| •
| Stock options
PSUs enable the Compensation Committee to incentivize and reward performance over a multi-year period, with the level of payout contingent on the performance delivered; and RSUs help retain senior leaders, whose experience and contributions are critical to the successful execution of our strategy. Being equity-based, both RSUs and PSUs have an inherent connection to the Company’s stock price performance and the direct interests of our shareholders. The Compensation Committee approves all long-term incentive awards to NEOs. These approvals are made either when an NEO’s employment agreement is entered into or in connection with their participation in the annual equity grant process as appropriate. All NEOs are subject to Share Ownership Guidelines as discussed in further detail above. In determining the award values the Compensation Committee considers several factors: | | | | | | | Individual performance | Company performance | Role scope and responsibility | Salary | Internal relativities | Market Data and Practices | Equity availability |
The key features of the awards made in 2020 were as follows: | | | PSUs | | • A PSU represents a contingent right to receive one Common Share of IMAX • Represents 50% of the target award value for the Compensation Committee to incentivize and reward sustained share price performance over a multi-year period, with no value realized unless the stock price increases; and | |
| •
| RSUs help retain senior leaders, whose experience and contributions are critical to the successful execution of our strategy.
| |
As noted above, the Company will be adjusting its equity compensation to incorporate PSUs tied to specific performance goals for its CEO, and 25% of the target award value for the other NEOs which we believe will further link executive compensation(increasing to Company performance.
The Compensation Committee approves all long-term incentive awards to NEOs. These approvals are made either when an NEO’s employment agreement is entered into or33% in connection with their participation in the annual equity grant process as appropriate. All NEOs are subject to share ownership guidelines as discussed in further detail above. In determining the award values the Compensation Committee considers several factors:
| | | | | | | Individual performance
| Company performance
| Role scope and responsibility
| Salary
| Internal relativities
| Market Data and Practices
| Equity availability
|
The key features of the awards made in 2019 were as follows:2021)
Stock Options
| •Exercise price equal to grant date• Award determined by dividing the target value by the fair market value on the date of grant, which for the relative TSR component is based on a Monte Carlo valuation
•Ten-year term for CEO and seven-year term for other NEOs, subject to cancellation or forfeiture if the NEO’s employment terminates
•CEO’s awards vest in accordance with his employment agreement in three equal installments on May 1, September 1 and December 1 of 2019
•Awards to Mr. McClymont, Mr. Welton and Ms. Colligan made in 2019 vest over four years subject to the following schedule:
▪20% on the first anniversary of the grant date;
▪25% on each of the second and third anniversaries of the grant date; and
▪30% on the fourth anniversary of the grant date
•A one-time appointment award to Ms. Colligan in connection with her appointment in February 2019 that vests in three equal installments beginning on the first anniversary of the grant date
•Awards to Mr. Lister made in 2019 vest in four equal installments beginning on the first anniversary of the grant date
|
RSU’s
| •An RSU represents a contingent right to receive one Common Share of IMAX
•Award determined by dividing the target value by the fair market value on the date of grant
•The CEO did not receive RSU awards in 2019 as they had previously been granted at the start of his prior employment agreement
•Awards to Mr. McClymont, Mr. Welton and Ms. Colligan made in 2019 vest subject to the following schedule:
▪20% on the first anniversary of the grant date;
▪25% on each of the second and third anniversaries of the grant date; and
▪30% on December 1st, immediately prior to the fourth anniversary of the grant date
•A one-time appointment award to Ms. Colligan in association with her appointment in February 2019 that vests in three equal installments beginning on the first anniversary of the grant date
•Awards to Mr. Lister made in 2019 vest in four equal installments beginning on the first anniversary of the grant date
|
In 2019, the following awards were granted• Subject to NEOs. The size and mix of equity grants are determined in the relevant provision of each NEO’s employment agreement.
| | | | | | | Name | Target Grant Value ($) | Total Actual Grant Date Value ($) | 2019 Option Award (#) | 2019 Option Award Grant Date Value ($) | 2019 RSU Award (#) | 2019 RSU Award Grant Date Value ($) | Richard L. Gelfond | 3,300,000 | 3,299,997 | 522,979 | 3,299,997 | -- | -- | Patrick McClymont | 1,350,000 | 1,349,993 | 47,736 | 337,493 | 45,020 | 1,012,500 | Megan Colligan | 1,500,000 | 1,499,988 | 51,581 | 374,994 | 48,159 | 1,124,994 | Robert D. Lister | 1,400,000 | 1,399,989 | 50,143 | 349,998 | 46,687 | 1,049,991 | Mark Welton | 1,400,000 | 1,399,984 | 49,504 | 349,993 | 46,687 | 1,049,991 |
In addition to the awards above, which reflectaverage annual participation in IMAX’s long-term incentive program, Ms. Colligan received the following awards in association with her appointment in February 2019. The awards were intended to immediately align Ms. Colligan’s interests with those of IMAX shareholders.
| | | | | | | | | | | | | | Name | Target Grant Value ($) | Total Grant Date Value ($) | Appointment Option Award (#) | Appointment Option Award Grant Date Value ($) | Appointment RSU Award (#) | Appointment RSU Award Grant Date Value ($) | Megan Colligan | 1,000,000 | 999,992 | 72,992 | 499,995 | 21,404 | 499,997 |
Additional information regarding the treatment on termination can be found in “Potential Payments upon Termination or Change-in-Control” on page 65, which provides details of the NEOs’ employment and change-in-control agreements.
Long-Term Incentives in 2020
As discussed above, in response to feedback from our shareholders, PSUs have been introduced in 2020, replacing stock options. The Compensation Committee believes the use of PSUs for annual equity grants will continue to meet our equity compensation objectives, with PSUs providing a pre-setAdjusted EBITDA growth (60%) performance condition that must be achieved rather than options simply requiring stock price appreciation to deliver value. The key features ofand relative TSR vs. the awards to be made from 2020 are as follows.Russell 2000 (40%) performance and market condition
PSUs
| •A PSU represents a contingent right to receive one Common Share of IMAX
•Award determined by dividing the target value by the fair market value on the date of grant, which for the relative TSR component is based on a Monte Carlo valuation
•Subject to average annual EBITDA growth (60%) and relative TSR vs. the Russell 2000 (40%) performance and market conditions
••Performance is measured over three years starting on January 1 in the year of grant
| |
| | | RSUs | •An RSU represents a contingent right to receive one Common Share of IMAX
•• An RSU represents a contingent right to receive one Common Share of IMAX
• Represents 50% of the target award value for the CEO, and 75% of the target award value for the other NEOs (decreasing to 67% in 2021) •Award determined by dividing the target value by the fair market value on the date of grant • Awards vest in three tranches on the first (33%), second (33%) and third (34%) anniversary of the date of grant
•Awards vest in three equal installments on the first, second and third anniversaries of the grant date
|
| The following performance conditions have been approved for 2020 PSU awards:
|
| | | | | Average Annual EBITDA Growth Over the Performance Period | Vesting (% of Target) | | Relative TSR Percentile Rank vs. Russell 2000 Over the Performance Period | Vesting (% of Target) | <5.0% | 0% | | < 40th | 0% | 5.0% | 50% | | 40th | 37.5% | 10.0% | 75% | | 50th | 50% | 12.5% | 100% | | 70th | 100% | ≥ 20.0% | 175% | | 80th | 125% | | | | ≥ 90th | 175% |
In 2020, the following awards were granted to NEOs. The size and mix of equity grants are determined in the relevant provision of each NEO’s employment agreement as guided by the factors above. | | | | | | | | Name | Target Grant Value ($) | Total Actual Grant Date Value ($) | 2020 PSU Award (#) | 2020 PSU Award Grant Date Value ($) | 2020 RSU Award (#) | 2020 RSU Award Grant Date Value ($) | | Richard L. Gelfond | 5,500,000 | 5,499,962 | 134,171 | 2,749,969 | 134,146 | 2,749,993 | | Patrick McClymont | 1,450,000 | 1,449,984 | 31,836 | 362,494 | 73,281 | 1,087,490 | | Megan Colligan | 1,500,000 | 1,499,999 | 32,935 | 375,008 | 75,808 | 1,124,991 | | Robert D. Lister | 1,400,000 | 1,399,993 | 30,739 | 350,004 | 70,754 | 1,049,989 | | Mark Welton | 1,400,000 | 1,399,993 | 30,739 | 350,004 | 70,754 | 1,049,989 | |
41
The 2020 PSU awards were granted subject to the following stretching performance goals. Despite being approved prior to the onset of COVID-19 and exceeding market typical performance standards, no adjustments have been made. | | | | | Average Annual Adjusted EBITDA Growth Over the Performance Period | Vesting (% of Target) | | Relative TSR Percentile Rank vs. Russell 2000 Over the Performance Period | Vesting (% of Target) | <5.0% | 0% | | < 40th | 0% | 5.0% | 50% | | 40th | 37.5% | 10.0% | 75% | | 50th | 50% | 12.5% | 100% | | 60th | 75% | 15.0% | 125% | | 70th | 100% | 17.5% | 150% | | 80th | 125% | ≥ 20.0% | 175% | | ≥ 90th | 175% |
Additional information regarding the treatment on termination can be found in “Potential Payments upon Termination or Change-in-Control” on page 49, which provides details of the NEOs’ employment and change-in-control agreements. One-Time Bridging Awards One-time “bridging awards” were approved to select employees, including our NEOs for the purposes of (i) retaining and awarding key employees during this uncertain period; and (ii) driving the continued commitment and engagement required for the Company to be successful as we approach a period of anticipated recovery in our markets. The Compensation Committee worked closely with Mr. Gelfond (who, as noted below, received no cash bonus for 2020 and a bridging award equivalent to 33% of his base salary) in formulating the structure and quantum of the NEO awards. These bridging awards were made in the first quarter of 2021, as part of the regular long-term incentive grant for the CEO and other NEOs. Given this timing, the awards are not reflected in the Summary Compensation Table, which reflects equity awards granted in the 2020 year. In approving the awards the Compensation Committee, working closely with Mr. Gelfond, took into account the retention value of each NEO’s current holdings, the fact that none of our NEOs received any annual cash bonuses for 2020, the lapsing of underwater stock options and the maintenance of stretching PSU goals. For NEOs, these awards took the form of RSUs which will vest in two equal tranches on the first and second anniversaries of the date of grant. | | | Name | Bridging Award Grant Value ($) | Bridging Award Grant Value (% of Base Salary) | Richard L. Gelfond | 400,000 | 33% | Patrick McClymont | 420,000 | 56% | Megan Colligan | 339,900 | 33% | Robert D. Lister | 310,149 | 42% | Mark Welton | 300,725 | 54% |
In aggregate, the Compensation Committee believes the base salary, treatment of 2020 annual cash bonus, long-term incentive awards and the one-time bridging awards for our NEOs appropriately reflects our 2020 performance, while retaining and engaging leaders in a manner aligned with the interests of our shareholders. Other Elements of Compensation Retirement and Pension Plans All employees are offered the opportunity to participate in at least one capital accumulation plan, to aid them in preparation for their future retirement. The exact nature of the plans offered for which an employee is eligible, including our NEOs, varies based on both their country of residence and level of seniority.
42
| | | Retirement and Pension Plans | All of
| • Available to eligible employees, which we believe allows our employees are offered the opportunity to participatebenefit from tax-advantaged savings plans and is part of providing a competitive compensation package to retain talent • Defined contribution employee retirement plans in at least one capital accumulation plan, to aid them in preparation for their future retirement. The exact naturevarious jurisdictions, including under Section 401(k) of the plans offered for which an employee is eligible, including our NEOs, variesU.S. Internal Revenue Code (the “401(k) Plan”) and Registered Retirement Savings Plans in Canada • Contributions are made to the plan based on both their countrya fixed percentage of residence and leveleach employee’s earnings •NEOs participate on terms consistent with all other eligible employees | |
| | | Arrangements for our CEO | | •The Company provides supplemental benefits for the CEO, which we believe is a way to help retain our CEO by contributing to a competitive overall compensation package •SERP ▪Unfunded defined benefit arrangement ▪The value of seniority.the SERP is fixed at the amount of $20.3 million pursuant to the Gelfond Agreement Retirement Plans
| •Available to eligible employees, which we believe allows our employees to benefit from tax-advantaged savings plans and is part of providing a competitive compensation package to retain talent▪Benefits are 100% vested such that in the event of employment termination, other than for cause (as defined in the Gelfond Agreement), our CEO is entitled to receive the benefits as a lump sum
•Defined contribution employee retirement plans in various jurisdictions, including under Section 401(k) of the U.S. Internal Revenue Code (the “401(k) Plan”) and Registered Retirement Savings Plans in Canada
•Contributions are made to the plan based on a fixed percentage of each employee’s earnings
•NEOs participate on terms consistent with all other eligible employees
|
•Unfunded Retiree Medical Benefit Plan | | Arrangements
for our CEO
| •The Company provides supplemental benefits for the CEO, which we believe is a way to help retain our CEO by contributing to a competitive overall compensation package
•SERP
▪Unfunded defined benefit arrangement
▪The value of the SERP is fixed at the amount of $20.3 million pursuant to the Gelfond Agreement
▪Benefits are 100% vested such that in the event of employment termination, other than for cause (as defined in the Gelfond Agreement), our CEO is entitled to receive the benefits as a lump sum
•Unfunded Retiree Medical Benefit Plan
▪Covers Mr. Gelfond and his eligible dependents
▪Provides that the Company will maintain retiree health benefits until Mr. Gelfond becomes eligible for Medicare
▪Covers Mr. Gelfond and his eligible dependents ▪Provides that the Company will maintain retiree health benefits until Mr. Gelfond becomes eligible for Medicare ▪Thereafter, the Company will provide Medicare supplemental coverage, as selected by Mr. Gelfond. If such supplemental coverage is not permitted, Mr. Gelfond will be entitled to an annual cash payment equal to the value of such coverage ▪Mr. Gelfond is fully vested in this plan
•For more information on the SERP and the retiree medical benefit plan, please see the section entitled “2019 Pension Benefits” on page 64
|
Other Benefits
We periodically review the levels of personal benefits and perquisites provided to the NEOs to ensure competitiveness and value to the employees and to promote their health and wellness. The benefits provided are intended to be market competitive, with the goal of ensuring that our senior executives are focused on their health and well-being which we hope will better enable them to discharge their duties and effectively focus on their contributions to IMAX. At present, we do not provide significant perquisites to our NEOs. The costs associated with these items ranging from $32,915 to $134,227 per NEO during 2019.
The supplemental health plan and executive wellness allowance were implemented to ensure that our medical benefits remain competitive in the market, and to ensure that our most senior executives are focused on health and well-being.
| •
| Executive Supplemental Health Plan:This plan, which covers certain of our senior executives located in the United States including all of our NEOs, provides expanded coverage and reimbursement of services not covered by our medical, dental and vision plans.
| |
| •
| Executive Wellness Allowance:Certain senior executives, including all of our NEOs, can submit for reimbursement up to $2,500 in qualifying wellness costs each year.
| |
| •
| Car Benefits: Certain senior executivesare provided either with use of Company car or a car allowances, along with the opportunity to submit reasonable car-related expenses for reimbursement.
| |
| •
| Death-in-Service Benefit: Certain senior executivesare entitled to receive a cash death benefit through our life insurance policies. In the event of the executive’s death prior to actual retirement at age 65, the executive’s designated beneficiaries would be entitled to receive a lump sum payment amount equal to two times the executive’s base salary, subject to prescribed maximums. In addition to our broader policy covering all executives, we have agreed to reimburse Mr. Gelfond for the costs of premiums associated with additional life insurance policies.
| |
| •
| Reimbursement of Qualifying Expenses: Certain senior executives are eligible to submit for reimbursement qualifying expenses related to tax, financial and estate planning services, charitable giving, as well as business club memberships and incidentals.
| |
| •
| Tax Gross-up:We have no tax gross-up obligations with respect to the CEO or any NEO.
| |
Additional Information
Employment and Change-In-Control Agreements
Currently, we have written employment agreements or offer letters with all our NEOs, which are described in detail below in “Potential Payments upon Termination or Change-in-Control” on page 65. We believe that these agreements are critical to attract and retain talent and to motivate and properly incentivize our NEOs, while still allowing the Compensation Committee and the CEO requisite discretion to determine overall compensation in a given year. These employment agreements specify details of the approach to salary, bonus, equity awards, and restrictive covenants surrounding executive officer employment, including non-competition and non-solicitation provisions. Generally, the agreements are established at the time of hire and are amended from time to time to extend or modify the terms of employment, including to reflect compensation decisions resulting from a promotion or other change in job responsibility.
Each NEO’s employment arrangement requires that we make certain payments to the relevant NEO in the event of a termination of employment for various reasons, including, for several NEOs, upon a change-in-control of the Company. The provisions are designed to promote stability and continuity of senior management in the event of a transaction involving a change-in-control. Our severance and change-in-control benefits were determined on the basis of market practices to provide this stability as well as competitive overall compensation packages to the NEOs. No NEO has a “single-trigger” change-in-control benefit; all such provisions require a qualifying termination of employment following a change-in-control event. The employment agreements for Mr. Gelfond and Mr. McClymont were reviewed in 2019, with changes to Mr. Gelfond’s agreement being effective January 1, 2020 and changes to Mr. McClymont’s agreement being effective August 8, 2019. Mr. Lister’s employment agreement was modified as of March 11, 2020. The employment agreement for Ms. Colligan became effective February 19, 2019. Mr. Welton’s offer letter was provided to him in 2011.
For a description of these agreements, please see “Potential Payments upon Termination or Change-in-Control” on page 65.
Tax and Accounting Considerations
To the extent that any compensation paid to the NEOs constitutes a deferral of compensation within the meaning of Section 409A of the Internal Revenue Code, we intend to cause the compensation to comply with the requirements of Section 409A and to avoid the imposition of penalty taxes and interest upon the participant receiving the award.
In determining the form and amount of compensation awarded we look mainly to the compensation principles and objectives outlined above while also giving consideration to the impact of Financial Accounting Standards Board Accounting Standards Codification Topic 718 “Compensation – Stock Compensation”.
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility of compensation paid to certain top executives to $1.0 million per taxable year. Prior to the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), there was an exemption from this $1.0 million deduction limit for compensation payments that qualified as “performance-based” under applicable regulations. In 2017, we modified our annual bonus program to comply with the requirements of Section 162(m), including Compensation Committee approval of metrics and targets at the beginning of the fiscal year. However, the enactment of the Tax Act eliminated the performance-based compensation exemption, except with respect to certain grandfathered arrangements. Therefore, grants of equity awards in 2018 did not receive the performance-based compensation exemption under Section 162(m) and the Company’s possible tax deduction was limited to a maximum of $1.0 million per taxable year.
COMPENSATION COMMITTEE REPORT
The members of the Compensation Committee hereby state that they have reviewed and discussed the Compensation Discussion and Analysis for the year ended December 31, 2019, with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Circular.
| | April 29, 2020
| Respectfully submitted,
| | | | Darren Throop (Chair)
| | Kevin Douglas
Dana Settle
|
2019 SUMMARY COMPENSATION TABLE
The table below sets forth the compensation earned by the NEOs during the last three completed fiscal years.
Name and Principal Position of Named Executive Officer | | Year ended December 31 | | Salary ($) | | Bonus ($) | | Stock Awards ($) (1) | | Option Awards ($) (1) | | Change in Pension Value ($) | | All Other Compensation ($) | | Total ($) | Richard L. Gelfond | | | 2019 | | | | | 1,200,000 | | | | | | 1,100,000 | | (2) | | | | | — | | | | | | | 3,299,997 | | (3) | | | | | 1,377,679 | | (4) | | | | | 134,227 | | (5) | | | | | 7,111,903 | | | Chief Executive Officer | | | 2018 | | | | | 1,200,000 | | | | | | 1,700,000 | | | | | | | — | | | | | | | 3,300,001 | | | | | | | — | | | | | | | 86,122 | | | | | | | 6,286,123 | | | and Director | | | 2017 | | | | | 1,198,077 | | | | | | 850,000 | | | | | | | — | | | | | | | 3,300,002 | | | | | | | — | | | | | | | 86,085 | | | | | | | 5,434,164 | | | Patrick McClymont | | | 2019 | | | | | 706,250 | (6) | | | | | 630,000 | | (2) | | | | | 1,012,500 | | (7) | | | | | 337,493 | | (8) | | | | | — | | | | | | | 40,859 | | (9) | | | | | 2,727,102 | | | Chief Financial Officer and | | | 2018 | | | | | 675,000 | | | | | | 550,000 | | | | | | | 1,012,497 | | | | | | | 337,497 | | | | | | | | | | | | | | 37,911 | | | | | | | 2,612,905 | | | Executive Vice President | | | 2017 | | | | | 675,000 | | | | | | 475,000 | | | | | | | 1,012,505 | | | | | | | 337,497 | | | | | | | — | | | | | | | 36,181 | | | | | | | 2,536,183 | | | Megan Colligan | | | 2019 | | | | | 842,308 | | | | | | 822,466 | | (2) | | | | | 1,624,991 | | (10) | | | | | 874,989 | | (11) | | | | | — | | | | | | | 32,915 | | (12) | | | | | 4,197,669 | | | President, IMAX Entertainment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | and Executive Vice President, IMAX Corporation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Robert D. Lister | | | 2019 | | | | | 714,654 | | | | | | 440,000 | | (2) | | | | | 1,049,991 | | (13) | | | | | 349,998 | | (14) | | | | | — | | | | | | | 53,678 | | (15) | | | | | 2,608,321 | | | Chief Legal Officer and Senior | | | 2018 | | | | | 700,000 | | | | | | 440,000 | | | | | | | 1,049,985 | | | | | | | 349,997 | | | | | | | — | | | | | | | 40,894 | | | | | | | 2,580,876 | | | Executive Vice President, IMAX Corporation | | | 2017 | | | | | 699,519 | | | | | | 275,000 | | | | | | | 1,049,985 | | | | | | | 350,002 | | | | | | | — | | | | | | | 33,627 | | | | | | | 2,408,133 | | | Mark Welton | | | 2019 | | | | | 518,706 | (16) | | | | | 420,300 | | (2)(16) | | | | | 1,049,991 | | (17) | | | | | 349,993 | | (18) | | | | | — | | | | | | | 43,648 | | (16)(19) | | | | | 2,382,638 | | | President, IMAX Theatres | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1)
| As required by SEC rules, the “Option Awards” and “Stock Awards” columns in this Summary Compensation Table reflect the aggregate grant date fair values of stock options and RSUs respectively, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (with no reductions for forfeitures). See note 16(c) to the audited consolidated financial statements in Item 8 of the 2019 Form 10-K, for the assumptions used to calculate the fair value of the stock options and RSUs. Whether, and to what extent, an NEO realizes value with respect to stock option or RSU awards will depend on our actual operating performance, stock price fluctuations and the NEO’s continued employment.
|
| (2)
| This amount was determined by the Compensation Committee as described in "Pay and Performance in 2019 - Annual Cash Bonus Awards" on page 52.
|
| (3)
| This amount reflects the grant date fair value of the 522,979 stock options granted on January 2, 2019. The stock options vest and become exercisable in three installments: 174,326 on each of May 1, 2019 and September 1, 2019 and 174,327 on December 31, 2019. This award was granted pursuant to Mr. Gelfond’s 2016 employment agreement.
|
| (4)
| The value of Mr. Gelfond’s pension benefits under the SERP increased by $1,377,679 compared to December 31, 2018 values, primarily due to a change in plan provisions. See note 23(a) to the audited consolidated financial statements in Item 8 of the 2019 Form 10-K, for more information related to this calculation.
|
| (5)
| This amount reflects: (i) $22,545 for the payment of life insurance premiums on the life of Mr. Gelfond; (ii) $7,000 for contributions to his 401(k) retirement plan; (iii) $14,736 for the supplemental health reimbursement premiums; (iv) $28,124 for allowance for personal automobile use; (v) $19,100 for accountant advisory services; (vi) $31,453 for charitable donations; (vii) $8,769 for other incidentals; and (viii) $2,500 reimbursement under the Executive Wellness Plan.
|
| (6)
| Mr. McClymont’s base salary increased from $675,000 to $750,000 effective as of August 8, 2019 pursuant to his employment agreement dated as of December 17, 2019.
|
| (7)
| This amount represents the grant date fair value of 45,020 RSUs granted on March 7, 2019. The RSUs vest and will be converted to Common Shares in four installments: 9,004 on March 7, 2020; 11,255 on each of March 7, 2021 and March 7, 2022 and 13,506 on March 7, 2023. This award was granted pursuant to Mr. McClymont’s 2016 employment agreement.
|
| (8)
| This amount represents the grant date fair value of the 47,736 stock options granted on March 7, 2019. The stock options become exercisable in four installments: 9,547 on March 7, 2020, 11,934 on each of March 7, 2021 and March 7, 2022 and 14,321 on March 7, 2022.This award was granted pursuant to Mr. McClymont’s 2016 employment agreement.
|
| (9)
| This amount reflects: (i) $15,336 for the supplemental health reimbursement premiums; (ii) $16,023 for the allowance for personal automobile; (iii) $7,000 for contributions to his 401(k) retirement plan; and (iv) $2,500 reimbursement under the Executive Wellness Plan.
|
| (10)
| This amount represent the grant date fair value of a total of 69,563 RSUs granted on March 14, 2019. 48,159 of the RSUs vest and convert to Common Shares in four installments: 9,631 on March 7, 2020, 12,039 on each of March 7, 2021 and March 7, 2022 and 14,450 on December 1, 2022. 21,404 of the RSUs vest and convert to Common Shares in three installments: 7,063 on each of March 7, 2020 and March 7, 2021 and 7,278 on March 7, 2022. These awards were granted pursuant to Ms. Colligan’s 2019 employment agreement.
|
| (11)
| This amount represents the grant date fair value of a total of 124,573 stock options granted on March 14, 2019. 51,581 of the stock options become exercisable in four installments: 10,316 on March 7, 2020, 12,895 on each of March 7, 2021 and March 7, 2022 and 15,475 on March 7, 2023. 72,992 of the stock options become exercisable in three installments: 24,087 on each of March 7, 2020 and March 7, 2021 and 24,818 on March 7, 2022. These awards were granted pursuant to Ms. Colligan’s 2019 employment agreement.
|
| (12)
| This amount reflects: (i) $13,508 for the supplemental health reimbursement premiums; (ii) $12,407 for the allowance for personal automobile; and (iii) $7,000 for contributions to her 401(k) retirement plan.
|
| (13)
| This amount reflects the grant date fair value of the 46,687 RSUs granted on March 7, 2019. The RSUs vest and will be converted to Common Shares in four installments: 11,671 on each of March 7, 2020, March 7, 2021 and March 7, 2022 and 11,674 on March 7, 2023. This award was granted pursuant to Mr. Lister’s 2017 employment agreement.
|
| (14)
| This amount reflects the grant date fair value of the 50,143 stock options granted on March 7, 2019. The stock options become exercisable in four installments: 12,535 on each of March 7, 2020, March 7, 2021 and March 7, 2022 and 12,538 on March 7, 2023. This award was granted pursuant to Mr. Lister’s 2017 employment agreement.
|
| (15)
| This amount reflects: (i) $7,000 for contributions to his 401(k) retirement plan; (ii) $14,736 for the supplemental health reimbursement premiums; (iii) $26,298 for allowance for personal automobile use; (iv) 3,500 for professional tax services; and (v) $2,144 reimbursement for the Executive Wellness Plan.
|
| (16)
| Mr. Welton’s salary, bonus and “all other compensation” are paid in Canadian dollars. An exchange rate of US$1.00=Cdn$1.3236 has been applied to convert such amounts from Canadian dollars to U.S. dollars.
|
| (17)
| This amount reflects the grant date fair value of the 46,687 RSUs granted on March 7, 2019. The RSUs vest and will be converted to Common Shares in four installments: 9,337 on March 7, 2020, 11,671 on each of March 7, 2021 and March 7, 2022 and 14,008 on December 1, 2022.
|
| (18)
| This amount reflects the grant date fair value of 49,504 stock options granted on March 7, 2019. The stock options become exercisable in four installments: 9,900 on March 7, 2020, 12,376 on each of March 7, 2021 and March 7, 2022 and 14,852 on March 7, 2023.
|
| (19)
| This amount reflects: (i) $25,935 for contributions to his retirement plan; (ii) $14,313 for allowance for personal automobile use; (iii) 1,511 for life insurance payments; and (iv) $1,889 reimbursement for the Executive Wellness Plan.
|
The material terms of the NEOs’ employment agreements are described below in “Potential Payments upon Termination or Change-in-Control” and such summaries are qualified in their entirety by the full text of such agreement.
2019 GRANTS OF PLAN-BASED AWARDS
The following table sets forth information relating to grants of stock options and RSUs made to NEOs during the fiscal year ended December 31, 2019 under any plan, including awards that subsequently have been transferred.
