAREHOLDERS' AGREEMENT
The Company, Wasserstein Perella Partners, L.P., Wasserstein Perella
Offshore Partners, L.P., WPPN, Inc., and the Michael J. Biondi Voting Trust
(collectively "WP"), and each of Messrs. Gelfond and Wechsler are parties to a
Second Amended and Restated Shareholders' Agreement (the "Shareholders'
Agreement") dated as of February 9, 1999, which amends and restates the previous
amended and restated shareholders' agreement among those parties dated June 16,
1994. The Shareholders' Agreement includes, among other things, certain
restrictions on transfers of Common Shares, take-along rights and come-along
rights. If WP holds at least 35% of their original holdings and WP desires to
transfer all of their securities in a transaction in which a majority of the
shares of outstanding common stock are to be sold, then Messrs. Gelfond and
Wechsler will be required to sell their securities on the same terms as WP sells
its securities.
The Shareholders' Agreement also contains provisions related to the
composition of the Board of Directors and committees thereof. WP was entitled,
but not required, to designate individuals to be nominated for election as
directors as follows: so long as WP held 3,685,759 or more Common Shares, it
could designate six nominees, of whom three could be employees of WP and its
affiliates (the "WP Employee Designees") and three were required to be
independent persons and resident Canadians. If WP held less than 3,685,759
Common Shares, but 1,842,879 or more Common Shares, it could designate four
nominees, of whom two could be WP Employee Designees and two were required to be
independent persons and resident Canadians. If WP held less than 1,842,879
Common Shares but 921,439 or more Common Shares, it could designate two
nominees, one of whom could be a WP Employee Designee and the other of whom was
required to be an independent person and a resident Canadian. When the 1999
Standstill Agreement between and among WP, the Company and Messrs. Gelfond and
Wechsler expired on June 30, 2001, WP's right to replace a designated director
in the event of the resignation, death, disqualification under the Canada
Business Corporations Act or the expiration of the term of such director
terminated. In addition to these provisions, each of Messrs. Gelfond and
Wechsler is entitled to be a director of the Company so long as he is either a
Co-Chief Executive Officer or is the Chief Executive Officer of the Company or
Messrs. Gelfond and Wechsler own more than 375,000 Common Shares. In addition,
Messrs. Gelfond and Wechsler are collectively entitled, but not required, to
designate individuals to be nominated for election as directors as follows: so
long as they hold 1,628,000 or more Common Shares, they may designate three
nominees, all of whom shall be independent persons and resident Canadians. If
they hold less than 1,628,000 Common Shares, but 1,075,000 or more Common
Shares, they may designate two nominees, both of whom shall be independent and
resident Canadians. If they hold less than 1,075,000 Common Shares but 375,000
or more Common Shares, they may designate one nominee who shall be an
independent person and resident Canadian. If the requirement that the Company
have 'resident Canadian' directors is changed, then neither WP nor Messrs.
Gelfond and Wechsler will be required to designate resident Canadian nominees.
The Shareholders' Agreement also provides that the Company, WP and each of
Messrs. Gelfond and Wechsler shall use their best efforts to cause the Company
to establish a nominating committee of the Board of Directors consisting of two
directors, one designated by WP and the other designated by Messrs. Gelfond and
Wechsler. The Shareholders' Agreement provides WP with the right, subject to the
approval of Messrs. Gelfond and Wechsler, to designate a WP Employee Designee
for appointment by the Board of Directors of the Company as the Non-Executive
Chairman of the Board, as long as WP holds at least 2,948,607 Common Shares. W.
Townsend Ziebold has been approved as such designee. Each of Messrs. Gelfond and
Wechsler is entitled to be appointed as a Co-Chairman or Chairman of the Company
as long as he is a Co-Chief Executive Officer or the Chief Executive Officer of
the Company. The Agreement provides that the duties of the Non-Executive
Chairman and the Co-Chief Executive Officers shall be as set forth in the
Bylaws, including the requirement that the following actions be approved by the
Non-Executive Chairman and at least one of the Co-Chief Executive Officers:
setting the dates and times of meetings of the directors and shareholders (other
than normal quarterly Board of Directors, and annual shareholders' meetings),
setting the agenda of such meetings, and appointing members of
21
committees of the Board of Directors other than persons designated by WP and
Messrs. Gelfond and Wechsler as provided in the Shareholders' Agreement. Each of
WP and Messrs. Gelfond and Wechsler have the right to designate one director to
serve on each committee of the Board of Directors of the Company, provided that
each such person meets applicable regulatory requirements.
