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]
Filed by a party other than the Registrant [ ]
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)
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction.
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid: _________________________
(2) Form, Schedule or Registration Statement No.: _________________________
(3) Filing Party: _________________________
(4) Date Filed: _________________________
(IMAX(R) 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 of Shareholders of IMAX
CORPORATION (the "Company") will be held at Stony Brook Manhattan, 2nd Floor,
401 Park Avenue South, New York, New York, USA, 10016 on Tuesday, April 11, 2006
at 10:30 a.m. (the "Meeting"), for the purposes of:
(1) receiving the consolidated financial statements for the fiscal year
ended December 31, 2005, 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
March 9, 2006
SHAREHOLDERS WHO ARE UNABLE TO BE PRESENT AT THE MEETING ARE REQUESTED TO
COMPLETE AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE PROVIDED FOR THAT
PURPOSE. PROXIES MUST BE DEPOSITED WITH COMPUTERSHARE INVESTOR SERVICES INC.,
C/O STOCK AND BOND TRANSFER DEPT., 9TH FLOOR, 100 UNIVERSITY AVENUE, TORONTO,
ONTARIO, CANADA, M5J 2Y1 OR AT THE CORPORATE HEADQUARTERS OF THE COMPANY NOTED
ABOVE ON OR BEFORE 10:30 A.M. (EASTERN TIME) ON FRIDAY, APRIL 7, 2006.
(IMAX(R) LOGO)
PROXY CIRCULAR
AND
PROXY STATEMENT
MARCH 9, 2006
IMAX CORPORATION
2525 Speakman Drive, Mississauga, Ontario, Canada, L5K 1B1
tel: 905-403-6500 fax: 905-403-6540
www.imax.com
TABLE OF CONTENTS
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.............................................. 1
Proxy and Voting by Mail or Delivery................................. 2
Proxy and Voting by Telephone........................................ 2
Proxy and Voting by Internet......................................... 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............................... 3
SHAREHOLDER PROPOSALS FOR THE COMPANY'S 2007 ANNUAL MEETING............. 3
ELECTION OF DIRECTORS................................................... 4
NOMINEES FOR ELECTION................................................... 4
Directors who Continue in Office after the Meeting................... 5
EXECUTIVE OFFICERS...................................................... 6
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT.......................... 7
Section 16(a) Beneficial Ownership Reporting Compliance.............. 8
EXECUTIVE COMPENSATION.................................................. 9
Summary Compensation Table........................................... 9
Options Granted...................................................... 10
Aggregated Option Exercises and Year-End Option Values............... 10
Pension Plans........................................................ 10
Employment Contracts................................................. 11
Equity Compensation Plans............................................ 13
CODE OF ETHICS.......................................................... 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION............. 14
REPORT ON EXECUTIVE COMPENSATION........................................ 14
Composition of Compensation Committee................................ 14
Base Salary.......................................................... 14
Annual Incentive Compensation........................................ 14
Stock Options........................................................ 14
Executive Share Ownership Plan....................................... 15
Compensation of Co-Chief Executive Officers.......................... 15
Performance Graph.................................................... 16
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE............................ 16
COMPENSATION OF DIRECTORS............................................... 16
CORPORATE GOVERNANCE PRACTICES.......................................... 17
Nomination Process................................................... 17
Board of Directors Mandate........................................... 17
Committees of the Board.............................................. 17
Audit Committee...................................................... 17
Compensation Committee............................................... 18
Corporate Governance Committee....................................... 18
Option Committee..................................................... 18
Orientation and Education............................................ 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................... 18
Registration Rights Agreements....................................... 19
AUDITOR INDEPENDENCE.................................................... 19
Audit Fees........................................................... 19
Audit-Related Fees................................................... 19
Tax Fees............................................................. 19
All Other Fees....................................................... 19
Audit Committee's Pre-Approval Policies and Procedures............... 19
REPORT OF THE AUDIT COMMITTEE........................................... 20
APPOINTMENT OF AUDITORS................................................. 20
AVAILABLE INFORMATION................................................... 20
APPROVAL BY BOARD OF DIRECTORS.......................................... 20
APPENDIX "A" STATEMENT OF CORPORATE GOVERNANCE PRACTICES................ A - 1
APPENDIX "B" BOARD OF DIRECTORS' CHARTER................................ B - 2
(IMAX(R) LOGO)
IMAX Corporation
2525 Speakman Drive
Mississauga, Ontario, Canada, L5K 1B1
GENERAL INFORMATION
The Annual Meeting (the "Meeting") of Shareholders of IMAX Corporation (the
"Company") will be held at Stony Brook Manhattan, 2nd Floor, 401 Park Avenue
South, New York, New York, USA, 10016, on Tuesday, April 11, 2006 at 10:30 a.m.,
for the purposes of: (i) receiving the consolidated financial statements for the
fiscal year ended December 31, 2005, 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 Proxy will be released
on or about March 9, 2006 to security holders of the Company's Common Shares as
of the close of business on February 21, 2006, the record date for the Annual
Meeting.
SOLICITATION OF PROXIES BY MANAGEMENT
THIS PROXY CIRCULAR AND PROXY STATEMENT (THE "CIRCULAR") IS FURNISHED IN
CONNECTION WITH THE SOLICITATION BY THE MANAGEMENT OF THE COMPANY OF PROXIES TO
BE USED AT THE ANNUAL MEETING OF SHAREHOLDERS OF THE COMPANY TO BE HELD ON
TUESDAY, APRIL 11, 2006 AT STONY BROOK MANHATTAN, 2ND FLOOR, 401 PARK AVENUE
SOUTH, NEW YORK, NEW YORK, USA, 10016 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 February 21, 2006 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 February 21, 2006.
APPOINTMENT AND DELIVERY OF PROXIES
The persons named in the accompanying 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 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 Proxy, or complete
another appropriate form of proxy.
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 10:30 a.m., Eastern Time, on the second 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.
Unless otherwise indicated, all references in this document to dollar amounts
are to U.S. dollars.
All information contained in this document is at February 21, 2006, unless
otherwise indicated.
1
PROXY AND VOTING BY MAIL OR DELIVERY
To vote by mail or delivery, your paper Proxy must be completed, signed and
returned in accordance with the instructions on the paper 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 Investor Services Inc., c/o Stock & Bond Transfer
Dept., 9th Floor, 100 University Avenue, Toronto, Ontario, Canada, M5J 2Y1 or at
the Corporate Headquarters of the Company, by 10:30 a.m., Eastern Time, on
Friday, April 7, 2006 or 10:30 a.m. on the second 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.
PROXY AND VOTING BY TELEPHONE
To vote by telephone, call the toll-free number shown on the Proxy form
provided. Using a touch-tone telephone to select your voting preferences, follow
the instructions of the "Vote voice" and REFER TO YOUR HOLDER ACCOUNT NUMBER AND
ACCESS NUMBER PROVIDED ON THE PROXY that was delivered to you by mail.
NOTE THAT VOTING BY TELEPHONE IS NOT AVAILABLE IF YOU WISH TO APPOINT A
PERSON AS A PROXY OTHER THAN THE PERSONS NAMED ON THE PROXY FORM. In such a
case, your Proxy should be voted by mail, delivery, or Internet.
PROXY AND VOTING BY INTERNET
To vote your Proxy by Internet, visit the website address as shown on the
Proxy form provided. Follow the on-line voting instructions given to you over
the Internet and REFER TO YOUR HOLDER ACCOUNT NUMBER AND ACCESS NUMBER PROVIDED
ON THE PROXY that was delivered to you by mail.
VOTING BY PROXY
For the purpose of voting by Proxy, proxies marked as "WITHHOLD" 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" is indicated.
By completing and returning a Proxy, you are authorizing the person named
in the Proxy to attend the Meeting and vote your shares on each item of business
you are entitled to vote on, according to your instructions. IF THERE ARE NO
INSTRUCTIONS WITH RESPECT TO YOUR PROXY, YOUR COMMON SHARES WILL BE VOTED IN
FAVOUR OF THE ELECTION OF DIRECTORS AND THE APPOINTMENT OF AUDITORS AND
AUTHORIZING THE DIRECTORS TO FIX THE AUDITORS' REMUNERATION, IN EACH CASE, AS
REFERRED TO IN THIS CIRCULAR.
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 proxyholder 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 Circular, 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 accompanying Proxy to vote on such other business in accordance
with their judgement.
VOTING SHARES
On February 21, 2006 the Company had 40,214,242 Common Shares issued and
outstanding, each carrying the right to one vote at all meetings of the
shareholders of the Company.
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 February 21, 2006,
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)
--------------------------------- ----------------------- ----------------------
RICHARD L. GELFOND 2,722,900 (3) 6.6%
Suite 2100, 110 East 59th Street, New York, New York
BRADLEY J. WECHSLER 2,632,800 (4) 6.4%
Suite 2100, 110 East 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 February 21, 2006 and Common
Shares as to which each individual had at February 21, 2006 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 40,214,242 Common Shares outstanding as of February 21, 2006
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 1,150,000 Common Shares as to which Mr.
Gelfond had the right to acquire beneficial ownership as of February 21,
2006 through the exercise of options.
(4) Included in the amount shown are 1,150,000 Common Shares as to which Mr.
Wechsler had the right to acquire beneficial ownership as of February 21,
2006 through the exercise of options.
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, 2005,
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 Circular.
SHAREHOLDER PROPOSALS FOR THE COMPANY'S 2007 ANNUAL MEETING
If a shareholder wishes to propose any matter for a vote by the Company's
shareholders at its 2007 annual meeting, he/she must send his/her proposal to
the Company's corporate office at IMAX Corporation, 2525 Speakman Drive,
Mississauga, Ontario, Canada, L5K 1B1, Attention: Corporate Secretary. The
Company may omit the proposal from next year's proxy circular and proxy
statement under applicable U.S. securities laws if it is not received by the
Company's Corporate Secretary at the address noted above by November 11, 2006
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 December 11, 2006.