Name | | Grant Date | | Approval Date (1) | | All Other Stock Awards: Number of Shares or Stock or Units (2) (#) | | | All Other Option Awards: Number of Securities Underlying Options (3) (#) | | Exercise or Base Price of Awards (4) ($/Sh) | | Grant Date Fair Value of Option/RSU Awards (5) ($) | Richard L. Gelfond | | January 2, 2019 | | November 8, 2016 | | | | — | | | | | | | 522,979 | | (6) | | | | | 18.75 | | | | | | 3,299,997 | | | Patrick McClymont | | March 7, 2019 | | March 6, 2019 | | | | — | | | | | | | 47,736 | | (7) | | | | | 22.49 | | | | | | 337,493 | | | | | March 7, 2019 | | March 6, 2019 | | | | 45,020 | | (8) | | | | | — | | | | | | | — | | | | | | 1,012,500 | | | Megan Colligan | | March 14, 2019 | | March 6, 2019 | | | | — | | | | | | | 51,581 | | (9) | | | | | 23.36 | | | | | | 374,994 | | | | | March 14, 2019 | | March 6, 2019 | | | | — | | | | | | | 72,992 | | (10) | | | | | 23.36 | | | | | | 499,995 | | | | | March 14, 2019 | | March 6, 2019 | | | | 48,159 | | (11) | | | | | — | | | | | | | — | | | | | | 1,124,994 | | | | | March 14, 2019 | | March 6, 2019 | | | | 21,404 | | (12) | | | | | — | | | | | | | — | | | | | | 499,997 | | | Robert D. Lister | | March 7, 2019 | | March 6, 2019 | | | | — | | | | | | | 50,143 | | (13) | | | | | 22.49 | | | | | | 349,998 | | | | | March 7, 2019 | | March 6, 2019 | | | | 46,687 | | (14) | | | | | — | | | | | | | — | | | | | | 1,049,991 | | | Mark Welton | | March 7, 2019 | | March 6, 2019 | | | | — | | | | | | | 49,504 | | (15) | | | | | 22.49 | | | | | | 349,993 | | | | | March 7, 2019 | | March 6, 2019 | | | | 46,687 | | (16) | | | | | — | | | | | | | — | | | | | | 1,049,991 | | |
| (1)
| Represents the date the grant was approved by the Compensation Committee, if different from the grant date. In the case of equity grants pursuant to an employment agreement, the Compensation Committee approves the equity grants at the same time as the applicable employment agreement.
|
| (2)
| Each RSU represents a contingent right to receive one Common Share. All RSUs were awarded under the LTIP.
|
| (3)
| Each stock option, when vested, entitles the NEO to purchase one Common Share. All stock options were awarded under the LTIP.
|
| (4)
| Stock options were granted with an exercise price equal to the fair market value of the Common Shares on the applicable date of grant. Fair market value of a Common Share on a given date refers to the closing price of a Common Share on such date (or the most recent trading date if such date is not a trading date) on the NYSE. There is no exercise price associated with the granting of the RSUs.
|
| (5)
| This amount represents the aggregate grant date fair values computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (with no reductions for expected forfeitures). See note 16(c) to the audited consolidated financial statements in Item 8 of the 2019 Form 10-K, for the assumptions used to calculate the fair value of the stock options and RSUs. Whether, and to what extent, an NEO realizes value with respect to stock option or RSU awards will depend on our actual operating performance, stock price fluctuations and the NEO’s continued employment.
|
| (6)
| The stock options became exercisable in three installments: 174,326 on each of May 1, 2019 and September 1, 2019 and 174,327 on December 31, 2019. This award was granted pursuant to Mr. Gelfond’s 2016 employment agreement.
|
| (7)
| The stock options will become exercisable in four installments: 9,547 on March 7, 2020, 11,934 on each of March 7, 2021 and March 7, 2022 and 14,321 on March 7, 2022. This award was granted pursuant to Mr. McClymont’s 2016 employment agreement.
|
| (8)
| The RSUs will vest and will be converted to Common Shares in four installments: 9,004 on March 7, 2020; 11,255 on each of March 7, 2021 and March 7, 2022 and 13,506 on March 7, 2023. This award was granted pursuant to Mr. McClymont’s 2016 employment agreement.
|
| (9)
| 51,581 stock options will become exercisable in four installments: 10,316 on March 7, 2020, 12,895 on each of March 7, 2021 and March 7, 2022 and 15,475 on March 7, 2023. This award was granted pursuant to Ms. Colligan’s 2019 employment agreement.
|
| (10)
| 72,992 stock options will become exercisable in three installments: 24,087 on each of March 7, 2020 and March 7, 2021 and 24,818 on March 7, 2022. This award was granted pursuant to Ms. Colligan’s 2019 employment agreement.
|
| (11)
| 48,159 RSUs will vest and will be converted to Common Shares in four installments: 9,631 on March 7, 2020, 12,039 on each of March 7, 2021 and March 7, 2022 and 14,450 on December 1, 2022. This award was granted pursuant to Ms. Colligan’s 2019 employment agreement.
|
| (12)
| 21,404 RSUs will vest and will be converted to Common Shares in three installments: 7,063 on each of March 7, 2020 and March 7, 2021 and 7,278 on March 7, 2022. This award was granted pursuant to Ms. Colligan’s 2019 employment agreement.
|
| (13)
| The stock options will become exercisable in four installments: 12,535 on each of March 7, 2020, March 7, 2021 and March 7, 2022 and 12,538 on March 7, 2023. This award was granted pursuant to Mr. Lister’s 2017 employment agreement.
|
| (14)
| The RSUs will vest and will be converted to Common Shares in four installments: 11,671 on each of March 7, 2020, March 7, 2021 and March 7, 2022 and 11,674 on March 7, 2023. This award was granted pursuant to Mr. Lister’s 2017 employment agreement.
|
| (15)
| The stock options will become exercisable in four installments: 9,900 on March 7, 2020, 12,376 on each of March 7, 2021 and March 7, 2022 and 14,852 on March 7, 2023.
|
| (16)
| The RSUs will vest and will be converted to Common Shares in four installments: 9,337 on March 7, 2020, 11,671 on each of March 7, 2021 and March 7, 2022 and 14,008 on December 1, 2022.
|
Additional terms and conditions of the stock options and RSUs granted listed above are described below in “Potential Payments upon Termination or Change-in-Control” and such summaries are qualified in their entirety by the full text of such agreement.
OUTSTANDING EQUITY AWARDS AT 2019 FISCAL YEAR-END
The following table sets forth information relating to unexercised equity awards for each NEO outstanding as of December 31, 2019.
| | Option Awards | | | | Stock Awards | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock that Have Not Vested ($) | Richard L. Gelfond | | | | 683,328 | | | | | | — | | | | | | | 28.19 | | | | December 31, 2020 | | | | | — | | | | | | — | | | | | | | | 426,695 | | | | | | — | | | | | | | 27.20 | | | | February 21, 2024 | | | | | — | | | | | | — | | | | | | | | 467,625 | | | | | | — | | | | | | | 29.58 | | | | January 5, 2025 | | | | | — | | | | | | — | | | | | | | | 486,284 | | | | | | — | | | | | | | 31.40 | | | | June 7, 2026 | | | | | — | | | | | | — | | | | | | | | 356,757 | | | | | | — | | | | | | | 31.90 | | | | January 3, 2027 | | | | | — | | | | | | — | | | | | | | | 452,675 | | | | | | — | | | | | | | 23.20 | | | | January 2, 2028 | | | | | — | | | | | | — | | | | | | | | 522,979 | | | | | | — | | | | | | | 18.75 | | | | January 2, 2029 | | | | | — | | | | | | — | | | | Patrick McClymont | | | | 15,723 | | | | | | — | | | | | | | 32.01 | | | | August 8, 2023 | | | | | — | | | | | | — | | | | | | | | 17,026 | | | | | 20,810 | | (1) | | | | | 32.45 | | | | March 7, 2024 | | | | | — | | | | | | — | | | | | | | | 10,647 | | | | | 42,586 | | (2) | | | | | 20.85 | | | | March 7, 2025 | | | | | — | | | | | | — | | | | | | | | — | | | | | 47,736 | | (3) | | | | | 22.49 | | | | March 7, 2026 | | | | | — | | | | | | — | | | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 17,161 | | (4) | | | | 350,599 | | (5) | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 38,849 | | (6) | | | | 793,685 | | (5) | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 45,020 | | (7) | | | | 919,758 | | (5) | | Megan Colligan | | | | — | | | | | | 51,581 | | (8) | | | | | 23.36 | | | | | March 7, 2026 | | | | — | | | | | | — | | | | | | | | — | | | | | | 72,992 | | (9) | | | | | 23.36 | | | | | March 7, 2026 | | | | — | | | | | | — | | | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 21,404 | | (10) | | | | 437,284 | | (5) | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 48,159 | | (11) | | | | 983,888 | | (5) | | Robert D. Lister | | | | 80,367 | | | | | | — | | | | | | | 27.20 | | | | February 21, 2021 | | | | | — | | | | | | — | | | | | | | | 62,850 | | | | | | — | | | | | | | 33.80 | | | | March 7, 2022 | | | | | — | | | | | | — | | | | | | | | 41,104 | | | | | 13,701 | | (12) | | | | | 31.85 | | | | March 7, 2023 | | | | | — | | | | | | — | | | | | | | | 19,954 | | | | | | 19,955 | | (13) | | | | | 32.45 | | | | March 7, 2024 | | | | | — | | | | | | — | | | | | | | | 13,978 | | | | | 41,932 | | (14) | | | | | 20.85 | | | | March 7, 2025 | | | | | — | | | | | | — | | | | | | | | — | | | | | 50,143 | | (15) | | | | | 22.49 | | | | March 7, 2026 | | | | | — | | | | | | — | | | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 7,362 | | (16) | | | | 150,405 | | (5) | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 16,179 | | (17) | | | | 330,536 | | (5) | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 37,769 | | (18) | | | | 771,620 | | (5) | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | | 46,687 | | (19) | | | | 953,815 | | (5) | | Mark Welton | | | | 20,834 | | | | | | — | | | | | | | 25.44 | | | | March 7, 2020 | | | | | — | | | | | | — | | | | | | | | 17,689 | | | | | — | | | | | | | 27.82 | | | | March 7, 2021 | | | | | — | | | | | | — | | | | | | | | 15,316 | | | | | 6,563 | | (20) | | | | | 31.85 | | | | March 7, 2023 | | | | | — | | | | | | — | | | | | | | | 9,459 | | | | | 11,561 | | (21) | | | | | 32.45 | | | | March 7, 2024 | | | | | — | | | | | | — | | | | | | | | 7,886 | | | | | 31,546 | | (22) | | | | | 20.85 | | | | March 7, 2025 | | | | | — | | | | | | — | | | | | | | | — | | | | | 49,504 | | (23) | | | | | 22.49 | | | | March 7, 2026 | | | | | — | | | | | | — | | | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 9,533 | | (24) | | | | 194,759 | | (5) | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 28,777 | | (25) | | | | 587,914 | | (5) | | | | | | — | | | | | | — | | | | | | | — | | | | | — | | | | 46,687 | | (26) | | | | 953,815 | | (5) | |
| (1)
| 9,459 of the stock options will vest on March 7, 2020 and 11,351 on March 7, 2021.
|
| (2)
| 13,308 of the stock options will vest on each of March 7, 2020 and March 7, 2021 and 15,970 on March 7, 2022.
|
| (3)
| 9,547 of the stock options will vest on March 7, 2020, 11,934 on each of March 7, 2021 and March 7, 2022 and 14,321 on March 7, 2023.
|
| (4)
| 7,801 of the RSUs will vest and be converted to Common Shares on March 7, 2020 and 9,360 on March 7, 2021.
|
| (5)
| Market value of the RSUs is based on the closing price of the Common Shares on the NYSE on December 31, 2019 ($20.43).
|
| (6)
| 12,140 of the RSUs will vest and be converted to Common Shares on each of March 7, 2020 and March 7, 2021 and 14,569 on March 7, 2022.
|
| (7)
| The RSUs vest and will be converted to Common Shares in four installments: 9,004 on March 7, 2020, 11,255 on each of March 7, 2021 and March 7, 2022 and 13,506 on March 7, 2023.
|
| (8)
| The stock options become exercisable in four installments: 10,316 on March 7, 2020, 12,895 on each of March 7, 2021 and March 7, 2022 and 15,475 on March 7, 2023.
|
| (9)
| The stock options become exercisable in three installments: 24,087 on each of March 7, 2020 and March 7, 2021 and 24,818 on March 7, 2022.
|
| (10)
| The RSUs vest and will be converted to Common Shares in three installments: 7,063 on each of March 7, 2020 and March 7, 2021 and 7,278 on March 7, 2022.
|
| (11)
| The RSUs vest and will be converted to Common Shares in four installments: 9,631 on March 7, 2020, 12,039 on each of March 7, 2021 and March 7, 2022 and 14,450 on December 1, 2022.
|
| (12)
| 13,701 of the stock options will vest on March 7, 2020.
|
| (13)
| 9,977 of the stock options will vest on March 7, 2020 and 9,978 on March 7, 2021.
|
| (14)
| 13,978 of the stock options will vest on each of March 7, 2020 and March 7, 2021 and 13,976 on March 7, 2022.
|
| (15)
| The stock options become exercisable in four installments: 12,535 on each of March 7, 2020, March 7, 2021 and March 7, 2022 and 12,538 on March 7, 2023.
|
| (16)
| 7,362 of the RSUs will vest and be converted to Common Shares on March 7, 2020.
|
| (17)
| 8,089 of the RSUs will vest and be converted to Common Shares on March 7, 2020 and 8,090 on March 7, 2021.
|
| (18)
| 12,590 of the RSUs will vest and be converted to Common Shares on each of March 7, 2020 and March 7, 2021 and 12,589 on March 7, 2022.
|
| (19)
| The RSUs vest and will be converted to Common Shares in four installments: 11,671 on each of March 7, 2020, March 7, 2021 and March 7, 2022 and 11,674 on March 7, 2023.
|
| (20)
| 6,563 of the stock options will vest on March 7, 2020.
|
| (21)
| 5,255 of the stock options will vest on March 7, 2020 and 6,306 on March 7, 2021.
|
| (22)
| 9,858 of the stock options will vest on each of March 7, 2020 and March 7, 2021 and 11,830 on March 7, 2022.
|
| (23)
| The stock options become exercisable in four installments: 9,900 on March 7, 2020, 12,376 on each of March 7, 2021 and March 7, 2022 and 14,852 on March 7, 2023.
|
| (24)
| 4,334 of the RSUs will vest and be converted to Common Shares on March 7, 2020 and 5,199 on December 1, 2020.
|
| (25)
| 8,993 of the RSUs will vest and be converted to Common Shares on each of March 7, 2020 and March 7, 2021 and 10,791 on December 1, 2021.
|
| (26)
| The RSUs vest and will be converted to Common Shares in four installments: 9,337 on March 7, 2020, 11,671 on each of March 7, 2021 and March 7, 2022 and 14,008 on December 1, 2022.
|
All stock options and RSUs in the “Outstanding Equity Awards at 2019 Fiscal Year-End” table were granted under the SOP or the IMAX LTIP as described above in “Compensation Discussion and Analysis – Long-Term Incentive Compensation”.
2019 OPTION EXERCISE AND STOCK VESTED
The following table sets forth information relating to the exercise of stock options and the vesting of RSUs during the fiscal year ended December 31, 2019 for each of the NEOs on an aggregated basis.
| | | Option Awards | | | | Stock Awards | | Name | | Number of Shares Acquired on Exercise of Options (#) | | Value Realized on Option Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting (1) ($) | | Richard L. Gelfond | | | | — | | | | | | — | | | | | | 65,283 | | | | | | 1,431,220 | | Patrick McClymont | | | | — | | | | | | — | | | | | | 21,418 | | | | | | 477,824 | | Megan Colligan | | | | — | | | | | | — | | | | | | — | | | | | | — | | Robert D. Lister | | | | — | | | | | | — | | | | | | 34,255 | | | | | | 770,394 | | Mark Welton | | | | — | | | | | | — | | | | | | 21,241 | | | | | | 472,465 | |
| (1)
| The value realized is based on the closing price of the Company’s Common Shares on the NYSE on the vesting date.
|
2019 PENSION BENEFITS
The following table sets forth information relating to each defined benefit pension plan that provides for payments or other benefits at, following, or in connection with retirement, as of December 31, 2019.
| | | Number of Years | | Present Value of | | Payments During | Name | Plan Name | | of Credited Service (#) | | Accumulated Benefits (1) ($) | | Last Fiscal Year ($) | Richard L. Gelfond | Supplemental Executive Retirement Plan | | | | 18.5 | | | | | | 20,098,181 | | | | — | | | Post-Retirement Medical Benefits | | | | — | | | | | 321,000 | | | | — | |
| (1)
| See note 23(a) to the audited consolidated financial statements in Item 8 of the 2019 Form 10-K, for certain assumptions used to calculate the present value of accumulated benefits.
|
We have an unfunded U.S. defined benefit pension plan, the SERP, covering Mr. Gelfond, which was established in 2000. The SERP provides for a lifetime retirement benefit from age 55. Under the terms of the SERP, if Mr. Gelfond’s employment is terminated other than for cause (as defined in the Gelfond Agreement), he is entitled to receive SERP benefits in the form of a lump sum payment. SERP benefit payments to Mr. Gelfond are subject to a deferral for six months after the termination of his employment, at which time Mr. Gelfond will be entitled to receive interest on the deferred amount credited at the applicable federal rate for short-term obligations. The benefits were 50% vested as at July 2000, the SERP initiation date. The vesting percentage increased on a straight-line basis from inception until age 55. Mr. Gelfond’s SERP benefits became 100% vested on July 10, 2010. Under the terms of the Gelfond Agreement, the total amount of benefit payable to Mr. Gelfond under the SERP has been fixed at $20.3 million. For more information regarding changes in the SERP value, see the 2019 Summary Compensation Table on page 59. For years where the SERP value declined, as was the case for 2017 and 2018, the change is reported as zero. The SERP value is based on certain assumptions required by the SEC. For instance, we are required to assume a retirement date of December 31, 2019 for Mr. Gelfond, even though the Gelfond Agreement runs through December 31, 2022.
The value of Mr. Gelfond’s pension benefits under the SERP increased by $1,377,679 compared to December 31, 2018 values, primarily due to a change in the plan provisions that set the amount of the lump sum equal to a fixed amount that does not vary when the benefit is paid or for what reasons it is paid. See note 23(a) to the audited consolidated financial statements in Item 8 of the 2019 Form 10-K for more information related to this calculation.
We also maintain an unfunded post-retirement medical benefits plan covering Mr. Gelfond. This plan provides that we will maintain retiree health benefits for Mr. Gelfond until he becomes eligible for Medicare and, thereafter, we will provide Medicare supplemental coverage as selected by Mr. Gelfond. If the foregoing coverage is not permitted, Mr. Gelfond will be entitled to an annual cash payment equal to the value of such coverage. coverage
▪Mr. Gelfond is fully vested in this plan.plan Further descriptions of the SERP, the unfunded post-retirement medical benefits plan and our defined contribution plans are summarized above in “Compensation Discussion and Analysis – Retirement and Pension Plans”.
PAY RATIO DISCLOSUREFor more information on the SERP and the retiree medical benefit plan, please see the section entitled “2020 Pension Benefits” on page 48.
| | | | |
Other Benefits We periodically review the levels of personal benefits and perquisites provided to the NEOs to ensure competitiveness and value to the employees and to promote their health and wellness. The benefits provided are intended to be market competitive, with the goal of ensuring that our senior executives are focused on their health and well-being which we hope will better enable them to discharge their duties and effectively focus on their contributions to IMAX. The supplemental health plan and executive wellness allowance exist to ensure that our medical benefits remain competitive in the market, and to ensure that our most senior executives are focused on health and well-being. | • | Executive Supplemental Health Plan:This plan, which covers certain of our senior executives located in the United States including all of our NEOs, provides expanded coverage and reimbursement of services not covered by our medical, dental and vision plans. |
Executive Wellness Allowance:Certain senior executives, including all of our NEOs, can submit for reimbursement up to $2,500 in qualifying wellness costs each year. Car Benefits: Certain senior executives are provided either with use of Company car or a car allowances, along with the opportunity to submit reasonable car-related expenses for reimbursement. Death-in-Service Benefit: Certain senior executives are entitled to receive a cash death benefit through our life insurance policies. In the event of the executive’s death prior to actual retirement at age 65, the executive’s designated beneficiaries would be entitled to receive a lump sum payment amount equal to two times the executive’s base salary, subject to prescribed maximums. In addition to our broader policy covering all executives, we have agreed to reimburse Mr. Gelfond for the costs of premiums associated with additional life insurance policies. Reimbursement of Qualifying Expenses: Certain senior executives are eligible to submit for reimbursement qualifying expenses related to tax, financial and estate planning services, charitable giving, as well as business club memberships and incidentals.
43
Employment and Change-In-Control Agreements Currently, we have written employment agreements or offer letters with all our NEOs, which are described in detail below in “Potential Payments upon Termination or Change-in-Control” on page 49. We believe that these agreements are critical to attract and retain talent and to motivate and properly incentivize our NEOs, while still allowing the Compensation Committee and the CEO requisite discretion to determine overall compensation in a given year. These employment agreements specify details of the approach to salary, bonus, equity awards, and restrictive covenants surrounding executive officer employment, including non-competition and non-solicitation provisions. Generally, the agreements are established at the time of hire and are amended from time to time to extend or modify the terms of employment, including to reflect compensation decisions resulting from a promotion or other change in job responsibility. Each NEO’s employment arrangement requires that we make certain payments to the relevant NEO in the event of a termination of employment for various reasons, including,upon a change-in-control of the Company. The provisions are designed to promote stability and continuity of senior management in the event of a transaction involving a change-in-control. Our severance and change-in-control benefits were determined on the basis of market practices to provide this stability as well as competitive overall compensation packages to the NEOs. No NEO has a “single-trigger” change-in-control benefit; all such provisions require a qualifying termination of employment following a change-in-control event. The employment agreements for Mr. Gelfond and Mr. McClymont were reviewed in 2019, with changes to Mr. Gelfond’s agreement being effective January 1, 2020 and changes to Mr. McClymont’s agreement being effective August 8, 2019. Mr. Lister’s employment agreement was amended as of March 11, 2020. The employment agreement for Ms. Colligan became effective February 19, 2019. Mr. Welton’s employment memorandum was entered into on September 18, 2020. Mr. Gelfond’s agreement includes provisions originally agreed to at the time of the acquisition of IMAX in 1994 and modified in 2006. They provide the CEO with the opportunity to earn two payments on a change-in-control, based on the value of the Company. Rescinding on these agreements and/or renegotiating them at this time could be very damaging and costly to all parties. Furthermore, and more importantly, the Compensation Committee continues to believe that these provisions are in shareholders’ interests as they relate to creating sustainable long-term value and retaining the CEO, while not creating undue risk. For a description of these agreements and terms, please see “Potential Payments upon Termination or Change-in-Control” on page 49. Tax and Accounting Considerations To the extent that any compensation paid to the NEOs constitutes a deferral of compensation within the meaning of Section 409A of the Internal Revenue Code, we intend to cause the compensation to comply with the requirements of Section 409A and to avoid the imposition of penalty taxes and interest upon the participant receiving the award. In determining the form and amount of compensation awarded we look mainly to the compensation principles and objectives outlined above while also giving consideration to the impact of Financial Accounting Standards Board Accounting Standards Codification Topic 718 “Compensation – Stock Compensation”. Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility of compensation paid to certain top executives to $1.0 million per taxable year. Prior to the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), there was an exemption from this $1.0 million deduction limit for compensation payments that qualified as “performance-based” under applicable regulations. In 2017, we modified our annual bonus program to comply with the requirements of Section 162(m), including Compensation Committee approval of metrics and targets at the beginning of the fiscal year. However, the enactment of the Tax Act eliminated the performance-based compensation exemption, except with respect to certain grandfathered arrangements. COMPENSATION COMMITTEE REPORT The members of the Compensation Committee hereby state that they have reviewed and discussed the Compensation Discussion and Analysis for the year ended December 31, 2020, with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Circular. | | April 27, 2021 | Respectfully submitted, | | | | Darren Throop (Chair) | | Kevin Douglas The Dodd-Frank Act requires usDana Settle
|
44
2020 SUMMARY COMPENSATION TABLE The table below sets forth the compensation earned by the NEOs during the last three completed fiscal years. Name and Principal Position of Named Executive Officer | | Year ended December 31 | | Salary ($) | | Bonus ($) | | Stock Awards ($) (1) | | Option Awards ($) (1) | | Change in Pension Value ($) | | All Other Compensation ($) | | Total ($) | Richard L. Gelfond | | | 2020 | | | | | 1,200,000 | | | | | | - | | (2) | | | | | 5,499,962 | | (3) | | | | | - | | | | | | | 163,489 | | (4) | | | | | 58,988 | | (5) | | | | | 6,922,439 | | | Chief Executive Officer | | | 2019 | | | | | 1,200,000 | | | | | | 1,100,000 | | | | | | | - | | | | | | | 3,299,997 | | | | | | | 1,377,679 | | | | | | | 134,227 | | | | | | | 7,111,903 | | | and Director | | | 2018 | | | | | 1,200,000 | | | | | | 1,700,000 | | | | | | | - | | | | | | | 3,300,001 | | | | | | | - | | | | | | | 86,122 | | | | | | | 6,286,123 | | | Patrick McClymont | | | 2020 | | | | | 725,000 | | (6) | | | | - | | (2) | | | | | 1,449,984 | | (7) | | | | | - | | | | | | | - | | | | | | | 55,820 | | (8) | | | | | 2,230,804 | | | Chief Financial Officer and | | | 2019 | | | | | 706,250 | | | | | | 630,000 | | | | | | | 1,012,500 | | | | | | | 337,493 | | | | | | | - | | | | | | | 40,859 | | | | | | | 2,727,102 | | | Executive Vice President | | | 2018 | | | | | 675,000 | | | | | | 550,000 | | | | | | | 1,012,497 | | | | | | | 337,497 | | | | | | | - | | | | | | | 37,911 | | | | | | | 2,612,905 | | | Megan Colligan | | | 2020 | | | | | 1,029,222 | | | | | | - | | (2) | | | | | 1,499,999 | | (9) | | | | | - | | | | | | | - | | | | | | | 53,268 | | (10) | | | | | 2,582,489 | | | President, IMAX Entertainment and Executive Vice President | | | 2019 | | | | | 842,308 | | | | | | 822,466 | | | | | | | 1,624,991 | | | | | | | 874,989 | | | | | | | - | | | | | | | 32,915 | | | | | | | 4,197,669 | | | Robert D. Lister | | | 2020 | | | | | 737,842 | | | | | | - | | (2) | | | | | 1,399,993 | | (11) | | | | | - | | | | | | | - | | | | | | | 51,171 | | (12) | | | | | 2,189,006 | | | Chief Legal Officer and | | | 2019 | | | | | 714,654 | | | | | | 440,000 | | | | | | | 1,049,991 | | | | | | | 349,998 | | | | | | | - | | | | | | | 53,678 | | | | | | | 2,608,321 | | | Senior Executive Vice President | | | 2018 | | | | | 700,000 | | | | | | 440,000 | | | | | | | 1,049,985 | | | | | | | 349,997 | | | | | | | - | | | | | | | 40,894 | | | | | | | 2,580,876 | | | Mark Welton (13) | | | 2020 | | | | | 558,944 | | | | | | - | | (2) | | | | | 1,399,993 | | (14) | | | | | - | | | | | | | - | | | | | | | 39,299 | | (15) | | | | | 1,998,236 | | | President, IMAX Theatres | | | 2019 | | | | | 518,706 | | | | | | 420,300 | | | | | | | 1,049,991 | | | | | | | 349,993 | | | | | | | - | | | | | | | 43,648 | | | | | | | 2,382,638 | | |
| (1) | As required by SEC rules, the “Option Awards” and “Stock Awards” columns in this Summary Compensation Table reflect the aggregate grant date fair values of stock options, PSUs and RSUs respectively, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (with no reductions for forfeitures). See note 17(c) to disclose the ratioaudited consolidated financial statements in Item 8 of the CEO’s2020 Form 10-K, for the assumptions used to calculate the fair value of the stock options, PSUs and RSUs. Whether, and to what extent, an NEO realizes value with respect to stock option, PSU or RSU awards will depend on our actual operating performance, stock price fluctuations and the NEO’s continued employment. |
| (2) | None of our NEOs earned or received any annual cash bonus payments in 2020. For more information, please see the section titled "Annual Cash Bonus Awards" on page 40. |
| (3) | This amount represents the grant date fair value of 134,146 RSUs and 134,171 PSUs granted on January 2, 2020. The RSUs vest and will convert to Common Shares in three installments: 44,715 on each of January 2, 2021 and January 2, 2022 and 44,716 on January 2, 2023. At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance vs. the established Adjusted EBITDA and TSR targets. These awards were granted pursuant to the Gelfond Agreement. |
| (4) | The value of Mr. Gelfond’s pension benefits under the SERP increased by $163,489 compared to December 31, 2019 values, primarily due to an accretion of interest and changes in actuarial assumptions. See note 23(a) to the audited consolidated financial statements in Item 8 of the 2020 Form 10-K, for more information related to this calculation. |
| (5) | This amount reflects: (i) $7,125 for contributions to his 401(k) retirement plan; (ii) $ 15,768 for the supplemental health reimbursement premiums; (iii) $28,595 for allowance for personal automobile use; (iv) $5,000 for professional services; and (v) $2,500 reimbursement under the Executive Wellness Plan. |
| (6) | Mr. McClymont’s base salary increased from $675,000 to $750,000 effective as of August 8, 2019, pursuant to his employment agreement. As a result of having exhausted his accrued PTO before year-end, Mr. McClymont’s actual paid base salary in 2020 was $725,000. |
| (7) | This amount represents the grant date fair value of 73,281 RSUs and 31,836 PSUs granted on March 12, 2020. The RSUs vest and will convert to Common Shares in three installments: 24,427 on each of March 7, 2021, March 7, 2022 and March 7, 2023. At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance vs. the established Adjusted EBITDA and TSR targets. These awards were granted pursuant to Mr. McClymont’s 2019 employment agreement. |
| (8) | This amount reflects: (i) $15,768 for the supplemental health reimbursement premiums; (ii) $15,435 for the allowance for personal automobile; (iii) $7,125 for contributions to his 401(k) retirement plan; (iv) $14,992 for professional services; and (v) $2,500 reimbursement under the Executive Wellness Plan. |
| (9) | This amount represents the grant date fair value of a total compensationof 75,808 RSUs and 32,935 PSUs granted on March 12, 2020. The RSUs vest and will convert to Common Shares in three installments: 25,269 on each of March 7, 2021 and March 7, 2022 and 25,270 on March 7, 2023. At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance vs. the established Adjusted EBITDA and TSR targets. These awards were granted pursuant to Ms. Colligan’s employment agreement. |
| (10) | This amount reflects: (i) $15,768 for the supplemental health reimbursement premiums; (ii) $13,679 for the allowance for personal automobile; (iii) $7,125 for contributions to her 401(k) retirement plan; (iv) $9,143 for a club membership; (v) $5,053 for other incidentals and; (vi) $2,500 reimbursement under the Executive Wellness Plan. |
| (11) | This amount reflects the grant date fair value of the 70,754 RSUs and 30,739 PSUs granted on March 12, 2020. The RSUs vest and will convert to Common Shares in three installments: 23,584 on each of March 7, 2021 and March 7, 2022 and 23,586 on March 7, 2023. At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance vs. the established Adjusted EBITDA and TSR targets. These awards were granted pursuant to Mr. Lister’s employment agreement, as amended. |
| (12) | This amount reflects: (i) $15,768 for the supplemental health reimbursement premiums; (ii) $22,378 for allowance for personal automobile use; (iii) $7,125 for contributions to his 401(k) retirement plan; (iv) $3,400 for professional services; and (v) $2,500 reimbursement for the Executive Wellness Plan. |
| (13) | Mr. Welton’s salary, bonus and “all other compensation” are paid in Canadian dollars. An exchange rate of US$1.00= Cdn$1.3415 in 2020 and US$1.00= Cdn$1.3415 in 2019 has been applied to convert such amounts from Canadian dollars to U.S. dollars. |
| (14) | This amount reflects the grant date fair value of the 70,754 RSUs and 30,739 PSUs granted on March 12, 2020. The RSUs vest and will convert to Common Shares in three installments: 23,584 on each of March 7, 2021 and March 7, 2022 and 23,586 on March 7, 2023. At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance vs. the established Adjusted EBITDA and TSR targets. |
| (15) | This amount reflects: (i) $20,745 for contributions to his retirement plan; (ii) $15,199 for allowance for personal automobile use; (iii) $1,491 for life insurance payments; and (iv) $1,864 reimbursement for the Executive Wellness Plan. |
The material terms of the NEOs’ employment agreements are described below in “Potential Payments upon Termination or Change-in-Control” and such summaries are qualified in their entirety by the full text of such agreement. 45
2020 GRANTS OF PLAN-BASED AWARDS The following table sets forth information relating to grants of PSUs and RSUs made to NEOs during the fiscal year ended December 31, 2020 under any plan, including awards that subsequently have been transferred. | | Estimated Future Payouts under Equity Incentive Plan Awards (1) | | | | | | | | | Name | Grant Date | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares or Stock or Units (2) (#) | Exercise or Base Price of Awards(3) $/Sh | Grant Date Fair Value of PSU/RSU Awards (4) ($) | Richard L. Gelfond | Jan 2, 2020 | - | 134,171 | | (5) | | 234,799 | | (6) | - | | | - | 2,749,969 | | Jan 2, 2020 | - | - | | | - | | | | 134,146 | | (7) | - | 2,749,993 | Patrick McClymont | Mar 12, 2020 | - | 31,836 | | (5) | | 55,713 | | (6) | - | | | - | 362,494 | | Mar 12, 2020 | - | - | | | - | | | | 73,281 | | (8) | - | 1,087,490 | Megan Colligan | Mar 12, 2020 | - | 32,935 | | (5) | | 57,636 | | (6) | - | | | - | 375,008 | | Mar 12, 2020 | - | - | | | - | | | | 75,808 | | (9) | - | 1,124,991 | Robert D. Lister | Mar 12, 2020 | - | 30,739 | | (5) | | 53,793 | | (6) | - | | | - | 350,004 | | Mar 12, 2020 | - | - | | | - | | | | 70,754 | | (10) | - | 1,049,989 | Mark Welton | Mar 12, 2020 | - | 30,739 | | (5) | | 53,793 | | (6) | - | | | - | 350,004 | | Mar 12, 2020 | - | - | | | - | | | | 70,754 | | (10) | - | 1,049,989 |
| (1) | Each PSU represents a contingent right to receive one Common Share. The number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance vs. the established Adjusted EBITDA and TSR targets. All PSUs were awarded under the LTIP. |
| (2) | Each RSU represents a contingent right to receive one Common Share. All RSUs were awarded under the LTIP. |
| (3) | There is no exercise price associated with the granting of the PSUs or RSUs. |
