FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of May 2004
AETERNA LABORATORIES INC.
(Translation of registrant's name into English)
1405, boul. du Parc-Technologique
Quebec, Quebec
Canada, G1P 4P5
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F Form 40-F X
------ -----
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-________________
DOCUMENTS INDEX
DOCUMENTS DESCRIPTION
1. AEterna Laboratories Inc. - Management's Proxy Circular
Dated April 23, 2004
[AETERNA LABORATORIES LOGO]
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NOTICE OF ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
AND
MANAGEMENT PROXY CIRCULAR
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AETERNA LABORATORIES INC.
April 23, 2004
[AETERNA LABORATORIES LOGO]
NOTICE OF THE ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the annual and special meeting of
shareholders of AEterna Laboratories Inc. (the "Corporation") will be held at
The Ritz-Carlton Hotel, 1228 Sherbrooke Street West, Montreal, Quebec, on
Wednesday, May 26, 2004, at 10:30 a.m. (Montreal time) for the following
purposes:
1. to receive the audited consolidated financial statements of the
Corporation for the financial year ended December 31, 2003, and the
auditors' report thereon;
2. to elect directors;
3. to appoint auditors and authorize the directors to fix their
compensation;
4. to consider, and if deemed advisable, adopt a resolution approving the
making of modifications to the Articles of the Corporation in order to:
change the name of the Corporation from "AEterna Laboratories Inc." to
"AEterna Zentaris Inc."; create a new class of Common Shares; exchange
each of the Corporation's issued and outstanding Subordinate Voting
Shares for one (1) Common Share; and to remove and repeal the
Subordinate Voting Shares, the Multiple Voting Shares and the rights,
privileges, restrictions and conditions attaching thereto;
5. to consider, and if deemed advisable, adopt a resolution ratifying and
approving amendments to the Corporation's Stock Option Plan in order to
increase to 4,543,744 the number of shares that may be issued
thereunder;
6. to consider, and if deemed advisable, adopt a resolution to confirm the
adoption and ratify the Shareholder Rights Plan adopted by the Board of
Directors of the Corporation on March 29, 2004, the whole as described
in the Management Proxy Circular attached hereto; and
7. to transact such other business as may properly come before the
meeting.
Enclosed is a copy of the 2003 Annual Report of the Corporation
including the financial statements and the auditors' report thereon, together
with the Management Proxy Circular and a form of proxy.
By order of the Board of Directors,
/s/ Mario Paradis
--------------------------------
Mario Paradis, CA
Corporate Secretary
Quebec City, Quebec, April 23, 2004
SHAREHOLDERS UNABLE TO ATTEND THE MEETING ARE REQUESTED TO COMPLETE AND
SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE STAMPED ENVELOPE PROVIDED.
TO BE VALID, PROXIES MUST REACH THE OFFICE OF NATIONAL BANK TRUST INC., SHARE
OWNERSHIP MANAGEMENT, 1100 UNIVERSITY STREET, 9TH FLOOR, MONTREAL, QUEBEC, H3B
2G7, NO LATER THAN AT THE CLOSE OF BUSINESS ON THE LAST BUSINESS DAY PRECEDING
THE DATE OF THE MEETING OR ANY ADJOURNMENT THEREOF.
AETERNA LABORATORIES INC., 1405 BOULEVARD DU PARC-TECHNOLOGIQUE, QUEBEC
CITY, QUEBEC, G1P 4P5
MANAGEMENT PROXY CIRCULAR
1. SOLICITATION OF PROXIES
THIS MANAGEMENT PROXY CIRCULAR IS FURNISHED IN CONNECTION WITH THE
SOLICITATION, BY THE MANAGEMENT OF AETERNa LABORATORIES INC. (THE
"CORPORATION"), OF PROXIES TO BE USED AT THE ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS OF THE CORPORATION (THE "MEETING"), TO BE HELD ON WEDNESDAY, MAY
26, 2004, AT THE TIME AND PLACE AND FOR THE PURPOSES SET FORTH IN THE NOTICE OF
MEETING OR ANY ADJOURNMENT THEREOF.
Unless otherwise indicated, the information contained in this Circular
is given as of April 1, 2004. All dollar amounts in this Management Proxy
Circular refer to Canadian dollars, unless otherwise indicated.
The solicitation will be conducted primarily by mail; some proxies may
also be solicited directly in the case of directors, officers or employees of
the Corporation, but without further compensation. The Corporation may also
reimburse brokers and other persons holding the Corporation's subordinate voting
shares (the "Subordinate Voting Shares") on their behalf or on behalf of
nominees, for costs incurred in sending the proxy documents to principals and to
obtain their proxies. The Corporation will assume the costs of solicitation,
which are expected to be minimal.
2. APPOINTMENT OF PROXYHOLDERS
THE PERSONS NAMED AS PROXYHOLDERS IN THE ENCLOSED FORM OF PROXY ARE
DIRECTORS OR OFFICERS OF THE CORPORATION. A SHAREHOLDER MAY APPOINT A PERSON
OTHER THAN THE PERSONS INDICATED IN SUCH PROXY FORM TO ACT AS HIS OR HER
PROXYHOLDER. TO DO SO, THE SHAREHOLDER MUST WRITE THE NAME OF SUCH PERSON IN THE
APPROPRIATE SPACE ON THE FORM OF PROXY. In order to ensure they are counted,
duly completed proxies must be received at the office of National Bank Trust
Inc., Share Ownership Management, 1100 University Street, 9th Floor, Montreal,
Quebec, H3B 2G7, no later than at the close of business on the last business day
preceding the date of the Meeting or any adjournment thereof, or they may be
delivered to the Chairman at the Meeting or at any adjournment thereof. A person
acting as proxyholder need not be a shareholder of the Corporation.
3. REVOCATION OF PROXIES
A shareholder giving a proxy may revoke it at all times by a document
signed by him or her or by a proxyholder authorized in writing or, if the
shareholder is a corporation, by a document signed by an officer or a
proxyholder duly authorized, given to the Corporate Secretary of the Corporation
at 1405 boulevard du Parc-Technologique, Quebec City, Quebec, G1P 4P5, until the
last business day, inclusively, preceding the day of the Meeting or any
adjournment thereof at which the proxy is to be used, or to the Chairman of such
meeting on the day of the Meeting or any adjournment thereof.
4. NON-REGISTERED HOLDERS OF SHARES
THE INFORMATION SET FORTH IN THIS SECTION SHOULD BE REVIEWED CAREFULLY
BY THE NON-REGISTERED SHAREHOLDERS OF THE CORPORATION. SHAREHOLDERS WHO DO NOT
HOLD THEIR SHARES IN THEIR OWN NAME SHOULD NOTE THAT ONLY PROXIES DEPOSITED BY
SHAREHOLDERS WHO APPEAR ON THE RECORDS MAINTAINED BY THE CORPORATION'S REGISTRAR
AND TRANSFER AGENT AS REGISTERED HOLDERS OF SHARES WILL BE RECOGNIZED AND ACTED
UPON AT THE MEETING.
Non-registered shareholders may vote shares that are held by their
nominees in one of two manners. Applicable securities laws and regulations,
including National Instrument 54-101 COMMUNICATION WITH BENEFICIAL OWNERS OF
SECURITIES OF A REPORTING ISSUER, require nominees of non-registered
shareholders to seek their voting instructions in advance of the Meeting.
Non-registered shareholders will receive (or will have received) from their
nominees either a request for voting instructions or a proxy form for the number
of shares held by them. The nominees' voting instructions or proxy forms will
contain instructions relating to signature and return of the
1
document and these instructions should be carefully read and followed by
non-registered shareholders to ensure that their shares are accordingly voted at
the Meeting.
Non-registered shareholders who would like their shares to be voted for
them must therefore follow the voting instructions provided by their nominees.
Non-registered shareholders who wish to vote their shares in person at
the Meeting must insert their own name in the space provided on the request for
voting instructions or proxy form, as the case may be, in order to appoint
themselves as proxyholder and follow the signature and return instructions
provided by their nominees. Non-registered shareholders who appoint themselves
as proxyholders should present themselves at the Meeting to a representative of
National Bank Trust Inc. Non-registered shareholders should not otherwise
complete the form sent to them by their nominees as their votes will be taken
and counted at the Meeting.
ALL REFERENCES TO "SHAREHOLDERS" IN THIS MANAGEMENT PROXY CIRCULAR AND
THE ACCOMPANYING FORM OF PROXY AND NOTICE OF MEETING ARE TO REGISTERED
SHAREHOLDERS UNLESS SPECIFICALLY STATED OTHERWISE.
5. VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The shares conferring voting rights at the Meeting are the multiple
voting shares (the "Multiple Voting Shares") and the Subordinate Voting Shares.
Each Multiple Voting Share confers the right to ten votes and each Subordinate
Voting Share confers the right to one vote. As at April 16, 2004 (the "Record
Date"), there were no Multiple Voting Shares and 45,440,242 Subordinate Voting
Shares issued and outstanding.
Holders of Subordinate Voting Shares, entered on the list of
shareholders compiled at the close of business (Montreal time) the Record Date,
will have the right to vote at the Meeting or at any adjournment thereof if they
are present or represented by a proxyholder.
To the knowledge of the directors and officers of the Corporation, the
only persons who are beneficial owners of, directly or indirectly, or exercise
power or control over shares conferring more than 10% of the voting rights
attached to each class of participating and issued and outstanding shares of the
Corporation are indicated in the table below:
NAME OF SHAREHOLDER SUBORDINATE VOTING SHARES MULTIPLE VOTING SHARES TOTAL PERCENTAGE OF
VOTING RIGHTS
---------------------------- ---------------------------- ---------------------------- -------------------------
(#) (%) (#) (%) (%)
Eric Dupont, PhD 4,758,413 10.47 -- -- 10.47
SGF Sante inc.* 5,333,334 11.73 -- -- 11.73
Solidarity Fund (QFL)* 4,996,525 11.00 -- -- 11.00
* 4,000,000 of these 5,333,334 Subordinate Voting Shares (in the case of
SGF Sante inc. ("SGF Sante"), a subsidiary of Societe Generale de
Financement du Quebec) and 3,333,334 of these 4,996,525 Subordinate
Voting Shares (in the case of the Solidarity Fund (QFL) ("Fund QFL"))
were issued on April 9, 2002, in connection with a total overall
investment of $55 million from these investors in the Corporation in
the form of a private placement in Subordinate Voting Shares with
attached warrants. In respect of this investment, SGF Sante and Fund
QFL have each reached an agreement with Dr. Eric Dupont whereby Dr.
Dupont specifically agreed that, so long as he holds the majority of
votes attached to all voting shares of the Corporation, he will not
vote in favour of specific significant events that concern the
Corporation and its subsidiaries without having received the prior
approval of SGF Sante and/or Fund QFL. This agreement is no longer in
force since Dr. Dupont converted all of his Multiple Voting Shares into
Subordinate Voting Shares in May 2003.
2
6. PRESENTATION OF THE FINANCIAL STATEMENTS
The Annual Report including the audited consolidated financial
statements of the Corporation for the financial year ended December 31, 2003 and
the Auditors' report thereon will be submitted to the Meeting.
7. EXERCISE OF VOTING RIGHTS BY PROXIES
The persons named as proxies will vote or withhold from voting the
shares in respect of which they are appointed or vote for or against any
particular question, in accordance with the direction of the shareholders
appointing them. IN THE ABSENCE OF SUCH DIRECTION, SUCH SHARES WILL BE VOTED IN
FAVOUR OF ALL MATTERS IDENTIFIED IN THE ATTACHED NOTICE OF MEETING. The enclosed
form of proxy confers discretionary authority upon the persons named therein
with respect to amendments or variations to matters identified in the Notice of
Meeting and to other matters which may properly come before the Meeting. As of
the date of this Management Proxy Circular, the Management of the Corporation
knows of no such amendment, variation or other matter expected to come before
the Meeting other than the matters referred to in the Notice of Meeting.
8. ELECTION OF DIRECTORS
The Corporation's Articles provide that the Board of Directors of the
Corporation shall be composed of a minimum of five and a maximum of fifteen
directors. Directors are elected annually by the shareholders of the
Corporation, but the directors may from time to time appoint one or more
directors, provided that the total number of directors so appointed does not
exceed one third of the number of directors elected at the last annual meeting
of shareholders. Management of the Corporation proposes the nine persons named
in the table below as candidates for election as directors. Each elected
director will remain in office until adjournment of the next annual meeting of
the shareholders or until his or her successor is elected or appointed, unless
his or her post is vacated earlier. Each of the candidates proposed by
Management of the Corporation is currently a director of the Corporation,
although one of such directors, Mr. Henri A. Roy, was appointed director by the
Board of Directors on November 19, 2003 in order to fill a vacancy on the Board.
