OCCULOGIX, INC.
NOTICE OF 2008 ANNUAL
AND
SPECIAL MEETING OF
STOCKHOLDERS
TO BE
HELD ON SEPTEMBER ■, 2008
NOTICE
IS HEREBY GIVEN THAT the 2008 Annual and Special Meeting of Stockholders of
OccuLogix, Inc. (the “Company”) will be held on September ■, 2008 at
8:30 a.m. Eastern Daylight Savings Time at ■, Toronto, Ontario, for the
following purposes:
1. To
elect six directors for the ensuing year;
2. To
ratify the selection of Ernst & Young LLP by the audit committee of the
board of directors of the Company (the “Board of Directors”) as independent
auditors of the Company for the fiscal year ending December 31,
2008;
3. To
approve an amendment to the Company’s Amended and Restated Certificate of
Incorporation in order to increase the number of authorized shares of the
Company’s common stock, from 75,000,000 to 500,000,000, as more fully described
in the accompanying proxy statement;
4. To
approve and adopt the Agreement and Plan of Merger and Reorganization, dated
April 22, 2008, by and among the Company, OcuSense Acquireco, Inc. and OcuSense,
Inc., as amended by the Amending Agreement, dated as of July 28, 2008, by and
among the Company, OcuSense Acquireco, Inc. and OcuSense, Inc., and as such
Agreement and Plan of Merger and Reorganization may be amended further from time
to time, pursuant to which the Company proposes to acquire all of the issued and
outstanding shares of capital stock of OcuSense, Inc. that the Company does not
already own in exchange for the issuance of an aggregate of 79,248,175 shares of
its common stock to the minority stockholders of OcuSense, Inc., as more fully
described in the accompanying proxy statement;
5. To
approve and adopt the Securities Purchase Agreement, dated as of May 19, 2008,
by and among the Company, Marchant Securities Inc. and the investors listed on
the Schedule of Investors attached thereto as Exhibit A, as amended by the
Amending Agreements, each dated as of August
[20]
, 2008, by and among the Company, Marchant
Securities Inc. and each of the investors listed on the Schedule of Investors
attached thereto as Exhibit A, and as such Securities Purchase Agreement may be
amended further from time to time (the “Securities Purchase Agreement”),
pursuant to which the Company proposes to sell an aggregate of a minimum of
21,730,000 shares of its common stock to the investors listed on the Schedule of
Investors attached thereto as Exhibit A for gross aggregate proceeds to the
Company of $2,173,000, as more fully described in the accompanying proxy
statement;
6. To
approve the pre-payment by the Company of the $6,703,500 aggregate principal
amount bridge loan, under the Loan Agreement, dated as of February 19, 2008, by
and among the Company, the lenders listed on the Schedule of Lenders attached
thereto as Exhibit A and Marchant Securities Inc., as amended (the “Loan
Agreement”), by issuing, to the lenders of such bridge loan, shares of the
Company’s common stock in the aggregate number required pursuant to the terms of
the Loan Agreement, which number will be no less than 78,864,705, as more fully
described in the accompanying proxy statement;
7. To
approve the issuance to Marchant Securities Inc. of a minimum of 4,812,000
shares of the Company’s common stock in payment of part of the
commission remaining owing for services rendered by Marchant Securities Inc. in
connection with the Securities Purchase Agreement and the $6,703,500 aggregate
principal amount bridge loan under the Loan Agreement, as more fully described
in the accompanying proxy statement;
8. To
approve the extension of the terms of certain stock options of the Company
issued under the Company’s 2002 Stock Option Plan, as amended (the “2002 Stock
Option Plan”), and held by current and former executives of the Company and
certain directors of the Company, as more fully described in the accompanying
proxy statement;
9. To
approve the proposed increase in the share reserve under the 2002 Stock Option
Plan by 53,544,000, from 6,456,000 to 60,000,000, as more fully described in the
accompanying proxy statement;
10. To
approve a further amendment to the Company’s Amended and Restated Certificate of
Incorporation in order to (i) provide for a recapitalization in which the issued
and outstanding shares of the Company’s common stock will be reverse split in a
ratio of up to 1:25, if at all, with the actual ratio and the timing of such
reverse split to be determined by the Board of Directors in its sole discretion,
and (ii) decrease the number of authorized shares of the Company’s common stock,
from 500,000,000 to a number equal to 500,000,000 multiplied by 50% of the
reverse split ratio, provided that the reverse split is effected, as more fully
described in the accompanying proxy statement; and
11. To
transact such further business as may properly come before the Annual and
Special Meeting of Stockholders or any adjournment thereof.
The Board of Directors has
fixed the close of business on August 6, 2008 as the record date for determining
the Company’s stockholders entitled to notice of, and to vote at, the Annual and
Special Meeting of Stockholders.
Management of the Company is soliciting
the enclosed proxy. Please refer to the accompanying proxy statement
for further information with respect to the business to be transacted at the
Annual and Special Meeting of Stockholders. The accompanying proxy
statement is deemed to be incorporated by reference in, and to form part of,
this notice.
The Board of Directors recommends that
you vote
FOR
each of the above
proposals.
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By Order of the Board of
Directors
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/s/ Elias
Vamvakas
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Elias
Vamvakas
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Chairman of the Board, Chief
Executive Officer and
Secretary
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Mississauga
,
Ontario
August
■, 2008
You
are cordially invited to attend the Annual and Special Meeting of
Stockholders of OccuLogix, Inc. (the “meeting”) in
person. Whether or not you expect to attend the meeting, please
complete, date and sign the enclosed proxy card and mail it promptly in
the enclosed envelope in order to assure that your shares are
represented. If you execute a proxy card, you may still attend
the meeting, revoke your proxy and vote your shares in
person. However, attending the meeting in person will not
revoke your proxy unless you follow the procedures explained under
“Information about this Proxy Material and Voting—Revocation of Proxy” in
the accompanying proxy statement. Please note that if your
shares are held of record by a broker, bank or other agent and you wish to
vote at the meeting, you must obtain a proxy issued in your name from that
recordholder.
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PRELIMINARY
COPY—SUBJECT TO COMPLETION
OCCULOGIX,
INC.
2600
Skymark Avenue, Unit 9, Suite 201
Mississauga,
Ontario, L4W 5B2
PROXY
STATEMENT
FOR
THE ANNUAL AND SPECIAL MEETING OF STOCKHOLDERS
September ■,
2008
We
sent you this proxy statement and the enclosed proxy card, because the Board of
Directors (sometimes referred to as the “Board”, “we” or “us”) of OccuLogix,
Inc. (sometimes referred to as “OccuLogix”, the “Company”, “we” or “us”) is
soliciting your proxy to vote at the Annual and Special Meeting of Stockholders
(the “Stockholders Meeting”). You are invited to attend the
Stockholders Meeting to vote on the proposals described in this proxy
statement. However, you do not need to attend the Stockholders
Meeting to vote your shares. Instead, you may simply complete, sign
and return the enclosed proxy card.
SUMMARY
TERM SHEET
The
following summary highlights selected information contained in this proxy
statement regarding the proposed acquisition by OccuLogix of all of the issued
and outstanding shares of OcuSense, Inc. that it does not already
own.
We encourage
you to read carefully this proxy statement in its entirety, including its
appendices and the documents referred to in this proxy
statement.
Each item in this section entitled “Summary Term
Sheet” is cross-referenced to a page in this proxy statement where a more
complete description of that item can be found.
Unless we
otherwise indicate, all references to “OcuSense” refer to OcuSense,
Inc. All references to “the Merger Agreement” refer to the Agreement
and Plan of Merger and Reorganization, dated April 22, 2008, by and among
OccuLogix, OcuSense Acquireco, Inc. and OcuSense, as amended by the Amending
Agreement, dated as of July 28, 2008, by and among OccuLogix, OcuSense
Acquireco, Inc. and OcuSense, and as it may be amended further from time to
time, and all references to “the merger” refer to the merger contemplated by the
Merger Agreement.
Please
note that, if any material amendment is made to the Merger Agreement in the
future, then we will advise you of the amendment and re-solicit your proxy to
vote at the Stockholders Meeting.
A copy of
the Agreement and Plan of Merger and Reorganization, dated April 22, 2008, by
and among OccuLogix, OcuSense Acquireco, Inc. and OcuSense was filed as an
exhibit to the Company’s Quarterly Report for the fiscal quarter ended March 31,
2008, filed with the U.S. Securities and Exchange Commission (the “SEC”) on Form
10-Q, and is available on the SEC’s Electronic Data Gathering, Analysis, and
Retrieval System (known as EDGAR) (
www.sec.gov
). A
copy of the Amending Agreement, dated as of July 28, 2008, by and among
OccuLogix, OcuSense Acquireco, Inc. and OcuSense was filed as an exhibit to the
Company’s Current Report on Form 8-K, filed with the SEC and on the System for
Electronic Document Analysis and Retrieval (known as SEDAR) on July 28, 2008,
and is available on EDGAR and SEDAR (
www.sedar.com
). Copies
of these agreements also may be obtained without charge upon written request
to: Secretary, OccuLogix, Inc., 2600 Skymark Avenue, Unit 9, Suite
201, Mississauga, Ontario, L4W 5B2.
In this proxy statement, references to
“$” or “dollars” shall mean U.S. dollars and references to “C$” shall mean
Canadian dollars. The information contained in this proxy statement
is given as at August ■, 2008, except where otherwise
stated.
Parties to the Merger
Agreement
See “Proposal IV—Merger Agreement;
Acquisition of Minority Ownership Interest in OcuSense—Business of the Parties”
(page 27
) and “—Merger
Agreement—Parties” (page
31
).
OccuLogix:
OccuLogix, a
Delaware
corporation, is an ophthalmic
therapeutic company founded to commercialize innovative treatments for
age-related eye diseases.
OcuSense Acquireco,
Inc.:
OcuSense
Acquireco, Inc., a
Delaware
corporation, is a wholly-owned
subsidiary of OccuLogix that was incorporated for the sole purpose of completing
the merger with OcuSense under the Merger Agreement.
OcuSense:
OcuSense, a
Delaware
corporation, is a San Diego-based
company that is developing technologies that will enable eye care practitioners
to test, at the point-of-care, for highly sensitive and specific biomarkers
using nanoliters of tear film. OccuLogix currently owns 50.1% of the
capital stock, on a fully diluted basis, of OcuSense.
The Merger
See “Proposal IV—Merger Agreement;
Acquisition of Minority Ownership Interest in OcuSense—Merger Agreement”
(page
31
).
You are being asked to consider and vote
on the proposal to approve and adopt the Merger Agreement pursuant to which
OccuLogix proposes to acquire
all of the issued and outstanding shares of
OcuSense that it does not already own. Under the terms of the Merger
Agreement, upon the filing of a certificate of merger with the Secretary of
State of the State of Delaware, OcuSense Acquireco, Inc. shall be merged with
and into OcuSense, whereupon the separate corporate existence of OcuSense
Acquireco, Inc. shall cease, and OcuSense shall continue as the surviving
corporation and become a wholly-owned subsidiary of OccuLogix.
Reasons for the
Proposal
See
“Proposal V—Reasons for the Proposal” (page 43).
Management
believes that the Company has cash and cash-equivalents sufficient to cover the
Company’s operating activities and other demands only until approximately
November 2008.
One of
the other proposals that you are being asked to consider and vote on is the
proposal to approve and adopt the Securities Purchase Agreement, dated as of May
19, 2008, by and among OccuLogix, Marchant Securities Inc. and the investors
listed on the Schedule of Investors attached thereto as Exhibit A, as amended by
the Amending Agreements, each dated as of August [
20]
, 2008, by and among OccuLogix, Marchant
Securities Inc. and each of the investors listed on the Schedule of Investors
attached thereto as Exhibit A, and as such Securities Purchase Agreement may be
amended further from time to time, pursuant to which OccuLogix proposes to sell
an aggregate of a minimum of 21,730,000 shares of its common stock to the
investors listed on the Schedule of Investors attached thereto as Exhibit A for
gross aggregate proceeds to the Company of $2,173,000 (the “Securities Purchase
Agreement”). See “Proposal V” (page 41).
(Please
note that, if any material amendment is made to the Securities Purchase
Agreement in the future, then we will advise you of the amendment and re-solicit
your proxy to vote at the Stockholders Meeting.)
Conditions precedent to
closing in the Securities Purchase Agreement include the receipt of the required
stockholder approval of the Merger Agreement and the transactions contemplated
by the Merger Agreement, including the merger. If the required
stockholder approval of the Merger Agreement is not obtained, the transactions
contemplated by the Securities Purchase Agreement will not close and the Company
will be unable to realize any proceeds. Since the Company does not
have an alternative source of capital at this time, if the required stockholder
approval of the Merger Agreement and the Securities Purchase Agreement, and the
respective transactions contemplated by each of them, is not obtained, the
Company will run out of cash.
Merger
Consideration
See
“Proposal IV—Background of the Merger” (page 29), “Proposal IV—Merger Agreement;
Acquisition of Minority Ownership Interest in OcuSense—Merger Agreement—Merger
Consideration” (page 31) and “Proposal IV—Reasons for the Proposal (page
39).
As merger
consideration, OccuLogix expects to issue an aggregate of 79,248,175 shares of
its common stock to the minority stockholders of OcuSense.
The quantum of the merger
consideration is based on a full-enterprise valuation of OcuSense of
$18,000,000, determined in good faith by the respective boards of directors of
OccuLogix and OcuSense, and a deemed value of $0.10 per share of OccuLogix’s
common stock which is reflective of the per share average trading price of
OccuLogix’s common stock on The NASDAQ Global Market during the period of
negotiation of the merger consideration.
During
December 2007, financial analysis was undertaken by OccuLogix and OcuSense in
order to identify a range of fair values for OcuSense. From the
outset, the parties agreed that, in view of the achievement by OcuSense of
critical developmental milestones since November 30, 2006, the date of
OccuLogix’s investment in OcuSense, the valuation used for purposes of that
investment was lower than the present value of OcuSense. After
completing the financial analysis, representatives of both companies agreed that
according a full-enterprise value of $18,000,000 to OcuSense was fair and
reasonable.
On
October 9, 2007, the Company announced that the Board had authorized management
and the Company’s advisors to explore the full range of strategic alternatives
available to enhance shareholder value. For some time prior to this
announcement, the Company had been seeking to raise additional capital, with the
objective of securing funding sufficient to sustain its operations as, at that
time, it had been clear that, unless we were able to raise additional capital,
the Company would not have had sufficient cash to support its operations beyond
early 2008.
Those
capital-raising efforts have culminated in a bridge loan to the Company in an
aggregate principal amount of $6,703,500 and the Securities Purchase
Agreement. The lenders of the bridge loan have made their respective
investment, and the investors party to the Securities Purchase Agreement have
agreed to make their respective investment, in OccuLogix on the understanding,
and with the expectation, that the Company will acquire the minority ownership
interest in OcuSense that we do not already own and that OcuSense’s business
will become the Company’s entire business in the future. This was the
basis on which the Company was able to attract the additional capital that it
will require in order to continue operations.
Management
considered two principal factors in making its decision to recommend the merger
to the Company’s stockholders—the first factor being its assessment that the
merger consideration is fair and reasonable and the second factor being that
conditions precedent to closing in the Securities Purchase Agreement include the
receipt of the required stockholder approval of the Merger Agreement and the
transactions contemplated in the Merger Agreement, including the
merger. If the required stockholder approval of the Merger Agreement
is not obtained, the transactions contemplated by the Securities Purchase
Agreement will not close and the Company will run out of cash.
Closing
Conditions
See
“Proposal IV—Merger Agreement; Acquisition of Minority Ownership Interest in
OcuSense—Merger Agreement—Conditions to Completion of Merger” (page
31).
Before
the merger and the other transactions contemplated by the Merger Agreement may
be completed, a number of conditions must be satisfied or waived.
Closing
conditions in favor of both OccuLogix and OcuSense include:
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the
absence of any statute, rule, regulation,
etc.
,
making the merger
illegal;
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the
absence of any proceeding by a governmental authority seeking to restrain
or prohibit the merger;
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the
absence of any court order prohibiting the
merger;
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the
receipt of all necessary consents and approvals from governmental
authorities;
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the
receipt of the required approval of stockholders of both OccuLogix and
OcuSense; and
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the
capitalization of OccuLogix with at least $1,000,000 of unrestricted cash
that is available to fund the working capital and general and
administrative expenses of OccuLogix and OcuSense,
post-merger.
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Closing
conditions in favor of OccuLogix and OcuSense Acquireco, Inc.
include:
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the
truth and correctness of OcuSense’s representations and warranties in the
Merger Agreement, except where the failure of such representations and
warranties to be true or correct would not have, individually or in the
aggregate, a material adverse effect on
OcuSense;
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the
performance by OcuSense, in all material respects, of all of its covenants
and obligations under the Merger
Agreement;
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the
absence of a material adverse effect on
OcuSense;
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the
absence of any litigation pending or threatened against OccuLogix or
OcuSense relating to the merger;
and
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the
execution and delivery by OccuLogix of a contractual indemnity to each
individual who is a director or officer of OccuLogix immediately prior to
the merger.
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Closing
conditions in favor of OcuSense include:
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the
truth and correctness of the representations and warranties of OccuLogix
and OcuSense Acquireco, Inc. in the Merger Agreement, except where the
failure of such representations and warranties to be true and correct
would not have, individually or in the aggregate, a material adverse
effect on OccuLogix;
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the
performance by OccuLogix and OcuSense Acquireco, Inc., in all material
respects, of all of their respective covenants and obligations under the
Merger Agreement;
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the
absence of a material adverse effect on OccuLogix and its subsidiaries,
taken as a whole;
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the
absence of any litigation pending or threatened against OccuLogix or
OcuSense relating to the merger;
and
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commercially
reasonable efforts on the part of OccuLogix having been made to take all
necessary corporate action to ensure that, post-merger, the Board consists
only of Elias Vamvakas, Thomas N. Davidson, Eric Donsky, Richard L.
Lindstrom, Adrienne L. Graves and Donald Rindell, being all of the
individuals who are nominated for election as a director of OccuLogix to
hold office until the next annual meeting of the stockholders of OccuLogix
or until his or her successor is elected or appointed. See
“Proposal I” (page 20).
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Conduct
of Business Prior to Merger
See
“Proposal IV—Merger Agreement; Acquisition of Minority Ownership Interest in
OcuSense—Merger Agreement—Conduct of Business Prior to Effective Time” (page
33).
The
parties have agreed that, prior to the Effective Time (being the time at which
the merger will be consummated), each of them will conduct its business in the
usual, regular and ordinary course, in substantially the same manner as its
business was conducted prior to the date of the Merger Agreement.
Termination of Merger
Agreement
See
“Proposal IV—Merger Agreement; Acquisition of Minority Ownership Interest in
OcuSense—Merger Agreement—Termination” (page 34).
The
Merger Agreement may be terminated at any time prior to the closing of the
merger:
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by
unanimous written agreement of OccuLogix and
OcuSense;
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by
OccuLogix or OcuSense, if the closing of the merger does not occur by
October 31, 2008;
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by
OccuLogix or OcuSense, if the required stockholder approvals are not
obtained;
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by
OccuLogix or OcuSense, if a court or other governmental authority
permanently restrains, enjoins or otherwise prohibits the
merger;
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by
OccuLogix or OcuSense, if any statute, rule, regulation,
etc.
is enacted,
promulgated or issued by any governmental authority that would make the
merger illegal;
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by
OccuLogix, if there has been a breach by OcuSense of any of its
representations, warranties, covenants or agreements in the Merger
Agreement, subject to certain exceptions;
and
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by
OcuSense, if there has been a breach by OccuLogix of any of its
representations, warranties, covenants or agreements in the Merger
Agreement, subject to certain
exceptions.
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Expenses
See
“Proposal IV—Merger Agreement; Acquisition of Minority Ownership Interest in
OcuSense—Merger Agreement—Expenses” (page 35).
The
parties have agreed that, regardless of whether the merger is consummated, all
fees and expenses incurred in connection with the merger will be the obligations
of the respective party incurring such fees and expenses.
Management Following the
Merger
See
“Proposal IV—Management Following the Merger” (page 36).
It is
contemplated that Eric Donsky, OcuSense’s Chairman and Chief Executive Officer
and a proposed nominee for election to the Board, will become OccuLogix’s Chief
Executive Officer following the closing of the merger. While it is
contemplated that Elias Vamvakas will resign the office of Chief Executive
Officer, it is expected that he will remain the Chairman of the
Board. William G. Dumencu will remain OccuLogix’s Chief Financial
Officer and Treasurer following the merger. However, the other
executive officer of OccuLogix will not continue her employment with the Company
beyond a short transition period.
Four of
the six nominees for election to the Board are currently directors of the
Company.
Interests of Proposed Nominees for
Director and Director in the Merger
See “Proposal IV—Interests of Proposed
Nominees for Director and Director” (page
39
).
Immediately prior to the
Effective Time (being the time at which the merger will be consummated), Mr.
Donsky will hold 785,500 shares of OcuSense’s common stock which will entitle
him to receive, as payment for his pro rata share of the merger consideration,
an aggregate of 45,104,892 shares of OccuLogix’s common stock.
Richard L. Lindstrom
is a director of OccuLogix and is standing for re-election to the
Board. He is also a stockholder of OcuSense. Immediately
prior to the Effective Time, he will hold 20,000 shares of OcuSense’s common
stock which will entitle him to receive, as payment for his pro rata share of
the merger consideration, an aggregate of 1,148,438 shares of OccuLogix’s common
stock. In addition, Dr. Lindstrom provides consulting services
to OcuSense, for which he received a one-time grant of stock options to acquire
an aggregate of 6,290 shares of OcuSense’s common stock at an exercise price of
$4.80 per share. Those stock options will be assumed by OccuLogix in
accordance with the terms of the Merger Agreement.
Donald
Rindell is a director of OcuSense and a proposed nominee for election to the
Board. Mr. Rindell holds stock options of OcuSense which entitle him
to acquire 13,748 shares of OcuSense’s common stock at an exercise price of
$4.80 per share. Those stock options will be assumed by OccuLogix in
accordance with the terms of the Merger Agreement.
Interests of
Management
See “Proposal IX” (page
53).
One of
the other proposals that you are being asked to consider and vote on is the
proposal to increase the share reserve under OccuLogix’s 2002 Stock Option Plan,
as amended (the “2002 Stock Option Plan”) by 53,544,000, from 6,456,000 to
60,000,000. That proposal is conditioned on certain of the other
proposals which you are being asked to consider and vote on, including the
proposal to approve and adopt the Merger Agreement. And the proposal
to approve and adopt the Merger Agreement, in turn, is conditioned on the
proposal to increase the share reserve under the 2002 Stock Option Plan, among
other proposals. If the proposal to approve and adopt the Merger
Agreement is not approved, then we will not take action with respect to the
proposal to increase the share reserve under the 2002 Stock Option Plan and vice
versa.
In order
to achieve cash savings, we are proposing to issue, to current and former
members of the Company’s executive team, stock options under the 2002 Stock
Option Plan in compromise of all or a portion of their severance entitlement
under their respective employment agreements. However, in order to do
so, the share reserve under the 2002 Stock Option Plan must be increased in
accordance with the proposal in question, because there currently is
insufficient room in the share reserve under the 2002 Stock Option Plan to
implement the proposed severance compromise.
The
following table sets out the dollar value of the severance entitlement of each
of the current or former members of the Company’s executive team that we are
proposing to compromise and the numbers of OccuLogix stock options that would be
issued to each of these affected individuals as a result of that
compromise. The numbers of stock options have been calculated using
the methodology set forth under “Proposal IX—Increase in Share Reserve under the
2002 Stock Option Plan—Calculation of Numbers of Stock Options” (page
54).
Name of Affected
Individual
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Value of
Compromised
Severance
($)
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Number of Stock
Options
to Be Granted
(1)(2)(3)
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Elias Vamvakas
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1,570,008
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18,046,066
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Thomas P. Reeves
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482,569
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5,546,766
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William G. Dumencu
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94,439
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1,085,504
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David C. Eldridge
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77,500
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890,804
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Nozait Chaudry-Rao
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80,213
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921,982
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John
Cornish
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90,460
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1,039,773
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Julie A. Fotheringham
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60,159
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691,487
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Suh Kim
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112,750
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1,295,977
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Stephen B. Parks
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77,500
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890,804
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Stephen H. Westing
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60,159
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691,487
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TOTAL
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2,705,757
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31,100,650
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___________________________________
(1)
|
We
have assumed that the per share exercise price of the stock options to be
granted to the affected individuals will be
$0.10.
|
(2)
|
The
stock options will be granted to the affected individuals prior to the
implementation of the proposed reverse stock split. See
“Proposal X” (page 57).
|
(3)
|
The
number of stock options to be granted to each of the affected individuals
will be affected by the income tax rate applicable to him or
her. For purposes of this illustrative table, we have assumed
that each affected individual will take all necessary action to ensure
that the exercise of his or her stock options will qualify for capital
gains treatment in his or her jurisdiction of
residence.
|
The
objective of the methodology, according to which the numbers of stock options to
be issued to the affected individuals are to be calculated, is to have each of
the affected individuals incur substantially the same investment risk that the
investors party to the Securities Purchase Agreement would incur in purchasing
shares of the Company’s common stock pursuant thereto—since that is the basis on
which these individuals have agreed to the proposed compromise of their
respective severance entitlement. The most straightforward way to
ensure this result would be to fix the per share exercise price of the stock
options of OccuLogix, to be issued to the affected individuals in compromise of
their respective severance entitlement, at the per share purchase price of the
Company’s common stock under the Securities Purchase
Agreement. However, since the exercise price of the stock options on
the date of their grant must not be less than their fair market value on that
date, determined in accordance with the terms of the 2002 Stock Option Plan and
applicable stock exchange rules, it is not possible for the Company to fix the
exercise price of these stock options ahead of the date of their
grant. The proposed methodology for the calculation of the numbers of
stock options to be issued to the affected individuals would put the affected
individuals in the same economic position as they would be in, if the Company
were able to fix, in advance of the date of their grant, the per share exercise
price of the stock options in question at the per share purchase price of the
Company’s common stock under the Securities Purchase Agreement. See
“Proposal IX—Increase in Share Reserve under the 2002 Stock Option
Plan—Calculation of Numbers of Stock Options” (page
54
).
The stock
options to be issued to the affected individuals will be exercisable immediately
upon grant and will have a term of ten years.
INFORMATION
ABOUT THIS PROXY MATERIAL AND VOTING
General
We sent you this proxy statement and the
enclosed proxy card
,
because the Board is soliciting your
proxy to vote at the Stockholders Meeting.
You are invited to attend
the Stockholders Meeting to vote on the proposals described in this proxy
statement. However, you do not need to attend the Stockholders
Meeting to vote your shares. Instead, you may simply complete, sign
and return the enclosed proxy card.
Voting
Rights and Outstanding Shares
Only
stockholders of record at the close of business on August 6, 2008 (the “record
date”) will be entitled to vote at the Stockholders Meeting. On the
date of this proxy statement, there are 57,306,145
shares of common stock
outstanding and entitled to vote.
Stockholder
of Record: Shares Registered in Your Name
If, on
August 6, 2008, your shares were registered directly in your name with
OccuLogix’s transfer agents, Mellon Investor Services LLC in the United States
and Equity Transfer & Trust Company in Canada, then you are a stockholder of
record. As a stockholder of record, you may vote in person at the
Stockholders Meeting or vote by proxy. Whether or not you plan to
attend the Stockholders Meeting, we urge you to fill out and return the enclosed
proxy card to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If, on
August 6, 2008, your shares were held in an account at a brokerage firm, bank,
dealer or other similar organization, then you are the beneficial owner of
shares held in “street name” and these proxy materials are being forwarded to
you by that organization. The organization holding your account is
considered the stockholder of record for purposes of voting at the Stockholders
Meeting. As a beneficial owner, you have the right to direct your
broker or other agent on how to vote the shares in your account. You
are also invited to attend the Stockholders Meeting. However, because
you are not the stockholder of record, you may not vote your shares in person at
the Stockholders Meeting unless you request and obtain a valid proxy from your
broker or other agent.
Appointment of
Proxies
The persons named in the enclosed proxy
card are representatives of OccuLogix management and are directors or officers
of the Company.
A stockholder who
wishes to appoint some other person, who need not be an OccuLogix stockholder,
to represent such stockholder at the Stockholders Meeting may do so by inserting
such person’s name in the blank space provided in the enclosed proxy
card.
To be valid, proxies must be deposited
with the Secretary of the Company, c/o Mellon Investor Services LLC, P.O. Box
3862, S. Hackensack, New Jersey 07606-9371 or via fax at
201-680-4671
,
Attention: Proxy Services, in the United States, or Equity Transfer
& Trust Company, 200 University Avenue, Suite 400, Toronto, Ontario, M5H 4H1
or via fax at 416-595-9593, in Canada, prior to the Stockholders
Meeting.
The executive office of OccuLogix is
located at
2600 Skymark
Avenue
, Unit 9,
Suite
201
,
Mississauga
,
Ontario
,
L4W 5B2
. OccuLogix’s registered
office is located at
9 East Loockerman Street, Dover,
Delaware 19901
.
Proposals to Be Voted
on
There are
ten proposals scheduled for a vote:
|
·
|
Proposal I
: Election
of six directors;
|
|
·
|
Proposal II:
Ratification
of the selection of Ernst & Young LLP as independent auditors of the
Company for its financial year ending December 31,
2008;
|
|
·
|
Proposal
III:
Approval of an amendment to the Company’s Amended
and Restated Certificate of Incorporation in order to increase the number
of authorized shares of the Company’s common stock from 75,000,000 to
500,000,000;
|
|
·
|
Proposal IV:
Approval
and adoption of the Agreement and Plan of Merger and Reorganization, dated
April 22, 2008, by and among OccuLogix, OcuSense Acquireco, Inc. and
OcuSense, as amended by the Amending Agreement, dated as of July 28, 2008,
by and among OccuLogix, OcuSense Acquireco, Inc. and OcuSense, and as such
Agreement and Plan of Merger and Reorganization may be amended further
from time to time, pursuant to which OccuLogix proposes to acquire all of
the issued and outstanding shares of capital stock of OcuSense that
OccuLogix does not already own in exchange for the issuance of an
aggregate of 79,248,175 shares of its common stock to the minority
stockholders of OcuSense (the “Merger
Agreement”);
|
|
·
|
Proposal V:
Approval
and adoption of the Securities Purchase Agreement, dated as of May 19,
2008, by and among OccuLogix, Marchant Securities Inc. and the investors
listed on the Schedule of Investors attached thereto as Exhibit A, as
amended by the Amending Agreements, each dated as of August [
20]
, 2008, by and among OccuLogix,
Marchant Securities Inc. and each of the investors listed on the Schedule
of Investors attached thereto as Exhibit A, and as such Securities
Purchase Agreement may be amended further from time to time, pursuant to
which OccuLogix proposes to sell an aggregate of a minimum of 21,730,000
shares of its common stock to the investors listed on the Schedule of
Investors attached thereto as Exhibit A for gross aggregate proceeds to
the Company of $2,173,000 (the “Securities Purchase
Agreement”);
|
|
·
|
Proposal
VI
:
Approval
of the pre-payment by the Company of the $6,703,500 aggregate principal
amount bridge loan, under the Loan Agreement, dated as of February 19,
2008, by and among OccuLogix, the lenders listed on the Schedule of
Lenders attached thereto as Exhibit A and Marchant Securities Inc., as
amended by the Amending Agreement, dated as of May 5, 2008, by and among
OccuLogix, the lenders listed on the Schedule of New Lenders attached
thereto as Exhibit A and Marchant Securities Inc., and as further amended
by the Second Amending Agreement, dated as of July 28, 2008, by and among
OccuLogix, the lenders listed on the Schedule of Second New Lenders
attached thereto as Exhibit A and Marchant Securities Inc. (the “Loan
Agreement”), by issuing, to the lenders of such bridge loan, shares of the
Company’s common stock in the aggregate number required pursuant to the
terms of the Loan Agreement, which number will be no less than
78,864,705;
|
|
·
|
Proposal
VII:
Approval of the issuance to Marchant
Securities Inc. of a minimum of 4,812,000 shares of the Company’s
common stock in payment of part of the commission
remaining owing for services rendered by Marchant Securities Inc. in
connection with the Securities Purchase Agreement and the $6,703,500
aggregate principal amount bridge loan under the Loan
Agreement;
|
|
·
|
Proposal
VIII
: Approval of the extension of the terms of certain
stock options of OccuLogix, issued under OccuLogix’s 2002 Stock Option
Plan, as amended (the “2002 Stock Option Plan”), and held by current and
former executives of OccuLogix and certain directors of OccuLogix, until
the tenth anniversaries of their respective dates of
grant;
|
|
·
|
Proposal
IX
: Approval of an increase of the share reserve under
the 2002 Stock Option Plan by 53,544,000, from 6,456,000 to 60,000,000;
and
|
|
·
|
Proposal
X
: Approval of a further amendment to the Company’s
Amended and Restated Certificate of Incorporation in order to (i) provide
for a recapitalization in which the issued and outstanding shares of the
Company’s common stock will be reverse split in a ratio of up to 1:25, if
at all, with the actual ratio and the timing of such reverse split to be
determined by the Board in its sole discretion, and (ii) decrease the
number of authorized shares of the Company’s common stock from 500,000,000
to a number equal to 500,000,000 multiplied by 50% of the reverse split
ratio, provided that such reverse split is
effected.
|
Please
note that, if any material amendment is made to the Merger Agreement or the
Securities Purchase Agreement in the future, then we will advise you of the
amendment and re-solicit your proxy to vote at the Stockholders
Meeting.
Hereinafter
in this proxy statement, (i) Marchant Securities Inc. will be referred to as
“Marchant”, (ii) the investors listed on the Schedule of Investors attached to
the Securities Purchase Agreement as Exhibit A will be referred to as the
“Investors”, (iii) the $6,703,500 aggregate principal amount bridge loan under
the Loan Agreement will be referred to as the “Bridge Loan”, and (iv) the
lenders of the Bridge Loan will be referred to as the “Bridge
Lenders”.
Proposals
IV, V, VI and VII are being submitted to the Company’s stockholders solely to
comply with Marketplace Rule 4350(i) of The NASDAQ Stock Market
(“NASDAQ”).
Interests
of Management
Certain proposed
nominees for the Board, certain directors of the Company and current and former
executives of the Company have interests in some of the proposals that you are
being asked to consider and vote on.
Proposal IV—Approval and Adoption of
the Merger Agreement
Eric
Donsky
Mr.
Donsky is OcuSense’s Chairman and Chief Executive Officer and is standing for
election to the Board. In addition, it is contemplated that he will
become OccuLogix’s Chief Executive Officer following the closing of the
transactions contemplated by the Merger Agreement and the Securities Purchase
Agreement. Mr. Donsky owns 785,500 shares of OcuSense’s common stock
which will entitle him to receive, as payment of his
pro rata
share of the merger
consideration under the Merger Agreement, an aggregate of 45,104,892 shares of
OccuLogix’s common stock. Assuming a deemed value of $0.10 per share
of OccuLogix’s common stock (which is reflective of the per share average
trading price of OccuLogix’s common stock on The NASDAQ Global Market during the
period of negotiation of the merger consideration and which may be the per share
purchase price paid by the Investors under the Securities Purchase Agreement),
Mr. Donsky’s
pro rata
share of the merger consideration will be worth
$4,510,489. See “Proposal IV—Interests of Proposed Nominees for
Director and Director—Eric Donsky”.
Richard L.
Lindstrom
Dr.
Lindstrom is a director of OccuLogix and is standing for re-election to the
Board. Dr. Lindstrom owns 20,000 shares of OcuSense’s common stock
which will entitle him to receive, as payment of his
pro rata
share of the merger
consideration under the Merger Agreement, an aggregate of 1,148,438 shares of
OccuLogix’s common stock. Assuming a deemed value of $0.10 per share
of OccuLogix’s common stock, Dr. Lindstrom’s
pro rata
share of the merger
consideration will be worth $114,844.
As
consideration for providing certain consulting services, in June 2005, OcuSense
made a one-time grant of stock options to Dr. Lindstrom to acquire an aggregate
of 6,290 shares of OcuSense’s common stock at an exercise price of $4.80 per
share, which stock options were to vest, and have been vesting, monthly during
the 36-month period following their date of grant. Dr. Lindstrom’s
stock options of OcuSense will be assumed by OccuLogix in accordance with the
terms of the Merger Agreement. The assumption will be effected in
such a manner so as to ensure that Dr. Lindstrom remains in the same economic
position with respect to his OcuSense stock options after their assumption by
OccuLogix as before their assumption. In other words, OccuLogix’s
assumption of Dr. Lindstrom’s OcuSense stock options will neither provide an
economic benefit to, nor economically harm, Dr. Lindstrom.
See
“Proposal IV—Interests of Proposed Nominee for Director and Director—Richard L.
Lindstrom”.
Donald
Rindell
Mr.
Rindell is a director of OcuSense and a proposed nominee for election to the
Board. In March 2006, OcuSense made a one-time grant of stock options
to Mr. Rindell to acquire an aggregate of 13,748 shares of OcuSense’s common
stock at an exercise price of $4.80 per share, which stock options were to vest,
and have been vesting, monthly during the 36-month period following their date
of grant. Mr. Rindell’s stock options of OcuSense will be assumed by
OccuLogix in accordance with the terms of the Merger Agreement. The
assumption will be effected in such a manner so as to ensure that Mr. Rindell
remains in the same economic position with respect to his OcuSense stock options
after their assumption by OccuLogix as before their assumption. In
other words, OccuLogix’s assumption of Mr. Rindell’s OcuSense stock options will
neither provide an economic benefit to, nor economically harm, Mr.
Rindell. See “Proposal IV—Interests of Proposed Nominees for Director
and Director—Donald Rindell”.
Proposal V—Approval and Adoption of
the Securities Purchase Agreement
Thomas N. Davidson and Richard L.
Lindstrom
Mr.
Davidson and Dr. Lindstrom are directors of OccuLogix and are standing for
re-election to the Board. Mr. Davidson, his spouse and certain other
parties related to him (collectively, the “Davidson Investors”) are Investors
under the Securities Purchase Agreement. Dr. Lindstrom is also an
Investor under the Securities Purchase Agreement.
Pursuant
to the Securities Purchase Agreement, the Davidson Investors have committed to
purchase $800,000 aggregate amount of shares of the Company’s common stock,
while Dr. Lindstrom has committed to purchase $100,000 aggregate amount of
shares of the Company’s common stock. Under the Securities Purchase
Agreement, the purchase price of each share of the Company’s common stock will
be the lower of (i) $0.10 and (ii) the volume-weighted average closing price of
the Company’s common stock on The NASDAQ Capital Market (or any other eligible
market or any other national securities exchange, market or trading or quotation
facility, in each case, on which the Company’s common stock is then listed or
quoted) (the “Primary Trading Market”) for the 15-trading day period immediately
preceding the closing date of the sale. If the per share purchase
price under the Securities Purchase Agreement is $0.10, then an aggregate of
8,000,000 shares of the Company’s common stock will be issued to the Davidson
Investors and an aggregate of 1,000,000 shares of the Company’s common stock
will be issued to Dr. Lindstrom. If the per share purchase price is
lower than $0.10, then a greater aggregate number of shares of the Company’s
common stock will be issued to the Davidson Investors and to Dr.
Lindstrom. At the date of this proxy statement, the per share
purchase price is not determinable. See “Proposal V—Interests of
Directors and Officer and Director—Thomas N. Davidson and Richard L.
Lindstrom”. If, and to the extent that, the Company’s common stock
trades above $0.10 per share on the closing date of the sale under the
Securities Purchase Agreement, the Davidson Investors and Dr. Lindstrom—together
with all of the other Investors—will acquire shares of the Company’s common
stock at a discount to the market price.
