Exhibit 99.1
Merus Labs International Inc.
100 Wellington St. West, Suite 2110
Toronto, Ontario M5K 1H1
NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 26, 2015
AND
INFORMATION CIRCULAR
February 23, 2015
This document requires immediate attention. If you are in doubt as to how to deal with the documents or matters referred to in this Information Circular, you should immediately contact your advisor.
MERUS LABS INTERNATIONAL INC.
100 Wellington Street West, #2110
Toronto, Ontario M5K 1H1
Telephone: (416) 593-3725
iNFORMATION cIRCULAR
February 23, 2015
INTRODUCTION
This Information Circular accompanies the Notice of Annual General and Special Meeting (the “Notice”) and is furnished to shareholders (the “Shareholders”) holding common shares (the “Common Shares”) in the capital of Merus Labs International Inc. (the ”Company”) in connection with the solicitation by the management of the Company of proxies to be voted at the annual general and special meeting (the “Meeting”) of the Shareholders to be held at 10:00 a.m. (Toronto time) on Thursday, March 26, 2015 at 181 Bay Street, Suite 4400, Toronto, Ontario M5J 2T3 or at any adjournment or postponement thereof.
The date of this Information Circular is February 23, 2015. Unless otherwise stated, all amounts herein are in Canadian dollars.
The Company was formed on December 19, 2011 by the amalgamation (the “Amalgamation”) of Merus Labs International Inc. (“Old Merus”) and Envoy Capital Group Inc. (“Envoy”). Unless otherwise noted, this Information Circular provides the historical information for only Envoy for the period before the Amalgamation.
PROXIES AND VOTING RIGHTS
Management Solicitation
The solicitation of proxies by management of the Company will be conducted by mail and may be supplemented by telephone or other personal contact to be made without special compensation by the directors, officers and employees of the Company. The Company does not reimburse Shareholders, nominees or agents for costs incurred in obtaining from their principals authorization to execute forms of proxy, except that the Company has requested brokers and nominees who hold stock in their respective names to furnish this proxy material to their customers, and the Company will reimburse such brokers and nominees for their related out of pocket expenses. No solicitation will be made by specifically engaged employees or soliciting agents. The cost of solicitation will be borne by the Company.
No person has been authorized to give any information or to make any representation other than as contained in this Information Circular in connection with the solicitation of proxies. If given or made, such information or representations must not be relied upon as having been authorized by the Company. The delivery of this Information Circular shall not create, under any circumstances, any implication that there has been no change in the information set forth herein since the date of this Information Circular. This Information Circular does not constitute the solicitation of a proxy by anyone in any jurisdiction in which such solicitation is not authorized, or in which the person making such solicitation is not qualified to do so, or to anyone to whom it is unlawful to make such an offer of solicitation.
Appointment of Proxy
Registered Shareholders are entitled to vote at the Meeting. A Shareholder is entitled to one vote for each Common Share that such Shareholder holds on the record date (the “Record Date”) of February 17, 2015 on the resolutions to be voted upon at the Meeting, and any other matter to come before the Meeting.
The persons named as proxyholders (the “Designated Persons”) in the enclosed form of proxy are directors and/or officers of the Company.
A Shareholder has the right to appoint a person or COMPANY (who need not be a Shareholder) other than the Designated Persons named in the enclosed form of proxy to attend and act for or on behalf of that Shareholder at the Meeting.
A SHAREHOLDER MAY exercise THIS right by striking out the printed names OF THE DESIGNATED PERSONS and inserting the name of such other person and, if desired, an alternate to such person, in the blank space provided in the form of proxy. such shareholder should notify the nominee of the appointment, obtain the nominee’s consent to act as proxy and should provide instruction to the nominee on how the shareholder’s COMMON shares should be voted. the nominee should bring personal identification to the meeting.
In order to be voted, the completed form of proxy must be received by the Company’s registrar and transfer agent, Computershare (the “Transfer Agent”) at their offices located at 510 Burrard Street, 3rd Floor, Vancouver, British Columbia, V6C 3B9 by mail or fax, at least 48 hours (excluding Saturdays, Sundays and holidays recognized in the Province of British Columbia) prior to the scheduled time of the Meeting, or any adjournment or postponement thereof.
A proxy may not be valid unless it is dated and signed by the Shareholder who is giving it or by that Shareholder’s attorney-in-fact duly authorized by that Shareholder in writing or, in the case of a corporation, dated and executed by a duly authorized officer or attorney-in-fact for the corporation. If a form of proxy is executed by an attorney-in-fact for an individual Shareholder or joint Shareholders, or by an officer or attorney-in-fact for a corporate Shareholder, the instrument so empowering the officer or attorney-in-fact, as the case may be, or a notarially certified copy thereof, must accompany the form of proxy.
Revocation of Proxies
A Shareholder who has given a proxy may revoke it at any time before it is exercised by an instrument in writing: (a) executed by that Shareholder or by that Shareholder’s attorney-in-fact, authorized in writing, or, where the Shareholder is a corporation, by a duly authorized officer of, or attorney-in-fact for, the corporation; and (b) delivered either: (i) to the Company at the address set forth above, at any time up to and including the last business day preceding the day of the Meeting or, if adjourned or postponed, any reconvening thereof, or (ii) to the Chairman of the Meeting prior to the vote on matters covered by the proxy on the day of the Meeting or, if adjourned or postponed, any reconvening thereof, or (iii) in any other manner provided by law.
Also, a proxy will automatically be revoked by either: (i) attendance at the Meeting and participation in a poll (ballot) by a Shareholder, or (ii) submission of a subsequent proxy in accordance with the foregoing procedures. A revocation of a proxy does not affect any matter on which a vote has been taken prior to any such revocation.
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Voting of Common Shares and Proxies and Exercise of Discretion by Designated Persons
A Shareholder may indicate the manner in which the Designated Persons are to vote with respect to a matter to be voted upon at the Meeting by marking the appropriate space. If the instructions as to voting indicated in the proxy are certain, the Common Shares represented by the proxy will be voted or withheld from voting in accordance with the instructions given in the proxy.The Common Shares represented by a proxy will be voted or withheld from voting in accordance with the instructions of the Shareholder on any ballot that may be called for. If the Shareholder specifies a choice with respect to any matter to be acted upon, then the Common Shares represented will be voted or withheld from voting on that matter accordingly.
If no choice is specified in the proxy with respect to a matter to be acted upon, the proxy confers discretionary authority with respect to that matter upon the Designated Persons named in the form of proxy. It is intended that the Designated Persons will vote the Common Shares represented by the proxy in favour of each matter identified in the proxy, INCLUDING for the nominees OF the Company’s Board of Directors (THE “BOARD”) for directors and auditor.
The enclosed form of proxy confers discretionary authority upon the persons named therein with respect to other matters which may properly come before the Meeting, including any amendments or variations to any matters identified in the Notice, and with respect to other matters which may properly come before the Meeting. At the date of this Information Circular, management of the Company is not aware of any such amendments, variations or other matters to come before the Meeting.
In the case of abstentions from, or withholding of, the voting of the Common Shares on any matter, the Common Shares that are the subject of the abstention or withholding will be counted for determination of a quorum, but will not be counted as affirmative or negative on the matter to be voted upon.
INFORMATION FOR BENEFICIAL SHAREHOLDERS
Only registered Shareholders or duly appointed proxyholders are permitted to vote at the Meeting. Most Shareholders are “non-registered” Shareholders because the Common Shares they own are not registered in their names but are instead registered in the name of the brokerage firm, bank or trust company through which they purchased the Common Shares. More particularly, a person is not a registered Shareholder in respect of Common Shares which are held on behalf of that person (the “Non-Registered Holder”) but which are registered either: (a) in the name of an intermediary (an “Intermediary”) that the Non-Registered Holder deals with in respect of the Common Shares (Intermediaries include, among others, banks, trust companies, securities dealers or brokers and trustees or administrators or self-administered RRSP’s, RRIF’s, RESPs and similar plans); or (b) in the name of a clearing agency (such as CDS Clearing and Depositary Services Inc. (“CDS”)) of which the Intermediary is a participant. In accordance with the requirements as set out in National Instrument 54-101 of the Canadian Securities Administrators (“NI 54-101”), the Company has distributed copies of the Notice of Meeting, this Information Circular and the form of Proxy (collectively, the ”Meeting Materials”) to the clearing agencies and Intermediaries for onward distribution to Non-Registered Holders.
Intermediaries are required to forward the Meeting Materials to Non-Registered Holders unless a Non-Registered Holder has waived the right to receive them. Very often, Intermediaries will use service companies to forward the Meeting Materials to Non-Registered Holders. Generally, Non-Registered Holders who have not waived the right to receive Meeting Materials will either:
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(a) | be given a form of proxy which has already been signed by the Intermediary (typically by a facsimile, stamped signature), which is restricted as to the number of Common Shares beneficially owned by the Non-Registered Holder but which is otherwise not completed. Because the Intermediary has already signed the form of proxy, this form of proxy is not required to be signed by the Non-Registered Holder when submitting the proxy. In this case, the Non-Registered Holder who wishes to submit a proxy should otherwise properly complete the form of proxy and deposit it with the Transfer Agent as provided above; or |
(b) | more typically, be given a voting instruction form which is not signed by the Intermediary, and which, when properly completed and signed by the Non-Registered Holder and returned to the Intermediary or its service company, will constitute voting instructions (often called a “proxy authorization form”) which the Intermediary must follow. Typically, the proxy authorization form will consist of a one page pre-printed form. Sometimes, instead of a one page pre-printed form, the proxy authorization will consist of a regular printed proxy form accompanied by a page of instructions, which contains a removable label containing a bar-code and other information. In order for the form of proxy to validly constitute a proxy authorization form, the Non-Registered Holder must remove the label from the instructions and affix it to the form of proxy, properly complete and sign the form of proxy and return it to the Intermediary or its service company in accordance with the instructions of the Intermediary or its service company. |
In either case, the purpose of this procedure is to permit a Non-Registered Holder to direct the voting of the Common Shares which they beneficially own. Should a Non-Registered Holder who receives one of the above forms wish to vote at the Meeting in person, the Non-Registered Holder should strike out the names of the management proxyholders named in the form and insert the Non-Registered Holder’s name in the blank space provided. In either case, Non-Registered Holders should carefully follow the instructions of their Intermediary, including those regarding when and where the proxy or proxy authorization form is to be delivered. Typically, the Intermediary will require the Non-Registered Holder to submit their proxy authorization form before the Company’s proxy deadline to allow the Intermediary time to submit their proxy to the Company.
There are two kinds of beneficial owners – those who object to their names being made known to the issuers of securities which they own (called OBOs for Objecting Beneficial Owners) and those who do not object to the issuers of the securities they own knowing who they are (called NOBOs for Non-Objecting Beneficial Owners). Pursuant to NI 54-101, issuers can obtain a list of their NOBOs from Intermediaries for distribution of proxy-related materials directly to NOBOs.
These security holder materials are being sent, directly or indirectly, to both registered and non-registered owners of the Common Shares. If you are a non-registered owner, and the Company 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.
All references to Shareholders in this Information Circular are to registered Shareholders, unless specifically stated otherwise.
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INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON
Except as disclosed elsewhere in this Information Circular, no director or executive officer of the Company who was a director or executive officer since the beginning of the Company’s last financial year, no proposed nominee for election as a director of the Company, or any associate or affiliates of any such directors, officers or nominees, has any material interest, direct or indirect, by way of beneficial ownership of Common Shares or other securities in the Company or otherwise, in any matter to be acted upon at the Meeting other than the election of directors.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The Company is authorized to issue an unlimited number of Common Shares without par value and an unlimited number of preferred shares without par value. As of the Record Date, a total of 81,212,391 Common Shares were issued and outstanding and 10,000 Series A Preferred Shares were issued and outstanding. Each Common Share carries the right to one vote at the Meeting. The Series A Preferred Shares are non-voting shares.
Only registered Shareholders as of the record date are entitled to receive notice of, and to attend and vote at, the Meeting or any adjournment or postponement of the Meeting.
To the knowledge of the directors and senior officers of the Company, as of the Record Date, no person or company beneficially owns, directly or indirectly, or exercises control or direction over, Common Shares carrying more than 10% of the voting rights attached to the outstanding Common Shares.
ELECTION OF DIRECTORS
Number of Directors
At the Meeting, Shareholders will be asked to pass an ordinary resolution to set the number of directors of the Company for the ensuing year at six. The number of directors will be approved if the affirmative vote of the majority of Shares present or represented by proxy at the Meeting and entitled to vote are voted in favour of setting the number of directors at six.
Management recommends the approval of the resolution to set the number of directors of the Company at six.
Election of Directors
The Board currently consists of six directors, all of whom are elected annually and hold office until the next annual general meeting of the Shareholders or until their successors are elected. The management of the Company proposes to nominate the persons listed below for election as directors of the Company to serve until their successors are elected or appointed. All of the six nominees for election at the Meeting are currently directors of the Company and have agreed to stand for election.
In the absence of instructions to the contrary, Proxies given pursuant to the solicitation by the management of the Company will be voted for the nominees listed in this Information Circular.
Advance Notice Provision
At the Company’s annual general and special meeting held on March 27, 2014, the shareholders of the Company approved the alteration of the Company’s articles for the purpose of adopting advance notice provisions (the “Advance Notice Provision”). The Advance Notice Provision provides for advance notice to the Company in circumstances where nominations of persons for election to the Board are made by shareholders of the Company other than pursuant to (i) a requisition of a meeting made pursuant to the provisions of the British ColumbiaBusiness Corporations Act or (ii) a shareholder proposal made pursuant to the provisions of the British ColumbiaBusiness Corporations Act.
