Notice of Annual General Meeting of Episurf Medical AB (publ)
NOTICE OF ATTENDANCE, ETC.
Shareholders who wish to attend and vote at the Meeting must be registered in the share register maintained by Euroclear Sweden AB on Wednesday 18 May 2016, and no later than on Wednesday 18 May 2016 give notice of attendance via the Company’s website, www.episurf.com, or by writing to Episurf Medical AB (publ), Stora Skuggans Väg 11, SE-115 42 Stockholm, Sweden.
Notice of attendance must be received by the Company no later than on Wednesday 18 May 2016. Notification shall include the shareholder’s name, personal identification number/corporate registration number and daytime telephone number. The notice of attendance shall also include the number of accompanying advisors (not more than two) who are attending the Meeting. Shareholders who are represented by a proxy must submit a dated and signed power of attorney. The original of the power of attorney and, for legal entities, a certified copy of a certificate of registration, should be sent to the Company at the address above in ample time prior to the Meeting. The power of attorney may not be valid for a longer period than one year from its issuance. However, the power of attorney may be valid for up to five years from its issuance if so explicitly stated. A form of power of attorney is available on the Company’s website, www.episurf.com.
Shareholders whose shares are registered in the name of a nominee must temporarily re-register their shares in their own name to be entitled to participate at the Meeting. Such registration must be completed at Euroclear Sweden AB no later than on Wednesday 18 May 2016. The nominee should therefore be instructed well in advance of this date.
PROPOSED AGENDA
1) Opening of the Meeting
2) Appointment of a chairman of the Meeting
3) Preparation and approval of the voting list
4) Election of one or two persons to approve the minutes of the Meeting
5) Approval of the agenda
6) Determination of whether the Meeting has been duly convened
7) Presentation of the annual accounts and the auditors’ report and the consolidated accounts and the auditors’ report on the consolidated accounts
8) Presentation by the CEO and shareholders’ questions to the Board of Directors and management of the Company
9) Resolution on:
a) adoption of the income statement and the balance sheet and the consolidated income statement and balance sheet
b) allocation of the result of the Company in accordance with the adopted balance sheet
c) discharge of the members of the Board of Directors and the CEO from liability
10) Resolution on the number of members of the Board of Directors
11) Determination of fees for the members of the Board of Directors and auditor
12) Election of members of the Board of Directors, chairman of the Board of Directors and auditor. In conjunction to this, report on the work of the Nomination Committee
13) Resolution on the Nomination Committee for the annual general meeting of 2017
14) Resolution regarding guidelines for remuneration to the senior management
15) Approval of a directed issue of shares in Episurf Medical UK Limited to the CEO
16) Resolution regarding a bonus issue without issuance of new shares as well as a reduction of the share capital with retirement of shares of series B for allocation to the unrestricted shareholders’ equity
17) Resolution regarding authorisation for the Board of Directors to resolve on new issues of shares
18) Closing of the Meeting
PROPOSALS FOR RESOLUTIONS
Proposal under item 2; Appointment of a chairman of the Meeting
The Nomination Committee, established in accordance with the principles adopted at the annual general meeting of 2015, appointed by the three, in terms of votes, largest shareholders has declared that it proposes advokat Carl Westerberg to be appointed as chairman of the Meeting.
Proposal under item 10; Resolution on the number of members of the Board of Directors
The Nomination Committee proposes that the Board of Directors shall consist of four directors with no deputy members.
Proposal under item 11; Determination of fees for the members of the Board of Directors and auditor
The Nomination Committee proposes that each member of the Board of Directors, including the Chairman of the Board of Directors, shall receive an annual fee of SEK 100,000. However, if Wilder Fulford is elected as member of the board in accordance with the Nomination Committee’s proposal, the Nomination Committee proposes that Wilder Fulford shall receive an annual fee of SEK 200,000. This means that the Nomination Committee proposes total fees to the Board of Directors of not more than SEK 500,000. The Nomination Committee proposes that no fees shall be paid for committee work.
The Nomination Committee proposes that the auditors’ fees shall be payable in accordance with approved invoice.
Proposal under item 12; Election of members of the Board of Directors, Chairman of the Board of Directors and auditor
The Board of Directors
The Nomination Committee proposes that Saeid Esmaeilzadeh and Leif Ryd are re-elected and that Christian Krüeger and Wilder Fulford are elected as members of the Board of Directors for the period until the end of the next annual general meeting. The Nomination Committee proposes that Saeid Esmaeilzadeh is re-elected as Chairman of the Board of Directors.
