Neurochem Inc · F-10 · On 2/23/05 · EX-4.3
Filed On 2/23/05 4:36pm ET · SEC File 333-122965 · Accession Number 1206212-5-47
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
2/23/05 Neurochem Inc F-10 7:142 1206212
Registration Statement of a Foreign Private Issuer · Form F-10
Filing Table of Contents
Document/Exhibit Description Pages Size
1: F-10 Registration Statement of a Foreign Private Issuer 50 250K
2: EX-4.1 Consolidated Financial Statements of Neurochem 47 283K
Inc.
3: EX-4.2 Annual Information Form 26 142K
4: EX-4.3 Management Proxy Circular 14 81K
5: EX-4.4 Material Change Report of the Registrant 2 13K
6: EX-5 Consent of Kpmg 1 8K
7: EX-10 Power of Attorney 2± 11K
Exhibit 4.3
(NEUROCHEM LOGO)
MANAGEMENT PROXY CIRCULAR
This proxy circular is furnished in connection with the solicitation by the
management of Neurochem Inc. (the "Corporation") of proxies to be voted at the
annual meeting of shareholders of the Corporation (the "Meeting"), to be held at
the Montreal Museum of Fine Arts, Michal and Renata Hornstein Pavilion, Maxwell
Cummings Auditorium, 1379 Sherbrooke Street West, Montreal, Quebec, H3G 2T9, on
May 19, 2004, at 10:00 AM, Montreal time, for the purposes set forth in the
accompanying notice of the Meeting, and at any adjournment thereof. Except as
otherwise stated, the information contained herein is given as at March 31,
2004, and all dollar amounts and references to $ are to Canadian dollars and US$
refers to United States dollars.
SOLICITATION OF PROXIES
THE ENCLOSED PROXY IS BEING SOLICITED BY THE MANAGEMENT OF THE CORPORATION
and the expenses of solicitation of proxies will be borne by the Corporation.
The solicitation will be made primarily by mail; however, officers and regular
employees of the Corporation may also solicit proxies by telephone, telecopier
or in person.
APPOINTMENT AND REVOCATION OF PROXIES
THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY ARE DIRECTORS OR OFFICERS
OF THE CORPORATION. EACH SHAREHOLDER IS ENTITLED TO APPOINT ANY OTHER PERSON TO
REPRESENT HIM AT THE MEETING, AND AT ANY ADJOURNMENT THEREOF.
A shareholder desiring to appoint another person (who need not be a
shareholder) to represent him at the Meeting, and at any adjournment thereof,
may do so either by striking out the names of the management nominees set forth
in the form of proxy and by inserting such person's name therein or by
completing another proper form of proxy and, in either case, sending the
completed proxy in the enclosed reply envelope for delivery before the Meeting,
or any adjournment thereof, or by depositing such proxy with the Chairman on the
day of the Meeting, at the Meeting or any adjournment thereof.
A shareholder giving a proxy pursuant to this solicitation may revoke any
such proxy by instrument in writing executed by the shareholder or by his
attorney duly authorized in writing, or if the shareholder is a corporation,
executed under its corporate seal or by an officer or attorney duly authorized
in writing, and deposited with the Corporation, c/o Computershare Trust Company
of Canada, Attention: Proxy Department, 1500 University Street, Suite 700,
Montreal, Quebec, H3A 3S8, at any time up to and including the last business day
preceding the day of the Meeting, or any adjournment thereof, or with the
Chairman on the day of the Meeting, at the Meeting or any adjournment thereof,
before any vote is cast under the proxy's authority.
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VOTING OF PROXIES
The persons named in the enclosed form of proxy will vote or withhold from
voting the shares in respect of which they are appointed in accordance with the
directions of the shareholders appointing them.
IN THE ABSENCE OF SUCH DIRECTIONS, SUCH SHARES WILL BE VOTED:
A. FOR THE ELECTION AS DIRECTORS OF THOSE PERSONS HEREINAFTER NAMED AS
MANAGEMENT'S NOMINEES; AND
B. FOR THE APPOINTMENT OF KPMG LLP, CHARTERED ACCOUNTANTS, AS AUDITORS OF THE
CORPORATION AND THE AUTHORIZATION OF THE AUDIT COMMITTEE TO FIX THE
AUDITORS' REMUNERATION.
All matters to be voted upon at the Meeting will be decided by a majority
of the votes cast by the shareholders entitled to vote thereon.
The enclosed form of proxy confers discretionary authority upon the persons
named therein with respect to amendments or variations to matters identified in
the accompanying notice of the Meeting or with respect to such other matters as
may properly come before the Meeting, or any adjournment thereof. At the date
hereof, the management of the Corporation knows of no such amendments,
variations or other matters to be presented for action at the Meeting, or any
adjournment thereof. However, if any other matters which are not now known to
management should properly come before the Meeting, or any adjournment thereof,
the persons named in the enclosed form of proxy will vote on such matters in
accordance with their best judgment.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
As at March 31, 2004, 29,934,864 common shares of the capital of the
Corporation ("Common Shares") were issued and outstanding, each such share
entitling the holder thereof to one vote.
