Exhibit
99.2
These materials
are important and require your immediate attention. If you have any questions or require more information with regard to the procedures
for voting your shares or completing your transmittal documentation, please contact the proxy solicitation agent, Gryphon Advisors
Inc. by telephone at 1.833.490.0586 toll-free in North America (1.416.661.6592 by collect call) or by email at inquiries@gryphonadvisors.ca.
NOTICE
OF ANNUAL GENERAL AND SPECIAL MEETING OF SECURITYHOLDERS
AND
MANAGEMENT
INFORMATION CIRCULAR
TO BE
HELD ON MAY 15, 2020
DATED APRIL
7, 2020
In order to vote by proxy, Registered Shareholders must fill out the YELLOW form of proxy and holders of Options, RSUs and/or
PSUs must fill out the GREEN form of proxy. If you are both a Registered Shareholder and a holder of Options, RSUs and/or PSUs
and are voting by proxy, you must fill out BOTH the YELLOW and the GREEN forms of proxy to ensure your vote is properly counted.
RECOMMENDATION
TO SECURITYHOLDERS:
YOUR
VOTE IS IMPORTANT, TAKE ACTION AND VOTE TODAY. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SECURITYHOLDERS VOTE
FOR THE ARRANGEMENT RESOLUTION
(AS DEFINED HEREIN). |
April 7,
2020
Dear Securityholders:
The directors
of Correvio Pharma Corp. (“Correvio” or the “Company”) invite you to attend the annual general
meeting of holders (the “Shareholders”) of common shares (the “Shares”) of the Company and
the special meeting of Shareholders, holders of options (the “Options”), restricted share units (the “RSUs”)
and phantom share units (the “PSUs”) to be held on May 15, 2020 at 10:00 a.m. (Pacific time) (the “Meeting”).
At the Meeting the Shareholders will be asked to vote on (i) annual general meeting matters including the election of directors
and the appointment of KPMG LLP as auditor of the Company until the next annual general meeting of Shareholders and (ii) the Arrangement
Resolution, as more fully described below. At the Meeting, the holders of Options, RSUs and PSUs (on an “as-converted basis”
and voting with the Shareholders as a single class) will be asked to only vote on the Arrangement Resolution. In this letter,
“as-converted basis” means, (i) in respect of Options, the number of Shares for which the Options are exercisable,
(ii) in respect of RSUs, on the basis of one Share for each RSU, and (iii) in respect of PSUs, on the basis of one Share for each
PSU.
This year,
out of an abundance of caution, to proactively deal with the public health impact of the COVID-19 pandemic and to mitigate risks
to the health and safety of our communities, Securityholders (as defined below) and employees, we will hold the Meeting in a virtual
only format, which will be conducted via live audio webcast. Securityholders will have an equal opportunity to participate at
the Meeting online, regardless of their geographic location. Securityholders will not be able to attend the Meeting in person.
Inside this document, you will find important and detailed instructions about how to participate at our virtual Meeting.
At the Meeting,
Shareholders and holders of Options, RSUs and PSUs (collectively, the “Securityholders”) will be asked to,
among other things, pass a special resolution (the “Arrangement Resolution”) approving a plan of arrangement
(the “Arrangement”) involving Correvio and Mercury Pharma Group Limited (the “Purchaser”),
an indirect, wholly owned subsidiary of ADVANZ PHARMA Corp. Limited. (“ADVANZ”) to be carried out pursuant
to an arrangement agreement (the “Arrangement Agreement”) made as of March 15, 2020 among Correvio, the Purchaser
and ADVANZ.
Full details
of the Arrangement are set out in the accompanying notice of annual general meeting of Shareholders and special meeting of Securityholders
and the information circular (the “Circular”). The following is a summary of certain terms of the Arrangement
for Securityholders:
| · | holders
of Shares (other than Shares held by dissenting Shareholders) will receive US$0.42 in
cash for each Share held (the “Share Consideration”), net of applicable
withholding taxes; |
| · | holders
of Options will receive a cash payment equal to the amount, if any, by which the Share
Consideration exceeds the exercise price payable for each Share underlying such Option,
net of applicable withholding taxes; |
| · | holders
of RSUs will receive US$0.42 in cash for each RSU held, net of applicable withholding
taxes; and |
| · | holders
of PSUs will receive US$0.42 in cash for each PSU held, net of applicable withholding
taxes |
(collectively,
the “Arrangement Consideration”).
The Arrangement
is subject to customary conditions for a transaction of this nature, which include court and regulatory approvals and the approval
of (i) at least 66⅔% of the votes cast on the Arrangement Resolution by the Shareholders present online or represented by
proxy at the Meeting and (ii) at least 66⅔% of the votes cast on the Arrangement Resolution by the Securityholders (on an
“as-converted basis”) present online or represented by proxy at the Meeting, voting together as a single class.
The board
of directors of the Company (the “Board”) has received an opinion from Piper Sandler & Co. (the “Fairness
Opinion”) to the effect that the Share Consideration to be received by the Shareholders pursuant to the Arrangement
is fair, from a financial point of view, to such holders, as of the date of such opinion and subject to the assumptions, limitations
and qualifications contained therein.
After consulting
with its financial and legal advisors, and after the consideration of, among other things, the Fairness Opinion, the Board has
unanimously determined that the Arrangement is fair to Securityholders and that the Arrangement is in the best interests of the
Company. The Board unanimously recommends that the Securityholders vote FOR the Arrangement Resolution.
The Circular
contains a detailed description of the Arrangement and contains additional information to assist you in considering how to vote
on the Arrangement Resolution. Please give this material your careful consideration and, if you require assistance, consult your
financial, legal, tax or other professional advisors.
Registered
Shareholders, holders of Options, RSUs and PSUs and duly appointed proxyholders for Registered Shareholders, holders of Options,
RSUs and PSUs, will be able to attend, participate and vote at the Meeting online at https://web.lumiagm.com/202877707. Non-Registered
Shareholders (being Shareholders who hold their Shares through a broker, investment dealer, bank, trust company, custodian, nominee
or other intermediary or depository, such as CDS & Co., in Canada, and The Depository Trust Company, in the United States,
of which an intermediary is a participant) who have not arranged for due appointment of themselves as proxyholder will not be
able to attend, participate or vote at the Meeting.
A Shareholder,
holder of Options, RSUs or PSUs who wishes to appoint a person other than the management nominees identified on the form of proxy
or voting instruction form (“VIF”), as applicable, to represent him, her or it at the Meeting may do so by
inserting such person's name in the blank space provided in the form of proxy or VIF, as applicable, and following the instructions
for submitting such form of proxy or VIF, as applicable. This must be completed prior to registering such proxyholder, which is
an additional step to be completed once you have submitted your form of proxy or VIF. If you wish that a person other than
the management nominees identified on the form of proxy or VIF attend and participate at the Meeting as your proxy and vote your
Shares, Options, RSUs and/or PSUs, including if you are not a registered holder of Shares (a “Non-Registered Shareholder”)
and wish to appoint yourself as proxyholder to attend, participate and vote at the Meeting, you MUST register such proxyholder
after having submitted your form of proxy or VIF, as applicable, identifying such proxyholder. Failure to register the proxyholder
will result in the proxyholder not receiving a username to participate in the Meeting (a “Username”). Without
a Username, proxyholders will not be able to attend, participate or vote at the Meeting. To register a proxyholder, Shareholders,
holders of Options, RSUs and PSUs MUST visit http://www.computershare.com/correvio and provide Computershare
Investor Services Inc. with their proxyholder's contact information, so that Computershare Investor Services Inc. may provide
the proxyholder with a Username via email.
Proxies must
be deposited with Computershare Investor Services Inc. no later than 10:00 a.m. (Pacific time) on May 13, 2020 (or if the
Meeting is postponed or adjourned, by no later than 48 hours prior to the time of such postponed or adjourned meeting, excluding
Saturdays, Sundays and holidays). Voting by proxy will not prevent you from voting online at the Meeting if you attend the virtual
Meeting but will ensure that your vote will be counted if you are unable to attend. Non-Registered Shareholders should carefully
follow the instructions of their intermediaries to ensure that their Shares are voted at the Meeting in accordance with such Shareholder’s
instructions. This is an important matter affecting the future of the Company and your vote is important regardless of the number
of securities you own.
In order
to vote by proxy, Registered Shareholders must fill out the YELLOW form of proxy and holders of Options, RSUs and/or PSUs must
fill out the GREEN form of proxy. If you are both a Registered Shareholder and a holder of Options, RSUs and/or PSUs and are voting
by proxy, you must fill out BOTH the YELLOW and the GREEN forms of proxy to ensure your vote is properly counted.
Subject to
obtaining the approvals of the Shareholders, the Securityholders and the Supreme Court of British Columbia, and to satisfying
certain other conditions, all of which are described in more detail in the attached Circular, the Arrangement is expected to close
on or about May 27, 2020.
If you have
any questions or need assistance, please contact Correvio or the transfer agent, Computershare Investor Services Inc., as follows:
| Mail: |
Correvio
Pharma Corp.
6th
Floor, 1441 Creekside Drive
Vancouver,
British Columbia
Canada, V6J
4S7
Attention:
Investor Relations |
Mail: |
Computershare
Investor Services Inc.
8th
Floor, 100 University Avenue
Toronto, Ontario
Canada, M5J
2Y1
Attention:
Proxy Department |
| Telephone: |
1-833-490-0586 (toll-free) |
Telephone: |
1-800-564-6253
(toll-free)
1-514-982-7555 |
| Fax: |
(604) 677-6915 |
Fax: |
1-866-249-7775 (toll-free) |
| Email: |
inquiries@gryphonadvisors.ca |
|
|
If you have any
questions and/or need assistance in voting your securities, please contact our proxy solicitation agent: Gryphon Advisors Inc.
North American Toll
Free Number: 1.833.490.0586
Collect Calls Outside
North America: 1.416.661.6592
Email: inquiries@gryphonadvisors.ca
On behalf
of Correvio, our management team and the Board, I would like to thank all Securityholders for their continuing support and urge
you to vote in favour of this milestone transaction.
| Sincerely, |
| |
| “W.
James O’Shea” |
| |
| Chairman |
| Correvio
Pharma Corp. |
Capitalized
terms used but not otherwise defined in the Circular have the meanings set out in the Glossary of Terms in the Circular.
FREQUENTLY
ASKED QUESTIONS ABOUT THE ARRANGEMENT AND THE MEETING
The following
is a summary of certain information contained in the Circular, together with some of the questions that you, as a Securityholder,
may have along with answers to those questions. You are urged to read the remainder of the Circular, the forms of proxy and the
Letter of Transmittal carefully because the information contained below is of a summary nature, and therefore is not complete,
and is qualified in its entirety by the more detailed information contained elsewhere in the Circular, the forms of proxy and
the Letter of Transmittal, and the attached appendices, all of which are important and should be reviewed carefully.
| A: | For
Shareholders and holders of Options, RSUs and/or PSUs |
Shareholders
and holders of Options, RSUs and PSUs are being asked to consider and, if deemed advisable, vote FOR the Arrangement
Resolution. The Arrangement provides for, among other things: the acquisition by the Purchaser of all the issued and outstanding
Shares of Correvio in exchange for the Share Consideration for each Share held by a Shareholder, net of applicable withholding
taxes (other than Shareholders exercising Dissent Rights and who have not withdrawn their notice of objection); a cash payment
to holders of Options equal to the amount, if any, by which the Share Consideration exceeds the exercise price payable under such
Option by the holder thereof to acquire the Share underlying such Option, net of applicable withholding taxes; a cash payment
to holders of RSUs of US$0.42 for each RSU held, net of applicable withholding taxes; and a cash payment to holders of PSUs of
US$0.42 for each PSU held, net of applicable withholding taxes. The Purchaser intends to have the Shares delisted from the TSX
and the Nasdaq. In addition, Correvio will apply to cease to be a reporting issuer in the applicable Canadian jurisdictions. Correvio’s
common stock will also be deregistered under the U.S. Exchange Act and Correvio will no longer file periodic or current reports
with the SEC.
Only
Shareholders
The
Meeting is also an annual meeting, and therefore, Shareholders will receive the audited consolidated financial statements of the
Company for the financial year ended December 31, 2019 and will be asked to vote on the election of directors and the appointment
of Correvio’s auditors for the ensuing year. Shareholders also are being asked to approve the transaction of any other business
that may properly come before the Meeting or any adjournments or postponements thereof. Further descriptions of the matters covered
by each of these resolutions are contained in the sections entitled “Business of the Meeting – Election of Directors”,
“Business of the Meeting – Appointment and Remuneration of Auditors” and “The Arrangement”.
| Q: | When
and where is the Meeting? |
| A: | The Meeting
will be held on May 15, 2020 commencing at 10:00 a.m. (Pacific time), subject to any
adjournment(s) or postponement(s) thereof. This year, out of an abundance of caution,
to proactively deal with the public health impact of the COVID-19 pandemic and to mitigate
risks to the health and safety of our communities, Securityholders and employees, we
will hold the Meeting in a virtual only format, which will be conducted via live audio
webcast online at https://web.lumiagm.com/202877707. A summary of the information Securityholders
will need to attend the Meeting online is provided below. A guide to how to login to,
and vote at, the Meeting can be found at Appendix “H” of this Circular. |
| Q: | As
a Securityholder, who is soliciting my proxy? |
| A: | Your proxy
(or proxies) is (are) being solicited by management of Correvio. The Circular is furnished
in connection with that solicitation. The solicitation of proxies for the Meeting will
be made primarily by mail and may be supplemented by telephone. Correvio has engaged
Gryphon Advisors Inc. as its proxy solicitation agent. If you have questions and/or need
assistance in voting your securities, please contact: |
Gryphon
Advisors Inc.
North
American Toll Free Number: 1.833.490.0586
Collect
Calls Outside North America: 1.416.661.6592
Email:
inquiries@gryphonadvisors.ca
| Q: | Who
can attend and vote at the Meeting and what is the quorum for the Meeting? |
| A: | Only Securityholders
of record as of the close of business on April 6, 2020, the record date for the Meeting,
are entitled to receive notice of and to attend, and vote at, the Meeting or any adjournment(s)
or postponement(s) of the Meeting. |
A
quorum for the transaction of business at the Meeting will be Shareholders present online or represented by proxy, holding not
less than 20% of the Shares entitled to be voted at the Meeting.
| Q: | What
will I receive for my Shares in the Arrangement? |
| A: | If the Arrangement
is completed, each Shareholder (other than Shareholders exercising Dissent Rights and
who have not withdrawn their notice of objection) will receive a cash payment of US$0.42,
net of applicable withholding taxes, in exchange for the transfer of each Share to the
Purchaser. See “The Arrangement”. |
Q:
What will happen to my Options in the Arrangement?
| A: | If the Arrangement
is completed, each Option granted and outstanding immediately prior to the Effective
Time will be transferred to Correvio in exchange for a cash payment from Correvio equal
to the amount, if any, by which the Share Consideration exceeds the exercise price payable
under such Option by the Optionholder to acquire the Share underlying such Option, net
of applicable withholding taxes. See “The Arrangement”. |
Q:
What will I received for my RSUs and PSUs in the Arrangement?
| A: | If the Arrangement
is completed, each holder of RSUs will receive a cash payment of US$0.42, net of applicable
withholding taxes, in exchange for the transfer of each RSU to Correvio; and each holder
of PSUs will receive a cash payment of US$0.42, net of applicable withholding taxes,
in exchange for the transfer of each PSU to Correvio. See “The Arrangement”. |
| Q: | What
vote is required at the Meeting to approve the Arrangement Resolution? |
| A: | In order
to become effective, the Arrangement Resolution must be approved by a special resolution
passed by (i) at least 66⅔% of the votes cast by Shareholders at the Meeting present
online or represented by proxy and (ii) at least 66⅔% of the votes cast by Securityholders
(on an As-Converted Basis, as applicable) at the Meeting present online or represented
by proxy, voting together as a single class. Completion of the Arrangement is also subject
to receipt of certain required regulatory approvals, including the approval of the Court,
and other customary closing conditions, all of which are described in more detail in
the attached Circular. |
| Q: | What
if I return my proxy but do not mark it to show how I wish to vote? |
| A: | If your proxy
(or proxies) is (are) signed and dated and returned without specifying your choice or
is (are) returned specifying both choices, your Shares, Options, RSUs and/or PSUs will
be voted FOR the Arrangement Resolution in accordance with the recommendation
of the Board. |
| Q: | When
is the cut-off time for delivery of proxies? |
| A: | Proxies must
be delivered by mail to Computershare Investor Services Inc., 100 University Avenue,
8th Floor, Toronto, Ontario M5J 2Y1, Attention: Proxy Department, or
fax to 1-866-249-7775 (toll-free), not less than 48 hours (excluding Saturdays, Sundays
and holidays) before the time of the Meeting or any adjournment or postponement thereof.
Therefore, assuming no adjournment or postponement, the proxy-cut off time is 10 a.m.
(Pacific time) May 13, 2020. The time limit for deposit of proxies may be waived or extended
by the Chairperson of the Meeting at his or her discretion, without notice. |
| Q: | As
a Securityholder, can I change my vote after I have submitted a signed proxy? |
| A: | Yes. If you
want to revoke your proxy (or proxies) after you have delivered it (them), you can do
so by (a) attending the Meeting and voting online if you were a Registered Shareholder
or a holder of Options, RSUs or PSUs at the Record Date, (b) signing a proxy (or proxies)
bearing a later date and returning such form(s) at any time before the proxy cut-off
time, (c) by signing a written statement which indicates, clearly, that you want to revoke
your proxy or proxies and delivering this signed written statement to the registered
office of Correvio by email to steven.mckoen@blakes.com at any time up to and including
the last Business Day prior to the Meeting (or any adjournment or postponement thereof),
or (d) in any other manner permitted by law. |
Your
proxy (or proxies) will only be revoked pursuant to (b) above if such proxy bearing a later date is received no later than 10:00
a.m. (Pacific time) on May 13, 2020 (or if the Meeting is postponed or adjourned, by no later than 48 hours prior to the time
of such postponed or adjourned meeting, excluding Saturdays, Sundays and holidays). If you revoke your proxy (or proxies) and
do not replace it (or them) with another that is deposited with us before the proxy cut-off time, you can still vote your Shares,
but to do so you must attend the Meeting online. If as a Registered Shareholder or holder of Options, RSUs or PSUs you are using
your control number (or, if you are both a Registered Shareholder and a holder of Options, RSUs and/or PSUs, you are using one
of your control numbers to login to the Meeting) and you accept the terms and conditions, you will be provided the opportunity
to vote by online ballot at the appropriate time on matters put forth at the Meeting. If you have already voted by proxy and you
vote again during the online ballot during the Meeting, your online vote during the Meeting will revoke your previously submitted
proxy (or proxies). If you have already voted by proxy (or proxies) and do not wish to revoke your previously submitted proxy
(or proxies), do not vote again during the online ballot.
If
you are a Non-Registered Shareholder and wish to revoke previously provided voting instructions, you should follow carefully the
instructions provided by your Intermediary.
| Q: | What
are the recommendations of the directors? |
| A: | After taking
into consideration, among other things, the Fairness Opinion, the Board has determined
that the Arrangement is in the best interests of Correvio and unanimously recommends
that Securityholders vote FOR the Arrangement Resolution to approve the Arrangement. |
| Q: | Why
are the directors making this recommendation? |
| A: | In reaching
their conclusion that the Arrangement is in the best interests of Correvio, the directors
considered and relied upon a number of factors, including those described under the headings
“The Arrangement – Reasons for the Arrangement” and “The
Arrangement – Fairness Opinion” in the Circular. |
| Q: | In
addition to the approval of the Securityholders, are there any other approvals required
for the Arrangement? |
| A: | Yes, the
Arrangement requires the approval of the Court and also is subject to the receipt of
certain third-party consents and regulatory approvals. See “The Arrangement
– Court Approval of the Arrangement” and “The Arrangement –
Regulatory Law Matters and Securities Law Matters” in the Circular. |
| Q: | When
can I expect to receive consideration for my Securities? |
With
respect to a Shareholder, as soon as practicable following the later of the Effective Date and the surrender of the Letter of
Transmittal, certificate(s)/DRS advice(s) and any other required documents and instruments to the Depositary, you will be entitled
to receive the aggregate amount of Share Consideration, net of withholding taxes, that you are entitled to receive for your Shares.
Share Consideration payable to you will be delivered by cheque by way of first class mail, pick-up at the offices of the Depositary
or by wire transfer.
Holders
of Options, RSUs and PSUs
With
respect to an Option, RSU or PSU, as soon as practicable following the later of the Effective Date and the surrender of any required
documents and instruments to the Depositary, the Depositary will deliver to each holder of Options, RSUs and PSUs, as applicable,
the aggregate amount of the applicable Arrangement Consideration, net of withholding taxes, that the holder of Options, RSUs or
PSUs is entitled to receive for their Options, RSUs and PSUs, as applicable. Such Arrangement Consideration payable to you will
be delivered by way of first class mail to the address shown on the register of the Optionholders, RSU holders or PSU holders
of Correvio, as applicable, maintained by or on behalf of Correvio or by wire transfer if wire instructions are provided to Correvio.
Where it is determined that delivery by mail may be delayed, the Depositary may make arrangements to hold for pick-up a cheque
at one of its office locations until it is determined that delivery by mail will no longer be delayed.
Holders
of both Shares and Options, RSUs or PSUs
If
you are a holder of both Shares and Options, RSUs or PSUs, you will receive the Share Consideration for your Shares on the same
terms as all other Shareholders and you will receive the applicable Arrangement Consideration for your Options, RSUs or PSUs on
the same terms as all other holders of Options, RSUs or PSUs, as applicable.
Q.
As a Shareholder, what happens if I submit my letter of transmittal and the associated documentation, including my Share certificate(s)
and the Arrangement Resolution is not approved or the Arrangement is not completed?
| A. | If the Arrangement
Resolution is not approved or if the Arrangement is not otherwise completed, your certificate(s)
and any other documentation associated with your ownership of Shares will be returned
promptly to you by the Depositary. |
| Q: | As
a holder of Options, RSUs and/or PSUs, what documentation do I need to submit to be able
to receive the applicable Arrangement Consideration? |
| A: | Other than
submitting a properly completed GREEN form of proxy as instructed on such form
herein (if you are choosing to vote by proxy rather than online at the Meeting), holders
of Options, PSUs and/or RSUs do not need to submit further documentation. |
| Q: | How
will the votes be counted? |
| A: | Computershare
Investor Services Inc., Correvio’s transfer agent, counts and tabulates the proxies.
Proxies are counted and tabulated by the transfer agent in such a manner as to preserve
the confidentiality of the voting instructions of Registered Shareholders and holders
of Options, RSUs and PSUs, subject to a limited number of exceptions. |
| Q: | How
will I know when the Arrangement will be implemented? |
| A: | The Effective
Date will occur following the satisfaction or waiver of all of the conditions to the
completion of the Arrangement. If the requisite level of Shareholder and Securityholder
approval of the Arrangement Resolution is obtained at the Meeting and the Final Order
is obtained as contemplated herein, the Effective Date is expected to occur on or about
May 27, 2020. On the Effective Date, Correvio and the Purchaser will publicly announce
that the Arrangement has been implemented. |
| Q: | Are
there risks I should consider in deciding whether to vote for the Arrangement Resolution? |
| A: | Yes. Securityholders
should carefully consider the risk factors relating to the Arrangement. Some of these
risks include, but are not limited to: (i) the impact of COVID-19 on timing for Court
approval, (ii) the Arrangement Agreement may be terminated in certain circumstances;
(iii) there can be no certainty that all conditions precedent to the Arrangement will
be satisfied; (iv) Correvio will incur costs even if the Arrangement is not completed,
and also may be required to pay the Termination Fee to the Purchaser; (v) the Termination
Fee provided under the Arrangement Agreement may discourage other parties from attempting
to acquire Correvio; (vi) the market price for the Shares may decline, if, for any reason,
the Arrangement Agreement is terminated, whether or not Correvio is required to pay a
Termination Fee to the Purchaser; and (vii) without any transaction alternatives, the
Company is facing a going concern risk as highlighted its most recent annual financial
statements. |
See
“The Arrangement – Risks Associated with the Arrangement” in the Circular.
| Q: | What
are the income tax consequences of the Arrangement? |
| A: | For a summary
of certain material Canadian federal, certain U.S. federal and foreign income tax consequences
of the Arrangement as applicable to Shareholders, see “Certain Canadian Federal
Income Tax Considerations”, “Certain U.S. Federal Income Tax Considerations”,
and “Certain Foreign Income Tax Considerations” in the Circular. Such
summary is not intended to be legal or tax advice to any particular Shareholder. Shareholders,
as well as other Securityholders, should consult their own tax and investment advisors
with respect to their particular circumstances. |
| Q: | Who
can help answer my questions? |
| A: | If you have
any questions, need assistance or need additional copies of the Circular, you should
contact Correvio or the transfer agent, Computershare Investor Services Inc., as follows: |
| Mail: |
Correvio
Pharma Corp.
6th
Floor, 1441 Creekside Drive
Vancouver,
British Columbia
Canada, V6J
4S7
Attention:
Investor Relations |
Mail: |
Computershare
Investor Services Inc.
8th
Floor, 100 University Avenue
Toronto, Ontario
Canada, M5J
2Y1
Attention:
Proxy Department |
| Telephone: |
1-833-490-0586
(toll-free)
|
Telephone: |
1-800-564-6253
(toll-free)
1-514-982-7555 |
| Fax: |
(604)
677-6915 |
Fax: |
1-866-249-7775
(toll-free) |
| Email: |
inquiries@gryphonadvisors.ca |
|
|
If you have any
questions and/or need assistance in voting your securities, please contact our proxy solicitation agent: Gryphon Advisors Inc.
North American Toll
Free Number: 1.833.490.0586
Collect Calls Outside
North America: 1.416.661.6592
Email: inquiries@gryphonadvisors.ca
CORREVIO PHARMA
CORP.
1441 Creekside
Drive, 6th Floor
Vancouver,
B.C. V6J 4S7
NOTICE
OF ANNUAL GENERAL AND SPECIAL MEETING OF SECURITYHOLDERS
NOTICE IS
HEREBY GIVEN that an annual general meeting of the holders (the “Shareholders”) of common shares (the “Shares”)
of Correvio Pharma Corp. (“Correvio” or the “Company”) and a special meeting of the Shareholders,
holders of options (the “Options”), restricted share units (the “RSUs”) and phantom share
units (the “PSUs”) of the Company (the “Meeting”) will be held virtually at https://web.lumiagm.com/202877707
on May 15, 2020 at 10 a.m. (Pacific time), subject to any adjournment(s) or postponement(s) thereof.
At the Meeting,
the Shareholders will receive the financial statements of the Company for the year ended December 31, 2019 and the report of the
auditors thereon and will be asked to vote on the following:
| 1. | to elect
the directors of the Company to hold office until their successors are elected or appointed; |
| 2. | to appoint
KPMG LLP, Chartered Professional Accountants as auditors of the Company until the next
annual meeting of the Company and to authorize the directors to fix the auditors’
remuneration; |
| 3. | to consider
pursuant to an interim order of the Supreme Court of British Columbia dated April 6,
2020 (the “Interim Order”) and, if thought fit, pass, with or without
amendment, a special resolution (the “Arrangement Resolution”) approving
an arrangement involving the Company and Mercury Pharma Group Limited, an indirect, wholly
owned subsidiary of ADVANZ PHARMA Corp. Limited, (the “Arrangement”)
under Section 192 of the Canada Business Corporations Act (“CBCA”),
the full text of which resolution is set forth in Appendix “A” to the Circular;
and |
| 4. | to transact
such further or other business as may properly come before the Meeting. |
At
the Meeting, Shareholders and holders of Options, RSUs and PSUs (on an “as-converted basis”), voting together as a
single class will be asked to vote on the following:
| 1. | to consider
pursuant to the Interim Order and, if thought fit, pass, with or without amendment, the
Arrangement Resolution approving the Arrangement under Section 192 of the CBCA, the
full text of which resolution is set forth in Appendix “A” to the Circular. |
For
the purposes of this notice, “as-converted basis” means, (i) in respect of Options, the number of Shares for which
the Options are exercisable, (ii) in respect of RSUs, on the basis of one Share for each RSU, and (iii) in respect of PSUs, on
the basis of one Share for each PSU.