Christian Krüeger is an experienced finance professional and is currently the CEO of LMK Ventures, a Swedish family office investing in both listed and unlisted companies. Krüeger has extensive experience from the financial industry, including stock and bond brokerage, equity raisings and the debt capital markets. Krüeger has held senior positions in the financial industry, most recently as Head of Equities at Pareto Securities in Stockholm.
Wilder Fulford is currently CEO of The Fulford Group, an investment banking firm providing M&A and strategic and financial advice to companies, entrepreneurs and investors in Life Sciences, Healthcare, and other industries. Fulford has advised the Boards, management and owners of companies in diverse industries on M&A, corporate finance and other strategic transactions for over 25 years. Among other positions, Fulford has served as Head of European Healthcare M&A at Deutsche Bank, Head of European Healthcare Investment Banking at Bank of America and Head of European Healthcare and Basic Materials M&A at Merrill Lynch.
Auditors
The Nomination Committee proposes to elect KPMG AB as auditor of the Company for the period until the end of the next annual general meeting. Should the proposal be adopted, KPMG intends to appoint Duane Swanson as auditor in charge.
Proposal under item 13; Resolution on the Nomination Committee for the annual general meeting of 2017
The Nomination Committee proposes that the Meeting resolves on the following regarding the principles for appointing the Nomination Committee for the next annual general meeting.
The Nomination Committee shall consist of four members. The three, in terms of votes, largest shareholders/owner groups (the “Largest Shareholders”) as per 31 August the year prior to the next annual general meeting, according to the list of shareholders in the share register maintained by Euroclear Sweden AB or that in another way are proved to be one of the Largest Shareholders, are entitled to appoint one member of the Nomination Committee each. In addition, the chairman of the Board of Directors shall be appointed as member of the Nomination Committee. The chairman of the Board of Directors shall summon the Largest Shareholders by 15 October the latest. If any of these shareholders waive their right to appoint a member of the Nomination Committee, the next shareholder/owner groups in order of size shall be given the opportunity to appoint a member of the Nomination Committee.
The CEO or any other person from the senior management shall not be a member of the Nomination Committee. The chairman of the Board of Directors shall summon the Nomination Committee’s first meeting.
The chairman of the Board of Directors shall not be appointed chairman of the Nomination Committee. The Nomination Committee’s term of office extends until a new Nomination Committee is appointed. The composition of the Nomination Committee shall be made public no later than 6 months before the annual general meeting.
If it becomes known that a shareholder that has appointed a member of the Nomination Committee, as a result of changes in the said owner’s shareholdings or due to changes in other owners’ shareholdings, is no longer one of the Largest Shareholders, the committee member who was appointed by said shareholder shall, if the Nomination Committee so decides, resign and be replaced by a new member appointed by the shareholder who at the time is the largest registered shareholder that has not already appointed a member of the Nomination Committee.
If the registered ownership structure is otherwise significantly changed prior to the completion of the Nomination Committee’s work, the composition of the Nomination Committee shall, if the Nomination Committee so decides, be changed in accordance with the above stated principles.
The tasks of the Nomination Committee shall be to prepare, for the next annual general meeting, proposals in respect of number of directors of the Board of Directors, remuneration to the Chairman of the Board of Directors, the other directors of the Board of Directors and the auditors respectively, remuneration, if any, for committee work, the composition of the Board of Directors, the Chairman of the Board of Directors, resolution regarding the nomination committee, chairman at the annual general meeting and election of auditors. The Company shall pay for reasonable costs that the nomination committee has considered to be necessary in order for the nomination committee to be able to complete its assignment.
Proposal under item 14; Resolution regarding guidelines for remuneration to the senior management
The Board of Directors proposes that the Meeting resolves on the following guidelines for remuneration to the senior management for the period until the annual general meeting of 2017.
Compensation and conditions of employment for the senior management, by which is meant the Chief Executive Officer, the Chief Financial Officer and the Chief Operating Officer, shall be designed to ensure the Company’s access to executives with the right set of skills. The remuneration shall consist of a fixed salary, a possible variable compensation, an incentive programme and other benefits including a company car and pension. The remuneration shall be on market terms and competitive, and be related to the executive’s responsibilities and authorities. Any variable remuneration shall be related to established, well-defined objectives and to the fixed salary and shall be limited to a maximum amount equivalent to 6 month’s salary (gross).