Holders of Common Shares listed as shareholders at the close of business on
April 19, 2004, will be entitled to vote at the Meeting, or any adjournment
thereof, either in person or by proxy, in respect of all matters which may
properly come before the Meeting, or any adjournment thereof.
To the knowledge of the directors and officers of the Corporation, as at
March 31, 2004, no person beneficially owned, directly or indirectly, or
exercised control or direction over, shares of the Corporation carrying more
than 10% of the voting rights attached to all outstanding voting shares of the
Corporation, except as follows:
· Download Table
NAME NUMBER OF COMMON SHARES PERCENTAGE OF CLASS
---------------------------------- ----------------------- -------------------
P.P. Luxco Holdings II S.A.R.L.(1) 6,718,368 22.4%
NOTE:
(1) P.P. Luxco Holdings II S.A.R.L. is a wholly-owned subsidiary of Picchio
Pharma Inc. ("Picchio Pharma"). The holdings and purchases of Common Shares
by Picchio Pharma through P.P. Luxco Holdings II S.A.R.L. are referred to
in and for the purposes of this management proxy circular as being holdings
and purchases of Picchio Pharma.
RECENT DEVELOPMENTS
On September 23, 2003, the Corporation completed the initial public
offering of its Common Shares in the United States and a new issue of Common
Shares in Canada. In connection with this offering, the Common Shares were
approved for quotation on the Nasdaq National Market ("NASDAQ") and trading
commenced on September 18, 2003, under the "NRMX" symbol. The Corporation
offered 5.75 million Common Shares at a price of US$10.87 per share. The
aggregate net proceeds from the offering were approximately US$59 million, net
of underwriting fees and commissions. The Corporation intends to use these
proceeds to fund clinical trials of its lead product candidates, as well as to
further complete pre-clinical and research and development
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programs. The Corporation also intends to use the proceeds for capital
expenditures and the balance for working capital and general corporate purposes.
ELECTION OF DIRECTORS
Ten directors are to be elected at the Meeting. The Board recommends that
shareholders vote for the election of the nominees whose names are set forth
below. THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY INTEND TO CAST THE VOTES
TO WHICH THE SHARES REPRESENTED BY SUCH PROXY ARE ENTITLED FOR THE ELECTION OF
THE NOMINEES WHOSE NAMES ARE SET FORTH BELOW UNLESS OTHERWISE DIRECTED BY THE
SHAREHOLDERS APPOINTING THEM.
Management does not contemplate that any of the nominees will be unable to
serve as a director, but, if that should occur for any reason at or prior to the
Meeting, the persons named in the enclosed form of proxy reserve the right to
vote for another nominee at their discretion, unless instructions have been
received from a particular shareholder to withhold its shares from voting with
respect to the election of directors. Each director elected will hold office
until the next annual meeting of shareholders or until his successor is duly
elected, unless his office is earlier vacated in accordance with the by-laws of
the Corporation. Except as indicated, all of the persons named in the table
below are now members of the Board of Directors of the Corporation (the "Board")
and have been since the years indicated.
The following table states the names of all the persons proposed by
management to be nominated for election as directors, their principal
occupation, their position in the Corporation (if any), the year in which they
first became directors of the Corporation and the number of Common Shares
beneficially owned, directly or indirectly, by each of them or over which they
exercise control or direction.
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· Enlarge/Download Table
NUMBER OF
COMMON
SHARES
BENEFICIALLY
YEAR OWNED,
FIRST CONTROLLED
NAME AND MUNICIPALITY BECAME A OR
OF RESIDENCE PRINCIPAL OCCUPATION OFFICE DIRECTOR DIRECTED(1)
-------------------------------------- ----------------------------------- ----------------- -------- ------------
Dr. Francesco Bellini, O.C.(2)........ Chairman and Chief Executive Chairman of the 2002 --(3)
Montreal, Quebec Officer of the Corporation Board, Chief
Executive Officer
and Director
Dr. Colin Bier(4), (5)................ Consultant Director 1996 900
Montreal, Quebec
Jean-Guy Desjardins................... President and Chief Executive Director -- 387,550
Montreal, Quebec Officer, Centria Inc. (a holding
company)(6)
Peter Kruyt(2), (5), (7).............. Vice President, Power Corporation Director 2002 25,200
Montreal, Quebec of Canada (a diversified
management and holding company)
Francois Legault...................... President and Chief Operating Director -- 10,000
Montreal, Quebec Officer, ViroChem Pharma Inc. (a
biopharmaceutical company)(8)
Dr. Frederick H. Lowy(7).............. Rector and Vice-Chancellor of Director 2003 Nil
Montreal, Quebec Concordia University (a university)
John Molloy(4)........................ President and Chief Executive Director 1994 20,000
Kingston, Ontario Officer, Parteq Research and
Development Innovations, Queen's
University (a university
technology transfer organization)
Ronald M. Nordmann(2), (5), (7), (9).. Co-President, Global Health Director 2002 Nil
Little Falls, New Jersey Associates, LLC (a consulting
company to the healthcare and
financial services industries)
Graeme K. Rutledge(4)................. Consultant Director 2003 Nil
Perth, Ontario
Dr. Emil Skamene(7)................... Scientific Director, Research Director 2002 Nil
Montreal, Quebec Institute of the McGill University
Health Centre (an academic health
centre)
NOTES:
(1) The information as to the Common Shares beneficially owned, controlled or
directed, not being within the knowledge of the Corporation, has been
furnished by the respective candidates individually.
