Document:

Exhibit 4.2

 

   

 

IMRIS INC.

NOTICE OF ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS

TO BE HELD ON MAY 11, 2010

 

NOTICE IS
HEREBY GIVEN THAT the
annual and special meeting of the shareholders of IMRIS Inc. (the “Corporation”) will be held on Tuesday May 11,
2010 at 11:00 am (EST) at Le Méridien King Edward, 37 King Street East Toronto,
Ontario M5C 1E9  (the “Meeting”), for the following purposes:

 

1.                                      to receive the financial statements of
the Corporation for the financial year ended December 31, 2009, together
with the report of the auditors of the Corporation thereon;

 

2.                                      to elect the directors of the
Corporation;

 

3.                                      to re-appoint the auditors of the
Corporation and to authorize the directors of the Corporation to fix the
auditors’ remuneration;

 

4.                                      to approve, with or without modification,
the ordinary resolution approving the unallocated stock options  of the Corporation and the amended stock
option plan of the Corporation; and

 

5.                                      to transact such further or other
business as may properly come before the Meeting or any adjournment or
adjournments thereof.

 

A copy of the Corporation’s Management Information Circular and a Form of
Proxy accompany this Notice, as well as a copy of the Corporation’s Annual
Report for the financial year ended December 31, 2009, which Annual Report
contains the financial statements of the Corporation for such financial year
together with the report of the Corporation’s auditors thereon and management’s
discussion and analysis of financial condition and results of operations relating
thereto.

 

The Board of Directors of the Corporation has fixed April 6, 2010
(the “Record  Date”)
as the record date for determining the holders of record of common shares who
are entitled to receive notice of the Meeting and to attend and vote at the Meeting
and any adjournment or postponement thereof.

 

Shareholders who are
unable to attend the Meeting in person are requested to date and sign the
enclosed Form of Proxy and return it to the Chief Financial Officer of the
Corporation at 100-1370 Sony Place, Winnipeg, Manitoba R3T 1N5 or to the
Corporation’s transfer agent, Computershare Investor Services Inc. (“Computershare”) at 100 University Avenue, 9th Floor, Toronto,
Ontario, M5J 2Y1, Attention: Proxy Department in the envelope provided for that
purpose or by fax to Computershare at 1-866-249-7775 (or 1-416-263-9524) and in
any such case, not later than 11:00 a.m. (EST) on May 7, 2010.  In order to be represented by proxy, you must
complete and submit the enclosed Form of Proxy or another appropriate form
of proxy.

 

DATED at Winnipeg,
Manitoba this 15th day of March, 2010.

 

BY ORDER OF THE BOARD OF DIRECTORS

 

H. David Graves

Chairman and Chief Executive Officer

 

 

 

IMRIS INC.

MANAGEMENT INFORMATION CIRCULAR

March 15, 2010

 

This Management
Information Circular (this “Circular”)
and the accompanying form of proxy (the “Proxy”)
are being sent to you in advance of the Annual and Special Meeting of
Shareholders (the “Meeting”) of
IMRIS Inc. (the “Corporation”) to
be held at 11:00 (EST) on May 11, 2010 at Le Méridien King Edward, 37 King
Street East Toronto, Ontario M5C 1E9.

 

This Circular
includes information about the Corporation that the Corporation is required to
disclose to shareholders and also describes and explains the business to be
transacted and the matters to be voted on at the Meeting.

 

Except as otherwise
stated, the information contained in this Circular is given as of March 10,
2010.  All dollar amounts in this
Circular are in Canadian dollars unless otherwise stated.

 

The Proxy

 

The Proxy
is being solicited on behalf of management of the Corporation for use at the
Meeting and at any adjournment of the Meeting.  In addition to
using the mail to solicit proxies, directors, officers, employees and agents of
the Corporation may solicit proxies by telephone, in writing or in person.  The Corporation will pay for all costs of
proxy solicitation.

 

The persons named in the
Proxy are officers of the Corporation.  You have the right to appoint a person or company (who need not be a
shareholder of the Corporation) to represent you at the Meeting other than the
persons designated in the Proxy.  You
may do so either by inserting the person’s name in the blank space provided in
the Proxy, or by completing another proxy. 
A shareholder wishing to be represented by proxy at the Meeting or at
any adjournment of the Meeting must, in all cases, deliver the completed Proxy
to the Chief Financial Officer of the Corporation at 100-1370 Sony Place,
Winnipeg, Manitoba, R3T 1N5 or to the Corporation’s transfer agent and registrar,
Computershare Investor Services Inc. (“Computershare”)
at 100 University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1, Attention:
Proxy Department in the envelope enclosed, or submit the completed Proxy by
facsimile to Computershare at 1-866-249-7775 or 1-416-263-9524, no later than
11:00 a.m. (EST) on May 7, 2010 or, if the Meeting is adjourned, 48
hours before any adjournment of the Meeting.

 

Revoking
Your Proxy

 

In addition to revoking
your proxy in any other manner permitted by law, you may revoke your proxy
under sub-section 148(4) of the Canada Business
Corporations Act (the “CBCA”) by depositing an instrument
in writing executed by you or your attorney authorized in writing at the
registered office of the Corporation at any time up to and including the last
business day preceding the day of the Meeting, or an adjournment thereof, at
which the proxy is to be used, or with the chair person of the Meeting on the
day of the Meeting or an adjournment thereof. 
If your written statement revoking your proxy is delivered to the
Chairperson of the Meeting on the day of the Meeting or any adjournment of the
Meeting, the revocation of your proxy will not be effective with respect to any
matter on which a vote has already been cast pursuant to your original proxy.

 

 

Voting
Your Proxy

 

The officers of the
Corporation named in the Proxy or any other person properly appointed by you as
a proxy holder will vote or withhold from voting any common shares in the
capital of the Corporation (“Common Shares”)
held by you and in respect of which they have been appointed proxy holders in
accordance with your directions on the Proxy. 
The common shares in the capital of the Corporation held by you will be
voted or withheld from voting in accordance with your instructions on any
ballot that may be called for.  In the absence of any direction from you, your Common Shares will be
voted FOR the election of the directors named in this Circular, FOR the
appointment of the auditors of the Corporation named in this Circular, and FOR
the approval of the ordinary resolution amending and approving the stock option
plan in this Circular.

 

The management of the
Corporation knows of no amendment to the matters referred to in the
accompanying Notice of Meeting or of any other business that will be presented
at the Meeting.  If any amendment or
other business should properly be brought before the Meeting, however, the
accompanying Proxy confers discretionary authority upon the persons named in the
Proxy to vote upon any amendment or on such other business in accordance with
their discretion.

 

Non-Registered
Shareholders

 

Only
registered holders of Common Shares or the persons they appoint as their
proxies are permitted to vote at the Meeting. 
Many shareholders are “non-registered” shareholders (“Non-Registered Shareholders”) because the
shares they own are not registered in their names but are instead either (i) registered
in the name of an intermediary (the “Intermediary”)
that the Non-Registered Shareholder deals with in respect of the Common Shares,
such as, among others, brokerage firms, banks, trust companies, securities
dealers or brokers and trustees or administrators of self-administered RRSPs,
RRIFs, RESPs and similar plans, or (ii) in the name of a clearing agency
(such as the Canadian Depository for Securities Limited) of which the
Intermediary is a participant.  In
accordance with the requirements of National Instrument 54-101 of the Canadian
Securities Administrators, the Corporation has distributed copies of the notice
of meeting, this Circular and the Proxy (collectively the “Meeting Materials”) to Intermediaries and
clearing agencies for onward distribution to Non-Registered Shareholders of
Commons Shares.

 

Intermediaries
are required to forward the Meeting Materials to Non-Registered Shareholders
unless a Non-Registered Shareholder has waived the right to receive them.  Intermediaries often use service companies to
forward the meeting materials to Non-Registered Shareholders.  A Non-Registered Shareholder who has not
waived the right to receive the Meeting Materials will either be given:

 

(a)                                 a voting
instruction form which is not signed by the
Intermediary and which, when properly completed and signed by the
Non-Registered Shareholder and returned to
the Intermediary or its service company, in accordance with the
directions of the Intermediary and which will constitute voting instructions
which the Intermediary must follow; or

 

(b)                                 a form of proxy
which has already been signed by the
Intermediary (typically a facsimile signature), which is restricted
as to the number of shares beneficially owned by the Non-Registered Shareholder
but which is otherwise not completed by the Intermediary.  This form of proxy does not require the
Intermediary to sign when submitting the proxy. 
In this case the Non-Registered Shareholder who wishes to submit a proxy
should properly complete the form of proxy and deposit it with the Corporation, c/o Computershare
Trust Company of Canada, at Computershare Investor Services, Proxy Department,
9th Floor, 100 University Ave., Toronto, ON M5J 2Y1.

 

In
either case, the purpose of these procedures is to permit the Non-Registered
Shareholder to direct the voting of the Common Shares of the Corporation that
the Non-Registered Shareholder beneficially owns.  Should a Non-Registered Shareholder wish to
attend and vote at the Meeting in person, (or have another person attend and
vote on behalf of the Non-Registered Shareholder), the Non-Registered
Shareholder should strike out the persons named in the form of proxy and insert
his or her name in the space provided 

 

3

 

for
the purpose on the voting instructions form and return it in accordance with
the directions of the Intermediary.

 

The Non-Registered Shareholder should carefully follow
the instructions of their Intermediary, including those regarding when and
where the proxy or voting instructions form is to be delivered.

 

A
Non-Registered Shareholder may revoke a form of proxy or voting instructions
form given to an Intermediary by contacting the Intermediary through which the
Non-Registered Shareholder’s Common Shares are held and following the
instructions of the Intermediary respecting the revocation of proxies.  In order to ensure than an Intermediary acts
upon a revocation of a proxy form or voting instruction form, the written
notice should be received by the Intermediary well in advance of the Meeting.

 

These securityholder
materials are being sent to both registered and non-registered owners of the
securities. If you are a non-registered owner, and the issuer or its agent has
sent these materials directly to you, your name and address and information
about your holdings of securities, have been obtained in accordance with
applicable securities regulatory requirements from the intermediary holding on
your behalf.

 

Common
Shares

 

Only the holders of
record of Common Shares at the close of business on April 6, 2010 (the “Shareholders”) are entitled to receive
notice of the Meeting.  Such Shareholders
are entitled to vote at the Meeting unless their Common Shares have been
transferred and the person to whom such Common Shares have been transferred has
produced certificates representing the transferred Common Shares or has
otherwise established ownership of the transferred Common Shares and has
demanded, on or before the commencement of the Meeting, that their name be
included on the list of the Corporation’s shareholders entitled to vote at the
Meeting.

 

At the date hereof,
32,831,315  Common Shares were
issued and outstanding, the holders of which are entitled to one (1) vote
for each Common Share held.

 

The following table sets
forth information regarding the beneficial ownership, direction or control of
the Common Shares as of the date hereof with respect to any persons who, as of
such date, are known to the directors or officers of the Corporation and who,
directly or indirectly beneficially owns, or controls or directs, more than 10%
of the votes attached to the Common Shares.

 

	
  Name of Beneficial Owner

  	
   

  	
  Number of Common Shares

  Held

  	
   

  	
  Percentage of Voting Common

  Shares

  	
   

  
	
  H. David Graves(1)

  	
   

  	
  11,763,796

  	
   

  	
  35.8

  	
  %

  
	
  Whitecastle Investments Limited(2)

  	
   

  	
  3,387,585

  	
   

  	
  10.3

  	
  %

  

 

	
  (1)

  	
  These shares are held in Norpine Holdings Inc. an investment company
  ultimately controlled by H. David Graves, Chief Executive Officer of IMRIS
  Inc.

  
	
  (2)

  	
  Whitecastle Investments Limited is an investment company over which
  Mr. Carey Diamond, a Director of IMRIS Inc., exercises managerial
  direction.

  

 

ORDINARY MATTERS TO BE ACTED UPON AT THE MEETING

 

1.                                      Presentation of
Financial Statements and Other Financial Information

 

The audited financial
statements of the Corporation for the year ended December 31, 2009 (the “Financial Statements”) and the auditor’s
report on the Financial Statements will be presented to shareholders at the
Meeting.  The Financial Statements are
included in the Corporation’s 2009 Annual Report which accompanies this
Circular.  In accordance with the
provisions of the CBCA, the Financial Statements are merely presented at the
Meeting and will not be voted on.

 

The Corporation has filed
an Annual Information Form (the “AIF”)
for its 2009 fiscal year and its 2009 Annual Consolidated Financial Statements
and Management’s Discussion and Analysis of the Financial 

 

4

 

Statements on SEDAR at
www.sedar.com that contain, among other things, all of the financial disclosure
(including copies of the Financial Statements and management’s discussion and
analysis of the Financial Statements) required under National Instrument 52-110
— Audit Committees of the Canadian Securities Administrators.  In particular, the information that is
required to be disclosed in Form 52-110F1 of National Instrument 52-110
may be found under the heading “Audit and Corporate Governance Committee” in
the AIF.  Upon request, the Corporation
will promptly provide copies of the AIF to shareholders free of charge.

 

2.                                      Election of Directors

 

The
Board of Directors of the Corporation (the “Board”)
currently consists of six (6) directors. 
The persons named in the Proxy intend to vote FOR the election of the
six (6) nominees whose names are set forth below.  Each director will hold office until the next
annual meeting of the shareholders of the Corporation or until the election of
his successor, unless his office is earlier vacated in accordance with the
by-laws of the Corporation.

 

The following
table sets forth the name, province and country of residence of each person
proposed to be nominated by management for election as a director, all other
positions and offices of the Corporation now held by that person, his principal
occupation, the year in which he first became a director of the Corporation and
the number of Common Shares that such person has advised the Corporation are beneficially
owned, or controlled or directed, directly or indirectly, as at the date of
this Circular.

 

The Corporation
has an Audit and Governance Committee and a Compensation Committee.  The members of such committees are identified
below.

 

	
  Name, Province and

  Country of Residence and

  Position with the

  Corporation

  	
   

  	
  Director

  Since

  	
   

  	
  Principal Occupation

  	
   

  	
  Number of Common

  Shares Beneficially

  Owned, or

  Controlled or

  Directed, Directly or

  Indirectly

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H. David Graves

  Manitoba, Canada

  Chairman of the Board &

  Chief Executive Officer 

  	
   

  	
  2005

  	
   

  	
  Chief Executive Officer of the Corporation

  	
   

  	
  11,763,796

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Robert Courteau(2)

  Ontario, Canada

  Director

  	
   

  	
  2006

  	
   

  	
  Chief Operating Officer, SAP Global Field Operations.

  	
   

  	
  77,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Carey Diamond(1)(2)

  Ontario, Canada

  Director

  	
   

  	
  2006

  	
   

  	
  President and Chief Executive Officer, Whitecastle Investments Limited
  

  	
   

  	
  3,387,585

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  William Fraser(1)

  Manitoba, Canada

  Director

  	
   

  	
  2007

  	
   

  	
  Corporate Director

  	
   

  	
  20,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Blaine Hobson(2)

  Ontario, Canada

  Director

  	
   

  	
  2006

  	
   

  	
  Managing Partner, Whitecap Venture Partners

  	
   

  	
  283,506

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  David Leslie(1)

  Ontario, Canada

  Director

  	
   

  	
  2007

  	
   

  	
  Corporate Director

  	
   

  	
  5,000

  	
   

  

 

(1)         Member of Audit and
Governance Committee.

(2)         Member of Compensation
Committee.

 

5

 

The following are brief
profiles of each of our directors, including a description of each individual’s
principal occupation within the past five years.  The information provided below has been
provided to us by the individuals themselves and has not been independently
verified by us.

 

H.
David Graves, Chairman and Chief Executive Officer

 

Mr. Graves is a
director and the Chief Executive Officer of the Corporation and the Chairman of
the board of directors.  Mr. Graves
has been the Chief Executive Officer since the Corporation’s formation in May 2005
and was also President until January 1, 2010.  From 1998 until 2005, Mr. Graves was the
President and Chief Executive Officer of Centara Corporation, a venture capital
firm.  Prior to that, Mr. Graves was
the founder and Chief Executive Officer of Broadband Networks Inc., a
leading-edge developer of wireless telecommunications systems.  Mr. Graves is a graduate of the
University of Manitoba faculty of Engineering and the Executive Marketing program
at Queen’s University and is a registered professional engineer.  Mr. Graves serves on the board of
directors of Great West Lifeco Inc.

 

Robert Courteau, Director

 

Mr. Courteau is
member of the Compensation Committee and a director of the Corporation.  For the past 25 years, Mr. Courteau has
held senior management positions in the technology industry in Canada, the
United States and internationally.  Mr. Courteau
is the Chief Operating Officer for SAP’s Global Field Operations, having
previously been the Chief Operating Officer in North America and before that
President and Managing Director of SAP Canada Inc from 2004 to 2008.  Prior to joining SAP Canada, Mr. Courteau
was the Executive Vice President responsible for Canadian sales and consulting
services for EDS Corporation from 2002 to 2003.   Mr. Courteau holds a Bachelor of
Commerce degree from Concordia University.

 

Carey
Diamond, Director

 

Mr. Diamond is the
Chairman of the Compensation Committee, a member of the Audit and Governance
Committee and a director of the Corporation. 
Mr. Diamond has held senior management positions at Whitecastle
Investments Limited, an investor in venture and later stage private companies,
since 1989, and since 1998 has been its President and Chief Executive Officer.  Since 2002, he has been Managing Director of
Whitecap Venture Partners and since 2004, he has been Managing Director of
Whitecastle Private Equity Partners and President of its General Partner.  In addition to sitting on the boards of
various private companies, Mr. Diamond is a member of the Board of
Directors of the Sunnybrook Health Sciences Centre, Vice Chair of the Baycrest
Centre for Geriatric Care and past Treasurer of Kids Help Phone.  Mr. Diamond holds a B.A. (Economics)
degree from the University of Western Ontario and an LL.B. from Osgoode Hall
Law School.  He is a member of the Law
Society of Upper Canada.

 

William
Fraser, F.C.A., Director

 

Mr. Fraser is a
member of the Audit and Governance Committee and a director of the
Corporation.  Mr. Fraser is an
independent corporate director.  Mr. Fraser
was the President and Chief Executive Officer, and a Director of Manitoba
Telecom Services Inc. (MTS) from 1994 to 2006, and successfully led the
transformation of the provincial crown corporation to a publicly traded
corporation, and the third largest telecommunications company in Canada.  Mr. Fraser was the Vice President
Finance of MTS from 1986 to 1994, and prior to that was the Assistant Deputy
Minister, Finance for the Government of Manitoba (1981-1986).  Mr. Fraser is a Director and is the
Chairman of the audit committee of Manitoba Hydro; is a Director and Chairman
of the audit committee of Craig Wireless Systems Ltd., and is the Vice Chair
and member of the finance committee of the Board of Directors for St. Boniface
Hospital Foundation.  Mr. Fraser has
been a director of a number of other corporations and charitable organizations
during his career.  Mr. Fraser is a
Chartered Accountant and was named a Fellow of the Institute of Chartered
Accountants in 2002.

 

Blaine Hobson, Director

 

Mr. Hobson
is a member of the Compensation Committee and a director of the Corporation. Mr. Hobson
is a private equity investor and has been the Managing Partner of Whitecap
Venture Partners, a private equity investment company, since November 2003.  Prior to that, Mr. Hobson was the Chief
Executive Officer of several WhiteCap investee companies, including Photonami
Corp. and Avo Photonics.  Mr. Hobson
is a telecommunications and business executive with over 20 years of experience
in start-ups and business turn-arounds in both the private and public
sectors.  Mr. Hobson has
successfully led a number of entrepreneurial 

 

6

 

ventures
and teams in the automobile, manufacturing, medical supply, telecom and
investment industries.  Mr. Hobson
originally joined Whitecap Venture Partners in 1995 where, as an Executive Vice
President, he led the Technology Practice, and held the role of “Entrepreneur
in Residence”.  Since 2004, Mr. Hobson
has also been a Managing Director of Whitecastle Private Equity Partners LP.

 

David
Leslie, F.C.A., Director

 

Mr. Leslie is the
Chairman of the Audit and Governance Committee and a director of the
Corporation.  Mr. Leslie is an
independent corporate director.  Mr. Leslie
was formerly the Chairman and Chief Executive Officer of Ernst and Young LLP
from 1999 to 2004, and was a partner and held various senior management
positions with the firm from 1977 to 2004. 
Mr. Leslie is a director of Enbridge, Inc.; Enbridge Gas
Distribution, Inc.; Sobeys Inc.; Empire Inc.; a Trustee of the Crombie
Real Estate Investment Trust; and is the Chairman of the Sunnybrook Health
Sciences Centre.  Mr. Leslie is a
director of MaRS Innovation, a non-profit company involved with the
commercialization of certain research generated by its non-profit members.  Mr. Leslie is a Chartered Accountant and
was named a Fellow of the Institute of Chartered Accountants in 1991.

 

Penalties and Sanctions and Personal Bankruptcies

 

Other than as set out below, none of the nominees for
election as directors:

 

(a)         is, as at the date hereof, or has been, within 10
years before the date of this Circular, a director or executive officer of any
company (including the Corporation) that, while that person was acting in that
capacity,

 

(i)                                     was the subject of a cease trade or
similar order or an order that denied the relevant company access to any
exemption under securities legislation, for a period of more than 30
consecutive days;

 

(ii)                                  was subject to an event that resulted,
after the director or executive officer ceased to be a director or executive
officer, in the company being the subject of a cease trade order or similar
order or an order that denied the relevant company access to any exemption under
securities legislation, for a period of more than 30 consecutive days;

 

(iii)                               or within a year of that person ceasing
to act in that capacity, became bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency or was subject to or instituted any
proceedings, arrangements or compromise with creditors or had a receiver,
receiver manager or trustee appointed to hold its assets; or,

 

(b)         has, within the 10 years before the date
of this Circular, become bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency, or become subject to or instituted any
proceedings, arrangement or compromise with creditors, or had a receiver,
receiver manager or trustee appointed to hold the assets of the proposed
nominee.

 

Mr. Leslie served as a member of the Board of
Directors of Canwest Global Communications Corp. from March 26, 2007 to January 14,
2009.  On October 6, 2009, Canwest
Global Communications Corp. voluntarily entered into, and successfully
obtained, an Order from the Ontario Superior Court of Justice (Commercial
Division) commencing proceedings under the Companies’ Creditors Arrangement Act
(“CCAA”).

 

The information as to cease trade orders and
bankruptcies, not being within the knowledge of the Corporation, has been
furnished by the directors.

 

7

 

3.                                      Re-Appointment of Independent
Auditors and Authorization of Directors to Fix Their Remuneration

 

It is intended
to vote the Proxy solicited hereby for (unless the shareholder directs its
Common Shares to be withheld from voting in the appointment of auditors) the
re-appointment of Deloitte & Touche LLP (“Deloitte”),
as independent auditors of the Corporation to hold office until the next annual
meeting of shareholders and to authorize the directors to fix the auditors’
remuneration.  Deloitte has been the
auditor of the Corporation beginning with the fiscal year ended December 31,
2005.  The Corporation was formed on May 18,
2005 and therefore did not have auditors prior to that date.

 

The reappointment of Deloitte & Touche LLP as auditors of the
Corporation will be authorized if it is approved by a majority of the votes
cast by shareholders represented in person or by proxy at the Meeting and
entitled to vote thereon.