Each of WP and Messrs. Gelfond and Wechsler agreed to use their best
efforts to cause there no longer to be CEO Advisors as of the date upon which
all of WP's employee designees are elected as directors of the Company. All of
the WP employee designees were elected as directors at the Company's annual and
special meeting of shareholders held June 7, 1999 and the CEO Advisors were
disbanded in June 1999.
REGISTRATION RIGHTS AGREEMENT
The Company, WP and Messrs. Gelfond and Wechsler entered into a
registration rights agreement (the "Registration Rights Agreement") dated as of
February 9, 1999, which carried forward the corresponding provisions of the June
16, 1994 shareholders' agreement, and pursuant to which each of WP and Messrs.
Gelfond and Wechsler have certain rights to cause the Company to use its best
efforts to register their securities under the U.S. Securities Act of 1933 (the
"1933 Act"). WP was entitled to effect up to four demand registrations and
Messrs. Gelfond and Wechsler are entitled to make two such demand registrations.
WP and Messrs. Gelfond and Wechsler also have unlimited piggyback rights to
register their securities under the Registration Rights Agreement whenever the
Company proposes to register any securities under the 1933 Act, other than the
registration of securities pursuant to an initial public offering or the
registration of securities upon Form S-4 or S-8 under the 1933 Act or filed in
connection with an exchange offer or an offering of securities solely to the
Company's existing shareholders. In addition to these provisions, if Messrs.
Gelfond and Wechsler hold at least 25% of their original holdings, WP has
recouped its original investment plus a 30% compounded annual return on such
investment, and WP initiates the sale of the Company, then for 60 days
thereafter, WP will enter into exclusive negotiations with Messrs. Gelfond and
Wechsler for the sale of the Company, and for another 60 days, thereafter WP may
not enter into an agreement for the sale of the Company to a third party.
WP, Messrs. Gelfond and Wechsler, and certain shareholders of the Company
have entered into another shareholders' agreement on March 1, 1996 (the "Selling
Shareholders' Agreement") which includes, among other things, registration
rights, tag along rights and drag along rights.
AUDITOR INDEPENDENCE
PricewaterhouseCoopers, LPP ("PWC") are the principal independent
accountants of the Company.
In February 2003, the Audit Committee of the Company recommended for
approval, and the Board of Directors of the Company approved, a policy that
thereafter, without the approval of the Audit Committee, the Company's auditors
would be retained solely to provide audit and audit-related services.
AUDIT FEES
PWC billed the Company $340,518 for professional services rendered in
connection with the audit of the Company's annual financial statements for the
fiscal year ended December 31, 2002, and review of the quarterly financial
statements during the fiscal year ended December 31, 2002.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PWC did not provide the Company with any services in connection with
financial information systems design or implementation fees in 2002.
ALL OTHER FEES
PWC billed the Company an aggregate of $167,506 for all services rendered
in 2002, other than the services described above. The Audit Committee has
considered whether the provision of these services is compatible with
maintaining PWC's independence.
22
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee with respect to the
Company's audited financial statements for the fiscal year ended December 31,
2002.
The Audit Committee meets privately with PWC on a periodic basis and PWC
has unrestricted access to the Audit Committee. The Audit Committee has reviewed
and discussed the Company's audited financial statements for the fiscal year
ended December 31, 2002 with senior management. The Audit Committee has
discussed with PWC the matters required to be discussed by SAS 61 (Codification
of Statements on Accounting Standards) which include, among other items, matters
related to the conduct of the audit of the Company's financial statements. The
Audit Committee has also received written disclosures and the letter from PWC
required by Independence Standards Board Standard No. 1 (which relates to the
accountant's independence from the Company and related entities) and has
discussed with PWC their independence from the Company. Based on the review and
discussions referred to above, the Audit Committee recommended to the Company's
Board of Directors that the Company's audited financial statements be included
in the Company's Annual Report on Form 10-K and the Company's Annual Information
Form for the fiscal year ended December 31, 2002.
The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference in such filing.
The foregoing Report of the Audit Committee, dated April 30, 2003, has been
furnished by G.M. Girvan, G.E. King and W.T. Ziebold as members of the Audit
Committee of the Board of Directors.