| (4) | This amount represents the aggregate grant date fair values computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (with no reductions for expected forfeitures). See note 17(c) to the audited consolidated financial statements in Item 8 of the 2020 Form 10-K, for the assumptions used to calculate the fair value of the stock options, RSUs and PSUs. Whether, and to what extent, an NEO realizes value with respect to stock option, RSU or PSU awards will depend on our actual operating performance, stock price fluctuations and the NEO’s continued employment. |
| (5) | This amount represents the PSUs granted in 2020. At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance vs. the established Adjusted EBITDA and TSR targets. |
| (6) | This amount represents the maximum vesting opportunity available for the PSUs granted in 2020, which will be evaluated at the conclusion of the three-year performance period depending upon actual performance versus the established Adjusted EBITDA and TSR targets. |
| (7) | This amount represents the RSUs granted on January 2, 2020. The RSUs vest and will convert to Common Shares in three installments: 44,715 on each of January 2, 2021 and January 2, 2022 and 44,716 on January 2, 2023. |
| (8) | This amount represents the RSUs granted on March 12, 2020. The RSUs vest and will convert to Common Shares in three installments: 24,427 on each of March 7, 2021, March 7, 2022 and March 7, 2023. |
| (9) | This amount represents the RSUs granted on March 12, 2020. The RSUs vest and will convert to Common Shares in three installments: 25,269 on each of March 7, 2021 and March 7, 2022 and 25,270 on March 7, 2023. |
| (10) | This amount represents the RSUs granted on March 12, 2020. The RSUs vest and will convert to Common Shares in three installments: 23,584 on each of March 7, 2021 and March 7, 2022 and 23,586 on March 7, 2023. |
Additional terms and conditions of the PSUs and RSUs granted listed above are described below in “Potential Payments upon Termination or Change-in-Control” and such summaries are qualified in their entirety by the full text of such agreement. 46
OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR-END The following table sets forth information relating to unexercised equity awards for each NEO outstanding as of December 31, 2020. | | Option Awards | | Stock Awards | | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Richard L. Gelfond | | | | 683,328 | | | | | — | | | | | 28.19 | | March 15, 2021 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 426,695 | | | | | — | | | | | 27.20 | | February 21, 2024 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 467,625 | | | | | — | | | | | 29.58 | | January 5, 2025 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 486,284 | | | | | — | | | | | 31.40 | | June 7, 2026 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 356,757 | | | | | — | | | | | 31.90 | | January 3, 2027 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 452,675 | | | | | — | | | | | 23.20 | | January 2, 2028 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 522,979 | | | | | — | | | | | 18.75 | | January 2, 2029 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | — | | | | | — | | | | | — | | | — | | | 134,146 | | (1) | | | 2,417,311 | | (2) | | | — | | | | | — | | | | | | | | — | | | | | — | | | | | — | | | — | | | — | | | | | — | | | | | 53,684 | | (3) | | | 967,385 | | (2) | | | | | | — | | | | | — | | | | | — | | | — | | | — | | | | | — | | | | | 80,487 | | (4) | | | 1,450,376 | | (2) | | Patrick McClymont | | | | 15,723 | | | | — | | | | 32.01 | | August 8, 2023 | | — | | | | — | | | | — | | | | — | | | | | | | | 26,485 | | | | | 11,351 | | (5) | | 32.45 | | March 7, 2024 | | — | | | | — | | | | — | | | | — | | | | | | | | 23,955 | | | | | 29,278 | | (6) | | 20.85 | | March 7, 2025 | | — | | | | — | | | | — | | | | — | | | | | | | | 9,547 | | | | | 38,189 | | (7) | | 22.49 | | March 7, 2026 | | — | | | | — | | | | — | | | | — | | | | | | | — | | | | — | | | | — | | — | | | 26,709 | | (8) | | | 481,296 | | (2) | | — | | | | — | | | | | | | — | | | | — | | | | — | | — | | | 9,360 | | (9) | | | 168,667 | | (2) | | — | | | | — | | | | | | | — | | | | — | | | | — | | — | | | 109,297 | | (10) | | | 1,969,532 | | (2) | | — | | | | — | | | | | | | — | | | | — | | | | — | | — | | — | | | | — | | | | | 14,656 | | (4) | | | 264,101 | | (2) | | | | | — | | | | — | | | | — | | — | | — | | | | — | | | | | 17,180 | | (3) | | | 309,584 | | (2) | | Megan Colligan | | | | 34,403 | | | | | 90,170 | | (11) | | | 23.36 | | March 7, 2026 | | — | | | | — | | | | | — | | | | | — | | | | | | | — | | | | — | | | | | — | | — | | | 14,341 | | (12) | | | 258,425 | | (2) | | | — | | | | | — | | | | | | | — | | | | — | | | | | — | | — | | | 38,528 | | (13) | | | 694,275 | | (2) | | | — | | | | | — | | | | | | | — | | | | — | | | | | — | | — | | | 75,808 | | (14) | | | 1,366,060 | | (2) | | | — | | | | | — | | | | | | | — | | | | — | | | | | — | | — | | | — | | | | | — | | | | | 15,162 | | (4) | | | 273,219 | | (2) | | | | | — | | | | — | | | | | — | | — | | | — | | | | | — | | | | | 17,773 | | (3) | | | 320,269 | | (2) | | Robert D. Lister | | | | 80,367 | | | | | - | | | | | 27.20 | | February 21, 2021 | | — | | | | — | | | | — | | | | — | | | | | | | | 62,850 | | | | | - | | | | | 33.80 | | March 7, 2022 | | — | | | | — | | | | — | | | | — | | | | | | | | 54,805 | | | | | — | | | | | 31.85 | | March 7, 2023 | | — | | | | — | | | | — | | | | — | | | | | | | | 29,931 | | | | | 9,978 | | (15) | | 32.45 | | March 7, 2024 | | — | | | | — | | | | — | | | | — | | | | | | | | 27,956 | | | | | 27,954 | | (16) | | 20.85 | | March 7, 2025 | | — | | | | — | | | | — | | | | — | | | | | | | | 12,535 | | | | | 37,608 | | (17) | | 22.49 | | March 7, 2026 | | — | | | | — | | | | — | | | | — | | | | | | | — | | | | | - | | | | — | | — | | | 25,179 | | (18) | | | 453,726 | | (2) | | — | | | | — | | | | | | | — | | | | | - | | | | — | | — | | | 8,090 | | (19) | | | 145,782 | | (2) | | — | | | | — | | | | | | | — | | | | | - | | | | — | | — | | | 105,770 | | (20) | | | 1,905,975 | | (2) | | — | | | | — | | | | | | | — | | | | | - | | | | — | | — | | — | | | | — | | | | | 14,151 | | (4) | | | 255,001 | | (2) | | | | | — | | | | | - | | | | — | | — | | — | | | | — | | | | | 16,588 | | (3) | | | 298,916 | | (2) | | Mark Welton | | | | 17,689 | | | | | — | | | | | 27.82 | | March 7, 2021 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 21,879 | | | | | — | | | | | 31.85 | | March 7, 2023 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 14,714 | | | | | 6,306 | | (21) | | | 32.45 | | March 7, 2024 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 17,744 | | | | | 21,688 | | (22) | | | 20.85 | | March 7, 2025 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | 9,900 | | | | | 39,604 | | (23) | | | 22.49 | | March 7, 2026 | | | — | | | | | — | | | | | — | | | | | — | | | | | | | | — | | | | | — | | | | | — | | | — | | | 19,784 | | (24) | | | 356,508 | | (2) | | | — | | | | | — | | | | | | | | — | | | | | — | | | | | — | | | — | | | 37,350 | | (25) | | | 673,047 | | (2) | | | — | | | | | — | | | | | | | | — | | | | | — | | | | | — | | | — | | | 70,754 | | (26) | | | 1,274,987 | | (2) | | | — | | | | | — | | | | | | | | — | | | | | — | | | | | — | | | — | | | — | | | | | — | | | | | 14,151 | | (4) | | | 255,001 | | (2) | | | | | | — | | | | | — | | | | | — | | | — | | | — | | | | | — | | | | | 16,588 | | (3) | | | 298,916 | | (2) | |
| (1) | 44,715 of the RSUs will vest and convert to Common Shares on each of January 2, 2021 and January 2, 2022 and 44,716 on January 2, 2023. |
| (2) | Market value of the RSUs is based on the closing price of the Common Shares on the NYSE on December 31, 2020 ($18.02). |
| (3) | These PSU units will vest and convert to Common Shares in the first quarter of 2023. At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance vs. the |
47
| (4) | These PSU units will vest and convert to Common Shares in the first quarter of 2023. At the conclusion of the three-year performance period, the number of PSUs that ultimately vest can range from 0% to a maximum vesting opportunity of 175% of the initial award, depending upon actual performance vs. the established Adjusted EBITDA target. |
| (5) | 11,351 of the stock options will vest on March 7, 2021. |
| (6) | 13,308 of the stock options will vest on March 7, 2021 and 15,970 on March 7, 2022. |
| (7) | 11,934 of the stock options will vest on each of March 7, 2021 and March 7, 2022 and 14,321 on March 7, 2023. |
| (8) | 12,140 of the RSUs will vest and convert to Common Shares on March 7, 2021 and 14,569 on March 7, 2022. |
| (9) | 9,360 of the RSUs will vest and convert to Common Shares on March 7, 2021. |
| (10) | 35,682 of the RSUs will vest and convert to Common Shares on each of March 7, 2021 and March 7, 2022 and 37,933 on March 7, 2023. |
| (11) | 36,982 of the stock options will vest on March 7, 2021, 37,713 on March 7, 2022 and 15,475 on March 7, 2023. |
| (12) | 7,063 of the RSUs will vest and convert to Common Shares on March 7, 2021 and 7,278 on March 7, 2022. |
| (13) | 12,039 of the RSUs will vest and convert to Common Shares on each of March 7, 2021 and March 7, 2022 and 14,450 on December 1, 2022. |
| (14) | 25,269 of the RSUs will vest and convert to Common Shares on each of March 7, 2021 and March 7, 2022 and 25,270 on March 7, 2023. |
| (15) | 9,978 of the stock options will vest on March 7, 2021. |
| (16) | 13,978 of the stock options will vest on March 7, 2021 and 13,976 on March 7, 2022. |
| (17) | 12,535 of the stock options will vest on each of March 7, 2021 and March 7, 2022 and 12,538 on March 7, 2023. |
| (18) | 12,590 RSUs will vest and convert to Common Shares on March 7, 2021 and 12,589 on March 7, 2022. |
| (19) | 8,090 RSUs will vest and convert to Common Shares on March 7, 2021. |
| (20) | 35,255 RSUs will vest and convert to Common Shares on each of March 7, 2021 and March 7, 2022 and 35,260 on March 7, 2023. |
| (21) | 6,306 of the stock options will vest on March 7, 2021. |
| (22) | 9,858 of the stock options will vest on March 7, 2021 and 11,830 on March 7, 2022. |
| (23) | 12,376 of the stock options will vest on each of March 7, 2021 and March 7, 2022 and 14,852 on March 7, 2023. |
| (24) | 8,993 of the RSUs will vest and convert to Common Shares on March 7, 2021 and 10,791 on December 1, 2021. |
| (25) | 11,671 of the RSUs will vest and convert to Common Shares on each of March 7, 2021 and March 7, 2022 and 14,008 December 1, 2022. |
| (26) | 23,584 of the RSUs will vest and convert to Common Shares on each of March 7, 2021 and March 7, 2022 and 23,586 on March 7, 2023. |
All stock options and RSUs in the “Outstanding Equity Awards at 2020 Fiscal Year-End” table were granted under the Stock Option Plan or the LTIP as described above in “Compensation Discussion and Analysis”. 2020 OPTION EXERCISE AND STOCK VESTED The following table sets forth information relating to the exercise of stock options and the vesting of RSUs during the fiscal year ended December 31, 2020 for each of the NEOs on an aggregated basis. | | | Option Awards | | | | Stock Awards | | | Name | | Number of Shares Acquired on Exercise of Options (#) | | Value Realized on Option Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) | | | Richard L. Gelfond | | | | — | | | | | | — | | | | | | — | | | | | | — | | | Patrick McClymont | | | | — | | | | | | — | | | | | | 28,945 | | | | | | 435,043 | | (1) | Megan Colligan | | | | — | | | | | | — | | | | | | 16,694 | | | | | | 250,911 | | (1) | Robert D. Lister | | | | — | | | | | | — | | | | | | 39,712 | | | | | | 596,871 | | (1) | Mark Welton | | | | — | | | | | | — | | | | | | 27,863 | | | | | | 419,301 | | (2) |
| (1) | The value realized is based on the closing price of the Company’s global median employee (excludingCommon Shares on the CEO). There have been no changes to our employee population or our employee compensation arrangements that would significantly impact the compensation of our median employee or our pay ratio disclosure since the year ended December 31, 2017. Accordingly, we are using the same median employee in the calculation of our pay ratio disclosure that we used for the year ended December 31, 2017. To determine the median employee, we prepared a list of our global employee population as of December 31, 2017. We included all employees, whether employedNYSE on a full-time, part-time, or seasonal basis. We excluded certain non-U.S. locations under the March 6, 2020.
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| (2) | de minimis exclusion to the extent that the total number of employees excluded in these locations in aggregate did not exceed 5% of our total employee population. We excluded a total of approximately one employee in Austria, one employee in Hungary, four employees in Ireland, eight employees in Japan, three employees in the Philippines, nine employees in the Russian Federation, two employees in the United Arab Emirates and 11 employees in the United Kingdom. Without applying the de minimis exclusion, we had a total of 755 employees as of December 31, 2017. With the de minimis exclusion, we had a total of 716 employees as of December 31, 2017.
We established a consistently applied compensation measure inclusive of base pay, overtime, incentives, and equity grants, all of which are widely disseminated elements of compensation. Our population was evaluated as of December 31, 2017 and reflects paid compensation from January 1, 2017 through December 31, 2017. We annualized compensation for employees newly hired in 2017. Non-U.S. compensation was converted to U.S. dollarsThe value realized is based on the average applicable exchange rates during 2017. Basedclosing price of the Company’s Common Shares on this methodology, we identified the median employee.
After identifying the median employee, we then determined the total compensationNYSE on March 6, 2020 for the median employee22,664 awards and December 1, 2020 for the year ended December 31, 2019. In making this determination, we used the Summary Compensation Table definition of annual total compensation,5,199 awards.z
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2020 PENSION BENEFITS The following table sets forth information relating to each defined benefit pension plan that provides for payments or other benefits at, following, or in connection with retirement, as of December 31, 2020.
| | | Number of Years | | Present Value of | | Payments During | Name and Principal Position of Named Executive Officer | Plan Name | | of Credited Service (#) | | Accumulated Benefits (1) ($) | | Last Fiscal Year ($) | Richard L. Gelfond | Supplemental Executive Retirement Plan | | | | 19.5 | | | | | | 20,261,670 | | | | — | | | Post-Retirement Medical Benefits | | | | — | | | | | | 366,000 | | | | — | |
| (1) | as permitted bySee note 23(a) to the rules. In 2019,audited consolidated financial statements in Item 8 of the median employee received both a merit-based and cost of living salary increase that resulted in an annual total compensation of $94,569.96 as of December 31, 2019. We used the same approach2020 Form 10-K, for our CEO, which resulted in annual total compensation of $7,111,903. The resulting ratio is 75:1 for the year ended December 31, 2019.
The ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. Given the rule’s flexibility, the method the Companycertain assumptions used to determinecalculate the median employee may be different from the method usedpresent value of accumulated benefits.
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We have an unfunded U.S. defined benefit pension plan, the SERP, covering Mr. Gelfond, which was established in 2000. The SERP provides for a lifetime retirement benefit from age 55. Under the terms of the SERP, if Mr. Gelfond’s employment is terminated other than for cause (as defined in the Gelfond Agreement), he is entitled to receive SERP benefits in the form of a lump sum payment. SERP benefit payments to Mr. Gelfond are subject to a deferral for six months after the termination of his employment, at which time Mr. Gelfond will be entitled to receive interest on the deferred amount credited at the applicable federal rate for short-term obligations. The vesting percentage increased on a straight-line basis from inception until age 55. Mr. Gelfond’s SERP benefits became 100% vested on July 10, 2010. Under the terms of the Gelfond Agreement, the total amount of benefit payable to Mr. Gelfond under the SERP has been fixed at $20.3 million. For more information regarding changes in the SERP value, see the “2020 Summary Compensation Table” on page 45. The SERP value is based on certain assumptions required by the SEC. For instance, we are required to assume a retirement date of December 31, 2020 for Mr. Gelfond, even though the Gelfond Agreement runs through December 31, 2022. The value of Mr. Gelfond’s pension benefits under the SERP increased by $163,489 compared to December 31, 2019 values, primarily due to an accretion of interest and changes in actuarial assumptions. See note 23(a) to the audited consolidated financial statements in Item 8 of the 2020 Form 10-K for more information related to this calculation. We also maintain an unfunded post-retirement medical benefits plan covering Mr. Gelfond. This plan provides that we will maintain retiree health benefits for Mr. Gelfond until he becomes eligible for Medicare and, thereafter, we will provide Medicare supplemental coverage as selected by Mr. Gelfond. If the foregoing coverage is not permitted, Mr. Gelfond will be entitled to an annual cash payment equal to the value of such coverage. Mr. Gelfond is fully vested in this plan. Further descriptions of the SERP, the unfunded post-retirement medical benefits plan and our defined contribution plans are summarized above in “Compensation Discussion and Analysis – Retirement and Pension Plans”. PAY RATIO DISCLOSURE The Dodd-Frank Act requires us to disclose the ratio of the CEO’s annual total compensation to that of the Company’s global median employee (excluding the CEO). To determine the median employee, we prepared a list of our global employee population as of our December 31, 2020 determination date, including all employees, whether employed on a full-time, part-time, or seasonal basis. Based on this methodology, the total number of global employees was 644 as of December 31, 2020. We then determined that employee’s annual total compensation (using the Summary Compensation Table definition of annual total compensation, as permitted by the rules) was $79,482 for the fiscal year ended December 31, 2020. The CEO’s annual total compensation was $6,922,439 resulting in an estimated ratio of 87:1 for CEO pay to median employee pay. The ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of SEC Regulation S-K. Given the rule’s flexibility, the method the Company used to determine the median employee may be different from its peers, so the ratios may not be comparable. POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL While we have no formal severance plans, we have entered into written employment agreements or offer letters with certain of our executive officers, including each of the NEOs, which require us to make payments to the NEOs in the event of the termination of their employment in various circumstances, including in the event of a change-in-control, as further described below. These employment agreement provisions are intended to attract, retain and motivate employees, provide stability and continuity among our senior executives, and ensure that our executive officers are able to devote their full time and attention to our operations in the event of an actual or potential change-in-control. Equity Provisions. In addition to the contractual rights of the NEOs described below, all of the NEOs hold equity awards granted under our equity compensation plans, which describe the impact of certain separation events on equity awards granted, unless provisions in the individual NEO’s employment arrangement override the terms of the relevant plan. These generally applicable termination-related provisions are as follows: | •
| Termination without cause; voluntary resignation; death/disability: If the participant’s employment, consulting arrangement or term of office is terminated without cause or by reason of the participant’s voluntary resignation, death or permanent disability, (i) unvested equity awards will be cancelled, and (ii) the participant (or the participant’s estate) will be generally entitled to exercise any vested stock options for a period of thirty days, or such longer period as the Board of Directors or Compensation Committee determines, following the date of termination of employment. Under the equity award agreements, in the event of a participant’s death or permanent disability, a portion of any unvested equity awards will vest such that, when combined with the participant’s previously vested equity awards, an aggregate of 50% of the equity awards granted to the participant will have vested;
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Termination generally: The Compensation Committee will determine the disposition of an award, including the acceleration of vesting, exercisability or settlement of, elimination of restrictions or conditions applicable to, or extension of exercise period, in the event of a participant’s termination of employment; | •
| Termination with cause: If the participant’s employment, consulting arrangement or term of office is terminated with cause, the participant’s vested and unvested equity awards will be cancelled;
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| Termination upon change-in-control: A change-in-control of the Company in itself will have no effect; however, all outstanding unvested equity awards will immediately vest and become fully exercisable in the event that, following the occurrence of a change-in-control, any of the following events occur within 24 months of the change-in-control: (i) the termination of the participant’s employment without cause, (ii) the diminution of the participant’s title and/or responsibilities, or (iii) the participant being asked to relocate more than twenty five miles from his or her existing office. In addition, all outstanding unvested equity awards granted under the LTIP will immediately vest and become fully exercisable in the event that, following a change-in-control, the successor entity does not assume or provide a substitute for such equity awards on substantially the same terms and conditions.
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For purposes of the LTIP, the following are considered to be a change-in-control: (i) any person becoming the beneficial owner of 35% or more of the Company’s securities; (ii) a change in the majority of the Board of Directors; (iii) completing certain reorganization, merger, or consolidation transactions or a sale of all or substantially all of the Company’s assets; or (iv) the complete liquidation or dissolution of the Company.
For purposes of the SOP,
Termination upon change-in-control: A change-in-control of the Company in itself will have no effect; however, all outstanding unvested equity awards will immediately vest and become fully exercisable in the event that the participant’s employment is terminated by the Company without cause or by the participant for good reason within 24 months of the change-in-control. In addition, all outstanding unvested equity awards granted under the LTIP will immediately vest and become fully exercisable in the event that, following a change-in-control, the successor entity does not assume or provide a substitute for such equity awards on substantially the same terms and conditions.
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For purposes of the LTIP, the following are considered to be a change-in-control: (i) any person becoming the beneficial owner of 35% or more of the Company’s securities; (ii) a change in the majority of the Board of Directors; (iii) completing certain reorganization, merger, or consolidation transactions or a sale of all or substantially all of the Company’s assets; or (iv) the complete liquidation or dissolution of the Company. For purposes of the Stock Option Plan, our primary equity vehicle prior to the adoption of our LTIP in 2013, a change-in-control is defined as any person other than Richard Gelfond and Bradley Wechsler acquiring greater than 50% of the outstanding Common Shares of the Company; and | •
| Service Factor: In March 2020, the Compensation Committee approved a change to certain outstanding equity awards that if, after achieving the “Service Factor” a Participant resigns or is terminated without cause, their outstanding equity will continue to vest in accordance with the applicable vesting schedule of the equity award and retain the other terms of the award. The “Service Factor” is defined as (i) attaining the age of at least 55 and (ii) continuous service with the Company or any of its Subsidiaries and Affiliates for at least 10 years, or such other criteria that are deemed by the Compensation Committee to be an achievement of the Service Factor, provided, however, that, in the case of a resignation, the Participant must provide the Company with a written notice of intent to resign at least six (6) months prior to the final day of employment with the Company.
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If the participant is a party to an employment agreement with the Company or any of its subsidiaries and breaches any of the restrictive covenants in such agreement, the participant’s unexercised stock options or unvested RSUs will be cancelled. In certain cases, an NEO’s equity awards are controlled by the terms of his or her employment agreement; in the event of a conflict between such employment agreement and the terms of our equity compensation plans, the terms of the employment agreement will prevail.
In certain cases, an NEO’s equity awards are controlled by the terms of his or her employment agreement; in the event of a conflict between such employment agreement and the terms of our equity compensation plans, the terms of the employment agreement will prevail. Employment Agreement Provisions The narrative description below reflects potential payments to each of the named executive officersNEOs in various termination and change-in-control scenarios based on employment agreements and arrangements, compensation, benefits and equity levels in effect on December 31, 2019.2020. Payments upon Termination Generally Regardless of the termination scenario, each named executive officerNEO will receive earned but unpaid base salary through the employment termination date, along with any other accrued or vested payments or benefits owed under any of our plans or agreements covering them as governed by the terms of those plans or agreements, including perquisites and business expenses (such payments, “Accrued Obligations”). Additionally, Mr. Gelfond would also be entitled to his benefits under the SERP (except in the event he is terminated for cause) and his retiree health benefits. Mr. Lister, Mr. McClymont, Mr. Welton and Ms. Colligan would also be entitled to a prorated target bonus for the year of termination. Mr. Welton may also be entitled to certain compensation under applicable Canadian law. Payments upon Termination due to Death or Disability In the event Mr. Gelfond’s employment is terminated due to death or disability, 100% of his outstanding unvested equity awards will vest immediately, and all vested options will remain exercisable until the shorter of (x) their original term and (y) 2 years from termination. In the event that Mr. McClymont, Mr. Lister and Ms. Colligan’s employment is terminated due to death or disability, each would be entitled to accelerated vesting for a portion of their outstanding equity that, when combined with those already vested, would total an aggregate of 50% of all of their equity granted. For Mr. McClymont, and Mr. Lister, and Ms. Colligan, any vested options would continue to be exercisable for a period of 180 days. In addition, Mr. McClymont and Ms. Colligan would be entitled to a prorated target bonus for the year of his or her death or disability and Mr. Lister would be entitled to a prorated achieved bonus for the year of his death or disability. Mr. Welton may also be entitled to accelerated vesting for a portion of his outstanding equity that, when combined with those already vested, would total an aggregate of 50% of all his equity granted. Payment upon Termination without Cause or Resignation for Good Reason In the event that Mr. Gelfond’s employment is terminated by the Company without cause or by him for good reason, Mr. Gelfond would be entitled to (i) his base salary automobile allowance and benefits for the greater of the remainder of his employment term and 12 months and (ii) his full or prorated target bonus for each full or partialthe year remaining inof termination based on the severance period. Allachievement of the performance goals. In addition, a portion of Mr. Gelfond’s unvested stock optionsPSUs and RSUs, prorated based on the number of calendar days served by Mr. Gelfond would immediately vest.vest, and all of his outstanding options will vest immediately and be exercisable subject to the terms set forth in his employment agreement. In the event that Mr. McClymont’s employment is terminated by the Company without cause or by him for good reason, Mr. McClymont would be entitled to (i) his base salary and continued benefits for a period of 14 months, (ii) his full or prorated target bonus for each full or partialthe year remaining inof termination based on the severance period,achievement of the performance goals, (iii) his target bonus for a period of 14 months, (iv) continued vesting of his outstanding unvested equity awards on their original vesting schedule for 14 months, and (v) exercisability of his vested options until the shorter of (x) the option’s original term and (y) 20 months following his termination.
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In the event that Mr. Lister’s employment is terminated by the Company without cause or by him for good reason, Mr. Lister would be entitled to receive (i) his base salary, automobile allowance and benefits for the greater of (i)(x) the remainder of his employment term and (ii)(y) 18 months; andmonths, (ii) a cash payment equal to a pro-rated target bonus for the year in which Mr. Lister is terminated, and (iii) a cash payment equal to the target bonus for each full year remaining during the term. In the event Mr. Lister were not permitted to continue his participation in our medical plans, Mr. Lister would be entitled to a cash payment equal to the value of the benefit continuation for the severance period, payable in three semi-annual installments. Other than equity awarded during 2021, 2022, and 2023 annual grants, Mr. Lister also would be entitled to the accelerated vesting of all granted but unvested stock options and RSUs. if the termination without cause or resignation for good reason were to occur prior to the 2020 Lister Equity Grants, the entire 2020 Lister Equity Grants would be forfeited.equity awards. Following a termination without cause or resignation for good reason, Mr. Lister would have 12 months to exercise any vested stock options. For the 2021, 2022, 2023 annual grants, all outstanding equity will be treated in accordance with our LTIP or the applicable award letters; except, that (a) equity awards granted will continue to vest on schedule during the applicable severance period (in the case of PSUs, subject to the achievement of applicable performance conditions), and (b) all vested options will remain exercisable until the earlier of (i) 12 months beyond the end of the applicable severance period, and (ii) the original expiration date of the vested options. In the event that Ms. Colligan’s employment is terminated by the Company without cause or by her for good reason, Ms. Colligan would be entitled to (i) her base salary, automobile allowance and benefits for a period of 12 months and (ii) her prorated target bonus for the year of her termination. Pursuant to the LTIP and Ms. Colligan’s award agreements, any unvested equity awards will be cancelled, except unvested equity will vest in accordance with the original vesting schedule if she meets the Service Factor requirement. In the event that Mr. Welton’s employment is terminated by the Company without cause, Mr. Welton would be entitled to (i) the greater of (x) his accrued but unpaid base salary, for a periodcar allowance and benefits through the date of 18 months, histermination and (ii) the prorated target bonus for the year of his termination and his car allowance and (y)termination. Mr. Welton would also be entitled to (i) one month’s salary for each year of service up to a maximum of 24 years, his proratedmonths, target bonus for the year of his termination and his car allowance and (ii) continued healthcare benefits for the duration of his salary continuation period (or earlier, upon Mr. Welton’s obtainment of new employment).
Payment upon Non-Renewal of Employment
If, following the expiration of the Mr. Gelfond’s employment term, we do not offer Mr. Gelfond continued employment on terms substantially similar to his employment agreement, or if Mr. Gelfond elects to retire at the end of the term, his outstanding unvested stock options and RSUs, if any, would be cancelled. In addition, (i) the 2017 Options would remain exercisable for the shorterall equity that remains unvested as of their original term, and five years; (ii) the 2018 Options would remain exercisable for the shorter of their original term, and four years; and (iii) the 2019 Options would remain exercisable for the shorter of their original term, and three years. Mr. Gelfond would also be entitled to a lump sum payment owing under the SERP and would be entitled to receive retiree health benefits until he becomes eligible for Medicare. Thereafter, Mr. Gelfond would be entitled to Medicare supplement coverage. In addition, for a period of twelve months from the date of non-renewal or retirement, we have agreedthe termination will continue to provide Mr. Gelfondvest in accordance with office space, a full-time assistant and continued automobile benefits.
If, following the expirationoriginal vesting schedule (in the case of Mr. Lister’s employment term, we do not offer Mr. Lister continued employment on terms substantially similarPSUs, subject to his employment agreement and Mr. Lister incurs a separation from service, then for the non-renewal period described below, Mr. Lister would be entitled to receive: (i) his base salary, automobile allowance and benefits; and (ii) a cash payment equal to Mr. Lister’s target bonus for the lengthachievement of the non-renewal period. In the event Mr. Lister were not permitted to continue his participation in our medical plans, Mr. Lister would be entitled to a cash payment equal to the value of the benefit continuation, payable in three semi-annual installments. The non-renewal period is equal to 12 months, except if the non-renewal occurs within 24 months following a change-in-control, then the non-renewal period will be equal to 18 months. In addition, following a non-renewal, any RSUs or options that remain unvested as of December 31, 2020, but which would have vested by March 31, 2021, would be accelerated to vest as of December 31, 2020. All other unvested options and RSUs would be forfeited.
Mr. McClymont is not entitled to any severance payments or benefits in the event that his employment agreement is not renewed at the end of its term. Ms. Colligan and Mr. Welton’s employment with us are not subject to any specified term period.original performance conditions).