 

Auditors’ Fees

 

For the years
ended December 31, 2009 and 2008, the Corporation incurred the following
fees:

 

	
   

  	
   

  	
  Fiscal
  2009

  	
   

  	
  Fiscal
  2008

  	
   

  
	
  Audit Fees (1)

  	
   

  	
  $

  	
  89,709

  	
   

  	
  $

  	
  63,264

  	
   

  
	
  Audit Related Fees (2)

  	
   

  	
  $

  	
  76,653

  	
   

  	
  $

  	
  74,667

  	
   

  
	
  Tax Fees (3)

  	
   

  	
  $

  	
  144,828

  	
   

  	
  $

  	
  59,929

  	
   

  
	
  All Other Fees (4)

  	
   

  	
  $

  	
  82,369

  	
   

  	
  $

  	
  129,401

  	
   

  

 

	
  (1)

  	
  “Audit Fees” consist of the aggregate fees
  billed by Deloitte for professional services rendered by it
  for the audit of our annual financial statements or services that are
  normally provided by Deloitte in connection with statutory and regulatory
  filings or engagements.

  
	
  (2)

  	
  “Audit Related Fees” consist of the aggregate fees billed by Deloitte
  for assurance and related services rendered by them that are reasonably
  related to the performance of the audit or review of our financial statements
  and are not reported as Audit Fees. Services provided include review of
  quarterly financial statements and accounting advice on certain matters.

  
	
  (3)

  	
  “Tax Fees” consist of the aggregate fees billed by Deloitte for
  professional services rendered by them for tax compliance, tax advice and tax
  planning. Tax services included advisory services and review and filing of
  our income tax returns.

  
	
  (4)

  	
  “All Other Fees” consist of fees billed by Deloitte for products and
  services other than fees noted above.

  

 

4.                                       Approval of the
Unallocated Options under the Corporation’s Stock Option Plan and Amendment to
the Stock Option Plan

 

Pursuant to the rules of the Toronto Stock
Exchange (“TSX), unallocated options, rights or other entitlements under a TSX
listed issuer’s security based compensation arrangement that does not have a
fixed maximum number of securities issuable (which includes the Corporation’s
Stock Option Plan), must be approved by a majority of the issuer’s directors
and by the issuer’s securityholders every three years.  Since the Stock Option Plan does not have a
fixed number of common shares issuable thereunder, but permits the issuance of
up to an aggregate of 15% of the outstanding common shares from time to time,
the Corporation is seeking shareholder approval at the Meeting of all of the
unallocated common shares issuable pursuant to the Stock Option Plan in
accordance with this requirement.

 

Unallocated options were last
ratified by Shareholders in October 2007 prior to the Corporation’s
initial public offering (the “Original Plan”). 
As the three year term as prescribed by the TSX expires in October 2010,
an ordinary resolution will be placed before shareholders to approve the
unallocated options.

 

As of the date hereof, there are options outstanding
to purchase 4,253,421 Common Shares (representing 13.0% of the aggregate number
of issued and outstanding Common Shares), resulting in the Stock Option Plan
currently having 671,276 unallocated options. 
If approval is obtained at the Meeting, the Corporation will not be
required to seek further approval of the grant of unallocated options under
the  Stock Option Plan until the
Corporation’s 2013 annual shareholders’ meeting (provided that such meeting is
held on or prior to May 11, 2013).

 

8

 

If approval is not obtained at the Meeting, options
which have not been allocated as of May 11, 2010 and options which are
outstanding as of May 11, 2010 and are subsequently cancelled, terminated
or exercised will not be available for a new grant of options.  Previously allocated options will continue to
be unaffected by the approval or disapproval of the resolution.  The granting of options has been a successful
strategy used by the Corporation to attract and retain qualified employees and
the loss of this incentive element from the overall employee compensation
arrangements would be significant.

 

The Original Plan was subsequently amended in August 2008
with the approval of the Board of Directors and the TSX.  Shareholders will also be asked to approve a
resolution approving the option plan as amended in 2008, with one further minor
change as described in this paragraph (the “Option Plan”).  The Original Plan was amended in 2008 to add
a definition of a “Black-out Period” during which option grants could be
authorized by the Board of Directors of the Corporation and granted and priced
by the CEO of the Corporation after the end of the Black-out Period.  In the 2008 amendment, “Black-out Period” was
defined as the period commencing on the first day of the month following the
end of each quarter or year end and ending on the close of business on the
second Business Day following the day on which the Company discloses its annual
or quarterly financial results.  In the
current version of the Option Plan, we are proposing that the definition of the
“Black-out Period” be further amended to coincide with any “Black-out Period”
as defined from time to time in our “Insider Trading Policy”, which is
administered by the Board of Directors of the Corporation.  The Option Plan with this amendment and as
further described below, complies with the rules of the TSX.

 

The general terms of the
Option Plan for which the Corporation is seeking approval is consistent with
the Original Plan and is summarized in this Management Information Circular in “SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS —
Stock Option Plan”  with a full copy of the Option Plan attached hereto as
Appendix A.

 

The proposed Option Plan and the unallocated Options
must be approved by a majority vote of the Shareholders.  Unless otherwise directed,
it is the intention of the Management Designees to vote proxies in the
accompanying form in favour of this ordinary resolution.

 

The following is the text of the resolution to be
considered at the Meeting:

 

“BE IT RESOLVED AS AN ORDINARY RESOLUTION THAT:

 

1.  The Option
Plan of the Corporation, as amended, in the form attached as Appendix A to the
Management Information Circular of the Corporation prepared for the purpose of
the Meeting be and is hereby approved, ratified and confirmed.

 

2.  All
unallocated Common Shares issuable pursuant to the Corporation’s Stock Option
Plan are hereby approved and authorized and effective until three years from
the date of approval hereof unless earlier amended or revoked by Shareholders
of the Corporation.

 

3.  The Company
have the ability to continue granting options under the Stock Option plan until
May 11, 2013, that is until the date that is three (3) years from the
date where shareholder approval is being sought.

 

4.  Any director
or officer is hereby authorized for and on behalf of the Corporation to take
all actions and to execute all documents as may be desirable to give effect to
this resolution.”

 

5.                                      Other Matters

 

Management of the Corporation
knows of no matters to come before the Meeting other than as set forth in the
Notice of Meeting.  However, if other
matters which are not currently known to management should properly come before
the Meeting, the accompanying proxy will be voted on such matters in accordance
with the best judgment of the persons voting the proxy.

 

9

 

STATEMENT
OF EXECUTIVE COMPENSATION

 

Compensation
Discussion and Analysis

 

Introduction

 

This compensation discussion and analysis (“CD&A”)
describes and explains the Corporation’s policies and practices with respect to
the compensation of its named executive officers, being each of Chief Executive
Officer (the “CEO”), its current and former
Chief Financial Officer (the “CFO”) and the
three most highly compensated executive officers other than the CEO and CFO
(collectively, with the CEO and the CFO, the “NEOs”).

 

Overview of compensation philosophy

 

The Corporation’s executive compensation philosophy is to provide
competitive compensation to attract and retain talented staff capable of
achieving the Corporation’s strategic and performance objectives.  Accordingly, an appropriate portion of total
compensation is variable and linked to achievement of goals, both corporate and
individual.  Consistent with this
philosophy, the primary objectives of the Corporation’s compensation program
for its NEOs are:

 

·                  to attract and retain talented,
high-achieving executives who will contribute to the success of the Corporation
and increase of long-term shareholder value;

 

·                  to motivate the executive management team to
meet and exceed operating targets and long-term strategic goals; and

 

·                  to align the interests of management and the
Corporation’s shareholders by emphasizing performance-based compensation that
recognizes individual and Corporate performance, and which helps to increase
long-term shareholder value.

 

The compensation program seeks to align management interests with
shareholder interests through both short and long-term incentives linking
compensation to performance.  The
short-term incentive is in the form of an annual cash bonus while the longer
term incentive is in the form of stock option grants, which creates a direct
correlation between variations in the Corporation’s stock price and the
compensation of the NEO.

 

Compensation Committee

 

The Corporation’s Compensation Committee (the “Committee”)
was formed by the Board of Directors on September 20, 2007, to assist the
Board in discharging the Board’s oversight responsibilities relating to the
compensation, development, succession and retention of the CEO and all senior
executives and employees, and the establishment of fair and competitive
compensation and performance incentive plans. 
The Committee’s responsibilities include the following:

 

·                  to recommend to the Board the appointment/termination
of the CEO;

 

·                  to review, at least annually and to approve corporate
goals and objectives relevant to CEO’s compensation, to evaluate the CEO’s
performance in light of those corporate goals and objectives, and to make
recommendations to the Board with respect to the CEO’s compensation level based
on that evaluation;

 

·                  to recommend to the Board the appointment, promotion,
termination and compensation of the CEO’s direct reports and other senior
officers based on recommendations from the CEO and other applicable management;

 

10

 

·                  to review IMRIS’s development and succession plans and
to review and recommend to the Board the annual corporate compensation plan and
guidelines, including compensation and benefits programs;

 

·                  to establish and monitor the terms and conditions of
stock option, stock purchase, other equity compensation plans or the Senior
Management Incentive Plan (the “SMIP”) (collectively the “Plans”) and any
related agreements and amendments to the Plans, and to act as the Board
committee responsible for administering the Plans, including reviewing,
approving and recommending to the Board awards under the Plans;

 

·                  to recommend to the Board from time to time the
amount, determination and payment of remuneration to be paid by the Corporation
to the non-executive members of the Board in light of their time commitment,
fees paid by comparable companies and their responsibilities;

 

·                  to assist the CEO by reviewing major organizational
changes and significant new human resources policies/programs or material
changes to existing human resource policies and programs and ensuring that
human resources policies are in compliance with applicable laws and
regulations;

 

·                  to produce an annual report on executive compensation
and review all executive compensation disclosure prior to its public disclosure
by the Corporation; and

 

·                  to review and monitor the overall employment environment
and consider any other human resources issues as it considers appropriate or as
may be referred to it by the Board.

 

Role of Management in Determining Compensation

 

Although the Committee is responsible for determining and, where
necessary, making recommendations to the Board on the Compensation of the
Corporation’s NEOs, the CEO and the Executive Vice President Human Resources
assist the Committee in this process. 
The CEO and Executive Vice President Human Resources assist the
Committee by compiling information to be used by the Committee in its
compensation determinations, documenting historical compensation levels and
methods used by the Corporation, reviewing and reporting on the performance of
the NEOs other than the CEO, and by compiling and assessing, where appropriate,
information respecting the compensation levels of the executive officers of
other companies comparable to the Corporation.

 

Prior to the formation of the Committee in September 2007, the
compensation plans for all senior executives, establishing their respective
base salaries, as well as the incentive compensation plans for 2007 and prior
years, had been set by the CEO, based on standard industry terms and
conditions.  The CEO was also responsible
for the establishment of both corporate and personal objectives for purposes of
evaluating the performance of the senior executives under the SMIP for those
years.

 

Elements of Executive Compensation

 

Compensation
of the Corporation’s NEOs for the fiscal year ended December 31, 2009 included
the following components:

 

·                  base salary;

 

·                  an annual cash bonus
pursuant to the SMIP;

 

·                  long term incentives in the
form of stock options granted pursuant to the SMIP or, in respect of new hires,
granted in consideration of the executive’s acceptance of an offer of
employment by the Corporation; and

 

·                  retirement benefits under
the Corporation’s defined contribution plan.

 

11

 

The
Corporation believes that these elements of compensation, when combined,
provide an appropriate mix of conventional and incentive-based
compensation.  The base salary, on the
one hand, provides for a stable income while the incentive compensation under
the SMIP and the Option Plan (as described below) provide an important mix of
both short-term incentive in the form of an annual cash bonus and a longer term
incentive in the form of stock options.

 

Base Salary

 

The
base salary of the NEOs, other than the CEO, was determined by the CEO prior to
the formation of the Compensation Committee in 2007, and was established at
levels to be able to attract the qualified executives and generally consistent
with the compensation offered at that time for similar roles at comparable
companies.  Further, the Corporation
recognizes that the NEOs function as an integrated team and therefore the base
salaries were established such that individuals with a similar level of
responsibility were treated comparably to one another.

 

Prior to the closing of the initial public offering of our shares on November 2,
2007, the CEO did not receive any base salary or annual cash bonus.  In lieu thereof he was granted stock
options.  In conjunction with the
completion of the initial public offering, the Committee met informally to
determine an appropriate compensation plan and employment agreement for the
CEO, which took effect from the date of the closing of the initial public
offering.  In establishing the
compensation plan for the CEO, the Committee took into consideration the
compensation levels for the other senior executives of the Corporation as well
as general market rates for similar positions.

 

The
base salaries of the Corporation’s NEOs as at December 31, 2009 are set
out in the table below.  There were no
changes to the base salaries of the NEOs during the 2009 year.

 

	
  Name

  	
   

  	
  Title

  	
   

  	
  Base salary

  ($)

  	
   

  
	
  H. David Graves

  	
   

  	
  Chairman and CEO

  	
   

  	
  400,000

  	
   

  
	
  Kelly McNeill(1)

  	
   

  	
  Executive Vice President
  Finance and Administration and CFO

  	
   

  	
  220,000

  	
   

  
	
  Ronald Sabourin (2)

  	
   

  	
  Executive Vice President
  Finance and Administration and CFO

  	
   

  	
  240,000

  	
   

  
	
  Denis Sutton

  	
   

  	
  Executive Vice President
  Human Resources

  	
   

  	
  236,000

  	
   

  
	
  Ram Liebenthal

  	
   

  	
  Executive Vice President
  Marketing

  	
   

  	
  240,000

  	
   

  
	
  Ed Richmond(3)

  	
   

  	
  President and Chief
  Operating Officer

  	
   

  	
  300,000

  	
   

  

 

(1)          Mr. McNeill  assumed the assumed  the role of Executive Vice President Finance and Administration and
Chief Financial Officer of the Corporation effective September 21, 2009

(2)          Mr. Sabourin retired from the
Corporation in September 2009.

(3)          Mr. Richmond moved from the role of
Executive Vice President Customer Solutions to the roles of President and Chief
Operating Officer in January 2010.

 

12

 

Senior Management Incentive Plan (SMIP)

 

The Corporation introduced the SMIP in 2007 to provide for both short
and long term incentives for personal and corporate performance.  The incentives provided under the SMIP
provide a variable component in the executive compensation to motivate
executive performance, to ensure that it is aligned with the Corporation’s
overall performance, and to recognize the executive’s initiatives to improve
the operational efficiency and execution of strategic initiatives to grow the
Corporation.

 

The SMIP provides for an overall bonus expressed as a target percentage
of the base salary of the executive, which is 40% in respect of the CEO and 30%
in respect of the other NEOs, based on the achievement of both personal and
corporate objectives compared to targets established annually by the Committee.  The SMIP establishes certain thresholds to
determine the achievement of the corporate objectives, and further provides
that the executives may earn up to 150% of the targeted incentives where the
performance targets are exceeded.

 

The SMIP is weighted 50% toward the attainment of corporate objectives
and 50% toward the attainment of personal objectives.  The corporate objectives are established by
the Committee on an annual basis taking into consideration the strategic and
tactical goals of the Corporation.  For
2009, these included the attainment of targeted order bookings, recognized
revenues, gross margin percentages and operating income levels.

 

Amounts earned under the SMIP for a fiscal year are awarded in the next
year after the approval of the annual Financial Statements by the Board.  The award, at the option of the executive,
may include a short-term incentive in the form of an annual cash bonus and/or a
long-term incentive in the form of stock options granted pursuant to the terms
of the Option Plan (see below).  Where
the award or portion of the award is satisfied through the grant of stock
options, the number of options granted are equal to the total value of the
applicable cash component, determined using a derivative of the Black Scholes
option value at the beginning of the year.

 

The Committee’s assessment of personal performance involves a subjective
judgement that takes into account many factors, including the NEOs’ ability to
manage their respective functional organizations as well as their ability to
meet performance objectives set for their area of responsibility.  For the 2009 year, the Committee recognized
the group efforts of the executive team as a whole, and set the cash bonus and
long-term option awards for each of the executives at 69% of the targeted
incentive awards for the year.

 

The following table sets out the cash bonuses and long term incentives
awarded to the NEOs in February 2010 in respect of the 2009 year.  The exercise price of the options granted
will be based on the closing price of the common shares on the date of award.

 

	
  Name

  	
   

  	
  Cash bonus

  ($)

  	
   

  	
  Stock options

  granted

  (#)

  	
   

  
	
  H. David Graves(1)

  	
   

  	
  135,200

  	
   

  	
  nil

  	
   

  
	
  Ronald Sabourin(3)

  	
   

  	
  45,630

  	
   

  	
  nil

  	
   

  
	
  Kelly McNeill(2)

  	
   

  	
  —

  	
   

  	
  13,943

  	
   

  
	
  Denis Sutton(2)

  	
   

  	
  —

  	
   

  	
  59,826

  	
   

  
	
  Ram Liebenthal(2)

  	
   

  	
  —

  	
   

  	
  60,840

  	
   

  
	
  Ed Richmond(4)

  	
   

  	
  38,025

  	
   

  	
  38,025

  	
   

  

 

(1)          Mr. Graves opted for 100% of the
SMIP to be paid in cash.

(2)          NEO opted to for 100% of the SMIP to be
satisfied with a stock option grant

(3)          Mr. Sabourin, as part of his
retirement contract in September 2009, was eligible for a pro-rata portion
of the bonus to be paid in cash.

(4)          Mr. Richmond opted to split evenly
his SMIP between a cash bonus and stock options.

 

13

 

Stock Option Plan

 

The
Corporation has established an employee stock option plan (the “Option Plan”)
for employees, directors, officers and consultants that governs all options
granted to date and all future option grants made under the Option Plan.  The Option Plan was established to provide
additional incentives to attract, retain and motivate our directors, officers,
employees and consultants.

The
Corporation generally grants options to all employees, including its
executives, under the Option Plan at the time they are hired, as well as
additional options for performance under the SMIP as described in the preceding
section.  The Corporation believes that
the grant of options under the Option Plan comprises an important element of
the executives’ compensation.  The
Committee believes this is appropriate because it creates a strong correlation
between variations in the share price and the compensation of its executives
thereby aligning their interests with those of the Corporation’s
shareholders.  The options also vest over
time, and have a term of six years, which encourages the long-term retention of
the Corporation’s executive officers and employees.  For more information on the terms and
conditions of the Plan please refer to the section entitled Stock Option Plan.

 

The
Committee considers a number of factors when determining the number of options
to be granted to executives upon their recruitment.  One such factor is the number of options
granted to executives in the past, which is reviewed to ensure that individuals
with a similar level of responsibility are treated comparably.  The Committee also considers the number of
options remaining or available to be granted under the Option Plan at the time
of grant and therefore available for future grants for either recruitment or
incentive purposes.

 

The
options to be granted under the SMIP are considered annually as described in
the preceding section.

 

The
options granted to the NEOs during the 2009 year included options granted at
the time of recruitment of one NEO as well as the award of options in March 2009
in respect of performance awards under the SMIP for 2008 as reflected in the
following table.

 

	
  Name

  	
   

  	
  Options

  granted at

  time of hire

  (#)

  	
   

  	
  Options

  granted in

  respect of 2008

  SMIP

  (#)

  	
   

  	
  Date of grant

  	
   

  	
  Option

  exercise

  price

  ($)

  	
   

  
	
  H. David Graves

  	
   

  	
  —

  	
   

  	
  18,939

  	
   

  	
  February 27, 2009

  	
   

  	
  $

  	
  2.01

  	
   

  
	
  Ronald Sabourin

  	
   

  	
  —

  	
   

  	
  8,522

  	
   

  	
  February 27, 2009

  	
   

  	
  $

  	
  2.01

  	
   

  
	
  Kelly McNeill

  	
   

  	
  100,000

  	
   

  	
  —

  	
   

  	
  November 5, 2009

  	
   

  	
  $

  	
  5.60

  	
   

  
	
  Denis Sutton

  	
   

  	
  —

  	
   

  	
  8,380

  	
   

  	
  February 27, 2009

  	
   

  	
  $

  	
  2.01

  	
   

  
	
  Ram Liebenthal

  	
   

  	
  —

  	
   

  	
  8,522

  	
   

  	
  February 27, 2009

  	
   

  	
  $

  	
  2.01

  	
   

  
	
  Ed Richmond

  	
   

  	
  —

  	
   

  	
  10,653

  	
   

  	
  February 27, 2009

  	
   

  	
  $

  	
  2.01

  	
   

  

 

Retirement Benefits

 

The
Corporation maintains a defined contribution pension plan for all its
employees, including the NEOs.  Under the
plan, the NEO may make contributions of up to 6 per cent of the NEO’s base
salary, subject to statutory limits, and the Corporation matches 50% of the NEO’s
contributions.  All contributions to the
plan, whether the individual’s contribution or the Corporations matching
contribution, vest in favor of the NEO immediately.

 

During
2009, only three of the NEOs participated in the defined contribution pension
plan.

 

14

 

Employment Agreements

 

Each of the NEOs as at December 31, 2009 is
party to an employment agreement with the Corporation that provides for
payments and benefits on the involuntary termination of such executive without
cause.  The agreements have an indefinite term,
subject to certain termination provisions within the agreement.  The agreements provide for a base salary and
enrolment in the SMIP.  The agreements
contain non-solicitation and non-competition covenants in favor of the
Corporation which apply during the term of the executive’s employment and for a
period of 12 months (24 months in the case of the CEO) following the
termination of employment.  The
agreements also contain non-disclosure covenants in favor of the Corporation
which apply indefinitely.  In addition,
the agreements provide that if the executive is terminated for any reason other
than for cause, they will receive an amount equal to one year’s base salary
plus any earned bonus.  The executives
will also receive benefits, excepting long-term disability insurance, for one
year following termination, or alternatively will receive one or more payments
equal to the cost of replacing the benefits for the same period.

 

In addition to the above, in the event of
termination of employment of Mr. Richmond, should Mr. Richmond remain
unemployed twelve months after the date of termination, the Corporation would
continue to provide Mr. Richmond with a base salary and enrolment in the
benefits plan until the earlier of his employment with another company or one
additional year.

 

All unvested stock options previously granted to the
NEOs would lapse upon the termination of employment and the vested options
would remain exercisable for a period of 90 days after termination before
expiring.

 

In
the case of a change of control of the Corporation, all of the executive’s
outstanding options will vest, to the extent that they were previously
unvested.

 

Performance Graph

 

On November 2, 2007, the
Corporation completed its initial public offering and the Common Shares began
trading on TSX under the symbol IM.  The
following graph compares the percentage change in the cumulative total
shareholder return on the Common Shares with the cumulative total return of the
S&P/TSX Composite Total Return Index for the period commencing on November 2, 2007 (the date that the
Common Shares began trading on the TSX) and ending on December 31, 2009.

 

 

Cumulative Total Return on CDN $100 Investment

 

	
   

  	
   

  	
  November 2, 2007

  	
   

  	
  December 31, 2007

  	
   

  	
  December 31, 2008

  	
   

  	
  December 31, 2009

  	
   

  
	
  Common Shares

  	
   

  	
  $

  	
  100

  	
   

  	
  $

  	
  99.50

  	
   

  	
  $

  	
  25.00

  	
   

  	
  $

  	
  88.33

  	
   

  
	
  S&P/TSX Total Return Index

  	
   

  	
  $

  	
  100

  	
   

  	
  $

  	
  96.25

  	
   

  	
  $

  	
  62.53

  	
   

  	
  $

  	
  81.73

  	
   

  

 

15

 

Summary Compensation Table

 

The following table sets forth all compensation
earned in respect of the individuals who were, at any time during 2009 the
Chief Executive Officer or the Chief Financial Officer, and the three other
most highly compensated executive officers during the year (collectively, the “Named Executive Officers” or “NEOs”) of the Corporation.

