PROXY STATEMENT
FOR
2018 ANNUAL MEETING OF SHAREHOLDERS
NO SECURITIES REGULATORY AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY STATEMENT AND ANY
REPRESENTATION TO THE CONTRARY IS AN OFFENSE.
QUESTIONS AND ANSWERS ABOUT THE 2018 ANNUAL MEETING OF SHAREHOLDERS AND RELATED PROXY MATERIALS
-
Q:
-
Why is the Company providing proxy materials?
-
A:
-
The board of directors (the "Board") of Aralez Pharmaceuticals Inc. ("Aralez," the "Company," "we,"
"our," or "us," as the context requires) is providing this proxy statement (this "Proxy Statement") to solicit your proxy in connection with Aralez's 2018 Annual Meeting of Shareholders
(the "Meeting"), which is scheduled to take place on Friday, June 29, 2018. The Board is requesting your vote on the proposals described in this Proxy Statement.
-
Q:
-
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full
set paper copy of the proxy materials?
-
A:
-
We are utilizing rules under applicable U.S. and Canadian securities laws that allow companies to furnish their proxy
materials on the Internet rather than in paper form. These rules allow a company to send to its shareholders a notice regarding Internet availability of proxy materials (the "Notice"). The
securities laws that allow us to furnish our proxy materials over the Internet rather than in paper form do not require us to do so for all shareholders. Shareholders who have previously opted to
receive proxy materials in paper form will receive paper copies of the proxy materials in accordance with their instructions. Instructions on how to access the proxy materials on the Internet or how
to request a paper or electronic copy of our proxy materials may be found in the Notice and below.
-
Q:
-
What proxy materials are available to shareholders?
-
A:
-
The Company has made available: (1) the Notice of 2018 Annual Meeting of Shareholders; (2) this Proxy
Statement (including the proxy); and (3) the Company's Annual Report on Form 10-K, as amended, including the related management discussion & analysis, for the fiscal year ended
December 31, 2017 ("Fiscal Year 2017") (collectively, the "proxy materials").
-
Q:
-
When was the Notice first mailed to shareholders?
-
A:
-
In order to comply with the rules under applicable U.S. and Canadian securities laws, the Company mailed the Notice to
you twice. The Notice was first mailed to shareholders on or about May 18, 2018. The Notice was then mailed a second time to shareholders on or about May 29, 2018 and accompanied by a
proxy or voting instruction form, as applicable, that can be used to vote your shares at the Meeting.
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Shareholders
have the option of (1) accessing the proxy materials, including instructions on how to vote online, by telephone or by mail; or (2) requesting that the proxy materials be
sent to the shareholders in paper form or electronically. Opting to receive your proxy materials online will save the Company the cost of producing and mailing documents to your home or business, and
will also give you an electronic link to the proxy voting site.
-
Q:
-
How can I access the proxy materials on the Internet?
-
A:
-
The Notice contains instructions on how to view the proxy materials on the Internet, vote your shares online, by
telephone or by mail, and obtain printed or electronic copies of the proxy materials. The proxy materials are available online at
www.envisionreports.com/Aralez2018,
on the EDGAR website maintained by
the Securities and Exchange Commission (the "SEC") at
www.sec.gov
and on the SEDAR website maintained by the Canadian Securities Administrators ("CSA") at
www.sedar.com
.
-
Q:
-
How do I request paper copies of the proxy materials?
The
Notice contains instructions on how to request paper or electronic copies of the proxy materials. You must request a paper or electronic copy of the proxy materials by the deadline indicated in
the Notice to ensure you receive them prior to the deadline for the submission of your voting instructions, which is 9:00 a.m. (Eastern Standard Time) on June 27, 2018.
-
Q:
-
Who is soliciting the proxies?
-
A:
-
The Board and management of Aralez are soliciting proxies for use at the Meeting, including any postponements or
adjournments thereof. We intend to retain the services of MacKenzie Partners, Inc. to aid in the solicitation of proxies.
-
Q:
-
What proposals will be voted on at the Meeting?
-
A:
-
There are four proposals for which a vote is contemplated at the Meeting:
-
-
The election of seven directors to the Board, each of whom will serve until the next annual meeting of shareholders or until their successors
are elected or appointed (Proposal 1);
-
-
The approval of the appointment of Ernst & Young LLP ("E&Y"), an independent registered public accounting firm, as the Company's
auditors for the fiscal year ending December 31, 2018 ("Fiscal Year 2018") (Proposal 2);
-
-
The approval of the Amendment to the Amended and Restated 2016 Long-Term Incentive Plan to adopt a limit on the number of awards that may be
granted to a non-employee director during any one calendar year (Proposal 3); and
-
-
A non-binding, advisory vote to approve our approach to the compensation of our named executive officers, as disclosed in this Proxy Statement
("say-on-pay") (Proposal 4).
Shareholders
will also consider and vote upon any other business properly brought before the Meeting or any adjournment or postponement thereof.
-
Q:
-
What are the Board's voting recommendations?
-
A:
-
The Board recommends that you vote all of your common shares ("Common
Shares"):
-
-
FOR
the election of each of the seven nominees named herein to the Board (Proposal 1);
-
-
FOR
the approval of the appointment of E&Y, an independent registered public accounting firm,
as the Company's auditors for Fiscal Year 2018 (Proposal 2);
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-
-
FOR
the approval of the Amendment to the Amended and Restated 2016 Long-Term Incentive Plan to
adopt a limit on the number of awards that may be granted to a non-employee director during any one calendar year (Proposal 3); and
-
-
FOR
the approval of the non-binding, advisory say-on-pay vote to approve our approach to the
compensation of the Company's named executive officers, as disclosed in this Proxy Statement (Proposal 4).
-
Q:
-
What shares may I vote?
-
A:
-
You may vote all Common Shares that you owned as of the close of business on May 10, 2018 (the "Record
Date"). These Common Shares include:
-
1.
-
those
Common Shares held in your name as a "
Registered Shareholder";
and
-
2.
-
those
Common Shares held by you as a "
Non-Registered Shareholder
" through a bank, broker or other financial
intermediary.
Each
Common Share is entitled to one vote for each of the proposals to be considered at the Meeting. The Company's authorized share capital consists of an unlimited number of Common Shares and an
unlimited number of preferred shares. On the Record Date, there were 67,194,277 Common Shares issued and outstanding. No preferred shares are currently issued and outstanding.
The
holders of Common Shares are entitled to receive notice of any meeting of shareholders of the Company, and to attend and vote at those meetings, except those meetings at which holders of a
specific class of shares are entitled to vote separately as a class under the British Columbia
Business Corporations Act
("BCBCA").
-
Q:
-
What is the difference between holding Common Shares as a Registered Shareholder and as a Non-Registered
Shareholder?
-
A:
-
Most Aralez shareholders hold their Common Shares through a bank, broker or other financial intermediary, as a
Non-Registered Shareholder, rather than in their own name, as a Registered Shareholder. As summarized below, there are some distinctions between Common Shares held by Registered Shareholders and those
held by Non-Registered Shareholders.
Registered Shareholders
If
your Common Shares are registered in your name with Aralez's transfer agent, Computershare Investor Services Inc. (the "Transfer Agent"), or if you are registered as the holder of
Common Shares in book-entry form, you are considered, with respect to those Common Shares, the
Registered Shareholder
, and we have delivered a Notice
directly to you. As a
Registered Shareholder
, you have the right to attend the Meeting in person or to grant your proxy directly to the Named Proxies
(as defined below) or any other person who will appear in person at the Meeting on your behalf.
Voting by proxy means that you are giving the person or people named on
your proxy form (your proxyholders) the authority to vote your Common Shares for you at the Meeting or any adjournment or postponement thereof.
The Board has selected Adrian
Adams and Andrew I. Koven (the "Named Proxies") to vote all Common Shares for which the Company has been appointed to act as proxy at the Meeting. The Named Proxies will vote any properly
submitted proxy, if received in time and not revoked, at the Meeting according to your directions. The Named Proxies will vote any properly submitted proxy that fails to specify a choice on any
proposal to be acted upon at the Meeting in accordance with the Board's voting recommendations (as described above in "
What are the Board's voting
recommendations?
"), and, in the Named
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Proxies'
discretion, FOR or AGAINST such other business as may properly come before the Meeting or any adjournment or postponement thereof.
Registered
Shareholders are requested to submit a proxy for their Common Shares, giving the Named Proxies the right to vote your Common Shares on your behalf.
Alternatively, if
you are a Registered Shareholder, you may also vote your Common Shares by proxy by appointing another person to attend the Meeting on your behalf and vote your Common Shares for you. This person does
not have to be a shareholder, but must be present at the Meeting to vote your Common Shares.
Make sure that the person you appoint is aware that he or she has been appointed as
your proxy and attends the Meeting. At the Meeting, he or she should see a representative of the Transfer Agent.
To
be valid, your proxy must be received by the proxy department of the Transfer Agent by mail, on the Internet at
www.investorvote.com
or by telephone
at 1-866-732-VOTE (8683) not later 9:00 a.m. (Eastern Standard Time) on June 27, 2018, or if the Meeting is adjourned or postponed, not less than two business days before
the time of any such adjourned or postponed Meeting. Failure to properly complete or submit a proxy may result in its invalidation. See "
How can I vote my Common Shares without
attending the Meeting?
" for more information.
Non-Registered Shareholders
If
you hold your Common Shares through a bank, broker or other financial intermediary, you are considered, with respect to those Common Shares, the
Non-Registered
Shareholder
, and your bank, broker or other financial intermediary is forwarding the Notice to you. Your bank, broker or other financial intermediary is considered, with
respect to those Common Shares, the Registered Shareholder. As the beneficial owner of the Common Shares, you have the right to direct your bank, broker or other financial intermediary to vote your
Common Shares according to your instructions (see "
How can I vote my Common Shares without attending the Meeting?
" for more information), but
because you are not the Registered Shareholder, you may not vote these Common Shares in person at the Meeting unless you obtain a signed proxy from the Registered Shareholder giving you the right to
vote your Common
Shares. In most cases, your bank, broker or other financial intermediary will provide you with instructions on how to vote your Common Shares by telephone, on the Internet or by mail, in each case not
later than 9:00 a.m. (Eastern Standard Time) on June 27, 2018, or if the Meeting is adjourned or postponed, not less than two business days before the time of any such adjourned or
postponed meeting. Please consult your bank, broker or other financial intermediary to ensure your vote is received in advance of the above noted voting deadline.
The
Company will pay for the cost of intermediaries to deliver the Notice, and if, requested, printed proxy materials (including a voting instruction form) to Non-Registered Shareholders (both
objecting beneficial owners and non-objecting beneficial owners). The Company will not reimburse shareholders, nominees or agents for the cost incurred in obtaining authorization to execute forms of
proxy from their principals or beneficial owners.
Non-Registered Shareholders who receive a voting instruction form should carefully follow the instructions provided to ensure their vote is counted and received in advance of
the voting deadline.
-
Q:
-
May I attend the Meeting in person?
-
A:
-
You are invited to attend the Meeting in person and we encourage all shareholders of Aralez to attend
the Meeting.
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All
shareholders attending the Meeting will be asked to present a form of photo identification, such as a driver's license, in order to be admitted to the Meeting.
-
Q:
-
How can I vote my Common Shares in person at the Meeting?
-
A:
-
You may vote Common Shares you hold in your name as the Registered Shareholder in person at the Meeting. If you choose
to do so, you do not need to submit a proxy, but you should see a representative of the Transfer Agent at the Meeting. Voting in person at the Meeting will revoke any proxy you submitted earlier upon
your request.
If
you hold your Common Shares through a bank, broker or other financial intermediary as a Non-Registered Shareholder, you may vote the Common Shares in person at the Meeting only if you have obtained
a signed proxy from your bank, broker or other financial intermediary (
i.e.
, the Registered Shareholder) giving you the right to vote your Common
Shares. Any Non-Registered Shareholder who wishes to vote his or her Common Shares in person at the Meeting, should follow the instructions included in the voting instruction form provided by your
bank, broker or other financial intermediary, and see a representative of the Transfer Agent at the Meeting.
Even
if you plan to attend the Meeting in person, we recommend that you also submit your proxy as described below so that your vote will be counted if you later decide not to attend the Meeting.
Submitting your proxy now will not prevent you from voting your Common Shares in person at the Meeting if you desire to do so, as your proxy is revocable at your option.
-
Q:
-
How can I vote my Common Shares without attending the Meeting?
-
A:
-
Whether you hold Common Shares as a Registered Shareholder or as a Non-Registered Shareholder, you may direct your
vote without attending the Meeting.
If
you hold your Common Shares as a Registered Shareholder, you may vote by granting a proxy through one of the following methods:
By Mail
You may vote your Common Shares by signing and dating each proxy that you receive and returning it by 9:00 a.m. (Eastern
Standard Time) on June 27, 2018 to the Transfer Agent. If you provide specific voting instructions, your Common Shares will be voted as you instruct at the Meeting. If you sign your proxy but
do not provide instructions, your Common Shares will be voted in accordance with the Board's recommendations. See "
What are the Board's voting
recommendations?
" for more information.
On the Internet
You may vote your Common Shares online at
www.investorvote.com
, by following
the instructions provided in the Notice and the proxy. Voting on the Internet has the same
effect as voting by mail. If you vote on the Internet, you do not need to return a proxy by mail. Internet voting will be available until 9:00 a.m. on June 27, 2018.
By Telephone
You may vote your Common Shares over the phone, by dialing 1-866-732-VOTE(8683) and following the instructions. Voting
by telephone has the same effect as voting by mail. If you vote by telephone, you do not need to return a proxy by mail. Telephone voting will be available until 9:00 a.m. on
June 27, 2018.
If
you hold Common Shares as a Non-Registered Shareholder, you may instruct your bank, broker or other financial intermediary to vote your Common Shares by following the instructions provided by them
in the voting instruction form. Most intermediaries offer voting by mail, by telephone and on the Internet.
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Table of Contents
-
Q:
-
Can Registered Shareholders revoke their proxy or change
their vote?
-
A:
-
A Registered Shareholder may revoke a previously submitted proxy at any time before it has been
exercised by:
-
-
timely submitting a proxy by mail, Internet or telephone that is dated later than the proxy you are revoking, but received before
9:00 a.m. (Eastern Standard Time) on June 27, 2018, or if the Meeting is adjourned or postponed, not less than two business days before the time of any such adjourned or postponed
Meeting;
-
-
sending a revocation notice in writing to the Corporate Secretary of the Company at its registered office, which is located at
666 Burrard Street, Suite 1700, Vancouver, British Columbia, V6C 2X8, so that it is received at any time up to and including the last business day before the date of the
Meeting. The notice can be from the shareholder or the attorney of such shareholder, duly authorized in writing; or
-
-
attending the Meeting, providing a revocation notice to the chairperson of the Meeting before any vote in respect of which the proxy has been
given, and casting your vote at the Meeting.
-
Q:
-
Can Non-Registered Shareholders change their vote?
-
A:
-
A Non-Registered Shareholder may change or revoke any prior voting instructions by contacting the bank, broker or
other financial intermediary that holds their Common Shares and following the instructions provided by such intermediary in sufficient time prior to the Meeting.
-
Q:
-
How are votes counted?
-
A:
-
For Proposal 1 (the election of directors), you may vote "FOR" or "WITHHOLD" for each of the nominees to
the Board.
For
Proposal 2 (the approval of E&Y, an independent registered public accounting firm, as the Company's auditors for Fiscal Year 2018), you may vote "FOR" or "WITHHOLD".
For
Proposal 3 (the approval of the Amendment to the Amended and Restated 2016 Long-Term Incentive Plan), you may vote "FOR", "AGAINST" or "ABSTAIN."
For
Proposal 4 (the non-binding, advisory say-on-pay vote), you may vote "FOR", "AGAINST" or "ABSTAIN".
For
abstentions, see "
What happens if I abstain from voting on Proposal 3 and/or Proposal 4"
for more information.
If
you are a Registered Shareholder and you properly submit your proxy with no voting instructions, the Named Proxies will vote your Common Shares in accordance with the Board's recommendation on each
of the proposals. See "
What are the Board's voting recommendations?
" for more information.
If
you hold your Common Shares as a Non-Registered Shareholder and you have not provided voting instructions to your bank, broker or other financial intermediary, such intermediary will not have
discretionary authority to vote your Common Shares in the election of directors (Proposal 1), the vote to approve the Amendment to the Amended and Restated 2016 Long-Term Incentive Plan
(Proposal 3) or the non-binding, advisory say-on-pay vote (Proposal 4), resulting in a "broker-non-vote" with respect to these matters. However, most intermediaries do have the authority
to exercise discretion to vote your Common Shares with respect to the approval of E&Y, an independent registered public accounting firm, as the Company's auditors for Fiscal Year 2018 (Proposal 2).
See "
What is a broker non-vote?
" for more information.
6
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-
Q:
-
What is the quorum requirement for the Meeting?
-
A:
-
Business may only be transacted at the Meeting if a quorum is present. Under the Company's Articles, two persons who
are, or who represent by proxy, shareholders who in the aggregate hold at least fifty percent (50%) of the issued and outstanding Common Shares entitled to vote at a meeting of shareholders constitute
a quorum. Abstentions and "broker non-votes" (described below) will be counted as present and entitled to vote for purposes of determining a quorum.
-
Q:
-
What is the voting requirement to approve each of
the proposals?
-
A:
-
A plurality of the votes duly cast in person or by proxy by the shareholders at the Meeting with respect to each
director is required for the election of each director. However, pursuant to the Company's Majority Voting Policy, if, in an uncontested election of directors, any of the nominees named in this Proxy
Statement do not receive at least a majority of the votes cast (including votes cast FOR and votes cast WITHHOLD), such director will be required to promptly tender his resignation for consideration
by the Board. The Company's Majority Voting Policy is described in more detail under the heading "
Proposal 1Election of Directors
."
Proposal
2 (the approval of E&Y, an independent registered public accounting firm, as the Company's auditors for Fiscal Year 2018), and Proposal 3 (the approval of the Amendment
to the Amended and Restated 2016 Long-Term Incentive Plan) are considered ordinary resolutions. Ordinary resolutions are passed by a simple majority of votes, such that if more than half of the votes
that are cast are cast in favor, the resolution passes.
Due
to the non-binding, advisory nature of the say-on-pay vote (Proposal 4), there is no minimum vote requirement for this matter. However, this proposal will be considered to have passed with the
affirmative vote of a majority of the votes cast by the shareholders that are present or represented by proxy at the Meeting and entitled to vote.
-
Q:
-
What happens if I abstain from voting on Proposal 3 and/or
Proposal 4?
-
A:
-
If a proxy is properly submitted and the shareholder has explicitly abstained from voting on Proposal 3 and/or
Proposal 4, the Common Shares represented by such proxy will be considered present at the Meeting for the purpose of determining a quorum. Abstentions will not be counted as votes cast and therefore
will have no effect on the outcome of any proposal.
-
Q:
-
What is a "broker non-vote"?
-
A:
-
A "broker non-vote" occurs when a bank, broker or other financial intermediary submits a proxy that does not indicate
a vote for one or more of the proposals because the intermediary has not received instructions from the Non-Registered Shareholder of the Common Shares on how to vote on such proposals and does not
have discretionary authority to vote in the absence of instructions.
Intermediaries
typically do not have discretionary authority to vote on "non-routine" matters. Under certain rules of the New York Stock Exchange (the "NYSE Rules") that apply to all
NYSE-licensed intermediaries who have record ownership of listed company stock (including stock such as our Common Shares that are listed on Nasdaq), these NYSE-licensed intermediaries have
discretionary authority to vote on "routine" matters when they have not received timely voting instructions from the Non-Registered Shareholder. Proposal 2 (the approval of E&Y, an independent
registered public accounting firm, as the Company's auditors for Fiscal Year 2018) is considered a "routine" matter under the NYSE Rules. Proposal 1 (election of directors), Proposal 3
(the approval of the Amendment to the Amended and Restated 2016 Long-Term Incentive Plan), and Proposal 4 (the non-binding, advisory say-on-pay vote) are each considered "non-routine"
matters on which the intermediaries do not have discretionary authority to vote,
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resulting
in a "broker non-vote" in the event these NYSE-licensed intermediaries have not received timely voting instructions from the Non-Registered Shareholder.
Broker
non-votes will be counted for the purposes of determining whether a quorum exists at the Meeting, but because they are not votes that are cast, they will have no effect on the outcome of
Proposals 1, 3 or 4.
-
Q:
-
Will I have rights of dissent?
-
A:
-
No rights of dissent are available under the laws of the Province of British Columbia, Canada or our Articles to any
shareholder with respect to any of the proposals.
-
Q:
-
What does it mean if I receive more than one proxy or voting
instruction form?
-
A:
-
It means your Common Shares are registered differently or are held in more than one account. Please provide voting
instructions for all proxies and voting instruction forms you receive.
-
Q:
-
Who will bear the cost of soliciting votes for the Meeting?
-
A:
-
Aralez is paying the costs of the solicitation of proxies. The solicitation of proxies or votes may be made in person,
by telephone or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities. We intend to retain the
services of MacKenzie Partners, Inc. to aid in the solicitation of proxies for a fee of $12,500 plus expenses payable by the Company. MacKenzie Partners, Inc. currently expects that
approximately 12 of its employees will assist in the solicitation. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses
for forwarding the Notice, and any printed proxy materials that are specifically requested by shareholders, and any other solicitation materials to shareholders.
-
Q:
-
Where can I find the voting results of the Meeting?
-
A:
-
We will announce preliminary voting results at the Meeting and publish final voting results in a press release
following the Meeting and also in a Current Report on Form 8-K filed with the SEC and a Voting Results Report pursuant to, and in accordance with, Section 11.3 of National
Instrument 51-102
Continuous Disclosure Obligations
following the Meeting.
Additional Q&A information regarding the Meeting and shareholder proposals may be found on page 90.
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EXPLANATORY NOTE
On June 8, 2015, POZEN Inc., a Delaware corporation ("Pozen"), entered into an Agreement and Plan of Merger and Arrangement
(the "Merger Agreement"), among Tribute Pharmaceuticals Canada Inc., a corporation incorporated under the laws of the Province of Ontario, Canada (now known as Aralez
Pharmaceuticals Canada Inc.) ("Tribute"), Aguono Limited (which was renamed Aralez Pharmaceuticals Limited and subsequently renamed Aralez Pharmaceuticals plc in connection with its
re-registration as a public limited company), a limited company incorporated in Ireland ("Former Parent"), Trafwell Limited, a private limited company incorporated in Ireland, ARLZ US Acquisition
Corp., a corporation incorporated under the laws of the State of Delaware and a wholly-owned subsidiary of Former Parent, and ARLZ CA Acquisition Corp., a corporation incorporated under the laws of
the Province of Ontario and a wholly-owned subsidiary of Former Parent ("Can Merger Sub") in order to effectuate the merger of Pozen and Tribute. On December 7, 2015, the Merger
Agreement was amended, pursuant to which, among other things, (i) Aralez replaced Former Parent as a party to the Merger Agreement, whereby, after giving effect to the merger transactions,
Aralez would be the ultimate parent company of the combined companies, (ii) ARLZ US Acquisition II Corp., a corporation formed under the laws of the State of Delaware, would be merged
with and into Pozen, with Pozen continuing as the surviving corporation and an indirect wholly-owned subsidiary of Aralez, and (iii) Can Merger Sub and Tribute would amalgamate, with the
separate legal existence of Can Merger Sub ceasing and Tribute and Can Merger Sub continuing as one corporation and as a wholly-owned subsidiary of Aralez.
On
February 5, 2016, pursuant to the Merger Agreement, Aralez completed the acquisition of Tribute by way of a court approved plan of arrangement in a share transaction with an
approximate purchase price of $138 million made up of (i) approximately $115 million related to Tribute common shares, equity awards and certain warrants outstanding and
(ii) approximately $23 million in repayments of Tribute indebtedness. In connection with the transaction, Pozen and Tribute were combined under and became subsidiaries of Aralez, with
Pozen treated as the acquiring company for accounting purposes (the "Tribute Transaction"). As a result of the merger, each share of Pozen common stock outstanding immediately prior to the
effective time of the merger was converted into one Aralez Common Share. Pursuant to the arrangement, each outstanding Tribute common share was exchanged for 0.1455 of an Aralez Common Share. Pursuant
to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Aralez is the successor issuer to Pozen.
Unless
we specify otherwise, all references in this Proxy Statement to "we," "our," "us," "the Company" and "our company" refer to Aralez Pharmaceuticals Inc. and/or our
predecessor, Pozen, prior to the Tribute Transaction, as the context requires.
9
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
The Board in General
The Board is currently comprised of seven directors, each of whose current term of office as a director expires at the Meeting. The Board is
responsible for nominating directors for election to the Board and for filling vacancies on the Board that may occur between annual meetings of shareholders.