Under the terms of a shareholders' agreement signed on November 12,
1999 between Fund QFL and the Corporation, Fund QFL was granted the right to
designate one member of the Board of Directors of the Corporation, provided that
Fund QFL holds at the relevant time at least 499,999 Subordinate Voting Shares.
Likewise, under the terms of contractual agreements signed by the Corporation,
SGF Sante and Dr. Eric Dupont, concerning, among other matters, the election of
directors, provided SGF Sante holds at least 5% in number of the Corporation's
issued and outstanding voting shares, (a) the Corporation will propose for
election as a director of the Corporation, at each annual meeting of the
shareholders, (i) one candidate designated by SGF Sante, provided that the
candidate receives a favourable recommendation from the Corporate Governance
Committee (this candidate will also be appointed to the Audit Committee and the
Corporate Governance Committee of the Corporation), and (ii) one candidate
jointly designated by SGF Sante and Dr. Eric Dupont, (b) the Corporation will
solicit proxies from its shareholders for the election of such candidates as
directors of the Corporation, and (c) Dr. Eric Dupont will exercise the voting
rights conveyed by his shares, concerning any resolution bearing on the election
of directors to be submitted to the beneficial holders of any participating
shares of the Corporation, in favour of the election of the candidates so
designated. In this respect, and in accordance with the agreement mentioned
above, Mr Henri A. Roy is the candidate currently designated by SGF Sante and
the candidate to be jointly designated by SGF Sante and Dr. Dupont remains to be
selected.
UNLESS INSTRUCTIONS ARE GIVEN TO ABSTAIN FROM VOTING WITH REGARD TO THE
ELECTION OF DIRECTORS, THE PERSONS WHOSE NAMES APPEAR ON THE ENCLOSED FORM OF
PROXY WILL VOTE IN FAVOUR OF THE ELECTION OF THE NINE NOMINEES WHOSE NAMES ARE
SET OUT IN THE TABLE BELOW. MANAGEMENT OF THE CORPORATION DOES NOT FORESEE THAT
ANY OF THE FOLLOWING NOMINEES LISTED BELOW WILL BE UNABLE OR, FOR ANY REASON,
UNWILLING TO PERFORM HIS OR HER DUTIES AS DIRECTOR. IN THE EVENT THAT THE
FOREGOING OCCURS FOR ANY REASON, PRIOR TO THE ELECTION, THE PERSONS INDICATED ON
THE ENCLOSED FORM OF PROXY RESERVE THE RIGHT TO VOTE FOR ANOTHER CANDIDATE OF
THEIR CHOICE UNLESS
3
OTHERWISE INSTRUCTED BY THE SHAREHOLDER IN THE FORM OF PROXY TO ABSTAIN FROM
VOTING ON THE ELECTION OF DIRECTORS.
NAME AND PLACE OF PRINCIPAL OCCUPATION DIRECTOR NUMBER OF SUBORDINATE
RESIDENCE SINCE VOTING SHARES HELD
--------------------------------------------------------------------------------------------------------------------
Marcel Aubut Managing Partner 1996 40,000
Quebec City, Quebec Heenan Blaikie Aubut
(law firm)
Francis Bellido, PhD(1) President and Chief Executive Officer 2002 --
Beaconsfield, Quebec Biomundis Biotechnology Investment Fund
Stormy Byorum(1) Chief Executive Officer 2001 12,000
New York, NY Cori Investment Advisors, LLC
(strategic and financial advisory services
company)
Eric Dupont, PhD(2) Executive Chairman of the Board 1991 4,758,413
Sainte-Petronille, AEterna Laboratories Inc.
Ile d'Orleans, Quebec
Prof. Dr. Jurgen Engel Chairman and Managing Director 2003 --
Frankfurt, Germany Zentaris GmbH
(a subsidiary of the Corporation)
Executive Vice President, Global R&D and
Chief Operating Officer
AEterna Laboratories Inc.
Gilles Gagnon President and Chief Executive Officer 2002 3,950
Sherbrooke, Quebec AEterna Laboratories Inc.
Pierre Laurin, PhD(2) Executive in Residence 1998 11,200
Verdun, Quebec HEC Montreal
(management faculty of university)
Pierre MacDonald(1)(2) President and Chief Executive Officer 2000 10,000
Verdun, Quebec MacD Consult Inc.
(a consulting company)
Henri A. Roy(2) Chairman, President and General Manager 2003(3) --
Montreal, Quebec Societe generale de financement du Quebec (SGF)
(investment entity of the Goverment of Quebec)
--------------------------------------------------------------------------------------------------------------------
(1) Member of the Audit Committee
(2) Member of the Corporate Governance Committee
(3) Mr. Roy was appointed director in order to fill a vacancy on the
Corporation's Board of Directors on November 19, 2003.
The Corporation does not have any direct information concerning shares
beneficially owned by the above mentioned persons or concerning shares over
which such persons exercise control or direction. This information was provided
by the directors and nominees individually.
Mr. Henri A. Roy is a seasoned executive with considerable experience
in directing and taking charge of challenging corporate situations. He also has
extensive investment expertise of private and public capital markets. Mr. Roy
has held executive positions in several key industrial sectors, both in North
America and overseas. He was Senior Vice President for Cambior Inc. from 1986
until 2000. From 2001 until 2003, he acted as Chairman and Chief Executive
Officer of Dolphin Telecommunications Ltd., Telesystem Europe, and HDR Capital
Inc. Since
4
2003, Mr. Roy has served as Chairman, President and General Manager of Societe
generale de financement du Quebec (SGF).
Mr. Roy holds a Master's of Business Administration (MBA) degree from
the Harvard Business School and a Bachelor of Mechanical Engineering degree from
McGill University.
9. EXECUTIVE COMPENSATION
A. COMPENSATION OF DIRECTORS
Further to a revision of its directors' remuneration policy in 2003,
each outside director receives an annual base remuneration of $15,000. The
Corporation has also granted to each of its outside directors, during the last
quarter of 2003, options to purchase 30,000 Subordinate Voting Shares as an
annual retainer for the years 2004, 2005 and 2006. The outside directors also
receive an attendance fee of $1,500 for each Board meeting attended and a daily
compensation of $1,500 for special work designated by the Board of Directors,
if any. Attendance fees are reduced to $750 per meeting for a director
participating in a Board meeting by telephone, teleconference or any other
telecommunication device. The Chairs of the Audit Committee and the Corporate
Governance Committee receive additional annual retainers of $20,000 and $5,000,
respectively. In addition, an attendance fee of $1,000 is paid to each outside
director attending Committee meetings, such fee being reduced to $500 for
participation by telephone or by any other telecommunication device.
B. COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth detailed information on the compensation
of the Executive Chairman of the Board, the President and Chief Executive
Officer and the Corporation's three other most highly compensated executive
officers (collectively, the "Named Executive Officers"), for services rendered
in all capacities during the financial years ended December 31, 2003, 2002 and
2001.
The aggregate amount of cash compensation paid by the Corporation to
the Named Executive Officers in consideration for services rendered during the
financial year ended December 31, 2003 was $1,811,013.
5
SUMMARY COMPENSATION TABLE
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ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------------------------------------------
AWARDS PAYOUTS
---------------------------------------
SECURITIES
OTHER UNDER
ANNUAL OPTIONS/ SUBORDINATE ALL
NAME AND PRINCIPAL COMPEN- SARS VOTING SHARES LTIP OTHER
OCCUPATION YEAR SALARY BONUS SATION GRANTED OR UNITS PAYOUTS BENEFITS
($) ($) ($) (#) ($) ($) ($)
---------------------------------------------------------------------------------------------------------------------
Eric Dupont, PhD 2003 300,000 100,000 -- 75,000 -- -- --
Executive Chairman of 2002 300,000 100,000 -- 175,000 -- -- --
the Board 2001 300,000 100,000 -- 55,000 -- -- --
---------------------------------------------------------------------------------------------------------------------
Gilles Gagnon 2003 248,302 125,000 140,000 -- -- --
President and Chief 2002 191,300 100,000 22,917 60,000 -- -- --
Executive Officer 2001 173,958 100,000 -- 125,000 -- -- --
---------------------------------------------------------------------------------------------------------------------
Prof. Dr. Jurgen Engel 2003 332,346(1) 55,391(1) 19,118(1) 120,000 -- -- --
Executive Vice 2002 -- -- -- -- -- -- --
President, Global R&D 2001 -- -- -- -- -- -- --
and Chief Operating
Officer
---------------------------------------------------------------------------------------------------------------------
Dennis Turpin 2003 159,321 90,000 -- 60,000 -- -- --
Vice President and 2002 150,000 75,000 -- 140,000 -- -- --
Chief Financial 2001 150,000 50,000 -- 92,500 -- -- --
Officer
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Matthias Rischer 2003 139,769(1) 80,771(1) 6,461(1) 60,000 -- -- --
Vice President 2002 -- -- -- -- -- -- --
Pharmaceutical 2001 -- -- -- -- -- -- --
Development
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(1) Amounts actually paid in Euros and converted to Canadian dollars at an
average exchange rate of CDN $1.00 to E0.6319.
C. STOCK OPTION PLAN
The Corporation has established a stock option plan for its directors,
executive officers, employees, members of the Scientific Advisory Board and
persons providing continuous services to the Corporation (the "Plan") in order
to attract and retain these persons, who will be motivated to work towards
ensuring the Corporation's success. The Board has full and complete authority to
interpret the Plan and to establish the applicable rules and regulations and to
make all other determinations it deems necessary or useful for the
administration of the Plan, provided that such interpretations, rules,
regulations and determinations are consistent with the rules of all stock
exchanges on which the securities of the Corporation are then traded and with
all relevant securities legislation. Subject to regulatory approval, the Board
may, at any time, amend, suspend or terminate the Plan, in whole or in part.
Individuals eligible to participate under the Plan will be determined by the
Board of Directors or the Corporate Governance Committee, as the case may be.
6
All of the options that are granted under the Plan may be exercised
within a maximum period of ten years following the date of their grant. The
Board of Directors or the Corporate Governance Committee, as the case may be,
designates, in its discretion, the option recipients to whom the stock options
are granted and determines the number of Subordinate Voting Shares covered by
each of such options, the grant date, the exercise price of each option, the
expiry date and any other question relating thereto, in each case in accordance
with the applicable rules and regulations of the securities regulatory
authorities. The price at which the Subordinate Voting Shares may be purchased
may not be lower than the greater of the closing prices of the Subordinate
Voting Shares on the Toronto Stock Exchange (the "TSX") and the NASDAQ Stock
Market (the "NASDAQ"), on the last trading day preceding the date of grant of
the option. Any option issued is non-transferable.
The maximum number of Subordinate Voting Shares that are issuable under
the Plan shall not exceed 4,069,352 shares. The maximum number of Subordinate
Voting Shares that may be optioned in favour of any individual shall not exceed
5% of the number of outstanding shares.
On February 26, 2004, the directors of the Corporation passed a
resolution in order, among other things, to amend and restate the Plan by
increasing the maximum number of Subordinate Voting Shares that are issuable
under the Plan, as more fully described in this Circular under Item 16,
"Amendments to the Stock Option Plan". The Board of Directors also approved an
amendment to the Plan whereby the shares issuable upon the exercise of options
under the Plan shall be redesignated from Subordinate Voting Shares to Common
Shares. This amendment is subject to the requisite majority of the Corporation's
shareholders having approved the proposed modifications to the Corporation's
Articles, as more fully described at Item 15 of this Management Proxy Circular,
"Modifications to the Articles of the Corporation", and it will only take effect
as of the date the Corporation receives a Certificate of Amendment in respect of
the amendments to its share capital described at Item 15.
OPTIONS GRANTED DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
The following table indicates the individual grants of securities to
the Named Executive Officers during the financial year ended December 31, 2003.
The aggregate number of Subordinate Voting Shares covered by options granted
during such period was 1,074,564 at prices varying from $3.85 to $8.63 per
Subordinate Voting Share, establishing at 3,197,435 the total number of
Subordinate Voting Shares covered by options granted and outstanding pursuant to
the Plan as at December 31, 2003. During the financial year ended December 31,
2003, 141,965 options were exercised at prices varying from $4.75 to $8.15.