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Non-equity
  incentive

  plan compensation

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name and principal

  position

  	
   

  	
  Year

  	
   

  	
  Salary

  	
   

  	
  Share-

  based

  awards

  	
   

  	
  Option based

  awards(1)(2)

  	
   

  	
  Annual

  incentive

  plans

  	
   

  	
  Long

  term

  incentive

  plans

  	
   

  	
  Pension

  value(3)

  	
   

  	
  All other

  compensation

  	
   

  	
  Total

  compensation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  ($)

  	
   

  	
  ($)

  	
   

  	
  ($)

  	
   

  	
  ($)

  	
   

  	
  ($)

  	
   

  	
  ($)

  	
   

  	
  ($)

  	
   

  	
  ($)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H. David Graves(4)

  	
   

  	
  2009

  	
   

  	
  415,385

  	
   

  	
  —

  	
   

  	
  19,128

  	
   

  	
  135,200

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  569,713

  	
   

  
	
  Chief Executive

  	
   

  	
  2008

  	
   

  	
  400,000

  	
   

  	
  —

  	
   

  	
  53,867

  	
   

  	
  46,400

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  500,267

  	
   

  
	
  Officer

  	
   

  	
  2007

  	
   

  	
  55,385

  	
   

  	
  —

  	
   

  	
  1,155,000

  	
   

  	
  80,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,290,385

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ronald Sabourin(5)

  	
   

  	
  2009

  	
   

  	
  184,615

  	
   

  	
  —

  	
   

  	
  8,607

  	
   

  	
  45,630

  	
   

  	
  —

  	
   

  	
  7,000

  	
   

  	
  12,462

  	
   

  	
  258,314

  	
   

  
	
  Executive Vice

  	
   

  	
  2008

  	
   

  	
  240,000

  	
   

  	
  —

  	
   

  	
  24,240

  	
   

  	
  20,880

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  285,120

  	
   

  
	
  President Finance and

  	
   

  	
  2007

  	
   

  	
  238,846

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  36,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  274,846

  	
   

  
	
  Administration, Chief

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financial Officer and

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kelly McNeill(6)

  	
   

  	
  2009

  	
   

  	
  63,462

  	
   

  	
  —

  	
   

  	
  284,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  347,462

  	
   

  
	
  Executive Vice

  	
   

  	
  2008

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  President Finance and

  	
   

  	
  2007

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Administration, Chief

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financial Officer and

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Denis Sutton(7)

  	
   

  	
  2009

  	
   

  	
  245,077

  	
   

  	
  —

  	
   

  	
  8,464

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  7,352

  	
   

  	
  —

  	
   

  	
  260,893

  	
   

  
	
  Executive Vice

  	
   

  	
  2008

  	
   

  	
  232,616

  	
   

  	
  —

  	
   

  	
  16,833

  	
   

  	
  20,532

  	
   

  	
  —

  	
   

  	
  5,668

  	
   

  	
  —

  	
   

  	
  275,649

  	
   

  
	
  President Human

  	
   

  	
  2007

  	
   

  	
  174,808

  	
   

  	
  —

  	
   

  	
  59,200

  	
   

  	
  25,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  259,008

  	
   

  
	
  Resources

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ram Liebenthal(8)

  	
   

  	
  2009

  	
   

  	
  249,231

  	
   

  	
  —

  	
   

  	
  8,607

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  7,477

  	
   

  	
  —

  	
   

  	
  265,315

  	
   

  
	
  Executive Vice

  	
   

  	
  2008

  	
   

  	
  230,769

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  20,880

  	
   

  	
  —

  	
   

  	
  3,046

  	
   

  	
  30,000

  	
   

  	
  284,695

  	
   

  
	
  President Marketing

  	
   

  	
  2007

  	
   

  	
  64,615

  	
   

  	
  —

  	
   

  	
  361,800

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  426,415

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Edward Richmond(9)

  	
   

  	
  2009

  	
   

  	
  311,539

  	
   

  	
  —

  	
   

  	
  10,760

  	
   

  	
  38,025

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  34,615

  	
   

  	
  394,939

  	
   

  
	
  President and Chief

  	
   

  	
  2008

  	
   

  	
  300,000

  	
   

  	
  —

  	
   

  	
  30,300

  	
   

  	
  26,100

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  356,400

  	
   

  
	
  Operating Officer

  	
   

  	
  2007

  	
   

  	
  300,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  50,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  350,000

  	
   

  

 

(1)          The Corporation grants options to all of
its executive officers and its employees generally at the time they commence
employment with the Corporation.  The
Corporation grants options to its executive officers under the Senior
Management Incentive Program.  The
valuation of these option based awards is based on the value determined under
the Black Scholes option valuation model at the time of the grant.  For accounting purposes, the option value
would be recorded in the financial statements over the vesting period of the
options.

(2)          In addition to the option based awards
reflected in the above table, the Named Executive Officers were awarded options
under the 2009 Senior Management Incentive Plan on February 26, 2010, as
follows:

 

	
   

  	
  Kelly McNeill

  	
  13,943 options

  	
  valued at
  $42,944

  	
   

  
	
   

  	
  Denis Sutton

  	
  59,826 options

  	
  valued at
  $184,264

  	
   

  
	
   

  	
  Ram Liebenthal

  	
  60,840 options

  	
  valued at
  $187,387

  	
   

  
	
   

  	
  Edward Richmond

  	
  38,025 options

  	
  valued at
  $117,117

  	
   

  

 

(3)          These entries represent amounts
contributed by the Corporation under the Defined Contribution Plan described
above.

(4)          Mr. Graves did not receive a salary
prior to the closing of the Corporation’s initial public offering on November 2,
2007.  During 2007, upon the closing of
the initial public offering, Mr. Graves received two grants of options; i)
a grant of 100,000 fully vested options at $6.00 per share in exchange for the
cancellation of 1,000,000 un-vested options previously granted to Mr. Graves
at $2.25 per share, and ii) a grant of 400,000 options at $6.00 per share which
vest in accordance with the Plan.  The
above table reflects the aggregate value of these option grants in 2007 and
excludes the value of the previous options that were replaced by their grant.

(5)          Mr. Sabourin retired from his role
as Executive Vice President Finance and Administration and Chief Financial
Officer in September 2009.   The
amount recorded in Other Compensation represents earned vacation paid in cash.

 

16

 

(6)         Mr. McNeill joined the Corporation
in September 2009.  Mr. McNeill
received 100,000 stock options upon commencement of employment at a price of
$5.60 per share and carried an option value of $284,000.

(7)         Mr. Sutton joined the Corporation in
March 2007.

(8)         Mr. Liebenthal joined the
Corporation in October 2007 and relocated to Canada in 2009.  The amount reflected under all other
compensation for Mr. Liebenthal resulted from a relocation allowance paid
to him during the year.

(9)         Mr. Richmond joined the Corporation
in October 2006.  The amount
recorded in Other Compensation represents earned vacation paid in cash.

 

The Corporation did
not have a pension plan prior to 2008 and has never granted stock appreciation
rights to any of its directors, officers or employees.

 

Outstanding Option Based Awards

 

The following table sets out all of the options that had been granted
and are outstanding to any of the Named Executive Officers as at December 31,
2009.

 

	
   

  	
   

  	
  Options based awards

  	
   

  
	
   

  	
   

  	
  Number of

  securities

  underlying

  unexercised

  options

  	
   

  	
  Option

  exercise

  price

  	
   

  	
  Option

  	
   

  	
  Value of

  unexercised

  in the money

  options

  	
   

  
	
  Name

  	
   

  	
  (#)

  	
   

  	
  ($)

  	
   

  	
  expiration date

  	
   

  	
  ($)

  	
   

  
	
  H. David Graves

  	
   

  	
  500,000

  	
   

  	
  6.00

  	
   

  	
  November
  2, 2013

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  26,667

  	
   

  	
  5.00

  	
   

  	
  March
  7, 2014

  	
   

  	
  8,000

  	
   

  
	
   

  	
   

  	
  18,939

  	
   

  	
  2.01

  	
   

  	
  February
  27, 2015

  	
   

  	
  62,309

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ronald Sabourin(1)

  	
   

  	
  160,000

  	
   

  	
  0.97

  	
   

  	
  May
  20, 2011

  	
   

  	
  692,800

  	
   

  
	
   

  	
   

  	
  12,000

  	
   

  	
  5.00

  	
   

  	
  March
  7, 2014

  	
   

  	
  3,600

  	
   

  
	
   

  	
   

  	
  8,522

  	
   

  	
  2.01

  	
   

  	
  February
  27, 2015

  	
   

  	
  28,037

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kelly McNeill

  	
   

  	
  100,000

  	
   

  	
  5.60

  	
   

  	
  November
  5, 2015

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Denis Sutton

  	
   

  	
  160,000

  	
   

  	
  2.25

  	
   

  	
  March
  7, 2013

  	
   

  	
  488,000

  	
   

  
	
   

  	
   

  	
  8,333

  	
   

  	
  5.00

  	
   

  	
  March
  7, 2014

  	
   

  	
  2,500

  	
   

  
	
   

  	
   

  	
  8,380

  	
   

  	
  2.01

  	
   

  	
  February
  27, 2015

  	
   

  	
  27,570

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ram Liebenthal

  	
   

  	
  100,000

  	
   

  	
  6.00

  	
   

  	
  November
  2, 2013

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  60,000

  	
   

  	
  5.65

  	
   

  	
  December
  5, 2013

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  8,522

  	
   

  	
  2.01

  	
   

  	
  February
  27, 2015

  	
   

  	
  28,037

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Edward Richmond

  	
   

  	
  750,000

  	
   

  	
  2.25

  	
   

  	
  October
  16, 2012

  	
   

  	
  2,287,500

  	
   

  
	
   

  	
   

  	
  15,000

  	
   

  	
  5.00

  	
   

  	
  March
  7, 2014

  	
   

  	
  4,500

  	
   

  
	
   

  	
   

  	
  10,653

  	
   

  	
  2.01

  	
   

  	
  February
  27, 2015

  	
   

  	
  35,048

  	
   

  

 

(1)              Mr. Sabourin retired from his role
as Executive Vice President Finance and Administration and Chief Financial
Officer in September 2009.  As part
of his consulting contract post retirement, Mr. Sabourin’s current options
will continue to vest under the current terms and remain eligible for exercise
until May 20, 2011.  

 

17

 

Incentive Plan Awards — Value
Vested or Earned During the Year

 

The following table sets out the value of incentives earned by the NEOs
or vested in their favor during the 2009 year.

 

	
  Name

  	
   

  	
  Option based

  awards – value

  vested during the

  year(1)

  ($)

  	
   

  	
  Share based

  awards – value

  vested during

  the year

  ($)

  	
   

  	
  Non-equity incentive

  plan compensation –

  value earned during

  the year

  ($)

  	
   

  
	
  H. David Graves

  	
   

  	
  917

  	
   

  	
  —

  	
   

  	
  135,200

  	
   

  
	
  Ronald Sabourin 

  	
   

  	
  36,203

  	
   

  	
  —

  	
   

  	
  45,630

  	
   

  
	
  Kelly McNeill

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Denis Sutton

  	
   

  	
  81,687

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Ram Liebenthal

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Edward Richmond

  	
   

  	
  314,625

  	
   

  	
  —

  	
   

  	
  38,025

  	
   

  

 

(1)            The value of options based
awards vested during the year is calculated as the difference in fair market
value of the shares and the exercise price per share on the date they vested in
favor of the NEO.

 

Pension
Plan Benefits - Defined Contribution Plan

 

The following table sets out contributions and year end values of the
defined contribution pension plan for the NEOs as at December 31, 2009.

 

	
  Name

  	
   

  	
  Accumulated

  value at start of

  year

  ($) (1)

  	
   

  	
  Compensatory

  ($)

  	
   

  	
  Non-

  compensatory

  change

  ($)

  	
   

  	
  Accumulated

  value year end

  ($)

  	
   

  
	
  H. David Graves(2)

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Ronald Sabourin(3)

  	
   

  	
  —

  	
   

  	
  7,000

  	
   

  	
  20,000

  	
   

  	
  27,000

  	
   

  
	
  Kelly McNeill(2)(4)

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Denis Sutton

  	
   

  	
  15,474

  	
   

  	
  7,352

  	
   

  	
  18,996

  	
   

  	
  41,822

  	
   

  
	
  Ram Liebenthal

  	
   

  	
  8,572

  	
   

  	
  7,477

  	
   

  	
  19,140

  	
   

  	
  35,189

  	
   

  
	
  Edward Richmond(2)

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  

 

(1)            The Corporation began its
defined contribution plan on March 1, 2008.

(2)            Voluntarily chose not to
participate in the plan during the year.

(3)            Mr. Sabourin retired
from the Corporation in September 2009. 
The accumulated value at December 31, 2009 was estimated

(4)            Mr. McNeill joined the Corporation in September 2009.

 

Termination
and Change of Control Benefits

 

Each of the NEOs is party to
an employment agreement with the Corporation that sets forth certain instances
where payments and other obligations arise upon termination of their employment
and/or upon a change of control.

 

18

 

These employment agreements
provide for the following payments and benefits upon termination without just
cause:

 

·                  A lump sum
payment in respect of twelve months base salary, and

·                  A lump sum
payment in respect of any earned bonus to the date of termination.

·                  In addition,
the NEO is entitled to continue to receive benefits under the Corporation’s
employee group benefit plans, save and except for long term disability, for a
period of one year or the NEO would be entitled to a payment equal to the cost
of replacing such benefits for that period.

 

In addition to the above, in
the event of termination of employment of Mr. Richmond, should Mr. Richmond
remain unemployed twelve months after the date of termination, the Corporation
would continue to provide Mr. Richmond with a base salary and enrolment in
the benefits plan until the earlier of his employment with another company or
one additional year.

 

All unvested stock options
previously granted to the NEOs would lapse upon the termination of employment
and their vested options would remain exercisable for a period of 90 days after
termination before expiring.

 

In addition to the above, in
the event of a change of control of the Corporation, all of the options
previously granted to the NEOs would immediately vest in favor of the NEO.

 

Payments
on Termination

 

The following table provides
details regarding the estimated incremental payments from the Corporation to
each of the NEOs assuming termination on December 31, 2009.  Mr. Sabourin retired from the
Corporation in September 2009 and there were no payments made to Mr. Sabourin
for salary or benefits past the date of termination of employment.

 

	
  Name

  	
   

  	
  Annual base

  salary

  ($)

  	
   

  	
  Estimated

  bonus based

  on 2009

  awards(2)

  ($)

  	
   

  	
  Estimated

  value of

  benefits

  ($)

  	
   

  
	
  H. David Graves

  	
   

  	
  400,000

  	
   

  	
  135,200

  	
   

  	
  3,847

  	
   

  
	
  Ronald Sabourin

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Kelly McNeill

  	
   

  	
  220,000

  	
   

  	
  13,942

  	
   

  	
  3,847

  	
   

  
	
  Denis Sutton

  	
   

  	
  236,000

  	
   

  	
  59,826

  	
   

  	
  3,847

  	
   

  
	
  Ram Liebenthal

  	
   

  	
  240,000

  	
   

  	
  60,840

  	
   

  	
  3,847

  	
   

  
	
  Ed Richmond(1)

  	
   

  	
  300,000

  	
   

  	
  76,050

  	
   

  	
  3,847

  	
   

  

 

(1)             In addition to the above, in
the case of termination of employment of Mr. Richmond, in the event that Mr. Richmond
remains unemployed twelve months after the date of termination, the Corporation
shall continue to provide Mr. Richmond with a base salary and enrolment in
the benefits plan until the earlier of his employment with another company or
for one additional year.

(2)             Estimated bonus includes the
cash value of incentive plan that was satisfied with the grant of stock
options.

 

Compensation of Directors

 

In 2009, the
Corporation’s non-executive directors (for the purposes of this section, the ‘‘Directors’’) received an annual cash retainer of
$30,000.  In addition, the Chair of the
Audit and Governance Committee received a $15,000 fee for serving in such
capacity and the Chair of the Compensation Committee received an additional fee
of $10,000 for serving in such capacity. 
All of the directors are eligible to recover out of pocket expenses to
attend any meetings of the directors or committees thereof.

 

19

 

All new
non-executive Directors are eligible to receive option awards.  The Corporation believes that the option
grants to Directors enable it to recruit qualified individuals to serve on the
Board and ensure they have a significant stake in the performance of the
Corporation.  The Compensation Committee
will recommend the appropriate number of options grants to any new
non-executive Directors.

 

The Compensation
Committee is responsible to review the Directors’ overall compensation
levels.  There has been no change in the
annual fees paid to Directors since the company went public on November 2,
2007.  The committee undertook a review
of the fees for 2010 and the fees will be revised in order to ensure that the
cash portion of the Corporation’s director compensation remains competitive in
the marketplace.

 

Director
Compensation Table

 

The following
table provides information regarding compensation paid to the Corporation’s
non-executive directors  during the financial year ended December 31, 2009.

 

	
  Name

  	
   

  	
  Fees earned

  ($)

  	
   

  	
  Option

  awards

  ($)

  	
   

  	
  All other

  compensation

  ($)

  	
   

  	
  Total

  ($)

  	
   

  
	
  Robert Courteau

  	
   

  	
  30,000

  	
   

  	
  28,400

  	
   

  	
  —

  	
   

  	
  58,400

  	
   

  
	
  Carey Diamond

  	
   

  	
  40,000

  	
   

  	
  28,400

  	
   

  	
  —

  	
   

  	
  68,400

  	
   

  
	
  William Fraser

  	
   

  	
  30,000

  	
   

  	
  28,400

  	
   

  	
  —

  	
   

  	
  58,400

  	
   

  
	
  Blaine Hobson

  	
   

  	
  30,000

  	
   

  	
  28,400

  	
   

  	
  —

  	
   

  	
  58,400

  	
   

  
	
  David Leslie

  	
   

  	
  45,000

  	
   

  	
  28,400

  	
   

  	
  —

  	
   

  	
  73,400

  	
   

  

 

Directors — Outstanding Unexercised Options

 

The following table sets out all of the options in favor of the
Corporation’s non-executive directors as at December 31, 2009.

 

	
   

  	
   

  	
  Options based awards

  	
   

  
	
  Name

  	
   

  	
  Number of securities
  underlying

  unexercised options

  (#)

  	
   

  	
  Option

  exercise

  price

  ($)

  	
   

  	
  Option expiration

  date

  	
   

  	
  Value of

  unexercised in

  the money

  options

  ($)

  	
   

  
	
  Robert Courteau

  	
   

  	
  35,000

  	
   

  	
  2.25

  	
   

  	
  February 2, 2013

  	
   

  	
  106,750

  	
   

  
	
   

  	
   

  	
  10,000

  	
   

  	
  5.60

  	
   

  	
  December 16, 2015

  	
   

  	
  —

  	
   

  
	
  Carey Diamond

  	
   

  	
  25,000

  	
   

  	
  6.00

  	
   

  	
  November 2, 2013

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  10,000

  	
   

  	
  5.60

  	
   

  	
  December 16, 2015

  	
   

  	
  —

  	
   

  
	
  William Fraser

  	
   

  	
  25,000

  	
   

  	
  6.00

  	
   

  	
  November 2, 2013

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  10,000

  	
   

  	
  5.60

  	
   

  	
  December 16, 2015

  	
   

  	
  —

  	
   

  
	
  Blaine Hobson

  	
   

  	
  35,000

  	
   

  	
  2.25

  	
   

  	
  February 2, 2013

  	
   

  	
  106,750

  	
   

  
	
   

  	
   

  	
  10,000

  	
   

  	
  5.60

  	
   

  	
  December 16, 2015

  	
   

  	
  —

  	
   

  
	
  David Leslie

  	
   

  	
  25,000

  	
   

  	
  6.00

  	
   

  	
  November 2, 2013

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  10,000

  	
   

  	
  5.60

  	
   

  	
  December 16, 2015

  	
   

  	
  —

  	
   

  

 

20

 

Directors - Incentive Plan Awards — Value Vested
or Earned During the Year

 

The following table sets out the value of incentives
earned by the non-executive directors or vested in their favour during the 2009
year.

 

	
  Name

  	
   

  	
  Option based awards

  – value vested during

  the year(1)

  ($)

  	
   

  	
  Share based awards

  – value vested

  during the year

  ($)

  	
   

  	
  Non-equity incentive

  plan compensation –

  value earned during

  the year

  ($)

  	
   

  
	
  Robert Courteau

  	
   

  	
  16,126

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Carey Diamond

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  William Fraser

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Blaine Hobson

  	
   

  	
  16,126

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  David Leslie

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  

 

(1)            The value of options based
awards vested during the year is calculated as the difference in fair market
value of the shares and the exercise price per share on the date they vested in
favor of the applicable director.

 

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE

 

The Corporation
maintains insurance for the benefit of its directors and officers against
liability incurred by them in their respective capacities as directors and
officers.  The current aggregate policy
limit for the Corporation’s insurance policy is $25,000,000  with deductible amounts of $50,000  with respect to corporate reimbursement
and $100,000  for securities claims payable by the Corporation.  The annual premium payable by the Corporation
in respect of such insurance is $136,000.  The premium for the policy is not allocated
between directors and officers as separate groups.  The directors and officers are not required
to pay any premium in respect of this insurance.

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY
COMPENSATION PLANS

 

The following table summarizes the number of Common
Shares authorized for issuance from treasury under the Corporation’s equity
compensation plans as at December 31, 2009.

 

	
  Plan category

  	
   

  	
  Number of securities to
  be

  issued upon exercise of

  outstanding options,

  warrants and rights (a)

  	
   

  	
  Weighted-average

  exercise price of

  outstanding options,

  warrants and rights

  	
   

  	
  Number of securities
  remaining

  available for future issuance

  under equity compensation plans

  (excluding securities reflected in

  column(a))

  	
   

  
	
  Equity compensation plans approved by the securityholders

  	
   

  	
  4,007,915

  	
   

  	
  $

  	
  3.08

  	
   

  	
  654,442

  	
   

  
	
  Equity compensation plans not approved by the securityholders

  	
   

  	
  None

  	
   

  	
  $

  	
  —

  	
   

  	
  None

  	
   

  

 

21

 

Stock Option Plan

 

The Corporation is seeking approval of the Option Plan
at this Annual and Special Meeting.  The
Option Plan provides the opportunity for long term equity based incentives, and
is a key component of the overall compensation strategy of the Corporation.

 

The Option Plan for employees, directors, officers and
consultants governs all options granted to date and all future option grants
made under the Option Plan.  The Option
Plan was established to provide additional incentives to attract, retain and
motivate our directors, officers, employees and consultants.  The Option Plan will be the Corporation’s
only securities-based compensation arrangement pursuant to which securities may
be issued from treasury of the Corporation.