Biographical
information for each of our directors as of the date of this Proxy Statement is provided below. There are no familial relationships among any of the executive officers and
directors of the Company.
|
|
|
|
|
|
|
|
|
Name
|
|
Position with the Company
|
|
Age
|
|
Director Since
|
|
Residence
|
Adrian Adams
|
|
Director and Chief Executive Officer
|
|
67
|
|
2015
|
|
Pennsylvania, USA
|
Neal F. Fowler
|
|
Director
|
|
56
|
|
2016
|
|
North Carolina, USA
|
Rob Harris
|
|
Director
|
|
63
|
|
2016
|
|
Ontario, Canada
|
Arthur S. Kirsch
|
|
Director and Chairperson of the Board
|
|
66
|
|
2016
|
|
New York, USA
|
Kenneth B. Lee, Jr.
|
|
Director
|
|
70
|
|
2016
|
|
North Carolina, USA
|
Seth A. Rudnick, M.D.
|
|
Director
|
|
69
|
|
2016
|
|
North Carolina, USA
|
F. Martin Thrasher
|
|
Director
|
|
67
|
|
2016
|
|
Ontario, Canada
|
Adrian Adams
has been our Chief Executive Officer since February 2016, and has been a director of the Company since
December 2015 and Chairperson of the Transaction Committee since November 2016. From May 2015 to February 2016, Mr. Adams was the Chief Executive Officer and a
director of Pozen, and served as a consultant to Pozen from April 2015 to May 2015. Previously, Mr. Adams served as Chief Executive Officer and President and as a director of
Auxilium Pharmaceuticals Inc., a specialty biopharmaceutical company, from December 2011 until January 2015, when it was acquired by Endo International plc.
Mr. Adams served as the Chairperson and Chief Executive Officer of and a director of Neurologix, Inc. ("Neurologix"), a company focused on the development of multiple innovative gene
therapy development programs, from September 2011 to November 2011. Before Neurologix, Mr. Adams served as President, Chief Executive Officer and a director of Inspire
Pharmaceuticals, Inc., a specialty pharmaceutical company, from February 2010 until May 2011, when it was acquired by Merck & Co., Inc. Previously,
Mr. Adams served as President and Chief Executive Officer of Sepracor Inc. ("Sepracor"), a specialty pharmaceutical company, from March 2007 and May 2007, respectively,
until February 2010, when Sepracor was acquired by Dainippon Sumitomo Pharma Co., Ltd. Prior to his appointment as Chief Executive Officer of Sepracor, Mr. Adams served as
its Chief Operating Officer. Prior to joining Sepracor, Mr. Adams served as the President and Chief Executive Officer of Kos Pharmaceuticals, Inc., a specialty pharmaceutical company,
from 2002 until its acquisition by Abbott Laboratories in December 2006. Mr. Adams has also held general management and senior international and national marketing positions at
SmithKline Beecham, Novartis and ICI (now part of AstraZeneca). Mr. Adams has served as Chairperson of the board of directors of AcelRx Pharmaceuticals, Inc. since
February 2013 and served on the board of directors of Amylin Pharmaceuticals, Inc. from October 2007 to August 2012. Mr. Adams graduated from the Royal Institute of
Chemistry at Salford University in the U.K.
Mr. Adams
is a highly qualified pharmaceutical executive who brings to the Board over 30 years of experience in the industry. Mr. Adams has extensive national and
international experience and has been instrumental in launching major global brands in addition to driving successful corporate development activities encapsulating financing, product and company
acquisitions, in-licensing and company M&A activities.
Neal F. Fowler
has been a director of the Company since February 2016, and was previously a director of Pozen from 2010 to
February 2016. Mr. Fowler is Chief Executive Officer of Liquidia Technologies Inc. ("Liquidia"), a biomedicines company, and has served in that capacity since 2008.
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Mr. Fowler
is also a co-founder of Envisia Therapeutics Inc. ("Envisia"), an ophthalmology spin-out of Liquidia, and concurrently served as Chief Executive Officer of Envisia from its
launch in 2013 through 2015. Mr. Fowler joined Liquidia in 2008 after seven years at Johnson & Johnson. While at Johnson & Johnson, he served as President of Centocor, Inc.
("Centocor"), a multi-billion dollar subsidiary focused on development and commercialization of industry leading biomedicines used in the treatment of chronic inflammatory diseases. Prior to Centocor,
Mr. Fowler was President of Ortho-McNeil Neurologics Inc. and Vice President of the central nervous system franchise at Ortho-McNeil Pharmaceuticals. Mr. Fowler joined
Johnson & Johnson after a 13-year career at Eli Lilly and Company where he held a variety of sales, marketing and business development roles with increasing responsibilities in both the
pharmaceutical and medical device divisions. Mr. Fowler is a native of Raleigh, NC and received a Bachelor of Science degree in Pharmacy and Masters of Business Administration from the
University of North Carolina at Chapel Hill (UNC-CH).
Mr. Fowler
brings to the Board his extensive background in the pharmaceutical industry acquired through a variety of senior positions at several large pharmaceutical companies. He
is currently chief executive officer at Liquidia, a position which has provided him with experience in running an emerging growth company.
Rob Harris
has been a director of the Company since February 2016. He previously served as President, Chief Executive Officer and a
director of Tribute from December 2011 to February 2016. Mr. Harris founded Tribute Pharma, which later became Tribute Pharma Canada Inc. and Tribute Pharmaceuticals
Canada Ltd. in November 2005. Tribute acquired both Tribute Pharma Canada Inc. and Tribute Pharmaceuticals Canada Ltd. in December 2011. Mr. Harris was
formerly the President and CEO of Legacy Pharmaceuticals Inc. from September 2004 to October 2005. As the VP of Business Development at Biovail Corporation ("Biovail") from
October 1997 to September 2004, Mr. Harris was involved in, led and successfully concluded numerous business development transactions, including the licensing of new chemical
entities, the acquisition of mature products, the completion of co-promotion deals, distribution agreements, product development and reformulation transactions. Mr. Harris joined Biovail in
1997 as the GM of Biovail Pharmaceuticals Canada at a time when the company experienced rapid growth in the Canadian division. Before Biovail, Mr. Harris worked in various senior commercial
management positions during his twenty-year tenure at Wyeth (Ayerst) from 1977 to 1997 and has been involved in numerous product launches during his career. Mr. Harris currently serves
on the boards of directors of GreyWolf Animal Health Company and CannaRoyalty, both since December 2016, and Nuvo Pharmaceuticals Inc., since May 2017.
Mr. Harris
brings to the Board over 35 years of pharmaceutical industry experience in both Canada and the United States in sales, marketing, business development and
general management.
Arthur S. Kirsch
has been a director of the Company, Chairperson of the Board, and Chairperson of the Audit Committee since
February 2016. Previously, he was a director of Pozen from 2004 to February 2016. Mr. Kirsch has been Senior Advisor at GCA, LLC (formerly GCA Savvian, LLC), an
investment bank, since June 2005. Mr. Kirsch was a Managing Director of Vector Securities, LLC, an investment and merchant banking firm, from 2001 to May 2005. He was a
Managing Director and Head of Healthcare Research and Capital Markets of Prudential Vector Healthcare Group, a unit of Prudential Securities, Inc., a full-service brokerage firm, from 1999 to
2001. Mr. Kirsch was the Director, Equity Research of Vector Securities International, Inc., an investment banking firm, from 1995 to 1999. He served as a director of
Immunomedics, Inc., a publicly-traded biopharmaceutical company, from August 2015 until October 2016. He currently serves as a director of Liquidia, since December, 2016.
Mr. Kirsch
has over 30 years of experience working in equity capital markets and has extensive knowledge of the healthcare and life sciences field. Mr. Kirsch, who
has spent the majority of his career in investment banking with a focus on the healthcare industry, brings both financial and industry expertise to the Board.
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Kenneth B. Lee, Jr.
has been a director of the Company and Chairperson of the Compensation Committee since February 2016.
Previously, he was a director of Pozen from 2002 to February 2016, and from 2002 was also Pozen's lead Independent Director. Since June 2002 he has been an independent consultant and
general partner of Hatteras Venture Partners (formerly Hatteras BioCapital, LLC and BioVista Capital, LLC), and the general partner of Hatteras BioCapital Fund, L.P., a venture
capital fund focusing on life sciences companies, since 2003. Mr. Lee was President of A.M. Pappas & Associates, a venture capital firm, between January 2002 and
June 2002. He was a Partner of Ernst & Young LLP from 1982 through 2000, and was the National Director of the Life Sciences Practice for the firm. He was a Partner of
Ernst & Young Corporate Finance LLC from 2000 to 2001, where he served as the Managing Director of Ernst & Young's Health Sciences Corporate Finance Group from 2000 to 2001.
Mr. Lee has served on the board of directors of Biocryst Pharmaceuticals, Inc., a public company, since 2011, and is currently Chairperson of the audit committee and Chairperson of the
finance committee. He has also served on the board of directors of Eyenovia Inc., a public company, since March 2018 and is currently Chairperson of the audit committee. Mr. Lee
is also a director of Clinipace Worldwide, a privately held company. Previously, he served on the boards of directors of CV Therapeutics, Inc., for which he served as lead independent director
and Chairperson of the audit committee and a member of the compensation committee, Abgenix, Inc., for which he served on the audit committee and the compensation committee, OSI Pharmaceuticals,
for which he served as a member of the audit committee, Inspire Pharmaceuticals Inc., for which he served as Chairperson of the board of directors, and Chairperson of the audit committee and a
member of the compensation committee and finance committee, and Maxygen, Inc., for which he served as Chairperson of the audit committee and a member of the nominating/governance committee and
the compensation committee. Mr. Lee served as a member of the executive committee of the board of directors of the North Carolina Biotechnology Industry Organization and as a member of the
board of directors of Ibiliti, a nonprofit organization dedicated to building and expanding networks of resources for advanced medical technology companies. Mr. Lee is also a co-founder of the
National Conference on Biotechnology Ventures.
Mr. Lee
brings his extensive accounting and financial background to the Board, as well as expertise in the life sciences industry from his experience as a general partner of
several venture capital funds specializing in life sciences. He has also served and is serving on the boards and audit committees of several public pharmaceutical companies similar in size to the
Company, including serving as Chairperson of the board of directors of Biocryst Pharmaceuticals, Inc.
Seth A. Rudnick, M.D.
has been a director of the Company and Chairperson of the Nominating/Corporate Governance Committee since
February 2016. Previously, he was a director of Pozen from 2011 to February 2016. Dr. Rudnick was a venture partner and previously general partner at Canaan Partners, a venture
capital firm, from 1998 to December 2014. Formerly, Dr. Rudnick was the Chief Executive Officer and Chairperson of CytoTherapeutics Inc., a company developing stem cell-based
therapies, from 1991 to 1998. He helped found and served as the Head of Research and Development for Ortho Biotech, a division of Johnson & Johnson, focusing on cancer and chronic illnesses
from 1986 to 1991. He currently serves on the boards of directors of the following privately held biotechnology companies: Liquidia, for which he serves as Chairperson, and G1 Therapeutics, for
which he serves as Chairperson. Dr. Rudnick also served on the board of directors of Square 1 Financial, Inc., a public financial services company, from 2012 to
October 2015. Currently he is a Clinical Adjunct Professor of Medicine at University of North Carolina, Chapel Hill.
Dr. Rudnick
brings to the Board deep operational experience in the pharmaceutical and biotechnology industries acquired through a variety of senior research and development
positions in several large and mid-size pharmaceutical companies and as Chief Executive Officer, and Chairperson of CytoTherapeutics, Inc., Chairperson of Liquidia Technologies, Inc. and
Executive Chairperson of GI Therapeutics. Dr. Rudnick retired from Canaan Partners, a global venture capital firm with significant
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investments
in the healthcare sector, where he served as general venture partner from 1998 to 2013, which provided him with significant experience in and insight into life sciences investments.
F. Martin Thrasher
has been a director of the Company since February 2016. Previously, he was a director of Tribute from 2009 to
February 2016. Mr. Thrasher is a seasoned international executive. After graduating from the Richard Ivey School of Business in London, Ontario, Mr. Thrasher spent over
30 years working around the globe for companies such as General Foods from 1973 to 1977, McCormick & Co from 1977 to 1988, Campbell Soup Co. from 1988 to 2001 and ConAgra
Foods Inc. from 2001 to 2004. He has served as President of FMT Consultants LLC since 2004. Mr. Thrasher has lived and worked in Canada, Australia, Belgium and the U.S. His
responsibilities with Campbell Soup Co. included positions as President, International Grocery and President, North America Grocery. At ConAgra Foods Inc., he was President of the Retail
Products Co, a $9 billion business with over 30,000 employees. Mr. Thrasher has been President of FMT Consulting, a boutique advisory and consulting firm since
August 2004. In this capacity, he has served in a number of interim CEO and Executive Chairperson positions in Canada and the United States. Mr. Thrasher currently serves on the
boards of directors of several privately held companies including NATT Tools Group Inc. and Race Roster, both since 2016, and Trudell Medical International, since 2017. He also served on the
board of directors of Legumex Walker Inc., from 2011 to 2015.
Mr. Thrasher
brings to the Board extensive international business experience acquired from his time serving at several Fortune 500 companies. He has led large, complex
organizations and overseen a variety of mergers and acquistions. Mr. Thrasher also has broad board experience having served on a number of private and public company boards.
Corporate Governance Overview
We have adopted policies and procedures that we believe will be of value to our shareholders and will positively aid in the governance of the
Company. In addition to the compensation-related actions we have taken which are described in the "
Compensation Discussion and Analysis
" section of this
Proxy Statement, we have adopted corporate governance practices, which we believe are beneficial to our shareholders, including, without limitation, annual director elections, robust corporate
governance guidelines, a diversity policy, and a majority voting policy. We have also elected not to adopt a shareholder rights plan at this time, but may do so in the future.
Corporate Governance Guidelines
As described in the Company's Corporate Governance Guidelines, the Board is responsible for supervising the management of the Company's business
and affairs. The Board's key responsibilities relate to the stewardship of management, generally through the Chief Executive Officer, to pursue the best interests of the Company, and include the
following, among others:
-
-
review and approval of the adoption of the strategic plan and, in relation thereto, approval of annual business and capital plans and policies
and processes generated by management relating to the authorization of major investments and significant allocations of capital;
-
-
supervision of senior management and succession planning, including the appointment of the Chief Executive Officer and the Chairperson of the
Board, and ensuring that other executives are in place for sound management;
-
-
ensuring that the Company has policies in accordance with the guidance set out under applicable U.S. and Canadian securities laws;
-
-
ensuring that the Company has risk management systems in place and also ensuring that the appropriate internal controls and corporate
governance policies are in place;
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-
ensuring a business ethics, compliance and corporate governance mindset and creation of a culture of integrity throughout the
organization; and
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-
-
review of the Company's Code of Business Conduct and Ethics (the "Code of Conduct") from time to time and the implementation procedures
to ensure compliance with the Code of Conduct.
The
Board is entitled to engage outside advisers, at the Company's expense, where, in the view of the Board, additional expertise or advice is required.
For
a complete description of the Corporate Governance Guidelines, which function as the mandate for the Board, shareholders should refer to Annex B to this Proxy
Statement.
Board Leadership Structure
The Company maintains separate Chairperson of the Board and Chief Executive Officer positions, which allows the Board to be more effective in
overseeing the Company's affairs and holding management accountable for the Company's activities. Having an independent Chairperson fosters strong leadership and healthy discussion and avoids the
potential for any conflict of interest. However, the Board believes that the Company and its shareholders are best served by maintaining flexibility to have any director serve as Chairperson and
therefore believes that a permanent policy on whether the Chairperson and Chief Executive Officer positions should be separated or combined is not appropriate.
The
Board has adopted a written position description for the Chairperson of the Board setting out the Chairperson's responsibilities, including leadership and governance of the Board,
the promotion of corporate social responsibility, the facilitation of shareholder meetings, and the oversight of committees of the Board. The primary functions of the Chief Executive Officer are to
lead the management of the Company's business and affairs, and to lead the implementation of the resolutions and the policies of the Board. As set out in the Chief Executive Officer's position
description approved by the Board, the duties and responsibilities of the Chief Executive Officer include leadership and governance, strategic planning, business organization and development, and risk
management and disclosure, among others.
As
discussed below, the Board has adopted charters for each of its committees. These charters set out, among other things, the duties and responsibilities of the respective committees.
The Board has also adopted written position descriptions for the Chairperson of each of the respective committees of the Board.
Board Oversight of Risk
The Board carries out its risk oversight function both as a whole and through delegation of certain risk management oversight responsibilities
to the committees of the Board, which report regularly to the Board. The Audit Committee has primary responsibility for overseeing enterprise risk management; however, the other committees of the
Board also consider risk within their
areas of responsibility. For example, the Nominating/Corporate Governance Committee monitors legal and regulatory compliance risks as they relate to corporate governance structure and processes, and
the Compensation Committee reviews compensation programs and arrangements to assure that they do not encourage excessive risk taking for compensation purposes. The committee Chairpersons regularly
apprise the Board of significant risks and management's response to those risks. While the Board and its committees oversee risk management strategy, management is responsible for implementing and
supervising day-to-day risk management processes and reporting to the Board and its committees on such matters.
Director Independence
The Board has determined that five of the seven incumbent directors (or 71% of the Board) have no material relationship with the Company,
either directly or indirectly, and are "independent" within the meaning of the applicable Nasdaq listing standards and National Instrument 58-101
Disclosure
of Corporate Governance Practices
("NI 58-101") (such directors, the "Independent Directors"). Specifically, the Board has identified each of the members of the Board,
with the exception of Mr. Adams, who serves as our Chief Executive Officer, and Mr. Harris, who previously served as
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President
and Chief Executive Officer of Tribute, as independent for the purposes of the applicable Nasdaq listing standards and NI 58-101.
The
Independent Directors have the opportunity to meet in-camera at each quarterly meeting or more frequently as they deem necessary. These executive sessions of the Independent
Directors are currently presided over by the Chairperson of the Board.
PROPOSAL 3
APPROVAL OF THE AMENDMENT TO THE AMENDED AND RESTATED 2016 LONG-TERM INCENTIVE PLAN
Our shareholders are being asked to approve an amendment to and the restatement of the Aralez Pharmaceuticals Inc. Amended and Restated
2016 Long-Term Incentive Plan (the "2016 Plan") to adopt a limit on the number of awards that may be granted to a non-employee director of the Board during any one calendar year
(the "Amendment"). Upon the recommendation of our Compensation Committee, our Board approved this amendment to and restatement of the 2016 Plan on May 7, 2018, subject to shareholder
approval.
Background
Our Board adopted the 2016 Plan on December 11, 2015, which was subsequently approved by our shareholders on February 2, 2016. The
2016 Plan was amended and restated, and approved by shareholders on May 3, 2017. The Board adopted the 2016 Plan to enable us to continue to grant stock options and other awards to employees of
Aralez and its subsidiaries at levels reasonably necessary to attract, retain and motivate talent after completion of the transactions.
Summary of Proposal
The Board amended and restated the 2016 Plan, subject to shareholder approval, to adopt limits on the number of stock options/stock appreciation
rights and restricted shares/RSUs that may be granted to a non-employee director of the Board during any one calendar year to 100,000 and 50,000, respectively. The Board believes that the Amendment to
the 2016 Plan will provide our shareholders the opportunity to confirm limits on the level of director compensation. The 2016 Plan did not previously include limits on grants of awards to non-employee
directors.
Key Features Designed to Protect Shareholders' Interests
The 2016 Plan's design reflects our commitment to strong corporate governance and our desire to preserve shareholder value as demonstrated by
the following 2016 Plan features:
-
-
Independent Administrator.
The
Compensation Committee, comprised solely of independent, non-employee directors, administers the 2016 Plan. Administrative powers may be delegated to officers and other employees, but all
determinations regarding awards to our executive officers and non-employee directors must be made by the Compensation Committee.
-
-
No Evergreen Feature.
The 2016
Plan does not contain an "evergreen" provision that automatically increases the number of shares authorized for issuance under the 2016 Plan.
-
-
No Liberal Share Recycling
Policy.
The 2016 Plan does not permit shares tendered by a participant or withheld by us, as full or partial payment of the exercise price of
stock options or to satisfy a participant's tax withholding obligations, to become available for issuance under the 2016 Plan.
-
-
Repricing and Reloading
Prohibited.
Shareholder approval is required for any repricing, replacement, or buyout of underwater awards. In addition, no new awards are
granted automatically upon the exercise or settlement of any outstanding award.
-
-
No Discount Awards; Maximum Term
Specified.
Stock options and stock appreciation rights must have an exercise price no less than the closing price per share on the date the award
is granted.
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-
-
Per-Participant Limits on
Awards.
The 2016 Plan limits the size of awards that may be granted during any one year to any one participant, and, pursuant to the Amendment,
separate limits on the size of awards that may be granted during any one year to non-employee directors.
-
-
Award Design
Flexibility.
Different kinds of awards may be granted under the 2016 Plan, giving us the flexibility to design our equity incentives to
complement the other elements of compensation and to support our attainment of strategic goals.
-
-
Performance-based Awards.
The
2016 Plan permits the grant of performance-based stock and cash-incentive awards that are payable only upon the attainment of specified performance goals.
-
-
No Dividends on Performance-based Awards Unless and Until Performance Goals Are
Met.
The 2016 Plan prohibits the payment of dividends or dividend equivalents on performance-based awards unless and until applicable performance
goals are met.
-
-
No Liberal Definition of Change in
Control.
The 2016 Plan's definition of a change in control transaction provides that any award benefits triggered by the transaction are
contingent upon the actual consummation of the transaction, not merely its approval by our Board or shareholders.
-
-
No Transfers for
Value.
Participants are not permitted to transfer awards for value under the 2016 Plan.
-
-
Awards Subject to Claw Back
Policy.
Awards granted under the 2016 Plan generally will be subject to any and all policies, guidelines, codes of conduct, or other agreement or
arrangement adopted by our Board with respect to the recoupment, recovery or clawback of compensation.
The
Compensation Committee has full discretion to determine the number of awards to be granted to participants under the 2016 Plan, subject to an annual limitation on the total number of
awards that may be granted to any one person. No awards have been granted contingent upon shareholder approval of the 2016 Plan.
Summary of the 2016 Plan
The following is a summary of certain material terms of the 2016 Plan, as proposed to be amended and restated. The summary is qualified in its
entirety by reference to the complete text of the amended and restated 2016 Plan, which is incorporated into this Proxy Statement by reference in its entirety and attached as Annex A
to this Proxy Statement.
Background and Purpose
The purpose of the 2016 Plan is to (i) promote our long-term financial interests by attracting and retaining management and other
personnel and key service providers with the training, experience and ability to enable them to make a substantial contribution to the success of our business; (ii) motivate management
personnel by means of incentives to achieve long-range goals; and (iii) further the alignment of interests of participants with those of our shareholders through opportunities for increased
share ownership in Aralez.
Administration
The Compensation Committee is the administrator of the 2016 Plan (the "Administrator"). At any time, the Board may serve as the
Administrator of the 2016 Plan, in lieu of, or in addition, to the Compensation Committee. Except as provided otherwise under the 2016 Plan, the Administrator has plenary authority to grant awards
pursuant to the terms of the 2016 Plan to eligible individuals, determine the types of awards and the number of shares to be covered by the awards, establish the terms and conditions for awards and
take all other actions necessary or desirable to carry out the purpose and intent of the 2016 Plan.
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The
Compensation Committee (or the Board) may delegate to officers and employees limited authority to perform administrative actions under the 2016 Plan to assist in its
administration, to the extent permitted by applicable law and stock exchange rules. This delegation of authority, however, may not extend to the exercise of discretion with respect to awards to
participants who are "covered employees" within the meaning of Section 162(m) of the Code or officers under Section 16 of the Exchange Act. With respect to any award to which
Section 16 of the Exchange Act applies, the Administrator shall consist of either the Board or the Compensation Committee, which committee shall consist of two or more directors, each of whom
is intended to be a "non-employee director" as defined in Rule 16b-3 of the Exchange Act and an "independent director" to the extent required by Nasdaq. With respect to any award that is
intended to be a qualified performance-based award, the Administrator shall consist of two or more directors, each of whom is intended to be an "outside director" as defined under
Section 162(m) of the Code. Any member of the Administrator who does not meet the foregoing requirements shall abstain from any decision regarding an award and shall not be considered a member
of the Administrator to the extent required to comply with Rule 16b-3 of the Exchange Act or Section 162(m) of the Code.
Eligibility and Participation
Participation in the 2016 Plan is generally open to all officers, employees and other individuals, including non-employee directors, who are
natural persons providing bona fide services to the Company or any of its subsidiaries. However, any individual whose services to the Company or any of its subsidiaries are limited to
capital-raising transactions, or the promotion and maintenance of a market for Aralez securities, are ineligible to participate in the 2016 Plan. Prospective officers, employees and other service
providers who have accepted offers to provide services to the Company may also participate in the 2016 Plan.
