Stockholder Proposals

 

To be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing by January 2, 2008 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 2008 annual meeting of stockholders of the Company (the “2008 annual meeting”) by April 10, 2008, then the persons named by the Board in the proxy card for the 2008 annual meeting will be allowed to use their discretionary authority with respect to any such proposal that is raised at the 2008 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 annual 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 towards the vote total for each proposal and will have the same effect as “Against” votes. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.

 

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

 

 

 

 

 

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 annual meeting or by proxy. On the date of this proxy statement, there are 57,303,895 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 28,651,948 shares must be represented by stockholders present at the annual 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 annual 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 annual meeting may adjourn the meeting to another date.

 

Results of the Voting at the Annual Meeting

 

Preliminary voting results will be announced at the annual meeting. Final voting results will be published in the Company’s quarterly report on Form 10-Q for the second quarter of the financial year ending December 31, 2007 and will be filed on the System for Electronic Document Analysis and Retrieval, or SEDAR (www.sedar.com).

 

PROPOSAL I

 

Election of Director s

 

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, the principal occupation of each nominee and the date on which each nominee was first elected or appointed as a director. See the section entitled “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 Board has an audit committee, a corporate governance and nominating committee and a compensation committee. The members of such committees are indicated in the table below.

 

 

__________________________________________

 

⁽¹⁾   Member of the Compensation Committee, * - Chairman

⁽²⁾   Member of the Corporate Governance and Nominating Committee, * - Chairman

⁽³⁾   Member of the Audit Committee, * - Chairman

 

Set forth below is biographical information relating to the nominees for election to the Board.

 

Elias Vamvakas co-founded TLC Vision Corporation (“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. 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.

 

Thomas N. Davidson has been a member of the Board since September 2004 and has been on the board of directors of TLC Vision since 2002. 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 is 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.

 

Jay T. Holmes has been a member of the Board since September 2004 and has been self-employed as an attorney and business consultant since mid-1996. From 1981 until mid-1996, Mr. Holmes held several senior management positions at Bausch & Lomb Incorporated, the most recent being Executive Vice President and Chief Administrative Officer from 1995 to 1996 and Senior Vice President and Chief Administrative Officer from 1993 to 1995. From 1983 to 1993, Mr. Holmes was Senior Vice President, Corporate Affairs and, from 1981 to 1983, Vice President and General Counsel at Bausch & Lomb. Mr. Holmes was a member of the board of directors of Bausch & Lomb from 1986 until 1996 and of VISX, Inc. from 1999 to 2005. Mr. Holmes also serves on the board of directors of IntraLase Corporation and of ReVision Optics, Inc.

 

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 and the International Refractive Surgery Club. 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.

 

Georges Noël has been a member of the Board since July 2003. Mr. Noël has been involved in the private equity and venture capital industry for over 14 years and, between 2002 and 2003, was the Secretary General of the Belgian Venturing Association. Mr. Noël is currently the Director of Research, Public Affairs and Development of the European Private Equity & Venture Capital Association (“EVCA”) and the Chief Executive Officer of Cofino SA which provides services to the venture capital industry. Mr. Noël’s professional experience in private equity has encompassed a range of roles and responsibilities at various private equity houses, including: CAM Private Equity, the Cologne-based fund of funds; Ostbelgieninvest AG; Eupen; and Fortis Private Equity NV. Prior to his involvement in private equity, Mr. Noël was Chief Financial Officer and Member of the Executive Committee of the industrial group NMC SA in Eupen, a company that develops, produces and markets synthetic foam products, between 1982 and 1993. He held various positions in corporate banking at Générale de Banque, now Fortis Bank, and was Managing Director of its German subsidiary, Belgische Bank, between 1971 and 1981. Mr. Noël serves on the boards of several investee or family-owned companies, is past President of the Belgium Venturing Association and of the IMD Alumni Club of Belgium. Mr. Noël was a member of the EVCA National Venture Capital Associations Committee from 2000 to 2003.