 

Under the Option Plan the board of directors may, from
time to time, grant options to purchase Common Shares to directors, officers,
employees, consultants and other eligible service providers of the Corporation
and its subsidiaries and affiliates, if any. 
The Option Plan is a “15% rolling plan” in that it continuously provides
for the reservation, subject to meeting the TSX listing requirements, of a
number of Common Shares under the plan equal to 15% of the Corporation’s issued
and outstanding Common Shares on an undiluted basis.  Thus, the maximum number of Common Shares
that may be reserved under the Option Plan will, from time to time, vary
proportionately to the issued and outstanding share capital of the Corporation.  Further, the Option Plan is a “reloading plan”,
meaning that when options under the plan expire, are cancelled or are
exercised, the number of Common Shares reserved for issuance under such
expired, cancelled or exercised options automatically become eligible to be
reallocated pursuant to new stock options under the Option Plan.

 

The aggregate number of Common Shares issuable under
the Option Plan, combined with all Common Shares issuable under all other
security based compensation arrangements, to related persons cannot exceed 10%
of the issued and outstanding Common Shares at any time; and the number of
Common Shares issued to related persons in aggregate, within any one-year
period under the Option Plan and any other securities based compensation
arrangement cannot exceed 10% of the issued and outstanding Common Shares.

 

The exercise price of the Common Shares subject to
each option shall be determined by the Compensation Committee of the Board of
Directors of the Corporation at the time the option is granted and shall be
equal to the closing price of the Common Shares on the TSX immediately
preceding the time of grant (“Fair Market Value”).

 

Options granted under the Option Plan generally vest
over a four-year period and may be exercised in whole or in part at any time as
follows: 25% on or after the first anniversary of the grant date and an
additional 6.25% on the first day of each calendar quarter following the first
anniversary of the grant (so that 100% of the options shall have vested on the
fourth anniversary of the date of the grant). Options expire on the sixth
anniversary of the date of the grant; provided that, should the expiry date of
any vested option fall on, or within nine trading days immediately following, a
date upon which the participant is prohibited from exercising such option due to
a Black-out Period or other trading restriction imposed by the Corporation,
then the expiry date of such option shall instead be ten trading days following
the date the relevant Black-out Period or other trading restriction imposed by
us is lifted, terminated or removed.

 

To the extent permitted by applicable laws and the
regulations of any stock exchange on which the Common Shares may be traded, if
applicable, upon written request of a participant, the Corporation may, in its
sole discretion, permit a “cashless exercise” by allowing a participant to
satisfy the payment obligations on exercise of options by reducing the number
of Common Shares received by a participant upon exercise of options by a number
of Common Shares representing the number of Common Shares required to satisfy
the aggregate exercise price if such Common Shares were sold at the closing
price of the Common Shares on the stock exchange on which the Common Shares are
traded on the trading day immediately preceding the day on which the option is
exercised

 

Notwithstanding the vesting periods set forth above or
in a stock option agreement, in the event of a change of control (including any
transaction pursuant to which the Corporation goes out of existence, any person

 

22

 

acquires direct or indirect beneficial ownership of
greater than 50% of the voting securities, the sale of all or substantially all
of the assets, the dissolution or liquidation of the Corporation or the
occurrence of a transaction requiring approval of the shareholders involving
the acquisition of the Corporation by an entity through purchase of assets, by
amalgamation or otherwise), the board may, in its sole discretion, deal with
the options granted under the plan in the manner it deems fair and reasonable
in light of the circumstances of the transaction.  Without limiting the generality of the
foregoing, the board may, without any action or consent required on the part of
any participant:

 

(i)            accelerate the vesting of any or all
outstanding options to provide that such outstanding options shall be fully
vested and conditionally exercisable upon (or prior to) the completion of the
change in control,

 

(ii)           effect a “cashless exercise”, by applying
a portion of the proceeds that would be received by a participant from the
change in control transaction to the exercise price payable by that participant
for the exercise of his or her options, and, as applicable, issuing the balance
of the shares, or paying the balance of the proceeds, to the participant, or

 

(iii)          make such adjustments to the number and
kind of shares which thereafter may be offered and sold to participants under
the plan as it may deem equitable.

 

The Corporation’s employees, officers, directors and
consultants are entitled to participate in the Option Plan while they are
engaged with the Corporation. If a participant under the Option Plan dies or
becomes disabled while engaged with the Corporation or retires from engagement
with the Corporation or is terminated without cause, the right of that
participant (or of that participant’s legal representative) to participate in
the Option Plan terminates as of the date of death, disability, retirement or
termination, as may be applicable, but any vested options may be exercised
within 90 days of that event (unless such options terminate earlier pursuant to
their terms) and any unvested options terminate immediately on the date of that
event. If a participant under the Option Plan is terminated by the Corporation
for cause, all options terminate immediately on the date of that
termination.  In the event that a
participant has violated any obligations to the Corporation set out in any
agreements with the Corporation (or applicable at law) then all unexercised
options which have otherwise vested in the participant shall become immediately
null and void and neither exercisable nor enforceable.

 

Except in the event of the death of a participant, in
which case the vested options may be exercised for 90 days after the
participant’s death by his or her personal representatives, options granted
under the Option Plan may only be exercised during the lifetime of a
participant by such participant personally. 
No assignment or transfer of options, whether voluntary, involuntary, by
operation of law or otherwise, vests any interest or right in such options
whatsoever in any assignee or transferee and immediately upon any assignment or
transfer, or any attempt to make the same, such options will terminate and be
of no further force or effect.

 

The Option Plan is administered by the Compensation
Committee, which has authority and discretion, subject to the express
provisions of the Option Plan, to interpret the Option Plan, to amend the
Option Plan and to make all other determinations deemed necessary or advisable
for the administration of the Option Plan. 
The board shall have the right, in its sole discretion, to amend,
suspend or terminate the Option Plan or any portion thereof at any time, in
accordance with applicable legislation, without obtaining the approval of
shareholders; provided that any amendment to any provision of the Option Plan
will be subject to any required regulatory approval, stock exchange rules and
the provisions of applicable law, if any, that require the approval of shareholders.  Since the Common Shares are listed for
trading on the Toronto Stock Exchange, the Corporation is required to obtain
the approval of its shareholders for any amendment related to:

 

(i)            increasing the maximum number or
percentage of Common Shares which are reserved for issuance under the Option
Plan,

 

(ii)           reducing the exercise price for
outstanding options or cancelling options for the purpose of issuing new
options,

 

(iii)          extending the term of any outstanding
options benefiting an insider of the Corporation,

 

23

 

(iv)          increasing limits on non-employee
director participation,

 

(v)           increasing the number of Common Shares
reserved for issuance to any one person under the plan, and

 

(vi)          amending the plan to allow an option
holder to transfer options other than by will or pursuant to laws of
succession.

 

As at the date of this circular, there were
outstanding options granted pursuant to the plan to purchase up to an aggregate
of 4,253,421  Common Shares or 13.0% of the outstanding
Common Shares and 186,052 options which were exercised or 0.6% of the
outstanding Common Shares.  The Option
plan is a “rolling” option plan and options up to 15% of the outstanding Common
Shares have been authorized under the plan. 
As a result, this number will increase if and as the issued and
outstanding share capital of the Corporation increases.

 

INDEBTEDNESS
OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS

 

There was no indebtedness owed to the Corporation
during the fiscal year ended December 31, 2009 by any individual who was a
director, executive officer and senior officer of the Corporation (and any
associate of the foregoing).

 

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

 

H. David Graves, the Chief Executive Officer and
Chairman of the board of directors of IMRIS, exercises control over Norpine
Holdings Inc. (“Norpine”), a significant shareholder of IMRIS.  IMRIS was incorporated by Mr. Graves in May 2005
to acquire the assets of Innovative Magnetic Resonance Imaging Systems
Inc.  Other than Mr. Graves, no
director, executive officer or shareholder who beneficially owns, directly or
indirectly, or exercises control or direction over more than 10% of the
outstanding Common Shares of IMRIS or known associate or affiliate of any such
person, has or had any material interest, direct or indirect, in any
transaction within the last three years or in any proposed transaction, that
has materially affected or will materially affect IMRIS.

 

IMRIS leases air travel time from 5343381 Manitoba
Ltd., a company which is wholly owned by Mr. Graves.  The amount charged to travel expenses during
the year ended December 31, 2009 with respect to transactions with this
related party totaled $740,940 (2008 - $382,832) and were transacted on a cost
recovery basis and recorded at the exchange amount.  The payable balance owing to 5343381 Manitoba
Ltd. as at December 31, 2009 was $Nil (2008 - $41,580).  Management has compared the amounts paid by
IMRIS for these services against the amounts charged by third parties for
similar services and has concluded that the rates charged by 5343381 Manitoba
Ltd. are competitive with market rates. 
Management monitors the competitiveness of these rates and may obtain
similar services from a third party should they become available at lower
rates.

 

The Corporation
contracts consulting services from Hobson Equities Inc. which is controlled by
Blaine Hobson, a director of IMRIS Inc. 
The amount charged to professional fees during the year ended December 31,
2009 totaled $Nil (December 31, 2008 — $96,000).  The transactions were priced using arms
length pricing and were recorded at the exchange amount.  The payable balance owing as at December 31,
2009 was $Nil (December 31, 2008 - $Nil).

 

24

 

STATEMENT OF CORPORATE GOVERNANCE PRACTICES

 

The Board and senior management of the Corporation
consider good corporate governance to be central to the effective operation of
the Corporation. As part of the Corporation’s commitment to effective corporate
governance, the Board, with the assistance of the Audit and Governance
Committee, monitors changes in legal requirements and best practices.

 

Corporate governance relates to the activities of the
Board, the members of which are elected by and are accountable to the
shareholders, and takes into account the role of the individual members of
management who are appointed by the Board and who are charged with the
day-to-day management of the Corporation. National Policy 58-201 Corporate Governance Guidelines (“NP-201”) establishes
corporate governance guidelines which apply to all public companies.  These guidelines are not intended to be
prescriptive but to be used by issuers in developing their own corporate
governance practices. Pursuant to National Policy 58-101 Disclosure of Corporate Governance Practices (“NP 58-101”)
which came into effect for financial years ending on or after June 30,
2005, the Corporation is required to disclose its corporate governance
practices.

 

The Board and the
Corporation have devoted significant attention and resources to ensuring that
the Corporation’s system of corporate governance meets or exceeds applicable
legal and stock exchange requirements. 
Of particular note, the Board together with the Corporation adopted a
Code of Business Conduct and Ethics (the “Code”)
applicable to all directors, officers and employees of the Corporation.  With input from the relevant committees, the
Board also devised the charters of the Audit and Governance Committee and the
Compensation Committee.  The Corporation’s
AIF for its 2009 fiscal year is filed on SEDAR at www.sedar.com and contains,
among other things, the full text of the charter of the Audit and Governance
Committee.

 

Set out below is a description of certain corporate
governance practices of the Corporation.

 

Board of
Directors

 

National Policy
58-201 recommends that boards of directors of reporting issuers be composed of
a majority of independent directors. With four of six of the Corporation’s
current directors considered independent, the Board is composed of a majority
of independent directors.  The four
independent directors are: Robert Courteau, Carey Diamond, William Fraser and
David Leslie.  Two directors have
material relationships with the Corporation and are therefore not independent.
David Graves, President and Chief Executive Officer of the Corporation, is
considered to have a material relationship with the Corporation by virtue of
his executive officer position and shareholdings.  Blaine Hobson, a director of the Corporation,
is considered to have a material relationship with the Corporation by virtue of
consulting services that Mr. Hobson has provided to the Corporation in
2008.

 

The Corporation
takes steps to ensure that adequate structures and processes are in place to
permit the Board to function independently of management.  The independent directors are encouraged to
hold meetings and/or discussions without the attendance of management if and
when necessary, including during or after the regularly scheduled quarterly
Board meetings.  The Audit and Governance
Committee also has discussions with the auditors without management
present.  The independent directors have
unfettered access to information regarding the Corporation’s activities, and
have the ability to engage outside advisors and the power to meet independently
of Management.

 

The Chairman of the Board is
considered to have a material relationship with the Corporation by virtue of
being the Chief Executive Officer of the Corporation and is therefore deemed
not to be an independent director by NP 58-101. 
However, given the background of the current Chairman and the role of
the chair in ensuring that adequate and proper information is made available to
the Board, a crucial element for effective corporate governance, in the Board’s
view the role of chair is best filled by the Chairman who has intimate
knowledge of the Corporation.

 

25

 

Board Mandate

 

The Board is responsible for the overall stewardship
of the Corporation.  The Board discharges
this responsibility directly and through delegation of specific
responsibilities to committees of the Board, the Chairman and officers of the
Corporation, all as more particularly described in the Board Mandate adopted by
the Board.

 

As set out in the Board Mandate, the Board has
established two committees to assist with its responsibilities: the Audit and
Governance Committee; and the Compensation Committee.  Each of the Audit and Governance Committee
and the Compensation Committee has a charter defining its
responsibilities.  The Board does not
have an executive committee.

 

The Board Mandate is attached as Appendix “B” to this
Circular.

 

Audit and Governance Committee

 

The directors have appointed an Audit and Governance
Committee consisting of entirely of independent directors, being, Carey
Diamond, William Fraser and David Leslie, all of whom are financially literate
within the meaning of Multilateral Instrument 52-110 (Audit Committees).  The responsibilities and mandate of the Audit
and Governance Committee are set out in an Audit and Governance Committee
Charter.  The primary purposes of the
Audit and Governance Committee are to:

 

·      manage, on behalf of the
Corporation’s shareholders, the relationship between the Corporation and its
external auditor and enhance the independence of the external auditor,

·      assist the board in
meeting its financial oversight responsibilities, oversee the audit and
financial reporting process and increase the credibility and objectivity of
financial reporting,

·      oversee the design,
implementation and ongoing effectiveness of a system of internal controls,

·      oversee the process by
which the Corporation assesses and manages risk, and

·      identify candidates for
director positions.

 

The Audit and Governance Committee is also responsible
for:

 

·      establishing procedures
for the receipt, retention and treatment of complaints received by the
Corporation regarding accounting practices, financial reporting, internal
accounting controls or auditing matters,

·      establishing procedures
for the confidential, anonymous submission by the Corporation’s employees of
concerns regarding questionable accounting or auditing matters, and

·      monitoring compliance
with the Corporation’s Whistleblower Protection Policy on Financial Matters.

 

The Audit and Governance Committee also takes a
leadership role in shaping the Corporation’s corporate governance practices by
overseeing and assessing the functioning of the board and the committees of the
board and developing, implementing and assessing effective corporate governance
processes and practices. It is also responsible for reviewing and recommending
the adoption of the Corporation’s strategic corporate policies, including its
Disclosure and Confidentiality Policy, Insider Trading Policy, Code of Business
Conduct and Ethics, and other relevant policies associated with ensuring an
effective system of corporate governance and for overseeing the investigation
of any alleged breach of any of these policies.

 

26

 

Compensation Committee

 

The board has appointed
a Compensation Committee consisting of three directors being Robert Courteau,
Carey Diamond and Blaine Hobson, the majority of whom are independent.  The Compensation Committee ensures the
independence of its actions by requiring the presence of a majority of
independent directors to convene any meeting of the Compensation
Committee.  The responsibilities and
mandate of the Compensation Committee are set out in a Compensation Committee
Charter.  The primary purposes of the
Compensation Committee are to:

 

·      assist the board in
discharging the board’s oversight responsibilities relating to the
compensation, development, succession and retention of the Chief Executive
Officer, President and senior management,

·      establish fair and
competitive compensation and performance incentive plans.

 

Code of
Business Conduct and Ethics

 

The Board approved the
Code of Business Conduct and Ethics (The ‘Code”) on September 20, 2007.  The
Code sets out in detail the core values and the principles by which the
Corporation is governed and addresses topics such as: honest and ethical
conduct and conflicts of interest; compliance with applicable laws and
Corporate policies and procedures; public disclosure and books and records; use
of corporate assets and opportunities; confidentiality of corporate
information; and reporting responsibilities and procedures.

 

The code has been filed
on and is accessible through SEDAR at www.sedar.com and on the Corporation’s website at www.imris.com.

 

The Board, through the
Audit and Governance Committee, receives reports on compliance with the
code.  The Board has not granted any
wavier of the Code in favour of any directors, officers or employees since the
Code was adopted by the Board. 
Accordingly, no material change has been required or filed.

 

Prior to the
Corporation entering into any “Related Transaction”, the Audit and Corporate
Governance Committee must review the transaction and recommend its approval or
rejection by the Board.  A “Related Transaction” means a
business transaction or contract between the Corporation and a party in which a
director or officer has a direct or indirect interest.  This direct or indirect interest could exist
by virtue of the following:

 

i)                 the party is the director or officer;

ii)              the director or officer, or their
relative or spouse, is on the board of directors or is an officer of the party
entering into such a business transaction with the Corporation; or

iii)          the director or officer, or their
relative or spouse, has a financial interest in the party entering into such a
business transaction with the Corporation.

 

27

 

The Board has approved a
number of policies and procedures to provide guidance to employees concerning
business conduct.  The Corporation has
created a document which references all policies and guidelines that employees
are expected to comply to.  This document
includes the following policies:

 

·      Code of Business Conduct
and Ethics

·      Corporate Disclosure and
Confidentiality Policy

·      Insider Trading Policy

·      Whistleblower Protection
Policy on Financial Matters

 

Employees are provided
these policies when starting their employment with the Corporation and are
asked to acknowledge, accept and comply with the policies.  Annually, all employees are required to read
the policies and acknowledge that they comply with the policies.

 

Board and Committee Attendance of Directors

 

Since the beginning of the financial year
ended December 31, 2009, the Board of Directors formally met five times, the
Audit and Governance Committee formally met four times, and the Compensation
Committee formally met twice in 2009.

 

Attendance records of the members of the
Board of Directors and committee members with respect to fiscal 2007 are as
follows:

 

	
  Name

  	
   

  	
  Board Meetings Attended/Scheduled

  	
   

  	
  Committee Meetings Attended/Scheduled

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H.
  David Graves

  	
   

  	
  7/7 (100%)

  	
   

  	
  N/A

  
	
  Robert
  Courteau

  	
   

  	
  7/7 (100%)

  	
   

  	
  Compensation
  (2/2 (100%))

  
	
  Carey
  Diamond

  	
   

  	
  7/7 (100%)

  	
   

  	
  Audit and
  Governance (4/4 (100%))

  Compensation
  (2/2 (100%))

  
	
  William
  Fraser

  	
   

  	
  7/7 (100%)

  	
   

  	
  Audit and
  Governance (4/4 (100%))

  
	
  Blaine
  Hobson

  	
   

  	
  7/7 (100%)

  	
   

  	
  Compensation
  (2/2 (100%))

  
	
  David
  Leslie

  	
   

  	
  6/7 (86%)

  	
   

  	
  Audit and
  Governance (3/4 (75%))

  

 

Directorships with Other Issuers

 

The Corporation and the
Board recognize the significant commitment involved in being a member of the
Board. Accordingly, the Code requires directors to notify the Chairman prior to
serving on another corporate board of directors or with any governmental
advisory or charitable organization.  The
Audit and Governance Committee is responsible for evaluating whether continued
membership on the Board is appropriate.

 

The following directors
are currently directors of other reporting issuers:

 

	
  H. David Graves

  	
  Great West Lifeco Inc
  (TSX)

  
	
  William Fraser

  	
  Craig Wireless Systems
  Ltd. (TSX)

  
	
  David Leslie

  	
  Enbridge, Inc. (TSX), Enbridge Gas Distribution
  Inc. (TSX), Sobeys Inc. (TSX), Empire Inc. (TSX) & Crombie Real
  Estate Investment Trust (TSX)

  

 

28

 

Position
Descriptions

 

Position descriptions
for the Chairs of the Audit and Governance Committee and the Compensation
Committee are set out in the mandates of each of these Committees.

 

The CEO and Chairman is
responsible for the overall management of the Corporation including directly
supervising the senior management team. 
The Board provides the CEO and Chairman with direction at regularly
scheduled Board meetings.

 

Orientation and Continuing Education

 

The Audit and Governance
Committee is responsible for the orientation and education of any new
directors.  The committee, on behalf of
the Board, ensures that every new director has the competencies, skills and
time availability required to fill the position adequately.  The Corporation provides an orientation
program to new directors.  The program
consists of reports and meetings with senior management of the Corporation to
review the business, technology and affairs.

 

The Corporation also
provides directors with continuous opportunities to increase their knowledge
and understanding of the Corporation’s business.  Briefings on strategic issues are conducted
regularly, and typically include reviews of the competitive environment, the
Corporation’s performance relative to its peers, and any other developments
that could materially affect the Corporation’s business.

 

As set out by its
charter, the Audit and Governance Committee is to at least annually, formally
review and make recommendations, on the composition of the Board and its
committees, including a review of what skills the Board, as a whole, should
possess and currently possesses.

 

Nomination of Directors

 

The Board does not have
a Nominating Committee.  These
responsibilities have been assigned to the Audit and Governance Committee under
its charter.  The committee has the
responsibility for proposing new directors to the Board.  The committee will review annually the
competencies and skills the Board, as a whole should possess and currently
possesses and review the appropriate size of the Board in order to facilitate
effective decision-making.

 

Assessments

 

The Board, its
committees and individual directors are currently not formally assessed with
respect to their effectiveness and contribution.  The Chairman of the Audit and Governance
Committee annually receives feedback from the other directors to assess the
effectiveness of the operation of the Board, its committees and individual
directors.  When required, he recommends
improvements to the Board.

 

29

 

ADDITIONAL
INFORMATION

 

Financial
information for the financial year ended December 31, 2009 is provided in
the Corporation’s consolidated financial statements and management’s discussion
and analysis (“MD&A”) which are included in
the Annual Report.  Securityholders who
wish to be added to the mailing list for the annual and interim financial
statements and MD&A should complete the appropriate sections of the proxy
or contact the Corporation’s Chief Financial Officer undersigned at 100-1370 Sony Place, Winnipeg Manitoba, R3T 1N5.

 

The Corporation’s Annual Report for the fiscal period ended December 31,
2009 (including the consolidated financial statements and
MD&A) and other information relating to the Corporation is available on
SEDAR at www.sedar.com.

 

SHAREHOLDER
PROPOSALS

 

The Canada Business Corporations Act permits certain  eligible shareholders of the Corporation to submit
shareholder proposals to the Corporation, which proposals may be included in a
management proxy circular relating to an annual meeting of shareholders, the
final day by which the Corporation must receive share holder proposals for the
next annual meeting of the shareholders of the Corporation is 90 days before March 27,
2011.

 

DIRECTORS’
APPROVAL

 

The undersigned hereby certifies that the directors of
the Corporation have approved the contents and the sending of this Circular.

 

DATED:  March 15, 2010

 

 

	
  

  	
   

  
	
   

  	
   

  
	
  H. David Graves

  	
   

  
	
  Chairman and Chief Executive Officer

  	
   

  
	
  IMRIS Inc.

  	
   

  
	
  Winnipeg, Manitoba

  	
   

  

 

30

 

APPENDIX “A”

 

IMRIS INC.

 

STOCK OPTION PLAN

 

1.             Purpose of the Plan

 

The purpose of the
Stock Option Plan (the “Plan”) is to
assist IMRIS Inc. (the “Company”) and
its subsidiaries in attracting, retaining and motivating directors, officers,
employees and consultants by providing such persons the opportunity to
participate in the growth and development of the Company, and to provide such
persons with the opportunity to acquire an increased proprietary interest in
the Company.  This
Plan amends and restates the IMRIS Inc. Second Amended and Restated Stock
Option Plan dated on or about August, 2008 (the “Prior
Plan”) in its entirety and all options
to purchase shares of the Company granted pursuant to the Prior Plan prior to
the date hereof shall, hereafter, be governed by this Plan.