Shares Available
As of the original effective date of the 2016 Plan, a total of 6,281,167 Common Shares were reserved for issuance under the 2016 Plan
representing approximately 9.82% of the issued
and outstanding Common Shares (consisting of 2,131,963 Common Shares available under the 2010 Plan and 830,614 Common Shares available under the Amended and Restated Option Plan of
Tribute Pharmaceuticals Canada Inc. as of February 5, 2016; 1,018,590 Common Shares required to cover options granted in substitution of outstanding Tribute options; and
2,300,000 Common Shares approved for the 2016 Plan). As of the effective date of the 2016 Plan as amended and restated at the 2017 annual meeting of shareholders, a total of
4,301,315 Common Shares remained eligible for grant. As of December 31, 2017, a total of 6,286,184 Common Shares were subject to awards outstanding under the 2016 Plan
representing approximately 9.4% of the issued and outstanding Common Shares, and 4,759,085 Common Shares remained eligible for grant,, representing approximately 7.1% of the issued and
outstanding Common Shares. The share pool will be reduced by one share for each stock option or stock appreciation right granted under the 2016 Plan, and by 1.59 Common Shares for each stock
award, stock unit, performance share or other stock-based award granted under the 2016 Plan,
provided
that the share pool will not be reduced for awards
that are required to be paid in cash pursuant to their terms. The number of Common Shares available for issuance under the 2016 Plan will increase, on the relevant date, by one share for each stock
option or stock appreciation right that terminates, expires, or is cancelled, forfeited, exchanged or surrendered without having been exercised, and by 1.59 Common Shares for each stock award,
stock unit, performance share or other stock-based award that is forfeited. Shares tendered by a participant or withheld by us, as full or partial payment of the exercise price of stock options or to
satisfy a participant's tax withholding obligations, will not become available for issuance under the 2016 Plan.
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The
number and class of Common Shares subject to the 2016 Plan, the number and class of Common Shares subject to any numerical limit in the 2016 Plan, and the number, price and class of
Common Shares subject to awards will be adjusted in the event of a merger, consolidation, stock rights offering, statutory share exchange or similar event affecting Aralez or a stock dividend, stock
split, reverse stock split, separation, spinoff, reorganization, extraordinary dividend of cash or other property, share combination or subdivision, or recapitalization or similar event affecting our
capital structure that occurs at any time.
In
the event of a corporate transaction involving Aralez (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, or exchange of Common Shares), the Compensation Committee may make discretionary adjustments, including the cancellation of outstanding awards
for cash, securities, other property or a combination of the three and the substitution of cash, securities, other property, a combination of the three or equivalent awards of the surviving or
successor entity or its Aralez company.
Types of Awards
The 2016 Plan enables the grant of stock options, stock appreciation rights, stock awards, stock unit awards, performance shares, cash-based
performance units and other stock-based awards, each of which may be granted separately or in tandem with other awards. All awards made under the 2016 Plan may be subject to vesting and other
contingencies as determined by the Administrator and will be evidenced by agreements approved by the Administrator which set forth the terms and conditions of each award.
Stock Options.
Stock options entitle the participant, upon exercise, to purchase a specified number of Common Shares at a
specified price for a
specified period of time. The Administrator may grant incentive stock options and nonqualified stock options under the 2016 Plan. The exercise price for each stock option is determined by the
Administrator but will in no event be less than 100% of the Fair Market Value of the Common Shares on the grant date. The "Fair Market Value" means, if the principal market for our Common Shares is a
national securities exchange or an established securities market (e.g., the Nasdaq Stock Market or the Toronto Stock Exchange), the official closing price per Common Share for the regular
market session on the day of determination, or, if the principal market for our Common Shares is not a national securities exchange or an established securities market, but the Common Shares are
quoted by a national quotation system, the average of the highest bid and lowest asked prices for our common shares on the day of determination as reported on a national quotation system, or in the
absence of an established market for the stock or its quotation by a national quotation system, the value determined by the Administrator in good faith by the reasonable application of a reasonable
valuation method, which method may, but need not, include taking into account an appraisal of the fair market value of the Common Shares conducted by a nationally recognized appraisal firm selected by
the Administrator.
Any
stock options that are granted in the form of an incentive stock option will be intended to comply with the requirements of Section 422 of the Code. Only options granted to
employees qualify for incentive stock option treatment.
Each
stock option will expire at the time the Administrator determines on the grant date. No stock option will be exercisable later than the tenth anniversary of its grant, unless
required otherwise by applicable law. A stock option may be exercised in whole or in installments. Common Shares purchased upon the exercise of a stock option must be paid for in full at the time of
exercise in cash or such other consideration as determined by the Administrator.
Stock Appreciation Rights.
A stock appreciation right ("SAR") is the right to receive a payment equal to the excess of the Fair
Market Value of a
specified number of shares on the date the SAR is
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exercised
over the base price per share specified in the award agreement. The base price for each SAR cannot be less than 100% of the Fair Market Value of Common Shares on the grant date and the
exercise price of any tandem stock option to which the SAR is related, and the term of a SAR cannot be more than 10 years from the grant date, unless required otherwise by applicable law. At
the discretion of the Administrator, the payment upon a SAR exercise may be in cash, Common Shares or a combination of the two.
Prohibition on Repricing for Stock Options and SARs.
Except in connection with a corporate transaction involving Aralez
(including, without
limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of Common Shares), the
terms of stock options and SARs granted under the 2016 Plan may not be amended, after the date of grant, to reduce the exercise price of such stock options or SARs, nor may outstanding stock options
or SARs be canceled in exchange for (i) cash, (ii) stock options or SARs with an exercise price that is less than the exercise price of the original outstanding stock options or SARs, or
(iii) other awards, unless such action is approved by Aralez's shareholders.
Restricted Stock.
Awards of restricted stock are actual Common Shares that are issued to a participant, but that are subject to
forfeiture if the
participant does not remain employed by us for a certain period of time and/or if certain performance goals are not met. Except for these restrictions and any others imposed by the Administrator, the
participant will generally have all of the rights of a shareholder with respect to the restricted stock, including the right to vote the restricted stock upon the expiration of the restricted period,
but will not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of restricted stock before the risk of forfeiture lapses. Dividends declared payable on shares of restricted
stock that are granted subject to risk of forfeiture conditioned solely on continued service over a period of time will be paid either at the dividend payment date or deferred for payment to such
later date as determined by the Administrator, and may be paid in cash or as unrestricted Common Shares or may be reinvested in additional shares of restricted stock. Dividends declared payable on
shares of restricted stock that are granted subject to risk of forfeiture conditioned on satisfaction of performance goals will be held by us and made subject to forfeiture at least until the
applicable performance goal related to such shares of restricted stock has been satisfied.
Restricted Stock Units.
An award of RSUs represents a contractual obligation of Aralez to deliver to the participant a number of
Common Shares, an
amount in cash equal to the fair market value of the specified number of Common Shares subject to the award, or a combination of Common Shares and cash. Until Common Shares are issued to the
participant in settlement of stock units, the participant shall not have any rights of a shareholder of Aralez with respect to the stock units or the Common Shares issuable thereunder. Vesting of RSUs
may be subject to performance goals, the continued service of the participant or both. The Administrator may provide that dividend equivalents will be paid or credited with respect to RSUs, but such
dividend equivalents will be held by us and made subject to forfeiture at least until any applicable performance goal related to such RSUs has been satisfied.
Performance Shares and Performance Units.
An award of performance shares refers to Common Shares or stock units that are
expressed in terms of our
Common Shares, the issuance, vesting, lapse of restrictions or payment of which is contingent on performance as measured against predetermined objectives over a specified performance period. An award
of performance units refers to dollar-denominated units valued by reference to designated criteria established by the Administrator, other than our Common Shares, whose issuance, vesting, lapse of
restrictions or payment is contingent on performance as measured against predetermined objectives over a specified performance period. The applicable award agreement will specify whether performance
shares and performance units will be settled or paid in cash or Common Shares or a combination of both, or will reserve to the
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Administrator
or the participant the right to make that determination prior to or at the payment or settlement date.
The
Administrator will, prior to or at the time of grant, condition the grant, vesting or payment of, or lapse of restrictions on, an award of performance shares or performance units
upon (i) the attainment of performance goals during a performance period; or (ii) the attainment of performance goals and the continued service of the participant. The length of the
performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained will be conclusively
determined by the Administrator in the exercise of its absolute discretion. Performance goals may include minimum, maximum and target levels of performance, with the size of the award or payout of
performance shares or performance units or the vesting or lapse of restrictions with respect thereto based on the level attained. An award of performance shares or performance units will be settled as
and when the award vests or at a later time specified in the award agreement or in accordance with an election of the participant, if the Administrator so permits, that meets the requirements of
Section 409A of the Code.
Qualified Performance-Based Awards.
The Administrator may, prior to or at the time of grant, designate an award of restricted
stock, RSUs,
performance shares or performance units as a qualified performance-based award, if desired. For any award so designated as a qualified performance-based award, the Administrator will take steps to
ensure that the terms of the award are consistent with such designation. The Administrator may retain in an award agreement the discretion to reduce, but not to increase, the amount or number of
qualified performance-based awards which will be earned based on the achievement of performance goals. Achievement of the performance goals will be certified by a committee of outside directors,
within the meaning of Section 162(m) of the Code, before any payment is made under a qualified performance-based award.
If
full value awards are intended to qualify as performance-based compensation under Section 162(m) of the Code, the award agreement must specify a predetermined amount of cash or
Common Shares that may be earned by the covered employee to the extent that one or more predetermined performance goals based on the following specified performance metrics are attained within a
predetermined performance period:
-
-
Earnings or Profitability
Metrics:
any derivative of revenue; earnings/loss (gross, operating, net, or adjusted); earnings/loss before interest and taxes ("EBIT");
earnings/loss before interest, taxes, depreciation and amortization ("EBITDA"); profit margins; operating margins; expense levels or ratios; provided that any of the foregoing metrics may be adjusted
to eliminate the effect of any one or more of the following: interest expense, asset impairments or investment losses, early extinguishment of debt or stock-based compensation expense;
-
-
Return Metrics:
any derivative of
return on investment, assets, equity or capital (total or invested);
-
-
Investment Metrics:
relative
risk-adjusted investment performance; investment performance of assets under management;
-
-
Cash Flow Metrics:
any derivative
of operating cash flow; cash flow sufficient to achieve financial ratios or a specified cash balance; free cash flow; cash flow return on capital; net cash provided by operating activities; cash flow
per share; working capital;
-
-
Liquidity Metrics:
any derivative
of debt leverage (including debt to capital, net debt-to-capital, debt-to-EBITDA or other liquidity ratios);
-
-
Stock Price and Equity
Metrics:
any derivative of return on shareholders' equity; total shareholder return; stock price; stock price appreciation; market
capitalization; earnings/loss per share (basic or diluted) (before or after taxes); and
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-
-
Strategic Metrics:
product
research and development; completion of an identified special project; clinical trials; regulatory filings or approvals; patent application or issuance; manufacturing or process development; sales or
net sales; market share; market penetration; economic value added; customer service; customer satisfaction; inventory control; balance of cash, cash equivalents and marketable securities; growth in
assets; key hires; employee satisfaction; employee retention; business expansion; acquisitions, divestitures, joint ventures or financing; legal compliance or safety and risk reduction.
Performance
metrics may apply to an individual, one or more business units, divisions or affiliates or on an Aralez-wide basis. Performance metrics may be expressed in absolute terms,
relative to a base period or relative to the performance of one or more comparable companies, peer groups or an index covering multiple companies. Performance goals may be applied on a per share or
absolute basis and relative to one or more performance metrics, or any combination thereof, and may be measured pursuant to GAAP, non-GAAP or other objective standards in a manner consistent with
Aralez's or its subsidiary's established accounting policies, all as the Administrator shall determine at the time the performance goals for a performance period are established. The Administrator
may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to the manner in which one or more of the performance goals is to be calculated or measured to
take into account, or ignore, one or more of the following: (1) items related to a change in accounting principle; (2) items relating to financing activities; (3) expenses for
restructuring or productivity initiatives; (4) other non-operating items; (5) items related to acquisitions; (6) items attributable to the business operations of any entity
acquired by Aralez during the performance period; (7) items related to the sale or disposition of a business or segment of a business; (8) items related to discontinued operations that
do not qualify as a segment of a business under U.S. generally accepted accounting principles; (9) items attributable to any stock dividend, stock split, combination or exchange of stock
occurring during the performance period; (10) any other items of significant income or expense which are determined to be appropriate adjustments; (11) items relating to unusual or
extraordinary corporate transactions, events or
developments, (12) items related to amortization of acquired intangible assets; (13) items that are outside the scope of Aralez's core, on-going business activities; (14) changes
in foreign currency exchange rates; (15) items relating to changes in tax laws; (16) certain identified expenses (including, but not limited to, cash bonus expenses, incentive expenses
and acquisition-related transaction and integration expenses); (17) items relating to asset impairment charges; or (18) items relating to gains or unusual or nonrecurring events or
changes in applicable law, accounting principles or business conditions.
Other Stock-Based Awards.
The Administrator may from time to time grant to eligible individuals awards in the form of our Common
Shares or any other
award that is valued in whole or in part by reference to, or is otherwise based upon, Common Shares, including without limitation dividend equivalents and convertible debentures ("Other Stock-Based
Awards"). Other Stock-Based Awards in the form of dividend equivalents may be (i) awarded on a free-standing basis or in connection with another award other than a stock option or SAR,
(ii) paid currently or credited to an account for the participant, including the reinvestment of such credited amounts in common share equivalents, to be paid on a deferred basis, and
(iii) settled in cash or our Common Shares as determined by the Administrator;
provided
,
however
,
that dividend equivalents payable on Other Stock-Based Awards that are granted as a performance award shall, rather than be paid on a current basis, be accrued and made subject to forfeiture at least
until the applicable performance goal related to such Other Stock-Based Awards has been satisfied. Any such settlements, and any such crediting of dividend equivalents, may be subject to such
conditions, restrictions and contingencies as the Administrator may establish.
Minimum Restriction Period.
Under the 2016 Plan, as amended and restated, except as provided below, each award granted under the
2016 Plan (other
than a performance unit that cannot be paid in shares) will be subject to a minimum vesting period or minimum restriction period as follows: (i) each
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stock
option or SAR will be subject to a minimum vesting period of 12 months from the date of grant, (ii) each award of stock, stock units, performance shares, performance units payable
in shares and other stock-based awards ("Full Value Awards") granted to non-employee directors will be subject to a minimum restriction period of 12 months from the date of grant, and
(iii) each Full Value Award granted to a participant other than a non-employee director will be subject to a minimum restriction period of 12 months from the date of grant if vesting of
or lapse of restrictions on such award is based on the satisfaction of performance goals and a minimum restriction period of 36 months from the date of grant, applied in either pro rata
installments or a single installment, if vesting of or lapse of restrictions on such award is based solely on the participant's satisfaction of specified service requirements with us (provided that no
such Full Value Awards will vest or have its restrictions lapse during the first 12 months following the date of grant). If the grant of a performance award is conditioned on satisfaction of
performance goals, the performance period must not be less than 12 months' duration, but no additional minimum restriction period need apply to such award. The
minimum vesting period or minimum restriction period will not apply in the case of death or disability of a participant or in the event of a change in control. Awards that result in the issuance of an
aggregate of up to 5% of the share pool under the 2016 Plan may be granted without regard to such minimum vesting period or minimum restriction period.
Award Limitations
The following limitations on awards are imposed under the 2016 Plan.
-
-
ISO Award Limit.
The maximum number of Common Shares that may be issued in
connection with awards granted under the 2016 Plan that are intended to qualify as incentive stock options under Section 422 of the Code is equal to the number of Common Shares available under
the 2016 Plan.
-
-
Insider Limit.
The maximum number of Common Shares that may (a) be
issued to insiders (as defined in the Securities Act (Ontario)) within any one year period and (b) issuable to insiders (as defined in the
Securities
Act
(Ontario)) at any time under the 2016 Plan or when combined with all of Aralez's other security based compensation arrangements, cannot exceed 10% of the issued and
outstanding Common Shares.
-
-
Individual Limits:
-
-
Appreciation Awards.
The maximum number of Common Shares that may be made
subject to awards granted under the 2016 Plan during a calendar year to any one person in the form of stock options or SARs is, in the aggregate, 1,000,000 Common Shares, which represents 1.5%
of the issued and outstanding Common Shares.
-
-
Stock-Based Performance Awards.
The maximum number of Common Shares that
may be made subject to awards granted under the 2016 Plan during a calendar year to any one person in the form of performance shares is, in the aggregate, 1,000,000 Common Shares, which
represents 1.5% of the issued and outstanding Common Shares. If such performance shares will be settled in cash, the maximum cash amount payable thereunder is the amount equal to the number of
performance shares to be settled in cash multiplied by the closing price of the Common Shares, as determined as of the payment date.
-
-
Cash-Based Performance Units.
In connection with awards granted under the
2016 Plan during a calendar year to any one person in the form of cash-based performance units, the maximum cash amount payable under such performance units is $5,000,000.
-
-
Awards to Non-Employee Directors.
As provided by the Amendment, the maximum
number of Common Shares that may be made subject to awards granted under the 2016 Plan during a calendar year to any non-employee director (i) in the form of stock options or SARs is, in
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the
aggregate, 100,000 Common Shares, and (ii) in the form of restricted shares or RSUs is, in the aggregate, 50,000 Common Shares.
-
-
Adjustments to Limits during Initial Year of Service.
Each of the
individual limits set forth above are multiplied by two when applied to awards granted to any individual during the calendar year in which such individual first commences service with us.
-
-
Adjustments for Multi-year Performance Periods.
The individual limits set
forth above for stock-based performance awards are multiplied by the number of calendar years over which the applicable performance period spans (in whole or in part), if the performance period
is longer than 12 months' duration.
If
any award is terminated, surrendered or canceled in the same year as the year in which it is granted, that award nevertheless will continue to be counted against the individual limits
set forth above for the calendar year in which it was granted.
Assignability
Awards granted under the 2016 Plan shall not be subject in any manner to alienation, anticipation, sale, transfer, assignment, pledge, or
encumbrance, except as otherwise determined by the Administrator; provided, however, that this restriction shall not apply to the Common Shares received in connection with an award after the date that
the restrictions on transferability of such shares set forth in the applicable award agreement have lapsed.
Termination of Service
Except as provided in the applicable award agreement or otherwise determined by the Administrator, and subject to the minimum vesting period or
minimum restriction period described above, upon termination of service (as defined in the 2016 Plan):
-
-
Stock options or stock appreciation rights shall be forfeited, to the extent stock options or stock appreciation rights are not vested and
exercisable;
-
-
During the applicable restriction period, restricted stock and any accrued but unpaid dividends that are at that time subject to restrictions
shall be forfeited; and
-
-
During the applicable deferral period or portion thereof to which forfeiture conditions apply, or upon failure to satisfy any other conditions
precedent to the delivery of Common Shares or cash to which RSUs relate, all RSUs and any other accrued but unpaid dividend equivalents with respect to such restricted stock units that are then
subject to deferral or restriction shall be forfeited.
Change in Control
In the event of a change in control (as defined in the 2016 Plan) of Aralez, outstanding awards will terminate upon the effective time of
the change in control unless provision is made for the continuation, assumption or substitution of awards by the surviving or successor entity or its parent. Unless an award agreement says otherwise,
the following will occur with respect to awards that terminate in connection with a change in control of Aralez:
-
-
stock options and SARs, whether vested or unvested, will become fully exercisable and holders of these awards will be permitted immediately
before the change in control to exercise them;
-
-
restricted stock and RSUs with time-based vesting (i.e., not subject to achievement of performance goals) will become fully vested
immediately before the change in control, and RSUs will be settled as promptly as is practicable in accordance with applicable law; and
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-
-
restricted stock, RSUs, performance shares, and performance units that vest based on the achievement of performance goals will become fully
vested and earned based on the target performance level as to the performance goals, such that 100% of the target award is earned as of the date of the change of control; and the RSUs and performance
units will be settled as promptly as is practicable in accordance with applicable law.
Duration, Amendment and Termination
The 2016 Plan will terminate on the earlier of (i) the earliest date as of which all awards granted under the 2016 Plan have been
satisfied in full or terminated and no shares approved for issuance under the 2016 Plan remain available to be granted under new awards, or (ii) the tenth anniversary of date the 2016 Plan, as
amended and restated, is approved by our shareholders.
The
Administrator may amend, alter or discontinue the 2016 Plan, but no amendment, alteration or discontinuation will be made that would materially impair the rights of a participant
with respect to a previously granted award without his or her consent, except such an amendment made to comply with applicable law or rule of any securities exchange or market on which our Common
Shares are listed or admitted for trading or to prevent adverse tax or accounting consequences to Aralez or the participant. In no event, however, will an amendment be made without the approval of our
shareholders to the extent such amendment would (i) materially increase the benefits accruing to participants under the 2016 Plan, (ii) increase the number of shares that may be issued
under the 2016 Plan or to a participant, (iii) materially expand the eligibility for participation in the 2016 Plan, (iv) eliminate or modify the prohibition on repricing of stock
options and SARs, (v) lengthen the maximum term or lower the minimum exercise price or base price permitted for stock options and SARs, (vi) modify the prohibition on the issuance of
reload or replenishment options, (vii) amend the amendment provisions in the 2016 Plan, or (viii) amend the 2016 Plan to remove or exceed the 10% insider participation limit.
New Plan Benefits Table
Awards that may be granted to eligible persons under the 2016 Plan are subject to the discretion of the Compensation Committee, so we cannot
currently determine the benefits or amounts that will be received or allocated to our current named executive officers, executive officers as a group, directors who are not executive officers as a
group, and employees, including all current officers who are not executive officers, as a group. Consequently, no new plan benefits table is included in this Proxy Statement.
U.S. Federal Income Tax Consequences
The following is a general summary of the United States federal income tax treatment of certain awards, which are authorized for grant
under the 2016 Plan, based upon the provisions of the Code as of the date of this Proxy Statement. Non-U.S. residents should consult with their tax adviser regarding the specific tax
consequences as a result of the grant of awards under the 2016 Plan in their country of origin. This summary is not intended to be exhaustive and the exact tax consequences to any award holder depend
upon his or her particular circumstances and other facts. Participants in the 2016 Plan should consult their tax advisor with respect to any state, local and non-U.S. tax considerations or
relevant federal tax implications of awards granted under the 2016 Plan.
Incentive Stock Options.
An option holder recognizes no taxable income for regular income tax purposes as a result of the grant
or exercise of an
incentive stock option that qualifies under Section 422 of the Code. Option holders who do not dispose of their shares within two years of the date that the option was granted and within one
year following the exercise of the option, normally recognize a capital gain or loss on the sale of shares equal to the difference, if any, between the sale
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price
and the purchase price of the shares. If an option holder satisfies these holding periods, on the sale of shares, we are not entitled to any deduction for federal income tax purposes. Where an
option holder disposes of shares within two years after the grant date of those options or within one year after the date of exercise (a "disqualifying disposition"), the difference between the
fair market value of the shares on the exercise date and the option exercise price (which is not to exceed the gain realized on the sale, if the disposition is a transaction with respect to which a
loss, if sustained, would be recognized) is taxed as ordinary income at the time of disposition. Any gain in excess of that amount is a capital gain. If a loss is recognized, there is no ordinary
income, and such loss is a capital loss. Any ordinary income recognized by the option holder on a disqualifying disposition of shares generally results in a deduction by us for federal income
tax purposes.
Nonqualified Stock Options.
Options not designated or qualifying as incentive stock options are nonqualified stock options
having no special tax
status. An option holder generally recognizes no taxable income as a result of the grant of the option. On the exercise of a nonqualified stock option,
the option holder normally recognizes ordinary income in the amount of the difference between the option exercise price and the fair market value of the shares on the exercise date. Where the option
holder is an employee, such ordinary income generally is subject to withholding of income and employment taxes. On the sale of shares acquired by the exercise of a nonqualified stock option, any gain
or loss (based on the difference between the sale price and the fair market value on the exercise date), is taxed as a capital gain or loss. No tax deduction is available to us with respect to the
grant of a nonqualified stock option or the sale of the stock acquired pursuant to such grant. We should generally be entitled to a deduction equal to the amount of ordinary income recognized by the
option holder as a result of the exercise of a nonqualified stock option.
Restricted Stock and RSUs.
The fair market value of any shares and any cash received by a participant in connection with
restricted stock or RSUs are
generally includible in the participant's ordinary income. In the case of restricted stock, this amount is includible in the participant's income when shares vest, unless the participant has filed an
election with the IRS to include the fair market value of the shares in income as of the date the award was granted. In the case of RSUs, generally, the value of any cash and the fair market value of
any shares received by a participant are includible in income when the awards are paid. Any dividends or dividend equivalents paid on unvested restricted stock or RSUs are also ordinary income for
participants.