Elias
Vamvakas
For
services rendered by Marchant in connection with the Securities Purchase
Agreement and the Bridge Loan
, the Company has agreed to pay a commission
totaling $750,000.
For a
description of these services, see “Proposal VII—Determination of Marchant’s
Commission”.
To date, $180,000 of such commission has been paid in
cash, with $570,000 remaining owing. The Company proposes to pay
$88,800 of the outstanding balance in cash and, subject to obtaining the
requisite stockholder and regulatory approvals, proposes to pay the remainder of
the outstanding balance, being $481,200, by issuing to Marchant shares of the
Company’s common stock, at a per share price equal to the per share purchase
price at which the Investors will be purchasing shares of the Company’s common
stock pursuant to the Securities Purchase Agreement.
Under the
Securities Purchase Agreement, the purchase price of each share of the Company’s
common stock will be the lower of (i) $0.10 and (ii) the volume-weighted average
closing price of the Company’s common stock on the Primary Trading Market for
the 15-trading day period immediately preceding the closing date of the
sale. If the per share purchase price under the Securities Purchase
Agreement is $0.10, then an aggregate of 4,812,000 shares of the Company’s
common stock will be issued to Marchant in part payment of its commission
remaining outstanding for services provided in connection with the Securities
Purchase Agreement and the Bridge Loan. If the per share purchase
price is lower than $0.10, then a greater aggregate number of shares of the
Company’s common stock will be issued to Marchant in payment of such
commission. At the date of this proxy statement, the per share
purchase price is not determinable. If, and to the extent that, the
Company’s common stock trades above $0.10 per share on the closing date of the
sale under the Securities Purchase Agreement, Marchant will acquire shares of
the Company’s common stock at a discount to the market price.
The
agreed total commission of $750,000 represents a significant increase over the
$264,480 amount that had been agreed upon previously by the Company and
Marchant. The parties have agreed that the increased commission is
justified, since the scope of the engagement and the volume of administrative
work necessary to advance the proposed transactions have turned out to be, and
continue to be, much greater than the parties had contemplated
originally. For a more detailed description of how such commission
was determined, see “Proposal VII—Determination of Marchant’s
Commission”.
Marchant
is indirectly beneficially owned, as to approximately 32%, by Mr. Vamvakas, the
Company’s Chairman of the Board and Chief Executive Officer, and members of his
family. Mr. Vamvakas is standing for re-election to the
Board. He is neither a director nor an officer of
Marchant. See “—Proposal VII” and “Proposal V—Interests of Directors
and Officer and Director—Elias Vamvakas”.
Proposal
VI—Approval of Pre-payment of the Bridge Loan
Elias
Vamvakas
For
services rendered by Marchant in connection with the Securities Purchase
Agreement and the Bridge Loan
, the Company has agreed to pay a commission
totaling $750,000.
For a
description of these services, see “Proposal VII—Determination of Marchant’s
Commission”.
To date, $180,000 of such commission has been paid in
cash, with $570,000 remaining owing. The Company proposes to pay
$88,800 of the outstanding balance in cash and, subject to obtaining the
requisite stockholder and regulatory approvals, proposes to pay the remainder of
the outstanding balance, being $481,200, by issuing to Marchant shares of the
Company’s common stock, at a per share price equal to the per share purchase
price at which the Investors will be purchasing shares of the Company’s common
stock pursuant to the Securities Purchase
Agreement.
Under the
Securities Purchase Agreement, the purchase price of each share of the Company’s
common stock will be the lower of (i) $0.10 and (ii) the volume-weighted average
closing price of the Company’s common stock on the Primary Trading Market for
the 15-trading day period immediately preceding the closing date of the
sale. If the per share purchase price under the Securities Purchase
Agreement is $0.10, then an aggregate of 4,812,000 shares of the Company’s
common stock will be issued to Marchant in part payment of its commission
remaining outstanding for services provided in connection with the Bridge Loan
and the Securities Purchase Agreement. If the per share purchase
price is lower than $0.10, then a greater aggregate number of shares of the
Company’s common stock will be issued to Marchant in part payment of such
commission. At the date of this proxy statement, the per share
purchase price is not determinable. If, and to the extent that, the
Company’s common stock trades above $0.10 per share on the closing date of the
sale under the Securities Purchase Agreement, Marchant will acquire shares of
the Company’s common stock at a discount to the market price.
The
agreed total commission of $750,000 represents a significant increase over the
$264,480 amount that had been agreed upon previously by the Company and
Marchant. The parties have agreed that the increased commission is
justified, since the scope of the engagement and the volume of administrative
work necessary to advance the proposed transactions have turned out to be, and
continue to be, much greater than the parties had contemplated
originally. For a more detailed description of how such commission
was determined, see “Proposal VII—Determination of Marchant’s
Commission”.
Marchant
is indirectly beneficially owned, as to approximately 32%, by Mr. Vamvakas, the
Company’s Chairman of the Board and Chief Executive Officer, and members of his
family. Mr. Vamvakas is standing for re-election to the
Board. He is neither a director nor an officer of
Marchant. See “—Proposal VII” and “Proposal VI—Interest of Officer
and Director—Elias Vamvakas”.
Proposal VII—Approval of Issuance of
Stock to Marchant
Elias
Vamvakas
If this
proposal is approved, shares of the Company’s common stock will be issued to
Marchant in part payment of its commission remaining outstanding for
services provided in connection with the Securities Purchase Agreement and the
Bridge Loan.
For
services rendered by Marchant in connection with the Securities Purchase
Agreement and the Bridge Loan, the Company has agreed to pay a commission
totaling $750,000.
For a
description of these services, see “Proposal VII—Determination of Marchant’s
Commission”.
To date, $180,000 of such commission has been
paid in cash, with $570,000 remaining owing. The Company proposes to
pay $88,800 of the outstanding balance in cash and, subject to obtaining the
requisite stockholder and regulatory approvals, proposes to pay the remainder of
the outstanding balance, being $481,200, by issuing to Marchant shares of the
Company’s common stock, at a per share price equal to the per share purchase
price at which the Investors will be purchasing shares of the Company’s common
stock pursuant to the Securities Purchase Agreement.
See
“—Proposal V—Elias Vamvakas” and “—Proposal VI”. Such shares of the
Company’s common stock will be issued at a per share price equal to the per
share price at which the Investors will be purchasing shares of the Company’s
common stock pursuant to the Securities Purchase Agreement.
Under
the Securities Purchase Agreement, the purchase price of each share of the
Company’s common stock will be the lower of (i) $0.10 and (ii) the
volume-weighted average closing price of the Company’s common stock on the
Primary Trading Market for the 15-trading day period immediately preceding the
closing date of the sale. If the per share purchase price under the
Securities Purchase Agreement is $0.10, then an aggregate of 4,812,000
shares of the Company’s common stock will be issued to Marchant in part payment
of its commission remaining outstanding for services provided in connection
with the Securities Purchase Agreement and
the Bridge Loan. If the per share purchase price is lower
than $0.10, then a greater aggregate number of shares of the Company’s common
stock will be issued to Marchant in payment of such
commission. At the date of this proxy statement, the per share
purchase price is not determinable. If, and to the extent that, the
Company’s common stock trades above $0.10 per share on the closing date of the
sale under the Securities Purchase Agreement, Marchant will acquire shares of
the Company’s common stock at a discount to the market price.
The
agreed total commission of $750,000 represents a significant increase over the
$264,480 amount that had been agreed upon previously by the Company and
Marchant. The parties have agreed that the increased commission is
justified, since the scope of the engagement and the volume of administrative
work necessary to advance the proposed transactions have turned out to be, and
continue to be, much greater than the parties had contemplated
originally. For a more detailed description of how such commission
was determined, see “Proposal VII—Determination of Marchant’s
Commission”.
Marchant
is indirectly beneficially owned, as to approximately 32%, by Mr. Vamvakas, the
Company’s Chairman of the Board and Chief Executive Officer, and members of his
family. Mr. Vamvakas is standing for re-election to the
Board. He is neither a director nor an officer of
Marchant. See “Proposal VII—Interest of Officer and
Director”.
Proposal VIII—Approval of Extension
of Stock Options’ Terms
The table
below sets out the numbers, and the respective dates of grant, of the stock
options that are subject to the proposed term extension. All of these
stock options are time-based stock options and are held by current and former
executives, and certain directors, of OccuLogix. Also indicated in
the table below are the current exercise price of these stock options, their
vesting schedule and their new expiration dates (assuming that the requisite
approval of the Company’s stockholders for the proposed extension of the terms
of these stock options is obtained).
While the
terms of these stock options are proposed to be extended until the tenth
anniversaries of their respective dates of grant, under this proposal, there
would be no change to the exercise price or the vesting schedule of any of these
stock options. The exercise prices of all of them are significantly
higher than the current market price of OccuLogix’s common stock into which they
are exercisable. There can be no assurance that the market price of
OccuLogix’s common stock, in the future, ever will exceed the exercise prices of
any of these stock options.
Stock
Options Subject to Proposed Term Extension
Name
of Holder
|
Stock
Options Subject to Proposed Term Extension
|
Current
Exercise Price of Stock Options Subject to Proposed Term
Extension
($)
|
Date
of Grant
|
Vesting
Schedule
|
Proposed
Expiration Date
|
|
|
|
|
|
|
Elias
Vamvakas
(1)
|
4,583
|
1.30
|
08/01/02
|
Vested
|
08/01/12
|
|
|
|
|
|
|
|
500,000
|
0.99
|
07/01/03
|
Vested
|
07/01/13
|
|
|
|
|
|
|
|
300,000
|
1.90
|
08/03/06
|
Vested
|
08/03/16
|
|
|
|
|
|
|
|
100,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Thomas
P. Reeves
|
300,000
|
2.05
|
12/16/04
|
Vested
|
12/16/14
|
|
|
|
|
|
|
|
20,000
|
1.82
|
03/10/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
03/10/17
|
|
|
|
|
|
|
|
100,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
William
G. Dumencu
|
100,000
|
0.99
|
08/01/03
|
Vested
|
08/01/13
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
David
C. Eldridge
|
36,924
|
1.30
|
10/01/02
|
Vested
|
10/01/12
|
|
|
|
|
|
|
|
59,798
|
0.99
|
07/01/03
|
Vested
|
07/01/13
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Nozait
Chaudry-Rao
|
80,000
|
2.05
|
02/10/06
|
2/3
vested; remaining 1/3 vesting on next anniversary of grant
date
|
02/10/16
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
John
Cornish
|
25,000
|
1.30
|
08/01/02
|
Vested
|
08/01/12
|
|
|
|
|
|
|
|
80,000
|
0.99
|
07/01/03
|
Vested
|
07/01/13
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Julie
A. Fotheringham
|
80,000
|
2.05
|
12/16/04
|
Vested
|
12/16/14
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Stephen
J. Kilmer
|
80,000
|
2.05
|
12/16/04
|
Vested
|
12/16/14
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
Name
of Holder
|
Stock
Options Subject to Proposed Term Extension
|
Current
Exercise Price of Stock Options Subject to Proposed Term
Extension
($)
|
Date
of Grant
|
Vesting
Schedule
|
Proposed
Expiration Date
|
|
|
|
|
|
|
Suh
Kim
|
100,000
|
1.82
|
03/10/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
03/10/17
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Stephen
B. Parks
|
200,000
|
2.05
|
10/04/05
|
2/3
vested; remaining 1/3 vesting on next anniversary of grant
date
|
10/04/15
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Stephen
H. Westing
|
80,000
|
2.05
|
02/10/06
|
2/3
vested; remaining 1/3 vesting on next anniversary of grant
date
|
02/10/16
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Jay
T. Holmes
(1)
|
25,000
|
2.05
|
12/16/04
|
Vested
|
12/16/14
|
|
|
|
|
|
|
|
25,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Georges
Noël
(1)
|
25,000
|
0.99
|
07/01/03
|
Vested
|
07/01/13
|
|
|
|
|
|
|
|
25,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Gilbert
S. Omenn
(1)
|
25,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
TOTAL
|
2,641,305
|
N/A
|
N/A
|
N/A
|
N/A
|
(1)
|
Certain
stock options held by Messrs. Vamvakas, Holmes and Noël and Dr. Omenn
already have 10-year terms and, therefore, are not shown in this
table. See “Additional Information on Executive
Compensation—Outstanding Equity Awards at 2007 Fiscal
Year-End”.
|
Proposal IX—Approval of Share
Reserve Increase under the 2002 Stock Option Plan
In order
to achieve cash savings, we are proposing to issue, to current and former
members of the Company’s executive team, stock options under the 2002 Stock
Option Plan in compromise of all or a portion of their severance entitlement
under their respective employment agreements.
The
following table sets out the dollar value of the severance entitlement of each
of the current or former members of the Company’s executive team that we are
proposing to compromise and the numbers of stock options of OccuLogix that would
be issued to each of these affected individuals as a result of that
compromise. The numbers of stock options have been calculated using
the methodology set forth under “Proposal IX—Increase in Share Reserve under the
2002 Stock Option Plan—Calculation of Numbers of Stock Options”.
Name of Affected
Individual
|
|
Value of
Compromised
Severance
($)
|
|
Number of Stock
Options
to Be Granted
(1)(2)(3)
|
|
Elias Vamvakas
|
|
|
1,570,008
|
|
|
|
18,046,066
|
|
|
Thomas P. Reeves
|
|
|
482,569
|
|
|
|
5,546,766
|
|
|
William G. Dumencu
|
|
|
94,439
|
|
|
|
1,085,504
|
|
|
David C. Eldridge
|
|
|
77,500
|
|
|
|
890,804
|
|
|
Nozait Chaudry-Rao
|
|
|
80,213
|
|
|
|
921,982
|
|
|
John
Cornish
|
|
|
90,460
|
|
|
|
1,039,773
|
|
|
Julie A. Fotheringham
|
|
|
60,159
|
|
|
|
691,487
|
|
|
Suh Kim
|
|
|
112,750
|
|
|
|
1,295,977
|
|
|
Stephen B. Parks
|
|
|
77,500
|
|
|
|
890,804
|
|
|
Stephen H. Westing
|
|
|
60,159
|
|
|
|
691,487
|
|
|
TOTAL
|
|
|
2,705,757
|
|
|
|
31,100,650
|
|
|
___________________________________
(1)
|
We
have assumed that the per share exercise price of the stock options to be
granted to the affected individuals will be
$0.10.
|
(2)
|
The
stock options will be granted to the affected individuals prior to the
implementation of the proposed reverse stock split. See
“Proposal X”.
|
(3)
|
The
number of stock options to be granted to each of the affected individuals
will be affected by the income tax rate applicable to him or
her. For purposes of this illustrative table, we have assumed
that each affected individual will take all necessary action to ensure
that the exercise of his or her stock options will qualify for capital
gains treatment in his or her jurisdiction of
residence.
|
The
objective of the methodology, according to which the numbers of stock options to
be issued to the affected individuals are to be calculated, is to have each of
the affected individuals incur substantially the same investment risk that the
investors party to the Securities Purchase Agreement would incur in purchasing
shares of the Company’s common stock pursuant thereto—since that is the basis on
which these individuals have agreed to the proposed compromise of their
respective severance entitlement. The most straightforward way to
ensure this result would be to fix the per share exercise price of the stock
options of OccuLogix, to be issued to the affected individuals in compromise of
their respective severance entitlement, at the per share purchase price of the
Company’s common stock under the Securities Purchase
Agreement. However, since the exercise price of the stock options on
the date of their grant must not be less than their fair market value on that
date, determined in accordance with the terms of the 2002 Stock Option Plan and
applicable stock exchange rules, it is not possible for the Company to fix the
exercise price of these stock options ahead of the date of their
grant. The proposed methodology for the calculation of the numbers of
stock options to be issued to the affected individuals would put the affected
individuals in the same economic position as they would be in, if the Company
were able to fix, in advance of the date of their grant, the per share exercise
price of the stock options in question at the per share purchase price of the
Company’s common stock under the Securities Purchase Agreement. See
“Proposal IX—Increase in Share Reserve under the 2002 Stock Option
Plan—Calculation of Numbers of Stock Options”.
The stock
options to be issued to the affected individuals will be exercisable immediately
upon grant and will have a term of ten years.
Voting
Procedure
You
either may vote “For” each of the nominees to the Board or you may withhold your
vote for any nominee you specify. For the other proposals to be voted
on, you may vote “For” or “Against” or abstain from voting. The
procedures for voting, set forth below, are fairly simple.
Stockholder
of Record: Shares Registered in Your Name
If you
are a stockholder of record, you may vote in person at the Stockholders Meeting
or vote by proxy using the enclosed proxy card. Whether or not you
plan to attend the Stockholders Meeting, we urge you to vote by proxy to ensure
your vote is counted. You may still attend the Stockholders Meeting
and vote in person if you have already voted by proxy.
|
·
|
To
vote in person, come to the Stockholders Meeting and we will give you a
ballot when you arrive.
|
|
·
|
To
vote using the proxy card, simply complete, sign and date the enclosed
proxy card and return it promptly in the envelope provided. If
you return your signed proxy card to us before the Stockholders Meeting,
we will vote your shares as you
direct.
|
Beneficial
Owner: Shares Registered in the Name of Broker, Bank or Other
Agent
If you
are a beneficial owner of shares registered in the name of your broker, bank or
other agent, you should have received a proxy card and voting instructions with
these proxy materials from that organization rather than from
us. Simply complete and mail the proxy card to ensure that your vote
is counted. To vote in person at the Stockholders Meeting, you must
obtain a valid proxy from your broker, bank or other agent. Follow
the instructions from your broker, bank or other agent included with these proxy
materials, or contact your broker, bank or other agent to request a proxy
form.
Number
of Votes
On each
proposal to be voted upon, you have one vote for each share of OccuLogix’s
common stock you own as of August 6, 2008, the record date.
Voting
by Proxy
If you
return a signed and dated proxy card without marking any voting selections, your
shares will be voted
“For”
each of the ten
proposals to be voted on. See “—Proposals to Be Voted
on”.
The form of proxy confers discretionary
voting authority on those persons designated in the proxy with respect to
amendments or variations to the resolutions identified in the notice of the
Stockholders M
eeting and with respect to other matters
that may properly come before the
Stockholders M
eeting. OccuLogix management
knows of no such amendment, variation or other matter to come before the
Stockholders M
eeting as of the date of this proxy
statement. However, if such amendments or variations or other matters
properly come before the
Stockholders M
eeting, the management representatives
designated in the form of proxy will vote the
shares of
OccuLogix
’s
common s
tock
represented thereby in accordance with
their best judgment.
Cost
of Proxy Solicitation
We will
pay for the entire cost of soliciting proxies. In addition to these
mailed proxy materials, our directors and employees may also solicit proxies in
person, by telephone or by other means of communication. Directors
and employees will not be paid any additional compensation for soliciting
proxies. We may also reimburse brokerage firms, banks and other
agents for the cost of forwarding proxy materials to beneficial
owners.
Receipt
of Multiple Proxy Cards
If you
receive more than one proxy card, your shares are registered in more than one
name or are registered in different accounts. Please complete, sign
and return
each
proxy
card to ensure that all of your shares are voted.
Revocation
of Proxy
You can
revoke your proxy at any time before the final vote at the Stockholders
Meeting. You may revoke your proxy in any one of the following three
ways:
|
·
|
You
may submit another properly completed proxy card with a later
date;
|
|
·
|
You
may send a written notice that you are revoking your proxy to the
Secretary of the Company at 2600 Skymark Avenue, Unit 9,
Suite 201, Mississauga, Ontario, L4W 5B2;
or
|
|
·
|
If
you are a stockholder of record, you may attend the Stockholders Meeting
and vote in person. Simply attending the Stockholders Meeting
will not, by itself, revoke your
proxy.
|
Stockholder
Proposals
To be
considered for inclusion in next year’s proxy materials, your proposal must be
submitted in writing by, not less than 120 days before the anniversary of the
date of this proxy statement,
to the Secretary of the
Company at 2600 Skymark Avenue, Unit 9, Suite 201, Mississauga,
Ontario, L4W 5B2. If the Company does not receive notice of a
proposal to be considered at the 2009 annual meeting of stockholders of the
Company (the “2009 annual meeting”) within the 45-day period preceding the
anniversary of the mailing date of this proxy statement, then the persons named
by the Board in the proxy card for the 2009 annual meeting will be allowed to
use their discretionary authority with respect to any such proposal that is
raised at the 2009 annual meeting. Stockholders wishing to submit any
such proposal are advised to review Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), which contains additional
requirements about advance notice of stockholder proposals and director
nominations.
Counting
of Votes
Votes
will be counted by the inspector of election appointed for the Stockholders
Meeting who will separately count “For” and (with respect to proposals other
than the election of directors) “Against” votes, abstentions and broker
non-votes. Abstentions will be counted toward the vote total for each
proposal and will have the same effect as “Against” votes. Except
with respect to Proposal III and Proposal X, broker non-votes have no effect and
will not be counted toward the vote total for any proposal. With
respect to Proposal III and Proposal X, broker non-votes will be counted toward
the vote total for these proposals and will have the same effect as “Against”
votes.
If your
shares are held by your broker as your nominee (that is, in “street name”), you
will need to obtain a proxy form from the institution that holds your shares and
follow the instructions included on that proxy form regarding how to
instruct your broker to vote your shares. If you do not give
instructions to your broker, your broker can vote your shares with respect to
“discretionary” items but not with respect to “non-discretionary”
items. Discretionary items are proposals considered routine under the
rules of the New York Stock Exchange on which your broker may vote shares held
in “street name” in the absence of your voting instructions. On
non-discretionary items for which you do not give your broker instructions, the
shares will be treated as broker non-votes.
Votes
Required to Approve Each Proposal
|
·
|
Proposal
I
: For the election of directors, the six nominees
receiving the most “For” votes (among votes properly cast in person or by
proxy) will be elected. Broker non-votes will have no
effect.
|
|
·
|
Proposal
II
: To be approved, the proposal to ratify the selection
of Ernst & Young LLP as independent auditors of the Company for its
financial year ending December 31, 2008 must receive a “For” vote
from the majority of the votes cast. If you “Abstain” from
voting, it will have the same effect as an “Against”
vote. Broker non-votes will have no
effect.
|
|
·
|
Proposal
III
: To be approved, the proposal to approve the
amendment to the Company’s Amended and Restated Certificate of
Incorporation in order to increase the number of authorized shares of the
Company’s common stock from 75,000,000 to 500,000,000 must receive a “For”
vote from the holders of a majority of the issued and outstanding shares
of the Company’s common stock. If you “Abstain” from voting, it
will have the same effect as an “Against” vote. A broker
non-vote also will have the same effect as an “Against”
vote.
|
|
·
|
Proposal
IV
: To be approved, the proposal to approve and adopt
the Merger Agreement must receive a “For” vote from the majority of the
votes cast. If you “Abstain” from voting, it will have the same
effect as an “Against” vote. Broker non-votes will have no
effect.
|
|
·
|
Proposal
V
: To be approved, the proposal to approve and adopt the
Securities Purchase Agreement must receive a “For” vote from the majority
of the votes cast. If you “Abstain” from voting, it will have
the same effect as an “Against” vote. Broker non-votes will
have no effect.
|
|
·
|
Proposal
VI
: To be approved, the proposal to pre-pay the Bridge
Loan by issuing, to the Bridge Lenders, shares of the Company’s common
stock in the aggregate number required pursuant to the terms of the Loan
Agreement (which number will be no less than 78,864,705) must receive a
“For” vote from the majority of the votes cast. If you
“Abstain” from voting, it will have the same effect as an “Against”
vote. Broker non-votes will have no
effect.
|
|
·
|
Proposal
VII
: To be approved, the proposal to approve the
issuance to Marchant of a minimum of 4,812,000 shares of the
Company’s common stock in payment of part of the commission
remaining owing for services rendered by Marchant in connection with
the Securities Purchase Agreement and the Bridge Loan must receive a “For”
vote from the majority of the votes cast. If you “Abstain” from
voting, it will have the same effect as an “Against”
vote. Broker non-votes will have no
effect.
|
|
·
|
Proposal
VIII
: To be approved, the proposal to approve the
extension of the terms of certain stock options of OccuLogix, issued under
the 2002 Stock Option Plan and held by current and former executives of
OccuLogix and certain directors of OccuLogix, must receive a “For” vote
from the majority of the votes cast. For purposes of this
approval, the votes attached to shares of OccuLogix’s common stock
beneficially owned by holders of stock options, the terms of which are
subject to the proposed extension, and the votes attached to shares
beneficially owned by such holders’ spouses, partners and certain other
related persons, will not be counted in determining whether the necessary
level of stockholder approval has been obtained. In addition
(and without duplication), for purposes of this approval, the votes
attached to shares of OccuLogix’s common stock beneficially owned by
directors and officers of OccuLogix, and the votes attached to shares
beneficially owned by such holders’ spouses, partners and certain other
related persons, will not be counted in determining whether the necessary
level of stockholder approval has been obtained. If you
“Abstain” from voting, it will have the same effect as an “Against”
vote. Broker non-votes will have no
effect.
|
|
·
|
Proposal
IX
: To be approved, the proposal to increase the share
reserve under the 2002 Stock Option Plan by 53,544,000, from 6,456,000 to
60,000,000, must receive a “For” vote from the majority of the votes
cast. For purposes of this approval, the votes attached to
shares of OccuLogix’s common stock beneficially owned by directors and
officers, and the votes attached to shares beneficially owned by such
holders’ spouses, partners and certain other related persons, will not be
counted in determining whether the necessary level of stockholder approval
has been obtained. If you “Abstain” from voting, it will have
the same effect as an “Against” vote. Broker non-votes will
have no effect.
|
|
·
|
Proposal
X
: To be approved, the proposal to approve a further
amendment to the Company’s Amended and Restated Certificate of
Incorporation in order to (i) provide for a recapitalization in which the
issued and outstanding shares of the Company’s common stock will be
reverse split in a ratio of up to 1:25, if at all, and (ii) decrease the
number of authorized shares of the Company’s common stock from 500,000,000
to a number equal to 500,000,000 multiplied by 50% of the reverse split
ratio, provided that such reverse split is effected, must receive a “For”
vote from the holders of a majority of the issued and outstanding shares
of the Company’s common stock. If you “Abstain” from voting, it
will have the same effect as an “Against” vote. A broker
non-vote also will have the same effect as an “Against”
vote.
|
If
Proposal III is not approved, then we will not take action with respect to any
of Proposals IV, V, VI, VII, IX or X even if some or all of such proposals are
approved. If any of Proposals IV, V, VI, VII or IX is not approved,
then we will not take action with respect to any of them even if one or more of
such proposals are approved.
Voting Intention of Major
Stockholders and Management
The
Company has been advised by TLC Vision Corporation (“TLC Vision”), the Company’s
major stockholder, that it intends to vote its shares
“For”
each of the ten
proposals to be voted on. Diamed Medizintechnik GmbH (“Diamed”),
another of the Company’s significant stockholders, has advised us that it
intends to vote its shares
“For”
each of the ten
proposals. In addition, those members of the Company’s management who
are also stockholders of the Company, all of whom happen to be Board members,
have confirmed that they intend to vote their shares
“For”
each of the ten
proposals to be voted on. Those of the former executives of the
Company who are also stockholders of the Company, and who are affected by
Proposal VIII and Proposal IX, have confirmed the same intention.
Note,
however, that, for purposes of determining whether the necessary level of
stockholder approval for Proposal VIII and Proposal IX has been obtained, we
will not count the votes attached to shares of OccuLogix’s common stock held by
certain of the aforementioned insiders or former insiders of the Company, or the
votes attached to shares beneficially owned by such persons’ spouses, partners
and certain other related persons, all as more particularly described under
“—Votes Required to Approve Each Proposal”.
As of the
date of this proxy statement, there are 57,306,145 shares of OccuLogix’s common
stock outstanding. The following table sets out (1) the number of
shares of OccuLogix’s common stock beneficially owned by each of (i) TLC Vision,
(ii) Diamed, (iii) those members of the Company’s management who are also
stockholders of the Company, all of whom happen to be Board members, and (iv)
the former executives of the Company who are also stockholders of the Company,
and who are affected by Proposal VIII and Proposal IX, and (2) the approximate
percentage of the Company’s common stock outstanding that each such number
represents. See also “Principal Stockholders”.
Beneficial
Owner
|
|
Number
of Shares Beneficially Owned
|
|
|
Percentage
of Shares Beneficially Owned
|
|
TLC
Vision Corporation
|
|
|
18,770,302
|
|
|
|
32.8
|
%
|
Diamed Medizintechnik
GmbH
|
|
|
4,332,234
|
|
|
|
7.6
|
%
|
Members
of the Company’s management
|
|
|
1,988,487
|
|
|
|
3.5
|
%
|
Former
executives of the Company
|
|
|
257,501
|
|
|
|
0.4
|
%
|
TOTAL
|
|
|
25,348,524
|
|
|
|
44.2
|
%
|
To our
knowledge, there is no agreement between or among any of TLC Vision, Diamed and
any current or former member of the Company’s management regarding the voting
of, or the giving of written consents with respect to, any shares of OccuLogix’s
common stock.
Quorum
Requirement
A quorum
of stockholders is necessary to hold a valid meeting. A quorum will
be present if a majority of the outstanding shares are represented by
stockholders present at the Stockholders Meeting or by proxy. On the
date of this proxy statement, there are 57,306,145
shares outstanding and
entitled to vote. Thus, if the same number of shares are outstanding
and entitled to vote on the record date, at least 28,653,073
shares must be
represented by stockholders present at the Stockholders Meeting or by proxy to
have a quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy vote
or vote at the Stockholders Meeting. Abstentions and broker non-votes
will be counted towards the quorum requirement. If there is no
quorum, a majority of the votes present at the Stockholders Meeting may adjourn
the meeting to another date.
Results
of the Voting at the Stockholders Meeting
Preliminary
voting results will be announced at the Stockholders Meeting. Final
voting results will be published in the Company’s Quarterly Report on
Form 10-Q for the third quarter of the financial year ending
December 31, 2008 and will be filed on SEDAR (
www.sedar.com
).
SPECIAL
NOTE
This
proxy statement contains forward-looking statements relating to future events
and our future performance within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange
Act. In some cases, you can identify forward-looking statements by
terms such as “may”, “will”, “should”, “could”, “would”, “expects”, “plans”,
“intends”, “anticipates”, “believes”, “estimates”, “projects”, “predicts”,
“potential” and similar expressions intended to identify forward-looking
statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results,
performances, time frames or achievements expressed or implied by the
forward-looking statements. Given these risks, uncertainties and
other factors, you should not place undue reliance on these forward-looking
statements.
Information
regarding market and industry statistics contained in this proxy statement is
included based on information that we believe is accurate. It is
generally based on academic and other publications that are not produced for
purposes of securities offerings or economic analysis. We have not
reviewed or included data from all sources and cannot assure you of the accuracy
of the market and industry data we have included.
PROPOSAL
I
Election of Director
s
The
Company’s Amended and Restated Bylaws authorize the number of directors to be
not less than five and no more than nine. Presently, the Board
consists of seven directors. Of the Company’s current directors, Jay
T. Holmes, Georges Noël and Gilbert S. Omenn will not stand for re-election to
the Board.
The table below sets out the name and
place of residence of
each
of the individuals who is
nominated for election as a director
of
OccuLogix
to hold office until the next annual
meeting of the
stockholders
of
OccuLogix
or until his
or her
successor is elected or
appointed. The table also sets out the age of the nominee, the
position with
OccuLogix
that each nominee
presently holds
(if
any)
, the principal
occupation of each nominee and
, if applicable,
the date on which each nominee was
first elected or appointed as a director. See
“Principal Stockholders”
for the number of
shares of OccuLogix’s
common
stock
that are beneficially owned, directly
or indirectly, or over which control or direction is exercised
,
by each nominee. Information
on each nominee’s business experience during the past five years is included
in
the
following table
. The
B
oard
has an a
u
dit c
ommittee, a
corporate governance and nominating
committee and a
c
ompensation
c
ommittee. The members
hip on
such committees
of the incumbent directors
are indicated
in the table below.
Name and Place of
Residence
|
Age
|
|
Position with the
Company
|
|
Principal
Occupation
|
|
Director of
the
Company
Since
|
|
|
|
|
|
|
|
|
Elias Vamvakas
|
50
|
|
Chief Executive
Officer,
|
|
Officer of the
Company
|
|
June 2003
|
Thornhill, Ontario,
Canada
|
|
|
Secretary and Chairman of the
Board
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas N.
Davidson
|
68
|
|
Director
(1*)(2)
(3)
|
|
Corporate
Director
|
|
September
2004
|
Key Largo, Florida,
U.S.A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Donsky
|
43
|
|
Nominee for
Director
|
|
Chairman and
Chief
|
|
--
|
San Diego, California,
U.S.A.
|
|
|
|
|
Executive Officer,
OcuSense
|
|
|
|
|
|
|
|
|
|
|
Richard L.
Lindstrom
|
60
|
|
Director
|
|
Ophthalmologist
|
|
September
2004
|
Minneapolis, Minnesota,
U.S.A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adrienne L.
Graves
|
54
|
|
Director
(1)(2)(3)
|
|
President and
Chief
|
|
April 2005
|
Napa, California,
U.S.A.
|
|
|
|
|
Executive Officer, Santen
Inc.
|
|
|
|
|
|
|
|
|
|
|
Donald Rindell
|
56
|
|
Nominee for
Director
|
|
Executive Director
of
|
|
--
|
Rancho Santa Fe, California,
U.S.A.
|
|
|
|
|
Business Development, Amylin
Pharmaceuticals, Inc.
|
|
|
___________________________________
(1)
|
Member of the Compensation
Committee, * - Chairman
|
(2)
|
Member of the Corporate Governance
and Nominating Committee
|
(3)
|
Member of the Audit
Committee
|
Each of the nominees for election to the
Board has consented to serve as a director of the Company, if elected, and has
consented to being named in this proxy statement. Set forth below is
biographical information relating to each of them.
Elias Vamvakas
co-founded TLC
Vision, the Company’s major stockholder and an eye care services company, where
he was the Chairman from 1994 to June 2006 and was the Chief Executive Officer
from 1994 to July 2004. He has been the Chairman of the Board and
Secretary of OccuLogix since June 2003 and the Chief Executive Officer of
OccuLogix since July 2004. Since November 30, 2006, Mr. Vamvakas has
been a member of the board of directors of OcuSense. Mr. Vamvakas was
named to “Canada’s Top Forty Under Forty” in 1996. In 1999, he was
named Ernst & Young’s Entrepreneur of the Year for Ontario in the Emerging
Category and Canadian Entrepreneur of the Year for Innovative
Partnering. In 2000, Mr. Vamvakas was recognized by Profit Magazine
for managing one of Canada’s fastest growing companies. He is neither
a director nor an officer of Marchant.
Thomas N. Davidson
has been a
member of the Board since September 2004 and had been on the board of directors
of TLC Vision since 2002 until he resigned in December 2007. Mr.
Davidson has been Chairman of NuTech Precision Metals Inc. since 1984 and
Chairman of Quarry Hill Group, a private investment holding company, since
1986. NuTech Precision Metals Inc. is a manufacturer of high
performance metal fabrications for the health care, aerospace, high technology,
nuclear power and chemical industries. Mr. Davidson is past Chairman
of Hanson Chemical Inc., a supplier of specialty chemical products, and General
Trust and PCL Packaging Inc. Mr. Davidson was formerly the
non-executive Chairman of Azure Dynamics Corporation, a developer of hybrid
electrical vehicle systems for commercial vehicles. He also sits on
the board of MDC Partners Inc. and was recognized by the Financial Post as the
Canadian Entrepreneur of the Year in 1979.
Eric Donsky
has 15 years of
experience in the development of early-stage biotechnology and life science
companies, as a founder and senior manager. Mr. Donsky has been the
Chairman and Chief Executive Officer of OcuSense since January
2003. Mr. Donsky is also a principal of Molecular Biosciences, a life
science incubator and consulting practice. Previously, he was the
founding Chief Executive Officer of Zolaris BioSciences, Inc., an early-stage
biotechnology company focused on the discovery and development of therapeutics
for the treatment of rheumatoid arthritis, multiple sclerosis and infectious
diseases. Prior to his tenure at Zolaris BioSciences, Inc., Mr.
Donsky was the founding Chief Executive Officer of Applied CarboChemicals, Inc.
(“ACC”), a biotechnology company focused on the commercial development of novel
fermentation processes capable of manufacturing unique compounds that have
application in the food, chemical and pharmaceutical industries. ACC
currently has manufacturing operations and several products on the
market. Mr. Donsky graduated from Boston University in 1987 with a
B.S. in Business Administration.
Richard L. Lindstrom, MD
, has
been a member of the Board since September 2004 and has been serving as a
director of TLC Vision since May 2002 and, prior to that, was a director of
LaserVision Centers, Inc. since November 1995. Since 1979, Dr.
Lindstrom has been engaged in the private practice of ophthalmology and is
Founder and Attending Surgeon of Minnesota Eye Consultants P.A., a provider of
eye care services. Dr. Lindstrom has been serving as Associate
Director of the Minnesota Lions Eye Bank since 1987. He is also a
medical advisor for several medical device and pharmaceutical
manufacturers. Dr. Lindstrom is past President of the International
Society of Refractive Surgery, the International Intraocular Implant Society,
the International Refractive Surgery Club and the American Society of Cataract
and Refractive Surgery. From 1980 to 1989, he served as a Professor
of Ophthalmology at the University of Minnesota and is currently Adjunct
Professor Emeritus in the Department of Ophthalmology at the University of
Minnesota. Dr. Lindstrom received his Doctor of Medicine, Bachelor of
Arts and Bachelor of Sciences degrees from the University of
Minnesota.
Adrienne L. Graves, PhD
, has
been a member of the Board since April 2005 and, since 2002, has been President
and Chief Executive Officer of Santen Inc., the U.S. subsidiary of Santen
Pharmaceutical Co., Ltd. Dr. Graves also sits on the board of
directors of Santen Inc. and is a corporate officer of Santen Pharmaceutical
Co., Ltd. Dr. Graves joined Santen Inc. in 1995 as Vice President of
Clinical Affairs to initiate the company’s clinical development in the
U.S. Prior to joining Santen Inc., Dr. Graves spent nine years with
Alcon Laboratories, Inc. (“Alcon”) beginning in 1986 as a Senior
Scientist. She was named Associate Director of Alcon’s Clinical
Science Division in 1992 and then Alcon’s Director of International
Ophthalmology in 1993. Dr. Graves is the author of over 30 research
papers and is a member of a number of professional associations, including the
Association for Research in Vision and Ophthalmology, the American Academy of
Ophthalmology, the American Glaucoma Society and Women in
Ophthalmology. She also serves on the boards of the American Academy
of Ophthalmology Foundation, the Pan-American Association of Ophthalmology and
the Corporate Committee for the Brown University Medical School. Dr.
Graves also co-founded Ophthalmic Women Leaders. She received her
B.A. in psychology with honors from Brown University, her PhD in psychobiology
from the University of Michigan and completed a postdoctoral fellowship in
visual neuroscience at the University of Paris.