 

2.             Definitions

 

In this Plan:

 

(a)           “Associate” has the meaning ascribed thereto by NI 45-106;

 

(b)           “Blackout Period” means any
period during which the then-current Insider Trading Policy of the Corporation
(or any other policy of similar intent, however named) prevents an Option
holder from exercising an option or otherwise dealing with shares of the
Company;

 

(c)           “Board” means the board of directors of the Company;

 

(d)           “Business Day” means a day, other than a Saturday or
Sunday, on which the principal commercial banks located in Toronto are open for
business during normal banking hours;

 

(e)           “Change in Control”
means the happening of any of the following events: (i) any transaction
pursuant to which (A) the Company goes out of existence or (B) any
person, or any Associate or Related Entity of such person, (other than: the
Company, a Related Entity of the
Company or an employee benefit plan of the Company (including any trustee of
such plan acting as trustee))  hereafter
acquires the direct or indirect “beneficial ownership” (as such term is defined
in the Canada  Business
Corporations Act) of securities of the Company representing 50% or
more of the aggregate voting power of all of the Company’s then issued and
outstanding securities; (ii) the sale of all or substantially all of the
Company’s assets to a person other than a person that was a Related Entity; (iii) the
dissolution or liquidation of the Company except in connection with the
distribution of assets of the Company to one or more persons which were Related
Entities prior to such event; or (iv) the occurrence of a transaction
requiring approval of the Company’s shareholders involving the acquisition of
the Company by an entity through purchase of assets, by amalgamation or otherwise;

 

(f)            “Closing Price” means the
closing price of the Common Shares on the Exchange on the indicated trading
day, provided that if there were no trades of the Common Shares on such trading
day, the Closing Price shall mean the average of the bid and ask prices in
respect of the Common Shares at the close of trading on such trading day;

 

31

 

(g)           “Committee” means the compensation committee appointed by the
Board to administer the Plan.  All
references in the Plan to the Committee shall mean the Board if no committee
has been appointed or if the Board acts in the compensation committee’s stead;

 

(h)           “Common Shares” means the common shares of the Company, or,
in the event of an adjustment contemplated in Section 9 hereof, such other
shares to which a Participant may be entitled upon the exercise of an Option as
a result of such adjustment;

 

(i)            “Company” means IMRIS Inc.;

 

(j)            “Consultant” means (i) a person or company, other than an Employee or a Director, that:

 

(i)            is engaged to
provide services to the Company or to a Related Entity of the Company, other than services provided in relation
to a distribution, under a written
contract having a term of at least one year between the Company or the Related
Entity and the person or a consultant company or consultant partnership of the
person; and

 

(ii)           in the Company’s
opinion, spends or will spend a significant amount of time and attention on the
affairs and business of the Company or of a Related Entity of the Company;

 

and, for the purposes of this paragraph, “consultant company” means, for
any individual Consultant, a company of which the individual Consultant is an
employee or shareholder and “consultant partnership” means, for any individual
Consultant, a partnership of which the individual Consultant is an employee or
partner and “Consultant” includes
Registered Retirement Savings Plans or Registered Retirement Income Funds
established by or for any individual Consultant or under which any individual
Consultant is the beneficiary;

 

(k)           “Date of Grant” means the date a Participant is granted an
Option to purchase Option Shares by resolution of the Board or, if the grant is
authorized by the Board during a Blackout Period, by action of the Chief
Executive Officer;

 

(l)            “Director” means a person occupying the position of director
on the Board or any of its’ subsidiaries;

 

(m)          “Employee” means a current full time permanent employee of
the Company or its Affiliated Entities and includes any
Registered Retirement Savings Plan or Registered Retirement Income Fund
established by or for an Employee (or under which an Employee is the
beneficiary);

 

(n)           “Exchange” means the Toronto Stock Exchange or, if the Common
Shares are not then listed and posted for trading on the Toronto Stock
Exchange, on such stock exchange or quotation system on which such shares are
listed, posted for trading or quoted as may be selected by the Committee;

 

(o)           “Exercise Date” means the date the Company receives from a
Participant a completed Stock Option Purchase Form with payment for the
Option Shares being purchased;

 

(p)           “Fair Market Value” at any date shall be equal to the Closing
Price on the trading day immediately preceding any given Date of Grant, unless
the relevant grant of Options occurs after the close of trading on the Date of
Grant, in which case the Fair Market Value shall be equal to the Closing Price
on the Date of Grant;

 

32

 

(q)           “NI 45-106” means National Instrument 45-106
— Prospectus and Registration Exemptions of the Canadian Securities
Administrators as may be amended, restated and/or supplanted from time to time;

 

(r)            “Option” means an option to purchase Common Shares from the
treasury of the Company granted to a Participant pursuant to this Plan;

 

(s)           “Option Price” means the exercise price per share at which a
Participant may exercise any Option and thereby purchase Option Shares;

 

(t)            “Option Shares” means the Common Shares of the Company which
a Participant is entitled to purchase pursuant to the exercise of any Options;

 

(u)           “Outstanding Issue” means the number of Common Shares that
are outstanding at any given date;

 

(v)           “Participant” means any Director, Employee and/or Consultant
to whom an Option is granted pursuant to the Plan and remains unexercised;

 

(w)          “Plan” means this IMRIS 
Inc. Stock Option Plan, as may be amended and restated from time to
time;

 

(x)            “Post-Blackout Period Price” means the Closing Price on the
first Business Day following the date on which the relevant Blackout Period has
expired, unless the relevant grant of Options occurs after the close of trading
on the Date of Grant, in which case the Post-Blackout Period Price shall be
equal to the Closing Price on the Date of Grant;

 

(y)           “Related Entity” has the meaning ascribed thereto by NI
45-106;

 

(z)            “Related Person” shall have the meaning
ascribed thereto in NI 45-106;

 

(aa)         “Stock Option Agreement” means the stock option agreement to
be entered into between the Company and a Participant of the Plan, substantially
in the form annexed as Schedule “A” hereto, upon the grant of an Option to a
Participant, and any other agreements entered into between the Company and a
Participant relating to the terms and conditions of that Participant’s Options;

 

(bb)         “Stock Option Purchase Form” means the stock option purchase
form to be executed by a Participant upon the exercise of an Option
substantially in the form annexed as Schedule “B” hereto; and

 

(cc)         “Vesting Period” means the period(s) referred to in Section 6
hereof (or such other period(s) as may be set out in the Stock Option
Agreement of a Participant) that determines when a Participant may purchase the
Option Shares.

 

3.             Eligibility

 

Participation in the Plan shall be limited to Participants who are
designated from time to time by the Committee. 
Participation shall be voluntary and the Committee shall determine the
extent to which any Participant shall be entitled to participate in the Plan.

 

4.             Number of Option Shares and Limitations on Issuance

 

Subject to adjustment in accordance with Section 6 or 9 hereof, the
number of Option Shares issuable under this Plan at any particular date shall
be fifteen percent (15%) of the Outstanding Issue at such date, provided that any increase in the issued and
outstanding Common Shares will result in an increase in the 

 

33

 

available number of
Common Shares issuable under the Plan, any exercises of Options will make new
grants available under the Plan effectively resulting in a re-loading of the
number of Options available to grant under the Plan.

 

No fractional shares may be purchased or issued hereunder.  Subject to the foregoing, the number of
Option Shares that a Participant is entitled to purchase under the Plan will be
determined by the Committee.  In
addition, during a Blackout Period, the Committee may determine the number of
Option Shares that a Participant is entitled to be granted under the Plan and
may authorize the Chief Executive Officer of the Company to grant such Options
to such Participants on the second Business Day following the date on which the
relevant Blackout Period has expired.

 

If the Common Shares are listed for trading on the Exchange, the
following restrictions shall apply to this Plan as well as all other plans or
stock option agreements to which the Company may be a party:

 

(i)            the aggregate number of Common Shares
reserved for issuance to Related Persons at any time shall not exceed ten
percent (10%) of the Outstanding Issue; and

 

(ii)           Related Persons shall not be issued,
within any twelve month period, a number of Common Shares which exceeds ten
percent (10%) of the Outstanding Issue.

 

5.             Exercise Price for Option Shares

 

The Committee shall advise each Participant designated to participate in
the Plan of the number of Option Shares such Participant is entitled to
purchase and the Option Price at which the Option Shares may be purchased and
the Vesting Period. The Option Price at which the Option Shares may be
purchased under the Plan shall be fixed by the Committee and shall be equal to
the Fair Market Value of the Common Shares of the Company as at the date of the
option grant.  Notwithstanding the
foregoing, if, during a Blackout Period, the Committee has determined the
number of Option Shares that a Participant is entitled to purchase under the
Plan and has authorized the Chief Executive Officer of the Company to grant
such Options to such Participants on the second Business Day following the date
on which the relevant Blackout Period has expired, the Option Price for such
Option Shares shall be equal to the Post-Blackout Period Price.

 

6.             Vesting

 

Unless otherwise approved by the Board and agreed to in writing by the
Company in the Stock Option Agreement to be executed by a Participant, the Options
granted under the Plan must be exercised within a period of six (6) years
from the Date of Grant, failing which the Option shall expire; provided that, should the expiry date of any vested Option
fall on, or within nine (9) trading days immediately following, a date
upon which a Participant is prohibited from exercising such Option due to a
Blackout Period or other trading restriction imposed by the Company, then the
expiry date of such Option shall instead be ten trading days following the date
the relevant Blackout Period or other trading restriction imposed by the
Company is lifted, terminated or removed.

 

Unless otherwise approved and/or amended by the Board and specifically
set forth in a Stock Option Agreement, the vesting periods within this six (6) year
period during which Option Shares or a portion thereof vest and may be
exercised by a Participant shall be as follows:

 

(a)           25% of the
Options granted shall vest on the first anniversary of the Date of Grant; and

 

(b)           6.25% of
the Options granted shall vest on the first day of each calendar quarter
following the first anniversary of the Date of Grant;

 

so that on the fourth
anniversary of the Date of Grant, all of the Options granted will have vested
and will be exercisable until the sixth anniversary of the Date of Grant.

 

34

 

Notwithstanding any particular Vesting Period the Board may, in its sole
discretion, by written notice to any Participant, accelerate the vesting of all
or any portion of any Option so that any such Option may become immediately
fully vested and exercisable.  In such
circumstances, the Board may by written notice require a Participant to
exercise any such Option within 30 days of the date of such written notice,
failing which exercise such Participant’s right to exercise such Option and
purchase the Option Shares underlying such Option shall immediately lapse and
be of no further force or effect.

 

Notwithstanding any particular Vesting Period, in the event of a Change
in Control, the Board may, in its sole discretion and without any action or consent
required on the part of any Participant and notwithstanding any Stock Option Agreement, deal
with the Options granted under the Plan in the manner it deems fair and
reasonable in light of the circumstances of the Change in Control, including,
without limiting the generality of the foregoing:

 

(a)           Accelerating the vesting of any or all
outstanding Options to provide that such outstanding Options shall be fully
vested and conditionally exercisable upon (or prior to) the completion of the
Change in Control, provided, however, that the Board shall not, in any case,
authorize the exercise of Options pursuant to this Section beyond the date
of expiry of such Options.  Unless
otherwise determined by the Board, if the Board elects to accelerate the
vesting of any Options, and if any such Options are not exercised within ten (10) Business
Days following the giving of the notice contemplated below, such unexercised
Options shall terminate and expire upon the completion of the proposed Change
in Control.  If, for any reason, the
Change in Control does not occur within the contemplated time period, the
acceleration of the vesting of the Options shall be retracted and vesting shall
instead revert to the manner provided in the second paragraph of this Section.

 

(b)           Effect
a “cashless exercise”, by applying a portion of the proceeds that would be
received by a Participant from the Change in Control transaction to the
exercise price payable by that Participant for the exercise of his or her
Options, and, as applicable, issuing the balance of the shares, or paying the
balance of the proceeds, to the Participant.

 

(c)           To the extent that the Change in Control
would also result in a capital reorganization, arrangement, amalgamation or
reclassification of the share capital of the Company and the Board does not
accelerate the vesting of Options pursuant to this Section, the Company shall
make adequate provisions to ensure that, upon completion of the proposed Change
in Control, the number and kind of shares subject to outstanding Options and/or
the Option Price per share of Options shall be appropriately adjusted in such
manner as the Board considers equitable to prevent substantial dilution or
enlargement of the rights granted to Participants.

 

Upon the Company entering
into an agreement relating to and publicly announcing a transaction which, if
completed, would result in a Change in Control, the Company shall give written
notice of the proposed Change in Control to each Participant that holds Options
at such date, together with a description of the effect of such Change in
Control on outstanding Options, not less than ten (10) Business Days prior
to the closing of the transaction resulting in the Change in Control

 

7.             Payment and Conditions of Exercise of Options

 

Subject to Section 6, from time to time and at
any time after the vesting of any Options and prior to the lapse of such
Options, a Participant may elect to purchase all or a portion of the Option
Shares available for purchase by delivering to the Company a completed Stock
Option Purchase Form and payment in full of the purchase price for such
Option Shares.  Such Stock Option
Purchase Form shall specify the number of Option Shares the Participant
desires to purchase.  Payment may be made
certified cheque, bank draft, money order or the equivalent payable to the
order of IMRIS Inc.  To the extent
permitted by applicable laws and the regulations of the Exchange, if
applicable, upon written request of the Participant, the Company may, in its
sole discretion, opt to permit to allow the Participant to satisfy the
foregoing payment 

 

35

 

obligations by reducing the number of Option Shares
received by the Participant upon exercise of the Options by a number of Option
Shares representing the number of Shares required to satisfy the aggregate
exercise price if such Shares were sold at the Fair Market Value of the Common
Shares determined at the time of exercise.

 

In the event that
the Option Shares are not listed on the Exchange as at the date of an exercise
of an Option, it shall be a condition precedent to the exercise of any Option
that the Participant agree to be bound by the terms of any unanimous
shareholders agreement or similar agreements generally applicable to all of the
shareholders of the Company then in force, and further that the Participant
agree to enter into voting trust generally applicable to employee shareholders
of the Company then in force and provide a power of attorney in support of such
voting trust.

 

8.             Share Certificates

 

Upon exercise of the Option and payment in full of the
purchase price the Company shall cause to be delivered to the Participant
within a reasonable period of time a duplicate certificate or certificates in
the name of the Participant representing the number of Option Shares the
Participant has purchased.  In the event
that the Shares are not listed on the Exchange as at the date of an exercise of
an Option, the original share certificate(s) may be held in trust by the
Company, to ensure compliance with the terms and conditions of the Plan, the
Stock Option Agreement, and any shareholders agreement of the Company in effect
and applicable to the Participant at such time.

 

9.             Adjustment in Shares

 

Appropriate adjustments in the number of Common Shares
subject to the Plan and, as regards Options granted or to be granted, in the
number of Common Shares optioned and in the Option Price, shall be made by the
Committee to give effect to adjustments in the number of Common Shares
resulting from sub-divisions, consolidations or re-classifications of the
Common Shares or other relevant changes in the authorised or issued capital of
the Company.

 

Furthermore, in the event of a Change in Control, the
Board may, in its sole discretion, deal with the Options issued under the Plan
in the manner it deems fair and reasonable in light of the circumstances of the
change, including without limitation, taking any of the actions outlined in Section 6
hereof and/or making such other adjustments to the number and kind of shares
which thereafter may be offered and sold to Participants under the Plan as it
may deem equitable.

 

10.          Termination of Participant

 

Unless otherwise approved by the Board or agreed to in
writing by the Company in the Stock Option Agreement to be executed by a
Participant, the following terms shall apply:

 

(a)           In the event that:

 

(i)            a Participant’s employment with the Company or any of
its subsidiaries is terminated; or

 

(ii)           the services with the Company or any of its
subsidiaries of a Participant who is a Consultant are terminated; or

 

(iii)          a Participant who
is a Director shall cease to be a Director (provided that if Director is also
an Employee, clause (i) must also apply)

 

for any reason other than (A) for cause (as defined in accordance with a
Participant’s employment or other applicable agreement, or, if not so defined,
as determined by applicable law) or (B) as a result of
death or disability of a Participant (any such event being referred to as a “Termination without Cause”), then this Section 10(a) shall

 

36

 

apply.  The date
on which a Participant is notified of a Termination without Cause is
hereinafter referred to in this Section 10(a) as the “Termination Date”.  On
a Termination without Cause, a Participant may exercise the Option to purchase
any Option Shares that have vested prior to the Termination Date for a period
of ninety (90) days following after the Termination Date (but in no event after
the expiry of any Options held).  Upon
the expiry of such 90-day period, all unexercised Options held by the
Participant shall lapse.  For the
purposes of this Plan, the transfer of the Employee’s employment to the Company
from any Related Entity or from the Company to any Related Entity of the
Company shall not be considered a termination of employment and the Employee’s
rights under the Option shall be the same as if such transfer had not
occurred.  In the event that the
Participant has violated any obligations to the Company set out in any
agreements with the Company (or applicable at law) pertaining to (i) non-disclosure
of the confidential information of the Company, (ii) ownership of
inventions, or (iii) dealings with employees or customers of the Company,
then all unexercised options which have otherwise vested in the Participant
shall become immediately null and void and neither exerciseable or enforceable.

 

(b)           In the event that
an Employee’s employment or Consultant’s services with the Company or any of
its subsidiaries is terminated by reason of death or disability or a Director
shall cease to be a Director on the Board by reason of death or disability,
then the applicable Participant, or the Participant’s personal representatives,
may exercise the Option for any Option Shares that have vested at the time such
employment, services or board position is terminated at any time during the
ninety (90) day period following the date of such termination of employment,
services or Board position (but in no event after the expiry of any Options
held), and upon the expiry of such 90-day period, all unexercised Options held
by the Participant (or the Participant’s personal representatives, as
applicable) shall lapse.

 

(c)           In the event that
an Employee’s employment or Consultant’s services with the Company or any of
its subsidiaries is terminated for cause or a Director shall cease to be a
Director for breach of fiduciary duty (as defined in accordance with the Participant’s
employment or other applicable agreement, or, if not so defined, as determined
by applicable law), then all vested and unexercised Options held
by the Participant shall lapse immediately upon the delivery to the Participant
of the notice of termination.

 

Notwithstanding the provisions
of this Section 10, the Board of Directors may, in its discretion, at any
time prior to or following the events contemplated in this Section 10,
permit the exercise of any or all Options held by an Participant in the manner
and on the terms authorized by the Board, provided that the Board shall not, in
any case, authorize the exercise of an Option pursuant to this Section 10
beyond the expiration of the exercise period of the particular Option.

 

11.          Transfer and Assignment

 

Subject to Section 10
hereof, Options granted under this Plan may only be exercised during the
lifetime of a Participant by such Participant personally and no assignment or
transfer of Options, whether voluntary, involuntary, by operation of law or
otherwise, vests any interest or right in such Options whatsoever in any
assignee or transferee and immediately upon any assignment or transfer, or any
attempt to make the same, such Options will terminate and be of no further
force or effect.  The obligations of each
Participant shall be binding on his or her heirs, executors and administrators.

 

12.          Employment, Consulting and
Board Position Non-Contractual

 

The granting of an Option to a Participant under the
Plan does not confer upon the Participant any right to continue in the employment
of the Company or any of its subsidiaries, or as a member of the Board, as the
case may be, nor does it interfere in any way with the rights of the Employee
or Consultant or of the 

 

37

 

Company’s rights to terminate the Employee’s
employment or Consultant’s services at any time or of the shareholders’ right
to elect directors.

 

13.          Rights and Obligations as
Shareholders

 

Participants shall not have any rights as a
shareholder with respect to Option Shares until:

 

(a)           full payment has
been made to the Company;

 

(b)           a share certificate
or share certificates have been duly issued; and

 

(c)           the Participant
becomes a party to any existing unanimous shareholders’ agreement and/or any
other agreement or voting trust generally applicable to Employees and/or
Consultants of the Company.

 

14.          Administration and
Application of The Plan

 

The Plan shall be administered by the
Committee.  The Committee shall have the
power to interpret and construe the terms and conditions of the Plan and the
Options.  Any determination by the
Committee shall be final and conclusive on all persons affected thereby unless
otherwise determined by the Board.  The day-to-day
administration of the Plan may be delegated to such officers and employees of
the Company or any Related Entity of the Company, or to such outside advisors
or consultants to the Company, as the Committee shall determine.  In the Stock Option Agreement applicable to a
Participant, the Company may modify the terms of this Plan applicable to such
Participant, provided that the approval of the Board is obtained for any such
modifications and provided further that such modifications are permissible
under securities legislation and, if the Common Shares are listed for trading on
the Exchange, the rules of the Exchange.

 

15.          Notices

 

All written notices to be given by a
Participant to the Company may be delivered personally or by registered mail,
postage prepaid, addressed as follows:

 

IMRIS Inc

100 - 1370 Sony
Place

Winnipeg, Manitoba

Canada, R3T 1N5

 

Attention:              Executive
Vice President and Chief Financial Officer

 

Any notice given by a Participant pursuant
to the terms of the Option shall not be effective until actually received by
the Company at the above address.  Any
notice to be given to a Participant shall be sufficiently given if delivered
personally (which shall be deemed to be effective at the time of delivery), by
facsimile transmission or electronic mail (which shall be deemed to be
effective one day after transmission), or by postage prepaid mail to the last
address of the Participant on the records of the Company (which shall be deemed
to be effective five days after mailing).

 

38

 

 

16.                               Corporate Action

 

Nothing contained in the Plan or in the
Option shall be construed so as to prevent the Company or any Related Entity of
the Company from taking corporate action that is deemed by the Company or the
Related Entity to be appropriate or in its best interest, whether or not such
action would have an adverse effect on the Plan.

 

Amendments

 

The Board shall have the right, in its sole discretion, to amend,
suspend or terminate this Plan or any portion thereof at any time, in
accordance with applicable legislation, without obtaining the approval of
shareholders; provided that any amendment to any provision of the Plan will be
subject to any required regulatory approval and the provisions of applicable
law, if any, that require the approval of shareholders.  Notwithstanding the foregoing, if the Common
Shares are listed for trading on the Exchange, the Company will be required to
obtain the approval of the shareholders of the Company for any amendment related
to: (i) the maximum number or percentage of Common Shares issuable under
the Plan; (ii) a reduction in the Option Price of outstanding Options or
cancellation of Options for the purpose of issuing new Options; (iii) an
extension to the term of outstanding Options; (iv) increasing limits on non-employee
director participation; (v) Section 4 of the Plan which would increase the
number of Common Shares reserved for issuance to insiders, at any time, or
issued to insiders within any one year period, under the Plan; or (vi) Section 11
which would allow an Option holder to transfer Options other than by will or
pursuant to laws of succession. Subject to compliance with
the applicable rules of the Exchange, no amendment, suspension or
termination will alter or impair any Options under the Plan, or any rights
pursuant thereto, granted previously to any Participant without the consent of
that Participant.

 

Notwithstanding any other
provision of this Plan, if the Common Shares are
listed for trading on the Exchange, the Option Price of any Options granted under this
Plan must not be lower than the Fair Market Value of the Common Shares at the
time the Option is granted.