Proposal 3: Vote Required
A majority of the votes duly cast in person or by proxy by the shareholders at the Meeting is required to approve the Amendment to the
2016 Plan.
Shareholders
will be asked at the Meeting to approve the following resolution pursuant to this Proposal 3:
Whereas
the Board of Directors of the Aralez Pharmaceuticals Inc. (the "Company") approved on May 7, 2018 the Amendment to and the restatement of the Company's 2016 Amended and
Restated Long-Term Incentive Plan (the "2016 Plan") as described in the Company's definitive proxy statement for the 2018 Annual Meeting of Shareholders in order to, among
other things:
-
1.
-
Adopt
annual limits on the amount of awards that may be granted to non-employee directors of Aralez during a calendar year under the 2016 Plan.
Be
it resolved that:
-
1.
-
The
annual limits on the amount of awards that may be granted to non-employee directors of Aralez during a calendar year under the 2016 Plan is adopted; and
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-
2.
-
Any
director or officer of the Company be and is hereby authorized to do such things and to sign, execute and deliver all documents that such director and officer
may, in their discretion, determined to be necessary in order to give full effect to the intent and purpose of this resolution.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE AMENDED AND RESTATED 2016 PLAN.
Unless a proxy specifies that the Common Shares it represents should be voted against the approval of the Amendment to the Amended and
Restated 2016 Plan or otherwise voted in accordance with the specification in the proxy, the Named Proxies intend to vote FOR the approval of the Amendment to the Amended and Restated
2016 Plan.
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THE MEETING AND SHAREHOLDER PROPOSALS
Q: What happens if additional proposals are presented at
the Meeting?
-
A:
-
Other than the four proposals described in this Proxy Statement, we do not currently expect any matters to be
presented for a vote at the Meeting. If you grant a proxy, the persons named as proxy holders will have the discretion to vote your Common Shares on any additional matters properly presented for a
vote at the Meeting. If for any unforeseen reason any of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or
candidates as may be nominated by the Board.
Q: May I propose nominees for election to the Board at next
year's Annual Meeting of Shareholders?
-
A:
-
Yes, our Articles establish an advance notice procedure for shareholders to make nominations for the position of
director at an annual meeting of shareholders. Director nominee proposals for the 2019 Annual Meeting of Shareholders will not be considered timely unless such proposals are received by us no less
than 30 days before the date of the 2019 Annual Meeting of Shareholders in accordance with our Articles; provided, however, that if the 2019 Annual Meeting of Shareholders is held on a date
that is less than 50 days after the date on which the first public announcement of the date of the annual meeting is made, notice may be made not later than the close of business on the
10
th
day following such public announcement. Any written notice delivered to the Company to nominate a director to the Board must set forth the information required by
our Articles.
Q: May I propose actions for consideration at next year's
Annual Meeting of Shareholders?
-
A:
-
Yes, you may submit proposals for consideration at next year's Annual Meeting of Shareholders. The Company is subject
to both the rules of the SEC under the Exchange Act and the provisions of the BCBCA with respect to shareholder proposals. As clearly indicated in the rules of the SEC under the Exchange Act and under
the BCBCA, simply submitting a shareholder proposal does not guarantee its inclusion in the proxy materials.
In
order for a shareholder proposal to be considered for inclusion in the proxy statement in reliance on Rule 14a-8 of the Exchange Act and presented at the 2019 Annual Meeting of Shareholders,
it must be in such form as is required by the rules and regulations promulgated by the SEC and received by us not less than 120 calendar days before May 18, 2019 (or by
January 18, 2019).
Shareholder
proposals may also be submitted pursuant to the applicable provisions of the BCBCA for inclusion in the Company's proxy materials for the 2019 Annual Meeting of Shareholders. Shareholder
proposals submitted pursuant to the BCBCA must be received by March 29, 2019, which is three months before the anniversary date of the Meeting.
|
|
|
|
|
By Order of the Board of Directors
|
|
|
May 18, 2018
|
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Annex A
ARALEZ PHARMACEUTICALS INC.
SECOND AMENDED AND RESTATED 2016 LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
A-i
Table of Contents
A-ii
Table of Contents
1. History; Effective Date.
ARALEZ PHARMACEUTICALS INC., a company formed under the laws of the Province of British Columbia, Canada
("
Aralez
"), has established the ARALEZ PHARMACEUTICALS SECOND AMENDED AND RESTATED 2016 LONG-TERM INCENTIVE PLAN, as set forth herein, and as the same
may be amended from time to time (the "
Plan
"). The Plan was originally adopted by the Board of Directors of Aralez
(the "
Board
") on December 11, 2015, amended and restated on March 8, 2017, and this second amendment and restatement was adopted by
the Board on May 7, 2018. The Plan became effective on February 5, 2016, upon the consummation of the transactions contemplated by the Merger Agreement
(the "
Original Effective Date
"), and this amended and restated Plan became effective as of the on date it was approved by the shareholders
of Aralez.
2. Purposes of the Plan.
The Plan is designed to:
(a) promote
the long-term financial interests and growth of Aralez and its Subsidiaries (together, the "
Company
") by
attracting and retaining management and other personnel and key service providers with the training, experience and ability to enable them to make a substantial contribution to the success of the
Company's business;
(b) motivate
management personnel by means of growth-related incentives to achieve long-range goals; and
(c) further
the alignment of interests of Participants with those of the shareholders of Aralez through opportunities for increased stock or stock-based ownership
in Aralez.
Toward
these objectives, the Administrator may grant stock options, stock appreciation rights, stock awards, stock units, performance shares, performance units, and other stock-based
awards to eligible individuals on the terms and subject to the conditions set forth in the Plan.
3. Terminology.
Except as otherwise specifically provided in an Award Agreement, capitalized words and phrases used in the Plan or an Award Agreement shall have the meaning set
forth in the glossary at Section 17 of the Plan or as defined the first place such word or phrase appears in the Plan.
4. Administration.
(a)
Administration of the Plan.
The Plan shall be administered by the Administrator.
(b)
Powers of the Administrator.
The Administrator shall, except as otherwise
provided under the Plan, have plenary authority, in its sole and absolute discretion, to grant Awards pursuant to the terms of the Plan to Eligible Individuals and to take all other actions necessary
or desirable to carry out the purpose and intent of the Plan. Among other things, the Administrator shall have the authority, in its sole and absolute discretion, subject to the terms and conditions
of the Plan to:
(i) determine
the Eligible Individuals to whom, and the time or times at which, Awards shall be granted;
(ii) determine
the types of Awards to be granted any Eligible Individual;
(iii) determine
the number of Common Shares to be covered by or used for reference purposes for each Award or the value to be transferred pursuant to any Award;
(iv) determine
the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without
limitation, (A) the
A-1
Table of Contents
purchase
price of any Common Shares, (B) the method of payment for shares purchased pursuant to any Award, (C) the method for satisfying any tax withholding obligation arising in
connection with any Award, including by the withholding or delivery of Common Shares, (D) subject to Section 5(f) and 7(b), the timing, terms and conditions of the exercisability,
vesting or payout of any Award or any shares acquired pursuant thereto, (E) the Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained,
(F) the time of the expiration of any Award, (G) the effect
of the Participant's Termination of Service on any of the foregoing, and (H) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto as the
Administrator shall consider to be appropriate and not inconsistent with the terms of the Plan;
(v) subject
to Sections 7(f), 7(k), 10(c) and 15, modify, amend or adjust the terms and conditions of any Award;
(vi) subject
to Section 7(b), accelerate or otherwise change the time at or during which an Award may be exercised or becomes payable and waive or accelerate
the lapse, in whole or in part, of any restriction, condition or risk of forfeiture with respect to such Award;
provided
,
however
, that, except in
connection with death, disability or a Change in Control, no such change, waiver or acceleration shall be made with respect to
a Qualified Performance-Based Award if the effect of such action would cause the Award to fail to qualify for the Section 162(m) Exemption or shall be made to any Award that is considered
"deferred compensation" within the meaning of Section 409A of the Code if the effect of such action is inconsistent with Section 409A of the Code;
(vii) except
for participants who receive their stock options by virtue of their employment in Canada, determine whether an Award will be paid or settled in cash, Common
Shares, or in any combination thereof and whether, to what extent and under what circumstances cash or Common Shares payable with respect to an Award shall be deferred either automatically or at the
election of the Participant;
(viii) for
any purpose, including but not limited to, qualifying for preferred or beneficial tax treatment, accommodating the customs or administrative challenges or
otherwise complying with the tax, accounting or regulatory requirements of one or more jurisdictions, adopt, amend, modify, administer or terminate sub-plans, appendices, special provisions or
supplements applicable to Awards regulated by the laws of a particular jurisdiction, which sub-plans, appendices, supplements and special provisions may take precedence over other provisions of the
Plan, and prescribe, amend and rescind rules and regulations relating to such sub-plans, supplements and special provisions;
(ix) establish
any "blackout" period, during which transactions affecting Awards may not be effectuated, that the Administrator in its sole discretion deems necessary
or advisable;
(x) determine
the Fair Market Value of Common Shares or other property for any purpose under the Plan or any Award;
(xi) administer,
construe and interpret the Plan, Award Agreements and all other documents relevant to the Plan and Awards issued thereunder, and decide all other matters to
be determined in connection with an Award;
(xii) establish,
amend, rescind and interpret such administrative rules, regulations, agreements, guidelines, instruments and practices for the administration of the Plan
and for the conduct of its business as the Administrator deems necessary or advisable;
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(xiii) correct
any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent the
Administrator shall consider it desirable to carry it into effect; and
(xiv) specify
that vesting conditions in respect of Awards shall not extend beyond applicable limitations such that the Award complies at all times with the exception in
paragraph (k) of the definition of "salary deferral arrangement" in subsection 248(1) of the Income Tax Act (Canada) or comparable legislation of any jurisdiction; and
(xv) otherwise
administer the Plan and all Awards granted under the Plan.
(c)
Delegation of Administrative Authority.
The Administrator may designate officers
or employees of the Company to assist the Administrator in the administration of the Plan and, to the extent permitted by applicable law and stock exchange rules, the Administrator may delegate to
officers or other employees of the Company the Administrator's duties and powers under the Plan, subject to such conditions and limitations as the Administrator shall prescribe, including without
limitation the authority to execute agreements or other documents on behalf of the Administrator; provided, however, that such delegation of authority shall not extend to the granting of, or exercise
of discretion with respect to, Awards to Eligible Individuals who are "covered employees" within the meaning of Section 162(m) of the Code or officers under Section 16 of the
Exchange Act.
(d)
Non-Uniform Determinations.
The Administrator's determinations under the Plan
(including without limitation, determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the Award Agreements evidencing
such Awards, and the ramifications of a Change in Control upon outstanding Awards) need not be uniform and may be made by the Administrator selectively among Awards or persons who receive, or are
eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.
(e)
Limited Liability; Advisors.
To the maximum extent permitted by law, no member
of the Administrator shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder. The Administrator may employ counsel, consultants, accountants,
appraisers, brokers or other persons. The Administrator, Aralez, and the officers and directors of Aralez shall be entitled to rely upon the advice, opinions or valuations of any such persons.
(f)
Indemnification.
To the maximum extent permitted by law, by Aralez's Memorandum
and Articles of Association, and by any directors' and officers' liability insurance coverage which may be in effect from time to time, the members of the Administrator and any agent or delegate of
the Administrator who is a director, officer or employee of Aralez or an Affiliate shall be indemnified by Aralez against any and all liabilities and expenses to which they may be subjected by reason
of any act or failure to act with respect to their duties on behalf of the Plan.
(g)
Effect of Administrator's Decision.
All actions taken and determinations made
by the Administrator on all matters relating to the Plan or any Award pursuant to the powers vested in it hereunder shall be in the Administrator's sole and absolute discretion, unless in
contravention of any express term of the Plan, including, without limitation, any determination involving the appropriateness or equitableness of any action. All determinations made by the
Administrator shall be conclusive, final and binding on all parties concerned, including Aralez, its shareholders, any Participants and any other employee, consultant, or director of Aralez and its
Affiliates, and their respective successors in interest. No member of the Administrator, nor any director, officer, employee or representative of Aralez shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or Awards.
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5. Shares Issuable Pursuant to Awards.
(a)
Share Pool.
As of the Effective Date, the number of Common Shares issuable
pursuant to Awards that may be granted under the Plan (the "
Share Pool
") shall be equal to the sum of (i) 6,600,000 Common Shares plus
(ii) the number of unallocated Common Shares available for issuance as of the Original Effective Date under the POZEN, Inc. 2010 Omnibus Equity Compensation Plan that are not then
subject to outstanding Awards, and (iii) the number of unallocated Common Shares available for issuance as of the Original Effective Date under the Amended and Restated Option Plan of Tribute
Pharmaceuticals Canada Inc. ("
Tribute
") that are not
then subject to outstanding Awards and (iv) the number of Common Shares required to cover each stock option granted in substitution of stock options held by employees of Tribute in connection
with the pending business combination between Tribute and Aralez.
(b)
Adjustments to Share Pool.
On and after the Effective Date, the Share Pool
shall be adjusted, in addition to any adjustments to be made pursuant to Section 10 of the Plan, as follows:
(i) The
Share Pool shall be reduced, on the date of grant, by one share for each stock option or stock appreciation right granted under the Plan and by 1.59 shares
for each stock award, stock unit, Performance Share and/or Other Stock-Based Award granted under the Plan; provided that Awards that are valued by reference to Common Shares but are required to be
paid in cash pursuant to their terms shall not reduce the Share Pool;
(ii) If
and to the extent options or stock appreciation rights originating from the Share Pool terminate, expire, or are canceled, forfeited, exchanged, or surrendered
without having been exercised, or if any stock awards, stock units, Performance Shares and/or Other Stock-Based Awards are forfeited, the Common Shares subject to such Awards shall again be available
for Awards under the Share Pool, and shall increase the Share Pool by one share for each stock option or stock appreciation right and 1.59 shares for each stock award, stock unit, Performance
Share and/or Other Stock-Based Award issued in connection with such Award or by which the Award is valued by reference;
(iii) Notwithstanding
the foregoing, the following Common Shares shall not become available for issuance under the Plan: (A) shares tendered by Participants, or
withheld by the Company, as full or partial payment to the Company upon the exercise of stock options granted under the Plan; (B) shares reserved for issuance upon the grant of stock
appreciation rights, to the extent the number of reserved shares exceeds the number of shares actually issued upon the exercise of the stock appreciation rights; and (C) shares withheld by, or
otherwise remitted to, the Company to satisfy a Participant's tax withholding obligations upon the lapse of restrictions on stock awards or the exercise of stock options or stock appreciation rights
granted under the Plan.
(c)
Individual Limits.
Subject to adjustment as provided in Section 10 of
the Plan:
(i) the
maximum number of Common Shares that may be made subject to Awards granted under the Plan during a calendar year to any one person in the form of stock options or
stock appreciation rights is, in the aggregate, 1,000,000 shares;
(ii) the
maximum number of Common Shares that may be made subject to Awards granted under the Plan during a calendar year to any one person in the form of Performance Awards
is, in the aggregate, 1,000,000 shares, and
(iii) in
connection with Awards granted under the Plan during a calendar year to any one person in the form of Performance Shares, the maximum cash amount payable thereunder
is the amount equal to the number of shares made subject to the Award, as limited by Section 5(c)(ii), multiplied by the Fair Market Value as determined as of the payment date;
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(iv) in
connection with Awards granted under the Plan during a calendar year to any one person in the form of Performance Units, the maximum cash amount payable under such
Performance Units is $5,000,000;
(v) the
maximum number of Common Shares that may be made subject to Awards granted under the Plan during a calendar year to any non-employee director of Aralez in the form
of stock options or stock appreciation rights is, in the aggregate, 100,000; and
(vi) the
maximum number of Common Shares that may be made subject to Awards granted under the Plan during a calendar year to any non-employee director of Aralez in the form
of any Award other than stock options or stock appreciation rights is, in the aggregate, 50,000;
provided, however,
that each of the limitations set forth above in clauses (i), (ii) and (iii) of this Section 5(c) shall be
multiplied by two when applied to Awards granted to any individual during the calendar year in which such individual first commences service with Aralez or a Subsidiary; and
provided, further,
that the
limitations set forth above in clauses (ii) and (iii) of this Section 5(c) shall be multiplied by the
number of calendar years over which the applicable Performance Period spans (in whole or in part), if the Performance Period is longer than 12 months' duration, when applied to
Performance Awards. If an Award is terminated, surrendered or canceled in the same year in which it was granted, such Award nevertheless will continue to be counted against the limitations set forth
above in this Section 5(c) for the calendar year in which it was granted.
(d)
ISO Limit.
Subject to adjustment pursuant to Section 10 of the Plan, the
maximum number of Common Shares that may be issued pursuant to stock options granted under the Plan that are intended to qualify as Incentive Stock Options within the meaning of
Section 422 of the Code shall be equal to the number of shares in the Share Pool as of the Effective Date of the Plan.
(e)
Source of Shares.
The Common Shares with respect to which Awards may be made
under the Plan shall be shares authorized for issuance under Aralez's memorandum and articles of association but unissued, or issued and reacquired, including without limitation shares purchased in
the open market or in private transactions.
(f)
Stock Exchange Limits.
(i) The
number of Common Shares subject to Awards granted to any one Participant shall be determined by the Board, but no one Participant shall be granted Awards which
exceed, in aggregate, the maximum number permitted by the Toronto Stock Exchange, or such other stock exchange on which Aralez's securities are listed for trade from time to time
(the "
Exchange
").
(ii) Subject
to the aggregate limit and adjustment provisions in Section 5 of this Plan, the aggregate number of Common Shares that may be issued pursuant to the
exercise of Awards under the Plan and all other security based compensation arrangements (as such term is defined in section 613 of the TSX Company Manual) of the Company are subject to
the following additional limitations:
(A) in
the aggregate, no more than 10% of the issued and outstanding Common Shares (on a non-diluted basis) may be reserved at any time for insiders
(as defined in the
Securities Act
(Ontario) and includes an associate and Affiliate, as defined in the
Securities
Act
(Ontario) ("
Insider(s)
") under the Plan, together with all other security based compensation arrangements of the
Company; and
(B) the
number of securities of the Company issued to Insiders, within any one year period, under all security based compensation arrangements, cannot exceed 10% of the
issued and outstanding Common Shares.
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6. Participation.
Participation in the Plan shall be open to all Eligible Individuals, as may be selected by the Administrator from time to time. The Administrator may also grant
Awards to Eligible Individuals in connection with hiring, recruiting or otherwise, prior to the date the individual first performs services for Aralez or a Subsidiary;
provided
,
however
, that such Awards shall not become vested or exercisable, and no shares shall be
issued to such individual, prior to the date the individual first commences performance of such services.
7. Awards.
(a)
Awards, In General.
The Administrator, in its sole discretion, shall establish
the terms of all Awards granted under the Plan consistent with the terms of the Plan. Awards may be granted individually or in tandem with other types of Awards, concurrently with or with respect to
outstanding Awards. All Awards are subject to the terms and conditions of the Plan and as provided in the Award Agreement, which shall be delivered to the Participant receiving such Award upon, or as
promptly as is reasonably practicable following, the grant of such Award. Unless otherwise specified by the Administrator, in its sole discretion, or otherwise provided in the Award Agreement, an
Award shall not be effective unless the Award Agreement is signed or otherwise accepted by Aralez and the Participant receiving the Award (including by electronic delivery and/or electronic
signature). Unless the Administrator determines otherwise, any failure by the Participant to sign and return the Award Agreement within such period of time following the granting of the Award as the
Administrator shall prescribe shall cause such Award to the Participant to be null and void. The Administrator may direct that any stock certificate evidencing shares issued pursuant to the Plan shall
bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan.
(b)
Minimum Vesting/Restriction Period.
Except as provided below and
notwithstanding any provision of the Plan to the contrary (but subject to Section 11 of the Plan), each Award granted under the Plan (other than a Performance Unit that cannot be paid in
Common Shares) will be subject to a minimum vesting period or minimum Restricted Period as follows: (i) beginning on the Effective Date, each stock option and stock appreciation right granted
under the Plan shall be subject to a minimum vesting period of 12 months from the date of grant, (ii) each Full Value Award granted under the Plan to a non-employee director shall be
subject to a minimum Restriction Period of 12 months from the date of grant, and (iii) each Full Value Award granted under the Plan to an Eligible Employee who is not a non-employee
director shall be subject to (A) a minimum Restriction Period of 12 months from the date of grant if vesting of or lapse of restrictions on such Award is based on the satisfaction of
Performance Goals and (B) a minimum Restriction Period of
36 months from the date of grant, applied in either pro rata installments or a single installment, if vesting of or lapse of restrictions on such Award is based solely on the
Participant's satisfaction of specified service requirements with the Company (provided that no portion of the Full Value Award shall vest or have its restrictions lapse during the first
12 months following the date of grant). If the grant of a Performance Award is conditioned on satisfaction of Performance Goals, the Performance Period shall not be less than 12 months'
duration, but no additional minimum Restriction Period need apply to such Award. The minimum vesting period or minimum Restriction Period shall not apply in the case of death or disability of a
Participant or in the event of a Change in Control. Notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to 5% of the Share Pool as set forth in Section 5(a)
may be granted without regard to such minimum vesting period or minimum Restriction Period.
(c)
Stock Options.
(i)
Grants.
A stock option means a right to purchase a specified number of Common Shares from Aralez at a
specified price during a specified period of time. The Administrator may
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from
time to time grant to Eligible Individuals Awards of Incentive Stock Options or Nonqualified Options;
provided
,
however
, that Awards of Incentive Stock
Options shall be limited to employees of Aralez or of any current or hereafter existing "parent corporation" or
"subsidiary corporation," as defined in Sections 424(e) and 424(f) of the Code, respectively, of Aralez, and any other Eligible Individuals who are eligible to receive Incentive Stock
Options under the provisions of Section 422 of the Code. No stock option shall be an Incentive Stock Option unless so designated by the Administrator at the time of grant or in the applicable
Award Agreement.
(ii)
Exercise.
Subject to the limitations set forth in Section 7(b), stock options shall be exercisable
at such time or times and subject to such terms and conditions as shall be determined by the Administrator;
provided, however,
that Awards of stock
options may not have a term in excess of ten years' duration unless required otherwise by applicable law. The exercise price per share subject to a stock option granted under the Plan shall not be
less than the Fair Market Value of one Common Share on the date of grant of the stock option, except as provided under applicable law or with respect to stock options that are granted in substitution
of similar types of awards of a company acquired by Aralez or a Subsidiary or with which Aralez or a Subsidiary combines (whether in connection with a corporate transaction, such as a merger,
combination, consolidation or acquisition of property or stock, or otherwise) to preserve the intrinsic value of such awards. Should the expiry date of a stock option fall within a period during which
the relevant Participant is prohibited from exercising a Nonqualified
Option due to trading restrictions imposed by the Company pursuant to any policy of the Company respecting restrictions on trading that is in effect at that time (a "blackout period") or within
nine Business Days following the expiration of a blackout period, such expiry date of the Nonqualified Option shall be automatically extended without any further act or formality to that date which is
the tenth Business Day after the end of the blackout period, such tenth Business Day to be considered the expiry date for such Nonqualified Option for all purposes under the Plan. The ten Business Day
period referred to in this paragraph may not be extended by the Board.
(iii)
Termination of Service.
Subject to the limitations set forth in Section 7(b), except as provided in
the applicable Award Agreement or otherwise determined by the Administrator, to the extent stock options are not vested and exercisable, a Participant's stock options shall be forfeited upon his or
her Termination of Service
provided
that, subject to the limitations set forth in Section 7(b), the Administrator may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case, that vesting or forfeiture conditions relating to stock options will be waived in whole or in part in the event of
terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of stock options.
(iv)
Additional Terms and Conditions.
The Administrator may, by way of the Award Agreement or otherwise,
determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock options,
provided
they are not inconsistent with
Section 7(b) or any other section of the Plan.
(d)
Limitation on Reload Options.
The Administrator shall not grant stock options
under this Plan that contain a reload or replenishment feature pursuant to which a new stock option would be granted automatically upon receipt of delivery of Common Shares to Aralez in payment of the
exercise price or any tax withholding obligation under any other stock option.
(e)
Stock Appreciation Rights.
(i)
Grants.
The Administrator may from time to time grant to Eligible Individuals Awards of stock appreciation
rights. A stock appreciation right entitles the Participant to receive, subject to the provisions of the Plan and the Award Agreement, a payment having an aggregate value equal to the product of
(i) the excess of (A) the Fair Market Value on the exercise date of one Common Share over (B) the base price per share specified in the Award Agreement, times (ii) the
number
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of
shares specified by the stock appreciation right, or portion thereof, which is exercised. The base price per share specified in the Award Agreement shall not be less than the lower of the Fair
Market Value on the date of grant or the exercise price of any tandem stock option to which the stock appreciation right is related, or with respect to stock appreciation rights that are granted in
substitution of similar types of awards of a company acquired by Aralez or a Subsidiary or with which Aralez or a Subsidiary combines (whether in connection with a corporate transaction, such as a
merger, combination, consolidation or acquisition of property or stock, or otherwise) such base price as is necessary to preserve the intrinsic value of such awards.