3
ELECTION OF DIRECTORS
As permitted by the Company's articles, the Board of Directors has fixed
the number of directors at seven, effective at the Meeting.
At the Meeting, shareholders will be asked to approve the election of
directors, 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 the
nominees. IN THE ABSENCE OF ANY INSTRUCTION ON THE ACCOMPANYING PROXY, IT IS THE
INTENTION OF THE PERSONS NAMED BY MANAGEMENT IN THE PROXY TO VOTE THE COMMON
SHARES REPRESENTED BY THE 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 Neil S.
Braun, Kenneth G. Copland, Michael Fuchs, Richard L. Gelfond, Garth M. Girvan,
David W. Leebron, Marc A. Utay and Bradley J. Wechsler. At the Meeting the term
of Class I directors expires. The term of Class II directors expires in 2008.
The term of Class III directors expires in 2007.
During the fiscal year ended December 31, 2005, the Board of Directors held
seven meetings. The Audit Committee held eleven meetings; the Corporate
Governance Committee held one meeting; the Compensation Committee held one
meeting; and the Option Committee held no meeting. During the fiscal year ended
December 31, 2005, no director attended fewer than 75% of the aggregate of the
total number of meetings of the Board of Directors and the total number of
meetings held by all committees of the board on which he served. See board
meeting attendance records in Item 1.g) of Appendix "A".
While the Company encourages directors to attend its annual meeting of
shareholders, it has no formal policy concerning such attendance. Six directors
attended last year's annual meeting of shareholders. The Company does not have a
formal policy regarding shareholders communicating with the Board of Directors,
although shareholders may do so in writing to IMAX Corporation, 2525 Speakman
Drive, Mississauga, Ontario, Canada, L5K 1B1, Attention: Board of Directors and
Secretary to the Board. The Secretary forwards all shareholder communications to
the Board of Directors.
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.
NOMINEES FOR ELECTION AS CLASS I CURRENT POSITION
DIRECTORS FOR THE TERM EXPIRING IN 2009 WITH THE COMPANY
--------------------------------------- ----------------
* Neil S. Braun, 53, New York, New York. Director
Neil S. Braun, a director of the Company since June 2003, has
been the President, Feature Films and Television, IDT
Entertainment since January 2005 and the President of
Vanguard Animation, LLC since 2001. He was the President of
Vast Video Inc. prior to this 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.
* Kenneth G. Copland, 68, Toronto, Ontario. Director
Kenneth G. Copland, a director of the Company since June
1999, is the Chairman of KGC Ltd. Mr. Copland was the
Vice-Chairman of BMO Nesbitt Burns Inc. from 1994 to May
2001. He 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
serves as the Chairman of the Audit Committee and is a
Canadian citizen.
++ = + Garth M. Girvan, 56, Toronto, Ontario. Director
Garth M. Girvan, a director of the Company since March 1994,
is a partner of McCarthy Tetrault, Canadian counsel to the
Company. Mr. Girvan is a director of Corby Distilleries
Limited and is a Canadian citizen.
4
EXPIRY OF
DIRECTORS WHO CONTINUE IN OFFICE AFTER THE MEETING TERM OF OFFICE
-------------------------------------------------- --------------
Richard L. Gelfond, 50, New York, New York. 2007
Richard 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. 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 Vice Chairman of
the New York Historical Society and a Member of the Motion
Picture Academy of Arts & Science. Mr. Gelfond served as the
Chairman of the Columbia Shuttle Memorial Trust Steering
Committee, which was established in co-operation with NASA to
support the families of the seven crew members of the STS-107
mission of the Space Shuttle Columbia, which came to a tragic
end on February 1, 2003.
* = David Leebron, 51, Houston, Texas. 2008
David W. Leebron, a director of the Company since September
2003, has been the President of Rice University since July 1,
2004. Prior to July 1, 2004, Mr. Leebron held the position of
Dean and Lucy G. Moses Professor of Law at Columbia
University School of Law since 1996 and Professor of Law
since 1989. Mr. Leebron is a member of the American Bar
Association and on the Council on Foreign Relations. Mr.
Leebron serves as Chairman of the Corporate Governance
Committee of the Company.
= + Marc A. Utay, 46, New York, New York. 2008
Marc A. Utay, a director of the Company since May 1996, has
been the Managing Partner of Clarion Capital Partners, a
private equity investment firm, 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. Mr. Utay is a director of P & F
Industries, Inc. Mr. Utay serves as Chairman of the Option
Committee of the Company.
Bradley J. Wechsler, 54, New York, New York. 2007
Bradley J. Wechsler has been Co-Chief Executive Officer of
the Company with Mr. Gelfond since May 1996. From March 1994
to June 1999, Mr. Wechsler served as Chairman of the Company
and has served as Co-Chairman with Mr. Gelfond since June
1999. Mr. Wechsler serves on the boards of NYU Hospital,
where he is a Vice Chairman and member of the Executive
Committee, the American Museum of the Moving Image, Math for
America, the Ethical Culture Fieldston Schools and Apollo
Investment Corporation. Mr. Wechsler is also a Member of the
Motion Picture Academy of Arts & Science.
* Member, Audit Committee of the Company
++ Member, Compensation Committee of the Company
= Member, Corporate Governance Committee of the Company
+ Member, Option Committee of the Company
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 ACCOMPANYING 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.
Shareholders who wish to have the Board of Directors consider the
nomination of any person for director at the 2007 meeting of shareholders should
communicate with the Company's Corporate Secretary at the Company's corporate
office (see description under "Nomination Process" below).
5
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of the Company.
Name Age Position
---- --- --------
Richard L. Gelfond... 50 Co-Chairman & Co-Chief Executive Officer and Director
Bradley J. Wechsler.. 54 Co-Chairman & Co-Chief Executive Officer and Director
Greg Foster.......... 43 Chairman & President, Filmed Entertainment
Francis T. Joyce..... 53 Chief Financial Officer
Robert D. Lister..... 37 Executive Vice President, Business & Legal Affairs
and General Counsel
Larry O'Reilly....... 43 Executive Vice President, Theatre Development
Brian Bonnick........ 49 Senior Vice President, Technology
David B. Keighley.... 57 Senior Vice President & President, David Keighley
Productions 70MM Inc.
G. Mary Ruby......... 48 Senior Vice President, Legal Affairs, Deputy General
Counsel and Corporate Secretary
Mary C. Sullivan..... 42 Senior Vice President, Human Resources & Administration
Mark Welton.......... 42 Senior Vice President, Theatre Operations
Kathryn A. Gamble.... 38 Vice President, Finance, Controller
Edward MacNeil....... 41 Vice President, Finance, Tax and 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. 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 Vice Chairman of the New York Historical Society and a Member of the Motion
Picture Academy of Arts & Science. Mr. Gelfond served as the Chairman of the
Columbia Shuttle Memorial Trust Steering Committee, which was established in
co-operation with NASA to support the families of the seven crew members of the
STS-107 mission of the Space Shuttle Columbia, which came to a tragic end on
February 1, 2003.
BRADLEY J. WECHSLER has been Co-Chief Executive Officer of the Company with
Mr. Gelfond since May 1996. From March 1994 to June 1999, Mr. Wechsler served as
Chairman of the Company and has served as Co-Chairman with Mr. Gelfond since
June 1999. Mr. Wechsler serves on the boards of NYU Hospital, where he is a Vice
Chairman and member of the Executive Committee, the American Museum of the
Moving Image, Math for America, the Ethical Culture Fieldston Schools and Apollo
Investment Corporation. Mr. Wechsler is also a Member of the Motion Picture
Academy of Arts & Science.
GREG FOSTER joined the Company in March 2001 as President, Filmed
Entertainment and was appointed Chairman & President, Filmed Entertainment in
September 2004. 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, Mr. Foster founded uMogul, a
financial services company and held the position of Chairman, Co-Founder and
President.
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.
ROBERT D. LISTER joined the Company in May 1999 as Senior Vice President,
Legal Affairs and General Counsel 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 serves on the board of Giant Screen Theater Association. Mr.
Lister is a member of the New York State Bar Association.
LARRY O'REILLY joined the Company in March 1994 as the Sales Manager, Film
Distribution and was appointed Executive Vice President, Theatre Development in
September 2004. Mr. O'Reilly has held various positions within the Company
including Manager, Business Development: Film; Director, Strategic Partnerships;
Director, Commercial Marketing: The Americas; Vice President, Sales, The
Americas; and Senior Vice President, Theatre Development & Film Distribution.
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 at TSB International Inc. a
telecommunications company. Mr. Bonnick is registered as a professional engineer
by the Association of Professional Engineers of Ontario.
6
DAVID B. KEIGHLEY joined the Company in February 1988, was appointed a
Senior Vice President of the Company in July 1997 and is President of David
Keighley Productions 70MM Inc., a subsidiary of the Company. Mr. Keighley is
responsible for motion picture and digital post-production and image quality
assurance for 15/70-format films.
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 of the Company from February 1989 to February 1997. Ms.
Ruby is Deputy General Counsel and acts as Corporate Secretary to the Board of
Directors. In November 2004, Ms. Ruby was appointed by the Company's Audit
Committee as Chief Compliance Officer, responsible for oversight of the
Company's Whistle Blower Program. 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, Theatre Operations in October 2003.