 

Termination Of Plan

 

The Plan will terminate and, for greater
certainty, all unexercised Options shall terminate and expire on the earliest
of: (i) the date upon which no further Common Shares remain available for
issuance pursuant to Options which may be granted under the Plan and no Options
remain outstanding; (ii) if the Board of Directors accelerates the vesting
of Options pursuant to any Change in Control, then upon the occurrence of such
Change in Control, unless renewed for such further period and upon such terms
and conditions as the Board may determine; and (iii) the tenth anniversary
of the Plan.

 

Governing Law

 

The Plan is established under the laws of
the Province of Manitoba and the rights of all parties and the construction and
effect of each provision of the Plan shall be according to the laws of the
Province of Manitoba and the laws of Canada applicable therein.

 

Government Regulation

 

The Company’s obligation to issue and
deliver Common Shares under any Option is subject to:

 

(a)                                  the
satisfaction of all requirements under applicable securities law in respect
thereof and obtaining all regulatory approvals as the Company shall determine
to be necessary or advisable in connection with the authorization, issuance or
sale thereof, including shareholder approval, if required;

 

39

 

(b)                                 the
receipt from a Participant of such representations, agreements and undertakings
as to future dealings in such Common Shares as the Company determines to be
necessary or advisable in order to safeguard against the violation of the
securities law of any jurisdiction; and

 

(c)                                  the
admission of such Option Shares to listing on any stock exchange on which
Option Shares may then be listed.

 

In this connection, the Company shall take
all reasonable steps to obtain such approvals and registrations as may be
necessary for the issuance of such Common Shares in compliance with applicable
securities law and for the listing of such Common Shares on any stock exchange
on which such Common Shares are then listed.

 

22.          Withholding Taxes

 

The exercise of each Option granted under
this Plan is subject to the condition that if at any time the Company
determines, in its discretion, that the satisfaction of withholding tax or
other withholding liabilities is necessary or desirable in respect of such
exercise, such exercise is not effective unless such withholding has been
effected to the satisfaction of the Company. 
In such circumstances, the Company may require that a Participant pay to
the Company, in addition to and in the same manner as the Option Price for the
Option Shares, such amount as the Company is obliged to remit to the relevant
taxing authority in respect of the exercise of the Option.  Any such additional payment is due no later
than the date as of which any amount with respect to the Option exercised first
becomes includable in the gross income of the Participant for tax purposes.

 

23.                               Compliance with Exchange Rules

 

The Board may make
changes to the terms of any Options or this Plan to the extent necessary or
desirable to comply with any rules, regulations or policies of the Exchange,
provided that the value of previously granted Options and the rights of
Participants are not materially adversely affected by any such changes.

 

24.          Incentive Stock Options (US
Participants)

 

The following provisions shall apply, in addition to
the other provisions of this Plan that are not inconsistent therewith, to
Options intended to qualify as incentive stock options (each, an “ISO”) under Section 422
of the United States’ Internal Revenue Code of 1986, as amended (the “Code”):

 

Options may be granted as ISOs only to
individuals who are employees of the Company or any present or future “subsidiary
corporation” or “parent corporation” as those terms are defined in Section 424
of the Code (collectively, “Related Corporations”) and Options shall not be
granted as ISOs to non-employee Directors or independent contractors;

 

for purposes of Sections 4.6 and 4.7
hereof, “disability” in respect of an Participant shall mean “permanent and
total disability” as defined in Section 22(e)(3) of the Code;

 

if a Participant ceases to be employed by
the Company and/or all Related Corporations other than by reason of death or
disability, Options shall be eligible for treatment as ISOs only if exercised
no later than three (3) months following such termination of employment;

 

the Option Price in respect of
Options granted as ISOs to employees who own more than ten percent (10%) of the
combined voting power of all classes of stock of the Corporation or a Related
Corporation (a “10% Stockholder”) shall be not less than one hundred and ten
percent (110%) of the fair market value per Common Share on the Date of Grant
and the term of any ISO granted to a 10% Stockholder shall not exceed five (5) years
measured 

 

40

 

from
the Date of Grant;

 

Options held by a Participant shall be
eligible for treatment as ISOs only if the fair market value (determined at the
Date of Grant) of the Common Shares with respect to which such
Options and all other options intended to qualify as “incentive stock options”
under Section 422 of the Code held by such individual and granted under
the Plan or any other plan of the Company or a Related Corporation and which
are exercisable for the first time by such individual during any one calendar
year does not exceed US$100,000 at such time;

 

by accepting an Option granted as an ISO
under the Plan, a Participant agrees to notify the Company in writing
immediately after such Participant makes a “Disqualifying Disposition” of any
Common Shares acquired pursuant to the exercise of such ISO; for this purpose,
a Disqualifying Disposition is any disposition occurring on or before the later
of (a) the date two (2) years following the date that such ISO
was granted or (b) the date one (1) year following the date that
such ISO was exercised;

 

notwithstanding that the Plan shall be
effective when adopted by the Board, no ISO granted under the Plan may be
exercised until the Plan is approved by the Company’s shareholders and, if such
approval is not obtained within twelve (12) months after the date of the Board’s
adoption of the Plan, then all ISOs previously granted shall terminate and
cease to be outstanding and the provisions of this Section 4.12 shall
cease to have effect; furthermore, the Board shall obtain shareholder approval
within twelve (12) months before or after any increase in the total number of
shares that may be issued under the Plan or any change in the class of
employees eligible to receive ISOs under the Plan;

 

no modification of an outstanding Option
that would provide an additional benefit to a Participant, including but not
limited to a reduction of the Option Price or extension of the exercise period,
shall be made without consideration and disclosure of the likely United States
federal income tax consequences to the Participants affected thereby; and

 

ISOs shall be neither transferable nor
assignable by the Participant other than by will or the laws of descent and
distribution and may be exercised, during the Participant’s lifetime, only by
such Participant.

 

Notwithstanding
anything in this Section 24, the Company makes no representation or
warranty to any Participant that any Option will, at the date hereof of any
time in future, qualify as an ISO under the Code and each Participant
specifically acknowledges this limitation.

 

25.          Indemnification

 

Every Director
will at all times be indemnified and saved harmless by the Company from and
against all costs, charges and expenses whatsoever including any income tax
liability arising from any such indemnification, that such Director may sustain
or incur by reason of any action, suit or proceeding, taken or threatened
against the Director, otherwise than by the Company, for or in respect of any
act done or omitted by the Director in respect of this Plan, such costs,
charges and expenses to include any amount paid to settle such action, suit or
proceeding or in satisfaction of any judgment rendered therein.

 

26.          Participation
in the Plan

 

The participation
of any Participant in the Plan shall not be interpreted as conferring upon such
Participant any rights or privileges other than those rights and privileges
expressly provided in the Plan. The Plan does not provide any guarantee against
any loss which may result from fluctuations in the market value of the Common
Shares. The Company does not assume responsibility for the income or other tax
consequences for the Participants and they are advised to consult with their
own tax advisors.

 

41

 

24.          Effective
Date

 

This Plan is
effective as of                                    ,
2008.

 

DATED this        day of
                                   ,
2008.

 

	
   

  	
  IMRIS
  Inc.

  
	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

42

 

APPENDIX “B”

 

IMRIS
INC.

 

BOARD
OF DIRECTORS

 

MANDATE

 

Appointment and Composition

 

Directors of IMRIS Inc. (“IMRIS”) are elected annually by shareholders and, together
with those appointed to fill vacancies or appointed as additional directors
throughout the year, collectively constitute the IMRIS Board of Directors (the “Board”). The Board elects a Chair of the Board (the “Chair”).  The
composition of the Board, including the qualification of its members, shall
comply with the applicable requirements of the Canada Business Corporations Act, the
Toronto Stock Exchange and applicable securities regulatory authorities, as
adopted or in force or amended from time to time.  In this regard, at least 25% of the directors
must be “resident Canadian” as defined by the Canada Business Corporations Act and at least a majority of members
of the Board must qualify as “independent” directors in accordance with the rules of
applicable securities regulators (collectively, the “Independence
Rules” and references herein to “independent” shall have the meaning
given in the applicable Independence Rules).

 

Accountability and Mandate

 

The Board has the statutory power and obligation to supervise the
management of IMRIS. 
The Board’s relationship with IMRIS is guided by a fiduciary principle that requires each director to act honestly
and in good faith with a view to the best interests of the Company. In
exercising their powers and discharging their duties, every director must
exercise the care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances.

 

The
Board’s
primary role is one of stewardship.  The
Board oversees the operations of IMRIS and supervises its management, which is
responsible for the day-to-day conduct of the business.  The Board establishes IMRIS’s policies,
monitors its strategic direction and evaluates, on an ongoing basis, whether
resources are being managed in a manner consistent with the enhancement of
shareholder value, ethical considerations and corporate social
responsibility.  The Board also discharges its responsibilities through standing committees
which currently include the following committees: the
Audit and Governance Committee and the Compensation Committee.  The charter of each standing committee
prescribes its duties and responsibilities and is reviewed periodically by the
Board.

 

In carrying out its
responsibilities, the Board focuses on the following specific matters:

 

(a)                                  ensuring the protection and advancement
of shareholder value;

 

(b)                                 setting IMRIS’s moral and ethical norms
and satisfying itself, to the extent feasible, as to the integrity of the
President and Chief Executive Officer (the “CEO”)
and other executive officers and that the CEO and other executive officers
create a culture of integrity throughout IMRIS;

 

(c)                                  monitoring compliance with Code of
Business Conduct and Ethics (the “Code”) and
Whistleblower Protection Policy on Financial Matters and, as appropriate,
granting any waivers to the Code;

 

(d)                                 approving the annual corporate
compensation plan and guidelines, including compensation for the CEO, senior
management and for individual directors, with input from the Compensation and
Governance Committee;

 

(e)                                  succession planning, including
appointing, training, monitoring and terminating senior management pursuant to
the recommendations of the Compensation and Governance Committee;

 

43

 

 

(f)                                    oversight of strategic direction and
development and review of ongoing results of operations and approving, on an
annual basis, a strategic plan which takes into account the opportunities and
risks of the business;

 

(g)                                 overseeing internal control and
management information systems;

 

(h)                                 identifying the principal risks of
business and ensuring the implementation of appropriate systems to monitor and
manage those risks;

 

(i)                                     oversight of investor relations and
public relations activities and IMRIS’s disclosure policy, with primary
emphasis on communication with shareholders, receipt of shareholder feedback
and responses to shareholder concern;

 

(j)                                     approving annual and interim financial
results, MD&A, annual information form, management proxy circulars and
their publication;

 

(k)                                  overseeing all matter relating to IMRIS’s
legal, regulatory and financial integrity; and

 

(l)                                     adopting, pursuant to the recommendation
of the Compensation and Governance Committee, a system of corporate governance
policies and practices, including an annual review.

 

Individual
Directors

 

The Board seeks directors from diverse
professional and personal backgrounds with both a broad spectrum of experience
and expertise and a reputation for business acumen and integrity.  Potential new directors are assessed on their
individual qualifications as well as skill, age and experience in the context
of the needs of the Board.  Individual
directors are also expected to:

 

·                                          prepare for each Board and committee
meeting and maintain an excellent Board and committee meeting attendance
record;

 

·                                          participate fully and frankly in Board
deliberations and discussions and demonstrate a willingness to listen to others’
opinions and consider them;

 

·                                          think, speak and act independently and be
willing to raise tough questions in a manner that encourages open discussion;

 

·                                          focus inquiries on issues related to
strategy, policy and results rather than day-to-day issues of corporate management;

 

·                                          participate on committees and become
knowledgeable about the duties, purpose and goals of each committee;

 

·                                          become knowledgeable about IMRIS’s
business and the industry in which it operates, including the regulatory,
legislative, business, social and political environments;

 

·                                          participate in director orientation and
development programs;

 

·                                          become acquainted with senior managers;

 

·                                          visit IMRIS offices when appropriate; and

 

·                                          annually review the Board Mandate and any
other documents used by the Board in fulfilling its responsibilities.

 

44

 

Measures for Receiving
Shareholder Feedback

 

IMRIS has
developed a Corporate Disclosure and Confidentiality Policy (the “Disclosure Policy”) to facilitate consistent disclosure
practices aimed at informative, timely and broad dissemination of material
information to the market in compliance with applicable securities laws and the
rules and policies of the Toronto Stock Exchange.  The Disclosure Policy Committee established under the
Disclosure Policy is responsible for overseeing and monitoring communications
with, and responses to inquiries from, both institutional and individual
investors and the financial community consistent with the Policy’s objectives.

 

IMRIS’s
spokespersons as appointed by the Disclosure Policy Committee from time to time
are available to shareholders by telephone, fax and e-mail and the Company
maintains extensive material of interest to shareholders and investors on the
Company’s web site at www.imris.com.

 

General

 

The Board shall review
and assess the adequacy of the mandate of the Board annually.

 

Nothing in this mandate
is intended, or is to be construed, to impose on any member of the Board a
standard of care or diligence that is in any way more onerous or extensive than
the standard required by law.

 

45Exhibit 4.5

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

This Management Discussion and
Analysis (“MD&A”) is dated as at February 26, 2010 and should be read
in conjunction with the annual audited consolidated financial statements and
the notes thereto for the year ended December 31, 2009.  In this MD&A, “IMRIS”, the “Company”, “we”,
“our” and “us” are used to refer to IMRIS Inc.

 

This MD&A contains forward-looking statements
about future events or future performance and reflects management’s
expectations and assumptions regarding our growth, results of operations,
performance and business prospects and opportunities.  Such forward-looking statements reflect
management’s current beliefs and are based on information currently available
to us.  In some cases, forward-looking
statements can be identified by terminology such as “may”, “would”, “could”, “will”,
“should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”,
“potential”, “continue” or the negative of these terms or other similar expressions
concerning matters that are not historical facts.  In particular, statements regarding our
future operating results, economic performance and product development efforts
are or involve forward-looking statements.

 

A number of factors could cause actual
events, performance or results, including those in respect of the foregoing
items, to differ materially from the events, performance and results discussed
in the forward-looking statements. 
Factors which could cause future outcomes to differ materially from
those set forth in the forward-looking statements include, but are not limited
to: [i] timing and amount of revenue recognition of order backlog and the
Company’s expectation of sales and margin growth [ii] obtaining sufficient and
suitable financing to support operations and commercialization of products,
[iii] adequately protecting proprietary information and technology from
competitors, [iv] obtaining regulatory approvals and successfully completing
new product launches, [v] successfully competing in the targeted markets, and
[vi] maintaining third party relationships, including key personnel, and key
suppliers.  In evaluating these
forward-looking statements, readers should specifically consider various factors,
including the risks outlined under “Risks and Uncertainties”, which may cause
actual events, performance or results to differ materially from any
forward-looking statement.

 

Readers are cautioned that our
expectation, beliefs, projections and assumptions used in preparation of such
information, although considered reasonable at the time of preparation, may
prove to be wrong, and as such, undue reliance should not be placed on
forward-looking statements.  By their
nature, forward-looking statements are subject to numerous known and unknown risks
and uncertainties so as a result, we can give no assurance that any of the
actual events, performance, results, or expectations will occur or be
realized.  These forward-looking
statements are expressly qualified by this cautionary statement as of the date
of this MD&A and we do not intend, and do not assume any obligation, to
update or revise them to reflect new or future events or circumstances.

 

OVERVIEW

 

IMRIS
is a global provider of image guided therapy solutions that deliver timely
information to clinicians during surgical or interventional procedures.  IMRIS systems incorporate multiple imaging modalities
including magnetic resonance “MR” imaging, fluoroscopy and computed tomography
into fully integrated imaging suites.  Our systems use a variety of patented
technologies that enhance patient safety and operating room efficiency.

 

Our
Products

 

IMRISneuro — is our
flagship product, providing surgeons with high resolution MR images during
neurosurgical procedures.  Due to the invasive nature of brain
surgery and the importance of minimizing disturbance to healthy brain tissue,
neurosurgical procedures may benefit from an MRI’s unique ability to
distinguish between diseased and healthy brain tissue.  IMRISneuro allows surgeons to make adjustments to the procedure
while the procedure is in progress, which may lead to improved patient outcomes
and reduce the likelihood that repeat surgeries will be needed.

 

IMRIScardio — provides clinicians with timely and
accurate images for visualizing the cardiovascular system before, during and
after an intervention.  Cardiovascular
interventions demand a high level of accuracy in the diagnosis of patients and
in the assessment of treatments.  The
IMRIScardio suite includes a wide-bore 1.5 Tesla MR scanner and a single-plane
angiography system providing the ability to alternate between imaging
modalities and immediately assess treatment.

 

1

 

IMRISNV  — sequentially employs MRI and fluoroscopy in an
integrated suite that provides interventional clinicians with imaging for the
rapid assessment and post procedure evaluation of neurovascular conditions
including stroke, where speed of treatment is a major determinant in the
success of patient outcomes.  The  IMRISNV suite features a wide-bore 3 Tesla MR scanner and a
bi-plane angiography system completely integrated into a single suite that
permits the patient to transition quickly and seamlessly between MR imaging and
intervention without transporting the patient between modalities.

 

Our Customer Value Proposition

 

All IMRIS products are
designed to assist clinicians to improve outcomes for their patients.  Our integrated imaging solutions are based on
three fundamental principles:

 

Patient Safety — The patient is never moved during the
course of a surgical or interventional procedure in an IMRIS integrated therapy
suite.  Unlike conventional imaging
solutions where the patient is moved for imaging, our solutions move the
imaging system to the patient at the right moment in the procedure.  This avoids any potential risks associated
with having to move the patient to the scanner, and maintains optimum patient
positioning during the procedure.

 

Clinical Efficiency — All aspects of IMRIS systems are
designed to enhance the workflow of the clinical team.  Imaging information is captured rapidly and
presented to maximize efficiency and effectiveness for clinicians.  In addition, because the imaging system is moved
to the patient during use, when not in use, clinicians are afforded unrestricted
access to the patient and do not require special MR-compatible instruments for
the procedures.

 

Financial Utility — IMRIS systems provide customers with
both intraoperative, interventional and diagnostic MR imaging
capabilities.  When not in use during a
surgery or interventional procedure, the MR scanner is located in an adjacent
room and is available for diagnostic imaging, thereby ensuring that the
hospital obtains maximum utility from its equipment.

 

Our
Technology

 

The creation of high
value intellectual property and advancements in technology is an important
element of our business.  To grow the
Company and remain competitive, we are continuously engaged in new product
development and enhancement and each year we invest significantly in research
and development to drive continuing innovation that supports our competitive
position.

 

Underlying all of our
image guided therapy solutions is advanced proprietary technology and
intellectual property that we have developed as part of our unique solutions.  The protection of these products, our
processes and know-how is integral to our business.  We have patents in place in the United
States, Canada and other countries where available to protect our core patent
family.  In addition, we have filed a
number of additional patent applications that are directed to specific aspects
of our technology.  We currently have 20
patents either issued or pending.  As we
develop our technologies we will continue to seek patent protection to
contribute to our competitive advantage.

 

Our Business Model

 

The purchase and
installation of an IMRIS system represents a significant capital project for
our customers that can range from approximately $4 million to $12 million. In
addition to our equipment, customers may require further capital expenditures
for room construction and ancillary operating room equipment.  The sales cycle for our systems is both
complex and lengthy as a result of the large capital expenditure associated
with the purchase of an IMRIS system and the number of stakeholders who are
engaged in the process.  As such, a
typical sales cycle can be more than 12 months from initial customer engagement
to receipt of a purchase order. Following the receipt of a customer purchase
order, the delivery and installation cycle for one of our systems typically
ranges from five months to twelve months or more depending in part on the
configuration of our system, but also dependent on the amount of additional
construction work that may be required to be completed by the customer. We
invoice customers for the system in installments spread over a number of
milestones which typically include a deposit at the time of order; and a
percentage of the total system price upon delivery of the equipment, completion
of installation and final acceptance. 
Due to the project nature of our system sales, we recognize revenues and
related cost of sales on a percentage-of-completion basis as the system is
installed.

 

2

 

2009
HIGHLIGHTS

 

Throughout 2009 we made
solid progress advancing our business strategies and delivering strong
financial performance.  Highlights from
the year included:

 

·                  Record sales of $44.4 million, the
highest annual sales in the history of the Company and a 94% increase over
2008.

 

·                  Gross profit as a percentage of sales
improved to 44% compared with 20% in 2008.

 

·                  In the fourth quarter, recorded positive
EBITDA(1)and net income for the first time in our Company’s history at $1.4
million and $0.4 million respectively.

 

·                  Completed an equity financing that closed
on November 2nd 2009 for net proceeds of $19.3 million.

 

·                  Record annual order bookings of $73.1
million contributing to 32% year over year growth in order backlog, which
increased to $89.4 million at year end.

 

·                  Received regulatory approval with the
issuance of a European CE Mark in April 2009, U.S. FDA approval in September 2009
and the Health Canada medical device license in October 2009 permitting
the sale of our new products, IMRISNV and IMRIScardio.

 

·                  At the end of 2009, we had sold 35
systems with sales in the United States, Canada, Asia Pacific and Europe.  Of particular note in the year:

 

·                  Brigham and Women’s Hospital, which is
home to the US National Center for Image Guided Therapy was the first to
purchase an IMRISNV/IMRIScardio solution.

 

·                  Yale-New Haven Hospital, the primary
teaching hospital for the Yale School of Medicine purchased IMRISNV.

 

·                  We sold our first IMRISNV system in Canada to Health Sciences Center Winnipeg.

 

·                  The first IMRISneuro sale in Europe was
made to CEA-LITI for CLINATEC® in Grenoble, France.

 

·                  A renewed and expanded OEM agreement
between IMRIS and Siemens Healthcare for the supply of MR scanners and
angiography systems as component parts for IMRIS’s image guided therapy suites
was completed in the fourth quarter of 2009.

 

·                  We realigned our organizational structure
in the fourth quarter of 2009 to meet the growing global demand for IMRIS
solutions.

 

(1) EBITDA is
defined as earnings before interest income (expense), foreign exchange gain
(loss) income taxes and amortization.

 

3

 

SUMMARY
OF SELECTED FINANCIAL INFORMATION

 

The following table sets
forth selected financial information for the dates and periods indicated.