(ii)
Exercise.
Subject to the limitations set forth in Section 7(b), stock appreciation rights shall be
exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator;
provided, however,
that stock
appreciation rights granted under the Plan may not have a term in excess of ten years' duration unless required otherwise by applicable law. The applicable Award Agreement shall specify whether
payment by Aralez of the amount receivable upon any exercise of a stock appreciation right is to be made in cash or Common Shares or a combination of both, or shall reserve to the Administrator or the
Participant the right to make that determination prior to or upon the exercise of the stock appreciation right. If upon the exercise of a stock appreciation right a Participant is to receive a portion
of such payment in Common Shares, the number of shares shall be determined by dividing such portion by the Fair Market Value of a Common Share on the exercise date. No fractional shares shall be used
for such payment and the Administrator shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional shares shall be eliminated.
(iii)
Termination of Service.
Subject to the limitations set forth in Section 7(b), except as provided in
the applicable Award Agreement or otherwise determined by the Administrator, to the extent stock appreciation rights are not vested and exercisable, a Participant's stock appreciation rights shall be
forfeited upon his or her Termination of Service;
provided
that, subject to the limitations set forth in Section 7(b), the Administrator may
provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that vesting or forfeiture conditions relating to stock appreciation rights will be waived in whole
or in part in the event of terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of stock appreciation rights.
(iv)
Additional Terms and Conditions.
The Administrator may, by way of the Award Agreement or otherwise,
determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock appreciation rights,
provided
they are not
inconsistent with Section 7(b) or any other section of the Plan.
(f)
Repricing.
Notwithstanding anything herein to the contrary, except in
connection with a corporate transaction involving Aralez (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, or exchange of shares), the terms of options and stock appreciation rights granted under the Plan may not be amended, after the date of grant, to reduce
the exercise price of such options or stock appreciation rights, nor may outstanding options or stock appreciation rights be canceled in exchange for (i) cash, (ii) options or stock
appreciation rights with an exercise price or base price that is less than the exercise price or base price of the original outstanding options or stock appreciation rights, or (iii) other
Awards, unless such action is approved by Aralez's shareholders.
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(g)
Stock Awards.
(i)
Grants.
The Administrator may from time to time grant to Eligible Individuals Awards of unrestricted Common
Shares or Restricted Stock (collectively, "
Stock Awards
") on such terms and conditions, and for such consideration, including no consideration or such
minimum consideration as may be required by law, as the Administrator shall determine, subject to the limitations set forth in Section 7(b). Stock Awards shall be evidenced in such manner as
the Administrator may deem appropriate, including via book-entry registration.
(ii)
Vesting.
Restricted Stock shall be subject to such vesting, restrictions on transferability and other
restrictions, if any, and/or risk of forfeiture as the Administrator may impose at the date of grant or thereafter. The Restriction Period to which such vesting, restrictions and/or risk of forfeiture
apply may lapse under such circumstances, including without limitation upon the attainment of Performance Goals, in such installments, or otherwise, as the Administrator may determine. In the event
that the Administrator conditions the grant or vesting of a Stock Award upon the attainment of Performance Goals, or the attainment of Performance Goals together with the continued service of the
Participant, the Administrator may, prior to or at the time of grant, designate the Stock Award as a Qualified
Performance-Based Award. Subject to the provisions of the Plan and the applicable Award Agreement, during the Restriction Period, the Participant shall not be permitted to vote, sell, assign,
transfer, pledge or otherwise encumber shares of Restricted Stock.
(iii)
Rights of a Shareholder; Dividends.
Except to the extent restricted under the Award Agreement relating to
the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a shareholder of Common Shares including, without limitation, the right to vote Restricted Stock upon the
expiry of the Restriction Period. Subject to shareholder approval, cash dividends declared payable on Common Shares shall be paid, with respect to outstanding Restricted Stock, either as soon as
practicable following the dividend payment date or deferred for payment to such later date as determined by the Administrator, and shall be paid in cash or as unrestricted Common Shares having a Fair
Market Value equal to the amount of such dividends or may be reinvested in additional shares of Restricted Stock as determined by the Administrator;
provided
,
however
, that dividends declared payable on Restricted Stock that is granted as a Performance
Award shall be held by Aralez and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such shares of Restricted Stock. Stock distributed in connection
with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to
which such Common Shares or other property has been distributed. As soon as is practicable following the date on which restrictions on any shares of Restricted Stock lapse, Aralez shall deliver to the
Participant the certificates for such shares or shall cause the shares to be registered in the Participant's name in book-entry form, in either case with the restrictions removed, provided that the
Participant shall have complied with all conditions for delivery of such shares contained in the Award Agreement or otherwise reasonably required by Aralez.
(iv)
Termination of Service.
Subject to the limitations set forth in Section 7(b), except as provided in
the applicable Award Agreement, upon Termination of Service during the applicable Restriction Period, Restricted Stock and any accrued but unpaid dividends that are at that time subject to
restrictions shall be forfeited;
provided
that, subject to the limitations set forth in Section 7(b), the Administrator may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event
of terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of Restricted Stock.
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(v)
Additional Terms and Conditions.
The Administrator may, by way of the Award Agreement or otherwise,
determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of Restricted Stock,
provided
they are not inconsistent
with Section 7(b) or any other section of the Plan.
(h)
Stock Units.
(i)
Grants.
The Administrator may from time to time grant to Eligible Individuals Awards of unrestricted stock
Units or Restricted Stock Units on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as the Administrator shall
determine, subject to the limitations set forth in Section 7(b). Restricted Stock Units represent a contractual obligation by Aralez to deliver a number of Common Shares, an amount in cash
equal to the Fair Market Value of the specified number of shares subject to the Award, or a combination of Common Shares and cash, in accordance with the terms and conditions set forth in the Plan and
any applicable Award Agreement.
(ii)
Vesting and Payment.
Restricted Stock Units shall be subject to such vesting, risk of forfeiture and/or
payment provisions as the Administrator may impose at the date of grant. The Restriction Period to which such vesting and/or risk of forfeiture apply may lapse under such circumstances, including
without limitation upon the attainment of Performance Goals, in such installments, or otherwise, as the Administrator may determine. In the event that the Administrator conditions the vesting and/or
lapse of risk of forfeiture of Restricted Stock Units upon the attainment of Performance Goals, or the attainment of Performance Goals together with the continued service of the Participant, the
Administrator may, prior to or at the time of grant, designate the Award of Restricted Stock Units as a Qualified Performance-Based Award. Common Shares, cash or a combination of Common Shares and
cash, as applicable, payable in settlement of Restricted Stock Units shall be delivered to the Participant as soon as administratively practicable, but no later than 30 days, after the date on
which payment is due under the terms of the Award Agreement
provided
that the Participant shall have complied with all conditions for delivery of such
shares or payment contained in the Award Agreement or otherwise reasonably required by Aralez, or in accordance with an election of the Participant, if the Administrator so permits, that meets the
requirements of Section 409A of the Code.
(iii)
No Rights of a Shareholder; Dividend Equivalents.
Until Common Shares are issued to the Participant in
settlement of stock Units, the Participant shall not have any rights of a shareholder of Aralez with respect to the stock Units or the shares issuable thereunder. The Administrator may grant to the
Participant the right to receive Dividend Equivalents on stock Units, on a current, reinvested and/or restricted basis, subject to such terms as the Administrator may determine
provided
,
however
, that Dividend Equivalents payable on stock Units that are granted as a Performance
Award shall, rather than be paid on a current basis, be accrued and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such stock Units.
(iv)
Termination of Service.
Upon Termination of Service during the applicable deferral period or portion
thereof to which forfeiture conditions apply, or upon failure to satisfy any other conditions precedent to the delivery of Common Shares or cash to which such Restricted Stock Units relate, all
Restricted Stock Units and any accrued but unpaid Dividend Equivalents with respect to such Restricted Stock Units that are then subject to deferral or restriction shall be forfeited;
provided
that,
subject to the limitations set forth in Section 7(b), the Administrator may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock Units will be waived in whole or in part in the event of termination
resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of Restricted Stock Units.
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(v)
Additional Terms and Conditions.
The Administrator may, by way of the Award Agreement or otherwise,
determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of stock Units,
provided
they are not inconsistent with
Section 7(b) or any other section of the Plan.
(i)
Performance Shares and Performance Units.
(i)
Grants.
The Administrator may from time to time grant to Eligible Individuals Awards in the form of
Performance Shares and Performance Units. Performance Shares, as that term is used in this Plan, shall refer to Common Shares or Units that are expressed in terms of Common Shares, the issuance,
vesting, lapse of restrictions on or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period. Performance Units, as that term is
used in this Plan, shall refer to dollar-denominated Units valued by reference to designated criteria established by the Administrator, other than Common Shares, the issuance, vesting, lapse of
restrictions on or payment of which is contingent on performance as measured against predetermined objectives over a specified Performance Period. The applicable Award Agreement shall specify whether
Performance Shares and Performance Units will be settled or paid in cash or Common Shares or a combination of both, or shall reserve to the Administrator or the Participant the right to make that
determination prior to or at the payment or settlement date.
(ii)
Performance Criteria.
The Administrator shall, prior to or at the time of grant, condition the grant,
vesting or payment of, or lapse of restrictions on, an Award of Performance Shares or Performance Units upon (A) the attainment of Performance Goals during a Performance Period or
(B) the attainment of Performance Goals and the continued service of the Participant. The Administrator may, prior to or at the time of grant, designate an Award of Performance Shares or
Performance Units as a Qualified Performance-Based Award. The length of the Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to
what degree such Performance Goals have been attained shall be conclusively determined by the Administrator in the exercise of its absolute discretion. Performance Goals may include minimum, maximum
and target levels of performance, with the size of the Award or payout of Performance Shares or Performance Units or the vesting or lapse of restrictions with respect thereto based on the level
attained. An Award of Performance Shares or Performance Units shall be settled as and when the Award vests or at a later time specified in the Award Agreement or in accordance with an election of the
Participant, if the Administrator so permits, that meets the requirements of Section 409A of the Code.
(iii)
Additional Terms and Conditions.
The Administrator may, by way of the Award Agreement or otherwise,
determine such other terms, conditions, restrictions, and/or limitations, if any, of any Award of Performance Shares or Performance Units,
provided
they
are not inconsistent with the Plan.
(j)
Other Stock-Based Awards.
The Administrator may from time to time grant to
Eligible Individuals Awards in the form of Other Stock-Based Awards. Other Stock-Based Awards in the form of Dividend Equivalents may be (A) awarded on a free-standing basis or in connection
with another Award other than a stock option or stock appreciation right, (B) paid currently or credited to an account for the Participant, including the reinvestment of such credited amounts
in Common Shares equivalents, to be paid on a deferred basis, and (C) settled in cash or Common Shares as determined by the Administrator;
provided
,
however
, that Dividend Equivalents payable on Other Stock-Based Awards that are granted as a
Performance Award shall, rather than be paid on a current basis, be accrued and made subject to forfeiture at least until achievement of the applicable Performance Goal related to such Other
Stock-Based Awards. Any such settlements, and any such crediting of Dividend
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Equivalents,
may be subject to such conditions, restrictions and contingencies as the Administrator shall establish.
(k)
Qualified Performance-Based Awards.
(i)
Stock Options and Stock Appreciation Rights.
The provisions of the Plan are intended to ensure that all
stock options and stock appreciation rights granted hereunder to any Participant who is or may be a "covered employee" (within the meaning of Section 162(m)(3) of the Code) in the tax year in
which such stock option or stock appreciation right is expected to be deductible to Aralez or a Subsidiary qualify for the Section 162(m) Exemption, and all such Awards shall therefore
be considered Qualified Performance-Based Awards, and the Plan shall be interpreted and operated consistent with that intention.
(ii)
Grant Process for Performance Awards.
When granting any Award other than a stock option or stock
appreciation right, the Administrator may designate such Award as a Qualified Performance-Based Award, based upon a determination that (A) the recipient is or may be a "covered employee"
(within the meaning of Section 162(m)(3) of the Code) with respect to such Award and (B) the Administrator wishes such Award to qualify for the Section 162(m) Exemption. For any
Award so designated as a Qualified Performance-Based Award, the Administrator shall take steps to ensure that the terms of any such Award (and of the grant thereof) shall be consistent with
such designation (including, without limitation, that all such Awards be granted by a committee composed solely of "outside directors" (within the meaning of Section 162(m) of the Code) and
that the Performance Goals be established, in writing, by the Administrator within the time period prescribed by Section 162(m) of the Code). The Performance Goals established by the
Administrator for each Qualified Performance-Based Award shall be objective such that a third party having knowledge of the relevant facts could determine whether or not any Performance Goal has been
achieved, or the extent of such achievement, and the amount, if any, which has been earned by the Participant based on such performance. The Administrator may
retain in an Award Agreement the discretion to reduce (but not to increase) the amount or number of Qualified Performance-Based Awards which will be earned based on the achievement of
Performance Goals. When the Performance Goals are established, the Administrator shall also specify the manner in which the level of achievement of such Performance Goals shall be calculated and the
weighting assigned to such Performance Goals.
(iii)
Certification and Payment.
Following completion of the applicable Performance Period, and prior to any, as
applicable, grant, vesting, lapse of restrictions on or payment of a Qualified Performance-Based Award, the Administrator shall determine in accordance with the terms of the Award and shall certify in
writing whether the applicable Performance Goal(s) were achieved, or the level of such achievement, and the amount, if any, earned by the Participant based upon such performance. For this purpose,
approved minutes of the meeting of the Administrator at which certification is made shall be sufficient to satisfy the requirement of a written certification. No Qualified Performance-Based Awards
will be granted, become vested, have restrictions lapse or be paid, as applicable, for a Performance Period until such certification is made by the Administrator. The amount of a Qualified
Performance-Based Award actually granted, vested, or paid to a Participant, or on which restrictions shall lapse, may be less than the amount determined by the applicable Performance Goal formula, at
the discretion of the Administrator to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the Performance Period
or otherwise, subject to the terms and conditions of the applicable Award Agreement.
(iv)
Performance Goals.
Performance Goals may be applied on a per share or absolute basis and relative to one or
more Performance Metrics, or any combination thereof, and may be measured pursuant to U.S. generally accepted accounting principles ("
GAAP
"),
non-GAAP or
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other
objective standards in a manner consistent with Aralez's or its Subsidiary's established accounting policies, all as the Administrator shall determine at the time the Performance Goals for a
Performance Period are established. The Administrator may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to the manner in which one or more of the
Performance Goals is to be calculated or measured to take into account, or ignore, one or more of the following: (1) items related to a change in accounting principle; (2) items relating
to financing activities; (3) expenses for restructuring or productivity initiatives; (4) other non-operating items; (5) items related to acquisitions; (6) items
attributable to the business operations of any entity acquired by the Company during the Performance Period; (7) items related to the sale or disposition of a business or segment of a business;
(8) items related to discontinued operations that do not qualify as a segment of a business under U.S. generally accepted accounting principles; (9) items attributable to any
stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (10) any other items of significant income or expense which are determined to be
appropriate adjustments; (11) items
relating to unusual or extraordinary corporate transactions, events or developments, (12) items related to amortization of acquired intangible assets; (13) items that are outside the
scope of the Company's core, on-going business activities; (14) changes in foreign currency exchange rates; (15) items relating to changes in tax laws; (16) certain identified
expenses (including, but not limited to, cash bonus expenses, incentive expenses and acquisition-related transaction and integration expenses); (17) items relating to asset impairment charges;
or (18) items relating to gains or unusual or nonrecurring events or changes in applicable law, accounting principles or business conditions. For all Awards intended to qualify as Qualified
Performance-Based Awards, such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.
(v)
Non-delegation.
No delegate of the Administrator is permitted to exercise authority granted to the
Administrator under Section 4 to the extent that the exercise of such authority by the delegate would cause an Award designated as a Qualified Performance-Based Award not to qualify for,
or to cease to qualify for, the Section 162(m) Exemption.
(l)
Awards to Participants Outside the United States.
The Administrator may
grant Awards to Eligible Individuals who are foreign nationals, who are located outside the United States or who are not compensated from a payroll maintained in the United States, or
who are otherwise subject to (or could cause Aralez or a Subsidiary to be subject to) tax, legal or regulatory provisions of countries or jurisdictions outside the United States, on such
terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable in order that any such Award shall conform to laws, regulations,
and customs of the country or jurisdiction in which the Participant is then resident or primarily employed or to foster and promote achievement of the purposes of the Plan.
(m)
Limitation on Dividend Reinvestment and Dividend Equivalents.
Reinvestment of
dividends in additional Restricted Stock at the time of any dividend payment, and the payment of Common Shares with respect to dividends to Participants holding Awards of stock Units, shall only be
permissible if sufficient shares are available under the Share Pool for such reinvestment or payment (taking into account then outstanding Awards). In the event that sufficient shares are not
available under the Share Pool for such reinvestment or payment, such reinvestment or payment shall be made in the form of a grant of stock Units equal in number to the Common Shares that would have
been obtained by such payment or reinvestment, the terms of which stock Units shall provide for settlement in cash and for Dividend Equivalent reinvestment in further stock Units on the terms
contemplated by this Section 7(m).
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8. Withholding of Taxes.
Participants and holders of Awards shall pay to Aralez or its Affiliate, or make arrangements satisfactory to the Administrator for payment of, any Tax
Withholding Obligation in respect of Awards granted under the Plan no later than the date of the event creating the tax or social insurance contribution liability. The obligations of Aralez under the
Plan shall be conditional on such payment or arrangements. Unless otherwise determined by the Administrator, and subject always to applicable law, Tax Withholding Obligations may be settled in whole
or in part with Common Shares, including unrestricted outstanding shares surrendered to Aralez and unrestricted shares that are part of the Award that gives rise to the Tax Withholding Obligation,
having a Fair Market Value on the date of surrender or withholding equal to the statutory minimum amount (and not any greater amount) required to be withheld for tax or social insurance
contribution purposes, all in accordance with such procedures as the Administrator establishes. Aralez or its Affiliate may deduct, to the extent permitted by law, any such Tax Withholding Obligations
from any payment of any kind otherwise due to the Participant or holder of an Award.
9. Transferability of Awards.
(a)
General Nontransferability Absent Administrator Permission.
Except as
otherwise determined by the Administrator, and in any event in the case of an Incentive Stock Option or a tandem stock appreciation right granted with respect to an Incentive Stock Option, no Award
granted under the Plan shall be transferable by a Participant otherwise than by will or the laws of descent and distribution. The Administrator shall not permit any transfer of an Award for value. An
Award may be exercised during the lifetime of the Participant, only by the Participant or, during the period the Participant is under a legal disability, by the Participant's guardian or legal
representative, unless otherwise determined by the Administrator. Awards granted under the Plan shall not be subject in any manner to alienation, anticipation, sale, transfer, assignment, pledge, or
encumbrance, except as otherwise determined by the Administrator;
provided, however,
that the restrictions in this sentence shall not apply to the
Common Shares received in connection with an Award after the date that the restrictions on transferability of such shares set forth in the applicable Award Agreement have lapsed. Nothing in this
paragraph shall be interpreted or construed as overriding the terms of any Aralez stock ownership or retention policy, now or hereafter existing, that may apply to the Participant or Common Shares
received under an Award.
(b)
Administrator Discretion to Permit Transfers Other Than For Value.
Except as
otherwise restricted by applicable law, the Administrator may, but need not, permit an Award, other than an Incentive Stock Option or a tandem stock appreciation right granted with respect to an
Incentive Stock Option, to be transferred to a Participant's Family Member (as defined below) as a gift or pursuant to a domestic relations order in settlement of marital property rights. The
Administrator shall not permit any transfer of an Award for value. For purposes of this Section 9, "Family Member" means any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant's household (other than a tenant or employee), a trust in which these persons have more than
fifty percent of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the
Participant) own more than fifty percent (50%) of the voting interests. The following transactions are not prohibited transfers for value: (i) a transfer under a domestic relations order in
settlement of marital property rights; and (ii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Participant) in
exchange for an interest in that entity.
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10. Adjustments for Corporate Transactions and Other Events.
(a)
Mandatory Adjustments.
In the event of a merger, consolidation, stock rights
offering, statutory share exchange or similar event affecting Aralez (each, a "
Corporate Event
") or a stock dividend, stock split, reverse stock split,
separation, spinoff, reorganization, extraordinary dividend of cash or other property, share combination or subdivision, or recapitalization or similar event affecting the capital structure of Aralez
(each, a "
Share Change
") that occurs at any time after adoption of this Plan by the Board (including any such Corporate Event or Share Change that
occurs after such adoption and coincident with or prior to the Effective Date), the Administrator shall, with the approval of the Exchange (if required), make equitable and appropriate
substitutions or proportionate adjustments to (i) the aggregate number and kind of Common Shares or other securities on which Awards under the Plan may be granted to Eligible Individuals,
(ii) the maximum number of Common Shares or other securities with respect to which Awards may be granted during any one calendar year to any individual, (iii) the maximum number of
Common Shares or other securities that may be issued with respect to Incentive Stock Options granted under the Plan, (iv) the number of Common Shares or other securities covered by each
outstanding Award and the exercise price, base price or other price per share, if any, and other relevant terms of each outstanding Award, and (v) all other numerical limitations relating to
Awards, whether contained in this Plan or in Award Agreements;
provided
,
however
, that any fractional
shares resulting from any such adjustment shall be eliminated; and,
provided further,
that in no event shall the exercise price per Common Share of a
stock option or stock appreciation right, or subscription price per Common Share or any other Award, be reduced to an amount that is lower than the par value of a Common Share.
(b)
Discretionary Adjustments.
In the case of Corporate Events, the Administrator
may, with the approval of the Exchange (if required), make such other adjustments to outstanding Awards as it determines to be appropriate and desirable, which adjustments may include, without
limitation, (i) the cancellation of outstanding Awards in exchange for payments of cash,
securities or other property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Administrator in its sole discretion (it being understood
that in the case of a Corporate Event with respect to which shareholders of Aralez receive consideration other than publicly traded equity securities of the ultimate surviving entity, any such
determination by the Administrator that the value of a stock option or stock appreciation right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being
paid for each Common Share pursuant to such Corporate Event over the exercise price or base price of such stock option or stock appreciation right shall conclusively be deemed valid and that any stock
option or stock appreciation right may be cancelled for no consideration upon a Corporate Event if its exercise price or base price equals or exceeds the value of the consideration being paid for each
Common Share pursuant to such Corporate Event), (ii) the substitution of securities or other property (including, without limitation, cash or other securities of Aralez and securities of
entities other than Aralez) for the Common Shares subject to outstanding Awards, and (iii) the substitution of equivalent awards, as determined in the sole discretion of the Administrator, of
the surviving or successor entity or a parent thereof ("
Substitute Awards
").
(c)
Adjustments to Performance Goals.
The Administrator may, in its discretion,
adjust the Performance Goals applicable to any Awards to reflect any unusual or non-recurring events and other extraordinary items, impact of charges for restructurings, discontinued operations and
the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identified in Aralez's consolidated financial statements, notes to the
consolidated financial statements, management's discussion and analysis or other Aralez filings with the Securities and Exchange Commission;
provided,
however,
that, except in connection with death, disability or a Change in Control, no such adjustment shall be made if the effect would be to cause an Award that is intended to
be a Qualified Performance-Based Award to no longer constitute a Qualified Performance-Based Award. If the Administrator determines that a change in the business, operations, corporate structure or
capital
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structure
of Aralez or the applicable subsidiary, business segment or other operational unit of Aralez or any such entity or segment, or the manner in which any of the foregoing conducts its business,
or other events or circumstances, render the Performance Goals to be unsuitable, the Administrator may modify such Performance Goals or the related minimum acceptable level of achievement, in whole or
in part, as the Administrator deems appropriate and equitable;
provided, however
, that, except in connection with death, disability or a Change in
Control, no such modification shall be made if the effect would be to cause an Award that is intended to be a Qualified Performance-Based Award to no longer constitute a Qualified Performance-Based
Award.
(d)
Statutory Requirements Affecting Adjustments.