Previous to that Mr. Welton was Senior Vice President, Business Affairs, a
position he held since September 2001. 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, Controller. Prior to joining the Company 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 publicly-traded 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, Tax and Special Projects in
September 2001. From October 1999 to August 2001, Mr. MacNeil held the position
of Director and Senior Vice President of Digital Projection Limited, a former
subsidiary of the Company. Prior to joining the Company, Mr. MacNeil was a
Taxation Manager at PricewaterhouseCoopers. Mr. MacNeil is a member of the
Canadian Institute of Chartered Accountants.
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 February 21, 2006 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
BENEFICIAL OWNERSHIP OF OUTSTANDING
NAME OF BENEFICIAL OWNER OF COMMON SHARES COMMON SHARES COMMON SHARES
----------------------------------------- ----------------------- -------------
Richard L. Gelfond 2,722,900 (1) 6.6
Bradley J. Wechsler 2,632,800 (2) 6.4
Neil S. Braun 24,000 (3) *
Kenneth G. Copland 83,865 (4) *
Michael Fuchs 58,139 (5) *
Garth M. Girvan 95,636 (6) *
David W. Leebron 25,892 (7) *
Marc A. Utay 1,344,065 (8) 3.3
Greg Foster 313,500 (9) *
Francis T. Joyce 91,500 (10) *
Robert D. Lister 123,666 (11) *
David B. Keighley 400 *
All directors and executive officers as a
group (19 persons) 7,784,772 (12) 17.8
* 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.
The amount of Common Shares listed includes the number of Common Shares
owned at February 21, 2006 and Common Shares as to which each individual had at
February 21, 2006 the right to acquire beneficial ownership through the exercise
of vested options plus options that vest within 60 days of that date.
7
The percent of outstanding Common Shares is based on dividing the number of
Common Shares beneficially owned by the individual by 40,214,242 Common Shares
outstanding as of February 21, 2006 adjusted for shares issuable through the
exercise of vested options held, plus options held that vest within 60 days of
that date.
(1) Included in the amount shown are 1,150,000 Common Shares which Mr. Gelfond
had the right to acquire beneficial ownership through the exercise of
options.
(2) Included in the amount shown are 1,150,000 Common Shares which Mr. Wechsler
had the right to acquire beneficial ownership through the exercise of
options.
(3) Included in the amount shown are 24,000 Common Shares which Mr. Braun had
the right to acquire beneficial ownership through the exercise of options.
(4) Included in the amount shown are 73,865 Common Shares which Mr. Copland had
the right to acquire beneficial ownership through the exercise of options
(5) Included in the amount shown are 58,139 Common Shares which Mr. Fuchs had
the right to acquire beneficial ownership through the exercise of options.
(6) Included in the amount shown are 69,738 Common Shares which Mr. Girvan had
the right to acquire beneficial ownership through the exercise of options.
(7) Included in the amount shown are 24,592 Common Shares which Mr. Leebron had
the right to acquire beneficial ownership through the exercise of options.
(8) Included in the amount shown are 219,738 Common Shares which Mr. Utay had
the right to acquire beneficial ownership through the exercise of options.
(9) Included in the amount shown are 297,500 Common Shares which Mr. Foster had
the right to acquire beneficial ownership through the exercise of options.
(10) Included in the amount shown are 84,000 Common Shares which Mr. Joyce had
the right to acquire beneficial ownership through the exercise of options.
(11) Included in the amount shown are 114,666 Common Shares which Mr. Lister had
the right to acquire beneficial ownership through the exercise of options.
(12) Included in the amount shown are 3,510,512 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 "SEC"). 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, 2005, the Company believes that no reports on
Form 4 were not timely filed.
8
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 2005 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, 2005 (collectively, the "Named Executive
Officers").
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- -------------------------
OTHER SECURITIES
NAME AND ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION OF YEAR ENDED SALARY BONUS COMPENSATION(1) STOCK AWARDS OPTIONS COMPENSATION (2)
NAMED EXECUTIVE OFFICER DECEMBER 31 ($) ($) ($) ($) (#) ($)
----------------------- ----------- ------- ----------- --------------- ------------ ---------- ----------------
Richard L. Gelfond 2005 500,000 250,000 Nil Nil Nil 6,514 (3)
Co-Chairman & Co-Chief 2004 500,000 750,000 Nil Nil 450,000 4,460
Executive Officer 2003 500,000 750,000 Nil Nil Nil 4,270
Bradley J. Wechsler 2005 500,000 250,000 Nil Nil Nil 6,514 (3)
Co-Chairman & Co-Chief 2004 500,000 750,000 Nil Nil 450,000 4,460
Executive Officer 2003 500,000 750,000 Nil Nil Nil 4,414
Greg Foster 2005 450,000 250,000 Nil Nil Nil 6,514 (3)
Chairman & President, 2004 422,500 350,000 Nil Nil 150,000 4,340
Filmed Entertainment 2003 394,519 250,000 Nil Nil 50,000 3,580
Francis T. Joyce 2005 310,000 70,000 Nil Nil 50,000 6,514 (3)
Chief Financial Officer 2004 306,192 116,000 Nil Nil Nil 4,652
2003 291,673 90,000 Nil Nil 66,000 4,414
Robert D. Lister 2005 318,000 145,000 Nil Nil 60,000 6,514 (3)
Executive Vice President, 2004 286,981 139,000 Nil Nil 55,000 4,316
Business and Legal Affairs 2003 255,000 100,000 Nil Nil 51,250 4,162
& General Counsel
David B. Keighley 2005 305,541 200,000 (6) Nil Nil 16,000 6,514 (3)
Senior Vice President and 2004 291,047 220,794 Nil Nil 15,000 5,132
President, David Keighley 2003 277,292 230,000 Nil Nil 15,000 4,774
Productions 70MM Inc.
(1) 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.
(2) 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.
(3) This amount reflects (i) the payment of $264 by the Company of life
insurance premiums on the life of the Named Executive Officer, and (ii)
contributions of $6,250 to the Company's defined contribution pension
plans.
(4) The calculation in respect of the Named Executive Officer's 2005 bonus is
not yet finalized but is expected to approximate this total.
9
OPTIONS GRANTED
The following table sets forth information relating to individual grants of
options to purchase Common Shares of the Company to Named Executive Officers
under the Stock Option Plan during the fiscal year ended December 31, 2005 in
respect of services rendered or to be rendered to the Company.
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS PARTICIPANTS EXERCISE PRICE ---------------------------
NAME GRANTED (#) IN FISCAL YEAR ($/SH) EXPIRATION DATE 5% ($) 10% ($)
---- ----------- -------------- -------------- --------------- ------ -------
Richard L. Gelfond Nil n/a n/a n/a Nil Nil
Bradley J. Wechsler Nil n/a n/a n/a Nil Nil
Greg Foster Nil n/a n/a n/a Nil Nil
Francis T. Joyce 30,000 (1) 4.6 9.59 August 25, 2012 10,324 125,038
Robert D. Lister 60,000 (1) 9.2 9.59 August 25, 2012 20,648 250,077
David B. Keighley 16,000 (1) 2.5 9.59 August 25, 2012 5,506 66,687
(1) 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. The stock
options become exercisable in five installments: 10% on August 25, 2006;
15% on August 25, 2007; 20% on August 25, 2008; 25% on August 25, 2009 and
30% on August 25, 2010.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth information relating to options exercised
during the fiscal year ended December 31, 2005 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 1,150,000 / Nil 2,353,800 / Nil
Bradley J. Wechsler Nil Nil 1,150,000 / Nil 2,353,800 / Nil
Greg Foster 50,000 354,500 297,500 / 120,000 747,725 / 20,400
Francis T. Joyce 30,000 226,800 84,000 / 52,000 172,400 / Nil
Robert D. Lister Nil Nil 114,666 / 126,584 294,185 / 72,765
David B. Keighley 36,500 261,630 Nil / 34,500 Nil / 19,845
(1) Calculated based on the December 31, 2005 closing price of the Common
Shares on Nasdaq of $7.06.
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, 2005, the Company contributed an aggregate of $37,500 to 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.
10
The Company has established a U.S. 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 proceeding retirement.
Under the original terms of the plan, 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
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 of control of the Company prior to termination
of a member's employment, the vesting percentage shall become 100%. The Company
intends to use the proceeds of life insurance policies taken on its Co-Chief
Executive Officers to be applied towards the benefits due and payable under the
plan, although there can be no assurance that the Company will ultimately do so.
On March 8, 2006, the Company and the Co-Chief Executives negotiated an
amendment to the plan. Under the terms of the plan amendment, the cost of living
adjustment and surviving spouse benefits previously owed to the Co-Chief
Executive Officers are each reduced by 50%, subject to a recoupment of a
percentage of such benefits upon a change of control of the Company, and benefit
payments are accelerated and paid out upon the occurrence of certain events,
including a change of control of the Company. The Company currently estimates
that the annual benefits upon retirement will be approximately $1.0 million for
each of the Co-Chief Executive Officers, subject to the amended cost of living
adjustment and surviving spouse benefits.
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, 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"). Pursuant to the 2000
Amendments, the Executives were each granted 180,000 restricted shares which, in
the event that regulatory or shareholder approval is not obtained, are deemed
phantom stock. The restricted shares, or phantom stock equivalent, became fully
vested on June 30, 2001. In 2003, a payment of $775,000 was made to each
Executive to reflect the value of the cancellation of 100,000 of the 180,000
phantom stock granted to each Executive in 2000. 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"), which extended their
respective employment terms through June 30, 2002.
On April 23, 2002, the Company entered into amendments to the employment
agreements of the Executives (the "2002 Amendments"), which extended their
respective employment terms through June 30, 2004. The 2002 Amendments also
provide that each of the Executives would 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.