(2) Pursuant to a subscription agreement dated July 25, 2002, by and between
Picchio Pharma, P.P. Luxco Holdings II S.A.R.L. and the Corporation, the
Corporation covenanted to cause a total of three nominees of Picchio Pharma
to be included in the list of management nominees to be proposed for
election to the Board at each shareholders meeting occurring following the
date thereof. Picchio Pharma's right shall terminate on the date it ceases
to beneficially hold at least 15% of the issued and outstanding Common
Shares (including Common Shares issuable upon exercise of the warrants
issued to it concurrently). Dr. Bellini and Messrs. Kruyt and Nordmann are
the current nominees of Picchio Pharma.
(3) Dr. Bellini holds directly, 166,666 Common Shares. Dr. Bellini is a
beneficiary of the FMRC Family Trust which holds indirectly, through its
50% ownership of Picchio Pharma, 6,718,368 Common Shares and warrants to
subscribe for four million Common Shares.
(4) Member of the Audit Committee.
(5) Member of the Compensation Committee.
(6) Mr. Desjardins is also the President and Chief Executive Officer of Fiera
Corporation Inc., a holding company. Prior to October 2001, Mr. Desjardins
was President and Chief Executive Officer of TAL Global Asset Management
Inc., a holding and management company.
(7) Member of the Nominating and Corporate Governance Committee.
(8) Since April 2002, Mr. Legault is also Chairman of the Board of Ecopia
Biosciences Inc. and since December 2001, Mr. Legault is also been Chairman
of the Board of Avance Pharma Inc., both of which are biopharmaceutical
companies. Prior to May 2001, Mr. Legault was Executive Vice-President
Corporate Development of Biochem Pharma Inc. (now ViroChem Pharma Inc.),
also a biopharmaceutical company.
(9) Mr. Nordmann is the Lead Director of the Corporation.
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COMPENSATION OF DIRECTORS AND EXECUTIVES
COMPENSATION OF DIRECTORS
Directors are remunerated for services in that capacity with cash
compensation and options to acquire Common Shares. Members of the Board are paid
an annual fee of $12,000, an attendance fee of $1,000 per meeting and an annual
grant of 5,000 options to acquire Common Shares. Additionally, directors who
serve on committees of the Board are entitled to an annual fee of $2,000 ($3,000
for the chairman of the committee), an attendance fee of $750 per committee
meeting and an annual grant of 1,000 options to acquire Common Shares. Upon
joining the Board, a director is entitled to a one-time option grant of 25,000
options to acquire Common Shares.
COMPENSATION OF EXECUTIVES
Summary Compensation Table
--------------------------
The following table provides a summary of compensation earned during the
fiscal years ended December 31, 2003, June 30, 2003 and June 30, 2002 by the
current Chief Executive Officer and each of the four other most highly
compensated current senior executives of the Corporation and its affiliates
(collectively, the "Named Executive Officers").
· Enlarge/Download Table
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------------
SECURITIES
OTHER UNDER
ANNUAL OPTIONS
SALARY BONUS COMPENSATION GRANTED ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR ($) ($) ($) (#) COMPENSATION
------------------------------- ----------- ------- ------ ------------ ------------ ------------
Dr. Francesco Bellini, O.C..... 2003* --(1) --(1) --(1) --(1) Nil
Chairman, Chief Executive 2003 --(1) --(1) --(1) 200,000 Nil
Officer and Director
Dr. Philippe Calais............ 2003* 117,000 15,775 6,000 Nil Nil
President 2003 112,500(2) Nil 6,000 200,000 Nil
Claude Michaud................. 2003* 104,000 25,500 Nil Nil Nil
Senior Vice-President, 2003 150,000(3) Nil Nil 250,000 Nil
Finance and Chief Financial
Officer
Dr. Denis Garceau.............. 2003* 130,000 50,000 4,800 Nil Nil
Vice-President, 2003 250,000 38,500 9,600 Nil Nil
Drug Development 2002 192,500 38,500 9,600 84,500 Nil
Dr. Francine Gervais........... 2003* 117,000 36,900 Nil Nil Nil
Vice-President, Research and 2003 225,000 36,900 Nil Nil Nil
Development 2002 184,800 37,000 Nil 84,500 Nil
NOTES:
* For 6 months ended December 31, 2003. Effective as of December 31, 2003,
the fiscal year of the Corporation changed from June 30 to December 31.