APPOINTMENT OF AUDITORS
At the Meeting, the shareholders will be asked to approve, by ordinary
resolution, the appointment of PricewaterhouseCoopers LLP, Chartered
Accountants, as auditors of the Company to hold office until the close of the
next annual meeting of shareholders at a remuneration rate to be fixed by the
Board of Directors. PWC, or one of its predecessors, have been the auditors of
the Company for more than five years.
Representatives of PWC are expected to be present at the Meeting and to be
available to respond to appropriate questions and to make statements as they
desire.
Shareholders will be asked to approve the appointment by ordinary
resolution, which requires that a majority of the votes cast at the Meeting be
in favour of the resolution. IN THE ABSENCE OF ANY INSTRUCTION ON THE
ACCOMPANYING FORM OF PROXY, IT IS THE INTENTION OF THE PERSONS NAMED BY
MANAGEMENT IN THE FORM OF PROXY TO VOTE THE COMMON SHARES REPRESENTED BY THE
FORM OF PROXY IN FAVOUR OF THE RESOLUTION.
AVAILABLE INFORMATION
The Company makes available free of charge its annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K as soon as
reasonably practicable after the such filing has been made with the Securities
and Exchange Commission. Reports may be obtained through the Company's website
at www.imax.com or by calling investor relations at 905-403-6500.
APPROVAL BY BOARD OF DIRECTORS
The contents and the sending of this proxy circular and proxy statement to
each shareholder entitled to receive notice of the Meeting, to each director and
to the auditors of the Company have been approved by the Board of Directors.
DATED at Mississauga, Ontario, Canada, April 30, 2003.
/s/ G. MARY RUBY
------------------------------------
G. MARY RUBY
Senior Vice President, Legal Affairs
and Corporate Secretary
23
APPENDIX A
IMAX CORPORATION
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee assists the Board in fulfilling its responsibility
for oversight of (i) the quality and integrity of the Company's financial
statements and related disclosure, (ii) the Company's compliance with legal and
regulatory requirements, (iii) the independent auditor's qualifications and
independence and (iv) the performance of the Company's internal controls and
procedures, and performance of the independent auditor. It may also have other
duties as may from time to time be assigned to it by the Board.
COMMITTEE COMPOSITION
1. Members. The Committee shall consist of as many members as the Board
shall determine, but in any event not fewer than three members. The
members of the Committee shall be appointed annually by the Board.
2. Qualifications. Each member of the Committee shall meet all
independence, financial literacy and other requirements of all
applicable laws and the NASDAQ Stock Market Inc. and the Toronto Stock
Exchange. At least one member must meet the applicable Securities and
Exchange Commission definition of "financial expert."
3. Chair. The Chair of the Committee shall be appointed by the Board.
4. Removal and Replacement. The members of the Committee may be removed
or replaced, and any vacancies on the Committee shall be filled, by
the Board. In addition, membership on the Committee shall
automatically end for a particular member at such time as the Board
determines that the member ceases to meet the qualifications required
of each member as set forth above.
COMMITTEE MEETINGS
1. Meetings. The Chair of the Committee, in consultation with the
Committee members, shall determine the schedule and frequency of the
Committee meetings, provided that the Committee shall meet at least
four times per year. The Committee shall, on a periodic basis, meet
separately with management, the general counsel, the internal audit
staff and the independent auditor. The Committee shall also meet
separately with the independent auditor at every meeting of the
Committee at which the independent auditor is present.
2. Agenda. The Chair of the Committee shall develop and set the
Committee's agenda, in consultation with the other members of the
Committee, the Board and management. The agenda and information
concerning the business to be conducted at each Committee meeting
shall, to the extent practical, be communicated to the members of the
Committee in advance of the meeting.
3. Report to the Board. The Committee shall report regularly to the Board
and submit to the Board the minutes of the Committee's meetings.
4. Performance Evaluation; Assessment of Charter. The Committee shall
annually conduct a performance evaluation and shall report to the
Board the results of the evaluation. The Committee shall review and
assess the adequacy of this Charter annually and recommend any changes
to the Board.
A-1
AUTHORITY AND DUTIES
Independent Auditor's Qualifications and Independence
1. The Committee shall be directly responsible for the appointment,
retention and replacement of the independent auditor employed by the
Company to audit its financial statements, subject to any required
shareholder approval. The Committee shall be responsible for
establishing the compensation of the independent auditor and for
overseeing its work.