Donald Rindell
has been a
member of the board of directors of OcuSense since March 2006. He
currently serves as Executive Director of Business Development for Amylin
Pharmaceuticals, Inc., a position he has held since 2005. Prior to
joining Amylin Pharmaceuticals, Inc., Mr. Rindell had a successful consulting
practice, during which time he served as Acting President of Medical Device
Group, Inc., an acute care and respiratory company, Vice President of Business
Development of CardioNet, Inc., a “real-time” 24/7 cardiovascular monitoring
company, and Vice President of Business Development of HandyLab, Inc., a
molecular diagnostics and pharmacogenomics system company. His
responsibilities included corporate marketing, mergers and acquisitions
activities, product planning and new strategic initiatives. Prior to
his consulting practice, he served as Vice President of Corporate Development
& Strategic Planning of Advanced Tissues Sciences, Inc. (“ATS”), a La Jolla,
California-based biotechnology company. Prior to his tenure at
ATS, Mr. Rindell was the Vice President for Global Business Management of
Braun/Thermoscan, a division of The Gillette Company. At
Braun/Thermoscan, he played a major role in building its medical diagnostics
business to achieve sales exceeding $170 million. Mr. Rindell was
also employed by Hybritech, a division of Eli Lilly and Company as Executive
Director of Sales and Marketing. Mr. Rindell received his BS degree
in Economics from the College of Wooster and an M.B.A. from Pepperdine
University Graduate School of Business.
Each of
Messrs. Vamvakas and Davidson and Drs. Lindstrom and Graves are currently
members of the Board. Mr. Donsky is the Chairman of the board of
directors of OcuSense and its Chief Executive Officer, and Messrs. Vamvakas and
Rindell are directors of OcuSense. The Merger Agreement obligates
OccuLogix to use commercially reasonable efforts to take all necessary corporate
action to ensure that, effective immediately after the closing of the
transactions contemplated by the Merger Agreement, the Board consists of all of
the aforementioned individuals. See “Proposal IV—Merger Agreement;
Acquisition of Minority Ownership Interest in OcuSense—Merger
Agreement—Conditions to Completion of Merger”.
OccuLogix management does not
contemplate that any of the proposed nominees will be unable to serve as a
director, but, if that should occur for any reason prior to the Stockholders
Meeting, the management representatives designated in the enclosed proxy card
reserve the right to vote for another nominee at their discretion, unless a
stockholder has specified in his or her proxy that his or her shares of
OccuLogix’s common stock are to be withheld from voting in the election of
directors.
The management representatives
designated in the enclosed proxy card intend to cast the votes, to which the
shares of OccuLogix’s common stock represented by such proxy are entitled,
equally among the proposed nominees for election as directors, unless the
stockholder who has given such proxy has directed that such shares be withheld
from voting in the election of directors.
The Board unanimously recommends a vote
FOR
the election of the individuals named
above as directors.
PROPOSAL
II
Selection of
Auditors
The audit committee of the
Board (the “Audit Committee”) has
selected Ernst & Young LLP as the Company’s independent auditors for the
financial year ending
December 31, 2008
and has further directed that
management submit the selection of independent auditors for ratification by the
stockholders at the Stockholders Meeting.
Ernst
& Young LLP have been auditors of
the Company since December 2003. Representatives of Ernst & Young
LLP are expected to attend the Stockholders Meeting, will be provided with an
opportunity to make a statement, should they desire to do so, and will be
available to respond to appropriate questions from the stockholders of the
Company.
Nothing in the
Company’s
Amended and Restated Bylaws
or other governing documents or law
require
s
stockholder ratification of the
selection
of Ernst & Young LLP as the
Company’s independent auditors. However, the
A
udit
C
ommittee is submitting the
selection
of Ernst & Young LLP to the
stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the
selection
, the
A
udit
C
ommittee will reconsider whether or not
to retain that firm. Even if the
selection
is ratified, the
Audit C
ommittee
,
in its discretion, may direct the
appointment of different independent auditors at any time during the year if the
members of the Audit Committee determine that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the majority of
the votes cast at the Stockholders Meeting, at which a quorum is present, is
required to ratify the selection of Ernst & Young LLP as independent
auditors of OccuLogix for the financial year ending
December 31, 2008
.
Unless otherwise
directed, the management representatives designated in the enclosed proxy card
intend to vote the shares of OccuLogix’s common stock, for which they have been
appointed,
FOR
the ratification of
the selection of Ernst & Young LLP as the independent auditors of the
Company.
The Board unanimously recommends a vote
FOR
the ratification of the selection of
Ernst & Young LLP as independent auditors of OccuLogix for its financial
year ending
December 31,
2008
.
Fees Billed by External
Auditors
Ernst
& Young LLP billed the Company for the following fees in the last two fiscal
years:
|
|
Year
Ended December 31,
|
|
|
|
2007
(C$)
|
|
|
2006
(C$)
|
|
Fees
for Audit Services
|
|
$523,000
|
|
|
$360,000
|
|
|
|
|
|
|
|
|
Fees
for Audit-Related Services
|
|
$23,400
|
|
|
$9,000
|
|
|
|
|
|
|
|
|
Fees
for Tax Services
|
|
$5,600
|
|
|
$10,000
|
|
|
|
|
|
|
|
|
All
Other Fees
|
|
--
|
|
|
--
|
|
Audit
fees for the financial years ended December 31, 2007 and 2006 were for
professional services provided in connection with the audit of the Company’s
annual consolidated financial statements, review of the Company’s quarterly
consolidated financial statements, accounting matters directly related to the
annual audits, the assessment and testing of internal controls for purposes of
compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and audit services
provided in connection with other statutory or regulatory
filings. Audit fees for the financial year ended December 31, 2007
also included approximately C$60,000 for services provided in connection with
the audit of historical financial statements of OcuSense, in preparation for
OccuLogix’s proposed acquisition of the minority ownership stake of OcuSense,
announced on April 22, 2008. See “Proposal IV”. Audit fees
for the financial year ended December 31, 2007 also included approximately
C$85,000 for services provided in connection with the restatements of the
Company’s audited consolidated financial statements for the financial years
ended December 31, 2007 and 2006 and its unaudited consolidated financial
statements for each of the first three quarters of the financial year ended
December 31, 2007. (The Company also incurred approximately C$15,000
in audit fees in connection with the restatement of its unaudited consolidated
financial statements for the quarter ended March 31, 2008, which amount is not
included in the table set forth above.)
The
audit-related fees for the financial years ended December 31, 2007 and 2006 were
for assurance and related services that were reasonably related to the
performance of the audit or review of the Company’s financial statements but
that were not included in audit fees. Fees charged for audit-related
services for the financial year ended December 31, 2007 were in respect of
professional services rendered in connection with the accounting of warrants and
the adoption and application, with respect to income taxes, of Financial
Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes—An Interpretation of FASB Statement No. 109”. Fees
charged for audit-related services for the financial year ended December 31,
2006 were in respect of professional services rendered in connection with the
audit of the Company’s adoption of the provisions of the Statement of Financial
Accounting Standards No. 123 (revised 2004),
Share-Based Payment
(“SFAS
No. 123R”) and the calculation of the Company’s goodwill
impairment. The fees for tax services incurred during the financial
years ended December 31, 2007 and 2006 were related to commodity tax advisory
services.
Ernst
& Young LLP did not provide any services in the last two fiscal years, other
than those described above.
Pre-Approval
Policies and Procedures
The Audit
Committee has concluded that the above-described non-audit services did not
adversely impact the independence of Ernst & Young LLP. All audit
fees relating to the audit for the financial year ended December 31, 2007, other
than such fees incurred in connection with the restatements of financial
statements, were approved in advance, or were ratified, by the Audit
Committee. The audit fees incurred in connection with the Company’s
restatements of financial statements will be presented to the Audit Committee
for ratification. All audit-related fees relating to the audit for
the financial year ended December 31, 2006 were approved in advance by the Audit
Committee. Generally, all audit and non-audit services to be provided
by Ernst & Young LLP are, and will continue to be, pre-approved by the
Audit Committee.
PROPOSAL
III
NOTE
: Proposal
III is conditioned upon Proposals IV, V, VI, VII, IX and X, and each of
Proposals IV, V, VI, VII, IX and X is conditioned upon Proposal
III. If any of Proposals IV, V, VI, VII, IX or X is not approved by
the Company’s stockholders, then we will not take action with respect to
Proposal III. If Proposal III is not approved by the Company’s
stockholders, then we will not take action with respect to any of Proposals IV,
V, VI, VII, IX or X even if some or all of such proposals are
approved.
Increase
in the Number of Authorized Shares of Common Stock
The
Company’s Amended and Restated Certificate of Incorporation provides the total
number of shares of all classes of capital stock which the Company shall have
authority to issue to be 85,000,000, of which 75,000,000 shares, par value
$0.001 per share, shall be common stock and 10,000,000 shares, par value $0.001
per share, shall be preferred stock.
On the date of this
proxy statement, there are 57,306,145 shares of common stock outstanding and no
shares of preferred stock outstanding.
In order
to implement the transactions contemplated by the Merger Agreement and the
Securities Purchase Agreement and in order to pre-pay the Bridge Loan and to
make payment of part of the commission remaining owing to Marchant by the
issuance to Marchant of shares of the Company's common stock in the
manner being proposed, the Company will need to issue a number of shares of its
common stock far in excess of 17,693,855, being the number of shares of common
stock remaining authorized to be issued under the Company’s Amended and Restated
Certificate of Incorporation. See “Proposal IV”, “Proposal V”,
“Proposal VI” and “Proposal VII”. It will not be possible to
implement these proposed transactions without increasing the number of
authorized shares of the Company’s common stock.
The
following table sets out the numbers of shares of the Company’s common stock
that we expect will be issued in the implementation of the transactions
contemplated by the Merger Agreement and the Securities Purchase Agreement
(Proposal IV and Proposal V, respectively), in the pre-payment of the Bridge
Loan (Proposal VI) and in the payment of part of the commission
remaining owing to Marchant by the issuance to Marchant of shares of the
Company's common stock in the manner being proposed (Proposal VII).
Proposal
|
|
|
Number of Shares to Be
Issued
|
|
|
|
|
|
Proposal
IV: Implementation of the transactions contemplated by the
Merger Agreement
|
|
|
79,248,175
|
|
|
|
|
|
|
Proposal
V: Implementation of the transactions contemplated by the
Securities Purchase Agreement
|
|
|
21,730,000
(1)
|
|
|
|
|
|
|
Proposal
VI: Pre-payment of the Bridge Loan
|
|
|
78,864,705
(2)
|
|
|
|
|
|
|
Proposal
VII: Part payment of the commission remaining owing to
Marchant
|
|
|
4,812,000
(3)
|
|
|
|
|
|
|
TOTAL
|
|
|
184,654,800
(1)(2)(3)
|
|
___________________________________
(1)
|
If
the per share purchase price of the Company’s common stock under the
Securities Purchase Agreement is $0.10, then an aggregate of 21,730,000
shares of the Company’s common stock will be issued to the
Investors. If the per share purchase price is lower than $0.10,
then a greater aggregate number of shares of the Company’s common stock
will be issued to the Investors. At the date of this proxy
statement, the per share purchase price is not
determinable.
|
(2)
|
We
are assuming that the per share purchase price of the Company’s common
stock under the Securities Purchase Agreement is $0.10 (which means that
the per share price of the Company’s common stock being issued to the
Bridge Lenders would be $0.085). At the date of this proxy
statement, the per share purchase price is not
determinable. The number shown in the table represents the
minimum number of shares of the Company’s common stock issuable to the
Bridge Lenders upon the Company’s exercise of the second pre-payment
option under the Loan Agreement and takes into account only the
pre-payment of the principal amount of the Bridge Loan and disregards
pre-payment of the accrued and unpaid interest thereon. At the
date of this proxy statement, it is not possible to determine the exact
number of shares of the Company’s common stock issuable to the Bridge
Lenders upon the Company’s exercise of the second pre-payment option under
the Loan Agreement.
|
(3)
|
If
the per share purchase price of the Company’s common stock under the
Securities Purchase Agreement is $0.10, then an aggregate
of 4,812,000 shares of the Company’s common stock will be issued to
Marchant in part payment of the commission remaining owing to
it. If the per share purchase price is lower than $0.10, then a
greater aggregate number of shares of the Company’s common stock will be
issued to Marchant. At the date of this proxy statement, the
per share purchase price is not
determinable.
|
The
holders of the Company’s common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders. In addition, the holders
of the Company’s common stock are entitled to receive, as, if and when declared
by the Board, out of the assets of the Company legally available therefor, such
dividends as may be declared from time to time by the Board. Upon the
voluntary or involuntary liquidation, sale, merger, consolidation, dissolution
or winding up of the Company, the holders of the Company’s common stock will be
entitled to receive all assets of the Company available for distribution to
stockholders, subject to any preferential rights of any then outstanding
preferred stock. The holders of the Company’s common stock do not
have any subscription, redemption or conversion rights. The rights
and preferences attached to the shares of the Company’s common stock will not
change subsequent to the proposed increase in the number of authorized shares of
the Company’s common stock.
No Appraisal
Rights
The
Company’s stockholders are not entitled to appraisal rights under the Delaware
General Corporation Law, the Company’s Amended and Restated Certificate of
Incorporation or the Company’s Amended and Restated Bylaws, and the Company will
not provide stockholders with any such rights. There may exist other
rights or actions under law for stockholders who are
aggrieved. However, the nature and extent of such rights or actions
are uncertain and may vary depending on the facts or
circumstances. Stockholder challenges to corporate action in general
are related to the fiduciary responsibilities of corporate officers and
directors and to the fairness of corporate transactions.
Resolution
Appendix
A to this proxy statement sets forth the full text of the resolution to amend
the Company’s Amended and Restated Certificate of Incorporation in order to
increase the number of authorized shares of the Company’s common stock from
75,000,000 to 500,000,000 (the “Appendix A Resolution”). If the
Appendix A Resolution is adopted by the Company’s stockholders, then the Board
will have the authority (but not the obligation), without any further action on
the part of the Company’s stockholders, to file the proposed amendment to the
Company’s Amended and Restated Certificate of Incorporation with the Secretary
of State of the State of Delaware. Such filing will be made prior to
any filing of the further amendment to the Company’s Amended and Restated
Certificate of Incorporation in order to (i) provide for a recapitalization in
which the issued and outstanding shares of the Company’s common stock will be
reverse split in a ratio of up to 1:25, if at all, and (ii) effect a decrease in
the number of authorized shares of the Company’s common stock from 500,000,000
to a number equal to 500,000,000 multiplied by 50% of the reverse split ratio,
provided that such reverse split is effected. See “Proposal
X”.
If the
Appendix A Resolution is not approved by the Company’s stockholders, then it
will not be possible for the Company to implement the transactions contemplated
by the Merger Agreement and the Securities Purchase Agreement, and the Company
will not be able to pre-pay the Bridge Loan in the manner being
proposed. See “Proposal IV”, “Proposal V” and “Proposal
VI”. Accordingly, if the Appendix A Resolution is not approved by the
Company’s stockholders, then we will not take action with respect to any of
Proposals IV, V, VI, VII, IX or X even if some or all of such proposals are
approved.
Required
Vote and Recommendation
The
affirmative vote of the holders of a majority of the issued and outstanding
shares of the Company’s common stock (and not simply the majority of the votes
cast at the Stockholders Meeting, at which a quorum is present) is required to
adopt the Appendix A Resolution.
Unless otherwise directed, the
management representatives designated in the enclosed proxy card intend to vote
the shares of OccuLogix’s common stock, for which they have been appointed,
FOR
the Appendix A
Resolution.
The
Board unanimously recommends a vote
FOR
the Appendix A
Resolution.
PROPOSAL IV
Note
: Proposal
IV is conditioned on Proposals III, V, VI, VII and IX. If any of
Proposals III, V, VI, VII or IX is not approved by the Company’s stockholders,
then we will not take action with respect to Proposal IV.
Merger Agreement; Acquisition of
Minority Ownership Interest in OcuSense
Business of the
Parties
We are an
ophthalmic therapeutic company founded to commercialize innovative treatments
for age-related eye diseases. Until recently, we operated two
business divisions, being Retina and Glaucoma.
Until
November 1, 2007, when we announced the suspension of the Company’s RHEO™ System
clinical development program, the Company’s Retina division had been in the
business of developing and commercializing the RHEO™ System, a treatment for dry
age-related macular degeneration. We had conducted a pivotal clinical
study, the MIRA-1 study, which, if successful, was expected to support our
application to the U.S. Food and Drug Administration (the “FDA”) to obtain
approval to market the RHEO™ System in the United States. The MIRA-1
study did not meet its primary efficacy endpoint, and the FDA required us to
conduct an additional study of the RHEO™ System, the RHEO-AMD study, which was
commenced in early 2007 and is being wound down currently.
In
anticipation of the delay in the commercialization of the Company’s RHEO™ System
in the United States as a result of the failure of the MIRA-1 study to meet its
primary efficacy endpoint and the FDA’s requirement of us to conduct the
RHEO-AMD study, we accelerated our diversification plans. On
September 1, 2006, we acquired Solx, Inc. (“Solx”), a Boston University
Photonics Center-incubated company that has developed a system for the treatment
of glaucoma. Solx was the Company’s Glaucoma division until we
disposed of it in December 2007.
On
November 30, 2006, also as part of our accelerated diversification plans, we
acquired 1,754,589 shares of the Series A Preferred Stock of OcuSense,
representing 50.1% of the capital stock, on a fully diluted basis, of OcuSense
(57.62% of the capital stock of OcuSense, measured on an issued and outstanding
basis). The total purchase price was $8,000,000, of which the Company
paid $2,000,000 on November 30, 2006 and paid another $2,000,000 on January 3,
2007. The third $2,000,000 installment of the purchase price was
payable upon the attainment by OcuSense of the first of two developmental
milestones and was paid by the Company on June 15, 2007. The last
$2,000,000 installment of the purchase price was payable upon the attainment by
OcuSense of the second of the two developmental milestones and was paid by the
Company on March 31, 2008.
OcuSense
is a San Diego-based company that is developing technologies that will enable
eye care practitioners to test, at the point-of-care, for highly sensitive and
specific biomarkers using nanoliters of tear film. OcuSense’s first
product is a hand-held tear film test for the measurement of osmolarity, a
quantitative and highly specific biomarker that has shown to correlate with dry
eye disease (“DED”). The test is known as the TearLab™ test for
DED. The anticipated innovation of the TearLab™ test for DED will be
its ability to measure precisely and rapidly certain biomarkers in nanoliter
volumes of tear samples, using inexpensive hardware. Historically,
eye care researchers have relied on expensive instruments to perform tear
biomarker analysis. In addition to their cost, these conventional
systems are slow, highly variable in their measurement readings and not
categorized as waived by the FDA under regulations promulgated under the
Clinical Laboratory Improvement Amendments (“CLIA”).
There are
estimated to be more than 30 million people with DED in the U.S. alone, and this
condition is estimated to account for up to one-third of all visits to U.S.
doctors. DED is often seen as a result of aging, diabetes, prostate
cancer therapy, HIV, autoimmune diseases such as Sjögren’s syndrome and
rheumatoid arthritis, LASIK surgery, contact lens wear and menopause and as a
side effect of hormone replacement therapy. Numerous commonly
prescribed and over-the-counter medications also can cause, or contribute to,
the manifestation of DED.
There are
approximately 15 million Americans who suffer from contact lens-induced DED, and
10-15% of these patients revert to frame wear annually due to dryness and
discomfort. There are approximately 1.2 million LASIK procedures
performed in the U.S. each year, and about 50% of patients experience DED
post-operatively. Osmolarity testing could provide optometrists with
a tool to identify patients at risk for dropping out of contact lens wear early
in disease progression so that they may be treated, and osmolarity testing could
be an invaluable pre-operative screen used to determine which LASIK patients
should be treated prior to surgery in order to improve post-operative
outcomes.
The
TearLab™ test for DED consists of the following three components: (1)
the TearLab™ disposable, which is a single-use microfluidic labcard; (2) the
TearLab™ pen, which is a hand-held device that interfaces with the TearLab™
disposable; and (3) the TearLab™ reader, which is a small desktop unit that
allows for the docking of the TearLab™ disposable and the TearLab™ pen and
provides a quantitative reading for the operator. The operator of the
TearLab™ test for DED, most likely a technician, will collect the tear sample
from the patient’s eye in the TearLab™ disposable, using the TearLab™ pen, and
then place the TearLab™ disposable into the TearLab™ reader. The
TearLab™ reader then will display an osmolarity reading to the
operator. Following the completion of the test, the TearLab™
disposable will be discarded and a new TearLab™ disposable will be readied for
the next test. The entire process, from sample to answer, should
require approximately two minutes or less to complete.
On April
4, 2008, we announced that OcuSense had validated successfully the beta
prototype of the TearLab™ test for DED. On April 8, 2008, we further
announced that OcuSense had received company-wide certification to ISO
13485:2003. The successful validation of the beta prototype and the
achievement of ISO certification represented the attainment of significant
milestones. OcuSense expects to commence clinical trials shortly in
support of its applications to the FDA for 510(k) clearance and a CLIA waiver
for the TearLab™ test for DED. Currently, it anticipates seeking the
510(k) clearance during the latter half of 2008 and the CLIA waiver during the
latter half of 2009. In addition, OcuSense intends to seek CE Mark
approval for the TearLab™ test for DED during the latter half of 2008, which
will enable the commencement of commercialization activities in
Europe.
On April
22, 2008, we announced that OccuLogix had entered into the Merger Agreement to
acquire the minority ownership interest in OcuSense that we do not already
own. Pursuant to the Merger Agreement, OccuLogix would acquire all of
the issued and outstanding shares of capital stock of OcuSense that OccuLogix
does not already own in exchange for the issuance of an aggregate of 79,248,175
shares of common stock to the minority stockholders of OcuSense. See
“—Merger Agreement”. There are 32 minority stockholders of OcuSense
who, in aggregate, hold 1,222,979 shares of OcuSense’s common stock and 67,317
shares of Series A Preferred Stock of OcuSense. OccuLogix owns
1,754,589 shares of Series A Preferred Stock of OcuSense. Including
OccuLogix, OcuSense has a total of 33 stockholders.
With the
suspension of the Company’s RHEO™ System clinical development program, and the
consequent winding-down of the RHEO-AMD study, and the Company’s disposition of
Solx, the Company does not have an operating business at the present
time. Our major asset is our 50.1% ownership stake, on a fully
diluted basis, in OcuSense. The Company will have an operating
business again upon the consummation of the transactions contemplated by the
Merger Agreement and the realization of the cash proceeds generated by the sale
of shares of the Company’s common stock pursuant to the Securities Purchase
Agreement. See “Proposal V”.
Background of the
Merger
Since our
acquisition of 50.1% of the capital stock, on a fully diluted basis, of OcuSense
on November 30, 2006, OccuLogix has been consolidating OcuSense in its financial
statements and there has developed a close working relationship between the two
companies. Since November 30, 2006, Messrs. Vamvakas and Reeves have
been serving as members of OcuSense’s board of directors. As a
result, the two companies have established a regular communication
channel.
On
November 28, 2007, Mr. Vamvakas flew to San Diego in order to assess whether an
acquisition by OccuLogix of the minority interest in OcuSense that it doesn’t
already own could be a possibility. On November 28, 2007 and November
29, 2007, Messrs. Vamvakas and Donsky engaged in a preliminary discussion of the
merits and disadvantages of a possible transaction, as well as a general
discussion regarding deal terms and OccuLogix’s and OcuSense’s need to raise
capital in an amount sufficient to fund OcuSense’s operational needs until the
achievement of regulatory milestones with respect to the TearLab™ test for
DED.
At that
point, Messrs. Vamvakas and Donsky agreed in principle that the minority
interest in OcuSense not owned by OccuLogix should be valued at a minimum of
$8,000,000, based on the belief that OcuSense continued to be worth at least
what the parties had assessed to be its value on November 30, 2006, the date of
acquisition by OccuLogix of its majority ownership interest in
OcuSense. We paid $8,000,000 for that majority ownership interest, of
which $2,000,000 was paid on November 30, 2006 and $2,000,000 paid on January 3,
2007. The third $2,000,000 installment of the purchase price was
payable upon the attainment by OcuSense of the first of two developmental
milestones, being the successful development of the alpha version of the
components of the TearLab™ Test for DED, and was paid by the Company on June 15,
2007. The last $2,000,000 installment of the purchase price was
payable upon the attainment by OcuSense of the second of the two developmental
milestones, being the successful development of the beta version of the
components of the TearLab™ Test for DED, and was paid by the Company on March
31, 2008. OccuLogix and OcuSense had agreed, at the outset, that the
purchase price for OccuLogix’s majority interest in OcuSense would total
$8,000,000, half of which would be payable only upon the attainment by OcuSense
of the two aforementioned developmental milestones. The achievement
of these milestones did not cause any adjustment to the originally agreed
purchase price.
In their
discussion, Messrs. Vamvakas and Donsky agreed that the transaction would be an
all-stock deal, with no cash consideration to be paid. Messrs.
Vamvakas and Donsky determined and agreed that, in view of both companies’
circumstances, it made sense to pursue further discussions and agreed to
undertake appropriate financial analysis in order to identify a range of fair
values for OcuSense. In parting, Mr. Donsky opined that, in view of
the achievement by OcuSense of critical developmental milestones since November
30, 2006, the full-enterprise value of OcuSense is a minimum of
$20,000,000. Mr. Vamvakas took Mr. Donsky’s opinion under
advisement.
During
December 2007, financial analysis was undertaken by both companies in order to
identify a range of fair values for OcuSense. From the outset, the
parties agreed that, in view of the achievement by OcuSense of critical
developmental milestones since November 30, 2006, the date of OccuLogix’s
investment in OcuSense, the valuation used for purposes of that investment was
lower than the present value of OcuSense. After completing the
financial analysis, representatives of both companies agreed that according a
full-enterprise value of $18,000,000 to OcuSense was fair and
reasonable. The financial analysis exercise occurred in a
co-operative atmosphere, and the subsequent discussions and negotiations were
friendly.
In
arriving at the agreed-upon value, the parties calculated a range of indications
of value based on income and guideline public company valuation
approaches. The income valuation calculations considered the
valuation assumptions used in connection with the Company’s initial investment
in OcuSense on November 30, 2006 and financial projections for OcuSense which
had been revised since the date of the Company’s initial investment in OcuSense,
as well as published venture capital rates of return for companies considered to
be at a similar stage of development as OcuSense. The guideline
public company valuation calculations considered the market value of investment
capital (“MVIC”) to revenue ratios of comparable point-of-care diagnostic or
ophthalmic diagnostic solution companies. Changes in the MVIC to
revenue ratios, over the period of approximately 12 months between November 30,
2006 and the time at which these valuation calculations were performed, were
also calculated and taken into account in the analysis. In addition,
the parties also performed these same guideline public company valuation
calculations, using a subset of the peer group comprised of companies with
yearly revenues of less than $2,000,000. These calculations indicated
a range of values that supported the parties’ attribution of a full-enterprise
value of $18,000,000 to OcuSense as being fair and reasonable.
At a
meeting of the Board on December 7, 2007, Mr. Vamvakas presented a case for the
proposed acquisition by OccuLogix of the minority interest in OcuSense that it
doesn’t already own, coupled with a proposed private placement of shares of
OccuLogix’s common stock. In his presentation to the Board, Mr.
Vamvakas disclosed the details of his preliminary discussions with Mr. Donsky
and presented management’s opinion regarding valuation matters. The
Board authorized management to pursue the proposed transactions.
At its
meeting held on January 10, 2008, the board of directors of OcuSense determined
that the full-enterprise valuation of $18,000,000 was fair and
reasonable. In the discussions between the two companies that had
occurred to that point, there had developed an understanding that the stock
consideration would be issued at approximately $0.10 per share—in light of the
then current per share trading price of OccuLogix’s common stock on The NASDAQ
Global Market and the purchase price at which OccuLogix’s management and
Marchant thought that the proposed private placement could be sold to
prospective investors. For clarity, Marchant was not involved in any
negotiations regarding OccuLogix’s acquisition of the minority interest in
OcuSense that it does not already own or the Merger Agreement.
During
the period between January 10, 2008 and April 22, 2008, the date on which the
Merger Agreement was executed and delivered, communication occurred on a regular
basis between Mr. Donsky, on the one hand, and members of OccuLogix’s management
team, on the other, regarding the merger as well as other unrelated
matters. In connection with the merger, the discussions that took
place related to, among other things, (i) the status of OccuLogix’s capital
raise, (ii) business integration issues, including the composition of the Board
and the management team of OccuLogix following the closing of the merger, (iii)
the status of the listing of OccuLogix’s common stock on The NASDAQ Global
Market, (iv) the public positioning of the merger and (v) the specific terms and
conditions of the Merger Agreement. The initial draft of the Merger
Agreement became available on March 25, 2008, after which date negotiations
ensued between the parties, led by their respective counsel. The
Merger Agreement was settled finally on April 21, 2008.
Throughout
the period between January 10, 2008 and April 22, 2008, Mr. Vamvakas gave
members of the Board regular updates. The Board approved and
authorized the Merger Agreement at a conference call meeting held on the morning
of April 22, 2008. OcuSense’s board of directors approved and
authorized the Merger Agreement by a unanimous written consent on the previous
day.
Merger Agreement
Parties
The
parties to the Merger Agreement are OccuLogix, OcuSense Acquireco, Inc. and
OcuSense. OccuLogix and OcuSense are both Delaware
corporations. OcuSense Acquireco, Inc., also a Delaware corporation,
is a wholly-owned subsidiary of OccuLogix that was incorporated for the sole
purpose of completing the merger with OcuSense under the Merger
Agreement. Under the terms of the Merger Agreement, upon the filing
of a certificate of merger with the Secretary of State of the State of Delaware
(the “Effective Time”), OcuSense Acquireco, Inc. shall be merged with and into
OcuSense, whereupon the separate corporate existence of OcuSense Acquireco, Inc.
shall cease, and OcuSense shall continue as the surviving corporation and become
a wholly-owned subsidiary of OccuLogix.
Merger
Consideration
As merger
consideration, the Company expects to issue an aggregate of 79,248,175 shares of
its common stock to the minority stockholders of OcuSense. The
quantum of the merger consideration is based on a full-enterprise valuation of
OcuSense of $18,000,000, determined in good faith by the respective boards of
directors of OccuLogix and OcuSense, and a deemed value of $0.10 per share of
OccuLogix’s common stock which is reflective of the per share average trading
price of OccuLogix’s common stock on The NASDAQ Global Market during the period
of negotiation of the merger consideration. Assuming that the deemed
value of $0.10 per share of OccuLogix’s common stock is reflective of its market
value on the date of closing of the merger, the value of the merger
consideration that OccuLogix will pay for the minority interest in OcuSense that
it does not already own will be $7,924,817.53. If, and to the extent
that, the Company’s common stock trades above or below the deemed value on the
date of closing of the merger, the value of the merger consideration will be
greater than, or lower than, $7,924,817.53, as the case may be.
Immediately
prior to the Effective Time, each share of each series of preferred stock held
by OcuSense minority stockholders will be converted into shares of OcuSense’s
common stock and each outstanding warrant of OcuSense will be deemed exercised
on a cashless basis and converted into shares of OcuSense’s common
stock. Then, at the Effective Time, each issued and outstanding share
of OcuSense’s common stock will be converted into, and represent the right to
receive, a
pro rata
share of the merger consideration.
The
Merger Agreement provides that, at the Effective Time, all outstanding stock
options issued under OcuSense’s Incentive Stock Plan, as amended, will be
assumed by OccuLogix. Each such stock option will be subject to its
original terms and conditions in effect immediately prior to the Effective Time,
except that (i) the per share exercise price of such stock option will be
adjusted by dividing it by a ratio (the “Merger Ratio”) obtained by dividing (a)
the per share merger consideration by (b) the volume-weighted average per share
closing price of OccuLogix’s common stock on the Primary Trading Market for the
15-trading day period immediately preceding the closing date of the merger and
(ii) each such stock option will be exercisable for a number of shares of
OccuLogix’s common stock, rather than shares of OcuSense’s common stock,
obtained by multiplying (a) the number of shares of OcuSense’s common stock
subject to such stock option immediately prior to the merger by (b) the Merger
Ratio. Each assumed stock option will be vested immediately following
the Effective Time as to the same percentage of the total number of shares
subject to such stock option as it was vested immediately prior to the Effective
Time. The Company anticipates that the aggregate number of shares of
its common stock that will become issuable upon the exercise of the stock
options of OcuSense, which will be assumed pursuant to the Merger Agreement,
will number approximately 16,005,927, assuming that the fair market value of
OccuLogix’s common stock will be $0.10 per share at the time of the Company’s
assumption of the stock options of OcuSense.
Conditions to Completion of
Merger
Before
the merger and the other transactions contemplated by the Merger Agreement may
be completed, a number of conditions must be satisfied or waived.
The
respective obligations of OccuLogix and OcuSense to effect the merger and the
other transactions contemplated by the Merger Agreement are subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
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the
absence of any statute, rule, regulation, executive order, decree,
injunction or other order making the merger illegal or otherwise
prohibiting it or any other transaction contemplated by the Merger
Agreement;
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the
absence of any proceeding by a governmental authority seeking to restrain,
prohibit, condition, rescind or take any substantially similar action with
respect to the merger or any other transaction contemplated by the Merger
Agreement;
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the
absence of any temporary restraining order, preliminary or permanent
injunction or other order issued by a court, or other similar legal
restraint, prohibiting the merger or any other transaction contemplated by
the Merger Agreement;
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the
receipt of all consents and approvals from any governmental authority that
are necessary to consummate the merger and the other transactions
contemplated by the Merger
Agreement;
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the
receipt of the required approval of stockholders of both OccuLogix and
OcuSense; and
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the
capitalization of OccuLogix with at least $1,000,000 of unrestricted cash
that is available to fund the working capital and general and
administrative expenses of OccuLogix and OcuSense,
post-merger.
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The
obligations of OccuLogix and OcuSense Acquireco, Inc. to effect the merger and
the other transactions contemplated by the Merger Agreement are subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions, among others:
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the
truth and correctness of OcuSense’s representations and warranties in the
Merger Agreement, except where the failure of such representations and
warranties to be true or correct would not have, individually or in the
aggregate, a material adverse effect on
OcuSense;
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the
performance by OcuSense, in all material respects, of all of its covenants
and obligations under the Merger
Agreement;
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the
absence of a material adverse effect on OcuSense’s business, assets,
liabilities, financial condition, results of operations, prospects or
capitalization;
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the
absence of any action, suit, claim, order, injunction or proceeding of any
nature pending or threatened against OccuLogix or OcuSense, or its
respective properties or its respective officers or directors, relating to
the merger or the other transactions contemplated by the Merger Agreement;
and
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the
execution and delivery by OccuLogix of a contractual indemnity to each
individual who is a director or officer of OccuLogix immediately prior to
the Effective Time.
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The
obligations of OcuSense to effect the merger and the other transactions
contemplated by the Merger Agreement are subject to the satisfaction or waiver,
at or prior to the Effective Time, of the following conditions, among
others:
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the
truth and correctness of the representations and warranties of OccuLogix
and OcuSense Acquireco, Inc. in the Merger Agreement, except where the
failure of such representations and warranties to be true or correct would
not have, individually or in the aggregate, a material adverse effect on
OccuLogix;
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the
performance by OccuLogix and OcuSense Acquireco, Inc., in all material
respects, of all of their respective covenants and obligations under the
Merger Agreement;
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the
absence of a material adverse effect on the business, assets, liabilities,
financial condition or results of operations of OccuLogix and its
subsidiaries, taken as a whole;
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the
absence of any action, suit, claim, order, injunction or proceeding of any
nature pending or threatened against OccuLogix or OcuSense, or its
respective properties or its respective officers or directors, relating to
the merger or the other transactions contemplated by the Merger Agreement;
and
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commercially
reasonable efforts on the part of OccuLogix having been made to take all
necessary corporate action to ensure that, post-merger, the board of
directors of OccuLogix consists only of Elias Vamvakas, Thomas N.
Davidson, Eric Donsky, Richard L. Lindstrom, Adrienne L. Graves and Donald
Rindell, being all of the individuals who are nominated for election as a
director of OccuLogix to hold office until the next annual meeting of the
stockholders of OccuLogix or until his or her successor is elected or
appointed. See “Proposal I—Election of
Directors”.
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Concept of “material adverse
effect”
Many of
the representations and warranties contained in the Merger Agreement are
qualified by the concept of “material adverse effect”. This concept
also applies to some of the covenants contained in the Merger
Agreement. For purposes of the Merger Agreement, “material adverse
effect” means any change, event or effect that has had, or is reasonably likely
to have, a material adverse effect on the business, assets, liabilities,
financial condition, results of operations, prospects or capitalization of
OccuLogix or OcuSense, as applicable. However, “material adverse
effect” does not cover (i) any change, event or effect to the extent
attributable to changes or conditions affecting the industries and segments in
which OccuLogix or OcuSense operates or the economy as a whole (other than if
there is a materially disproportionate adverse effect on OccuLogix or OcuSense,
as applicable, relative to other companies in the same or similar industry),
(ii) changes in general economic, market or political conditions, other than
such changes that have a materially disproportionate adverse effect on OccuLogix
or OcuSense, as applicable, relative to other companies in the same or similar
industry, (iii) any adverse event, circumstance, change or effect resulting from
or relating to compliance with the Merger Agreement and (iv) changes in U.S.
generally accepted accounting principles (“GAAP”) or changes in the laws or
regulations affecting GAAP (or the interpretation of such laws or
regulations).
Conduct of Business Prior to
Effective Time
The
parties have agreed that, prior to the Effective Time (being the time at which
the merger will be consummated), each of them will conduct its business in the
usual, regular and ordinary course, in substantially the same manner as its
business was conducted prior to the date of the Merger Agreement. In
addition, each of the parties has agreed that, other than with the other
parties’ written consent, it would not:
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cause
or permit any amendments to its certificate of incorporation, bylaws or
other organizational documents;
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declare,
set aside or pay any dividends on, or make any other distributions in
respect of, any of its capital
stock;
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split,
combine or reclassify any of its capital stock or issue, or authorize the
issuance of, any securities in respect of shares of its capital stock
(except upon conversion of OcuSense’s preferred stock) or repurchase,
redeem or otherwise acquire any of its
securities;
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issue,
grant, deliver or sell any shares of its capital stock or any convertible
securities, except for issuances of its capital stock pursuant to the
exercise of outstanding options or warrants or other
rights;
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incur
or guarantee or issue any indebtedness, other than trade payables in the
ordinary course of business, consistent with past
practices;
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make
any expenditures exceeding $10,000 individually or $25,000 in the
aggregate, other than the payment of expenses incurred in connection with
the transactions contemplated by the Merger
Agreement;
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sell,
lease, license or otherwise dispose of any of its properties or
assets;
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revalue
any of its assets, other than in accordance with past practice or as
required by GAAP;
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make
or change any election in respect of taxes, adopt or change any accounting
method or practices (other than as required by GAAP), enter into any
closing agreement, settle any claim or assessment with respect to taxes or
consent to any extension or waiver of the limitation period applicable to
any claim or assessment in respect of
taxes;
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waive
or release any right or claim of
OcuSense;
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commence,
threaten or settle any litigation;
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(i)
sell, license or transfer any of OcuSense’s intellectual property, (ii)
buy or license any intellectual property or enter into any agreement with
respect to intellectual property or (iii) enter into any agreement with
respect to the development of intellectual
property;
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·
|
enter
into, renew, fail to renew, renegotiate, amend, modify or breach any
material contract;
|
|
·
|
terminate,
amend or fail to renew any insurance policy;
or
|
|
·
|
terminate
or fail to renew any consent, license, permit, grant or other
authorization, with respect to which termination or failure to renew would
reasonably be expected to result in a material adverse
effect.
|
Termination
The
Merger Agreement may be terminated, and the merger may be abandoned
(notwithstanding the receipt of the required stockholder approval), at any time
prior to the closing of the merger:
|
·
|
by
unanimous agreement of OccuLogix and
OcuSense;
|
|
·
|
by
OccuLogix or OcuSense, if the closing of the merger does not occur by
October 31, 2008;
|
|
·
|
by
OccuLogix or OcuSense, if the required stockholder approvals are not
obtained;
|
|
·
|
by
OccuLogix or OcuSense, if a court or other governmental authority issues a
non-appealable final order, decree or ruling or takes any action, in each
case, having the effect of permanently restraining, enjoining or otherwise
prohibiting the merger or any other material transaction contemplated by
the Merger Agreement;
|
|
·
|
by
OccuLogix or OcuSense, if any statute, rule, regulation or order is
enacted, promulgated or issued by any governmental authority that would
make the consummation of the merger
illegal;
|
|
·
|
by
OccuLogix, if it is not in material breach of its obligations under the
Merger Agreement and there has been a breach by OcuSense of any of its
representations, warranties, covenants or agreements in the Merger
Agreement and such breach has not been cured within 10 business days of
written notice thereof (provided that no cure period shall be required for
a breach that, by its nature, cannot be cured);
and
|
|
·
|
by
OcuSense, if it is not in material breach of its obligations under the
Merger Agreement and there has been a breach by OccuLogix of any of its
representations, warranties, covenants or agreements in the Merger
Agreement and such breach has not been cured within 10 business days of
written notice thereof (provided that no cure period shall be required for
a breach that, by its nature, cannot be
cured).
|
Expenses
The
parties have agreed that, regardless of whether the merger is consummated, all
fees and expenses incurred in connection with the merger will be the obligations
of the respective party incurring such fees and expenses, including all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties incurred by a party to the Merger Agreement in connection with
it.