The Board of Directors is given the possibility to deviate from the above guidelines in individual cases should special reasons justify this. If this is the case, the information and the reasons for the deviation shall be reported at the next annual general meeting.
Besides from the CEO, no other senior executive or other employee is entitled to severance pay.
After discussions with the Company’s largest shareholders and Episurf’s employees, the Board of Directors has resolved, in the light of the Company’s expansion and personnel changes in 2015, not to propose the Meeting to resolve on a new issue of shares in accordance with the share based incentive programme that was adopted by the annual general meeting of 2015.
Proposal under item 15; Approval of a directed issue of shares in Episurf Medical UK Limited to the CEO
The Board of Directors proposes that the Meeting approves a directed issue of shares in the Company’s wholly-owned subsidiary Episurf UK Limited (“Episurf UK”) to the Company’s CEO Rosemary Cunningham Thomas.
Cunningham Thomas was appointed as CEO of Episurf in June 2015. In the negotiation of the total compensation to Cunningham Thomas, consisting of both salary and an equity component, there was a mutual understanding between Cunningham Thomas and the Company about the importance of the equity component. It was agreed that Cunningham Thomas would forfeit a part of the salary in exchange for a greater equity component. The final terms of her agreement stipulated that the equity component would be constituted of SEK 2,000,000 worth of shares in Episurf subject to a four year vesting period.
Cunningham Thomas is employed by Episurf UK and is resident in the UK. She is a citizen of both the UK and the US and pays taxes in both these countries. As a UK resident Cunningham Thomas is allowed to participate in a UK Government sponsored share plan arrangement in place to support small business growth.
Against this background, the Board of Directors proposes to implement such a share plan arrangement, known as “employee shareholder shares”, which allows the value of the shares issued to Cunningham Thomas to be agreed with the UK tax authorities in advance of the award date. Pursuant to this arrangement, any income tax liabilities that would have arisen in respect of the acquisition of the agreed SEK 2,000,000 worth of share in Episurf are deferred until the shares are vested in accordance with the below while allowing Cunningham Thomas to benefit from capital gains tax treatment on future increases in the value of her shares.
The arrangement
In short, the arrangement means that a new class of “incentive shares” in Episurf UK is created. A number of incentive shares equal to SEK 2,000,000 divided by the average volume weighted share price for the Company’s share of series B on Nasdaq Stockholm during the period from and including 9 May 2016 up to and including 23 May 2016, rounded down to the nearest whole share, is issued from Episurf UK to Cunningham Thomas. The value of the incentive shares is pegged to the value of shares of series B in the Company. The incentive shares will have no dividend or voting rights.
The incentive shares will vest in four annual instalments starting from June 2015 (i.e. when Cunningham Thomas took office), with 40% vesting in at the end of the first year and 20% vesting in each subsequent year until fully vested in June 2019. If Cunningham Thomas leaves Episurf for any reason, her unvested incentive shares will be forfeited while her vested incentive shares may, subject to approval of the new issue of shares of series B at a general meeting in Episurf, continue to be exchanged for the same number of shares of series B in Episurf for a period of six months following cessation. The incentive shares will vest in full in case of certain change-of-control events. Cunningham Thomas will acquire the incentive shares in exchange for the surrender of certain UK statutory employment rights.
Once vested Cunningham Thomas will, for a period of up to 10 years from the award date, have a right to transfer the incentive shares to Episurf in exchange for the same number of shares of series B in Episurf (subject to approval of the new issue of shares of series B at a general meeting in Episurf).
These arrangements are not pensionable.
Dilution, costs and majority requirements
Based on SEK 14.10, the closing price of Episurf’s share of series B on Nasdaq Stockholm on 21 April 2016, the last trading day before the date of this notice, 141,844 incentive shares would be issued, which would mean that no more than 141,844 shares of series B in Episurf shares could be issued. This corresponds to a potential dilution of approximately 0.9% of the shares and approximately 0.6% of the votes in Episurf.
The Company’s cost for the program consists of UK national insurance contributions corresponding to approximately SEK 276,000 (13.1% of SEK 2,000,000).