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The purpose of the Advance Notice Provision is to foster a variety of interests of the shareholders and the Company by ensuring that all shareholders - including those participating in a meeting by proxy rather than in person - receive adequate notice of the nominations to be considered at a meeting and can thereby exercise their voting rights in an informed manner. Among other things, the Advance Notice Provision fixes a deadline by which holders of Common Shares must submit director nominations to the Company prior to any annual or special meeting of shareholders and sets forth the minimum information that a shareholder must include in the notice to the Company for the notice to be in proper written form.
The Advance Notice Provision also requires all proposed director nominees to deliver a written representation and agreement that such candidate for nomination, if elected as a director of the Company, will comply with all applicable corporate governance, conflict of interest, confidentiality, share ownership, majority voting and insider trading policies and other policies and guidelines of the Company applicable to directors and in effect during such person’s term in office as a director.
The foregoing is merely a summary of the Advance Notice Provision, is not comprehensive and is qualified by the full text of such provision which is available in Schedule “C” of the Company’s Information Circular filed on March 5, 2014 under the Company’s profile on SEDAR at www.sedar.com.
Majority Voting Policy
The Board has adopted a majority voting policy relating to the election of directors. Pursuant to this policy, any nominee for director of the Company who, in an uncontested election, has a greater number of votes withheld from his her election that are in favour of his or her election, will promptly submit his or her resignation to the Board for consideration following the meeting. Such proposed resignations will be considered by directors other than the individual who submitted a resignation, and such directors may choose to accept or reject the resignation. The rules of the TSX require the Company to accept the resignation other than in “exceptional circumstances”. The Company will issue a press release within 90 days following the date of the meeting disclosing if the directors accepted or rejected the resignation, and if the proposed resignation was rejected, the reasons therefor.
Management recommends the approval of each of the nominees listed below for election as directors of the Company for the ensuing year.
Management has no reason to believe that any of such nominees will be unable to serve as directors; however, if, for any reason one or more of the proposed nominees do not stand for election or are unable to serve as directors, the management designees named in the Proxy intend to vote for another nominee or nominees, as the case may be, in their discretion, unless the Shareholder has specified in his or her Proxy that his or her Common Shares are to be withheld from voting in the election of directors.
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Name, Office held, Province/ State and Country of Residence | Principal Occupation During Previous Five Years | Director Since | Shares Beneficially Owned or Controlled(1) | |||||
Barry Fishman Chief Executive Officer and Director Thornhill, Ontario | Chief Executive Officer of the Company in September 2014; Formerly Chief Executive Officer of Teva Pharmaceuticals Canada from June 2008 to December 2013. | September 23, 2014 | 50,000 | (3) | ||||
David D. Guebert(4)(5)(6) Calgary, Alberta | Chartered accountant and certified public accountant; Chief Financial Officer of Marret Resource Corp. from August 2008 to present; Chief Financial Officer of Times Three Wireless Inc. from May 2004 to present; Chief Financial Officer of Sereno Capital Corporation from March 2011 to December 2013. | February 11, 2011 | (2) | 209,167 | (7) | |||
Robert S. Pollock(5)(6) Toronto, Ontario | Director and Chief Executive Officer of Primary Capital Inc. from July 2008 to present; Chief Executive Officer and Director of Primary Corp. from August 2008 to June 2012. | February 11, 2011 | (2) | 3,507,500 | (8) | |||
Michael Cloutier(4)(5) Director Burlington, Ontario | President and General Manager of Intermune Inc. from 2013 to present; CEO of Canadian Diabetes Association from 2010 to 2013; CEO of Critical Outcomes Technology Inc. from 2008 to 2010. | July 8, 2013 | Nil | (9) | ||||
Theresa Firestone (5) Director Toronto, Ontario | Senior Vice President of Shoppers Drug Mart, April 2014 to present. Regional President, Emerging Markets Asia, Pfizer Inc. 2010 to December 2013, General Manager, Established Products, Pfizer Canada, 2009 to 2010. | May 26, 2014 | 10,000 | (10) | ||||
Timothy G. Sorensen(4)(5)(6) Director Toronto, Ontario | President of Primary Capital Inc. from November 2010 to present; Managing Director of Institutional Sales of Macquarie Capital Markets Canada Ltd. (formerly Orion Securities Inc.) from January 2008 to September 2010. | February 11, 2011 | (2) | 913,500 | (11) |
Notes:
(1) | This information has been obtained from public insider filings and from the directors themselves. No individual director, either alone or together with such director’s associates or affiliates, owns or controls 10% of more of the voting securities of the Company. |
(2) | Appointed a director of Envoy on February 10, 2011. On December 19, 2011, Old Merus amalgamated with Envoy continuing under the name “Merus Labs International Inc.” On October 1, 2012, the Company amalgamated with its wholly-owned subsidiary, Merus Labs Inc. and continued under the name “Merus Labs International Inc.” |
(3) | Does not include 575,000 stock options exercisable into Common Shares. |
(4) | Member of the Audit Committee. |
(5) | Independent director. |
(6) | Member of the Compensation Committee. |
(7) | Includes 62,500 Common Shares controlled or directed by Deborah Guebert and 146,667 Common Shares held directly but does not include 450,000 stock options exercisable into Common Shares. |
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(8) | Includes 470,000 Common Shares controlled or directed by Michelle Pollock and 3,037,500 Common Shares held directly but does not include 450,000 stock options exercisable into Common Shares. |
(9) | Does not include 400,000 stock options exercisable into Common Shares. |
10) | Does not include 300,000 stock options exercisable into Common Shares. |
(11) | Includes 100,000 Common Shares controlled or directed by Anne Sorensen and 813,500 Common Shares held directly but does not include 450,000 stock options exercisable into Common Shares. |
Principal Occupation, Business or Employment of Nominees
Barry Fishman – Chief Executive Officer and Director
Mr. Fishman was the President & CEO of Teva Canada Limited (the Canadian subsidiary of Teva Pharmaceutical Industries Ltd.), from June 2008 to December 2013. Teva Pharmaceutical Industries Ltd. is a global pharmaceutical company specializing in the development, production and marketing of generic and proprietary specialty medicines as well as active pharmaceutical ingredients. Prior to Teva, Mr. Fishman was President and CEO of Taro Canada from 2000 to 2003. Mr. Fishman also spent seventeen years with Eli Lilly Canada where he held a variety of leadership positions in finance, human resources, operations, business development and marketing. Mr. Fishman graduated from McGill University in Montreal with a concentration in finance and accounting, and received his CPA designation at Deloitte in Costa Mesa, California. Barry is past Chair of the Canadian Generic Pharmaceutical Association and a member of the Executive Committee.
Robert S. Pollock — Director
Mr. Pollock is a Director and Chief Executive Officer of Primary Capital Inc., an exempt market dealer. Mr. Pollock was President of Primary Corp. (TSX: PYC), a natural resources lending company from August 2008 to June 2012. He was formerly Vice President-Investment Banking at Dundee Securities Corporation and has 15 years of experience in the Canadian capital markets with specific experience in merchant banking, institutional sales and investment banking. Mr. Pollock holds an MBA from St. Mary’s University (1993) and a BA from Queen’s University (1991).
Mr. Pollock’s principal occupations during the five preceding years are as follows: since July 2008 he has been Director and Chief Executive Officer of Primary Capital Inc.; from August 2008 to June 2012, he was a Director and Chief Executive Officer of Primary Corp.; from February 10, 2011 to January 12, 2012, he was the interim Chief Executive Officer of Envoy and our company.
David D. Guebert — Director
Mr. Guebert is a chartered accountant and certified public accountant with over 30 years of experience in finance and accounting, 20 of which were served as chief financial officer of public and private companies in the resource and technology sectors. He is currently the Chief Financial Officer of Marret Resource Corp., a company focused on natural resource lending. He is also is the Chief Financial Officer of Times Three Wireless Inc., a wireless location technology company. Mr. Guebert holds a B.Comm. from the University of Saskatchewan (1979).
Mr. Guebert’s principal occupations during the five preceding years are as follows: Since 2008 he has been Chief Financial Officer of Marret Resource Corp. and since 2004 has been Chief Financial Officer of Times Three Wireless Inc. From 2010 to 2013 he was a director of Advitech Inc., a biotech company.
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Timothy G. Sorensen — Director
Mr. Sorensen is a Director and the President of Primary Capital Inc., an exempt market dealer. He joined Primary Capital from Macquarie Capital Markets Canada where he served as Divisional Director Head of Institutional Sales. Mr. Sorensen has over 14 years of capital markets experience in institutional sales and equity analysis. He has a CFA designation and holds an MBA (1996) and B.Comm (1995) both from the University of Windsor.
Mr. Sorensen’s principal occupation during the five preceding years is as follows: he has been President of Primary Capital Inc. since November 2010; from January 2008 until September 2010, he was the Divisional Director Head of Institutional Sales of Macquarie Capital Markets Canada; and he was an institutional sales person from 2004 to 2008 with Orion Financial Inc., which became Macquarie Group in 2007.
Michael Cloutier — Director
Mr. Michael Cloutier was appointed Director of Merus Labs International Inc. on July 8, 2013. He is currently the President and General Manager of InterMune Inc., a biotechnology company focused on the research, development and commercialization of innovative therapies in pulmonology and orphan fibrotic diseases. Prior to his appointment at Merus, Mr. Cloutier was the CEO of the Canadian Diabetes Association from 2010 to 2013 and was the CEO of Critical Outcomes Technology Inc., an early stage biotech company based in London, Ontario with proprietary technology uniquely positioned to accelerate and advance pre-clinical research and drug development activities, from 2008 to 2010. From 2003 to 2008, Mr. Cloutier held several roles with AstraZeneca including the CEO of the Canadian operations and VP, HR, Global Marketing at the corporate headquarters in London, England. Other leadership roles include President of Pharmacia Canada from 2000 to 2003 and President of Searle Canada from 1998 to 2000.
Theresa Firestone — Director
Ms. Firestone was appointed to Director of Merus Labs International on May 26th, 2014. She is currently Senior Vice President, Healthcare Businesses with Shoppers Drug Mart. Prior to joining Shoppers, Ms. Firestone was Regional President, Emerging Markets Asia with Pfizer Inc, a position she held for three years located in Shanghai and Hong Kong. Ms. Firestone joined Pfizer Canada in 1999 as Vice President Government and Public Affairs. She held several roles with Pfizer including Country Manager of Pfizer Austria and General Manager of the Established Products Business Unit in Canada. Ms. Firestone has extensive experience and a strong track record of success in pharmaceuticals and healthcare management with 15 years at Pfizer and over 12 years with government and not-for-profit organizations. During her tenure with the Ontario Ministry of Health she was responsible for the overall operations of the provinces 10 psychiatric hospitals and was Director of Drug Programs Branch where she was responsible for restructuring the largest managed drug program in Canada and establishing the Trillium Drug Program.
Selection of Directors and Officers
There are no arrangements or understandings between any director or executive officer of the Company with major shareholders, customers or others, pursuant to which he or she was selected as such.
Family Relationship
There are no family relationships between any of the persons named above.
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Cease Trade Orders
To the best of management’s knowledge, and except as provided below, no proposed director of the Company is, or within the ten (10) years before the date of this Information Circular has been, a director, chief executive officer or chief financial officer of any company that:
(a) | was subject to (i) a cease trade order; (ii) an order similar to a cease trade order; or (iii) an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that was issued while the proposed director was acting in the capacity as director, chief executive officer or chief financial officer; or |
(b) | was subject to (i) a cease trade order; (ii) an order similar to a cease trade order; or (iii) an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer. |
Mr. Guebert is the Chief Financial Officer and Vice-President Finance of Times Three Wireless Inc. (“Times Three”). On May 6, 2014, the Alberta Securities Commission issued a cease trade order against Times Three for failing to file required annual financial statements and related management’s discussion and analysis and officer certifications. The cease trade order remains in effect and has not been revoked.
Bankruptcies
To the best of management’s knowledge, no proposed director of the Company is, or within ten (10) years before the date of this Information Circular has been, a director or an executive officer of any company that, while the person was acting in that capacity, or within a year of that person ceasing to act in the capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets or made a proposal under any legislation relating to bankruptcies or insolvency.
To the best of management’s knowledge, no proposed director of the Company has, within 10 years before the date of this Information Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.