The Circular
provides additional information relating to the matters to be addressed at the Meeting, including the Arrangement, and is deemed
to form part of this Notice.
Shareholders
who are registered holders of Shares (“Registered Shareholders”) and holders of Options, RSUs and PSUs are
entitled to either vote at the Meeting online or vote by proxy. Shareholders who are not Registered Shareholders (“Non-Registered
Shareholders”) should carefully follow the instructions of their intermediaries (see “General Proxy Information
– Non-Registered Shareholders”).
In order
to vote by proxy, Registered Shareholders must fill out the YELLOW form of proxy and holders of Options, RSUs and/or PSUs must
fill out the GREEN form of proxy. If you are both a Registered Shareholder and a holder of Options, RSUs and/or PSUs and are voting
by proxy, you must fill out BOTH the YELLOW and the GREEN forms of proxy to ensure your vote is properly counted.
Registered
Shareholders and holders of Options, RSUs and PSUs who are unable to attend the virtual Meeting are encouraged to read, complete,
sign, date and return the applicable enclosed form(s) of proxy in accordance with the instructions set out therein and in the
Circular. In order to be valid for use at the Meeting, proxies must be received by our transfer agent at its mailing address of
Computershare Investor Services Inc., 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, Attention: Proxy
Department, at least 48 hours (excluding Saturdays, Sundays and holidays) prior to the time of the Meeting or any adjournment
or postponement thereof. The time limit for deposit of proxies may be waived or extended by the Chairperson of the Meeting at
his or her discretion, without notice.
Registered
Shareholders and holders of Options, RSUs and PSUs and duly appointed proxyholders of such Registered Shareholders and holders
of Options, RSUs and PSUs will be able to attend, participate and vote at the Meeting online at https://web.lumiagm.com/202877707.
A Shareholder or holder of Options, RSUs or PSUs who wishes to appoint a person other than the management nominees identified
on the applicable form(s) of proxy or voting instruction form (“VIF”), as applicable, to represent him, her
or it at the Meeting may do so by inserting such person’s name in the blank space provided in the applicable form(s) of
proxy or VIF, as applicable, and following the instructions for submitting such form of proxy or VIF, as applicable. This must
be completed prior to registering such proxyholder, which is an additional step to be completed once you have submitted your applicable
form(s) of proxy or VIF. If you wish that a person other than the management nominees identified on the applicable form(s)
of proxy or VIF attend and participate at the Meeting as your proxy and vote your Shares, Options, RSUs and/or PSUs, including,
if you are a Non-Registered Shareholder and wish to appoint yourself as proxyholder to attend, participate and vote at the Meeting,
you MUST register such proxyholder after having submitted your applicable form(s) of proxy or VIF, as applicable, identifying
such proxyholder. Failure to register the proxyholder will result in the proxyholder not receiving a username to participate
in the Meeting (a “Username”). Without a Username, proxyholders will not be able to attend, participate or
vote at the Meeting. To register a proxyholder, Shareholders and holders of Options, RSUs and PSUs MUST visit http://www.computershare.com/correvio
and provide Computershare Investor Services Inc. with their proxyholder’s contact information, so that Computershare Investor
Services Inc. may provide the proxyholder with a Username via email.
Proxies must
be deposited with Computershare Investor Services Inc. no later than 10:00 a.m. (Pacific time) on May 13, 2020 (or if the
Meeting is postponed or adjourned, by no later than 48 hours prior to the time of such postponed or adjourned meeting, excluding
Saturdays, Sundays and holidays). Voting by proxy will not prevent you from voting online at the Meeting if you attend the virtual
Meeting but will ensure that your vote will be counted if you are unable to attend. Non-Registered Shareholders should carefully
follow the instructions of their intermediaries to ensure that their Shares are voted at the Meeting in accordance with such Shareholder’s
instructions. Please refer to the section in the Circular entitled “General Proxy Information – Non-Registered
Shareholders” for information on how to vote your securities if you are a Non-Registered Shareholder.
The Interim
Order provides that each Registered Shareholder has been granted the right to dissent in respect of the Arrangement Resolution
in accordance with the provisions of section 190 of the CBCA as modified by the Interim Order and Plan of Arrangement and, if
the Arrangement becomes effective, have his, her or its Shares cancelled in exchange for a cash payment from Correvio equal to
the fair value of his or her Shares in accordance with the dissent rights set out in section 190 of the CBCA as modified by the
Plan of Arrangement. To exercise such right, (a) a written notice of dissent with respect to the Arrangement Resolution from the
registered Shareholder must be received by Correvio at its address for such purpose, Blake, Cassels & Graydon LLP, 2600 –
595 Burrard Street, Vancouver, British Columbia, V7X 1L3, Attention: Alexandra Luchenko, or by email to alexandra.luchenko@blakes.com
by not later than 10:00 a.m. (Pacific time) on May 13, 2020 or two Business Days prior to any adjournment or postponement of the
Meeting, and (b) the registered Shareholder must have otherwise complied with the dissent procedures in Section 190 of the CBCA,
as modified by the Interim Order. The right to dissent is described in the Circular and the text of the Interim Order is set forth
in Appendix “D” to the Circular.
Failure
to strictly comply with the requirements set forth in the Interim Order may result in the loss of any right of dissent.
If you have
any questions or need assistance, please contact Correvio or the transfer agent, Computershare Investor Services Inc., as follows:
| Mail: |
Correvio
Pharma Corp.
6th
Floor, 1441 Creekside Drive
Vancouver,
British Columbia
Canada, V6J
4S7
Attention:
Investor Relations |
Mail: |
Computershare
Investor Services Inc.
8th
Floor, 100 University Avenue
Toronto, Ontario
Canada, M5J
2Y1
Attention:
Proxy Department |
| Telephone: |
1-833-490-0586
(toll-free)
|
Telephone: |
1-800-564-6253
(toll-free)
1-514-982-7555 |
| Fax: |
(604)
677-6915 |
Fax: |
1-866-249-7775
(toll-free) |
| Email: |
inquiries@gryphonadvisors.ca |
|
|
If you have any
questions and/or need assistance in voting your securities, please contact our proxy solicitation agent: Gryphon Advisors Inc.
North American Toll
Free Number: 1.833.490.0586
Collect Calls Outside
North America: 1.416.661.6592
Email: inquiries@gryphonadvisors.ca
DATED at
Vancouver, British Columbia this 7th day of April, 2020.
| BY
ORDER OF THE BOARD OF DIRECTORS OF CORREVIO PHARMA CORP. |
| |
| “W.
James O’Shea” |
| |
| W.
James O’Shea |
| Chairman |
TABLE
OF CONTENTS
| INFORMATION
CONTAINED IN THIS INFORMATION CIRCULAR |
1 |
| CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISKS |
1 |
| NOTE TO
U.S. SHAREHOLDERS |
3 |
| CURRENCY
AND EXCHANGE RATES |
3 |
| REPORTING
CURRENCIES AND ACCOUNTING PRINCIPLES |
4 |
| GLOSSARY
OF TERMS |
5 |
| SUMMARY |
19 |
| The Meeting |
19 |
| Record
Date |
19 |
| Business
of the Meeting |
19 |
| Principal
Steps to the Arrangement |
20 |
| Background
to the Arrangement |
21 |
| Recommendation
of the Correvio Board |
21 |
| Reasons
for the Arrangement |
21 |
| Fairness
Opinion |
23 |
| Correvio
Voting Agreement |
23 |
| Parties
to the Arrangement |
24 |
| Conditions
to the Arrangement |
24 |
| Termination
of the Arrangement Agreement |
26 |
| CRG Loan
Amendment & Waiver |
27 |
| Risk
Factors |
27 |
| Arrangement
Mechanics |
27 |
| Dissent
Rights |
28 |
| Income
Tax Considerations |
28 |
| GENERAL
PROXY INFORMATION |
29 |
| Solicitation
of Proxies |
29 |
| How the
Vote for the Arrangement Resolution is Approved |
29 |
| Who can
Vote? |
29 |
| What
is a Form of Proxy? |
30 |
| Appointment
of Proxies/Submission of Voting Instruction Forms & Registering Proxyholders |
30 |
| Instructing
your Proxy and Exercise of Discretion by your Proxy |
31 |
| Changing
your mind |
31 |
| Non-Registered
Shareholders |
32 |
| Attending
and Participating at the Meeting |
33 |
| Voting
Shares and Principal Holders |
33 |
| BUSINESS
OF THE MEETING |
34 |
| Receipt
of Financial Statements |
34 |
| Election
of Directors |
34 |
| Appointment
and Remuneration of Auditors |
37 |
| STATEMENT
OF EXECUTIVE COMPENSATION |
37 |
| INDEBTEDNESS
OF DIRECTORS AND EXECUTIVE OFFICERS |
37 |
| INTEREST
OF INFORMED PERSONS IN MATERIAL TRANSACTIONS |
37 |
| CORPORATE
GOVERNANCE PRACTICES |
38 |
| THE ARRANGEMENT |
38 |
| Parties
to the Arrangement |
39 |
| Principal
Steps to the Arrangement |
39 |
| Background
to the Arrangement |
40 |
| Recommendation
of the Board |
45 |
| Reasons
for the Arrangement |
45 |
| Fairness
Opinion |
47 |
| Approval
of Arrangement Resolution |
49 |
| Correvio
Voting Agreement |
49 |
| Completion
of the Arrangement |
50 |
| Court
Approval of the Arrangement |
50 |
| Regulatory
Law Matters and Securities Law Matters | 51 |
| Fees
and Expenses | 51 |
| Interest
of Certain Persons in the Arrangement | 52 |
| The Arrangement
Agreement | 52 |
| CRG Loan
Amendment & Waiver | 67 |
| Risks Associated
with the Arrangement | 68 |
| Risks
Related to the Arrangement | 68 |
| Risks
Related to the Sale of Shares for Cash | 70 |
| Risks
Relating to Correvio | 70 |
| Arrangement
Mechanics | 71 |
| Lost
Certificates | 72 |
| Cancellation
of Rights After Six Years | 73 |
| Dissent
Rights | 73 |
| CERTAIN
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS | 75 |
| Holders
Resident in Canada | 76 |
| Holders
Not Resident in Canada | 77 |
| CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS | 79 |
| Consequences
of the Arrangement | 79 |
| Passive
Foreign Investment Company Rules | 80 |
| Backup
Withholding and Information Reporting | 80 |
| CERTAIN
FOREIGN INCOME TAX CONSIDERATIONS | 80 |
| ADDITIONAL
INFORMATION | 81 |
| APPROVAL
OF DIRECTORS | 81 |
| CONSENT
OF PIPER SANDLER & CO. | 1 |
| APPENDIX
“A” |
ARRANGEMENT
RESOLUTION |
A-1 |
| APPENDIX “B” |
PLAN OF ARRANGEMENT |
B-1 |
| APPENDIX “C” |
FAIRNESS OPINION |
C-1 |
| APPENDIX “D” |
COURT MATERIALS |
D-1 |
| APPENDIX “E” |
DISSENT RIGHTS |
E-1 |
| APPENDIX “F” |
STATEMENT OF EXECUTIVE
COMPENSATION |
F-1 |
| APPENDIX “G” |
CORPORATE GOVERNANCE
PRACTICES |
G-1 |
| APPENDIX “H” |
ELECTRONIC MEETING GUIDE |
H-1 |
CORREVIO PHARMA
CORP.
1441 Creekside
Drive, 6th Floor
Vancouver,
B.C. V6J 4S7
ANNUAL
GENERAL AND SPECIAL MEETING OF SECURITYHOLDERS
MANAGEMENT
INFORMATION CIRCULAR
INFORMATION
CONTAINED IN THIS INFORMATION CIRCULAR
The information
contained in this Circular, unless otherwise indicated, is given as of April 7, 2020.
This Circular
is delivered in connection with the solicitation of proxies by and on behalf of management of Correvio for use at the Meeting
and any adjournment or postponement thereof. No person has been authorized to give any information or to make any representation
in connection with the matters being considered herein other than those contained in this Circular and, if given or made, such
information or representation should be considered or relied upon as not having been authorized. This Circular does not constitute
an offer to sell, or a solicitation of an offer to acquire, any securities, or the solicitation of a proxy, by any person in any
jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation
is not qualified to do so or to any person to whom it is unlawful to make such an offer of proxy solicitation. Neither the delivery
of this Circular nor any distribution of securities referred to herein shall, under any circumstances, create any implication
that there has been no change in the information set forth herein since the date of this Circular.
Information
contained in this Circular should not be construed as legal, tax or financial advice and Securityholders are urged to consult
their own professional advisors in connection with the matters considered in this Circular.
The Arrangement
has not been approved or disapproved by any securities regulatory authority, nor has any securities regulatory authority passed
upon the fairness or merits of the Arrangement or upon the accuracy or adequacy of the information contained in this Circular
and any representation to the contrary is unlawful.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISKS
This Circular
and the documents incorporated into this Circular by reference, contain “forward-looking statements” within the meaning
of the U.S. Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning
of the applicable Canadian securities legislation (forward-looking information and forward-looking statements being collectively
hereinafter referred to as “forward-looking statements”) that are based on expectations, estimates and projections
as at the date of this Circular or the dates of the documents incorporated herein by reference, as applicable. These forward-looking
statements include but are not limited to statements and information concerning: the Arrangement; the timing for the implementation
of the Arrangement and the potential benefits of the Arrangement; the timing of the Meeting and the Final Order; the likelihood
of the Arrangement being completed; principal steps to the Arrangement; the Board and management team of the Company following
the completion of the Arrangement; statements made in, and based upon, the Fairness Opinion; statements relating to the business
and future activities of, and developments related to, Correvio after the date of this Circular and prior to the Effective Time;
Securityholder Approval and Court approval of the Arrangement; regulatory approval and consent of and in connection with the Arrangement;
stock exchange delistings and Correvio’s ceasing to be a reporting issuer and the timing thereof; market position, and future
financial or operating performance of Correvio and the Purchaser; anticipated developments in operations; the timing and amount
of estimated capital expenditure; costs and timing of development and capital expenditures related thereto; executive compensation
arrangements; operating expenditures; currency fluctuations; requirements for additional capital; Intellectual Property rights
disputes or Claims; limitations on insurance coverage; the timing and possible outcome of pending litigation in future periods;
goals; strategies; future growth; planned future acquisitions; the adequacy of financial resources; and other events or conditions
that may occur in the future.
Any statements
that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future
events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is
expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”,
“forecasts”, “estimates”, “believes” or “intends” or variations of such words
and phrases or stating that certain actions, events or results “may” or “could”, “would”,
“might”, or “will” be taken to occur or be achieved) are not statements of historical fact and may be
forward-looking statements and are intended to identify forward-looking statements.
These forward-looking
statements are based on the beliefs of Correvio’s management as well as on assumptions that such management believes to
be reasonable based on information currently available at the time such statements were made. However, there can be no assurance
that the forward-looking statements will prove to be accurate. Such assumptions and factors include, among other things, the satisfaction
of the terms and conditions of the Arrangement, including the approval of the Arrangement and its fairness by the Court, and the
receipt of the required regulatory approvals and consents.
By their
nature, forward-looking statements are based on assumptions and involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Correvio to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements are subject to
a variety of risks, uncertainties and other factors which could cause actual events or results to differ from those expressed
or implied by forward-looking statements, including, without limitation: risks relating to COVID-19, including any impact on the
timing for Court approval of the Arrangement; the fact that the Arrangement Agreement may be terminated in certain circumstances;
the uncertainty that all conditions precedent to the Arrangement will be satisfied; the fact that Correvio will incur costs even
if the Arrangement is not completed, and also may be required to pay the Termination Fee; risks that the Termination Fee provided
under the Arrangement Agreement may discourage other parties from attempting to acquire Correvio; the risk that the required Securityholder
approval may not be obtained; the fact that Correvio is restricted from taking certain actions while the Arrangement is pending;
the risk that the market price of the Shares may decline if, for any reason, the Arrangement Agreement is terminated, whether
or not Correvio is required to pay a Termination Fee to the Purchaser; the fact that Securityholders will no longer hold an interest
in Correvio following the Arrangement and will forego any future increase in value of future growth of Correvio; the risk that
the Company will not have sufficient liquidity to satisfy its obligations if the Arrangement is not completed; the fact that the
Arrangement is subject to the condition that a Material Adverse Effect has not occurred; the risk that the failure to consummate
the Arrangement could negatively affect the Company and that significant management time and attention is diverted from the business
to undertake the Arrangement; general business, economic, competitive, political, regulatory and social uncertainties; risks related
to factors beyond the control of Correvio or the Purchaser; risks related to regulatory requirements; risks related to obtaining
and maintaining necessary licenses and Permits; environmental risks and hazards, including unknown environmental risks related
to past activities; risks related to current or future litigation which could affect Correvio’s operations; risks related
to political developments and policy shifts; risks related to dependence on key personnel; risks related to amendments to Laws;
changes in labour costs or other costs of production; labour disputes; delays in obtaining governmental approvals or financing;
the ability to renew existing licenses or Permits or obtain required licenses and Permits; increased operating costs; risks related
to directors and officers of Correvio possibly having interests in the Arrangement that are different from other Securityholders;
and risks relating to the possibility that more than 5% of Shareholders may exercise their Dissent Rights.
Some of
the important risks and uncertainties that could affect forward-looking statements are described further under the heading “The
Arrangement – Risks Associated with the Arrangement”. Although Correvio has attempted to identify important factors
that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there
may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance
that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. These forward-looking
statements are made as of the date of this Circular and other than as required by applicable Securities Laws, Correvio assumes
no obligation to update or revise them to reflect new events or circumstances.
NOTE
TO U.S. SHAREHOLDERS
Correvio
is a “foreign private issuer” as defined in Rule 405 under the U.S. Securities Act and Rule 3b-4 under the U.S. Exchange
Act. The solicitation of proxies from Securityholders is not subject to the proxy requirements of Section 14(a) of the U.S. Exchange
Act by virtue of an exemption for foreign private issuers. Therefore, this solicitation of proxies for the Meeting is not subject
to the requirements applicable to proxy statements under the U.S. Exchange Act. Accordingly, this Circular has been prepared solely
in accordance with disclosure requirements applicable in Canada. Securityholders in the United States should be aware that such
requirements are different from those of the United States applicable to proxy statements under the U.S. Exchange Act. Specifically,
information contained herein has been prepared in accordance with Canadian disclosure standards, which are different from those
applicable to proxy statements, prospectuses or registration statements prepared in accordance with U.S. laws.
The enforcement
by Securityholders of civil liabilities under the United States federal or state Securities Laws may be affected adversely by
the fact that the Company is organized under the Laws of Canada, that certain of the officers and directors of Correvio are residents
of countries other than the United States and a significant portion of the assets of the Company and substantially all of the
assets of such Persons are, or will be, located outside the United States. As a result, it may be difficult or impossible for
Securityholders resident in the United States to effect service of process within the United States upon Correvio, their respective
officers and directors, and any documents incorporated by reference herein, and the courts of Canada may not enforce judgments
of United States’ courts obtained in actions against such Persons predicated upon civil liabilities under the federal or
state Securities Laws of the United States.
This transaction
has not been approved or disapproved by the United States Securities and Exchange Commission or the securities regulatory authority
of any state, nor has any securities regulatory authority passed upon the fairness or the merits of this transaction or upon the
accuracy or adequacy of the information contained in this Circular.
Securityholders
in the United States should be aware that the disposition of Shares, Options, RSUs and PSUs pursuant to the Arrangement may have
Tax consequences both in the United States and in Canada. Such consequences may not be fully described herein and Securityholders
in the United States are advised to consult their independent tax advisors regarding the United States and Canadian federal, state,
local and foreign Tax consequences to them of participating in the Arrangement. See “U.S. Federal Income Tax Considerations”.
CURRENCY
AND EXCHANGE RATES
Unless otherwise
indicated herein, references herein to “$”, “C$” or “Canadian dollars” are to Canadian dollars,
and references to “US$” or “U.S. dollars” are to United States dollars.
The following
table sets out: (i) the rates of exchange for one U.S. dollar expressed in Canadian dollars in effect at the end of the periods
indicated; (ii) the average rates of exchange for such periods; and (iii) the highest and lowest rates of exchange during such
periods, based on the closing rates of exchange as quoted by the Bank of Canada.
| |
Year
Ended December 31, |
| |
|
2017 |
|
2018 |
|
2019 |
|
| Low |
|
1.2128 |
|
1.2288 |
|
1.2988 |
|
| High |
|
1.3743 |
|
1.3642 |
|
1.3600 |
|
| Average |
|
1.2986 |
|
1.2957 |
|
1.3269 |
|
| Year End |
|
1.2545 |
|
1.3642 |
|
1.2988 |
|
On April 7,
2020, the closing exchange rate for one United States dollar expressed in Canadian dollars as reported by the Bank of Canada was
C$1.3986.
REPORTING
CURRENCIES AND ACCOUNTING PRINCIPLES
Correvio’s
financial statements that are referenced herein are reported in U.S. dollars and are prepared in accordance with GAAP in the United
States of America.
GLOSSARY
OF TERMS
In this
Circular and accompanying Notice of Annual General and Special Meeting, unless there is something in the subject matter inconsistent
therewith, the following terms shall have the respective meanings set out below, words importing the singular number shall include
the plural and vice versa and words importing any gender shall include all genders.