Payment upon a Change-in-control In the event that the Company experiences a change-in-control, Mr. Gelfond would be entitled to a cash bonus (the “Sale Bonus”) in an amount equal to the product of (a) 0.375% and (b) the amount by which the sale or liquidation transaction imputes an equity value in excess of Cdn$150,000,000 to the Common Shares originally issued by the Company (on a fully diluted basis but excluding the Common Shares issued upon the conversion of the Class B convertible preferred shares of the Company formerly outstanding that were converted into Common Shares on June 16, 1994 and the Common Shares issuable upon the exercise of warrants previously owned by Messrs. Gelfond and Wechsler). The Sale Bonus provisions date back to Mr. Gelfond’s and Mr. Wechsler’s original employment agreements in connection with their 1994 acquisition of the Company and would be paid as a result of the Company’s having reached an imputed equity value in excess of Cdn$150,000,000. He would also be entitled to a cash incentive bonus (the “Incentive Bonus”) equal to the product of (a) 225,000 and (b) the difference between the closing price of the Common Shares upon such change-in-control and the closing price of the Common Shares on March 10, 2006, which was $10.67. The Incentive Bonus provision dates back to the extension of Mr. Gelfond’s employment pursuant to a March 8, 2006 amendment agreement. In the event that the change-in-control is by way of a stock-for-stock merger, all of Mr. Gelfond’s outstanding unvested stock options will vest and be converted at the stock merger conversion ratio into stock options of the acquiring company (if it is public) or be cashed out (if the acquiring company is not public). Mr. Gelfond did not have any unvested, in-the-money stock options as of December 31, 2019.2020. Additionally, in the event that Mr. Gelfond’s employment is terminated by the Company without cause or by him for good reason within 24 months following a change-in-control, Mr. Gelfond would also be entitled to his severance payments and benefits detailed under “Payment upon Termination without Cause or Resignation for Good Reason.”Reason”. Also, all of Mr. Gelfond’s unvested equity awards will vest immediately, and he will be entitled to the vesting and settlement of unvested PSUs equal to the greater of (x) the Company’s performance as of the last trading day before the change-in-control event or (y) to the extent the performance conditions remain applicable, actual performance as of the end of the applicable performance period. Upon a change-in-control, Mr. Gelfond’s benefits under the SERP would be accelerated and become payable. In the event that Mr. McClymont’s employment is terminated by the Company without cause or by him for good reason within 24 months following a change-in-control, he wouldall of his granted and outstanding options and RSUs will accelerate to August 8, 2022. He will also be entitled to 100% acceleratedthe vesting on his outstandingand settlement of unvested equity.PSUs equal to the greater of (x) the Company’s performance as of the last trading day before the change-in-control event or (y) to the extent the performance conditions remain applicable, actual performance as of the end of the applicable performance period.
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In the event that Mr. Lister’s employment is terminated by the Company without cause or by him for good reason within 24 months following a change-in-control, he would be entitled to receive his severance payments and benefits detailed under “Payments upon Termination without Cause or Resignation for Good Reason.” Mr. Lister would also be entitled to the accelerated vesting of his equity awardawards, subject to the terms of his employment agreement, and would be entitled to receive a cash payment equal to $1,400,000 for each annual equity award in 2018, 2019 and 2020 that had not been made as of the date of such termination or resignation for good reason. Mr. Lister would also be entitled to an incentive payment of $107,500. Any requirement for continued service for his granted and outstanding PSUs will be waived. In the event that Ms. Colligan’s and Mr. Welton’s employment is terminated by the Company without cause in connection with a change-in-control, they would be entitled to the same severance payments and benefits as they would be entitled to had the termination not occurred in connection with a change-in-control. In addition, Mr. Welton’s outstanding options and RSUs will accelerate and vest immediately. Mr. Welton will also be entitled to the vesting and settlement of unvested PSUs equal to the greater of (x) the Company’s performance as of the last trading day before the change-in-control event or (y) to the extent the performance conditions remain applicable, actual performance as of the end of the applicable performance period. The table below reflects potential payments to each of the named executive officersNEOs in various termination and change-in-control scenarios based on compensation, benefits and equity levels in effect on December 31, 2019.2020. The amounts shown assume that the termination or change-in-control event was effective as of December 31, 20192020 and all Accrued Obligations up to this date has been paid. We caution that the actual amounts that would be paid upon an NEO’s termination of employment can be determined only at
the time of such individual’s separation from the Company, and in certain cases would be determined under arrangements put in place after December 31, 2019.2020. To the extent that the calculated amounts relate to awards of stock options, RSUs, or RSUs,PSUs, we have assumed that the price per share is the fair market value of our Common StockShares at December 31, 2019,2020, which was $20.43,$18.02, the closing price on the NYSE on that date. The table below excludes any amounts payable to the named executive officersNEOs to the extent that these amounts are available generally to all salaried employees and do not discriminate in favor of our named executive officers.NEOs. Name | | Triggering Event | Cash Payments (1) | Value of Accelerated Vesting of Equity Awards (2) | | Total | | | | Triggering Event | Cash Payments (1) ($) | Value of Accelerated Vesting of Equity Awards (2) ($) | Total ($) | | Richard L. Gelfond | | Resignation Without Good Reason | | $20,419,181 (3) | | | ꟷ | | | $20,419,181 | | | | Death/Disability | | | 20,664,168 | | (3) | | 4,835,072 | | | | 25,499,240 | | | | Non-Renewal of Agreement | | $20,519,181 (4) | | | ꟷ | | | $20,519,181 | | | | Resignation Without Good Reason | | | 20,664,168 | | (3) | | — | | | | 20,664,168 | | | | Termination With Cause | | $321,000 (5) | | | ꟷ | | | $321,000 | | | | Termination With Cause | | | 366,000 | | (4) | | — | | | | 366,000 | | | | Termination Without Cause or Resignation for Good Reason | | $22,836,102 (6) | | | ꟷ | | | $22,836,102 | | | | Termination Without Cause or Resignation for Good Reason | | | 25,532,080 | | (5) | | 1,651,823 | | | | 27,183,903 | | | | Termination Without Cause following a Change-in-control | | $25,634,192 (7) | | | ꟷ | | | $25,634,192 | | | | Non-Renewal of Employment | | | 20,707,080 | | (6) | | 3,263,363 | | | | 23,970,443 | | | | | Termination Without Cause following a Change-in-Control | | | 24,835,591 | | (7) | | 4,955,468 | | | | 29,791,060 | | Patrick McClymont | | Termination Without Cause or Resignation for Good Reason | | $2,312,798 (8) | | | $1,260,531 | | | $3,573,329 | | | | Death/Disability | | | — | | | | 1,234,226 | | | | 1,234,226 | | | | Termination Without Cause Within Two Years of Change-in-control | | | $2,312,798 (8) | | | $2,064,042 | | | $4,376,840 | | | | Termination Without Cause or Resignation for Good Reason | | | 1,703,459 | | (8) | | 1,935,943 | | | | 3,639,402 | | | | | Involuntary Termination Within Two Years of Change-in-Control | (13) | | 1,703,459 | | (8) | | 3,081,672 | | | | 4,785,131 | | Megan Colligan | | Termination Without Cause or Resignation for Good Reason | | | $1,909,091 (9) | | | ꟷ | | | $1,909,091 | | | | Death/Disability | | | — | | | | 1,305,702 | | | | 1,305,702 | | | | | Termination Without Cause or Resignation for Good Reason | | | 1,097,341 | | (9) | | 478,134 | | | | 1,575,475 | | | | | Involuntary Termination Within Two Years of Change-in-Control | (13) | | 1,097,341 | | (9) | | 2,796,893 | | | | 3,894,234 | | Robert D. Lister | | Termination Without Cause or Resignation for Good Reason | | | $1,976,984 (10) | | | $2,206,376 | | | $4,183,360 | | | | Death/Disability | | | — | | | | 1,070,949 | | | | 1,070,949 | | | | | Termination Without Cause or Resignation for Good Reason | | | 3,638,262 | | (10) | | 2,951,735 | | | | 6,589,997 | | | | Termination Without Cause Within Two Years of Change-in-control | | | $3,484,484 (11) | | | $2,206,376 | | | $5,690,860 | | | | Involuntary Termination Within Two Years of Change-in-Control | (13) | | 3,745,762 | | (11) | | 2,951,735 | | | | 6,697,497 | | Mark Welton | | Termination Without Cause | | $1,618,106 (12)(13) | | | ꟷ | | | $1,618,106 | | | Death/Disability | | | — | | | | 1,199,240 | | | | 1,199,240 | | | | Termination Without Cause Within Two Years of Change-in-control | | $1,618,106 (12)(13) | | | $1,736,488 | | | $3,354,594 | | | Termination Without Cause or Resignation for Good Reason | | | 1,900,306 | | (12) | | 2,750,794 | | | | 4,651,100 | | | | | | | | | | | | | | | Involuntary Termination Within Two Years of Change-in-Control | (13) | | 1,900,306 | | (12) | | 2,750,794 | | | | 4,651,100 | |
| (1) | This value represents the estimated severance payments to each NEO, not including each NEO’s bonus earned for 2019 and reported in the 2019 Summary Compensation Table on page 61, unless otherwise noted.NEO. |
| (2) | The amounts represent the intrinsic value of the accelerated vesting of the NEO’s outstanding and unvested stock options, RSUs and RSUsPSUs calculated using the December 31, 2019 closing price of our Common Shares ($20.43). All values are in US dollars.18.02) and performance conditions as at December 31, 2020.
|
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| (3) | This value includes an estimated lump sum payment of $20,098,181$20,298,168 reflecting the value of Mr. Gelfond’s vested SERP and the estimated value of Mr. Gelfond’s retiree health benefits of $321,000.$366,000. |
| (4) | This value includes an estimated lump sum payment of $20,098,181 reflecting the value of Mr. Gelfond’s vested SERP, the estimated value of Mr. Gelfond’s retiree health benefits of $321,000 and automobile benefits of $100,000.
|
| (5)
| This value includes the estimated value of Mr. Gelfond’s retiree health benefits of $321,000.$366,000 |
| (6)(5)
| This value includes severance benefits totaling $2,416,921,$4,867,912, an estimated lump sum payment of $20,098,181$20,298,168 reflecting the value of Mr. Gelfond’s vested SERP and the estimated value of Mr. Gelfond’s retiree health benefits of $321,000.$366,000. |
| (7)(6)
| This value includes an estimated lump sum payment of $20,098,181$20,298,168 reflecting the value of Mr. Gelfond’s vested SERP, the estimated value of Mr. Gelfond’s retiree health benefits of $321,000,$366,000 and automobile benefits of $42,912. |
| (7) | This value includes an estimated lump sum payment of $20,298,168 reflecting the value of Mr. Gelfond’s vested SERP, the estimated value of Mr. Gelfond’s retiree health benefits of $366,000, an Incentive Bonus of $2,196,000$1,653,750 based on the closing price of our Common Shares on December 31, 20192020 ($20.43)18.02) and $3,019,011,$2,517,673, which is the average of a Sale Bonus that ranges from $1,747,742$1,478,809 to $4,290,280,$3,556,537, depending on the equity assumptions used. |
| (8) | This value includes Mr. McClymont’s salary for the severance periodpayments of $982,798,$1,003,459 and a target bonus for 2019 of $630,000 and an additional target bonus prorated for 14 months of $700,000. |
| (9) | This value includes Ms. Colligan’s severance payments of $1,447,946 and automobile payments of $13,200.$1,097,341. |
| (10) | This value includes Mr. Lister’s severance payments.payments of $3,638,262. |
| (11) | This value includes Mr. Lister’s severance payments of $1,976,984,$3,638,262 and an incentive payment of $107,500 and the additional payment of $1,400,000 for Mr. Lister’s annual equity grant not yet granted as of December 31, 2019.$107,500. |
| (12) | This value includes Mr. Welton’s severance payments of $1,900,306, which is the greater of 18 months and 1 month per year of service, of $1,603,225 and healthcare benefits for the severance period of $14,881. |
| (13)
| service. Mr. Welton’s compensation is paid in Canadian dollars. An exchange rate of US$1.00=Cdn$1.32361.3415 has been applied to convert such amounts from Canadian dollars to U.S. dollars. |
| (13) | The amounts in this row are based on the assumption that the successor corporation does not assume or provide a substitute for the outstanding awards. |
Summary of other employment agreement terms. The summary below describes, for each of the named executive officers,NEOs, the material terms of their employment agreements other than with respect to the potential payments upon termination or change-in-control.
Richard L. Gelfond, Chief Executive Officer and Director. Mr. Gelfond’s current employment agreement, the Gelfond Agreement, is effective as of January 1, 2020. The Gelfond Agreement provides for a three-year employment term that expires on December 31, 2023. Under the terms of the Gelfond Agreement, Mr. Gelfond’s base salary is equal to $1,200,000 during each year of the term, subject to increases at the discretion of the Board of Directors, and he is eligible to receive an annual cash bonus with a target equal to his base salary, and a maximum bonus equal to two times his base salary. The Compensation Committee reviews the annual cash bonus for Mr. Gelfond in the context of both Company and individual performance. Mr. Gelfond’s bonus will be comprised of the following elements: 80% will be based on pre-established, non-discretionary criteria established by the Compensation Committee, and 20% will be determined at the end of the year at the discretion of the Compensation Committee. In assessing Mr. Gelfond’s performance, the Compensation Committee assesses the non-discretionary portion of his bonus against a scorecard of specific, express objectives that have been established for him by the Compensation Committee. This scorecard is intended to provide the Compensation Committee with an objective means of assessing performance and progress in a number of key financial and strategic areas. The specific financial and operational metrics used to evaluate Mr. Gelfond’s annualGelfond did not receive any cash bonus for 2019 is included in2020. For more information, please see the “Compensation Discussion and Analysis” section above. The Gelfond Agreement contains: (i) a customary non-competition provision; (ii) a provision requiring Mr. Gelfond to provide us with consulting services following the expiration of his employment and (iii) a clawback provision. Mr. Gelfond has received grants of RSUs, PSUs and stock options under the Gelfond Agreement, as well as grants of RSUs and options under his prior employment agreements. Mr. Gelfond’s equity awards outstanding as of December 31, 2019,2020, and their respective exercise prices and expiration dates, are set forth above in “Outstanding Equity Awards at 20192020 Fiscal Year-End”. Pursuant to the Gelfond Agreement, in January of each of 2020, 2021 and 2022, Mr. Gelfond was and will be granted PSUs having a grant date value of $2.75 million and RSUs having a grant date value of $2.75 million that vest in three equal installments on the first three anniversaries of the date of grant and PSUs having a grant date value of $2.75 million, subject to Mr. Gelfond’s continued employment. With respect to the PSUs, the number of Common Shares that Mr. Gelfond may receive upon settlement depends upon achievement of pre-specified performance metrics over a three-year performance period and ranges from 0% to 175% of the PSUs granted. The terms of the PSUs granted to Mr. Gelfond are described in the “Compensation Discussion and Analysis” section above. In 2000, we created a defined benefit pension plan, the SERP, to provide benefits for Mr. Gelfond upon his retirement, resignation or termination other than with cause. See “Compensation Discussion and Analysis – Retirement“Retirement and Pension Plans” on page 5942 for a description of the SERP. Mr. Gelfond is fully vested in his benefits under the SERP. The Gelfond Agreement fixes the total amount of benefit payable to Mr. Gelfond under the SERP at $20,298,168. Mr. Gelfond is also entitled to retiree health benefits for himself and his eligible dependents until he becomes eligible for Medicare and, thereafter, Medicare supplemental coverage selected by Mr. Gelfond, or if such coverage is not permitted, an annual cash payment equal to the value of such coverage. We
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If, following the expiration of the Mr. Gelfond’s employment term, we do not offer Mr. Gelfond continued employment on terms substantially similar to his employment agreement, or if Mr. Gelfond elects to retire at the end of the term, Mr. Gelfond will be entitled to a pro‐rated bonus. Mr. Gelfond’s unvested RSUs and options will vest immediately and a pro‐rated amount of unvested PSUs will vest upon the end of the applicable performance period, subject to the achievement of performance conditions. The remaining PSUs will be cancelled. In addition, his outstanding options will be exercisable as set forth in his employment agreement. Mr. Gelfond would also be entitled to a lump sum payment owing under the SERP and would be entitled to receive retiree health benefits until he becomes eligible for Medicare. Thereafter, Mr. Gelfond would be entitled to Medicare supplement coverage. In addition, for a period of twelve months from the date of non‐renewal or retirement, we have agreed to reimburseprovide Mr. Gelfond for the premiums related towith office space, a $15,000,000 term life insurance policy that became effective in January 2010. In 2019, we reimbursed Mr. Gelfond for $22,545 in annual premiums.full‐time assistant and continued automobile benefits. Patrick McClymont, Chief Financial Officer and Executive Vice President. The details of Mr. McClymont’s employment are set forth in an employment agreement dated December 17, 2019 (the “McClymont Agreement”), which is effective as of August 8, 2019. Mr. McClymont’s employment term extends through August 8, 2022. Under the terms of the McClymont Agreement, Mr. McClymont’s base salary is $750,000, and he is eligible to receive discretionary annual cash incentive bonuses with a target amount equal to 80% of his base salary, with the potential to overachieve. Pursuant to his previous employment agreement dated June 6, 2016, Mr. McClymont has received certain RSU and stock option grants in 2016, 2017, 2018 and 2019. For 2020, Mr. McClymont received a mix of PSUs and RSUs as his equity awards. Mr. McClymont’s equity awards outstanding as of December 31, 20192020 and their respective exercise prices and expiration dates are set forth above in “Outstanding Equity Awards at 20192020 Fiscal Year-End”. Pursuant to the McClymont Agreement, Mr. McClymont was and is eligible to receive in each of 2020, 2021 and 2022, equity awards each with an aggregate grant date fair market value equal to $1,450,000. The annual equity awards were and will be comprised of a mix of equity vehicles, including PSUs, which will vest following the public disclosure of the Company’s financial results for the second year following the grant year, and RSUs, thatwhich will vest in three equal installments on the first three anniversaries of the date of grant, subject to Mr. McClymont’s continued employment. With respect to the PSUs, the number of Common Shares that Mr. McClymont may receive upon settlement depends upon achievement of pre-specified performance metrics over a three-year performance period and ranges from 0% to 175% of the PSUs granted. The terms of the PSUs granted to Mr. McClymont are described in the “Compensation Discussion and Analysis” section above. If, within 24 months following a change-in-control, Mr. McClymont’s employment agreement is not renewed upon the expiration of his employment term, Mr. McClymont would be entitled to (i) the accelerated vesting of his granted and outstanding options and RSUs to August 8, 2022 and (ii) the vesting of his granted and outstanding PSUs equal to the (x) the Company’s performance as of the last trading day before the change-in-control event or (y) to the extent the performance conditions remain applicable, actual performance as of the end of the applicable performance period. Mr. McClymont is also subject to customary non-solicitation and non-competition provisions. Megan Colligan, President, IMAX Entertainment and Executive Vice President, IMAX Corporation. The details of Ms. Colligan’s employment are set forth in an employment agreement dated October 10, 2018 and became effective on February 19, 2019 (the “Colligan Agreement”). Ms. Colligan’s employment term continues indefinitely until a termination or resignation. Under the terms of the Colligan Agreement, Ms. Colligan’s base salary is $1,000,000,$1,030,000, and she is eligible to receive discretionary annual cash incentive bonuses with a target amount equal to 100% of her base salary. Pursuant to the Colligan Agreement, Ms. Colligan received a mix of PSUs and RSUs in 2020 with an aggregate grant date fair value of $1,499,999. Ms. Colligan’s equity awards in the year of 2020 comprised of 25% PSUs and 75% RSUs and stock optionsvest as set forth above in 2019 in the amount“2020 Grants of $2,500,000.Plan-Based Awards”. Each
subsequent year, Ms. Colligan will receive equity awards in an aggregate grant date value of a range between $1,500,000 to $2,000,000 based on a combination of her performance and Company performance in a mix of equity vehicles with vesting schedules consistent with those granted to other senior executives at the time. Ms. Colligan’s equity awards in the year of 2019 comprised of 25% stock options and 75% RSUs and vest as set forth above in “Grants of Plan-Based Awards”. Ms. Colligan’s equity awards outstanding as of December 31, 20192020 and their respective exercise prices and expiration dates are set forth above in “Outstanding Equity Awards at 20192020 Fiscal Year-End”. Ms. Colligan is also subject to customary non-solicitation and non-competition provisions. Robert D. Lister, Chief Legal Officer & Senior Executive Vice President IMAX Corporation. The details of Mr. Lister’s employment are set forth in an amendment to his employment agreement dated March 11, 2020 (the “Lister Agreement”). Mr. Lister’s employment term extends through DesumcemberDecember 31, 2023. Under the terms of the Lister Agreement, Mr. Lister’s base salary beginning in 2020 will be $738,450, subject to annual review, and he is eligible to receive discretionary annual cash incentive bonuses with a target amount equal to 60% of his base salary, with the potential to overachieve.
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Pursuant to the Lister Agreement, Mr. Lister received RSUs and stock options each year during his employment term with an aggregate grant date fair market value of $1,400,000. Mr. Lister’s equity awards in 2018 and 2019 were comprised of 25% stock options and 75% RSUs and vest in four equal annual installments beginning on the first anniversary of the applicable grant date. For 2020, Mr. Lister’s awards consisted of 25% PSUs and 75% RSUs consistent with other senior executives. Mr. Lister’s equity awards outstanding as of December 31, 20192020 and their respective exercise prices and expiration dates are set forth above in “Outstanding Equity Awards at 20192020 Fiscal Year-End”. Starting in 2021 and until December 31, 2023, he will be entitled to an annual equity award with an aggregate grant date fair market value of $1,450,000. Beginning in 2020, Mr. Lister’s equity awards will be comprised of a mix of RSUs and PSUs consistent with grants given to other senior executives. The RSUs granted in 2020 will vest in three equal installments beginning on the first anniversary of the applicable grant date, subject to Mr. Lister’s continued employment. With respect to the PSUs, the number of Common Shares that Mr. Lister may receive upon settlement depends upon achievement of pre-specified performance metrics over a three-year performance period and ranges from 0% to 175% of the PSUs granted. The terms of the PSUs granted to Mr. Lister are described in the “Compensation Discussion and Analysis” section above. If, following the expiration of Mr. Lister’s employment term, we do not offer Mr. Lister continued employment on terms substantially similar to his employment agreement and Mr. Lister incurs a separation from service, then for the non‐renewal period described below, Mr. Lister would be entitled to receive: (i) his base salary, automobile allowance and benefits; and (ii) a cash payment equal to Mr. Lister’s pro‐rated target bonus for the length of the non‐renewal period. In the event Mr. Lister were not permitted to continue his participation in our medical plans, Mr. Lister would be entitled to a cash payment equal to the value of the benefit continuation, payable in three semi‐annual installments. The non‐renewal period is equal to 12 months, except if the non‐renewal occurs within 24 months following a change‐in‐control, then the non‐renewal period will be equal to 18 months. In addition, following a non‐renewal, any unvested equity as of December 31, 2020 will continue to vest in accordance with the original vesting schedule pursuant to the Service Factor provision in the LTIP. Mr. Lister is also subject to customary non-solicitation and non-competition provisions. Mark Welton.Welton, President, IMAX Theatres. Under the terms of his employment arrangement with the Company in 2011,2020, Mr. Welton was entitled to receive a base salary of Cdn$400,000,750,750, which is subject to annual review.review, and he eligible to receive discretionary cash bonuses with a target amount equal to 70% of his base salary. Mr. Welton is entitledalso eligible for an equity award with an aggregate grant date fair market value of at least $1,450,000, which will be comprised of a mix of options, RSUs and PSUs consistent with grants given to participate in the Management Bonus Plan and to receive a target annual performance bonus of 37.5% of his base salary, subject to annual review.other senior executives. Details about Mr. Welton’s compensation are further disclosed in “Compensation Discussion and Analysis.” Mr. Welton has received certain stock option, PSU and RSU grants from the Company. Mr. Welton’s equity awards outstanding as of December 31, 2019,2020, and their respective exercise prices and expiration dates are set forth above in “Outstanding Equity Awards at 20192020 Fiscal Year End”. Upon a termination without cause, Mr. Welton’s vested stock options remain exercisable for a periodunvested equity awards will continue to vest in accordance with the original vesting schedule (in the case of six months.PSUs, subject to the achievement of the original performance conditions). Mr. Welton entered into a non-compete agreement with the Company which contains customary non-solicitation and non-competition provisions for periods of two years and one year, respectively, after the termination of his employment with the Company.
COMPENSATION OF DIRECTORS Directors who are also employees of the Company receive no additional fees for service on the Board of Directors. Our independent directors receive an annual retainer of $50,000. In addition, Committee Chairs receive the following annual retainers: the Audit Committee Chair receives $15,000 and the Compensation Committee Chair and the Governance Committee Chair each receive $10,000. Committee members also receive the following yearly retainers: Audit Committee members receive $10,000; Compensation Committee members receive $7,500; the Company’s Lead Independent Director receives $15,000; and Governance Committee members receive $5,000. Committee retainers are in addition to any applicable retainer for being a Committee Chair. Each year, independent directors are granted an annual grant of RSUs with a value of $125,000 on the date of grant, and the Chairman of the Board is granted an annual grant of RSUs with a value of $170,000 on the date of grant. These grants are made following the election of our independent directors at our annual meeting. The grants made in 20192020 vested on the date of grant. Directors are reimbursed for expenses incurred in attending meetings of the Board of Directors and Committees of the Board of Directors. The Governance Committee reviews director compensation and benefits on a periodic basis.
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The following table sets forth information relating to compensation of our non-executive directors for the fiscal year ended December 31, 2019.2020. Name
| | Fees Earned or Paid in Cash ($) | | Stock Awards ($) (1) | | All Other Compensation ($) | | | Total ($) | | | Fees Earned or Paid in Cash ($) (1) | | Stock Awards ($) (2) | | All Other Compensation ($) | | | Total ($) | Bradley J. Wechsler | | | | 230,000 | | (2) | | | | | 169,992 | | (3) | | | | | 75,746 | (4) | | | | | 475,738 | | | | | | | 218,500 | | (3) | | | | | 178,497 | | (4) | | | | | 70,020 | | (5) | | | | 467,017 | | | Neil S. Braun | | | | 65,000 | | | | | | | 124,987 | | (5) | | | | | — | | | | | | 189,987 | | | | | | | 61,750 | | | | | | | 131,242 | | (6) | | | | | — | | | | | | 192,992 | | | Eric A. Demirian | | | | 75,000 | | | | | | | 124,987 | | (5) | | | | | — | | | | | | 199,987 | | | | | | | 71,250 | | | | | | | 131,242 | | (6) | | | | | — | | | | | | 202,492 | | | Kevin Douglas | | | | 57,500 | | | | | | | 124,987 | | (5) | | | | | — | | | | | | 182,487 | | | | | | | 54,625 | | | | | | | 131,242 | | (6) | | | | | — | | | | | | 185,867 | | | David W. Leebron | | | | 75,000 | | | | | | | 124,987 | | (5) | | | | | — | | | | | | 199,987 | | | | | | | 71,250 | | | | | | | 131,242 | | (6) | | | | | — | | | | | | 202,492 | | | Michael Lynne (6) | | | | 33,750 | | | | | | | — | | | | | | | — | | | | | | 33,750 | | | | | Michael MacMillan | | | | 55,000 | | | | | | | 124,987 | | (5) | | | | | — | | | | | | 179,987 | | | | | | | 52,250 | | | | | | | 131,242 | | (6) | | | | | — | | | | | | 183,492 | | | Dana Settle | | | | 58,750 | | | | | | | 124,987 | | (5) | | | | | — | | | | | | 183,737 | | | | | | | 59,375 | | | | | | | 131,242 | | (6) | | | | | — | | | | | | 190,617 | | | Darren Throop | | | | 62,500 | | | | | | | 124,987 | | (5) | | | | | — | | | | | | 187,487 | | | | | | 64,125 | | | | | | | 131,242 | | (6) | | | | | — | | | | | | 195,367 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | On June 3, 2020, in light of pandemic-related measures taken by the Company’s management to preserve cash and reduce costs, the Board of Directors agreed to reduce the cash compensation paid to each director by 20% for the second quarter of 2020. |
| (2) | As required by SEC rules, the “Stock Awards” column in this table reflect the aggregate grant date fair values of the RSU awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (with no reductions for expected forfeitures). See note 1617(c) to the audited consolidated financial statements in Item 8 of the 20192020 Form 10-K, for the assumptions used to calculate the fair value of the RSUs. |
| (2)(3)
| This amount represents the amount paid to Mr. Wechsler pursuant to the services agreementhis Services Agreement as described below. |
| (3)(4)
| Mr. Wechsler received a grant of 8,37413,281 RSUs on June 6, 2019,4, 2020, in recognition of his position as Chairman of the Board. The RSUs vested on June 6, 2019.4, 2020. |
| (4)(5)
| This amount reflects: (i) $31,843$31,546 for personal automobile use; (ii) $29,167$25,724 for retiree health benefit premiums; and (iii) $14,736$12,750 for the supplemental health plan premiums. |
| (5)(6)
| The director received a grant of 6,1579,765 RSUs on June 6, 2019.4, 2020. The RSUs vested on June 6, 2019. |
| (6)
| Mr. Lynne served as a member of our Board of Directors until he passed away on March 24, 2019. He did not receive any equity compensation during the fiscal year ended December 31, 2019.4, 2020.
|
On December 11, 2008, we entered into a services agreement with Mr. Wechsler (as amended, the “Services Agreement”) which provides that, effective April 1, 2009, Mr. Wechsler’s employment as Co-CEO was terminated. The Services Agreement, which has been amended from time to time, provides that Mr. Wechsler will serve as Chairman of the Company’s Board of Directors until the Board of Directors determines to terminate the services of Mr. Wechsler. The Services Agreement was most recently amended as of April 1, 2013. Pursuant to an amendment, that amendment,was effective April 1, 2013, Mr. Wechsler’s compensation for each year served as Chairman increased from $200,000 to $230,000. The Services Agreement providesalso provided that certain other provisions of Mr. Wechsler’s former employment agreement with the Company continue to survive the termination of such employment agreement. Mr. Wechsler will not stand for re-election at the Meeting. On March 30, 2021, we entered into an amendment to terminate the Services Agreement (the “Termination Letter”), which will take effect following the Meeting. Among theCertain provisions of Mr. Wechsler’s prior employment agreement thatwill continue to survive are those relating tofollowing the Sale Bonus andtermination of the Incentive Bonus.Services Agreement. Upon a[a sale of the Company,Company], Mr. Wechsler iswill continue to be entitled to receive a cash Sale Bonus in an amount equal to the product of (a) 0.375% and (b) the amount by which the sale or liquidation transaction imputes an equity value in excess of Cdn$150,000,000 to the Common Shares originally issued by the Company (on a fully diluted basis but excluding the Common Shares issued upon the conversion of the Class B convertible Preferred Shares of the Company formerly outstanding which were converted into Common Shares on June 16, 1994 and the Common Shares issuable upon the exercise of warrants previously owned by Messrs. Gelfond and Wechsler). The Sale Bonus provisions date back to Mr. Wechsler’s original employment agreement in connection with the 1994 acquisition of the Company and would be paid as a result of the Company’s having reached an imputed equity value in excess of Cdn$150,000,000. As of December 31, 2019,2020, we estimated the Sale Bonus to be between $1,747,724$1,478,809 and $4,290,280,$3,556,537, depending upon the equity assumptions used in the relevant calculations.