 

Statement of Operations

(In
CDN dollars)

(Unaudited)

 

	
   

  	
   

  	
  Year
  ended

  	
   

  
	
   

  	
   

  	
  December 31

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  2007

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sales

  	
   

  	
  $

  	
  44,417,518

  	
   

  	
  $

  	
  22,952,486

  	
   

  	
  $

  	
  17,445,058

  	
   

  
	
  Cost
  of sales

  	
   

  	
  24,748,219

  	
   

  	
  18,344,182

  	
   

  	
  15,180,438

  	
   

  
	
  Gross
  profit

  	
   

  	
  19,669,299

  	
   

  	
  4,608,304

  	
   

  	
  2,264,620

  	
   

  
	
  As
  a percentage of sales

  	
   

  	
  44.3

  	
  %

  	
  20.1

  	
  %

  	
  13.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating
  expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Administration

  	
   

  	
  6,706,411

  	
   

  	
  6,807,248

  	
   

  	
  5,300,845

  	
   

  
	
  Sales
  and marketing

  	
   

  	
  8,039,705

  	
   

  	
  6,450,458

  	
   

  	
  3,497,318

  	
   

  
	
  Customer
  support and operations

  	
   

  	
  4,950,479

  	
   

  	
  3,930,270

  	
   

  	
  3,899,824

  	
   

  
	
  Research
  and development

  	
   

  	
  4,923,818

  	
   

  	
  4,705,505

  	
   

  	
  3,334,511

  	
   

  
	
  Amortization

  	
   

  	
  2,161,959

  	
   

  	
  1,457,035

  	
   

  	
  940,632

  	
   

  
	
   

  	
   

  	
  26,782,372

  	
   

  	
  23,350,516

  	
   

  	
  16,973,130

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating
  income (loss) before the following

  	
   

  	
  (7,113,073

  	
  )

  	
  (18,742,212

  	
  )

  	
  (14,708,510

  	
  )

  
	
  Foreign
  exchange (loss) gain

  	
   

  	
  (2,025,355

  	
  )

  	
  1,118,553

  	
   

  	
  (84,228

  	
  )

  
	
  Interest
  (expense) income

  	
   

  	
  (26,705

  	
  )

  	
  660,767

  	
   

  	
  222,545

  	
   

  
	
  Net
  income (loss) for the period

  	
   

  	
  $

  	
  (9,165,133

  	
  )

  	
  $

  	
  (16,962,892

  	
  )

  	
  $

  	
  (14,570,193

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Basic
  and fully diluted loss per share

  	
   

  	
  $

  	
  (0.33

  	
  )

  	
  $

  	
  (0.62

  	
  )

  	
  $

  	
  (0.76

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance Sheet Data

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash
  and cash equivalents

  	
   

  	
  26,273,633

  	
   

  	
  18,597,333

  	
   

  	
  30,803,989

  	
   

  
	
  Total
  assets

  	
   

  	
  65,583,833

  	
   

  	
  39,848,770

  	
   

  	
  48,649,231

  	
   

  
	
  Customer
  deposits

  	
   

  	
  21,050,029

  	
   

  	
  12,647,883

  	
   

  	
  7,135,834

  	
   

  
	
  Long-term
  debt

  	
   

  	
  ––

  	
   

  	
  ––

  	
   

  	
  8,624

  	
   

  
	
  Total
  liabilities

  	
   

  	
  33,722,555

  	
   

  	
  18,884,493

  	
   

  	
  11,381,390

  	
   

  
	
  Shareholders’
  equity

  	
   

  	
  31,861,278

  	
   

  	
  20,964,277

  	
   

  	
  37,267,841

  	
   

  

 

The financial results for
the three most recent years reflect the progression of an early stage Company
with a limited operating history. 
Factors that have caused our results to vary are described below.

 

·                  The general trend has been for strong
growth in sales over the years as the Company has achieved increased market
acceptance.  As a result of the limited
number of systems sold and installed to date and the high dollar value
associated with each sale, our revenues recorded from quarter to quarter have
varied depending on the number and stage of active projects in any given
quarter.

 

·                  Gross profit has improved significantly
with increased sales volumes and higher pricing.  Our initial pricing strategy was market
penetration based.  As product
recognition and adoption occurred we increased our pricing to reflect the
underlying value of IMRIS systems.  This
change has resulted in improved gross profit as a percentage of sales
particularly comparing the 2008 results with those achieved in 2009.

 

·                  Net losses have generally decreased from
2007 to 2009.  We achieved our first
quarter of net income in Q4 2009.  The
improvements over time reflect the increases in gross profit described above,
controlled increases in operating expenses to meet growth in the business and
foreign exchange gains and losses.

 

4

 

·                  Most of our sales to date have been denominated in
currencies other than the Canadian dollar which can give rise to foreign
exchange gains or losses depending on the change in value of the Canadian
dollar versus other currencies in each quarter. 
In 2007, the Canadian dollar weakened against the US dollar.  For most of 2008, the relative value of the
Canadian dollar versus the US dollar resulted in the recording of foreign
exchange gains.  In the last three
quarters of 2009, we incurred foreign exchange losses primarily as a result of
changes in the relative values of these two currencies.

 

·                  On November 2, 2009 we completed an
equity financing with the issuance of 3,215,000 common shares and an additional
482,250 common shares granted as an overallotment option, resulting in net
proceeds of $19.3 million.  With
completion of the financing, our total number of shares outstanding increased
compared with prior years.

 

Results
of Operations

 

Sales

 

Sales increased to $44.4
million from $23 million in the prior year, an increase of 93.5%.  Revenue growth for the year ended December 31,
2009 is the result of increased systems deliveries in 2009 and a significant
increase in the average revenue per system in the 2009 period due to favourable
product mix, including delivery of our first IMRISNV system.

 

Sales for the year ended December 31,
2009 included $42.7 million of revenues associated with new system deliveries
and $1.7 million of revenues associated with extended maintenance
contracts.  This compares to  $22.2 million of new system sales and
$0.8 million in extended maintenance contracts for the same period in the prior
year.

 

Gross
Profit

 

Gross profit for the year ended December 31, 2009
increased by approximately $15.1 million to $19.7 million, as compared to the
prior year.  Gross profit as a percentage
of sales increased from 20.1% to 44.3% for the year ending December 31,
2009.  The growth in gross profit is the
result of a change in the pricing strategy reflecting the increasing customer
acceptance of our technology.  We have
also seen improved margins as a result of our efforts to reduce the direct
costs of our systems.

 

Operating
Expenses

 

Operating expenses for
the year were $26.8 million an increase of approximately $3.4 million or 15%
from $23.4 million in the prior year, The increase is primarily a result of
increased costs in sales and marketing and customer support and operations.  Sales and marketing increased in the year
mainly due to the launch of the IMRISNV  and IMRIScardio systems as well as higher wages and
benefits associated with increased staff levels to support future sales
growth.  Customer support and operations
increased in the year primarily as a result of increased staff to support the
increased system delivery volume.  Year
to date amortization expense was significantly higher as a result of additional
research and development equipment being placed into use and being amortized
over its useful life.

 

At the departmental
level, administrative expenses decreased to $6.7 million from $6.8 million in
the prior year or a 1% decrease. 
Although year to date amounts did not change in total in comparison to
prior year, the department did experience an increase in travel expenses and a
small increase in wages and benefits offset by a decrease in professional fees
and consulting fees.

 

Sales and marketing
expenses for the year increased to $8.0 million from $6.5 million in the prior
year for a 25% increase.  The year to
date increases are mainly due to launch costs for the IMRISNV  and IMRIScardio systems and higher staffing levels and
related costs to support future sales growth.

 

5

 

Customer support and
operations expense for 2009, increased to $5.0 million from $3.9 million in the
prior year or a 26% increase.  The year
to date increase is mainly attributed to an increase in wages and benefits associated
with additional staff to support the higher system volume delivered in the
year.  The department also had a small
increase in 2009 for professional fees associated with obtaining regulatory
approvals for our products.

 

Research and development
expenses for the year increased to $4.9 million from $4.7 million in the prior
year, or a 5% increase.  The year to date
increase is primarily due to an increase in staff levels for the full year and
additional costs relating to filing new patent applications.

 

Amortization expense for
2009 was $2.2 million compared to $1.5 million in the prior year, a 48%
increase.  The year to date increase in
amortization expense resulted from the commencement of amortization on capital
additions to our research and development test facility.

 

The company had a foreign
exchange loss $2.0 million compared to a foreign exchange gain of $1.1 million
the prior year.  The foreign exchange
loss year resulted from the decrease in value of the US dollar relative to the
Canadian dollar.  The majority of the
Company’s sales are denominated in US dollars; as such we held US dollar
denominated net assets during the period which were negatively impacted as the
US dollar weakened against the Canadian dollar.

 

Interest income (expense)
decreased by approximately $0.7 million as compared to the prior year.  This was due to extremely low yields on
short-term money market instruments, lower average cash balances and interest
expense relating to a provincial sales tax reassessment.

 

Operating
Loss and Net Loss for the Year

 

The Company’s operating
loss for 2009 was $7.1 million compared to $18.7 million in the prior year, a
62% improvement.  The year over year
improvements are due primarily to increased sales volume and higher gross
profit margins offset in part by additional operating expenses to fund the
growth in the business.

 

Our net loss for the year
ended December 31, 2009 was $9.2 
million, a decrease of $7.8 million compared to the loss of $17.0
million in 2008,, an improvement of 46%. 
The improvement was mainly due higher sales volume and improved gross
margins offset in part by higher foreign exchange losses and lower interest
income.

 

EBITDA

 

In the fourth quarter of
2009 we delivered our first quarter of positive EBITDA at $1.4 million compared
with negative $4.3 million in the fourth quarter of 2008.  For year ended December 31, 2009, EBITDA
was negative $5.0 million compared with negative $17.3 million in 2008.  The improvements in EBITDA in both the fourth
quarter and full year 2009 were primarily due to increased sales volumes and
higher gross profit margins, net of higher cash operating expenses used to fund
growth in the business.  We have begun
reporting EBITDA because we believe investors use it as another measure of our
operating performance.

 

6

 

SUMMARY
OF QUARTERLY RESULTS

 

The
following table is a summary of our financial results for the past eight
quarters.

 

	
  (In CDN
  dollars)

  	
   

  	
  Q4

  	
   

  	
  Q3

  	
   

  	
  Q2

  	
   

  	
  Q1

  	
   

  	
  Q4

  	
   

  	
  Q3

  	
   

  	
  Q2

  	
   

  	
  Q1

  	
   

  
	
  (Unaudited)

  	
   

  	
  2009

  	
   

  	
  2009

  	
   

  	
  2009

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  2008

  	
   

  	
  2008

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sales

  	
   

  	
  19,921,667

  	
   

  	
  9,863,709

  	
   

  	
  $

  	
  9,827,863

  	
   

  	
  $

  	
  4,804,279

  	
   

  	
  $

  	
  5,733,845

  	
   

  	
  $

  	
  4,869,433

  	
   

  	
  $

  	
  8,191,072

  	
   

  	
  $

  	
  4,158,136

  	
   

  
	
  Cost of sales

  	
   

  	
  10,991,504

  	
   

  	
  5,401,780

  	
   

  	
  5,398,467

  	
   

  	
  2,956,468

  	
   

  	
  4,312,698

  	
   

  	
  3,541,973

  	
   

  	
  6,733,398

  	
   

  	
  3,756,113

  	
   

  
	
  Gross Profit

  	
   

  	
  8,930,163

  	
   

  	
  4,461,929

  	
   

  	
  4,429,396

  	
   

  	
  1,847,811

  	
   

  	
  1,421,147

  	
   

  	
  1,327,460

  	
   

  	
  1,457,674

  	
   

  	
  402,023

  	
   

  
	
  As a
  percentage of sales

  	
   

  	
  44.8

  	
  %

  	
  45.2

  	
  %

  	
  45.1

  	
  %

  	
  38.5

  	
  %

  	
  24.8

  	
  %

  	
  27.3

  	
  %

  	
  17.8

  	
  %

  	
  9.7

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating
  expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Administration

  	
   

  	
  1,814,853

  	
   

  	
  1,642,702

  	
   

  	
  1,774,512

  	
   

  	
  1,474,344

  	
   

  	
  1,718,663

  	
   

  	
  1,733,936

  	
   

  	
  1,613,014

  	
   

  	
  1,741,635

  	
   

  
	
  Sales and
  marketing

  	
   

  	
  2,770,288

  	
   

  	
  1,601,483

  	
   

  	
  1,963,812

  	
   

  	
  1,704,122

  	
   

  	
  1,741,730

  	
   

  	
  1,747,905

  	
   

  	
  1,638,278

  	
   

  	
  1,322,545

  	
   

  
	
  Customer
  support and operations

  	
   

  	
  1,507,042

  	
   

  	
  1,161,209

  	
   

  	
  1,216,876

  	
   

  	
  1,065,352

  	
   

  	
  955,378

  	
   

  	
  1,021,536

  	
   

  	
  1,041,746

  	
   

  	
  911,610

  	
   

  
	
  Research and
  development

  	
   

  	
  1,430,109

  	
   

  	
  1,133,412

  	
   

  	
  1,282,928

  	
   

  	
  1,077,369

  	
   

  	
  1,271,654

  	
   

  	
  1,419,993

  	
   

  	
  1,110,014

  	
   

  	
  903,844

  	
   

  
	
  Amortization

  	
   

  	
  596,724

  	
   

  	
  539,392

  	
   

  	
  527,106

  	
   

  	
  498,737

  	
   

  	
  503,793

  	
   

  	
  432,931

  	
   

  	
  269,613

  	
   

  	
  250,698

  	
   

  
	
   

  	
   

  	
  8,119,016

  	
   

  	
  6,078,198

  	
   

  	
  6,765,234

  	
   

  	
  5,819,924

  	
   

  	
  6,191,218

  	
   

  	
  6,356,301

  	
   

  	
  5,672,665

  	
   

  	
  5,130,332

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating
  profit (loss) before the following

  	
   

  	
  811,147

  	
   

  	
  (1,616,269

  	
  )

  	
  (2,335,838

  	
  )

  	
  (3,972,113

  	
  )

  	
  (4,770,071

  	
  )

  	
  (5,028,841

  	
  )

  	
  (4,214,991

  	
  )

  	
  (4,728,309

  	
  )

  
	
  Foreign
  exchange (loss) gain

  	
   

  	
  (367,747

  	
  )

  	
  (1,033,741

  	
  )

  	
  (960,663

  	
  )

  	
  336,796

  	
   

  	
  880,516

  	
   

  	
  230,763

  	
   

  	
  (45,218

  	
  )

  	
  52,492

  	
   

  
	
  Interest
  income (expense)

  	
   

  	
  (25,633

  	
  )

  	
  (6,096

  	
  )

  	
  754

  	
   

  	
  4,270

  	
   

  	
  74,463

  	
   

  	
  118,060

  	
   

  	
  196,939

  	
   

  	
  271,305

  	
   

  
	
  Net income
  (loss) for the quarter

  	
   

  	
  $

  	
  417,767

  	
   

  	
  $

  	
  (2,656,106

  	
  )

  	
  $

  	
  (3,295,747

  	
  )

  	
  $

  	
  (3,631,047

  	
  )

  	
  $

  	
  (3,815,092

  	
  )

  	
  $

  	
  (4,680,018

  	
  )

  	
  $

  	
  (4,063,270

  	
  )

  	
  $

  	
  (4,404,512

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Earning (loss)
  per share

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Basic

  	
   

  	
  $

  	
  0.02

  	
   

  	
  $

  	
  (0.10

  	
  )

  	
  $

  	
  (0.12

  	
  )

  	
  $

  	
  (0.13

  	
  )

  	
  $

  	
  (0.14

  	
  )

  	
  $

  	
  (0.17

  	
  )

  	
  $

  	
  (0.15

  	
  )

  	
  $

  	
  (0.16

  	
  )

  
	
  Diluted

  	
   

  	
  $

  	
  0.01

  	
   

  	
  (0.10

  	
  )

  	
  (0.12

  	
  )

  	
  (0.13

  	
  )

  	
  (0.14

  	
  )

  	
  (0.17

  	
  )

  	
  (0.15

  	
  )

  	
  (0.16

  	
  )

  

 

The financial results for
the eight most recent quarters reflect the progression of an early stage
Company with a limited operating history. 
Factors that have caused our quarterly results to vary are generally
consistent with the factors described in the 3 year in the Summary of Selected
Financial Information section above.

 

ORDER
BACKLOG(2)

 

During the year, we received record order bookings of
$73.1 million, contributing to order backlog of $89.4 million at December 31,
2009.  The change in the Company’s order
backlog was impacted by delivering record revenues of $44.4 million and a $7.1
million reduction in the value of the backlog due to the appreciation of the
Canadian dollar versus the US dollar. 
The annual orders are composed of 10 new customer orders and three
upgrades of existing orders.  This
includes our first order from Europe, which represents a significant new market
for the company.  We continue to convert
past order backlog to recognized revenue and we are reasonably confident that
we will convert our present order backlog to recognized revenue going forward.

 

To date, we have sold 35
systems, 19 of which are installed and 16 of which are in the delivery
phase.  Of the 35 systems sold, 25 are in
the United States, 5 are in Canada, 4 systems are in Asia Pacific and 1 system
has been sold in Europe.

 

(2) Oder backlog is
defined as the unrecognized portion of the revenues anticipated to be recorded
from confirmed system orders, including the next twelve months of revenues to
be derived from executed service contracts.

 

7

 

ACQUISITION
OF NEUROARM SURGICAL LTD.

 

On February 4, 2010,
the Company announced that it has entered into a definitive agreement to
acquire NeuroArm Surgical Limited (“NASL”), a privately held company based in
Calgary, Alberta, and its magnetic resonance-compatible neurosurgical
robot.  IMRIS has also entered into a
memorandum of understanding with MacDonald Dettwiler and Associates Limited (“MDA”)
to create the next generation of the technology.

 

IMRIS will issue 1.6
million common shares from treasury, as consideration for the acquisition of
NASL, including the technology, patents and associated intellectual property.

 

The closing conditions of
the transaction were completed on February 5, 2010.

 

OUTLOOK

 

When our Company was
formed in 2005, our initial focus was on gaining market acceptance for
IMRISneuro and ensuring the successful delivery of each customer installation
as we developed our core competencies across all facets of the
organization.  Today, IMRISneuro has
become the solution of choice and is installed in leading neuroscience centers
around the world.  We have broadened our
market opportunity with the recent introduction of IMRISNV and IMRIScardio and continue to leverage our
technology platforms and core competencies in support of bringing new
application—specific solutions to market. 
All of which we have achieved while carefully controlling costs in
support of achieving positive earnings as quickly as possible — a milestone we
reached in the fourth quarter of 2009.

 

2010 Corporate Priorities

 

Our corporate priorities
for 2010 reflect a disciplined approach to advancing our business in support of
delivering continuing strong growth and value-creation.  Our 2010 corporate plans include:

 

Focus on Major Market
Opportunities — IMRIS
systems have been purchased by medical facilities in regions around the world
including the United States, Canada, India, China, Australia and France.  In 2010 we plan to focus our sales and
marketing resources on North America, Europe and China.  We have aligned our organization structure
and resources to reflect this approach and established regional organizations
in each of these markets to move decision-making as close as possible to the
customer.  We believe by expanding our
presence in Europe and China and focusing most of our efforts on these two
markets and on North America, that there is significant opportunity to capitalize
on.  Other geographic markets will
continue to be addressed as emerging market opportunities.

 

Build Capacity and Capability —   We have a strong track record of meeting our
installation schedules and ensuring customer satisfaction.  In 2010 we plan to build additional capacity
and capability across the Company to ensure we meet our customer commitments
and financial objectives.  In 2009 our
revenues for system deliveries increased 94% and given our 2009 year end
backlog, we expect a significant increase in backlog conversion again this year.  To meet this anticipated growth, we are
planning to expand our sales and customer support resources to ensure we manage
the expected ongoing growth in our business effectively.

 

Strengthen our Product Portfolio — Since first coming to market, we have expanded
our product portfolio to include IMRISNV and IMRIScardio.  Our recently
announced acquisition of NASL and its MRI compatible neurosurgical robot system
builds on the Company’s vision to deepen the offering of its image guided
solutions.  The Company’s collaboration
with MacDonald Dettwiler, a world leader in robotics, to create the next
generation of the technology, provides the Company with a number of potential
applications for medical practitioners. 
In 2010 our efforts will be concentrated on research and development
programs that further enhance the value of our three products.  We will also continue to advance the
development of our longer term initiatives for radiation and interventional
therapies including new the robotics systems.

 

Control Costs and Operate
Profitably — We
are committed to continuing to invest prudently in our business to capture the
growth potential we believe exists for IMRIS’s image guided therapy
solutions.  In 2010 we will work to
harden product lines and control costs in support of overall growth in
profitability.

 

8

 

2010 Financial Outlook

 

We are expecting a strong
year of growth in 2010 as we advance our business plan and execute on our
corporate priorities.  Order flow is
expected to build on the positive trends in 2009 as market demand for IMRIS
systems continues to expand.  Net of
increased operating expenses to support expansion of the business, we expect to
generate a growing operating income profile through the year.

 

Given our growth in
backlog in 2009, we expect to continue to convert our backlog into revenues at
a higher rate than historical trends.  As
we move through the year, our focus will be on advancing customer installations
in support of converting orders into recognized revenues.  Our ability to complete installations is
highly dependent on the readiness of customer sites which are often part of a
larger hospital construction project.  As
a result, we can experience delays in our delivery schedule which are beyond
our control resulting in an unbalanced quarterly revenue profile.  While we do not control our customers’
broader construction schedules, through our active involvement in managing each
customer program we continue to work to minimize the potential for delays and
shorten the delivery cycle of those elements that are within the Company’s
control.

 

Gross profit as a
percentage of sales increased in 2009 to 44% as a result of pricing increases
we implemented together with efforts to reduce direct costs of our
systems.  In 2010, we expect full year
gross profit as a percentage of sales to be comparable to 2009 levels.  Some quarterly variability is expected
including reduced margins in the first quarter of the year due to an
installation of our first IMRISNV/IMRIScardio system.  While some
erosion on margin may occur related to exposure to a weakening U.S dollar, we
believe this can be offset as part of our focus on incrementally reducing
component costs through various cost reduction and sustaining engineering
programs in 2010.

 

Operating expenses for
2010 are expected to increase modestly over 2009 levels as we add more capacity
in anticipation of an increase in system deliveries and deliver on planned
objectives.  The primary driver of capacity
will be an additional investment in the sales and marketing area to expand our
global presence and additional support in the customer solutions and delivery
area of the business to manage our growth. 
In addition, we will continue to invest in research and development
programs to add depth to our product offerings, including an investment to
further develop the surgical robotics technology acquired from NASL.

 

We have significant
balance sheet strength with cash and receivables totaling $40 million at December 31,
2009. This together with anticipated positive cash flow from operations  in 2010 as well as cash from customer
deposits on future orders is expected to provide sufficient liquidity to fund
our operations and planned projects through the year.

 

LIQUIDITY
AND CAPITAL RESOURCES

 

Our principal capital
needs are for funding scientific research and development programs, supporting
our sales and marketing activities and funding capital expenditures and working
capital.  The Company has financed its
cash requirements primarily through issuances of securities and customer
deposits from new orders.

 

We had cash or cash
equivalents of $26.3 million as at December 31, 2009, an increase of $20.2
million from September 30, 2009 and an increase of $7.7 million from December 31,
2008.  The increase from December 31,
2008 primarily resulted from the issuance of shares for $19.3 million offset by
the cash operating loss of $6.3 million, an increase in working capital of $1.7
million and capital spending of $3.6 million.