On June 3, 2004, the Company entered into amendments to the employment
agreements of the Executives (the "2004 Amendments"), which extended their
respective employment terms through December 31, 2005. The 2004 Amendments also
provided that each of the Executives would be considered for a bonus payable in
2005 and 2006 based upon performance to December 31, 2004 and December 31, 2005,
respectively. Pursuant to the 2004 Amendments, on June 3, 2004 the Executives
were each granted 450,000 options to purchase Common Shares in accordance with
the Stock Option Plan, 150,000 of which vested on each of December 3, 2004, June
3, 2005, and December 3, 2005. These options expire on June 3, 2014.
11
On March 8, 2006, the Company entered into amendments to the employment
agreements of the Executives (the "2006 Amendments"), which extended their
respective employment terms through December 31, 2006. The 2006 Amendments also
provided that each of the Executives would be considered for a bonus payable in
2007 based upon performance to December 31, 2006, with a guaranteed bonus of
$750,000 paid for 2006 in the event of a change of control of the Company.
Pursuant to the 2006 Amendments, on March 10, 2006 the Executives will each be
granted 75,000 options to purchase Common Shares in accordance with the Stock
Option Plan (the "Options"), which Options shall vest as to 50% on the first
anniversary of the grant date and 50% on the second anniversary of the grant
date. The Options expire on March 10, 2016 and vesting accelerates on a change
of control. In addition, if there is a change of control of the Company on or
before March 10, 2008, the executives will each receive an incentive bonus equal
to the product of (a) 225,000 and (b) the difference between the closing price
of the Company's common shares upon such change of control and the closing price
of the Company's shares on March 10, 2006. The 2006 Amendments provide that if
an Executive's employment is terminated without cause prior to the end of the
employment term, or if his agreement is not renewed, the Company must continue
to pay the Executive his annual salary and bonus for twelve months. In
conjunction with the 2006 Amendments, the Executives and the Company agreed to
amend the Executives' defined benefit pension plan as more fully described under
"Pension Plans" above. The restrictive covenants, including non-competition
provisions, of the Executives' existing employment agreements, as well as other
provisions not modified by the 2006 Amendments remain in force.
On March 9, 2001, the Company and Greg Foster entered into an employment
agreement. The agreement was for a two-year term. 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.
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 received an annual
salary effective March 19, 2004 of $425,000. Mr. Foster was granted 50,000
options to purchase Common Shares in accordance with the Stock Option Plan on
March 18, 2003, which options became fully vested upon achievement of certain
performance criteria and expire on March 18, 2010.
On October 28, 2004, the Company entered into an amendment to the
employment agreement with Mr. Foster, under which Mr. Foster's employment term
was extended to June 30, 2006. Under the amended agreement, Mr. Foster received
an annual salary of $450,000 effective November 10, 2004 and received an annual
salary of $475,000 effective January 1, 2006. The amendment further provides
that Mr. Foster was entitled to receive a minimum annual bonus of $200,000 for
the year ending December 31, 2004 and the year ending December 31, 2005, and a
minimum annual bonus of $100,000 in respect of the year ending December 31, 2006
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 November 1, 2004, which options shall vest as to 50% on
each of November 1, 2006 and November 1, 2007 and expire on November 1, 2011.
The agreement also provided for Mr. Foster to receive a grant of 50,000 options
to purchase Common Shares in accordance with the Stock Option Plan on November
1, 2004, of which 30,000 of such options are fully vested, the remaining 20,000
of such options shall vest subject to certain performance criteria. These
options expire on November 1, 2011.
On March 9, 2006, the Company entered into an amendment to the employment
agreement with Mr. Foster, under which Mr. Foster's employment term was extended
to June 30, 2008. Under the amended agreement, Mr. Foster receives an annual
salary of $700,000 effective March 1, 2006, which is, thereafter, subject to
annual review. The amendment further provides that Mr. Foster is entitled to
receive a minimum annual bonus of 50% of his base salary for the year ending
December 31, 2006 and the year ending December 31, 2007, and a prorated bonus in
respect of the year ending December 31, 2008. In addition, if there is a change
of control of the Company on or before March 10, 2008, Mr. Foster shall receive
an incentive bonus equal to the product of (a) 75,000 and (b) the difference
between the closing price of the Company's common shares upon such change of
control and the closing price of the Company's shares on March 10, 2006, which
shall be paid out in either a lump-sum or three installments, depending upon
certain events. Pursuant to the amendment, Mr. Foster will be granted 225,000
options to purchase Common Shares in accordance with the Stock Option Plan on
March 10, 2006, which options shall vest as to 50% on each of March 10, 2007 and
March 10, 2008 and expire on March 10, 2013. The amendment further provides that
Mr. Foster is entitled to a term life insurance policy in the amount of US$
5,000,000 during the term. 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. The restrictive covenants, including
confidentiality and non-competition provisions, of Mr. Foster's existing
employment agreement remain in force.
On May 9, 2001, the Company and Francis T. Joyce entered into an employment
agreement. The agreement was for a two-year term and provided for an annual base
salary and a minimum annual bonus in respect of 2001 as well as a discretionary
bonus based on a percentage of base salary throughout the employment term. 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 by Mr. Joyce.
12
On May 14, 2003, the Company entered into an amendment to the employment
agreement with Mr. Joyce, under which Mr. Joyce's employment term was extended
until May 14, 2005. The amendment provided for an annual salary effective May
14, 2004 of $310,000. Pursuant to the amendment, Mr. Joyce was granted 66,000
options to purchase Common Shares in accordance with the Stock Option Plan on
June 16, 2003, 22,000 of which vested on each of June 16, 2004 and June 16,
2005, and 22,000 of which shall vest on June 16, 2006. These options expire on
June 16, 2010. The restrictive covenants, including confidentiality and
non-competition provisions, of Mr. Joyce's existing employment agreement remain
in force.
On May 17, 1999, the Company and Robert D. Lister entered into an
employment agreement. The agreement was for a two-year term and provided for
annual base salary and a minimum annual bonus in respect of 1999. The agreement
contains restrictive covenants, including confidentiality and non-competition
covenants. On August 21, 2000, the Company entered into an agreement with Mr.
Lister, under which Mr. Lister is entitled to receive a bonus of $107,500 upon
the occurrence of certain events.
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.
On January 1, 2004, the Company entered into an amendment to the employment
agreement with Mr. Lister, under which Mr. Lister's employment term was extended
until June 30, 2006. The amendment provided for an annual salary of $275,000,
subject to an annual review.
On February 14, 2006, the Company entered into an amendment to the
employment agreement with Mr. Lister, under which Mr. Lister's employment term
was extended until January 1, 2008. The amendment provided for an annual salary
of $365,700 and, effective January 1, 2007, an annual salary of $402,270.
Pursuant to the amendment, Mr. Lister was granted 50,000 options to purchase
Common Shares in accordance with the Stock Option Plan on February 20, 2006,
which option shall vest as to 10% on the first anniversary of the grant date,
15% on the second anniversary of the grant date, 20% on the third anniversary of
the grant date, 25% on the fourth anniversary of the grant date and 30% on the
fifth anniversary of the grant date. These options will expire on the seventh
anniversary of the grant date. The amendment provided that if Mr. Lister's
employment is terminated without cause prior to the end of the employment term,
or if 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 either twelve months or eighteen months, depending upon
the circumstances. The restrictive covenants, including confidentiality and
non-competition provisions, of Mr. Lister's existing employment agreement remain
in force.
On July 15, 1997, the Company, David Keighley Productions 70 MM Inc.
(formerly 70MM Inc.) ("DKP/70MM"), a wholly-owned subsidiary of the Company and
David B. Keighley entered into an employment agreement. The agreement was for a
five-year term and provided for an annual base salary, annual bonus and
additional bonus of 10% of any excess of DKP/70MM audited profit before taxes
over an enumerated pre-tax profit threshold. Under the agreement, Mr. Keighley
has agreed to 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.
EQUITY COMPENSATION PLANS
The following table sets forth information regarding the Company's Equity
Compensation Plans as of December 31, 2005:
Number of securities
remaining available for
Number of securities to Weighted average future issuance under equity
be issued upon exercise exercise price of compensation plans (excluding
of outstanding options, outstanding options, securities reflected in
Plan category warrants and rights warrants and rights column (a))
------------- ----------------------- -------------------- -----------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders 5,504,324 $7.26 1,542,365
Equity compensation plans not
approved by security holders
Nil Nil Nil
--------- ----- ---------
Total 5,504,324 $7.26 1,542,365
========= ===== =========
13
CODE OF ETHICS
The Company has a Code of Ethics applicable to all employees, including the
Company's Co-Chief Executive Officers, Chief Financial Officer and Controller
and all other persons performing similar functions, and all directors and
consultants. A copy of the Code of Ethics is available, without charge, at
www.imax.com or upon written request to the Company at IMAX Corporation, 2525
Speakman Drive, Mississauga, Ontario, Canada, L5K 1B1, Attention: Corporate
Secretary. Any amendments to, or waivers of, the Code of Ethics which
specifically relate to any financial professional will be disclosed promptly
following the date of such amendment or waiver at www.imax.com.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2005, two members of the Board of Directors served as members of the
Compensation Committee: Messrs. Girvan and Fuchs.
The law firm of McCarthy Tetrault, of which Mr. Girvan is a senior partner,
provided legal services to the Company on several matters in 2005 and is
expected to provide legal services in 2006.
No executive officers of the Company serve on boards of directors or
compensation committees of any other entities that had or have 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 current members of the Compensation Committee are Messrs. Girvan and
Fuchs, both are "independent directors" as defined in Rule 4200(a)(15) of the
National Association of Securities Dealers ("NASD") Marketplace Rules and in
Section 1.4 of Multilateral Instrument 52-110. The Compensation Committee did
not participate in executive compensation decisions in respect of 2005 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
Company utilizes independently-produced survey data of the salaries paid at
groups of other companies which are regarded as comparable to the Company in the
various locations in which employees of the Company are located, to confirm that
the midpoint of each salary range is generally equal to the average salary of
equivalent positions at such groups of comparable companies. The groups of
comparable companies are chosen based on their industry, size and revenues, as
such factors are thought to be relevant to compensation conditions in the
locations of the Company's employees. 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 that annual operating objectives targets
are achieved by the Company and provided that personal performance standards are
achieved by the participating employees. An aggregate of $2,094,988 will be
paid to all employees participating in this plan in respect of 2005.