| “Access
Limitations” |
has
the meaning given to such term under the heading “The Arrangement – The Arrangement Agreement – Other
Covenants”. |
| “Acquisition
Proposal” |
means,
other than the transactions contemplated by the Arrangement Agreement, any offer, proposal or inquiry from any Person or group
of Persons acting jointly or in concert, whether or not in writing and whether or not delivered to Correvio, after the date
of the Arrangement Agreement relating to: (a) any acquisition or purchase, direct or indirect, of: (i) the assets of Correvio
and/or one or more of its subsidiaries that, individually or in the aggregate, constitute 20% or more of the consolidated
assets of Correvio and its subsidiaries, taken as a whole, or which contribute 20% or more of the consolidated revenue of
Correvio and its subsidiaries, taken as a whole (or any lease, long-term supply, hedging arrangement, joint venture, strategic
alliance, partnership or other transaction having the same economic effect as a sale of such assets), or (ii) beneficial ownership
of 20% or more of the issued and outstanding voting or equity securities of Correvio or any one or more of its subsidiaries
that, individually or in the aggregate, contribute 20% or more of the consolidated revenues or constitute 20% or more of the
consolidated assets of Correvio and its subsidiaries, taken as a whole; (b) any take-over bid, tender offer or exchange offer
that, if consummated, would result in such Person or group of Persons beneficially owning 20% or more of the issued and outstanding
voting or equity securities of any class of voting or equity securities of Correvio or any of its subsidiaries; or (c) any
plan of arrangement, merger, amalgamation, consolidation, share exchange, business combination, reorganization, recapitalization,
liquidation, dissolution or other similar transaction involving Correvio or any of its subsidiaries; in all cases, whether
in a single transaction or in a series of related transactions. |
| “Acquisition
Proposal Notice” |
has
the meaning given to such term under the heading “The Arrangement – The Arrangement Agreement – Covenant
Regarding Acquisition Proposal”. |
| “Advance
Notice Provisions” |
has
the meaning given to such term under the heading “Business of the Meeting – Election of Directors”. |
| “ADVANZ” |
means
ADVANZ PHARMA Corp. Limited. |
| “affiliate” |
has
the meaning specified in the Securities Act. |
| “allowable
capital loss” |
has
the meaning given to such term under the heading “Certain Canadian Federal Income Tax Considerations – Holders
Resident in Canada – Capital Gains and Capital Losses”. |
| “Angiotech
Canadian Subsidiaries” |
has
the meaning given to such term under the heading “Business of the Meeting – Election of Directors”. |
| “Angiotech
U.S. Subsidiaries” |
has
the meaning given to such term under the heading “Business of the Meeting – Election of Directors”. |
| “Annual
Information Form” |
means
the annual information form of Correvio filed on SEDAR on March 30, 2020. |
| “Arrangement” |
means
the arrangement of Correvio under Section 192 of the CBCA on the terms and subject to the conditions set out in the Plan of
Arrangement, subject to any amendments or variations to the Plan of Arrangement made in accordance with the terms of the Arrangement
Agreement or Section 6.1 of the Plan of Arrangement or made at the direction of the Court in the Final Order with the consent
of the Parties, each acting reasonably. |
| “Arrangement
Agreement” |
means
the arrangement agreement dated March 15, 2020 among Correvio, the Purchaser and ADVANZ, including the schedules thereto,
as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. |
| “Arrangement
Consideration” |
means
the applicable consideration to be received by Securityholders, being (i) for Shareholders, the Share Consideration; (ii)
for Optionholders, a cash payment equal to the amount, if any, by which the Share Consideration exceeds the exercise price
payable under such Option by the holder thereof to acquire the Share underlying such Option, net of applicable withholding
taxes; (iii) for holders of RSUs, US$0.42 in cash for each RSU held, net of applicable withholding taxes; and (iv) for holders
of PSUs, US$0.42 in cash for each PSU held, net of applicable withholding taxes. |
| “Articles
of Arrangement” |
means
the articles of arrangement of Correvio in respect of the Arrangement required by the CBCA to be sent to the Director after
the Final Order is made, which shall be in a form and content satisfactory to the Parties, each acting reasonably. |
| “Arrangement
Resolution” |
means
the special resolution of the Shareholders, Optionholders and Holders of RSUs and PSUs approving the Arrangement, the Plan
of Arrangement and the Arrangement Agreement, which is to be considered at the Meeting, a copy of which is attached to this
Circular as Appendix “A”. |
| “As-Converted
Basis” |
means,
(i) in respect of Options, the number of Shares for which the Options are exercisable, (ii) in respect of RSUs, on the basis
of one Share for each RSU, and (iii) in respect of PSUs, on the basis of one Share for each PSU. |
| “Authorization” |
means
any authorization, order, Permit, approval, grant, licence, registration, consent, right, notification, condition, franchise,
privilege, certificate, judgment, writ, injunction, award, determination, direction, decision, decree, bylaw, rule or regulation,
whether or not having the force of Law, and includes any environmental Permit. |
| “Blakes” |
has
the meaning given to such term under the heading “The Arrangement – Background to the Arrangement”. |
| “Board” |
means
the board of directors of Correvio as the same is constituted from time to time. |
| “Board
Recommendation” |
has
the meaning given to such term under the heading “The Arrangement – Recommendation of the Correvio Board”. |
| “Broadridge” |
means
Broadridge Financial Solutions Inc. |
| “Business” |
means
the business and affairs of the Correvio Group as described in the Disclosure Documents. |
| “Business
Day” |
means
a day, other than a Saturday, a Sunday or any other day on which commercial banking institutions in Vancouver, British Columbia
or Toronto, Ontario are authorized or required by applicable Law to be closed. |
| “Business
IP” |
means
all Intellectual Property used or held for use in the operations of Correvio’s Business. |
| “Canadian
Securities Administrators” |
means
the voluntary umbrella organization of Canada’s provincial and territorial securities regulators. |
| “Cardiome” |
means
Cardiome Pharma Corp. |
| “Cardiome
Arrangement” |
has
the meaning given to such term under the heading “Summary – Parties to the Arrangement”. |
| “CBCA” |
means
the Canada Business Corporations Act. |
| “CDS
& Co.” |
means
the registration name for CDS Clearing and Depository Services Inc., which acts as a nominee for many Canadian brokerage firms. |
| “Certificate
of Arrangement” |
means
the certificate of arrangement to be issued by the Director pursuant to subsection 192(7) of the CBCA in respect of the Articles
of Arrangement. |
| “Change
in Recommendation” |
has
the meaning given to such term under the heading “The Arrangement – The Arrangement Agreement – Covenants
Regarding Acquisition Proposal”. |
| “Cipher” |
means
Cipher Pharmaceuticals Inc. |
| “Circular” |
means,
collectively, the Notice of Annual General and Special Meeting and this Management Information Circular of Correvio, including
all appendices hereto, sent to Securityholders in connection with the Meeting. |
| “Claim” |
means
(i) any suit, action, proceeding, dispute, investigation, claim, arbitration, order, summons, citation, directive, ticket,
charge, demand or prosecution, whether legal or administrative; or (ii) any appeal or application for review; whether at Law
or in equity or by any Governmental Entity. |
| “Confidentiality
Agreement” |
means
the confidentiality agreement between Correvio and Advanz Pharma Services (UK) Limited dated January 16, 2019, as amended
February 16, 2020. |
| “Contract” |
means
any contract, agreement, license, franchise, lease, arrangement, commitment, understanding, joint venture, partnership or
other right or obligation (written or oral) to which a Party or any of its subsidiaries is a party or by which it or any of
its subsidiaries is bound or to which any of their respective properties or assets is subject. |
| “Correvio”
or “Company” |
means
Correvio Pharma Corp., a corporation existing under the federal Laws of Canada. |
| “Correvio
Disclosure Letter” |
means
the disclosure letter dated March 15, 2020 and delivered by Correvio to the Purchaser and ADVANZ with the Arrangement Agreement. |
| “Correvio
Financial Statements” |
has
the meaning ascribed thereto in the Arrangement Agreement. |
| “Correvio
Group” |
means
Correvio and all of its direct and indirect subsidiaries. |
| “Correvio
Interim Financial Statements” |
has
the meaning ascribed thereto in the Arrangement Agreement. |
| “Correvio
Material Contracts” |
means
those Contracts set out in Schedule C(t) of the Correvio Disclosure Letter and all leases listed in Schedule C(r)(vi) of the
Correvio Disclosure Letter. |
| “Correvio
Supporting Shareholders” |
means
collectively all of the senior officers and directors of Correvio who have entered into Correvio Voting Agreements. |
| “Correvio
Voting Agreement” |
means
the voting agreement (including all amendments thereto) between Purchaser and the Correvio Supporting Shareholders setting
forth the terms and conditions upon which the Correvio Supporting Shareholders have agreed, among other things, to vote their
Shares in favour of the Arrangement Resolution. |
| “Court” |
means
the Supreme Court of British Columbia. |
| “CRDAC” |
has
the meaning given to such term under the heading “The Arrangement - Background to the Arrangement”. |
| “CRA” |
means
the Canada Revenue Agency. |
| “CRG” |
means
CRG Partners III L.P., CRG Partners III – Parallel Fund “A” L.P., CRG Partners III (Cayman) L.P. and CRG
Partners III – Parallel Fund “B” (Cayman) L.P. (and their agent, CRG Servicing LLC). |
| “CRG
Consent” |
has
the meaning given to such term under the heading “The Arrangement – CRG Loan Amendment & Waiver”. |
| “CRG
Loan” |
means
the second amended and restated term loan agreement dated as of May 15, 2018 among Correvio and CRG, as amended to the date
of the Arrangement Agreement, and all agreements ancillary thereto. |
| “CRG
Warrants” |
has
the meaning given to such term under the heading “The Arrangement – CRG Loan Amendment & Waiver”. |
| “Demand
Notice” |
has
the meaning given to such term under the heading “The Arrangement – Dissent Rights”. |
| “Depositary” |
means
Computershare Investor Services Inc. |
| “Director” |
means
the director appointed pursuant to Section 260 of the CBCA. |
| “Disclosure
Documents” |
means
all information, disclosure, forms, reports, schedules, statements, certifications and other documents, including without
limitation all press releases, forms, reports, schedules, financial statements and notes and schedules to such financial statements,
management’s discussion and analysis of financial condition and results of operations, certifications, annual information
forms, management information circulars, material change reports, business acquisition reports and other documents publicly
disclosed or filed by Correvio with the securities authorities and publicly available at www.sedar.com. |
| “Dissent
Rights” |
means
the rights of dissent exercised by the Shareholders under Section 190 of the CBCA in respect of the Arrangement, as modified
by the Plan of Arrangement or the Court in the Interim Order or the Final Order in respect of the Arrangement. |
| “Dissent
Shares” |
means
the Shares held by Dissenting Shareholders in respect of which such Dissenting Shareholders have given Notice of Dissent. |
| “Dissenting
Shareholder” |
means
a Registered Shareholder who has duly and validly exercised the Dissent Rights in respect of the Arrangement Resolution in
strict compliance with the Dissent Rights and who has not withdrawn or been deemed to have withdrawn such exercise of Dissent
Rights. |
| “Dissenting
Non-Resident Holder” |
has
the meaning given to such term under the heading “Certain Canadian Federal Income Tax Considerations – Holders
Not Resident in Canada – Dissenting Non-Resident Holders”. |
| “Dissenting
Resident Holder” |
has
the meaning given to such term under the heading “Certain Canadian Federal Income Tax Considerations – Holders
Resident in Canada – Dissenting Resident Holders”. |
| “DRS” |
means
Direct Registration System. |
| “DTC” |
means
The Depository Trust Company. |
| “EDGAR” |
means
the Electronic Data Gathering, Analysis, and Retrieval system. |
| “Effective
Date” |
means
the date shown on the Certificate of Arrangement giving effect to the Arrangement, which shall be no later than the Outside
Date. |
| “Effective
Time” |
means
12:01 a.m. (Pacific time) on the Effective Date or such other time as Correvio and Purchaser may agree upon in writing. |
| “Employee
Plans” |
means
all benefit or compensation plans, programs, policies, practices, Contracts, agreements or other arrangements, covering current
or former employees, directors or consultants of the Correvio Group, including without limitation employment, consulting,
deferred compensation, equity, benefit, bonus, incentive, pension, retirement, savings, stock purchase, profit sharing, stock
option, stock appreciation, phantom stock, termination, change of control, life insurance, medical, health, welfare, hospital,
dental, vision care, drug, sick leave, disability, and similar plans, programmes, arrangements or practices, whether or not
in writing and whether or not funded, in each case, which is sponsored, maintained or contributed to by a member of the Correvio
Group, or to which a member of the Correvio Group is obligated to contribute, or with respect to which a member of the Correvio
Group has any Liability, direct or indirect, contingent or otherwise, other than benefit plans established pursuant to statute. |
| “Encumbrance” |
means
any Claim, encumbrance, lien, charge, hypothec, pledge, mortgage, title retention agreement, security interest of any nature,
adverse Claim, exception, reservation, easement, right of occupation, option, right of pre-emption, privilege or any matter
capable of registration against title or any Contract to create any of the foregoing. |
| “Environmental
Laws” |
means
all Law aimed at, or relating to, the reclamation or restoration of properties, occupational health and safety, protection
of the environment, abatement of pollution, protection of wildlife, ensuring public safety from environmental hazards and
all other Laws relating to (a) the management processing, use, treatment, storage, disposal, discharge, transport or handling
of any Hazardous Substances; (b) plant and animal life, (c) lands; or (d) other natural resources. |
| “Epirus” |
has
the meaning given to such term under the heading “Business of the Meeting –Election of Directors”. |
| “Fairness
Opinion” |
means
the opinion of Piper Sandler & Co. to the effect that, as of the date of such opinion, and subject to the assumptions,
limitations and qualifications set forth therein, the Share Consideration to be received by Shareholders is fair, from a financial
point of view to Shareholders, a copy of which is attached as Appendix “C” to this Circular. |
| “FDA” |
has
the meaning given to such term under the heading “The Arrangement - Background to the Arrangement”. |
| “FDA
Decision” |
has
the meaning given to such term under the heading “The Arrangement – Background to the Arrangement”. |
| “Final
Order” |
means
an order of the Court granted pursuant to Section 192 of the CBCA, in a form acceptable to each of the Parties, each acting
reasonably, approving the Arrangement after a hearing upon the procedural and substantive fairness of the terms and conditions
of the Arrangement, as such order may be affirmed, amended, modified, supplemented or varied by the Court (with the consent
of the Parties, each acting reasonably) at any time prior to the Effective Date or, if appealed, as affirmed or amended (provided,
however, that any such amendment is acceptable to the Parties, each acting reasonably) on appeal, unless such appeal is withdrawn,
abandoned or denied. |
| “forward-looking
statements” |
has
the meaning given to such term under the heading “Cautionary Note Regarding Forward-Looking Statements and Risks”. |
| “GAAP” |
means
the generally accepted accounting principles. |
| “Governmental
Entity” |
means
(i) any multinational or supranational body or organization, nation, government, state, province, country, territory, municipality,
quasi-government, administrative, judicial or regulatory authority, agency, board, body, bureau, commission, instrumentality,
court or tribunal or any political subdivision thereof, or any central bank (or similar monetary or regulatory authority)
thereof, any taxing authority, any ministry or department or agency of any of the foregoing, (ii) any self-regulatory organization
or stock exchange, including the TSX and Nasdaq, (iii) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government; and (iv) any corporation or other entity owned or controlled,
through stock or capital ownership or otherwise, by any of such entities or other bodies pursuant to the foregoing. |
| “Gryphon
Advisors Inc.” |
means
Gryphon Advisors Inc., being the proxy solicitation agent retained by Correvio in respect of the Meeting. |
| “Hazardous
Substances” |
means
any waste or other substance that is prohibited, listed, defined, designated or classified as hazardous, radioactive, corrosive,
explosive, infectious, carcinogenic, or toxic or a pollutant or a contaminant under or pursuant to, or that could result in
any Liability under, any applicable Environment Laws including petroleum and all derivatives thereof or synthetic substitutes
therefor, hydrogen sulphide, arsenic, cadmium, lead, mercury, polychlorinated biphenyls (“PCBs”), PCB-containing
equipment and material, mould, asbestos, asbestos-containing material, urea-formaldehyde, urea-formaldehyde-containing material
and any other material or substance that may impair the environment. |
| “Holder” |
has
the meaning given to such term under the heading “Certain Canadian Federal Income Tax Considerations”. |
| “Intellectual
Property” |
means
domestic and foreign intellectual property rights, whether or not registrable, patentable or otherwise formally protectable,
including: (i) inventions (whether patentable or unpatentable and whether or not reduced to practice), patents, applications
for patents and reissues, divisions, continuations, renewals, extensions and continuations-in-part of patents or patent applications;
(ii) works, copyrights, copyright registrations and applications for copyright registration, including all moral rights or
similar rights of authorship or attribution; (iii) designs, design registrations, design registration applications and integrated
circuit topographies; (iv) trade names, business names, corporate names, domain names, website names and world wide web addresses,
common law trade-marks, trade-mark registrations, trade-mark applications, trade dress and logos, and all goodwill related
thereto; (v) Trade Secrets; and (vi) telephone numbers, domain names and social media identities, and the goodwill associated
with any of the foregoing. |
| “Interim
Order” |
means
an order of the Court in a form acceptable to each of the Parties, acting reasonably, providing for, among other things, the
calling and holding of the Meeting, as the same may be amended by the Court with the consent of the Parties, each acting reasonably,
a copy of which is attached as Appendix “D” to this Circular. |
| “Intermediary” |
has
the meaning given to such term under the heading “General Proxy Information – Who Can Vote?”. |
| “IRS” |
means
the Internal Revenue Service. |
| “Key
Regulatory Approvals” |
means
those sanctions, rulings, consents, orders, exemptions, permits, Authorizations and other approvals of Governmental Entities,
necessary to proceed with the transactions contemplated by the Arrangement Agreement and the Plan of Arrangement, including
but not limited to, in relation to Correvio, the approval of the TSX of this Circular in respect of the Arrangement. |
| “Key
Third Party Consents” |
means
those notices, consents or approvals required to be delivered to or obtained from any third party (other than any Governmental
Entity), including under any Contract, to proceed with or in connection with the transactions contemplated by the Arrangement
Agreement and the Plan of Arrangement, as set out in Schedule C(cc) of the Correvio Disclosure Letter. |
| “KPMG” |
has
the meaning given to such term under the heading “Business of the Meeting – Appointment and Remuneration of
Auditors”. |
| “Law”
or “Laws” |
means,
with respect to any Person, any and all applicable law (statutory, common, civil or otherwise), constitution, treaty, convention,
ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement, whether domestic
or foreign, enacted, adopted, promulgated or applied by a Governmental Entity that is binding upon or applicable to such Person
or its business, undertaking, property or securities, and to the extent that they have the force of law, policies, guidelines,
notices and protocols of any Governmental Entity, as amended. |
| “Letter
of Transmittal” |
means
the letter of transmittal, a form of which accompanies this Circular, to be completed by Registered Shareholders in connection
with the Arrangement. |
| “Liability” |
means,
in respect of any Person, any debt, liability or obligation of any kind or nature whatsoever, including (i) any right against
such Person to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured, (ii) any right against such Person to an equitable
remedy for breach of performance, whether or not such right to any equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured, and (iii) any obligation of such Person for the performance
of any covenant or agreement (whether for the payment of money or otherwise). |
| “Lien” |
means
any mortgage, charge, pledge, hypothec, security interest, prior claim, encroachments, option, right of first refusal or first
offer, occupancy right, covenant, assignment, lien (statutory or otherwise), defect of title, or restriction or adverse right
or claim, or other third party interest or encumbrance of any kind, in each case, whether contingent or absolute. |
| “Liquidity
Covenant” |
has
the meaning given to such term under the heading “The Arrangement – CRG Loan Amendment & Waiver”. |
| “Market
Capitalization” |
has
the meaning given to such term under the heading “Certain U.S. Federal Income Tax Considerations - Passive Foreign
Investment Company Rules” |
| “Material
Adverse Effect” |
means
any effect, fact, change, event, occurrence or circumstance that is, or would reasonably be expected to be, material and adverse
to the business, condition (financial or otherwise), properties, assets (tangible or intangible), liabilities (whether absolute,
accrued, conditional or otherwise), capital, operations or results of operations of Correvio and its subsidiaries, taken as
a whole, other than any effect arising from, relating to or resulting from, as applicable: (i) the global economy, political
conditions (including the outbreak of war or any acts of terrorism), international trade or securities, financial or credit,
markets in general, natural disasters or other acts of God; (ii) the pharmaceutical industry in general, (iii) any generally
applicable change in applicable Law (other than orders, judgments, Claims or decrees against Correvio or any of its subsidiaries),
or accounting standards or the enforcement or interpretation thereof; (iv) a change in the market trading price or trading
volume of Shares (it being understood that the underlying cause of any such change may be taken into consideration when determining
whether a Material Adverse Effect has occurred, unless otherwise excepted under this definition); (v) the announcement of
the Arrangement Agreement, including the impact thereof on the relationships, contractual or otherwise, on Correvio and its
subsidiaries with customers, suppliers, business partners, regulators, vendors, Governmental Entities or other third Persons;
(vi) any action taken or refrained from being taken by Correvio or its subsidiaries in connection with the Arrangement Agreement,
to the extent the Purchaser has expressly consented to, approved or requested such action in writing following the date of
the Arrangement Agreement; (vii) any failure, in and of itself, of Correvio and its subsidiaries to meet (A) any public estimates
or expectations of Correvio’s revenues, earnings or other financial performance or result of operations or (B) any internal
budgets, plans, projections or forecasts of its revenues, earnings or other financial performance or results of operations
(it being understood that the underlying cause of any such failure may be taken into consideration when determining whether
a Material Adverse Effect has occurred, unless otherwise excepted under this definition); (viii) a negative ruling by the
U.S. Food and Drug Administration in the United States, with respect to Trevyent including without limitation, a complete
response letter, or any action taken by United Therapeutics Corporation after such ruling; (ix) any actions or positions taken
by Eddingpharm (Asia) Macao Commercial Offshore Limited or any rulings made by the arbitral body in connection with the binding
arbitration proceedings regarding the Aggrastat distribution agreement in China; (x) the matter set forth in Schedule 1.1(ii)
of the Correvio Disclosure Letter (but subject to the limitation set out in such Schedule); and (xi) any disease outbreaks,
pandemics or epidemics or other related condition provided, however, that (x) in the event that Correvio and its subsidiaries,
taken as a whole, are materially and disproportionately affected by an effect described in clause (i), (ii), (iii) or (xi)
above relative to other participants in the industries in which Correvio and its subsidiaries operate, the extent (and only
the extent) of such effect, relative to such other participants, on Correvio or any of its subsidiaries, taken as a whole,
may be taken into account in determining whether there has been a Material Adverse Effect; and (y) references in certain sections
of the Arrangement Agreement to dollar amounts are not intended to be, and shall not be deemed to be, illustrative or interpretive
for the purposes of determining whether a “Material Adverse Effect” has occurred. |
| “material
fact” and “misrepresentation” |
have
the meanings ascribed thereto in the Securities Act. |
| “MD&A” |
has
the meaning given to such term under the heading “Additional Information”. |
| “Meeting” |
means
the annual general and special meeting of Shareholders and Optionholders and holders of RSUs and PSUs, including any adjournment
or postponement thereof, to be called and held in accordance with the Interim Order to consider the Arrangement Resolution
and for the other purposes as set out in this Circular. |
| “MI
61-101” |
means
Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions. |
| “Nasdaq” |
means
the Nasdaq Stock Market. |
| “New
Drug Application” |
has
the meaning given to such term under the heading “The Arrangement – Background to the Arrangement”. |
| “NI
52-110” |
has
the meaning given to such term under the heading “Corporate Governance Practices”. |
| “NI
58-101” |
has
the meaning given to such term under the heading “Corporate Governance Practices”. |
| “NI
58-201” |
has
the meaning given to such term under the heading “Corporate Governance Practices”. |
| “NOBO” |
has
the meaning given to such term under the heading “General Proxy Information – Non-Registered Shareholders”. |
| “Non-Registered
Shareholders” |
means
Shareholders who are not Registered Shareholders. |
| “Non-Resident
Holders” |
has
the meaning given to such term under the heading “Certain Canadian Federal Income Tax Considerations – Holders
Not Resident in Canada”. |
| “Notice
of Annual General and Special Meeting” |
means
the notice of annual general and special meeting of Securityholders which accompanies this Circular. |
| “Notice
of Dissent” |
has
the meaning given to such term under the heading “The Arrangement – Dissent Rights”. |
| “Notice
of Intention” |
has
the meaning given to such term under the heading “The Arrangement – Dissent Rights”. |
| “Notice
Shares” |
has
the meaning given to such term under the heading “The Arrangement – Dissent Rights”. |
| “NP
58-201” |
has
the meaning given to such term under the heading “Corporate Governance Practices”. |
| “OBO” |
has
the meaning given to such term under the heading “General Proxy Information – Non-Registered Shareholders”. |
| “Optionholder” |
means
the holders of Options. |
| “Options” |
means,
at any time, options exercisable to acquire Shares granted under the Option Plan which are, at such time, outstanding (whether
or not vested). |
| “Option
Plan” |
means
the stock option plan of Correvio, last approved by Shareholders on May 9, 2018. |
| “ordinary
course of business” or “ordinary course of business consistent with past practice” |
or
any similar reference, means, with respect to an action taken by a Person, that such action is consistent with the past practices
(in terms of nature, scope and magnitude) of such Person and is taken in the ordinary course of the normal day-to-day business
and operations of such Person. |
| “Outside
Date” |
means
June 30, 2020, or such later date as may be agreed to in writing by the Parties. |
| “Parties” |
means,
collectively, Correvio and the Purchaser and “Party” means any one of them (and, where specified in the
Arrangement Agreement, “Parties” includes ADVANZ). |
| “PDUFA
Date” |
has
the meaning given to such term under the heading “The Arrangement – Background to the Arrangement”. |
| “Permit” |
means
any license, permit, certificate, consent, order, grant, approval, agreement, classification, restriction, registration or
other Authorization of, from or required by any Governmental Entity. |
| “Person” |
includes
any individual, firm, partnership, limited partnership, limited liability partnership, joint venture, venture capital fund,
limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal
Representative, estate, body corporate, corporation, company, unincorporated association or organization, Governmental Entity,
syndicate or other entity, whether or not having legal status. |
| “PFIC” |
has
the meaning given to such a term under the heading “Certain U.S. Federal Income Tax Considerations–Passive
Foreign Investment Company Rules”. |
| “PFIC
rules” |
has
the meaning given to such a term under the heading “Certain U.S. Federal Income Tax Considerations – Passive
Foreign Investment Company Rules”. |
| “Piper
Sandler & Co.” |
means
Piper Sandler & Co., being the financial advisor to the Board. |
| “Plan
of Arrangement” |
means
the plan of arrangement substantially in the form set out in Appendix “B” hereto, subject to any amendments or
variations thereto made from time to time in accordance with the Arrangement Agreement, the plan of arrangement
or upon the direction of the Court in the Final Order with the consent of the Parties, each acting reasonably. |
| “PSUs” |
means,
as of any date, phantom share units issued under the PSU Plan outstanding as of such date. |
| “PSU
Plan” |
means
Correvio’s Phantom Share Unit Plan adopted with effect from May 15, 2018. |
| “Purchaser” |
means
Mercury Pharma Group Limited, an indirect, wholly owned subsidiary of ADVANZ. |
| “Receivables” |
means
all accounts receivable, bills receivable, trade accounts, book debts and insurance Claims of Correvio and each of its subsidiaries
together with any unpaid interest accrued on such items and any security or collateral for such items, including recoverable
deposits. |
| “Record
Date” |
means
April 6, 2020. |
| “Registered
Shareholder” |
means
a registered holder of Shares. |
| “Representative” |
means,
collectively, in respect of a Person, its subsidiaries and its affiliates and its and their respective officers, directors,
employees, consultants, advisors, agents or other representatives (including financial, legal or other advisors). |
| “Resident
Holder” |
has
the meaning given to such term under the heading “Certain Canadian Federal Income Tax Considerations – Holder
Resident in Canada”. |
| “RSUs” |
means,
as of any date, restricted share units issued under the RSU Plan outstanding as of such date. |
| “RSU
Plan” |
means
the restricted share unit plan last approved by Shareholders on May 9, 2018. |
| “Sale
Process” |
has
the meaning given to such term under the heading “The Arrangement - Background to the Arrangement”. |
| “SEC” |
means
the United States Securities and Exchange Commission. |
| “Securities” |
means
Shares, Options, RSUs and PSUs. |
| “Securities
Act” |
means
the Securities Act (British Columbia) and the rules, regulations and published policies made thereunder, as now in
effect and as they may be promulgated or amended from time to time. |
| “Securities
Laws” |
means
the Securities Act, together with all other applicable Canadian provincial securities laws, the U.S. Securities Act, U.S.
Exchange Act, the Sarbanes-Oxley Act of 2002, and applicable securities laws of the United States and the states thereof,
and the rules and regulations and published policies of the securities authorities thereunder, as now in effect and as they
may be promulgated or amended from time to time, and includes the rules and policies of the TSX and Nasdaq. |
| “Securityholders” |
means
the Shareholders, Optionholders and holders of RSUs and PSUs. |
| “Securityholder
Approval” |
means
(i) two-thirds of the votes cast by the Shareholders present online or represented by proxy at the Meeting and (ii) two-thirds
of the votes cast by the Shareholders, the Optionholders and the holders of RSUs and PSUs (on an As-Converted Basis, as applicable),
voting together as a single class, present online or represented by proxy at the Meeting. |
| “SEDAR” |
means
the System for Electronic Document Analysis and Retrieval described in National Instrument 13-101 of the Canadian Securities
Administrators and available for public view at www.sedar.com. |
| “Share
Consideration” |
means
the consideration to be received by Shareholders pursuant to the Plan of Arrangement in respect of each Share that is issued
and outstanding immediately prior to the Effective Time, of US$0.42 per Share. |
| “Shareholders” |
means
the registered or beneficial holders of Shares, as the context requires. |
| “Shares” |
means
the issued and outstanding common shares in the capital of Correvio. |
| “Skadden” |
has
the meaning given to such term under the heading “The Arrangement – Background to the Arrangement”. |
| “Superior
Proposal” |
means
any bona fide Acquisition Proposal made in writing by a third party or third parties acting jointly or in concert with
one another, after the date of the Arrangement Agreement that would, if consummated, result in any Person or group of Persons
acquiring, directly or indirectly, 100% of the consolidated net revenues, net income or total assets (including equity securities
of Correvio’s subsidiaries) of Correvio and its subsidiaries or securities representing 100% of the total voting power
of the equity securities of Correvio (or of the surviving entity in a merger, amalgamation, arrangement or similar transaction
involving Correvio) that, in the good faith determination of the Board, after receipt of advice from its outside financial
advisor and outside legal counsel: (i) is reasonably capable of being completed in accordance with its terms without undue
delay, taking into account all legal, financial, regulatory and other aspects of such proposal and the party making such proposal;
(ii) in respect of which any required financing to complete such Acquisition Proposal has been demonstrated to be available
to the satisfaction of the Board; (iii) is not subject to a due diligence, access or financing condition; (iv) did not result
from a breach of Article 7 of the Arrangement Agreement by Correvio or its Representatives; (v) in the case of a transaction
that involves the acquisition of Shares, is made available to all Shareholders on the same terms and conditions; and (vi)
in respect of which the Board determines, in its good faith judgment after receiving advice of its outside legal counsel and
financial advisor, that (a) failure to recommend such Acquisition Proposal to the Shareholders would be inconsistent with
the Board’s fiduciary duties; and (b) taking into account all of the terms and conditions of such Acquisition Proposal,
if consummated in accordance with its terms (but not assuming away any risk of non-completion), would result in a transaction
more favourable to the Shareholders from a financial point of view, than the Arrangement (after taking into account any adjustment
to the terms and conditions of the Arrangement proposed by Purchaser pursuant to Subsection 7.3 of the Arrangement Agreement). |
| “Superior
Proposal Notice” |
has
the meaning given to such term under the heading “The Arrangement – The Arrangement Agreement – Covenants
of Correvio – Right to Accept a Superior Proposal”. |
| “Superior
Proposal Notice Period” |
has
the meaning given to such term under the heading “The Arrangement – The Arrangement Agreement – Covenants
of Correvio – Right to Accept a Superior Proposal”. |
| “Tax
Act” |
means
the Income Tax Act (Canada) and the regulations made thereunder, as now in effect and as they may be promulgated or
amended from time to time. |
| “taxable
capital gain” |
has
the meaning given to such term under the heading “Certain Canadian Federal Income Tax Considerations – Holders
Resident in Canada – Capital Gains and Capital Losses”. |
| “Taxes” |
means
any and all domestic and foreign federal, state, provincial, municipal, territorial and local taxes, assessments and other
governmental charges, duties, fees, levies, impositions and liabilities imposed by any Governmental Entity (whether payable
directly or by withholding and whether or not requiring the filing of a Tax Return), including without limitation pension
plan contributions, tax instalment payments, unemployment insurance contributions and employment insurance contributions,
disability, severance, social security, workers’ compensation and deductions at source, including taxes based on or
measured by gross receipts, income, profits, sales, capital, use, and occupation, and including goods and services, value
added, ad valorem, sales, capital gains, capital stock, windfall profits, premium, transfer, franchise, stamp, license, non-resident
withholding, customs, payroll, recapture, employment, excise and property duties and taxes, together with all estimated taxes,
deficiency assessments, interest, penalties, fines and additions to tax imposed with respect to such amounts, and shall include
any Liability for such amounts as a result of (i) being a transferee or successor or member of a combined, consolidated, unitary
or affiliated group, or (ii) a contractual obligation to indemnify any Person or other entity. |
| “Tax
Proposals” |
has
the meaning given to such term under the heading “Certain Canadian Federal Income Tax Considerations”. |
| “Tax
Returns” |
means
all domestic and foreign federal, state, provincial, territorial, municipal and local returns, reports, declarations, disclosures,
elections, notices, filings, forms, statements, information statements and other documents (whether in tangible, electronic
or other form) and including any amendments, schedules, attachments, supplements, appendices and exhibits thereto, made, prepared,
filed or required to be made, prepared or filed by Law in respect of Taxes. |
| “Termination
Fee” |
means
an amount equal to US$3,500,000 payable by Correvio to the Purchaser. |
| “Trade
Secret” |
means
know-how, trade secrets, proprietary information, algorithms, formulae, recipes, systems, compositions, manufacturing and
production processes, methods and techniques and related documentation, clinical and testing data, customer and supplier information,
and market and survey information. |
| “TSX” |
means
the Toronto Stock Exchange. |
| “United
States” or “U.S.” |
means
the United States of America, its territories and possessions, any State of the United States and the District of Columbia. |
| “U.S.
Exchange Act” |
means
the United States Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder. |
| “U.S.
Holder” |
has
the meaning given to such term under the heading “Certain U.S. Federal Income Tax Considerations”. |
| “U.S.
Securities Act” |
means
the United States Securities Act of 1933, as amended and the rules and regulations promulgated thereunder. |
| “U.S.