(1) Dr. Bellini was appointed Chief Executive Officer of the Corporation on
December 11, 2002. Dr. Bellini is compensated for acting as Chief Executive
Officer of the Corporation through a management services agreement dated
March 1, 2003, amended as of October 30, 2003, by and between Picchio
International Inc. ("Picchio International") and the Corporation (see
"Interest of Insiders in Material Transactions").
(2) Dr. Calais' employment with the Corporation began on January 6, 2003.
(3) Mr. Michaud's employment with the Corporation began on October 1, 2002.
Option Grants during Fiscal Year ended December 31, 2003
--------------------------------------------------------
No stock options were granted to the Named Executive Officers during the
fiscal year ended December 31, 2003.
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Aggregated Option Exercises During Most Recently Completed Fiscal Year and
--------------------------------------------------------------------------
Fiscal Year-End Option Values
-----------------------------
The following table indicates, for each of the Named Executive Officers,
the details as to the stock options exercised during the fiscal year ended
December 31, 2003, the total number of unexercised share purchase options held
at December 31, 2003 and the value of such unexercised options at that date.
· Enlarge/Download Table
VALUE OF
OPTIONS IN-THE-MONEY
COMMON HELD AS AT OPTIONS HELD AS AT
SHARES AGGREGATE DECEMBER 31, 2003 DECEMBER 31, 2003
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)(1)
------------------------------- ----------- --------- ----------------- -------------------
Dr. Francesco Bellini, O.C .... Nil Nil 36,667/163,333 824,641/3,673,359
Dr. Philippe Calais ........... Nil Nil 36,667/163,333 824,641/3,673,359
Claude Michaud ................ 15,000 120,000 63,125/171,875 1,597,063/4,348,438
Dr. Denis Garceau ............. Nil Nil 233,250/43,750 6,644,083/1,207,563
Dr. Francine Gervais .......... 20,000 228,800 225,750/43,750 6,417,283/1,207,563
NOTES:
(1) The value of unexercised in-the-money options at financial year-end is the
difference between the exercise price and the closing sale price of the
Common Shares on the Toronto Stock Exchange (the "TSX") on December 31,
2003. This gain has not been, and may never be, realized. The options have
not been, and may never be, exercised and actual gains, if any, on exercise
will depend on the value of the Common Shares on the date of exercise. The
closing sale price of the Common Shares on the TSX, on December 31, 2003
was $30.60.
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
No officers, directors, employees or former officers, directors and
employees of the Corporation were indebted to the Corporation as at March 31,
2004.
DIRECTORS' AND OFFICERS' INSURANCE
The Corporation provides insurance for the benefit of its directors and
officers against liability incurred by them in these capacities. The current
aggregate policy limit is US$15,000,000, the first US$500,000 of certain claims
being deductible and payable by the Corporation. The annual premium is
US$765,000 for a one year term ending September 16, 2004. This annual premium,
which has not been specifically allocated between directors as a group and
officers as a group, was paid entirely by the Corporation.
TERMINATION OF EMPLOYMENT, CHANGE IN CONTROL AND EMPLOYMENT AGREEMENTS
In case of termination of their employment for reason other than for just
cause or for good reason, and other than termination following a change of
control of the Corporation, Dr. Philippe Calais, Mr. Claude Michaud, Drs. Denis
Garceau and Francine Gervais are entitled, under their employment agreements, to
lump sum payments of $234,000, $208,000 plus bonus, $260,000, and $234,000,
respectively.
In case of termination of their employment following a change of control of
the Corporation, Dr. Philippe Calais, Mr. Claude Michaud, Drs. Denis Garceau and
Francine Gervais are entitled, under their employment agreements, to lump sum
payments of $468,000, $416,000 plus bonus, $520,000, and $468,000, respectively.
Following a change of control of the Corporation, if Dr. Philippe Calais, Mr.
Claude Michaud, Drs. Denis Garceau or Francine Gervais elect to remain in their
function for at least six months following such change of control and, prior to
the expiry of two years following such change of control, decide to leave the
employment of the Corporation for any reason whatsoever, they are entitled,
under their employment agreements, to lump sum payments of $234,000, $208,000
plus bonus, $260,000, and $234,000, respectively.
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COMPOSITION OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board currently consists of Dr. Colin
Bier (Chair), Mr. Peter Kruyt and Mr. Ronald M. Nordmann. During the most
recently completed year, Dr. Francesco Bellini, O.C., the Corporation's Chairman
and Chief Executive Officer also served on the Compensation Committee. Dr.