------------------------------------------------------------------------------------------------------------------------
% OF TOTAL OPTIONS EXERCISE PRICE MARKET VALUE
SECURITIES UNDER GRANTED DURING OR BASIC PRICE OF SECURITIES
NAME OPTIONS GRANTED FINANCIAL YEAR PER SHARE UNDERLYING OPTIONS EXPIRATION DATE
ON THE DATE OF GRANT
(#) (%) ($ / SECURITY) ($ / SECURITY)
------------------------------------------------------------------------------------------------------------------------
Eric Dupont, PhD 75,000 7.0 3.76 3.76 December 10, 2013
------------------------------------------------------------------------------------------------------------------------
Gilles Gagnon 40,000 3.7 4.45 4.45 December 31, 2012
100,000 9.3 3.76 3.76 December 10, 2013
------------------------------------------------------------------------------------------------------------------------
Jurgen Engel 60,000 5.6 4.45 4.45 December 31, 2012
60,000 5.6 3.76 3.76 December 10, 2013
------------------------------------------------------------------------------------------------------------------------
Dennis Turpin 60,000 5.6 3.76 3.76 December 10, 2013
------------------------------------------------------------------------------------------------------------------------
Matthias Rischer 30,000 2.8 4.45 4.45 December 31, 2012
30,000 2.8 3.76 3.76 December 10, 2013
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
7
OPTIONS EXERCISED DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR AND
FINANCIAL YEAR-END OPTION VALUES
The following table summarizes for each of the Named Executive Officers
the number of shares acquired on options exercised, if any, during the financial
year ended December 31, 2003, the aggregate value realized upon exercise, the
total number of shares covered by unexercised options, if any, held at December
31, 2003, and the value of such unexercised options as at the same date.
------------------------------------------------------------------------------------------------------------------------
VALUE OF UNEXERCISED
NAME SECURITIES ACQUIRED AGGREGATE VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ON EXERCISE REALIZED FY-END 2003 AT FY-END 2003(1)
(#) ($) (#) ($)
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------------------------------
Eric Dupont, PhD -- -- 125,000/155,000 --/40,500
------------------------------------------------------------------------------------------------------------------------
Gilles Gagnon -- -- 113,667/253,000 --/54,000
------------------------------------------------------------------------------------------------------------------------
Jurgen Engel -- -- --/120,000 --/32,400
------------------------------------------------------------------------------------------------------------------------
Dennis Turpin -- -- 122,500/157,500 --/32,400
------------------------------------------------------------------------------------------------------------------------
Matthias Rischer -- -- --/60,000 --/16,200
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
(1) The value of an unexercised in-the-money option at financial year-end is
the difference between the exercise price of the option and the closing
price of a Subordinate Voting Share on the TSX at December 31, 2003,
namely $4.30. These values have not been and may never be realized. The
options have not been and may never be exercised; and actual gains, if
any, upon exercise will depend upon the value of the Subordinate Voting
Shares on the date of the exercise. There can be no assurance that these
values will ever be realized. Values of unexercised options are based on
the exercise price of $3.76.
D. REPORT OF THE CORPORATE GOVERNANCE COMMITTEE ON EXECUTIVE COMPENSATION
COMPOSITION OF THE COMMITTEE
On December 31, 2003, the Corporate Governance Committee (the
"Committee") was composed of Dr. Eric Dupont, Dr. Pierre Laurin, Mr. Pierre
MacDonald and Mr. Henri A. Roy.
MANDATE OF THE COMMITTEE
The Committee, which was formed on May 16, 1996, is entrusted with
examining matters related to the appointment and compensation of the
Corporation's executive officers, including the Executive Chairman of the Board
and the President and Chief Executive Officer, in view of making recommendations
to the Board. The Committee also reports to the Board on options granted. It
reviews the composition of both the Board and its committees and proposes and
recommends candidates for election or appointment to the Board. Finally, the
Committee is responsible for examining the terms and conditions of the aggregate
compensation plans of the Corporation and verifying the competitiveness thereof
in relation to companies carrying on activities similar to those of the
Corporation.
EXECUTIVE COMPENSATION POLICY
An aggregate compensation policy has been established to acknowledge
and reward the contributions of the executive officers to the Corporation's
success and to ensure competitive compensation, in order that the Corporation
may benefit from the expertise required to pursue its objectives.
In accordance with this policy, the compensation of the Corporation's
executive officers is based on three principal elements: (i) basic salary; (ii)
performance bonuses; and (iii) the award of stock options. The Corporation
8
intends to pay a competitive aggregate compensation that includes an incentive
related to the attainment of corporate results in addition to basic salary in
accordance with a reference market. The incentive compensation is granted on the
basis of criteria approved by the Committee.
SHORT-TERM INCENTIVE COMPENSATION
The short-term incentive plan sets out the allocation of incentive
awards based on the financial results and the achievement of the Corporation's
strategic objectives. These objectives are set at the beginning of each
financial year as part of the revision of corporate strategies.
In the case of executive officers, incentive awards may vary in
accordance with the attainment of the Corporation's financial and strategic
objectives.
LONG-TERM COMPENSATION OF EXECUTIVE OFFICERS
The long-term component of the officers' aggregate compensation is
based exclusively on the Corporation's Stock Option Plan. This Plan permits the
granting of a number of options that varies in accordance with the contribution
of the officers and their responsibilities.
CONTROL AND REVISION OF THE COMPENSATION PLAN
The Committee must ensure that the compensation of the Corporation's
officers is consistent with the aggregate compensation policy of the
Corporation. The relative situation of the Corporation with regard to
compensation is determined annually by means of studies, with respect to a
reference market, composed of comparable businesses. Internal equity analyses
are also conducted in order to make the required adjustments.
COMPENSATION OF THE EXECUTIVE CHAIRMAN OF THE BOARD AND THE PRESIDENT AND CHIEF
EXECUTIVE OFFICER
The compensation of the Executive Chairman of the Board is governed by
an individual contractual agreement. On October 23, 1993, Dr. Eric Dupont signed
an exclusive agreement with the Corporation having an initial term of five years
and renewable annually thereafter. This contract included a non-competition
clause in favour of the Corporation. The compensation of the President and Chief
Executive Officer is along the lines of the Corporation's policy on management
compensation. The President and Chief Executive Officer's contract of employment
also contains a non-competition clause but does not provide for any specific
plan of remuneration.
CONCLUSION
In accordance with the Corporation's executive compensation policy, a
significant portion of the compensation of its executive officers is related to
the performance of the Corporation, the responsibilities inherent in their
duties and, in particular, the performance of the Corporation's publicly traded
shares and their long-term appreciation. The Committee reviews the compensation
programs of the executive officers annually in order to ensure their
competitiveness and compliance with the objectives, values and strategies of the
Corporation.
If the circumstances so require, the Committee may recommend employment
conditions that are different from the policies in effect as well as the
execution of non-standard employment contracts by the Corporation.
By the Corporate Governance Committee:
Eric Dupont, PhD
Pierre Laurin
Pierre MacDonald
Henri A. Roy
9
10. INDEBTEDNESS OF DIRECTORS AND OFFICERS
Neither at any time during the financial year ended December 31, 2003
nor as at April 23, 2004 did any of the directors and officers of the
Corporation owe it any amount in respect of the purchase of securities of the
Corporation or otherwise. On March 29, 2004, the Board of Directors of the
Corporation adopted a resolution formally prohibiting (i) the making of any new
loans to its directors and officers and (ii) modifying the material terms of any
such existing loans.
11. PERFORMANCE GRAPH
On December 31, 2003, the closing price of the Subordinate Voting
Shares on the TSX was $4.30 per share. The following graph shows the cumulative
return of a $100 investment in the Subordinate Voting Shares, made on December
31, 1998, initially, on the Montreal Exchange and as at December 6, 1999 on the
TSX (as of which date all trading had to be effected on the TSX), compared with
the total return of the S&P/TSX Composite Index for each financial year shown on
this graph.
[GRAPHIC]
12. STATEMENT OF CORPORATE GOVERNANCE PRACTICES
In compliance with the rules of the TSX, the Corporation must disclose
information with respect to its corporate governance practices as compared to
the guidelines provided for in the TSX Company Manual (the "TSX Guidelines").
The Board of Directors of the Corporation considers good corporate governance to
be important to the effective operations of the Corporation. The Corporate
Governance Committee of the Board of Directors makes recommendations regarding
the compliance of the Corporation's practices with the TSX Guidelines and
oversees disclosure obligations related thereto. The Corporate Governance
Committee has also been reviewing the proposed amendments to the TSX Guidelines
published in the spring and fall of 2002, as well as the proposed corporate
governance practices and disclosure rules published by the Canadian Securities
Administrators in January 2004. Once new guidelines or regulations are adopted
and published in final form, the Board will re-assess its corporate governance
practices and make any necessary changes. Schedule A to this Management Proxy
Circular sets out a description of the Corporations' corporate governance
practices in tabular form with reference to the TSX Guidelines but also taking
into account, where appropriate, some of the proposed modifications and the
effect of the recently enacted SARBANES-OXLEY ACT in the United States as well
as the rules of the NASDAQ.
10
13. INSURANCE OF DIRECTORS AND OFFICERS
The Corporation purchases liability insurance for the benefit of its
directors and officers, which protects them against certain liabilities
contracted by them while acting in such capacity. In 2003, this insurance
provided a maximum coverage of $20,000,000 per event and policy year. For the
financial year ended December 31, 2003, the premium paid by the Corporation was
$654,000. When the Corporation is authorized or required to indemnify insured
persons, a deductible of $250,000 applies, except for securities-based claims,
for which the deductible is $1,000,000.
14. APPOINTMENT OF AUDITORS
Management of the Corporation proposes that PricewaterhouseCoopers LLP,
Chartered Accountants, be appointed as auditors of the Corporation and that the
directors of the Corporation be authorized to determine their compensation.
PricewaterhouseCoopers have acted as auditors of the Corporation since the
financial year ended December 31, 1993.
In addition to performing the audit of the Corporation's consolidated
financial statements, PricewaterhouseCoopers LLP provided other services to the
Corporation and they billed the Corporation the following fees for each of the
Corporation's two most recently completed financial years:
---------------------------------------------------------------------------------------------------------------------
FINANCIAL YEAR ENDED FINANCIAL YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
FEES ($) ($)
---------------------------------------------------------------------------------------------------------------------
Audit Fees(1) 333,329 192,218
---------------------------------------------------------------------------------------------------------------------
Audit-Related Fees(2) 3,000 8,300
---------------------------------------------------------------------------------------------------------------------
Tax Fees(3) 45,616 8,475
---------------------------------------------------------------------------------------------------------------------
All other Fees(4) 60,850 16,207
---------------------------------------------------------------------------------------------------------------------
TOTAL FEES: 442,795 225,200
---------------------------------------------------------------------------------------------------------------------
(1) Refers to all fees incurred in respect of audit services, being the
professional services rendered by the Corporation's external auditor for
the audit and review of the Corporation's financial statements as well as
services normally provided by the external auditor in connection with
statutory and regulatory filings and engagements.
(2) Includes audit or attest services not required by statute or regulation,
employee benefit plan audits, due diligence services, and accounting
consultations on proposed transactions.
(3) Incurred in respect of tax compliance, tax planning and tax advice.
(4) Refers to all fees not included in audit fees, audit-related fees or tax
fees.
UNLESS INSTRUCTED TO ABSTAIN FROM VOTING WITH REGARD TO THE APPOINTMENT
OF AUDITORS, THE PERSONS WHOSE NAMES APPEAR ON THE ENCLOSED FORM OF PROXY WILL
VOTE IN FAVOUR OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AND AUTHORIZING
THE DIRECTORS OF THE CORPORATION TO DETERMINE THEIR COMPENSATION.
15. MODIFICATIONS TO THE ARTICLES OF THE CORPORATION
CHANGING THE CORPORATION'S LEGAL NAME
Since the acquisition by the Corporation of Zentaris AG ("Zentaris") in
December 2002, the Corporation has evolved into a biopharmaceutical company with
international activities. In addition to owning a deep portfolio of
11
novel products in oncology and endocrinology, the Corporation now has both
the scientific and pharmaceutical expertise that reflects the know-how of
highly qualified and experienced scientists. This expertise enables the
Corporation to engage in pharmaceutical activities from drug discovery to
drug approval.
The integration of Zentaris being successfully completed, it is now
becoming essential to standardize the Corporation's image in order to
demonstrate its progress during the last few months. Changing the
Corporation's name is an integral part of its new corporate development plan,
which includes the following elements:
(i) gaining recognition for the deep and diversified new pipeline
of products obtained following the acquisition of Zentaris;
(ii) highlighting the evolution of the Corporation from a "one drug
biotech" company to a "multiple compounds" biopharmaceutical
company;
(iii) demonstrating a global perspective; and
(iv) facilitating the creation of shareholder value through the new
image of a fully integrated international company.