Tax Code” |
has
the meaning given to such term under the heading “Certain U.S. Federal Income Tax Considerations”. |
| “Username” |
has
the meaning given to such term under the heading “General Proxy Information – Appointment of Proxies/Submission
of Voting Instruction Forms & Registering Proxyholders”. |
| “VIF” |
means
a voting instruction form. |
| “Warrants” |
means
the outstanding common share purchase warrants to acquire Shares. |
SUMMARY
This summary
is qualified in its entirety by the more detailed information appearing elsewhere in this Circular, including the appendices which
are incorporated into and form part of this Circular. Terms with initial capital letters in this summary are defined in the Glossary
of Terms immediately preceding this summary.
The
Meeting
This year,
out of an abundance of caution, to proactively deal with the public health impact of the COVID-19 pandemic and to mitigate risks
to the health and safety of our communities, Securityholders and employees, we will hold the Meeting in a virtual only format,
which will be conducted via live audio webcast at https://web.lumiagm.com/202877707 on May 15, 2020 commencing at 10:00 a.m. (Pacific
time), subject to any adjournment(s) or postponement(s) made in accordance with the Arrangement Agreement.
Record
Date
Only Securityholders
of record at the close of business on the Record Date (being April 6, 2020) are entitled to receive notice of and vote at the
Meeting, or any adjournment or postponement thereof.
Business
of the Meeting
At the Meeting,
Shareholders will be asked to consider and approve:
| (a) | the
election of directors of Correvio to hold office until their successors are elected or
appointed; |
| | | |
| (b) | the
appointment of Correvio’s auditors for the ensuing year and authorizing its directors
to fix the auditors’ remuneration; and |
| | | |
| (c) | the
Arrangement Resolution. |
| | | |
At
the Meeting, Shareholders, Optionholders and holders of RSUs and PSUs (on an As-Converted Basis, as applicable), voting together
as a single class, will be asked to consider and approve the Arrangement Resolution.
The full
text of the Arrangement Resolution is set out in Appendix “A” to this Circular. By passing the Arrangement Resolution,
Securityholders will also be giving authority to the Board to use its best judgment to proceed with and cause Correvio to complete
the Arrangement in the event of any variation of, or amendments to, the Arrangement Agreement or Plan of Arrangement without any
requirement to seek or obtain any further approval of the Securityholders. In order to become effective, the Arrangement must
be approved by at least (i) 66⅔% of the votes cast by Shareholders at the Meeting present online or represented by proxy
and (ii) 66⅔% of the votes cast by Securityholders (on an As-Converted Basis, as applicable) at the Meeting present online
or represented by proxy, voting together as a single class. See “The Arrangement — Approval of Arrangement Resolution”.
For further
information on voting your Securities at the Meeting, see “General Proxy Information”.
Minority
Approval Considerations
As at the
date of the Arrangement Agreement and as at the date the Arrangement Agreement was publicly announced, each related party of Correvio
and such related party’s associated entities beneficially owned or exercised control or direction over less than one percent
of the Shares, except for William Hunter, a director of Correvio. As at the date of the Arrangement Agreement and as at the date
the Arrangement Agreement was publicly announced, Dr. Hunter beneficially owned or exercised control or direction over 1,020,881
Shares (being approximately 1.54% of the issued and outstanding Shares), 1,250,000 Options and no RSUs or PSUs. Dr. Hunter will
receive (i) a payment per Share identical in amount and form to the entitlement of the general body of Shareholders; and (ii)
a payment per Option, if any, calculated using an identical formula to that used for each other Optionholder. Dr. Hunter is not
receiving any benefit as a direct or indirect consequence of the Arrangement other than as disclosed in the previous sentence.
Therefore, no related party of Correvio will be receiving a collateral benefit (as defined in MI 61-101) in connection with the
Arrangement. Accordingly, the Arrangement is not a “business combination” within the meaning of MI 61-101 and is therefore
not subject to the minority approval and formal valuation requirements of MI 61-101.
Principal
Steps to the Arrangement
Under the
Plan of Arrangement, commencing at the Effective Time, the following principal steps shall occur and shall be deemed to occur
without any further act or formality, but in the order and with the timing set out in the Plan of Arrangement:
Dissent
Shares
Each Share
held by a Dissenting Shareholder will be deemed to be transferred, free and clear of all Liens, to Correvio and Correvio will
pay the amount determined and payable in accordance with the Plan of Arrangement.
Shares
Each outstanding
Share (other than the Shares held by a Dissenting Shareholder who has validly exercised and not withdrawn such holder’s
Dissent Rights) will be irrevocably assigned and transferred by the Shareholder to the Purchaser, free and clear of all Liens,
in exchange for a cash payment equal to the Share Consideration, subject to applicable withholdings. The Purchaser will be deemed
to be the transferee and the legal and beneficial holder of each Share.
Options
In-the-money
Options
Each in-the-money
Option outstanding immediately prior to the Effective Time, whether or not vested, will be acquired for cancellation by Correvio
in consideration for a cash payment from Correvio equal to the product obtained by multiplying the amount by which the Share Consideration
exceeds the exercise price per Share of such in-the-money Option by the number of Shares underlying such in-the-money Option,
subject to applicable withholdings. All in-the-money Options issued and outstanding immediately prior to the Effective Time will
thereafter immediately be cancelled.
Out-of-the-money
Options
Each out-of-the-money
Option that is outstanding immediately prior to the Effective Time, whether or not vested, will be cancelled without payment to
any holder thereof.
RSUs
Each RSU
outstanding immediately prior to the Effective Time, whether vested or unvested, will be deemed to be unconditionally vested,
and such RSU will be deemed to be assigned and transferred by such holder to Correvio in exchange for a cash payment from Correvio
of US$0.42, subject to applicable withholdings, and each RSU will be immediately cancelled.
PSUs
Each PSU
outstanding immediately prior to the Effective Time, whether vested or unvested, will be deemed to be unconditionally vested,
and such PSU will be deemed to be assigned and transferred by such holder to Correvio in exchange for a cash payment from Correvio
of US$0.42, subject to applicable withholdings, and each PSU will be immediately cancelled.
Background
to the Arrangement
The provisions
of the Arrangement Agreement are the result of arm’s length negotiations between Representatives of Correvio and the Purchaser
and their respective financial and legal advisors. Details of the background to the Arrangement are set out under the heading
“The Arrangement — Background to the Arrangement”.
Recommendation
of the Correvio Board
The Board
has unanimously determined, after consultation with its financial and legal advisors, and after consideration of, among other
things, the Fairness Opinion, the text of which is attached as Appendix “C” to this Circular and its own deliberations,
that the Arrangement is fair and reasonable to the Securityholders and the Arrangement is in the best interests of Correvio, and
the Board recommends that the Securityholders vote in favour of the Arrangement Resolution. Accordingly, the Board unanimously
recommends that Securityholders vote FOR the Arrangement Resolution.
Reasons
for the Arrangement
In evaluating
the Arrangement and the transactions contemplated in the Arrangement Agreement, the Board has reviewed and considered information
it considered relevant to its decision and considered a number of factors relating to the Arrangement with the benefit of advice
from Correvio’s senior management and its financial and legal advisors. The following is a summary of the principal reasons
for the recommendation of the Board that Securityholders vote FOR the Arrangement Resolution (which reasons are
not necessarily presented in order of relative importance):
| (a) | All
Cash Consideration. The fact that the Arrangement Consideration under the Arrangement
is cash will provide Securityholders with certainty of value and liquidity while eliminating
the uncertainties of long-term business and execution risk to Securityholders. |
| | | |
| | • |
Advice from Piper Sandler & Co. The receipt by the Board of the Fairness Opinion on March 15,
2020 provided that, as of the date thereof and subject to the assumptions, limitations and qualifications contained therein, the
Share Consideration to be received by Shareholders pursuant to the Arrangement is fair from a financial point of view, to Shareholders.
The Fairness Opinion is attached as Appendix “C” to this Circular and should be read in its entirety. After consultation
with Piper Sandler & Co., including reviewing Piper Sandler & Co.’s methodology for determining that the Share Consideration
was fair to Shareholders, including performing (i) selected public companies analysis; (ii) precedent transactions analysis and
(iii) discounted cash flow analysis, the Board determined the Share Consideration was fair, from a financial point of view, to
Shareholders. |
| | | |
| (b) | Premium
to Trading Price. The relationship of the Arrangement Consideration (US$0.42 per
Share, in the case of Shares, PSUs and RSUs) to the unaffected trading price of Correvio’s
Shares, which constitutes a premium of approximately 35% to Correvio’s closing
share price on the NASDAQ Capital Market of US$0.31 on the business day prior to the
announcement, and a premium of approximately 44% to Correvio’s unaffected closing
share price on the NASDAQ Capital Market of US$0.29 on February 21, 2020, the business
day prior to initial unsubstantiated rumours related to Xydalba’s off-label efficacy
for treatment of the symptoms of COVID-19. |
| | | |
| (c) | Current
Company Financial Needs. The Company’s cash on hand is not sufficient to fund
the Company’s current planned operations. To fund those operations the Company
would need to raise additional equity or debt financing or monetize assets. In the current
market for equity and debt financing and given the current volatility of the capital
markets, there can be no assurance that the Company will be able to raise such additional
financing on reasonable terms or at all. Further, any equity financing would likely be
highly dilutive to Shareholders. The Arrangement avoids the need for the Company to complete
such financing or asset transactions. Without any transaction alternatives, the Company
is facing a going concern risk as highlighted in the most recent annual financial statements. |
| (d) | Required
Securityholder and Court Approvals. The Board considered the following rights and
approvals which protect Securityholders: |
| | | |
|
| | • |
the Arrangement Resolution must be approved by (i) not less than 66⅔% of the votes cast on the
Arrangement Resolution by the Shareholders and (ii) not less than 66⅔% of the votes cast on the Arrangement Resolution by
all Securityholders (on an As-Converted Basis, as applicable), voting together as a single class; |
| | | |
|
| | • |
the Arrangement must be approved by the Court, which will consider, among other things, the fairness
of the Arrangement to Securityholders; and |
| | | |
|
| | • |
Registered Shareholders have the right to dissent to the Arrangement Resolution. |
| | | |
|
| (e) | Securityholder
Value. After engaging Piper Sandler & Co. to canvass the market for other investment
and combination opportunities including completing a fulsome auction during which 80
potential bidders were contacted, management of Correvio and the Board have concluded
that the Arrangement represents the best available opportunity to maximize Securityholder
value given current industry, economic and market conditions and trends. See “The
Arrangement – Background to the Arrangement.” In addition, prolonging
the sale process further could have resulted in the loss of a favorable opportunity to
successfully consummate a transaction on favorable terms. |
| | | |
| (f) | Economic
Conditions. The current state of the economy and the stage of the pharmaceutical
industry cycle, as well as the uncertainty surrounding these forecasted economic conditions
both in the near term and the long term. In addition, it has become much more challenging
given the ongoing COVID-19 situation globally. |
| | | |
| (g) | Strategic
Alternatives. The perceived risks and benefits of a variety of possible alternatives
to the Arrangement Agreement, including the alternative of continuing to pursue the Company’s
long-term business plan as a public company and not undertaking a strategic transaction
at this time, taking into account the Company’s historical performance, current
financial position and prospects, access to capital, growth plans and ability to expand
its business, key supplier and customer relationships and the ability of the Company
to maintain and build on such relationships in the future. The Board also considered
the future direction and strategic alternatives available to the Company in light of
its size, growth, key supplier and customer relationships, and ability to compete in
the longer term against increasingly larger and better capitalized competitors. |
| | | |
| (h) | The
Terms of the Arrangement Agreement. |
| | | |
| | • |
Required Approvals. The Arrangement Resolution must be approved by (i) not less than 66⅔%
of the votes cast on the Arrangement Resolution by the Shareholders and (ii) not less than 66⅔% of the votes cast on the
Arrangement Resolution by all Securityholders (on an As-Converted Basis, as applicable), voting together as a single class. |
| | | |
|
| | • |
Superior Proposals. Under the Arrangement Agreement, the Board remains able to respond, in accordance
with its fiduciary duties and pursuant to the terms of the Arrangement Agreement, to unsolicited proposals that are more favourable
to Securityholders than the Arrangement. |
| | | |
|
| | • |
Likelihood of Closing. The likelihood that the Arrangement will be completed, given the covenants
of the parties to consummate the transaction, conditions and other approvals necessary to complete the Arrangement. |
| | | |
|
| | • |
Treatment of Options. Optionholders will receive a cash payment equal to the amount, if any,
by which the Share Consideration exceeds the per Share exercise price payable under such Options, net of applicable withholding
Taxes. In addition, Optionholders have the right to vote (on an As-Converted Basis) in favour of or against the Arrangement Resolution,
voting together as a single class with all other Securityholders. |
| · | Treatment
of RSUs and PSUs. Holders of RSUs and PSUs will receive a cash payment equal to US$0.42
per RSU or PSU, respectively, net of applicable withholding Taxes. In addition, holders
of RSUs and PSUs have the right to vote (on an As-Converted Basis) in favour of or against
the Arrangement Resolution, voting together as a single class with all other Securityholders. |
| | | |
| · | No
Financing. The Arrangement Agreement is not subject to a financing condition. |
| | | |
| · | Specific
Performance. The Company’s ability, under certain circumstances pursuant to
the Arrangement Agreement, to seek specific performance to prevent breaches of the Arrangement
Agreement and to enforce specifically the terms of the Arrangement Agreement. |
| | | |
| · | Arms-Length
Negotiations. The Arrangement Agreement has customary terms and was the product of
extensive arms-length negotiations by Correvio and the Purchaser. |
| | | |
| · | Loan
Repayment. Under the Arrangement Agreement, the Purchaser has agreed to repay in
full approximately US$48,000,000 owed to CRG by Correvio under the CRG Loan. |
| | | |
In
view of the wide variety of factors and information considered in connection with their evaluation of the Arrangement, the Board
did not find it practicable to, and therefore did not, quantify or otherwise attempt to assign any relative weight to each specific
factor or item of information considered in reaching their conclusions and recommendations. In addition, individual members of
the Board may have given different weights to different factors or items of information.
See “The
Arrangement – Reasons for the Arrangement”.
Fairness
Opinion
This summary
is qualified in its entirety by reference to the full text of the Fairness Opinion. In connection with the Arrangement, the Board
received a written opinion dated from Piper Sandler & Co. The Fairness Opinion states that, as of March 15, 2020, and subject
to the assumptions, limitations and qualifications set out therein, the Share Consideration to be received by the Shareholders
is fair, from a financial point of view, to the Shareholders. The full text of the Fairness Opinion, which sets forth certain
assumptions made, matters considered and limitations on the review undertaken in connection with the Fairness Opinion, is attached
as Appendix “C” to this Circular. Shareholders are urged to, and should, read the Fairness Opinion in its entirety.
See “The Arrangement – Fairness Opinion”.
Subject
to the terms of its engagement, Piper Sandler & Co. has consented to the inclusion in this Circular of the Fairness Opinion
in its entirety, together with references to and a summary of the Fairness Opinion and other information relating to Piper Sandler
& Co. and the Fairness Opinion. The Fairness Opinion addresses the fairness, from a financial point of view, of the Share
Consideration to be received by the Shareholders. The Fairness Opinion is not and should not be construed as a recommendation
to any Securityholder as to how to vote with respect to the Arrangement or any other matter at the Meeting.
Correvio
Voting Agreement
On March
15, 2020, the Purchaser entered into the Correvio Voting Agreement with each of the directors and senior officers of Correvio.
The Correvio Voting Agreement sets forth, among other things, the agreement of such directors and senior officers to vote their
Shares and, if applicable, any Options, RSUs or PSUs they hold in favour of the Arrangement. As of the Record Date, 1,194,909
of the outstanding Shares were subject to the Correvio Voting Agreement, representing approximately 1.81% of the outstanding Shares.
See “The
Arrangement – Correvio Voting Agreement”.
Parties
to the Arrangement
Correvio
Correvio
is a specialty pharmaceutical company focused on providing innovative, high-quality brands that meet the needs of acute care physicians
and patients.
Correvio
was incorporated on March 7, 2018, under the CBCA, in connection with a reorganization of Cardiome by way of a plan of arrangement
(the “Cardiome Arrangement”). On March 19, 2018, Correvio entered into a definitive arrangement agreement with
Cipher and Cardiome. Under the terms of the agreement, Cipher acquired Cardiome’s Canadian business portfolio in exchange
for cash consideration of C$25.5 million. As a result of the Cardiome Arrangement, Correvio acquired, and currently holds, all
of Cardiome’s pre-transaction assets and assumed liabilities, but excluding the Canadian business portfolio. Pursuant to
the Cardiome Arrangement, Cardiome shareholders received common shares, on a one-for-one ratio, of Correvio. Correvio obtained
a substitution listing on the Nasdaq and TSX and has succeeded to Cardiome’s reporting obligations. Correvio has a head
office located at 6th Floor, 1441 Creekside Drive, Vancouver, British Columbia, Canada, V6J 4S7, and a registered office at 2600
– 595 Burrard Street, Vancouver, British Columbia, Canada, V7X 1L3.
Correvio
is listed on each of the TSX and the Nasdaq with the trading symbol “CORV”.
ADVANZ
and the Purchaser
ADVANZ operates
an international speciality pharmaceutical business with a diversified portfolio of more than 200 patented and off-patent products,
and sales in more than 90 countries, and is focused on becoming the leading platform for niche-established medicines, with advanced
commercial capabilities throughout Western Europe.
ADVANZ was
incorporated pursuant to the provisions of the Business Corporations Act (Ontario) on January 20, 2010, under the name
“Mercari Acquisition Corp.” It was subsequently renamed “Concordia Healthcare Corp.” then “Concordia
International Corp.” and then on November 29, 2018, ADVANZ changed its name to “ADVANZ PHARMA Corp.” as part
of a global rebrand in support of its strategy and vision. ADVANZ was continued under the CBCA on June 22, 2018. On September
6, 2018, ADVANZ amended its articles to, among other things, provide for a class of Class A special shares, a class of Class B
special shares and a class of Class C special shares, and redesignate its common shares as limited voting shares. On January 1,
2020, ADVANZ completed the continuance of the company from Canada to Jersey, Channel Islands and changed its name to “ADVANZ
PHARMA Corp. Limited”. On March 27, 2020, ADVANZ completed a voluntary delisting of its limited voting shares from the TSX.
ADVANZ is
a Jersey-registered company and its corporate head office is located in London, England. ADVANZ, through its subsidiaries, operates
out of various international office locations with key offices located in: London, England; Dublin, Ireland; Sydney, Australia;
Helsingborg, Sweden; Chicago, USA and Mumbai, India.
Conditions
to the Arrangement
Completion
of the Arrangement is subject to a number of specified conditions being met as of the Effective Time, including, but not limited
to:
Mutual
Conditions
| (a) | the Interim
Order being granted on terms consistent with the Arrangement Agreement; |
| | | |
| (b) | Securityholder
Approval for the Arrangement being obtained in accordance with the Interim Order; |
| | | |
| (c) | the Final
Order being granted on terms consistent with the Arrangement Agreement; |
| | | |
| (d) | no action
having been taken under any applicable Law or by any Governmental Entity which makes
it illegal or otherwise prohibits the completion of the Arrangement; |
| (e) | the Articles
of Arrangement that will be filed with the Director being in a form acceptable to the
Parties; |
| | | |
| (f) | the Arrangement
Agreement not being terminated in accordance with its terms; and |
| | | |
| (g) | certain
regulatory approvals, including the approval of the TSX of this Circular, being obtained. |
| | | |
Conditions
Precedent to the Obligations of the Purchaser
The following
conditions are for the sole benefit of the Purchaser and may be waived by it in whole or in part at any time.
| (a) | all covenants
of Correvio under the Arrangement Agreement being duly performed in all material respects
and the receipt by the Purchaser of a certificate from Correvio confirming such as of
the Effective Date; |
| | | |
| (b) | (i) the
representations and warranties of Correvio set forth (A) in the Arrangement Agreement,
that are qualified by reference to materiality or Material Adverse Effect and (B) the
representations that (1) Correvio is duly incorporated and is validly existing and in
good standing under the CBCA and has all requisite corporate power and capacity to carry
on its business as now conducted and to own, lease and operate its properties and assets
and (2) relate to capitalization, set out in paragraph (e) of Schedule “C”
of the Arrangement Agreement, including, but not limited to, that all the issued and
outstanding Shares of Correvio and each of its subsidiaries have been authorized and
validly issued and are fully paid and non-assessable, will be true and correct in all
respects as of the Effective Time (except for representations and warranties made as
of a specified date, the accuracy of which shall be determined as of such specified date);
and (ii) the representations and warranties of Correvio set forth in the Arrangement
Agreement that are not qualified by materiality or Material Adverse Effect will be true
and correct in all respects as of the Effective Time (except for representations and
warranties made as of a specified date, the accuracy of which shall be determined as
of the specified date), except where any failure or failures of such representations
and warranties to be so true and correct would not have, individually or in the aggregate,
a Material Adverse Effect, and the Purchaser will have received a certificate of Correvio
confirming the same as at the Effective Time; |
| | | |
| (c) | no Material
Adverse Effect on or prior to the date of the Arrangement Agreement which is continuing
and since the date of the Arrangement Agreement, there will not have occurred a Material
Adverse Effect, and the Purchaser will have received a certificate signed on behalf of
Correvio to such effect; |
| | | |
| (d) | all covenants
of the Correvio Supporting Shareholders under the Correvio Voting Agreement to be performed
on or before the Effective Time will have been duly performed by the parties thereto
in all respects; |
| | | |
| (e) | holders
of no more than five percent of the Shares will have exercised, and at the date of the
Meeting, will not have withdrawn, Dissent Rights; |
| | | |
| (f) | the administrative
agent in respect of the CRG Loan will have provided a payout letter and release in favour
of Correvio, the Purchaser and the Purchaser’s lender in respect of liabilities
under the CRG Loan, in form and substance acceptable to the Purchaser acting reasonably; |
| | | |
| (g) | the Purchaser
will have been provided with evidence of discharge of the Encumbrances set out in the
Correvio Disclosure Letter; and |
| | | |
| (h) | the Key
Third Party Consents will have been obtained. |
Conditions
Precedent to the Obligations of Correvio
The following
conditions are for the sole benefit of Correvio and may be waived by it in whole or part at any time.
| (a) | all covenants
of the Purchaser under the Arrangement Agreement being duly performed in all material
respects and Correvio receiving a certificate from the Purchaser confirming such as of
the Effective Date; |
| (b) | (i) the
representations and warranties of the Purchaser set forth in the Arrangement Agreement,
that are qualified by reference to materiality will be true and correct in all respects
as of the Effective Time (except for representations and warranties made as of a specified
date, the accuracy of which shall be determined as of that specified date); and (ii)
the representations and warranties of the Purchaser set forth in the Arrangement Agreement
that are not qualified by materiality will be true and correct in all respects as of
the Effective Time (except for representations and warranties made as of a specified
date, the accuracy of which shall be determined as of that specified date), except where
the failure or failures of all such representations and warranties to be so true and
correct in all respects would not reasonably be expected to prevent or have a material
adverse effect on the ability of the Purchaser to perform its obligations under the Arrangement
Agreement or consummate the Arrangement, and Correvio will have received a certificate
of the Purchaser confirming such as of the Effective Time; and |
| | | |
| (c) | the Purchaser
will have complied with its obligations to pay the aggregate Share Consideration for
the Shares outstanding and the Depositary will have confirmed receipt of the aggregate
Share Consideration contemplated thereby. |
| | | |
See “The
Arrangement – The Arrangement Agreement – Conditions to the Arrangement Becoming Effective”.
Termination
of the Arrangement Agreement
The Arrangement
Agreement may be terminated prior to the Effective Time in certain circumstances (certain of which lead to payment of a Termination
Fee).
The
Termination Fee is payable by Correvio if the Arrangement Agreement is terminated in the following circumstances:
| (a) | by the Purchaser
if (A) prior to the Effective Time (1) the Board makes a Change in Recommendation, (2)
the Board approves or recommends an Acquisition Proposal, or (3) Correvio enters into
a definitive agreement with respect to a Superior Proposal; (B) the Meeting does not
occur on or before June 1, 2020 or such later day as may be agreed to by Correvio and
the Purchaser; or (C) Correvio has breached any of its obligations provided for in the
non-solicitation, Acquisition Proposal and Superior Proposal provisions of the Arrangement
Agreement or materially breached any of its obligations with respect to the Meeting and
this Circular; |
| | | |
| (b) | by Correvio
if at any time prior to the receipt of the Securityholder Approval, Correvio wishes to
enter into a definitive written agreement with respect to a Superior Proposal; or |
| | | |
| (c) | (A) by either
Correvio or the Purchaser if (i) the Effective Time has not occurred on or before the
Outside Date (subject to certain exceptions provided for in the Arrangement Agreement)
or (ii) the Securityholder Approval is not obtained at the Meeting in accordance with
applicable Law or the Interim Order or (B) by the Purchaser if Correvio is in default
of certain covenants or obligations under the Arrangement Agreement, provided that the
Purchaser is not in breach of the Arrangement Agreement so as to cause certain conditions
therein not to be satisfied if prior to the earlier of the termination of the Arrangement
Agreement or the Meeting: (A) an Acquisition Proposal or the intention to make an Acquisition
Proposal, with respect to Correvio is made to Correvio or is publicly announced by any
Person and not withdrawn prior to the Meeting, and (B) within nine months after the earlier
of the date of termination of the Arrangement Agreement or the Meeting either (1) the
Acquisition Proposal is accepted, recommended or approved by the Board, and if applicable,
has not expired, been withdrawn or been publicly abandoned, or (2) any Person or company
acquires more than 50% of the issued and outstanding Shares or more than 50% of the consolidated
assets of Correvio under such Acquisition Proposal. For the purposes of the foregoing,
the term “Acquisition Proposal” shall have the meaning set out in the Glossary
of Terms, except that references to “20%” shall be deemed “50%”. |
| | | |
See “The
Arrangement – The Arrangement Agreement – Termination”.
CRG
Loan Amendment & Waiver
In connection
with and prior to entering into the Arrangement Agreement, on March 12, 2020, Correvio and CRG entered into the fourth amending
agreement to the CRG Loan. Pursuant to such amendment, CRG has waived, for a limited period of time only, the Liquidity Covenant
otherwise applicable to Correvio. Such waiver period will end on the earlier to occur of June 30, 2020 and the termination of
the Arrangement Agreement. In addition, such amendment provides that the 2019 minimum revenue threshold for Correvio be lowered
from US$36,000,000 to US$32,000,000.
The Company
entered into the CRG Consent on March 15, 2020 with CRG. Pursuant to the CRG Consent, CRG (i) consented to the entry by the Company
into the Arrangement Agreement, and (ii) agreed that concurrent with the full repayment of the obligations owing under the CRG
Loan upon the completion of the Arrangement, the share purchase warrants to purchase Shares that are held by CRG will be cancelled
for no consideration.
In connection
with the completion of the Arrangement, ADVANZ or the Purchaser plans to fully repay the CRG Loan.
See “The
Arrangement – CRG Loan Amendment & Waiver”.
Risk
Factors
Securityholders
should carefully consider the risk factors relating to the Arrangement. Some of these risks include, but are not limited to: (i)
the impact of COVID-19 on timing for Court approval; (ii) the Arrangement Agreement may be terminated in certain circumstances;
(iii) there can be no certainty that all conditions precedent to the Arrangement will be satisfied; (iv) Correvio will incur costs
even if the Arrangement is not completed, and also may be required to pay the Termination Fee to the Purchaser; (v) the Termination
Fee provided under the Arrangement Agreement may discourage other parties from attempting to acquire Correvio; and (vi) the market
price for the Shares may decline if, for any reason, the Arrangement Agreement is terminated, whether or not Correvio is required
to pay a Termination Fee to the Purchaser. For more information see “The Arrangement – Risks Associated with the
Arrangement”.
Arrangement
Mechanics
If you hold
Shares in your own name (a Registered Shareholder), in order to receive the Share Consideration that you are entitled to upon
completion of the Arrangement, you must complete and sign the Letter of Transmittal enclosed with this Circular and return it,
together with the certificate(s)/DRS advice(s) representing your Shares and any other required documents and instruments to the
Depositary in accordance with the procedures set out in the enclosed Letter of Transmittal.
Shareholders
who do not hold Shares in their own names and whose Shares are registered in the name of an Intermediary (a Non-Registered Shareholder)
should contact their Intermediary for instructions and assistance in receiving the Share Consideration to which they are entitled
pursuant to the Arrangement.