Bellini is compensated for acting as Chief Executive Officer of the Corporation
through a management services agreement dated March 1, 2003, as amended as of
October 30, 2003, by and between Picchio International and the Corporation (see
"Interest of Insiders in Material Transactions").
REPORT ON EXECUTIVE COMPENSATION
The Corporation's current compensation policy for its executive officers,
including the Named Executive Officers, emphasizes incentive-based compensation
over base salary. Through the granting of options to purchase Common Shares, the
executive officers of the Corporation, including the Named Executive Officers,
are provided with incentive to (a) advance the drug development programs of the
Corporation towards commercialization and (b) enhance the market value of the
Corporation's Common Shares. In order to establish base salary and bonus
compensation levels, the Corporation studies, among other things, the
competitive market environment.
The members of the Compensation Committee, whose names are set out above,
have approved the issue of the foregoing report and its inclusion in this proxy
circular.
PERFORMANCE GRAPH
The outstanding Common Shares began trading at the opening of business on
June 22, 2000, on the TSX (NRM).
The following graph compares, as at the end of each quarter up to December
31, 2003, the cumulative total shareholder return on $100 invested in Common
Shares on June 30, 2000, with the cumulative total shareholder return on the
S&P/TSX Composite Index, assuming reinvestment of all dividends.
-8-
(CHART SHOWING CUMULATIVE TOTAL SHAREHOLDER RETURN
FOR THE PERIOD OF JUNE, 2000 THROUGH DECEMBER, 2003)
REPORT ON CORPORATE GOVERNANCE
In 1995, the Toronto Stock Exchange Committee on Corporate Governance in
Canada issued its final report, establishing guidelines for corporate governance
for Canadian corporations (the "Guidelines"). The Guidelines relate to a number
of significant governance issues, including the proper role of the board of
directors, its structure and composition and its relationship with shareholders
and management. The TSX has adopted as a listing requirement that disclosure be
made by a listed corporation of its corporate governance practices with
reference to the Guidelines. A complete description of the Corporation's
corporate governance practices, with specific references to each of the
Guidelines is attached hereto as Schedule A. The Nominating and Corporate
Governance Committee, currently composed of Mr. Ronald M. Nordmann (chair), Dr.
Frederick H. Lowy, Mr. Peter Kruyt and Dr. Emil Skamene, has reviewed the
disclosure set out in Schedule A.
Throughout 2003, the Corporation has reviewed its corporate governance
practices, particularly, in connection with its offering in the United States
and concurrent listing of the Common Shares for quotation on the NASDAQ. While
the Corporation has always been materially in compliance with the Guidelines, in
light of the quotation of its Common Shares on NASDAQ and changes in the
regulatory framework in the United States, most notably with the implementation
of the Sarbanes-Oxley Act, the Board concluded that it is was in the best
interests of the Corporation and its shareholders to implement certain changes
to its corporate governance practices. In addition to the Audit Committee and
the Compensation Committee, the Corporation created a Nominating and Corporate
Governance Committee, and a Disclosure Committee (which committee is comprised
solely of executive officers of the Corporation). Moreover, the Corporation
adopted a formal mandate of the Board of Directors, a charter for each of its
committees, a Disclosure and Trading Policy, a Code of Ethics and a Hiring
Policy for its independent auditors (to avoid any impairment of the independence
of the Corporation's independent auditors).
The Board continues to review corporate governance proposals made by the
Toronto Stock Exchange, the Canadian Securities Administrators and NASDAQ. As
new standards come into force, the Board will review
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and amend, where necessary and appropriate, its corporate governance practices
and the eligibility of the members of the Board on each committee and shall, if
necessary, make appropriate changes.
The following is a description of the current committees of the Board:
COMMITTEES OF THE BOARD
Audit Committee
---------------
The mandate of the Audit Committee includes assisting the Board in its
oversight of (i) the integrity of the Corporation's financial statements,
financial reporting process, system of internal controls over financial
reporting, and audit process, (ii) the Corporation's compliance with, and
process for monitoring compliance with, legal and regulatory requirements, (iii)
the independent auditors' qualifications and independence, and (iv) the
performance of the independent auditors. The current members of the Audit
Committee are Mr. Graeme K. Rutledge (chair), Dr. Colin Bier and Mr. John
Molloy.
Under the listing requirements of NASDAQ, no director who is not
independent, may be appointed to the audit committee of a company. Mr. Molloy is
not independent under these listing requirements, as he is the President and
Chief Executive Officer of Parteq Research and Development Innovations, Queen's
University ("Parteq"). However, in accordance with the NASDAQ listing
requirements, the Board has resolved that the continued membership of Mr. Molloy
on the Audit Committee is required in the best interests of the Corporation and
its shareholders because of his knowledge of the Corporation and experience in
such matters.