Penalties or Sanctions
To the best of management’s knowledge, no proposed director of the Company has been subject to:
(a) | any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or |
(b) | any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director. |
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Executive Compensation
General
For the purpose of this Information Circular:
“CEO” means an individual who acted as chief executive officer of the company, or acted in a similar capacity, for any part of the most recently completed financial year;
“CFO” means an individual who acted as chief financial officer of the company, or acted in a similar capacity, for any part of the most recently completed financial year;
“NEO” or “Named Executive Officer” means each of the following individuals:
(a) | a CEO; |
(b) | a CFO; |
(c) | each of the three most highly compensated executive officers of the company, including any of its subsidiaries, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year whose total compensation was, individually, more than $150,000, as determined in accordance with subsection 1.3(6) of Form 51-102F6Statement of Executive Compensation, for that financial year; and |
(d) | each individual who would be an NEO under paragraph (c) but for the fact that the individual was neither an executive officer of the company or its subsidiaries, nor acting in a similar capacity, at the end of that financial year; |
Compensation Discussion and Analysis
The Company’s executive compensation program has been developed with the objective of aligning executive compensation with the Company’s business plans, strategies and goals, while taking into account various factors and criteria, including competitive factors and the Company’s performance. The specific objectives of the Company’s compensation strategy are to:
(a) | provide an appropriate overall compensation package that enables the Company to attract and retain highly qualified and experienced senior executives and which is competitive with that offered for comparable positions in other pharmaceutical companies of a similar size and overall stage of business development; |
(b) | encourage superior performance by executives, to motivate executives to achieve important corporate and personal performance objectives and then to award compensation based on corporate and individual results; and |
(d) | align the interests of executive officers with the long-term interests of shareholders through participation in the Company’s incentive stock option plan and the Company’s performance share unit plan. |
The Compensation Committee is responsible for recommending the compensation of the Company’s executive officers to the Board.
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The Company’s executive compensation package consists of the following components:
(a) | base salary; |
(b) | discretionary annual incentive cash bonuses, and |
(c) | long-term incentives in the form of share options granted under the Company’s 2011 Plan (as defined below); and |
(d) | performance share units granted under the Company’s 2015 PSU Plan (as defined below). |
The Compensation Committee did not rely on any specific objectives or measures to measure individual performance, other than by measuring the achievement of specific objectives that were related to concrete, measurable elements, including net income and earnings per share.
Salary
The NEOs are paid a salary in order to ensure that the compensation package offered by the Company is in line with that offered by other comparable companies in the pharmaceutical industry, and as an immediate means of rewarding the NEO's for efforts expended on behalf of the Company. Base salary levels are based on responsibility, experience, knowledge and on internal equity criteria and external pay practices, as well as by reference to the competitive marketplace for management talent at other pharmaceutical companies of similar stage of development, market capitalization and size.
The Compensation Committee completes an annual performance review of each NEO following the end of each fiscal year at which it considers, among other things, individual performance assessments, the Company’s performance, the alignment with and balance between short and longer-term performance goals, the value of incentive awards paid to similar positions in comparable companies and previous incentive awards. This annual performance review is used to determine any adjustments to the NEO’s base salary and any bonuses to be awarded to the NEO in respect of the completed fiscal year.
The Compensation Committee did not rely on any comparator groups to determine salaries for the Company’s most recent financial year. Actual salaries take into consideration the individual’s position and responsibilities with the Company and their contribution to the Company’s performance.
Annual Incentive Cash Bonuses
Our NEOs are entitled to be considered for a discretionary annual incentive cash bonus at the end of each fiscal year. Based on the recommendation of the Compensation Committee, the Board has adopted an annual incentive cash bonus target for each eligible NEO. The annual incentive cash bonus target is expressed as a percentage of the NEO’s annual salary. The Company has established distinct performance metrics that are to be evaluated in assessing the annual incentive cash bonus to be awarded to each eligible NEO. The performance metrics include (i) achievement of the Company’s targeted net sales for the fiscal year, (ii) achievement of the Company’s targeted adjusted EBITDA for the fiscal year, (iii) completion on targeted product acquisition transactions during the fiscal year, and (iv) execution during the fiscal year on targeted objectives for products acquired by the Company. Each of these performance metrics are considered along with individual performance goals in the determination of the annual incentive cash bonus.
The Company’s objectives in granting annual incentive cash bonuses generally include:
(i) | attracting and retaining talented, qualified and effective executives, |
(ii) | motivating the short and long-term performance of these executives, and |
(iii) | better aligning their interests with those of the Company’s shareholders. |
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Long Term Incentives – Share Options
The 2011 Plan is intended to provide long term rewards linked directly to the market value of the Common Shares. The Company regards the strategic use of incentive stock options as a key component of the Company’s compensation plan. The Company is committed to long-term incentive programs that promote the continuity of an excellent management team and, therefore, the long-term success of the Company. The Company established a formal plan under which stock options may be granted to directors, officers, employees and consultants as an incentive to serve the Company in attaining its goal of improved shareholder value. It applies to personnel at all levels and continues to be one of the Company’s primary tools for attracting, motivating and retaining qualified personnel which is critical to the Company’s success. The Compensation Committee is responsible for administering the Company’s stock option plan and determining the type and amount of compensation to be paid to directors, officers, employees and consultants of the Company including the awards of any stock options under a stock option plan. Stock options are typically part of the overall compensation package for executive officers.
Stock options are granted to reward individuals for current performance, expected future performance and to align the long term interest of NEOs with shareholders. All grants of stock options to the NEOs are reviewed and approved by the Compensation Committee. In evaluating option grants to an NEO, the Compensation Committee evaluates a number of factors including, but not limited to: (i) the number of options already held by such NEO; (ii) a fair balance between the number of options held by the NEO concerned and the other executives of the Company, in light of their responsibilities and objectives; and (iii) the value of the options (generally determined using a Black-Scholes analysis) as a component in the NEO’s overall compensation package.
Performance share units
Under the performance share unit Plan (“PSU Plan”), performance share units (“PSUs”) may be granted at the discretion of the Board as a bonus to executives taking into account a number of factors, including the amount and term of PSUs previously granted, base salary and bonuses and competitive market factors. Granted PSUs are notional shares that have the same value as Common Shares and earn dividend equivalents as additional units, at the same rate as dividends paid on the Common Shares. No dividend equivalents will vest unless the associated PSUs also vest.
The vesting conditions for each PSU grant are established by the Board at the time of grant, but if no specific conditions are set, the vesting date will be December 31 of the third calendar year following the grant date. Vesting conditions may include performance against fundamental corporate objectives that are achieved prior to the expiry of the grant, as recommended by the Compensation Committee to the Board. Such performance requirements may also provide for tranche vesting of outstanding PSUs. It is anticipated that the performance requirements for vesting will be consistent with the four distinct performance metrics that are to be evaluated in assessing the annual incentive cash bonus to be awarded to each eligible NEO. The performance metrics include (i) achievement of the Company’s targeted net sales for the fiscal year, (ii) achievement of the Company’s targeted adjusted EBITDA for the fiscal year, (iii) completion on targeted product acquisition transactions during the fiscal year, and (iv) execution during the fiscal year on operational objectives for existing products. It is anticipated that each of these performance metrics will be given equal weighting in the determination of the vesting of PSU’s.
All vested PSUs from the original grant and those acquired as dividend equivalents are valued based on the volume weighted average price per Common Share traded on the TSX over the 5 trading days immediately preceding that date (“Fair Market Value”). Currently, awards are paid out in cash, net of required withholdings. Subject to the receipt of approvals from the TSX and Shareholders, the PSU Plan may alternatively provide one Common Share for each whole vested PSU. Fractional vested PSUs will be paid out in cash. Each Share issued by the Company pursuant to the PSU Plan will be issued as fully paid and non-assessable.
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In the event of a Change of Control (as defined in the PSU Plan) which is followed by the termination or cessation of employment due to a material reduction or change of position, duties or remuneration at any time during the ensuing 12 months, all PSUs immediately vest. Upon death, permanent disability or retirement from active employment of a participant under the PSU Plan, the participant shall continue to be entitled to redeem and receive payment for the PSUs held by the participant on a vesting date stipulated under the terms of the PSU Plan. Upon resignation of a participant, PSUs for which performance and other vesting criteria have been met will remain outstanding, and all other PSUs will be forfeited for no consideration. In the event of termination of employment for cause, all PSUs will immediately be forfeited.
Please see “Particulars of Matters to be Acted Upon – Performance share unit Plan” for further information regarding the PSU Plan. A copy of the PSU Plan will be available for inspection at the Meeting.
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Performance Graph
Comparison of Cumulative Total Return Between Common Shares and S&P/TSX Composite Total
Return Index 2009 through 2014
The above graph compares the Company’s cumulative total shareholder return (assuming an investment of $100 on October 1, 2009) on the Common Shares during the period October 1, 2009 to October 1, 2014 with the cumulative total return of the S&P/TSX Composite Total Return Index during the same period. The Common Share price performance as set out in the graph does not necessarily indicate future price performance.
2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||||||
The Company | $ | 100.00 | $ | 59.21 | $ | 121.71 | $ | 90.13 | $ | 92.11 | $ | 109.87 | ||||||||||||
S&P/TSX Composite Total Return Index | $ | 100.00 | $ | 108.55 | $ | 102.01 | $ | 108.10 | $ | 112.22 | $ | 131.29 |
Hedging Policy
Although the Company has not adopted a policy disallowing insiders from purchasing financial instruments designed to hedge or offset any decrease in market value of Common Shares or any other securities of the Company, the Company is not aware of any insiders having adopted such practice.
Compensation Governance
The Company does not have a formal written policy with respect to the remuneration of its NEOs and directors. Under the Company’s executive compensation program, the Board has delegated to the Compensation Committee the responsibility of determining for each NEO the amounts of the three main components of the Company’s executive compensation. The Compensation Committee also determines the compensation paid to the directors of the Corporation.
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Role of the Compensation Committee
When considering the appropriate compensation to be paid to the executive officers, the Compensation Committee has regard to a number of factors including:
· | recruiting and retaining executives critical to the success of the Company and the enhancement of shareholder value; |
· | providing fair and competitive compensation; |
· | aligning the interests of management and shareholders; |
· | rewarding performance, both on an individual basis and with respect to operations generally; and |
· | available financial resources. |
In addition, the Compensation Committee receives performance reviews and compensation recommendations from the President and Chief Executive Officer in respect of other executive officers. The Committee reviews these recommendations made to it and has discretion to modify any of the recommendations before making its recommendation to the Board.
Composition of the Compensation Committee
The Compensation Committee is comprised of only independent members within the meaning of NI 52-110Audit Committees (“NI 52-110”) and while the Board determines its members, the CEO is not involved in the selection process for this committee. The current members of the Compensation Committee are Tim Sorensen (Chair), Rob Pollock and David Guebert.
Each member has experience in executive compensation by virtue of his experience as current or former director or officer of a public corporation (see above under “Election of Directors – Principal Occupation, Business or Employment of Nominees”). The Board believes the Compensation Committee collectively has the knowledge, experience and background required to fulfill its mandate.
No compensation consultant or advisor was retained by the Corporation during the fiscal year ended September 30, 2014.
Compensation Risk Management
The Compensation Committee, during its annual review, evaluates the risks, if any, associated with the Company’s compensation policies and practices. Implicit in the Compensation Committee’s mandate is that the Company’s policies and practices respecting compensation, including those applicable to the Company’s NEOs, be designed in a manner which is in the best interests of the Company and its Shareholders. Risk evaluation is one of the considerations for this review.
A portion of the Company’s executive compensation consists of options granted under the 2011 Plan. Such compensation is both “long term” and “at risk” and, accordingly, is directly linked to the achievement of long term value creation. Since the benefits of such compensation, if any, are generally not realized by the NEO until a significant period of time has passed, the possibility of NEOs taking inappropriate or excessive risks with regard to their compensation that are financially beneficial to them at the expense of the Company and its Shareholders is extremely limited. In addition, all major transactions require approval by the Board.
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The other element of compensation, salary, is capped, thereby reducing risks associated with unexpectedly high levels of pay. In addition, the Compensation Committee believes it is unlikely that NEOs would take inappropriate or excessive risks at the expense of the Company and its Shareholders that would be beneficial to them with regard to their short term compensation when their longer term compensation might be put at risk from their actions.
Management bonuses are not directly tied to financial performance but are discretionary based on the achievement of personal and company objectives. Bonuses are also capped at a percentage of salary, minimizing risks associated with unexpectedly high amounts.
Due to the size of the Company, and the current level of the Company’s activity, the Compensation Committee is able to closely monitor and consider any risks which may be associated with the Company’s compensation policies and practices. Risks, if any, may be identified and mitigated through regular Board meetings during which, financial and other information of the Company are reviewed, and which includes executive compensation. No risks have been identified arising from the Company’s compensation policies and practices that are reasonably likely to have a material adverse effect on the Company.
Summary Compensation Table
The following table sets forth, in Canadian dollars, all compensation for the fiscal years ended September 30, 2014, 2013, and 2012 paid to the principal executive officer of the Company, the principal financial officer of our company and the three other most highly compensated officers who served as NEOs.