As soon
as practicable following the later of the Effective Date and the surrender of the Letter of Transmittal, share certificate(s)/DRS
advice(s) and any other required documents and instruments to the Depositary, a Shareholder will be entitled to receive the Share
Consideration, less applicable withholding taxes, payable for its, his or her Shares in the form of a cheque representing the
net cash payment payable to such former Shareholder by way of first class mail, pick-up at the offices of the Depositary or by
wire transfer.
Each Option,
RSU and PSU granted and outstanding immediately prior to the Effective Time will, without further action, be deemed to be assigned
and transferred by the holder thereof to Correvio. As soon as practicable after the Effective Date, the Depositary will deliver
to such Optionholder, holder of RSUs or PSUs the aggregate amount of Arrangement Consideration net of applicable withholding Taxes
that such Optionholder or holder of RSUs or PSUs, as applicable, is entitled to receive. Such Arrangement Consideration payable
to Optionholders and holders of RSUs and PSUs will be delivered by way of first class mail to the address shown on the register
of Optionholders, RSU holders or PSU holders of Correvio, as applicable, maintained by or on behalf of Correvio or by wire transfer
if wire instructions are provided to Correvio.
See “The
Arrangement – Arrangement Mechanics” in this Circular.
Cancellation
of Rights after Six Years
Any certificate
which immediately before the Effective Date represented Shares and which has not been duly surrendered with all other documents
required by the Depositary on or before the sixth anniversary of the Effective Date will cease to represent any Claim of any nature
whatsoever and will be deemed to have been surrendered to the Purchaser and will be cancelled. After the sixth anniversary of
the Effective Date, all Share Consideration to which the former holder of such certificate(s)/DRS advice(s) was entitled shall
be automatically cancelled without any repayment of capital in respect thereof and the Share Consideration to which such former
Shareholder was entitled shall be delivered to the Purchaser by the Depositary. Accordingly, persons who tender certificates for
Shares after the sixth anniversary of the Effective Date will not receive Share Consideration and will not be paid any cash or
other compensation.
Dissent
Rights
The Interim
Order expressly provides Registered Shareholders with the right to dissent with respect to the Arrangement Resolution.
Each Dissenting
Shareholder is entitled to be paid the fair value (determined as of immediately before the passing of the Arrangement Resolution)
of all, but not less than all, of such holder’s Shares.
A Non-Registered
Shareholder will not be entitled to exercise his, her or its rights of dissent directly (unless the Shares are re-registered in
the holder’s name).
To exercise
Dissent Rights, a Shareholder must dissent with respect to all Shares of which it is the registered and beneficial owner. Any
failure by a Shareholder to fully comply with the provisions of the CBCA, as modified by the Plan of Arrangement, the Interim
Order and the Final Order, may result in the loss of that holder’s Dissent Rights. See “Dissent Rights”
and Appendix “E”.
Income
Tax Considerations
Summary
of Certain Canadian Federal Income Tax Considerations
Certain
Canadian federal income tax considerations applicable to Shareholders are summarized herein under “Certain Canadian Federal
Income Tax Considerations”.
Shareholders
should carefully review the applicable Tax considerations resulting from the Arrangement and are urged to consult their own tax
advisors in regard to their particular circumstances.
This Circular
does not address any Tax considerations of the Arrangement other than certain Canadian federal income tax considerations applicable
to Shareholders. Shareholders who are resident in jurisdictions other than Canada should consult their tax advisors with respect
to the relevant Tax implications of the Arrangement, including any associated filing requirements, in such jurisdictions. All
Securityholders should also consult their own tax advisors regarding relevant provincial, territorial or state Tax considerations
of the Arrangement.
For more
information on certain U.S. federal and certain foreign income Tax consequences of the Arrangement see “Certain U.S.
Federal Income Tax Considerations” and “Certain Foreign Income Tax Considerations”.
GENERAL
PROXY INFORMATION
Solicitation
of Proxies
This Circular
is furnished in connection with the solicitation of proxies by the management of Correvio for use at the Meeting, to be held on
May 15, 2020, at the time and place (being online) and for the purposes set forth in the accompanying Notice of Annual General
and Special Meeting, subject to any adjournment(s) or postponement(s) thereof. The solicitation will be primarily by mail; however,
proxies may also be solicited personally or by telephone by the directors, officers or employees of Correvio. Correvio may also
pay brokers or other persons holding Shares in their own names or in the names of nominees for their reasonable expenses of sending
proxies and proxy materials to Non-Registered Shareholders for the purposes of obtaining their proxies. The Company has also retained
Gryphon Advisors Inc. to assist in connection with the Correvio communications with Shareholders and solicitation of proxies.
In connection with these services, Gryphon Advisors Inc. is expected to receive a fee of up to C$50,000, plus reasonable out-of-pocket
expenses. The costs of solicitation are being borne by Correvio. The Company will not transmit proxy-related materials to Registered
Shareholders or beneficial owners using notice-and-access.
How
the Vote for the Arrangement Resolution is Approved
At the Meeting,
Securityholders will be asked, among other things, to consider and to vote to approve the Arrangement Resolution. In order to
become effective, the Arrangement must be approved by a special resolution passed by at least (i) 66⅔% of the votes cast
on the Arrangement Resolution by the Shareholders present online or represented by proxy at the Meeting and (ii) 66⅔% of
the votes cast on the Arrangement Resolution by Securityholders (on an As-Converted Basis, as applicable), present online or represented
by proxy at the Meeting, voting as a single class. Completion of the Arrangement is also subject to receipt of certain required
regulatory approvals, Court approvals and other customary closing conditions, all of which are described in more detail in this
Circular.
Who
can Vote?
Only Securityholders
whose names appear on the records of the Company as at the Record Date as the registered holders of the Securities or duly appointed
proxyholders are permitted to vote at the Meeting.
The information
set out in this section is of significant importance to many Shareholders as a substantial number of Shareholders do not hold
their Shares in their own name. This Circular and the accompanying materials are being sent directly to Registered Shareholders
and Non-Registered Shareholders, who are Shareholders who hold their Shares through a broker, investment dealer or other intermediary
(each, an “Intermediary”).
If you are
a Registered Shareholder as at April 6, 2020, you are entitled to attend the virtual Meeting and cast one vote for each Share
registered in your name on the Arrangement Resolution. If you are an Optionholder or holder of RSUs or PSUs you are entitled to
attend the Meeting and will be asked to only vote on the Arrangement Resolution on an As-Converted Basis. If the Shares are registered
in the name of a corporation, a duly authorized officer of the corporation may attend on its behalf, such duly authorized officer
must have the Username provided in order to login to the Meeting. If you are a Registered Shareholder, Optionholder or holder
of RSUs or PSUs but do not wish to, or cannot, attend the online Meeting, you can appoint someone who will login to the Meeting
and act as your proxyholder to vote in accordance with your instructions. If your Shares are registered in the name of a “nominee”
(usually a bank, trust company, securities dealer, other financial institution or intermediary, or depository, such as CDS &
Co., in Canada, and DTC in the United States, of which an intermediary is a participant) you should refer to the section entitled
“Non-Registered Shareholders” set out below.
It is important
that your Securities be represented at the Meeting regardless of the number of Securities you hold. If you are a Shareholder,
Optionholder or holder of RSUs or PSUs and will not be attending the online Meeting, we encourage you to complete, date, sign
and return your form(s) of proxy as soon as possible so that your Securities will be represented.
What
is a Form of Proxy?
A form of
proxy is a document that authorizes someone to attend the online Meeting and cast your votes for you. We have enclosed two forms
of proxy with this Circular. You should use the applicable form or forms to appoint a proxyholder, although you can also use any
other legal form of proxy.
In order
to vote by proxy, Registered Shareholders must fill out the YELLOW form of proxy and holders of Options, RSUs and/or PSUs must
fill out the GREEN form of proxy. If you are both a Registered Shareholder and a holder of Options, RSUs and/or PSUs and are voting
by proxy, you must fill out BOTH the YELLOW and the GREEN forms of proxy to ensure your vote is properly counted.
Appointment
of Proxies/Submission of Voting Instruction Forms & Registering Proxyholders
If you do
not attend the Meeting, you can still make your votes count by appointing a person or company who will login to the Meeting to
act as your proxyholder at the Meeting.
Your proxyholder
is the person you appoint and name on the proxy form to cast your votes for you. You can appoint the persons named in the applicable
enclosed form or forms of proxy, who are each a director or an officer of Correvio. You have the right to appoint any person
or company you want to be your proxyholder. It does not have to be a Securityholder or the person designated in the enclosed form(s).
Simply fill in the person’s name in the blank space provided on the enclosed proxy form(s) or complete any other legal proxy
form and deliver it to Computershare Investor Services Inc. within the time hereinafter specified for receipt of proxies.
Shareholders,
Optionholders and holders of RSUs or PSUs who wish to appoint a third party proxyholder to virtually attend, participate or vote
at the Meeting as their proxy and vote their Securities MUST submit their proxy (or proxies) or VIF, as applicable, appointing
such third party proxyholder AND register the third party proxyholder, as described below. Registering your proxyholder is an
additional step to be completed AFTER you have submitted your proxy or VIF. Failure to register the proxyholder will result in
the proxyholder not receiving a username to virtually attend, participate or vote at the Meeting (a “Username”).
Step
1: Submit your proxy or VIF: To appoint a third party proxyholder, insert such person’s name in the blank space provided
in the form of proxy or VIF (if permitted) and follow the instructions for submitting such form of proxy or VIF. This must be
completed prior to registering such proxyholder, which is an additional step to be completed once you have submitted your form
of proxy or VIF. If you are a Non-Registered Shareholder located in the United States, you must also provide Computershare Investor
Services Inc. with a duly completed legal proxy if you wish to attend, participate or vote at the Meeting or, if permitted, appoint
a third party as your proxyholder. See below under this section for additional details. If you are both a Shareholder and a holder
of RSUs, PSUs and/or Options, you must fill out both the YELLOW and the GREEN proxy.
Step
2: Register your proxyholder: To register a proxyholder, Shareholders, Optionholders and holders of RSUs or PSUs MUST visit
http://www.computershare.com/correvio by 10:00 a.m. (Pacific
time) on May 13, 2020 (or, if the Meeting is adjourned or postponed, by the time that is 48 hours prior to the Meeting, excluding
Saturdays, Sundays and holidays) and provide Computershare Investor Services Inc. with the required proxyholder contact information,
so that Computershare Investor Services Inc. may provide the proxyholder with a Username via email. Without a Username, proxyholders
will not be able to virtually attend, participate or vote at the Meeting. If you are both a Registered Shareholder and a holder
of Options, RSUs and/or PSUs you are required to go through the registration process twice: once to register a proxyholder
for your Shares and once to register a proxyholder for your Options, RSUs and/or PSUs.
If you
are a Non-Registered Shareholder and wish to virtually attend, participate or vote at the Meeting, you have to insert your own
name in the space provided on the VIF sent to you by your Intermediary, follow all of the applicable instructions provided by
your Intermediary AND register yourself as your proxyholder, as described above. By doing so, you are instructing your Intermediary
to appoint you as proxyholder. It is important that you comply with the signature and return instructions provided by your Intermediary.
Please also see further instructions below under the heading “Attending and Participating at the Meeting”.
If you
are a Non-Registered Shareholder located in the United States and wish to attend, participate or vote at the Meeting or, if permitted,
appoint a third party as your proxyholder, in addition to the steps described above and below under “Attending and
Participating at the Meeting”, you must obtain a valid legal proxy from your Intermediary. Follow the instructions from
your Intermediary included with the legal proxy form and the VIF sent to you, or contact your Intermediary to request a legal
proxy form or a legal proxy if you have not received one. After obtaining a valid legal proxy from your Intermediary, you must
then submit such legal proxy to Computershare Investor Services Inc. at uslegalproxy@computershare.com.
To vote
your Securities, your proxyholder must virtually attend the Meeting. Regardless of who you appoint as your proxyholder, you can
either instruct that appointee how you want to vote or you can let your appointee decide for you. You can do this by completing
the applicable form or forms of proxy. In order to be valid, you must return the completed form of proxy forty-eight (48) hours,
excluding Saturdays, Sundays and holidays, prior to the time of the Meeting or any adjournment or postponement thereof to our
transfer agent, Computershare Investor Services Inc., 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, Attention: Proxy
Department or by fax to 1-866-249-7775 (toll-free). The time limit for deposit of proxies may be waived or extended by the Chairperson
of the Meeting at his discretion, without notice.
Instructing
your Proxy and Exercise of Discretion by your Proxy
You may
indicate on your applicable form or forms of proxy how you wish your proxyholder to vote your Securities. Securities represented
by proxy will be voted for or against, or withheld from voting, on a particular issue in accordance with the instructions of the
Securityholder. If the Securityholder specifies a choice with respect to any matter to be acted upon, the Securities will be voted
accordingly. To do this, simply mark the appropriate boxes on the applicable form or forms of proxy. If you do this, your proxyholder
must vote your Securities in accordance with the instructions you have given.
If you do
not give any instructions as to how to vote on a particular issue to be decided at the Meeting, your proxyholder can vote your
Securities as he or she thinks fit. If you have appointed the persons designated in the applicable form(s) of proxy as your proxyholder
they will, unless you give contrary instructions, vote FOR the matters set out in the Notice of Annual General and
Special Meeting.
In order
to approve a motion proposed at the Meeting a majority of the votes cast will be required (an “ordinary resolution”)
unless the motion requires a “special resolution” in which case 66⅔% of the votes cast will be required.
Further
details about these matters are set out in this Circular. The enclosed forms of proxy gives the persons named on such forms the
authority to use their discretion in voting on amendments or variations to matters identified on the Notice of Annual General
and Special Meeting. At the time of printing this Circular, the management of Correvio is not aware of any other matter to be
presented for action at the Meeting. If, however, other matters do properly come before the Meeting, the persons named on the
enclosed forms of proxy will vote on them in accordance with their best judgment, pursuant to the discretionary authority conferred
by the forms of proxy with respect to such matters.
Changing
your mind
If you want
to revoke your proxy (or proxies) after you have delivered it (them), you can do so by (a) attending the Meeting and voting online
if you were a Registered Shareholder or a holder of Options, RSUs or PSUs at the Record Date, (b) signing a proxy (or proxies)
bearing a later date and returning such form(s) at any time before the proxy cut-off time, (c) by signing a written statement
which indicates, clearly, that you want to revoke your proxy (or proxies) and delivering this signed written statement to the
registered office of Correvio by email to steven.mckoen@blakes.com at any time up to and including the last Business Day prior
to the Meeting (or any adjournment or postponement thereof), or (d) in any other manner permitted by law.
Your proxy
(or proxies) will only be revoked pursuant to (b) above if such proxy bearing a later date is received by no later than 10:00
a.m. (Pacific time) on May 13, 2020 (or if the Meeting is postponed or adjourned, by no later than 48 hours prior to the time
of such postponed or adjourned meeting, excluding Saturdays, Sundays and holidays). If you revoke your proxy (or proxies) and
do not replace it (or them) with another that is deposited with us before the proxy cut-off time, you can still vote your Shares,
but to do so you must attend the Meeting online. If as a Registered Shareholder, Optionholder, or holder of RSUs or PSUs you are
using your control number to login to the Meeting (or, if you are both a Registered Shareholder and a holder of Options, RSUs
and/or PSUs, you are using one of your control numbers to login to the Meeting) and you accept the terms and conditions, you will
be provided the opportunity to vote by online ballot at the appropriate time on the matters put forth at the Meeting. If you have
already voted by proxy and you vote again during the online ballot during the Meeting, your online vote during the Meeting will
revoke your previously submitted proxy (or proxies). If you have already voted by proxy (or proxies) and do not wish to revoke
your previously submitted proxy (or proxies), do not vote again during the online ballot.
If you are
a Non-Registered Shareholder and wish to revoke previously provided voting instructions, you should follow carefully the instructions
provided by your Intermediary.
Non-Registered
Shareholders
If you are
a Non-Registered Shareholder, meaning your Shares are not registered in your own name, they will be held in the name of a “nominee”,
usually a bank, trust company, securities dealer, other financial institution or intermediary, or depository, such as CDS &
Co., in Canada, and DTC, in the United States, of which an intermediary was a participant and, as such, your nominee will be the
entity legally entitled to vote your Shares and must seek your instructions as to how to vote your Shares.
If you are
a Non-Registered Shareholder, your Intermediary will send you a VIF or, less frequently, a proxy form with this Circular. This
form will instruct the Intermediary as to how to vote your Shares at the Meeting on your behalf. You must follow the instructions
from your Intermediary to vote.
Intermediaries
are required to forward the Meeting materials to Non-Registered Shareholders unless in the case of certain proxy-related materials
the Non-Registered Shareholder has waived the right to receive them. The majority of Intermediaries now delegate responsibility
for obtaining instructions from Non-Registered Shareholders to Broadridge. Broadridge typically mails a VIF to Non-Registered
Shareholders and asks Non-Registered Shareholders to return the VIF to Broadridge (in some cases the completion of the VIF may
be by telephone or the internet). Broadridge will tabulate the results of all instructions received and provide the appropriate
instructions respecting the voting of Shares to be represented at the Meeting.
Additionally,
there are two kinds of Non-Registered Shareholders: (i) those who object to their name being made known to the issuers of securities
which they own, known as objecting beneficial owners (“OBOs”); and (ii) those who do not object to their name
being made known to the issuers of securities which they own, known as non-objecting beneficial owners (“NOBOs”).
For greater
certainty, Non-Registered Shareholders should note that they are not entitled to use a VIF or proxy form received from Broadridge
or their Intermediary to vote Shares directly at the Meeting. Instead, the Non-Registered Shareholder must complete the VIF or
proxy form and return it as instructed on the form. The Non-Registered Shareholder must complete these steps well in advance of
the Meeting in order to ensure such Shares are voted.
In the alternative,
if you wish to vote online at the Meeting or have another person attend and vote online on your behalf, insert your name or such
other person’s name in the space provided for the proxyholder appointment in the VIF or proxy form, and return it as instructed
by your Intermediary. You will also have to register yourself as your proxyholder, as described above in “Appointment
of Proxies”. Your Intermediary may have also provided you with the option of appointing yourself or someone else to
virtually attend and vote on your behalf at the Meeting.
Non-Registered
Shareholders who have questions or concerns regarding any of these procedures may also contact their Intermediary. It is recommended
that inquiries of this kind be made well in advance of the Meeting.
Management
of Correvio will pay for Intermediaries to forward this Circular, the proxy form or a VIF to OBOs under National Instrument 54-101
– Communication with Beneficial Owners of Securities of a Reporting Issuer.
Attending
and Participating at the Meeting
The Company
is holding the Meeting as a completely virtual meeting, which will be conducted via live audio webcast. Shareholders, Optionholders
and holders of RSUs and PSUs will not be able to attend the Meeting in person. In order to attend, participate or vote at the
Meeting (including for voting and asking questions at the Meeting), Securityholders must have a valid Username.
Registered
Shareholders, Optionholders and holders of RSUs and PSUs and duly appointed proxyholders will be able to attend, participate and
vote at the Meeting online at https://web.lumiagm.com/202877707. Such persons may then enter the Meeting by clicking “I
have a login” and entering a Username and password before the start of the Meeting:
Registered
Shareholders, Optionholders and holders of RSUs and PSUs: The control number located on the form of proxy or in the email
notification you received is the Username. The password to the Meeting is “correvio2020” (case sensitive). If as a
Registered Shareholder, Optionholder or holder of RSUs or PSUs you are using your control number to login to the Meeting (or,
if you are both a Registered Shareholder and a holder of Options, RSUs and/or PSUs, you are using one of your control numbers
to login to the Meeting) and you accept the terms and conditions, you will be provided the opportunity to vote by online ballot
at the appropriate time on the matters put forth at the Meeting. If you have already voted by proxy and you vote again during
the online ballot during the Meeting, your online vote during the Meeting will revoke your previously submitted proxy (or proxies).
If you have already voted by proxy (or proxies) and do not wish to revoke your previously submitted proxy (or proxies), do not
vote again during the online ballot.
Duly
appointed proxyholders: Computershare Investor Services Inc. will provide the proxyholder with a Username by e-mail after
the voting deadline has passed. The password to the Meeting is “correvio2020” (case sensitive).
Only Registered
Shareholders, Optionholders and holders of RSUs and PSUs and duly appointed proxyholders will be entitled to attend, participate
and vote at the Meeting. Non-Registered Shareholders who have not made arrangements for the due appointment of themselves as proxyholder
will not be able to attend, participate or vote at the Meeting.
Securityholders
who wish to appoint a third party proxyholder to represent them at the Meeting (including Non-Registered Shareholders who wish
to appoint themselves as proxyholder to attend, participate or vote at the Meeting) MUST submit their duly completed proxy
(or proxies, as applicable) or VIF AND register the proxyholder. See “General Proxy Information – Appointment
of Proxies”.
If you
are a Non-Registered Shareholder located in the United States and wish to attend, participate or vote at the Meeting or, if permitted,
appoint a third party as your proxyholder, in addition to the steps described above and below under “Attending and
Participating at the Meeting”, you must obtain a valid legal proxy from your Intermediary. Follow the instructions from
your Intermediary included with the legal proxy form and the VIF sent to you, or contact your Intermediary to request a legal
proxy form or a legal proxy if you have not received one. After obtaining a valid legal proxy from your Intermediary, you must
then submit such legal proxy to Computershare Investor Services Inc. at uslegalproxy@computershare.com.
If you attend
the online Meeting, it is important that you are connected to the internet at all times during the Meeting in order to vote when
balloting commences. It is your responsibility to ensure connectivity for the duration of the Meeting. You should allow ample
time to check into the Meeting online and complete the related procedures.
Voting
Shares and Principal Holders
The authorized
share capital of Correvio consists of an unlimited number of Shares and an unlimited number of preferred shares without par value,
issuable in series. Shareholders are entitled to one vote for each Share held.
At the close
of business on the Record Date, there were 66,191,487 Shares outstanding and no preferred shares outstanding. To the knowledge
of Correvio’s directors and officers, no persons or companies beneficially own, or exercise control or direction over, directly
or indirectly, shares carrying more than 10% of the voting rights attached to all Shares.
BUSINESS
OF THE MEETING
Receipt
of Financial Statements
The consolidated
financial statements of the Company for the year ended December 31, 2019 and the auditors’ report thereon will be placed
before the Shareholders at the Meeting.
Election
of Directors
The Articles
of the Company provide that the Company shall have a minimum of three and a maximum of ten directors. The Board presently consists
of seven directors and it is intended to elect seven directors for the ensuing year, unless he or she ceases to hold office prior
to such time.
Each director
of the Company is elected annually and holds office until the next annual meeting of the Company unless he or she ceases to hold
office prior to such time. The persons proposed for nomination are, in the opinion of the Board and management, well qualified
to act as directors for the ensuing year. The persons named in the enclosed form of proxy intend to vote for the election of such
nominees. The Board has adopted a majority voting policy stipulating that Shareholders shall be entitled to vote in favour of,
or withhold from voting for, each individual director nominee at a shareholders’ meeting. If the number of votes “withheld”
for any nominee exceeds the number of votes “for” the nominee, then, notwithstanding that such director was duly elected
as a matter of corporate law, he or she shall immediately tender his or her resignation to the Board. The Board shall within 90
days after the shareholder’s meeting, determine whether to accept such director’s resignation, which resignation should
be accepted absent exceptional circumstances. The resignation shall become effective when accepted by the Board. The policy does
not apply in circumstances involving contested director elections.
The bylaws
of the Company include an advance notice policy regarding the nomination of directors (the “Advance Notice Provision”).
The purpose of the Advance Notice Provision is to provide Shareholders, directors and management of the Company with direction
on the procedure for Shareholder nomination of directors. The Advance Notice Provision is the framework by which the Company seeks
to fix a deadline by which registered or beneficial holders of Shares of the Company must submit director nominations to the Company
prior to any annual or special meeting of Shareholders and sets forth the information that a shareholder must include in the notice
to the Company for the notice to be in proper written form. The Advance Notice Provision provides that only persons who are nominated
(i) by or at the direction of the Board, (ii) by or at the direction or request of one or more Shareholders pursuant to a proposal
or requisition made in accordance with the provisions of the CBCA, or (iii) by any person who, at the close of business on the
notice date and on the record date for notice of such meeting, is entered in the central securities register as a holder of shares
carrying the right to vote at such meeting or who beneficially owns shares carrying the right to vote at such meeting and provides
evidence of such beneficial ownership to the Company, and who complies with the notice procedures set forth in the Advance Notice
Provision shall be eligible for election as directors of the Company. The Advance Notice Provision further provides that in the
case of an annual general meeting, notice to the Company must be given no less than 30 nor more than 60 days prior to the date
of the meeting; provided that if the meeting is to be held on a date that is less than 60 days after the date on which the first
public announcement of the date of the meeting was made, notice may be given no later than the close of business on the 10th day
following such public announcement. For special meetings that are not also an annual meeting, notice to the Company must be made
no later than the close of business on the 10th day following the day on which the first public announcement of the date of the
special meeting was made. The Board may, in its sole discretion, waive any requirement of the Advance Notice Provision.
The following
table sets forth for all persons proposed to be nominated by management for election as directors, the positions and offices with
the Company now held by them, their present principal occupation and principal occupation for the preceding five years (or longer),
the periods during which they have served as directors of the Company and the number of Shares of the Company beneficially owned,
directly or indirectly, by each of them, or over which they exercise control or direction as at April 7, 2020.
| Name,
Province/State and Country of Residence(1) |
Position
with the Company and Date the Individual Became a Director(12) |
Present
Principal Occupation and
Principal Occupation for Five Preceding Years(1) |
No.
of Common Shares Beneficially Owned, Controlled or Directed(1)(2) |
No.
of Securities Underlying Unexercised Stock Options(1) |
Richard M. Glickman(3)
(4) (5)
British Columbia, Canada |
Director
December 11, 2006 |
Retired
(April 2019 to present); Chief Executive Officer, Aurinia Pharmaceuticals (February 2017 to March 2019); Retired (July 2007
to January 2017) |
14,444 |
75,000 |
W. James O’Shea(3)
(4)
Massachusetts, United States |
Director
June 11, 2014 |
Retired
(September 2007 to present) |
25,000 |
99,000 |
William
L. Hunter, MD, MSc(6)
British Columbia, Canada |
Director
June 11, 2007 |
Chief
Executive Officer, Canary Medical Inc. (March 2019 to present) (8); Chief Executive Officer, Correvio Pharma Corp.
(July 2012 to March 2019) |
1,020,881 |
1,120,000 |
Mark H. Corrigan, MD(7)
Massachusetts, United States |
Director
June 22, 2015 |
Chief
Executive Officer, Correvio Pharma Corp. (March 2019 to present) (9); Executive Chairman, Novelion Therapeutics
Inc. (2017 – 2019), President, Research and Development, Tremeau Pharmaceuticals, Inc. (2017 to 2019); Chairman of the
Board, Epirus Pharmaceuticals (July 2014 to July 2016); Chief Executive Officer, Zalicus, Inc. (January 2010 to June 2014) |
10,000 |
1,059,000 |
Arthur H. Willms(4)
(5)
British Columbia, Canada |
Director
June 22, 2015 |
Retired
(2009 to present) |
18,000 |
79,000 |
Robert J. Meyer, MD(6)
Virginia, United States |
Director
September 25, 2015 |
Principal,
Drug and Biological Products, Greenleaf Health(10) (January 2018 - present); Director for Translational and Regulatory
Sciences at the University of Virginia School of Medicine (March 2013 to present) (11) |
Nil |
75,100 |
Vanda De Cian, MD(3)
(5)
Lipari Messina, Italy |
Director
March 12, 2019 |
Consultant
(January 2012 to present) |
Nil |
35,000 |
Notes:
(1)
This information has been provided by the respective nominee as of April 7, 2020.
| (2) | The number
of Shares held includes Shares of the Company beneficially owned, directly or indirectly,
or over which control or direction is exercised by the proposed nominee. |
| (3) | Member
of the GN Committee. Mr. O’Shea is the Chair of this Committee. |
| (4) | Member
of the Audit Committee. Mr. Willms is the Chair of this Committee. |
| (5) | Member
of the Compensation Committee. Dr. Glickman is the Chair of this Committee. |
| (6) | Member
of the Special Committee. Dr. Meyer is the Chair of this Committee. |
| (7) | Dr. Corrigan
was appointed Chief Executive Officer on March 14, 2019. |
| (8) | The principal
business of Canary Medical Inc. is improving healthcare outcomes through the continuous
collection, analysis, and monetization of data derived from proprietary, smart medical
devices that self-report on function, diagnostic information, patient activity, side
effects and treatment failure for up to 20 years. |
| (9) | The principal
business of Correvio Pharma Corp. is offering patients and healthcare providers innovative
therapeutic options that effectively, safely and conveniently manage acute medical conditions
to improve health and quality of life. |
| (10) | The principal
business of Greenleaf Health is offering U.S. Food and Drug Administration regulatory
strategic consulting to life sciences companies. |
| (11) | The principal
business of the Translational and Regulatory Sciences at the University Virginia School
of Medicine is developing a regulatory science educational track, as well as providing
regulatory and translational knowledge resources to University and external entities
who seek to translate basic science discoveries to the bedside. |
| (12) | Except
for Vanda De Cian, date of appointment is based on appointment as director for predecessor
entity, Cardiome. |
The Company
is not aware that any of the above nominees will be unable or unwilling to serve; however, should the Company become aware of
such an occurrence before the election of directors takes place at the Meeting, if one of the persons named in the enclosed form
of proxy is appointed as proxyholder, it is intended that the discretionary power granted under such proxy will be used to vote
for any substitute nominee or nominees whom the Company in its discretion may select.