In addition, following[following a change-in-control,change-of-control], Mr. Wechsler would receive a cash Incentive Bonus equal to the product of (a) 225,000 and (b) the difference between the closing price of the Common Shares upon such change-in-control and the closing price of the Common Shares on March 10, 2006, which was $10.67. The Incentive Bonus provision dates back to the extension of Mr. Wechsler’s employment pursuant to a March 8, 2006 amended employment agreement. As of December 31, 2019,2020, the Incentive Bonus would have been $2,196,000,$1,653,750, based on the closing price of the Common Shares on that date ($20.43)18.02). We maintainIn 2020, we maintained an unfunded retiree medical benefit plan covering Mr. Wechsler. The plan provides that we will maintain retiree health benefits for Mr. Wechsler until he becomes eligible for Medicare, and thereafter we will provide Medicare supplemental coverage as selected by Mr. Wechsler. As of December 31, 2019,2020, the estimated value of Mr. Wechsler’s retiree health benefits was $307,000.
$336,000. Effective January 1, 2012, we implemented an executive supplemental health reimbursement plan which covers Mr. Wechsler. The plan provides expanded coverage and reimbursement of services not covered by our medical, dental and vision plans. We reimbursed Mr. Wechsler for $14,736$12,750 in health premiums in 20192020 in connection with this plan. Under the Termination Letter, we will continue to provide Mr. Wechsler’s current medical benefits through December 31, 2021. In addition, we will continue to pay for his car lease and reasonable automobile expenses until October 31, 2023. 56
COMPENSATION COMMITTEE INTERLOCKSINTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee is currently composed of Messrs. Throop (Chair) and Douglas and Ms. Settle, each of whom is an independent director. Mr. Lynne was the Chair of the Compensation Committee until his passing on March 24, 2019. Mr. Throop was appointed Chair and Ms. Settle was appointed as a member of the Compensation Committee on June 5, 2019 following Mr. Lynne’s passing. All compensation decisions for Mr. Gelfond in 20192020 were made by the Compensation Committee. None of the members of the Compensation Committee during 20192020 is a current or former officer or employee of the Company or had any relationship requiring disclosure under Item 404 of Regulation S-K. During the fiscal year ended December 31, 2019,2020, none of our executive officers served on compensation committees or boards of directors of any other entity that had or has had one or more of its executive officers serving as a member of our Compensation Committee or Board of Directors. CORPORATE GOVERNANCE The Board of Directors believes that good corporate governance is fundamental to our overall success. The Governance Committee of the Board of Directors, which is currently composed of Messrs. Leebron (Chair), Braun, MacMillan and Ms. Settle, all of whom are independent directors, reviews our corporate governance practices from time to time, as further described in our “Corporate Governance Guidelines”. Corporate Governance Guidelines Corporate Governance Guidelines
The Board of Directors has adopted Corporate Governance Guidelines, which outline the Board of Directors’ authority, responsibilities, composition and procedures. The role of the Board of Directors is to supervise the business and affairs of the Company, including: | • | overseeing the strategic and business planning process(es) and reviewing, approving and monitoring the annual and long-term operating plans, including fundamental financial and business strategies and objectives; |
| • | reviewing and assessing the major risks we face and reviewing, approving and monitoring our approach to addressing such risks; |
| • | developing and reviewing the CEO’s corporate objectives, annually evaluating the performance of the CEO against these objectives, determining his performance-based compensation annually and developing appropriate succession plans, from time to time; and |
| • | reviewing, monitoring, and maintaining the integrity of the Company’s controls and procedures, including its disclosure controls and procedures, its internal controls and procedures for financial reporting, and its compliance with the Code of Business Conduct and Ethics. |
From time to time, the Board of Directors retains the services of external consultants to assist in the review of its governance practices. A current copy of the Corporate Governance Guidelines, the text of which is incorporated by reference into this Circular, is available, without charge, at www.imax.com and www.sedar.com or provided within one business day upon written request to the Company at IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1, Attention: Corporate Secretary, tel:Tel: 905-403-6500.
Director IndependenceIndependence The Board of Directors is comprised of a majority of independent directors as defined under applicable legal, regulatory and stock exchange requirements. Section 303A of the NYSE Listed Company Manual provides that no director qualifies as “independent” unless the Board of Directors affirmatively determines that such director has no material relationship with the Company, and Section 1.2 of Canadian National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”) provides that an independent director is a person other than an officer or employee of the Company, or an individual having a material relationship with the Company that in the opinion of the Board of Directors would interfere with the exercise of independentindependent judgment in carrying out the responsibilities of the director. The NYSE Listed Company Manual and NI 58-101 set forth specific categories of relationships that disqualify a director from being independent. The Board of Directors has reviewed the independence of each director and considered whether any director has a material relationship with the Company. As a result of this review, the Board of Directors affirmatively determined that each of the following directors, representing seven of our nine directors, is independent within the meaning of the NYSE, Canadian securities regulations, and SEC director independence standards, as currently in effect: •Neil S. Braun(1) | •David W. Leebron | •Darren Throop | •Eric A. Demirian | •Michael MacMillan | •Dana Settle | •Kevin Douglas | | |
| (1) | Mr. Braun will not stand for re-election at the Meeting. |
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Our Board of Directors’ independence determination was based on information provided by the directors and discussions among the officers and directors. In making the foregoing independence determination, the Board of Directors noted that Mr. Throop is the President and CEO of Entertainment One Ltd., an entity which paid the Company approximately $19,684$3,649 in 20192020 as box office royalties for exhibiting IMAX films. The Board of Directors determined that these amounts are immaterial, and Mr. Throop has neither a direct nor indirect material interest in any transactions between the Company and Entertainment One Ltd. In addition, the Board of Directors considered that Mr. Douglas is our largest individual shareholder, holding approximately 15.1%15.0% of our Common Shares as of April 9, 2020.12, 2021. However, the Board determined that, notwithstanding Mr. Douglas’ shareholdings, he has neither a direct nor indirect material interest in any transactions with the Company. Mr. Wechsler served as Co-Chairman of the Board of Directors, along with Mr. Gelfond, from June 1999 to March 2009. On April 1, 2009, Mr. Wechsler became sole Chairman of the Board. Mr. Wechsler is not an independent director by virtue of his continuing compensation arrangements with the Company. By virtue of Mr. Gelfond’s current role as CEO, IMAX Corporation, he is not considered to be an independent director. All members of the Compensation Committee, Audit Committee and Governance Committee are considered “independent” under each such Committee’s independence standards pursuant to the relevant U.S. and Canadian regulations. In the event any transaction or agreement is proposed in respect of which a director has a material interest, the director will be recused from voting on that matter and removed from the meeting while the transaction at issue is being considered by the Board of Directors. Board Size and Composition Our articles provide that the Board of Directors may be comprised of a minimum of 1 and a maximum of 15 directors with the actual number determined from time to time by resolution of the Board of Directors. As of the date of this Circular, the size of the Board of Directors has been set at nine directors. Messrs. Wechsler and Braun will not stand for re-election as directors at the Meeting. Following the Meeting, the size of the Board of Directors will be reduced to eight directors. The Board of Directors recognizes that one of its key responsibilities is to evaluate and determine its optimal governance structure so as to provide independent oversight of management. The Board of Directors has determined that there is no single, generally accepted approach to providing governance and that given the evolving nature of our business, the right governance structure for the Board of Directors may vary as circumstances warrant. Consistent with this understanding, the independent directors consider the Board of Directors’ size and composition on an annual basis in connection with its annual self-evaluation. In considering its governance structure, the Board of Directors has taken a number of factors into consideration. The Board of Directors, with a majority of its directors being independent directors, exercises strong, independent oversight. This oversight function is enhanced by the fact that all of the committees of the Board of Directors (the “Board Committees”)Committees and their respective chairpersons are comprised entirely of independent directors. A number of processes and procedures of the Board of Directors and of the Committees provide independent oversight of the CEO’s performance: regular executive sessions of the independent directors; the ability of independent directors to contact one another, the CEO and other executive officers at any time; and the annual evaluations of the performance of the CEO against pre-determined and other criteria.
We also provide instructions for our shareholders and other interested parties to communicate directly with the Board of Directors, see “Shareholder Communication” on page 10.7. The Board of Directors believes that these factors provide the appropriate balance between the authority of those who oversee the Company and of those who manage it on a day-to-day basis. Board Refreshment The Board of Directors recognizes the importance of Board of Directors refreshment and aims to strike a balance between the knowledge and experience that comes from longer tenures on the Board of Directors with the fresh ideas and perspectives that can come from adding new members. As a result of our refreshment efforts, the Board of Directors has nominated one new director for election at the Meeting, and will appoint a new independent Chair of the Board of Directors following the Meeting Lead Independent DirectorBoard Leadership Structure
Under our Corporate Governance Guidelines, the Board of Directors has the flexibility to determine the appropriate Board of Directors leadership structure. In making this determination, the Board of Directors considers many factors, including the needs of the business at the time, the assessment of its leadership needs, and the best interests of shareholders. When the Chair is not an independent director, the independent directors will appoint a lead independent director.
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In October 2018, Mr. Leebron was chosen as the Lead Independent Director for the Board of Directors. As the Lead Independent Director, Mr. Leebron’s authority and responsibilities include presiding at meetings of the Board of Directors where the ChairmanChair of the Board is not present, including executive sessions, facilitating discussions among independent directors, having the ability to review and approve Board of Director meeting schedules, agendas, and materials and to call meetings of the independent directors, serving in an advisory capacity to the ChairmanChair and a liaison between the ChairmanChair and Chief Executive Officer on the one hand and the independent directors on the other, communicating views expressed by the independent directors in executive sessions or otherwise to the ChairmanChair of the Board and management, and performing other duties or functions that the Board of Directors may delegate. Given Mr. Leebron’s extensive leadership and management experience, the Board of Directors has determined that his appointment as the Lead Independent Director is optimal for the Company as he provides us with independent oversight, facilitates communication between independent directors and other stakeholders in the Company and offers collaborative and objective guidance to the ChairmanChair of the Board and the Board of Directors. Following the election of directors at the Meeting, the Board of Directors intends to appoint an independent Chair. The Chair will ensure the Board of Directors’ time and attention are focused on effective oversight of the matters most critical to the Company. The Board of Directors will routinely assess its Board leadership structure with careful consideration of the feedback obtained through shareholder engagement. Risk Management The Board of Directors is responsible for overseeing the various risks that we face. In this regard, the Board of Directors seeks to understand and oversee critical business risks. Risks are considered in virtually every business decision and as part of our overall business strategy. While the Board of Directors is responsible for reviewing and assessing the major risks that we face and for reviewing, approving and monitoring our approach to addressing such risks, our management is charged with managing risk. We have robust internal processes and a strong internal control environment to identify and manage risks and to communicate with the Board of Directors through senior management. These include: an enterprise risk management program;
| • | an enterprise risk management program; |
regular internal management disclosure committee meetings; a Code of Business Conduct and Ethics; a Whistle Blower Program; | • | an Anti-Bribery and Anti-Corruption Policy; |
a Clawback Policy;Corporate Policy and Procedure on Insider Trading; rigorous product quality standards and processes; and a comprehensive internal and external audit process. The Board of Directors and the Audit Committee monitor and evaluate the effectiveness of the internal controls and the risk management program at least annually. Management communicates routinely with the Board of Directors and the Audit Committee on the significant risks identified and how they are being managed. The Board of Directors implements its risk oversight function both as a whole and through the Audit Committee. The Audit Committee oversees risks related to our financial statements, the financial reporting process, accounting, cybersecurity, data privacy and legal matters. The Audit Committee also oversees the internal audit function and our Whistle Blower Program. The Audit Committee members meet separately with our CEO and representatives of the independent auditing firm a minimum of four times per year. The Governance Committee assists the Board of Directors in its oversight of the Company’s governance structure and other corporate governance matters, including the composition of the Board of Directors. The Compensation Committee reviews our compensation policies and practices to assess whether such policies and practices could lead to unnecessary risk-taking behavior of our employees. The Board of Directors regularly engages in discussion of financial, legal, business, technology, economic, political and other risks. Because overseeing risk is an ongoing process and inherent in our strategic decisions, the Board of Directors also discusses risk in relation to specific proposed actions. For example, the Board of Directors was actively engaged in reviewing and assessing the risks related to the spread ofongoing COVID-19 pandemic and its impact on the Company’s business and financial position and overseeing management’s strategies to manage such risks.
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Nomination Process The Governance Committee is responsible for identifying and recommending candidates for election or re-election to the Board of Directors. Such candidates are then nominated for election by a majority of our independent directors. The Governance Committee does not set forth specific, minimum qualifications that nominees must possess in order for the Governance Committee to recommend them to the Board of Directors, but rather believes that each nominee should be evaluated in light of opportunities and risks facing the Company and the competencies, skills and personal qualities that are desirable to contribute to our effective governance. In evaluating potential nominees for election and re-election as members of the Board of Directors, the Governance Committee seeks nominees that:
| • | manifest the highest integrity and that possess the highest personal and professional ethics; |
| • | have significant business experience or other organizational leadership experience that will allow the nominee to contribute significantly to the Company as a member of the Board of Directors; |
have the willingness and an ability to make the necessary time commitment to actively participate as a member of the Board of Directors; | • | exhibit sound business judgment; and |
| • | are committed to representing the long-term interests of our shareholders. |
Candidates are identified from a number of sources including recommendations from directors, management, shareholders and others. The Governance Committee will consider any nominee recommended by a shareholder under the same criteria as any other potential nominee. Shareholders who wish to have the Governance Committee consider the nomination of any person for director at the 20212022 Annual Meeting of Shareholders should submit a shareholder proposal made in accordance with the provisions of the Canadian Business Corporations Act to the Company at IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1, Attention: Corporate Secretary no later than December 24, 2020,28, 2021, or by submitting a timely notice in compliance with the advance notice procedures set forth in By-Law No. 1 of the Company at IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1, Attention: Corporate Secretary. We may require that a proposed nominee furnish additional information as may be reasonably required to determine the qualifications of such proposed nominee to serve as a director of the Company. Diversity
The Governance Committee charter mandates that the Governance Committee review, on a periodic basis, the current composition of the Board of Directors in light of the characteristics of independence, diversity, age, competencies, skills, experience, availability of service to the Company and tenure of the directors and of the Board of Directors’ anticipated needs. While the Governance Committee does not have a formal policy specifying how diversity of background and personal experience should be applied in reviewing the current composition of the Board of Directors or in identifying or evaluating candidates for the Board of Directors, the Governance Committee is committed to having a diverse Board of Directors in that it seeks individuals from different backgrounds with varying perspectives, professional experience, education and skills.
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The Company has evaluated the number of (i) women; (ii) members of visible minorities; (iii) aboriginal persons; and (iv) persons with disabilities (collectively, the “Designated Groups”) represented on the Board of Directors or in senior management positions. We currently have one female director on the Board of Directors (11%) and no directors who identify as members of the other Designated Groups. We currently have twofour female members of our management team of fourteen (14%sixteen (25%) and twothree other members of our management team who are members of a visible minority (14%(18%). None of the other members of our management team identify as any of the other types of Designated Groups. The Company has not independently verified the responses of those who have self-identified as members of the Designated Groups. We do not have a policy on the representation of Designated Groups on the Board of Directors or on our management team, as the Board of Directors does not believe that quotas or strict rules necessarily result in the identification or selection of the best candidates. Rather, the Governance Committee takes into account the competencies, skills and personal qualities described above. However, the Board of Directors is mindful of the benefit of diversity in our leadership positions and the need to maximize the effectiveness of the Board of Directors and its decision-making abilities. Accordingly, in searches for new directors, the Board of Directors, and its third-party consultants that may be hired to assist in identifying candidates, consider the level of diversity as one of several factors used in its search process.
Director Term Limits Director Term Limits
The Board of Directors has not established any term limits for directors but has adopted a mandatory retirement age of 80. It does not believe there to be a correlation between term of service and effective board performance and renewal. The Board of Directors has adopted processes whereby the Governance Committee, along with the ChairmanChair of the Board, periodically reviews the composition of the Board of Directors and the skills and experience required to best meet the needs of the Company. WhereWhen a vacancy in the Board of Directors occurs, the Governance Committee, in conjunction with the ChairmanChair of the Board and the CEO, will beis responsible for identifying potential candidates for consideration based on the various experience and skills required as a result of such vacancy. In addition, the Governance Committee oversees an annual assessment of the effectiveness of the Board of Directors and Board Committees and self-assessments completed by the directors evaluating their individual performance and contributions to the Board of Directors. Meetings of the Board of Directors and its Committees During the fiscal year ended December 31, 2019,2020, the Board of Directors held nineten meetings, the Audit Committee held fivemeetings, the Compensation Committee held one meetingtwo meetings and the Governance Committee held one meeting. In addition to the meetings, the Compensation Committee also had extensive communications telephonically and through email correspondences to discuss several compensation related decisions, including the introduction of PSUs and NEO compensations. Each incumbent director attended at least 75% of the aggregate of the total number of meetings of the Board of Directors and Committees of the Board on which such director served during the fiscal year ended December 31, 2019, other than Mr. Throop.2020. The directors are given the opportunity to hold executive sessions (where members of management are not in attendance) at all regularly scheduled Board of Directors meetings. A total of seven such executive sessions of the Board of Directors were held during 2019.2020. Our Board of Directors does not include a single director chosen to preside over the regularly scheduled (quarterly) executive sessions. Executive sessions which follow Board of Directors meetings are usually informal discussions which are often led by the ChairmanChair of the Board or a chair of one of the Board Committees, depending on the subjects to be discussed. The ChairmanChair of the Board reviews the matters to be discussed in executive sessions and determines which director or Board Committee chair is best placed to preside over the executive session. This process facilitates open and candid discussions among the directors. The following incumbent directors attended the following number of Board of Directors meetings during the fiscal year ended December 31, 2019:2020: Richard L. Gelfond | | 9/910/10
| | | Kevin Douglas | | 10/10 | | | Michael MacMillan | | 10/10 | | Bradley J. Wechsler | | 10/10 | | | David W. Leebron | | 10/10 | | | Dana Settle | | 10/10 | | Neil S. Braun | | 10/10 | | | Darren Throop | | 10/10 | | | Eric A. Demirian | | 9/9
| | | Darren Throop
| | 6/9
| | Bradley J. Wechsler
| | 9/9
| | | Kevin Douglas
| | 9/9
| | | Michael MacMillan
| | 9/9
| | Neil S. Braun
| | 7/9
| | | David W. Leebron
| | 9/9
| | | Dana Settle
| | 8/910/10
| |
All of the members of the Audit Committee are independent directors and hold in camera sessions where members of management are not in attendance at least once each fiscal quarter. A total of four such in camera sessions were held during 2019.2020. While we encourage directors to attend our Annual Meeting of Shareholders, there is no formal policy concerning such attendance. EightAll of the nine incumbent directors attended last year’s Annual Meeting of Shareholders. 61
Committees ofof the Board To assist it in discharging its duties effectively, the Board of Directors has delegated some of its duties to three specifics committees of the Board: the Audit Committee; the Compensation Committee and the Governance Committee. Each of these committees and their respective chairs are appointed annually by the Board of Directors. Each committee has a written charter which sets out its principal duties and responsibilities. Each committee has the authority to retain special legal, accounting or other advisors. The following table shows the composition of each of our Board Committees on April 29, 2020.27, 2021. | Independent Director | Audit Committee | Governance Committee | Compensation Committee | Neil S. Braun | ✓ | ✓ | ✓ | | Eric A. Demirian | ✓ | ✓ (Chair) | | | Kevin Douglas | ✓ | | | ✓ | David W. Leebron | ✓ | ✓ | ✓ (Chair) | | Michael MacMillan | ✓ | | ✓ | | Dana Settle | ✓ | | ✓ | ✓ | Darren Throop | ✓ | | | ✓ (Chair) |
Audit CommitteeCommittee The Audit Committee is currently composed of Messrs. Demirian (Chair), Braun, and Leebron, each of whom is an independent director who meets the independence and other requirements of the NYSE and Canadian National Instrument 52-110 - Audit Committees standards applicable to Audit Committee members. The Board of Directors has established the Audit Committee for the purpose of overseeing: the quality and integrity of our financial statements and related disclosure; our compliance with legal and regulatory requirements; the independent auditors’ qualifications and independence; the effectiveness of our risk management program;program, including with respect to cybersecurity and data privacy risk; the performance of our internal audit function; internal controls and procedures; and the performance of the independent auditors. Each Audit Committee member has experience with various businesses and professions, which is relevant to their understanding of the accounting principles used by the Company in preparing its financial statements and to their understanding of the general applications of such accounting principles in connection with the accounting for estimates, accruals and reserves. These experiences have been with companies, businesses and professional organizations presenting a breadth and level of complexity of accounting issues generally comparable to those reasonably expected to be raised by our financial statements and have provided them with an understanding of internal controls and procedures for financial reporting. For more information on the education and experience of each Audit Committee member, see “Item No. 1 - Election of Directors” on page 11.8. The Board of Directors has determined that Mr. Demirian qualifies as an “audit committee financial expert” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K as a result of Mr. Demirian’s qualifications as a Chartered Professional Accountant, a Chartered Accountant and as a Certified General Accountant. Mr. Demirian serves as the Chair of the Audit Committee. The Audit Committee meets with our external auditors, both with and without management present, to review and discuss our accounting policies, our quarterly and year-end financial statement information and their presentation, and significant financial issues which may arise for our Company. The Audit Committee operates under a written mandate adopted by our Board of Directors. A current copy of the Audit Committee Charter is available, without charge, at www.imax.com or upon written request to the Company at IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1, Attention: Corporate Secretary.
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Compensation Committee The Compensation Committee is currently composed of Messrs. Throop (Chair) and Douglas and Ms. Settle, each of whom is an independent director. The Compensation Committee is responsible for evaluating and making recommendations to the Board of Directors regarding our equity-based and incentive compensation plans, policies and programs. In addition, the Compensation Committee approves or recommends to the Board of Directors the compensation package (including components, quantum and timing) for our CEO, sets his performance factors, and assesses his performance on a periodic basis. On an annual basis, the Compensation Committee reviews and approves the components and the amount of compensation paid to certain of our senior executives. The Compensation Committee made recommendations to the Board of Directors with respect to the discretionary and non-discretionary portions of the bonus paid to Mr. Gelfond in respect of 2019. The Compensation Committee has been actively engaged in implementing changes that will promote greater alignment between executive compensation and the long-term priorities of the Company, which include the design and granting of PSUs as part of executive compensation for the CEO and NEOs. The Compensation Committee has the authority to retain outside consultants to provide independent advice to the Compensation Committee. In 2020, the Compensation Committee retained compensation consultants. For additional information on the role of outside consultants, please see “Role of Outside Consultants” on page 35. The Compensation Committee is responsible for performing the functions required of it under our equity award plans, including the grant of stock options, RSUs and PSUs from time to time, which grants are subject to guidelines determined by our Human Resources department and the Compensation Committee. The Compensation Committee enacts written resolutions from time to time authorizing the grant of stock options, RSUs and PSUs. The Compensation Committee operates under a written mandate adopted by our Board of Directors. A current copy of the Compensation Committee Charter is available, without charge, at www.imax.com or upon written request to the Company at IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1, Attention: Corporate Secretary. Governance Committee The Governance Committee is currently composed of Messrs. Leebron (Chair), Braun, MacMillan and Ms. Settle, each of whom is an independent director. The Governance Committee is responsible for monitoring and evaluating our corporate polices and governance practices, monitoring significant developments in the law and practice of corporate governance, monitoring and evaluating our compliance with the law, monitoring and evaluating compliance with our articles, by-laws and governance agreements, and monitoring the effectiveness of the Board of Directors and Board Committees in the discharge of their general oversight responsibilities.
The Governance Committee is responsible for identifying and recommending candidates for election to the Board of Directors. The Governance Committee evaluates potential new candidates for the Board of Directors on an ongoing basis in light of the opportunities and risks facing us and the competencies, skills and personal qualities that are desirable to add value and to contribute to our effective governance. The Governance Committee also has the authority to engage consultants and third-party search firms to assist in identifying qualified candidates for the Board of Directors. In 2020, the Governance Committee retained an independent search firm to identify and evaluate potential director candidates. The firm provides background information and qualifications of potential candidates and, if directed, makes initial contacts with potential candidates. The Governance Committee, together with the CEO and other members of the Board and/or senior management, meet with and interview potential candidates. Mr. Steve Pamon, who is standing for election by shareholders for the first time, was recommended to the Governance Committee by the retained search firm. The Governance Committee operates under a written mandate adopted by our Board of Directors. A current copy of the Governance Committee Charter is available, without charge, atwww.imax.com or upon written request to the Company at IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1, Attention: Corporate Secretary. Orientation and Education We have developed and implemented orientation materials and procedures for new directors. In this regard, a Board of Directors Manual is provided to all new directors. New directors also have access to fellow directors and senior management and are invited to attend orientation sessions as necessary. Reports, materials and presentations relating to our business are provided to the Board of Directors on a periodic basis. Directors are also offered annual membership in the National Association of Corporate Directors, at our expense. Board and Committee Self-Assessment Periodically, and at least annually, each director and committee member completes a review and self-evaluation of the Board of Directors’ and Board Committees’ operating effectiveness as well as his or her own individual performance as a member of the Board of Directors. The input is summarized on a confidential basis and provided to the ChairmanChair of the Governance Committee. The results of the evaluations are reported to the Board of Directors. Any agreed upon improvements are implemented as applicable.
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Written Position Descriptions Mr. Wechsler’s services agreementServices Agreement includes a written position description for his role as the Chairman of the Board. Mr. Wechsler will not stand for re-election as director at the Meeting. The Board of Directors is responsible for the appointment of the ChairmanChair of the Board and for the appointment of the Chair and members of each Board Committee. The Board of Directors and Committees of the Board each operate within written mandates established and periodically reviewed by the Board of Directors. The Chair of each committee is responsible for reporting on the activities of that committee to the full Board of Directors on a periodic basis. The Board of Directors has not developed a written position description for the CEO. The Board of Directors and the CEO develop, on an annual basis, detailed written corporate objectives and parameters pursuant to which the CEO operates our business. The Board of Directors is also responsible for annually evaluating the CEO against these objectives. Directors’ Share Ownership Guidelines To support the alignment of directors’ interests with those of our shareholders, non-management directors are required, in accordance with the Share Ownership Guidelines, to achieve and maintain share ownership of at least two times their annual retainer. Directors subject to the policy must satisfy the guidelines within four years of the date such director first became subject to the policy. As of April 1, 2020,2021, all of the non-management directors had met their share ownership guidelines within the required time frame. Directors’ Share Ownership Guidelines | | | | Non-Management Directors’ Ownership Guideline (% of annual retainer) | | Current Level of Achievement (% of annual retainer) (1) | | | | | | | | | Name | | | Guideline (% Annual Retainer) | (1) | | Current Ownership (% of salary) | | Bradley J. Wechsler | | | | 200% | | | | | 1,929% | | | 200% | | 354 | % | | Neil S. Braun | | | | 200% | | | | | 1,292% | | | 200% | | 1,379 | % | | Eric A. Demirian | | | | 200% | | | | | 1,181% | | | 200% | | 1,118 | % | | Kevin Douglas | | | | 200% | | | | | 448,957% | | | 200% | | 285,077 | % | | David W. Leebron | | | | 200% | | | | | 2,525% | | | 200% | | 2,391 | % | | Michael MacMillan | | | | 200% | | | | | 739% | | | 200% | | 783 | % | | Dana Settle | | | | 200% | | | | | 881% | | | 200% | | 995 | % | | Darren Throop | | | | 200% | | | | | 389% | | | 200% | | 432 | % | |
| (1) | Pursuant to the Company's Share Ownership Guidelines, compliance with such guidelines is measured as of April 1st of each year. |
(1) Pursuant to the Company's Share Ownership Guidelines, compliance with such guidelines is measured as of April 1 of each year.
Mr. Douglas’ holdings in excess of 8 million Common Shares far exceeded his Share Ownership Guideline requirement and have been omitted from the chart above for clarity. 64
Corporate Responsibility The Company makes it a priority to operate its business in a responsible and sustainable manner. This not only helps us manage risks and maximize opportunities, but it also helps us to contribute our society’s wider goal of sustainable development. This effort includes, but is not limited to, conducting business in a socially responsible and ethical manner, supporting human rights, and not engaging in activities that harm the environment. The Company recognizes the importance of protecting our social, financial, informational, environmental, and reputational assets. HUMAN CAPITAL The Company is a globally diverse brand with the mission to connect the world through extraordinary experiences that inspire us to reimagine what’s possible, together. The Company has the power to inspire, ignite and involve its teams, customers, and partners across the 1,650 IMAX Theater Systems in its network to transcend the ordinary. However, the Company understands that these experiences are only made possible through its employees’ diverse range of unique abilities and perspectives and its ability to attract, retain, and engage a talented, inclusive and respected workforce. As of December 31, 2020, the Company had 622 full-time employees, of whom 142 employees were based outside of North America. Total Rewards The Company continues to have a total rewards mindset that encompasses all that is provided to its employees in the form of financial and nonfinancial compensation, benefits, well-being, and growth opportunities. The goal of these total rewards programs is to provide employees with market competitive offerings, opportunities and experiences that evolve over time. As the Company continues to evolve as an organization, it continues to modernize its total rewards programs to deliver and drive a better employee experience and adequately reflect a diverse, multigenerational, and talented workforce. The structure of the Company’s total rewards programs balances base compensation, incentive compensation for both short-term and long-term performance and a focus on total well-being. The Company’s comprehensive benefit program is a valuable piece of the Company’s total rewards package. All active, full-time employees are eligible for the benefit program, which includes medical, dental and vision coverage for employees and their families; provides income protection should employees become disabled and/or unable to work; and offers life and accidental death and dismemberment insurance. The Company provides parental leave to all new parents for birth, adoption, or foster placement. The Company also maintains additional benefit programs to support the financial, mental, and physical well-being of its employees. The Company’s employee salaries and wages are competitive and consistent with employee positions, skill levels, experience, knowledge, and geographic location. Job function relative to salaries and wages are evaluated and benchmarked annually. By providing long-term equity-based incentive compensation, the Company aligns the interests of its employees with its shareholders. The Company partners with multiple external industry experts around compensation and benefits to support and independently evaluate its total rewards programs. The Company receives advice from such experts relating to global benefits offerings and employee compensation to ensure alignment with its peers within the industry. Diversity and Inclusion The Company’s culture is defined by its core values of Inspire, Ignite, and Involve, and the Company is committed to Diversity and Inclusion (“D&I”), which the Company views as the intersection of differences sparking exploration, creativity, innovation and collaboration. The Company’s focus with respect to D&I is to attract, retain, and engage a talented, inclusive, and respected workforce. The Company has assembled a D&I council of employees across levels, tenure, and demographic background to assist the Company in executing the four key pillars of its global D&I strategy: Raise awareness and educate those around the Company on issues that are important to its people and its audiences. Empower the Company’s people and leadership to be champions of diversity, equity, and inclusion by rewarding positive behaviors and encouraging frequent feedback and input; Communicate and connect using inclusive and concise messages. Ensure that equal opportunity and diversity of people is non-negotiable in how the Company attracts, selects, supports, develops, and rewards its people, and in whom IMAX chooses to partner with.