 

Gilbert S. Omenn, MD , PhD , has been a member of the Board since April 2005 and, since 1997, has been Professor of Internal Medicine, Human Genetics and Public Health at the University of Michigan. He is also the Director of the Center for Computational Medicine and Biology at the University of Michigan. From 1997 to 2002, he served as Executive Vice President for Medical Affairs and as Chief Executive Officer of the University of Michigan Health System. He was formerly Dean of the School of Public Health and Professor of Medicine and Environmental Health, University of Washington, Seattle. Since 1987, he has served on the board of directors of Amgen Inc. and of Rohm & Haas Company. He served as Associate Director, Office of Science and Technology Policy, and as Associate Director, Office of Management and Budget, in the Executive Office of the President in the Carter Administration. He is a member of the Council and leader of the Human Plasma Proteome Project for the international Human Proteome Organization and, in 2007, completed his service as board chair of the American Association for the Advancement of Science. Dr. Omenn is the author of over 390 research papers and scientific reviews and the author/editor of 17 books. He is a member of the Institute of Medicine of the National Academy of Sciences, the American Academy of Arts and Sciences, the Association of American Physicians and the American College of Physicians. In 2004, he received the John W. Gardner Legacy of Leadership Award from the White House Fellows Association.

 

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. 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.

 

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 annual 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, 2007 and has further directed that management submit the selection of independent auditors for ratification by the stockholders at the annual meeting. Ernst & Young LLP have been auditors of the Company since December 2003. Representatives of Ernst & Young LLP are expected to attend the annual 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 by-laws or other governing documents or law requires stockholder ratification of the selection of Ernst & Young LLP as the Company’s independent auditors. However, the Audit Committee 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 Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee, 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 annual 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, 2007. 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, 2007.

 

 

Audit fees for the financial years ended December 31, 2006 and 2005 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, 2006 included approximately Cdn$100,000 for services provided in connection with the audit of the financial statements of Solx, Inc. (now the Company’s Boston-based glaucoma subsidiary) in connection with the Company’s acquisition of it on September 1, 2006.

 

The audit-related fees for the financial years ended December 31, 2006 and 2005 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, 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 Standard No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”) and the calculation of the Company’s goodwill impairment. Fees charged for audit-related services for the financial year ended December 31, 2005 were mainly in respect of professional services rendered in connection with the Company’s documentation of internal controls in readiness for its compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

 

The fees for tax services incurred during the financial years ended December 31, 2006 and 2005 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 foregoing 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, 2006 and the audit for the financial year ended December 31, 2005 were approved in advance by the Audit Committee. 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

 

Increase in Share Reserve under the 2002 Stock Option Plan

 

The Company’s compensation philosophy is to retain and motivate its management and employees and third party consultants through appropriate levels of cash and equity compensation and to provide an effective incentive for these individuals to promote, and to participate in, the growth and success of the Company. The 2002 Stock Option Plan is essential to the implementation of the Company’s compensation philosophy. As of the date of this proxy statement, 33 employees of the Company and an indeterminate number of third party consultants are eligible to participate in the 2002 Stock Option Plan. For a description of the 2002 Stock Option Plan, see “Employee Benefit Plans”.

 

In November 2004, the maximum number of shares of the Company’s common stock issuable upon the exercise of stock options under the 2002 Stock Option Plan was set at 4,456,000. Such share reserve represents approximately 7.8% 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 8.8% of the issued and outstanding shares of the Company’s common stock. (See “Employee Benefit Plans—Options Granted Outside the 1997 Plan and the 2002 Stock Option Plan”.) As a result of grants and exercises of stock options that have taken place since November 2004, 3,735,721 shares of the Company’s common stock are issuable upon the exercise of stock options that are currently issued and outstanding under the 2002 Stock Option Plan, and 350,351 shares of the Company’s common stock are reserved for issuance upon the exercise of stock options under the 2002 Stock Option Plan that may be issued in the future.

 

 

 

The Board anticipates that the number of shares of the Company’s common stock available for issuance upon the exercise of stock options, to be issued in the future under the 2002 Stock Option Plan, will be inadequate to meet the Company’s compensation objectives. Accordingly, the Board is asking stockholders of the Company to approve an increase in the share reserve under the 2002 Stock Option Plan, from 4,456,000 to 6,456,000, which represents approximately 11.3% of the number of shares of the Company’s common stock that are currently issued and outstanding and an increase of 2,000,000 over the share reserve established in November 2004.