Non-equity Incentive Plan Compensation(1) ($) | ||||||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Share- based Awards(2) ($) | Option- based Awards(3) ($) | Annual Incentive Plans | Long- term Incentive Plans | Pension Value ($) | All Other Compens- ation ($) | Total Compens- ation ($) | |||||||||||||||||||||||||||
Barry Fishman, | 2014 | nil | nil | $ | 199,541 | nil | nil | nil | $ | 7,258 | $ | 206,799 | ||||||||||||||||||||||||
Chief Executive Officer | 2013 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
(as of September 24, | 2012 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
2014) | ||||||||||||||||||||||||||||||||||||
Elie Farah, | 2014 | $ | 292,500 | nil | $ | 220,352 | nil | nil | nil | nil | $ | 512,852 | ||||||||||||||||||||||||
Former President and | 2013 | $ | 270,000 | nil | nil | $ | 75,000 | nil | nil | nil | $ | 345,000 | ||||||||||||||||||||||||
CEO (until September | 2012 | $ | 187,977 | nil | $ | 521,282 | nil | nil | nil | nil | $ | 709,259 | ||||||||||||||||||||||||
23, 2014) | ||||||||||||||||||||||||||||||||||||
Andrew Patient, | 2014 | $ | 220,000 | nil | $ | 121,193 | $ | 33,000 | nil | nil | nil | $ | 374,193 | |||||||||||||||||||||||
Chief Financial Officer | 2013 | $ | 210,000 | nil | $ | 38,507 | $ | 31,500 | nil | nil | nil | $ | 280,007 | |||||||||||||||||||||||
2012 | $ | 217,248 | nil | $ | 256,827 | nil | nil | nil | nil | $ | 474,075 | |||||||||||||||||||||||||
Ulrich Schoeberl(4) | 2014 | $ | 268,188 | nil | $ | 165,264 | $ | 76,093 | nil | nil | nil | $ | 509,545 | |||||||||||||||||||||||
Managing Director | 2013 | $ | 259,436 | nil | nil | $ | 50,292 | nil | nil | nil | $ | 309,728 | ||||||||||||||||||||||||
European Operations | 2012 | $ | 39,398 | nil | $ | 94,850 | nil | nil | nil | nil | $ | 134,248 | ||||||||||||||||||||||||
Robert McLay | 2014 | $ | 120,000 | nil | $ | 71,685 | $ | 32,000 | nil | nil | nil | $ | 223,685 | |||||||||||||||||||||||
Vice President Sales | 2013 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
and Marketing (as of | 2012 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
January 2, 2014) |
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Notes:
(1) | “Non-equity Incentive Plan Compensation” includes all compensation under an incentive plan or portion of an incentive plan that is not an equity incentive plan. |
(2) | “Share-based Awards” means an award under an equity incentive plan of equity-based instruments that do not have option-like features, including, for greater certainty, Common Shares, restricted shares, restricted share units, deferred share units, phantom shares, phantom share units, common share equivalent units, and stock. |
(3) | “Option-based Awards” means an award under an equity incentive plan of options, including, for greater certainty, share options, share appreciation rights, and similar instruments that have option-like features. The value of these options in 2014 was estimated using the Black-Scholes option pricing model with the following assumptions: Share price equal to market price on date of grant, risk free interest rate of 2%, expected stock price volatility ranging from 73- 80% based on five year history, expected dividend yield of nil and expected term of 5 years. |
(4) | Compensation for Mr. Schoeberl is paid in Euros. Canadian dollar equivalent amounts are calculated at the rates in effect when the expense is incurred. |
Employment Agreements
Barry Fishman – Chief Executive Officer
Effective December 15, 2014, the Company entered into an employment agreement with Barry Fishman, whereby Barry Fishman agreed to provide services to the Company in consideration for, among other things, an annual base salary of $360,000. In addition, four weeks of paid vacation per annum shall be provided to Barry Fishman and shall be taken at such time or times as is mutually determined. Barry Fishman is also eligible to receive an annual target bonus of 40% with a maximum bonus payout of 60% of his annual base salary when certain agreed upon above-target milestones are attained. The amount of any bonus paid, if any is to be paid, will be made by reference to the achievement during the fiscal year of three equally weighted incentive bonus criteria to be established by agreement between the Company and Mr. Fishman at the outset of each fiscal year. These bonus criteria will include achievement of targeted sales, EBITDA and new business development. Mr. Fishman is entitled to options to acquire additional Common Shares as the compensation and Board shall determine, from time to time. In connection with his employment agreement, Barry Fishman was granted 300,000 options to purchase Common Shares priced at market price at the time of grant, which options are subject to vesting. Barry Fishman was also granted 800,000 Performance Share Units, subject to approval of the plan by the board, regulators and shareholders. Barry Fishman is entitled to receive health and dental benefits according to the Company’s benefit plan as well as long term disability and life insurance coverage. Barry Fishman’s base salary is reviewed by the Compensation Committee and, if deemed appropriate by the Compensation Committee, adjusted on an annual basis.
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Andrew Patient – Chief Financial Officer
Effective January 1, 2012, the Company entered into an employment agreement with Andrew Patient, whereby Andrew Patient agreed to provide services to the Company in consideration for, among other things, an annual base salary of $180,000. In addition, four weeks of paid vacation per annum shall be provided to Andrew Patient and shall be taken at such time or times as is mutually determined. Andrew Patient is also eligible to receive an annual bonus of up to 15% of his annual base salary in recognition of personal and employer milestones. The decision to pay a bonus, if any is to be paid, is at the discretion of the Compensation Committee and the Board. Andrew Patient is entitled to options to acquire additional Common Shares as the Compensation Committee and Board shall determine, from time to time. In connection with his employment, Andrew Patient was granted 200,000 options to purchase Common Shares of the Company priced at market price at the time of grant, subject to vesting. Andrew Patient is entitled to receive health and dental benefits according to the Company’s benefit plan as well as long term disability and life insurance coverage. Mr. Patient’s base salary is reviewed by the Compensation Committee and, if deemed appropriate by the Compensation Committee, adjusted on an annual basis.
Termination and Change of Control Provisions
Each of the employment agreements for Mr. Fishman and Mr. Patient provides that their employment agreement may be terminated without cause by the Company upon payment to the NEO, in lieu of all notice requirements or other payments due under the employment agreement, of an amount equal to the aggregate of (i) an amount equal to all accrued but unpaid base salary and vacation pay, and (ii) in the case of Mr. Fishman, an amount equal to 200% of his base salary for the current year, and in the case of Mr. Patient, an amount equal to 100% of his base salary for the current year.
Each of the employment agreements for Mr. Fishman and Mr. Patient also provides that their employment agreement may be terminated by the NEO within three months of the date of a “change of control”, as defined in the NEO’s employment agreement, at the election of the NEO. Upon termination by the NEO following a “change of control”, the Company will pay to the NEO an amount equal to the aggregate of (i) an amount equal to all accrued but unpaid base salary and vacation pay, and (ii) in the case of Mr. Fishman, an amount equal to 200% of his base salary for the current year, and in the case of Mr. Patient, an amount equal to 100% of his base salary for the current year.
The table below provides estimates of the incremental amounts that would have been payable to the following NEOs assuming (i) termination by the Company without cause, or (ii) termination in the event of a Change of Control event occurred on September 30, 2014.
Name | Termination Without Cause ($) | Termination and Change in Control ($) | ||||||
Barry Fishman | $ | nil | $ | nil | ||||
Andrew Patient | $ | 226,600 | $ | 226,600 |
Incentive Plan Awards
Outstanding Share-based awards and option-based awards
The following table sets forth all option and share-based awards granted to NEOs that were outstanding as of September 30, 2014.
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Option-based Awards | Share-based Awards | |||||||||||||||||||||
Name | Number of securities underlying unexercised options (#) | Option exercise price y($) | Option expiration date | Value of unexercised in-the- money options ($)(1) | Number of shares or units of shares that have not vested (#) | Market or payout value of share- based awards that have not vested ($) | ||||||||||||||||
Barry Fishman | 75,000 | $ | 1.70 | April 23, 2019 | nil | nil | nil | |||||||||||||||
200,000 | $ | 1.63 | September 25, 2019 | $ | 8,000 | nil | nil | |||||||||||||||
Elie Farah | 300,000 | $ | 2.05 | January 21, 2015 | nil | nil | nil | |||||||||||||||
66,666 | $ | 1.80 | January 21, 2015 | nil | nil | nil | ||||||||||||||||
Andrew Patient | 200,000 | $ | 2.02 | January 18, 2017 | nil | nil | nil | |||||||||||||||
50,000 | $ | 1.19 | January 6, 2018 | $ | 24,000 | nil | nil | |||||||||||||||
110,000 | $ | 1.80 | March 3, 2019 | nil | ||||||||||||||||||
Ulrich Schoeberl | 100,000 | $ | 1.52 | September 11, 2017 | $ | 15,000 | nil | nil | ||||||||||||||
150,000 | $ | 1.80 | March 3, 2019 | nil | nil | nil | ||||||||||||||||
Robert McLay | 75,000 | $ | 1.49 | January 1, 2019 | $ | 13,500 | nil | nil |
Notes:
(1) | The closing price of Common Shares on September 30, 2014 was $1.67. |
Incentive Plan Awards – Value vested or earned during the year
The following table sets forth details of the value vested or earned for all incentive plan awards during the year ended September 30, 2014 by NEOs.
Name | Option-based awards – Value vested during the year ($) | Share-based awards – Value vested during the year ($) | Non-equity incentive plan compensation – Value earned during the year ($) | |||||||||
Barry Fishman | nil | nil | nil | |||||||||
Elie Farah | nil | nil | nil | |||||||||
Andrew Patient | $ | 12,500 | nil | nil | ||||||||
Ulrich Schoeberl | $ | 17,000 | nil | nil | ||||||||
Robert McLay | nil | nil | nil |
Narrative Discussion
Refer to the section titled “Compensation Discussion and Analysis”, beginning on page 8, and “2011 Stock Option Plan”, beginning on page 8, for a description of all plan based awards and their significant terms. There was no re-pricing of stock options under the stock option plan or otherwise during the Company’s most recently completed financial year ended September 30, 2014.
In January 2014, the Company granted 75,000 options to Robert McLay in connection with his employment agreement. The options have a five year term and were granted with an exercise price of $1.49 per share, with options vesting over a three year period based on one-third vesting on each anniversary.
In March 2014, the Company granted a total of 1,025,000 incentive stock options to officers and directors of the Company in connection with their compensation arrangements. The options have a five year term with an exercise price of $1.80 per share and vest on the basis of one-third immediately and one third on each of the first two anniversaries.
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In May 2014, the Company granted 150,000 options to Theresa Firestone. The options have a term of five years, vesting immediately, with an exercise price of $1.69 per share. In addition, the Company granted 75,000 options to an advisor to the board of directors. The options are exercisable at $1.70 for a period of five years and vest on April 23, 2015.
In September 2014, the Company granted 200,000 options to Barry Fishman. The options have a term of five years, with one half vesting immediately and the remainder vesting on the first anniversary of the date of grant and an exercise price of $1.63 per share.
The estimated fair value of the options granted during the twelve months of fiscal 2014, using the Black-Scholes option pricing model, was $1,633,734. $1,048,696 was expensed in the financial statements during the twelve months ending September 30, 2014 relating to current and prior period grants, and has been included in general and administrative expenses in the statement of operations and in equity as equity reserves. The remaining expense will be recognized over the balance of the vesting periods.
Pension Plan Benefits
The Company has no pension, defined benefit, defined contribution or deferred compensation plans in place.
Compensation of Directors
Director Compensation Table
The total compensation paid to directors, who are not NEOs, during the financial year ended on September 30, 2014, is set out in the following table:
Name | Fees earned ($) | Share- based awards ($) | Option- based awards ($) | Non-equity incentive plan compensation ($) | Pension value ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||
David D. Guebert | $ | 59,250 | nil | $ | 165,264 | nil | nil | nil | $ | 224,514 | ||||||||||||||||||
Robert S. Pollock | $ | 55,500 | nil | $ | 165,264 | nil | nil | nil | $ | 220,764 | ||||||||||||||||||
Timothy G. Sorensen | $ | 58,500 | nil | $ | 165,264 | nil | nil | nil | $ | 223,764 | ||||||||||||||||||
Michael Cloutier | $ | 55,500 | nil | $ | 82,632 | nil | nil | nil | $ | 138,132 | ||||||||||||||||||
Theresa Firestone | $ | 19,956 | nil | $ | 155,164 | nil | nil | nil | $ | 175,120 |
Narrative Discussion
All directors of the Company or any of its affiliates are compensated for their services as directors and members of a committee through the payment of monthly fees. In addition, Directors are entitled to participate in the Company’s Stock Option Plan. Directors earn an annual fee of $40,000, plus an an additional fee for their role as Chairman ($10,000) or subcommittee Chair ($5,000), as well as meeting fees of $1,000 per meeting attended. Directors may also be reimbursed reasonable travel expenses incurred in connection with attendance at meetings.
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Directors’ and Officers’ Liability Insurance
The Company maintains liability insurance for the benefit of the directors and officers of the Company and its subsidiaries against liability incurred by them in their respective capacities. The current annual policy limit is $10,000,000. Under the policy, individual directors and officers are reimbursed for losses incurred in their capacities as such, subject to a deductible of $100,000 for securities or employment practices claims and no deductible for all other claims. The deductible is the responsibility of the Company. The annual premium of $102,600 was paid by the Company.
Outstanding Share-Based Awards and Option-Based Awards for Directors
The following table sets forth all option and share-based awards granted to the Company’s directors, other than the NEOs, that were outstanding as of September 30, 2014.
Option-based Awards | Share-based Awards | |||||||||||||||||||||
Name | Number of securities underlying unexercised options (#) | Option exercise price ($) | Option expiration date | Value of unexercised in-the- money options(1) ($) | Number of shares or units of shares that have not vested (#) | Market or payout value of share-based awards that have not vested ($) | ||||||||||||||||
David D. Guebert | 150,000 | $ | 2.00 | July 25, 2017 | nil | nil | nil | |||||||||||||||
150,000 | $ | 1.80 | March 3, 2019 | nil | nil | nil | ||||||||||||||||
Robert S. Pollock | 150,000 | $ | 2.00 | July 25, 2017 | nil | nil | nil | |||||||||||||||
150,000 | $ | 1.80 | March 3, 2019 | nil | nil | nil | ||||||||||||||||
Timothy G. Sorensen | 150,000 | $ | 2.00 | July 25, 2017 | nil | nil | nil | |||||||||||||||
150,000 | $ | 1.80 | March 3, 2019 | nil | nil | nil | ||||||||||||||||
Michael Cloutier | 150,000 | $ | 0.91 | July 7, 2018 | $ | 114,000 | nil | nil | ||||||||||||||
75,000 | $ | 1.80 | March 3, 2019 | nil | nil | nil | ||||||||||||||||
Theresa Firestone | 150,000 | $ | 1.69 | May 25, 2019 | nil | nil | nil |
Notes:
(1) | The closing price of Common Shares on September 30, 2014 was $1.67. |
Incentive Plan Awards – Value Vested or Earned During the Year
The following table sets forth details of the value vested or earned for all incentive plan awards during the year ended September 30, 2014 by directors.