Notwithstanding the foregoing:
(A) any adjustments made pursuant to Section 10 to Awards that are considered "deferred compensation" within the meaning of Section 409A of the Code shall be made in
compliance with the requirements of Section 409A of the Code; (B) any adjustments made pursuant to Section 10 to Awards that are not considered "deferred compensation"
subject to Section 409A of the Code shall be made in
such a manner as to ensure that after such adjustment, the Awards either (1) continue not to be subject to Section 409A of the Code or (2) comply with the requirements of
Section 409A of the Code; (C) in any event, the Administrator shall not have the authority to make any adjustments pursuant to Section 10 to the extent the existence of
such authority would cause an Award that is not intended to be subject to Section 409A of the Code at the date of grant to be subject thereto; and (D) any adjustments made pursuant to
Section 10 to Awards that are Incentive Stock Options shall be made in compliance with the requirements of Section 424(a) of the Code.
(e)
Dissolution or Liquidation.
Unless the Administrator determines otherwise, all
Awards outstanding under the Plan shall terminate upon the dissolution or liquidation of Aralez.
11. Change in Control Provisions.
(a)
Termination of Awards.
Notwithstanding the provisions of Section 11(b),
in the event that any transaction resulting in a Change in Control occurs, outstanding Awards will terminate upon the effective time of such Change in Control unless provision is made in connection
with the transaction for the continuation or assumption of such Awards by, or for the issuance therefor of Substitute Awards of, the surviving or successor entity or a parent thereof. Solely with
respect to Awards that will terminate as a result of the immediately preceding sentence and except as otherwise provided in the applicable Award Agreement:
(i) the
outstanding Awards of stock options and stock appreciation rights that will terminate upon the effective time of the Change in Control shall, immediately before the
effective time of the Change in Control, become fully exercisable and the holders of such Awards will be permitted, immediately before the Change in Control, to exercise the Awards;
(ii) the
outstanding shares of Restricted Stock the vesting or restrictions on which are then solely time-based and not subject to achievement of Performance Goals shall,
immediately before the effective time of the Change in Control, become fully vested, free of all transfer and lapse restrictions and free of all risks of forfeiture;
(iii) the
outstanding shares of Restricted Stock the vesting or restrictions on which are then subject to and pending achievement of Performance Goals shall, immediately
before the effective time of the Change in Control and unless the Award Agreement provides for vesting or lapsing of restrictions in a
greater amount upon the occurrence of a Change in Control, become vested, free of transfer and lapse restrictions and risks of forfeiture in such amounts as if the applicable Performance Goals for the
unexpired Performance Period had been achieved at the target level set forth in the applicable Award Agreement;
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(iv) the
outstanding Restricted Stock Units, Performance Shares and Performance Units the vesting, earning or settlement of which is then solely time-based and not subject
to or pending achievement of Performance Goals shall, immediately before the effective time of the Change in Control, become fully earned and vested and shall be settled in cash or Common Shares
(consistent with the terms of the Award Agreement after taking into account the effect of the Change in Control transaction on the shares) as promptly as is practicable, subject to any applicable
limitations imposed thereon by Section 409A of the Code; and
(v) the
outstanding Restricted Stock Units, Performance Shares and Performance Units the vesting, earning or settlement of which is then subject to and pending achievement
of Performance Goals shall, immediately before the effective time of the Change in Control and unless the Award Agreement provides for vesting, earning or settlement in a greater amount upon the
occurrence of a Change in Control, become vested and earned in such amounts as if the applicable Performance Goals for the unexpired Performance Period had been achieved at the target level set forth
in the applicable Award Agreement and shall be settled in cash or Common Shares (consistent with the terms of the Award Agreement after taking into account the effect of the Change in Control
transaction on the shares) as promptly as is practicable, subject to any applicable limitations imposed thereon by Section 409A of the Code.
Implementation of the provisions of this Section 11(a) shall be conditioned upon consummation of the Change in Control.
(b)
Continuation, Assumption or Substitution of Awards.
The administrator may
specify, on or after the date of grant, in an award agreement or amendment thereto, the consequences of a Participant's Termination of Service that occurs coincident with or following the occurrence
of a Change in Control, if a Change in Control occurs under which provision is made in connection with the transaction for the continuation or assumption of outstanding Awards by, or for the issuance
therefor of Substitute Awards of, the surviving or successor entity or a parent thereof.
(c)
Other Permitted Actions.
In the event that any transaction resulting in a
Change in Control occurs, the Administrator may take any of the actions set forth in Section 10 with respect to any or all Awards granted under the Plan.
(d)
Section 409A Savings Clause.
Notwithstanding the foregoing, if any Award
is considered to be a "nonqualified deferred compensation plan" within the meaning of Section 409A of the Code, this Section 11 shall apply to such Award only to the extent that its
application would not result in the imposition of any tax or interest or the inclusion of any amount in income under Section 409A of the Code.
12. Substitution of Awards in Mergers and Acquisitions.
Awards may be granted under the Plan from time to time in substitution for assumed awards held by employees, officers, consultants or directors of entities who
become employees, officers, consultants or directors of Aralez or a Subsidiary as the result of a merger or consolidation of the entity for which they perform services with Aralez or a Subsidiary, or
the acquisition by Aralez of the assets or stock of the such entity. The terms and conditions of any Awards so granted may vary from the terms and conditions set forth herein to the extent that the
Administrator deems appropriate at the time of grant to conform the Awards to the provisions of the assumed awards for which they are substituted and to preserve their intrinsic value as of the date
of the merger, consolidation or acquisition transaction. To the extent permitted by applicable law and marketplace or listing rules of the primary securities market or exchange on which the Common
Shares are listed or admitted for trading, any available shares under a shareholder-approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for
Awards granted pursuant to this Section 12 and, upon such grant, shall not reduce the Share Pool.
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13. Compliance with Securities Laws; Listing and Registration.
(a) The
obligation of Aralez to sell or deliver Common Shares with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and
regulations, including all applicable federal, state or foreign (non-United States) securities laws, or foreign (non-United States) securities laws and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or appropriate by the Administrator. If at any time the Administrator determines that the delivery of Common Shares under the Plan is or
may be unlawful under the laws of any applicable jurisdiction, or federal, state or foreign (non-United States) securities laws, the right to exercise an Award or receive Common Shares pursuant
to an Award shall be suspended until the Administrator determines that such delivery is lawful. If at any time the Administrator determines that the delivery of Common Shares under the Plan would or
may violate the rules of any exchange on which Aralez's securities are then listed for trading, the right to exercise an Award or receive Common Shares pursuant to an Award shall be suspended until
the Administrator determines that such delivery would not violate such rules. If the Administrator determines that the exercise or nonforfeitability of, or delivery of benefits pursuant to, any Award
would violate any applicable provision of securities laws or the listing requirements of any stock exchange upon which any of Aralez's equity securities are listed, then the Administrator may postpone
any such exercise, nonforfeitability or delivery, as applicable, but Aralez shall use all reasonable efforts to cause such exercise, nonforfeitability or delivery to comply with all such provisions at
the earliest practicable date.
(b) Each
Award is subject to the requirement that, if at any time the Administrator determines, in its absolute discretion, that the listing, registration or qualification
of Common Shares issuable pursuant to the Plan is required by any securities exchange or under any state, federal or foreign (non-United States) law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Common Shares, no such Award shall be granted or payment made
or Common Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Administrator.
(c) In
the event that the disposition of Common Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of
1933, as amended (the "
Securities Act
"), and is not otherwise exempt from such registration, such Common Shares shall be restricted against
transfer to the extent required by the Securities Act or regulations thereunder, and the Administrator may require a person receiving Common Shares pursuant to the Plan, as a condition precedent to
receipt of such Common Shares, to represent to Aralez in writing that the Common Shares acquired by such person is acquired for investment only and not with a view to distribution and that such person
will not dispose of the Common Shares so acquired in violation of federal, state or foreign securities laws and furnish such information as may, in the opinion of counsel for the Company, be
appropriate to permit the Company to issue the Common Shares in compliance with applicable federal, state or foreign securities laws. If applicable, all certificates representing such Common Shares
shall bear applicable legends as required by federal, state or foreign securities laws or stock exchange regulation.
14. Section 409A Compliance.
It is the intention of Aralez that any Award that constitutes a "nonqualified deferred compensation plan" within the meaning of Section 409A of the Code
shall comply in all respects with the requirements of Section 409A of the Code to avoid the imposition of any tax or interest or the inclusion of any amount in income pursuant to
Section 409A of the Code, and the terms of each such Award shall be construed, administered and deemed amended, if applicable, in a manner consistent with this intention. Notwithstanding the
foregoing, neither Aralez nor any of its Affiliates nor any of its or their directors, officers, employees, agents or other service providers will be liable for any taxes,
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penalties
or interest imposed on any Participant or other person with respect to any amounts paid or payable (whether in cash, Common Shares or other property) under any Award, including any taxes,
penalties or interest imposed under or as a result of Section 409A of the Code. Any payments described in an Award that are due within the "short term deferral period" as defined in
Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. For purposes of any Award, each amount to be paid or benefit to be provided to a
Participant that constitutes deferred compensation subject to Section 409A of the Code shall be construed as a separate identified payment for purposes of Section 409A of the Code. For
purposes of Section 409A of the Code, the payment of Dividend Equivalents under any Award shall be construed as earnings and the time and form of payment of such Dividend Equivalents shall be
treated separately from the time and form of payment of the underlying Award. Notwithstanding any other provision of the Plan to the contrary, with respect to any Award that constitutes a
"nonqualified deferred compensation plan" within the meaning of Section 409A of the Code, any payments (whether in cash, Common Shares or other property) to be made with respect to the Award
that become payable on account of the
Participant's separation from service, within the meaning of Section 409A of the Code, while the Participant is a "specified employee" (as determined in accordance with the uniform
policy adopted by the Administrator with respect to all of the arrangements subject to Section 409A of the Code maintained by Aralez and its Affiliates) and which would otherwise be paid within
six months after the Participant's separation from service shall be accumulated (without interest) and paid on the first day of the seventh month following the Participant's separation from service
or, if earlier, within 15 days after the appointment of the personal representative or executor of the Participant's estate following the Participant's death. Notwithstanding anything in the
Plan or an Award Agreement to the contrary, in no event shall the Administrator exercise its discretion to accelerate the payment or settlement of an Award where such payment or settlement constitutes
deferred compensation within the meaning of Code section 409A unless, and solely to the extent that, such accelerated payment or settlement is permissible under Treasury Regulation
section 1.409A-3(j)(4).
15. Plan Duration; Amendment and Discontinuance.
(a)
Plan Duration.
The Plan shall remain in effect, subject to the right of the
Board or the Compensation Committee to amend or terminate the Plan at any time, until the earlier of (a) the earliest date as of which all Awards granted under the Plan have been satisfied in
full or terminated and no Common Shares approved for issuance under the Plan remain available to be granted under new Awards or (b) the tenth anniversary of the Effective Date. No Awards shall
be granted under the Plan after such termination date. Subject to other applicable provisions of the Plan, all Awards made under the Plan on or before the tenth anniversary of the Effective Date, or
such earlier termination of the Plan, shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards. Notwithstanding the
continuation of the Plan, no Award (other than a stock option or stock appreciation right) that is intended to be a Qualified Performance-Based Award shall be granted on or after the fifth anniversary
of the Effective Date unless the material terms of the applicable performance goals, within the meaning of Treasury Regulation Section 1.162-27(e)(4)(i), are approved by the shareholders of
Aralez no later than the first shareholder meeting that occurs in the fifth year following the Effective Date.
(b)
Amendment and Discontinuance of the Plan.
The Board or the Compensation
Committee may, without shareholder approval, amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would materially impair the rights of a
Participant with respect to a previously granted Award without such Participant's consent, except such an amendment made to comply with applicable law or rule of any securities exchange or market on
which the Common Shares are listed or admitted for trading or to prevent adverse tax or accounting consequences to Aralez or the Participant. Notwithstanding the foregoing, no such amendment shall be
made without the approval of Aralez's shareholders to the extent such amendment would (A) materially increase the benefits
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accruing
to Participants under the Plan, (B) increase the number of Common Shares which may be issued under the Plan or to a Participant, (C) materially expand the eligibility for
participation in the Plan, (D) eliminate or modify the prohibition set forth in Section 7(f) on repricing of stock options and stock appreciation rights, (E) lengthen the maximum
term or lower the minimum exercise price or base price permitted for stock options and stock appreciation rights, (F) modify the prohibition on the issuance of reload or replenishment options,
or (G) make any amendment to remove or exceed the limit in Section 5(f)(ii), or (H) amend the provisions set out in this Section 15(b). Except as otherwise determined by
the Board or Compensation Committee, termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan
prior to the date of such termination.
(c)
Amendment of Awards.
Subject to Section 7(f) and Section 15(b),
the Administrator may unilaterally amend the terms of any Award theretofore granted, but no such amendment shall materially impair the rights of any Participant with respect to an Award without the
Participant's consent, except such an amendment made to cause the Plan or Award to comply with applicable law, applicable rule of any securities exchange on which the Common Shares are listed or
admitted for trading, or to prevent adverse tax or accounting consequences for the Participant or the Company or any of its Affiliates. For purposes of the foregoing sentence, an amendment to an Award
that results in a change in the tax consequences of the Award to the Participant shall not be considered to be a material impairment of the rights of the Participant and shall not require the
Participant's consent.
16. General Provisions.
(a)
Non-Guarantee of Employment or Service.
Nothing in the Plan or in any Award
Agreement thereunder shall confer any right on an individual to continue in the service of Aralez or any Affiliate or shall interfere in any way with any right of Aralez or any Affiliate may have to
terminate such service at any time with or without cause or notice and whether or not such termination results in (i) the failure of any Award to vest or become payable; (ii) the
forfeiture of any unvested or vested portion of any Award; and/or (iii) any other adverse effect on the individual's interests under any Award or the Plan. No person, even though deemed an
Eligible Individual, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. To the extent that an Eligible Individual who is an
employee of a Subsidiary receives an
Award under the Plan, that Award shall in no event be understood or interpreted to mean that Aralez is the Participant's employer or that the Participant has an employment relationship
with Aralez.
(b)
No Trust or Fund Created.
Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between Aralez and a Participant or any other person. To the extent that any Participant or other person acquires a
right to receive payments from Aralez pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of Aralez.
(c)
Status of Awards.
Awards shall be special incentive payments to the Participant
and shall not be taken into account in computing the amount of salary or compensation of the Participant for purposes of determining any pension, retirement, death, severance or other benefit under
(a) any pension, retirement, profit-sharing, bonus, insurance, severance or other employee benefit plan of Aralez or any Affiliate now or hereafter in effect under which the availability or
amount of benefits is related to the level of compensation or (b) any agreement between (i) Aralez or any Affiliate and (ii) the Participant, except as such plan or agreement
shall otherwise expressly provide.
(d)
Subsidiary Employees.
In the case of a grant of an Award to an Eligible
Individual who provides services to any Subsidiary, Aralez may, if the Administrator so directs, issue or transfer the Common Shares, if any, covered by the Award to the Subsidiary, for such lawful
consideration as the Administrator may specify, upon the condition or understanding that the Subsidiary will transfer the
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Common
Shares to the Eligible Individual in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. All Common Shares underlying Awards that are
forfeited or canceled after such issue or transfer of shares to the Subsidiary shall revert to Aralez.
(e)
Governing Law and Interpretation.
The validity, construction and effect of the
Plan, of Award Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Administrator relating to the Plan or such Award Agreements, and the
rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable United States federal laws and the
laws of the state of North Carolina without regard to its conflict of laws principles. The captions of the Plan are not part of the provisions hereof and shall have no force or effect. Except
where the context otherwise requires: (i) the singular includes the plural and vice versa; (ii) a reference to one gender includes other genders; (iii) a reference to a person
includes a natural person, partnership, corporation, association, governmental or local authority or agency or other entity; and (iv) a reference
to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them.
(f)
Use of English Language.
The Plan, each Award Agreement, and all other
documents, notices and legal proceedings entered into, given or instituted pursuant to an Award shall be written in English, unless otherwise determined by the Administrator. If a Participant receives
an Award Agreement, a copy of the Plan or any other documents related to an Award translated into a language other than English, and if the meaning of the translated version is different from the
English version, the English version shall control.
(g)
Recovery of Amounts Paid.
Except as otherwise provided by the Administrator,
Awards granted under the Plan shall be subject to any and all policies, guidelines, codes of conduct, or other agreement or arrangement adopted by the Board or Compensation Committee with respect to
the recoupment, recovery or clawback of compensation (collectively, the "
Recoupment Policy
") and/or to any provisions set forth in the applicable Award
Agreement under which Aralez may recover from current and former Participants any amounts paid or Common Shares issued under an Award and any proceeds therefrom under such circumstances as the
Administrator determines appropriate. The Administrator may apply the Recoupment Policy to Awards granted before the policy is adopted to the extent required by applicable law or rule of any
securities exchange or market on which Common Shares are listed or admitted for trading, as determined by the Administrator in its sole discretion.
17. Glossary.
Under this Plan, except where the context otherwise indicates, the following definitions apply:
"Administrator
" means the Compensation Committee, or such other committee(s) or officer(s) duly appointed by the Board or the Compensation
Committee to administer the Plan or delegated limited authority to perform administrative actions under the Plan, and having such powers as shall be specified by the Board or the Compensation
Committee; provided, however, that at any time the Board may serve as the Administrator in lieu of or in addition to the Compensation Committee or such other committee(s) or officer(s) to whom
administrative authority has been delegated. With respect to any Award to which Section 16 of the Exchange Act applies, the Administrator shall consist of either the Board or a committee of the
Board, which committee shall consist of two or more directors, each of whom is intended to be, to the extent required by Rule 16b-3 of the Exchange Act, a "non-employee director" as defined in
Rule 16b-3 of the Exchange Act and an "independent director" to the extent required by the rules of the national securities exchange that is the principal trading market for the Common Shares,
and with respect to any Award that is intended to be a Qualified Performance-Based Award, the Administrator shall consist of two or more directors, each of whom is intended to be, to the extent
required by Section 162(m) of the Code, an "outside director" as defined under Section 162(m)
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of
the Code;
provided
, that with respect to Awards made to a member of the Board who is not an employee of the Company, "Administrator" means the Board.
Any member of the Administrator who does not meet the foregoing requirements shall abstain from any decision regarding an Award and shall not be considered a member of the Administrator to the extent
required to comply with Rule 16b-3 of the Exchange Act or Section 162(m) of the Code.
"
Affiliate"
means any entity, whether now or hereafter existing, which controls, is controlled by, or is under common control with, Aralez
or any successor to Aralez. For this purpose, "control" (including the correlative meanings of the terms "controlled by" and "under common control with") shall mean ownership, directly or indirectly,
of 50% or more of the total combined voting power of all classes of voting securities issued by such entity, or the possession, directly or indirectly, of the power to direct the management and
policies of such entity, by contract or otherwise.
"
Aralez"
means Aralez Pharmaceuticals Inc., a company organized under the laws of the province of British Colombia, Canada.
"
Award
" means any stock option, stock appreciation right, stock award, stock unit, Performance Share, Performance Unit, and/or Other
Stock-Based Award, whether granted under this Plan.
"Award Agreement"
means the written document(s), including an electronic writing acceptable to the Administrator, and any notice, addendum
or supplement thereto, memorializing the terms and conditions of an Award granted pursuant to the Plan and which shall incorporate the terms of the Plan.
"
Board
" means the Board of Directors of Aralez.
"
Business Day
" means a day, other than a Saturday, Sunday or statutory holiday, when banks are generally open in the City of Toronto, or
the City of New York for the transaction of banking business.
"
Change in Control
" means the first of the following to occur: (i) a Change in Ownership of Aralez, (ii) a Change in
Effective Control of Aralez, or (iii) a Change in the Ownership of Assets of Aralez, as described herein and construed in accordance with Code section 409A.
(i) A
"Change in Ownership of Aralez" shall occur on the date that any one Person acquires, or Persons Acting as a Group acquire, ownership of the capital stock of Aralez
that, together with the stock held by such Person or Group, constitutes more than 50% of the total fair market value or total voting power of the capital stock of Aralez. However, if any one Person
is, or Persons Acting as a Group are, considered to own more than 50%, on a fully diluted basis, of the total fair market value or total voting power of the capital stock of Aralez, the acquisition of
additional stock by the same Person or Persons Acting as a Group is not considered to cause a Change in Ownership of Aralez or to cause a Change in Effective Control of Aralez (as described
below). An increase in the percentage of capital stock owned by any one Person, or Persons Acting as a Group, as a result of a transaction in which Aralez acquires its stock in exchange for property
will be treated as an acquisition of stock.
(ii) A
"Change in Effective Control of Aralez" shall occur on the date either (A) a majority of members of Aralez's Board is replaced during any 12-month period by
directors whose appointment or election is not endorsed by a majority of the members of Aralez's Board before the date of the appointment or election, or (B) any one Person, or Persons Acting
as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of Aralez possessing 50% or more
of the total voting power of the stock of Aralez.
(iii) A
"Change in the Ownership of Assets of Aralez" shall occur on the date that any one Person acquires, or Persons Acting as a Group acquire (or has or have
acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons), assets from Aralez that have a total gross fair market value equal to or more than 50%
of the total
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gross
fair market value of all of the assets of Aralez immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of Aralez, or the
value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
The
following rules of construction apply in interpreting the definition of Change in Control:
(A) A
"
Person
" means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended, other than employee benefit plans sponsored or maintained by Aralez and by entities controlled by Aralez or an underwriter, initial purchaser or
placement agent temporarily holding the capital stock of Aralez pursuant to a registered public offering.
(B) Persons
will be considered to be Persons Acting as a Group (or Group) if they are owners of a corporation that enters into a merger, consolidation, purchase or
acquisition of stock, or similar business transaction with the corporation. If a Person owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, such shareholder is considered to be acting as a Group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation. Persons will not be considered to be acting as a Group solely because they purchase assets of the same corporation at
the same time or purchase or own stock of the same corporation at the same time, or as a result of the same public offering.
(C) A
Change in Control shall not include a transfer to a related person as described in Code section 409A or a public offering of capital stock
of Aralez.
(D) For
purposes of the definition of Change in Control, Section 318(a) of the Code applies to determine stock ownership. Stock underlying a vested option is
considered owned by the individual who holds the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option). For
purposes of the preceding sentence, however, if a vested option is exercisable for stock that is not substantially vested (as defined by Treasury Regulation §1.83-3(b) and (j)), the
stock underlying the option is not treated as owned by the individual who holds the option.
"Code"
means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto, the Treasury Regulations
thereunder and other relevant interpretive guidance issued by the Internal Revenue Service or the Treasury Department. Reference to any specific section of the Code shall be deemed to include such
regulations and guidance, as well as any successor section, regulations and guidance.
"Common Shares"
means common shares in the capital of Aralez, without par value, and any capital securities into which they
are converted.
"
Company
" means Aralez and its Subsidiaries, except where the context otherwise requires. For purposes of determining whether a Change in
Control has occurred, Company shall mean only Aralez.
"Compensation Committee"
means the Compensation Committee of the Board.
"
Dividend Equivalent
" means a right, granted to a Participant, to receive cash, Common Shares, stock Units or other property equal in
value to dividends paid with respect to a specified number of Common Shares.
"
Effective Date
" means the date on which adoption of this Plan, as amended and restated, is approved by the shareholders of Aralez.
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"
Eligible Individuals
" means (i) officers and employees of, and other individuals, including non-employee directors, who are
natural persons providing bona fide services to or for, Aralez or any of its Subsidiaries,
provided
that such services are not in connection with
the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for Aralez's securities, (ii) prospective officers, employees and
service providers who have accepted offers of employment or other service relationship from Aralez or a Subsidiary; and (iii) consultants who are natural persons providing bona fide
services to or for, Aralez or any of its Subsidiaries,
provided
that such services are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or maintain a market for Aralez's securities.
"
Exchange
" means collectively, the Toronto Stock Exchange and the NASDAQ or any such exchange in Canada or the United States on
which Common Shares are listed and posted for trading.
"
Exchange Act
" means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. Reference to any
specific section of the Exchange Act shall be deemed to include such regulations and guidance issued thereunder, as well as any successor section, regulations and guidance.
"Fair Market Value
" means, on a per share basis as of any date, unless otherwise determined by the Administrator:
(i) if
the principal market for the Common Shares (as determined by the Administrator if the Common Shares are listed or admitted to trading on more than one
exchange or market) is a national securities exchange or an established securities market, the official closing price per Common Share for the regular market session on that date on the principal
exchange or market on which the Common Shares are then listed or admitted to trading or, if no sale is reported for that date, on the last preceding day on which a sale was reported, all as reported
by such source as the Administrator may select;
(ii) if
the principal market for the Common Shares is not a national securities exchange or an established securities market, but the Common Shares are quoted by a national
quotation system, the average of the highest bid and lowest asked prices for the Common Shares on that date as reported on a national quotation system or, if no prices are reported for that date, on
the last preceding day on which prices were reported, all as reported by such source as the Administrator may select; or
(iii) if
the Common Shares are neither listed or admitted to trading on a national securities exchange or an established securities market, nor quoted by a national
quotation system, the value determined by the Administrator in good faith by the reasonable application of a reasonable valuation method, which method may, but need not, include taking into account an
appraisal of the fair market value of the Common Shares conducted by a nationally recognized appraisal firm selected by the Administrator.