 

The affirmative vote of the majority of votes cast at the annual meeting, at which a quorum is present, is required to adopt the resolution to increase the share reserve under the 2002 Stock Option Plan and to amend the 2002 Stock Option Plan accordingly. Such resolution appears in Appendix A to this proxy statement. 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 resolution appearing in Appendix A to this proxy statement.

 

The Board unanimously recommends a vote FOR the resolution appearing in Appendix A to this proxy statement.  

 

PROPOSAL IV

 

Additional Amendments to the 2002 Stock Option Plan

 

Amendment Procedure

 

Effective January 1, 2005, the Toronto Stock Exchange (the “TSX”), one of the two exchanges on which shares of the Company’s common stock are listed, introduced new rules regarding the procedure for amending security-based compensation arrangements such as the 2002 Stock Option Plan (the “New TSX Rules”). Under the New TSX Rules, securityholder approval is required for amendments to a security-based compensation arrangement unless it contains a detailed amendment provision. Prior to the introduction of the New TSX Rules, securityholder approval was required for any proposed amendment considered to be material by the TSX. This situation gave rise to significant uncertainty for issuers. After providing a transition period for adjustment to the New TSX Rules, the TSX has advised issuers that, effective June 30, 2007, all amendments to a security-based compensation arrangement will require securityholder approval unless such security-based compensation arrangement contains a detailed amendment procedure which specifies which types of amendments will require securityholder approval. In addition, the New TSX Rules provide that, notwithstanding the fact that a security-based compensation arrangement may have already been approved by securityholders, securityholder approval on a disinterested basis will be required for any extension of the term of, or a reduction in the exercise price of, options benefiting insiders.

 

Currently, Section 12 of the 2002 Stock Option Plan, being the amendment provision of the 2002 Stock Option Plan, provides that, without the approval of the Company’s stockholders, there shall be (i) no increase in the maximum aggregate number of shares of the Company’s common stock, (ii) no change in the class of persons eligible to receive incentive stock options and (iii) no other amendment of the 2002 Stock Option Plan that would require the approval of the Company’s stockholders under any applicable law, regulation or rule. In order to bring the amendment provision of the 2002 Stock Option Plan in better compliance with the New TSX Rules, the Board proposes to add, to the list of types of amendments requiring the approval of the Company’s stockholders, (i) any extension of the term of stock options granted to an insider of the Company, other than for reason of the existence of a Company-imposed trading blackout period (see “—Extension of Stock Options Exercise Periods during Trading Blackout Periods”), and (ii) any reduction of the exercise price of such stock options, other than in connection with adjustments for changes in the Company’s capital structure as permitted pursuant to Section 4.2 of the 2002 Stock Option Plan.

 

Therefore, the Board proposes to amend Section 12 of the 2002 Stock Option Plan in accordance with the resolution appearing in Appendix B to this proxy statement.

 

Extension of Stock Options Exercise Periods during Trading Blackout Periods

 

In accordance with good corporate governance practices, many issuers, including the Company, self-impose trading blackout periods from time to time which result in preventing insiders from exercising their otherwise exercisable stock options. The TSX has recognized that the requirement under the New TSX Rules for securityholder approval to extend the term of stock options held by insiders could penalize positive corporate behavior unintentionally. In order to address this unintended consequence, the TSX allows security-based compensation arrangements to provide, with securityholder approval, an extension of the expiry date of stock options if that expiry date would fall within, or immediately after the end of, a trading blackout period.

 

Therefore, the Board proposes to amend the 2002 Stock Option Plan in accordance with the resolution appearing in Appendix B to this proxy statement, by adding a new subsection (d) to Section 6.6 which, in the case of exercisable stock options that would expire during a Company-imposed trading blackout period to which the holder of such stock options is subject, will have the effect of extending the exercise period of such stock options to the end of the tenth business day following the end of the trading blackout period.

 

Appendix B

 

The affirmative vote of the majority of votes cast at the annual meeting, at which a quorum is present, is required to adopt the resolution to effect the changes to the 2002 Stock Option Plan described immediately above, under the heading “—Additional Changes to the 2002 Stock Option Plan”. Such resolution appears in Appendix B to this proxy statement. For purposes of this approval, 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 resolution appearing in Appendix B to this proxy statement.

 

The Board unanimously recommends a vote FOR the resolution appearing in Appendix B to this proxy statement.