Contact
Information of the Parties
OccuLogix
The
mailing address and telephone number of OccuLogix’s executive office are set
forth below:
OccuLogix,
Inc.
2600
Skymark Avenue, Unit 9, Suite 201
Mississauga,
Ontario
L4W
5B2
Canada
(905)
602-0887
OcuSense Acquireco,
Inc.
The
mailing address and telephone number of OcuSense Acquireco, Inc.’s executive
office are set forth below:
OcuSense
Acquireco, Inc.
c/o
OccuLogix, Inc.
2600
Skymark Avenue, Unit 9, Suite 201
Mississauga,
Ontario
L4W
5B2
Canada
(905)
602-0887
OcuSense
The
mailing address and telephone number of OcuSense’s executive office are set
forth below:
OcuSense,
Inc.
12707
High Bluff Drive, Suite 200
San
Diego, California 92130
U.S.A.
(858)
794-1422
Management
Following the Merger
It is
contemplated that Mr. Donsky will become OccuLogix’s Chief Executive Officer
following the closing of the merger and the transactions contemplated by the
Securities Purchase Agreement. While it is contemplated that Mr.
Vamvakas will resign the office of Chief Executive Officer at that time, it is
expected that he will remain the Chairman of the Board.
Mr.
Dumencu will remain the Chief Financial Officer and
Treasurer. However, the other executive officer of OccuLogix will not
continue her employment with the Company beyond a short transition
period.
Four of
the six nominees for election to the Board are currently directors of the
Company.
No
Regulatory Approvals
There are
no federal or state regulatory requirements applicable to the merger or the
other transactions contemplated by the Merger Agreement, and no approvals from
federal or state regulators are required to be obtained in connection with the
merger or the other transactions contemplated by the Merger
Agreement.
Selected
Financial Data
The
following tables set forth our selected historical consolidated financial data
for the years ended December 31, 2007, 2006, 2005, 2004 and 2003 which have been
derived from our consolidated financial statements found in Amendment No. 2 on
Form 10-K/A filed with the SEC on July 21, 2008 (the “Annual Amended Report”),
which amended our Annual Report on Form 10-K filed with the SEC on March 17,
2008, and our consolidated financial statements included on Form S-1 for the
years ended December 31, 2004 and 2003. The selected consolidated
financial data as of March 31, 2008 and for the three months ended March 31,
2007 and 2008 have been derived from our unaudited consolidated financial
statements found in Amendment No. 1 on Form 10-Q/A filed with the SEC on July
21, 2008 (the “Quarterly Amended Report”), which amended our Quarterly Report on
Form 10-Q filed with the SEC on May 12, 2008 for the fiscal quarter ended March
31, 2008. Historical results are not necessarily indicative of the
results to be expected for future periods, and interim results may not be
indicative of results for the remainder of the year.
The
following tables should be read in conjunction with our financial statements,
the related notes thereto and the information contained in the Annual Amended
Report and the Quarterly Amended Report and our consolidated financial
statements included on Form S-1 for the years ended December 31, 2004 and
2003.
|
|
Year Ended December
31,
|
Six
Months Ended June 30
,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
(ii)
|
|
|
2006
(i)(ii)
|
|
|
2007
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
|
|
|
Restated
|
Restated
|
|
|
|
|
|
|
(in
thousands except per share amounts)
|
|
|
Consolidated
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from related parties
|
|
$
|
390
|
|
|
$
|
732
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Revenue
from unrelated parties
|
|
|
—
|
|
|
|
238
|
|
|
|
1,759
|
|
|
|
174
|
|
|
|
92
|
|
|
|
90
|
|
|
|
134
|
|
Total
revenue
|
|
|
390
|
|
|
|
970
|
|
|
|
1,840
|
|
|
|
174
|
|
|
|
92
|
|
|
|
90
|
|
|
|
134
|
|
Cost
of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold to related parties
|
|
|
373
|
|
|
|
689
|
|
|
|
43
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cost
of goods sold to unrelated parties
|
|
|
—
|
|
|
|
134
|
|
|
|
3,251
|
|
|
|
3,429
|
|
|
|
2,298
|
|
|
|
15
|
|
|
|
(1
|
)
|
Royalty
costs
|
|
|
109
|
|
|
|
135
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
50
|
|
|
|
25
|
|
Gross
margin (loss)
|
|
|
(92
|
)
|
|
|
12
|
|
|
|
(1,554
|
)
|
|
|
(3,355
|
)
|
|
|
(2,306
|
)
|
|
|
25
|
|
|
|
110
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and
administrative
|
|
|
1,565
|
|
|
|
17,530
|
|
|
|
8,670
|
|
|
|
8,476
|
|
|
|
8,104
|
|
|
|
5,215
|
|
|
|
2,870
|
|
Clinical
and regulatory
|
|
|
731
|
|
|
|
3,995
|
|
|
|
5,168
|
|
|
|
4,922
|
|
|
|
8,675
|
|
|
|
4,128
|
|
|
|
1,831
|
|
Sales
and marketing
|
|
|
—
|
|
|
|
220
|
|
|
|
2,165
|
|
|
|
1,625
|
|
|
|
1,413
|
|
|
|
998
|
|
|
|
410
|
|
Impairment
of goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
147,452
|
|
|
|
65,946
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Impairment
of intangible asset
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,923
|
|
|
|
—
|
|
|
|
—
|
|
Restructuring
charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
820
|
|
|
|
1,313
|
|
|
|
—
|
|
|
|
956
|
|
|
|
|
2,296
|
|
|
|
21,745
|
|
|
|
163,455
|
|
|
|
81,788
|
|
|
|
40,429
|
|
|
|
10,341
|
|
|
|
6,067
|
|
Other
income (expense)
|
|
|
(82
|
)
|
|
|
(110
|
)
|
|
|
1,536
|
|
|
|
1,547
|
|
|
|
2,769
|
|
|
|
1,759
|
|
|
|
(76
|
)
|
Loss
from continuing operations before income taxes
|
|
|
(2,470
|
)
|
|
|
(21,843
|
)
|
|
|
(163,473
|
)
|
|
|
(83,595
|
)
|
|
|
(39,967
|
)
|
|
|
(8,557
|
)
|
|
|
(6,033
|
)
|
Recovery
of income taxes
|
|
|
—
|
|
|
|
24
|
|
|
|
643
|
|
|
|
2,916
|
|
|
|
5,566
|
|
|
|
3,166
|
|
|
|
1,219
|
|
Loss
from continuing operations
|
|
|
(2,470
|
)
|
|
|
(21,819
|
)
|
|
|
(162,830
|
)
|
|
|
(80,680
|
)
|
|
|
(34,401
|
)
|
|
|
(5,391
|
)
|
|
|
(4,814
|
)
|
Loss
from discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,542
|
)
|
|
|
(35,429
|
)
|
|
|
(2,185
|
)
|
|
|
—
|
|
Net
loss for the year
|
|
$
|
(2,470
|
)
|
|
$
|
(21,819
|
)
|
|
$
|
(162,830
|
)
|
|
$
|
(82,222
|
)
|
|
$
|
(69,830
|
)
|
|
$
|
(7,576
|
)
|
|
$
|
(4,814
|
)
|
Per
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations per share — basic and
diluted
|
|
$
|
(0.62
|
)
|
|
$
|
(2.96
|
)
|
|
$
|
(3.88
|
)
|
|
$
|
(1.79
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.08
|
)
|
Loss
from discontinued operations per share — basic and
diluted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.04
|
)
|
|
$
|
(0.63
|
)
|
|
|
(0.04
|
)
|
|
|
—
|
|
Net
loss per share —basic and diluted
|
|
$
|
(0.62
|
)
|
|
$
|
(2.96
|
)
|
|
$
|
(3.88
|
)
|
|
$
|
(1.83
|
)
|
|
$
|
(1.23
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.08
|
)
|
Weighted
average number of shares used in per share calculations — basic and
diluted
|
|
|
3,977
|
|
|
|
7,370
|
|
|
|
41,931
|
|
|
|
44,980
|
|
|
|
56,628
|
|
|
|
55,931
|
|
|
|
57,306
|
|
(i)
|
The
comparative figures for the year ended December 31, 2006 have been
reclassified to reflect the effect of discontinued
operations.
|
(ii)
|
The
comparative figures for the years ended December 31, 2006 and 2005 have
been corrected to reflect the Company’s accounting for stock options
issued to non-employees that were subject to performance
conditions.
|
|
|
As at
December 31,
|
|
|
As
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
(ii)
|
|
|
2006
(i)(ii)
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
|
|
|
Restated
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
Consolidated
Balance
Sheet
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,237
|
|
|
$
|
17,531
|
|
|
$
|
9,600
|
|
|
$
|
5,705
|
|
|
$
|
2,236
|
|
|
$
|
920
|
|
Cash
and cash equivalents of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36
|
|
|
|
—
|
|
|
|
—
|
|
Short-term
investments
|
|
|
—
|
|
|
|
42,500
|
|
|
|
31,663
|
|
|
|
9,785
|
|
|
|
—
|
|
|
|
—
|
|
Working
capital (deficiency)
|
|
|
(2,538
|
)
|
|
|
58,073
|
|
|
|
44,415
|
|
|
|
13,407
|
|
|
|
(997
|
)
|
|
|
(6,442
|
)
|
Working
capital (deficiency) of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
132
|
|
|
|
—
|
|
|
|
—
|
|
Total
assets of continuing operations
|
|
|
1,868
|
|
|
|
301,601
|
|
|
|
137,806
|
|
|
|
54,367
|
|
|
|
15,313
|
|
|
|
12,539
|
|
Total
assets of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
44,158
|
|
|
|
—
|
|
|
|
—
|
|
Long-term
debt (including
current
portion due to
stockholders)
|
|
|
3,694
|
|
|
|
517
|
|
|
|
158
|
|
|
|
152
|
|
|
|
33
|
|
|
|
90
|
|
Other
long-term obligations
(including
amount classified
as
current portion of other
liability)
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
6,421
|
|
|
|
—
|
|
|
|
—
|
|
Total
liabilities of continuing operations
|
|
|
4,134
|
|
|
|
13,502
|
|
|
|
11,765
|
|
|
|
19,673
|
|
|
|
6,358
|
|
|
|
8,801
|
|
Total
liabilities of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,574
|
|
|
|
—
|
|
|
|
—
|
|
Minority
interest
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
6,111
|
|
|
|
4,954
|
|
|
|
4,474
|
|
Common
stock
|
|
|
5
|
|
|
|
42
|
|
|
|
42
|
|
|
|
51
|
|
|
|
57
|
|
|
|
57
|
|
Series
A Convertible Preferred Stock
|
|
|
2
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
Series
B Convertible Preferred
Stock
|
|
|
1
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
Additional
paid-in capital
|
|
|
23,915
|
|
|
|
336,064
|
|
|
|
336,836
|
|
|
|
354,176
|
|
|
|
362,232
|
|
|
|
362,310
|
|
Accumulated
deficit
|
|
|
(26,188
|
)
|
|
|
(48,007
|
)
|
|
|
(210,837
|
)
|
|
|
(293,059
|
)
|
|
|
(358,289
|
)
|
|
|
(363,103
|
)
|
Total
stockholders’ equity (deficiency)
|
|
|
(2,266
|
)
|
|
|
288,098
|
|
|
|
126,041
|
|
|
|
61,167
|
|
|
|
4,000
|
|
|
|
(736
|
)
|
(i)
|
The
balance sheet as at December 31, 2006 has been reclassified to reflect the
assets and liabilities of discontinued
operations.
|
(ii)
|
The
comparative figures as at December 31, 2006 and 2005 have been corrected
to reflect the Company’s accounting for stock options issued to
non-employees that were subject to performance
conditions.
|
Pro
Forma Financial Data
The
unaudited pro forma consolidated financial statements of OccuLogix, showing the
pro forma effects of the acquisition of OcuSense pursuant to the Merger
Agreement and certain of the other transactions forming the subject matter of
the proposals put forward in this proxy statement, are included at the end of
this proxy statement—immediately prior to Appendix A to this proxy
statement.
Accounting
Treatment
The
acquisition of OcuSense pursuant to the Merger Agreement will be accounted for
using the purchase method of accounting in accordance with GAAP under Statement
of Financial Accounting Standards No. 141,
Business
Combinations
. OccuLogix will be the acquiring entity for
financial reporting purposes. Under the purchase method of
accounting, the cost of the transaction will be allocated to the tangible and
intangible assets of the acquired entity and the liabilities of the acquired
entity that are assumed by the acquiring entity, based on their respective
estimated fair values, with any excess being recognized as intangible assets
with a finite life since OcuSense is a development stage
company. Under Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible
Assets
, intangible assets with a finite life are amortized and will be
subject to an impairment test if indicators of impairment are
present.
No Appraisal
Rights
The
Company’s stockholders are not entitled to appraisal rights under the Delaware
General Corporation Law, the Company’s Amended and Restated Certificate of
Incorporation or the Company’s Amended and Restated Bylaws, and the Company will
not provide stockholders with any such rights. There may exist other
rights or actions under law for stockholders who are
aggrieved. However, the nature and extent of such rights or actions
are uncertain and may vary depending on the facts or
circumstances. Stockholder challenges to corporate action in general
are related to the fiduciary responsibilities of corporate officers and
directors and to the fairness of corporate transactions.
Reasons for the
Proposal
On
October 9, 2007, we announced that the Board had authorized management and the
Company’s advisors to explore the full range of strategic alternatives available
to enhance shareholder value. These alternatives may have included,
but were not limited to, the raising of capital through the sale of securities,
one or more strategic alliances and the combination, sale or merger of all or
part of OccuLogix.
For some
time prior to the October 9, 2007 announcement, the Company had been seeking to
raise additional capital, with the objective of securing funding sufficient to
sustain its operations as, at that time, it had been clear that, unless we were
able to raise additional capital, the Company would not have had sufficient cash
to support its operations beyond early 2008. The Board’s decision to
suspend the Company’s RHEO™ System clinical development program and to dispose
of Solx were made and implemented in order to conserve as much cash as possible
while the Company continued its capital-raising efforts.
The
Company’s capital-raising efforts have culminated in the Bridge Loan and the
Securities Purchase Agreement. Pursuant to the latter, OccuLogix
proposes to sell an aggregate of a minimum of 21,730,000 shares of its common
stock to the Investors for gross aggregate proceeds to the Company of
$2,173,000. Conditions precedent to closing in the Securities
Purchase Agreement include the receipt of the required stockholder approval of
the Merger Agreement and the transactions contemplated thereby. If
such approval is not obtained, the transactions contemplated by the Securities
Purchase Agreement will not close and the Company will be unable to realize any
proceeds. See “Proposal V—Securities Purchase
Agreement”. The Bridge Lenders have made their respective investment,
and the Investors have agreed to make their respective investment, in OccuLogix
on the understanding, and with the expectation, that the Company will acquire
the minority ownership interest in OcuSense that we do not already own and that
OcuSense’s business will become the Company’s entire business in the
future. This was the basis on which the Company was able to attract
the additional capital that it will require in order to continue
operations. The Company does not have an alternative source of
capital at this time.
The Board
considered two principal factors in making its decision to recommend the merger
to the Company’s stockholders—the first factor being its assessment that the
merger consideration is fair and reasonable and the second factor being that
conditions precedent to closing in the Securities Purchase Agreement include the
receipt of the required stockholder approval of the Merger Agreement and the
transactions contemplated in the Merger Agreement, including the
merger. If the required stockholder approval of the Merger Agreement
is not obtained, the transactions contemplated by the Securities Purchase
Agreement will not close and the Company will run out of cash.
Management
believes that the proceeds of the Bridge Loan, together with the Company’s
existing cash and cash-equivalents, will be sufficient to cover the Company’s
operating activities and other demands only until approximately November
2008. Accordingly, if the required stockholder approval of the Merger
Agreement and the Securities Purchase Agreement, and the respective transactions
contemplated by each of them, is not obtained, then the Company will run out of
cash.
Note that the issuance of an
aggregate of 79,248,175 shares of the Company’s common stock, as merger
consideration, to the minority stockholders of OcuSense will result in a
significant dilution of the holdings of the Company’s current
stockholders.
Interests of Proposed Nominees for
Director and Director
Eric Donsky
Mr.
Donsky is OcuSense’s Chairman and Chief Executive Officer and is standing for
election to the Board. In addition, it is contemplated that he will
become OccuLogix’s Chief Executive Officer following the closing of the
transactions contemplated by the Merger Agreement and the Securities Purchase
Agreement. Immediately prior to the Effective Time, Mr. Donsky will
hold 785,500 shares of OcuSense’s common stock which will entitle him to
receive, as payment of his
pro
rata
share of the merger consideration, an aggregate of 45,104,892 shares
of OccuLogix’s common stock. Assuming a deemed value of $0.10 per
share of OccuLogix’s common stock (which is reflective of the per share average
trading price of OccuLogix’s common stock on The NASDAQ Global Market during the
period of negotiation of the merger consideration and which may be the per share
purchase price paid by the Investors under the Securities Purchase Agreement),
Mr. Donsky’s
pro rata
share of the merger consideration will be worth $4,510,489.
After
giving effect to the transactions contemplated by the Merger Agreement, but
prior to giving effect to the transactions contemplated by the Securities
Purchase Agreement or the pre-payment of the Bridge Loan or the payment of part
of the commission remaining owing to Marchant by the issuance to Marchant of
shares of the Company's common stock in the manner being proposed, Mr. Donsky
will hold approximately 33% of the issued and outstanding shares of the
Company’s common stock. After giving effect to the transactions
contemplated by the Securities Purchase Agreement and the pre-payment of the
Bridge Loan and the payment of part of the commission remaining owing
to Marchant by the issuance to Marchant of shares of the Company's common stock
in the manner being proposed, Mr. Donsky’s percentage holdings of the issued and
outstanding shares of the Company’s common stock will be reduced to
approximately 18.64%. See “Proposal VI” and “Proposal
VII”.
Richard L.
Lindstrom
Dr.
Lindstrom is a director of OccuLogix and is standing for re-election to the
Board. He is also a stockholder of OcuSense. Immediately
prior to the Effective Time, he will hold 20,000 shares of OcuSense’s common
stock which will entitle him to receive, as payment of his
pro rata
share of the merger
consideration, an aggregate of 1,148,438 shares of OccuLogix’s common
stock. Assuming a deemed value of $0.10 per share of OccuLogix’s
common stock, Dr. Lindstrom’s
pro rata
share of the merger
consideration will be worth $114,844.
After
giving effect to the transactions contemplated by the Merger Agreement, but
prior to giving effect to the transactions contemplated by the Securities
Purchase Agreement or the pre-payment of the Bridge Loan or the payment of part
of the commission remaining owing to Marchant by the issuance to Marchant of
shares of the Company's common stock in the manner being proposed, Dr. Lindstrom
will hold less than 1.0% of the issued and outstanding shares of the Company’s
common stock. After giving effect to the transactions contemplated by
the Securities Purchase Agreement and the pre-payment of the Bridge Loan and the
payment of part of the commission remaining owing to Marchant by the
issuance to Marchant of shares of the Company's common stock in
the manner being proposed, Dr. Lindstrom’s percentage holdings of the issued and
outstanding shares of the Company’s common stock will be reduced. See
“Proposal VI” and “Proposal VII”.
In June
2005, Dr. Lindstrom entered into an agreement with OcuSense pursuant to which he
agreed to provide consulting services to OcuSense between June 2005 and June
2008. As consideration for providing such consulting services,
OcuSense made a one-time grant of stock options to Dr. Lindstrom to acquire an
aggregate of 6,290 shares of OcuSense’s common stock at an exercise price of
$4.80 per share, which stock options were to vest, and have been vesting,
monthly during the 36-month period following their date of grant. Dr.
Lindstrom’s stock options of OcuSense will be assumed by OccuLogix in accordance
with the terms of the Merger Agreement. The assumption will be
effected in such a manner so as to ensure that Dr. Lindstrom remains in the same
economic position with respect to his OcuSense stock options after their
assumption by OccuLogix as before their assumption. In other words,
OccuLogix’s assumption of Dr. Lindstrom’s OcuSense stock options will neither
provide an economic benefit to, nor economically harm, Dr.
Lindstrom.
See
“—Merger Agreement; Acquisition of Minority Ownership Interest in
OcuSense—Merger Agreement—Merger Consideration”.
Dr.
Lindstrom did not participate in the meeting at which the Board authorized and
approved the Company’s entering into of the Merger Agreement, nor did he
participate in the meeting at which the Board resolved to recommend, to the
Company’s stockholders, a vote “For” the approval and adoption of the Merger
Agreement.
Donald
Rindell
Mr.
Rindell is a director of OcuSense and a proposed nominee for election to the
Board. In March 2006, OcuSense made a one-time grant of stock options
to Mr. Rindell to acquire an aggregate of 13,748 shares of OcuSense’s common
stock at an exercise price of $4.80 per share, which stock options were to vest,
and have been vesting, monthly during the 36-month period following their date
of grant. Mr. Rindell’s stock options of OcuSense will be assumed by
OccuLogix in accordance with the terms of the Merger Agreement. The
assumption will be effected in such a manner so as to ensure that Mr. Rindell
remains in the same economic position with respect to his OcuSense stock options
after their assumption by OccuLogix as before their assumption. In
other words, OccuLogix’s assumption of Mr. Rindell’s OcuSense stock options will
neither provide an economic benefit to, nor economically harm, Mr.
Rindell. See “—Merger Agreement; Acquisition of Minority Ownership
Interest in OcuSense—Merger Agreement—Merger Consideration”.
Resolution
Appendix
B to this proxy statement sets forth the full text of the resolution to approve
and adopt the Merger Agreement (the “Appendix B Resolution”). If the
Appendix B Resolution is adopted by the Company’s stockholders, then the Board
will have the authority, without any further action on the part of the Company’s
stockholders, to effect the merger by filing a certificate of merger with the
Secretary of State of the State of Delaware, as contemplated by the Merger
Agreement, and to consummate the other transactions contemplated by the Merger
Agreement.
Required Vote and Recommendation
The
affirmative vote of the majority of the votes cast at the Stockholders Meeting,
at which a quorum is present, is required to adopt the Appendix B
Resolution.
Unless
otherwise directed, the management representatives designated in the enclosed
proxy card intend to vote the shares of OccuLogix’s common stock, for which they
have been appointed,
FOR
the Appendix B
Resolution.
The Board unanimously recommends a
vote
FOR
the Appendix B Resolution, with Dr.
Lindstrom having advised the Board that he would have recorded his abstention if
he had been present at the meeting at which the Board had resolved to recommend
a vote “For” the Appendix B resolution.
PROPOSAL V
Note
: Proposal
V is conditioned on Proposals III, IV, VI, VII and IX. If any of
Proposals III, IV, VI, VII or IX is not approved by the Company’s stockholders,
then we will not take action with respect to Proposal V.
Securities Purchase
Agreement
The
Company’s capital-raising efforts since its October 9, 2007 announcement of the
exploration, by management and the Company’s advisors, of strategic alternatives
have culminated in the Bridge Loan and the Securities Purchase
Agreement.
Pursuant
to the Securities Purchase Agreement, the Company proposes to sell an aggregate
of a minimum of 21,730,000 shares of its common stock to the Investors for gross
aggregate proceeds to the Company of $2,173,000. The purchase price
of each share of the Company’s common stock will be the lower of (i) $0.10 and
(ii) the volume-weighted average closing price of the Company’s common stock on
the Primary Trading Market for the 15-trading day period immediately preceding
the closing date of the sale. If the per share purchase price is
$0.10, then an aggregate of 21,730,000 shares of the Company’s common stock will
be issued to the Investors. If the per share purchase price is lower
than $0.10, then a greater aggregate number of shares of the Company’s common
stock will need to be issued to the Investors. At the date of this
proxy statement, the per share purchase price is not determinable.
The sale
of the Company’s common stock under the Securities Purchase Agreement will be
done in reliance upon the exemption from registration afforded by Section 4(2)
of the Securities Act and Rule 506 of Regulation D, as promulgated by the SEC
under the Securities Act, and Rule 903 of Regulation S, as promulgated by the
SEC under the Securities Act, as well as the exemptions from the prospectus and
registration requirements afforded by National Instrument 45-106—Prospectus and
Registration Exemptions and comparable exemptions in certain foreign
jurisdictions. Accordingly, the shares of the Company’s common stock
that will be issued to the Investors will be “restricted
securities”.
However,
the Company has agreed to prepare and file with the SEC, on or prior to the
30
th
day following the closing date of the sale, a registration statement (the
“Registration Statement”), covering the resale of the shares of the Company’s
common stock sold pursuant to the Securities Purchase Agreement, for an offering
to be made on a continuous basis pursuant to Rule 415, as promulgated by the SEC
under the Securities Act. Pursuant to the Securities Purchase
Agreement, the Company has agreed to use commercially reasonable efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as possible after its filing but, in any event, if the
Registration Statement does not become subject to review by the SEC, prior to
the earliest to occur of (i) the 90
th
day
following the closing date of the sale and (ii) the fifth trading day following
the date on which the Company receives notification from the SEC that the
Registration Statement will not become subject to the SEC’s
review. If the Registration Statement becomes subject to review by
the SEC, the Company will be obligated to use commercially reasonable efforts to
cause the Registration Statement to be declared effective prior to the 120
th
day
following the closing date of the sale. Pursuant to the Securities
Purchase Agreement, the Company has also agreed to use commercially reasonable
efforts to keep the Registration Statement continuously effective under the
Securities Act until the earlier of the date on which all of the shares of the
Company’s common stock sold pursuant to the Securities Purchase Agreement have
been sold and the date on which all of such shares can be sold publicly under
Rule 144(b)(1), as promulgated by the SEC under the Securities Act.
The
obligations of OccuLogix and the Investors to sell and to purchase,
respectively, the shares of the Company’s common stock, as contemplated by the
Securities Purchase Agreement, are subject to the satisfaction or waiver by
OccuLogix or the Investors, as applicable, at or before the closing of the sale,
of the following conditions:
|
·
|
the
truth and correctness of the representations and warranties in the
Securities Purchase Agreement, in all material
respects;
|
|
·
|
the
receipt of the approval of the majority of votes cast at the Stockholders
Meeting by the stockholders of the
Company;
|
|
·
|
the
receipt of all required regulatory approvals;
and
|
|
·
|
the
performance, in all material respects, of all covenants, agreements and
conditions in the Securities Purchase Agreement and the Merger Agreement
that are required to be performed at or prior to the closing of the
sale.
|
The
Securities Purchase Agreement may be terminated, and the transactions
contemplated thereby, may be abandoned (notwithstanding the receipt of the
required stockholder approval) at any time prior to the closing date of the
sale:
|
·
|
by
duly authorized mutual written consent of the Company and the
Investors;
|
|
·
|
automatically
if the required stockholder approval is not
obtained;
|
|
·
|
automatically
if any law makes the consummation of the transactions contemplated by the
Securities Purchase Agreement illegal or if a court, governmental
authority or NASDAQ issues an order, decree, ruling or takes any other
action restraining, enjoining or otherwise prohibiting such transaction;
and
|
|
·
|
automatically
on October 31, 2008.
|
The
Investors are residents of Canada, the United States, the United Kingdom, Italy
or Australia. Some of the Investors are also Bridge
Lenders.
A copy of
the Securities Purchase Agreement, dated as of May 19, 2008, by and among
OccuLogix, Marchant and the investors listed on the Schedule of Investors
attached thereto as Exhibit A, was filed as an exhibit to the Company’s Current
Report on Form 8-K, filed on May 21, 2008 with the SEC and on SEDAR, and is
available on EDGAR (
www.sec.gov
) and on
SEDAR (
www.sedar.com
). A
copy of the form of the Amending Agreement, dated as of August [
20]
, 2008, by and among OccuLogix, Marchant and
each of the investors listed on the Schedule of Investors attached thereto as
Exhibit A was filed as an exhibit to the Company’s Current Report on Form 8-K,
filed on July 28, 2008 with the SEC and on SEDAR, and is available on EDGAR
(
www.sec.gov
)
and on SEDAR (
www.sedar.com
). A
copy of these agreements also may be obtained without charge upon written
request to: Secretary, OccuLogix, Inc., 2600 Skymark Avenue, Unit 9,
Suite 201, Mississauga, Ontario, L4W 5B2.
Reasons
for the Proposal
The
Company does not have an alternative source of capital at this
time. Management believes that the proceeds of the Bridge Loan,
together with the Company’s existing cash and cash-equivalents, will be
sufficient to cover the Company’s operating activities and other demands only
until approximately November 2008. Accordingly, if the required
stockholder approval of the Securities Purchase Agreement and the Merger
Agreement, and the respective transactions contemplated by each of them, is not
obtained, then the Company will run out of cash.
Note that the issuance of an
aggregate of a minimum of 21,730,000 shares of the Company’s common stock to the
Investors, pursuant to the Securities Purchase Agreement, will result in a
significant dilution of the holdings of the Company’s current
stockholders.
Interests of Directors and Officer
and Director
Thomas N. Davidson and Richard L.
Lindstrom
Mr.
Davidson and Dr. Lindstrom are directors of OccuLogix and are standing for
re-election to the Board. The Davidson Investors, being Mr. Davidson,
his spouse and certain other parties related to him, are Investors under the
Securities Purchase Agreement. Dr. Lindstrom is also an Investor
under the Securities Purchase Agreement.
Pursuant
to the Securities Purchase Agreement, the Davidson Investors have committed to
purchase $800,000 aggregate amount of shares of the Company’s common stock,
while Dr. Lindstrom has committed to purchase $100,000 aggregate amount of
shares of the Company’s common stock. If the per share purchase price
is $0.10, then an aggregate of 8,000,000 shares of the Company’s common stock
will be issued to the Davidson Investors and an aggregate of 1,000,000 shares of
the Company’s common stock will be issued to Dr. Lindstrom. If the
per share purchase price is lower than $0.10, then a greater aggregate number of
shares of the Company’s common stock will need to be issued to the Davidson
Investors and to Dr. Lindstrom. At the date of this proxy statement,
the per share purchase price is not determinable. If, and to the
extent that, the Company’s common stock trades above $0.10 per share on the
closing date of the sale under the Securities Purchase Agreement, the Davidson
Investors and Dr. Lindstrom—together with all of the other Investors—will
acquire shares of the Company’s common stock at a discount to the market
price.
After
giving effect to the transactions contemplated by the Merger Agreement and the
Securities Purchase Agreement, but prior to giving effect to the pre-payment of
the Bridge Loan or the payment of part of the commission remaining owing to
Marchant by the issuance to Marchant of shares of the Company's common stock in
the manner being proposed, and assuming that the per share purchase price of the
Company’s common stock under the Securities Purchase Agreement is $0.10, the
Davidson Investors will hold approximately 4.34% of the issued and outstanding
shares of the Company’s common stock and Dr. Lindstrom will hold less than 1% of
the issued and outstanding shares of the Company’s common
stock. After giving effect to the pre-payment of the Bridge Loan and
the payment of part of the commission remaining owing to Marchant by the
issuance to Marchant of shares of the Company's common stock in the manner being
proposed, the Davidson Investors’ and Dr. Lindstrom’s respective percentage
holdings of the issued and outstanding shares of the Company’s common stock will
be reduced. See “Proposal VI” and “Proposal VII”.
As
a result of his interest in the transactions contemplated by the Securities
Purchase Agreement, Mr. Davidson recused himself from the Board’s decision to
recommend, to the Company’s stockholders, a vote “For” the approval and adoption
of the Securities Purchase Agreement. Dr. Lindstrom did not
participate in the meeting at which the Board resolved to recommend, to the
Company’s stockholders, a vote “For” the approval and adoption of the Merger
Agreement.
Elias
Vamvakas
For
services rendered by Marchant in connection with the Securities Purchase
Agreement and the Bridge Loan,
the Company has agreed to pay a commission
totaling $750,000.
For a
description of these services, see “Proposal VII—Determination of Marchant’s
Commission”.
To date, $180,000 of such commission has been paid in
cash, with $570,000 remaining owing. The Company proposes to pay
$88,800 of the outstanding balance in cash and, subject to obtaining the
requisite stockholder and regulatory approvals, proposes to pay the remainder of
the outstanding balance, being $481,200, by issuing to Marchant shares of the
Company’s common stock, at a per share price equal to the per share purchase
price at which the Investors will be purchasing shares of the Company’s common
stock pursuant to the Securities Purchase Agreement. See “Proposal
VII”.
Under the
Securities Purchase Agreement, the purchase price of each share of the Company’s
common stock will be the lower of (i) $0.10 and (ii) the volume-weighted average
closing price of the Company’s common stock on the Primary Trading Market for
the 15-trading day period immediately preceding the closing date of the
sale. If the per share purchase price under the Securities Purchase
Agreement is $0.10, then an aggregate of 4,812,000 shares of the Company’s
common stock will be issued to Marchant in part payment of its commission
remaining outstanding for services provided in connection with the
Securities Purchase Agreement and the Bridge Loan. If the per share
purchase price is lower than $0.10, then a greater aggregate number of shares of
the Company’s common stock will be issued to Marchant in part payment of such
commission. At the date of this proxy statement, the per share
purchase price is not determinable. If, and to the extent that, the
Company’s common stock trades above $0.10 per share on the closing date of the
sale under the Securities Purchase Agreement, Marchant will acquire shares of
the Company’s common stock at a discount to the market price.
The
agreed total commission of $750,000 represents a significant increase over the
$264,480 amount that had been agreed upon previously by the Company and
Marchant. The parties have agreed that the increased commission is
justified, since the scope of the engagement and the volume of administrative
work necessary to advance the proposed transactions have turned out to be, and
continue to be, much greater than the parties had contemplated
originally. For a more detailed description of how such commission
was determined, see “Proposal VII—Determination of Marchant’s
Commission”.
Marchant
is indirectly beneficially owned, as to approximately 32%, by Mr. Vamvakas, the
Company’s Chairman of the Board and Chief Executive Officer, and members of his
family. Mr. Vamvakas is standing for re-election to the
Board. He is neither a director nor an officer of
Marchant.
Multilateral
Instrument 61-101—Protection of Minority Shareholders in Special
Transactions
The sale
of shares of OccuLogix’s common stock pursuant to the Securities Purchase
Agreement is a related party transaction under Multilateral Instrument
61-101—Protection of Minority Shareholders in Special Transactions (“MI 61-101”)
as a result of the participation in such sale by the Davidson Investors and Dr.
Lindstrom. The Company is relying on the exemptions from the minority
approval and formal valuation requirements of MI 61-101 that are available under
Section 5.6 and Section 5.5(a) of MI 61-101, respectively, on the basis that
neither the fair market value of the subject matter of, nor the fair market
value of the consideration for, the sale of shares of OccuLogix’s common stock
pursuant to the Securities Purchase Agreement, insofar as the Davidson Investors
and Dr. Lindstrom are involved, exceeds 25% of the Company’s market
capitalization.
Resolution
Appendix
C to this proxy statement sets forth the full text of the resolution to approve
and adopt the Securities Purchase Agreement (the “Appendix C
Resolution”). If the Appendix C Resolution is adopted by the
Company’s stockholders, then the Board will have the authority, without any
further action on the part of the Company’s stockholders, to sell an aggregate
of a minimum of 21,730,000
shares
of the Company’s common stock to the Investors and to consummate the other
transactions contemplated by the Securities Purchase Agreement.
Required
Vote and Recommendation
The
affirmative vote of the majority of the votes cast at the Stockholders Meeting,
at which a quorum is present, is required to adopt the Appendix C
Resolution.
Unless
otherwise directed, the management representatives designated in the enclosed
proxy card intend to vote the shares of OccuLogix’s common stock, for which they
have been appointed,
FOR
the Appendix C
Resolution.
The Board unanimously recommends a
vote
FOR
the Appendix C Resolution, with Mr.
Davidson recording his abstention and Dr. Lindstrom having advised the Board
that he would have recorded his abstention if he had been present at the meeting
at which the Board had resolved to recommend a vote “For” the Appendix C
resolution.
PROPOSAL
VI
Note
: Proposal
VI is conditioned on Proposals III, IV, V, VII and IX. If any of
Proposals III, IV, V, VII or IX is not approved by the Company’s stockholders,
then we will not take action with respect to Proposal VI.
Loan
Agreement
The
aggregate principal amount of the Bridge Loan is $6,703,500. It bears
interest at a rate of 12% per annum and will mature and become due and payable
on August 17, 2008, subject to an extension of the maturity date to November 15,
2008 under certain circumstances. The Company’s obligations under the
Loan Agreement are secured by a pledge by the Company of its major asset—its
50.1% ownership interest, on a fully diluted basis, in OcuSense.
Under the
terms of the Loan Agreement, the Company has two pre-payment options available
to it, should it decide to not wait until the maturity date to repay the Bridge
Loan. Under the first pre-payment option, at any time prior to the
maturity date, the Company may repay the Bridge Loan in full by paying the
Bridge Lenders, in cash, the amount of outstanding principal and accrued
interest and issuing to the Bridge Lenders five-year warrants of the Company in
an aggregate amount equal to approximately 19.9% of the issued and outstanding
shares of the Company’s common stock (but not to exceed 20% of the issued and
outstanding shares of the Company’s common stock). The warrants would
be exercisable into shares of the Company’s common stock at an exercise price of
$0.10 per share and would not become exercisable until the 180
th
day
following their issuance. Under the second pre-payment option, at any
time prior to the maturity date, but by no later than the tenth day following
the date of closing of a private placement (if any) by the Company of shares of
its common stock for aggregate gross proceeds of no less than $1,000,000, the
Company may repay the Bridge Loan in full by issuing to the Bridge Lenders
shares of its common stock, in an aggregate amount equal to the amount of
outstanding principal and accrued interest, at a 15% discount to the price paid
by the private placement investors (but on other terms substantially similar to
those accepted by the private placement investors).
The Board
is proposing to exercise the second pre-payment option, which will result in the
issuance to the Bridge Lenders of an aggregate of a minimum of 78,864,705 shares
of the Company’s common stock, assuming that the per share purchase price of the
Company’s common stock under the Securities Purchase Agreement is $0.10 (which
means that the per share price of the Company’s common stock being issued to the
Bridge Lenders would be $0.085) and taking into account only the pre-payment of
the principal amount of the Bridge Loan and disregarding the pre-payment of the
accrued and unpaid interest thereon. At the date of this proxy
statement, it is not possible to determine the exact number of shares of the
Company’s common stock issuable to the Bridge Lenders upon the Company’s
exercise of the second pre-payment option under the Loan Agreement, since the
per share purchase price of the Company’s common stock under the Securities
Purchase Agreement is not known and since the amount of accrued but unpaid
interest on the Bridge Loan cannot be calculated until the date of pre-payment
of the Bridge Loan is determined.