Notwithstanding
the preceding, for foreign, federal, state and local income tax reporting purposes and for such other purposes as the Administrator deems appropriate, the Fair Market
Value shall be determined by the Administrator in accordance with uniform and nondiscriminatory standards adopted by it from time to time.
"
Full Value Award
" means an Award that results in Aralez transferring the full value of a Common Share under the Award, whether or not an
actual share of stock is issued. Full Value Awards shall include, but are not limited to, stock awards, stock units, Performance Shares, Performance Units that are payable in Common Shares, and Other
Stock-Based Awards for which Aralez transfers the full value of a Common Share under the Award, but shall not include Dividend Equivalents.
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"
Incentive Stock Option
" means any stock option that is designated, in the applicable Award Agreement or the
resolutions of the Administrator under which the stock option is granted, as an "incentive stock option" within the meaning of Section 422 of the Code and otherwise meets the requirements to be
an "incentive stock option" set forth in Section 422 of the Code.
"
Merger Agreement
" means the Agreement and Plan of Merger and Arrangement, dated as of June 8, 2015, among Tribute Pharmaceuticals
Canada Inc., POZEN Inc., the Company and certain other entities, as amended.
"
Nonqualified Option
" means any stock option that is not an Incentive Stock Option.
"
Other Stock-Based Award
" means an Award of Common Shares or any other Award that is valued in whole or in part by reference to, or is
otherwise based upon, Common Shares, including without limitation Dividend Equivalents.
"
Participant
" means an Eligible Individual to whom one or more Awards are or have been granted pursuant to the Plan and have not been
fully settled or cancelled and, following the death of any such person, his successors, heirs, executors and administrators, as the case may be.
"
Performance Award
" means a Full Value Award, the grant, vesting, lapse of restrictions or settlement of which is conditioned upon the
achievement of performance objectives over a specified Performance Period and includes, without limitation, Performance Shares and Performance Units.
"
Performance Goals
" means the performance goals established by the Administrator in connection with the grant of Awards based on
Performance Metrics or other performance criteria selected by the Administrator;
provided
,
however
, that
in the case of Qualified Performance-Based Awards, such performance goals shall be based on the attainment of specified levels of one or more Performance Metrics.
"
Performance Period
" means that period established by the Administrator during which any Performance Goals specified by the Administrator
with respect to such Award are to be measured.
"
Performance Metrics
" means criteria established by the Administrator relating to any of the following, as it may apply to an individual,
one or more business units, divisions, or Affiliates, or on a company-wide basis, and in absolute terms, relative to a base period, or relative to the performance of one or more comparable companies,
peer groups, or an index covering multiple companies:
(i)
Earnings or Profitability Metrics:
any derivative of revenue; earnings/loss (gross, operating, net, or
adjusted); earnings/loss before interest and taxes ("EBIT"); earnings/loss before interest, taxes, depreciation and amortization ("EBITDA"); profit margins; operating margins; expense levels or
ratios;
provided
that any of the foregoing metrics may be adjusted to eliminate the effect of any one or more of the following: interest expense, asset
impairments or investment losses, early extinguishment of debt or stock-based compensation expense;
(ii)
Return Metrics:
any derivative of return on investment, assets, equity or capital (total
or invested);
(iii)
Investment Metrics:
relative risk-adjusted investment performance; investment performance of assets under
management;
(iv)
Cash Flow Metrics:
any derivative of operating cash flow; cash flow sufficient to achieve financial ratios
or a specified cash balance; free cash flow; cash flow return on capital; net cash provided by operating activities; cash flow per share; working capital;
(v)
Liquidity Metrics:
any derivative of debt leverage (including debt to capital, net debt-to-capital,
debt-to-EBITDA or other liquidity ratios);
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(vi)
Stock Price and Equity Metrics:
any derivative of return on shareholders' equity; total shareholder return;
stock price; stock price appreciation; market capitalization; earnings/loss per share (basic or diluted) (before or after taxes); and/or
(vii)
Strategic Metrics:
product research and development; completion of an identified special project; clinical
trials; regulatory filings or approvals; patent application or issuance; manufacturing or process development; sales or net sales; market share; market penetration; economic value added; customer
service; customer satisfaction; inventory control; balance of cash, cash equivalents and marketable securities; growth in assets; key hires; employee satisfaction; employee retention; business
expansion; acquisitions, divestitures, joint ventures or financing; legal compliance or safety and risk reduction.
"Performance Shares
" means a grant of stock or stock Units the issuance, vesting or payment of which is contingent on performance as
measured against predetermined objectives over a specified Performance Period.
"
Performance Units
" means a grant of dollar-denominated Units the value, vesting or payment of which is contingent on performance against
predetermined objectives over a specified Performance Period.
"
Plan
" means this Aralez Pharmaceuticals Inc. Amended and Restated 2016 Long-Term Incentive Plan, as set forth herein and as it may
be amended from time to time.
"
Qualified Performance-Based Award
" means an Award intended to qualify for the Section 162(m) Exemption, as provided in
Section 7(k).
"
Restricted Stock
" means an Award of Common Shares to a Participant that may be subject to certain transferability and other restrictions
and to a risk of forfeiture (including by reason of not satisfying certain Performance Goals).
"
Restricted Stock Unit
" means a right granted to a Participant to receive Common Shares or cash at the end of a specified deferral period,
which right may be conditioned on the satisfaction of certain requirements (including the satisfaction of certain Performance Goals).
"
Restriction Period
" means, with respect to Full Value Awards, the period commencing on the date of grant of such Award to which vesting
or transferability and other restrictions and a risk of forfeiture apply and ending upon the expiration of the applicable vesting conditions, transferability and other restrictions and lapse of risk
of forfeiture and/or the achievement of the applicable Performance Goals (it being understood that the Administrator may provide that vesting shall occur and/or restrictions shall lapse with
respect to portions of the applicable Award during the Restriction Period in accordance with Section 7(b)).
"
Section 162(m) Exemption
" means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code
that is set forth in Section 162(m)(4)(C) of the Code.
"
Subsidiary
" means any corporation or other entity in an unbroken chain of corporations or other entities beginning with Aralez if each of
the corporations or other entities, or group of commonly controlled corporations or other entities, other than the last corporation or other entity in the unbroken chain then owns stock or other
equity interests possessing 50% or more of the total combined voting power of all classes of stock or other equity interests in one of the other corporations or other entities in such chain or
otherwise has the power to direct the management and policies of the entity by contract or by means of appointing a majority of the members of the board or other body that controls the affairs of the
entity;
provided, however,
that solely for purposes of determining whether a Participant has a Termination of Service that is a "separation from
service" within the meaning of Section 409A of the Code or whether an Eligible Individual is eligible to be granted an Award that in the hands of such Eligible Individual would constitute a
"nonqualified deferred compensation plan"
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within
the meaning of Section 409A of the Code, a "Subsidiary" of a corporation or other entity means all other entities with which such corporation or other entity would be considered a single
employer under Sections 414(b) or 414(c) of the Code.
"
Tax Withholding Obligation
" means any federal, state, local or foreign (non-United States) income, employment or other tax or
social insurance contribution required by applicable law to be withheld in respect of Awards.
"
Termination of Service
" means the termination of the Participant's employment or consultancy with, or performance of services for, Aralez
and its Subsidiaries. Temporary absences from employment because of illness, vacation or leave of absence and transfers among Aralez and its Subsidiaries shall not be considered Terminations of
Service. With respect to any Award that constitutes a "nonqualified deferred compensation plan" within the meaning of Section 409A of the Code, "Termination of Service" shall mean a "separation
from service" as defined under Section 409A of the Code to the extent required by Section 409A of the Code to avoid the imposition of any tax or interest or the inclusion of any amount
in income pursuant to Section 409A of the Code. A Participant has a separation from service within the meaning of Section 409A of the Code if the Participant terminates employment with
Aralez and all Subsidiaries for any reason. A Participant will generally be treated as having terminated employment with Aralez and all Subsidiaries as of a certain date if the Participant and the
entity that employs the Participant reasonably anticipate that the Participant will perform no further services for Aralez or any Subsidiary after such date or that the level of bona fide
services that the Participant will perform after such date (whether as an employee or an independent contractor) will permanently decrease to no more than 20 percent (20%) of the average level
of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services if the Participant
has been providing services for fewer than 36 months);
provided, however,
that the employment relationship is treated as continuing while the
Participant is on military leave, sick leave or other bona fide leave of absence if the period of leave does not exceed six months or, if longer, so long as the Participant retains the right to
reemployment with Aralez or any Subsidiary.
"
Total and Permanent Disability
" means, with respect to a Participant, except as otherwise provided in the relevant Award Agreement, that
a Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to last until the
Participant's death or result in death, or (ii) determined to be totally disabled by the Social Security Administration or other governmental or quasi-governmental body that administers a
comparable social insurance program outside of the United States in which the Participant participates and which conditions the right to receive benefits under such program on the Participant
being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to last until the Participant's death or result in
death. The Administrator shall have sole authority to determine whether a Participant has suffered a Total and Permanent Disability and may require such medical or other evidence as it deems necessary
to judge the nature and permanency of the Participant's condition.
"
Unit
" means a bookkeeping entry used by Aralez to record and account for the grant of the following types of Awards until such time as
the Award is paid, cancelled, forfeited or terminated, as the case may be: stock units, Restricted Stock Units, Performance Units, and Performance Shares that are expressed in terms of units of
Common Shares.
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Annex B
ARALEZ PHARMACEUTICALS INC.
CORPORATE GOVERNANCE GUIDELINES
I. Introduction
The board of directors (the "
Board
") of Aralez Pharmaceuticals Inc.
(the "
Company
") is elected by the shareholders of the Company and is responsible for the stewardship of the Company. The purpose of these
guidelines is to describe the principal duties and responsibilities of the Board, as well as certain of the policies and procedures that apply to the Board in discharging its duties and
responsibilities.
II. Accountability
The Board is accountable to the Company's shareholders and has a duty to act honestly and in good faith with a view to the best interests of the Company.
III. Chair of the Board
The chair of the Board (the "
Chair
") will be appointed by the Board, after considering the recommendation
of the Nominating & Corporate Governance Committee, for such term as the Board may determine.
IV. Majority of Independent Directors
The Board shall be comprised of that number of directors as shall be determined from time to time by the Board in accordance with the Articles of the Company, at
least a majority of whom shall meet the criteria for independence required by the U.S. Securities and Exchange Commission, National
Instrument 58-101
Disclosure of Corporate Governance Practices
, the listing standards of the NASDAQ Global Market and the Toronto
Stock Exchange and any other applicable regulatory authority or securities exchange (collectively, the "
Applicable Regulatory Requirements
"). In
addition to the foregoing requirements, Audit and Compensation Committee members are subject to heightened independence requirements or considerations pursuant to certain of the Applicable Regulatory
Requirements. The Board must determine, based on all of the relevant facts and circumstances, whether each director satisfies these criteria for independence and will disclose such determinations as
required in accordance with the Applicable Regulatory Requirements.
Each
independent director of the Board shall promptly notify the Chair of any developments that may impair such director's independence. If a conflict exists and cannot be resolved, such
director should submit to the Board written notification of such conflict of interest and an offer of resignation from the Board and each of the committees on which such director serves. The Board
need not accept such offer of resignation; however, the submission of such offer of resignation provides the opportunity for
the Board to review the appropriateness of the continuation of such individual's membership on the Board or any committee of the Board.
V. Board Leadership
-
A.
-
Chair of the Board.
The Company maintains separate Chair and Chief Executive Officer positions, which
allows the Board to be more effective in overseeing the Company's affairs and holding management accountable for the Company's activities. Having an independent Chair of the Board fosters strong
leadership, healthy discussion and avoids the potential for any conflict of interest. However, the Board believes that the Company and its shareholders are best served by maintaining flexibility to
have any director serve as Chair and therefore believes that a permanent policy on whether the Chair and Chief Executive Officer positions should be separated or combined is not appropriate.
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Table of Contents
-
B.
-
Lead Director.
The Board has adopted a written position description for the Chair setting out the Chair's
responsibilities, including leadership and governance of the Board, the promotion of corporate social responsibility, the facilitation of shareholder meetings, and the oversight of Board committees.
The Board has appointed a non-executive, independent director as its Chair to help it function independently of management. In order to maintain the independent integrity of the Board, however, if the
Chair and Chief Executive Officer positions are combined, the Board shall appoint a lead director who must be independent.
VI. Director Selection and Board Membership Criteria
The Nominating & Corporate Governance Committee has, as one of its responsibilities, the recommendation of director candidates to the full Board. Nominees
for directorship will be identified by the Nominating & Corporate Governance Committee in accordance with the criteria set forth below and any other criteria that may be identified by the Board
or a committee of the Board, if appropriate, and in accordance with the procedures set forth in the Nominating & Corporate Governance Committee's charter.
-
A.
-
Background and Diversity
. The Board seeks members from diverse professional and personal backgrounds who
combine a broad spectrum of experience and expertise with a reputation for integrity. This assessment will include an individual's independence, as well as consideration of age, skills and experience,
and a policy of promoting diversity, in the context of the needs of the Company. The Diversity Policy, which is attached hereto as Appendix "A", sets out the guidelines by which the Board will
endeavor to increase diversity amongst members of the Board as well as executive officers.
-
B.
-
Simultaneous Service
. No director should serve on more than 5 other public company boards. No
member of the Audit Committee should serve on more than 2 other public company audit committees. Directors are expected to advise the Chair and the chair of the Nominating & Corporate
Governance Committee in advance of accepting an invitation to serve on another public company board or the audit committee of a public company board.
-
C.
-
Financial Literacy
. Directors should know how to read and understand fundamental financial statements and
understand the use of financial ratios and information in evaluating the financial performance of the Company.
-
D.
-
Character
. Directors should be persons of good character and thus should possess all of the following
personal characteristics:
-
-
Integrity
: Directors should demonstrate high ethical standards and integrity in
their personal and professional dealings;
-
-
Accountability
: Directors should be willing to be accountable for their decisions
as directors;
-
-
Judgment
: Directors should possess the ability to provide wise and thoughtful
counsel on a broad range of issues;
-
-
Responsibility
: Directors should interact with each other in a manner which
encourages responsible, open, challenging and inspired discussion;
-
-
High Performance Standards
: Directors should have a history of achievements which
reflects high standards for themselves and others;
-
-
Commitment and Enthusiasm
: Directors should be committed to, and enthusiastic
about, their performance for the Company as directors, both in absolute terms and relative to their peers; and
-
-
Courage
: Directors should possess the courage to express views openly, even in the
face of opposition.
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VII. Board Renewal
-
A.
-
Term Limits.
The Board does not favor term limits for directors, but believes that it is important to
monitor overall Board performance. Therefore, the Nominating & Corporate Governance Committee shall review each director's continuation on the Board annually. This will allow the
Nominating & Corporate Governance Committee to evaluate each director's performance as well as provide each director with the opportunity to confirm his or her desire to continue as a member of
the Board.
-
B.
-
Retirement Age.
No person shall be nominated by the Board to serve as a director after he or she has
passed his or her 75th birthday, unless the Nominating & Corporate Governance Committee has recommended, on an annual basis, to waive the mandatory retirement age for
such director.
-
C.
-
Resignation PolicyManagement Directors
. Management directors shall forthwith offer to resign
from the Board upon their resignation, removal or retirement as an employee of the Company.
-
D.
-
Significant Change in Job Responsibilities.
The Board expects directors to notify the Chair promptly and
offer to resign from the Board upon a significant change in their business position. It is not the sense of the Board that in every instance the directors who retire or change from the position they
held when they joined the Board should necessarily leave the Board. There should, however, be an opportunity for the Board through the Nominating & Corporate Governance Committee, to review the
continued appropriateness of Board membership under the circumstances.
VIII. Role and Responsibilities of the Board and the Directors
The role of the Board is to represent the shareholders of the Company, enhance and maximize shareholder value and conduct the business and affairs of the Company
ethically and in accordance with high standards of corporate governance. The basic responsibility of the directors is to exercise their business judgment to act in what they reasonably believe to be
in the best interests of the Company and its shareholders.
The
Board is ultimately accountable and responsible for providing effective leadership in supervising the management of the business and affairs of the Company. In discharging that
obligation, directors should be entitled to rely on the honesty and integrity of the Company's officers, employees, outside advisors and independent auditors. The Board selects and oversees the
members of senior management, to whom the Board delegates the authority and responsibility for the conduct of the day-to-day operations of the business.
The
responsibilities of the Board include:
-
1.
-
reviewing
and adopting a strategic planning process;
-
2.
-
risk
identification and ensuring that procedures are in place for the management of those risks;
-
3.
-
reviewing
and approving annual business and capital plans and policies and processes generated by management relating to the authorization of major investments and
significant allocations of capital, subject to general authority guidelines;
-
4.
-
corporate
social responsibility, ethics and integrity;
-
5.
-
supervision
of senior management and succession planning including the appointment of the Chief Executive Officer and the Chair and ensuring that other executives are
in place to ensure sound management of the Company;
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-
6.
-
delegations
and general approval guidelines for management;
-
7.
-
monitoring
financial reporting and management;
-
8.
-
monitoring
internal control and management information systems;
-
9.
-
oversight
over corporate disclosure and communications;
-
10.
-
adopting
measures for receiving feedback from stakeholders; and
-
11.
-
adopting
key corporate policies designed to ensure that the Company, its directors, officers and employees comply, in all material respects, with all applicable
laws, rules and regulations and conduct their business ethically and with honesty and integrity.
Further,
each director is expected to:
-
1.
-
dedicate
sufficient time, energy and attention to ensure the diligent performance of his or her duties;
-
2.
-
comply
with the duties and responsibilities set forth herein and in the Articles of the Company;
-
3.
-
comply
with all duties of care, loyalty and confidentiality applicable to directors of publicly traded corporations organized in our jurisdiction of
incorporation; and
-
4.
-
adhere
to the Company's Code of Business Conduct and Ethics, including, but not limited to, the policies on conflicts of interest expressed therein and any other
applicable policies of the Company.
IX. Board Meetings
Meetings of the Board will be held at regular intervals and at least quarterly, with additional meetings to be held depending on the state of the Company's
affairs and in light of opportunities or risks which the Company faces. In addition, independent directors of the Board will have the opportunity to meet
in
camera
at each quarterly meeting of the Board or more frequently as they determine necessary. The executive sessions of the independent directors are currently presided over by
the independent Chair.
Directors
are strongly encouraged to attend the annual meeting of shareholders, Board meetings and meetings of committees on which they serve, and to spend the time needed and meet as
frequently as necessary to properly discharge their responsibilities. Directors are expected to review meeting materials prior to Board and committee meetings and, when possible, should communicate in
advance of meetings any questions or concerns that they wish to discuss so that management will be prepared to address the same.
The
Company shall distribute written materials sufficiently in advance of meetings to permit a meaningful review by the directors.
X. Board Committees
Subject to the Applicable Regulatory Requirements, the Board may delegate certain matters it is responsible for to Board committees, presently consisting of the
Audit Committee, the Nominating & Corporate Governance Committee, the Compensation Committee and the Transaction Committee. The Board will, however, retain its oversight function and ultimate
responsibility for these matters and all delegated responsibilities.
The
Board will have at all times an Audit Committee, a Compensation Committee and a Nominating & Corporate Governance Committee. Each of these committees of the Board shall
consist
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solely
of independent directors. The Board may, at its discretion, establish any other committees as it deems appropriate from time to time, including a Transaction Committee, which shall consist of
at least three members of the Board, one of whom must be an independent director in accordance with the Applicable Regulatory Requirements.
Committee
members will be appointed by the Board upon the recommendation of the Nominating & Corporate Governance Committee with consideration of the desires of individual
directors. Each committee shall have its own charter, which will set forth the purposes, goals and responsibilities of the committee as well as qualifications for committee membership, procedures for
committee member appointment and removal, committee structure and operations and committee reporting to the Board. The charters may also provide that each committee will annually evaluate its own
performance and such charters will be posted on the Company's website.
XI. Majority Vote Policy for the Election of Directors
The Company's Majority Voting Policy provides that directors receiving a greater number of votes withheld than votes in favour in uncontested elections of
directors shall be considered not to have the support of the shareholders and shall forthwith tender his or her resignation to the Chair, and the Nominating & Corporate Governance Committee
will make a recommendation to the Board on whether to accept or reject the resignation or other action. The Board will review and act on this recommendation within 90 days from the date of the
meeting. The Board will promptly publicly disclose its decision and, should the Board decline to accept the resignation, its rationale. The Company's Majority Voting Policy is attached hereto as
Appendix "B".
XII. Share Ownership Requirements
The Company has also developed share ownership guidelines for its directors and executive officers to create alignment and mutual ownership among directors,
executives and the shareholders of the Company.
XIII. Strategic Planning Process and Risk Management
The Board will adopt a strategic planning process to establish objectives and goals for the Company's business and will review, approve and modify as appropriate
the strategies proposed by senior management to achieve such objectives and goals. The Board will review and approve, as appropriate, a strategic plan which takes into account, among other things, the
opportunities and risks of the Company's business and affairs.
The
Audit Committee, in conjunction with senior management, will identify the principal risks of the Company's business and oversee senior management's implementation of appropriate
systems to effectively monitor, manage and mitigate the impact of such risks and report on and make recommendations with respect to such matters to the Board.
-
XIV.
-
Access to Officers, Employees and Advisors
Board
members have complete and open access to the Company's senior management, any other employees and any of the Company's advisors as necessary to complete their duties. Board members
who wish to have access to such persons may coordinate such access through the Chair or may contact such persons directly, with concurrent notice to the Chair.
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XV. Confidentiality
The Board believes maintaining confidentiality of information and deliberations is imperative. Information learned during the course of service on the Board is to
be held confidentially and used solely in furtherance of the Company's business.
-
XVI.
-
Corporate Social Responsibility, Business Conduct, Ethics and
Integrity
The
Company has adopted a Code of Business Conduct and Ethics and other internal policies and guidelines designed to support these guidelines and to comply with applicable law.
Directors, officers
and employees are expected to comply fully with that Code and any other applicable policies and guidelines.
The
Board will provide leadership to the Company in support of its commitment to corporate social responsibility, set the ethical tone for the Company and its management and foster
ethical and responsible decision making by management. The Board will take all reasonable steps to satisfy itself of the integrity of the Chief Executive Officer and senior management and satisfy
itself that the Chief Executive Officer and senior management create a culture of integrity throughout the organization.
XVII. Succession Planning
The Compensation Committee will review from time to time the Company's succession plan for the Chief Executive Officer, the Chief Financial Officer and other
executive officers, including appointment, training and evaluation.
XVIII. Executive Officer Performance Objectives and Compensation
The Compensation Committee will review the corporate goals and performance objectives relevant to compensation for the Chief Executive Officer, Chief Financial
Officer and other executive officers and evaluate such officers' performance and determine their compensation in light of those goals and objectives.
XIX. Director Compensation
The form and amount of non-management director compensation will be determined by the Board upon the recommendation of the Compensation Committee. The Board is
aware that questions as to directors' independence may be raised when directors' fees and emoluments exceed what is customary. Similar concerns may be raised when the Company makes substantial
charitable contributions to organizations with which a director is affiliated, or enters into consulting contracts with (or provides other indirect forms of compensation to) a director. The
Board will critically evaluate each of these matters when determining the form and amount of director compensation and will ensure that such payments do not violate the independence requirements of
the Applicable Regulatory Requirements.
XX. Director Orientation and Continuing Education
The Company will adopt an orientation program for any new directors under which a new director will meet separately with the Chair and members of the senior
executive team. A new director will be presented with a director manual that reviews Board policies and procedures, the Company's current strategic plan, financial plan and capital plan, the most
recent annual and quarterly reports and materials relating to key business issues. New directors will also receive training and preparation sessions in respect of financial accounting standards.
The
Chair of each committee is responsible for coordinating orientation and continuing director development programs relating to the committee's mandate.
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XXI. Delegations and Approval Authorities
The role of the Board focuses on governance and stewardship rather than on the responsibility of management to run the day-to-day operations of the Company. The
Board delegates to the Chief Executive Officer and senior management authority over the day-to-day management of the business and affairs of the Company. This delegation of authority will be subject
to the Applicable Regulatory Requirements and specified financial limits and any transactions or arrangements in excess of general authority guidelines will be reviewed by and subject to the prior
approval of the Board.
XXII. Monitoring of Financial Reporting and Management
The Board, the Disclosure Committee and/or committees of the Board, as appropriate and applicable, will approve all regulatory filings, including the annual
audited financial statements, interim financial statements, the notes and management discussion and analysis accompanying such financial statements, any quarterly and annual reports, management proxy
statements, registration statements, prospectuses, and all capital investments, equity and debt financings, borrowings and all annual operating plans and budgets.