In view of each of the above factors, the Board of Directors of the
Corporation unanimously resolved on March 29, 2004, that the Corporation change
its name to AEterna Zentaris Inc.
AMENDMENTS TO SHARE CAPITAL
The authorized share capital of the Corporation currently consists of
an unlimited number of Multiple Voting Shares without par value, an unlimited
number of Subordinate Voting Shares without par value, an unlimited number of
First Preferred Shares without par value, issuable in series, and an unlimited
number of Second Preferred Shares without par value, issuable in series.
The shares conferring voting rights to the shareholders of the
Corporation are the Multiple Voting Shares and the Subordinate Voting Shares.
Each Multiple Voting Share carries with it the right to ten votes and each
Subordinate Voting Share carries with it the right to one vote. As at April 1,
2004, there were 45,440,242 Subordinate Voting Shares issued and outstanding and
no preferred shares issued and outstanding.
Effective May 29, 2003, Dr. Eric Dupont, the Executive Chairman of the
Board, in accordance with the Articles of the Corporation, voluntarily converted
all of his 4,725,000 Multiple Voting Shares into the same number of Subordinate
Voting Shares, such that, as of the conversion date, there were no longer any
Multiple Voting Shares issued and outstanding, the only class of outstanding
voting and participating shares of the Corporation being the Subordinate Voting
Shares.
Applicable rules of the TSX prevent the Corporation from reducing the
voting power of the holders of its Subordinate Voting Shares, including through
future issuances of Multiple Voting Shares.
Therefore, on February 26, 2004, the Board of Directors of the
Corporation unanimously recommended that the Corporation amend its Articles in
order to (i) create a new class of Common Shares containing the terms and
conditions described in the draft Articles of Amendment reproduced at Schedule C
hereto, (ii) exchange each one issued and outstanding Subordinate Voting Share
into one Common Share, and (iii) remove and repeal the old classes of
Subordinate Voting Shares and Multiple Voting Shares, as well as the rights,
privileges restrictions and conditions attaching thereto.
The Corporation seeks its shareholders' approval of Special Resolution
2004-1 reproduced at Schedule B to this Management Proxy Circular, which would,
if adopted, authorize the Corporation to apply for a Certificate of Amendment
under section 173 of the CANADA BUSINESS CORPORATIONS ACT amending its Articles
in order to change its legal name and share capital as described above.
12
In order for Special Resolution 2004-1 to be adopted, shareholders
having at least two-thirds of the votes cast at the Meeting by all shareholders
of the Corporation present or represented by proxy must vote in favour of such
resolution. The Board of Directors of the Corporation recommends that
shareholders vote in favour of Special Resolution 2004-1.
UNLESS INSTRUCTED OTHERWISE, THE PERSONS WHOSE NAMES APPEAR ON THE
ENCLOSED FORM OF PROXY WILL VOTE IN FAVOUR OF SPECIAL RESOLUTION 2004-1.
Should Special Resolution 2004-1 be approved by the requisite majority
of shareholders, the Corporation will file Articles of Amendment as soon as
practicable following the Meeting. In addition, following the receipt of the
Certificate of Amendment in respect of such Articles of Amendment, the
Corporation intends to restate its Articles by applying for a Restated
Certificate of Incorporation, in respect of which shareholder approval is
neither required nor will it be sought.
16. AMENDMENTS TO THE STOCK OPTION PLAN
At the Meeting, shareholders will be asked to consider, and if deemed
advisable, to adopt Resolution 2004-2 ratifying and approving certain amendments
to the Plan which the Corporation's directors unanimously approved on February
26, 2004, subject to having obtained shareholder and regulatory approval.
The material amendment proposed to be made to the Plan is to set the
maximum number of shares which may be set aside for issuance under the Plan at
4,543,744 (the "New Maximum"). Initially, the Plan was adopted by the
Corporation on November 7, 1995, and it was amended on June 18, 1997, May 5,
1999, June 8, 2000, May 23, 2001, June 12, 2002 and May 29, 2003, each time in
order to increase the number of Subordinate Voting Shares issuable under the
Plan. The shares that are currently issuable under the Plan are the
Corporation's Subordinate Voting Shares. As described in detail under Item 15 of
this Management Proxy Circular, "Modifications to the Articles of the
Corporation", the Corporation is asking its shareholders at the Meeting to
approve certain amendments to its share capital, including the exchange of each
issued and outstanding Subordinate Voting Share for one newly created Common
Share. Consequently, for the purposes of this Item 16 of the Management Proxy
Circular, when the term "Plan Shares" is used, it refers to the Corporation's
Subordinate Voting Shares and, following the aforementioned exchange of
Subordinate Voting Shares for Common Shares (provided the requisite shareholder
approval shall have been obtained), then such term shall refer to the
Corporation's Common Shares.
The Corporation, like other companies in the biopharmaceutical
industry, considers the use of a stock option plan to be an important means of
attracting, retaining and motivating qualified personnel. Management is of the
opinion that the fact that some of the Corporation's employees have options
contributes to the overall success and rapid growth of the Corporation. In
making the decision to amend the Plan, the Corporate Governance Committee and
the Board of Directors considered a number of factors, including the number of
options currently outstanding under the Plan, the Corporation's human resources
requirements, competitive benchmarks and the anticipated need to grant options
in the future. Based on a review of each of these factors, the directors have
unanimously determined that the proposed changes, including, among other things,
the setting of a maximum number of Plan Shares reserved for issuance under the
Plan, are both reasonable and in the best interests of the Corporation.
The proposed New Maximum is intended to allow the Corporation to
continue (as has been the Corporation's practice in the past) to have 10% of the
total of Plan Shares available for issuance pursuant to the exercise of options
in the form of "Unexercised Options" and "Options Available for Issue". With the
establishment of the New Maximum at 4,543,744 Plan Shares, an additional 718,307
Plan Shares will be listed and reserved for issuance pursuant to the Plan. As at
February 26, 2004, there were 2,988,859 options outstanding and unexercised and
836,578 options available for granting. Taking into account the additional Plan
Shares to be listed pursuant to the New Maximum, there will be 1,554,885 Plan
Shares available for issuance pursuant to the exercise of options that have yet
to be granted. The proposed New Maximum represents 10% of the total aggregate
number of issued and outstanding Plan Shares as at February 26, 2004. An
aggregate of 2,378,757 Plan Shares have been issued
13
further to exercises of stock options since the enactment of the Plan and the
granting of stock options on an individual basis in 1995.
Resolution 2004-2, a copy of which is reproduced at Schedule B to this
Management Proxy Circular, has been approved by the TSX and must also be
approved by a majority of the votes cast at the Meeting by all shareholders of
the Corporation present or represented by proxy. The Board of Directors of the
Corporation recommends that shareholders vote in favour of Resolution 2004-2.
UNLESS INSTRUCTED OTHERWISE, THE PERSONS WHOSE NAMES APPEAR ON THE
ENCLOSED FORM OF PROXY WILL VOTE IN FAVOUR OF RESOLUTION 2004-2.
17. INTRODUCTION OF A SHAREHOLDER RIGHTS PLAN
On March 29, 2004, the Board of Directors of the Corporation approved
the adoption of a shareholder rights plan (the "Rights Plan"). As part of the
Rights Plan, the Corporation entered into a shareholder rights plan agreement
dated March 29, 2004 with National Bank Trust Inc. (the "Rights Agreement"). The
Rights Plan became effective on March 29, 2004 (the "Effective Date"). Under the
listing policies of the TSX, shareholder rights plans must be ratified by
shareholders of a listed company within six months of their adoption. The TSX
has advised the Corporation that this requirement will be satisfied in respect
of the Rights Plan if the resolution approving the Rights Plan, namely
Resolution 2004-3, a copy of which is reproduced at Schedule B to this
Management Proxy Circular, is approved by a majority of the votes cast at the
Meeting.
OBJECTIVES AND BACKGROUND OF THE RIGHTS PLAN
The fundamental objectives of the Rights Plan are to provide adequate
time for the Corporation's Board of Directors and shareholders to assess an
unsolicited take-over bid for the Corporation, to provide the Board of Directors
with sufficient time to explore and develop alternatives for maximizing
shareholder value if a take-over bid is made, and to provide shareholders with
an equal opportunity to participate in a take-over bid.
The Rights Plan encourages a potential acquiror who makes a take-over
bid to proceed either by way of a "Permitted Bid", which requires a take-over
bid to satisfy certain minimum standards designed to promote fairness, or with
the concurrence of the Corporation's Board of Directors. If a take-over bid
fails to meet these minimum standards and the Rights Plan is not waived by the
Board of Directors, the Rights Plan provides that holders of Shares (as defined
below), other than the acquiror, will be able to purchase additional Shares at a
significant discount to market, thus exposing the person acquiring Shares to
substantial dilution of its holdings.
Currently, the Board of Directors of the Corporation is not aware of
any pending or threatened take-over bid for the Corporation and, as discussed
below, the Board of Directors of the Corporation recommends the ratification,
confirmation and approval by shareholders of the Rights Plan.
In adopting the Rights Plan, the Board of Directors considered the
existing legislative framework governing take-over bids in Canada. The Board of
Directors believes that such legislation currently does not provide sufficient
time to permit shareholders to consider the take-over bid and make a reasoned
and unhurried decision with respect to the take-over bid or give the Board
sufficient time to develop alternatives for maximizing shareholder value.
Shareholders may also feel compelled to tender to a take-over bid even if the
shareholder considers such bid to be inadequate out of a concern that failing to
tender may result in a shareholder being left with illiquid or minority
discounted shares in the Corporation. This is particularly so in the case of a
partial bid for less than all the Subordinate Voting Shares of the Corporation,
or, if the required majority of shareholders vote in favour of Special
Resolution 2004-1 reproduced in Schedule B to this Management Proxy Circular to
exchange, on a one-for-one basis, all issued and outstanding Subordinate Voting
Shares for Common Shares (see Item 15, "Modifications to the Articles of the
Corporation"), of such a partial bid for less than all of the Common Shares of
the Corporation then issued and outstanding (the Subordinate Voting Shares or
the Common Shares, as the case may be, being referred to as the "Shares" for the
purposes of this Item 17), where the bidder wishes to obtain a control position
but does not wish to acquire all of the Shares. Finally, while existing
securities legislation has addressed many concerns related to
14
unequal treatment of shareholders, there remains the possibility that control of
a company may be acquired pursuant to private agreements in which a small group
of shareholders disposes of shares at a premium to market price, which premium
is not shared with the other shareholders.
It is neither the intention of the Board of Directors in recommending
the confirmation and ratification of the Rights Plan to secure the continuance
of the directors or Management of the Corporation nor to preclude a bid for
control of the Corporation. The Rights Plan provides various mechanisms whereby
shareholders could tender to take-over bids as long as they meet the Permitted
Bid criteria. Furthermore, even in the context of the take-over bid that does
not meet the Permitted Bid criteria, the Board of Directors would still have a
duty to consider any take-over bid for the Corporation and consider whether or
not it should waive the application of the Rights Plan in respect of such bid.
In discharging such duty, the Board of Directors must act honestly and in good
faith with a view to the best interests of the Corporation.
A recent number of decisions rendered by the Canadian securities
regulators relating to shareholder rights plans have concluded that a board of
directors faced with an unsolicited take-over bid will not be permitted to
maintain a shareholder rights plan indefinitely to prevent the successful
completion of the bid, but only insofar as the board is actively seeking
alternatives to the bid and there is a reasonable possibility that, given
additional time, a value-maximizing alternative will be developed. The
Corporation's Rights Plan does not preclude any shareholder from using the proxy
mechanism of the CANADA BUSINESS CORPORATIONS ACT, the Corporation's governing
corporate statute, to promote a change in the management or direction of the
Corporation, and it will have no effect on the rights of holders of the Shares
to requisition a meeting of shareholders in accordance with the provisions of
applicable legislation.
In recent years, unsolicited bids have been made for a number of
Canadian public companies, many of which had shareholder rights plans in force
at such time. The Board of Directors believes that this demonstrates that the
existence of a shareholder rights plan does not itself prevent the making of an
unsolicited bid. Furthermore, in a number of these cases, a change of control
ultimately occurred at a price in excess of the original bid price. There can be
no assurance, however, that the Corporation's Rights Plan would serve to bring
about a similar result.