Name | Option-based awards – Value vested during the year ($) | Share-based awards – Value vested during the year ($) | Non-equity incentive plan compensation – Value earned during the year ($) | |||||||||
David D. Guebert | nil | nil | nil | |||||||||
Robert S. Pollock | nil | nil | nil | |||||||||
Joseph Rus | nil | nil | nil | |||||||||
Timothy G. Sorensen | nil | nil | nil | |||||||||
Michael Cloutier | nil | nil | nil |
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Narrative Discussion
Refer to the section titled “Compensation Discussion and Analysis”, beginning on page 8, and “2011 Stock Option Plan”, beginning on page 8, for a description of all plan based awards and their significant terms. There was no re-pricing of stock options under the stock option plan or otherwise during the Company’s most recently completed financial year ended September 30, 2014.
In March 2014, the Company granted a total of 1,025,000 incentive stock options to officers and directors of the Company in connection with their compensation arrangements. The options have a five year term with an exercise price of $1.80 per share and vest on the basis of one-third immediately and one third on each of the first two anniversaries.
In May 2014, the Company granted 150,000 options to a new director. The options have a term of five years, vesting immediately, with an exercise price of $1.69 per share. In addition, the Company granted 75,000 options to an advisor to the board of directors. The options are exercisable at $1.70 for a period of five years and vest on April 23, 2015.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets out, as at September 30, 2014, the share-based compensation plans of the Company pursuant to which Common Shares can be issued from treasury. The information has been consolidated by category of share-based compensation plan, namely, the plans providing for the issuance of Shares previously approved by the Shareholders and those not having been approved by the Shareholders. There is no plan which has not been approved by the Shareholders. The number of Shares which appears at the line “Share-based compensation plan” refers to the 2011 Plan.
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 (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(1) (c) | |||||||||
Equity compensation plans approved by securityholders | 3,456,667 | $ | 1.82 | 4,667,905 | ||||||||
Equity compensation plans not approved by securityholders | Nil | N/A | Nil |
Notes:
(1) | The Company’s stock option plan allows it to grant options to acquire up to 8,124,572 Common Shares. |
2011 Stock Option Plan
The Company’s stock option plan (the “2011 Plan”) was adopted in connection with the Amalgamation on December 19, 2011, which was updated by the Board on January 18, 2012 and February 25, 2013.
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The following summary of the 2011 Plan is intended to be a brief description of the 2011 Plan and is qualified in its entirety by the full text of the 2011 Plan which is attached hereto as Schedule “A”.
The purpose of the 2011 Plan is intended to: (i) provide an incentive to Eligible Persons (as defined in the 2011 Plan) to further the development, growth and profitability of the Company; (ii) contribute in providing such Eligible Persons with a total compensation and rewards package; (iii) assist the Company in retaining and attracting employees and consultants with experience and ability; and (iv) encourage share ownership and provide Eligible Persons with proprietary interests in, and a greater concern for, the welfare of, and an incentive to continued service with, the Company. Eligible persons include (i) employees, (ii) directors, (iii) executive officers, and (iv) any person or company engaged to provide ongoing management or consulting services to the Company.
The 2011 Plan is administered by the Compensation Committee, which has full and final authority with respect to granting of all options thereunder subject to the requirements of the TSX and other requirements of law.
The 2011 Plan authorizes the Compensation Committee to grant options to purchase Common Shares on the following terms and conditions:
· | the aggregate number of Common Shares which may be issued pursuant to options granted under the 2011 Plan will not exceed that number which is equal to ten percent of the issued and outstanding Common Shares from time to time; |
· | any increase in the issued and outstanding Common Shares will result in an increase in the available number of Common Shares issuable under the 2011 Plan, and any exercises of options will make new grants available under the 2011 Plan effectively resulting in a re-loading of the number of options available to grant under the 2011 Plan; |
· | no single participant in the 2011 Plan and his, her or its associates may be granted options which could result in the issuance of Common Shares exceeding five percent of the issued and outstanding Common Shares, within a one year period, to such participant and his, her or its associates, in the aggregate; |
· | the number of Common Shares issuable to any single participant in the 2011 Plan pursuant to options, shall not exceed five percent of the issued and outstanding Common Shares; |
· | the number of Common Shares issuable to Insiders (as defined in the TSX Company Manual), at any time, under all share compensation arrangements, shall not exceed ten percent of the issued and outstanding Common Shares and the number of Common Shares issued to Insiders, within any one year period, under all share compensation arrangements, shall not exceed ten percent of the issued and outstanding Common Shares; |
· | the exercise price of an option shall not be less than the closing price on the day prior the date of grant of the option, subject to any extension in the event of a blackout period; |
· | vesting of options granted under the 2011 Plan shall be at the discretion of the Board; |
· | options granted under the 2011 Plan will be granted for a term not to exceed ten years from the date of grant; |
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· | in the event of the termination of a participant’s employment with the Company for cause or as a result of the participant’s voluntary resignation prior to normal retirement, such participant’s options will terminate three months from the date of such termination, and in the event of the retirement, death, physical or mental disability or termination (other than for cause) by the Company, the participant’s options will terminate 12 months from the date employment by the Company ceased, provided in each case that no options will be extended past their term except as provided below; |
· | the Board or Compensation Committee is entitled to extend the time during which a participant that is not an Insider may exercise their options at its discretion provided that such extension does not extend past the maximum ten year term; |
· | the expiry date of an option can be extended by the Compensation Committee without shareholder approval where such expiry date occurs within a blackout period or within ten days of the end of a blackout period and the new expiry date shall be the tenth day following the end of the relevant blackout period; |
· | during a participant’s lifetime, an option may not be assigned or transferred except to a participant’s trust; |
· | upon the announcement or contemplation of any event, including a reorganization, acquisition, amalgamation or merger (or a plan of arrangement in connection with any of the foregoing), other than solely involving the Company and one or more of its affiliates (as such term is defined in theSecurities Act (Ontario)), with respect to which all or substantially all of the persons who were the beneficial owners of the Common Shares immediately prior to such reorganization, amalgamation, merger or plan of arrangement do not, following such reorganization, amalgamation, merger or plan of arrangement, beneficially own, directly or indirectly more than 50% of the resulting voting shares on a fully-diluted basis (for greater certainty, this shall not include a public offering or private placement out of treasury) or the sale to a person other than an affiliate of the Company of all or substantially all of the Company’s assets, the Company shall have the discretion, without the need for the agreement of any participant, to accelerate the expiry dates and/or any applicable vesting provisions of all options, as it shall see fit. The Company may accelerate one or more participant’s expiry dates and/or vesting requirements without accelerating the expiry dates and/or vesting requirements of all options and may accelerate the expiry date and/or vesting requirements of only a portion of a participant’s options; |
· | the following amendments to the 2011 Plan may be made by the Board without the approval of shareholders: (i) any amendments necessary to ensure that the 2011 Plan is in compliance with the rules of the Exchange and any other applicable regulatory authority; (ii) amendments that are of an administrative or general housekeeping nature; (iii) amendments to the definitions of “Eligible Persons” under the 2011 Plan; (iv) amendments to the manner in which the 2011 Plan is administered; (v) amendments to the maximum term of options granted pursuant to the 2011 Plan, provided that (A) such extension does not extend past the maximum ten year term, and (B) the participant is not an Insider as the Compensation Committee is not entitled to extend the time during which an Insider may exercise Options held by the Insider; (vi) amendments to the vesting provisions and the termination provisions set out in the 2011 Plan; and (vii) amendments to the anti-dilution provisions set out in the 2011 Plan; and |
· | the following amendments to the 2011 Plan will require Shareholder approval: (i) amendments to the maximum number of Common Shares that may be issued as a result of the grant of options pursuant to the 2011 Plan; (ii) amendments to the maximum number of securities or options that may be granted to Insiders; (iii) amendments to the manner in which the exercise price of options is determined; (iv) any amendment to the term of options granted to Insiders; and (v) amendments to the amending provisions of the 2011 Plan. |
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Indebtedness of Directors and Executive Officers
No person who is, or who was within the 30 days prior to the date of the Information Circular, a director, executive officer, employee or any former director, executive officer or employee of the Company or a subsidiary thereof, and furthermore, no person who is a nominee for election as a director of the Company, and no associate of such persons is, or was as of the date of this Information Circular, indebted to the Company or a subsidiary of the Company or indebted to any other entity where such indebtedness is subject to a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company or a subsidiary of the Company.
Interest of Informed Persons in Material Transactions
Except as otherwise disclosed herein, no: (a) director or executive officer of the Company; (b) person or company who beneficially owns, directly or indirectly, Common Shares or who exercises control or direction of Common Shares, or a combination of both carrying more than ten percent of the voting rights attached to the Common Shares outstanding (an “Insider”); (c) director or executive officer of an Insider; or (d) associate or affiliate of any of the directors, executive officers or Insiders, has had any material interest, direct or indirect, in any transaction since the commencement of the Company’s most recently completed financial year or in any proposed transaction which has materially affected or would materially affect the Company, except with an interest arising from the ownership of Common Shares where such person or company will receive no extra or special benefit or advantage not shared on a pro rata basis by all holders of the same class of Common Shares.
Appointment of Auditor
MNP LLP, Chartered Accountants (“MNP”), will be nominated at the Meeting for reappointment as auditors of the Company until the next annual general meeting of the Shareholders or until their successors are duly elected or appointed, at remuneration to be fixed by the Board. MNP have been the auditors of the Company since July 4, 2014.
At the Meeting, Shareholders will be asked to vote for the appointment of MNP to serve as auditors of the Company to hold office until the next annual meeting of the Shareholders or until such firm is removed from office or resigns as provided by law, and to authorize the Board to fix the remuneration to be paid to the auditors.
Management recommends Shareholders vote for the appointment of MNP as the Company’s auditors for the Company’s fiscal year ending September 30, 2015 at remuneration to be fixed by the Board.
Audit Committee Disclosure
Among other things, the Audit Committee is responsible for reviewing the Company’s annual and quarterly consolidated financial statements and reporting to the Board in connection therewith. On February 25, 2013, the Audit Committee adopted a new Audit Committee Charter, which specifies the auditor’s accountability to the Board and the authority and responsibilities of the Audit Committee in compliance with National Instrument 52-110Audit Committees (“NI 52-110”).
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Charter
The text of the Audit Committee Charter is attached hereto as Schedule “B” to this Information Circular.
Composition
The Audit Committee is comprised of three directors, David Guebert (Chair), Tim Sorensen and Michael Cloutier. All three members of the Audit Committee are “independent” (as defined by NI 52-110) directors of the Company and “financially literate” (as defined by NI 52-110).
Relevant Education and Experience
The following describes the relevant education and experience of each member of the Audit Committee that shows their (a) understanding of the accounting principles used by the Company to prepare its financial statements, (b) ability to assess the general application of such accounting principles, (c) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to those that can reasonably be expected to be raised by the Company’s financial statements or experience actively supervising one or more persons engaged in such activities and (d) understanding of internal controls and procedures for financial reporting.
David D. Guebert — Director
Mr. Guebert is a chartered accountant and certified public accountant with over 30 years of experience in finance and accounting, 20 of which were served as chief financial officer of public and private companies in the resource and technology sectors. He is currently the Chief Financial Officer of Marret Resource Corp., a merchant banking company. He is also is the Chief Financial Officer of Times Three Wireless Inc., a wireless location technology company. Mr. Guebert holds a B.Comm. from the University of Saskatchewan (1979).
Timothy G. Sorensen — Director
Mr. Sorensen is a Director and the President of Primary Capital Inc., an exempt market dealer. He recently joined Primary Capital from Macquarie Capital Markets Canada where he served as Divisional 7 Director Head of Institutional Sales. Mr. Sorensen has over 14 years of capital markets experience in institutional sales and equity analysis. He has a CFA designation and holds an MBA (1996) and B.Comm (1995) both from the University of Windsor.
Michael Cloutier — Director
Mr. Michael Cloutier was appointed Director of Merus Labs International Inc. on July 8, 2013. He is currently the President and General Manager of InterMune Inc., a biotechnology company focused on the research, development and commercialization of innovative therapies in pulmonology and orphan fibrotic diseases. Prior to his appointment at Merus, Mr. Cloutier was the CEO of the Canadian Diabetes Association from 2010 to 2013 and was the CEO of Critical Outcomes Technology Inc., an early stage biotech company based in London, Ontario with proprietary technology uniquely positioned to accelerate and advance pre-clinical research and drug development activities, from 2008 to 2010. From 2003 to 2008, Mr. Cloutier held several roles with AstraZeneca including the CEO of the Canadian operations and VP, HR, Global Marketing at the corporate headquarters in London, England. Other leadership roles include President of Pharmacia Canada from 2000 to 2003 and President of Searle Canada from 1998 to 2000.