XXIII. Corporate Disclosure and Communications
The Board values communications with the Company's shareholders and other stakeholders, and will ensure that effective communication is in place between the Board
and the Company's shareholders and other stakeholders.
Directors,
officers and employees other than the Chief Executive Officer and the Chair, and the Chief Financial Officer and Head of Investor Relations acting at the direction of the
Chief Executive officer and the Chair (the "
Spokespersons
"), are not authorized to speak on behalf of the Company and must not initiate
communication regarding the Company with any shareholders and other stakeholders, or respond under any circumstances to inquiries from shareholders and other stakeholders, or otherwise discuss Company
business with outside third parties, including the investment community, the media, regulatory authorities or others unless specifically authorized by the Board. As a general practice, if a director,
officer or employee is contacted by shareholders and other stakeholders, including the investment community, the media, regulatory authorities or others, he or she is instructed to consult the Board
and refer all such communications (including electronic communications) to the Spokespersons.
Situations
in which a director is required to speak publicly on behalf of the Board are highly unusual and infrequent. Should such a situation arise, the Chair or a delegate is
authorized to speak (or respond) on behalf of the Board.
In
furtherance of the foregoing, the Board will:
-
1.
-
adopt
a communication policy for the Company.
-
2.
-
ensure
that the financial performance of the Company is reported to shareholders on a timely, regular and non-selective basis.
-
3.
-
ensure
that there are measures in place for receiving feedback from stakeholders.
XXIV. Corporate Policies
The Board will adopt and review, as appropriate, policies and procedures designed to ensure that the Company, its directors, officers and employees comply, in all
material respects, with all Applicable
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Regulatory
Requirements and conduct the Company's business ethically and with honesty and integrity. Principal policies consist of:
-
1.
-
Code
of Business Conduct and Ethics;
-
2.
-
Delegation
of Authority Policy;
-
3.
-
Corporate
Investment Policy;
-
4.
-
Majority
Voting Policy;
-
5.
-
Diversity
Policy; and
-
6.
-
Insider
Trading Policy.
XXV. Assessing Board Performance
The Board will conduct a self-evaluation at regular intervals to determine whether individual directors, the Board and committees of the Board are functioning
effectively. The Nominating & Corporate Governance Committee will receive comments from all directors as to their individual performance, the Board's performance, and the performance of
committees of the Board and report to the Board with an assessment, to be discussed with the full Board.
XXVI. Review of Guidelines
The Nominating & Corporate Governance Committee will review and assess, as appropriate, the adequacy of these guidelines and recommend any proposed changes
to the Board for consideration.
Approved
by the Board of Directors
Aralez Pharmaceuticals Inc.
March 7, 2017
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Appendix "A"
Diversity Policy
See attached.
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ADMINISTRATIVE POLICY & PROCEDURE
Effective Date
: May 4, 2016
Title
: Diversity Policy
I. INTRODUCTION
Aralez
Pharmaceuticals Inc. (the "Company") recognizes the importance and benefit of having a board of directors (the "Board") and executive officers comprised of
highly talented and experienced individuals, with a view toward fostering and promoting diversity amongst Board members and executive officers. To this end, the Board has unanimously adopted this
diversity policy (the "Policy").
II. OBJECTIVES
The
Board is committed to growth and development with respect to diversity among its Board members and executive officers. This may include, but is not limited to, diversity in regards
to attributes such as gender, ethnicity, age, national origin, disability, sexual orientation and other dimensions.
In
addition, the Board is committed to ensuring that its members are reflective of diverse professional experience, skills, knowledge and other attributes that are essential to its
successful operation and the achievement of the Company's current and future plans and objectives.
III. MANDATE
The
Board and its committees, as applicable, will, when identifying candidates to nominate for election to the Board or appointment as executive
officers:
-
-
consider individuals who are highly qualified, based on their talents, experience, functional expertise and personal skills, character and
qualities, and in light of the Company's current and future plans and objectives as well as anticipated regulatory and market developments and any other factors that the Board or its committees, as
applicable, deem appropriate;
-
-
consider criteria that promotes diversity, including with regard to gender, ethnicity, age, national origin, disability, sexual orientation,
and other dimensions; and
-
-
consider the level of representation of women on the Board and in executive officer positions along with other markers of diversity when making
recommendations for nominees to the Board or for appointment as executive officers and in general with regard to succession planning for the Board and executive officers.
Given
the nature and size of the Company's business and its industry, it may be challenging for the Company to identify a qualified pool of candidates that adequately reflects the
various diverse characteristics that the Company seeks to promote. The Company has therefore not adopted any specific targets, but will promote its objectives as set out in this Policy with a view to
identifying and fostering the development of a suitable pool of candidates for nomination or appointment over time.
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IV. MONITORING AND REPORTING
The
Nominating & Corporate Governance Committee shall periodically report to the Board on the implementation of this Policy and shall review and evaluate this Policy from time to
time as the Committee deems necessary to determine whether this Policy is effective in achieving the objectives set forth herein.
Recognizing
the need for considered and effective progression in respect of this Policy, progress will be measured based on, among other things, the relative increase of diversity on the
Board and executive officer positions over time, as well the implementation of specific processes designed to foster the progression of diverse candidates to be considered for nomination
or appointment.
V. REVIEW OF POLICY
This
is a policy, and is subject to change from time to time by the Board. In addition, the Board may, from time to time, permit departures from the terms of this Policy, either
prospectively or retroactively. The terms of this Policy are not intended to give rise to civil liability to shareholders of the Company or other liability whatsoever.
Approved
by the Board of Directors and the Nominating & Corporate Governance Committee
Aralez
Pharmaceuticals Inc.
May 4, 2016
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Appendix "B"
Majority Voting Policy
See attached.
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ADMINISTRATIVE POLICY & PROCEDURE
Effective Date:
May 4, 2016
Title:
Majority Voting Policy
The
board of directors (the "Board") of Aralez Pharmaceuticals Inc. (the "Company") believes that each of its members should have the confidence
and support of the Company's shareholders (the "Shareholders"). To this end, the Board has unanimously adopted this majority voting policy regarding the election of directors
(the "Policy"). This Policy applies to all current and future directors of the Company.
I. VOTING PROCEDURE DURING MEETINGS
A. Individual Voting
Forms of proxy provided to Shareholders in respect of the election of directors at a Shareholders' meeting shall enable each Shareholder to vote its shares in
favour of, or to withhold its shares from voting with respect to, each nominee separately. The chair of the Board (the "Chair") will ensure that the number of shares voted in favour or withheld
from voting for each director nominee is recorded and promptly made public by press release after the meeting of Shareholders. If the vote was by a show of hands, the Company will disclose the number
of shares voted by proxy in favour or withheld for each director. Voting results will also be made public in accordance with applicable Canadian and U.S. securities laws, Toronto Stock Exchange
and NASDAQ Global Market rules and any other applicable regulatory requirements (collectively, the "Applicable Regulatory Requirements").
B. Treatment of Withheld Votes
If, in an uncontested election of directors of the Company, any particular nominee for director receives a greater number of votes withheld than votes in favour
of the nominee, then, for purposes of this Policy, the nominee shall be considered not to have received the support of the Shareholders, even though duly elected as a matter of corporate law, and such
nominee shall tender his or her resignation to the Chair following the meeting in accordance with Section II. In this Policy, an "uncontested election" shall mean an election where the number
of nominees for director shall be equal to the number of directors to be elected as determined by the Board. This Policy does not apply where the number of nominees for election as a director exceeds
the number of directors to be elected and/or an election involving a proxy contest i.e., where proxy material is circulated and/or a solicitation of proxies is carried out, in support of one or
more nominees who are not part of the director nominees supported by the Board or public communications are disseminated, against one or more nominees who are supported by the Board. In this latter
case of a contested election, directors shall continue to be elected by plurality.
II. NOMINEE NOT RECEIVING THE SUPPORT OF THE SHAREHOLDERS
A. Director to Submit Resignation
A director nominee who is considered under this Policy not to have received the support of Shareholders shall forthwith submit his or her resignation to the
Board, effective on acceptance by the Board. Upon receipt, the Board will refer the resignation to the Nominating & Corporate Governance Committee (the "Committee") for consideration.
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B. Committee Consideration
The Committee shall consider the resignation offer and shall recommend to the Board whether to accept the resignation. In determining whether to recommend
acceptance, the Committee shall consider
all factors deemed relevant by members of the Committee including, without limitation, such factors as (i) the stated reasons, if any, why the Shareholders withheld votes from the election of
that nominee; (ii) the length of service and the qualifications of the director whose resignation has been tendered; (iii) such director's contributions to the Company; (iv) the
Company's Corporate Governance Guidelines; (v) available alternatives to cure the underlying cause of the withheld votes; (vi) the overall composition of the Board (including the current
mix of skills and attributes of the Board); (vii) whether accepting the resignation would cause the Company to fail to meet any Applicable Regulatory Requirements; and (viii) whether
exceptional or extraordinary circumstances relating to the composition of the Board or the voting results should delay the acceptance of the resignation or justify rejecting it outright.
C. Board Expected to Consider Resignation within 90 Days
Notwithstanding Section II.A above, it is expected that any such tendered resignation shall be considered in a timely manner and a decision taken in
respect thereof no later than within 90 days of the meeting of Shareholders.
D. Director's Activities while Resignation Is Considered
Any director who tenders his or her resignation pursuant to this Policy will not participate in the Committee or Board's consideration regarding whether to accept
the tendered resignation. However, unless otherwise determined by the Board, such director shall remain active and engaged in all other committee and Board activities, deliberations and decisions
during the process described by this Policy.
E. Considerations
In reviewing the Committee's recommendation, the Board will examine the factors considered by the Committee and any additional information and factors that the
Board considers relevant in determining whether to accept the recommendation of the Committee.
F. Press Release
Following the Board's decision on the resignation, the Board shall promptly publicly disclose, via press release, its decision regarding whether to accept or
reject the director's resignation. Should the Board decline to accept the resignation where exceptional circumstances would so warrant, it should include in
the press release the reasons for its decision. Such information will also be made public in accordance with Applicable Regulatory Requirements.
III. EFFECT OF ANY RESULTING VACANCY
A. Alternatives available to the Board
In the event that the Board chooses to accept one or more resignations, and subject to Applicable Regulatory Requirements, the
Board may:
-
-
leave the resultant vacancy unfilled until the next annual general meeting of Shareholders;
-
-
fill the vacancy through the appointment of a new director whom the Board considers to merit the confidence of the Shareholders; or
-
-
call a special meeting of Shareholders at which one or more management nominees will be presented to fill the vacant position or positions,
as applicable.
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IV. REVIEW OF POLICY
The
Committee will review and assess from time to time, as the Committee determines to be necessary, the adequacy of this Policy and recommend any proposed changes to the Board for
consideration.
V. GENERAL
This
is a policy, and is subject to change from time to time by the Board. In addition, the Board may, from time to time, permit departures from the terms of this Policy, either
prospectively or retrospectively. The terms of this Policy are not intended to give rise to civil liability to Shareholders or other liability whatsoever.
Approved
by the Board of Directors and the Nominating & Corporate Governance Committee
Aralez
Pharmaceuticals Inc.
May 4, 2016
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Annex C
ARALEZ PHARMACEUTICALS INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. Purpose
The purpose of the Audit Committee (the "
Committee
") is to assist the Board of Directors
(the "
Board
") of Aralez Pharmaceuticals Inc. (the "
Company
") in fulfilling its
oversight responsibilities with respect to the Company's accounting and financial processes and the audits of the Company's financial statements.
II. Structure and Membership
A.
Number.
The Committee shall be comprised of at least three or more members of the Board.
B.
Independence.
Except as otherwise permitted by the applicable Nasdaq and Securities and Exchange Commission
rules, each member of the Committee shall be independent as defined by Nasdaq rules, meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934,
and not have participated in the preparation of the financial statements of the Company or any subsidiary of the Company at any time during the prior three years.
C.
Financial Literacy.
Each member of the Committee shall be able to read and understand fundamental financial
statements, including the Company's balance sheet, income statement and cash flow statement, at the time of his or her appointment to the Committee. In addition, at least one member of the Committee
shall have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background that results in that member's
financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. To the extent possible,
at least one member of the Committee shall be an "audit committee financial expert" (as defined by applicable SEC rules).
D.
Selection and Removal.
The members of the Committee shall be appointed by the Board, upon the recommendation
of the Nominating/Corporate Governance Committee, and shall serve until their successors shall be duly elected and qualified. The Board may remove members of the Committee from such Committee, with or
without cause. The Chair of the Committee shall be elected by the Board, upon the recommendation of the Nominating/ Corporate Governance Committee.
E.
Compensation.
The compensation of Committee members shall be as determined by the Board. No member of the
Committee may receive, directly or indirectly, any consulting, advisory or other
compensatory fee from the Company or any of its subsidiaries, other than fees paid in his or her capacity as a member of the Board or a committee of the Board.
III. Procedures and Administration
A.
Meetings.
The Committee shall meet as often as it may deem necessary and appropriate in its judgment, but in
no event less than four times per year. The Committee may also act by unanimous written consent in lieu of a meeting. A majority of the members of the Committee shall constitute a quorum. The Chair of
the Committee or a majority of the members of the Committee may call a special meeting of the Committee. The Committee shall meet with the independent auditors, the senior personnel performing the
Company's internal audit function, and management in separate meetings, as often as it deems necessary and appropriate in its judgment.
B.
Investigations; Attendance at Meetings.
The Committee shall have the authority to conduct or authorize
investigations into any matters within the scope of its responsibilities as it shall deem
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appropriate.
The Committee may also request that any directors, officers or employees of the Company, or other persons whose advice and counsel are sought by the Committee, attend any meeting to
provide such information as the Committee may request.
C.
Committee Procedures.
The Committee may fix such policies and rules of procedure as it deems necessary or
appropriate. Such policies or rules of procedures as the Committee may adopt shall be consistent with this Charter.
D.
Records.
The Committee shall keep written minutes of its meetings, which minutes shall be maintained with the
books and records of the Company.
E.
Subcommittees; Delegation.
The Committee may delegate authority to one or more members of the Committee where
appropriate, but no such delegation shall be permitted if the authority is required by a law, regulation, or listing standard to be exercised by the Committee as a whole. Any decision made
pursuant to such delegation to pre-approve audit, review, attest or non-audit services shall be presented to the full Committee at its next scheduled meeting.
F.
Independent Advisors; Funding.
The Committee shall have the authority, without further action by the Board,
to obtain advice and assistance from internal and external legal, accounting and other advisors, and the Committee shall be empowered, without further action by the Board, to cause the Company to
provide appropriate funding for the Committee to retain any such advisors.
IV. Authority and Responsibilities
A.
General
The
Committee shall discharge its responsibilities, and shall assess the information provided by the Company's management and the independent auditor, in accordance with its business
judgment. The role of the Committee is one of oversight. The members of the Committee are not full-time employees of the Company and may or may not be accountants or auditors by profession or experts
in the fields of accounting or auditing and, in any event, do not serve in such capacity. It is not the duty or responsibility of the Committee to conduct audits, to independently verify management's
representations, or to determine that the Company's financial statements are complete and accurate, are prepared in accordance with generally accepted accounting principles
("
GAAP
"), or fairly present the financial condition, results of operations, and cash flows of the Company in accordance with GAAP. These are the
responsibilities of management and the independent auditor. The Committee's considerations and discussions with management and the independent auditor do not assure that the Company's financial
statements are presented in accordance with GAAP, that the audit of the Company's financial statements has been carried out in accordance with generally accepted auditing standards, or that the
Company's independent auditor is in fact "independent."
B.
Oversight of Independent Auditor
1.
Selection.
The Committee shall be solely and directly responsible for appointing, evaluating, retaining and,
when necessary, terminating the engagement of the independent auditor. The Committee may, in its discretion, seek shareholder ratification of the independent auditor it appoints.
2.
Compensation.
The Committee shall have sole and direct responsibility for setting the compensation of the
independent auditor. The Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of the independent auditor established by the Committee.
3.
Pre-Approval of Services.
The Committee shall review and approve in advance all audit services to be provided
to the Company, whether provided by the principal auditor or other firms, and all non -audit services to be provided to the Company by the independent auditor and the fees
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for
such services. Pre-approval of services that are not prohibited may be pursuant to appropriate policies and procedures established by the Committee for the pre-approval of such services.
4.
Independence.
The Committee shall obtain and review a formal written statement from the independent auditor
describing all relationships between the auditor and the Company, including the disclosures required by Independence Standards Board Standard No. 1. The Committee shall actively engage in
dialogue with the independent auditor concerning any disclosed relationships or services that might impact the objectivity and independence of the independent auditor.
5.
Oversight.
The independent auditor shall report directly to the Committee, and the Committee shall have sole
and direct responsibility for overseeing the work of the independent auditor, including resolution of disagreements between Company management and the independent auditor regarding financial reporting
and the receipt and consideration from time to time as appropriate of any reports required under applicable law to be made by the independent auditor. The Committee shall obtain and review a report
from the independent auditor describing: (i) the independent auditor's internal quality-control procedures; and (ii) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities or a private sector regulatory board, within the preceding five
years, respecting one or more independent audits performed by the firm, and any steps taken to deal with any such issues.
C.
Audited Financial Statements and Other Financial Disclosures
1.
Review and Discussion.
The Committee shall review and discuss with the Company's management and independent
auditor the Company's annual audited financial statements to be included in the Company's annual report on Form 10-K, the quarterly financial statements to be included in the Company's
quarterly reports on Form 10-Q, the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations", and other financial disclosures to be
included in SEC filings prior to their release. This discussion should include, where
appropriate, a discussion about the Company's accounting principles, critical accounting estimates, significant financial reporting issues and judgments (including off-balance sheet arrangements and
the use of pro forma or non-GAAP financial information), the adequacy of the Company's internal control, and any regulatory and accounting initiatives, correspondence with regulators, or
published reports that raise material issues with respect to, or that could have a significant effect on, the Company's financial statements.
2.
Recommendation to Board Regarding Financial Statements.
The Committee shall recommend to the Board whether
the Company's audited financial statements should be included in the Company's Annual Report on Form 10-K.
3.
Audit Committee Report.
The Committee shall prepare the committee report required by the rules of the SEC to
be included in the Company's annual proxy statement.
4.
Earnings Releases and Financial Guidance.
The Committee shall review the Company's quarterly earnings press
releases prior to their release and shall discuss generally any financial information and earnings guidance to be provided to analysts and rating agencies.
D.
Controls and Procedures
1.
Internal Audit Function.
The Committee shall coordinate the Board's oversight of the performance of the
Company's internal audit function.
2.
Risk Management.
The Committee shall discuss periodically with management the Company's policies and
guidelines regarding risk assessment and risk management, as well as the
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Company's
major financial risk exposures and the steps that management has taken to monitor and control such exposures.
3.
Disclosure Controls and Procedures.
The Committee shall oversee the Company's disclosure controls and
procedures, including applicable internal control over financial reporting, and where applicable, shall oversee changes in internal control over financial reporting controls intended to address any
material weaknesses or significant deficiencies in the design or operation of internal control over financial reporting and any fraud involving management or other employees that is reported to the
Committee. In addition, the Committee shall review and discuss the annual internal control report of management and the independent auditor's report on, and attestation of, such management report, to
the extent that those reports are required by SEC rules.
4.
Procedures for Complaints.
The Committee shall establish procedures for (i) the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (ii) the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing matters.
5.
Additional Powers.
The Committee shall have such other duties as may be delegated from time to time by
the Board.
V. Other Matters
A.
Assessment.
The Committee shall annually review and assess the performance of the Committee, and report the
results of such evaluation to the Board.
B.
Charter.
The Committee shall review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for its approval.
C.
Reports.
The Committee shall report regularly to the Board on the matters discussed and actions taken at each
meeting of the Committee, including the Committee's evaluation of the independent auditor.
D.
Additional Powers.
The Committee shall perform any other activities consistent with this Charter and the
Company's Articles, and governing law, as the Committee or the Board may deem necessary or appropriate.
This
Charter of the Audit Committee of the Board of Directors
was adopted by the Board on February 1, 2016.
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/s/ ERIC L. TRACHTENBERG
Corporate Secretary of Aralez Pharmaceuticals Inc.
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ARALEZ PHARMACEUTICALS INC. Security Class Holder Account Number -------Fold Form of Proxy - Annual Meeting to be held on June 29, 2018 This Form of Proxy is solicited by and on behalf of the Board of Directors. Notes to proxy 1. Every holder has the right to appoint some other person or company of their choice, who need not be a holder, to attend and act on their behalf at the meeting or any adjournment or postponement thereof. If you wish to appoint a person or company other than the persons whose names are printed herein, please insert the name of your chosen proxyholder in the space provided (see reverse). If the securities are registered in the name of more than one owner (for example, joint ownership, trustees, executors, etc.), then all those registered should sign this proxy. If you are voting on behalf of a corporation or another individual you must sign this proxy with signing capacity stated, and you may be required to provide documentation evidencing your power to sign this proxy. This proxy should be signed in the exact manner as the name(s) appear(s) on the proxy. If this proxy is not dated, it will be deemed to bear the date on which it is mailed by Management to the holder. The securities represented by this proxy will be voted as directed by the holder, however, if such a direction is not made in respect of any matter, this proxy will be voted as recommended by the Board. The securities represented by this proxy will be voted in favour or withheld from voting or voted against each of the matters described herein, as applicable, in accordance with the instructions of the holder, on any ballot that may be called for and, if the holder has specified a choice with respect to any matter to be acted on, the securities will be voted accordingly. This proxy confers discretionary authority in respect of amendments or variations to matters identified in the Notice of Meeting or other matters that may properly come before the meeting or any adjournment or postponement thereof. This proxy should be read in conjunction with the accompanying documentation provided by Management and the Board. 2. 3. 4. 5. 6. 7. -------Fold 8. Proxies submitted must be received by 9:00 AM (Eastern Standard Time) on June 27, 2018. If you vote by telephone or the Internet, DO NOT mail back this proxy. To Vote Using the Telephone To Vote Using the Internet Call the number listed BELOW from a touch tone telephone. 1-866-732-VOTE (8683) Toll Free Go to the following web site: www.investorvote.com Smartphone? Scan the QR code to vote now. If you vote by telephone or the Internet, DO NOT mail back this proxy. Voting by mail may be the only method for securities held in the name of a corporation or securities being voted on behalf of another individual. Voting by mail or by Internet are the only methods by which a holder may appoint a person as proxyholder other than the Named Proxies nominees named on the reverse of this proxy. Instead of mailing this proxy you may choose one of the two voting methods outlined above to vote this proxy. To vote by telephone or the Internet, you will need to provide your CONTROL NUMBER listed below. CONTROL NUMBER
Appointment of Proxyholder I/We, being holder(s) of Aralez Pharmaceuticals Inc. hereby appoint: Adrian Adams, or failing him, Andrew I. Koven (the Named Proxies), Print the name of the person you are appointing if this person is someone other than the Named Proxies. OR as my/our proxyholder with full power of substitution and to attend, act and to vote for and on behalf of the shareholder in accordance with the following direction (or if no directions have been given, as the proxyholder sees fit) and all other matters that may properly come before the Annual Meeting (the "Meeting") of shareholders of Aralez Pharmaceuticals Inc. (the " Company") to be held at the offices of Stikeman Elliott LLP, 5300 Commerce Court West, 199 Bay Street, Toronto, ON, Canada, M5L 1B9, on June 29, 2018 at 9:00 AM (Eastern Standard Time) or at any adjournment or postponement thereof. VOTING RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED TEXT OVER THE BOXES. 1. Election of Directors For Withhold For Withhold For Withhold 01. Adrian Adams 02. Neal F. Fowler 03. Rob Harris -------Fold 04. Arthur S. Kirsch 05. Kenneth B. Lee, Jr. 06. Seth A. Rudnick, M.D. 07. F. Martin Thrasher Withhold 2. Appointment of Auditors Approval of the appointment of Ernst & Young LLP, an independent registered public accounting firm, as the Companys auditors for the fiscal year ending December 31, 2018. Against Abstain 3. Approval of an Amendment to the Amended and Restated 2016 Long-Term Incentive Plan Approval of an amendment to the Amended and Restated 2016 Long-Term Incentive Plan to adopt a limit on the number of awards that may be granted to a non-employee director during any one calendar year. Against Abstain 4. Non-Binding Say-on-Pay Vote Approval of the non-binding advisory vote to approve the Companys approach to the compensation of its named executive officers, as disclosed in the Companys proxy statement dated May 18, 2018. -------Fold Authorized Signature(s) - This section must be completed for your instructions to be executed. Signature(s) Date I/We authorize you to act in accordance with my/our instructions set out above. I/We hereby revoke any proxy previously given with respect to the Meeting. If no voting instructions are indicated above, this Proxy will be voted as recommended by the Board. Y R Z Q 2 7 5 9 1 1 A R 0 For For For