 

9

 

The following table sets
forth the summary statement of cash flows for the periods indicated:

 

Statements
of Cash Flows

(In
CDN dollars)

(Unaudited)

 

	
   

  	
   

  	
  Year
  ended

  December 31

  	
   

  
	
   

  	
   

  	
  2009

  	
   

  	
  2008

  	
   

  	
  Change

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash
  flows:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Used
  in Operating Activities

  	
   

  	
  $

  	
  (8,035,775

  	
  )

  	
  $

  	
  (6,458,088

  	
  )

  	
  $

  	
  (1,577,687

  	
  )

  
	
  From
  (used in) Financing Activities

  	
   

  	
  19,327,467

  	
   

  	
  (216,166

  	
  )

  	
  19,543,633

  	
   

  
	
  Used
  in Investing Activities

  	
   

  	
  (3,615,392

  	
  )

  	
  (5,532,402

  	
  )

  	
  1,917,010

  	
   

  
	
  Net
  increase (decrease)

  	
   

  	
  7,676,300

  	
   

  	
  (12,206,656

  	
  )

  	
  19,882,956

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash
  and cash equivalents, opening

  	
   

  	
  18,597,333

  	
   

  	
  30,803,989

  	
   

  	
   

  	
   

  
	
  Cash
  and cash equivalents, closing

  	
   

  	
  $

  	
  26,273,633

  	
   

  	
  $

  	
  18,597,333

  	
   

  	
  $

  	
  7,676,300

  	
   

  

 

Operating
Activities

 

The cash used from
operating activities for the current year was $8.0 million.  The cash used in 2009 was comprised of the
operating loss (excluding non-cash related items) of approximately $6.3 million
and $1.7 million increase in working capital. 
This increase in working capital is made up of an increase in
receivables ($14.5 million), an increase in inventory ($1.0 million) and an
increase in prepaid expenses ($1.0 million) offset by a decrease in accounts
payables and accruals ($6.4) and an increase in customer deposits ($8.4
million).

 

Financing
Activities

 

The cash generated in
financing activities for the current year was $19.3 million.  The Company closed on November 2, 2009,
a bought deal financing with a syndicate of underwriters to issue 3,215,000
common shares of IMRIS at $5.60 per common share for gross proceeds of
approximately $18 million.  In addition,
IMRIS granted the underwriters an option, exercisable in whole or in part for a
period of up to 30 days following the offering closing date, to increase the
offering by up to 482,250 common shares at a price of $5.60 per common
share.  This option was exercised on November 2,
2009, increasing the aggregate size of the offering to approximately $20.7
million.  The Company incurred
approximately $1.4 million in costs associated with the offering.

 

Proceeds of the offering
will be used for working capital and general corporate purposes.

 

Investing
Activities

 

The cash used in investing activities for the year
ended December 31, 2009 was approximately $3.6 million.  All of the investing activities are for
capital equipment purchases.  During the
current year, capital purchases included; research and development  equipment ($2.2 million), a new enterprise
resource planning (ERP) software system ($0.4 million), a new trade show booth
($0.5 million) and miscellaneous office and computer equipment ($0.5 million).

 

Capital expenditures for 2010 are expected to be in
the range of $1.0 to $1.5 million for computer hardware and software and office
equipment to support our increased staff levels.

 

Liquidity
and Capital Resources Summary

 

Our cash and cash
equivalents as at December 31, 2009 totaled $26.3 million.  This cash position and our expectation that
we will generate positive cash flow from operations including the customer
deposits on future orders, is expected to provide sufficient liquidity to meet
the anticipated needs of ongoing operations and existing projects including the
funding of current research and development programs and budgeted capital asset
expenditures.

 

10

 

Contractual
Obligations

 

Lease
Commitments

 

The Company has lease commitments in respect of
operating leases as set out below:

 

	
  2010

  	
   

  	
  $

  	
  500,440

  	
   

  
	
  2011

  	
   

  	
  256,516

  	
   

  
	
  2012

  	
   

  	
  59,255

  	
   

  
	
  Total

  	
   

  	
  $

  	
  816,211

  	
   

  

 

OUTSTANDING
SHARE DATA

 

The
following table sets forth our outstanding share data as at the dates given:

 

	
   

  	
   

  	
  Authorized

  	
   

  	
  February 26, 2010

  	
   

  	
  December 31, 2008

  	
   

  
	
  Common shares

  	
   

  	
  unlimited

  	
   

  	
  $92,121,047  (32,682,377 common shares)

  	
   

  	
  $65,992,820  (27,352,513 common shares)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preferred shares

  	
   

  	
  unlimited

  	
   

  	
  Nil

  	
   

  	
  Nil

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Contributed
  surplus

  	
   

  	
   

  	
   

  	
  $1,946,100

  	
   

  	
  $1,228,193

  	
   

  

 

As at February 26,
2010 a total of 4,015,240 stock options were outstanding under the Company’s
stock option plan.

 

Non-GAAP
Financial Measures

 

In this MD&A, we use the
non-GAAP measure “EBITDA”.  We define
EBITDA as the earnings before interest income (expense), foreign exchange gain
(loss), income taxes, and amortization. 
We have begun reporting EBITDA because we believe investors use it as
another measure of our operating performance. 
EBITDA does not have a standardized meaning as prescribed by Canadian
generally accepted accounting principles and it is not necessarily comparable
to similarly titled measures used by other companies.

 

A reconciliation to the
most comparable GAAP measures is as follows:

 

	
   

  	
   

  	
  Three months ended

  	
   

  	
  Twelve months ended

  	
   

  
	
   

  	
   

  	
  December 31,

  2009

  	
   

  	
  December 31,

  2008

  	
   

  	
  December 31,

  2009

  	
   

  	
  December 31,

  2008

  	
   

  
	
  Operating income
  (loss)

  	
   

  	
  $

  	
  811,147

  	
   

  	
  $

  	
  (4,770,071

  	
  )

  	
  $

  	
  (7,113,073

  	
  )

  	
  $

  	
  (18,742,212

  	
  )

  
	
  Amortization

  	
   

  	
  596,724

  	
   

  	
  503,793

  	
   

  	
  2,161,959

  	
   

  	
  1,457,035

  	
   

  
	
  EBITDA

  	
   

  	
  $

  	
  1,407,871

  	
   

  	
  $

  	
  (4,266,278

  	
  )

  	
  $

  	
  (4,951,114

  	
  )

  	
  $

  	
  (17,285,177

  	
  )

  

 

11

 

FINANCIAL
INSTRUMENTS

 

Our financial instruments consist of cash and cash
equivalents, accounts receivables, unbilled receivables, and accounts payable
and accrued liabilities.

 

We are subject to credit risk with respect to our
accounts receivable and unbilled receivables to the extent debtors do not meet
their obligations and we are subject to foreign exchange risk with respect to
financial instruments denominated in a currency other than the Canadian dollar.

 

Our short-term investments at December 31, 2009
were $18.3 million and were invested in interest bearing saving accounts and
short term bank deposits.  Of this total,
$0.2 million was denominated in US dollars.

 

Our accounts receivable at December 31, 2009 were
$13.7 million, of which $12.6 million is considered current (less than 60 days
old).  Accounts receivable include $12.9
million that are denominated in US dollars.

 

RELATED PARTY TRANSACTION

 

The Company leases air travel time from 5343381
Manitoba Ltd., a company which is wholly owned by Centara Corporation, a
corporation controlled by our Chairman. 
The amount charged to travel expenses with respect to transactions
conducted on an estimated third party comparable cost basis with this related
party during the year ended December 31, 2009 was $740,940 (2008 -
$382,832).

 

As at December 31, 2009, the balance payable to
this related party was $Nil versus $41,580 as at December 31, 2008.

 

CRITICAL
ACCOUNTING POLICIES AND ESTIMATES

 

The preparation of financial
statements in accordance with GAAP requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
year.  Among the accounting estimates
described in the notes to the financial statements, we consider the accounting
estimates used in the determination of recognized revenues, the value of
goodwill and the valuation of stock options to be critical.  Our results as determined by actual events
could differ materially from the previously mentioned estimates.

 

Revenue recognition

 

We recognize
revenues for our system sales on a percentage-of-completion basis as the system
is installed.  The
percentage-of-completion is determined by the ratio of actual costs incurred to
date to the estimated cost of completion for the project.  In the event that the actual costs of
completion differ from the estimated cost we have used in determining the
percentage-of-completion, recognized revenues may be over or under-estimated
until all costs have been incurred and the project is complete.  Funds received from our customers in advance
of meeting the criteria for recognition of revenues are recorded as customer
deposits until the revenue is recognized. 
Revenues recognized in advance of the criteria for invoicing to our
customer are recorded as unbilled receivables. 
Accordingly, the reported amounts shown on the balance sheet under
customer deposits or unbilled receivables may be over or understated.

 

Interest income is
recognized as earned.

 

Value
of goodwill

 

We recorded goodwill on
the purchase of the assets of a predecessor company.  The value of goodwill is tested for
impairment annually or more frequently if an event or circumstance occurs which
we feel may result in an impairment of the value of goodwill.

 

12

 

Stock based compensation plan

 

From time to time we
issue stock options to employees, directors, officers or consultants.  We have adopted the recommendations of Section 3870
of the Canadian Institute of Chartered Accountants’ Handbook, “Stock Based
Compensation and Other Stock Based Payments”. 
Options granted to employees are valued at the grant date using the
Black-Scholes option pricing model which requires management to make
assumptions as to volatility, exercise date and option life.  The value of the options is expensed over the
vesting period of the options, generally a period of four years.  Options granted to non-employees are valued
at the grant date using the Black-Scholes option pricing model.  The options are expensed at the time the
goods are received or services performed, or over the vesting period.

 

CHANGES
IN ACCOUNTING POLICIES

 

Goodwill,
Intangible Assets and Financial Statement Concept;

 

In February 2008, the CICA
issued Section 3064 Goodwill and Intangible Assets, replacing Section 3062
Goodwill and Other Intangible Assets and Section 3450 Research and
Development Costs.  The new Section establishes
standards on the recognition, measurement, presentation and disclosure for
goodwill and intangible assets subsequent to their initial recognition.  The standard requires retroactive application
to prior period financial statements. 
The adoption of the standard has had no material impact on our financial
position or results of operations.

 

Financial Instruments — Fair
Value and Liquidity Risk Disclosure

 

The Company adopted amendments to
CICA 3862, Financial Instruments — Disclosures for the year ended December 31,
2009, which require all financial instruments measured at fair value to be
classified into one of three levels that distinguish fair value measurements by
the significance of the inputs used for valuation.  Fair value is determined based on the price
that would be received for an asset or paid to transfer a liability in the most
advantageous market, utilizing a hierarchy of three different valuation
techniques, based on the lowest level input that is significant to the fair
value measurement in its entirety.

 

Level
1 - Unadjusted quoted prices in active markets for identical assets or
liabilities;

 

Level
2 - Observable inputs other than Level 1 quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or similar assets or
liabilities in markets that are not active; or inputs other than quoted prices
that are observable or corroborated by observable market data; and

 

Level
3 - Unobservable inputs that are supported by little or no market
activity.  Valuation techniques are
primarily model-based.

 

As at December 31, 2009, no
on-balance sheet financial instruments were required to be classified in this manner.

 

FUTURE ACCOUNTING STANDARDS

 

International
Financial Reporting Standards (IFRS)

 

In February 2008,
the CICA confirmed that Canadian reporting issuers will be required to report
under IFRS effective January 1, 2011, including comparative figures for
the prior year.  In April 2008, the
CICA released an exposure draft of the coming standards.  We have developed a high level IFRS
implementation plan, and a detailed assessment of the impact of the accounting
standard differences to the financial statements has been completed.  This assessment has provided insight as to
the most significant areas of difference applicable to us, including property
and equipment, as well as the more extensive presentation and disclosure
requirements under IFRS.  We expect to
make changes to certain processes in 2010 to ensure transactions are recorded
in accordance with IFRS for comparative reporting purposes on the required
implementation date.

 

13

 

We continue to monitor standards development as issued
by the International Accounting Standards Board and the AcSB, as well as
regulatory developments as issued by the Canadian Securities Administrators
(CSA), which may affect the timing, nature or disclosure of our adoption of
IFRS.

 

The transition from current Canadian GAAP to IFRS is a
significant undertaking that may materially affect our reported financial
position and results of operations.  As
we are still in the development phase and have not yet selected our accounting policy
choices and IFRS 1 exemptions, we are unable to quantify the impact of IFRS on
our financial statements.  The areas of
significance identified above are based on available information and our
expectations as of the date of this MD&A and thus, are subject to change
for new facts and circumstances.

 

Business
Combinations

 

Section 1582 further
aligns Canadian GAAP with U.S. GAAP and IFRS, and changes the accounting for
business combinations in a number of areas. 
It establishes principles and requirements governing how an acquiring
company recognizes and measures in its consolidated financial statements
identifiable assets acquired, liabilities assumed, any non-controlling interest
in the acquiree, and goodwill acquired. 
The Section also establishes disclosure requirements.  The impact to the Corporation will be limited
to any future acquisitions beginning in fiscal 2011.

 

Consolidated
Financial Statements and Non-Controlling Interests

 

Sections 1601 and 1602
further align Canadian GAAP with U.S. GAAP and IFRS. Sections 1601 and 1602
change the accounting and reporting of ownership interests in subsidiaries held
by parties other than the parent. 
Non-controlling interests are to be presented in the consolidated statement
of financial position within equity but separate from the parent’s equity.  The amount of consolidated net income
attributable to the parent and to the non-controlling interest is to be clearly
identified and presented on the face of the consolidated statements of income.
In addition, these pronouncements establish standards for a change in a parent’s
ownership interest in a subsidiary and the valuation of retained
non-controlling equity investments when a subsidiary is deconsolidated. They
also establish reporting requirements for providing sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the non-controlling owners. 
The Corporation does not believe there will be any impact on its consolidated
financial statements upon the adoption of these pronouncements in fiscal 2011,
unless the Corporation’s circumstances change.

 

Multiple
Deliverable Revenue Arrangements

 

In December 2009,
the CICA issued EIC Abstract 175, Multiple Deliverable Revenue Arrangements.
The EIC deals with arrangements that have multiple deliverables and provides
guidance which is to be applied to determine how an arrangement consideration
should be measured, whether the arrangement should be divided into separate
units of accounting, and how the arrangement consideration should be allocated
among the separate units of accounting. 
This EIC is effective for years beginning January 1, 2011, with
early adoption permitted.  The Company is
currently assessing the future impact of this EIC on its financial statements
and has not yet determined the timing and method of its adoption.

 

DISCLOSURE AND INTERNAL CONTROLS

 

Disclosure controls and procedures are those controls
and other procedures that are designed to provide reasonable assurance that
information required to be disclosed under securities legislation in annual
filings, interim filings or other reports is recorded, processed, summarized
and reported within the time periods specified by the legislation.  They include, without limitation, controls
and procedures designed to ensure the information required to be disclosed in
these reports is accumulated and communicated to the Company’s management,
including the Chief Executive Officer (CEO) and Executive Vice President and
Chief Financial Officer (CFO) to allow timely decisions regarding required
disclosure.

 

14

 

The system of disclosure controls and procedures is
designed to provide reasonable assurance, not absolute assurance, that all
control issues and instances of fraud will be detected.  The CEO and CFO are responsible for
establishing and maintaining IMRIS’s disclosure controls and procedures.  An evaluation of the design and operation of
the Company’s disclosure controls and procedures as of the date of this report
was conducted under the supervision of the CEO and CFO.  The evaluation concluded that the controls
and procedures were effective in providing such reasonable assurance.

 

Internal controls over financial reporting are
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements according to Canadian
GAAP.  An evaluation of the design and
effectiveness of IMRIS’s internal controls was conducted under the supervision
of the CEO and CFO.  The evaluation
concluded that there were no significant weaknesses in the design or
effectiveness of IMRIS’s internal controls over financial reporting.

 

During the quarter ended December 31, 2009, we
implemented a new enterprise resource planning (ERP) software system as noted
in the Investing Activities section of this MD&A.  The system went live on November 2,
2009, replacing the legacy ERP software system. 
The system implementation included core processing in production,
inventory purchasing and accounting. 
Although there has been a change in the ERP system, the conversion has
not resulted in a change that will materially affect our internal controls over
financial reporting.

 

No material changes have been made to the Company’s
internal controls during 2009.

 

RISKS
AND UNCERTAINTIES

 

The
operating results, business prospects and financial position of the Company are
subject to a number of risks and uncertainties. 
Risks relating
to our business include: our long sales cycle, high unit price and limited
quarterly installations; our limited operating history and accumulated deficit;
our lack of product diversity; our dependence on our suppliers; the development
of IMRIScardio and IMRISNV; our reliance on key personnel; the lack
of supporting clinical data; market competition and technological advances;
patent protection and trade secrets; intellectual property litigation; our
ability to shift from research and development to commercialization; our
ability to manage growth; foreign exchange fluctuations; additional financing
requirements; and regulatory matters.  If any of the events
described as risks or uncertainties actually occurs, our business, prospects,
financial condition and operating results would likely suffer, possibly
materially.  We have discussed several of
the more significant risks and uncertainties which may affect the business
below, however for a more comprehensive list of the risks and uncertainties
affecting the business, readers are advised to refer to our most recent Annual
Information Form, available at www.sedar.com.

 

Long
sales cycle, high unit price and limited installations

 

The long sales
cycle, as well as the high unit price of the IMRIS systems, among other
factors, may contribute to substantial fluctuations in our quarterly operating
results.  Because of the high unit price
of IMRIS systems and the fact that we have completed the installation of only
19 units over the Company’s history, each installation currently represents a
significant component of our revenue for a particular quarter.  If we lose a single customer order or if
customers defer installation of an IMRIS system for even a short period of
time, recognition of a significant amount of revenue may be lost or deferred to
a subsequent period.  Given that our
operating costs are relatively fixed, our inability to recognize revenue in a
particular quarter may adversely affect our profitability in that quarter.  We expect that revenues from a limited number
of new customers will account for a large percentage of total revenues in
future quarters.  Our ability to attract
new customers will depend on a variety of factors, including the capability,
safety, efficacy, ease of use, price, quality and reliability of our products
and effective sales, support, training and service.  In addition, if we are unable
to fulfill our current purchase orders and other commitments on a timely basis
or at all, market acceptance of our products could be adversely affected and
hospitals may instead purchase our competitors’ products.  The loss or delay of individual orders or
failure to add new customers could have a significant impact on future revenues
and operating results.

 

15

 

Limited operating history and accumulated deficit

 

We have a limited
operating history from which investors can evaluate our business and
prospects.  We have a large accumulated deficit and we may
not maintain profitability.  We have
incurred substantial losses since inception and despite achieving profitability
in the fourth quarter of 2009; we may incur additional operating losses in the
near term.  If the time required to
generate significant revenues and achieve profitability on an annualized basis
is longer than anticipated, we may not be able to continue our operations
without additional capital.  Our
prospects must be considered in light of the risks and uncertainties
encountered by an early-stage company in the continuously-evolving surgical
imaging market.  If we cannot
successfully address these risks, our business and financial condition would
suffer.

 

Lack of product diversity

 

Currently, our
commercially available products are the IMRISneuro, IMRIScardio and IMRISNV
systems.  Although we expect sales of our
new IMRIScardio and IMRISNV systems to increase with market acceptance of these
systems, we currently generate substantially all of our revenue from sales of
the IMRISneuro system and multiyear service plans for the IMRISneuro
system.  If we are unable to sustain or grow
sales of the IMRISneuro system or grow sales of IMRIScardio and IMRISNV, we may
not generate sufficient revenue to support our business.  Accordingly, we are currently dependent on
our ability to market and sell the IMRISneuro system.  Any factor materially and/or adversely
affecting our ability to market and sell the IMRISneuro system or pricing and
demand for the IMRISneuro system may have a material and adverse effect on our
financial condition and results of operations.

 

Foreign exchange fluctuations

 

As a global provider of integrated imaging solutions,
most of our sales are denominated in currencies other than the Canadian
dollar.  We currently generate a
significant portion of our sales in US dollars but many of our expenses are
denominated in Canadian dollars.  To
date, we have not used forward exchange contracts to hedge exposures
denominated in US dollars or any other derivative instrument for trading,
hedging or speculative purposes.  As
such, we are exposed to fluctuations in the exchange rate between the US dollar
and the Canadian dollar as a result of the translation into Canadian dollars of
our balance sheet and income statement items denominated in US dollars.

 

Regulatory matters

 

Products intended for diagnostic and therapeutic use
for humans are governed by a wide array of regulatory authorities in various
jurisdictions.  For most of these
products in most jurisdictions, applicable statutes and regulations require
testing and government review and approval prior to marketing the product.  This procedure can take a number of years and
involves the expenditure of substantial resources.  Any failure or delay by us to obtain
regulatory approvals or clearances could adversely affect the marketing of any
products developed by us and our ability to receive product revenue.  There is no assurance that any of our planned
products will be approved by any regulatory authority on a timely basis, or at
all.  Also, in the event that a
regulatory authority revokes any approvals granted in respect of our products,
or a recall of our products is required in the event of material deficiencies
or defects, our business, financial condition and results of operations could
be adversely affected.

 

Dependence on suppliers

 

We depend on
Siemens to supply the MR scanner and angiography systems for our IMRIS
systems.  Our current agreement with
Siemens was entered into as of November 2009 for a five-year term with
automatic renewal provisions thereafter, subject to six months’ advance written
notice of termination by either party. 
The agreement may be terminated earlier in the event of default or in
the event of insolvency or equivalent proceedings against either party or in
the event of a change of control or similar sale transaction affecting IMRIS
where the buyer or controlling shareholder is a direct competitor to
Siemens.  If for any reason we could not
obtain MR scanners and angiography systems from Siemens, there is no certainty
that we could find another vendor willing to supply this equipment for the
IMRIS systems and a change would require a redesign of the IMRIS systems, which
could take a year or more to implement. 
We are dependant on Siemens to provide support and maintenance services
to our customers under contract to IMRIS; if Siemens’ services became
unavailable, any resulting service issues could disrupt our customer
relationships and cause damage to our reputation.

 

16

 

We purchase
certain other components of our system from outside vendors, including
radio-frequency shielding systems, certain hardware components for our surgical
information management system and operating room booms and lights.  For the majority of our system components, we
do not have long-term supply contracts with the suppliers; however, we attempt
to establish dual sourcing for most of these other components of our system and
we believe that we would be able to establish alternative sources for these
components, subject to any regulatory qualifications, as may be required.  It is possible that a disruption of the
supply of these components could result in increased costs and delays in
deliveries of IMRIS systems, which could adversely affect our reputation and
results of operations.  Additionally, any
transition to alternate manufacturers or suppliers would likely result in operational
problems and increased expenses and could delay the shipment of, or limit our
ability to provide our products.

 

Competition
and technological advances

 

The surgical
imaging industry is subject to intense and increasing competition and rapidly
evolving technologies.  Many government,
academic and business entities are investing substantial resources in research
and development of treatments and new products that may render surgical imaging
obsolete, including radiation treatment, new drug treatments and gene
therapy.  Successful developments that
result in new approaches for treatments could reduce the attractiveness of our
products or render them obsolete.  MRI
competes with other surgical imaging technologies such as CT, fluoroscopy and
ultrasound for market share in the overall surgical imaging market.

 

The market for
neurosurgical MR imaging is highly competitive, with a number of companies
providing competing surgical MRI systems. 
Many of these competitors are large medical system suppliers which have
considerably greater resources at their disposal to advance the development of
their MRI systems.  These competitors or
other companies may at any time develop new or improved surgical imaging
solutions.  Alternatively, these
competitors may choose to increase their respective market share by changing
their pricing model or by lowering the price of their surgical imaging
solutions or ancillary supplies.  If we
are unable to address these competitor tactics by either continuing to enhance
and improve our current product(s) or we are unable to maintain or
increase our selling price in the face of competition, there can be no
assurance that the Company will be able to maintain its desired market share or
achieve its financial objectives.

 

Additional
Information

 

Additional
information about IMRIS can be found on the SEDAR website at www.sedar.com.

 

17

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}]]