2. The Committee shall have the sole authority to pre-approve any
non-audit services to be provided by the independent auditor. The
Committee shall review with the lead audit partner whether any of the
audit team members receive any discretionary compensation from the
audit firm with respect to non-audit services performed by the
independent auditor.
3. The Committee shall review with the lead audit partner and/or a more
senior representative of the independent auditor, annually or more
frequently as the Committee considers appropriate, the independent
auditor's system of internal quality controls.
4. The Committee shall review the performance of the senior members of
the independent auditor team.
5. The Committee shall pre-approve the hiring of any employee or former
employee of the independent auditor for senior positions within the
Company in accordance with the Sarbanes-Oxley Act of 2002.
Financial Statements and Related Disclosure
6. The Committee shall review the annual audited financial statements and
quarterly unaudited financial statements with management and the
independent auditor, and will also review the Company's disclosures
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations," before the filing of the Company's Form 10-K,
Form 10-Q and Forms 8-K containing financial statements.
7. The Committee shall review, or may appoint one of its members to
review, with management earnings press releases before they are
issued. The Committee shall review generally with management the
nature of the financial information and earnings guidance provided to
analysts and rating agencies.
8. The Committee shall review with the independent auditor: (a) all
critical accounting policies and practices to be used by the Company
in preparing its financial statements, (b) all alternative treatments
of financial information that have been discussed with management,
ramifications of the use of these alternative disclosures and
treatments, and the independent auditors' judgement as to the quality,
not just the acceptability, of the accounting principles applied, and
(c) other material communications between the independent auditor and
management, such as any management letter or schedule of unadjusted
differences. In addition, the Committee shall review with the
independent auditor any audit problems or difficulties and
management's response.
9. The Committee shall review with management, and any outside
professionals as the Committee considers appropriate, the
effectiveness of the Company's disclosure controls and procedures.
10. The Committee shall review with management, and any outside
professionals as the Committee considers appropriate, important trends
and developments in financial reporting practices and requirements and
their effect on the Company's financial statements.
11. The Committee shall prepare the report for the Company's proxy
statement that is required by the Securities and Exchange Commission.
A-2
Internal Controls and Procedures
12. The Committee shall review with management and the independent auditor
the scope, planning and staffing of the proposed audit for the
upcoming year.
13. The Committee shall review with management, the quality, adequacy and
effectiveness of the Company's internal controls and any significant
deficiencies or material weaknesses in internal controls and
procedures.
14. The Committee shall review the Company's policies on risk assessment
and risk management.
Compliance with Legal and Regulatory Requirements
15. The Committee shall review with management, and any internal or
external counsel as the Committee considers appropriate, any legal
matters (including the status of pending litigation) that may have a
material impact on the Company and any material reports or inquiries
from regulatory or governmental agencies.
16. The Committee shall review with the general counsel the adequacy and
effectiveness of the Company's procedures to ensure compliance with
its legal and regulatory responsibilities. The Committee shall also
review the legal and compliance function's organization,
responsibilities, plans, results, budget and staffing. In addition,
management shall consult with the Committee on the appointment,
replacement, reassignment or dismissal of the general counsel.
17. The Committee shall establish procedures for (a) the receipt,
retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls, auditing matters
or potential violations of law and (b) the confidential, anonymous
submission by employees of the Company of concerns regarding
questionable accounting or auditing matters or potential violations of
law.
18. The Committee shall obtain reports from management on compliance with
all applicable legal and regulatory requirements, including the
Foreign Corrupt Practices Act.
The foregoing list of duties is not exhaustive, and the Committee may,
in addition, perform any other functions it may find necessary or appropriate
for the performance of its oversight function. The Committee shall have the
power to delegate its authority and duties to subcommittees or individual
members of the Committee, as it deems appropriate. In discharging its oversight
role, the Committee shall have full access to all Company books, records,
facilities and personnel. The Committee shall have the power to retain legal
counsel, accounting professionals or other advisors, as it deems appropriate,
after prior consultation with the Company.
CLARIFICATION OF AUDIT COMMITTEE'S ROLE
The Committee's responsibility is one of oversight. It is the
responsibility of the Company's management to prepare financial statements in
accordance with applicable law and regulations and of the Company's independent
auditor to audit those financial statements. Therefore, each member of the
Committee shall be entitled to rely, to the fullest extent permitted by law, on
the integrity of those persons and organizations within and outside the Company
from whom he or she receives information, and the accuracy of the financial and
other information provided to the Committee members by those persons or
organizations.