The Rights Plan is not expected to interfere with the day-to-day
operations of the Corporation. The continuation of the existing outstanding
rights and the issuance of additional rights in the future will not in any way
alter the financial condition of the Corporation, impede its business plans, or
alter its financial statements. In addition, the Rights Plan is initially not
dilutive. However, if a "Flip-in Event" (described below) occurs and the rights
separate from the Shares as described below, reported earnings per share and
reported cash flow per share on a fully-diluted or non-diluted basis may be
affected. In addition, holders of rights not exercising their rights after a
Flip-in Event may suffer substantial dilution.
SUMMARY OF THE RIGHTS PLAN
The following is a summary of the principal terms of the Rights Plan,
which summary is qualified in its entirety by reference to the terms of the
Rights Agreement. To obtain copies of the Rights Agreement, send your request
to: National Bank Trust Inc., Corporate Secretary's Office, 1100, University
Street, 9th Floor, Montreal, Quebec, H3B 2G7.
OPERATION OF THE RIGHTS PLAN
Pursuant to the terms of the Rights Agreement, one right will be issued
in respect of each Share outstanding as at the close of business on March 29,
2004 (the "Record Time"). In addition, one right will be issued for each
additional Share issued after the Record Time and prior to the earlier of the
Expiration Time and the Separation Time (as defined below). The rights have an
initial exercise price equal to the Market Price (as defined below) of the
Shares as determined at the Separation Time, multiplied by five, subject to
certain adjustments, and they are not exercisable until the Separation Time.
Upon the occurrence of a Flip-in Event (as defined below), each right will
entitle the holder thereof, other than an Acquiring Person (as defined below),
to purchase from the Corporation one
15
Share upon payment to the Corporation of 50% of the Market Price of the
Shares of the Corporation on the TSX on the date of consummation or
occurrence of such Flip-in Event, subject to certain anti-dilution
adjustments.
TRADING OF RIGHTS
Until the Separation Time, the rights trade with the Shares and are
represented by the same share certificates as the Shares or an entry in the
Corporation's securities register in respect of any outstanding Shares. From and
after the Separation Time and prior to the Expiration Time, the rights are
evidenced by rights certificates and trade separately from the Shares. The
rights do not carry any of the rights attaching to the Shares such as voting or
dividend rights.
SEPARATION TIME
The rights will separate from the Shares to which they are attached and
become exercisable at the time (the "Separation Time") of the close of business
on the eighth business day after the earliest to occur of:
1. the first date (the "Stock Acquisition Date") of a public announcement
of facts indicating that a person has become an Acquiring Person (as
defined below);
2. the date of the commencement of, or first public announcement of the
intention of any person (other than the Corporation or any of its
subsidiaries) to commence a take-over bid or a share exchange bid for
more than 20% of the outstanding Shares of the Corporation other than a
Permitted Bid or a Competing Permitted Bid (as defined below); and
3. the date upon which a Permitted Bid or a Competing Permitted Bid ceases
to be such.
The Separation Time can also be such later time as may from time to
time be determined by the Board of Directors.
FLIP-IN EVENT
The acquisition by a person (an "Acquiring Person"), including others
acting jointly or in concert with such person, of more than 20% of the
outstanding Shares, other than by way of a Permitted Bid, a Competing Permitted
Bid or in certain other limited circumstances described in the Rights Plan, is
referred to as a "Flip-in Event".
DEFINITION OF MARKET PRICE
Market Price is generally defined in the Rights Plan, on any given day
on which a determination must be made, as the average of the daily closing
prices per Share on each of the 20 consecutive Trading Days (as defined below)
through and including the Trading Day immediately preceding such date of
determination; subject to certain exceptions. Trading Day is generally defined
as the day on which the principal Canadian or United States securities exchange
(as determined by the Board of Directors acting in good faith) on which the
Shares are listed or admitted to trading is open for the transaction of
business.
EXERCISE OF RIGHTS
Upon the Separation Time or the effective date of the Flip-in Event,
whichever occurs first, each right (other than those held by the Acquiring
Person) will entitle the holder thereof to purchase from the Corporation one
Share upon payment to the Corporation of 50% of the Market Price of the Shares
of the Corporation on the Stock Acquisition Date subject to certain
anti-dilution adjustments.
PERMITTED BID REQUIREMENTS
The requirements of a Permitted Bid include the following:
16
1. the take-over bid must be made by means of a take-over bid circular;
2. the take-over bid must be made to all holders of Shares wherever
resident, on identical terms and conditions, other than the bidder;
3. the take-over bid must not permit Shares tendered pursuant to the bid
to be taken up or paid for (a) prior to the close of business on a date
which is not less than 60 days following the date of the bid, and (b)
then only if at such date more than 50% of the then outstanding Shares
held by shareholders other than any other Acquiring Person, the bidder,
the bidder's affiliates or associates, persons acting jointly or in
concert with the bidder and any employee benefit plan, deferred
profit-sharing plan, stock participation plan or trust for the benefit
of employees of the Corporation or any of its subsidiaries, unless the
beneficiaries of such plan or trust direct the manner in which the
Shares are to be voted or direct whether the Shares are to be tendered
to a take-over bid (the "Independent Shareholders"), have been
deposited or tendered to the take-over bid and not withdrawn;
4. the take-over bid must allow Shares to be deposited, unless the
take-over bid is withdrawn, at any time up to the close of business on
the date that the Shares are to be first taken up and paid for;
5. the take-over bid must allow Shares to be withdrawn until taken up and
paid for; and
6. if more than 50% of the then outstanding Shares of the Corporation held
by Independent Shareholders are deposited or tendered to the take-over
bid and not withdrawn, the bidder must make a public announcement of
that fact and the take-over bid must remain open for deposits and
tenders of Shares for not less than 10 days from the date of such
public announcement.
The Rights Plan allows a competing Permitted Bid (a "Competing
Permitted Bid") to be made while a Permitted Bid is in existence. A Competing
Permitted Bid must satisfy all the requirements of a Permitted Bid other than
the requirements set out in clauses 3 and 6 above and must not permit Shares
tendered or deposited pursuant to the bid to be taken up or paid for (a) prior
to the close of business on a date which is not earlier than the latter of the
last day on which the bid must be open for acceptance after the date of the bid
under applicable Canadian provincial securities legislation and the earliest
date on which Shares of the Corporation may be taken up and paid for under any
earlier Permitted Bid or Competing Permitted Bid that is then in existence, and
(b) then only if at such date more than 50% of the then outstanding Shares held
by the Independent Shareholders have been deposited or tendered to the take-over
bid and not withdrawn. In the event that the requirement set forth in (b) of
this paragraph is satisfied, the competing bidder must make a public
announcement of the fact and the take-over bid must remain open for deposits and
tenders of Shares for not less than 10 days from the date of such public
announcement.
WAIVER AND REDEMPTION
The Board may, prior to the occurrence of a Flip-in Event, waive the
dilutive effects of the Rights Plan in respect of, among other things, a
particular Flip-in Event resulting from a take-over bid made by way of a
take-over bid circular to all holders of Shares of the Corporation. In such an
event, such waiver shall also be deemed to be a waiver in respect of any other
Flip-in Event occurring under a take-over bid made by way of a take-over bid
circular to all holders of Shares prior to the expiry of the first mentioned
take-over bid.
The Board may, at any time prior to the Separation Time, elect to
redeem all but not less than all of the outstanding rights at a price of $0.0001
each.
AMENDMENT TO THE RIGHTS AGREEMENT
The Rights Agreement may be amended to correct any clerical or
typographical error or to make such changes as are required to maintain the
validity of the Rights Agreement as a result of any change in any applicable
legislation, regulations or rules thereunder, without the approval of the
holders of the Shares or rights. Prior to the Separation Time, the Corporation
may, with the prior consent of the holders of Shares, amend, vary or delete any
of
17
the provisions of the Rights Agreement in order to effect any changes which the
Board, acting in good faith, considers necessary or desirable. The Corporation
may, with the prior consent of the holders of rights, at any time after the
Separation Time and before the Expiration Time, amend, vary or delete any of the
provisions of the Rights Agreement.
FIDUCIARY DUTY OF BOARD
The Rights Plan will not detract from or lessen the duty of the Board
to act honestly and in good faith with a view to the best interests of the
Corporation and its shareholders. The Board will continue to have the duty and
power to take such actions and make such recommendations to the Corporation's
shareholders as are considered appropriate.
EXEMPTIONS FOR INVESTMENT ADVISORS
Investment advisors (for fully-managed accounts), trust companies
(acting in their capacities as trustees and administrators), statutory bodies
whose business includes the management of funds, and administrators of
registered pension plans are exempt from triggering a Flip-in Event, provided
that they are not making, or are not part of a group making, a take-over bid.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS OF THE RIGHTS PLAN
The Corporation will not be required to include any amount in computing
its income for the purposes of the INCOME TAX ACT (Canada) (the "ITA") as a
result of the issuance of the rights.
Under the ITA, the issuance of rights to a recipient could be
considered a taxable benefit, the value of which is required to be included in
computing the income of a Canadian resident recipient or is subject to
withholding tax in the case of a recipient who is not resident in Canada. In any
event, no amount in respect of the value of the rights is required to be
included in computing income, or subject to withholding tax, if the rights do
not have any value at the date of issue. The Corporation considers that the
rights will have negligible value when issued, there being only a remote
possibility that the rights will ever be exercised. A holder of rights could be
required to include an amount in computing income or be subject to withholding
tax under the ITA if the rights become exercisable or are exercised. A holder of
rights may be subject to tax under the ITA in respect of the proceeds of
disposition of such rights.
THIS STATEMENT IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO
CONSTITUTE NOR SHOULD IT BE CONSTRUED TO CONSTITUTE LEGAL OR TAX ADVICE TO ANY
PARTICULAR HOLDER OF SHARES. SUCH SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE CONSEQUENCES OF ACQUIRING, HOLDING, EXERCISING OR
OTHERWISE DISPOSING OF THEIR RIGHTS, TAKING INTO ACCOUNT THEIR OWN PARTICULAR
CIRCUMSTANCES AND ANY APPLICABLE FEDERAL, PROVINCIAL, TERRITORIAL OR FOREIGN
LEGISLATION.
TERM
Unless terminated earlier in accordance with the applicable terms, the
Rights Plan and the Rights Agreement will expire on the date on which the first
annual meeting of the Corporation's shareholders is held following the third
anniversary of the date of the Rights Agreement or, if the Independent
Shareholders re-approve the Rights Plan at or prior to such annual meeting of
shareholders, then on March 29, 2010 (the "Expiration Time").
ELIGIBILITY FOR INVESTMENT
Provided that the Corporation remains a "public corporation" for
purposes of the ITA at all material times, the rights will be qualified
investments under the ITA for registered retirement savings plans, registered
education savings plans, registered retirement income funds and deferred
profit-sharing plans. The issuance of rights will not affect the status of the
Shares of the Corporation under the ITA for such purposes, nor will it affect
the eligibility of
18
such securities as investments for investors governed by certain Canadian
federal and provincial legislation governing insurance companies, trust
companies and pension plans.
Resolution 2004-3, a copy of which is reproduced at Schedule B to this
Management Proxy Circular, must be approved by a majority of the votes cast at
the Meeting by all shareholders of the Corporation present or represented by
proxy. The Board of Directors of the Corporation recommends that shareholders
vote in favour of Resolution 2004-3.
UNLESS INSTRUCTED OTHERWISE, THE PERSONS WHOSE NAMES APPEAR ON THE
ENCLOSED FORM OF PROXY WILL VOTE IN FAVOUR OF RESOLUTION 2004-3.
18. SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals must be submitted no later than January 28, 2005
in order that the Corporation may include them in the Management Proxy Circular
that will be prepared and mailed in connection with the Corporation's annual
meeting of shareholders in 2005.
19. ADDITIONAL INFORMATION
The Corporation will provide the following documents to any person or
company upon request to the Corporate Secretary of the Corporation, at its head
office at 1405 boulevard du Parc-Technologique, Quebec City, Quebec, G1P 4P5:
(i) one copy of the audited annual financial statements of the Corporation
for its most recently completed financial year together with the report
of the auditors thereon, both contained in the Corporation's 2003
Annual Report, and one copy of any interim financial statements of the
Corporation published subsequent to the financial statements for its
most recent financial year; and
(ii) one copy of this Management Proxy Circular.