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 (the
"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.
14
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. Under the Stock Option Plan, the Board of
Directors through the Option Committee has the authority to prescribe additional
terms and conditions to grants of options thereunder. All options granted shall
immediately vest and become fully exercisable upon a change of control and the
occurrence of other stated events. 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 5,504,324 Common Shares have
been granted and are outstanding under the Stock Option Plan as of December 31,
2005. Under the terms of the Stock Option Plan, the maximum number of Common
Shares that the Company may issue under options is 7,046,689 Common Shares as of
December 31, 2005. During 2005, 651,866 stock options were granted to Stock
Option Plan Participants, including certain of the Company's executive officers.
Certain Named Executive Officers received options to purchase Common Shares of
the Company, as detailed in the "Options Granted" 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 of similar revenue, size and market segment or industry. In
addition consideration is given as to the number of options granted to other
executive officers.
EXECUTIVE SHARE OWNERSHIP PLAN
The Company believes that it is important to align the interests of the
Company's management with those of its shareholders, and that this can be
achieved, in part, by encouraging executives to have significant personal
holdings of the Company's Common Shares. In 2003, the Company adopted formal
guidelines that set out the expected share ownership for senior executives,
ranging from one to two times base salary. Current executives are required to
meet these minimum shareholding guidelines by fiscal 2008, and new executives
within five years of appointment. In addition, once executives have met their
initial shareholding requirement, they are required to maintain the minimum
percentage ownership requirement.
COMPENSATION OF CO-CHIEF EXECUTIVE OFFICERS
The Compensation Committee of the Board of Directors makes recommendations
to the Board of Directors regarding the compensation of the Co-Chief Executive
Officers. The pay-for-performance philosophy of the Company's executive
compensation program applies equally to the Co-Chief Executive Officers. The
base salary and option components of the Co-Chief Executive Officers' 2005
compensation were fixed by the provisions of the 2004 Agreements. The bonus
component of their 2005 compensation was approved by the Board of Directors
after careful assessment of their personal contributions to the performance of
the Company.
The Co-Chief Executive Officers' performance was assessed in light of a
number of quantitative and qualitative factors, which included corporate
financial results and strategic planning objectives. Early in 2005, management
of the Company developed, and the Board of Directors approved, an operating plan
for fiscal 2005. The operating plan included a series of specific objectives
related to the Company's performance for the year. These included, among others,
targeted theatre signings, release of IMAX DMR versions of Hollywood films,
specified Research & Development objectives and overall performance targets
related to budgeted profit and loss and cash flows. The bonus component of the
Co-Chief Executive Officers' compensation was assessed by the Board of Directors
in light of the overall success in achieving these objectives, in the context of
the overall performance by the Company in 2005. In this process, the Board of
Directors assessed the contributions of the Co-Chief Executive Officers to the
achievement of the objectives set out in the operating plan, consideration of
bonuses paid to the Co-Chief Executive Officers in prior years, the success of
the Co-Chief Executive Officers in handling unexpected challenges which arose
during the year and more general assessments of the leadership role played by
the Co-Chief Executive Officers during the year. While the Board of Directors
took into account the level of achievement of each of the objectives, specific
relative weightings were not assigned to individual factors in the Board of
Directors' assessment and there was no specific relationship between any one of
these factors and the bonuses approved by the Board of Directors.
The foregoing Report on Executive Compensation, dated March 9, 2006, has
been furnished by Messrs. Braun, Copland, Girvan, Leebron and Utay, being the
non-management members of the Board of Directors who were in attendance at the
meeting at which the Circular including this report was approved.
15
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 on December 31, 2001 to the end of the most recently
completed fiscal year.
(LINE CHART)
31-Dec-01 31-Dec-02 31-Dec-03 31-Dec-04 31-Dec-05
--------- --------- --------- --------- ---------
IMAX 100 200.00 391.58 408.42 349.50
Nasdaq 100 68.81 103.79 112.93 115.49
S&P/TSX Composite 100 88.26 136.75 168.07 215.39
Bloomberg Hollywood Reporter 100 75.75 103.42 105.02 97.04
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
As contemplated under Section 124 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 $863,953
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.
COMPENSATION OF DIRECTORS
Directors are reimbursed for expenses incurred in attending meetings of the
Board of Directors and Committees of the Board of Directors. 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 attended in person or by telephone and Cdn. $1,200 for each
Committee of the Board meeting attended in person or by telephone. The Chairman
of the Audit Committee receives Cdn. $8,000 per year. In addition, each of the
directors who are not also employees of the Company are granted options annually
to purchase 8,000 Common Shares, in accordance with the Stock Option Plan, 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 seven years after the date of the grant.
16
CORPORATE GOVERNANCE PRACTICES
Over the last several years, there have been extensive regulatory changes
based on reforms arising out of the Sarbanes Oxley Act of 2002 ("SOX"), the
reforms of the SEC, the new listing requirements of the Nasdaq Stock Market, and
the new Canadian disclosure regulations. With shares listed on the TSX and
Nasdaq, the Company reviews its governance policies and practices against these
standards under the direction of its Board of Directors and Corporate Governance
Committee.
National Instrument 58-101 - Disclosure of Corporate Governance Practices
("NI 58-101") require the Company to disclose, on an annual basis, its approach
to corporate governance with reference to the governance guidelines provided in
National Policy 58-201 - Corporate Governance Guidelines (the "Guidelines").
Appendix "A" to this Circular describes the Company's various governance
practices with reference to the Guidelines and, where applicable, with the
Nasdaq Stock Market listing standards and the National Association of Securities
Dealers ("NASD") Marketplace Rules, as these rules have been approved by the
SEC.
The Board of Directors has determined that the following directors are
"independent" within the meaning of Rule 4200(a)(15) of the NASD Marketplace
Rules and within Section 1.4 of Multilateral Instrument 52-110: Messrs. Braun;
Copland; Fuchs; Girvan, Leebron and Utay.
NOMINATION PROCESS
The Board of Directors has assumed responsibility for identifying and
recommending candidates for election to the Board of Directors and believes,
considering the size and composition of the Board of Directors, that this is the
most efficient means to identify nominees for election to the Board of
Directors. Such candidates are then nominated for election by a majority of
independent directors, as defined in Rule 4200(a)(15) of the NASD Marketplace
Rules and in Section 1.4 of Multilateral Instrument 52-110. The Board of
Directors has adopted a formal process regarding the nominating function,
although there is no written charter. The Board of Directors evaluates potential
new candidates for the Board of Directors on an ongoing basis in light of
opportunities and risks facing the Company, and the competencies, skills and
personal qualities that are desirable to add value to the Company and to
contribute to the effective governance of the Company. Candidates are identified
from a number of sources including recommendations from Board members,
management, shareholders and others. The Board of Directors will consider any
nominee recommended by a shareholder under the same criteria as any other
potential nominee. The Company may require any proposed nominee to furnish
additional information as may be reasonably required to determine the
qualifications of such proposed nominee to serve as a director of the Company.
BOARD OF DIRECTORS MANDATE
The Board of Directors operates under a written mandate, the Board of
Directors' Charter, adopted by the Company's Board of Directors. A copy of the
Board of Directors' Charter is found in Appendix "B" to this Circular and is
available at www.imax.com or upon written request to the Company at IMAX
Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada, L5K 1B1,
Attention: Corporate Secretary.
COMMITTEES OF THE BOARD
The Board of Directors has delegated some of its duties to four specific
committees of the Board: Audit Committee, Compensation Committee, Corporate
Governance Committee and Option Committee. Each of these committees are
appointed annually and have a written mandate which sets out its principal
duties and responsibilities.
AUDIT COMMITTEE
The Audit Committee is currently composed of Messrs. Copland, Braun and
Leebron, all "independent directors" as defined in Rule 4200(a)(15) of the NASD
Marketplace Rules and in Sections 1.4 and 1.5 of Multilateral Instrument 52-110,
who are "financially literate", as that term is defined in Section 1.6 of
Multilateral Instrument 52-110, and have an understanding of financial
statements and financial affairs. Each committee member has many years of
experience with various businesses and professions which has given them an
understanding of the accounting principles used by the Company in preparing its
financial statements and the ability to assess the general applications of such
accounting principles in connection with the accounting for estimates, accruals
and reserves. These experiences have been with companies, businesses and
professional organizations presenting a breadth and level of complexity of
accounting issues generally comparable to those reasonably expected to be raised
by the Company's financial statements and have provided them with an
understanding of internal controls and procedures for financial reporting. The
Board of Directors has determined that Mr. Copland, an independent director,
qualifies as an "audit committee financial expert" as that term is defined in
Item 401(h) of Regulation S-K. 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 available at www.imax.com or
upon written request to the Company at IMAX Corporation, 2525 Speakman Drive,
Mississauga, Ontario, Canada, L5K 1B1, Attention: Corporate Secretary. The
preceding information in this paragraph shall not be deemed to be "soliciting
material" or to be "filed" with the SEC, nor shall such information be
incorporated by reference into any future filing under the U.S. Securities Act
of 1933, as amended (the "1933 Act"), or the Exchange Act, as amended, except to
the extent that the Company specifically incorporates it by reference in such
filing.
17
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 reviews and assesses the adequacy of the Audit Committee
Charter on an annual basis.