To the best
knowledge of management of the Company, no proposed director of the Company:
| (a) | is, as at
the date of this Circular, or has been, within the ten years before, a director or executive
officer of any company (including Correvio), that while that person was acting in that
capacity, |
| (i) | was
the subject of a cease trade or similar order or an order that denied the relevant company
access to any exemption under securities legislation, for a period of more than 30 consecutive
days, |
| (ii) | was
subject to an event that resulted, after the proposed director ceased to be a director
or executive officer, in the company being the subject of a cease trade or similar order
or an order that denied the relevant company access to any exemption under securities
legislation, for a period of more than 30 consecutive days, or |
| (iii) | or
within a year of that person ceasing to act in that capacity, became bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency or was subject to
or instituted any proceedings, arrangement or compromise with creditors or had a receiver,
receiver manager or trustee appointed to hold its assets; or |
| (b) | has,
within the 10 years before the date of this Circular, become bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency, or become subject to or instituted
any proceedings, arrangement or compromise with creditors, or had a receiver, receiver
manager or trustee appointed to hold the assets of the director, |
except in
respect of the following companies:
| · | Angiotech
and each of the following subsidiaries: 0741693 B.C. Ltd. and Angiotech International
Holdings Corp. (the “Angiotech Canadian Subsidiaries”) and Angiotech
Pharmaceuticals (US), Inc., American Medical Instruments Holdings Inc., NeuColl Inc.,
Angiotech BioCoatings Corp., Afmedica Inc., Quill Medical Inc., Angiotech America Inc.,
Angiotech Florida Holdings Inc., B.G. Sulzle Inc., Surgical Specialties Company, Angiotech
Delaware Inc., Medical Device Technologies Inc., Manan Medical Products Inc. and Surgical
Specialties Puerto Rico Inc. (the “Angiotech U.S. Subsidiaries”).
On January 28, 2011, Angiotech, the Angiotech Canadian Subsidiaries and the Angiotech
U.S. Subsidiaries voluntarily filed a petition under the Companies’ Creditors
Arrangement Act in the Supreme Court of British Columbia to implement a proposed
recapitalization transaction. On January 31, 2011, the Angiotech U.S. Subsidiaries filed
a voluntary petition under Chapter 15 of Title 11 of the United States Code to obtain
recognition and enforcement in the United States for certain relief granted in the Companies’
Creditors Arrangement Act proceedings, and to obtain assistance of the United States
courts to the Supreme Court of British Columbia in effectuating the proposed recapitalization.
Dr. William Hunter was the president and chief executive officer and a director of Angiotech
until October 2011, and Mr. Willms was a director of Angiotech until May 2011. |
| · | On
July 25, 2016, Epirus Biopharmaceuticals, Inc. (“Epirus”) filed a
voluntary petition for relief under the provisions of Chapter 7 of Title 11 of the United
States Code in the United States Bankruptcy Court for the District of Massachusetts.
As a result of this filing, a Chapter 7 trustee was appointed to assume control of Epirus.
Dr. William Hunter and Dr. Mark Corrigan were directors of Epirus until July 25, 2016. |
To the best
knowledge of management of the Company, none of the proposed directors of the Company have been subject to:
| (a) | any penalties
or sanctions imposed by a court relating to securities legislation or by a securities
regulatory authority or has entered into a settlement agreement with a securities regulatory
authority; or |
| (b) | any other
penalties or sanctions imposed by a court or regulatory body that would likely be considered
important to a reasonable securityholder in deciding whether to vote for a proposed director. |
Appointment
and Remuneration of Auditors
KPMG LLP,
Chartered Professional Accountants (“KPMG”) will be nominated at the Meeting for appointment as auditor of
the Company until the next annual general meeting of Shareholders or until a successor is appointed, at remuneration to be fixed
by the directors. KPMG is located at 4th Floor, 777 Dunsmuir Street, Vancouver, British Columbia.
There have
been no reportable events between the Company and KPMG for the purposes of National Instrument 51 102 – Continuous Disclosure
Obligations.
To be approved,
the resolution must be passed by a majority of the votes cast by the Shareholders at the Meeting. Unless otherwise instructed,
the named proxyholders will vote FOR the resolution approving the appointment of the auditor and authorizing the directors
to fix the auditor’s remuneration.
Principal
Accountant Fees and Services
The following
table sets out the fees billed to the Company by KPMG for professional services for the financial years ended December 31, 2019
and December 31, 2018. All dollar amounts are reflected in Canadian dollars. During 2019 and 2018, KPMG was the Company’s
only external auditor:
| |
December
31, 2019 |
December
31, 2018 |
| Audit
Fees(1) |
C$638,533 |
C$543,725 |
| Audit-Related
Fees(2) |
C$36,934 |
C$40,200 |
| Tax
Fees(3) |
C$30,228 |
C$153,759 |
| All
Other Fees(4) |
Nil |
C$80,250 |
Notes:
| (1) | Audit
fees consist of fees for the audit and interim reviews of the Company’s consolidated
financial statements or services that are normally provided in connection with statutory
and regulatory filings or engagements. |
| (2) | Audit-related
fees are fees for assurance and related services reasonably related to the performance
of the audit or review of our consolidated financial statements that are not reported
under “Audit Fees”. |
| (3) | Tax
fees include tax compliance, tax planning, tax advice and various taxation matters. |
| (4) | Other
fees relate to the sale of the Canadian business portfolio pursuant to the Cardiome Arrangement. |
Pre-Approval
Policies
In accordance
with the Sarbanes Oxley Act of 2002, all audit and non-audit services performed by KPMG for the year ended December 31, 2019 were
pre-approved by the Audit Committee. It is the Company’s policy that all audit and non-audit services performed by the Company’s
auditor will continue to be pre-approved by the Audit Committee.
STATEMENT
OF EXECUTIVE COMPENSATION
Further
information on the executive compensation program of the Company can be found in Appendix “F” to this Circular.
INDEBTEDNESS
OF DIRECTORS AND EXECUTIVE OFFICERS
No current
or former director or executive officer of the Company, no proposed nominee for election as a director of the Company, and no
associate of any such director, executive officer or proposed nominee, at any time during the most recently completed financial
year has been indebted to the Company or any of its subsidiaries or had indebtedness to another entity that is, or has been, the
subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company
or any of its subsidiaries.
INTEREST
OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
Other than
as set out herein, none of the directors or officers of the Company, no director or officer of a company that is itself an informed
person or a subsidiary of the Company, no person or company who beneficially owns, directly or indirectly, voting securities of
the Company or who exercised control or direction, directly or indirectly, over voting securities of the Company or a combination
of both carrying more than 10% of the voting rights attached to any class of outstanding voting securities of the Company entitled
to vote in connection with any matters being proposed for consideration at the Meeting, no proposed director or nominee for election
as director of the Company and no associate or affiliate of any of the foregoing has or had any material interest, direct or indirect,
in any transaction or proposed transaction since the beginning of the Company’s last financial year that has materially
affected or would or could materially affect the Company or any of its subsidiaries.
The executive
officers and directors of Correvio have interests in the Arrangement that may be different from, or in addition to, the interests
of Securityholders. The Board was aware of these interests and considered them, among other matters, when recommending approval
of the Arrangement Resolution. For further details of the interest of executive officers and directors of Correvio in the Arrangement,
see “The Arrangement – Share Ownership”, “Appendix F – Statement of Executive Compensation
– Equity-Based Incentives” and “Appendix F – Statement of Executive Compensation – Employment
Contracts with Named Executive Officers”.
CORPORATE
GOVERNANCE PRACTICES
Effective
June 30, 2005, National Instrument 58-101 – Disclosure of Corporate Governance Practice (“NI 58 101”)
and National Policy 58 201 – Corporate Governance Guidelines (“NP 58-201”) were adopted in each
of the provinces and territories of Canada. NI 58-101 requires issuers to disclose the corporate governance practices that they
have adopted. NP 58-201 provides guidance on governance practices. The Company is also subject to National Instrument 52 110 –
Audit Committees (“NI 52-110”), which has been adopted in each of the provinces and territories of Canada
and which prescribes certain requirements in relation to audit committees. In addition, the disclosure required on the Audit Committee
of the Company pursuant to NI 52-110 can be located in the Company’s Annual Information Form dated March 27, 2020 at www.sedar.com.
Further
information on the corporate governance practices of the Company can be found in Appendix “G” to this Circular.
THE
ARRANGEMENT
At the Meeting,
Securityholders will be asked to consider and, if thought advisable, to pass, the Arrangement Resolution. The Arrangement, the
Plan of Arrangement and the terms of the Arrangement Agreement are summarized below. This summary does not purport to be complete
and is qualified in its entirety by reference to the Arrangement Agreement, which has been filed by Correvio under its profile
on SEDAR at www.sedar.com, and the Plan of Arrangement, which is attached to this Circular as Appendix “B”.
In order
to become effective, the Arrangement must be approved by a special resolution passed by (i) at least 66⅔% of the votes cast
on the Arrangement Resolution by Shareholders present online or represented by proxy at the Meeting and (ii) at least 66⅔%
of the votes cast on the Arrangement Resolution by the Securityholders (on an As-Converted Basis, as applicable) present online
or represented by proxy at the Meeting, voting together as a single class.
Completion
of the Arrangement is also subject to the receipt of certain required regulatory approvals, including the approval of the Court,
and other customary closing conditions. A copy of the Arrangement Resolution is set out in Appendix “A” of this Circular.
Management
has agreed to vote their Shares FOR the Arrangement Resolution in accordance with the terms of the Correvio Voting
Agreement. If you do not specify how you want your Shares voted, the persons named as proxyholders will cast the votes represented
by your proxy at the Meeting FOR the Arrangement Resolution.
If the Arrangement
is approved at the Meeting and the Final Order approving the Arrangement is issued by the Court and the applicable conditions
to the completion of the Arrangement are satisfied or waived, the Arrangement will take effect commencing at the Effective Time
(which will be at 12:01 a.m. (Pacific time) on the Effective Date (which is expected to be on or about May 27, 2020).
Parties
to the Arrangement
Correvio
Correvio
is a specialty pharmaceutical company focused on providing innovative, high-quality brands that meet the needs of acute care physicians
and patients.
Correvio
was incorporated on March 7, 2018, under the CBCA, in connection with the Cardiome Arrangement. On March 19, 2018, Correvio entered
into a definitive arrangement agreement with Cipher and Cardiome. Under the terms of the agreement, Cipher acquired Cardiome’s
Canadian business portfolio in exchange for cash consideration of C$25.5 million. As a result of the Cardiome Arrangement, Correvio
acquired, and currently holds, all of Cardiome’s pre-transaction assets and assumed liabilities, but excluding the Canadian
business portfolio. Pursuant to the Cardiome Arrangement, Cardiome shareholders received common shares, on a one-for-one ratio,
of Correvio. Correvio obtained a substitution listing on the Nasdaq and TSX and has succeeded to Cardiome’s reporting obligations.
Correvio has a head office located at 6th Floor, 1441 Creekside Drive, Vancouver, British Columbia, Canada, V6J 4S7, and a registered
office at 2600 – 595 Burrard Street, Vancouver, British Columbia, Canada, V7X 1L3.
Correvio
is listed on each of the TSX and the Nasdaq with the trading symbol “CORV”.
ADVANZ
and the Purchaser
ADVANZ operates
an international speciality pharmaceutical business with a diversified portfolio of more than 200 patented and off-patent products,
and sales in more than 90 countries, and is focused on becoming the leading platform for niche-established medicines, with advanced
commercial capabilities throughout Western Europe.
ADVANZ was
incorporated pursuant to the provisions of the Business Corporations Act (Ontario) on January 20, 2010, under the
name “Mercari Acquisition Corp.” It was subsequently renamed “Concordia Healthcare Corp.” then “Concordia
International Corp.” and then on November 29, 2018, ADVANZ changed its name to “ADVANZ PHARMA Corp.” as part
of a global rebrand in support of its strategy and vision. ADVANZ was continued under the CBCA on June 22, 2018. On September
6, 2018, ADVANZ amended its articles to, among other things, provide for a class of Class A special shares, a class of Class B
special shares and a class of Class C special shares, and redesignate its common shares as limited voting shares. On January 1,
2020, ADVANZ completed the continuance of the company from Canada to Jersey, Channel Islands and changed its name to “ADVANZ
PHARMA Corp. Limited”. On March 27, 2020, ADVANZ completed a voluntary delisting of its limited voting shares from the TSX.
ADVANZ is
a Jersey-registered company and its corporate head office is located in London, England. ADVANZ, through its subsidiaries, operates
out of various international office locations with key offices located in: London, England; Dublin, Ireland; Sydney, Australia;
Helsingborg, Sweden; Chicago, USA and Mumbai, India.
Principal
Steps to the Arrangement
Under the
Plan of Arrangement, commencing at the Effective Time, the following principal steps will occur and will be deemed to occur on
the Effective Date, without any further act or formality by any of the Parties or any other Person, in the order and timing set
out in the Plan of Arrangement:
Dissent
Shares
Each Share
held by a Dissenting Shareholder will be deemed to be transferred by the holder thereof, without any further act or formality
on its part, free and clear of all Liens, to Correvio and Correvio will be obligated to pay the amount determined and payable
in accordance with the Plan of Arrangement. The name of the holder will be removed from the central securities register of Correvio
and Correvio will be recorded as the registered holder of the Shares so transferred and be deemed to be the legal owner of such
Shares.
Shares
Each outstanding
Share (other than the Shares held by a Dissenting Shareholder who has validly exercised and not withdrawn such holder’s
Dissent Rights) will, without further act or formality by or on behalf of the holder of Shares, be irrevocably assigned and transferred
by the Shareholder to the Purchaser, free and clear of all Liens, in exchange for a cash payment equal to the Share Consideration
less any withholdings. The Shareholder will cease to be the holder of the Shares and to have any rights as a shareholder other
than the right to receive payment in accordance with the Plan of Arrangement and the Purchaser will be deemed to be the transferee
and the legal and beneficial holder of each such Share.
Options
In-the-money
Options
Each in-the-money
Option outstanding immediately prior to the Effective Time, whether or not vested, without any further action on behalf of any
holder of such in-the-money Option and without any payment except as provided for in the Plan of Arrangement, will be acquired
for cancellation by Correvio in consideration for a cash payment from Correvio equal to the product obtained by multiplying the
amount by which the Share Consideration exceeds the exercise price per Share of such in-the-money Option by the number of Shares
underlying such in-the-money Option, subject to applicable withholdings. All in-the-money Options issued and outstanding immediately
prior to the Effective Time will thereafter immediately be cancelled and the holder thereof will thereafter only have the right
to receive the consideration to which such holder is entitled.
Out-of-the-money
Options
Each out-of-the-money
Option that is outstanding immediately prior to the Effective Time, whether or not vested, will, without any further action on
behalf of the holder of such out-of-the-money Option, be cancelled without payment to any holder thereof and all option agreements
related thereto will be terminated.
The Option
Plan and any stock option agreement pursuant to which Options were granted will be terminated.
RSUs
Each RSU
outstanding immediately prior to the Effective Time, whether vested or unvested, will be deemed to be unconditionally vested,
and such RSU will, without any further action by or on behalf of the holder of RSUs, be deemed to be assigned and transferred
by such holder to Correvio in exchange for a cash payment from Correvio of US$0.42, subject to applicable withholdings, and each
RSU will be immediately cancelled.
PSUs
Each PSU
outstanding immediately prior to the Effective Time, whether vested or unvested, will be deemed to be unconditionally vested,
and such PSU will, without any further action by or on behalf of the holder of PSUs, be deemed to be assigned and transferred
by such holder to Correvio in exchange for a cash payment from Correvio of US$0.42, subject to applicable withholdings, and each
PSU will be immediately cancelled.
Background
to the Arrangement
The execution
of the Arrangement Agreement on March 15, 2020 resulted from extensive arm’s length negotiations among representatives of
the Company and Board, on the one hand, and the Purchaser and ADVANZ on the other, and their respective financial and legal advisors.
The following is a summary of the material events, meetings, negotiations and discussions that preceded the execution and public
announcement of the Arrangement Agreement.
The Board
regularly evaluates the strategic direction of the Company, and in recent years the Board has considered the future direction
and strategic alternatives available to the Company in light of relevant factors including, without limitation, its size, growth,
access to capital, ability to expand its business, key supplier and customer relationships, and ability to compete in the longer
term against increasingly larger and better capitalized competitors.
During the
first half of 2018, the Company was exploring the potential regulatory path forward for Brinavess in the U.S., and had engaged
in various discussions with the U.S. Food and Drug Administration (“FDA”) in connection with this effort.
On June
11, 2018, the Company announced that the FDA had informed the Company that it would be permissible for it to resubmit the New
Drug Application (“NDA”) for Brinavess and agreed that the Company could schedule a pre-NDA meeting with the
FDA, which at such time the Company expected to take place in the fourth quarter of 2018.
In October
2018, the Company met with the FDA to discuss the content and format of the NDA resubmission. On October 23, 2018, the Company
announced that based on productive pre-NDA discussions with the FDA, the Company planned to resubmit the Brinavess NDA to the
FDA during the second quarter of 2019.
In the event
the Company were to receive FDA approval of Brinavess, the commercialization of Brinavess in the U.S. was anticipated to require
a substantial sales force in the U.S. that the Company did not have. As such, the Company had to consider its options for how
to proceed with its business, including how to develop and fund, as needed, any such activities.
On November
8, 2018, the Company engaged Piper Sandler & Co. to assist it in evaluating potential value maximizing transactions. In December
2018, Piper Sandler & Co. initiated broad outreach to assess interest in several strategic alternatives for the Company including
a sale of the entire Company, partnership for the commercialization of Brinavess in the U.S. or a sale of its European business
among other potential strategic transactions. Piper Sandler & Co. reached out to 26 parties to solicit this initial feedback
on the potential strategic alternatives. As part of that initial outreach effort, management of the Company met with members of
ADVANZ’s management team on January 9, 2019.
On April
18, 2019, the Board met and, after receiving an update from management (which included an overview of the results of Piper Sandler
& Co.’s initial outreach efforts) and considering the interests of the Company’s stakeholders, including its shareholders,
decided to explore the potential for a sale of the Company’s European business to maximize the value of the Company through
a non-dilutive fund-raising process. That sale would focus the Company on the potential commercialization of Brinavess in the
U.S. Since that potential commercialization was anticipated to require a substantial U.S.-based sales force that the Company did
not have, the Company would then have additional resources to pursue strategic alternatives around the Brinavess opportunity if
it received FDA approval. The Board advised management that they should attempt to complete any such transaction, if available
on satisfactory terms, before the date for any FDA determination for Brinavess. The Board had determined that it would be preferable
to have such transaction consummated, and such additional resources in place, prior to such FDA determination. The Board further
determined that, in any event, it was prudent to avoid intertwining the transaction and FDA action date timelines, given the complexity
and risks associated with overlapping a pending strategic transaction with a pending regulatory determination. The FDA determination
date for Brinavess was not known at that time, but was anticipated to occur in the fourth quarter of 2019.
Based on
the feedback provided by Piper Sandler & Co., nine parties had expressed an interest in a transaction of that nature, although
the scope of transactions under consideration varied widely between counterparties that were contacted in the outreach process.
The Board also considered other alternatives that might have been available to it, including pursuing a sale of the entire Company
or a merger with a company of similar size but no actionable proposals had been received. The Board therefore instructed management
and Piper Sandler & Co. to reach out to the nine parties that had expressed an interest in a transaction during the initial
outreach. As part of that process, on April 25, 2019, Piper Sandler & Co. and management of the Company approached ADVANZ
to explore whether a sale of the European business could be completed on favourable terms with them.
Piper Sandler
& Co. formally commenced marketing with respect to a sale of the Company’s European business on April 29, 2019. On May
16, 2019, the Company instructed Piper Sandler & Co. to send formal process letters to the five parties out of the nine that
remained interested in discussing a potential transaction, including ADVANZ. Diligence sessions were offered to the five interested
parties after they executed confidentiality agreements. Three of those parties chose to conduct due diligence and of those three,
two requested meetings with management. At ADVANZ’s request, Management of the Company and Piper Sandler & Co. met with
representatives of ADVANZ on May 28, 2019 to discuss financial modelling.
June 11,
2019 was the deadline for non-binding letters of intent and only ADVANZ submitted a non-binding letter of intent on time. The
other four parties to the process did not formalize an offer with a letter of intent and further discussions with such parties
did not lead to other offers. Management of the Company met with Piper Sandler & Co. on June 14, 2019 to consider the result
of the process and management presented the results to the Board on June 18, 2019. After consideration, the Board determined that
the non-binding proposal that was received did not represent sufficient value for the European business as it was less than the
Board’s internal estimate of value, which was determined based on advice of management and Piper Sandler & Co. as to
the market value of the assets. However, given ADVANZ’s interest, the Board authorized the Company to continue negotiations
with ADVANZ in the hope of receiving an improved non-binding proposal.
On June
24, 2019, the Company resubmitted the Brinavess NDA to the FDA, and on July 25, 2019, the FDA accepted the resubmitted Brinavess
NDA for review and set the date for a determination to be on or prior to December 24, 2019 (the “PDUFA Date”).
The Company
and ADVANZ continued discussions in June and July of 2019. On July 16, 2019, the Board created a transaction committee composed
of Mark Corrigan, Jim O’Shea and William Hunter and gave them a mandate to focus on negotiating the best terms for the sale
of the European business.
On July
19, 2019, ADVANZ provided the Company with a revised non-binding letter of intent that proposed a transaction with a proposed
purchase price for the European business of US$110 million. Management presented the revised non-binding letter of intent to the
Board on July 22, 2019. The Board considered the revised non-binding letter of intent. The transaction that was proposed would
require the consent of the Company’s lenders and repayment of all amounts owing to them (approximately US$48 million). After
taking into account the effect of that required payment, the Board determined that the non-binding letter of intent proposed a
transaction with a value that was adequate, however it remained subject to diligence and negotiation of definitive agreements.
Discussions continued between ADVANZ and the Company regarding a potential transaction. In August and September, ADVANZ conducted
extensive due diligence on the Company’s European business. Outside counsel to the Company were instructed to commence drafting
a share purchase agreement for that transaction on August 28, 2019. The Company engaged Blake, Cassels & Graydon LLP (“Blakes”)
as its lead legal counsel for the transaction and to advise on Canadian legal matters, and Skadden Arps Slate Meagher & Flom
LLP (“Skadden”) to advise on certain U.S. legal matters.
On September
19, 2019, the Board met again to consider the transaction and the non-binding proposal from ADVANZ dated July 19, 2019 and to
receive an update on negotiations of the definitive agreements and the progress of ADVANZ’s diligence investigations. The
Board remained of the view that the value represented by the non-binding letter of intent remained adequate and that a negotiated
transaction was possible provided that the transaction could be expeditiously completed in advance of the PDUFA Date. The Board
instructed the transaction committee and the Company to continue to engage with ADVANZ. After that meeting but on the same day,
ADVANZ provided the Company with a list of legal and business issues they wished to address. Management, Piper Sandler & Co.
and Blakes continued negotiations with ADVANZ and its representatives. On September 24, 2019, ADVANZ presented a revised list
of outstanding material issues they saw as remaining to be negotiated or addressed before a binding agreement could be entered
into. The Company and its representatives offered discussions with ADVANZ and its team to attempt to resolve those issues.
On October
7, 2019, Dr. Corrigan spoke with the chief executive officer of ADVANZ who indicated that a revised non-binding proposal could
be forthcoming and that ADVANZ was pursuing other corporate initiatives, which would take priority over the completion of any
transaction with the Company.
On October
10, 2019, ADVANZ made a revised non-binding proposal that lowered the proposed purchase price for the Company’s European
business from US$110 million, as set out in the July 19, 2019, non-binding letter of intent, down to US$85 million in cash and
US$15 million in a contingent value right. In addition to being non-binding and for lower value than had previously been discussed,
it remained subject to due diligence, required all working capital and accounts receivables in Europe, which averaged US$12 million,
to be sold with the business, proposed a 10% break fee, required the Company to pay for representation and warranty insurance
coverage for the buyer, and the contingent value right was of uncertain value due to it being tired to Trevyent satisfying undefined
targets.
On October
11, 2019, management of the Company met with two of the three transaction committee members to discuss the revised offer and the
adequacy of the consideration that was proposed in light of the Company’s financing needs taking into account, among other
considerations, the requirement that the CRG Loan be repaid from the cash portion of the consideration and the requirement that
substantially all of the Company’s working capital be transferred with the European business. The transaction committee
members also considered other relevant factors related to the proposed transaction including, among other things, the proximity
of the then anticipated transaction timeline with the PDUFA Date, which made it unlikely that such transaction could be consummated
prior to such date. The transaction committee members agreed on how Dr. Corrigan should respond, and Dr. Corrigan confirmed by
e-mail and telephone that the third committee member agreed with that response. Later on October 11, 2019, Dr. Corrigan, acting
on the transaction committee’s instructions, communicated to ADVANZ that the non-binding proposal was rejected by the transaction
committee because the delay had resulted in increased deal uncertainty and the lowered consideration was inadequate as it no longer
met the Board’s internal estimate of adequate value for the European business. Dr. Corrigan expressed in that discussion
that the Company remained open to continuing discussion if ADVANZ would reconsider the valuation it had proposed and with respect
to a transaction that would be entered into after the target action date for Brinavess. No revised offer was received from ADVANZ.
The Company
announced on November 4, 2019, that the FDA’s Cardiovascular and Renal Drugs Advisory Committee (“CRDAC”)
was scheduled to review the data supporting Correvio’s NDA for Brinavess on December 10, 2019.
As the Company
announced on December 10, 2019, CRDAC jointly voted that day that the benefit-risk profile for Brinavess was not adequate to support
approval by a vote of two in favour and eleven opposed and while the FDA is not required to follow CRDAC’s vote, the agency
considers the committee’s recommendations informative when making its decision.
On the night
of December 10, 2019, management and the Board met to discuss the CRDAC decision and the financing needs of the Company, given
the anticipated impact of the decision on the Company’s ability to refinance the CRG Loan and fund its continuing operations.
As part of such discussions, the Board determined that it would be in the best interest of the Company and its shareholders to
explore strategic alternatives that may be available to the Company. On December 11, 2019, the Company announced that it would
expand the corporate developments efforts that the Company had undertaken to that point and it would be formally evaluating its
strategic alternatives and had reengaged Piper Sandler & Co. in connection with that process, which included the possible
sale of the Company. In connection with this second engagement, Piper Sandler & Co. provided advice regarding, and, after
due consideration, the Board approved, a process (the “Sale Process”) targeted at canvassing selected potential
buyers about their interest in pursuing an acquisition transaction involving the whole Company (including the parties that had
previously participated in the process to sell the European business, including ADVANZ).
On December
24, 2019, the Company announced that the FDA released its complete response letter for Brinavess which stated, among other things,
that the FDA determined it could not approve the Brinavess NDA in its present form (the “FDA Decision”).