Reasons for the
Proposal
The
anticipated net aggregate proceeds of the sale of shares of the Company’s common
stock to the Investors, pursuant to the Securities Purchase Agreement, will be
insufficient to permit the Company to repay the Bridge Loan in
cash. In addition, one of the conditions precedent in the Merger
Agreement is the capitalization of OccuLogix with a minimum of $1,000,000 of
unrestricted cash that is available to fund the working capital and general
administrative expenses of OccuLogix and OcuSense, post-merger. See
“Proposal IV—Merger Agreement; Acquisition of Minority Ownership Interest in
OcuSense—Merger Agreement—Conditions to Completion of Merger”.
It is in
the best interests of the Company and its stockholders to avoid a default under
the Loan Agreement since a default will permit enforcement against the
collateral securing the Bridge Loan, being the Company’s ownership interest in
OcuSense and the Company’s major asset. The only way to avoid a
default under the Loan Agreement, while ensuring that the Company’s working
capital needs are met, is for the Company to exercise the second pre-payment
option under the Loan Agreement in the manner described above. See
“—Loan Agreement”.
Note
that the pre-payment of the Bridge Loan in the manner proposed will result in a
significant dilution of the holdings of the Company’s current
stockholders.
Interest of Officer
and Director
Elias
Vamvakas
For
services rendered by Marchant in connection with the Securities Purchase
Agreement and the Bridge Loan
, the Company has agreed to pay a commission
totaling $750,000.
For a
description of these services, see “Proposal VII—Determination of Marchant’s
Commission”.
To date, $180,000 of such commission has been
paid in cash, with $570,000 remaining owing. The Company proposes to
pay $88,800 of the outstanding balance in cash and, subject to obtaining the
requisite stockholder and regulatory approvals, proposes to pay the remainder of
the outstanding balance, being $481,200, by issuing to Marchant shares of the
Company’s common stock, at a per share price equal to the per share purchase
price at which the Investors will be purchasing shares of the Company’s common
stock pursuant to the Securities Purchase Agreement. See “Proposal
VII”.
Under the
Securities Purchase Agreement, the purchase price of each share of the Company’s
common stock will be the lower of (i) $0.10 and (ii) the volume-weighted average
closing price of the Company’s common stock on the Primary Trading Market for
the 15-trading day period immediately preceding the closing date of the
sale. If the per share purchase price under the Securities Purchase
Agreement is $0.10, then an aggregate of 4,812,000 shares of the Company’s
common stock will be issued to Marchant in part payment of its commission
remaining outstanding for services provided in connection with the Bridge Loan
and the Securities Purchase Agreement. If the per share purchase
price is lower than $0.10, then a greater aggregate number of shares of the
Company’s common stock will be issued to Marchant in part payment of such
commission. At the date of this proxy statement, the per share
purchase price is not determinable. If, and to the extent that, the
Company’s common stock trades above $0.10 per share on the closing date of the
sale under the Securities Purchase Agreement, Marchant will acquire shares of
the Company’s common stock at a discount to the market price.
The
agreed total commission of $750,000 represents a significant increase over the
$264,480 amount that had been agreed upon previously by the Company and
Marchant. The parties have agreed that the increased commission is
justified, since the scope of the engagement and the volume of administrative
work necessary to advance the proposed transactions have turned out to be, and
continue to be, much greater than the parties had contemplated
originally. For a more detailed description of how such commission
was determined, see “Proposal VII—Determination of Marchant’s
Commission”.
Marchant
is indirectly beneficially owned, as to approximately 32%, by Mr. Vamvakas, the
Company’s Chairman of the Board and Chief Executive Officer, and members of his
family. Mr. Vamvakas is standing for re-election to the
Board. He is neither a director nor an officer of
Marchant.
Resolution
Appendix
D to this proxy statement sets forth the full text of the resolution to approve
the pre-payment of the Bridge Loan, in accordance with the terms of the Loan
Agreement, by issuing, to the Bridge Lenders, shares of the Company’s common
stock in the aggregate number required pursuant to the terms of the Loan
Agreement, which number will be no less than 78,864,705 (the “Appendix D
Resolution”). If the Appendix D Resolution is adopted by the
Company’s stockholders, then the Board will have the authority, without any
further action on the part of the Company’s stockholders, to pre-pay the Bridge
Loan in the manner being proposed.
Required Vote and Recommendation
The
affirmative vote of the majority of the votes cast at the Stockholders Meeting,
at which a quorum is present, is required to adopt the Appendix D
Resolution.
Unless
otherwise directed, the management representatives designated in the enclosed
proxy card intend to vote the shares of OccuLogix’s common stock, for which they
have been appointed,
FOR
the Appendix D
Resolution.
The
Board unanimously recommends a vote
FOR
the Appendix D
Resolution.
PROPOSAL VII
Note
: Proposal
VII is conditioned on Proposals III, IV, V, VI and IX. If any of
Proposals III, IV, V, VI or IX is not approved by the Company’s stockholders,
then we will not take action with respect to Proposal VII.
Payment
of Marchant’s Commission
The
following table sets out (1) the total amount paid, or to be paid in the future,
to Marchant for all services rendered to OccuLogix in connection with the
Securities Purchase Agreement and the Bridge Loan, (2) the number of shares of
OccuLogix’s common stock issued to Marchant, to date, in payment for such
services, (3) the amount of cash paid to Marchant, to date, for such services,
(4) the total amount currently owing to Marchant for such services, (5) the
amount of cash to be paid to Marchant in satisfaction of the amount currently
owing to Marchant for such services, (6) the number of shares of OccuLogix’s
common stock to be issued to Marchant in satisfaction of the amount currently
owing to Marchant for such services and (7) the total number of shares of
OccuLogix’s common stock that Marchant will own after all payments owing to it
are satisfied by the Company.
|
|
Dollar Amount/Number of
Shares
|
|
(1) Total amount
paid, or to be paid in the future, for services rendered in connection
with the Securities Purchase Agreement and the Bridge Loan (collectively,
“Services”)
|
|
$
|
750,000
|
|
|
(2) Number of shares
issued, to date, in payment for Services
|
|
|
--
|
|
|
(3) Cash amount paid
to date for Services
|
|
$
|
180,000
|
|
|
(4) Amount remaining
owing for Services
|
|
$
|
570,000
|
|
|
(5) Amount remaining
owing for Services that will be paid in cash
|
|
$
|
88,800
|
|
|
(6) Amount remaining
owing for Services that will be paid in shares
|
|
$
|
481,200
|
|
|
(7) Number
of shares that Marchant will own after all payments owing for Services are
made
(1)
|
|
|
4,812,000
|
(2)
|
|
___________________________________
(1)
|
Marchant
currently does not own any shares of the Company’s common
stock.
|
(2)
|
This
number assumes that the per share purchase price under the Securities
Purchase Agreement will be $0.10. If it is lower than $0.10,
then a greater aggregate number of shares of the Company’s common stock
will be issued to Marchant. At the date of this proxy
statement, the per share purchase price is not
determinable.
|
For
services rendered by Marchant in connection with the Securities Purchase
Agreement and the Bridge Loan, the Company has agreed to pay Marchant a
commission of $750,000. For a description of these services, see
“—Determination of Marchant’s Commission”. To date, $180,000 of such
commission has been paid in cash, with $570,000 remaining owing. The
Company proposes to pay $88,800 of the outstanding balance in cash and, subject
to obtaining the requisite stockholder and regulatory approvals, proposes to pay
the remainder of the outstanding balance, being $481,200, by issuing to Marchant
shares of the Company’s common stock, at a per share price equal to the per
share purchase price at which the Investors will be purchasing shares of the
Company’s common stock pursuant to the Securities Purchase
Agreement.
If the
per share purchase price of the Company’s common stock under the Securities
Purchase Agreement is $0.10, then an aggregate of 4,812,000 shares of the
Company’s common stock will be issued to Marchant in part payment of the
commission remaining owing to it, as described above. If the per
share purchase price is lower than $0.10, then a greater aggregate number of
shares of the Company’s common stock will need to be issued to Marchant in order
to achieve the same objective of satisfying the part payment of the
commission remaining owing to it, as described above. At the
date of this proxy statement, the per share purchase price is not
determinable. If, and to the extent that, the Company’s common stock
trades above $0.10 per share on the closing date of the sale under the
Securities Purchase Agreement, Marchant will acquire shares of the Company’s
common stock at a discount to the market price.
The
Company intends to qualify for resale shares of the Company’s common stock
issued to Marchant, in part payment of the commission remaining owing
to it, by including such shares in the Registration Statement.
Determination
of Marchant’s Commission
Marchant
has been assisting OccuLogix with its capital-raising efforts since December
2007. For some time prior to the October 9, 2007 announcement, in
which was announced that the Board authorized the exploration of strategic
alternatives, the Company had been seeking to raise additional capital, with the
objective of securing funding sufficient to sustain its operations as, at that
time, it had been clear that, unless we were able to raise additional capital,
the Company would not have had sufficient cash to support its operations beyond
early 2008.
On
February 19, 2008, the Company announced that it had secured a bridge loan in an
aggregate principal amount of $3,000,000, which constituted the first tranche of
the Bridge Loan. The Company and Marchant had agreed previously that
Marchant would be paid a commission of $180,000 with respect to that first
tranche of the Bridge Loan, half of which commission would be paid by the
issuance to Marchant of shares of the Company’s common stock, subject to
obtaining the requisite stockholder and regulatory approval. In the
meantime, the Company paid Marchant $180,000 in cash shortly following the
closing of that first tranche of the Bridge Loan on the understanding that
Marchant would be earning a commission in the future in connection with the
Securities Purchase Agreement (which, at that point, had not yet been entered
into but was contemplated) and would be paid a lower proportion of that future
commission in cash and a greater proportion of that commission in shares of the
Company’s common stock.
At the
time of the closing of that first tranche of the Bridge Loan, the Company
expected that the proceeds of the loan would be sufficient to sustain the
Company’s operations until the closings of the transactions contemplated by the
Merger Agreement and the Securities Purchase Agreement, as they were announced
subsequently on April 22, 2008. However, the negotiation and
settlement of the Merger Agreement and the Securities Purchase Agreement took
longer than the Company had anticipated. Consequently, the Company
found itself having to secure additional interim financing.
On May
5, 2008, OccuLogix announced that it had secured a bridge loan in an aggregate
principal amount of $300,000, on the same terms and conditions as the first
tranche of the Bridge Loan. Although the proceeds of this second
tranche of the Bridge Loan were expected to sustain the Company’s operations
until the closings of the transactions contemplated by the Merger Agreement and
the Securities Purchase Agreement, because of certain significant and continuing
delays in the Company’s implementation of the transactions contemplated by the
Merger Agreement and the Securities Purchase Agreement (in large part, due to
the Company’s restatements of certain of its historical financial statements),
the Company again needed to secure additional interim
financing.
On
July 28, 2008, the Company announced that it had secured an additional bridge
loan in an aggregate principal amount of $3,403,500, $2,893,500 of which
principal amount was committed to be advanced by certain of the Investors in
exchange for the Company’s agreement to reduce the dollar amounts of these
Investors’ respective commitments under the Securities Purchase
Agreement. This third tranche of the Bridge Loan is subject to the
same terms and conditions as the first and second tranches of the Bridge
Loan.
Prior
to the July 28, 2008 transaction, Marchant had agreed to a total commission of
$264,480, of which the Company had already paid $180,000 in cash shortly after
the closing of the first tranche of the Bridge Loan and the balance of which was
to be paid in shares of the Company’s common stock, subject to obtaining the
requisite stockholder and regulatory approval. In the period leading
up to the closing of the third tranche of the Bridge Loan, Marchant informed the
Company of its view that the agreed-upon commission, although modest but
acceptable when it had been agreed upon, needed to be re-negotiated in light of
the actual number of person-hours invested, and the overhead costs incurred, by
the firm since the start of the engagement. Marchant argued, and the
Company’s management agreed, that the scope of the engagement and the volume of
administrative work necessary to advance the proposed transactions have turned
out to be, and continue to be, much greater than the parties had contemplated
originally. The Company’s management agreed to engage in a good faith
re-negotiation of the commission but deferred the discussion until after the
completion of the July 28, 2008 transaction since its first priority, at that
point in time, was to ensure that the Company would not run out of
cash.
During
the weeks following the completion of the July 28, 2008 transaction, the parties
reviewed all of the work that had been done to date and the work still remaining
to be done in order to complete the transactions contemplated by the Securities
Purchase Agreement. Services rendered, or to be rendered, to the
Company by Marchant include the assistance of the Company’s management in the
preparation of its oral and written investor presentations, the introduction to
the Company of certain of the Bridge Lenders and the Investors, the facilitation
of communication between the Company and certain of the Bridge Lenders and the
Investors, the provision of financial advisory services and investor relations
advice to the Company and the management and organization of documents signings
and closing logistics. The parties agreed that all of such services
rendered, or to be rendered, by Marchant should be viewed as a whole and take
into account, not only the number of person-hours spent and the amount of
overhead incurred by Marchant, but also the following additional
factors: the extreme urgency with which each of the tranches of the
Bridge Loan needed to be closed; the several unexpected and burdensome
logistical challenges that have arisen during the course of the engagement, none
of which was attributable to Marchant; the consequent taxing of several of
Marchant’s business relationships; and opportunity costs incurred by Marchant as
a direct result of having had to devote resources to the Company’s transactions
unexpectedly. In addition, we are of the view that the commission
should reflect fairly the fact that Marchant has done a creditable job of
assisting the Company to secure financing in a capital-raising environment that
has been difficult generally and in which the Company’s management had been
unable to achieve success independently or with the assistance of other
advisors. We believe that, in the absence of Marchant’s assistance,
the Company would have faced bankruptcy.
For
these reasons, we have agreed to the proposed increased commission of
$750,000. Because of the scarcity of OccuLogix’s cash resources, we
asked Marchant to accept the bulk of the commission in shares of the Company’s
common stock, to which it has agreed. We are of the view that the
amount of the cash component of the proposed commission, representing
approximately 36% of the total, is not unduly taxing on the Company’s cash
resources while, at the same time, balancing Marchant’s interest in taking a
certain portion of its commission on an investment risk-free
basis.
You
should note that Mr. Vamvakas, the Company’s Chairman of the Board and Chief
Executive Officer, was not involved in any discussions regarding Marchant’s
commission. It was negotiated on behalf of the Company by other
members of the Company’s management.
There
does not exist, nor has there ever existed, any written agreement between the
Company and Marchant regarding the payment of commission.
Reasons for the
Proposal
As the
Company’s cash resources are scarce despite the anticipated net aggregate
proceeds of the sale of shares of the Company’s common stock to the Investors
pursuant to the Securities Purchase Agreement, it is in the best interests of
the Company to conserve its cash to the extent practicable. Payment
of part of the commission remaining owing to Marchant in the manner described
above will assist the Company’s cash conservation efforts.
Note
that the proposed issuance of shares of the Company’s common stock to Marchant
will result in a further dilution of the holdings of the Company’s current
stockholders.
Interest of Officer and
Director
Marchant
is indirectly beneficially owned, as to approximately 32%, by Mr. Vamvakas, the
Company’s Chairman of the Board and Chief Executive Officer, and members of his
family. Mr. Vamvakas is standing for re-election to the
Board. He is neither a director nor an officer of
Marchant.
As a
result of his indirect interest in this proposal, Mr. Vamvakas recused himself
from the Board’s decision to recommend, to the Company’s stockholders, a vote
“For” this proposal.
Resolution
Appendix
E to this proxy statement sets forth the full text of the resolution to approve
the issuance to Marchant of shares of the Company’s common stock, in payment of
part of the commission remaining owing for services rendered by
Marchant in connection with the Securities Purchase Agreement and the Bridge
Loan, at a per share price equal to the per share price at which the Investors
will be purchasing shares of the Company’s common stock pursuant to the
Securities Purchase Agreement (the “Appendix E Resolution”). If the
Appendix E Resolution is adopted by the Company’s stockholders, then the Board
will have the authority, without any further action on the part of the Company’s
stockholders to issue to Marchant that number of shares of the Company’s common
stock required to satisfy, in full, the payment of part of the
commission remaining owing to Marchant in the manner described
above.
Required Vote and
Recommendation
The
affirmative vote of the majority of the votes cast at the Stockholders Meeting,
at which a quorum is present, is required to adopt the Appendix E
Resolution.
Unless
otherwise directed, the management representatives designated in the enclosed
proxy card intend to vote the shares of OccuLogix’s common stock, for which they
have been appointed,
FOR
the Appendix E
Resolution.
The
Board unanimously recommends a vote
FOR
the Appendix E
Resolution, with Mr. Vamvakas recording his abstention.
PROPOSAL
VIII
Extension
of Terms of Stock Options
On
January 9, 2008, the Company announced the termination of employment of five
members of its executive team and the pending termination of employment of two
other members. The employment with OccuLogix of John Cornish
(formerly, Vice President, Operations), Julie Fotheringham (formerly, Vice
President, Marketing), Stephen Parks (formerly, Vice President, Sales) and
Stephen Westing (formerly, Vice President, Medical and Scientific Development)
ended, effective January 4, 2008, and that of David Eldridge (formerly, Vice
President, Science and Technology) ended, effective January 8,
2008. In addition, the employment with OccuLogix of Nozait
Chaudry-Rao (formerly, Vice President, Clinical Research) and Stephen Kilmer
(formerly, Vice President, Investor & Public Affairs) ended on January 31,
2008.
The
termination of these individuals’ employment was without cause, entitling each
of them to an immediate lump-sum severance payment, under their respective
employment agreements with the Company, in an amount equal to 12 months’ base
salary plus 2.5% of such amount in respect of entitlement to
benefits. However, in light of the Company’s financial condition,
each of these individuals voluntarily agreed to a modification of the timetable
according to which his or her severance would be paid.
Accordingly,
pursuant to the agreement reached with each of these individuals, from the date
of termination of his or her employment to March 31, 2008 inclusive, the Company
continued to pay each of them, on a semi-monthly basis according to the
Company’s regular payroll practices, amounts equal to the base salary that he or
she was earning prior to the date of termination of his or her
employment. The aggregate gross base salary amount paid to each of
these individuals during such period will be deducted from his or her severance
entitlement, which we now anticipate will become due and payable upon the
closing of the transactions contemplated by the Merger Agreement and the
Securities Purchase Agreement or, if the requisite stockholder approval is not
obtained for those transactions, at the end of the Stockholders
Meeting.
In
consideration of these individuals’ agreement to defer the payment of their
respective severance entitlement, subject to obtaining the requisite approval of
the Company’s stockholders, the Board agreed to extend the respective terms of
the time-based stock options of the Company, held by these individuals, until
the tenth anniversaries of their respective dates of grant. In the
absence of this proposed extension, these stock options would have expired at
the end of the three-month period following the respective dates of termination
of the holders’ employment.
Subject
to obtaining the requisite approval of the Company’s stockholders, the Board
also agreed to extend, until the tenth anniversaries of their respective dates
of grant, the respective terms of the time-based stock options of the Company
held by the then remaining members of the executive team—being Mr. Vamvakas,
Thomas P. Reeves (President and Chief Operating Officer), William G. Dumencu
(Chief Financial Officer and Treasurer) and Ms. Kim (General Counsel)—as an
incentive to remain with the Company despite the challenging
circumstances. (Mr. Reeves’ employment with the Company was
terminated subsequently—on June 30, 2008.)
In
addition, subject to obtaining the requisite approval of the Company’s
stockholders, the Board agreed to extend, until the tenth anniversaries of their
respective dates of grant, the respective terms of the time-based stock options
of the Company held by those current directors who are not standing for
re-election to the Board—being Messrs. Holmes and Noël and Dr.
Omenn.
Under
this proposal, there would be no change to the exercise price or the vesting
schedule of any of the affected stock options.
The
following table sets out the numbers, and the respective dates of grant, of the
stock options that are subject to the proposed term extension. Also
indicated in the following table are the current exercise prices of these stock
options, their vesting schedule and their new expiration dates (assuming that
the requisite approval of the Company’s stockholders for the proposed extension
of the term of these stock options is obtained). All of these stock
options were granted under the 2002 Stock Option Plan, other than the 200,000
stock options which were granted to Mr. Parks on October 4, 2005.
Stock
Options Subject to Proposed Term Extension
Name
of Holder
|
Stock
Options Subject to Proposed Term Extension
|
Current
Exercise Price of Stock Options Subject to Proposed Term
Extension
($)
|
Date
of Grant
|
Vesting
Schedule
|
Proposed
Expiration Date
|
|
|
|
|
|
|
Elias
Vamvakas
(1)
|
4,583
|
1.30
|
08/01/02
|
Vested
|
08/01/12
|
|
|
|
|
|
|
|
500,000
|
0.99
|
07/01/03
|
Vested
|
07/01/13
|
|
|
|
|
|
|
|
300,000
|
1.90
|
08/03/06
|
Vested
|
08/03/16
|
|
|
|
|
|
|
|
100,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Thomas
P. Reeves
|
300,000
|
2.05
|
12/16/04
|
Vested
|
12/16/14
|
|
|
|
|
|
|
|
20,000
|
1.82
|
03/10/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
03/10/17
|
|
|
|
|
|
|
|
100,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
William
G. Dumencu
|
100,000
|
0.99
|
08/01/03
|
Vested
|
08/01/13
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
David
C. Eldridge
|
36,924
|
1.30
|
10/01/02
|
Vested
|
10/01/12
|
|
|
|
|
|
|
|
59,798
|
0.99
|
07/01/03
|
Vested
|
07/01/13
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Nozait
Chaudry-Rao
|
80,000
|
2.05
|
02/10/06
|
2/3
vested; remaining 1/3 vesting on next anniversary of grant
date
|
02/10/16
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
John
Cornish
|
25,000
|
1.30
|
08/01/02
|
Vested
|
08/01/12
|
|
|
|
|
|
|
|
80,000
|
0.99
|
07/01/03
|
Vested
|
07/01/13
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
Name
of Holder
|
Stock
Options Subject to Proposed Term Extension
|
Current
Exercise Price of Stock Options Subject to Proposed Term
Extension
($)
|
Date
of Grant
|
Vesting
Schedule
|
Proposed
Expiration Date
|
|
|
|
|
|
|
Julie
A. Fotheringham
|
80,000
|
2.05
|
12/16/04
|
Vested
|
12/16/14
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Stephen
J. Kilmer
|
80,000
|
2.05
|
12/16/04
|
Vested
|
12/16/14
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Suh
Kim
|
100,000
|
1.82
|
03/10/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
03/10/17
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Stephen
B. Parks
|
200,000
|
2.05
|
10/04/05
|
2/3
vested; remaining 1/3 vesting on next anniversary of grant
date
|
10/04/15
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Stephen
H. Westing
|
80,000
|
2.05
|
02/10/06
|
2/3
vested; remaining 1/3 vesting on next anniversary of grant
date
|
02/10/16
|
|
|
|
|
|
|
|
30,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Jay
T. Holmes
(1)
|
25,000
|
2.05
|
12/16/04
|
Vested
|
12/16/14
|
|
|
|
|
|
|
|
25,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Georges
Noël
(1)
|
25,000
|
0.99
|
07/01/03
|
Vested
|
07/01/13
|
|
|
|
|
|
|
|
25,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
Gilbert
S. Omenn
(1)
|
25,000
|
1.11
|
07/03/07
|
1/3
vested; remaining 2/3 vesting as to 1/3 on each anniversary of grant
date
|
07/03/17
|
|
|
|
|
|
|
TOTAL
|
2,641,305
|
N/A
|
N/A
|
N/A
|
N/A
|
(1)
|
Certain
stock options held by Messrs. Vamvakas, Holmes and Noël and Dr. Omenn
already have 10-year terms and, therefore, are not shown in this
table. See “Additional Information on Executive
Compensation—Outstanding Equity Awards at 2007 Fiscal
Year-End”.
|
Resolution
Appendix
F to this proxy statement sets forth the full text of the resolution to approve
and adopt the proposed extension of the terms of the stock options of OccuLogix,
held by the above-named individuals, until the tenth anniversaries of their
respective dates of grant (the “Appendix F Resolution”). If the
Appendix F Resolution is adopted by the Company’s stockholders, then without any
further action on the part of the holders of such stock options or the Company’s
stockholders, the Board will have the authority to effect the proposed extension
of the terms of such stock options.
Required
Vote and Recommendation
The
affirmative vote of the majority of the votes cast at the Stockholders Meeting,
at which a quorum is present, is required to adopt the Appendix F
Resolution. For purposes of this approval, the votes attached to
shares of OccuLogix’s common stock beneficially owned by the holders of stock
options, the terms of which are subject to the proposed extension, and the votes
attached to shares beneficially owned by such holders’ spouses, partners and
certain other related persons, will not be counted in determining whether the
necessary level of stockholder approval has been obtained. In
addition (and without duplication), for purposes of this approval, the votes
attached to shares of OccuLogix’s common stock beneficially owned by directors
and officers, and the votes attached to shares beneficially owned by such
holders’ spouses, partners and certain other related persons, will not be
counted in determining whether the necessary level of stockholder approval has
been obtained.
Unless otherwise directed, the
management representatives designated in the enclosed proxy card intend to vote
the shares of OccuLogix’s common stock, for which they have been appointed,
FOR
the Appendix F
Resolution.
The
Board unanimously recommends a vote
FOR
the Appendix F
Resolution.
PROPOSAL
IX
Note
: Proposal
IX is conditioned on Proposals III, IV, V, VI and VII. If any of
Proposals III, IV, V, VI or VII is not approved by the Company’s stockholders,
then we will not take action with respect to Proposal IX.
Increase in Share Reserve under the
2002 Stock Option Plan
Outstanding
Severance Liability
Currently,
the maximum number of shares of OccuLogix’s common stock issuable upon the
exercise of stock options issued under the 2002 Stock Option Plan is
6,456,000. Such share reserve represents approximately 11.27% of the
issued and outstanding shares of the Company’s common stock and, together with
the number of stock options outstanding outside the 2002 Stock Option Plan,
represents approximately 12.27% of the issued and outstanding shares of the
Company’s common stock.
We are
proposing to issue, to current and former members of the Company’s executive
team, stock options under the 2002 Stock Option Plan in compromise of all or a
portion of their severance entitlement under their respective employment
agreements.
Each of
Drs. Eldridge, Chaudry-Rao and Westing, Messrs. Cornish, Kilmer, Parks and
Reeves and Ms. Fotheringham has a contractual right to receive severance pay
from the Company as a result of his or her without-cause termination of
employment. We anticipate that such severance payments will become
due and payable upon the closing of the transactions contemplated by the Merger
Agreement and the Securities Purchase Agreement or, if the requisite stockholder
approval is not obtained for those transactions, at the end of the Stockholders
Meeting. See “Proposal VIII—Extension of Terms of Stock
Options”.
Following
the closing of the merger (assuming that each of Proposals IV, V and VI and this
Proposal VII receives the requisite approval of the Company’s stockholders), it
is contemplated that Mr. Vamvakas will resign the office of Chief Executive
Officer and become non-executive Chairman of the Board. It also is
contemplated that Ms. Kim will not continue employment with the
Company. See “Proposal IV—Management Following the
Merger”. Upon their departure from the Company, each of Mr. Vamvakas
and Ms. Kim will be entitled to a severance payment under their respective
employment agreements. Mr. Vamvakas will be entitled to receive a
payment equal to 24 months of his salary and bonus (which amount will equal the
average annual bonus earned by him during his employment with the Company),
provided that the total lump sum payment is no less than
$1,400,000. See “Additional Information on Executive
Compensation—Employment Contracts—Elias Vamvakas”. Ms. Kim will be
entitled to receive a payment equal to 12 months of her base salary plus 2.5% of
such amount in respect of entitlement to benefits.
In
aggregate, the Company anticipates a liability of $3,719,384 in respect of the
severance entitlement of the above-named individuals.
Following
the termination of employment of the departed executives and their voluntary
agreement to modify the timetable according to which their severance would be
paid, it became apparent to the remaining executives of the Company, as they
were continuing to attempt to raise additional financing for the Company, that
prospective investors were concerned about such a significant amount of the
proceeds of any financing being used to fulfill the Company’s severance
obligations owing to former executives and to executives whose employment is
expected to be terminated. In order to enhance the Company’s ability
to complete a successful financing, all of the above-named individuals (with the
exception of one individual) consented to a compromise of their respective
severance entitlement. Each of them has agreed that the Company may
satisfy up to 50% of the amount remaining owing to him or her (or to be owing to
him or her in the future, in the case of Mr. Vamvakas and Ms. Kim), in respect
of severance, by issuing to him or her stock options of OccuLogix upon
substantially the terms and conditions described in this proxy
statement. Each of Messrs. Vamvakas and Cornish has agreed that the
Company may satisfy up to 100% of the amount remaining owing to him (or to be
owing to him in the future, in the case of Mr. Vamvakas), in respect of
severance, by issuing to him stock options of OccuLogix upon substantially the
terms and conditions described in this proxy statement. See
“—Calculation of Numbers of Stock Options”. Such compromise would
represent a total cash savings to the Company of approximately
$2,611,318.
Under Mr.
Dumencu’s employment agreement, upon a without-cause termination of his
employment, he is entitled to receive a lump sum severance equal to 12 months’
salary plus a cash amount equal to 2.5% of such amount in respect of his
entitlement to benefits. See “Additional Information on Executive
Compensation—Employment Contracts—William G. Dumencu”. As an
incentive for Mr. Dumencu to remain with the Company despite the challenging
circumstances, the Company has agreed to treat Mr. Dumencu in substantially the
same manner as it has agreed to treat the Company’s departed executives and the
executives whose employment is expected to be
terminated. Accordingly, the Company has agreed (i) to pay Mr.
Dumencu 50% of his severance entitlement in cash and (ii) to issue to him stock
options of OccuLogix upon substantially the terms and conditions described in
this proxy statement, in respect of the other 50% of his severance entitlement,
all upon the closing of the transactions contemplated by the Merger Agreement
and the Securities Purchase Agreement. In return, Mr. Dumencu has
agreed to a reduction in his future severance entitlement under his employment
agreement. Provided that the aforementioned cash payment and stock
options grant are made to Mr. Dumencu, his employment agreement will be amended
to provide for a reduced severance entitlement of three months’ salary plus 2.5%
of such amount in respect of his entitlement to benefits.
Calculation
of Numbers of Stock Options
The
affected individuals, including Mr. Dumencu, agreed to the proposed compromise
of their severance entitlement on the understanding that they would incur
substantially the same investment risk that the Investors would incur in
purchasing shares of the Company’s common stock pursuant to the Securities
Purchase Agreement. In order to achieve that objective, the per share
exercise price of the stock options of OccuLogix to be issued to the affected
individuals should be equal to the per share purchase price of the Company’s
common stock under the Securities Purchase Agreement. However, as the
latter will be the lower of (i) $0.10 and (ii) the volume-weighted average
closing price of the Company’s common stock on the Primary Trading Market for
the 15-trading day period immediately preceding the closing date of the sale, it
will not be possible to ensure that the per share exercise price of the stock
options to be issued to the affected individuals will equal the per share
purchase price of the Company’s common stock under the Securities Purchase
Agreement since the exercise price of these stock options on the date of their
grant must not be less than their fair market value on that date, determined in
accordance with the terms of the 2002 Stock Option Plan and applicable stock
exchange rules. See “Additional Information on Executive
Compensation—Employee Benefit Plans—Administration”.
Accordingly,
the Company has determined a methodology to put the affected individuals in the
same economic position as they would be in, if the Company were able to fix the
per share exercise price of the stock options in question at the per share
purchase price of the Company’s common stock under the Securities Purchase
Agreement. Under this methodology, the number of stock options to be
issued to each affected individual would be calculated in accordance with the
following formula:
(Compromised Severance
X Ultimate Value)
|
|
(1
– Tax Rate)
|
|
(Terminal
Value – Market Price)
|
where:
“Compromised
Severance” = the dollar amount of the severance obligation owing to an affected
individual that is being paid in stock options in lieu of cash;
“Ultimate
Value” = the ultimate after-tax cash value of each dollar of Compromised
Severance;
“Tax
Rate” = the percentage tax rate applicable to the affected individual in respect
of stock options exercise;
“Terminal
Value” = the currently projected per share terminal value of the Company, as
determined by management; and
“Market
Price” = the per share price of the Company’s common stock on the Primary
Trading Market at the time of closing of the sale of shares of the Company’s
common stock pursuant to the Securities Purchase Agreement.
“Ultimate
Value” is a measure of the ultimate value to an affected individual of each
dollar of Compromised Severance, assuming that the Company ultimately realizes
the Terminal Value and taking into account tax effects to the affected
individual. “Ultimate Value” is calculated by determining, using the
Black-Scholes valuation method, the value of a stock option issued to an
affected individual based on an attributed value equal to the per share purchase
price of the Company’s common stock pursuant to the Securities Purchase
Agreement. The Compromised Severance is divided by that Black-Scholes
value of the stock option, which quotient would be representative of the number
of stock options issuable to the affected individual. That number of
stock options is then multiplied by the Terminal Value. From the
product of that multiplication would be subtracted (i) the aggregate exercise
price of those stock options, assuming an exercise price equal to the per share
purchase price of the Company’s common stock pursuant to the Securities Purchase
Agreement, and (ii) the tax liability that would be incurred in connection with
an exercise of those stock options. The difference produced by that
subtraction then would be divided by the Compromised Severance, and that
quotient is the “Ultimate Value”—which is reflective of the net return generated
by each dollar of severance compromised by the affected individual.
The
following table sets out the numbers of OccuLogix stock options that would be
issued to each of the affected individuals, calculated using the above-described
methodology. For purposes of the following table, we have assumed
that the per share purchase price of the Company’s common stock pursuant to the
Securities Purchase Agreement will be $0.10. Should the Market Price
be greater than $0.10, the numbers of stock options that would need to be issued
to each of the affected individuals will increase. Accordingly, the
numbers shown in the table are for illustrative purposes only.
Name of Affected
Individual
|
|
Value of
Compromised
Severance
($)
|
|
Number of Stock
Options
to Be Granted
(1)(2)(3)
|
|
Elias
Vamvakas
|
|
|
1,570,008
|
|
|
|
18,046,066
|
|
|
Thomas
P.
Reeves
|
|
|
482,569
|
|
|
|
5,546,766
|
|
|
William
G.
Dumencu
|
|
|
94,439
|
|
|
|
1,085,504
|
|
|
David
C.
Eldridge
|
|
|
77,500
|
|
|
|
890,804
|
|
|
Nozait
Chaudry-Rao
|
|
|
80,213
|
|
|
|
921,982
|
|
|
John
Cornish
|
|
|
90,460
|
|
|
|
1,039,773
|
|
|
Julie
A.
Fotheringham
|
|
|
60,159
|
|
|
|
691,487
|
|
|
Suh
Kim
|
|
|
112,750
|
|
|
|
1,295,977
|
|
|
Stephen
B.
Parks
|
|
|
77,500
|
|
|
|
890,804
|
|
|
Stephen
H.
Westing
|
|
|
60,159
|
|
|
|
691,487
|
|
|
TOTAL
|
|
|
2,705,757
|
|
|
|
31,100,650
|
|
|
___________________________________
(1)
|
We
have assumed that the per share exercise price of the stock options to be
granted to the affected individuals will be
$0.10.
|
(2)
|
The
stock options will be granted to the affected individuals prior to the
implementation of the proposed reverse stock split. See
“Proposal X”.
|
(3)
|
The
number of stock options to be granted to each of the affected individuals
will be affected by the income tax rate applicable to him or
her. For purposes of this illustrative table, we have assumed
that each affected individual will take all necessary action to ensure
that the exercise of his or her stock options will qualify for capital
gains treatment in his or her jurisdiction of
residence.
|
The stock
options to be issued to the affected individuals will be exercisable immediately
upon grant and will have a term of ten years.
Required Increase in Share Reserve
under the 2002 Stock Option Plan
There is
insufficient room in the share reserve under the 2002 Stock Option Plan to
implement the proposed severance compromise. We are proposing that
the share reserve be increased by 53,544,000 and anticipate that this number
should be adequate to implement the proposed severance compromise and also meet
the Company’s compensation objectives, going forward. If increased as
proposed, the share reserve under the 2002 Stock Option Plan will represent
approximately 26.2% of the number of shares of the Company’s common stock that
will be issued and outstanding, after giving effect to the transactions
contemplated by the Merger Agreement and the Securities Purchase Agreement and
the pre-payment of the Bridge Loan and the payment of part of the commission
remaining owing to Marchant in the manner being proposed.
Reasons for the
Proposal
The
Company’s cash resources are scarce despite the anticipated net aggregate
proceeds of the sale of shares of the Company’s common stock to the Investors
pursuant to the Securities Purchase Agreement. The Investors and the
minority stockholders of OcuSense have an expectation that the Company will
achieve the cash savings represented by the severance compromise. If
such cash savings is not achieved, it is unlikely that the closing condition in
the Merger Agreement requiring OccuLogix to be capitalized with at least
$1,000,000 of unrestricted cash will be met. The Company will run out
of cash if the merger and the other transactions contemplated by the Merger
Agreement are not consummated, since the closing of those transactions is a
condition precedent to the Investors’ obligations to purchase shares of the
Company’s common stock pursuant to the Securities Purchase
Agreement.
Note
that the above-described severance compromise, if implemented, represents a
potential for significant dilution of the holdings of the Company’s current
stockholders.
Interest
of Director
If the
proposed increase in the share reserve under the 2002 Stock Option Plan is
approved, and the above-described severance compromise is implemented, Mr.
Vamvakas will be issued a significant number of stock options of
OccuLogix.
As a
result of his interest in this proposal, Mr. Vamvakas did not participate in the
Board’s decision to recommend, to the Company’s stockholders, a vote “For” this
proposal.
Resolution
Appendix
G to this proxy statement sets forth the full text of the resolution to increase
the share reserve under the 2002 Stock Option Plan by 53,544,000, from 6,456,000
to 60,000,000 (the “Appendix G Resolution”).
Required
Vote and Recommendation
The
affirmative vote of the majority of the votes cast at the Stockholders Meeting,
at which a quorum is present, is required to adopt the Appendix G
Resolution. For purposes of this approval, the votes attached to
shares of OccuLogix’s common stock beneficially owned by directors and officers,
and the votes attached to shares beneficially owned by such holders’ spouses,
partners and certain other related persons, will not be counted in determining
whether the necessary level of stockholder approval has been
obtained.
Unless
otherwise directed, the management representatives designated in the enclosed
proxy card intend to vote the shares of OccuLogix’s common stock, for which they
have been appointed,
FOR
the Appendix G
Resolution.
The
Board unanimously recommends a vote
FOR
the Appendix G
Resolution, with Mr. Vamvakas recording his abstention.
PROPOSAL X
Note
: Proposal
X is conditioned on Proposal III. If Proposal III is not approved by
the Company’s stockholders, then we will not take action with respect to
Proposal X.
Background
The Board
is seeking authority to effect a recapitalization of the Company’s share capital
following the implementation of the transactions contemplated by the Merger
Agreement and the Securities Purchase Agreement, and following the pre-payment
of the Bridge Loan and the payment of the commissions owing to Marchant in the
manner proposed. The proposed recapitalization would result in (i) a
reverse split of the issued and outstanding shares of the Company’s common stock
in a ratio of up to 1:25, if at all, with the actual ratio and the timing of
such reverse split to be determined by the Board in its sole discretion, and
(ii) a decrease in the number of authorized shares of the Company’s common stock
from 500,000,000 to a number equal to 500,000,000 multiplied by 50% of the
reverse split ratio, provided that such reverse split is effected.