COMPENSATION COMMITTEE
The Compensation Committee is currently composed of Messrs. Girvan and
Fuchs, both "independent directors" as defined in Rule 4200(a)(15) of the NASD
Marketplace Rules and in Section 1.4 of Multilateral Instrument 52-110. The
Compensation Committee is responsible for setting objectives for the Co-Chief
Executive Officers, assessing their performance on a periodic basis and
recommending compensation arrangements to the Board of Directors. The Report on
Executive Compensation is included above. The Compensation Committee operates
under a written mandate, the Compensation Committee Charter, adopted by the
Company's Board of Directors. A copy of the Compensation Committee Charter is
available at www.imax.com or upon written request to the Company at IMAX
Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada, L5K 1B1,
Attention: Corporate Secretary.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee is currently composed of Messrs.
Leebron, Girvan and Utay, all "independent directors" as defined in Rule
4200(a)(15) of the NASD Marketplace Rules and in Section 1.4 of Multilateral
Instrument 52-110. The Corporate Governance Committee is responsible for
monitoring and evaluating the Company's compliance with regard to the
regulations enacted in connection with SOX and under the Guidelines; monitoring
and evaluating compliance with the Company's articles, by-laws 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. The Corporate Governance
Committee operates under a written mandate, the Corporate Governance Committee
Charter, adopted by the Company's Board of Directors. A copy of the Corporate
Governance Committee Charter is available at www.imax.com or upon written
request to the Company at IMAX Corporation, 2525 Speakman Drive, Mississauga,
Ontario, Canada, L5K 1B1, Attention: Corporate Secretary.
OPTION COMMITTEE
The Option Committee is currently composed of Messrs. Utay and Girvan, both
"independent directors" as defined in Rule 4200(a)(15) of the NASD Marketplace
Rules and in Section 1.4 of Multilateral Instrument 52-110. 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. The Option
Committee enacts written resolutions from time to time authorizing the grant of
stock options but did not conduct formal meetings in 2005.
ORIENTATION AND EDUCATION
The Company has developed and implemented orientation materials and
procedures for new directors. In this regard, a Board of Directors Manual is
provided to all new Board members. Reports, materials and presentations relating
to the Company's business are periodically provided to the Board of Directors.
New directors also have access to fellow directors and senior management.
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 for the following:
The law firm of McCarthy Tetrault, of which Mr. Girvan is a senior partner,
provided legal services to the Company on several matters in 2005 and is
expected to provide legal services in 2006.
Mr. Utay is the Managing Partner of Clarion Capital Partners, LLC, which
leases office space from the Company for an annual rent of approximately
$120,000.
18
REGISTRATION RIGHTS AGREEMENTS
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 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 Messrs. Gelfond
and Wechsler have certain rights to cause the Company to use its best efforts to
register their securities under the 1933 Act. Messrs. Gelfond and Wechsler are
entitled to make two such demand registrations. 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.
Numerous provisions of the Registration Rights Agreement terminated in 2002,
when WP ceased to be a shareholder of the Company.
Messrs. Gelfond and Wechsler, and certain shareholders of the Company
entered into another shareholders' agreement on January 3, 1994 as amended on
March 1, 1994 (the "Selling Shareholders' Agreement") which includes, among
other things, registration rights, tag along rights and drag along rights.
AUDITOR INDEPENDENCE
PricewaterhouseCoopers LLP ("PWC") are the principal independent
accountants of the Company. PWC, or one of its predecessors, have been the
auditors of the Company for more than five years.
AUDIT FEES
For professional services rendered by PWC for the audit of the Company's
financial statements, audit of internal control over financial reporting, and
review of the quarterly financial statements included in the Company's Form
10-Ks and 10-Qs and services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements during the
fiscal year ended December 31, 2005, PWC billed the Company $1,174,942 (2004 -
$1,164,481).
AUDIT-RELATED FEES
For professional services rendered by PWC for assurance and related
services that are reasonably related to the performance of the audit or review
of financial statements and which includes consultations concerning financial
accounting and reporting standards and review of regulatory matters during the
fiscal year ended December 31, 2005, PWC billed the Company $51,920 (2004 -
$275,072).
TAX FEES
For professional services rendered by PWC for tax compliance, tax advice
and tax planning during the fiscal year ended December 31, 2005, PWC billed the
Company $99,706 (2004 - $13,126).
ALL OTHER FEES
PWC did not bill the Company for services rendered during the fiscal year
ended December 31, 2005, other than the services described above.
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
Section 10A(i)(1) of the Exchange Act and related SEC rules require that
all auditing and permissible non-audit services to be performed by a company's
principal accountants be approved in advance by the Audit Committee of the Board
of Directors, subject to a de minimis exception set forth in the SEC rules (the
"De Minimis Exception"). Pursuant to Section 10A(i)(3) of the Exchange Act and
related SEC rules, the Audit Committee has established procedures by which the
Chairman of the Audit Committee may pre-approve such services provided the
pre-approval is detailed as to the particular service or category of services to
be rendered and the Chairman reports the details of the services to the full
Audit Committee at its next regularly scheduled meeting. None of the
audit-related or non-audit services described above were performed pursuant to
the De Minimis Exception during the periods in which the pre-approval
requirement has been in effect.
19
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,
2005.
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, 2005 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, 2005.
The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the 1933 Act, or the
Exchange Act, 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 March 9, 2006, has been
furnished by Messrs. Copland, Braun and Leebron as members of the Audit
Committee of the Board of Directors.
APPOINTMENT OF AUDITORS
At the Meeting, the shareholders will be asked to approve 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.
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 PROXY, IT IS THE INTENTION OF THE PERSONS NAMED BY MANAGEMENT IN
THE PROXY TO VOTE THE COMMON SHARES REPRESENTED BY THE 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 SEC. REPORTS
ARE AVAILABLE AT WWW.IMAX.COM OR BY CALLING INVESTOR RELATIONS AT 212-821-0100.
ADDITIONAL INFORMATION RELATING TO THE COMPANY IS AVAILABLE AT WWW.SEDAR.COM.
FINANCIAL INFORMATION IS PROVIDED IN THE COMPANY'S COMPARATIVE FINANCIAL
STATEMENTS AND MD&A FOR ITS MOST RECENTLY COMPLETED FINANCIAL YEAR.
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.
/s/ G. Mary Ruby
DATED at Mississauga, Ontario, ----------------------------------------
Canada, March 9, 2006. G. MARY RUBY
Senior Vice President, Legal Affairs
and Corporate Secretary
20
APPENDIX "A"
IMAX CORPORATION
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
IMAX Corporation (the "Company") seeks to attain high standards of
corporate governance. The Board of Directors has carefully considered the
Corporate Governance Guidelines set forth in National Policy 58-201. A
description of the Company's corporate governance practices is set out below in
response to the requirements of National Instrument 58-101 "Disclosure of
Corporate Governance Practices" ("NI 58-101").
CORPORATE GOVERNANCE DISCLOSURE THE COMPANY'S PRACTICES
------------------------------- -----------------------
1. BOARD OF DIRECTORS
a) Disclose the identity of directors who are The Board of Directors is comprised of 8 persons. Of those 8 persons, 6
independent. of them; Neil Braun, Kenneth Copland, Michael Fuchs, Garth Girvan, David
Leebron and Marc Utay are independent as such term is defined in NI
58-101 as well as in accordance with Rule 4200(a)(15) of the National
Association of Securities Dealers ("NASD") Marketplace Rules. These
directors are independent as none of them have a direct or indirect
material relationship with the Company.
b) Disclose the identity of directors who are The other 2 directors are Richard Gelfond and Bradley Wechsler, neither
not independent, and describe the basis for of whom are independent as they hold the positions of Co-Chief Executive
that determination. Officers of the Company.
c) Disclose whether or not a majority of A majority of the Company's directors are independent.
directors are independent. If a majority of
directors are not independent, describe what
the board of directors does to facilitate its
exercise of independent judgement in carrying
out its responsibilities.
d) If a director is presently a director of any Mr. Girvan is also a director of Corby Distilleries Limited. Mr. Utay is
other issuer that is a reporting issuer (or a director of P&F Industries, Inc. Mr. Fuchs is a director of
the equivalent) in a jurisdiction or a Autobytel.com.
foreign jurisdiction, identify both the
director and the other issuer.
e) Disclose whether or not the independent The independent directors hold executive sessions at regularly scheduled
directors hold regularly scheduled meetings Board meetings where non-independent Directors and members of management
at which non-independent directors and are not in attendance. A total of three such executive sessions of the
members of management are not in attendance. Board of Directors were held in 2005.
If the independent directors hold such
meetings, disclose the number of meetings In addition, all of the members of the Audit Committee are independent
held since the beginning of the issuer's most and hold in camera sessions where non-independent directors and members
recently completed financial year. of management are not in attendance. At total of five such in camera
sessions of the Audit Committee were held in 2005.