In addition, the Corporation's Annual Information Form will be
available from the date of its filing with the securities commissions or similar
securities regulatory authorities in Canada as well as any other document
incorporated by reference in such Annual Information Form. The Corporation may
require the payment of reasonable expenses if a request is received from a
person who is not a holder of securities of the Corporation, unless the
Corporation makes a distribution of its securities pursuant to a short form
prospectus, in which case such documents will be provided free of charge. Copies
of the Corporation's public disclosure documents, including financial
statements, management proxy circulars and annual information forms, are also
available on the SEDAR website at www.sedar.com.
20. DIRECTORS' APPROVAL
The contents and the sending of this Management Proxy Circular were
approved by the Board of Directors of the Corporation on April 9, 2004.
Dated at Quebec City, Quebec, April 23, 2004.
/s/ Mario Paradis
-------------------------------
Mario Paradis, CA
Corporate Secretary
19
SCHEDULE A
AETERNA LABORATORIES INC.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
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TSX CORPORATE GOVERNANCE GUIDELINES COMMENTS
---------------------------------------------------------------------------------------------------------------------------
1. BOARD SHOULD EXPLICITLY ASSUME The mandate of the Board is to assume stewardship of the Corporation's
RESPONSIBILITY FOR STEWARDSHIP OF overall administration and to oversee the management of the Corporation's
THE CORPORATION SPECIFICALLY FOR: operations.
In addition, on March 29, 2004, the Board of Directors adopted a "Code of
Ethical Conduct", a copy of which is reproduced at Schedule E to this
Management Proxy Circular (also available on the Corporation's website at
www.aeterna.com). The Code of Ethical Conduct includes specific provisions
dealing with integrity in accounting matters, conflicts of interest and
compliance with applicable laws and regulations.
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(a) ADOPTION OF A STRATEGIC Prior to the beginning of each financial year, the Board receives and
PLANNING PROCESS approves the annual budget and the strategic objectives of the Corporation,
which are submitted to it by Management. In addition, significant matters
such as those related to the annual budget, strategic investments, as well
as capital and operating expenditures exceeding a certain threshold of
materiality are submitted to the Board.
(b) IDENTIFICATION OF PRINCIPAL The Board identifies the Corporation's principal risks and manages these
RISKS, AND IMPLEMENTING risks through regular appraisal of Management's practices on an ongoing
RISK MANAGEMENT SYSTEMS basis.
---------------------------------------------------------------------------------------------------------------------------
(c) SUCCESSION PLANNING AND When choosing senior management members, the Board strives for quality and
MONITORING SENIOR MANAGEMENT loyalty which are basic elements needed for the realization of the
Corporation's objectives. Every year, the Corporate Governance Committee
examines the performance, development and remuneration of senior executives
in light of these objectives. The Board contemplates studying succession
planning during the course of the next year.
---------------------------------------------------------------------------------------------------------------------------
(d) COMMUNICATIONS POLICY The Vice President and Chief Financial Officer is responsible for the
communications between Management and the Corporation's stakeholders. The
Audit Committee reviews press releases containing the quarterly results of
the Corporation prior to their release, these press releases being the
responsibility of the Vice President and Chief Financial Officer along with
communications with institutions and financial analysts. In addition, all
press releases of the Corporation are reviewed by the President and Chief
Executive Officer. The communications policy has been established in
accordance with the relevant disclosure requirements under applicable
Canadian and United States securities laws.
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TSX CORPORATE GOVERNANCE GUIDELINES COMMENTS
---------------------------------------------------------------------------------------------------------------------------
(e) INTEGRITY OF INTERNAL The Audit Committee is responsible for assisting the Board in the
CONTROL AND MANAGEMENT fulfillment of its duties with respect to financial accounting and
INFORMATION SYSTEMS reporting practices as well as the adequacy and integrity of the
Corporation's internal controls and management information systems.
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2. MAJORITY OF DIRECTORS SHOULD BE The Board is composed of nine directors, of which five are unrelated. The
"UNRELATED" (INDEPENDENT OF Executive Chairman of the Board, Dr. Eric Dupont, holds more than 10% of
MANAGEMENT AND FREE FROM the voting rights of the Corporation, and SGF, represented by Mr. Henri A.
CONFLICTING INTEREST) TO THE Roy, its Chairman, President and General Manager, also holds more than 10%
CORPORATION AND THE CORPORATION'S of the voting rights. The Board believes that the current majority of
SIGNIFICANT SHAREHOLDER, IF ANY unrelated directors provides appropriate independent representation for the
Corporation's public shareholders.
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3. DISCLOSURE FOR EACH DIRECTOR Dr. Eric Dupont - Related - Executive Chairman of the Board of the
WHETHER HE OR SHE IS RELATED, AND Corporation.
HOW THAT CONCLUSION WAS REACHED Mr. Gilles Gagnon - Related - President and Chief Executive Officer of the
Corporation.
Prof. Dr. Jurgen Engel - Related - Managing Director, Zentaris GmbH (a
significant subsidiary of the Corporation) - Executive Vice President,
Global Research and Development and Chief Operating Officer of the
Corporation.
Mr. Marcel Aubut - Related - Senior partner of a law firm which provides
legal services to the Corporation on a regular basis.
For the remainder of the proposed directors, none of them or their
associates has any interest or any business or other relationship which
could, or could reasonably be perceived to, materially interfere with the
directors' ability to act with a view to the best interests of the
Corporation, other than interests arising from shareholding.
Francis Bellido Unrelated
Stormy Byorum Unrelated
Pierre Laurin Unrelated
Pierre MacDonald Unrelated
Henri A. Roy Unrelated
The Board of Directors is of the view that each of its unrelated directors
would also be "independent" within the meaning of Rules 4200 and 4200A of
the Corporate Governance Rules of the NASDAQ as well as the proposed
corporate governance practices and disclosure rules recently published by
the Canadian Securities Administrators.
---------------------------------------------------------------------------------------------------------------------------
4. (a) APPOINT A COMMITTEE OF At the present time, the Corporation has no formal procedures in place
DIRECTORS RESPONSIBLE FOR for recruiting new directors. It nevertheless proposes nominees annually
PROPOSING TO THE FULL BOARD for election to the Board and makes recommendations as to the composition
NEW NOMINEES TO THE BOARD of the committees of the Board.
AND FOR ASSESSING DIRECTORS
ON AN ONGOING BASIS
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(b) COMPOSED EXCLUSIVELY OF See item 4(a) above.
NON-MANAGEMENT DIRECTORS,
THE MAJORITY OF WHOM ARE
UNRELATED
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TSX CORPORATE GOVERNANCE GUIDELINES COMMENTS
---------------------------------------------------------------------------------------------------------------------------
5. IMPLEMENT A PROCESS FOR ASSESSING The Corporate Governance Committee is responsible for developing and
THE EFFECTIVENESS OF THE BOARD, monitoring the Corporation's corporate governance practices, the
ITS COMMITTEES AND DIRECTORS functioning of the Board and the powers, mandates and performance of the
Board committees.
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6. PROVIDE ORIENTATION AND EDUCATION The Board ensures that every new director possesses the capacities,
PROGRAMS FOR NEW DIRECTORS expertise, availability and knowledge required to fill this position
adequately. The Corporation also offers an orientation and training program
to its newly elected Board members.
---------------------------------------------------------------------------------------------------------------------------
7. CONSIDER REDUCING SIZE OF BOARD, Management of the Corporation considers that the size of its Board (namely
WITH A VIEW TO IMPROVING nine members) is adequate to maintain the Board's effectiveness and for the
EFFECTIVENESS stewardship of the Corporation.
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8. REVIEW COMPENSATION OF DIRECTORS The Corporate Governance Committee reviews periodically the Corporation's
IN LIGHT OF RESPONSIBILITIES AND compensation policies in light of market conditions and responsibilities.
RISKS The Board has determined that the compensation paid to directors is
adequate in light of the risks and responsibilities associated with their
positions. Only external (i.e. non-management) directors are compensated in
their capacity as members of the Board of Directors of the Corporation.
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9. COMMITTEES OF THE BOARD SHOULD The Board has two committees, namely the Audit Committee and the Corporate
GENERALLY BE COMPOSED OF OUTSIDE Governance Committee. All members of the Audit Committee are external and
(NON-MANAGEMENT) DIRECTORS, A unrelated and a majority of the members of the Corporate Governance
MAJORITY OF WHOM ARE UNRELATED Committee are external and unrelated.
The Audit Committee and the Corporate Governance Committee consist of three
members and four members, respectively.
Audit Committee
Francis Bellido Unrelated
Stormy Byorum Unrelated
Pierre MacDonald Unrelated
Corporate Governance Committee
Eric Dupont Related
Pierre Laurin Unrelated
Pierre MacDonald Unrelated
Henri A. Roy Unrelated
The Board of Directors is of the view that each of the unrelated members of
the Audit Committee and the Corporate Governance Committee as indicated
above would be "independent" within the meaning of Rules 4200 and 4200A of
the Corporate Governance Rules of the NASDAQ as well as the proposed
corporate governance practices and disclosure rules recently published by
the Canadian Securities Administrators.
---------------------------------------------------------------------------------------------------------------------------
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TSX CORPORATE GOVERNANCE GUIDELINES COMMENTS
---------------------------------------------------------------------------------------------------------------------------
10. BOARD SHOULD EXPRESSLY ASSUME The Corporate Governance Committee is responsible for developing and
RESPONSIBILITY FOR, OR ASSIGN TO monitoring the Board's corporate governance practices.
A COMMITTEE GENERAL RESPONSIBILITY
FOR, THE APPROACH TO CORPORATE
GOVERNANCE ISSUES
---------------------------------------------------------------------------------------------------------------------------
11. (a) DEFINE LIMITS TO
MANAGEMENT'S
RESPONSIBILITIES BY
DEVELOPING MANDATES FOR:
---------------------------------------------------------------------------------------------------------------------------
(i) THE BOARD The Board oversees the conduct and supervises the management of the
business and affairs of the Corporation pursuant to the powers vested in
it under the CANADA BUSINESS CORPORATIONS ACT and in accordance with the
requirements thereof. The Board meets regularly to consider particular
issues or conduct specific reviews whenever deemed appropriate. Any
responsibility, which is not delegated to senior management or a
committee of the Board, remains the responsibility of the Board.
---------------------------------------------------------------------------------------------------------------------------
(ii) THE CEO There is no formal process of developing mandates for the CEO.
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(b) BOARD SHOULD APPROVE OR The CEO and Management establish the corporate objectives of the
DEVELOP CEO'S CORPORATE Corporation annually which, in turn, are expected to be implemented by the
OBJECTIVES CEO. These objectives receive Board approval.
---------------------------------------------------------------------------------------------------------------------------
12. ESTABLISH PROCEDURES TO ENABLE The Corporation does not currently have a member of the Board that is
THE BOARD TO FUNCTION responsible for ensuring that the Board properly discharges its duties,
INDEPENDENTLY OF MANAGEMENT independent of Management. The Board does not deem it necessary to add
structures to those that already exist to ensure its independence vis-a-vis
Management.
---------------------------------------------------------------------------------------------------------------------------
13. (a) ESTABLISH AN AUDIT The Audit Committee reviews the Corporation's annual and interim financial
COMMITTEE WITH A statements before they are approved by the Board, oversees Management
SPECIFICALLY DEFINED MANDATE reporting on internal audits and controls and reviews the comments of the
external auditors regarding internal control procedures. The Committee is
also responsible for ensuring that the Corporation has in place adequate
and efficient internal control systems to monitor the Corporation's
financial information and that transactions involving the Corporation with
related parties are made on terms that are fair to the Corporation. The
Committee also examines the audit fees of the external auditors and submits
the appropriate recommendations to the Board.
The Audit Committee Charter was revised and approved by the Board of
Directors on February 26, 2004. The revised version of such charter is
reproduced at Schedule D to this Management Proxy Circular.
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(b) ALL MEMBERS SHOULD BE The Audit Committee is composed entirely of outside, non-management
OUTSIDE OR NON-MANAGEMENT directors who are also unrelated directors. The Board of Directors is of
DIRECTORS the view that each of the members of the Audit Committee would also be
"independent" within the meaning of Rules 4200 and 4200A of the Corporate
Governance Rules of the NASDAQ as well as the proposed
---------------------------------------------------------------------------------------------------------------------------
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TSX CORPORATE GOVERNANCE GUIDELINES COMMENTS
---------------------------------------------------------------------------------------------------------------------------
corporate governance practices and disclosure rules recently published by
the Canadian Securities Administrators.