Compensation Committee
----------------------
The mandate of the Compensation Committee includes reviewing the
compensation arrangements for the Corporation's employees, including executive
officers and directors, and making recommendations to the Board with respect to
such compensation arrangements, as well making recommendations to the Board with
respect to the Corporation's incentive compensation plans and equity-based plans
and to oversee succession planning. The Compensation Committee is also
responsible for preparing an annual report on executive compensation for
purposes of disclosure to shareholders. The current members of the Compensation
Committee are Dr. Colin Bier (chair), Mr. Peter Kruyt and Mr. Ronald M.
Nordmann.
Nominating and Corporate Governance Committee
---------------------------------------------
The mandate of the Nominating and Corporate Governance Committee is to
develop and recommend to the Board a set of corporate governance principles and
to prepare and review the disclosure with respect to, and the operation of, the
Corporation's system of corporate governance, before such disclosure is
submitted to the Board for its approval. The Nominating and Corporate Governance
Committee is responsible for the review and periodic update of the Corporation's
Code of Ethics which governs the conduct of the Corporation's directors,
officers and other employees. Moreover, the Nominating and Corporate Governance
Committee is mandated to examine, on an annual basis, the size and composition
of the Board and, if appropriate, recommend to the Board a program to establish
a Board comprised of members who facilitate effective decision-making. Finally,
the Nominating and Corporate Governance Committee shall identify individuals
qualified to become members of the Board, recommend to the Board nominees to be
put before shareholders at each annual meeting and recommend to the Board a
process for board, committee and director assessment. The current members of the
Nominating and Corporate Governance Committee are Mr. Ronald M. Nordmann
(chair), Dr. Frederick H. Lowy, Mr. Peter Kruyt and Dr. Emil Skamene.
COMMUNICATIONS, INSIDER TRADING, CONFIDENTIAL INFORMATION AND DISCLOSURE
POLICIES
The Board is committed to an effective communications policy with all
stakeholders including shareholders, suppliers, advertisers, employees, agents
and members of the investment community. The Corporation is committed to
complying with all laws, regulations and policies which are applicable to it as
well as to best practices in the field. This commitment is evidenced, notably,
by the adoption in 2003 of a Disclosure and Trading Policy.
-10-
The Board or the Audit Committee reviews in advance all press releases
which disclose financial results or other non-routine matters. Other statutory
documents or documents required to be prepared, filed and delivered including,
without limitation, the annual report, proxy materials and annual information
form are reviewed by members of the Board and, where required, these documents
are approved by the Board.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
On March 1, 2003, the Corporation entered into a management services
agreement with Picchio International into which Picchio Pharma intervened
(Picchio Pharma and Picchio International are sometimes referred to collectively
in this management proxy circular as the "Picchio Group"). All of the shares of
Picchio International are owned by Dr. Francesco Bellini, O.C., and his spouse.
The management services agreement provides that Picchio International shall
provide the services of Dr. Bellini as Chairman and Chief Executive Officer of
the Corporation and provide the services of other members of the Picchio Group,
including all senior managers of Picchio Pharma. Under the agreement, the
Picchio Group is currently providing, and will continue to provide, on-going
regular consulting and advisory services, including services related to
reviewing existing and potential research and development activities, and
existing potential clinical programs, financing activities, partnering and
licensing opportunities, commercialization plans and programs, and advising and
assisting in investor relations activities.
In consideration of all services rendered under the agreement, Picchio
International receives a monthly fee of $80,000. This amount includes all direct
and indirect costs and expenses, including travel and all other out-of-pocket
expenses, incurred by Dr. Bellini and the Picchio Group relating to the services
provided pursuant to such agreement. The agreement was amended as of October 30,
2003, to provide for the payment, from time to time, to Picchio International of
a discretionary amount as a performance based fee for services rendered. The
amount of such performance based fee, if any, will be determined by the Board at
its sole discretion. The term of the agreement is two years and each party has
the right to terminate such agreement at any time upon sending a written prior
notice of 180 days. The agreement provides that it shall be automatically
renewed for successive one year terms unless either party sends a prior written
notice of non-renewal to the other party at least 90 days prior to the then
current termination date.
The management services agreement provides that the Picchio Group shall
not, without the Corporation's written consent, during the term of such
agreement and for the 24 months following the termination of the agreement,
carry on or be engaged in any business which is the same or similar to or in
competition in any material way with any of the businesses which the Corporation
now or which the Corporation shall, during the term of the agreement, carry on
anywhere in the world. The Picchio Group also agreed not to hire any of the
Corporation's employees during the term of the agreement and for the twelve
months following its expiration.
AUDITORS OF THE CORPORATION
KPMG LLP, Chartered Accountants, have been the auditors of the Corporation
since September 1995. The Board recommends that shareholders vote for the
appointment of KPMG LLP, Chartered Accountants, as auditors of the Corporation
and the authorization of the Audit Committee to fix the auditors' remuneration.
THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY INTEND TO CAST THE VOTES TO
WHICH THE SHARES REPRESENTED BY SUCH PROXY ARE ENTITLED FOR THE REAPPOINTMENT OF
KPMG LLP, CHARTERED ACCOUNTANTS, AS AUDITORS OF THE CORPORATION FOR THE TERM
EXPIRING WITH THE NEXT ANNUAL MEETING OF SHAREHOLDERS, AND TO AUTHORIZE THE
AUDIT COMMITTEE TO FIX THEIR REMUNERATION, UNLESS OTHERWISE DIRECTED BY THE
SHAREHOLDERS APPOINTING THEM.
2004 SHAREHOLDER PROPOSALS
Shareholder proposals must be submitted no later than January 6, 2005 to be
considered for inclusion in the Management Proxy Circular for the purposes of
the Corporation's 2005 annual meeting of shareholders.
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APPROVAL BY DIRECTORS
The contents of this proxy circular and the sending thereof have been
approved by resolution of the Board.
DATED at Montreal, Quebec, April 6, 2004.
/s/ DAVID SKINNER
David Skinner
Corporate Secretary
SCHEDULE A
CORPORATE GOVERNANCE PRACTICES
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TSX GUIDELINE CORPORATION'S PRACTICE
1. The Board should explicitly assume The Board has explicitly assumed responsibility for the stewardship of
responsibility for stewardship of the the Corporation in a formal Mandate of the Board of Directors, which
corporation, and specifically: was adopted on August 18, 2003. Specifically, the Board has assumed
(i) adopt a strategic planning process, responsibility for (i) the adoption of a strategic planning process,
(ii) identify principal risks of the (ii) the identification of the principal risks for the Corporation and
business and implement systems of the implementation of appropriate risk management systems, (iii)
risk management, succession planning, including appointing, training and monitoring senior
(iii) provide for succession planning, management; (iv) ensuring that the Corporation has in place a communications
including appointing, training and policy to enable the Corporation to communicate effectively with
monitoring senior management, shareholders, other stakeholders and the public generally by, notably,
(iv) a communications policy, enacting a Disclosure and Trading Policy and (v) the integrity of
(v) assume responsibility for the internal controls and management information systems.
integrity of the Company's internal
control and management information
systems.
2. The Board should be constituted with The Board currently consists of a majority of unrelated directors as,
a majority of individuals who qualify as of the nine directors currently serving on the Board, seven are
unrelated directors. considered unrelated, namely Dr. Colin Bier, Mr. Richard Cherney, Mr.
Peter Kruyt, Dr. Frederick H. Lowy, Mr. Ronald M. Nordmann, Mr. Graeme
K. Rutledge and Dr. Emil Skamene. The additional nominees, namely
Messrs. Jean-Guy Desjardins and Francois Legault, are also unrelated.
Dr. Francesco Bellini, O.C. and Mr. John Molloy are related directors.
Mr. Richard Cherney is not standing for re-election as director of the
Corporation.
The Corporation does not have a majority shareholder and therefore no
shareholder can exercise a majority of voting rights for the election of
directors, but pursuant to a subscription agreement dated July 25, 2002,
by and between Picchio Pharma, P.P. Luxco Holdings II S.A.R.L. and the
Corporation, the Corporation covenanted to cause a total of three nominees
of Picchio Pharma to be included in the list of management nominees to be
proposed for election to the Board at each meeting of shareholders occurring
following the date thereof. Picchio Pharma's right shall terminate on the
date it ceases to beneficially hold at least 15% of the issued and
outstanding Common Shares (including Common Shares issuable upon exercise of
the warrants issued to them concurrently). Dr. Bellini and Messrs. Kruyt and
Nordmann are the current nominees of Picchio Pharma.
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TSX GUIDELINE CORPORATION'S PRACTICE
3. The Board should disclose, for each Dr. Francesco Bellini, O.C., Chairman and Chief Executive Officer ("CEO")
director, whether he or she is related and how of the Corporation, is a related director as he is a member of the
that conclusion was reached. management of the Corporation. Mr. John Molloy is also a related
director, as he is President and Chief Executive Officer of Parteq, an
organization with whom the Corporation has entered into research alliances,
licensing agreements and service agreements.
Dr. Colin Bier, Mr. Richard Cherney, Mr. Peter Kruyt, Dr. Frederick H.
Lowy, Mr. Ronald M. Nordmann, Mr. Graeme K. Rutledge, Dr. Emil Skamene
and the additional nominees, namely Messrs. Jean-Guy Desjardins and
Francois Legault, are unrelated in that they are (i) independent of
management; and (ii) free from any interest and any business or other
relationship which could, or could reasonably be perceived to,
materially interfere with the director's ability to act with a view to
the best interests of the Corporation, other than interests and
relationships arising from shareholding.
Mr. Richard Cherney is a partner of Davies Ward Phillips & Vineberg LLP
which provides legal services to the Corporation and Picchio Pharma.