At the direction
of the Board, Piper Sandler & Co. commenced their initial outreach to the most likely prospective bidders on January 7, 2020
and sent process letters to 80 potential bidders in connection with the Sale Process, of which 32 executed non-disclosure agreements
in order to pursue further discussions with the Company. Such parties were given access to the virtual data room established by
the Company.
From January
2020 to March 2020, management held weekly calls with representatives of Piper Sandler & Co. to receive updates on the Sale
Process and to provide direction to Piper Sandler & Co. On January 8, 2020, Piper Sandler & Co. began to distribute process
letters to 25 parties offering each party a call or meeting with management and requesting non-binding expressions of interest
by January 30, 2020. Piper Sandler & Co. arranged for management of the Company to meet with 13 prospective counterparties
on January 13, 14 and 15, 2020 during a healthcare conference held in San Francisco, including ADVANZ, with which Mr. Renz and
Mr. Dean met on January 15, 2020. On January 17, 2020, management held a conference call with a 14th prospective bidder, and with
a 15th on January 21, 2020.
On January
31, 2020, three bidders (including ADVANZ) submitted initial non-binding expressions of interest and two more were received on
February 1 and February 11, 2020, respectively. The Board reviewed all five non-binding expressions and, following discussions
regarding the non-binding expressions of interest received with Piper Sandler & Co., management, Blakes and Skadden, determined
that four of the proposals offered sufficient consideration to merit continued dialogue. The Board subsequently directed Piper
Sandler & Co. to send a final process letter on February 16, 2020 to four of the interested counterparties, including ADVANZ,
with final offers requested for March 5, 2020. The fifth interested party that submitted a non-binding expression of interest
was deemed not to be competitive with the other bidders because it offered consideration that was substantially lower than any
other bidder and thus was excluded from the next stage of the process. The fourth prospective bidder to which Piper Sandler &
Co. sent a final process letter determined not to proceed in the process.
Management,
Piper Sandler and Blakes held commercial, financial, legal, tax and operational diligence calls with three of the counterparties,
including ADVANZ, and their representatives between February 18 and March 3, 2020. The bidders were also provided with a draft
of the proposed form of Arrangement Agreement on February 18, 2020 and were asked to submit a mark-up of the proposed form of
Arrangement Agreement with such final offers. Each of those parties was also offered an opportunity to conduct additional due
diligence.
Three prospective
bidders submitted revised final offers between March 6 and March 10, 2020, which included updated indicative pricing (subject
to various qualifications and assumptions) and certain other terms and conditions. ADVANZ also submitted a mark-up of the proposed
form of Arrangement Agreement. The ADVANZ offer, which contemplated a total purchase price of approximately US$76 million (inclusive
of the repayment of the CRG Loan), provided more consideration to shareholders than any of the offers received from the other
bidders.
On March
10, 2020, the Board, following discussions with Piper Sandler & Co., Blakes and Skadden, met to carefully review and consider
the merits of the three non-binding expressions of interest. The Board’s deliberations took into account a number of considerations,
including, among others, indicative pricing, the specific terms and conditions to each offer, the change in the Company’s
circumstances following the FDA Decision, including the impact of such decision on the Company, its prospects and its value, and
the likelihood that, in the absence of a transaction, the Company would be offside of its obligations under the CRG Loan with
respect to its liquidity covenant due to the risk that funds from operations of the Company would be insufficient to meet those
liquidity requirements, in addition to, among other things, the challenges that the Company would face in connection with pursuing
any equity offerings at such time and in the coming months. After due deliberations, the Board determined that ADVANZ’s
offer represented the most favourable alternative available to the Company and provided the highest consideration per share to
shareholders. The Board thereafter directed Piper Sandler & Co. and outside counsel to continue negotiating the terms of the
potential transaction with ADVANZ.
Negotiations
between the Parties and their respective advisors to finalize the Arrangement Agreement, the Plan of Arrangement and other ancillary
documents were held during the period from March 11, 2020 to March 15, 2020. During this period, the Board met regularly with
representatives of management, Piper Sandler & Co., Blakes and Skadden to monitor the progress of discussions and due diligence
and to review and consider key transactional issues and updated drafts of the Arrangement Agreement and other key documents, as
needed.
On March
15, 2020, the Board met formally to (i) receive a complete update on the status of documents and issues concerning the Arrangement
from Blakes, (ii) receive a presentation from Piper Sandler & Co. on the methodologies and analysis underlying its Fairness
Opinion, and (iii) receive a presentation from management on other alternatives available to the Company aside from the Arrangement.
The Board members were joined by representatives of Piper Sandler & Co., Blakes, Skadden and, for a portion of the meeting,
members of management. During the course of the Board meeting, representatives of Blakes provided an overview of the specific
terms and conditions of the Arrangement Agreement and other ancillary documents and answered questions from the Board. Piper Sandler
& Co. presented an analysis of the Arrangement and delivered the verbal fairness opinion (which was subsequently confirmed
by the delivery of the written Fairness Opinion), to the effect that, subject to the assumptions, limitations and qualifications
contained therein, the Share Consideration to be received by the Shareholders pursuant to the Arrangement is fair, from a financial
point of view, to the Shareholders.
In particular,
the Board considered the alternative of continuing to pursue the Company’s long-term business plan as a public company and
not undertaking a strategic transaction at this time, taking into account the Company’s historical performance, current
financial position and prospects, the Company’s obligations under the CRG Loan, access to capital, growth plans and ability
to expand its business, key supplier and customer relationships and the ability of the Company to maintain and build on such relationships
in the future. After duly considering the financial aspects and other considerations relating to the Arrangement (including those
discussed immediately above), the potential impact on the Securityholders and other stakeholders, legal and financial advice,
and other matters considered relevant, including without limitation, matters relating to timing of the transaction, the likelihood
of completing a transaction on terms acceptable to the Board, and the challenges of continuing to operate as a standalone company
including meeting the liquidity covenant under the CRG Loan, the Board, after receiving advice from its legal counsel with respect
to its fiduciary duties and other matters, the impact of the Arrangement on the Securityholders and other stakeholders, financial
advice from Piper Sandler & Co. and other matters considered relevant, consideration and review of the Arrangement Agreement
and other ancillary documents, and after full consideration of the Fairness Opinion, as well as other relevant factors, unanimously
(i) determined that the Arrangement is in the best interests of the Company; (ii) determined that the consideration payable to
the Securityholders under the Arrangement is fair, from a financial point of view, to the Securityholders; (iii) resolved to approve
the Arrangement, the Arrangement Agreement and the Company’s performance of its obligations thereunder; and (iv) resolved
to recommend that Securityholders vote FOR the Arrangement Resolution. The Board also authorized management to finalize the form
of and execute the Arrangement Agreement and applicable ancillary documents on behalf of the Company.
After the
conclusion of these presentations and discussions, the Board met in camera without management present and confirmed its decision.
The Board then adjourned its meeting. Following the meeting of the Board, the Arrangement Agreement and other ancillary documents
were finalized by the Parties. The Company also secured an executed Correvio Voting Support Agreement from all Correvio Supporting
Shareholders.
The Arrangement
Agreement and other transaction documents were executed during the evening of March 15, 2020, and a press release announcing the
transaction was issued on the morning of March 16, 2020.
On April
7, 2020, the Board approved this Circular and certain other procedural matters related thereto and to the Arrangement.
Recommendation
of the Board
The Board
has unanimously determined, after consultation with its financial and legal advisors and after consideration of, among other things,
the Fairness Opinion, the text of which is attached as Appendix “C” to this Circular, and its own deliberations, that
the Arrangement is fair and reasonable to the Securityholders and the Arrangement is in the best interests of Correvio, and the
Board recommends that the Securityholders vote in favour of the Arrangement Resolution (the “Board Recommendation”).
Accordingly, the Board unanimously recommends that Securityholders vote FOR the Arrangement Resolution.
All of the
directors and senior officers of Correvio have agreed to vote all of their Securities in favour of the Arrangement Resolution,
pursuant and subject to the terms of the Correvio Voting Agreement.
Reasons
for the Arrangement
In evaluating
the Arrangement and the transactions contemplated in the Arrangement Agreement, the Board has reviewed and considered information
it considered relevant to its decision and considered a number of factors relating to the Arrangement with the benefit of advice
from Correvio’s senior management and its financial and legal advisors. The following is a summary of the principal reasons
for the recommendation of the Board that Securityholders vote FOR the Arrangement Resolution (which reasons are
not necessarily presented in order of relative importance):
| (a) | All
Cash Consideration. The fact that the Arrangement Consideration under the Arrangement
is cash will provide Securityholders with certainty of value and liquidity while eliminating
the uncertainties of long-term business and execution risk to Securityholders. |
| · | Advice
from Piper Sandler & Co. The receipt by the Board of the Fairness Opinion on
March 15, 2020 provided that, as of the date thereof and subject to the assumptions,
limitations and qualifications contained therein, the Share Consideration to be received
by Shareholders pursuant to the Arrangement is fair from a financial point of view, to
Shareholders. The Fairness Opinion is attached as Appendix “C” to this Circular
and should be read in its entirety. After consultation with Piper Sandler & Co.,
including reviewing Piper Sandler & Co.’s methodology for determining that
the Share Consideration was fair to Shareholders, including performing (i) selected public
companies analysis; (ii) precedent transactions analysis and (iii) discounted cash flow
analysis, the Board determined the Share Consideration was fair, from a financial point
of view, to Shareholders. |
| (b) | Premium
to Trading Price. The relationship of the Arrangement Consideration (US$0.42 per
Share, in the case of Shares, PSUs and RSUs) to the unaffected trading price of Correvio’s
Shares, which constitutes a premium of approximately 35% to Correvio’s closing
share price on the NASDAQ Capital Market of US$0.31 on the business day prior to the
announcement, and a premium of approximately 44% to Correvio’s unaffected closing
share price on the NASDAQ Capital Market of US$0.29 on February 21, 2020, the business
day prior to initial unsubstantiated rumours related to Xydalba’s off-label efficacy
for treatment of the symptoms of COVID-19. |
| (c) | Current
Company Financial Needs. The Company’s cash on hand is not sufficient to fund
the Company’s current planned operations. To fund those operations the Company
would need to raise additional equity or debt financing or monetize assets. In the current
market for equity and debt financing, and given the current volatility of the capital
markets, there can be no assurance that the Company will be able to raise such additional
financing on reasonable terms or at all. Further, any equity financing would likely be
highly dilutive to Shareholders. The Arrangement avoids the need for the Company to complete
such financing or asset transactions. Without any transaction alternatives, the Company
is facing a going concern risk as highlighted in the most recent annual financial statements. |
| (d) | Required
Securityholder and Court Approvals. The Board considered the following rights and
approvals which protect Securityholders: |
| · | the
Arrangement Resolution must be approved by (i) not less than 66⅔% of the votes
cast on the Arrangement Resolution by the Shareholders and (ii) not less than 66⅔%
of the votes cast on the Arrangement Resolution by all Securityholders (on an As-Converted
Basis, as applicable), voting together as a single class; |
| · | the
Arrangement must be approved by the Court, which will consider, among other things, the
fairness of the Arrangement to Securityholders; and |
| · | Registered
Shareholders have the right to dissent to the Arrangement Resolution. |
| (e) | Securityholder
Value. After engaging Piper Sandler & Co. to canvass the market for other investment
and combination opportunities including completing a fulsome auction during which 80
potential bidders were contacted, management of Correvio and the Board have concluded
that the Arrangement represents the best available opportunity to maximize Securityholder
value given current industry, economic and market conditions and trends. See “The
Arrangement – Background to the Arrangement.” In addition, prolonging
the sale process further could have resulted in the loss of a favorable opportunity to
successfully consummate a transaction on favorable terms. |
| (f) | Economic
Conditions. The current state of the economy and the stage of the pharmaceutical
industry cycle, as well as the uncertainty surrounding these forecasted economic conditions
both in the near term and the long term. In addition, it has become much more challenging
given the ongoing COVID-19 situation globally. |
| (g) | Strategic
Alternatives. The perceived risks and benefits of a variety of possible alternatives
to the Arrangement Agreement, including the alternative of continuing to pursue the Company’s
long-term business plan as a public company and not undertaking a strategic transaction
at this time, taking into account the Company’s historical performance, current
financial position and prospects, access to capital, growth plans and ability to expand
its business, key supplier and customer relationships and the ability of the Company
to maintain and build on such relationships in the future. The Board also considered
the future direction and strategic alternatives available to the Company in light of
its size, growth, key supplier and customer relationships, and ability to compete in
the longer term against increasingly larger and better capitalized competitors. |
| (h) | The
Terms of the Arrangement Agreement. |
| · | Required
Approvals. The Arrangement Resolution must be approved by (i) not less than 66⅔%
of the votes cast on the Arrangement Resolution by the Shareholders and (ii) not less
than 66⅔% of the votes cast on the Arrangement Resolution by all Securityholders
(on an As-Converted Basis, as applicable), voting together as a single class. |
| · | Superior
Proposals. Under the Arrangement Agreement, the Board remains able to respond, in
accordance with its fiduciary duties and pursuant to the terms of the Arrangement Agreement,
to unsolicited proposals that are more favourable to Securityholders than the Arrangement. |
| · | Likelihood
of Closing. The likelihood that the Arrangement will be completed, given the covenants
of the parties to consummate the transaction, conditions and other approvals necessary
to complete the Arrangement. |
| · | Treatment
of Options. Optionholders will receive a cash payment equal to the amount, if any,
by which the Share Consideration exceeds the exercise price per Share payable under such
Options, net of applicable withholding Taxes. In addition, Optionholders have the right
to vote (on an As-Converted Basis) in favour of or against the Arrangement Resolution,
voting together as a single class with all other Securityholders. |
| · | Treatment
of RSUs and PSUs. Holders of RSUs and PSUs will receive a cash payment equal to US$0.42
per RSU or PSU, respectively, net of applicable withholding Taxes. In addition, holders
of RSUs and PSUs have the right to vote (on an As-Converted Basis) in favour of or against
the Arrangement Resolution, voting together as a single class with all other Securityholders. |
| · | No
Financing. The Arrangement is not subject to a financing condition. |
| · | Specific
Performance. The Company’s ability, under certain circumstances pursuant to
the Arrangement Agreement, to seek specific performance to prevent breaches of the Arrangement
Agreement and to enforce specifically the terms of the Arrangement Agreement. |
| · | Arms-Length
Negotiations. The Arrangement Agreement has customary terms and was the product of
extensive arms-length negotiations by Correvio and the Purchaser. |
| · | Loan
Repayment. Under the Arrangement Agreement, the Purchaser has agreed to repay in
full approximately US$48,000,000 owed to CRG by Correvio under the CRG Loan. |
In
view of the wide variety of factors and information considered in connection with their evaluation of the Arrangement, the Board
did not find it practicable to, and therefore did not, quantify or otherwise attempt to assign any relative weight to each specific
factor or item of information considered in reaching their conclusions and recommendations. In addition, individual members of
the Board may have given different weights to different factors or items of information.
Fairness
Opinion
The following
is only a summary of the Fairness Opinion and is qualified in its entirety by the full text of the Fairness Opinion. The Board
urges Shareholders to read the Fairness Opinion carefully in its entirety. The full text of the written Fairness Opinion, dated
March 15, 2020, setting out the assumptions made, procedures followed, matters considered and limitations and qualifications on
the review undertaken by Piper Sandler & Co., is attached as Appendix “C” to this Circular. The preparation of
a fairness opinion, such as the Fairness Opinion, is a complex process and is not necessarily amenable to partial analysis or
summary description.
The
Fairness Opinion states that, in the opinion of Piper Sandler & Co., as of March 15, 2020 and subject to the assumptions and
limitations on which the opinion is based, the Share Consideration to be received by Shareholders pursuant to the Arrangement
is fair, from a financial point of view, to the Shareholders.
In
connection with rendering its Fairness Opinion, Piper Sandler & Co. performed the following financial analyses: (i) selected
public companies analysis; (ii) precedent transactions analysis and (iii) discounted cash flow analysis. For the selected public
companies analysis, Piper Sandler & Co. reviewed selected historical financial data of Correvio and estimated financial data
of Correvio based on projections provided by Correvio’s management and compared them to corresponding financial data, where
applicable, for selected publicly-traded companies considered comparable to Correvio in terms of operating characteristics, geography,
commercial focus, growth prospects and risk profile. For the precedent transactions analysis, Piper Sandler & Co. reviewed
publicly available information for selected completed merger and acquisition transactions involving specialty pharmaceutical and
life sciences companies, that Piper Sandler & Co. deemed relevant to consider in relation to Correvio and the Arrangement.
Piper Sandler & Co. also performed a discounted cash flow analysis to calculate a range of theoretical enterprise values for
Correvio, using the projections provided by the Company’s management, based on the net present value of free cash flows
from June 30, 2020 to December 31, 2023 and a terminal value at December 31, 2023 that Piper Sandler & Co. calculated using
a range of perpetuity growth rates discounted back to June 30, 2020.
Piper
Sandler & Co. (which has given and not withdrawn written consent to the inclusion of the references to its name in this Circular
in the form and context in which they are included, and to the inclusion of a copy of the Fairness Option as Appendix “C”
to this Circular) provided the Fairness Opinion solely for the information and assistance of the Board in connection with its
consideration of the transaction contemplated therein and the Fairness Opinion is not to be used, circulated, quoted or otherwise
referred to for any other purpose, nor is it to be filed with, included in or referred to in whole or in part in any registration
statement, proxy statement, information circular or any other document, except in accordance with Piper Sandler & Co.’s
prior written consent. The Fairness Opinion addresses only the fairness, from a financial point of view, of the Share Consideration
to be received by the Shareholders pursuant to the Arrangement and does not and should not be construed as a valuation of the
Company or its assets or securities. The Fairness Opinion is not a recommendation as to how any Shareholder should vote with respect
to the Arrangement or any other matter. Piper Sandler & Co. has not undertaken to reaffirm or revise the Fairness Opinion
or otherwise comment upon any events occurring after the date of the Fairness Opinion and does not have any obligation to update,
revise or reaffirm the Fairness Opinion.
Piper
Sandler & Co. was engaged by the Company as a financial advisor to provide the Company with various financial advisory services,
including advice and assistance in evaluating the Arrangement. Pursuant to the terms of its engagement with the Company, Piper
Sandler & Co. will receive a transaction fee of $2,500,000 (less the amount of any fairness opinion and retainer fees received)
from the Company for providing its financial services, which fee is contingent upon the consummation of the Arrangement. Piper
Sandler & Co. will also receive a fee in the amount of $500,000 for rendering the Fairness Opinion. The opinion fee is earned
on the delivery of the Fairness Opinion and is not contingent upon the consummation of the Arrangement or the conclusions reached
in the Fairness Opinion. The Company has also agreed to indemnify Piper Sandler & Co. against certain liabilities and reimburse
Piper Sandler & Co. for certain expenses in connection with its services provided under its engagement.
Piper
Sandler & Co. and its affiliates have not been engaged to provide any financial advisory services, have not acted as lead
or co-lead manager on any offering of securities of the Company, ADVANZ or the Purchaser or any of their respective associates
and affiliates, and have not had a material financial interest in any transaction involving the Company, ADVANZ, the Purchaser
or any of their respective associates and affiliates during the 36 months preceding the date on which Piper Sandler & Co.
was first contacted with respect to their engagement by the Company, other than: (i) they acted as lead arranger and bookrunner
on the Company’s U.S.$50 million financing in February 2017 and (ii) they acted as financial advisor with respect to the
amendments to the CRG Loan in May 2018. In addition, in the ordinary course of Piper Sandler & Co.’s business, they
and their affiliates may actively trade securities of the Company, ADVANZ or the Purchaser or any of their respective associates
and affiliates for their own account or the account of their customers and, accordingly, may at any time hold a long or short
position in such securities. Piper Sandler & Co. may also, in the future, provide investment banking and financial advisory
services to the Company, ADVANZ, the Purchaser or any of their respective associates and affiliates, for which they would expect
to receive compensation.
Approval
of Arrangement Resolution
At the Meeting,
the Securityholders will be asked to approve the Arrangement Resolution, the full text of which is set out in Appendix “A”
to this Circular. In order for the Arrangement to become effective, as provided in the Interim Order and by the CBCA, the Arrangement
must be approved by (i) at least 66⅔% of the votes cast by Shareholders at the Meeting present online or represented by
proxy and (ii) at least 66⅔% of the votes cast by Securityholders (on an As-Converted Basis, as applicable) at the Meeting
present online or represented by proxy, voting together as a single class. Should Shareholders or Securityholders fail to approve
the Arrangement Resolution by the requisite majority specified above, the Arrangement will not be completed.
As at the
date of the Arrangement Agreement and as at the date the Arrangement Agreement was publicly announced, each related party of Correvio
and such related party’s associated entities beneficially owned or exercised control or direction over less than one percent
of the Shares, except for William Hunter, a director of Correvio. As at the date of the Arrangement Agreement and as at the date
the Arrangement Agreement was publicly announced, Dr. Hunter beneficially owned or exercised control or direction over 1,020,881
Shares (being approximately 1.54% of the issued and outstanding Shares), 1,250,000 Options and no RSUs or PSUs. Dr. Hunter will
receive (i) a payment per Share identical in amount and form to the entitlement of the general body of Shareholders; and (ii)
a payment per Option, if any, calculated using an identical formula to that used for each other Optionholder. Dr. Hunter is not
receiving any benefit as a direct or indirect consequence of the Arrangement other than as disclosed in the previous sentence.
Therefore, no related party of Correvio will be receiving a collateral benefit (as defined in MI 61-101) in connection with the
Arrangement. Accordingly, the Arrangement is not a “business combination” within the meaning of MI 61-101 and is therefore
not subject to the minority approval and formal valuation requirements of MI 61-101.
The Board
has approved the terms of the Arrangement Agreement and the Plan of Arrangement and recommends that the Securityholders vote FOR
the Arrangement Resolution. See “The Arrangement — Recommendation of the Board” above.
Correvio
Voting Agreement
On March
15, 2020, the Correvio Supporting Shareholders entered into the Correvio Voting Agreement with the Purchaser. The Correvio Voting
Agreement sets forth, among other things, the agreement of such directors and senior officers to vote their Shares and, if applicable,
any Options, RSUs and PSUs they hold, FOR the Arrangement Resolution. As of the Record Date, 1,194,909 of the outstanding
Shares were subject to the Correvio Voting Agreement, representing approximately 1.81% of the outstanding Shares.
The Correvio
Voting Agreement requires from the Correvio Supporting Shareholders: voting support in favour of the Arrangement, prohibits certain
actions that would reasonably result in an alternative Acquisition Proposal except as permitted pursuant to the Arrangement Agreement,
imposes a contractual hold period on Securities held by the Correvio Supporting Shareholders expiring upon completion of the Arrangement,
or upon earlier termination of the Correvio Voting Agreement, prohibits any actions that would reasonably be expected to adversely
affect the success of the Arrangement, requires the delivery of proxies to the Purchaser and prohibits the exercise of any Dissent
Rights in connection with the Arrangement.
Each Correvio
Supporting Shareholder has agreed to vote his or her owned (directly or indirectly) Securities, to the extent he or she is so
entitled, FOR the Arrangement Resolution. Under the terms of the Correvio Voting Agreement, the Purchaser has acknowledged
that each Correvio Supporting Shareholder is bound under the Correvio Voting Agreement only in such person’s capacity as
a Securityholder, and not in his or her capacity as a director or officer.
The Correvio
Voting Agreement automatically terminates in the event the Arrangement Agreement is terminated in accordance with its terms.
Completion
of the Arrangement
The Arrangement
will become effective at 12:01 a.m. (Pacific time) on or about the second Business Day following the date upon which all of the
conditions to completion of the Arrangement as set out in the Arrangement Agreement have been satisfied or waived in accordance
with the Arrangement Agreement. Completion of the Arrangement is expected to occur on or about May 27, 2020; however, it is possible
that completion may be delayed beyond this date, but in no event shall completion of the Arrangement occur later than the Outside
Date, unless automatically extended as provided for in the Arrangement Agreement or extended by mutual agreement between Correvio
and the Purchaser in accordance with the terms of the Arrangement Agreement.
Court
Approval of the Arrangement
An arrangement
under the CBCA requires Court approval.
Interim
Order
On April
6, 2020, Correvio obtained the Interim Order providing for the calling and holding of the Meeting, the Dissent Rights and certain
other procedural matters. The text of the Interim Order is set out in Appendix “D” to this Circular.
Final
Order
Subject
to the terms of the Arrangement Agreement, and if the Arrangement Resolution is approved by the Securityholders at the Meeting
in the manner required by the Interim Order, Correvio intends to make an application to the Court for the Final Order.
The Interim
Order provides for a Final Order approving the Arrangement to be heard on May 21, 2020 at 10:00 a.m. (Pacific time), or as soon
thereafter as counsel may be heard, or at any other date and time as the Court may direct. Effective March 19, 2020 and until
further notice, regular operations of the Supreme Court of British Columbia are suspended. If Court operations in Vancouver have
resumed on May 21, 2020, the application for the Final Order will take place at the Courthouse, 800 Smithe Street, Vancouver,
British Columbia. If such operations remain suspended in Vancouver, Correvio intends to submit a request to the Court for an urgent
hearing and, if the Court determines that the matter will be heard, the Court will set a date and direct the parties to file their
materials electronically in accordance with a modified process developed by the Court.
Any Securityholder
or any other interested party who wishes to appear or be represented and to present evidence or arguments at that hearing of the
application for the Final Order, whether operations are suspended or not, must deliver a response to petition no later than 4:00
p.m. (Pacific time) on May 20, 2020 along with any other documents required, all as set out in the Interim Order and the Notice
of Hearing of Petition, the text of which are set out in Appendix “D” to this Circular, and satisfy any other requirements
of the Court. Such persons should consult with their legal advisors as to the necessary requirements. In the event that the hearing
is adjourned, then, subject to further order of the Court, only those persons having previously delivered a Response to Petition
will be given notice of the adjournment.
The Court
has broad discretion under the CBCA when making orders with respect to the Arrangement. The Court will consider, among other things,
the fairness and reasonableness of the Arrangement, both from a substantive and a procedural point of view. The Court may approve
the Arrangement, either as proposed or as amended, on the terms presented or substantially on those terms. Depending upon the
nature of any required amendments, Correvio or the Purchaser may determine not to proceed with the Arrangement.
For further
information regarding the Court hearing and your rights in connection with the Court hearing, see the form of Notice of Hearing
of Petition attached at Appendix “D” to this Circular. The Notice of Hearing of Petition constitutes notice of the
Court hearing of the application for the Final Order and is your only notice of the Court hearing.
Regulatory
Law Matters and Securities Law Matters
Other than
the approval of the Court, Correvio is not aware of any material approval, consent or other action by any federal, provincial,
state or foreign government or any administrative or regulatory agency that would be required to be obtained in order to complete
the Arrangement. In the event that any such approvals or consents are determined to be required, such approvals or consents will
be sought. Any such additional requirements could delay the Effective Date or prevent the completion of the Arrangement. While
there can be no assurance that any regulatory consents or approvals that are determined to be required will be obtained, Correvio
currently anticipates that any such consents and approvals that are determined to be required will have been obtained or otherwise
resolved by the Effective Date. Subject to receipt of Securityholder Approval at the Meeting and the approval of the Court, and
the satisfaction or waiver of the other customary closing conditions, including the receipt of certain third party consents, the
Effective Date is expected to occur on or about May 27, 2020.
Fees
and Expenses
All costs
and expenses of the Parties relating to the Arrangement and the transactions contemplated in the Arrangement Agreement, including
legal fees, accounting fees, all disbursements of advisors and printing and mailing costs, shall be paid by the Party incurring
such expenses.
Share
Ownership
Directors
The non-executive
directors hold, in the aggregate, 1,078,325 Shares, representing approximately 1.63% of the Shares outstanding on the Record Date.
Such non-executive directors hold, in the aggregate, 1,483,100 Options, and no RSUs or PSUs, representing approximately 33.19%
of the Options as of the Record Date. All of the Shares and Options held by the non-executive directors will be treated in the
same fashion under the Arrangement as the Shares and Options held by every other Shareholder and Optionholder, respectively.
Consistent
with standard practice in similar transactions, in order to ensure that these directors do not lose or forfeit their protection
under liability insurance policies maintained by Correvio, the Arrangement Agreement provides that the Purchaser will, or will
cause Correvio to, maintain tail policies in effect for six years from the Effective Date, subject to certain conditions. See
“The Arrangement – Fees and Expenses – Indemnification and Insurance” below.