The Board of Directors’ proposal for resolution pursuant to this item 15 relates to a new issue of subsidiary shares to the CEO of Episurf. This means that the resolution must be passed with observance of the majority rules stated in Chapter 16 of the Swedish Companies Act, meaning that the resolution must be supported by shareholders representing at least nine tenths of both the votes cast and of the shares represented at the Meeting as well as on a shareholders’ meeting in Episurf UK.
Proposal under item 16; Resolution on a bonus issue without issuance of new shares, and a reduction of the share capital with retirement of shares of series B for allocation to the unrestricted shareholders’ equity
In connection with Michael McEwan leaving his position as CCO of Episurf in August 2015, he returned, without compensation, 13,501 of the 16,877 shares of series B that was issued to him in accordance with a resolution at the annual general meeting of 2015. The Board of Directors proposes that these shares, which are held by the Company itself, are retired by virtue of a reduction of the share capital. In order to avoid the requirement of an authorisation from the Swedish Companies Registration Office, the Board of Directors proposes that the Company at the same time carry out a bonus issue without the issuance of new shares.
In the light of the above, the Board of Directors proposes that the Meeting resolves upon a bonus issue through which the Company’s share capital will increase by SEK 4,050.30 by a transfer of funds from the unrestricted equity (pursuant to the balance sheet adopted by the Meeting). The bonus issue shall be carried out without the issuance of new shares.
Furthermore, the Board of Directors proposes that the Meeting resolves upon a reduction of the Company’s share capital by SEK 4,050.30 for allocation to the unrestricted shareholders’ equity with a retirement of 13,501 shares of series B. The reduction shall be effected with a retirement of the shares of series B that are held by the Company.
Proposal under item 17; Resolution on authorising the Board of Directors to resolve on new issues of shares
The Board of Directors proposes that the Meeting resolves to authorise the Board of Directors to, at one or several occasions until the next annual general meeting, resolve on new issues of shares, with or without deviation from the shareholders’ preferential rights, within the limits provided by the articles of association, to be paid for in cash or in kind. A valid resolution under this item must be supported by shareholders representing at least two-thirds of the votes cast as well as the shares represented at the Meeting.
MISCELLANEOUS
On the date of this notice, the total number of shares in Episurf is 15,963,305, of which 3,437,721 are shares of series A with three votes each, and 12,525,584 are shares of series B with one vote each. Accordingly, the total number of votes amounts to 22,838,747. As of the same date, the Company holds 13,501 shares of series B that cannot be represented at the Meeting.
The Nomination Committee’s complete proposals are available at the Company’s website www.episurf.com and at the Company’s head of office at Stora Skuggans väg 11, 115 42 Stockholm. The annual report and the auditors’ report will not later than 3 May 2016 be available to the shareholders at the Company’s website and at the Company’s head office. A proxy form as well as the Board of Directors’ complete proposals and reports prepared in accordance with the Swedish Companies Act will not later than 3 May 2016 be available to the shareholders on the Company’s website and at the Company’s head office. All documents will also be sent free of charge to those shareholders who so request and provide the Company with their address.
The shareholders are informed of their right to request information from the Board of Directors and the CEO at the Meeting in accordance with Chapter 7, Section 32 of the Swedish Companies Act.
Welcome!
Stockholm in April 2016
The Board of Directors
www.episurf.com
For more information, please contact:
Rosemary Cunningham Thomas, CEO, Episurf Medical
Tel: +46 (0) 70-7655892
Tel: +44 (0) 7803-753603
rosemary@episurf.com
About Episurf Medical
Episurf Medical is endeavoring to bring people with painful joint injuries a more active, healthier life through the availability of minimally invasive and personalized treatment alternatives. Episurf Medical’s Episealer® personalized implants and Epiguide® surgical drill guides are developed for treating localized cartilage injury in joints. Episurf Medical’s μiFidelity® system enables implants to be cost-efficiently tailored to each individual’s unique injury for the optimal fit and minimal intervention.
Episurf Medical’s head office is in Stockholm, Sweden. Its share (EPIS B) is listed on Nasdaq Stockholm. For more information, go to the company’s website: www.episurf.com. The information in this press release is such that Episurf Medical AB is required to disclose in accordance with the Securities Markets Act and/or the Financial Instruments Trading Act.