---------------------------------------------------------------------------------------------------------------------------
14. IMPLEMENT A SYSTEM TO ENABLE The Corporation has a practice of permitting the Board, any committee
INDIVIDUAL DIRECTORS TO ENGAGE thereof and any individual director to engage independent, external
OUTSIDE ADVISORS, AT advisors at the Corporation's expense. Thus far, no member of the Board has
CORPORATION'S EXPENSE requested the assistance of an outside adviser.
---------------------------------------------------------------------------------------------------------------------------
SCHEDULE B
SPECIAL RESOLUTION 2004-1
RESOLVED AS SPECIAL RESOLUTION 2004-1:
1. THAT the Corporation be, and it is hereby, authorized to apply
for a Certificate of Amendment under Section 173 of the CANADA
BUSINESS CORPORATIONS ACT amending its Articles as follows:
(i) to change its name from "AEterna Laboratories Inc." to
"AEterna Zentaris Inc.";
(ii) to create a new class of shares, being an unlimited number of
Common Shares having the rights, privileges, restrictions and
conditions outlined in Schedule 1 to the Articles of Amendment
of the Corporation and forming part thereof;
(iii) to exchange each of the issued and outstanding Subordinate
Voting Shares for one Common Share created by paragraph (ii)
hereof; and
(iv) following the changes effected by paragraphs (ii) and (iii)
hereof, to remove and repeal the old classes of Subordinate
Voting Shares and Multiple Voting Shares which the Corporation
was authorized to issue before this amendment, including the
rights, privileges, restrictions and conditions attaching to
the Subordinate Voting Shares and the Multiple Voting Shares.
2. THAT the Articles of Amendment of the Corporation shall be in
the form and terms set forth in Schedule C to the Management
Proxy Circular of the Corporation dated April 23, 2004 to form
part hereof and they be hereby approved; and
3. THAT any officer or any director of the Corporation be, and
each is hereby, authorized and directed to sign and deliver,
for and on behalf of the Corporation, the said Articles of
Amendment and all such notices and other documents and do all
such other acts and things as may be considered necessary or
desirable to give effect to this Special Resolution 2004-1.
RESOLUTION 2004-2
RESOLVED AS RESOLUTION 2004-2:
1. THAT the amendment to the Corporation's Stock Option Plan
adopted by the Board of Directors on February 26, 2004,
increasing the number of Subordinate Voting Shares (and,
following the issuance of a Certificate of Amendment pursuant
to the CANADA BUSINESS CORPORATIONS ACT whereby each
Subordinate Voting Share shall be exchanged for one (1) Common
Share of the Corporation, the Common Shares) that may be
issued and sold pursuant to such plan to 4,543,744, be, and it
is hereby, approved; and
2. THAT any director or officer of the Corporation be, and each
is hereby, authorized and directed to sign and deliver, for
and on behalf of the Corporation, all such documents and do
all such acts and things as may be considered necessary or
desirable to give effect to this Resolution 2004-2.
RESOLUTION 2004-3
RESOLVED AS RESOLUTION 2004-3:
1. THAT the Shareholder Rights Plan evidenced by the shareholder
rights plan agreement entered into between the Corporation and
National Bank Trust Inc., as Rights Agent, dated March 29,
2004 and substantially as described in the Management Proxy
Circular of the Corporation dated April 23, 2004, be, and it
is hereby, ratified and approved;
2. THAT any officer or director of the Corporation be, and each
is hereby, authorized and directed, for and on behalf of the
Corporation, to sign and execute all documents, to conclude
any agreements and to do and perform all acts and things
deemed necessary or advisable in order to give effect to this
resolution, including compliance with all securities laws and
regulations; and
3. THAT the Board of Directors of the Corporation be, and it is
hereby, authorized to cause all measures to be taken, such
further agreements to be entered into and such further
documents to be executed as may be deemed necessary or
advisable to give effect to and fully carry out the intent of
this Resolution 2004-3.
SCHEDULE C
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[GOVERNMENT OF CANADA LOGO]
Industry Canada Industrie Canada FORM 4 FORMULAIRE 4
Canada Business Loi canadienne sur les ARTICLES OF AMENDMENT CLAUSES MODIFICATRICES
Corporations Act societes par action (SECTIONS 27 OR 177) (ARTICLES 27 OU 177)
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
1 -Name of the Corporation - Denomination sociale de la societe 2 -Corporation No. - N(degree)de la societe
LES LABORATOIRES AETERNA INC. - 264271-9
AETERNA LABORATORIES INC.
-----------------------------------------------------------------------------------------------------------------------------
3 -The articles of the above-named corporation are amended as follows:
Les statuts de la societe mentionnee ci-dessus sont modifies de la
facon suivante :
(i) to change its name to AETERNA ZENTARIS INC.;
(ii) to create a new class of shares, being an unlimited number of Common Shares and to add the
rights, privileges, restrictions and conditions attaching to the new class of Common Shares, the
whole as set out in the annexed Schedule 1 which is incorporated in this form;
(iii) to change each issued and outstanding Subordinate Voting Share into one Common Share;
(iv) to cancel the Subordinate Voting Shares as a class, together with all authorized and unissued
Subordinate Voting Shares as well as the rights, privileges, restrictions and conditions
attaching to the Subordinate Voting Shares;
(v) to cancel the Multiple Voting Shares as a class, together with all authorized and unissued
Multiple Voting Shares as well as the rights, privileges, restrictions and conditions attaching
to the Multiple Voting Shares, and so that the authorized share capital of the Corporation shall
now consist of:
- an unlimited number of Common Shares;
- an unlimited number of First Preferred Shares, issuable in series; and
- an unlimited number of Second Preferred Shares,
issuable in series.
-----------------------------------------------------------------------------------------------------------------------------
Signature Printed Name - Nom en lettres moulees 4 - Capacity of - En qualite de 5 - Tel. No. - No de tel.
-----------------------------------------------------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY - A L'USAGE DU MINISTERE SEULEMENT
-----------------------------------------------------------------------------------------------------------------------------
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[GOVERNMENT OF CANADA LOGO]
SCHEDULE 1
TO THE ARTICLES OF AMENDMENT OF
AETERNA LABORATORIES INC.
The authorized share capital of AEterna Laboratories Inc. (the "CORPORATION")
shall consist of an unlimited number of Common Shares, an unlimited number of
First Preferred Shares, issuable in series, and an unlimited number of Second
Preferred Shares, issuable in series. The rights, privileges, restrictions and
conditions attaching to of the Common Shares are as follows:
ARTICLE 1
COMMON SHARES
1.1 VOTING RIGHTS. The holders of the Common Shares shall be entitled to
one (1) vote for each Common Share held by them at all meetings of
shareholders, except meetings at which only shareholders of a specified
class of shares are entitled to vote.
1.2 DIVIDEND RIGHTS. Subject to section 2.3 hereof, the holders of the
Common Shares shall be entitled to receive such dividends as are
declared by the Board of Directors of the Corporation on the Common
Shares.
1.3 LIQUIDATION RIGHTS. The holders of the Common Shares shall be entitled
to receive, subject to the other provisions hereof, the remaining
property of the Corporation upon any liquidation, dissolution or
winding-up of the affairs of the Corporation, whether voluntary or
involuntary.
SCHEDULE D
AUDIT COMMITTEE CHARTER
1. MISSION STATEMENT
The Audit Committee will assist the Board of Directors in fulfilling its
oversight responsibilities. The Audit Committee will review the financial
reporting process, the system of internal control, the audit process, and the
company's process for monitoring compliance with laws and regulations and with
the Code of Ethical Conduct. In performing its duties, the Committee will
maintain effective working relationships with the Board of Directors,
management, and the external auditors. To effectively perform his or her role,
each committee member will obtain an understanding of the detailed
responsibilities of committee membership as well as the company's business,
operations, and risks.
2. POWERS
The board authorises the audit committee, within the scope of its
responsibilities, to:
2.1 Perform activities within the scope of its charter.
2.2 Engage independent counsel and other advisers as it deems
necessary to carry out its duties.
2.3 Ensure the attendance of company officers at meetings as
appropriate.
2.4 Have unrestricted access to members of management, employees
and relevant information.
2.5 Establish procedures for dealing with concerns of employees
regarding accounting or auditing matters.
2.6 Establish procedures for the receipt, retention and treatment
of complaints received by the company regarding accounting,
internal accounting controls or auditing matters.
2.7 Be directly responsible for the appointment, compensation,
retention and oversight of the work of the external auditor.
2.8 Approve all audit engagement fees and terms as well as
reviewing policies for the provision of non-audit services by
the external auditors and, when required, the framework for
pre-approval of such services.
3. ORGANIZATION
MEMBERS
3.1 The Audit Committee shall be formed of three members, each of
which shall be a director not holding a management function.
3.2 Each member shall provide a useful contribution to the
Committee.
3.3 All members shall be independent of management.
3.4 The chairperson of the Audit Committee shall be appointed by
the Board from time to time.
3.5 The term of the mandate of each member shall be one year.
3.6 The quorum requirement for any meeting shall be two members.
3.7 The secretary of the Audit Committee shall be the secretary of
the company or any other individual appointed by the Board.
ATTENDANCE AT MEETINGS
3.8 If deemed necessary, the Audit Committee may invite other
individuals (such as the Senior Vice President and COO, the
Executive Vice President or the Vice President and CFO).
3.9 External auditors shall be invited, if needed, to make
presentations to the Audit Committee.
3.10 The Committee shall meet at least four times a year. Special
meetings may be held if needed. If deemed necessary, external
auditors may invite members to attend any meeting.
3.11 The audit committee will meet with the external auditors at
least once a year without management present.
3.12 The minutes of each meeting shall be recorded.
4. ROLE AND RESPONSIBILITIES
INTERNAL CONTROL
4.1 Evaluate whether management is setting the appropriate tone at
the top by communicating the importance of internal control
and ensuring that all individuals possess an understanding of
their roles and responsibilities.
4.2 Understand the controls and processes implemented by
management to ensure that the financial statements derive from
the underlying financial systems, comply with relevant
standards and requirements, and are subject to appropriate
management review.
4.3 Gain an understanding of the current areas of financial risk
and how these are being handle by the management.
4.4 Focus on the extent to which external auditors review computer
systems and applications, the security of such systems and
applications, and the contingency plan for processing
financial information in the event of a systems breakdown.
4.5 Gain an understanding of whether internal control
recommendations made by external auditors have been
implemented by management.
4.6 Ensure that the external auditors keep the Audit Committee
informed about fraud, illegal acts, deficiencies in internal
control, and any other matter deemed appropriate.
FINANCIAL REPORTING
a) GENERAL
4.7 Review significant accounting and reporting issues, including
recent professional and regulatory pronouncements, and
understand their impact on the financial statements.
4.8 Ask management and external auditors about significant risks
and exposures and the plans to minimize such risks.
b) ANNUAL FINANCIAL STATEMENTS
4.9 Review the annual financial statements and determine whether
they are complete and consistent with the information known to
committee members, and assess whether the financial statements
reflect appropriate accounting principles and recommend their
approval to the Board of Directors.
4.10 Pay particular attention to complex and/or unusual
transactions such as restructuring charges and derivative
disclosures.
4.11 Focus on judgmental areas such as those involving valuation of
assets and liabilities including, for example, the accounting
for and disclosure of obsolete or slow-moving inventory; loan
losses; warranty, product, and environmental liability;
litigation reserves and other commitments and contingencies.
4.12 Meet with management and the external auditors to review the
financial statements and the results of the audit.
4.13 Consider management's handling of proposed audit adjustments
identified by the external auditors.
4.14 Review the MD&A and other sections of the annual report before
its release and consider whether the information is adequate
and consistent with members' knowledge about the company and
its operations.
4.15 Ensure that the external auditors communicate certain required
matters to the Committee.
c) INTERIM FINANCIAL STATEMENTS
4.16 Be briefed on how management develops and summarizes quarterly
financial information, the extent to which the external
auditors review quarterly financial information, and whether
that review is performed on a pre- or post-issuance basis.
4.17 Meet with management and, if a pre-issuance review was
completed, with the external auditors, either by telephone or
in person, to review the interim financial statements and the
results of the review.
4.18 To gain insight into the fairness of the interim statements
and disclosures, obtain explanations from management and from
the external auditors on whether.
o Actual financial results for the quarter or interim
period varied significantly from budgeted or
projected results;
o Changes in financial ratios and relationships in the
interim financial statements are consistent with
changes in the company's operations and financing
practices;
o Generally accepted accounting principles have been
consistently applied;
o There are any actual or proposed changes in
accounting or financial reporting practices;
o There are any significant or unusual events or
transactions;
o The company's financial and operating controls are
functioning effectively;
o The company has complied with the terms and
conditions of loan agreements or security indentures;
and
o The interim financial statements contain adequate and
appropriate disclosures.