A-1
CORPORATE GOVERNANCE DISCLOSURE THE COMPANY'S PRACTICES
------------------------------- -----------------------
f) Disclose whether or not the chair of the The Co-Chairmen of the Board of Directors are Richard Gelfond and
board is an independent director. If the Bradley Wechsler, both of whom are also Co-Chief Executive Officers and
board has a chair or lead director who is an are non-independent directors. The Board of Directors does not have a
independent director, disclose the identity lead director. The Company's Board of Directors, having 8 members, is
of the independent chair or lead director, relatively small and maintains very open lines of communication. Any
and describe his or her role and independent director wishing to meet with the other independent
responsibilities. If the board has neither a directors is free to contact the other Board members at any time. In
chair that is independent nor a lead director addition, the independent directors are given the opportunity to meet
that is independent, describe what the board without the non-independent directors at every regularly scheduled
does to provide leadership for its meeting. Each committee of the Board of Directors is made up of and
independent directors. chaired by exclusively independent directors.
g) Disclose the attendance record of each The following directors attended the following number of meetings* in
director for all board meetings held since the fiscal year ended December 31, 2005:
the beginning of the issuer's most recently Richard Gelfond 6/6
completed financial year. Bradley Wechsler 6/6
Neil S. Braun 5/6
Kenneth Copland 5/6
Michael Fuchs 5/6
Garth Girvan 6/6
David Leebron 4/6
Marc Utay 6/6
* refers to all meetings at which full Board attendance was required
(including management directors)
2. BOARD MANDATE
Disclose the text of the board's written mandate. The Board of Directors' Charter is attached hereto as Appendix "B" and
If the board does not have a written mandate, is available at www.imax.com or upon written request to the Company at
describe how the board delineates its role and IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada, L5K
responsibilities. 1B1, Attention: Corporate Secretary.
3. POSITION DESCRIPTIONS
a) Disclose whether or not the board has The Board of Directors has not developed written position descriptions
developed written position descriptions for for the Chair of the Board or of the Chair of each Committee, however it
the chair and the chair of each board is responsible for the appointment of each Chair of a Board Committee.
committee. If the board has not developed The Board of Directors and Committees of the Board each operate within
written position descriptions for the chair written mandates established and periodically reviewed by the Board of
and/or the chair of each board committee, Directors. The Chair of each committee is responsible for reporting on
briefly describe how the board delineates the the activities of that Committee to the full Board on a periodic basis.
role and responsibilities of each such
position.
b) Disclose whether or not the board and CEO The Board of Directors has not developed written position descriptions
have developed a written position description for the Chief Executive Officers. The Board of Directors and the
for the CEO. If the board and CEO have not Co-Chief Executive Officers develop, on an annual basis, detailed
developed such a position description, written corporate objectives and parameters in which the Co-Chief
briefly describe how the board delineates the Executive Officers operate the business of the Company. The Board of
role and responsibilities of the CEO. Directors is also responsible for annually evaluating the Co-Chief
Executive Officers against these objectives.
A-2
CORPORATE GOVERNANCE DISCLOSURE THE COMPANY'S PRACTICES
------------------------------- -----------------------
4. ORIENTATION AND CONTINUING EDUCATION
a) Briefly describe what measures the board All new directors are provided with the Directors' Manual, a
takes to orient new directors regarding i) comprehensive reference source about the Company, the Board of Directors
the role of the board, its committees and its and its Committees.
directors, and ii) the nature and operation
of the issuer's business. Arrangements are made for specific briefing sessions from appropriate
senior personnel to help new directors better understand the Company's
business environment, strategies and operations. Invitations are also
given to existing Board members to join the sessions as a refresher.
Directors are given periodic reviews and more detailed presentations on
particular strategies and presentations by the Company's senior
management.
b) Briefly describe what measures, if any, the Directors are encouraged to enroll in professional development courses.
board takes to provide continuing education
for its directors. If the board does not
provide continuing education, describe how
the board ensures that its directors maintain
the skill and knowledge necessary to meet
their obligations as directors.
5. ETHICAL BUSINESS CONDUCT
a) Disclose whether or not the board has adopted The Board of Directors has adopted a written Code of Ethics for
a written code for the directors, officers directors, officers and employees.
and employees. If the board has adopted a
written code:
i) disclose how a person or company may A copy of the Code of Ethics is available at www.imax.com or upon
obtain a copy of the code; written request to the Company at IMAX Corporation, 2525 Speakman Drive,
Mississauga, Ontario, Canada, L5K 1B1, Attention: Corporate Secretary.
ii) describe how the board monitors Each year, employees and officers must confirm in writing that they have
compliance with its code, or if the board read and understand the Code of Ethics and that the Company has
does not monitor compliance, explain whether implemented a complaint procedure which allows employees to report any
and how the board satisfies itself regarding conduct that is not compliant with the Code of Ethics on an anonymous
compliance with its code; and and/or confidential basis.
iii) provide a cross-reference to any The Company has not filed any material change report during the
material change report filed since the financial year ended December 31, 2005 that pertains to any conduct of a
beginning of the issuer's most recently director or executive officer that constitutes a departure from the Code
completed financial year that pertains to any of Ethics. No waivers from the Code of Ethics have been sought or
conduct of a director or executive officer granted.
that constitutes a departure from the code.
b) Describe any steps the board takes to ensure In the event any transactions or agreements occur in respect of which a
directors exercise independent judgement in director or executive officer has a material interest, the director or
considering transactions and agreements in executive officer will recuse himself from voting on that matter and
respect of which a director or executive remove himself from the meeting while the transaction at issue is being
officer has a material interest. considered by the Board of Directors.
A-3
CORPORATE GOVERNANCE DISCLOSURE THE COMPANY'S PRACTICES
------------------------------- -----------------------
c) Describe any other steps the board takes to The Board of Directors, through the Audit Committee, which is comprised
encourage and promote a culture of ethical entirely of independent directors, has appointed the Chief Compliance
business conduct. Officer to oversee the Company's compliance with all regulatory
requirements, including the Company's Code of Ethics.
The Board of Directors sets the tone for ethical conduct throughout the
Company by considering and discussing ethical considerations when
reviewing corporate transactions and other Company activities.
6. NOMINATION OF DIRECTORS
a) Describe the process by which the board The Board of Directors as a whole evaluates potential new candidates for
identifies new candidates for board the Board on an ongoing basis in light of opportunities and risks facing
nomination. the Company, and the competencies, skills and personal qualities that
are desirable to add value to the Company and to contribute to effective
governance of the Company. Candidates are identified from a number of
sources, including recommendations from Board members, management,
shareholders and others.
The Board of Directors will consider any nominee recommended by a
shareholder under the same criteria as any other potential nominee. The
names and biographies of any such proposed nominees should be sent to
IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario L5K 1B1,
Attention: Corporate Secretary. The Company may require any proposed
nominee to furnish additional information as may be reasonably required
to determine the qualifications of such proposed nominee to serve as a
director of the Company.
b) Disclose whether or not the board has a The Board of Directors does not have a nominating committee but has
nominating committee composed entirely of adopted a formal nominating process (described in 6.a) above) which it
independent directors. If the board does not believes is effective in the identification and recruitment of potential
have a nominating committee composed entirely board members.
of independent directors, describe what steps
the board takes to encourage an objective
nomination process.
7. COMPENSATION
a) Describe the process by which the board The Board of Directors has adopted a "Director Remuneration Policy"
determines the compensation for the issuer's setting forth the remuneration for the independent directors. This
directors and officers. policy is reviewed periodically by the Corporate Governance Committee at
which time the Committee reviews director compensation data for
companies of a comparable size. This data is compiled by the Company's
management from public sources and is reported to the Committee. Using
such information, the Committee formulates a recommendation to the Board
of Directors and the final decision is made by the Board of Directors.
With respect to the Co-Chief Executive Officers, the Compensation
Committee reviews and recommends to the Board of Directors the
compensation and performance criteria, basing its recommendations on
available data for the most comparable companies and external
compensation consultants. From time to time, the Board of Directors
considers issues of compensation of certain senior executives of the
Company.
b) Disclose whether or not the board has a The Board of Directors has established a Compensation Committee composed
compensation committee composed entirely of entirely of independent directors.
independent directors.
A-4
CORPORATE GOVERNANCE DISCLOSURE THE COMPANY'S PRACTICES
------------------------------- -----------------------
c) If the board has a compensation committee, The Compensation Committee is responsible for setting objectives for the
describe the responsibilities, powers and Co-Chief Executive Officers, assessing their performance on a periodic
operation of the compensation committee. basis and recommending compensation arrangements to the Board of
Directors. A copy of the Compensation Committee Charter is available at
www.imax.com or upon written request to the Company at IMAX Corporation,
2525 Speakman Drive, Mississauga, Ontario, Canada, L5K 1B1, Attention:
Corporate Secretary.
d) If a compensation consultant or advisor has, During the fiscal year ended December 31, 2005, Mercer Human Resources
at any time since the beginning of the Consulting ("Mercer") was retained by the Compensation Committee to
issuer's most recently completed financial assist the Board of Directors in reviewing various aspects of the
year, been retained to assist in determining compensation packages for the Co-Chief Executive Officers in connection
compensation for any of the issuer's with the renewal of their employment agreements. In addition, Mercer was
directors and officers, disclose the identity retained to assist the Company in benchmarking aspects of its
of the consultant or advisor and briefly independent directors' compensation against those of comparative
summarize the mandate for which they have companies.
been retained. If the consultant or advisor
has been retained to perform any other work
for the issuer, state that fact and briefly
describe the nature of the work.
8. OTHER BOARD COMMITTEES
If the board has standing committees other than In addition to Audit and Compensation Committees, the Board of Directors
the audit, compensation and nominating committees, has constituted the following committees:
identify the committees and describe their
function. (i) Corporate Governance Committee: The Corporate Governance Committee
is comprised entirely of independent directors, and is responsible
for monitoring and evaluating the Company's compliance with regard
to the recently enacted regulations in connection with SOX;
monitoring and evaluating compliance with the Company's articles,
by-laws 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, and
(ii) Option Committee: The Option Committee is comprised entirely of
independent directors, and 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.
9. ASSESSMENTS
Disclose whether or not the board, its committees Annually, each director and committee member completes a self-evaluation
and individual directors are regularly assessed questionnaire. The input is summarized on a confidential basis and
with respect to their effectiveness and reviewed with the Corporate Governance Committee. The Chair of that
contribution. If assessments are regularly committee reports the findings to the full Board. Any agreed upon
conducted, describe the process used for the improvements are implemented as applicable.
assessments.
