Invest in the Future of Opto-Electronics

The Company's common shares are listed on Nasdaq. As a "foreign private issuer" under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is permitted, pursuant to Nasdaq Stock Market Rule 5615(a)(3), to follow its home country practice in lieu of certain Nasdaq corporate governance standards provided that it discloses and describes the differences between its corporate governance practices and those that would otherwise be required by Nasdaq. Below we describe the differences between the Nasdaq Stock Market Rules and the applicable home country requirement that the Company follows. References to a "Rule" below are references to the applicable rule in the Nasdaq Stock Market Rules.

The Company is incorporated under the Business Corporations Act (Ontario) and is subject to the Securities Act (Ontario) as a result of being a "reporting issuer" under applicable Canadian securities laws. As a Canadian "reporting issuer," the Company's home country requirement with respect to corporate governance standards and practices refers to certain instruments prescribed by the applicable Canadian securities regulators in the provinces and territories in which the Company is a "reporting issuer" acting collectively as the Canadian Securities Administrators ("CSA"). Specifically, the applicable framework includes: (i) National Instrument 58-101 – Disclosure of Corporate Governance Practices of the CSA, (ii) National Instrument 51-102 – Continuous Disclosure Obligations ("NI 51-102") of the CSA, (iii) National Policy 58-201 – Corporate Governance Guidelines ("NP 58-201") of the CSA, and (iv) National Policy 51-201 – Disclosure Standards of the CSA. Pursuant to National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers, the Company is an "SEC foreign issuer" because it has a class of securities registered under Section 12 of the Exchange Act and is not registered or required to be registered as an investment company under the Investment Company Act of 1940, as amended, and, as a result, certain other instruments prescribed by the CSA, such as National Instrument 52-110 – Audit Committees of the CSA, do not apply to the Company.

Meeting of Board of Directors: Rule 5605(b)(2) requires that independent directors (as defined by Nasdaq) of Nasdaq-listed issuers must have regularly scheduled meetings at which only such independent directors are present. There is no home country requirement to have, and the Company does not have, mandated regularly scheduled meetings of its independent directors. However, its independent directors hold meetings without management present as deemed necessary or appropriate from time to time. The charters for the Company's Corporate Governance & Nominating Committee and Compensation Committee provide that the Chair of each of those committees must be an independent director, and a majority of its members must be independent.

Content of Audit Committee Charter: Rule 5605(c)(1) requires that the formal written audit committee charter for a Nasdaq-listed issuer’s audit committee specifies the audit committee's responsibility for ensuring its receipt from the outside auditors of a formal written statement delineating all relationships between the auditor and the Company, actively engaging in a dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor and for taking, or recommending that the full board take, appropriate action to oversee the independence of the outside auditor. The home country NI 51-102 requirements stipulate that the current version of the Company's Audit Committee Charter be disclosed to shareholders on an annual basis. The Company's Audit Committee Charter requires that the Audit Committee assess the independent auditor's performance, qualifications, and independence and pre-approve all audit services as well as any non-audit services to be provided by the independent auditors.

Content of Compensation Committee Charter: Rule 5605(d)(1) requires that the formal written compensation committee charter of a Nasdaq-listed issuer specifies that the compensation committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the compensation committee only after taking into consideration the specific factors enumerated in Rule 5605(d)(3)(D). The home country requirement is less prescriptive, as NP 58-201 sets out suggested non-binding guidelines only. NP 58-201 suggests that the Company "should" have a formal compensation committee, which committee should have a formal written charter with specified content, and that the compensation committee should have specified delineated responsibilities. The Company's Compensation Committee Charter provides that the Committee has the authority to retain, at the Company's expense, independent legal, financial and other advisors, consultants and experts to assist the Committee in fulfilling its duties and responsibilities but does not require the Compensation Committee to first consider the factors enumerated in Rule 5605(d)(3)(D).  

Compensation Committee Composition: Under Rule 5605(d)(2), subject to limited exceptions, the compensation committee of a Nasdaq-listed issuer must be composed of at least two members, each of whom must be an independent director.  With respect to compensation committee members, Rule 5605(d)(2) requires the issuer’s board of directors to consider all factors specifically relevant to determining whether a director has a relationship to the Company which is material to that director's ability to be independent from management in connection with the duties of a compensation committee member. The home country requirement is less prescriptive, as NP 58-201 sets out suggested non-binding guidelines only. NP 58-201 suggests that the compensation committee of the Company should be comprised entirely of independent directors. The Company's Compensation Committee Charter provides that the Company's Compensation Committee will consist of at least three directors, a majority of which will meet the criteria for independence as established by applicable laws and the rules of each stock exchange upon which the Company's securities are listed. The committee’s charter also provides that each independent director must be free of any relationship which could, in the view of the board, reasonably interfere with the exercise of a committee member's independent judgement.

Nomination Committee Composition: Under Rule 5605(e), director nominees of a Nasdaq-listed issuer must either be selected, or recommended for a board of directors' selection, either by: (i) independent directors constituting a majority of the board's independent directors in a vote in which only independent directors participate; or (ii) a nominees committee comprised solely of independent directors. The home country requirement is less prescriptive, as NP 58-201 sets out suggested non-binding guidelines only. NP 58-201 suggests that the Company should have a formal nominating committee that should be comprised of only independent directors. The Company's Corporate Governance & Nominating Committee Charter provides that the board will appoint at least three (3) directors to the Company's Governance & Nominating Committee.

Proxy Solicitations: Under Rule 5620(b), a Nasdaq-listed issuer that is not a limited partnership must solicit proxies and provide proxy statements for all meetings of shareholders and provide copies of such proxy solicitation materials to Nasdaq. The Company solicits proxies in accordance with applicable rules and regulations in Canada, including the Business Corporations Act (Ontario). The content of proxy solicitation materials sent to shareholders is prescribed by NI 51-102. The Company is a "foreign private issuer" as defined in Rule 3b-4 under the Exchange Act, and the equity securities of the Company are accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Exchange Act.

Shareholder Meeting Quorum Requirement: Rule 5620(c) provides that the minimum quorum requirement for a meeting of a Nasdaq-listed issuer’s shareholders is 33 1/3% of the issuer’s outstanding shares of common voting stock. The Company follows the requirements under applicable Canadian corporate law with respect to quorum requirements, which allows the Company to specify a quorum requirement in its by-laws. Pursuant to the Company's by-laws, a quorum for any meeting of shareholders is two holders of shares entitled to vote at a meeting of shareholders, whether present in person or represented by proxy.

Shareholder Approval Requirements: Rule 5635 requires that shareholder approval be obtained by a Nasdaq-listed issuer in order to issue securities in connection with certain events, such as the acquisition of shares or assets of another company, a change in control of the issuer, the establishment of or amendments to equity-based compensation plans for employees, rights issues at or below market price, certain private placements, directed issues at or above market price and the issuance of convertible notes. Neither applicable Canadian securities laws nor Canadian corporate law require shareholder approval for such transactions, except where such transactions constitute a "related party transaction" or "business combination" under Canadian securities laws. In addition to the above requirements stipulated by Rule 5635, the Company's incorporating statute also requires shareholder approval to effect the sale, lease or exchange of all or substantially all of the Company's property, other than in the ordinary course of the Company's business.