Following
the implementation of the transactions contemplated by the Merger Agreement and
the Securities Purchase Agreement, and following the pre-payment of the Bridge
Loan and the payment of the commissions owing to Marchant in the manner
proposed, there will be at least 237,993,825 shares of OccuLogix’s common stock
issued and outstanding. The Board believes that it would not be in
the best interests of the Company or its stockholders for the Company to have
such a large number of shares of its capital stock issued and
outstanding.
In
addition, on September 18, 2007, OccuLogix received a letter from NASDAQ,
indicating that, for the previous 30 consecutive business days, the bid price of
the Company’s common stock closed below the minimum $1.00 per share requirement
(the “Minimum Bid Price Rule”) for continued inclusion under Marketplace Rule
4450(e)(5). Therefore, in accordance with Marketplace Rule
4450(e)(2), the Company was provided 180 calendar days, or until March 17, 2008,
to regain compliance with the Minimum Bid Price Rule. On March 18,
2008, the Company received a letter from NASDAQ, indicating that the Company had
not regained compliance with the Minimum Bid Price Rule and that the Company’s
securities are, therefore, subject to delisting from The NASDAQ Global
Market.
At that
time, OccuLogix confirmed its intention to appeal this delisting determination
to a NASDAQ Listing Qualifications Panel. On April 24, 2008, members
of management appeared before a NASDAQ Listing Qualifications Panel (the
“Panel”) and submitted a detailed compliance plan. We described
Proposals IV, V and VI to the Panel and also disclosed an intention to effect a
reverse split of the issued and outstanding shares of the Company’s common stock
in a ratio of up to 1:25. In its letter of March 18, 2008, NASDAQ
indicated that, historically, NASDAQ Listing Qualifications Panels generally
have viewed a near-term reverse stock split as the only definitive plan
acceptable to resolve a bid price deficiency.
On May
29, 2008, we received a letter from NASDAQ informing us that the Panel had
determined to grant the Company’s request for continued listing. The
Panel’s determination was subject to the conditions that, on or before July 24,
2008, the Company inform the Panel that it has obtained stockholder approval
for, and implemented, the reverse stock split and that the Company’s stock
evidence a closing bid price of at least $1.00 for a minimum of ten consecutive
trading days. The Panel’s determination was subject to the further
condition that, on or before July 24, 2008, the Company disclose, in a Current
Report on Form 8-K, pro forma financial statements evidencing stockholders’
equity of at least $10,000,000 or demonstrate compliance with one of NASDAQ’s
alternative listing criteria.
On June
27, 2008, we sent a letter to the Panel, requesting the transfer of our listing
to The NASDAQ Capital Market and an extension of the Panel’s July 24, 2008
deadline through August 29, 2008. On July 28, 2008, we received a
letter from NASDAQ informing us that the Panel has determined to grant the
Company’s requests for approval to transfer the listing of its common stock from
The NASDAQ Global Market to The NASDAQ Capital Market and for an extension of
time to regain compliance with the applicable continued listing
requirements. The Panel’s determination is subject to the condition
that, on or before August 29, 2008, the Company disclose, in a Current Report on
Form 8-K, pro forma financial statements evidencing stockholders’ equity of at
least $2,500,000 or demonstrate compliance with one of NASDAQ’s alternative
listing criteria and the further condition that, on or before September 16,
2008, the Company inform the Panel that the Company’s common stock has evidenced
a closing bid price of $1.00 or more for a minimum of ten consecutive trading
days. The transfer of the listing of the Company’s common stock to
The NASDAQ Capital Market was effective at the opening of business on July 30,
2008. Such transfer remains contingent upon the successful completion
of an application and review process.
Impact of Reverse Stock Split, if
Implemented
If
approved and implemented, the reverse stock split will be realized
simultaneously, and in the same ratio, for all of the issued and outstanding
shares of the Company’s common stock and will affect all issued and outstanding
shares of the Company’s common stock and outstanding rights to acquire the same
uniformly. It will not affect any stockholder’s percentage ownership
in the Company, except to the extent that the reverse stock split would result
in any holder of the Company’s common stock receiving whole shares instead of
fractional shares. See “—Fractional Shares”. As described
below, holders of shares of the Company’s common stock, who otherwise would be
entitled to fractional shares as a result of the reverse stock split, will
receive whole shares in lieu of such fractional shares. In addition,
the reverse stock split will not affect any stockholder’s proportionate voting
power, subject to the treatment of fractional shares.
The
principal effects of the reverse stock split will be the following.
|
·
|
The
number of shares of the Company’s common stock owned by a stockholder will
be reduced to the number obtained by dividing (i) the number of shares of
the Company’s common stock owned by such stockholder by (ii) the
denominator of the reverse split ratio. For example, if the
reverse split ratio is 1:25, then each 25 shares of the Company’s common
stock owned by a stockholder will be combined into one share of the
Company’s common stock.
|
|
·
|
Based
on the reverse split ratio selected by the Board in its sole discretion,
proportionate adjustments will be made to the per share exercise price and
the number of shares issuable upon the exercise of all outstanding stock
options and warrants to purchase shares of the Company’s common
stock.
|
|
·
|
The
share reserve under the 2002 Stock Option Plan will be reduced
proportionately, based on the reverse split ratio selected by the Board in
its sole discretion.
|
Fractional Shares
Stockholders
will not receive fractional shares of the Company’s common stock as a result of
the reverse stock split. A holder of shares of the Company’s common
stock, who otherwise would be entitled to a fractional share as a result of the
reverse stock split, will receive a whole share of the Company’s common stock in
lieu of such fractional share.
Board Discretion to Implement the
Reverse Stock Split
If the
reverse stock split is approved by the Company’s stockholders, it will be
implemented, if at all, only upon a determination by the Board, in its sole
discretion, that a reverse stock split is in the best interests of the Company
and its stockholders. Although the Board will not be required to
implement the reverse stock split, in view of the Company’s non-compliance with
the Minimum Bid Price Rule and the Company’s submission to the Panel in
connection with that matter, it is the Board’s intention, at the date of this
proxy statement, to implement the reverse stock split. If the Board
determines to implement the reverse stock split, it will consider various
factors in selecting the reverse split ratio, including, but not limited to, the
recent trading history of the Company’s common stock and the overall market
conditions.
If the
Board does not implement the reverse stock split on or prior to November 30,
2008, then the Board’s authority to effect the reverse stock split on the terms
described in this proxy statement will terminate.
Effective Date
If
implemented, the reverse stock split would become effective as of 11:59 p.m.
(Eastern time) on the date of filing, with the Secretary of State of the State
of Delaware, of an amendment to the Company’s Amended and Restated Certificate
of Incorporation that provides for the reverse stock split. No action
on the part of the Company’s stockholders will be necessary to effect the
reverse stock split.
Effect on “Street Name” Holders of
Common Stock
Following
the reverse stock split, if any, the Company intends to treat stockholders who
hold their shares of the Company’s common stock in “street name” (through a
brokerage firm, bank, dealer or other similar organization) in the same manner
as registered stockholders. Brokerage firms, banks, dealers and
similar organizations will be instructed to effect the reverse stock split for
their clients who are beneficial owners of shares of the Company’s common
stock.
Effect on “Book-Entry” Holders of
Common Stock
Certain
stockholders may hold some or all of their shares of the Company’s common stock
electronically in book-entry form with the Company’s transfer
agent. No action need be taken by any such stockholder in order to
receive post-reverse stock split shares of the Company’s common
stock. If such a stockholder is entitled to receive post-reverse
stock split shares, the Company’s transfer agent will send a transaction
statement to such stockholder’s address of record, indicating the number of
shares of the Company’s common stock held by such stockholder following the
reverse stock split, if any.
Effect
on Certificated Shares of Common Stock
Stockholders
holding shares of the Company’s common stock in certificated form will be sent a
transmittal letter by the Company’s transfer agent as soon as practicable
following the reverse stock split, if any. The transmittal letter
will contain instructions on how such stockholders should surrender their
certificates representing shares of the Company’s common stock to the Company’s
transfer agent in exchange for new certificates representing their post-reverse
stock split shares of the Company’s common stock. No new certificate
will be issued to any stockholder until such stockholder has surrendered all of
his, her or its old certificates, together with a properly completed and
executed transmittal letter, to the Company’s transfer agent. New
certificates will be issued with the same restrictive legends, if any, as may
have appeared on the exchanged old certificates.
No Appraisal
Rights
The
Company’s stockholders are not entitled to appraisal rights under the Delaware
General Corporation Law, the Company’s Amended and Restated Certificate of
Incorporation or the Company’s Amended and Restated Bylaws, and the Company will
not provide stockholders with any such rights. There may exist other
rights or actions under law for stockholders who are
aggrieved. However, the nature and extent of such rights or actions
are uncertain and may vary depending on the facts or
circumstances. Stockholder challenges to corporate action in general
are related to the fiduciary responsibilities of corporate officers and
directors and to the fairness of corporate transactions.
U.S.
Federal Income Tax Consequences of Reverse Stock Split
The
following is a summary of certain U.S. federal income tax consequences of the
reverse stock split, if any.
No gain
or loss should be recognized by a stockholder upon such stockholder’s exchange
of pre-reverse split shares of the Company’s common stock for post-reverse stock
split shares, following the reverse stock split, if any. In
connection with the reverse stock split (including any fraction of a
post-reverse stock split share deemed to have been received), the tax basis will
be the same as such stockholder’s aggregate tax basis in the pre-reverse stock
split shares exchanged therefor. Such stockholder’s holding period
for the post-reverse stock split shares will include the period during which
such stockholder held the pre-reverse stock split shares.
The
Company’s view regarding the tax consequences of the reverse stock split is not
binding on the Internal Revenue Service or the courts. Accordingly,
stockholders are urged to consult their own tax advisors with respect to their
particular circumstances and the potential tax consequences to them of the
reverse stock split.
This
summary is of a general nature only, is not exhaustive of all U.S. federal
income tax considerations and is not intended to be, nor should it be construed
to be, legal or tax advice to stockholders. Furthermore, it does not
address any state, local or foreign income or other tax
consequences. Also, it does not address the tax consequences to
stockholders that are subject to special tax rules, such as banks, insurance
companies, regulated investment companies, personal holding companies, foreign
entities, non-resident alien individuals, broker-dealers and tax-exempt
entities.
Accordingly, stockholders
are urged to consult their own tax advisors with respect to their particular
circumstances.
This summary is based on the provisions of the
U.S. federal income tax law at the date of this proxy statement, which is
subject to change retroactively as well as prospectively. This
summary also assumes that the pre-reverse stock split shares were, and the
post-reverse stock split shares will be, held as a “capital asset” (as such term
is defined in the Internal Revenue Code of 1986, as amended), being, generally,
property held for investment.
Canadian Federal Income Tax
Consequences of Reverse Stock Split
The
following summary describes the principal Canadian federal income tax
considerations under the
Income Tax Act
(Canada) (the
“Tax Act”) generally applicable to stockholders whose shares of the Company’s
common stock are consolidated pursuant to the reverse stock split, if any, and
who for purposes of the Tax Act, are resident in Canada, hold such shares as
capital property and deal at arm’s length, and are not affiliated, with the
Company.
Such
stockholder will not realize a capital gain or a capital loss as a result of the
implementation of the reverse stock split.
This
summary is of a general nature only, is not exhaustive of all Canadian income
tax considerations and is not intended to be, nor should it be construed to be,
legal or tax advice to stockholders.
Accordingly, stockholders
are urged to consult their own tax advisors with respect to their particular
circumstances.
This summary is based on the current provisions
of the Tax Act, the regulations thereunder (the “Regulations”) and the current
published administrative practices and policies of the Canada Revenue Agency and
takes into account all specific proposals to amend the Tax Act and the
Regulations announced by the Minister of Finance (Canada) prior to the date of
this proxy statement. This summary does not take into account or
anticipate any other changes in the law or administrative practices, whether by
judicial, governmental or legislative action or decision, nor does it take into
account any provincial, territorial or foreign income tax legislation or
considerations.
Decrease in the Number of Authorized
Shares of Common Stock
If
Proposal III is approved by the Company’s stockholders, the number of authorized
shares of the Company’s common stock will be 500,000,000. Following
the implementation of the transactions contemplated by the Merger Agreement and
the Securities Purchase Agreement, and following the pre-payment of the Bridge
Loan and the payment of part of the commissions owing to Marchant in the manner
proposed, there will be at least 237,993,825 shares of OccuLogix’s common stock
issued and outstanding. Following the implementation of the reverse
stock split, that number will be reduced by up to 25 times. The Board
believes that, should the reverse stock split be implemented, it would not be in
the best interests of the Company and its stockholders to maintain the number of
authorized shares of the Company’s common stock at
500,000,000. Accordingly, we are seeking authority to effect a
decrease in the number of authorized shares of the Company’s common stock from
500,000,000 to a number equal to 500,000,000 multiplied by 50% of the reverse
split ratio, provided that such reverse split is effected.
Reasons for the
Proposal
Following
the implementation of the transactions contemplated by the Merger Agreement and
the Securities Purchase Agreement, and following the pre-payment of the Bridge
Loan and the payment of part of the commissions owing to Marchant in the manner
proposed, the issued and outstanding share capital of OccuLogix will consist of
at least 237,993,825 shares of common stock. The Board believes that
it would not be in the best interests of the Company to have such a large number
of shares of its capital stock issued and outstanding.
More
importantly, although there can be no assurance that implementing the reverse
stock split will cause the Company to regain compliance with the Minimum Bid
Price Rule and avoid the delisting of the Company’s securities from The NASDAQ
Capital Market, the Board believes that the reverse stock split is the only
viable plan to resolve the bid price deficiency, as was confirmed in NASDAQ’s
letter to the Company of March 18, 2008.
Given the
reduction in the number of issued and outstanding shares of the Company’s common
stock that will result if the reverse stock split is implemented, the Board does
not believe that it would be in the best interests of the Company and its
stockholders to maintain the number of authorized shares of the Company’s common
stock at 500,000,000 and, therefore, proposes to decrease it to a number equal
to 500,000,000 multiplied by 50% of the reverse split ratio. The
Board believes that that number of authorized shares of the Company’s common
stock will be sufficient for current and future corporate purposes, including
the issuance of shares of the Company’s common stock upon the exercise of stock
options and outstanding warrants of the Company, and will provide sufficient
flexibility for future capital raising needs. The decrease in the
number of authorized shares of the Company’s common stock, if approved by the
Company’s stockholders and implemented, will not change the number of issued and
outstanding shares of the Company’s common stock.
Resolution
Appendix
H to this proxy statement sets forth the full text of the resolution to approve
a further amendment to the Company’s Amended and Restated Certificate of
Incorporation in order to (i) provide for a recapitalization in which the issued
and outstanding shares of the Company’s common stock will be reverse split in a
ratio of up to 1:25, if at all, with the actual ratio and the timing of such
reverse stock split to be determined by the Board in its sole discretion, and
(ii) decrease the number of authorized shares of the Company’s common stock from
500,000,000 to a number equal to 500,000,000 multiplied by 50% of the reverse
split ratio, provided that such reverse split is effected (the “Appendix H
Resolution”). Notwithstanding the approval of the Appendix H
Resolution by the Company’s stockholders, the Board may elect not to proceed
with the further amendment to the Company’s Amended and Restated Certificate of
Incorporation, in its sole discretion. However, in view of the
Company’s non-compliance with the Minimum Bid Price Rule and the Company’s
submission to the Panel in connection with that matter, it is the Board’s
intention, at the date of this proxy statement, to implement the reverse stock
split and the consequent decrease in the number of authorized shares of the
Company’s common stock from 500,000,000 to a number equal to 500,000,000
multiplied by 50% of the reverse split ratio.
If the
Appendix H Resolution is adopted by the Company’s stockholders, then the Board
will have the authority, without any further action on the part of the Company’s
stockholders, to determine the actual ratio of the reverse stock split and to
file the further amendment to the Company’s Amended and Restated Certificate of
Incorporation, contemplated in the Appendix H Resolution, with the Secretary of
State of the State of Delaware at any time on or prior to November 30,
2008.
Required
Vote and Recommendation
The
affirmative vote of the holders of a majority of the issued and outstanding
shares of the Company’s common stock (and not simply the majority of the votes
cast at the Stockholders Meeting, at which a quorum is present) is required to
adopt the Appendix H Resolution.
Unless otherwise directed, the
management representatives designated in the enclosed proxy card intend to vote
the shares of OccuLogix’s common stock, for which they have been appointed,
FOR
the Appendix H
Resolution.
The
Board unanimously recommends a vote
FOR
the Appendix H
Resolution.
EXECUTIVE
OFFICERS
Provided below are brief summaries of
the business experience during the past five years or more of each of the
executive officers of OccuLogix who is not a director:
William G. Dumencu,
CA
, served as Occulogix’s
Chief Financial Officer and Treasurer between September 2003 and June 2005 and
has been serving again in that capacity since the middle of April
2006. Prior to his re-appointment as OccuLogix’s Chief Financial
Officer and Treasurer in April 2006,
Mr.
Dumencu
had been serving as OccuLogix’s Vice
President, Finance. From January 2003 to August 2003,
Mr.
Dumencu
was a consultant for OccuLogix and TLC
Vision, and, from 1998 until 2002,
Mr.
Dumencu
served in a variety of financial
leadership positions at TLC Vision, including
Controller.
Mr.
Dumencu
was employed in various financial
management positions by Hawker Siddeley Canada, Inc., a manufacturing
conglomerate, from 1978 to 1998.
Mr.
Dumencu
is a Chartered Accountant and a member
of the Canadian Institute of Chartered Accountants. He holds a
Bachelor of Math degree from the
University
of
Waterloo
.
Suh Kim
is OccuLogix’s
General Counsel. Prior to joining the Company, she practised
corporate and securities law in Toronto with a major Canadian law
firm. Prior to commencing legal practice, she had served as Executive
Assistant (Chief of Staff) to Bill Graham, formerly Canada’s Minister of
National Defence, Minister of Foreign Affairs and Chairman of the House of
Commons Committee on Foreign Affairs and International Trade. Ms. Kim
holds a Bachelor of Social Sciences from the University of Ottawa and a Bachelor
of Laws from the University of Toronto. She is a member of the Law
Society of Upper Canada and also has been called to the Bar of the State of New
York.
COMPENSATION DISCUSSION AND
ANALYSIS
Overview
Despite
the departure of most members of our executive team, the objectives of, and the
principles underlying, the Company’s compensation program for executive officers
remain unchanged.
The main
objective of the compensation program for executive officers, including the five
executives who are identified in the Summary Compensation Table (the “Named
Executive Officers”), is the same as our overall objective in operating the
Company—to create long-term value for stockholders. OccuLogix’s
corporate philosophy on compensation is that compensation should be tied to an
individual’s performance and to the performance of the Company
overall. We believe that executive officers who make a substantial
contribution to the long-term success of the Company and its subsidiaries are
entitled to participate in that success.
Our
executive compensation program is designed to attract qualified executives and
to encourage them to remain with the Company for long and productive careers, to
reward executives for performance and leadership excellence and to align
executives’ interests with those of stockholders. The compensation of
OccuLogix’s executive officers, including the Named Executive Officers, is
comprised of base salary, cash bonuses and long-term incentives in the form of
OccuLogix stock options. Mr. Vamvakas, the Chief Executive Officer
(also the Secretary and Chairman of the Board), also receives certain
perquisites as part of his compensation package. During most of his
tenure as the President and Chief Operating Officer of the Company, Mr. Reeves
also received certain perquisites as part of his compensation
package. While he was employed by the Company, Dr. Eldridge, the Vice
President, Science and Technology, also received certain perquisites as part of
his compensation package. Most of the elements of our executive
officers’ compensation simultaneously fulfill one or more of the attraction and
retention, performance and alignment objectives of our executive compensation
program. We combine these elements for each executive in a manner
that we believe optimizes that executive’s contribution to the
Company.
OccuLogix
does not have an executive pension plan. However, our executives
participate in benefit programs that are generally available to employees of the
Company, including our health and dental insurance plan.
Compensation
Objectives
Attraction and
Retention
OccuLogix
was incorporated in the State of Delaware in 2002 and operates in an emerging
market. As a pre-revenue company which is in the development phase of
its growth, we are subject to certain challenges in our executive recruitment
activities that more mature companies may not face. We seek to keep
our executives’ base salaries and cash bonus compensation competitive with those
of executives at comparable companies in the biotechnology and medical devices
industries. The Company also places considerable emphasis on stock
options as an attraction and retention tool. Our stock option awards
are structured to facilitate the retention of executives in that they typically
vest in one-third increments during the three-year period following their
grant.
Performance
Base
salaries and cash bonus compensation are designed to reward annual achievements
and to be commensurate with executives’ scope of responsibilities, demonstrated
leadership abilities, management experience and demonstrated effectiveness in
their respective roles. Cash bonus compensation, in particular, is
intended to reward performance—individual performance as well as the performance
of the Company. Cash bonuses are paid, within the discretion of the
Compensation Committee of the Board (the “Compensation Committee”), based on an
assessment of an executive’s performance against pre-determined quantitative
and/or qualitative individual goals and based also on a determination of whether
pre-determined collective, corporate objectives have been met by the Company
during the performance review period in question. Performance-based
stock option awards are sometimes used to encourage and reward performance
prospectively, and a stock option award, on one occasion, was granted in
recognition of the extraordinary past performance of a Named Executive
Officer.
Alignment
We seek
to align the interests of our executives with those of our stockholders by
evaluating executive performance on the basis of measurements which we believe
correlate to long-term stockholder value. Key elements of executive
compensation that align the interests of executives with those of stockholders
include (1) cash bonus compensation since it is paid, based on an assessment of
the attainment of, or failure to attain, certain pre-determined measures, the
attainment of which is judged to be critical to the success of the Company, and
(2) stock option awards, which link that portion of executives’ compensation to
stockholder value since the value of such awards is directly related to the
value of the underlying stock. Although we do not require stock
ownership by executives, we do not discourage it in any way and actively
encourage executives to execute their duties and responsibilities, and manage
the Company, as though they are owners of the Company.
Implementing
Our Objectives
In making
compensation decisions, we rely on our judgment after reviewing the performance
of the Company and evaluating an executive’s performance during the year against
pre-determined measures and his or her leadership qualities, operational
performance, responsibilities, current compensation arrangements and long-term
potential to enhance stockholder value. We also take into account
marketplace standards and trends.
Some
specific factors affecting compensation decisions include:
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strategic
objectives of the Company such as acquisitions and
financings;
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specific
operational goals for the Company such as, for example, the progress of
the Company’s clinical trials;
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ability
to lead, mentor and motivate employees;
and
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contribution
to the promotion of the Company’s corporate
values.
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We
generally do not adhere to set formulas, or react to short-term changes in
performance, in determining the amount and mix of compensation. In
our view, some measure of flexibility in this regard is desirable since the most
effective tools used to motivate long-term performance by some executives may
not be the same ones that will be most effective or appropriate in motivating
the long-term performance of other executives. We believe that the
most important indicator of whether our compensation objectives are being met is
our ability to motivate our executives to perform well consistently and to
continue their careers with the Company.
Annual
Cash Compensation—Base Salary
The base
salaries of our executives depend on the scope and level of their
responsibilities and their performance. Decisions regarding salary
increases take into account the executive’s current base salary, the level of
compensation paid to his or her peers within and outside the Company and the
Company’s overall financial condition. Base salaries are reviewed
every year, in July, but are not increased automatically.
Annual
Cash Compensation—Bonus
Bonus
compensation, in particular, is intended to reward individual performance as
well as the performance of the Company. The maximum bonus
compensation of each executive, other than that of Mr. Vamvakas, is a percentage
of his or her base salary. Mr. Vamvakas is entitled to receive up to
the full amount of his base salary in bonus compensation. For most
executives, payment of 25% of his or her bonus compensation is dependent on the
achievement of his or her individual goals, and payment of the remaining 75% is
contingent on the attainment of the collective, corporate objectives of the
Company. However, Mr. Vamvakas’ bonus compensation (and that of Mr.
Reeves while he was employed with the Company) is contingent solely on the
attainment of the collective, corporate objectives of the Company. In
December of each year, Messrs. Vamvakas and Reeves would review with the
Compensation Committee their assessment of each executive’s performance against
the pre-determined measures applicable to that executive, which would have been
approved by the Compensation Committee at the start of the performance review
period in question. Using that assessment as an evaluative tool and
factoring in its determination of whether, or the extent to which, the Company’s
collective, corporate objectives have been met during the performance review
period, the Compensation Committee would set the level of bonus compensation, if
any, to be paid to executives. The Compensation Committee’s approach
to setting executives’ individual goals and the Company’s collective, corporate
objectives is to ensure that these goals and objectives are attainable but
challenging.
Long-term
Incentives—Stock Options
In 2005,
an aggregate of 768,750 performance-based stock options under the 2002 Stock
Option Plan was granted to executives, the vesting of which is contingent upon
the attainment of certain milestones on or prior to certain specified
dates. In connection with the recruitment of two executives in 2005,
an additional 400,000 stock options were granted—100,000 under the 2002 Stock
Option Plan and 300,000 outside the 2002 Stock Option Plan, of which 100,000 are
performance-based stock options. In 2006, no stock options were
awarded to any of our executives, other than to (1) Mr. Vamvakas, who agreed to
receive stock options in lieu of the cash compensation to which he would have,
or might have (in the case of his bonus compensation), otherwise been entitled
in his capacity as the Chief Executive Officer of the Company, (2) to Mr. Adams,
the President & Founder, Glaucoma Division of the Company, who joined the
Company on September 1, 2006 and (3) to Dr. Chaudry-Rao, Vice President,
Clinical Research of the Company, who joined the Company on February 10,
2006. In 2007, 20,000 time-based stock options were granted to Mr.
Reeves in recognition of his exceptional contribution to the Company during
2006, and time-based stock options also were granted to Ms. Kim, the General
Counsel, upon her joining the Company on March 12, 2007. In addition
to these two grants, in July 2007, an aggregate of 530,000 time-based stock
options was awarded to our executives (including to Mr. Reeves and Ms.
Kim). We are of the view that it will be important for the attainment
of the Company’s compensation objectives for it, in the future, to continue to
have the ability to make such annual grants of additional stock options to
executives, if doing so would be appropriate in view of the strategic,
operational and financial performance of the Company overall.
Perquisites
We
provide Mr. Vamvakas with a car allowance and used to provide Mr. Reeves with a
car allowance but ceased to do so after April 30, 2008. In addition,
Mr. Vamvakas is entitled to have the Company reimburse him for miscellaneous
expenses, to a maximum of C$20,000 per year, which can include club membership
fees. While he was employed with the Company, Mr. Reeves enjoyed the
same perquisite. We also paid a portion of the premium on Dr.
Eldridge’s supplementary health insurance policy while he was employed by the
Company.
Stock
Options Grant Practice
The
exercise price of stock options awarded to our executives is set at the greater
of (1) the volume weighted average trading price of the Company’s common stock
on The NASDAQ Global Market for the five trading-day period immediately
preceding the date of grant and (2) the closing price of the Company’s common
stock on The NASDAQ Global Market on the trading date immediately preceding the
date of grant. Under no circumstances, are stock options deemed to be
granted as of a date preceding a date on which the requisite approval of the
Compensation Committee or the Board is given. It is the Company’s
practice to avoid making stock options grants when there exists material
information that has not been publicly disclosed.
Role
of Executives in Determining Compensation
The
Compensation Committee has primary responsibility for assisting the Board in
developing and evaluating potential candidates for executive positions,
including that of the Chief Executive Officer, and for overseeing the
development of executive succession planning. As part of this
responsibility, the Compensation Committee oversees the design, development and
implementation of the Company’s executive compensation program.
The
Compensation Committee evaluates Mr. Vamvakas’ performance and determines his
compensation. Mr. Vamvakas and the Compensation Committee, together,
evaluated the performance of Mr. Reeves, and, guided by Mr. Vamvakas’
recommendation, the Compensation Committee determined Mr. Reeves’
compensation. Messrs. Vamvakas and Reeves and the Compensation
Committee, together, would evaluate the performance of all of the other
executives, including the other Named Executive Officers, and, guided by
recommendations made by Messrs. Vamvakas and Reeves, the Compensation Committee
would determine the compensation of all of the other executives.
Other
than as described above, and other than by discussing their performance
objectives and evaluations with the individual to whom they report, executives
do not play a role in determining their own compensation.
Role
of Compensation Consultant
At the
present time, neither the Company nor the Compensation Committee has retained
any compensation consultant to assist with executive compensation
matters.
Tax
Deductibility of Compensation
Section
162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue
Code”), imposes a $1 million limit on the amount that a public company may
deduct for compensation paid to the company’s chief executive officer or any of
the company’s four other most highly compensated executives who are employed as
of the end of the year. This limit does not apply to compensation
that meets the requirements under Section 162(m) of the Internal Revenue Code
for “qualifying performance-based” compensation, generally being compensation
paid only if the individual’s performance meets pre-established objective goals
based on performance criteria approved by stockholders. The current
levels of compensation of the Chief Executive Officer and the other Named
Executive Officers do not make the limitation imposed by Section 162(m) of the
Internal Revenue Code of immediate concern to the Company. However,
the Compensation Committee intends to take note of that limitation as it sets
and monitors executive compensation levels in the future.
Compensation
of the Named Executive Officers in 2007
Chief
Executive Officer
Mr.
Vamvakas’ base compensation during the financial year ended December 31, 2007
was C$483,132. He earned no bonus compensation for his performance
during the financial year ended December 31, 2007 but was awarded 100,000
time-based stock options which will vest in one-third increments during the
three-year period following their grant. See “Additional Information
on Executive Compensation—Employment Contracts—Elias Vamvakas”.
Chief
Financial Officer and Treasurer
Mr.
Dumencu’s base compensation during the financial year ended December 31, 2007
was C$181,155. He earned no bonus compensation for his performance
during the financial year ended December 31, 2007 but was awarded 30,000
time-based stock options which will vest in one-third increments during the
three-year period following their grant. See “Additional Information
on Executive Compensation—Employment Contracts—William G. Dumencu”.
President
and Chief Operating Officer
Mr.
Reeves’ base compensation during the financial year ended December 31, 2007
consisted of a base salary of C$325,600 and professional fees in the amount of
$51,750. He earned no bonus compensation for his performance during
the financial year ended December 31, 2007 but was awarded an aggregate of
120,000 time-based stock options, of which 20,000 were granted in recognition of
his exceptional contribution to the Company during 2006. All of these
stock options will vest in one-third increments during the three-year period
following their grant. Mr. Reeves’ employment with the Company was
terminated on June 30, 2008, as a result of which he is owed severance by the
Company. See “Additional Information on Executive
Compensation—Employment Contracts—Thomas P. Reeves”.
Vice
President, Science and Technology
Dr.
Eldridge’s base compensation during the financial year ended December 31, 2007
was $197,500. He earned no bonus compensation for his performance
during the financial year ended December 31, 2007 but was awarded 30,000
time-based stock options which will vest in one-third increments during the
three-year period following their grant. Dr. Eldridge’s employment
with the Company was terminated on January 8, 2008, as a result of which he is
owed severance by the Company. See “Additional Information on
Executive Compensation—Employment Contracts—David C. Eldridge”.
Vice
President, Clinical Research
Dr.
Chaudry-Rao’s base compensation during the financial year ended December 31,
2007 was C$203,500. She earned no bonus compensation for her
performance during the financial year ended December 31, 2007 but was awarded
30,000 stock options. Dr. Chaudry-Rao’s employment with the Company
was terminated on January 31, 2008, as a result of which she is owed severance
by the Company. See “Additional Information on Executive
Compensation—Employment Contracts—Nozait Chaudry-Rao”. The Company
has retained Dr. Chaudry-Rao’s services in connection with the winding-down of
its RHEO-AMD study, for which she is being paid on an hourly basis.
Post-Employment
Compensation
All of
the Named Executive Officers have a severance entitlement pursuant to their
respective employment agreements. Had their employment with the
Company been terminated without cause as at December 31, 2007, the Company would
have been obligated to make severance payments of C$1,572,565, C$188,878,
C$965,137, $217,705 and C$216,062 to Mr. Vamvakas, Mr. Dumencu, Mr. Reeves, Dr.
Eldridge and Dr. Chaudry-Rao, respectively. See also “Additional
Information on Executive Compensation—Employment Contracts”.
Directors’
Compensation
Our
general philosophy toward directors’ compensation is that directors should be
paid fairly for the work, time and effort required to serve on the Board, that
directors’ compensation should align their interests with those of stockholders
and that the structure of directors’ compensation should be straightforward and
transparent. The Company compensates only non-executive directors for
serving on the Board.
Directors’
compensation during the financial year ended December 31, 2007 is described
under “Additional Information on Executive Compensation—Compensation of
Directors” and “—Director Compensation Table”.
Compensation
Committee Report
The
Compensation Committee has reviewed the Compensation Discussion and Analysis and
has discussed it with management. Based on its review and discussions
with management, the Compensation Committee has recommended to the Board that
the Compensation Discussion and Analysis be included in this proxy
statement.
Thomas
N. Davidson
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Jay
T. Holmes
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Georges
Noël
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Gilbert
S. Omenn
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Adrienne
L. Graves
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ADDITIONAL
INFORMATION ON EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following table sets forth information concerning the total compensation earned
during each of the financial years ended December 31, 2007 and December 31, 2006
by:
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the
Chief Executive Officer;
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|
the
Chief Financial Officer and Treasurer;
and
|
|
·
|
each
of the three most highly compensated executive officers (other than the
Chief Executive Officer and the Chief Financial Officer and Treasurer)
during the financial year ended December 31, 2007 and who was serving as
an executive officer at the end of such financial
year.
|
Summary Compensation
Table
Name
and Principal Position
|
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Option
Awards
(1)(2)
|
|
|
All
Other Compensation
(3)
|
|
|
Total
|
|
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elias
Vamvakas
(4)
|
|
|
2007
|
|
|
|
491,983
|
|
|
|
—
|
|
|
|
78,000
|
|
|
|
35,610
|
|
|
|
605,592
|
|
Chairman
and Chief Executive Officer
|
|
|
2006
|
|
|
|
182,188
|
(5)
|
|
|
—
|
|
|
|
418,500
|
|
|
|
18,445
|
|
|
|
619,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
G. Dumencu
(4)
|
|
|
2007
|
|
|
|
184,474
|
|
|
|
—
|
|
|
|
23,400
|
|
|
|
—
|
|
|
|
207,874
|
|
Chief
Financial Officer and Treasurer (between September 2003 and May 2005; and
from April 2006 to the present)
|
|
|
2006
|
|
|
|
147,508
|
|
|
|
10,542
|
|
|
|
12,600
|
|
|
|
—
|
|
|
|
170,650
|
|
Vice
President, Finance (between June 2005 and April 2006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Reeves
(6)
|
|
|
2007
|
|
|
|
331,564
|
|
|
|
—
|
|
|
|
103,600
|
|
|
|
87,330
|
|
|
|
522,494
|
|
President
and Chief Operating Officer
|
|
|
2006
|
|
|
|
274,353
|
|
|
|
48,297
|
|
|
|
130,050
|
|
|
|
89,821
|
|
|
|
542,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
C. Eldridge
|
|
|
2007
|
|
|
|
197,500
|
|
|
|
—
|
|
|
|
23,400
|
|
|
|
217,705
|
|
|
|
438,605
|
|
Vice
President, Science and Technology (between November 2004 and January
2008)
|
|
|
2006
|
|
|
|
195,000
|
|
|
|
13,203
|
|
|
|
12,600
|
|
|
|
—
|
|
|
|
220,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nozait
Chaudry-Rao
(4)
|
|
|
2007
|
|
|
|
207,227
|
|
|
|
—
|
|
|
|
23,400
|
|
|
|
216,062
|
|
|
|
446,689
|
|
Vice
President, Clinical Research
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
___________________________________
(1)
|
For
the financial year ended December 31, 2007, the values set forth in this
column are based on the full grant date fair value of stock option awards,
computed in accordance with the provisions of SFAS No.
123R. For the financial year ended December 31, 2006, the
values set forth in this column are based on the full grant date fair
value of stock option awards, computed in accordance with the provisions
of SFAS No. 123R. These stock options include time-based stock
options granted during the financial years ended December 31, 2007 and
December 31, 2006.
|
(2)
|
The
values in this column also include the incremental fair value of the then
out-of-the-money stock options which were re-priced by the Company during
2006. The incremental fair value of the re-priced stock
options, which were granted to the Named Executive Officers prior to the
financial year ended December 31, 2006, was computed in accordance with
the provisions of SFAS No. 123R. See “—Re-Pricing of Stock
Options”.
|
(3)
|
These
amounts do not include the value of perquisites received by Dr. Eldridge
as the aggregate value of such perquisites did not exceed
$10,000. Although Mr. Dumencu was entitled to reimbursement by
the Company of the costs of preparation of his annual income tax return
during the financial years ended December 31, 2007 and December 31, 2006,
he did not exercise such entitlement. The amounts set forth in
this column for Drs. Eldridge and Chaudry-Rao consist of the amounts
accrued by the Company in December 2007 in respect of their respective
severance entitlement.
|
(4)
|
All
cash compensation paid to Messrs. Vamvakas and Dumencu and Dr. Chaudry-Rao
was paid in Canadian dollars. Amounts paid during 2007 and 2006
have been converted to U.S. dollars at the year-end exchange rate of
C$0.98201 to $1.00 and C$1.16638 to $1.00,
respectively.
|
(5)
|
Reflects
salary earned by Mr. Vamvakas during the period from January 1, 2006 to
June 30, 2006 inclusive.
|
(6)
|
Cash
compensation paid to Mr. Reeves as an employee of OccuLogix was paid in
Canadian dollars, and that amount has been converted to U.S.
dollars. See note 4 for exchange rates. Compensation
paid to Mr. Reeves as a consultant of OccuLogix is included in the column
headed “All Other Compensation” and was paid in U.S.
dollars.
|
All
Other Compensation Table
The
following table sets forth each component of the column headed “All Other
Compensation” in the Summary Compensation Table.
Name
|
|
|
Year
|
|
|
Severance
(1)
|
|
|
Consulting
Fees
|
|
|
Car
Allowance
|
|
|
Club
Membership
|
|
|
Tax
Return Preparation
|
|
|
Total
|
|
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elias
Vamvakas
|
|
|
2007
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,220
|
|
|
|
23,390
|
|
|
|
—
|
|
|
|
35,610
|
|
|
|
|
2006
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,144
|
|
|
|
13,301
|
|
|
|
—
|
|
|
|
18,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Reeves
|
|
|
2007
|
|
|
|
—
|
|
|
|
50,875
|
|
|
|
12,220
|
|
|
|
18,298
|
|
|
|
5,937
|
|
|
|
87,330
|
|
|
|
|
2006
|
|
|
|
—
|
|
|
|
58,668
|
|
|
|
10,288
|
|
|
|
15,809
|
|
|
|
5,056
|
|
|
|
89,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
C. Eldridge
|
|
|
2007
|
|
|
|
217,705
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
217,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nozait
Chaudry-Rao
|
|
|
2007
|
|
|
|
216,062
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
216,062
|
|
___________________________________
(1)
|
The
amounts set forth in this column were accrued by the Company in December
2007 but were not paid during the financial year ended December 31,
2007. See “—Employment Contracts—David C. Eldridge” and
“—Employment Contracts—Nozait
Chaudry-Rao”.
|
Grants
of Plan-Based Awards Table
The
following table sets forth the grant of OccuLogix stock options for the
financial year ended December 31, 2007 to the Named Executive
Officers. All of these stock options are time-based and will vest in
one-third increments during the three-year period following their respective
dates of grant. In July 2007, an aggregate of 530,000 time-based
stock options was granted to our executives, of which 290,000 were granted to
the Named Executive Officers. Such grant was the inaugural grant of
additional stock options to executives which the Board has resolved to effect,
on an annual basis, if doing so would be appropriate in view of the strategic,
operational and financial performance of the Company overall. In
addition to the 100,000 time-based stock options that Mr. Reeves received in
July 2007, he also was awarded 20,000 time-based stock options in March 2007 in
recognition of his exceptional contribution to the Company during
2006.