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Employee Health and Safety Recognizing the various employee health and safety risks associated with the delivery of the world’s most immersive movie-going experience, the Company has implemented a global program for workplace safety that ensures it has the necessary controls in place to strive to keep its employees and visitors safe. Employee health and safety at the Company is a shared responsibility that requires continuous effort. Risks to the health and safety of the Company’s employees are present in day-to-day office work, building renovation, manufacturing, logistics, training, testing, research and development, and during the designing, installation and service of the Company’s theaters around the world. Every employee at each IMAX location, workplace, business unit and department is responsible for participating in workplace safety planning activities and managers are responsible for employee health and safety program implementation for their business function. This effort is supported by a cross-functional Health and Safety team dedicated to employee health and safety and business continuity. This relentless focus and commitment to the health and safety of the Company’s employees was never more evident than in the Company’s approach to COVID-19. Specifically, the Company: Instituted a cross-functional pandemic response team to support decision making and implementation of COVID-19 response programs; Supported a quick pivot to a virtual workplace and scheduling flexibility to meet competing personal demands; Developed an illness reporting process to encourage those who were ill to stay home and focus on their health; and Increased communication with the introduction of a dedicated resource page on its intranet for information related to the understanding of COVID-19, local resources, and access to mental well-being support; For work locations that remained open, the Company; | - | Required training before entering its office locations; |
| - | Increased cleaning protocol; |
| - | Upgraded air filtration and ventilation systems; |
| - | Provided access to personal protective equipment; |
| - | Mandated daily health screenings; |
| - | Mandated masks for those entering the facility; |
| - | Required social distancing and implemented flow of traffic requirements in the building; and |
| - | Modified workspaces to allow for social distancing and plexiglass protections where necessary. |
CODE OF BUSINESS CONDUCT AND ETHICS We have a Code of Business Conduct and Ethics (the “Code of Ethics”) applicable to all employees, including our CEO, CFO, and Controller and all other persons performing similar functions, and all directors and consultants. Any incidents or reports made in connection with a potential violation of the Code of Ethics are reported to the Audit Committee through (i) the Whistle Blower hotline or (ii) our internal audit function. The Code of Ethics is distributed to applicable individuals on commencement of service and annually thereafter. Such individuals are required to acknowledge receipt of, read and agree to abide by the Code of Ethics. A current copy of the Code of Ethics is available, without charge, at www.imax.com or upon written request at IMAX Corporation, 2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1, Attention: Corporate Secretary. Any amendments to, or waivers of, the Code of Ethics which specifically relate to any financial professional will be disclosed promptly following the date of such amendment or waiver at www.imax.com. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None of our directors or executive officers, or any security holder of record as of the date of this Circular who owned, of record or to our knowledge, more than 5% of our outstanding Common Shares, or any member of such person’s immediate family, had any material interest, direct or indirect, in any transaction during the last fiscal year, or since the commencement of the current fiscal year, in any completed or proposed transaction, except for the following: Mr. Douglas is our largest individual shareholder, holding approximately 15.1%15.0% of our Common Shares as of April 9, 2020.12, 2021. However, the Board of Directors has determined that, notwithstanding Mr. Douglas’ shareholdings, he has neither a direct nor indirect material interest in any transactions with the Company. The Company, Wasserstein Perella Partners, L.P., Wasserstein Perella Offshore Partners, L.P., WPPN, Inc., and the Michael J. Biondi Voting Trust (collectively “WP”), and Messrs. Gelfond and Wechsler entered into a registration rights agreement (the “Registration Rights Agreement”) dated as of February 9, 1999, which carried forward the corresponding provisions of the June 16, 1994 shareholders’ agreement. Though numerous provisions of the Registration Rights Agreement were terminated in 2002 when WP ceased to be a shareholder of the Company, each of Messrs. Gelfond and Wechsler retain the right to cause us to use best efforts to register their securities under the Securities Act of 1933, as amended (the “Securities Act”). Messrs. Gelfond and Wechsler are entitled to make two such demand registrations. Messrs. Gelfond and Wechsler also have unlimited piggyback rights to register their securities under the Registration Rights Agreement whenever we propose to register any securities under the Securities Act, other than the registration of securities pursuant to an initial public offering or the registration of securities on Form S-4 or S-8 under the Securities Act or filed in connection with an exchange offer or an offering of securities solely to our existing shareholders.
Messrs. Gelfond and Wechsler and certain other shareholders of the Company entered into another shareholders’ agreement on January 3, 1994 as amended on March 1, 1994 which includes, among other things, registration rights, tag along rights and drag along rights.
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REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS On a regular basis, we require our directors, nominees for director and executive officers to identify to the Board of Directors transactions and/or relationships which could constitute transactions with a related person as defined in Item 404(a) of Regulation S-K. For any potential transaction in which a director, executive officer, nominee for director, 5% or greater beneficial owner, any immediate family members of the foregoing, or other related person would have a material interest that is expected to exceed $120,000 in a single calendar year, such transaction is reviewed, in advance, by our Chief Legal Officer and Chief Compliance Officer to ensure compliance with our Code of Ethics and to evaluate the disclosure requirements under Item 404(a) of Regulation S-K before being considered for approval by the Board of Directors. In the course of its review and approval or ratification of a related person transaction, the Board of Directors considers: the approximate dollar value of the transaction; the related person’s interest in the transaction and the approximate dollar value of such interest without regard to any profit or loss; the position of the related person within the Company or relationship with the Company; the materiality of the transaction to the related person and the Company; whether the transaction was undertaken in the ordinary course of business of the Company; whether the transaction would impair the independence of a non-employee director; whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have been reached with an unrelated third party; the purpose of, and the potential benefits to the Company of, the transaction; and any other information regarding the transaction or the related person in the context of the transaction that would be material to investors in light of the circumstances of the particular transaction. Currently, we do not have a formal written policy governing transactions with related persons. In the event any transaction or agreement occurs in respect of which a director has a material interest, the director will be recused from voting on that matter and will not participate in the meeting while the transaction at issue is being considered by the Board of Directors. REPORT OF THE AUDIT COMMITTEE The following is the report of the Audit Committee with respect to our audited financial statements for the fiscal year ended December 31, 2019.2020. The Audit Committee has reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 20192020 with senior management. The Audit Committee meets privately with PwC on a periodic basis and PwC has unrestricted access to the Audit Committee. The Audit Committee has discussed with PwC the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board Rule 3200T, which include, among other items, matters related to the conduct of the audit of the Company’s financial statements. The Audit Committee has also received written disclosures and the letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board (which relate to the accountant’s independence from the Company and related entities) and has discussed with PwC the independence of PwC from the Company. As part of its responsibilities for oversight of the Company’s enterprise risk management process, the Audit Committee has reviewed and discussed the Company’s policies with respect to risk assessment and risk management, including discussions of individual risk areas as well as an annual summary of the overall process. Based on the review and discussions referred to above, the Audit Committee recommended to the Company’s Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 for filing with the SEC and the Company’s Annual Information Form for the fiscal year ended December 31, 2019.2020. The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference in such filing. | April 27, 2021 | April 29, 2020
| | Respectfully submitted, | | | | | | | | | | Eric A. Demirian (Chair) | | | | | Neil S. Braun | | | | | David W. Leebron |
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NON-GAAP FINANCIALFINANCIAL MEASURES (in thousands of U.S. dollars)dollars, except per share amounts) In this Circular, the Company presents adjusted net income, adjusted net income per diluted share, adjusted net(loss) income attributable to common shareholders and adjusted net (loss) income attributable to common shareholders per diluted share, EBITDA, adjustedAdjusted EBITDA per Credit Facility, and free cash flow and return on invested capital as supplemental measures of performance of the Company,Company’s performance, which are not recognized under U.S. generally accepted accounting principles (“GAAP”). The Company presents adjustedGAAP. Adjusted net income and adjusted net income per diluted share because it believes that they are important supplemental measures of its comparable controllable operating performance and it wants to ensure that its investors fully understand the impact of its stock-based compensation (net of any related tax impact) and non-recurring charges on net income. In addition, the Company presents adjusted net(loss) income attributable to common shareholders and adjusted net (loss) income attributable to common shareholders per basic and diluted share exclude, where applicable: (i) share-based compensation; (ii) COVID-19 government relief benefits, (iii) legal judgment and arbitration awards; (iv) exit costs, restructuring charges and associated impairments, (v) loss in the fair value of investments, as well as the related tax impact of these adjustments, and (vi) income taxes resulting from management’s decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries. The Company believes that these non-GAAP financial measures are important supplemental measures that allow management and users of the Company’s financial statements to view operating trends and analyze controllable operating performance on a comparable basis between periods without the after-tax impact of share-based compensation and certain unusual items included in net (loss) income attributable to common shareholders. Although share-based compensation is an important aspect of the Company’s employee and executive compensation packages, it is a non-cash expense and is excluded from certain internal business performance measures. A reconciliation from net (loss) income attributable to common shareholders and the associated per share amounts to adjusted net (loss) income attributable to common shareholders and adjusted net (loss) income attributable to common shareholders per diluted share because it believes that they are important supplemental measures of its comparable financial results and could potentially distortis presented in the analysis of trends in business performance and it wants to ensure that its investors fully understand the impact of net income attributable to non-controlling interests, its stock-based compensation (net of any related tax impact) and non-recurring charges in determining net income attributable to common shareholders. Management uses these measures to review operating performance on a comparable basis from period to period. However, these non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Adjusted net income, adjusted net income per diluted share, adjusted nettable below. Net (loss) income attributable to common shareholders and adjusted net incomethe associated per share amounts are the most directly comparable GAAP measures because they reflect the earnings relevant to the Company’s shareholders, rather than the earnings attributable to common shareholders per diluted share should be considered in addition to, and not as a substitute for, net income and net income attributable to common shareholders and other measures of financial performance reported in accordance with U.S. GAAP. The Company is required to maintain a minimum level of “EBITDA”, as such term is definednon-controlling interests. Accordingly, beginning in the Company’s Fifth Amended and Restatedfirst quarter of 2020, the Company updated its reconciliations of these non-GAAP financial measures to reflect this approach.
As allowed by the Credit Agreement, (and which is referred to herein as “Adjusted EBITDA per Credit Facility”, as the credit agreement includes additional adjustments beyond interest, taxes, depreciation and amortization). EBITDA and Adjusted EBITDA per Credit Facility (each as defined below) should not be construed as substitutes for net income or as better measuresincludes adjustments in addition to the exclusion of liquidity as determined in accordance with U.S. GAAP. The Company believes that EBITDAinterest, taxes, depreciation and amortization. Adjusted EBITDA per Credit Facility aremeasure is presented to allow a more comprehensive analysis of the Company’s operating performance and to provide additional information with respect to the Company’s compliance against its Credit Agreement requirements when applicable. In addition, the Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widely used by analysts, investors and other interested parties in the Company’s industry.industry to evaluate, assess and benchmark the Company’s results. EBITDA is defined as net income or loss excluding (i) interest expense, net of interest income; (ii) income tax expense or benefit; and (iii) depreciation and amortization, including film asset amortization. Adjusted EBITDA per Credit Facility is defined as EBITDA excluding: (i) share-based and other non-cash compensation; (ii) gain or loss in fair value of investments; (iii) write-downs, net of recoveries, including asset impairments and credit loss expense; (iv) legal judgment and arbitration award; (v) gain or loss from equity accounted investments; and (vi) exit costs, restructuring charges and associated impairments. | | Twelve Months Ended | | | Twelve Months Ended | | | | December 31, 2019 (1) | | | December 31, 2018 (1) | | Net income | | $ | 58,571 | | | $ | 33,595 | | Add (subtract): | | | | | | | | | Provision for income taxes | | | 16,768 | | | | 9,518 | | Interest expense, net of interest income | | | 423 | | | | 1,072 | | Depreciation and amortization, including film asset amortization | | | 63,487 | | | | 57,437 | | EBITDA | | $ | 139,249 | | | $ | 101,622 | | Stock and other non-cash compensation | | | 23,570 | | | | 23,723 | | Change in fair value of equity investment | | | 517 | | | | — | | Write-downs, net of recoveries including asset impairments and receivable provisions | | | 6,806 | | | | 5,338 | | Exit costs, restructuring charges and associated impairments | | | 850 | | | | 9,542 | | Legal arbitration award | | | — | | | | 11,737 | | Executive transition costs | | | — | | | | 2,994 | | Loss from equity accounted investments | | | (3 | ) | | | 492 | | Adjusted EBITDA before non-controlling interests | | $ | 170,989 | | | $ | 155,448 | | Adjusted EBITDA attributable to non-controlling interests (2) | | (21,661) | | | (22,220) | | Adjusted EBITDA per Credit Facility | | $ | 149,328 | | | $ | 133,228 | |
| (1)
| Senior Secured Net Leverage Ratio calculated using twelve months ended Adjusted EBITDA per Credit Facility.
|
| (2)
| TheA reconciliation of net loss attributable to common shareholders, which is the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA per Credit Facility calculation specified for purpose of the minimum Adjusted EBITDA covenant excludes the reduction in Adjusted EBITDA from the Company’s non-controlling interests.
|
Return on Invested Capital
Return on Invested Capital (“ROIC”) is not defined under U.S. GAAP. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as earnings before interest after taxes (before non-controlling interests) divided by total invested capital (total equity plus total debt less goodwill and other intangible assets). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation. A reconciliation of ROIC is presented in the table below.
| | Twelve Months Ended December 31, | | | | | 2019 | | | 2018 | | | Income from operations | | $ | 77,278 | | | $ | 45,176 | | | Provision for income taxes | | | (16,768 | ) | | | (9,518 | ) | | EBIAT Return | | $ | 60,510 | | | $ | 35,658 | | | Total shareholders' equity | | $ | 637,187 | | | $ | 592,918 | | | Total bank indebtedness | | | 18,229 | | | | 37,753 | | | Less: Goodwill | | | 39,027 | | | | 39,027 | | | Less: Other intangible assets | | | 30,347 | | | | 34,095 | | | Total Invested Capital | | $ | 586,042 | | | $ | 557,549 | | | Return on Invested Capital (Non-GAAP measure) | | 10.33% | | | | 6.40 | % | |
Adjusted Net Income and Adjusted Diluted Per Share Calculations – Year Ended December 31, 2019 vs. 2018
A reconciliation of net income and net incomeloss attributable to common shareholders is the most directly comparable U.S. GAAP measure because it reflects the earnings relevant to adjusted net income, adjusted net income per diluted share, adjusted net incomethe Company’s shareholders, rather than the earnings attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share is presentednon-controlling interests. Accordingly, beginning in the table below.
| | Twelve Months Ended December 31, | | | | 2019 | | | 2018 | | | | Net Income | | | Diluted EPS | | | Net Income | | | Diluted EPS | | Reported net income | | $ | 58,571 | | | $ | 0.95 | | | $ | 33,595 | | | $ | 0.53 | | Adjustments: | | | | | | | | | | | | | | | | | Stock-based compensation | | | 22,830 | | | | 0.37 | | | | 22,211 | | | | 0.35 | | Exit costs, restructuring charges and associated impairments | | | 850 | | | | 0.01 | | | | 9,542 | | | | 0.15 | | Legal arbitration award | | | — | | | | — | | | | 11,737 | | | | 0.19 | | Executive transition costs | | | — | | | | — | | | | 2,994 | | | | 0.05 | | Change in fair value of equity investment | | | 517 | | | | 0.01 | | | | — | | | | — | | Impact of enactment of U.S. Tax Cuts and Jobs Act | | | — | | | | — | | | | — | | | | — | | Tax impact on items listed above | | | (5,614 | ) | | | (0.09 | ) | | | (9,873 | ) | | | (0.16 | ) | Adjusted net income | | | 77,154 | | | | 1.25 | | | | 70,206 | | | | 1.11 | | Net income attributable to non-controlling interests (1) | | | (11,705 | ) | | | (0.19 | ) | | | (10,751 | ) | | | (0.17 | ) | Stock-based compensation (net of tax of $0.1 million, and $0.1 million, respectively) (1) | | | (480 | ) | | | (0.01 | ) | | | (394 | ) | | | (0.01 | ) | Exit costs, restructuring charges and associated impairments (net of tax of $nil and $0.4 million, respectively) (1) | | | — | | | | — | | | | (1,262 | ) | | | (0.02 | ) | Change in fair value of equity investment | | | (184 | ) | | | — | | | | — | | | | — | | Adjusted net income attributable to common shareholders | | $ | 64,785 | | | $ | 1.05 | | | $ | 57,799 | | | $ | 0.91 | | Weighted average diluted shares outstanding | | | | | | | 61,489 | | | | | | | | 63,207 | |
| (1)
| Reflects amounts attributable to non-controlling interests.
|
Free Cash Flowfirst quarter of 2020, the Company updated its reconciliations of these non-GAAP financial measures to reflect this approach.
Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the condensed consolidated statementstatements of cash flows). Cash provided by operating activities consist of net (loss) income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow,, a non-GAAP measure, as a measure of the Company’s after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities. Free cash flow does not represent residual cash flow available for discretionary expenditures. A reconciliation of cash provided by operating activities to free cash flow is presented below. These non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Additionally, the non-GAAP financial measures used by the Company should not be considered as a substitute for, or superior to, the comparable GAAP amounts.
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Adjusted EBITDA per Credit Facility | | Twelve Months Ended December 31, 2020(1) | | | Twelve Months Ended December 31, 2019(1) | | | | Attributable to Non- Controlling Interests and Common Shareholders | | | Less: Attributable to Non- Controlling Interests | | | Attributable to Common Shareholders | | | Attributable to Non- Controlling Interests and Common Shareholders | | | Less: Attributable to Non- Controlling Interests | | | Attributable to Common Shareholders | | Reported net (loss) income | | $ | (157,486 | ) | | $ | (13,711 | ) | | $ | (143,775 | ) | | $ | 58,571 | | | $ | 11,705 | | | $ | 46,866 | | Add (subtract): | | | | | | | | | | | | | | | | | | | | | | | | | Income tax expense | | | 26,504 | | | | 5,408 | | | | 21,096 | | | | 16,768 | | | | 3,625 | | | | 13,143 | | Interest expense, net of interest income | | | 3,720 | | | | (370 | ) | | | 4,090 | | | | 423 | | | | (524 | ) | | | 947 | | Depreciation and amortization, including film asset amortization | | | 53,606 | | | | 4,570 | | | | 49,036 | | | | 63,487 | | | | 5,033 | | | | 58,454 | | EBITDA | | $ | (73,656 | ) | | $ | (4,103 | ) | | $ | (69,553 | ) | | $ | 139,249 | | | $ | 19,839 | | | $ | 119,410 | | Share-based and other non-cash compensation | | | 22,038 | | | | 968 | | | | 21,070 | | | | 23,570 | | | | 617 | | | | 22,953 | | Loss in fair value of investments | | | 2,081 | | | | 631 | | | | 1,450 | | | | 517 | | | | 165 | | | | 352 | | Write-downs, including asset impairments and credit loss expense | | | 36,337 | | | | 8,364 | | | | 27,973 | | | | 6,806 | | | | 1,040 | | | | 5,766 | | Legal judgment and arbitration awards (2) | | | 4,105 | | | | — | | | | 4,105 | | | | — | | | | — | | | | — | | Loss from equity accounted investments | | | 1,858 | | | | — | | | | 1,858 | | | | (3 | ) | | | — | | | | (3 | ) | Exit costs, restructuring charges and associated impairments | | | — | | | | — | | | | — | | | | 850 | | | | — | | | | 850 | | Adjusted EBITDA per Credit Facility | | $ | (7,237 | ) | | $ | 5,860 | | | $ | (13,097 | ) | | $ | 170,989 | | | $ | 21,661 | | | $ | 149,328 | |
| (1) | The Senior Secured Net Leverage Ratio is calculated using twelve months ended Adjusted EBITDA per Credit Facility. During the second quarter of 2020, the Company entered into the First Amendment to the Credit Agreement which provides for, among other things, the suspension of the Senior Secured Net Leverage Ratio financial covenant through the first quarter of 2021. |
| (2) | Includes a $0.9 million charge recorded in the second quarter of 2020 within Selling, General and Administrative Expenses that has been reclassified to Legal Judgment and Arbitration Awards in the fourth quarter of 2020 in order to conform to the current period presentation. |
Adjusted Net (Loss) Income Attributable to Common Shareholders and Adjusted Diluted Per Share Calculations | | Twelve Months Ended December 31, | | | | 2020 | | | 2019 | | | | Net Loss | | | Diluted EPS Per Share | | | Net Income | | | Diluted EPS Per Share | | Net (loss) income attributable to common shareholders | | $ | (143,775 | ) | | $ | (2.43 | ) | | $ | 46,866 | | | $ | 0.76 | | Adjustments (1): | | | | | | | | | | | | | | | | | Share-based compensation | | | 20,558 | | | | 0.35 | | | | 22,236 | | | | 0.36 | | COVID-19 government relief benefits (2) | | | (7,115 | ) | | | (0.12 | ) | | | — | | | | — | | Legal judgment and arbitration award (3) | | | 4,105 | | | | 0.07 | | | | — | | | | — | | Exit costs, restructuring charges and associated impairments | | | — | | | | — | | | | 850 | | | | 0.01 | | Loss in fair value of investments | | | 1,450 | | | | 0.02 | | | | 333 | | | | 0.01 | | Tax impact on items listed above (4) | | | (630 | ) | | | (0.01 | ) | | | (5,500 | ) | | | (0.09 | ) | Income taxes resulting from management's decision to no longer indefinitely reinvest the historical earnings of certain foreign subsidiaries | | | 13,344 | | | | 0.23 | | | | — | | | | — | | Adjusted net (loss) income (1): | | $ | (112,063 | ) | | $ | (1.89 | ) | | $ | 64,785 | | | $ | 1.05 | | Weighted average diluted shares outstanding (in '000) | | | | | | | 59,237 | | | | | | | | 61,489 | |
| (1) | Reflects amounts attributable to common shareholders. |
| (2) | The Company recognized $6.4 million in benefits from the CEWS program and $0.7 million in benefits from the U.S. CARES Act, as reductions to Selling, General and Administrative Expenses ($6.0 million), Costs and Expenses Applicable to Revenues ($1.0 million) and Research and Development ($0.1 million) in the Consolidated Statements of Operations. |
| (3) | Includes a $0.9 million charge recorded in the second quarter of 2020 within Selling, General and Administrative Expenses that has been reclassified to Legal Judgment and Arbitration Awards in the fourth quarter of 2020 in order to conform to the current period presentation. |
| (4) | For the year ended December 31, 2020, the Company recorded a valuation allowance to reduce the value of the deferred tax assets attributable to certain jurisdictions where management cannot reliably estimate future tax liabilities within the next five years, primarily due to uncertainties associated with the COVID-19 global pandemic. As a result, the calculated tax impact as a percentage of the related non-GAAP adjustments is lower than in the prior year. |
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Free Cash Flow | | 12 Months Ended | | | 12 Months Ended | | | | December 31, 2019 | | | December 31, 2020 | | Net cash provided by operating activities | | $ | 90,376 | | | Net cash used in operating activities | | | $ | (23,011 | ) | Net cash used in investing activities | | | (65,994 | ) | | | (9,255 | ) | Free cash flow | | $ | 24,382 | | | $ | (32,266 | ) | | | | | | |
AVAILABLE INFORMATION We make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K as soon as reasonably practicable after such filing has been made with the SEC. Reports are available at www.imax.com or by calling Investor Relations at 905-403-6500.212-821-0100. Additional information relating to the Company is available at www.sedar.com. Financial information is provided in our comparative financial statements and MD&A for our most recently completed financial year. The text of the current copy of the Corporate Governance Guidelines is incorporated by reference into this Circular. APPROVAL BY BOARD OF DIRECTORS The contents and the sending of this Circular to each shareholder entitled to receive notice of the Meeting, to each director and to the auditors of the Company have been approved by the Board of Directors. April 29, 202027, 2021 | | | /s/ Kenneth I. Weissman | | | | Kenneth I. Weissman | | Senior Vice President, Legal Affairs | | & Corporate Secretary |
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APPENDIX A IMAX CORPORATION RESOLVED that By-Law No. 1 of the Corporation be repealed and replaced with the following: BY-LAW NO. 1 A by-law regulating generally the transaction of the business and affairs of IMAX Corporation. Section 1 INTERPRETATION 1.1Definitions. In this by-law, which may be cited as the By-law, unless the context otherwise requires: “Act” means the Canada Business Corporations Act, R.S.C. 1985, C. 44 and any statute that may be substituted therefor, as from time to time amended; “Articles” includes the original or restated articles of incorporation, articles of amendment, articles of amalgamation, articles of continuance, articles of reorganization, articles of arrangement and articles of revival of the Corporation; “Board” means the Board of Directors of the Corporation; “Corporation” means IMAX Corporation; “meeting of shareholders” means any meeting of shareholders including an annual meeting and a special meeting; “non-business day” means Saturday, Sunday and any other day that is a holiday as defined in the Interpretation Act (Canada); “recorded address” means in the case of a shareholder the address as recorded in the securities register; and in the case of joint shareholders the address appearing in the securities register in respect of such joint holding or the first address so appearing if there are two or more; and in the case of a director, officer or auditor, the latest address as recorded in the records of the Corporation. 1.2Construction. Save as aforesaid, words and expressions defined in the Act have the same meanings when used herein; and words importing the singular include the plural and vice versa; words importing gender include the masculine, feminine and neuter genders; and words importing persons include individuals, bodies corporate, partnerships, associations, trusts, executors, administrators, legal representatives, and unincorporated organizations and any number or aggregate of persons. Section 2 MEETINGS OF SHAREHOLDERS 2.1Meetings of Shareholders. The annual meeting of shareholders shall be held in each year on a date to be determined by the Board. The Board, the Chair, a Vice-Chair or the Chief Executive Officer may call a special meeting of shareholders, at any time. 2.2Chair, Secretary and Scrutineers. The chair of any meeting of shareholders shall be the first mentioned of such of the following officers who is present at the meeting: the Chair, the Chief Executive Officer, a Vice-Chair or a Vice-President who is a director of the Corporation. If no such officer is present within fifteen minutes from the time fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number to act as chair. The secretary of any meeting of shareholders shall be the Secretary of the Corporation. If the Secretary is absent, the chair shall appoint some person, who need not be a shareholder, to act as secretary of the meeting. The chair may appoint one or more persons who need not be shareholders to act as scrutineers at the meeting. 2.3Persons Entitled to be Present. The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors, the auditors of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the Articles to be present. Any other person may be admitted with the consent of the meeting or of the chair of the meeting.
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2.4APPENQuorum. Except as otherwise provided in the Articles, a quorum for the transaction of business at any meeting of shareholders shall be at least two persons present in person or by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, each being a shareholder entitled to vote thereat or a duly appointed proxyholder for such a shareholder and together holding or representing by proxy not less than 33-1/3% of the outstanding shares of the Corporation entitled to be voted at the meeting. 2.5DIXProcedures at Meetings. The Board may determine the procedures to be followed at any meeting of shareholders including, without limitation, the rules of order. Subject to the foregoing, the chair of a meeting may determine the procedures of the meeting in all respects. 2.6Meetings Held by Electronic Means. If the Board calls a meeting of shareholders under the Act, the Board may determine that the meeting shall be held, in accordance with the Act, entirely by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting. A person participating in the meeting by such means shall be deemed to be present at the meeting. 2.7Place of Meetings. All meetings of the shareholders shall be held at such place in Canada or otherwise specified in the Articles as the Board determines or, in the absence of such a determination, at the place stated in the notice of meeting. Any meeting of shareholders conducted by means of a telephonic, an electronic or other communication facility in accordance with Section 2.6 shall be deemed to be held at the registered office of the Corporation or such other place as determined by the Board. Section 3 DIRECTORS 3.1Number of Directors; Filling Vacancies. Subject to the Act and the Articles the number of directors of the Corporation may be fixed from time to time by resolution of the Board, and any vacancies on the Board, whether arising due to an increase in the number of directors or otherwise, may be filled by the Board. 3.2Term of Office. Subject to Section 3.3 hereof, each director shall be elected for a term as provided in the Articles. 3.3Qualification of Directors. In addition to the disqualifications provided for in the Act, a director who is a salaried officer of the Corporation other than the Chief Executive Officer, the Chair, or a Vice-Chair, shall cease to hold office as a director when he or she ceases to be a salaried officer of the Corporation. 3.4Quorum. A majority of the directors holding office at any particular time shall constitute a quorum of the Board. 3.5Meeting Following Annual Meeting. The Board shall meet without notice as soon as practicable after each annual meeting of shareholders to transact such business as may come before the meeting and to appoint by election:
(1)the Chair; (2)the Chief Executive Officer; (3)the Secretary; IMAX CORPORATION(4)one or more Vice-Presidents; and (5)such other officers as the Board chooses to appoint.
SECOND AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
Each of the officers appointed by the Board, whether at the meeting of the Board after the annual meeting of shareholders or at any other meeting, shall perform such duties and have such powers as are customarily performed and held by such officers, subject to any limitations or specific duties required to be performed or specific powers bestowed by the Board from time to time. 3.6Other Meetings of the Board. In addition to the meeting following the annual meeting of shareholders described in Section 3.5 above and regular quarterly meetings, meetings of the Board may be held from time to time at a date, time and place determined by the Chair, a Vice-Chair or any two of the directors. 3.7Notice of Meeting. Notice of the time and place of each meeting of the Board requiring notice shall be given to each director not less than forty-eight (48) hours before the time at which the meeting is to be held.
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3.8Chair. The chair of any meeting of the Board shall be the first mentioned of such of the following officers who is present at the meeting: the Chair, the Chief Executive Officer, a Vice-Chair or a Vice-President who is a director of the Corporation. If no such officer is present, the directors present shall choose one of their number to act as chair. 3.9Votes to Govern. Subject to the Articles and this By-law, at all meetings of the Board, every question shall be decided by a majority of the votes cast. The chair of any meeting may vote as a director and, in the event of an equality of votes, the chair shall not be entitled to a second or casting vote. 3.10Remuneration. No director who is a salaried officer of the Corporation shall be entitled to any remuneration for the performance of his or her duties as a director. If any director or officer of the Corporation shall be employed by or shall perform services for the Corporation otherwise than as a director or officer or shall be a member of a firm or a shareholder, director or officer of a body corporate which is employed by or performs services for the Corporation, the fact of his or her being a director or officer of the Corporation shall not disentitle such director or officer or such firm or body corporate, as the case may be, from receiving proper remuneration for such services. 3.11Interest of Directors and Officers Generally in Contracts. No director or officer shall be disqualified as a result of being a director or officer from contracting with the Corporation. No contract or arrangement entered into by or on behalf of the Corporation with any director or officer or in which any director or officer is in any way interested shall be voidable for that reason, nor shall any director or officer so contracting or being so interested be liable to account to the Corporation for any profit realized by any such contract or arrangement by reason of such director or officer holding that office or of the fiduciary relationship thereby established; provided that the director or officer shall have complied with the provisions of the Act. Section 4 ADVANCE NOTICE PROVISION 4.1Nomination of Directors. Except as otherwise provided by applicable law, the Articles or the By-laws of the Corporation, only persons who are nominated in accordance with the following procedures will be eligible for election as a director of the Corporation. Nominations of a person for election to the Board may be made at any annual meeting of shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called was the election of directors, (a) by or at the direction of the Board or an authorized officer of the Corporation, including pursuant to a notice of meeting, (b) by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Act or a requisition of the shareholders made in accordance with the provisions of the Act, or (c) by any person (a “Nominating Shareholder”) (i) who, at the close of business on the date of the giving of the notice provided for in Section 4.1(a) below and on the record date for notice of such meeting, is entered in the securities register of the Corporation as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting, and (ii) who provides timely notice in proper written form to the Secretary of the Corporation in accordance with this Section 4.1: 1.
| Purposes(a)
| to be timely, a Nominating Shareholder’s notice must be made and received at the registered office of the IMAX LTIPCorporation: |
The purposes(i)in the case of an annual meeting of shareholders, not less than 30 days prior to the date of the IMAX LTIP are to (a) promoteannual meeting of shareholders; provided, however, that in the long term successevent that the annual meeting of shareholders is called for a date that is less than 50 days after the date (the “Notice Date”) on which the first Public Announcement (as defined below) of the Company and its Affiliates and to increase shareholder value by providing Eligible Individuals with incentives to contribute to the long term growth and profitabilitydate of the Company,annual meeting was made, notice by the Nominating Shareholder may be made not later than the close of business on the tenth (10th) day following the Notice Date; and (b) assist
(ii)in the Company in attracting, retaining and motivating highly qualified individuals who are incase of a position to make significant contributions tospecial meeting (which is not also an annual meeting) of shareholders called for the Company and its Affiliates. The original versionpurpose of electing directors (whether or not called for other purposes), not later than the close of business on the fifteenth (15th) day following the day on which the first Public Announcement of the IMAX LTIP became effective on June 11, 2013 upon its approval by shareholders and was amended and restated on June 6, 2016. The effectivenessdate of the original IMAX LTIP terminated any further grants under the Prior Plan. This Second Amended and Restated IMAX LTIP shall become effective upon adoption by the Board and approval by the Company’sspecial meeting of shareholders (the “Effective Datewas made.”).