A-5
APPENDIX "B"
IMAX CORPORATION
BOARD OF DIRECTORS' CHARTER
ROLE OF BOARD
The role of the Board of Directors is to supervise the business and affairs
of the Company, which are conducted by its officers and employees under the
direction of the chief executive officers ("Co-CEOs"), to enhance the long-term
value of the Company for its shareholders. The Board is elected by the
shareholders to oversee management to ensure that the best interests of the
shareholders are advanced by enhancing shareholder value in a manner that
recognizes the concerns of other stakeholders in the Company including its
employees, suppliers, customers and the communities in which it operates.
AUTHORITY AND RESPONSIBILITIES
The Board of Directors meets regularly to review reports by management on
the performance of the Company. In addition to the general supervision of
management, the Board is responsible for performing or delegating the
performance of the following functions to Committees of the Board:
1. Strategic Planning - overseeing the strategic planning process within
the Company and reviewing, approving and monitoring the annual
operating plan for the Company including fundamental financial and
business strategies and objectives;
2. Risk Assessment - assessing the major risks facing the Company and
reviewing, approving and monitoring the manner of managing those
risks;
3. Co-CEOs - developing and reviewing the Co-CEO's corporate objectives,
evaluating the Co-CEOs against these objectives and determining their
compensation;
4. Maintaining Integrity - reviewing and monitoring the controls and
procedures within the Company to maintain its integrity, including its
disclosure controls and procedures, its internal controls and
procedures for financial reporting and its compliance with its Code of
Ethics.
COMPOSITION AND PROCEDURES
1. Size of Board and Nominating Process - The directors of the Company
are elected by the shareholders at the annual meeting of shareholders.
The Board is responsible for identifying and recommending candidates
for election to the Board from time to time. The Board evaluates
potential candidates on an ongoing basis in light of opportunities and
risks facing the Company, and the competencies, skills, personal and
professional qualities that are desirable to add value and to
contribute to the effective governance of the Company. Candidates are
then formally nominated for election by a majority of the independent
directors. Any shareholder may propose a nominee for election to the
Board either by means of a shareholder proposal upon compliance with
the requirements prescribed by the Canada Business Corporations Act or
at the annual meeting. The Board also determines the number of
directors on the Board, subject to a minimum of one and a maximum of
15. Between annual meetings, the Board may appoint directors to serve
until the next annual meeting.
2. Qualifications - Directors should have the highest personal and
professional ethics and values and be committed to advancing the best
interests of the shareholders of the Company. A majority of the
directors will be "independent directors" as defined by applicable
securities regulation.
3. Director Orientation - On joining the Board, each new director will be
provided with various corporate information and will be invited to
attend personal briefings with senior management on the Company's
current operating plan, major risks and other key business and
technology matters.
BOARD OF DIRECTORS' CHARTER
(CONTINUED)
4. Meetings - The Board has at least four scheduled meetings a year which
directors are expected to make every reasonable effort to attend in
person. The Chairman of the Board together with the Secretary to the
Board are responsible for determining meeting agendas. Materials for
each meeting will be distributed to the directors in advance, to the
extent practically possible.
At each scheduled quarterly meeting, the directors have the
opportunity to meet "in camera" without management present.
5. Committees - The Board has established the following permanent
committees to assist the Board in discharging its responsibilities:
Audit, Corporate Governance, Compensation and Option. Each such
committee operates under terms of reference or charters which have
been approved by the Board. Special committees may be established from
time to time to assist the Board in connection with specific matters.
The chair of each committee reports to the Board following meetings of
the committee. The terms of reference of each permanent committee is
periodically reviewed by the committee and approved by the Board.
6. Evaluation - The Corporate Governance Committee performs an annual
evaluation of the effectiveness of the Board as a whole and of the
Audit Committee.
7. Compensation - The Board's compensation is reviewed periodically by
the Corporate Governance Committee and recommendations are then made
to the Board.
8. Access to Independent Advisors - The Board and any committee may at
any time retain outside financial, legal or other advisors at the
expense of the Company. Any director may, subject to the approval of
the Chair of the Board, retain an outside advisor at the expense of
the Company.
August 2005
B-2
(IMAX(R)LOGO)
(IMAX(R) LOGO) (COMPUTERSHARE LOGO)
9th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
www.computershare.com
SECURITY CLASS
HOLDER ACCOUNT NUMBER
FORM OF PROXY - ANNUAL MEETING OF IMAX CORPORATION TO BE HELD ON APRIL 11, 2006
THIS FORM OF PROXY IS SOLICITED BY AND ON BEHALF OF MANAGEMENT.
NOTES TO PROXY
1. EVERY HOLDER HAS THE RIGHT TO APPOINT SOME OTHER PERSON OR COMPANY OF THEIR
CHOICE, WHO NEED NOT BE A HOLDER, TO ATTEND AND ACT ON THEIR BEHALF AT THE
MEETING. IF YOU WISH TO APPOINT A PERSON OR COMPANY OTHER THAN THE PERSONS
WHOSE NAMES ARE PRINTED HEREIN, PLEASE INSERT THE NAME OF YOUR CHOSEN
PROXYHOLDER IN THE SPACE PROVIDED (SEE REVERSE).
2. If the securities are registered in the name of more than one owner (for
example, joint ownership, trustees, executors, etc.), then all those
registered should sign this proxy. If you are voting on behalf of a
corporation or another individual you may be required to provide
documentation evidencing your power to sign this proxy with signing
capacity stated.
3. This proxy should be signed in the exact manner as the name appears on the
proxy.
4. If this proxy is not dated, it will be deemed to bear the date on which it
is mailed by Management to the holder.
5. THE SECURITIES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
HOLDER, HOWEVER, IF SUCH A DIRECTION IS NOT MADE IN RESPECT OF ANY MATTER,
THIS PROXY WILL BE VOTED AS RECOMMENDED BY MANAGEMENT.
6. The securities represented by this proxy will be voted or withheld from
voting, in accordance with the instructions of the holder, on any ballot
that may be called for and, if the holder has specified a choice with
respect to any matter to be acted on, the securities will be voted
accordingly.
7. This proxy confers discretionary authority in respect of amendments to
matters identified in the Notice of Meeting or other matters that may
properly come before the meeting.
8. This proxy should be read in conjunction with the accompanying
documentation provided by Management.
PROXIES SUBMITTED MUST BE RECEIVED BY 10:30AM, EASTERN TIME, ON APRIL 7, 2006.
VOTE USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEK!
TO VOTE USING THE TELEPHONE TO VOTE USING THE INTERNET
- Call the number listed BELOW from a - Go to the following web site:
touch tone telephone. www.computershare.com/proxy
1-866-732-VOTE (8683) TOLL FREE
IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT MAIL BACK THIS PROXY.
VOTING BY MAIL may be the only method for securities held in the name of a
corporation or securities being voted on behalf of another individual.
VOTING BY MAIL OR BY INTERNET are the only methods by which a holder may appoint
a person as proxyholder other than the Management nominees named on the reverse
of this proxy. Instead of mailing this proxy, you may choose one of the two
voting methods outlined above to vote this proxy.
TO VOTE BY TELEPHONE OR THE INTERNET, YOU WILL NEED TO PROVIDE YOUR CONTROL
NUMBER, HOLDER ACCOUNT NUMBER AND ACCESS NUMBER LISTED BELOW.
CONTROL NUMBER HOLDER ACCOUNT NUMBER ACCESS NUMBER
_____________ _____________ _____________
APPOINTMENT OF PROXYHOLDER
The undersigned common shareholder of IMAX Corporation (the "Company") PRINT THE NAME OF THE PERSON YOU ARE ------------------
hereby appoints Bradley J. Wechsler, failing whom, Richard L. Gelfond, OR APPOINTING IF THIS PERSON IS SOMEONE
failing whom, Robert D. Lister, failing whom, G. Mary Ruby, OTHER THAN THE MANAGEMENT
NOMINEES LISTED HEREIN. ------------------
as my/our proxyholder with full power of substitution and to vote in accordance with the following direction (or if no directions
have been given, as the proxyholder sees fit) and all other matters that may properly come before the Annual Meeting of IMAX
CORPORATION to be held at Stony Brook Manhattan, 2nd Floor, 401 Park Avenue South, New York, New York, USA, 10016 on April 11, 2006
at 10:30 am and at any adjournment thereof.
VOTING RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED TEXT OVER THE BOXES.
1. ELECTION OF DIRECTORS
FOR WITHHOLD FOR WITHHOLD FOR WITHHOLD
01. Neil S. Braun [ ] [ ] 02. Kenneth G. Copland [ ] [ ] 03. Garth M. Girvan [ ] [ ]
2. APPOINTMENT OF AUDITORS
FOR WITHHOLD
In respect of the appointment of PriceWaterhouseCoopers LLP as auditors of the
Company and authorizing the directors to fix their remuneration. [ ] [ ]
AUTHORIZED SIGNATURE(S) - THIS SECTION MUST BE COMPLETED SIGNATURE(S) DATE
FOR YOUR INSTRUCTIONS TO BE EXECUTED.
I/We authorize you to act in accordance with my/our instructions set out above. I/We hereby ---------------------
revoke any proxy previously given with respect to the Meeting. IF NO VOTING INSTRUCTIONS ARE MM/DD/YY
INDICATED ABOVE, THIS PROXY WILL BE VOTED AS RECOMMENDED BY MANAGEMENT. ---------------------
INTERIM FINANCIAL STATEMENTS
Mark this box if you would like to receive interim financial statements and accompanying [ ]
Management's Discussion and Analysis by mail.
If you are not mailing back your proxy, you may register online to receive the above financial report(s) by mail at
www.computershare.com/mailinglist.