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Reliance on Certain Exemptions
During the financial year ended September 30, 2014, the Company has not relied on any exemption contained in NI 52 110.
Audit Committee Oversight
Since the commencement of the Company’s most recently completed financial year, the Board has not failed to adopt a recommendation of the Audit Committee to nominate or compensate an external auditor.
Pre-Approval Policies and Procedures
The Audit Committee has not adopted specific policies and procedures for the engagement of non-audit services. Subject to the requirements of NI 52-110, the engagement of non-audit services is considered by the Audit Committee on a case-by-case basis.
External Auditor Fees
In the following table, “audit fees” are fees billed by the Company’s external auditor for services provided in auditing the Company’s annual financial statements for the subject year. “Audit-related fees” are fees not included in audit fees that are billed by the auditor for assurance and related services that are reasonably related to the performance of the audit review of the Company’s financial statements. “Tax fees” are fees billed by the auditor for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the auditor for products and services not included in the foregoing categories.
The aggregate fees billed by MNP LLP related to the fiscal years ending September 30, 2014 and 2013 by category, are as follows:
Financial Year Ending | Audit Fees | Audit Related Fees | Tax Fees | All Other Fees | ||||||||||||
September 30, 2014 | $ | 190,000 | $nil | $nil | $ | 50,000 | ||||||||||
September 30, 2013 | $nil | $nil | $nil | $ | 40,000 |
The aggregate fees billed by Deloitte & Touche LLP related to the fiscal years ending September 30, 2014 and 2013 by category, are as follows:
Financial Year Ending | Audit Fees | Audit Related Fees | Tax Fees | All Other Fees | ||||||||||||
September 30, 2014 | $ | 50,000 | $nil | $ | 8,000 | $ | 110,000 | |||||||||
September 30, 2013 | $ | 270,000 | $ | 18,000 | $ | 69,000 | $nil |
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MANAGEMENT CONTRACTS
There are no management functions of the Company which were to any substantial degree performed by a person other than a director or executive officer of the Company or its subsidiaries during the Company’s most recently completed financial year.
Disclosure of Corporate Governance Practices
Board of Directors
The Board is responsible for determining whether or not each director is independent. In making this determination, the Board has adopted the definition of “independence” as set forth in National Instrument 58-101 Disclosure of Corporate Governance Standards. The Board has not adopted the director independence standards contained in Rule 5605 of the NASDAQ Listing Rules. The Company has determined that it has a majority of independent directors.
As of the date of this Information Circular, the Company considers that Robert Pollock, David Guebert, Michael Cloutier, Theresa Firestone and Timothy Sorensen are independent directors. The Company does not consider Barry Fishman to be independent as he is also an officer of the Company and a member of management.
Other Directorships
The directors who are presently a director of other reporting issuers, and the names of the issuers, are as follows:
Name | Name of Reporting Issuer | |
Robert S. Pollock | INV Metals Inc. | |
David D. Guebert | Nil | |
Michael Cloutier | Nil | |
Barry Fishman | Bedrocan Cannabis Corp. | |
Theresa Firestone | Nil | |
Timothy Sorensen | Nil |
The Company does not hold regularly scheduled meetings at which non-independent directors are not in attendance. However, the Company’s independent directors do communicate outside of formal meetings of the Board. Further, the independent directors have very strong governance backgrounds. As a result, they are acutely aware of the important roles independent directors have.
Mr. Michael Cloutier currently serves as Chairman of the Board. The Board provides leadership for its independent directors by giving the independent directors unrestricted access to the Company’s auditors and external legal counsel.
All directors attended all meetings of the Board during the year ended September 30, 2014.
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Board Mandate
The Board has adopted a Board Mandate pursuant to which the Board has the responsibility for the overall stewardship of the Company, establishing the overall policies and standards for the Company in the operation of its businesses, and reviewing and approving the Company’s strategic plans. In addition, the Board monitors and assesses overall performance and progress in meeting the Company’s goals. Day to day management is the responsibility of the Chief Executive Officer and senior management.
Position Descriptions
The Board has not developed written position descriptions for the chair and the chair of each committee of the Board. The Board delineates the role and responsibilities of each such position by discussing the role of the chair and by adopting written charters for each committee which delineate the role and responsibilities for the chair of each such committee.
The CEO's contract sets out the primary responsibilities of the position. As per the terms of the contract, the Executive shall be responsible for:
· | performing duties customarily performed by a chief executive officer of a reporting issuer and its subsidiaries, including those specific to the Corporation and its business; |
· | participating as a member of the executive team in defining the strategic direction of the Corporation; |
· | overseeing the day to day management of the Company’s business activities; |
· | developing and managing key customer, supplier, partner and stakeholder relations; |
· | serving as the external face of the organization for external and public relations; |
· | devising, implementing and managing financial strategies, business plans, systems and procedures to deliver on the Company’s corporate objectives, including the Company’s product acquisition strategies; |
· | devising and managing plans for equity and debt financing of the Company, which shall include developing and implementing an effective capital markets strategy; |
· | managing corporate and shareholder affairs, including relationships with regulatory bodies, investors and analysts; |
· | ensuring Company assets are safeguarded and business activities are in compliance with relevant legal and regulatory requirements; |
· | directing and focusing the team on the execution of the strategic and operating plans of the Company; |
· | serving as a member of the board of directors and as an officer of the Company’s subsidiaries, as determined by the Board from time to time; |
· | serving as a member of the Board; and |
· | performing any additional responsibilities commensurate with the position of CEO that may be assigned by the Board over time. |
Orientation and Continuing Education
New directors are given the opportunity to individually meet with members of senior management to improve their understanding of the Company’s business. All directors have regular access to senior management to discuss Board presentations and other matters of interest.
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The Company also gives directors a reference manual, which contains information about the Company’s history and current status, corporate governance materials, its investments and its Shareholders. This reference manual is updated regularly. It includes the Company’s Code of Business Conduct, which also applies to the directors, as well as governance and responsibilities of the Board and its committees, and a description of the duties and obligations of directors. As part of its mandate, the Nominating and Corporate Governance Committee is also responsible for providing orientation and continuing education for all members of the Board, including reimbursing costs of attending certain outside director education programs. During their regular scheduled Board meetings, directors are given presentations on various aspects of the Company’s business.
Ethical Business Conduct
The Board has adopted a Code of Business Conduct (the “Code”). All of the Company’s employees, directors and officers must follow the Code, which provides guidelines for ethical behaviour.
The Code sets out in detail the principles and general business tenets and ethics and compliance policies applicable to the Company’s business and activities. The Code addresses topics such as honest and ethical conduct and conflicts of interest; compliance with applicable laws and Company policies and procedures; business integrity and fair dealing; public disclosure; use of corporate property and opportunities; confidentiality; compliance with insider trading and other legal requirements; and records and document retention.
The Board expects all employees at all levels of the companies within its group, as well as officers, directors, customers, suppliers, vendors, contractors and partners, to read, understand and comply with the Code. If any employee is uncertain about a situation, the employee is expected to refer the matter to a supervisor or Human Resources representative. All employees are also expected to report in good faith any violations or potential violations of the Code and to co-operate in internal investigations about a reported violation. Supervisors are expected to answer employee questions about the Code or direct them to the right source of information; provide timely advice and guidance to employees on ethics and compliance concerns; handle all employee reports promptly and confidentially; encourage employees to ask questions and get advice before they act; and report in good faith any violations of the Code or situations that could result in violations. In addition to employees’ and supervisors’ responsibilities detailed above, senior management has the responsibility to continuously promote ethical business conduct, in line with the Company’s values and general business principles.
No material change report has been filed that pertains to any conduct of a director or executive officer that constitutes a departure from the Code.
In addition to the Code, the Company has also developed procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls, auditing matters or evidence of an activity that may constitute corporate fraud or violation of applicable law and for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
Directors and officers of the Company are required under the British ColumbiaBusiness Corporations Act (the “Act”) to disclose any material interest in any material contract or transaction with the Company and refrain from voting with respect thereof, subject to certain exceptions.
Nomination of Directors
The Nominating and Corporate Governance Committee is comprised of three independent directors: Tim Sorensen (Chair), David Guebert and Robert Pollock. The Nominating and Corporate Governance Committee has the responsibility for assessing potential Board nominees, screening their qualifications and making recommendations for approval by the Board of nominees for election or appointment to the Board. To help achieve this task, the Nominating and Corporate Governance Committee develops qualifications and criteria for the selection of directors.
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The Board aims to have a sufficient range of skills, expertise and experience to ensure that it can carry out its responsibilities effectively. Directors are chosen for their ability to contribute to the broad range of issues that the Board must deal with. The Board reviews each director’s contribution through the Nominating and Corporate Governance Committee and determines whether the Board’s size allows it to function efficiently and effectively. The Nominating and Corporate Governance Committee is mandated to review the size of the Board from time to time and recommend changes in size when appropriate.
Compensation
The purpose of the Compensation Committee is to assist the Board in its oversight responsibilities relating to the compensation, nomination, evaluation and succession of the executive officers of the Company; the administration of the Company’s Stock Option Plan; and the review of executive compensation disclosure. The Compensation Committee is comprised of three directors, Tim Sorensen (Chair), Rob Pollock and David Guebert, all of whom are independent directors. The Compensation Committee reviews and approves annual salaries and other forms and items of compensation for our senior officers and employees. Except for plans that are, in accordance with their terms or as required by law, administered by the Board or another particularly designated group, the Compensation Committee also administers and implements all of our stock option and other stock-based and equity-based benefit plans (including performance-based plans), recommends changes or additions to those plans, and reports to the Board on compensation matters.
No compensation consultant or advisor has been retained since the beginning of the Company’s most recently completed financial year to assist in determining compensation for any of the directors and officers.
Other Board Committees
The Board has not established any committees other than the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.
Assessments
As part of its charter, the Nominating and Corporate Governance Committee is required to survey every year all directors on the effectiveness and performance of the Board and the Board’s committees, as well as individual directors. This is done primarily by distributing questionnaires to each director and will often include individual interviews with the Chair of the Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee will report to the Board annually on the evaluation of the performance of the Board, each of its committees and that of individual directors, based on the results of the directors’ annual questionnaire.
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PARTICULARS OF MATTERS TO BE ACTED UPON
A. Approval of Performance Share Unit Plan
The Board is seeking shareholder ratification of a performance share unit plan (the “PSU Plan”), the particulars of which are described below. The PSU Plan was approved effective as of January 23, 2015. The PSU Plan provides that for the grant of performance share units (“PSUs”) to employees and officers of the Company (a “PSU Eligible Person”). At the time of the adoption of the PSU Plan, the Board granted an aggregate of 950,000 units representing approximately 1.2% of the outstanding shares in PSUs to employees and officers of the Company. The PSUs will be settled through cash payment, unless the Company has obtained the approval of the Shareholders of the Company and any stock exchange upon which the Common Shares of the Company are listed to settle the PSUs in Common Shares. The PSU Plan will be available for inspection and placed before the Shareholders for approval at the Meeting. The PSU Plan will also be posted on the Company’s website atwww.meruslabs.com.
The purpose of the PSU Plan is to is to allow for certain discretionary bonuses and similar awards as an incentive and reward for selected eligible persons related to the achievement of long-term financial and strategic objectives of the Company and the resulting increases in shareholder value. This Plan is intended to promote a greater alignment of interests between the Shareholders of the Company and the selected eligible persons by providing an opportunity to participate in increases in the value of the Company. The PSU Plan is administered by the Board of Directors. The Board has the authority to delegate all of its powers and authority under the PSU Plan to the Compensation Committee or to another committee of the Board of Directors.
PSUs are akin to DSUs and “phantom shares” that track the value of the underlying Common Shares but do not entitle the recipient to the actual underlying Common Shares until such PSUs vest. The PSU Plan permits the Board to grant awards of PSUs to PSU Eligible Persons (a “PSU Grantee”). Upon vesting, the PSUs will be, subject to the approval of the Shareholders and any stock exchange upon which the Common Shares of the Company are listed, converted on a one-for-one basis for freely tradable, non-restricted Common Shares; otherwise, PSUs will be settled through a cash payment equal to the Fair Market Value of the PSUs as of the trigger date of the PSUs. The trigger date will be set by the Board at the time of the grant of the PSUs and, if not set by the Board at such time, the trigger date will be September 30 of the third calendar year following the date of grant. The Board of Directors has the discretion to stipulate the length of time for vesting and to determine various performance objectives based on certain business criteria as a pre-condition to a PSU vesting. It is the Board’s intent that all PSUs will only vest upon achievement of performance objectives designed to advance the Company’s business interests and increase the value of the Company. The performance objectives to be met are established by the Board at the time of grant of the PSU. PSUs shall expire if they have not vested prior to an expiry date to be set by the Board, which shall be no later than December 31 of the third calendar year after the year in which the PSUs have been granted, and will be terminated to the extent the performance objectives or other vesting criteria have not been met. PSUs may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of (other than to the PSU Grantee’s beneficiary or estate, as the case may be, upon the death of the PSU Grantee).
