EXHIBIT 99(a)
PHARMOS CORPORATION
CORPORATE GOVERNANCE GUIDELINES
The following corporate governance guidelines have been adopted by the
Board of Directors of Pharmos Corporation, upon the recommendation of the
Board's Governance and Nominating Committee, to promote the effective
functioning of the Board. These guidelines are intended to set forth general
guidance for the functioning of the Board and should not be viewed as a set of
legally binding obligations. The Board may, from time to time, modify these
guidelines or approve deviations from these guidelines as it deems appropriate.
1. Matters Relating to Board Composition
1.1. Mix of Independent and Inside Directors. A majority of the
directors should be "independent" within the meaning of the rules
of the Nasdaq Stock Market. The Board believes that it is useful
and appropriate to have members of senior management as directors.
1.2. Qualifications for Directors.
1.2.1. The members of the Board should collectively possess a
broad range of experience, skills, expertise, and knowledge
useful to the effective oversight of the Company's
business.
1.2.2. The general factors to be considered in evaluating a
prospective candidate to the Board should include:
o business or other relevant experience;
o expertise, skills and knowledge;
o integrity and reputation;
o the extent to which the candidate will enhance the
objective of having directors with diverse viewpoints,
backgrounds, expertise, skills and experience;
o willingness and ability to commit sufficient time to
Board responsibilities; and
o qualification to serve on specialized Board
committees--such as the Audit Committee or
Compensation Committee.
1.2.3. At least one director should qualify as an "audit committee
financial expert" within the meaning of SEC rules.
1.2.4. The Board has delegated to the Goveranance and Nominating
Committee certain responsibilities relating to the
evaluation, recruitment and screening of prospective
candidates to the Board. However, the Board retains final
authority for determining those individuals that will be
nominees for election to the Board.
1.2.5. It is expected that the members of the Governance and
Nominating Committee will consider input from other members
of the Board.
1.2.6. The Governance and Nominating Committee has sole authority
to (i) retain and terminate any search firm to be used to
identify director candidates and (ii) approve the search
firm's fees and other retention terms.
1.2.7. The Board has not established term limits or a mandatory
retirement age for directors.
1.3. Invitation to Join Board. The invitation to join the Board should
be extended by the Board via the Chairman or any other director
approved by the Board.
2. Compensation of Directors
2.1. Directors who are executive officers of the Company should not be
paid additional compensation for serving on the Board.
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2.2. The Board has authority to establish the amount and form of
director compensation.
2.3. The general factors to be considered in establishing director
compensation include:
o the Board's assessment of the level of compensation
required to recruit and retain qualified directors;
o compensation practices at other companies; and
o the estimated time that directors are expected to
devote to their duties.
3. General Responsibilities of the Board.
3.1. The business and affairs of the Company are managed by or under
the direction of the Board in accordance with Nevada law. In
performing their duties, directors are expected to exercise their
business judgment in the best interests of the Company.
3.2. The primary responsibilities of the Board are:
o overseeing the performance of management and providing
counseling and direction to management;
o reviewing and, where appropriate, approving the
Company's major financial objectives, strategic and
operating plans and actions;
o overseeing the processes for maintaining the integrity
of the Company's financial statements and compliance
with applicable legal requirements;
o selecting, regularly evaluating the performance of, and
approving the compensation of the Company's executive
officers (acting through the Compensation Committee
with respect to compensation);
o succession planning with respect to the position of CEO
and monitoring management's succession planning for
other senior executives; and
o approving the nominees for election to the Board.
3.3. The Board may delegate its responsibilities to one or more
committees of the Board to the fullest extent permitted by
applicable law.
3.4. In performing its functions, the Board shall be entitled to rely
on the advice, reports and opinions of counsel, accountants,
auditors and other expert advisors.
4. Operation of Board
4.1. Selection of Chairman. The Board should select a Chairman from
among its members. The CEO may serve as Chairman.
4.2. Meetings.
4.2.1. The Board should hold at least four regularly scheduled
meetings each year, of which at least two meetings should
be in person rather than by telephone conference call, and
such additional meeting as may be required to discharge its
responsibilities.
4.2.2. The agenda for each meeting should be established by the
Chairman and CEO. Any director may suggest the inclusion of
additional items on the agenda.
4.2.3. Each director is expected to make reasonable effort to
regularly attend meetings of the Board and meetings of each
committee on which the director serves.
4.2.4. If any materials relevant to an upcoming meeting is
circulated to directors, each director is expected to
review such materials prior to the meeting.
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4.3. Executive Sessions of the Board.
4.3.1. The non-management directors should, at least twice a year,
meet in executive session without the presence of
management. Non-management directors who do not qualify as
"independent" may participate in these meetings. However,
at least once a year, the independent directors should meet
in executive session without the presence of either
management or the non-independent directors.
4.3.2. The purpose of the executive session meetings is to
facilitate free and open discussion among the participants.
Accordingly, the participants may determine that the
minutes of these meetings not record the substance of the
discussions.
4.3.3. The Chairman of the Audit Committee (or such other
independent director as may be selected by the Board)
should preside over the executive session meetings of the
Board.
5. Committees of the Board.
5.1. The Board should establish and maintain such committees of the
Board as are required by the rules of the Nasdaq Stock Market and
SEC and any additional committees it deems appropriate. Each
committee shall have the responsibilities set forth in its Charter
and/or the authorizing resolution for such committee.
5.2. Each member of the Audit Committee, Compensation Committee and
Governance and Nominating Committee should meet the independence
and other applicable requirements of the rules of the Nasdaq Stock
Market. At lease one member of the Audit Committee should be an
"audit committee financial expert" within the meaning of SEC
rules.
6. Access to Management and Employees. Each director should be free to
contact or meet with the Company's management and other employees as
often as the director deems necessary or advisable. However, in order to
avoid disruption of the Company's operations, contact with non-management
employee should be coordinated through management.
7. Access to Advisors. Directors should have access to the Company's
advisors. To the extent that the Board deems it necessary or appropriate,
the Board may also retain independent advisors to assist the Board. The
Company will pay the fees and expenses of any advisors retained by the
Board.
8. Orientation and Continuing Education
8.1. The Chief Executive Officer or Chief Financial Officer should
provide an orientation session for each new director. This session
should generally be held within two months after a director is
first elected to the Board. This session should give new directors
the opportunity to gain familiarity with, among other things, the
Company's strategic plans, financial statements, significant
financial, accounting and risk management issues, principal
officers, and Code of Conduct.
8.2. Management should on a regular basis arrange for presentations to
be made to the Board on matters relevant to the Company and its
business.
9. Assessment of Board Performance. The Board should conduct a
self-evaluation at least annually to determine whether it and its
committees are functioning effectively. The Governance and Nominating
Committee should coordinate and oversee this process.
10. Assessment of Executive Performance.
10.1. The Board should evaluate the CEO's performance at least annually.
This evaluation should be conducted at an executive session of
non-management directors. The results of the evaluation should be
communicated to the CEO by the Chairman of the Compensation
Committee.
10.2. The CEO should report to the Board at least annually on the
performance of the other executive officers of the Company.
11. Succession Planning. The Board should review and approve a succession
plan at least annually. The plan should address, among other things, CEO
succession in the ordinary course of business and CEO succession in the
event of an unexpected departure by the CEO.
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12. Speaking on Behalf of the Company. The Board believes that management
should speak for the Company. Accordingly, non-management directors
should generally refer inquiries from the press and others to management.
If a situation does arise in which it seems necessary for a
non-management director to speak for the Company, the director should
consult with the CEO.
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