4.19 Ensure that the external auditors communicate certain required
matters to the Committee.
EXTERNAL AUDIT
4.20 Review the professional qualification of the auditors
(including background and experience of partner and auditing
personnel).
4.21 Consider the independence of the external auditor and any
potential conflicts of interest.
4.22 Review on an annual basis the performance of the external
auditors and make recommendations to the board for the
appointment, reappointment or termination of the appointment
of the external auditors.
4.23 Review the external auditors' proposed audit scope and
approach for the current year in the light of the company's
present circumstances and changes in regulatory and other
requirements.
4.24 Discuss with the external auditor any audit problems
encountered in the normal course of audit work, including any
restriction on audit scope or access to information.
4.25 Discuss with the external auditor the appropriateness of the
accounting policies applied in the company's financial reports
and whether they are considered as aggressive, balanced or
conservative.
4.26 Review policies for the provision of non-audit services by the
external auditor and where applicable the framework for
pre-approval of audit and non-audit services.
4.27 Ensure the company has appropriate policies regarding the
hiring of audit firm personnel for senior positions after they
have left the audit firm.
COMPLIANCE WITH LAWS AND REGULATIONS
4.28 Review the effectiveness of the system for monitoring
compliance with laws and regulations and the results of
management's investigation and follow-up (including
disciplinary action) on any fraudulent acts or accounting
irregularities.
4.29 Periodically obtain updates from management, general counsel,
and tax director regarding compliance.
4.30 Be satisfied that all regulatory compliance matters have been
considered in the preparation of the financial statements.
4.31 Review the findings of any examinations by regulatory
agencies.
COMPLIANCE WITH CODE OF ETHICAL CONDUCT
4.32 Ensure that a Code of Ethical Conduct is formalized in writing
and that all employees are aware of it.
4.33 Evaluate whether management is setting the appropriate tone at
the top by communicating the importance of the Code of Ethical
Conduct and the guidelines for acceptable business practices.
4.34 Review the program for monitoring compliance with the Code of
Ethical Conduct.
4.35 Periodically obtain updates from management and general
counsel regarding compliance.
OTHER RESPONSIBILITIES
4.36 Meet with the external auditors and management in separate
executive sessions to discuss any matters that the Committee
or these groups believe should be discussed privately.
4.37 Ensure that significant findings and recommendations made by
the external auditors are received and discussed on a timely
basis.
4.38 Review, with the company's counsel, any legal matters that
could have a significant impact on the company's financial
statements.
4.39 Review the policies and procedures in effect for considering
officers' expenses and perquisites.
4.40 If necessary, institute special investigations and, if
appropriate, hire special counsel or expert to assist.
4.41 Perform other oversight functions as requested by the full
Board.
4.42 Review and update the charter; receive approval of changes
from the Board.
REPORTING RESPONSIBILITIES
4.43 Regularly update the Board of Directors about committee
activities and make appropriate recommendations.
4.44 Ensure the board is aware of matters that may significantly
impact on the financial condition or affairs of the business.
4.45 Prepare any reports required by law or listing rules or
requested by the board, for example a report on the audit
committee's activities and duties to be included in the
section on corporate governance in the annual report.
REVIEW OF THE COMMITTEE CHARTER
4.46 Review the audit committee charter annually and discuss any
required changes with the board.
4.47 Ensure that the charter is approved or reapproved by the
board.
SCHEDULE E
CODE OF ETHICAL CONDUCT
AEterna Laboratories Inc. ("AEterna") and all of the directors, officers and
employees of AEterna and its subsidiaries (collectively with AEterna, the
"Company") are committed to preserving the reputation of the Company for
integrity and excellence and conducting the businesses and activities of the
Company honestly and ethically and in compliance with applicable laws, rules and
regulations.
Accordingly, the Board of Directors of AEterna has adopted this Code of Ethical
Conduct, which applies to all directors, officers and employees of the Company
and its subsidiaries, including, but not limited to, AEterna's principal
executive officer, principal financial officer, principal accounting officer or
controller and persons performing similar functions. This Code of Ethical
Conduct is intended to meet the requirements for a code of ethics under the
Sarbanes-Oxley Act of 2002 (and the related regulations adopted by the
Securities and Exchange Commission) and the applicable Marketplace Rules of The
Nasdaq Stock Market, Inc.
This Code of Ethical Conduct does not summarize all of the Company's policies.
You must also comply with the Company's other policies which are set forth
elsewhere. In addition, this Code of Ethical Conduct reflects general principles
of conduct and does not anticipate or cover in detail every topic or situation.
If you have a question about anything covered in this Code of Ethical Conduct or
if you are unsure about whether some action would be consistent with this Code
of Ethical Conduct, you agree to ask the Corporate Secretary of AEterna (the
"Compliance Officer"). Similarly, if you should encounter a situation in which
you are unsure what to do, you agree to tell the Compliance Officer and ask for
help.
Nothing in this Code of Ethical Conduct should be construed as changing the at
will employment relationship between the Company and its employees.
POLICIES AND PRACTICE
GENERAL CONDUCT; CONFLICTS OF INTEREST
You should act ethically, honestly and with integrity. Your duty to act
ethically, honestly and with integrity includes avoiding actual or apparent
conflicts of interest between your personal, private interests and the interests
of the Company, including using your position to receive improper personal
benefits. This obligation applies to both business relationships and personal
activities. A "conflict of interest" exists whenever your interests (financial
or otherwise) interfere or conflict in any way (or even appear to interfere or
conflict) with the Company's interests. A conflict of interest can arise when
you take actions or have interests that may make it difficult to perform your
work for the Company objectively and effectively. Conflicts of interest may also
arise when you, or members of your family, receive improper personal benefits as
a result of your position with the Company, regardless of from where those
benefits are received.
You also owe the Company a duty to advance its legitimate interests when the
opportunity to do so arises. You are prohibited from (i) taking for yourself
personally opportunities that properly belong to the Company or are discovered
through the use of the Company's resources, property, information or your
position with the Company; (ii) using corporate property, information
(confidential or otherwise) or position for personal gain; or (iii) competing
with the Company.
You should conduct your personal affairs so that there can be no unfavorable
reflection on the Company, either express or implied. You must report to the
Compliance Officer any interest or relationship that you believe might
compromise or appear to compromise your duty of loyalty to the Company or
otherwise might present conflict of interest concerns. In addition, if you
become aware of any conflict of interest on the part of anyone else at the
Company, you must report it to the Compliance Officer.
COMPLIANCE WITH LAWS, RULES AND REGULATIONS
In performing your duties on behalf of the Company, you must comply with all
applicable governmental laws, rules and regulations, as well as the rules and
regulations of any stock exchanges and quotation systems on which AEterna's
securities are listed.
PUBLIC DISCLOSURE; CONFIDENTIALITY OF NON-PUBLIC INFORMATION
As a public company, AEterna must provide full, fair, accurate, timely, and
understandable disclosure in reports and documents that AEterna files with, or
submits to, the Securities and Exchange Commission or other regulators and in
other public communications by AEterna.
Consequently, the Company's books, business records, accounts and financial
statements must be maintained in reasonable detail, must appropriately reflect
the Company's transactions and must conform both to applicable legal and
regulatory requirements, including, if applicable, maintaining the financial and
accounting records in accordance with generally accepted accounting principles,
and to the Company's system of internal controls. Unrecorded or "off the books"
funds or assets should not be maintained unless permitted by applicable law or
regulation.
In addition, all employees, officers and directors of the Company are expected
to comply with the Company's disclosure controls and procedures to ensure that
material information relating to the Company is timely recorded, processed,
summarized and reported in accordance with all applicable laws, rules and
regulations. You must ensure that all information or data that you report to
management is accurate and honest, and you must fully and accurately comply with
all audits, requests for special record keeping or retention of documents,
documents or other material from or on behalf of the Company's auditors or the
Company's management.
You must also take all reasonable measures to protect the confidentiality of
non-public information about the Company and its customers obtained or created
in connection with your activities and prevent the unauthorized disclosure of
such information unless required by applicable law or regulation or legal or
regulatory process.
COMPLIANCE WITH THIS CODE OF ETHICAL CONDUCT
All employees, officers and directors of the Company, regardless of level or
seniority in the Company, have a duty to review, understand and adhere strictly
to the guidelines set forth in this Code of Ethical Conduct. In addition, you
will be required to certify in writing that you (i) received a copy of this Code
of Ethical Conduct, (ii) have read and understand this Code of Ethical Conduct,
including your duty to report violations or other questionable conduct, and (ii)
have complied with, and will continue to comply with, this Code of Ethical
Conduct. The required certification form is attached to this Code of Ethical
Conduct. Please sign it and return it to the Compliance Officer.
The Company is committed to holding all employees, officers and directors
accountable for adherence to this Code of Ethical Conduct.
DUTY TO REPORT VIOLATIONS OF THIS CODE OF ETHICAL CONDUCT; NO RETALIATION
If you reasonably believe that anyone connected with the Company may have, or is
about to, violate this Code of Ethical Conduct, you must promptly bring the
matter to the attention of the Compliance Officer. If you do not believe that
talking to the Compliance Officer is appropriate or if it does not result in a
response with which you are comfortable, then you should contact any of
AEterna's executive officers or any member of AEterna's Board of Directors. If
requested, the Company will keep your name confidential except as required by
applicable law.
Failure to report a known violation of this Code of Ethical Conduct is itself a
violation of this Code of Ethical Conduct and may result in disciplinary
measures.
If you have questions or concerns regarding accounting or auditing matters,
then, in addition to the reporting procedures described above, you may also
confidentially and anonymously submit such questions or concerns to the Audit
Committee of the Board of Directors of AEterna.
The Company will not tolerate retaliation of any kind against any person whom in
good faith reports to the Company potential issues relating to violations of
this Code of Ethical Conduct. Any director, officer or employee of the Company
who commits such retaliation will be subject to disciplinary measures. If you
believe that you have been penalized, discharged, disciplined or otherwise
penalized for reporting a violation in good faith, you should immediately report
that belief in accordance with the reporting procedures described above.
DISCIPLINARY ACTIONS
The Company is committed to the appropriate, prompt investigation and follow-up
of any violation or suspected violation of this Code of Ethical Conduct. Reports
of violations will be investigated under the Compliance Officer's supervision,
in such manner as the Compliance Officer finds appropriate. You are expected to
cooperate in the investigation of reported violations. The Compliance Officer
has the power to monitor, make determinations, and recommend action to the Board
of Directors of AEterna with respect to violations of this Code of Ethical
Conduct.
Violations of this Code of Ethical Conduct may result in disciplinary measures,
including, depending on the individual circumstances, the level of involvement
and knowledge and the severity of the violation, (i) warning and/or reprimand;
(ii) probation; (iii) suspension; (iv) salary reduction; (v) bonus reduction or
elimination; (vi) demotion; or (vii) termination.
In addition, violations of this Code of Ethical Conduct may also constitute
violations of law and may result in civil and criminal penalties for you, your
supervisors and/or the Company.
WAIVERS OF ANY PROVISION OF THIS CODE OF ETHICAL CONDUCT
Any request for a waiver of any provision of this Code of Ethical Conduct for a
director, officer or employee of the Company must be in writing and addressed to
the Compliance Officer. The Board of Directors of AEterna must approve any
waiver with respect to this Code of Ethical Conduct that involves a director or
an executive officer of AEterna. Waivers of any provision of this Code of
Ethical Conduct for a director, officer or employee of the Company (other than a
person who is a director or executive officer of AEterna) may be made by the
Compliance Officer.
AEterna is required to publicly disclose any waivers granted to a director or
executive officer of AEterna, along with the reasons for such waivers, in
accordance with the provisions of the Securities Exchange Act of 1934, as
amended, and the relevant rules, if any, of any stock exchanges and quotation
systems on which AEterna's securities are listed.
AMENDMENTS TO THIS CODE OF ETHICAL CONDUCT
The Board of Directors of AEterna may update or otherwise amend this Code of
Ethical Conduct. When there are material changes, the Company will provide each
director, officer and employee of the Company with an updated copy of the Code
of Ethical Conduct and may require each director, officer and employee of the
Company to execute a new Certification.
Adopted and approved by the Board of Directors on March 29, 2004.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AETERNA LABORATORIES INC.
DATE: MAY 21, 2004 By: /s/ Mario Paradis
------------------- ---------------------------
Mario Paradis
Senior Finance Director and
Corporate Secretary