2.
| Definitions and Rules(b)
| in the event of Constructionany adjournment or postponement of a meeting of shareholders, or a Public Announcement thereof, the required time periods for the giving of a Nominating Shareholder’s notice as described in Section 4.1(a)(i) or (ii), as applicable, will apply using the date of the adjourned or postponed meeting or the date of a Public Announcement thereof, as the case may be. |
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| (c) | to be in proper written form, a Nominating Shareholder’s notice must set forth: |
| (a)(i)
| Definitions: For purposesas to each person whom the Nominating Shareholder proposes to nominate for election as a director:
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| (1) | the name, age, business address and residential address of the IMAX LTIP, person; |
| (2) | the following capitalized wordsprincipal occupation, business or employment of the person; |
| (3) | the country of residence of the person, including the person’s status as a “resident Canadian” (as such term is defined in the Act); |
| (4) | the class or series and number of shares of the Corporation which are, directly or indirectly, controlled or directed, or which are owned beneficially or of record, by such person as of the record date for the meeting of shareholders (if such record date shall have occurred) and as of the meanings set forth below: date of such notice; |
| (5) | a description of all direct and indirect compensation and other material agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such Nominating Shareholder and beneficial owner, if any, and their respective affiliates and associates, or others acting jointly or in concert therewith, on the one hand, and such nominee, and his or her respective associates, or others acting jointly or in concert therewith, on the other hand; |
| (6) | a written consent of the nominee to act as a director of the Corporation, in the form provided by the Secretary of the Corporation; and |
“Affiliate” means any Subsidiary and
| (7) | any other information relating to the person that would be required to be disclosed in a dissident’s proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act or applicable securities laws; and |
| (ii) | as to the Nominating Shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made: |
| (1) | the name and address of such Nominating Shareholder, as they appear on the Corporation’s securities register, and of such beneficial owner, if any, and of their respective affiliates or associates or others acting jointly or in concert therewith; |
| (2) | (A) the class or series and number of shares of the Corporation which are, directly or indirectly, controlled or directed by, or which are owned beneficially or of record by, such Nominating Shareholder, such beneficial owner, if any, or any of their respective affiliates or associates or others acting jointly or in concert therewith as of the record date for the meeting of shareholders (if such record date shall have occurred) and as of the date of such notice; |
(B)any instrument, agreement, understanding, security or exchange contract which is directly or indirectly, through onecontrolled or more intermediaries, controls, is controlleddirected by, or which is under common controlowned beneficially or of record by, such Nominating Shareholder, such beneficial owner, if any, or any of their respective affiliates or others acting jointly or in concert with the Company. “Award” means an Option, Restricted Share, Restricted Share Unit, Stock Appreciation Right, Performance Stock, Performance Stock Unit, Cash Performance Unit or Other Award granted by the Committee pursuant to the termsany of them and which is derived from any security of the IMAX LTIP.
“Award Document” means an agreement, certificate or other type or form of document or documentation approved by the Committee that sets forth the terms and conditions of an Award. An Award Document may be in written, electronic or other media, may be limited to a notation on the books and records of the Company and, unless the Committee requires otherwise, need not be signed by a representative of the Company or a Participant.
“Beneficial Owner” and “Beneficially Owned” have the meaning set forth in Rule 13d-3 under the Exchange Act.
“Board” means the Board of Directors of the Company, as constituted from time to time.
“Cash Performance Unit” means a right to receive a Target Amount of cash in the future granted pursuant to Section 10(b).
“Cause” has the meaning determined by the Committee at the time of grant and set forth in the applicable Award Document. In the absence of any alternative definition approved by the Committee, Cause shall mean a termination of the Participant’s employment with the Company or one of its Affiliates (i) for “cause” as defined in an employment agreement applicable to the Participant, or (ii) in the case of a Participant who does not have an employment agreement that defines “cause”, because of: (A) any act or omission that constitutes a material breach by the Participant of any obligations under an employment agreement with the Company or one of its Affiliates or an Award Document; (B) the continued failure or refusal of the Participant to substantially perform the duties reasonably required of the Participant as an employee of the Company or one of its Affiliates; (C) any willful and material violation by the Participant of any law or regulation applicable to the business of the Company or one of its Affiliates, or the Participant’s conviction of a felony, or any willful perpetration by the Participant of a common law fraud; or (D) any other willful misconduct by the Participant which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the CompanyCorporation or any of its Affiliates.principal competitors;
“(C)Change in Control” means
i.Any Person isany proxy, contract, arrangement, understanding, or becomes the Beneficial Owner, directlyrelationship pursuant to which any such Nominating Shareholder or indirectly,beneficial owner, if any, has a right to vote any class or series of securitiesshares of the Company representing thirty-five percent (35%)Corporation;
(D)any direct or moreindirect interest of such Nominating Shareholder or beneficial owner, if any, in any contract arrangement, understanding or relationship with the Corporation, any affiliate of the combined voting power of the Company’s then-outstanding securities; or ii.The following individuals cease forCorporation, any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least a majority of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; or
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iii.There is consummated a merger or consolidationofficers of the Company, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary, at least fifty percent (50%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the Company’s then outstanding securities; or
iv.The shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.
“Code” means the United States Internal Revenue Code of 1986, as amended, and the applicable rulings, regulations and guidance promulgated thereunder as amended from time to time.
“Committee” means the Compensation Committee of the Board, any successor committee thereto or any other committee appointed from time to time by the Board to administer the IMAX LTIP, which committee shall meet the requirements of Section 16(b) of the Exchange Act, the applicable rules of the NYSE and all other applicable rules and regulations (in each case as amended or superseded from time to time); provided, however, that, if any Committee member is found not to have met the qualification requirements of Section 16(b) of the Exchange Act, any actions taken or Awards granted by the Committee shall not be invalidated by such failure to so qualify.
“Common Share” means a share of Common Stock, as may be adjusted pursuant to Section 13(b).
“Common Stock” means the common stock of the Company, or such other class of share or other securities as may be applicable under Section 13.
“Company” means IMAX Corporation a Canadian corporation, or any successor to all or substantially all of the Company’s business that adopts the IMAX LTIP.
“Disability” means a physical or mental disability or infirmity of the Participant that prevents the normal performance of substantially all of the Participant’s duties as an employee of the Company or any Affiliate, which disability or infirmity shall exist for any continuous period of 180 days within any twelve (12) month period. Notwithstanding the previous sentence, with respect to an Award that is subject to Section 409A of the Code where the payment or settlement of the Award will accelerate upon termination of employment as a result of the Participant’s Disability, no such termination will constitute a Disability for the purposes of the IMAX LTIP or any Award Document unless such event also constitutes a “disability” as defined under Section 409A of the Code.
“EBITA” means the Company’s earnings before interest, taxes and amortization.
“EBITDA” means earnings before interest, taxes, depreciation and amortization.
“Eligible Individuals” means the individuals described in Section 4(a) who are eligible for Awards under the IMAX LTIP.
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as amended from time to time.
“Fair Market Value” means, with respect to a Common Share, the fair market value thereof as of the relevant date of determination, as determined in accordance with the valuation methodology approved by the Committee in compliance with Section 409A of the Code, if applicable. In the absence of any alternative valuation methodology approved by the Committee, the Fair Market Value of a Common Share on a given date shall equal the average of the closing selling prices of a Common Share on the preceding five trading days on the NYSE or such other securities exchanges, if any, as may be designated by the Board from time to time.
“Full-value Award” means an award of (i) Restricted Shares, (ii) Restricted Share Units, (iii) Performance Stock, (iv) Performance Stock Units, (v) Cash Performance Units or (vi) Other Awards.
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“Good Reason” has the meaning determined by the Committee at the time of grant and set forth in the applicable Award Document. In the absence of any alternative definition approved by the Committee, Good Reason shall mean (i) the diminution of the Participant’s title and/or responsibilities or (ii) the Participant being required to relocate more than twenty-five (25) miles from the Participant’s then-existing office.
“IMAX LTIP” means this IMAX Corporation Second Amended and Restated Long-Term Incentive Plan, as amended or restated from time to time.
“IMAX LTIP Limit” means the maximum aggregate number of Common Shares that may be issued for all purposes under the IMAX LTIP as set forth in Section 5(a).
“Incentive Stock Option” means an Option that is intended to comply with the requirements of Section 422 of the Code or any successor provision thereto.
“Nonqualified Stock Option” means an Option that is not intended to or fails to comply with the requirements of Section 422 of the Code or any successor provision thereto.
“NYSE” means the New York Stock Exchange.
“Option�� means an Incentive Stock Option or Nonqualified Stock Option granted pursuant to Section 7.
“Other Award” means any form of Award (other than an Option, Performance Stock, Performance Stock Unit, Cash Performance Unit, Restricted Share, Restricted Share Unit or Stock Appreciation Right) granted pursuant to Section 11.
“Participant” means an Eligible Individual who has been granted an Award under the IMAX LTIP.
“Performance Period” means the period established by the Committee and set forth in the applicable Award Document over which Performance Targets are measured.
“Performance Stock” means a Target Amount of Common Shares granted pursuant to Section 10(a).
“Performance Stock Unit” means a right to receive a Target Amount of Common Shares granted pursuant to Section 10(a).
“Performance Target” means the performance goals established by the Committee, which may be from among the performance criteria provided in Section 6(g), and set forth in the applicable Award Document.
“Permitted Transferees” means, in respect of Participants resident in a province or territory of Canada, a “permitted assign” within the meaning of National Instrument 45-106 (Prospectus and Registration Exemptions) or any successor instrument thereto, and in respect of all other Participants, (i) one or more trusts established in whole or in part for the benefit of one or more of a Participant’s family members and (ii) one or more entities which are Beneficially Owned in whole or in part by one or more of a Participant’s family members.
“Person” means any person, entity or “group” within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, except that such term shall not include (i) the Company or any of its Affiliates, (ii) a trusteeaffiliates, or other fiduciary holding securities under an employee benefit plan ofwith the CompanyNominating Shareholder, such beneficial owner, if any, or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) a corporation owned, directlytheir respective affiliates or indirectly, by the shareholdersassociates, or with any principal competitor of the Company in substantially the same proportions as their ownership of stock of the Company, or (v) a person or group as used in Rule 13d-1(b) under the Exchange Act.Corporation; and
“(E)Prior Plan” means the IMAX Corporation Stock Option Plan, as amended from timeany other information that would be required to time.
“Restricted Share” means a Common Share granted or sold pursuant to Section 8(a).
“Restricted Share Unit” means a right to receive one or more Common Shares (or cash, if applicable) in the future granted pursuant to Section 8(b).
“Service Factor” means the Participant’s (i) attaining the age of at least 55 and (ii) continuous servicebe reported on an early warning report filed with the CompanyOntario Securities Commission or any of its Subsidiaries and Affiliates for at least ten (10) years, or such other criteria that are deemed by the Committee to be an achievement of the Service Factor, provided, however, that, in the case ofon a resignation, the Participant must provide the Company with a written notice of intent to resign at least six (6) months prior to the Participant’s final day of employmentSchedule 13D filed with the Company.
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“Stock Appreciation Right” means a right to receive all or some portion of the appreciation on Common Shares granted pursuant to Section 9.
“Subsidiary” means any foreign or domestic corporation, limited liability company, partnership or other entity of which fifty percent (50%) or more of the outstanding voting equity securities or voting power is Beneficially Owned directly or indirectly by the Company. For purposes of determining eligibility for the grant of Incentive Stock Options under the IMAX LTIP, the term “Subsidiary” shall be defined in the manner required by Section 424(f) of the Code.
“Substitute Award” means any Award granted upon assumption of, or in substitution or exchange for, outstanding employee equity awards previously granted by a company or other entity acquired by the Company or with which the Company combines in connection with a corporate transaction pursuant to the terms of an equity compensation plan that was approved by the shareholders of such company or other entity.
“Target Amount” means the target number of Common Shares or target cash value established by the CommitteeU.S. Securities and set forth in the applicable Award Document.
(b)Rules of ConstructionExchange Commission.: The masculine pronoun shall be deemed to include the feminine pronoun, and the singular form of a word shall be deemed to include the plural form, unless the context requires otherwise. Unless the text indicates otherwise, references to sections are to sections of the IMAX LTIP.
a.Committee: The IMAX LTIP shall be administered by the Committee, which shall have full power and authority, subject to the express provisions hereof, to:
i.select the Participants from the Eligible Individuals;
ii.grant Awards in accordance with the IMAX LTIP;
iii.determine the number of Common Shares subject to each Award or the cash amount payable in connection with an Award;
iv.determine the terms and conditions of each Award, including, without limitation, those related to term, permissible methods of exercise, vesting, cancellation, forfeiture, payment, settlement, exercisability, Performance Periods, Performance Targets, and the effect or occurrence, if any, of a Participant’s termination of employment, separation from service or leave of absence with the Company or any of its Affiliates or, subject to Section 6(d), a Change in Control of the Company;
v.subject to Sections 15 and 16(e), amend the terms and conditions of an Award after the granting thereof;
vi.specify and approve the provisions of the Award Documents delivered to Participants in connection with their Awards;
vii.make factual determinations in connection with the administration or interpretation of the IMAX LTIP;
viii.adopt, prescribe, establish, amend, waive and rescind administrative regulations, rules and procedures relating to the IMAX LTIP;
ix.employ such legal counsel, independent auditors and consultants as it deems desirable for the administration of the IMAX LTIP and to rely upon any advice, opinion or computation received therefrom;
x.vary the terms of Awards to take into account tax and securities laws (or change thereto) and other regulatory requirements or to procure favorable tax treatment for Participants;
xi.correct any defects, supply any omission or reconcile any inconsistency in any Award Document or the IMAX LTIP; and
xii.make all other determinations and take any other action desirable or necessary to interpret, construe or implement properly the provisions of the IMAX LTIP or any Award Document.
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| (iii) | any other information that would be required to be made in a dissident’s proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act or applicable securities laws; and |
| (iv) | a statement of whether either such Nominating Shareholder or beneficial owner, if any, alone or acting jointly or in concert with others, intends to solicit or participate in the solicitation of proxies from shareholders of the Corporation in support of the nomination. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such proposed nominee. |
| (d) | No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this Section 4.1. The chair of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in the foregoing provisions and, if any proposed nomination is not in compliance with such foregoing provisions, to declare that such defective nomination shall be disregarded. |
| (e) | For purposes of this Section 4.1, “Public Announcement” means disclosure in a press release reported by a national news service in Canada, or in a document publicly filed by the Corporation under its profile on the System of Electronic Document Analysis and Retrieval at www.sedar.com or on the Electronic Data Gathering, Analysis, and Retrieval system at www.sec.gov/edgar.shtml. |
| (f) | Notwithstanding any other provision of the By-law of the Corporation, notice given to the Secretary of the Corporation pursuant to this Section 4.1 may only be given by personal delivery or by email (at such email address as stipulated from time to time by the Secretary of the Corporation for purposes of the notice), and shall be deemed to have been given and made only at the time it is served by personal delivery or email (at the address as aforesaid) to the Corporate Secretary at the address of the registered office of the Corporation; provided that if such delivery or electronic communication is made on a day which is a non-business day or later than 5:00 p.m. (Eastern Time) on a day which is a business day, then such delivery or electronic communication shall be deemed to have been made on the next day that is a business day. |
| (g) | Notwithstanding the foregoing, the Board may, in its sole discretion, waive any requirement of this Section 4.1. |
Section 5 COMMITTEES 5.1b.CommitteesIMAX LTIP Construction and Interpretation:. The CommitteeBoard shall, have full power and authority, subject to the express provisions hereof, to construe and interpret the IMAX LTIP and any Award Document delivered under the IMAX LTIP. c.Prohibited Actions: Notwithstanding the authority granted to the Committee pursuant to Sections 3(a) and 3(b), the Committee shall not have the authority, without obtaining shareholder approval, to: (i) reprice or cancel Options and Stock Appreciation Rights in violation of Section 6(h); (ii) amend Section 5 to increase the IMAX LTIP Limit or any of the special limits listed therein; or grant Options or Stock Appreciation Rights with an exercise price that is less than 100% of the Fair Market Value of a Common Share on the date of grant in violation of Section 6(j).
d.Determinations of Committee Final and Binding: All determinations by the Committee in carrying out and administering the IMAX LTIP and in construing and interpreting the IMAX LTIP shall be made in the Committee’s sole discretion and shall be final, binding and conclusive for all purposes and upon all persons interested herein.
e.Delegation of Authority: To the extent not prohibited by applicable laws, rules and regulations, the Committee may, from time to time, delegate some or allappoint members of its authority under the IMAX LTIP to a subcommittee or subcommittees thereof or other persons or groups of personsaudit, compensation, and governance committees and such additional committees as it deems necessary appropriate or advisable under such conditions or limitations as it may set at the time of such delegation or thereafter; provided, however, that the Committee may not delegate its authority: (i) to make Awards to individuals (A) who areand, subject on the date of the Award to the reporting rules under Section 16(a) of the Exchange Act, or (B) who are officers of the Company who are delegated authority by the Committee hereunder; or (ii) pursuant to Section 15. For purposes of the IMAX LTIP, referencedelegate to the Committee shall be deemed to refer to any subcommittee, subcommittees, or other persons or groups of persons to whom the Committee delegates authority pursuant to this Section 3(e).
f.Liability of Committee and its Delegates: Subject to applicable laws, rules and regulations: (i) no membercommittees such powers of the Board or Committee (or its delegates pursuantand assign to Section 3(e)) shall be liable for any good faith action, omission or determination made in connection with the operation, administration or interpretationcommittees such duties, as the Board considers appropriate.
5.2Composition of Committees. To the IMAX LTIP; and (ii)extent required by regulatory requirements applicable to the Corporation, all of the members of the Board or the Committee (and its delegates)audit, compensation, and governance committees shall be entitleddirectors who are independent directors for the purposes of such regulatory requirements applicable to indemnification and reimbursement in accordance with applicable law in the manner provided in the Company’s by-laws and any indemnification agreements as they may be amended from time to time.Corporation. 5.3Operation of Committees. In the performancecase of each committee, a majority of members holding office at any particular time shall constitute a quorum for the transaction of business at that time. The Board shall appoint a chair of each committee. Each committee shall meet at the call of its responsibilities with respectchair, on not less than forty-eight (48) hours’ notice to the IMAX LTIP, the Committee shall be entitled to rely upon information and/or advice furnished by the Company’s officers or employees, the Company’s accountants, the Company’s counsel and any other party the Committee deems necessary, and noeach member of the Committeecommittee prior to the date on which the meeting is to be held. All acts or proceedings of any committee shall be liable for any action taken or not taken in reliance upon any such information and/or advice. g.Action by the Board: Anything in the IMAX LTIPreported to the contrary notwithstanding, subject to applicable laws, rules and regulations, any authorityBoard at or responsibility that, underbefore the terms of the IMAX LTIP, may be exercised by the Committee may alternatively be exercised by the Board.
a.Eligible Individuals: Awards may be granted to officers, employees, directors and consultants of the Company or any of its Affiliates. The Committee shall have the authority to select the persons to whom Awards may be granted and to determine the type, number and terms of Awards to be granted to each such Participant.
b.Grants to Participants: The Committee shall have no obligation to grant any Eligible Individual an Award or to designate an Eligible Individual as a Participant solely by reason of such Eligible Individual having received a prior Award or having been previously designated as a Participant. The Committee may grant more than one Award to a Participant and may designate an Eligible Individual as a Participant for overlapping periods of time.
5.
| Common Shares Subject to the IMAX LTIP
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a.IMAX LTIP Limit: Subject to adjustment in accordance with Section 13, the maximum aggregate number of Common Shares that may be issued for all purposes under the IMAX LTIP shall be 17.7 million (17,700,000) Common Shares. All of the Common Shares subject to the IMAX LTIP Limit may be issued pursuant to Incentive Stock Options.
b.Rules Applicable to Determining Common Shares Available for Issuance: The number of Common Shares remaining available for issuance will be reduced by the number of Common Shares actually delivered upon settlement or payment of an Award; provided, however, that, notwithstanding the above, every one (1) Common Share issued in respect of a Full-value Award will reduce the number of Common Shares that are available for issuance under the IMAX LTIP by 2.25 Common Shares. For purposes of determining the number of Common Shares that remain available for issuance under the IMAX LTIP:next meeting thereof.
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Section 6 THE TRANSACTION OF BUSINESS 6.1i.Execution of InstrumentsCommon Shares. Contracts, documents or instruments in writing requiring execution by the Corporation shall be signed by any two officers or directors, and all contracts, documents or instruments in writing so signed shall be binding upon the Corporation without any further authorization or formality. The Board is authorized from time to time by resolution to appoint any officer or officers or any other person or persons on behalf of the Corporation to sign and deliver either contracts, documents or instruments in writing generally or to sign either manually or by facsimile signature and deliver specific contracts, documents or instruments in writing. Contracts, documents or instruments in writing that are tenderedto be signed by hand may be signed electronically. The term “contracts, documents or instruments in writing” as used in this By‑law shall include deeds, mortgages, charges, conveyances, powers of attorney, transfers and assignments of property of all kinds including specifically but without limitation transfers and assignments of shares, warrants, bonds, debentures or other securities and all paper writings. 6.2Banking Arrangements. The banking business of the Corporation, or any part thereof, shall be transacted with such banks, trust companies or other financial institutions as the Board may designate, appoint or authorize from time to time by resolution and all such banking business, or any part thereof, shall be transacted on the Corporation's behalf by such one or more officers and/or other persons as the Board may designate, direct or authorize from time to time by resolution and to the extent therein provided. Section 7 DIVIDENDS 7.1Dividends. The Board may from time to time declare dividends payable to shareholders according to their respective rights. 7.2Dividend Payment. A dividend payable in money may be paid by cheque, wire transfer or any other electronic means, drawn on the Corporation’s bankers, or one of them, to the order of each registered holder of shares of a class or series in respect of which the dividend has been declared, and mailed by prepaid ordinary mail to such registered holder at the registered holder’s recorded address. In the case of joint holders the cheque shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and mailed to them at their recorded address. The Corporation may pay a dividend by cheque to a registered holder or to joint holders other than in the manner herein set out, if the registered holder or joint holders so request. 7.3Idem. The Corporation may, when so directed by a Participantregistered holder of a share in respect of which a dividend in money has been declared, pay the dividend in the manner so directed. 7.4Non-receipt or withheldLoss of Dividend Cheques. In the event of non-receipt or loss of any dividend cheque by the Companyperson to paywhom it is sent, the exercise priceCorporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt or loss and of entitlement as the Board or the Vice-President in charge of finance, or any employee delegated authority by such persons, may from time to time prescribe, whether generally or in a particular case. Section 8 PROTECTION OF DIRECTORS AND OFFICERS 8.1Indemnification of Directors and Officers. The Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or a person who acts or acted at the Corporation’s request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor, and his or her heirs and legal representatives to the extent permitted by the Act. 8.2Indemnity of Others. Except as otherwise required by the Act and subject to paragraph 8.1, the Corporation may from time to time indemnify and save harmless any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an Awardaction by or to satisfyin the Participant’s tax withholding obligationsright of the Corporation) by reason of the fact that he or she is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent of or participant in another body corporate, partnership, joint venture, trust or other enterprise, against expenses (including legal fees), judgments, fines and any amount actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted honestly and in good faith with a view to the exercise or settlementbest interests of an Award shall count against the IMAX LTIP LimitCorporation and, shall not be made available for issuance or delivery under the IMAX LTIP; ii.The full number of Common Shares that were subject to a net-settled Option or a stock-settled Stock Appreciation Right (rather than the net number of Shares actually delivered upon exercise) shall count against the IMAX LTIP Limit and shall not be made available for issuance or delivery under the IMAX LTIP;
iii.Common Shares repurchased on the open market with the proceeds of an Option exercise shall count against the IMAX LTIP Limit and shall not be made available for issuance or delivery under the IMAX LTIP; and
iv.Common Shares corresponding to Awards under the IMAX LTIP that are forfeited or cancelled or otherwise expire for any reason without having been exercised or settled or that are settled through the issuance of consideration other than Common Shares (including, without limitation, cash) shall not be counted against the IMAX LTIP Limit and shall again be available for the grant of Awards; provided, however, that this provision shall not be applicable with respect to (i)any criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his or her conduct was lawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction shall not, of itself, create a presumption that the cancellation ofperson did not act honestly and in good faith with a Stock Appreciation Right granted in tandem with an Option uponview to the exercisebest interests of the Option or (ii) the cancellation of an Option granted in tandemCorporation and, with a Stock Appreciation Right upon the exercise of the Stock Appreciation Right.
c.Special Limits: Anything to the contrary in Section 5(a) above notwithstanding, but subject to adjustment under Section 13, the following special limits shall apply to Common Shares available for Awards under the IMAX LTIP:
i.the maximum number of Common Shares that may be subject to Options and Stock Appreciation Rights grantedrespect to any Eligible Individual in any calendar year shall equal one million (1,000,000) Common Shares; and
ii.the maximum value of Awards (other than those Awards set forth in Section 5(c)(i))criminal or administrative action or proceeding that may be awarded to any Eligible Individual in any calendar year is five million dollars ($5,000,000) measured as of the date of grant (with respect to Awards denominated in cash)enforced by a monetary penalty, had no reasonable grounds for believing that his or two million (2,000,000) Common Shares measured as of the date of grant (with respect to Awards denominated in Common Shares).
d.To the extent not prohibited by applicable laws, rules and regulations, any Common Shares underlying Substitute Awards shall not be counted against the number of Common Shares remaining for issuance and shall not be subject to Section 5(c).
a.Types of Awards; Exercise: Awards under the IMAX LTIP may consist of Options, Restricted Shares, Restricted Share Units, Stock Appreciation Rights, Performance Stock, Performance Stock Units, Cash Performance Units and Other Awards. Any Award described in Sections 7 through 11 may be granted singly or in combination or tandem with any other Award, as the Committee may determine. Subject to Section 6(g), Awards under the IMAX LTIP may be made in combination with, in replacement of, or as alternatives to awards or rights under any other compensation or benefit plan of the Company, including the plan of any acquired entity. Subject to the provisions of the IMAX LTIP and the applicable Award Document, the Committee shall determine the permissible methods of exercise for any Award.
b.Terms Set Forth in Award Document: The terms and conditions of each Award shall be set forth in an Award Document in a form approved by the Committee for such Award, which Award Document shall contain terms and conditions not inconsistent with the IMAX LTIP. Notwithstanding the foregoing, and subject to applicable laws, rules and regulations and except to the extent otherwise not permitted under the IMAX LTIP (including without limitation pursuant to Sections 6(d) and 6(l)), the Committee may at any time following grant: (i) accelerate the vesting, exercisability, lapse of restrictions, settlement or payment of any Award; (ii) eliminate the restrictions and conditions applicable to an Award; or (iii) extend the post-termination exercise period of an outstanding Award (subject to the limitations of Section 409A of the Code). The terms of Awards may vary among Participants, and the IMAX LTIP does not impose upon the Committee any requirement to make Awards subject to uniform terms. Accordingly, the terms of individual Award Documents may vary.
c.Termination of Employment: The Committee shall specify at or after the time of grant of an Award the provisions governing the disposition of an Award in the event of a Participant’s termination of employment with the Company or any of its Affiliates for any reason, including the Participant’s death, Disability or following the achievement of the Service Factor. Subject to applicable laws, rules and regulations and except to the extent otherwise not permitted under the IMAX LTIP (including without limitation pursuant to Sections 6(d) and 6(l)), in connection with a Participant’s termination of employment, the Committee shall have the discretion to accelerate the vesting, exercisability or settlement of, eliminate the restrictions or conditions applicable to, or extend the post-termination exercise period of an outstanding Award (subject to the limitations of Section 409A of the Code). Such provisions may be specified in the applicable Award Document or determined at a subsequent time.
her conduct was lawful.
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i.Subject8.3Right of Indemnity Not Exclusive. The provisions for indemnification contained in the By‑law of the Corporation shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any agreement, vote of shareholders or directors or otherwise, both as to action in his or her official capacity and as to action in another capacity, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the terms and conditions as provided in an Award Document and other provisionsbenefit of the IMAX LTIP, including Section 6(d)(ii), the following provisions shall apply in the eventheirs and legal representatives of such a Change in Control:person.
1.To8.4No Liability of Directors or Officers for Certain Matters. To the extent permitted by law, no director or officer for the successor company (or a subsidiary or parent thereof) assumes the Award, with appropriate adjustments pursuant to Section 13 to preserve the valuetime being of the Award, or provides a substituteCorporation shall be liable for the Awardacts, receipts, neglects or defaults of any other director or officer or employee or for joining in any receipt or act for conformity or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired by the Corporation or for or on substantially the same terms and conditions, the existing vesting schedule will continue to apply.
2.To the extent (x) the successor company (or a subsidiary or parent thereof) does not assume or provide a substitute for an Award on substantially the same terms and conditions or (y) the successor company (or a subsidiary or parent thereof) assumes the Award as provided in Section 6(d)(i)(1) above and the Participant’s employment or service relationship is terminated without Cause or with Good Reason within twenty-four (24) months following the Change in Control:
(A)any and all Options and Stock Appreciation Rights outstanding asbehalf of the effective date of the Change in Control shall become immediately exercisable, and shall remain exercisable until the earlier of the expiration of their initial term or the second (2nd) anniversary of the Participant’s termination of employment with the Company;
(B)any restrictions imposed on Restricted Shares and Restricted Share Units outstanding as of the effective date of the Change in Control shall lapse;
(C)the Performance Targets with respect to all Performance Units, Performance Stock and other performance-based Awards granted pursuant to Sections 6(g) or 10 outstanding as of the effective date of the Change in Control shall be deemed to have been attained at the specified target level of performance; and
(D)the vesting of all Awards denominated in Common Shares outstanding as of the effective date of the Change in Control shall be accelerated.
ii.Subject to the other terms of the IMAX LTIP and to applicable laws, rules and regulations, the Board or the Committee shall, at any time prior to, coincident with or after the effective time of a Change in Control, take such actions as it may consider appropriate, including, without limitation: (A) provide for the acceleration of any vesting or exercisability of an Award, (B) provide for the adjustment of any performance conditions as the Committee deems necessary or appropriate to reflect the Change in ControlCorporation or for the deemed attainmentinsufficiency or deficiency of performance conditions relatingany security in or upon which any of the moneys of or belonging to an Award, (C) providethe Corporation shall be placed out or invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, firm or body corporate with whom or which any moneys, securities or other assets belonging to the Corporation shall be lodged or deposited or for any loss, conversion, misapplication or misappropriation of or any damage resulting from any dealings with any moneys, securities or other assets belonging to the Corporation or for any other loss, damage or misfortune whatever which may happen in the execution of the duties of his or her respective office or trust or in relation thereto unless the same shall happen by or through his or her failure to act honestly and in good faith with a view to the best interests of the Corporation and in connection therewith to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. If any director or officer of the Corporation shall be employed by or shall perform services for the lapseCorporation otherwise than as a director or officer or shall be a member of restrictions relating to an Award, (D) providea firm or a shareholder, director or officer of a body corporate which is employed by or performs services for the assumption, substitution, replacementCorporation, the fact of his or continuationher being a director or officer of any Award by a successorthe Corporation shall not disentitle such director or surviving corporation (or a parentofficer or subsidiary thereof) with cash, securities, rightssuch firm or other property to be paid or issued,body corporate, as the case may be, from receiving proper remuneration for such services.