PSUs will remain outstanding and vest in accordance with their terms notwithstanding the subsequent termination of employment of a PSU Grantee, unless the PSU Grantee is terminated by the Company with cause, in which case all PSU Awards of the PSU Grantee, whether vested or unvested will be forfeited and cancelled without payment. In the event of a change of control of the Company and the subsequent termination of the PSU Grantee, or a decrease or diminishment of the PSU Grantee’s duties, the PSUs will immediately vest and PSU Award will be paid out. Upon resignation of a participant, PSUs for which performance and other vesting criteria have been met will remain outstanding, and all other PSUs will be forfeited for no consideration.
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The Board of Directors may, at any time and from time to time, amend, suspend or terminate the PSU Plan as to any Common Shares of which PSU Awards have not been made. No amendments may be made by the Board to the PSU Plan to effect any of the following without shareholder approval: (i) an increase in the maximum number of securities reserved for issuance under the PSU Plan, or (ii) any amendment to remove or to exceed the insider participation limit.
The maximum number of Common Shares available for issuance upon the vesting of PSUs, in combination with all security-based compensation arrangements of the Company (including the Company’s Share Option Plan), will not exceed 10% of the issued and outstanding Common Shares. The maximum number of Common Shares issuable to insiders of the Company under all security-based compensation arrangements, including the PSU Plan and Stock Option Plan at any time cannot exceed 10% of the issued and outstanding Common Shares and the number of securities to be issued to Insiders of the Company pursuant to such arrangements within any one-year period, cannot exceed 10% of the issued and outstanding Common Shares. Any shares subject to a PSU which is cancelled or terminated in accordance with the terms of the PSU Plan without being paid out will be again be available for issuance under PSUs granted under the Plan.
Based on the foregoing, Shareholders are being requested to consider and, if thought advisable, to pass the following ordinary resolution approving the PSU Plan, with or without variation:
“RESOLVED that:
1. | The performance share unit Plan (the “PSU Plan”) providing for the issuance of common shares of the Company pursuant to the exercise of PSU Awards, substantially in the form presented to the shareholders of the Company, is hereby approved, subject to such revisions as may be required by any stock exchange upon which the Company is listed from time to time, and any director or officer of the Company is hereby authorized and directed to settle the terms thereof and to execute and deliver for and on behalf of and in the name of the Company the PSU Plan and any other documents in relation thereto as may be approved by such director or officer (the “PSU Plan Documents”), and the PSU Plan Documents so executed shall be conclusively deemed to be the PSU Plan Documents authorized and approved by this resolution and the Company is authorized to perform its obligations under the PSU Plan and any associated PSU Plan Documents; |
2. | The issuance of common shares of the Company in satisfaction of the 950,000 performance share units granted by the Company at the time of the adoption of the PSU Plan is hereby approved; |
3. | The Board be authorized to grant PSU Awards to eligible persons under the PSU Plan, provided that at no time shall the aggregate number of shares subject to PSUs granted pursuant to the PSU Plan and share options granted under the Company’s share option plan in effect from time to time exceed 10% of the number of common shares outstanding at the time of such PSU Award; |
4. | The issuance of unallocated shares under the PSU Plan be hereby approved until March 26, 2018 or such earlier date as may be required by the policies of the TSX; |
5. | Any officer or director of the Company is hereby authorized to take all such steps and execute all such documents and to do all such other acts and things, as such person may in his or her sole discretion consider necessary or desirable in connection with or to carry out the provisions of the foregoing resolution; and |
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6. | The directors be authorized in their sole discretion not to proceed with the PSU Plan, or to terminate the PSU Plan, without further approval from the shareholders.” |
The PSU Plan must be approved by at least a majority of the votes cast at the Meeting by Shareholders who vote in respect of the approval of the PSU Plan (present in person or represented by proxy). If the Shareholders do not approve the PSU Plan, the PSU Plan will remain in place and PSU Awards will be settled by cash payments. The settlement of PSUs through the issue of Common Shares will only be implemented once the Company has received both Shareholder and TSX and NASDAQ approval of the PSU Plan.
The Board unanimously recommends that the Shareholders approve the PSU Plan by voting FOR this resolution at the Meeting.
Proxies received in favour of management will be voted in favour of the PSU Plan unless the Shareholder has specified in the Proxy that his or her Common Shares are to be voted against such resolution.
The Board recommends that shareholders vote in favour of adoption of the Plan.
A copy of the Plan is attached as Schedule A to this Information Circular.
PROXIES RECEIVED IN FAVOUR OF MANAGEMENT WILL BE VOTED IN FAVOUR OF THE PERFORMANCE SHARE UNIT PLAN, UNLESS THE SHAREHOLDER HAS SPECIFIED IN THE PROXY THAT HIS OR HER COMMON SHARES ARE TO BE VOTED AGAINST SUCH RESOLUTION.
ADDITIONAL INFORMATION
Additional information relating to the Company is available on SEDAR at www.sedar.com.
The Company’s Shareholders may contact the Company at 100 Wellington St. West, Suite 2110 P.O. Box 151, Toronto, Ontario M5K 1H1 to request copies of the Company’s Financial Statements and the Management’s Discussion & Analysis (MD&A). These documents are also available on the Company’s website.
Financial information is provided in the Company’s Financial Statements and MD&A for its most recently completed financial year, both of which are filed on SEDAR and can be viewed at www.sedar.com.
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DIRECTORS’ APPROVAL
The contents of this Information Circular and its distribution to the Shareholders have been approved by the Board of Directors of the Company.
DATED at Toronto, Ontario, this 23rd day of February, 2015.
By Order of the Board of Directors of
Merus Labs International Inc.
Per: | “Barry Fishman” | |
Barry Fishman | ||
Chief Executive Officer | ||
and Director |
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Schedule A
MERUS LABS INTERNATIONAL INC.
PERFORMANCE SHARE UNIT PLAN
MERUS LABS INTERNATIONAL INC.
2015 PERFORMANCE SHARE UNIT PLAN
Part 1
General Provisions
Establishment and Purpose
1.1 The Company hereby establishes a performance share unit plan known as the “2015 Performance Share Unit Plan”.
1.2 The purpose of this Plan is to allow for certain discretionary bonuses and similar awards as an incentive and reward for selected Eligible Persons related to the achievement of long-term financial and strategic objectives of the Company and the resulting increases in shareholder value. This Plan is intended to promote a greater alignment of interests between the shareholders of the Company and the selected Eligible Persons by providing an opportunity to participate in increases in the value of the Company.
Definitions
1.3 In this Plan:
(a) Applicable Withholding Taxhas the meaning set forth in §3.9;
(b) Award means an agreement evidencing the grant of a Performance Share Unit;
(c) Award Payout means the applicable Share issuance or cash payment in respect of a vested Performance Share Unit pursuant and subject to the terms and conditions of this Plan and the applicable Award;
(d) Board means the Board of Directors of the Company;
(e) Change of Control in respect of any Recipient has the meaning ascribed to such term (in a relevant context) in the Recipient’s then existing employment agreement with the Company or, if no meaning is so ascribed, means the acquisition by any person or by any person and its joint actors (as such term is defined in the Securities Act), whether directly or indirectly, of voting securities (as such term is defined in Securities Act) of the Company which, when added to all of the voting securities of the Company at the time held by such person and its joint actors, totals for the first time not less than 30% of the outstanding voting securities of the Company;
(f) Committee means the Compensation Committee of the Board or other committee of the Board, consisting of not less than three directors, to whom the authority of the Board is delegated in accordance with §1.5 ;
(g) Company means Merus Labs International Inc., and includes any successor company thereto;
(h) Eligible Personmeans any person who is an Employee or Officer;
(i) Employeemeans an employee of the Company or of a Related Entity;
(j) Expiry Datemeans December 31 of the third calendar year after the Grant Date, or such earlier date as may be established by the Board in respect of an Award at the time of grant of the Award;
(k) Fair Market Valuemeans, as at a particular date, for the purpose of calculating the applicable Vesting Date Value and Award Payout,
(i) if the Shares are listed on the TSX, the volume weighted average price per Share traded on the TSX over the last five trading days preceding that date,
(ii) if the Shares are not listed on the TSX, the value established by the Board based on the volume weighted average price per Share traded on any other public exchange on which the Shares are listed over the same period, or
(iii) if the Shares are not listed on any public exchange, the value per Share established by the Board based on its determination of the fair value of a Share;
(l) Grant Date means the date of grant of any Performance Share Unit;
(m) IFRS means the International Financial Reporting Standards as adopted by the Accounting Standards Board of Canada;
(n) Insiderhas the meaning ascribed to such term in the Toronto Stock Exchange Company Manual;
(o) Officermeans an individual who is an officer of the Company or of a Related Entity as an appointee of the Board or the board of directors of the Related Entity, as the case may be;
(p) Performance Share Unitmeans a right granted under this Plan to receive the Award Payout on the terms contained in this Plan as more particularly described in §3.1;
(q) Plan means this 2015 Performance Share Unit Plan, as amended from time to time;
(r) Recipient means an Eligible Person who may be granted Performance Share Units from time to time under this Plan;
(s) Related Entity means a person that is controlled by the Company. For the purposes of this Plan, a person (first person) is considered to control another person (second person) if the first person, directly or indirectly, has the power to direct the management and policies of the second person by virtue of
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(i) ownership of or direction over voting securities in the second person,
(ii) a written agreement or indenture,
(iii) being the general partner or controlling the general partner of the second person, or
(iv) being a trustee of the second person;
(t) Required Approvalshas the meaning contained in §1.7.
(u) Retirement means, with respect to a Recipient, the early or normal retirement of the Recipient within the meaning of the pension plan of the Company for salaried employees, whether or not such Recipient is a member of that pension plan, or, if the Company does not have such a plan, the date on which the Recipient reaches age 65;
(v) Securities Act means theSecurities Act (Ontario), as amended from time to time;
(w) Share means a Common share in the capital of the Company as from time to time constituted;
(x) Terminationmeans, with respect to a Recipient, that the Recipient has ceased to be an Eligible Person, other than as a result of Retirement, and has ceased to fulfil any other role as employee or officer of the Company or any Related Entity, including as a result of termination of employment, resignation from employment, removal as an officer, death or Total Disability;
(y) Total Disability means, with respect to a Recipient, that, solely because of disease or injury, within the meaning of the long-term disability plan of the Company, the Recipient is deemed by a qualified physician selected by the Company to be unable to work at any occupation which the Recipient is reasonably qualified to perform;
(z) Trigger Date means, with respect to a Performance Share Unit, the date set by the Board at the time of grant, and if no date is set by the Board, then September 30 of the third calendar year following the Grant Date of the Performance Share Unit, as such may be amended in accordance with §2.6;
(aa) TSX means The Toronto Stock Exchange; and
(bb) Vesting Date Value means the notional value, as at a particular date, of the Fair Market Value of one Share.
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Administration
1.4 The Board will, in its sole and absolute discretion, but taking into account relevant corporate, securities and tax laws,
(a) interpret and administer this Plan,
(b) establish, amend and rescind any rules and regulations relating to this Plan, and
(c) make any other determinations that the Board deems necessary or appropriate for the administration of this Plan.
The Board may correct any defect or any omission or reconcile any inconsistency in this Plan in the manner and to the extent the Board deems, in its sole and absolute discretion, necessary or appropriate. Any decision of the Board in the interpretation and administration of this Plan will be final, conclusive and binding on all parties concerned. All expenses of administration of this Plan will be borne by the Company.
Delegation to Committee
1.5 All of the powers exercisable hereunder by the Board may, to the extent permitted by law and as determined by a resolution of the Board, be delegated to a Committee including, without limiting the generality of the foregoing, those referred to under §1.4).
Incorporation of Terms of Plan
1.6 Subject to specific variations approved by the Board all terms and conditions set out herein will be incorporated into and form part of each Performance Share Unit granted under this Plan.
Effective Date
1.7 This Plan will be effective on [effective date]. The Board may, in its discretion, at any time, and from time to time, issue Performance Share Units to Eligible Persons as it determines appropriate under this Plan. However, any such issued Performance Share Units may not be paid out in Shares in any event until receipt of the necessary approvals from shareholders of the Company, the TSX or TSXV, and any other regulatory bodies (the “Required Approvals”).
Maximum Number of Shares
1.8 The aggregate number of Shares available for issuance from treasury under this Plan, subject to adjustment pursuant to §2.9, shall not shall exceed such number of Shares as, when combined with all other Shares subject to grants made under the Company’s other share compensation arrangements (including the Company’s 2011 incentive stock option plan, as amended from time to time), is equal to 10% of the outstanding shares of the Company. Any Shares subject to a Performance Share Unit which has been granted under the Plan and which is cancelled or terminated in accordance with the terms of the Plan without being paid out as provided for in Part 3 shall again be available under the Plan.
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Part 2
Awards under this plan
Recipients
2.1 Only Eligible Persons are eligible to participate in this Plan and receive one or more Performance Share Units. Performance Share Units that may be granted hereunder to a particular Eligible Person in a calendar year will (subject to any applicable terms and conditions) represent a right to a bonus or similar award to be received for services rendered by such Eligible Person to the Company or a Related Entity, as the case may be, in the Company’s or the Related Entity’s fiscal year ending in, or coincident with, such calendar year, as determined by the Board in its discretion.
Grant
2.2 The Board may, in its discretion, at any time, and from time to time, grant Performance Share Units to Eligible Persons as it determines is appropriate, subject to the limitations set out in this Plan. In making such grants the Board may, in its sole discretion but subject to §2.4(d) , in addition to Performance Conditions set out below, impose such conditions on the vesting of the Awards as it sees fit, including imposing a vesting period on grants of Performance Share Units.