February 2003
A-3
[IMAX LOGO]
IMAX Corporation
2525 Speakman Drive
Mississauga, Ontario, Canada, L5K 1B1
FORM OF PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF IMAX CORPORATION (THE
"COMPANY") TO BE USED AT THE ANNUAL MEETING OF SHAREHOLDERS (THE "MEETING") OF
SHAREHOLDERS OF THE COMPANY TO BE HELD ON WEDNESDAY, JUNE 4, 2003 AT THE FAMOUS
PLAYERS IMAX(R) THEATRE AT PARAMOUNT FESTIVAL HALL, 259 RICHMOND STREET, WEST,
TORONTO, ONTARIO, CANADA, AT 10:30 A.M., AND AT ANY ADJOURNMENTS THEREOF FOR THE
PURPOSES SET FORTH IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING.
The undersigned common shareholder of IMAX Corporation (the "Company") hereby
appoints Bradley J. Wechsler, failing whom, Richard L. Gelfond, failing whom,
Robert D. Lister, failing whom, G, Mary Ruby, or instead of the
foregoing,___________________as the proxyholder of the undersigned to attend and
act for and on behalf of the undersigned at the Annual Meeting of Shareholders
of the Company to be held on June 4, 2003, and at any adjournments thereof, to
the same extent and with the same power as if the undersigned were present in
person thereat and with the authority to vote and act in the said proxyholder's
discretion with respect to amendments or variations to matters referred to in
the Notice of Annual Meeting and with respect to other matters which may
properly come before the Meeting.
The said proxyholder is specifically directed to vote or withhold from voting
the shares registered in the name of the undersigned as indicated below:
(1) VOTE [ ] FOR [ ] AGAINST [ ] WITHHOLD/ABSTAIN FROM VOTING
In respect of the election of the nominees for directors of the Company as
a group listed below: Neil S. Braun; Michael Fuchs; G. Edmund King and W.
Townsend Ziebold.
(2) VOTE [ ] FOR [ ] AGAINST [ ] WITHHOLD/ABSTAIN FROM VOTING
In respect of the appointment of PricewaterhouseCoopers LLP as auditors of
the Company and authorizing the directors to fix their compensation.
Date: _________________, 2003
--------------------------------------------------------
(Print name of Registered Holder of Common Shares)
--------------------------------------------------------
(Signature of Registered Holder or Authorized Signatory)
Notes:
(1) YOU HAVE THE RIGHT TO APPOINT A PERSON OTHER THAN THE MANAGEMENT NOMINEES
TO ATTEND AND ACT FOR YOU AT THE MEETING. SUCH PERSON NEED NOT BE A
SHAREHOLDER OF THE COMPANY. In such case, please delete the names of
Messrs. Wechsler, Gelfond, Lister and Ms. Ruby as your proxy nominee and
insert the name of the desired person in the blank space provided for this
purpose.
(2) If the proxy is not dated in the space provided for this purpose, it will
be deemed to bear the date on which it was mailed by the Company.
(3) To be valid, this proxy must be dated and signed by yourself, as the
registered holder of Common Shares, or as a person named as a proxy nominee
in respect of this Meeting in an omnibus proxy containing a power of
substitution pursuant to applicable securities laws, or your attorney. If
the registered holder or the person named in an omnibus proxy is a
corporation, this proxy must be signed by an authorized officer or attorney
of such corporation.
(4) For the purpose of voting by proxy, proxies marked as "WITHHOLD/ABSTAIN"
will be treated as present for the purpose of determining a quorum but will
not be counted as having been voted in respect of any matter to which the
instruction to "WITHHOLD/ABSTAIN" is indicated.
(5) On any ballot that may be called for regarding the matters listed in the
Notice of Annual Meeting and in the Form of Proxy, the Common Shares
represented by the enclosed Form of Proxy will be voted or withheld from
voting in accordance with the instructions of the shareholder indicated
thereon by marking an "X" in the boxes provided for the purpose on the Form
of Proxy. IN THE ABSENCE OF SUCH INSTRUCTIONS THE SHARES WILL BE VOTED FOR
(i) THE ELECTION OF DIRECTORS AND (II) THE APPOINTMENT OF AUDITORS AND
AUTHORIZING THE DIRECTORS TO FIX THE AUDITORS' REMUNERATION, IN EACH CASE,
AS REFERRED TO IN THE PROXY CIRCULAR AND PROXY STATEMENT.