Section 9 MISCELLANEOUS 9.1Omissions and Errors. The accidental omission to give any notice to any shareholder, director, officer or auditor or the non-receipt of any notice by any such person or any error in any notice not affecting the successorsubstance thereof shall not invalidate any action taken at any meeting to which the notice related. 9.2Persons Entitled by Death or surviving corporation (orOperation of Law. Every person who, by operation of law, transfer, death of a parentshareholder or subsidiary thereof), (E) provide that an Awardany other means whatsoever, becomes entitled to any share, shall terminate or expire unless exercised or settled in full on or before a date fixedbe bound by the Committee, or (F) terminate or cancel any outstanding Award in exchange for a cash payment (including, if as of the date of the Change in Control, the Committee determines that no amount would have been realized upon the exercise of the Award, then the Award may be cancelled by the Company without payment of consideration). Notwithstanding the foregoing or anything herein to the contrary, neither the Board nor the Committee shall take any of the actions described in clauses (A), (B), (C) or (F) of the preceding sentenceevery notice in respect of an Award solely duesuch share which shall have been duly given to the occurrenceshareholder from whom title is derived to such share prior to his or her name and address being entered on the securities register. 9.3Waiver of a Change in Control, exceptNotice. A shareholder, proxyholder, director, officer or auditor may at any time waive any notice, or waive or abridge the time for any notice, required to the extent that the successor company in the Change in Control (or a subsidiarybe given to him or parent thereof) does not assume or provide a substitute for the Award on substantially the same terms and conditions. iii.Notwithstandingher under any other provision of the IMAX LTIPAct, the regulations thereunder, the Articles or otherwise and such waiver or abridgment, whether given before, during, or after the meeting or other event of which notice is required to be given, shall cure any default or defect in the giving or in the time of such notice, as the case may be. Any such waiver or abridgment shall be in writing except a waiver of notice of a meeting of shareholders or of the Board or of a committee of the Board which may be given in any manner. Attendance at a meeting by a person shall constitute a waiver of notice of the meeting, except where such person attends such meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.
9.4Invalidity of any Provision of this By-law. The invalidity or unenforceability of any provision of this By-law shall not affect the validity or enforceability of the remaining provisions of this By-law. Section 10 REPEAL 10.1Repeal. By-Law No. 1 of the Corporation adopted and confirmed by the shareholders of the Corporation on June 2, 2014 is repealed on the coming into force of this Amended and Restated By-Law No. 1. Such repeal shall not affect the previous operation of By-Law No. 1 of the Corporation or any Award Document,of its predecessors or affect the validity of any act done or right, privilege, obligation or liability acquired or incurred under or the validity of any contract or agreement made pursuant to any such by-law prior to its repeal. All officers and persons acting under the by-law so repealed shall continue to act as if appointed by the directors under the provisions of this Section 6(d) may not be terminated, amended,By-law or modified following a Change in Control in a manner that would adversely affect a Participant’s rights with respect to an outstanding Award without the prior written consent of the Participant.Act until their successors are appointed. iv.Notwithstanding any other provision of the IMAX LTIP or any Award Document, the payment or settlement of any Award that is considered to provide for a deferral of compensation subject to Section 409A of the Code shall not accelerate upon a Change in Control unless such event also constitutes a “change in ownership,” “change in effective control,” or “change in the ownership of a substantial portion of the Company’s assets” as defined under Section 409A of the Code.
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e.Dividends and Dividend Equivalents: The Committee may provide Participants with the right to receive dividends or payments equivalent to dividends or interest with respect to an outstanding Award to recognize the Participant’s services in the year, which payments can either be paid currently or deemed to have been reinvested in Common Shares, and can be made in Common Shares, cash or a combination thereof, as the Committee shall determine; provided, however, that: (i) dividends or dividend equivalents with respect to Performance Stock and Performance Stock Units shall be accumulated until, and shall be paid only to the extent that, such Award is earned and vested based on the satisfaction of the applicable performance measures and time-based vesting restrictions, (ii) dividends or dividend equivalents with respect to Awards that are subject to time-based vesting restrictions shall be accumulated until, and shall be paid only to the extent that, such Awards vest in accordance with their terms, and (iii) the terms of any reinvestment of dividends must comply with all applicable laws, rules and regulations, including, without limitation, Section 409A of the Code. Notwithstanding the foregoing, no dividends or dividend equivalents shall be paid with respect to Cash Performance Units, Options or Stock Appreciation Rights.
f.Rights of a Shareholder: A Participant shall have no rights as a shareholder with respect to Common Shares covered by an Award (including voting rights) until the date the Participant or his nominee becomes the holder of record of such Common Shares. No adjustment shall be made for dividends or other rights for which the record date is prior to such date, except as provided in Section 13.
g.Performance-Based Awards:
i.The Committee may determine whether any Award under the IMAX LTIP is intended to be “performance-based compensation”. Any such Awards designated to be “performance-based compensation” shall be conditioned on the achievement of one or more Performance Targets. The Performance Targets may include one or more of the following performance criteria: net income; cash flow or cash flow on investment; operating cash flow; pre-tax or post-tax profit levels or earnings; profit in excess of cost of capital; operating earnings; return on investment; free cash flow; free cash flow per share; earnings per share; return on assets; return on net assets; return on equity; return on capital; return on invested capital; return on sales; sales growth; growth in managed assets; operating margin; operating income; total shareholder return or stock price appreciation; EBITDA; EBITA; revenue; net revenues; market share, market penetration; productivity improvements; inventory turnover measurements; reduction of losses, loss ratios or expense ratios; reduction in fixed costs; operating cost management; cost of capital; and debt reduction.
ii.The Performance Targets shall be determined in accordance with generally accepted accounting principles (subject to adjustments and modifications approved by the Committee in advance) consistently applied on a business unit, divisional, Subsidiary or consolidated basis or any combination thereof.
iii.The Performance Targets may be described in terms of objectives that are related to the individual Participant or objectives that are Company-wide or related to a Subsidiary, business unit, or region and may be measured on an absolute or cumulative basis or on the basis of percentage of improvement over time, and may be measured in terms of Company performance (or performance of the applicable Subsidiary, business unit, or region) or measured relative to selected peer companies or a market index.
iv.The Participants will be designated, and the applicable Performance Targets will be established, by the Committee within ninety (90) days following the commencement of the applicable Performance Period. Each Participant will be assigned a Target Amount payable if Performance Targets are achieved. Any payment of an Award granted with Performance Targets shall be conditioned on the written certification of the Committee in each case that the Performance Targets and any other material conditions were satisfied. The Committee may determine, at the time of grant, that if performance exceeds the specified Performance Targets, the Award may be settled with payment greater than the Target Amount, but in no event may such payment exceed the limits set forth in Section 5(c). The Committee retains the right to reduce any Award notwithstanding the attainment of the Performance Targets.
v.The Committee may also grant Awards not intended to qualify as “performance-based compensation”. With respect to such Awards, the Committee may establish Performance Targets based on any criteria as it deems appropriate.
h.Repricing of Options and Stock Appreciation Rights: Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split up, spin off, combination, or exchange of Common Shares), the terms of outstanding Awards may not be amended, without shareholder approval, to reduce the exercise price of outstanding Options or Stock Appreciation Rights, or to cancel outstanding Options or Stock Appreciation Rights in exchange for (i) cash or other property, (ii) Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Options or Stock Appreciation Rights or (iii) other Awards.
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i.Recoupment: Notwithstanding anything in the IMAX LTIP to the contrary, all Awards granted under the IMAX LTIP, any payments made under the IMAX LTIP and any gains realized upon exercise or settlement of an Award shall be subject to clawback or recoupment as permitted or mandated by applicable law, rules, regulations or any Company policy as enacted, adopted or modified from time to time.
j.Minimum Grant or Exercise Price: In no event shall the exercise price per Common Share of an Option or the grant price per Common Share of a Stock Appreciation Right be less than one hundred percent (100%) of the Fair Market Value of a Common Share on the date of grant; provided, however, that the exercise price of a Substitute Award granted as an Option shall be determined in accordance with Section 409A of the Code and may be less than one hundred percent (100%) of the Fair Market Value on the date of grant.
k.Term of Options and Stock Appreciation Rights: An Option or Stock Appreciation Right shall be effective for such term as shall be determined by the Committee and as set forth in the Award Document relating to such Award. The Committee may extend the term of an Option or Stock Appreciation Right after the time of grant; provided, however, that the term of an Option or Stock Appreciation Right may in no event extend beyond the tenth (10th) anniversary of the date of grant of such Award.
l.Minimum Vesting Period: Notwithstanding anything herein to the contrary and subject to Sections 6(c) and (d) hereof, no Awards granted after the Effective Date may vest in full prior to the first anniversary of the date of grant, except in the case of a Substitute Award made in replacement of an Award that is already fully vested or scheduled to vest in full in less than one year from the date of grant of such Substitute Award. Notwithstanding the foregoing, for Awards other than Awards that are (i) not Full-value Awards and were granted prior to the Effective Date or (ii) accelerated based on satisfaction of the Service Factor, Awards covering an aggregate of no more than 5% of the total number of Common Shares authorized for issuance under the Plan pursuant to Section 5(a) may be granted pursuant to Awards that provide for vesting in full less than one year following the date of grant.
7.
| Terms and Conditions of Options
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a.General: The Committee, in its discretion, may grant Options to Eligible Individuals and shall determine whether such Options shall be Incentive Stock Options or Nonqualified Stock Options. Each Option shall be evidenced by an Award Document that shall expressly identify the Option as an Incentive Stock Option or Nonqualified Stock Option, and be in such form and contain such provisions as the Committee shall from time to time deem appropriate.
b.Payment of Exercise Price: Subject to the provisions of the applicable Award Document and Company policy in effect from time to time, the exercise price of an Option may be paid (i) in cash or cash equivalents, (ii) by actual delivery or attestation to ownership of freely transferable Common Shares already owned by the person exercising the Option, (iii) by a combination of cash and Common Shares equal in value to the exercise price, (iv) through net share settlement or similar procedure involving the withholding of Common Shares subject to the Option with a value equal to the exercise price or (v) by such other means as the Committee may authorize. In accordance with the rules and procedures authorized by the Committee for this purpose, the Option may also be exercised through a “cashless exercise” procedure authorized by the Committee from time to time that permits Participants to exercise Options by delivering irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the exercise price and the amount of any required tax or other withholding obligations or such other procedures determined by the Company from time to time.
c.Incentive Stock Options: The exercise price per Common Share of an Incentive Stock Option shall be fixed by the Committee at the time of grant or shall be determined by a method specified by the Committee at the time of grant, but in no event shall the exercise price of an Incentive Stock Option be less than one hundred percent (100%) of the Fair Market Value of a Common Share on the date of grant. No Incentive Stock Option may be issued pursuant to the IMAX LTIP to any individual who, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, unless (i) the exercise price determined as of the date of grant is at least one hundred ten percent (110%) of the Fair Market Value on the date of grant of the Common Shares subject to such Incentive Stock Option and (ii) the Incentive Stock Option is not exercisable more than five (5) years from the date of grant thereof. No Participant shall be granted any Incentive Stock Option which would result in such Participant receiving a grant of Incentive Stock Options that would have an aggregate Fair Market Value in excess of one hundred thousand dollars ($100,000), determined as of the time of grant, that would be exercisable for the first time by such Participant during any calendar year. No Incentive Stock Option may be granted under the IMAX LTIP after the tenth anniversary of the Effective Date. The terms of any Incentive Stock Option granted under the IMAX LTIP shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, as amended from time to time.
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8.
| Terms and Conditions of Restricted Shares and Restricted Share Units
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a.Restricted Shares: The Committee, in its discretion, may grant or sell Restricted Shares to Eligible Individuals. An Award of Restricted Shares shall consist of one or more Common Shares granted or sold to an Eligible Individual, and shall be subject to the terms, conditions and restrictions set forth in the IMAX LTIP and established by the Committee in connection with the Award and specified in the applicable Award Document. Restricted Shares may, among other things, be subject to restrictions on transferability, vesting requirements or other specified circumstances under which it may be canceled.
b.Restricted Share Units: The Committee, in its discretion, may grant Restricted Share Units to Eligible Individuals. A Restricted Share Unit shall entitle a Participant to receive, subject to the terms, conditions and restrictions set forth in the IMAX LTIP and the applicable Award Document, one or more Common Shares. Restricted Share Units may, among other things, be subject to restrictions on transferability, vesting requirements or other specified circumstances under which they may be canceled. If and when the cancellation provisions lapse, the Restricted Share Units shall become Common Shares owned by the applicable Participant or, at the sole discretion of the Committee, cash, or a combination of cash and Common Shares, with a value equal to the Fair Market Value of the Common Shares at the time of payment.
9.
| Stock Appreciation Rights
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The Committee, in its discretion, may grant Stock Appreciation Rights to Eligible Individuals. The Committee may grant Stock Appreciation Rights in tandem with Options or as stand-alone Awards. Each Stock Appreciation Right shall be subject to the terms, conditions and restrictions set forth in the IMAX LTIP and established by the Committee in connection with the Award and specified in the applicable Award Document. A Stock Appreciation Right shall entitle a Participant to receive, upon satisfaction of the conditions to payment specified in the applicable Award Document, an amount equal to the excess, if any, of the Fair Market Value of a Common Share on the exercise date of the number of Common Shares for which the Stock Appreciation Right is exercised over the per Common Share grant price for such Stock Appreciation Right specified in the applicable Award Document. Payments to a Participant upon exercise of a Stock Appreciation Right may be made in cash or Common Shares, as determined by the Committee on or following the date of grant.
10.
| Terms and Conditions of Performance Stock, Performance Stock Units and Cash Performance Units
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a.Performance Stock or Performance Stock Units: The Committee may grant Performance Stock or Performance Stock Units to Eligible Individuals. An Award of Performance Stock or Performance Stock Units shall consist of, or represent a right to receive, a Target Amount of Common Shares granted to an Eligible Individual based on the achievement of Performance Targets over the applicable Performance Period, and shall be subject to the terms, conditions and restrictions set forth in the IMAX LTIP and established by the Committee in connection with the Award and specified in the applicable Award Document. Payments to a Participant in settlement of an Award of Performance Stock or Performance Stock Units may be made in cash or Common Shares, as determined by the Committee on or following the date of grant.
b.Cash Performance Units: The Committee, in its discretion, may grant Cash Performance Units to Eligible Individuals. A Cash Performance Unit shall entitle a Participant to receive, subject to the terms, conditions and restrictions set forth in the IMAX LTIP and established by the Committee in connection with the Award and specified in the applicable Award Document, a Target Amount of cash based upon the achievement of Performance Targets over the applicable Performance Period. Payments to a Participant in settlement of an Award of Cash Performance Units may be made in cash or Common Shares, as determined by the Committee on or following the date of the grant.
The Committee shall have the authority to specify the terms and provisions of other forms of equity-based or equity-related Awards not described above that the Committee determines to be consistent with the purpose of the IMAX LTIP and the interests of the Company, which Awards may provide for cash payments based in whole or in part on the value or future value of Common Shares, for the acquisition or future acquisition of Common Shares, or any combination thereof.
a.Transfers: No Award shall be transferable other than pursuant to a beneficiary designation approved by the Company, by last will and testament or by the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a domestic relations order, as the case may be; provided, however, that the Committee may, subject to applicable laws, rules and regulations and such terms and conditions as it shall specify, permit the transfer of an Award, other than an Incentive Stock Option, for no consideration to a Permitted Transferee. Any Award transferred to a Permitted Transferee shall be further transferable only by last will and testament or the laws of descent and distribution or, for no consideration, to another Permitted Transferee of the Participant.
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b.Award Exercisable Only by Participant: During the lifetime of a Participant, an Award shall be exercisable only by the Participant or by a Permitted Transferee to whom such Award has been transferred in accordance with Section 12(a) above. The grant of an Award shall impose no obligation on a Participant to exercise or settle the Award.
13.
| Recapitalization or Reorganization
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a.Authority of the Company and Shareholders: The existence of the IMAX LTIP, the Award Documents and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Shares or the rights thereof or which are convertible into or exchangeable for Common Shares, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
b.Change in Capitalization: Notwithstanding any provision of the IMAX LTIP or any Award Document, the number and kind of Common Shares authorized for issuance under Section 5, including the maximum number of Common Shares available under the special limits provided for in Section 5(c), shall be equitably adjusted in the manner deemed necessary by the Committee in the event of a stock split, reverse stock split, stock dividend, recapitalization, reorganization, partial or complete liquidation, reclassification, merger, consolidation, separation, extraordinary stock or cash dividend, split-up, spin-off, combination, exchange of Common Shares, warrants or rights offering to purchase Common Shares at a price substantially below Fair Market Value, or any other corporate event or distribution of stock or property of the Company affecting the Common Shares in order to preserve, but not increase, the benefits or potential benefits intended to be made available under the IMAX LTIP. In addition, upon the occurrence of any of the foregoing events, the number and kind of Common Shares subject to any outstanding Award and the exercise price per Common Share (or the grant price per Common Share, as the case may be), if any, under any outstanding Award shall be equitably adjusted in the manner deemed necessary by the Committee (including by payment of cash to a Participant) in order to preserve the benefits or potential benefits intended to be made available to Participants. Unless otherwise determined by the Committee, such adjusted Awards shall be subject to the same restrictions and vesting or settlement schedule to which the underlying Award is subject (subject to the limitations of Section 409A of the Code).
Unless earlier terminated pursuant to Section 15, the IMAX LTIP shall terminate on the tenth (10th) anniversary of the Effective Date, except with respect to Awards then outstanding. No Awards may be granted under the IMAX LTIP after the tenth (10th) anniversary of the Effective Date.
15.
| Amendment and Termination
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Subject to applicable laws, rules and regulations, the Board may at any time terminate or, from time to time, amend, modify or suspend the IMAX LTIP; provided, however, that no termination, amendment, modification or suspension (i) will be effective without the approval of the shareholders of the Company if such approval is required under applicable laws, rules and regulations, including the rules of the NYSE and such other securities exchanges, if any, as may be designated by the Board from time to time, and (ii) shall materially and adversely alter or impair the rights of a Participant in any Award previously made under the IMAX LTIP without the consent of the holder thereof. Notwithstanding the foregoing, the Board shall have broad authority to amend the IMAX LTIP or any Award under the IMAX LTIP without the consent of a Participant to the extent it deems necessary or desirable (a) to comply with, or take into account changes in, or interpretations of, applicable tax laws, securities laws, employment laws, accounting rules and other applicable laws, rules and regulations, (b) to take into account unusual or nonrecurring events or market conditions (including, without limitation, the events described in Section 13(b)) or (c) to take into account significant acquisitions or dispositions of assets or other property by the Company.
a.Tax Withholding: The Company or an Affiliate, as appropriate, may require any individual entitled to receive a payment of an Award to remit to the Company, prior to payment, an amount sufficient to satisfy any applicable tax withholding requirements. In the case of an Award payable in Common Shares, the Company or an Affiliate, as appropriate, may permit or require a Participant to satisfy, in whole or in part, such obligation to remit taxes by directing the Company to withhold Common Shares that would otherwise be received by such individual or to repurchase Common Shares that were issued to the Participant to satisfy the tax withholding obligations in accordance with all applicable laws and pursuant to such rules as the Committee may establish from time to time, up to the maximum rate. The Company or an Affiliate, as appropriate, shall also have the right to deduct from all cash payments made to a Participant (whether or not such payment is made in connection with an Award) any applicable taxes required to be withheld with respect to such payments.
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b.No Right to Awards or Employment: No person shall have any claim or right to receive Awards under the IMAX LTIP. Neither the IMAX LTIP, the grant of Awards under the IMAX LTIP nor any action taken or omitted to be taken under the IMAX LTIP shall be deemed to create or confer on any Eligible Individual any right to be retained in the employ of the Company or any of its Affiliates, or to interfere with or to limit in any way the right of the Company or any of its Affiliates to terminate the employment of such Eligible Individual at any time. No Award shall constitute salary, recurrent compensation or contractual compensation for the year of grant, any later year or any other period of time. Payments received by a Participant under any Award made pursuant to the IMAX LTIP shall not be included in, nor have any effect on, the determination of employment-related rights or benefits under any other employee benefit plan or similar arrangement provided by the Company and its Affiliates, unless otherwise specifically provided for under the terms of such plan or arrangement or by the Committee.
c.Securities Law Restrictions: An Award may not be exercised or settled, and no Common Shares may be issued in connection with an Award, unless the issuance of such shares (i) has been registered under the Securities Act of 1933, as amended, (ii) has qualified under applicable state “blue sky” laws (or the Company has determined that an exemption from registration and from qualification under such state “blue sky” laws is available) and (iii) complies with all applicable foreign securities laws. The Committee may require each Participant purchasing or acquiring Common Shares pursuant to an Award under the IMAX LTIP to represent to and agree with the Company in writing that such Eligible Individual is acquiring the Common Shares for investment purposes and not with a view to the distribution thereof. All certificates for Common Shares delivered under the IMAX LTIP shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the SEC, any exchange upon which the Common Shares are then listed, and any applicable securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
d.Section 16 of the Exchange Act: Notwithstanding anything contained in the IMAX LTIP or any Award Document under the IMAX LTIP to the contrary, if the consummation of any transaction under the IMAX LTIP, or the taking of any action by the Committee in connection with a Change in Control of the Company, would result in the possible imposition of liability on a Participant pursuant to Section 16(b) of the Exchange Act, the Committee shall have the right, in its discretion, but shall not be obligated, to defer such transaction or the effectiveness of such action to the extent necessary to avoid such liability, but in no event for a period longer than 180 days.
e.Section 409A of the Code: To the extent that the Committee determines that any Award granted under the IMAX LTIP is subject to Section 409A of the Code, the Award Document evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the IMAX LTIP and Award Documents shall be interpreted in accordance with Section 409A of the Code and interpretive guidance issued thereunder. Notwithstanding any contrary provision in the IMAX LTIP or an Award Document, if the Committee determines that any provision of the IMAX LTIP or an Award Document contravenes any regulations or guidance promulgated under Section 409A of the Code or would cause an Award to be subject to additional taxes, accelerated taxation, interest and/or penalties under Section 409A of the Code, the Committee may modify or amend such provision of the IMAX LTIP or Award Document without consent of the Participant in any manner the Committee deems reasonable or necessary. In making such modifications the Committee shall attempt, but shall not be obligated, to maintain, to the maximum extent practicable, the original intent of the applicable provision without contravening the provisions of Section 409A of the Code. Moreover, any discretionary authority that the Committee may have pursuant to the IMAX LTIP shall not be applicable to an Award that is subject to Section 409A of the Code to the extent such discretionary authority would contravene Section 409A of the Code.
f.Awards to Individuals Subject to Laws of a Jurisdiction Outside of the United States: To the extent that Awards under the IMAX LTIP are awarded to Eligible Individuals who are domiciled or resident outside of the United States or to persons who are domiciled or resident in the United States but who are subject to the tax laws of a jurisdiction outside of the United States, the Committee may adjust the terms of the Awards granted hereunder to such person (i) to comply with the laws, rules and regulations of such jurisdiction and (ii) to permit the grant of the Award not to be a taxable event to the Participant. The authority granted under the previous sentence shall include the discretion for the Committee to adopt, on behalf of the Company, one or more sub-plans applicable to separate classes of Eligible Individuals who are subject to the laws of jurisdictions outside of the United States.
g.References to Termination of Employment: References to “termination of employment” shall also mean termination of any other service relationship of the Participant with the Company, as applicable.
h.No Limitation on Corporate Actions: Nothing contained in the IMAX LTIP shall be construed to prevent the Company or any Affiliate from taking any corporate action, whether or not such action would have an adverse effect on any Awards made under the IMAX LTIP. No Participant, beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any such action.
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i.Unfunded Plan: The IMAX LTIP is intended to constitute an unfunded plan for incentive compensation. Prior to the issuance of Common Shares, cash or other form of payment in connection with an Award, nothing contained herein shall give any Participant any rights that are greater than those of a general unsecured creditor of the Company.
j.Successors: All obligations of the Company under the IMAX LTIP with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
k.Application of Funds: The proceeds received by the Company from the sale of Common Shares pursuant to Awards will be used for general corporate purposes.
l.Satisfaction of Obligations: Subject to applicable laws, rules and regulations, the Company may apply any cash, Common Shares, securities or other consideration received upon exercise of settlement of an Award to any obligations a Participant owes to the Company and its Affiliates in connection with the IMAX LTIP or otherwise.
m.Award Document: In the event of any conflict or inconsistency between the IMAX LTIP and any Award Document, the IMAX LTIP shall govern and the Award Document shall be interpreted to minimize or eliminate any such conflict or inconsistency.
n.Headings: The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of the IMAX LTIP.
o.Severability: If any provision of this IMAX LTIP is held unenforceable, the remainder of the IMAX LTIP shall continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the IMAX LTIP.
p.Governing Law: Except as to matters of federal law, the IMAX LTIP and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of New York.
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8thIMAX Computershare 8th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1 www.computershare.com Security Class COMMON SHARES Holder Account Number Fold Form of Proxy - Annual and Special Meeting of IMAX Corporation to be held on June 3, 20209, 2021 This Form of Proxy is solicited by and on behalf of Management. Fold CONTROL NUMBER Notes to proxy 1. Every holder has the right to appoint some other person or company of their choice, who need not be a holder, to attend and act on their behalf at the meeting.meeting or any adjournment or postponement thereof. If you wish to appoint a person or company other than the personsManagement Nominees whose names are printed herein, please insert the name of your chosen proxyholder in the space provided (see reverse). 2. If the securities are registered in the name of more than one owner (for example, joint ownership, trustees, executors, etc.), then all those registered should sign this proxy. If you are voting on behalf of a corporation or another individual you may be required to provide documentation evidencing your power to sign this proxy with signing capacity stated. 3. This proxy should be signed in the exact manner as the name(s) appear(s) on the proxy. 4. If this proxya date is not dated,inserted in the space provided on the reverse of this proxy, it will be deemed to bear the date on which it iswas mailed by Management to the holder.holder by Management. 5. The securities represented by this proxy will be voted as directed by the holder, however, if such a direction is not made in respect of any matter, and the proxy appoints the Management Nominees listed on the reverse, this proxy will be voted as recommended by Management. 6. The securities represented by this proxy will be voted in favour, or withheld from voting, or voted against each of the matters described herein, as applicable, in accordance with the instructions of the holder, on any ballot that may be called for and, if the holder hasfor. If you have specified a choice with respect to any matter to be acted on, the securities will be voted accordingly. 7. This proxy confers discretionary authority in respect of amendments or variations to matters identified in the Notice of Meeting and Management Information Circular or other matters that may properly come before the meeting.meeting or any adjournment or postponement thereof, unless prohibited by law. 8. This proxy should be read in conjunction with the accompanying documentation provided by Management. Fold Proxies submitted must be received by 10:00 a.m., Eastern Time, on June 1, 2020.7, 2021. VOTE USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEKWEEK! To Vote Using the Telephone To Vote Using the Internet To Receive Documents Electronically To Virtually Attend the Meeting Call the number listed BELOW from a touch tone telephone.telephone 1-866-732-VOTE (8683) Toll Free Go to the following web site: www.investorvote.com SmartphoneSmartphone? Scan the QR code to vote now. You can enroll to receive future securityholder communications electronically by visiting www.investorcentre.com and clicking at the bottom of the page. To Virtually Attend the Meeting •www.investorcentre.com. You can attend the meeting virtually by visiting the URL provided on the back of this proxy 1-866-732-VOTE (8683) Toll Free If you vote by telephone or the Internet, DO NOT mail back this proxy. Voting by mail may be the only method for securities held in the name of a corporation or securities being voted on behalf of another individual. Voting by mail or by Internet are the only methods by which a holder may appoint a person as proxyholder other than the Management nomineesNominees named on the reverse of this proxy. Instead of mailing this proxy, you may choose one of the two voting methods outlined above to vote this proxy. To Virtually Attend the Meeting You can attend the meeting virtually by visiting the URL provided on the back of this proxy To vote by telephone or the Internet, you will need to provide your CONTROL NUMBER listed below. CONTROL NUMBER
Appointment of Proxyholder The undersigned common shareholderI/We being holder(s) of securities of IMAX Corporation (the “Company”) hereby appointsappoint: Richard L. Gelfond, or failing whom,this person, Robert D. Lister, or failing whom,this person, Kenneth I. Weissman (the "Management Nominees") OR Print the name of the person you are appointing if this person is someone other than the Management Nominees listed herein. NoteNote: If completing the appointment box above YOU MUST go to https www.computershare.comhttp:// www.computershare.com/IMAX and provide Computershare with the name and email address of the person you are appointing. Computershare will use this information ONLY to provide the appointee with a user name to gain entry to the online meeting. as my my/our proxyholder with full power of substitution and to attend, act and to vote for and on behalf of the holder in accordance with the following direction (or if no directions have been given, as the proxyholder sees fit) and on all other matters that may properly come before the Annual and Special Meeting of IMAX Corporationshareholders of the Company to be held online at https web.lumiagm.com 205601388https:// web.lumiagm.com/223853148 on June 3, 20209, 2021 at 10:00 a.m., Eastern Time, and at any adjournment or postponement thereof. VOTING RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED TEXT OVER THE BOXES. 1. Election of Directors 01. Neil S. Braun For Withhold 04. Richard L. Gelfond 02. Eric A. Demirian For Withhold 05. David W. Leebron 03.02. Kevin Douglas For Withhold 06.03. Richard L. Gelfond For Withhold 04. David W. Leebron 05. Michael MacMillan 06. Steve Pamon 07. Dana Settle 08. Darren Throop 09. Bradley J. Wechsler Fold 2. Appointment of Auditors Note: Voting Withhold is the equivalent to voting Abstain. In respect of the appointment of Pricewat erhouseCoopersPricewaterhouseCoopers LLP as auditors of the Company and authorizing the directors to fix their remunerationremuneration. For Against Withhold 3. Advisory Vote on Named Executive Officer Compensation Note: Voting Abstain is the equivalent to voting Withhold. Advisory resolution to approve the compensation of the Company’s Named Executive Officers as set forth in the accompanying Proxy Circular and Proxy Statement. For Against Withhold 4. Second Amended and Restated Long Term Incentive Plan Note: Voting Withhold is the equivalentAmendment to voting Abstain.By-Law No.1 In respect of the approvalconfirmation of amendments to By-Law No. 1 of the Second Amended and Restated Long-Term Incentive PlanCompany as set forth in Appendix A"A" to the Proxy Circular and Proxy Statement. For Against Withhold Abstain Authorized Signature(s) This section must be completed for your instructions to be executed. I Signature of Proxyholder I/We authorize you to act in accordance with my my/our instructions set out above. I/We hereby revoke any proxy previously given with respect to the Meeting. If no voting instructions are indicated above, and the proxy appoints the Management Nominees, this Proxy will be voted as recommended by Management. Signature(s) Date Interim Financial Statements - Mark this box if you would like to receive Interim Financial Statements and accompanying Management’s Discussion and Analysis by mail. If you are not mailing back your proxy, you may register online to receive the above financial report(s) by mail at www.computershare.com www.computershare.com/mailinglist. MM DD YY FoldI M X Q 3 2 3 5 4 0 A R 6I
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