Performance Conditions
2.3 At the time a grant of a Performance Share Unit is made, the Board may, in its sole discretion, establish such performance conditions for the vesting of Performance Share Units as may be specified by the Committee in the Award (the “Performance Conditions”). The Board may use such business criteria and other measures of performance as it may deem appropriate in establishing any Performance Conditions, and may exercise its discretion to reduce the amounts payable under any Award subject to Performance Conditions. The Board may determine that an Award shall vest in whole or in part upon achievement of any one performance condition or that two or more Performance Conditions must be achieved prior to the vesting of an Award. Performance Conditions may differ for Awards granted to any one Grantee or to different Grantees.
Vesting
2.4 Except as provided in this Plan, Performance Share Units issued under this Plan will vest on the later of:
(a) the Trigger Date; and
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(b) the date upon which the relevant Performance Condition or other vesting condition set out in the Award has been satisfied,
provided that
(c) Performance Share Units shall only vest on the Trigger Date to the extent that the Performance Conditions or other vesting conditions set out in an Award have been satisfied on or before the Trigger Date; and
(d) no Performance Share Unit will remain outstanding for any period which exceeds the Expiry Date of such Performance Share Unit.
Forfeiture and Cancellation Upon Expiry Date
2.5 Performance Share Units which do not vest on or before the Expiry Date of such Performance Share Unit will be automatically cancelled, without further act or formality and without compensation.
Amendment of Trigger Date
2.6 The Board of Directors may, at any time after a grant of a Performance Share Unit, accelerate the Trigger Date of such Performance Share Unit without shareholder approval.
Account
2.7 Performance Share Units issued pursuant to this Plan (including fractional Performance Share Units, computed to three digits) will be credited to a notional account maintained for each Recipient by the Company for the purposes of facilitating the determination of amounts that may become payable hereunder. A written confirmation of the balance in each Recipient’s account will be sent by the Company to the Recipient upon request of the Recipient.
Dividend Equivalents
2.8 On any date on which a cash dividend is paid on Shares, a Recipient’s account will be credited with the number and type of Performance Share Units (including fractional Performance Share Units, computed to three digits) calculated by
(a) multiplying the amount of the dividend per Share by the aggregate number of Performance Share Units that were credited to the Eligible Person’s account as of the record date for payment of the dividend, and
(b) dividing the amount obtained in §(a) by the Fair Market Value on the date on which the dividend is paid.
Adjustments and Reorganizations
2.9 In the event of any dividend paid in shares, share subdivision, combination or exchange of shares, merger, consolidation, spin-off or other distribution of Company assets to shareholders, or any other change in the capital of the Company affecting Shares, the Board, in its sole and absolute discretion, will make, with respect to the number of Performance Share Units outstanding under this Plan, any proportionate adjustments as it considers appropriate to reflect that change.
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Notice and Acknowledgement
2.10 No certificates will be issued with respect to the Performance Share Units issued under this Plan. Each Eligible Person will, prior to being granted any Performance Share Units, deliver to the Company a signed acknowledgement substantially in the form of Schedule “A” to this Plan.
Part 3
Payments Under this Plan
Payment of Performance Share Units
3.1 Subject to the terms of this Plan and, in particular, §3.9 of this Plan, the Company will pay out vested Performance Share Units issued under this Plan and credited to the account of a Recipient by paying or issuing (net of any Applicable Withholding Tax) to such Recipient, on or subsequent to the Trigger Date but no later than the Expiry Date of such vested Performance Share Unit, an Award Payout of either:
(a) subject to receipt of the Required Approvals, one Share for such whole vested Performance Share Unit. Fractional Shares shall not be issued and where a Recipient would be entitled to receive a fractional Share in respect of any fractional vested Performance Share Unit, the Company shall pay to such Recipient, in lieu of such factional Share, cash equal to the Vesting Date Value as at the Trigger Date of such fractional Share. Each Share issued by the Company pursuant to this Plan shall be issued as fully paid and non-assessable, or
(b) if the Company has not received the Required Approvals, a cash amount equal to the Vesting Date Value as at the Trigger Date of such vested Performance Share Unit.
Limitation on Issuance of Shares to Insiders
3.2 Notwithstanding anything in this Plan, the Company shall not issue Shares under this Plan to any Eligible Person who is an Insider of the Company where such issuance would result in:
(a) the total number of Shares issuable at any time under this Plan to Insiders, or when combined with all other Shares issuable to Insiders under any other equity compensation arrangements then in place, exceeding 10% of the total number of issued and outstanding Shares of the Company on a non-diluted basis; and
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(b) the total number of Shares that may be issued to Insiders during any one year period under this Plan, or when combined with all other Shares issued to Insiders under any other equity compensation arrangements then in place, exceeding 10% of the total number of issued and outstanding Shares of the Company on a non diluted basis.
Where the Company is precluded by this §3.2 from issuing Shares to an Insider of the Company, the Company will pay to the relevant Insider a cash Award Payout in an amount equal to the Vesting Date Value as at the Trigger Date of the Performance Share Unit.
Consultants and Advisors
3.3 The Board may engage such consultants and advisors as it considers appropriate, including compensation or human resources consultants or advisors, to provide advice and assistance in determining the amounts to be paid under this Plan and other amounts and values to be determined hereunder or in respect of this Plan including, without limitation, those related to a particular Fair Market Value.
Cancellation on Termination for Cause
3.4 Subject to §3.7 and §3.8 of this Plan, unless the Board at any time otherwise determines, all unvested Performance Share Units held by any Recipient and all rights in respect thereof will be automatically cancelled, without further act or formality and without compensation, immediately in the event of a Termination arising from:
(a) the termination of employment or removal from service by the Company or a Related Entity for cause; or
(b) the resignation or voluntary cessation of employment or service by the Recipient.
Retirement, Total Disability, Death and Termination Without Cause
3.5 If a Recipient ceases to be an Eligible Person for any of the following reasons, unvested Performance Share Units will not be cancelled but will remain outstanding and vest in accordance with the terms of this Plan as if such person was an Eligible Person:
(a) Retirement of the Recipient;
(b) death or Total Disability of a Recipient; and
(c) the Termination of employment or removal from service by the Company or a Related Entity without cause.
Cancellation on Resignation
3.6 Subject to §3.7 and §3.8 of this Plan, unless the Board at any time otherwise determines, all Performance Share Units held by a Recipient for which the Performance Conditions or other vesting conditions set out in the Award have not been met as of the date of Termination and all rights in respect thereof will be automatically cancelled, without further act or formality and without compensation, immediately in the event of a Termination arising from the resignation of employment by the Recipient, and all Performance Share Units for which the Performance Conditions or other vesting conditions set out in the Award have been met as at the date of Termination shall continue to vest in accordance with the terms of this Plan for the balance of the year in which the termination has occurred as if such person were an Eligible Person.
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Termination on Change of Control
3.7 Notwithstanding anything else in this Plan, all unvested Performance Share Units held by any Recipient will automatically vest, without further act or formality, immediately in the event of a Termination arising from the resignation or cessation of employment or service by the Recipient based on a material reduction or change in position, duties or remuneration of the Recipient at any time within 12 months after the occurrence of a Change of Control (the “Early Trigger Date”).
3.8 Upon the occurrence of an Early Trigger Date of this Plan, the Company will pay out on such vested Performance Share Units issued under this Plan and credited to the account of such Recipient by paying (net of any Applicable Withholding Tax) to such Recipient on or subsequent to the Early Trigger Date, but no later than 10 days after the Early Trigger Date, an Award Payout in an amount equal to the Vesting Date Value as at the Early Trigger Date of such Performance Share Unit. Payments in respect of Performance Share Units credited to the accounts of persons who are deceased will be made to or for the benefit of the legal representative of such person in accordance with §3.1.
Tax Matters and Applicable Withholding Tax
3.9 The Company does not assume any responsibility for or in respect of the tax consequences of the receipt by Recipients of Performance Share Units, or payments received by Recipients pursuant to this Plan. The Company or relevant Related Entity, as applicable, is authorized to deduct such taxes and other amounts as it may be required or permitted by law to withhold (“Applicable Withholding Tax”), in such manner (including, without limitation, by selling Shares otherwise issuable to Recipients, on such terms as the Company determines) as it determines so as to ensure that it will be able to comply with the applicable provisions of any federal, provincial, state or local law relating to the withholding of tax or other required deductions, or the remittance of tax or other obligations. The Company or relevant Related Entity, as applicable, may require Recipients, as a condition of receiving amounts to be paid to them under this Plan, to deliver undertakings to, or indemnities in favour of, the Company or Related Entity, as applicable, respecting the payment by such Recipients of applicable income or other taxes.
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Part 4
miscellaneous
Compliance with Applicable Laws
4.1 The issuance by the Company of any Performance Share Units and its obligation to make any payments hereunder is subject to compliance with all applicable laws. As a condition of participating in this Plan, each Recipient agrees to comply with all such applicable laws and agrees to furnish to the Company all information and undertakings as may be required to permit compliance with such applicable laws. The Company will have no obligation under this Plan, or otherwise, to grant any Performance Share Unit or make any payment under this Plan in violation of any applicable laws.
Non-Transferability
4.2 Performance Share Units and all other rights, benefits or interests in this Plan are non-transferable and may not be pledged or assigned or encumbered in any way and are not subject to attachment or garnishment, except that if a Recipient dies the legal representatives of the Recipient will be entitled to receive the amount of any payment otherwise payable to the Recipient hereunder in accordance with the provisions hereof.
No Right to Service
4.3 Neither participation in this Plan nor any action under this Plan will be construed to give any Eligible Person or Recipient a right to be retained in the service or to continue in the employment of the Company or any Related Entity, or affect in any way the right of the Company or any Related Entity to terminate his or her employment at any time.
Successors and Assigns
4.4 This Plan will enure to the benefit of and be binding upon the respective legal representatives of the Eligible Person.
Plan Amendment
4.5 The Board may amend this Plan without shareholder approval as it deems necessary or appropriate, subject to the requirements of applicable laws, but no amendment will, without the consent of the Recipient or unless required by law, adversely affect the rights of a Recipient with respect to Performance Share Units to which the Recipient is then entitled under this Plan. However, no amendments may be made by the Board to this Plan to effect any of the following without shareholder approval: (i) an increase in the maximum number of securities reserved for issuance under this Plan, or (ii) any amendment to remove or to exceed the Insider participation limit.
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Plan Termination
4.6 The Board may terminate this Plan at any time, but no termination will, without the consent of the Recipient or unless required by law, adversely affect the rights of a Recipient with respect to Performance Share Units to which the Recipient is then entitled under this Plan. In no event will a termination of this Plan accelerate the vesting of Performance Share Units or the time at which a Recipient would otherwise be entitled to receive any payment in respect of Performance Share Units hereunder.
Governing Law
4.7 This Plan and all matters to which reference is made in this Plan will be governed by and construed in accordance with the laws of Ontario and the federal laws of Canada applicable therein.
Reorganization of the Company
4.8 The existence of this Plan or Performance Share Units will not affect in any way the right or power of the Company or its shareholders to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, or to create or issue any bonds, debentures, Shares or other securities of the Company or to amend or modify the rights and conditions attaching thereto or to effect the dissolution or liquidation of the Company, or any amalgamation, combination, merger or consolidation involving the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar nature or otherwise.
No Shareholder Rights
4.9 Performance Share Units are not considered to be Shares or securities of the Company, and a Recipient who is issued Performance Share Units will not, as such, be entitled to receive notice of or to attend any shareholders’ meeting of the Company, nor entitled to exercise voting rights or any other rights attaching to the ownership of Shares or other securities of the Company, and will not be considered the owner of Shares by virtue of such issuance of Performance Share Units.
No Other Benefit
4.10 No amount will be paid to, or in respect of, a Recipient under this Plan to compensate for a downward fluctuation in the Fair Market Value or price of a Share, nor will any other form of benefit be conferred upon, or in respect of, a Recipient for such purpose.
Unfunded Plan
4.11 For greater certainty, this Plan will be an unfunded plan, including for tax purposes and for purposes of theEmployee Retirement Income Security Act (United States). Any Recipient to which Performance Share Units are credited to his or her account or holding Performance Share Units or related accruals under this Plan will have the status of a general unsecured creditor of the Company with respect to any relevant rights that may arise thereunder.
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SCHEDULE “A”
MERUS LABS INTERNATIONAL INC.
PERFORMANCE SHARE UNIT PLAN
Merus Labs International Inc. (the “Company”) hereby confirms the grant to the undersigned Recipient of Performance Share Units (“Units”) described in the table below pursuant to the Company’s Performance Share Unit Plan (the “Plan”), a copy of which Plan has been provided to the undersigned Recipient.
No. of Units | Trigger Date | Expiry Date | ||
Vesting of the Units is subject to the following vesting conditions:
· | [include any specific/additional vesting period or Performance Conditions] |
DATED ____________________, 20____. | ||
MERUS LABS INTERNATIONAL INC. | ||
Per: | ||
Authorized Signatory |
The undersigned hereby accepts such grant, acknowledges being a Recipient under the Plan, agrees to be bound by the provisions thereof and agrees that the Plan will be effective as an agreement between the Company and the undersigned with respect to the Units granted or otherwise issued to it.
DATED ____________________, 20____. |
Witness (Signature) | ||
Name (please print) | ||
Recipient’s Signature | ||
Address | ||
City, Province | Name of Recipient (print) | |
Occupation |
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