The Board considers that this professional relationship does not
materially interfere with Mr. Cherney's ability to act with a view to the
best interests of the Corporation.
4. Appoint a committee of directors The Corporation has created a Nominating and Corporate Governance
composed exclusively of outside, i.e. Committee, responsible for the appointment and assessment of directors.
non-management directors, a majority of whom All the members of this committee are unrelated and outside directors.
are unrelated directors, responsible for the
appointment and assessment of directors.
5. Implement a process for assessing the The Nominating and Corporate Governance Committee has the mandate,
effectiveness of the Board, its committees and explicitly documented in its Charter, to implement a process for
individual directors. assessing the effectiveness of the Board, its committees and individual
directors.
6. Provide an orientation and education The Nominating and Corporate Governance Committee has the mandate,
program for new directors. explicitly documented in its Charter, to consider the appropriateness
of implementing formal programs for the orientation and education of
new directors.
7. Examine the size of the Board, with The Board presently consists of nine directors with a variety of
specific reference to its effectiveness. backgrounds. Its size and composition are subject to periodic review of
the Nominating and Corporate Governance Committee, and the Board is of
the opinion that it will be most effective as it will be composed after
the Meeting.
8. Review compensation of directors in light The Compensation Committee has the mandate, explicitly documented in
of risks and responsibilities. its Charter, to review compensation of directors in light of risks and
responsibilities.
9. Committees should generally be composed The Board has three committees: the Audit Committee, the Compensation
of only outside directors, a majority of whom Committee, and the Nominating and Corporate Governance Committee. All
are unrelated directors. members of the Audit Committee, the Compensation Committee and the
Nominating and Corporate Governance Committee are outside directors. All
committees are composed of a majority of unrelated directors.
The current Composition of each the committees is set out below.
AUDIT COMMITTEE
Graeme K. Rutledge Unrelated Outside
Dr. Colin Bier Unrelated Outside
John Molloy Related Outside
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TSX GUIDELINE CORPORATION'S PRACTICE
COMPENSATION COMMITTEE
Dr. Colin Bier Unrelated Outside
Peter Kruyt Unrelated Outside
Ronald M. Nordmann Unrelated Outside
NOMINATING AND CORPORATE GOVERNANCE
COMMITTEE
Ronald M. Nordmann Unrelated Outside
Dr. Frederick H. Lowy Unrelated Outside
Peter Kruyt Unrelated Outside
Dr. Emil Skamene Unrelated Outside
10. Assume or assign responsibility for The Nominating and Corporate Governance Committee has the mandate,
corporate governance issues. explicitly documented in its Charter, to assume responsibility for
corporate governance issues.
11. Define management's responsibilities and The Board has the responsibility, explicitly documented in the Mandate
approve corporate objectives to be met by the of the Board of Directors, to approve a formal position description for
CEO. the CEO. Moreover, the Nominating and Corporate Governance Committee of
the Board has the mandate, explicitly documented in its Charter, to
submit to the Board an assessment of the CEO against the corporate
objectives, which are approved by the Board and which the CEO is
responsible for meeting.
On March 1, 2003, the Corporation entered into a management services
agreement with Picchio International into which Picchio Pharma intervened
(Picchio Pharma and Picchio International are sometimes referred to
collectively in this management proxy circular as the "Picchio Group").
All of the shares of Picchio International are owned by Dr. Bellini and
his spouse. The management services agreement provides that Picchio
International shall provide the services of Dr. Francesco Bellini, O.C.,
as Chairman and CEO of the Corporation and provide the services of other
members of the Picchio Group, including all senior managers of Picchio
Pharma. Under the agreement, the Picchio Group is currently providing,
and will continue to provide, on-going regular consulting and advisory
services, including services related to reviewing existing and potential
research and development activities, and existing potential clinical
programs, financing activities, partnering and licensing opportunities,
commercialization plans and programs, and advising and assisting in
investor relations activities.
12. Establish structures and procedures The Board endeavors to ensure that it can function independently of
to enable the Board to function independently management. One measure taken to this end is the appointment of Mr.
of management. An appropriate structure would Ronald M. Nordmann as Lead Director of the Corporation by the outside
be to appoint a chairman who is not a member directors of the Corporation on December 9, 2003. However, given its
of management. current state of development and the controls in place, the Board is of
the opinion that it is in the best interests of the Corporation and its
shareholders to have Dr. Francesco Bellini, O.C., act both as Chairman
and CEO of the Corporation.
13. The audit committee should be composed of The Audit Committee is exclusively composed of outside directors. Its
outside directors and its role specifically role is specifically defined in its Charter.
defined.
14. Implement a system to enable individual Individual directors are able to engage outside advisers at the expense
directors to engage outside advisors, at the of the Corporation, with the engagement of the adviser being subject to
Company's expense. the approval of the Nominating and Corporate Governance Committee, as
specifically documented in the mandate of the Board.
Dates Referenced Herein and Documents Incorporated By Reference
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