 

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:

 

Thomas P. Reeves has served as Occulogix’s President and Chief Operating Officer since September 2004. Mr. Reeves was the President and Chief Executive Officer from March 2001 to September 2004 of Borderfree, an international e-commerce service provider, and of the Canada Post Borderfree Partnership, a commercial partnership between Canada Post Corporation and Borderfree. From 1998 to 2000, Mr. Reeves was President of Beamscope Canada Inc. (“Beamscope”), a retail distributor of micro-computer products. While Mr. Reeves was President of Beamscope, the company instituted proceedings under the Companies’ Creditors Arrangement Act (Canada) and a receiver was appointed after his departure. From 1994 to 1998, Mr. Reeves was President of Merisel Canada, a subsidiary of one of the largest distributors of micro-computer products. From 1992 until 1994, Mr. Reeves was Managing Director of Merisel Europe where he was responsible for all strategic, financial and operational aspects of subsidiaries in the UK, France, Germany, Switzerland, Austria and Russia. From 1989 until 1992, Mr. Reeves was Managing Director of Merisel Ltd., and, from 1987 to 1989, he was Vice President of European Business Development based in Paris, France. From 1985 until 1987, Mr. Reeves was a consultant with the Boston Consulting Group in its San Francisco office. Mr. Reeves holds a Master of Arts in International Relations from the Australian National University and graduated magna cum laude with a Bachelor of Arts in Economics from Harvard University.

 

 

 

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.

 

Nozait Chaudry-Rao (Nozhat Choudry), PhD, joined OccuLogix as Vice President, Clinical Research in February 2006. During the nine-year period prior to her arrival at OccuLogix, Dr. Choudry worked at Boehringer Ingelheim, most recently as Director of the National Medicine Department. From March 1993 to August 1996, Dr. Choudry worked at Ciba-Geigy (now Novartis Corporation) where she held increasingly senior roles in drug development and clinical trial management. Dr. Choudry earned her PhD in Clinical Pharmacology at the Royal Postgraduate Medical School in London, England and has done extensive post-graduate research and publishing in both pharmacology and medicine. She has served on several committees of the National Science and Engineering Research Committee of Canada and has an appointment at the University of Toronto as lecturer.

 

David C. Eldridge, OD, FAAO , became OccuLogix’s Vice President, Science and Technology in October 2002. Prior to joining OccuLogix, Dr. Eldridge was the Executive Vice President, Clinical Affairs of TLC Vision from 1997 to 2002 and, from 1994 to 1998, served on TLC Vision’s board of directors. Prior to joining TLC Vision, Dr. Eldridge was an optometrist in private practice from 1978 to 1997. He served as President of the Oklahoma Chapter of the American Academy of Optometry, as President of the Oklahoma Association of Optometric Physicians (the “OAOP”), as a member of the OAOP board of directors and as Chairman of the OAOP Education Committee. Dr. Eldridge was named Oklahoma “Optometric Physician of the Year” in 1993 and is a charter member of the American Optometric Association Contact Lens Section. Dr. Eldridge is a Fellow of the American Academy of Optometry. In addition to a Doctor of Optometry from the Southern College of Optometry, Dr. Eldridge holds a B.S. in Biology and Physics from Oklahoma State University.

 

John Cornish has served as OccuLogix’s Vice President, Operations since September 2004. He also served as the Company’s President and CEO from August 2001 until October 2001, and he served as one of the Company’s directors from April 1997 until September 2004. Mr. Cornish has over nineteen years of medical industry experience. He is also the president of Apheresis Technologies, Inc. (“Apheresis Technologies”), a position he has held since 1996. Currently, Mr. Cornish devotes 50% of his time, on average, to his duties as OccuLogix’s Vice President of Operations and devotes 50% of his time, on average, to his duties as president of Apheresis Technologies. From 1989 to 1995, Mr. Cornish held numerous operational and managerial positions with several device manufacturers, and, in 1994, he founded a private regulatory consulting practice overseeing the operations of numerous medical companies’ activities relating to quality assurance, regulatory affairs, manufacturing, sterilization, process validation and good manufacturing practices auditing. Mr. Cornish holds a B.S. in Business Administration from the University of Texas at Dallas.