Name
|
|
|
Grant
Date
|
|
|
All
Other Option Awards: Number of Securities Underlying
Options
|
|
Exercise
Price of Option Awards
|
|
|
|
|
|
|
|
(#)
|
|
|
($/share)
|
|
|
|
|
|
|
|
|
|
|
|
Elias
Vamvakas
|
|
|
07/03/2007
|
|
|
|
100,000
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
William
G. Dumencu
|
|
|
07/03/2007
|
|
|
|
30,000
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Reeves
|
|
|
03/11/2007
|
|
|
|
20,000
|
|
|
|
1.82
|
|
|
|
07/03/2007
|
|
|
|
100,000
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
David
C. Eldridge
|
|
|
07/03/2007
|
|
|
|
30,000
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
Nozait
Chaudry-Rao
|
|
|
07/03/2007
|
|
|
|
30,000
|
|
|
|
1.11
|
Outstanding
Equity Awards at 2007 Fiscal Year-End
The following table provides information
regarding the Named Executive Officers’ holdings of OccuLogix stock options as
of the end of the financial year ended
December 31, 2007
.
Outstanding Equity Awards at Fiscal
Year-End
|
|
|
|
|
|
Option
Awards
|
|
Name
|
|
|
Grant
Date
|
|
|
Number
of Securities Underlying Unexercised Options Exercisable
|
|
|
Number
of Securities Underlying Unexercised Options Unexercisable
|
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
|
|
|
Option
Exercise Price
|
|
|
Options
Expiration Date
|
|
|
|
|
|
|
|
|
(#)
|
|
|
|
(#)
|
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elias
Vamvakas
|
|
|
07/03/2007
(1)
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
1.11
|
|
|
07/03/2017
|
|
|
|
|
08/03/2006
(2)
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.90
|
|
|
08/03/2016
|
|
|
|
|
03/30/2005
(3)
|
|
|
|
—
|
|
|
|
112,500
|
|
|
|
—
|
|
|
|
2.05
|
|
|
03/30/2015
|
|
|
|
|
07/01/2003
(4)
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.99
|
|
|
07/01/2013
|
|
|
|
|
08/01/2002
(5)
|
|
|
|
4,583
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.30
|
|
|
08/01/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
G. Dumencu
|
|
|
07/03/2007
(1)
|
|
|
|
—
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
1.11
|
|
|
07/03/2017
|
|
|
|
|
03/30/2005
(3)
|
|
|
|
—
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
2.05
|
|
|
03/30/2015
|
|
|
|
|
08/01/2003
(4)
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.99
|
|
|
08/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Reeves
|
|
|
07/03/2007
(1)
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
1.11
|
|
|
07/03/2017
|
|
|
|
|
03/11/2007
(6)
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
1.82
|
|
|
03/11/2017
|
|
|
|
|
03/30/2005
(3)
|
|
|
|
—
|
|
|
|
78,750
|
|
|
|
—
|
|
|
|
2.05
|
|
|
03/30/2015
|
|
|
|
|
12/16/2004
(7)
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.05
|
|
|
12/16/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
C. Eldridge
|
|
|
07/03/2007
(1)
|
|
|
|
—
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
1.11
|
|
|
07/03/2017
|
|
|
|
|
03/30/2005
(3)
|
|
|
|
—
|
|
|
|
45,000
|
|
|
|
—
|
|
|
|
2.05
|
|
|
03/30/2015
|
|
|
|
|
07/01/2003
(4)
|
|
|
|
59,798
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.99
|
|
|
07/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nozait
Chaudry-Rao
|
|
|
07/03/2007
(1)
|
|
|
|
—
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
1.11
|
|
|
07/03/2017
|
|
|
|
|
02/10/2006
(8)
|
|
|
|
26,667
|
|
|
|
53,333
|
|
|
|
|
|
|
|
2.05
|
|
|
02/10/2016
|
|
___________________________________
(1)
|
Exercisable
as to (i) 33⅓% on July 3, 2008, (ii) 33⅓% on July 3, 2009 and (iii) 33⅓%
on July 3, 2010.
|
(2)
|
Exercisable
immediately upon grant and will remain exercisable until the expiration
date, notwithstanding any earlier disability or death of Mr. Vamvakas or
any earlier termination of his service to the
Company.
|
(3)
|
As
of the date of this proxy statement, exercisable when and if OccuLogix
receives the approval that it is seeking from the FDA for the RHEO™ System
for use in the Rheopheresis™ treatment of dry age-related macular
degeneration.
|
(4)
|
Fully
vested and exercisable upon the closing of OccuLogix’s initial public
offering of shares of its common stock on December 16,
2004.
|
(5)
|
Exercisable
immediately upon grant and will remain exercisable until the earlier of
(i) the expiration date and (ii) the last date for exercise following the
termination of Mr. Vamvakas’ service to the
Company.
|
(6)
|
Exercisable
as to (i) 33⅓% on March 11, 2008, (ii) 33⅓% on March 11, 2009 and (iii)
33⅓% on March 11, 2010.
|
(7)
|
On
December 11, 2005, the Board approved accelerating the vesting of unvested
stock options granted prior to December 31, 2004 to employees, officers
and directors.
|
(8)
|
Exercisable
as to (i) 33⅓% on February 10, 2007, (ii) 33⅓% on February 10, 2008 and
(iii) 33⅓% on February 10, 2009.
|
Re-Pricing
of Stock Options
At the
annual meeting of the stockholders of the Company held on June 23, 2006, the
stockholders of the Company approved the re-pricing of all then out-of-the-money
stock options of the Company as approximately 66.7% of the Company’s outstanding
stock options had exercise prices that were significantly higher than the then
current market price of OccuLogix’s common stock. The Company
believed that these stock options were not providing an effective incentive for
the Company’s management, employees and third party consultants. The
exercise price of all outstanding stock options of the Company that, on June 23,
2006, was greater than $2.05, being the weighted average trading price of the
Company’s common stock on The NASDAQ Global Market during the five-trading day
period immediately preceding June 23, 2006, was adjusted downward to
$2.05.
The
following table sets forth the number of OccuLogix stock options held by the
Named Executive Officers as at December 31, 2006 which were re-priced during the
financial year ended December 31, 2006, together with the incremental fair value
of the re-priced stock options, which was computed in accordance with the
provisions of SFAS No. 123R.
Name
|
|
|
Grant
Date
|
|
|
Number
of Securities Underlying Options Re-Priced
|
|
|
Incremental
Fair Value of Re-Priced Options
(1)
|
|
|
|
|
|
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elias
Vamvakas
|
|
|
03/30/2005
|
|
|
|
150,000
|
|
|
|
31,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
G. Dumencu
|
|
|
03/30/2005
|
|
|
|
60,000
|
|
|
|
12,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Reeves
|
|
|
03/30/2005
|
|
|
|
105,000
|
|
|
|
22,050
|
|
|
|
|
12/16/2004
|
|
|
|
300,000
|
|
|
|
108,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
C. Eldridge
|
|
|
03/30/2005
|
|
|
|
60,000
|
|
|
|
12,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nozait
Chaudry-Rao
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
___________________________________
(1)
|
The
incremental difference in value is measured as the excess, if any, of the
fair value of the modified award determined in accordance with the
provisions of SFAS No. 123R over the fair value of the original award
immediately before its terms are modified, measured based on the share
price and other pertinent factors at the date of the
modification. SFAS No. 123R provides that this incremental fair
value, plus the remaining unrecognized compensation cost from the original
measurement of the fair value of the old option, must be recognized over
the remaining vesting period.
|
Stock
Option Exercises in 2007
No stock
option was exercised by any Named Executive Officer during the financial year
ended December 31, 2007.
Compensation
of Directors
Directors
who are not employees
are entitled to receive
an attendance fee of $2,500 in respect of each Board meeting attended in person,
$1,000 in respect of each committee meeting attended in person and $500 in
respect of each meeting attended by phone. Directors also receive an
annual fee of $15,000. Directors are reimbursed for out-of-pocket
expenses incurred in connection with attending meetings of the
Board. In addition, non-employee directors are entitled to receive
stock options to acquire shares of OccuLogix’s common stock under the 2002 Stock
Option Plan. The chairman of each of the Audit Committee, the
Compensation Committee and the Corporate Governance and Nominating Committee
also receives an annual fee of $5,000.
In March
2007, in exchange for stock options under the 2002 Stock Option Plan, each of
the directors (other than Mr. Vamvakas) agreed to forego the cash remuneration
to which he or she would have been entitled to receive from the Company during
the financial year ended December 31, 2007 in respect of (i) his or her annual
director’s fee, (ii) in the case of those directors who chair a committee of the
Board, his or her fee for chairing such committee and (iii) his or her fee for
attending the quarterly in-person meetings of the Board. Each
director who is a chair of a committee of the Board received 30,000 stock
options, and each director who is not a chair of a committee of the Board
received 25,000 stock options. The numbers of these stock options
were determined to be 8% higher in value than the cash remuneration to which the
directors would have been entitled during the financial year ended December 31,
2007 and were determined using the Black-Scholes valuation method, based on an
attributed value of $1.61 per share of the Company’s common stock underlying
these stock options. The number of stock options granted to each
director, calculated using this methodology, was then rounded up to the nearest
1,000. These stock options were exercisable immediately upon grant
and will remain exercisable until the tenth anniversary of the date of their
grant, notwithstanding any earlier disability or death of the holder thereof or
any earlier termination of his or her service to the Company. The per
share exercise price of these stock options is $1.82.
In May
2007, the Board struck a special committee for purposes of reviewing certain
proposed transactions. The chairman of the special committee and the
directors who served on it were paid fees, in cash, at the same rates paid to
the chairmen and members of the regular standing committees of the
Board.
In July
2007, each of the directors (other than Mr. Vamvakas) was granted 25,000
time-based stock options. These stock options have a 10-year life and
an exercise price of $1.11, and they will vest in one-third increments during
the three-year period following their date of grant.
Director
Compensation Table
Name
(1)
|
|
Fees
Earned or Paid in Cash
(2)
|
|
|
Option
Awards
(3)(4)(5)(6)(7)
|
|
|
All
Other Compensation
|
|
|
Total
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
N. Davidson
|
|
|
6,500
|
|
|
|
16,206
|
(8)
|
|
—
|
|
|
|
22,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay
T. Holmes
|
|
|
15,250
|
|
|
|
16,206
|
(8)
|
|
—
|
|
|
|
31,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georges
Noël
|
|
|
9,000
|
|
|
|
16,206
|
|
|
—
|
|
|
|
25,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
L. Lindstrom
|
|
|
2,000
|
|
|
|
10,306
|
(8)
|
|
—
|
|
|
|
12,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gilbert
S. Omenn
|
|
|
7,000
|
|
|
|
15,340
|
|
|
—
|
|
|
|
22,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adrienne
L. Graves
|
|
|
11,000
|
|
|
|
17,929
|
|
|
—
|
|
|
|
28,929
|
|
___________________________________
(1)
|
Mr.
Vamvakas does not receive any compensation for his services as a director
of the Company. All compensation paid to Mr. Vamvakas by the
Company during 2007 for his services as the Chief Executive Officer is
disclosed in the Summary Compensation Table and the Grant of Plan-Based
Awards Table.
|
(2)
|
Reflects
cash remuneration that each director received from the Company, for the
financial year ended December 31, 2007, in respect of fees only for
attending Board and committee meetings held by telephone. In
addition to such cash remuneration, Mr. Holmes was also paid in cash for
serving as the chairman of a special committee of the Board, which special
committee was constituted after March 2007 when the directors had agreed
to forego cash remuneration, in respect of annual directors’ fees and fees
for attending Board and committee meetings during 2007, in exchange for
stock options. The other members of the special committee also
received cash remuneration for their attendance at
meetings.
|
(3)
|
In
exchange for stock options, each of the directors agreed to forego the
cash remuneration which he or she would have been entitled to receive from
the Company during 2007 in respect of (i) his or her annual director's
fee, (ii) in the case of those directors who chair a committee of the
Board, his or her fee for chairing such committee and (iii) his or her fee
for attending the quarterly in-person meetings of the
Board. The numbers of these stock options were determined to be
8% higher in value than the cash remuneration to which the directors would
have been entitled during the financial year ended December 31, 2007 and
were determined using the Black-Scholes valuation method, based on an
attributed value of $1.61 per share of the Company’s common stock
underlying these stock options. The number of stock options
granted to each director, calculated using this methodology, was then
rounded up to the nearest 1,000. These stock options were
exercisable immediately upon grant on March 11, 2007 and will remain
exercisable until March 11, 2017, notwithstanding any earlier disability
or death of the holder or any earlier termination of his or her service to
the Company. The per share exercise price of these stock
options is $1.82.
|
(4)
|
On
July 3, 2007, each of the directors (other than Mr. Vamvakas) was granted
25,000 time-based stock options. These stock options have a
10-year life and an exercise price of $1.11, and they will vest in
one-third increments during the three-year period following their date of
grant.
|
(5)
|
On
November 1, 2007, the Company announced the indefinite suspension of its
RHEO™ System clinical development program and is currently in the process
of winding down the RHEO-AMD study as there is no reasonable prospect that
the RHEO™ System clinical development program will be relaunched in the
foreseeable future. Management does not believe that certain
issued performance-based stock options, the vesting of which is contingent
upon successfully obtaining FDA approval of the RHEO™ System, will ever
vest. As a result, in the financial year ended December 31,
2007, the Company reversed option expenses previously reported for these
performance-based stock options. The portion of such expense
reversal applicable to these performance-based stock options held by
directors of the Company was
$208,670.
|
(6)
|
The
values set forth in this column are based on the aggregate grant date fair
value of stock option awards, computed in accordance with the provisions
of SFAS No. 123R, and reflect the expense recorded in 2007 in accordance
with the provisions of SFAS No. 123R. Information regarding the
assumptions used to estimate the fair value of these stock option awards
in accordance with the provisions of SFAS No. 123R appears in note 17(e)
to the restated audited consolidated financial statements of the Company
for the financial year ended December 31, 2007, which are included in the
Amended Report.
|
(7)
|
As
of December 31, 2007, non-executive members of the Board had the following
aggregate number of stock options outstanding: (i) Mr.
Davidson, 117,500; (ii) Mr. Holmes, 117,500; (iii) Mr. Noël, 117,500; (iv)
Dr. Lindstrom, 110,000; (v) Dr. Omenn, 85,000; and (vi) Dr. Graves,
85,000.
|
(8)
|
Includes
the incremental fair value, calculated in accordance with the provisions
of SFAS No. 123R, of stock options which were re-priced during the
financial year ended December 31, 2006. See “—Re-pricing of
Stock Options”.
|
Employment Contracts
Elias
Vamvakas
OccuLogix
entered into an employment agreement with Mr. Vamvakas, who is the Company’s
Chairman of the Board and Chief Executive Officer, on July 30,
2004. Mr. Vamvakas receives an annual base salary of
C$491,625. At the discretion of the Compensation Committee, Mr.
Vamvakas is entitled to an annual bonus of up to 100% of his annual base
salary. Mr. Vamvakas is entitled to receive, and has received, stock
options pursuant to the 2002 Stock Option Plan.
Mr.
Vamvakas’ employment may be terminated for cause (as defined in the agreement)
or without cause upon 24 months’ notice. If Mr. Vamvakas’ employment
is terminated for any reason other than cause, he is entitled to a lump sum
payment equal to 24 months of his salary and bonus (which amount will equal the
average annual bonus earned by him during his employment with the Company),
provided that the total lump sum payment is no less than
$1,400,000. In addition, in the event that Mr. Vamvakas voluntarily
terminates his employment within six months of a change of control (as defined
in the agreement), Mr. Vamvakas is entitled to a lump sum payment equal to 12
months of his salary.
The
agreement also contains non-compete and confidentiality covenants for the
Company’s benefit.
Mr.
Vamvakas voluntarily agreed to a 50% reduction of his base salary, commencing on
February 1, 2008. Since that time, Mr. Vamvakas has been paid, and is
continuing to be paid, a reduced base salary. There have been no
other changes to his compensation package.
William
G. Dumencu
OccuLogix
entered into an employment agreement with Mr. Dumencu, who is the Company’s
Chief Financial Officer and Treasurer, on August 1, 2003. Between
June 2005 and April 2006, Mr. Dumencu served as the Company’s Vice President,
Finance. His annual base salary is C$184,271. At the
Company’s discretion, based on specific measurable objectives, he is entitled to
an annual bonus of 25% of his annual base salary. Mr. Dumencu is
entitled to receive, and has received, stock options pursuant to the 2002 Stock
Option Plan.
Mr.
Dumencu’s employment may be terminated for cause (as defined in the
agreement). If Mr. Dumencu’s employment is terminated without cause
(as defined in the agreement), he currently is entitled to receive a lump sum
severance equal to 12 months’ salary plus a cash amount equal to 2.5% of such
amount in respect of his entitlement to benefits. Mr. Dumencu has
agreed to a reduction in such entitlement to a lump sum severance equal to three
months’ salary plus 2.5% of such amount in respect of his entitlement to
benefits, provided that he is paid 50% of his current severance entitlement in
cash and is granted stock options of OccuLogix, in respect of the other 50% of
his current severance entitlement, on substantially the same terms as the
severance compromise reached by the Company with all of its former executives
and its other presently employed executives whose employment is expected to be
terminated. See “Proposal IX—Increase in Share Reserve under the 2002
Stock Option Plan—Outstanding Severance Liability”.
The
agreement also contains non-compete and confidentiality covenants for the
Company’s benefit.
Thomas
P. Reeves
OccuLogix
entered into an employment agreement with Mr. Reeves, who formerly was the
Company’s President and Chief Operating Officer, in August
2004. While employed with the Company, Mr. Reeves received an annual
base salary of C$331,200 and professional fees of $51,750 per
annum. At the discretion of the Chairman of the Board and/or the
Compensation Committee, Mr. Reeves was entitled to an annual bonus of up to 80%
of his annual base salary and his professional fees. Mr. Reeves was
entitled to receive, and has received, stock options pursuant to the 2002 Stock
Option Plan.
Under his
employment agreement, upon the without-cause termination of his employment with
the Company on June 30, 2008, Mr. Reeves was entitled to receive a lump-sum
severance payment equal to the aggregate of 24 months of his salary and bonus
(which amount will equal the average annual bonus earned by him during his
employment with the Company), 2.5% of his annual base salary in respect of
benefits and $100,000. He voluntarily agreed to a modification to the
timetable according to which his severance would be paid.
Mr.
Reeves has agreed to postpone the date on which his severance will become due
and owing until the earliest to occur of (i) October 31, 2008, (ii) the
termination of the Stockholders Meeting, provided that the requisite stockholder
approval of the Securities Purchase Agreement or any of the proposals, on which
the approval of the Company’s stockholders of the Securities Purchase Agreement
is conditioned, is not obtained at the Stockholders Meeting, (iii) the closing
of the sale of shares of the Company’s common stock to the Investors pursuant to
the Securities Purchase Agreement and (iv) a change of control of the
Company. See “Proposal V”. In addition, Mr. Reeves has
agreed to reduce the amount of his severance by C$8,568.29, being the aggregate
amount that the Company disbursed on his behalf, during 2008, for certain
perquisites to which he was entitled under his employment
agreement. Mr. Reeves also has agreed to accept up to 50% of his
severance entitlement in stock options of the Company (subject to the Company
obtaining all requisite approval therefor, including the approval of the
Company’s stockholders), with the balance to be paid in cash.
Subject
to obtaining the requisite approval of the Company’s stockholders therefor, the
Company has agreed to extend the respective terms of the time-based stock
options of the Company, held by Mr. Reeves, until the tenth anniversaries of
their respective dates of grant. Mr. Reeves holds an aggregate of
420,000 such stock options, of which 300,000 were granted on December 16, 2004,
20,000 were granted on March 10, 2007 and 100,000 were granted on July 3,
2007.
Prior to
the termination of his employment with the Company, Mr. Reeves voluntarily had
agreed to a 50% reduction of his base salary, commencing on February 1, 2008 and
was paid this reduced base salary until April 30, 2008. On May 1,
2008, Mr. Reeves became a part-time employee, and his base salary was reduced
further to C$5,000 per month. His entitlement to perquisites under
his employment agreement ceased on May 1, 2008.
David
C. Eldridge
On
November 9, 2004, OccuLogix entered into an employment agreement with Dr.
Eldridge, who was the Company’s Vice President, Science and Technology until
January 8, 2008. Until the without-cause termination of his
employment with the Company on January 8, 2008, Dr. Eldridge received an annual
base salary of $200,000 and, at the discretion of the Compensation Committee,
was entitled to an annual bonus of up to 25% of his annual base
salary. Dr. Eldridge also was entitled to receive, and received,
stock options pursuant to the 2002 Stock Option Plan.
Under his
employment agreement, upon the termination of his employment with the Company on
January 8, 2008, Dr. Eldridge was entitled to a lump-sum severance payment in an
amount equal to 12 months of his base salary plus 2.5% of such amount in respect
of his entitlement to benefits. He voluntarily agreed to a
modification to the timetable according to which his severance would be
paid.
Accordingly,
from January 8, 2008 to March 31, 2008 inclusive, the Company continued to pay
Dr. Eldridge, on a semi-monthly basis according to the Company’s regular payroll
practices, amounts equal to the base salary that he was earning prior to the
date of termination of his employment. In addition, the Company paid
Dr. Eldridge $4,901.64 in respect of benefits during the period between January
8, 2008 to March 31, 2008 inclusive. The aggregate gross base salary
amount paid to Dr. Eldridge during such period, plus $1,225.41, will be deducted
from his severance entitlement, which now will become due and payable on the
earliest to occur of (i) October 31, 2008, (ii) the termination of the
Stockholders Meeting, provided that the requisite stockholder approval of the
Securities Purchase Agreement or any of the proposals, on which the approval of
the Company’s stockholders of the Securities Purchase Agreement is conditioned,
is not obtained at the Stockholders Meeting, (iii) the closing of the sale of
shares of the Company’s common stock to the Investors pursuant to the Securities
Purchase Agreement and (iv) a change of control of the Company. See
“Proposal V”. In addition, subject to obtaining the requisite
approval of the Company’s stockholders therefor, notwithstanding the termination
of employment of Dr. Eldridge, the Company has agreed to extend the respective
terms of the time-based stock options of the Company, held by him, until the
tenth anniversaries of their respective dates of grant. Dr. Eldridge
holds an aggregate of 126,722 of such stock options, of which 36,924 were
granted on October 1, 2002, 59,798 were granted on July 1, 2003 and 30,000 were
granted on July 3, 2007.
On March
3, 2008, Dr. Eldridge agreed to accept up to 50% of his remaining severance
entitlement in stock options of the Company (subject to the Company obtaining
all requisite corporate approval therefor, including the approval of the
Company’s stockholders), with the balance to be paid in cash.
Nozait
Chaudry-Rao
On
February 10, 2006, OccuLogix entered into an employment agreement with Dr.
Chaudry-Rao, who was the Company’s Vice President, Clinical Research until
January 31, 2008. Until the without-cause termination of her
employment with the Company on January 31, 2008, Dr. Nozait Chaudry-Rao received
an annual base salary of $207,000 and, at the discretion of the Compensation
Committee, was entitled to an annual bonus of up to 25% of her annual base
salary. Dr. Chaudry-Rao also was entitled to receive, and received,
stock options pursuant to the 2002 Stock Option Plan.
Under her
employment agreement, upon the termination of her employment with the Company on
January 31, 2008, Dr. Chaudry-Rao was entitled to a lump-sum severance payment
in an amount equal to 12 months’ of her base salary plus 2.5% of such amount in
respect of her entitlement to benefits. She voluntarily agreed to a
modification to the timetable according to which her severance would be
paid.
Accordingly,
from January 31, 2008 to March 31, 2008 inclusive, the Company continued to pay
Dr. Chaudry-Rao, on a semi-monthly basis according to the Company’s regular
payroll practices, amounts equal to the base salary that she was earning prior
to the date of termination of her employment. The aggregate gross
amount paid to Dr. Chaudry-Rao during such period will be deducted from her
severance entitlement, which now will become due and payable on the earliest to
occur of (i) October 31, 2008, (ii) the termination of the Stockholders Meeting,
provided that the requisite stockholder approval of the Securities Purchase
Agreement or any of the proposals, on which the approval of the Company’s
stockholders of the Securities Purchase Agreement is conditioned, is not
obtained at the Stockholders Meeting, (iii) the closing of the sale of shares of
the Company’s common stock to the Investors pursuant to the Securities Purchase
Agreement and (iv) a change of control of the Company. See “Proposal
V”. In addition, subject to obtaining the requisite approval of the
Company’s stockholders therefor, notwithstanding the termination of employment
of Dr. Chaudry-Rao, the Company has agreed to extend the respective terms of the
time-based stock options of the Company, held by her, until the tenth
anniversaries of their respective dates of grant. Dr. Chaudry-Rao
holds an aggregate of 110,000 of such stock options, of which 80,000 were
granted on February 10, 2006 and 30,000 were granted on July 3,
2007.
On March
3, 2008, Dr. Chaudry-Rao agreed to accept up to 50% of her remaining severance
entitlement in stock options of the Company (subject to the Company obtaining
all requisite corporate approval therefor, including the approval of the
Company’s stockholders), with the balance to be paid in cash.
Employee
Benefit Plans
Stock
Option Plan
OccuLogix
adopted the 2002 Stock Option Plan in June 2002, and OccuLogix’s stockholders
approved the 2002 Stock Option Plan in June 2002. In November 2004,
prior to the initial public offering of shares of Occulogix’s common stock, an
amendment to the 2002 Stock Option Plan to increase the shares of the Company’s
common stock reserved for issuance under the 2002 Stock Option Plan and to
permit share appreciation rights to be granted with stock options was
adopted. A share appreciation right allows the participant to request
a cash payment equal to the difference between the fair market value of a share
and the exercise price. The Company will have the option of paying
cash or delivering common stock on the exercise of a share appreciation
right. In June 2007, OccuLogix’s stockholders approved an increase in
the share reserve under the 2002 Stock Option Plan by 2,000,000, from 4,456,000
to 6,456,000, and also approved certain additional amendments to the 2002 Stock
Option Plan. Stock options under the 2002 Stock Option Plan shall be
granted within ten years from June 13, 2002.
The 2002
Stock Option Plan provides for the grant of the following:
·
|
incentive
stock options, as defined under the Internal Revenue Code, which may be
granted solely to the Company’s employees, including officers;
and
|
·
|
nonstatutory
stock options, which may be granted to the Company’s directors,
consultants or employees, including
officers.
|
OccuLogix
Corporation, a predecessor company, adopted a stock option plan in 1997 (the
“1997 plan”). When the 2002 Stock Option Plan was adopted, the 1997
plan was terminated and the number of shares of common stock reserved for
issuance under the 2002 Stock Option Plan was reduced by the number of shares of
common stock issuable under stock options granted under the 1997
plan.
Share
Reserve
Following
amendment of the 2002 Stock Option Plan in June 2007, an aggregate of 6,456,000
shares of Occulogix’s common stock, representing approximately 11.3% of the then
issued and outstanding shares of OccuLogix’s common stock, was reserved for
issuance under the 2002 Stock Option Plan and the 1997 plan. The
number of shares of OccuLogix’s common stock currently reserved for issuance
under the 2002 Stock Option Plan and the 1997 plan is 3,726,388, and the number
of shares of OccuLogix’s common stock available for further stock option grants
is 2,357,434. Currently, stock options exercisable into 2,892,887
shares of OccuLogix’s common stock are outstanding, representing approximately
5.0% of the issued and outstanding shares of OccuLogix’s common
stock.
Shares
subject to stock options that expire, terminate, are repurchased or are
forfeited under the 2002 Stock Option Plan or the 1997 plan will again become
available for the grant of stock options under the 2002 Stock Option
Plan. Shares issued under the 2002 Stock Option Plan may be
previously unissued shares or reacquired shares bought on the market or
otherwise or any combination thereof. If any shares subject to a
stock option are not delivered to a participant because such shares are withheld
for the payment of taxes or the stock option is exercised through a “net
exercise”, the number of shares that are not delivered to the participant shall
remain available for the grant of stock options under the 2002 Stock Option
Plan. If the exercise price of any stock option is satisfied by
tendering shares of common stock held by the participant, the number of shares
tendered shall remain available for the grant of stock options under the 2002
Stock Option Plan. If a share appreciation right is exercised, the
shares subject to the related stock option shall remain available for the grant
of stock options under the 2002 Stock Option Plan.
Administration
The 2002
Stock Option Plan is administered by the Compensation
Committee. Subject to the terms of the 2002 Stock Option Plan, the
Compensation Committee determines recipients, the numbers and types of stock
options to be granted and the terms and conditions of the stock options,
including the period of their exercisability and vesting. Subject to
the limitations set forth below, the Compensation Committee also determines the
exercise price of stock options granted under the 2002 Stock Option Plan and may
reprice such stock options, which includes reducing the exercise price of any
outstanding stock option, canceling a stock option in exchange for cash or
another equity option or any other action that is treated as a repricing under
generally accepted accounting principles.
Stock
options are granted pursuant to stock option agreements. The exercise
price for a stock option cannot be less than 100% of the fair market value of
the common stock on the date of grant. Fair market value is
determined as the closing price of OccuLogix’s common stock on The NASDAQ Global
Market (or such other national or regional securities exchange or market system
constituting the primary market for OccuLogix’s common stock) on the date of
grant, provided that it is not lower than the weighted average trading price of
OccuLogix’s common stock on The NASDAQ Global Market (or such other national or
regional securities exchange or market system constituting the primary market
for OccuLogix’s common stock) during the five-trading day period immediately
preceding the date of grant, in which case, fair market value is determined as
such weighted average trading price.
In
general, the term of stock options granted under the 2002 Stock Option Plan may
not exceed ten years and, in certain circumstances, may be
shorter. Unless the terms of an optionee’s stock option agreement
provide for earlier or later termination, if an optionee’s service relationship
with the Company, or any of its affiliates, ceases due to disability or death,
the optionee, or his or her beneficiary, may exercise any vested stock options
for up to 12 months from cessation of service or such longer period as the
Board, in its discretion, determines. If an optionee’s service
relationship with the Company, or any of its affiliates, ceases for any reason
other than disability or death, the optionee may exercise any vested stock
options for up to three months from cessation of service or such longer period
as the Board, in its discretion, determines.
Acceptable
consideration for the purchase of common stock issued under the 2002 Stock
Option Plan will be determined by the Board and may include cash, common stock
previously owned by the optionee, the net exercise of the stock option,
consideration received in a “cashless” broker-assisted sale and other legal
consideration approved by the Board.
Generally,
an optionee may not transfer a stock option other than by will or the laws of
descent and distribution unless the optionee holds a nonstatutory stock option
that provides otherwise. However, an optionee may designate a
beneficiary who may exercise the stock option following the optionee’s
death.
Limitations
The 2002
Stock Option Plan places no limitation on the number of shares of OccuLogix’s
stock available for issuance to insiders of OccuLogix or to any one
person.
Incentive
stock options may be granted only to OccuLogix’s employees. The
aggregate fair market value, determined at the time of grant, of shares of
Occulogix’s common stock with respect to incentive stock options that are
exercisable for the first time by an optionee during any calendar year under all
of the Company’s stock plans may not exceed $100,000. The stock
options or portions of stock options that exceed this limit are treated as
nonstatutory stock options. No incentive stock option may be granted
to any person who, at the time of the grant, owns or is deemed to own stock
possessing more than 10% of the Company’s total combined voting power or of any
affiliate unless the following conditions are satisfied:
·
|
the
option exercise price must be at least 110% of the fair market value of
the stock subject to the option on the date of grant;
and
|
·
|
the
term of any incentive stock option award must not exceed five years from
the date of grant.
|
Corporate
Transactions
In the
event of certain corporate transactions, all outstanding stock options under the
2002 Stock Option Plan may be assumed, continued or substituted for by any
surviving entity. If the surviving entity elects not to assume,
continue or substitute for such stock options, such stock options will be
terminated if not exercised prior to the effective date of the corporate
transaction.
Plan
Amendments
Subject
to certain limits, the Board has authority to amend or terminate the 2002 Stock
Option Plan. No amendment or termination of the 2002 Stock Option
Plan shall adversely affect any rights under stock options already granted to a
participant unless agreed to by the affected participant or required to comply
with applicable law. To the extent necessary to comply with
applicable provisions of federal securities laws, state corporate and securities
laws, the Internal Revenue Code, the rules of any applicable stock exchange or
national market system, and the rules of any non-United States jurisdiction
applicable to options granted to residents therein, the Company shall obtain
stockholder approval of any such amendment to the 2002 Stock Option Plan in such
a manner and to such a degree as required and will obtain stockholder approval
to any increase in the maximum number of shares of common stock reserved for
issuance under the 2002 Stock Option Plan. Stockholders of the
Company are being asked to approve an increase in the share reserve under the
2002 Stock Option Plan by 53,544,000, from 6,456,000 to
60,000,000. See “Proposal IX”.
Options
Granted Under the 1997 Plan and the 2002 Stock Option Plan
As of
December 31, 2007, there was an aggregate of 4,215,387 stock options
outstanding under the 1997 plan and the 2002 Stock Option
Plan.
Options
Granted Outside the 1997 Plan and the 2002 Stock Option Plan
In
addition to the stock options referred to above, at December 31, 2007, there
were 572,000 stock options outstanding that were granted outside the 1997 plan
and the 2002 Stock Option Plan. 300,000 of such stock options were
inducement grant options awarded to Mr. Parks in connection with his joining the
Company as Vice President, Sales in October 2005, and the balance of such stock
options, numbering 272,000, was granted prior to 2002 and prior to the time when
the Company became an SEC registrant and a Canadian reporting issuer and shares
of its common stock became listed on any exchange.
The following table sets forth certain
information, as of
December 31, 2007
, with respect to each equity plan or
arrangement pursuant to which options, warrants or rights to purchase shares of
OccuLogix’s common stock have been granted.
Equity Compensation Plan Information as of December
31, 2007
Plan
Category
|
|
Number
of Shares to Be Issued Upon Exercise of Outstanding Options,
Warrants and Rights
|
|
|
Weighted-Average
Exercise Price
of
Outstanding
Options,
Warrants and
Rights
|
|
|
Number
of Shares Remaining Available for Future Issuance under Equity
Compensation Plans (excluding shares reflected in the first
column)
|
|
|
As
of December 31, 2007
|
|
|
|
Equity compensation plans approved
by stockholders
|
|
4,215,387
|
|
|
$1.59
|
|
|
|
1,868,435
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by stockholders
|
|
572,000
|
|
|
$2.01
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
4,787,387
|
|
|
$1.64
|
|
|
|
1,868,435
|
|
U.S.
Federal Income Tax Consequences of Stock Options Granted under the 2002 Stock
Option Plan
The U.S.
federal income tax treatment for the two types of stock options available under
the 2002 Stock Option Plan—incentive stock options and nonstatutory stock
options—differs as described below.
Incentive Stock
Options
No
taxable income is recognized by the optionee at the time of the stock option
grant, and, generally, no taxable income is recognized at the time the stock
options are exercised. However, the optionee will recognize taxable
income in the year in which the shares underlying the stock options (the
“purchased shares”) are sold or otherwise made the subject of a taxable
disposition. For U.S. federal tax purposes, dispositions are divided
into two categories: (i) qualifying and (ii)
disqualifying. A qualifying disposition occurs if the sale or other
disposition is made more than two years from the date of grant and more than one
year from the date of exercise. If either of these two holding
periods is not satisfied, then a disqualifying disposition will
result.
Upon a
qualifying disposition of the purchased shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for those shares. If there is a disqualifying
disposition of the purchased shares, then the excess of (i) the fair market
value of those shares on the exercise date (or the fair market value on the date
on which the shares are disposed of, if less) over (ii) the exercise price paid
for those shares will be taxable as ordinary income to the
optionee. Any additional gain or loss recognized upon the disposition
will be taxable as a capital gain or loss.
If the
optionee makes a disqualifying disposition of the purchased shares, then the
Company will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of those shares on the stock options exercise date (or the fair market value on
the date on which the shares are disposed of, if less) over (ii) the exercise
price paid for those shares. In no other instances will the Company
be allowed a deduction with respect to the optionee’s disposition of the
purchased shares.
Nonstatutory Stock
Options
No
taxable income is recognized by an optionee upon the grant of nonstatutory stock
options which do not have a readily ascertainable fair market value and are not
transferable. Stock options granted under the 2002 Stock Option Plan
do not have a readily ascertainable fair market value and are not
transferable. In general, the optionee will recognize ordinary income
in the year in which stock options are exercised, equal to the excess of the
fair market value of the purchased shares on the exercise date over the exercise
price paid for those shares, and the optionee will be required to satisfy the
tax withholding requirements applicable to such income.
The
Company will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised
nonstatutory stock options. In general, the deduction will be allowed
for the taxable year in which such ordinary income is recognized by the
optionee.
This
summary is of a general nature only, is not exhaustive of all U.S. federal
income tax considerations and is not intended to be, nor should it be construed
to be, legal or tax advice to any particular optionee.
Accordingly, optionees are
urged to consult their own tax advisors with respect to their particular
circumstances.
Canadian
Income Tax Consequences of Stock Options Granted under the 2002 Stock Option
Plan
The
following is a summary of the principal Canadian federal income tax
considerations generally applicable to the grant of stock options pursuant to
the 2002 Stock Option Plan to, and the exercise of such stock options by, an
optionee who acquired such stock options in respect of, in the course of, or by
virtue of, employment and who, at all relevant times for the purposes of the
application of the Tax Act, and at the time immediately after each stock option
grant, deals with the Company at arm’s length.
Stock
options granted under the 2002 Stock Option Plan do not result in taxable income
having to be recognized by the optionee at the time of grant. At the
time that the optionee exercises his or her stock options, he or she will be
required to recognize, as ordinary income, an amount equal to the excess of the
fair market value of the shares underlying the exercised stock options on the
exercise date over the exercise price paid for those shares. The
optionee will also be allowed a deduction equaling 50% of the income
recognized.
The
Company will not be entitled to an income tax deduction with respect to the
optionee’s exercise of his or her stock options or the disposition of the
underlying shares.
This
summary is of a general nature only, is not exhaustive of all Canadian income
tax considerations and is not intended to be, nor should it be construed to be,
legal or tax advice to any particular optionee.
Accordingly, optionees are
urged to consult their own tax advisors with respect to their particular
circumstances.
This summary is based on the current provisions
of the Tax Act, the Regulations and the current published administrative
practices and policies of the Canada Revenue Agency and takes into account all
specific proposals to amend the Tax Act and the Regulations announced by the
Minister of Finance (Canada) prior to the date of this proxy
statement. This summary does not take into account or anticipate any
other changes in the law or administrative practices, whether by judicial,
governmental or legislative action or decision, nor does it take into account
any provincial, territorial or foreign income tax legislation or
considerations.
Compensation
Committee Interlocks and Insider Participation
No member
of the Compensation Committee has ever been an officer or employee of
OccuLogix. None of the Company’s executive officers currently serves,
or has served during the last completed fiscal year, on the compensation
committee or the board of directors of any other entity that has one or more
executive officers serving as a member of the Board (of OccuLogix) or the
Compensation Committee (of OccuLogix).
STATEMENT
OF CORPORATE GOVERNANCE POLICIES
Mandates of the Board and
Management
The mandate of the Board is to supervise
the management of OccuLogix’s business and affairs and to act with a view to the
best interests of the Company. The role of the Board focuses on
governance and stewardship rather than on the responsibility of managing the
day-to-day operations of the Company. The Board’s role is to set
corporate direction, to assign responsibility to management for the achievement
of that direction, to define executive limitations and to monitor performance
against those objectives and executive limitations. At the present
time, the Board’s mandate is unwritten. However, the members of the
Board discuss regularly the appropriate role of the Board, with a view to
ensuring ongoing agreement regarding the Board’s mandate and ensuring its
effective execution.
Responsibilities of the Chairman of the
Board include providing overall leadership to the Board, assuming primary
responsibility for the operation and functioning of the Board, ensuring
compliance with the governance policies of the Board and taking a leadership
role in ensuring effective communication and relationships between the Company,
on the one hand, and stockholders, stakeholders and the general public, on the
other. In the absence of a written position description for the
Chairman of the Board, the Board ensures the execution of the role and
responsibilities of the Chairman of the Board through active supervision of his
work in that capacity.
Responsibilities of the Chief Executive
Officer include the development and recommendation of corporate strategies and
business and financial plans for the approval of the Board, managing the
operations of the Company’s business in accordance with the strategic direction
set by the Board, reporting management and performance information to the Board
and developing a list of risk factors and informing the Board of the mechanisms
in place to address those risks. The Board has not developed a
written position description for the Chief Executive Officer. To
date, the Board has delineated the role and responsibilities of the Chief
Executive Officer orally and ensures their proper execution through the
discipline of his yearly performance evaluation.
Composition
of the Board; Election and Removal of Directors
The Board
is currently comprised of four of the six individuals nominated for election at
the Stockholders Meeting—being Messrs. Vamvakas and Davidson and Drs. Lindstrom
and Graves. Three of the Company’s current directors—being Messrs.
Holmes and Noël and Dr. Omenn—are not standing for re-election. The
Company’s Amended and Restated Bylaws authorize the number of directors to be
not less than five and no more than nine, and, in accordance with the Company’s
Amended and Restated Bylaws, the number of directors comprising the Board will
be determined from time to time by the Board. Each director is to
hold office until his or her successor is duly elected and
qualified. Directors will be elected for a term that will expire at
the annual meeting of stockholders immediately succeeding their
election. TLC Vision is OccuLogix’s major stockholder and, until
April 11, 2006, had the ability to exercise a majority of the votes attached to
the outstanding shares of OccuLogix’s common stock for the election of
directors. Currently, TLC Vision has the ability to exercise
approximately 32.8% of the votes attached to the outstanding shares of
OccuLogix’s common stock for the election of directors.
The Board
believes Messrs. Davidson, Holmes and Noël and Drs. Graves and Omenn are
independent directors under the guidelines of the Canadian securities regulatory
authorities and under NASDAQ and SEC rules (covered below). The Board
does not believe that Dr. Lindstrom is an independent director under such
guidelines and rules as a result of certain business relationships that he and
his associates have with TLC Vision and certain of its
affiliates. However, provided that the transactions described in
Proposals III, IV, V, VI and VII are approved by the Company’s stockholders and
effected, and provided, further, that Dr. Lindstrom is re-elected to the Board,
then he will be an independent director following the closing of these
transactions since TLC Vision’s holdings of the Company’s common stock will be
reduced to below 10% of the issued and outstanding shares of the Company’s
common stock. The Board believes that, if elected, Mr. Rindell will
be an independent director, while Mr. Donsky will not be an independent director
since it is contemplated that he will become OccuLogix’s Chief Executive Officer
following the closing of the transactions contemplated by the Merger Agreement
and the Securities Purchase Agreement.
An
independent director is a director who is independent of management and is free
from any interest and any business or other relationship which could, or could
reasonably be perceived to, materially interfere with the director’s ability to
act with a view to the best interests of the Company, other than interests and
relationships arising from shareholding. During the financial year
ended December 31, 2007, the independent directors of the Company did not meet
in the absence of non-independent directors. Although the Board has
not adopted formal procedures to facilitate discussions among the independent
directors, they engage in such discussions, if, as and when advisable, strong
working relationships having developed among them as a result of having served
on the Board together for a number of years.
The
Chairman of the Board, Mr. Vamvakas, is not an independent director, and the
Board does not have a lead director who is an independent
director. However, each of the independent directors of the Company
has a substantial amount of board and management experience and is able to
provide the leadership and direction that an independent chairman or lead
director would provide. While it is contemplated that Mr. Vamvakas
will resign the office of Chief Executive Officer following the closing of the
transactions contemplated by the Merger Agreement and the Securities Purchase
Agreement, it is expected that he will remain the Chairman of the
Board. He will remain a non-independent director even if the
Company’s stockholders approve the transactions described in Proposals III, IV,
V, VI and VII and they are effected.
The
Board, to date, has not implemented a formal procedure for assessing its
effectiveness and contribution and those of its committees and individual
directors. However, this assessment is conducted informally by Board
members, on an ongoing basis. At the end of each of its quarterly
meetings, Board members meet in executive session, without the presence of any
members of management. Board members take these opportunities to
engage in candid discussions regarding the performance of management—both team
performance and individual performance. Board members also take these
opportunities to raise any concerns about, and to discuss, issues relating to
the practices and processes of the Board and its committees, the adequacy of
information communicated by management to Board members, the composition of the
Board, the Board’s culture and any other matter that any director sees fit to
raise. The Chairman of the Board is excluded from these discussions,
in the first instance, since he is not a non-executive
director. However, to the extent that these discussions result in any
proposed courses of action, the implementation of which would require the
involvement of the Chairman of the Board (and it typically does), the Chairman
of the Corporate Governance and Nominating Committee, or his designee, will
confer with him afterward and enlist his assistance in the implementation of any
directives of the Board emanating from these executive sessions.
Board
members are actively aware of their duties to act in the best interests of the
Company and its stockholders and to exercise independent judgment in considering
matters that are brought to the Board. To that end, when a director
or an officer of the Company has a material interest in such a matter, that
interest is declared to the Board and, in the case of a director with a material
interest, that director will recuse himself or herself from any decision of the
Board in connection with such matter.
During
the financial year ended December 31, 2007, there were three in-person meetings
of the Board and eight conference call meetings of the Board. The
attendance record of each director is set forth in the table below:
Name
of
Director
|
|
|
Number of the Three (3)
In-person Board Meetings Attended
|
|
|
Number of the Eight (8) Conference
Call Board Meetings Attended
|
|
|
Number of the Five (5) Conference
Call Audit Committee Meetings Attended
|
|
|
Number of the Three (3)
Compensation Committee Meetings Attended
|
|
|
Number of the Three (3)
Special Committee Meetings Attended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elias
Vamvakas
(
1
)
|
|
|
3
|
|
|
8
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
N.
Davidson
|
|
|
3
|
|
|
5
|
|
|
4
|
|
|
3
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adrienne
L.
Graves
|
|
|
3
|
|
|
7
|
|
|
5
|
|
|
3
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay
T.
Holmes
|
|
|
3
|
|
|
8
|
|
|
5
|
|
|
3
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
L.
Lindstrom
(
1
)
|
|
|
3
|
|
|
5
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georges
Noël
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
3
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gilbert
S.
Omenn
(
2)
|
|
|
3
|
|
|
7
|
|
|
--
|
|
|
2
|
|
|
3
|
|
(1)
|
Is not a member of any of the
committees of the Board.
|
|
(2)
|
Is not a member of the Audit
Committee.
|
Although
the Company does not have a formal process in place for the orientation and
education of new directors, the Company and the Board do take steps to educate
new directors upon their appointment or election to the Board. Among
other things, new directors are provided with binders of written materials to
familiarize them with the Company and its business, and officers of the Company
are made available to new directors for orientation and education
purposes. Although the Board has not implemented a formal continuing
education program for directors, they are at liberty to, and are encouraged to,
make a request to participate in education programs, at the Company’s expense,
if they feel that it would assist them in maintaining the skills and knowledge
necessary to discharge their obligations as directors.
Directors
may be removed from office with or without cause by the affirmative vote of the
holders of at least a majority of the voting power of all of the then
outstanding shares of the Company’s stock that are entitled to vote generally in
the election of the Company’s directors. The Company’s Amended and
Restated Bylaws provide that, in the case of any vacancies among the directors,
such vacancy may be filled with a candidate approved by the vote of a majority
of the remaining directors.
The
ability of the remaining directors to fill vacancies could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company.
At any
meeting of the Board, a majority of the total number of directors then in office
will constitute a quorum for all purposes.
The
Company expects that all nominees to the Board will attend the Stockholders
Meeting. All seven nominees to the Board as at June 29, 2007, the
date of the last annual meeting of stockholders of the Company, attended that
meeting.
Stockholders
may contact non-management members of the Board by sending written communication
to the Chief Financial Officer and Treasurer at 2600 Skymark Avenue, Unit 9,
Suite 201, Mississauga, Ontario, L4W 5B2. All such written
communication will be given to non-management members of the Board, unless it
would be addressed more appropriately by others within the Company.
Committees
of the Board
The Board
has three committees: the Audit Committee; the Compensation
Committee; and the Corporate Governance and Nominating
Committee. Currently, there is no written position description for
the chairman of any of the Board’s committees. The Board believes
that the charter and the agreed mandate of each of the Board’s committees,
together with the chairman’s own experience, provide adequate guidance to the
chairman in the fulfilment of his role, and the carrying out of his
responsibilities, as chairman of the relevant committee of the Board.
Audit
Committee
The Audit
Committee consists of Messrs. Holmes, Davidson and Noël and Dr. Graves, each of
whom is an independent director. Furthermore, the Board has
determined that Mr. Noël, the Audit Committee’s chairman, is an “audit committee
financial expert” as defined by the rules of the SEC and NASDAQ. The
principal duties and responsibilities of the Audit Committee are as
follows:
|
·
|
to monitor the
Company’s financial reporting process and internal control
system;
|
|
·
|
to
appoint and replace the Company’s independent outside auditors from time
to time, to determine their compensation and other terms of engagement and
to oversee their work;
|
|
·
|
to
oversee the performance of the Company’s internal audit function;
and
|
|
·
|
to
oversee the Company’s compliance with legal, ethical and regulatory
matters.
|
The Audit
Committee has the power to investigate any matter brought to its attention
within the scope of its duties. It also has the authority to retain counsel and
advisors to fulfill its responsibilities and duties.
Compensation
Committee
The
Compensation Committee consists of Messrs. Davidson, Holmes and Noël and Drs.
Omenn and Graves, each of whom is an independent director. Mr.
Davidson is the Compensation Committee’s chairman. The principal
duties and responsibilities of the Compensation Committee are as
follows:
|
·
|
to
provide oversight of the development and implementation of the
compensation policies, strategies, plans and programs for the Company’s
key employees and directors, including policies, strategies, plans and
programs relating to long-term compensation for the Company’s senior
management, and the disclosure relating to these
matters;
|
|
·
|
to
make recommendations regarding the operation of and/or implementation of
employee bonus plans and incentive compensation
plans;
|
|
·
|
to
review and approve the compensation of the Chief Executive Officer and the
other executive officers of the Company and the remuneration of the
Company’s directors; and
|
|
·
|
to
provide oversight of the selection of officers, management succession
planning, the performance of individual executives and related
matters.
|
Corporate
Governance and Nominating Committee
The
Corporate Governance and Nominating Committee consists of Messrs. Davidson,
Holmes and Noël and Drs. Omenn and Graves, each of whom is an independent
director. Mr. Holmes is the Corporate Governance and Nominating
Committee’s chairman. A copy of the Corporate Governance and
Nominating Committee’s charter is available on the Company’s website (
www.occulogix.com)
.
The
principal duties and responsibilities of the Corporate Governance and Nominating
Committee are as follows:
|
·
|
to
establish criteria for Board and committee membership and to recommend to
the Board proposed nominees for election to the Board and for membership
on committees of the Board;
|
|
·
|
to
ensure that appropriate processes are established by the Board to fulfill
its responsibility for (i) the oversight of strategic direction and
development and the review of ongoing results of operations of the Company
by the appropriate committee of the Board and (ii) the oversight of the
Company’s investor relations and public relations activities and ensuring
that procedures are in place for the effective monitoring of the
stockholder base, receipt of stockholder feedback and response to
stockholders concerns;
|
|
·
|
to
monitor the quality of the relationship between management and the Board
and to recommend improvements for ensuring an effective and appropriate
relationship; and
|
|
·
|
to
make recommendations to the Board regarding corporate governance matters
and practices.
|
The
Corporate Governance and Nominating Committee believes that the process it
utilizes to identify and evaluate nominees to the Board brings forward
individuals who possess the educational, professional and business qualification
and personal qualities that are well suited to further the Company’s
objectives. Although the Corporate Governance and Nominating
Committee may avail itself of the services of professional search firms, to
date, it only has received recommendations for nominees to the Board from
existing directors and executive officers of the Company, key business partners
of the Company and industry contacts. In evaluating any proposed
nominee, the Corporate Governance and Nominating Committee will consider, among
other things, the following factors: the proposed nominee’s
experience, skills and other qualifications in view of the specific needs of the
Board and the Company; diversity of backgrounds, skills and expertise; and
demonstration by the proposed nominee of high ethical standards, integrity and
sound business judgment. The Corporate Governance and Nominating
Committee does not have a formal policy regarding the consideration of nominees
to the Board who are recommended by stockholders since it believes that the
process currently in place for the identification and evaluation of prospective
members of the Board is adequate. However, the Corporate Governance
and Nominating Committee will receive and consider recommendations from
stockholders. Stockholders may communicate with members of the
Corporate Governance and Nominating Committee at any time by writing to the
Chief Financial Officer and Treasurer at 2600 Skymark Avenue, Unit 9, Suite 201,
Mississauga, Ontario, L4W 5B2.
Code
of Ethics
On
December 4, 2004, the Board adopted a code of ethics that applies to the
Company’s directors, officers and employees and which is intended to promote
honest and ethical conduct, full and accurate reporting and compliance with
laws. On October 3, 2005, the Board adopted a revised code of ethics,
entitled “OccuLogix, Inc. Code of Conduct”. A copy of this document
can be requested free of charge by writing to, or calling, the Chief Financial
Officer and Treasurer
at 2600 Skymark Avenue,
Unit 9, Suite 201, Mississauga, Ontario, L4W 5B2, 905-602-0887. It is
also available on the Company’s website (
www.occulogix.com)
.
The Audit
Committee has established an independent, toll-free Values Line (1-888-475-8376)
which anyone with good faith concerns regarding accounting, internal accounting
controls or auditing matters at the Company, or matters relating to compliance
with the Company’s code of ethics, may call to report his or her
concerns. The Values Line is available 24 hours a day and seven
days a week. All concerns reported through the Values Line are
communicated to the Audit Committee which will take appropriate
action.
Outside
Advisors
A
n individual director
is able
to engage an outside advisor at the
expense of the Company in appropriate circumstances. The engagement
of an external advisor by an individual director, as well as the terms of the
retainer and the fees to be paid to the advisor, is subject to the prior
approval of the Corporate Governance and Nominating
Committee.
S
tock
holder
Communications
The Board places great emphasis on its
communications with stockholders. Stockholders will receive timely
dissemination of information, and the Company has procedures in place to permit
and encourage feedback from its stockholders. OccuLogix’s senior
officers are available to stockholders
. T
he Company seeks to provide clear and
accessible information about the results of OccuLogix’s business and its future
plans. OccuLogix has
a website (
www.occulogix.com
)
through which it makes available press
releases, financial statements, annual reports, trading information and other
information relevant to investors.
AUDIT
COMMITTEE REPORT
The information contained in this report
shall not be deemed to be “soliciting material” or “filed” or incorporated by
reference in future filings with the
SEC
, or subject to the liabilities of
Section 18 of the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into a document filed under the
Securities Act or the Exchange Act.
The members of the Audit Committee are
Messrs.
Davidson
,
Holmes
and Noël and
Dr.
Graves
.
Each member of the Audit Committee is
independent in the judgment of the
B
oard
,
as required by t
he current NASDAQ listing
standards
.
Mr.
Noël
has been designated by the Board as the
Audit Committee’s financial expert
.
The Audit Committee operates
under the Charter of the Audit Committee adopted by the
Board.
Management is responsible for preparing
OccuLogix’s financial statements, and the independent auditors are responsible
for auditing those financial statements. The Audit Committee’s
primary responsibility is to oversee OccuLogix’s financial reporting process on
behalf of the Board and to report the result of its activities to the Board, as
described in the Charter of the Audit Committee. The principal
recurring duties of the Audit Committee in carrying out its oversight
responsibility include reviewing and evaluating the audit efforts of OccuLogix’s
independent auditors, discussing with management and the independent auditors
the adequacy and effectiveness of OccuLogix’s accounting and financial controls,
and reviewing and discussing with management and the independent auditors the
quarterly and annual financial statements of the Company.
The Audit Committee has reviewed and
discussed with OccuLogix management the audited financial statements of the
Company for the financial year ended
December 31, 2007
. The Audit Committee has
also discussed with
Ernst
& Young LLP
, the
independent auditors of OccuLogix, the matters required to be discussed by the
Statement on Auditing Standards No. 91 (Audit Committee
Communications). The Audit Committee has also received from the
independent auditors written affirmation of their independence as required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and the Audit Committee has discussed with the auditors the
firm’s independence.
Based upon the review and discussions
summarized above, the Audit Committee recommended to the Board that the audited
financial statements of the Company as of December 31, 2007 and for the
year then ended be included in the Company’s Annual Report on Form 10-K for
the financial year ended December 31, 2007 for filing with the
SEC
.
Georges Noël
|
|
Thomas N. Davidson
|
|
Jay T. Holmes
|
Adrienne L. Graves
|
|
|
|
|
DIRECTORS’
AND OFFICERS’ LIABILITY INSURANCE
OccuLogix maintains directors’ and
officers’ liability insurance. Under this insurance coverage, the
insurer pays, on OccuLogix’s behalf, for losses for which the Company
indemnifies its directors and officers and, on behalf of individual directors
and officers, losses arising during the performance of their duties for which
OccuLogix does not indemnify them. The total limit for the policy
is
$
10,000,000
per policy term, subject to a deductible
of $500,000
per claim with respect to corporate
indemnity provisions and $500,000
if the claim relates to securities law
claims. The total premiums in respect of the directors’ and officers’
liability insurance for the financial year ended
December 31, 2007
were approximately
$
385,000.
The directors’ and officers’
liability insurance policy is effective from
December 7, 2007
to
December 7, 2008
.
The insurance policy does
not distinguish between directors and officers as separate
groups.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Indebtedness of Directors and
Officers
No officer, director or employee, or
former officer, director or employee, of the Company or any of its subsidiaries,
or associate of any such officer, director or employee is currently or has been
indebted (other than routine indebtedness of employees and non-executive
officers), at any time since January 1, 200
7
, to the Company or any of its
subsidiaries.
Review and Approval of Related Party
Transactions
The
Company’s General Counsel is primarily responsible for reviewing all
relationships and transactions in which the Company, on the one hand, and its
significant stockholders or the Company’s directors and executive officers, or
members of their respective immediate families, on the other hand, are
participants and for assessing whether any of such persons has a direct or
indirect material interest. The General Counsel is also primarily
responsible for developing and implementing processes to obtain information
relevant to such review from the Company’s significant stockholders and its
directors and executive officers. Transactions that are determined to
necessitate disclosure pursuant to the SEC’s rules are disclosed in the
Company’s proxy statement and are brought to the Board for pre-approval or
ratification, as the case may be. Any director who has a material
interest in such a transaction (or whose family member has such a material
interest) will declare his or her interest and will recuse himself or herself
from any decision of the Board in connection with such matter.
Interests
of Insiders in Prior and Proposed Transactions
TLC Vision
TLC
Vision beneficially owns approximately 32.8% of the Company’s issued and
outstanding common stock or approximately 28.9% on a fully diluted
basis. Mr. Vamvakas, formerly a director of TLC Vision and its past
Chairman and CEO, became our Chairman in 2003 and is also our CEO. In
addition, one of our other directors, Dr. Lindstrom, is also a director of TLC
Vision. One of our other directors, Mr. Davidson, was also a director
of TLC Vision until December 2007, and another of our directors, Mr. Holmes, who
is not standing for re-election to the Board, was elected to the board of
directors of TLC Vision on June 10, 2008.
TLC
Vision provides to OccuLogix certain information technology and administrative
support and also makes available certain of its employee benefit plans,
including health and dental insurance plans, to employees of
OccuLogix. During the financial year ended December 31, 2007, the
Company paid to TLC Vision an aggregate of approximately $12,685 and $244,445 in
respect of these services.
John
Cornish and Apheresis Technologies, Inc.
John Cornish is one of the Company’s
stockholders and, until January 2008, was the Company’s Vice President,
Operations. He was also one of the Company’s directors from April
1997 to September 2004.
Apheresis Technologies, Inc. (“Apheresis
Technologies”) of which Mr. Cornish is the President, was spun off from
OccuLogix in 2002, and, as a result, OccuLogix’s stockholders at the time, which
did not include TLC Vision, became stockholders of Apheresis
Technologies.
Mr. Cornish and his family are the most
significant stockholders of Apheresis Technologies, holding an aggregate of
approximately 25% of the outstanding stock of Apheresis
Technologies. Diamed and Hans Stock are currently stockholders of the
Company and together own approximately 11% of the outstanding stock of Apheresis
Technologies. Diamed is a significant stockholder of the Company, and
Mr. Stock is the controlling shareholder of Diamed.
During
the financial year ended December 31, 2007, Apheresis Technologies made
available to OccuLogix, upon request, the services of certain of Apheresis
Technologies’ employees and consultants on a
per diem
basis. During the financial year ended December 31, 2007,
OccuLogix paid Apheresis Technologies $98,769 under this
arrangement.
Mr.
Cornish also owns and manages Cornish Properties, which leased space to
OccuLogix in Palm Harbor, Florida, for clinical trial activities, office space
and storage under a lease that expired on December 31, 2007. During
the financial year ended December 31, 2007, the Company paid rent to Cornish
Properties in the amount of $26,016.
Elias
Vamvakas
On
November 30, 2006
,
Mr.
Vamvakas
agreed to provide the Company with a
standby commitment to purchase convertible debentures of the Company in an
aggregate principal amount of up to $8,000,000. When the Company
raised gross proceeds in the amount of $10,016,000 on
February 6, 2007
in a private placement of shares of its
common stock and warrants, the commitment amount under
Mr.
Vamvakas
’ standby commitment was reduced to
zero, thus effectively terminating the standby commitment. No portion
of the standby commitment was ever drawn down by the Company, and the Company
paid
Mr.
Vamvakas
a total of $29,808 in commitment fees
in February 2007.
Doug
P.
Adams
and
Peter
M.
Adams
Prior to the Company’s acquisition of
Solx on
September 1,
2006
, Mr. Doug P. Adams
served as the President and Chief Executive Officer of
Solx
and was a significant stockholder of
Solx
. As of
September 1, 2006
, the closing date of the acquisition,
Mr.
Adams
became an executive officer of the
Company
and remained an
executive officer of the Company until
December 19, 2007
, the date on which the Company sold
Solx to Solx Acquisition, Inc. (“Solx Acquisition”)
. The Company
has
paid
Mr.
Adams
a total of $1,
615,930
and issued to him 1,309,329 shares of
its common stock in consideration of his proportionate share of the purchase
price of
Solx
.
Until the assumption, on
December 19, 2007
, by Solx Acquisition, of OccuLogix’s
obligation to pay $5,000,000 to the former stockholders of Solx on
September 1, 2008
in satisfaction of the outstanding
balance of the purchase price of Solx,
Mr. Adams
was
owed $
1,024,263
by the Company in consideration of his
proportionate share of the outstanding balance of the purchase price of
Solx
.
See “—Solx Acquisition,
Inc.”.
In addition,
in connection with the Company’s
acquisition of Solx,
the
Company
has
paid
Peter
M.
Adams
,
Doug
P.
Adams
’ brother, a total of $
371,095
and issued to him and his spouse an
aggregate of 300,452 shares of its common stock in consideration of
Mr.
Peter
M.
Adams
’
proportionate shar
e of the purchase price of
Solx
.
Until the assumption, on
December 19, 2007
, by Solx Acquisition, of OccuLogix’s
obligation to pay $5,000,000 to the former stockholders of Solx on
September 1, 2008
in satisfaction of the outstanding
balance of the purchase price of Solx, t
he Company owe
d
Mr. Peter M. Adams $
236,917
in consideration of his proportionate
share of the outstanding balance of the purchase price of
Solx
.
Solx Acquisition,
Inc.
On
December 19, 2007
, we sold Solx to Solx Acquisition, a
company wholly-owned by
Doug
P.
Adams
who, until the closing of the sale, was
an executive officer of OccuLogix. The consideration for the purchase
and sale of all of the issued and outstanding shares of the capital stock of
Solx consisted of: (i) on
December 19, 2007
, the closing date of the sale, the
assumption by Solx Acquisition of all of the liabilities of OccuLogix, as they
related to Solx’s business, incurred on or after
December 1, 2007
, and OccuLogix’s obligation to make a
$5,000,000 payment to the former stockholders of Solx due on
September 1, 2008
in satisfaction of the outstanding
balance of the purchase price of Solx; (ii) on or prior to
February 15, 2008
, the payment by Solx Acquisition of all
of the expenses that OccuLogix had paid to the closing date, as they related to
Solx’s business during the period commencing on
December 1, 2007
; (iii) during the period commencing on
the closing date and ending on the date on which Solx achieves a positive cash
flow, the payment by Solx Acquisition of a royalty equal to 3% of the worldwide
net sales of the SOLX 790 Laser and the SOLX Gold Shunt, including
next-generation or future models or versions of these products; and (iv)
following the date on which Solx achieves a positive cash flow, the payment by
Solx Acquisition of a royalty equal to 5% of the worldwide net sales of these
products. In order to secure the obligation of Solx Acquisition to
make these royalty payments, Solx granted to OccuLogix a subordinated security
interest in certain of its intellectual property.
The sale of Solx to Solx Acquisition was
a “related party transaction” within the meaning of Ontario Securities
Commission Rule 61-501—Insider Bids, Issuer Bids, Business Combination and
Related Party Transactions (“Rule 61-501”). The Board, acting in good
faith, determined that the Company was in serious financial difficulty and that
the transaction would improve the financial position of the
Company. The Board unanimously approved the transaction, having
judged the terms and conditions of the sale to be reasonable under the
surrounding circumstances. Based on the Board’s determination, in
connection with the sale, the Company relied on the financial hardship
exemptions from the formal valuation and minority approval requirements of Rule
61-501. On
October 9, 2007
, we announced that the Board had
authorized management and the Company’s advisors to explore the full range of
strategic alternatives available to enhance shareholder value. For
some time prior to the
October 9, 2007
announcement, the Company had been
seeking to raise additional capital, with the objective of securing funding
sufficient to sustain its operations, as at that time, it had been clear that,
unless we were able to raise additional capital, the Company would not have had
sufficient cash to support its operations beyond early 2008. The
Board’s decision to dispose of Solx was made and implemented in order to
conserve as much cash as possible while the Company continued its
capital-raising efforts which, at the time the sale of Solx to Solx Acquisition
was proposed and being negotiated, had not returned any results. The
Board decided that it was in the best interests of the Company and its
stockholders to dispose of Solx.
Marchant Securities
Inc.
Marchant
is a firm indirectly beneficially owned as to approximately 32% by
Mr.
Vamvakas
and members of
his family.
For
services rendered by Marchant in connection with the Securities Purchase
Agreement and the Bridge Loan
, the Company has agreed to pay Marchant a
commission of $750,000.
For a
description of these services, see “Proposal VII—Determination of Marchant’s
Commission”.
To date, $180,000 of such commission has been paid in
cash, with $570,000 remaining owing. The Company proposes to pay
$88,800 of the outstanding balance in cash and, subject to obtaining the
requisite stockholder and regulatory approvals, proposes to pay the remainder of
the outstanding balance, being $481,200, by issuing to Marchant shares of the
Company’s common stock, at a per share price equal to the per share purchase
price at which the Investors will be purchasing shares of the Company’s common
stock pursuant to the Securities Purchase Agreement. See “Proposal
VII”.
No
Other Interests of Insiders
None of
the principal stockholders, senior officers or directors of the Company or the
proposed nominees for election as directors of the Company, or any of their
associates or subsidiaries, has any other interest in any other transaction
since January 1, 2007
or any other proposed
transaction that has materially affected or would materially affect the Company
or its subsidiaries.
PRINCIPAL
STOCKHOLDERS
The
following table shows information regarding the beneficial ownership of the
Company’s and TLC Vision Corporation’s common stock as of the date of this proxy
statement by:
|
·
|
each
person who is known by OccuLogix to own beneficially more than 5% of the
Company’s common stock;
|
|
·
|
each
person who is a member of the
Board;
|
|
·
|
each
person who is a nominee to the Board but who is not currently a member of
the Board;
|
|
·
|
each
person who is one of the Company’s executive officers;
and
|
|
·
|
all
persons who are members of the Board, all persons who are nominees to the
Board but who are not currently members of the Board and the Company’s
executive officers, as a group.
|
Beneficial
ownership of shares is determined in accordance with SEC rules and generally
includes any shares over which a person exercises sole or shared voting or
investment power. The information set forth below is based
on 57,306,145 shares of OccuLogix’s common stock outstanding as of the date
of this proxy statement and on 50,352,569 shares of TLC Vision’s common stock
outstanding as at the date of this proxy statement. Common stock
underlying stock options that are presently exercisable or exercisable within 60
days of the date of this proxy statement is deemed to be outstanding and
beneficially owned by the person holding the stock options for the purpose of
computing the ownership percentage of that person, but are not considered
outstanding for the purpose of computing the percentage ownership of any other
person.
Except as
indicated in the footnotes to this table, to the Company’s knowledge, each
stockholder in the table has sole voting and investment power for the shares
shown as beneficially owned by such stockholder. Except as otherwise noted, each
person’s address is c/o OccuLogix, Inc., 2600 Skymark Avenue, Unit 9, Suite 201,
Mississauga, Ontario, L4W 5B2.
Name
of Beneficial Owner
|
|
Shares
Beneficially Owned
|
|
Percentage
of Shares Beneficially Owned
|
|
TLC
Vision Corporation Common Shares Beneficially Owned
|
|
Percentage
of TLC Vision Common Shares Beneficially Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TLC
Vision Corporation
(1)
|
|
|
18,770,302
|
|
|
|
32.8
|
%
|
|
|
--
|
|
|
*
|
|
|
Diamed
Medizintechnik GmbH
(2)
|
|
|
4,332,234
|
|
|
|
7.6
|
%
|
|
|
--
|
|
|
*
|
|
|
Elias
Vamvakas
|
|
|
2,729,345
|
|
|
|
4.8
|
%
|
|
|
201,571
|
|
|
*
|
|
|
William
G. Dumencu
|
|
|
100,000
|
|
|
|
*
|
|
|
|
1,500
|
|
|
*
|
|
|
Suh
Kim
|
|
|
33,333
|
|
|
|
*
|
|
|
|
--
|
|
|
*
|
|
|
Thomas
N. Davidson
|
|
|
123,000
|
|
|
|
*
|
|
|
|
80,000
|
|
|
*
|
|
|
Eric
Donsky
|
|
|
--
|
|
|
|
*
|
|
|
|
--
|
|
|
*
|
|
|
Jay
T. Holmes
|
|
|
94,000
|
(3)
|
|
|
*
|
|
|
|
7,500
|
|
|
*
|
|
|
Adrienne
L. Graves
|
|
|
40,725
|
|
|
|
*
|
|
|
|
--
|
|
|
*
|
|
|
Richard
L. Lindstrom
|
|
|
70,000
|
|
|
|
*
|
|
|
|
124,000
|
|
|
*
|
|
|
Georges
Noël
|
|
|
70,000
|
|
|
|
*
|
|
|
|
--
|
|
|
*
|
|
|
Gilbert
S. Omenn
|
|
|
40,000
|
|
|
|
*
|
|
|
|
--
|
|
|
*
|
|
|
Donald
Rindell
|
|
|
--
|
|
|
|
*
|
|
|
|
--
|
|
|
*
|
|
|
All
directors and executive officers as a group (9
persons)
|
|
|
3,300,403
|
(4)
|
|
|
5.8
|
%
|
|
|
414,571
|
(5)
|
|
*
|
|
|
___________________________________
* Less
than 1%.
(1)
|
Of
such shares, 981,926 are owned directly by TLC Vision and 17,788,376 are
owned by TLC Vision (USA) Corporation, a wholly-owned subsidiary of TLC
Vision. TLC Vision is a widely held public
company. TLC Vision’s address is 5280 Solar Drive, Suite 100,
Mississauga, Ontario, L4W 5M8.
|
(2)
|
Diamed
is controlled by Mr. Hans Stock. Diamed’s address is
Stadtwaldgürtel 77, 50935 Köln,
Germany.
|
(3)
|
12,000
shares are beneficially owned by Mr. Holmes’
wife.
|
(4)
|
This
does not include family members of directors or executive
officers. This includes 1,592,082 shares of common stock
related to stock options currently
outstanding.
|
(5)
|
This
does not include family members of directors or executive
officers. This includes 152,000 shares of common stock related
to stock options currently
outstanding.
|
Following Approval and
Implementation of Proposals
The
following table shows information regarding the future beneficial ownership of
the Company’s common stock by the below-listed persons, assuming that all of the
ten proposals that you are being asked to consider and vote on are approved and
implemented:
|
·
|
each
person who OccuLogix knows will own beneficially more than 5% of the
Company’s common stock;
|
|
·
|
each
person who will be a member of the
Board;
|
|
·
|
each
person who will be an executive officer of the Company;
and
|
|
·
|
all
persons who will be members of the Board or executive officers of the
Company, as a group.
|
Beneficial
ownership of shares is determined in accordance with SEC rules and generally
includes shares over which a person exercises sole or shared voting or
investment power. The information set forth below assumes
that 241,961,025 shares of OccuLogix’s common stock will be outstanding
following the approval and implementation of the ten proposals that OccuLogix’s
stockholders are being asked to consider and vote on, which assumption, in turn,
is based on the assumption that the per share purchase price under the
Securities Purchase Agreement will be $0.10. If the per share
purchase price under the Securities Purchase Agreement is lower than $0.10, then
a greater number of shares of OccuLogix’s common stock will be
outstanding. At the date of this proxy statement, the per share
purchase price is not determinable. Common stock underlying stock
options that are presently exercisable within 60 days of this proxy
statement is deemed to be outstanding and beneficially owned by the person
holding the stock options for the purpose of computing the ownership percentage
of that person, but are not considered outstanding for the purpose of computing
the percentage ownership of any other person. For purposes of the
information shown in the following table, we have taken into account stock
options of OcuSense that are presently exercisable within 60 days of this proxy
statement and that will be assumed by OccuLogix in accordance with the terms of
the Merger Agreement and, as a result, become exercisable into shares of
OccuLogix’s common stock.
Name
of Beneficial Owner
|
|
Shares Beneficially
Owned
(1)
|
|
Percentage
of Shares Beneficially Owned
|
Eric
Donsky
|
|
|
1,804,195
|
|
|
18.64%
|
|
TLC
Vision Corporation
(2)
|
|
|
750,812
|
|
|
7.76%
|
|
Elias
Vamvakas
|
|
|
832,349
|
|
|
7.98%
|
|
William
G. Dumencu
|
|
|
47,820
|
|
|
*
|
|
Thomas
N. Davidson
|
|
|
325,253
|
|
|
3.36%
|
|
Adrienne
L. Graves
|
|
|
1,962
|
|
|
*
|
|
Richard
L. Lindstrom
|
|
|
103,518
|
|
|
1.07%
|
|
Donald
Rindell
|
|
|
31,577
|
|
|
*
|
|
All
directors and executive officers as a group (7 persons)
|
|
|
3,146,676
|
(3)
|
|
29.87%
|
|
___________________________________
* Less
than 1%.
(1)
|
The
numbers set forth in this column assume that the Board implements a
reverse stock split in a ratio of
1:25.
|
(2)
|
Of
such shares, 39,278 will be owned directly by TLC Vision and 711,536 will
be owned by TLC Vision (USA) Corporation, a wholly-owned subsidiary of TLC
Vision. TLC Vision is a widely held public
company. TLC Vision’s address is 5280 Solar Drive, Suite 100,
Mississauga, Ontario, L4W 5M8.
|
(3)
|
This
does not include family members of directors or executive
officers. This includes 857,005 shares of common stock
underlying stock options of OccuLogix and stock options of OcuSense that
will be assumed by OccuLogix in accordance with the terms of the Merger
Agreement.
|
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act
requires OccuLogix’s directors, certain officers and persons who own more than
10% of a registered class of OccuLogix’s equity securities to file reports of
ownership on Form 3 and changes in ownership on Form 4 or 5 with the
SEC
. Such directors, officers
and 10% stockholders are also required by the
SEC
rules to furnish the Company with
copies of all Section 16(a) reports they file. OccuLogix assists
its directors and officers in preparing their Section 16(a)
reports.
To the knowledge of the Company, all
Section 16(a) reports required to be filed by directors and officers of the
Company during the fiscal year ended
December 31, 2007
were filed on a timely
basis.
HOUSEHOLDING
OF PROXY MATERIALS
The SEC
has adopted rules that permit companies and intermediaries (
e.g.
, brokers) to satisfy the
delivery requirements for proxy statements and annual reports with respect to
two or more stockholders sharing the same address by delivering a single proxy
statement addressed to those stockholders. This process, which is
commonly referred to as “householding”, potentially means extra convenience for
stockholders and cost savings for companies.
We expect
that a number of brokers with account holders who are OccuLogix stockholders
will be “householding” the OccuLogix proxy materials. A single proxy
statement will be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected
stockholders. Once you have received notice from your broker that it
will be “householding” communications to your address, “householding” will
continue until you are notified otherwise or until you revoke your
consent. If, at any time, you no longer wish to participate in
“householding” and would prefer to receive a separate proxy statement and annual
report, please notify your broker or direct your written request to the
Secretary of the Company at 2600 Skymark Avenue, Unit 9, Suite 201, Mississauga,
Ontario, L4W 5B2. Stockholders who currently receive multiple copies
of the proxy statement at their address and would like to request “householding”
of their communications should contact their broker.
OTHER
BUSINESS
OccuLogix knows of no other matter to
come before the Stockholders Meeting other than the matters referred to in the
notice of meeting.
DIRECTORS’
APPROVAL
The contents and sending of this proxy
statement have been approved by the Board.
|
By Order of the
Board
|
|
|
|
|
|
|
|
|
/s/
Elias
Vamvakas
|
|
|
Elias
Vamvakas
|
|
|
Chairman of the Board, Chief
Executive Officer and Secretary
|
|
Mississauga
,
Ontario
August ■, 2008
Copies of the Company’s Annual Report
for the financial year ended December 31, 2007, filed with the SEC on Form
10-K, and Amendment No. 1 and Amendment No. 2 to the Company’s Annual Report for
the financial year ended December 31, 2007, filed with the SEC on Form 10-K/A,
are available on the Company’s website
(
www.occulogix.com
) and
without charge upon written
request to: Secretary, OccuLogix, Inc., 2600 Skymark Avenue, Unit 9,
Suite 201, Mississauga, Ontario, L4W 5B2.
Additional information regarding the
Company can be found on
EDGAR)
(
www.sec.gov
) and
on SEDAR
(www.sedar.com).