 

Stephen J. Kilmer , OccuLogix’s Vice President, Investor & Public Affairs joined the Company in July 2004. Mr. Kilmer was Vice President, Investor Relations of TLC Vision from December 2003 to October 2004. From October 2000 until December 2003, he was Director of Corporate Communications for TLC Vision, and, from October 1998 until October 2000, he was Director of Investor Relations for TLC Vision. From September 1997 until October 1998, Mr. Kilmer was Manager of Investor Relations for TLC Vision.

 

Julie A. Fotheringham became OccuLogix’s Vice President, Marketing in September 2004. From September 2002 until September 2004, Ms. Fotheringham was Senior Brand Manager at Cadbury Adams, a manufacturer of assorted candy. From January 2000 until September 2002, she was Brand Manager at Adams (a division of Warner-Lambert and then Pfizer Canada Inc.). From November 1996 until November 1997, she was Client Manager for the Sales & Merchandising Group. From December 1993 to September 1996, Ms. Fotheringham was Territory Manager for Warner-Lambert Canada’s Parke-Davis Pharmaceutical Division. Ms. Fotheringham has a Bachelor of Science degree in Biology from Queen’s University in Kingston, Canada.

 

Stephen B. Parks became OccuLogix’s Vice President, Sales in October 2005. He joined OccuLogix from his position as Vice President, Sales at Advanced Medical Optics, Inc. Before Advanced Medical Optics, Inc. acquired VISX, Inc. in May 2005, Mr. Parks led VISX, Inc.’s excimer laser sales and procedure fee business in the eastern part of the United States from 1995 to 2005. Prior to joining VISX, Inc., Mr. Parks held a variety of sales and sales management positions with Alcon Surgical, Coopervision Surgical Systems, Johnson & Johnson and Procter & Gamble Co. Mr. Parks holds a Bachelor of Business Administration degree from the University of Mississippi.

 

Doug P. Adams is OccuLogix’s President & Founder, Glaucoma Division. He began his tenure with the Company on September 1, 2006 upon its acquisition of Solx, Inc., a company which he had founded in 2000. Mr. Adams has more than 25 years of experience in the ophthalmic industry. He has directed the launch of more than 20 products while the founder and chief executive officer of several start-up companies and, in addition, has held senior executive positions at a number of companies, including Summit Technology, Allergan Medical Optics and Humphrey Instruments. He has served on industry advisory boards for Boston University and Ocular Surgery News International. Mr. Adams holds a Bachelor of Business Administration from the University of Georgia and has completed executive leadership courses at Columbia University and the Wharton School of Business.

 

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

 

The main objective of the compensation program for executive officers, including the five currently employed executives who are identified in the Summary Compensation Table (whom we refer to as 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. Each of Mr. Vamvakas, the Chief Executive Officer (also the Secretary and Chairman of the Board), Mr. Dumencu, the Chief Financial Officer and Treasurer, Mr. Reeves, the President and Chief Operating Officer, and Dr. Eldridge, the Vice President, Science and Technology, also receives certain perquisites as part of his respective 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. As best as possible, 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:

 

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 and Mr. Parks, the Vice President, Sales, is a percentage of his or her base salary. Each of Mr. Vamvakas and Mr. Parks 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 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 Mr. Reeves’ bonus compensation are contingent solely on the attainment of the collective, corporate objectives of the Company. In December of each year, Messrs. Vamvakas and Reeves 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 sets 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

 

The Company’s equity incentive compensation program is intended to be an effective recruitment and retention tool, to recognize the scope of responsibilities of executives, to reward performance and leadership and to motivate future performance by aligning the interests of executives with those of stockholders. In 2005, an aggregate of 768,750 performance-based stock options under the Company’s 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 Company’s 2002 Stock Option Plan and 300,000 outside the Company’s 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. 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 have the ability to make 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 each of Mr. Vamvakas and Mr. Reeves with a car allowance. In addition, each of them is entitled to have the Company reimburse him for miscellaneous expenses, to a maximum of Cdn$20,000 per year, which can include club membership fees. We also pay a portion of the premium on Dr. Eldridge’s supplementary health insurance policy, and Mr. Dumencu is entitled to reimbursement by the Company of the costs of preparation of his annual income tax returns.

 

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, or NASDAQ, for the five trading-day period immediately preceding the date of grant and (2) the closing price of the Company’s common stock on NASDAQ 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 of Directors 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.