Executive
Officers
The current
responsibility for the general management of Correvio is held and discharged by a group of six executive officers. The executive
officers of Correvio are as follows:
| Name |
Position |
Correvio
Shares |
Correvio
Options |
Correvio
RSUs |
Correvio
PSUs |
| Mark
Corrigan |
Chief
Executive Officer |
10,000 |
1,059,000 |
Nil |
Nil |
| Justin
Renz |
President
& Chief Financial Officer |
50,000 |
600,000 |
Nil |
Nil |
| David
McMasters |
General
Counsel |
29,093 |
425,000 |
Nil |
Nil |
| Sheila
Grant |
Chief
Operating Officer |
12,991 |
425,000 |
Nil |
Nil |
| David
Dean |
Chief
Business
Development Officer |
14,500 |
475,000 |
Nil |
Nil |
| Hugues
Sachot |
Chief
Commercial Officer |
Nil |
Nil |
Nil |
48,952 |
| Total
held: |
|
116,584 |
2,984,000 |
Nil |
48,952 |
| Name |
Position |
Correvio
Shares |
Correvio
Options |
Correvio
RSUs |
Correvio
PSUs |
| Percent
of total issued and outstanding as of the Record Date: |
0.18% |
66.78% |
Nil |
77.82% |
The executive
officers hold, in the aggregate, 116,584 Shares, representing approximately 0.18% of the Shares outstanding on the Record Date.
Such executive officers hold, in the aggregate, 2,984,000 Options, no RSUs and 48,952 PSUs, representing approximately 66.78%
of the Options, and 77.82% of the PSUs, respectively, as of the Record Date. All of the Shares, Options, RSUs and PSUs held by
the executive officers of Correvio will be treated in the same fashion under the Arrangement as the Shares, Options and PSUs held
by every other Shareholder, Optionholder and holder of PSUs, respectively.
Indemnification
and Insurance
Pursuant
to the Arrangement Agreement, prior to the Effective Date, Correvio will purchase customary and normal course “run-off”
policies of directors’ and officers’ liability insurance providing protection not materially more favourable in the
aggregate to the protection provided by the policies maintained by Correvio which are in effect as of immediately prior to the
Effective Time and providing protection in respect of Claims arising from facts or events which occurred on or prior to the Effective
Date and the Purchaser will, or will cause Correvio to, maintain such tail policies in effect without any reduction in scope or
coverage for six years from the Effective Date. The Parties agreed that the premium for such tail policies will not exceed 300%
of the annual premiums for the directors’ and officers’ liability insurance policy of Correvio in effect as at the
date of the Arrangement Agreement, provided, that, if applicable, if the premiums of such tail insurance coverage exceed such
amount, Correvio will have the right to obtain a tail policy with the best coverage available for a cost not exceeding such amount.
The Purchaser
agreed that it will cause Correvio to honour all rights to advancement, indemnification or exculpation now existing in favour
of present and former officers and directors of Correvio and its subsidiaries that are expressly disclosed in the Correvio Disclosure
Letter and acknowledges that such rights will survive the completion of the Plan of Arrangement and will continue in full force
and effect for a period of not less than six years from the Effective Date.
Interest
of Certain Persons in the Arrangement
The executive
officers and directors of Correvio have interests in the Arrangement that may be different from, or in addition to, the interests
of Securityholders. The Board was aware of these interests and considered them, among other matters, when recommending approval
of the Arrangement Resolution. For further details of the interest of executive officers and directors of Correvio in the Arrangement,
see “The Arrangement – Share Ownership”, “Appendix F – Statement of Executive Compensation
– Equity-Based Incentives” and “Appendix F – Statement of Executive Compensation – Employment
Contracts with Named Executive Officers”.
The
Arrangement Agreement
The description
of the Arrangement Agreement, both below and elsewhere in this Circular, is a summary only, is not exhaustive and is qualified
in its entirety by reference to the terms of the Arrangement Agreement, which is incorporated by reference herein and may be found
under Correvio’s profile on SEDAR at www.sedar.com. We encourage you to read the Arrangement Agreement carefully and in
its entirety because this summary may not contain all the information about the Arrangement Agreement that is important to you.
The rights and obligations of the parties are governed by the express terms of the Arrangement Agreement and not by this summary
or any other information contained in this Circular.
The Arrangement
Agreement is described in this Circular only to provide you with information regarding its terms and conditions and is not intended
to provide any factual information about ADVANZ, Correvio or their respective businesses. The representations, warranties and
covenants contained in the Arrangement Agreement have been made solely for the benefit of the parties to the Arrangement Agreement.
In addition, such representations, warranties and covenants: (1) have been made only for purposes of the Arrangement Agreement;
(2) have been qualified by certain disclosures made by the parties to one another not reflected in the text of the Arrangement
Agreement; (3) may be subject to materiality qualifications contained in the Arrangement Agreement which may differ from what
may be viewed as material by you; (4) were made only as of March 15, 2020 or dates specified in the Arrangement Agreement; and
(5) have been included in the Arrangement Agreement for the purpose of allocating risk between the contracting parties rather
than establishing matters as facts. Accordingly, the summary of the Arrangement Agreement is included in this Circular only to
provide you with information regarding the terms of the Arrangement and not to provide you with any other factual information
regarding ADVANZ, Correvio or their respective businesses. Moreover, information concerning the subject matter of the representations,
warranties and covenants may change after March 15, 2020, which subsequent information may or may not be fully reflected in ADVANZ’s
or Correvio’s public disclosures. For the foregoing reasons, you should not rely on the representations, warranties and
covenants contained in the Arrangement Agreement as statements of factual information at the time they were made or otherwise
Effective
Date and Conditions of Arrangement
If the Arrangement
Resolution is passed, the Final Order of the Court is obtained approving the Arrangement, and all other conditions disclosed under
“The Arrangement – The Arrangement Agreement – Conditions to the Arrangement Becoming Effective”
are met or waived, the Arrangement will become effective at 12:01 a.m. (Pacific time) on the Effective Date. It is currently expected
that the Effective Date will be on or about May 27, 2020.
Representations
and Warranties
The representations
and warranties provided by Correvio in favour of the Purchaser relate to, among other things: (a) (i) the due incorporation, existence,
authority and qualification to conduct the business of Correvio; (ii) the name, jurisdiction of incorporation and the directors
and officers of Correvio and each of its subsidiaries as set forth in the Correvio Disclosure Letter and each subsidiary of Correvio
being duly formed and in good standing under the laws of the jurisdiction of its incorporation; (b) Correvio’s requisite
corporate power and authority to enter into, deliver and perform its obligations under the Arrangement Agreement; (c) the Arrangement
Agreement having been duly and validly executed and delivered by Correvio and, assuming due authorization, execution, and delivery
by Purchaser, constituting a legal, valid and binding obligation of Correvio, enforceable against Correvio in accordance with
its terms, subject to certain limitations; (d) the execution and delivery of the Arrangement Agreement, the performance by Correvio
of its obligations thereunder, and the consummation of the Arrangement, not: (i) constituting or resulting in any violation or
breach of, or conflict with, or allowing any Person to exercise any rights under, or requiring the consent, notice or other action
by any Person under applicable law, Correvio’s constating documents or the organizational documents of any of its subsidiaries,
any order or judgement relating to Correvio or any of its subsidiaries, any Contracts to which Correvio or any of its subsidiaries
is a party, or any Permit or Authorization issued to Correvio or any of its subsidiaries; (ii) create any Encumbrance upon any
of the properties or assets of Correvio or any of its subsidiaries; (e) the capitalization of Correvio and each of its subsidiaries;
(f) the absence of additional subsidiaries other than those disclosed to the Purchaser; (g) the absence of any agreement, right
or option, present or future, contingent, absolute or capable of becoming an agreement, right or option or which with the passage
of time or the occurrence of any event could become an agreement, right or option, except as otherwise disclosed to the Purchaser:
(i) to require Correvio or any of its subsidiaries to (A) issue any further shares in its capital, voting interests, or any other
security convertible or exchangeable into shares, voting interests or other securities in its capital, or (B) pay any amount determined
by reference to the value or market price of any of its shares; (ii) for the allotment of any unissued shares or other securities
in the capital of Correvio or any of its subsidiaries; (iii) to require Correvio or any of its subsidiaries to purchase, redeem
or otherwise acquire any of the issued and outstanding shares or other securities in the capital of Correvio or its subsidiaries
or any of their voting interests, as applicable; (iv) to acquire the shares or other securities or voting interests of Correvio
or any of its subsidiaries; or (v) relating to the voting, dividend, ownership or transfer rights of any capital stock or voting
interests of Correvio or any of its subsidiaries; (h) the qualifications of Correvio and each of its subsidiaries to do business
under applicable Law; (i) the corporate records of Correvio and each of its subsidiaries; (j) the solvency of Correvio and each
of its subsidiaries; (k) (i) the Correvio Financial Statements, and (ii) Correvio’s disclosure controls and internal controls
over financial reporting; (l) the Receivables of Correvio and its subsidiaries; (m) (i) the absence of undisclosed liabilities,
except as otherwise disclosed to the Purchaser and (ii) the absence of circumstances that could cause Correvio to incur any liability
in favour of Cipher pursuant to Correvio’s indemnity obligations under the Cardiome Arrangement; (n) banking information
of Correvio and its subsidiaries; (o) the absence of any Material Adverse Effect; (p) the absence, since the date of Correvio’s
latest balance sheet and except as otherwise disclosed to the Purchaser, of: (i) the amendment, or authorization of amendment,
of the constating documents of Correvio or its subsidiaries; (ii) dividends; (iii) redeemed, purchased, retired or otherwise acquired
securities; (iv) issuance or sale of securities; (v) disposition, assignment, exclusive licensing or revaluing of assets reflected
on the balance sheet forming part of the Correvio Interim Financial Statements; (vi) change in any accounting methods; (vii) liabilities
or obligations, except unsecured current liabilities incurred in the ordinary course of business; (viii) granting security interests
or Encumbrances (other than permitted Encumbrances) on any of Correvio’s property or assets except in the ordinary course
of business; (ix) Contracts outside of the ordinary and usual course of business; (x) termination, non-renewal, cancellation,
modification or amendment in any material respect or receipt of notice or request for termination, non-renewal, cancellation,
modification or amendment of any Correvio Material Contract or action taken or failed to be taken that would entitle any party
to a Correvio Material Contract or any of its subsidiaries to terminate, not renew, modify, cancel or amend it; (xi) cancellation
or waiver of any debt in excess of a certain threshold; (xii) the purchase of any interest in any securities; (xiii) any capital
expenditure or the authorization of any capital expenditure or commitment for the purchase, construction or improvement of capital
assets except in the ordinary course of business ; (xiv) acquisitions or agreements to acquire; (xv) any material damage to material
property or assets owned by Correvio that is not covered by insurance; (xvi) forgiveness or cancellation of indebtedness held
by Correvio or any of its subsidiaries; (xvii) payment, discharge, settlement or other satisfaction of any proceeding involving
Correvio or any of its subsidiaries or any of their assets or properties; (xviii) any action taken prohibited by the interim covenants
under the Arrangement Agreement relating to the conduct of Correvio’s business; or (xix) authorization or commitment to
do any of (i) through (xviii); (q) the title to and sufficiency of the assets of Correvio and each of its subsidiaries; (r) real
property interests of Correvio and each of its subsidiaries (s) the personal property owned by Correvio and each of its subsidiaries
including computer systems; (t) (i) disclosure of each Correvio Material Contract, (ii) Correvio Material Contracts as valid and
binding on Correvio or a subsidiary to the extent such Person is a party thereto, and (iii) the absence of consent or Authorization
necessary from a counterparty to a Correvio Material Contract to enter into the Arrangement Agreement, the Arrangement or the
other transactions contemplated thereby except as disclosed to the Purchaser; (u) employees and consultants of Correvio or any
of its subsidiaries; (v) Employee Plans; (w) the absence of collective agreements except as disclosed to the Purchaser; (x) the
absence of conflicting agreements except as disclosed to the Purchaser; (y) the absence of guarantees except as disclosed to the
Purchaser; (z) the absence of any Claims, actions, investigations or proceedings pending or, to the best of Correvio’s knowledge,
threatened against Correvio or its subsidiaries except a disclosed to the Purchaser; (aa) the existence and maintenance of insurance
policies of Correvio; (bb) regulatory approvals and consents required in connection with the execution and delivery or the performance
by Correvio or its subsidiaries of their obligations under the Arrangement Agreement or the consummation of the transactions contemplated
in the Arrangement Agreement or the Plan of Arrangement; (cc) third party consents required under Correvio Material Contracts;
(dd) permits and licenses; (ee) compliance with all Laws generally and compliance with anti-corruption Laws; (ff) the due payment
of Taxes, the proper filing of Tax Returns, and the absence of Tax-related Claims or proceedings against Correvio or its subsidiaries
by any Governmental Entity, except as otherwise disclosed to the Purchaser; (gg) Intellectual Property used or held for use in
the operation of the Business of Correvio; (hh) privacy Law and anti-spam Law; (ii) compliance with Environmental Laws and the
absence of Claims under Environmental Laws; (jj) inventories of Correvio; (kk) major suppliers of Correvio; (ll) major customers
of Correvio; (mm) agreements or transactions with certain of Correvio’s affiliates; (nn) the products produced by Correvio
and its subsidiaries; (oo) brokers in connection with the Arrangement; (pp) indebtedness of Correvio and its subsidiaries; (qq)
Correvio’s reporting issuer status, the absence of an order, ruling or determination having the effect of ceasing or suspending
trading in the securities of Correvio, Correvio not being in default in any material respect of any requirements of any Securities
Laws and the Correvio Disclosure Documents not containing any misrepresentation or omission to disclose any material fact regarding
Correvio or any of its subsidiaries, except as otherwise disclosed to the Purchaser; (rr) arrangements with Securityholders; (ss)
the fee received by Piper Sandler & Co. in consideration for providing the Fairness Opinion, receipt of the Fairness Opinion
by the Board, the approval of the Arrangement by the Board and the Board’s recommendation to Shareholders to vote in favour
or the Arrangement Resolution; (tt) compliance with sanctions and export control Laws; and (vv) Correvio having not made other
representations or warranties other than those set out above,
The representations
and warranties provided by the Purchaser and ADVANZ in favour of Correvio relate to, among other things: (a) the due incorporation
and existence of the Purchaser and ADVANZ, and the authority and qualification of the Purchaser and ADVANZ to conduct their respective
businesses; (b) Purchaser and its subsidiaries being duly qualified, licensed or registered to carry on business (c) the absence
of any act or proceeding (or, to the knowledge of the Purchaser, the threat of any such act or proceeding) by or against the Purchaser
or any of its subsidiaries in connection with the dissolution, liquidation, winding up, bankruptcy, or reorganization of the Purchaser
or any of its subsidiaries or for the appointment of a trustee, receiver, manager or other administrator of Purchaser or any of
its subsidiaries or any of its properties or assets; Purchaser and its subsidiaries having not sought protection under the Bankruptcy
and Insolvency Act (Canada), the Companies’ Creditor Arrangement Act (Canada) or similar legislation in any jurisdiction;
(d) the corporate authority of the Purchaser to enter into, deliver and perform its obligations under, the Arrangement Agreement;
(e) the execution, delivery and enforceability of the Arrangement Agreement constituting a binding obligation of the Purchaser,
enforceable against Purchaser in accordance with its terms, subject to certain limitations; (f) the execution and delivery by
Purchaser of the Arrangement Agreement and the performance by the Purchaser of its obligations thereunder, and the completion
of the Arrangement, not violating, conflicting with or resulting in a breach of the Purchaser’s organizational documents,
or any Contract, Authorization or Law to which the Purchaser is bound, except that would not, individually or in the aggregate,
materially impede the ability of the Purchaser to consummate the Arrangement and the transactions contemplated thereby or perform
its obligations thereunder; (g) no Authorization, consent or approval of, or filing with, or notification to, any Governmental
Entity being necessary on the part of the Purchaser in connection with the execution and delivery of the Arrangement Agreement
or the performance of its obligations under the Arrangement Agreement or the completion by the Purchaser of the transactions contemplated
by the Arrangement, other than the Interim Order and any approvals required by the Interim Order, the Final Order, filings with
the Director under the CBCA and such filings and other actions required under applicable Securities Laws; (h) there being no proceeding
outstanding against, or to the knowledge of the Purchaser, threatened against or relating to the Purchaser that would reasonably
be expected to prevent or materially delay the completion of the Arrangement; (i) the Purchaser having sufficient cash, cash equivalents
and borrowing ability under existing credit facilities, in the aggregate and including its cash-on-hand at the date of the Arrangement
Agreement, to satisfy its obligations under the Arrangement Agreement or the completion by it of the transactions contemplated
by the Arrangement Agreement; and (j) the Purchaser having made no other representations or warranties other than those set out
above.
Conditions
to the Arrangement Becoming Effective
In order
for the Arrangement to become effective, certain conditions must have been satisfied or waived which conditions are summarized
below.
Mutual
Conditions
The respective
obligations of Correvio and the Purchaser to complete the Arrangement Agreement are subject to the fulfillment, on or before the
Effective Time, of each of the following conditions, each of which may only be waived with the mutual consent of Correvio and
the Purchaser:
| (a) | the Interim
Order being granted on terms consistent with the Arrangement Agreement; |
| (b) | Securityholder
Approval for the Arrangement being obtained in accordance with the Interim Order; |
| (c) | the Final
Order being granted on terms consistent with the Arrangement Agreement; |
| (d) | no action
having been taken under any applicable Law or by any Governmental Entity which makes
it illegal or otherwise prohibits the completion of the Arrangement; |
| (e) | the Articles
of Arrangement that will be filed with the Director being in a form acceptable to the
Parties; |
| (f) | the Arrangement
Agreement not being terminated in accordance with its terms; and |
| (g) | certain
regulatory approvals, including the approval of the TSX of this Circular, being obtained. |
Purchaser
Conditions
The obligations
of the Purchaser to complete the transactions contemplated in the Arrangement Agreement will also be subject to the fulfillment
of each of the following conditions:
| (a) | all covenants
of Correvio under the Arrangement Agreement being duly performed in all material respects
and the receipt by the Purchaser of a certificate from Correvio confirming such as of
the Effective Date; |
| (b) | (i) the
representations and warranties of Correvio set forth (A) in the Arrangement Agreement,
that are qualified by reference to materiality or Material Adverse Effect and (B) the
representations that (I) Correvio is duly incorporated and is validly existing and in
good standing under the CBCA and has all requisite corporate power and capacity to carry
on its business as now conducted and to own, lease and operate its properties and assets
and (II) relate to capitalization, set out in paragraph (e) of Schedule “C”
of the Arrangement Agreement, including, but not limited to, that all the issued and
outstanding Shares of Correvio and each of its subsidiaries have been authorized and
validly issued and are fully paid and non-assessable, will be true and correct in all
respects as of the Effective Time (except for representations and warranties made as
of a specified date, the accuracy of which shall be determined as of the specified date);
and (ii) the representations and warranties of Correvio set forth in the Arrangement
Agreement that are not qualified by materiality or Material Adverse Effect will be true
and correct in all respects as of the Effective Time (except for representations and
warranties made as of a specified date, the accuracy of which shall be determined as
of that specified date), except where any failure or failures of such representations
and warranties to be so true and correct would not have, individually or in the aggregate,
a Material Adverse Effect, and the Purchaser will have received a certificate of Correvio
confirming the same as at the Effective Time; |
| (c) | no Material
Adverse Effect on or prior to the date of the Arrangement Agreement which is continuing
and since the date of the Arrangement Agreement, there will not have occurred a Material
Adverse Effect, and the Purchaser will have received a certificate signed on behalf of
Correvio to such effect; |
| (d) | all covenants
of the Correvio Supporting Shareholders under the Correvio Voting Agreement to be performed
on or before the Effective Time will have been duly performed by the parties thereto
in all respects; |
| (e) | holders
of no more than five percent of the Shares will have exercised, and at the date of the
Meeting, will not have withdrawn, Dissent Rights; |
| (f) | the administrative
agent in respect of the CRG Loan will have provided a payout letter and release in favour
of Correvio, the Purchaser and the Purchaser’s lender in respect of liabilities
under the CRG Loan, in form and substance acceptable to the Purchaser acting reasonably; |
| (g) | the Purchaser
will have been provided with evidence of discharge of the Encumbrances set out in the
Correvio Disclosure Letter; and |
| (h) | the Key
Third Party Consents will have been obtained. |
The foregoing
conditions are for the sole benefit of the Purchaser and may be waived by the Purchaser in whole or in part at any time.
Correvio
Conditions
The obligations
of Correvio to complete the transactions contemplated in the Arrangement Agreement, will also be subject to the fulfillment of
each of the following conditions:
| (a) | all covenants
of the Purchaser under the Arrangement Agreement being duly performed in all material
respects and Correvio receiving a certificate from the Purchaser confirming such as of
the Effective Date; |
| (b) | (i) the
representations and warranties of the Purchaser set forth in the Arrangement Agreement,
that are qualified by reference to materiality will be true and correct in all respects
as of the Effective Time (except for representations and warranties made as of a specified
date, the accuracy of which shall be determined as of that specified date); and (ii)
the representations and warranties of the Purchaser set forth in the Arrangement Agreement
that are not qualified by materiality will be true and correct in all respects as of
the Effective Time (except for representations and warranties made as of a specified
date, the accuracy of which shall be determined as of that specified date), except where
the failure or failures of all such representations and warranties to be so true and
correct in all respects would not reasonably be expected to prevent or have a material
adverse effect on the ability of the Purchaser to perform its obligations under the Arrangement
Agreement or consummate the Arrangement, and Correvio will have received a certificate
of the Purchaser confirming such as of the Effective Time; and |
| (c) | the Purchaser
will have complied with its obligations to pay the aggregate Share Consideration for
the Shares outstanding and the Depositary will have confirmed receipt of the aggregate
Share Consideration contemplated thereby. |
The foregoing
conditions are for the sole benefit of Correvio and may be waived by Correvio in whole or in part at any time.
Covenants
of Correvio
Covenants
relating to Conduct of Business
Correvio
has covenanted and agreed, subject to certain exceptions, that, at all times prior to the Effective Time or as the Purchaser has
otherwise agreed in writing, Correvio will, and will cause its subsidiaries (as applicable) to:
| (a) | use reasonable
best efforts to conduct the Business and maintain any properties and facilities related
to the Business, and not take any action respecting the Business except, in the ordinary
course of business consistent with past practice and in accordance with applicable Law; |
| (b) | use all
commercially reasonable efforts to preserve intact its and its subsidiaries’ present
business organization, the assets of the Correvio Group (including associated intellectual
property) and goodwill, and preserve the current material relationships with suppliers,
distributors, employees, consultants, customers and others having business relationships
with it and/or its subsidiaries; |
| i. | issue,
deliver, sell, pledge, lease, dispose of or encumber, or agree or offer to issue, deliver
sell, pledge, lease, dispose of or encumber, any Shares (including, for certainty, through
an at-the-market offering) or securities of its subsidiaries, or any securities convertible,
exchangeable or exercisable into or for Shares or securities of its subsidiaries, or
any stock appreciation rights, phantom stock awards or other rights that are linked to
the price or value of the Shares or securities of the Correvio subsidiaries (other than
pursuant to the exercise, in accordance with their respective terms, of Options, RSUs,
PSUs or Warrants outstanding on the date of the Arrangement Agreement) or except as provided
for in the Arrangement Agreement in respect of accelerated vesting of RSUs and PSUs,
amend, extend or terminate, or agree to amend, extend or terminate, any of the terms
of, or agreements governing, any of the outstanding Options, RSUs, PSUs or Warrants or
other convertible securities of Correvio or its subsidiaries; |
| ii. | amend
or propose to amend its articles or by-laws or other constating documents or the terms
of any of its securities; or, except as contemplated by the Arrangement Agreement, split,
consolidate or reclassify, or propose to split, consolidate or reclassify, any of the
Shares or undertake or propose to undertake any other capital reorganization or change
in or exchange of Shares, any other of its securities or its share capital; |
| iii. | declare,
set aside or pay any dividend or other distribution or payment (whether in cash, securities
or property or any combination thereof) in respect of the Shares or any other securities
of Correvio, redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise
acquire, any outstanding securities of Correvio, adopt a plan of liquidation or resolution
providing for the liquidation, winding-up or dissolution of Correvio, or enter into any
agreement with respect to any of the foregoing; |
| iv. | except
with respect to inter-company transfers between Correvio and its subsidiaries, sell,
pledge, lease, transfer, dispose of or encumber any assets, rights or properties of Correvio
or any of its subsidiaries, except in the ordinary course of business consistent with
past practice, and provided that the aggregate amount of all such sales, pledges, leases,
transfers, disposals and encumbrances (excluding product sales) will not be for proceeds
of greater than $100,000; |
| v. | acquire
or agree to acquire (by merger, amalgamation, arrangement, acquisition of shares or assets
or otherwise) any Person or division or business unit thereof, or incorporate or form,
or agree to incorporate or form, any Person or make or agree to make any investment either
by purchase of shares or securities, contributions of capital, property transfer or purchase
of, any property or assets of any other Person; |
| vi. | make
any material change to its Business or enter into enter into any Contract that, if entered
into prior to the date of the Arrangement Agreement, would be a Correvio Material Contract; |
| vii. | enter
into or agree to the terms of any joint venture, strategic alliance, partnership, or
similar agreement, arrangement or relationship; |
| viii. | incur,
create, assume or otherwise become liable for, any indebtedness for borrowed money, or
any other liability or obligation, other than in respect of trade payables, which trade
payables in no event will exceed $100,000 individually or $250,000 in the aggregate;
issue any debt or derivative securities; or assume, guarantee, endorse or otherwise as
an accommodation become responsible for the obligation of any other Person; make any
loans, capital contribution, investments or advances; or create or permit to be created
any Encumbrance on the Business or the property or assets of Correvio or its subsidiaries
(other than permitted encumbrances) not existing as at the date of the Arrangement Agreement; |
| ix. | pay,
discharge or satisfy any material Claims, liabilities or obligations of Correvio or any
of its subsidiaries other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice, of liabilities reflected or reserved
against in Correvio’s financial statements or incurred in the ordinary course of
business consistent with past practice; |
| x. | waive,
release, grant or transfer any rights of value, other material rights, claims or benefits
or modify or change any existing Correvio Material Contract, Authorization or Permit,
without first advising the Purchaser and obtaining the Purchaser’s consent and
direction, as to any action to be taken in that regard, and forthwith taking any action
directed by the Purchaser, acting reasonably; |
| xi. | enter
into or modify (or make a promise regarding entering into or modifying) any Employee
Plan or any employment, consulting, severance or similar agreements or arrangements with,
or grant any bonuses, salary or fee increases, severance or termination pay to, any officers
or directors or, in the case of employees or consultants who are not officers or directors,
take any action other than in the ordinary course of business and consistent with past
practice with respect to the grant of any bonuses, salary or fee increases, severance
or termination pay or with respect to any increase of benefits payable in effect on the
date of the Arrangement Agreement provided, however, that it is acknowledged and agreed
that Correvio will abide by the terms and conditions of any employment plan and any employment
agreements and consulting agreements, including with respect to the payments of any severance
amounts or change of control payments, if applicable; |
| xii. | enter
into any collective bargaining or similar agreement; |
| xiii. | enter
into or adopt any shareholder rights plan or similar agreement or arrangement; |
| xiv. | take
any action or fail to take any action which action or failure to act would result in
the material loss, expiration or surrender of, or the loss of any material benefit under,
or reasonably be expected to cause any Governmental Entities to institute proceedings
for the suspension, revocation or limitation of rights under, any Authorizations or Permits;
or fail to prosecute with commercially reasonable due diligence any pending applications
to any Governmental Entities; |
| xv. | change
any method of Tax accounting; make, revoke or change any Tax election; amend any previously
filed Tax Return; file any Tax Return inconsistent with past practice; settle or compromise
any Liability for Taxes; agree to an extension or waiver of the limitation period with
respect to the assessment, reassessment, or determination of Taxes; enter into any closing
agreement with respect to any Tax; surrender any right to claim a material Tax refund;
change an annual accounting period; adopt or change any accounting method with respect
to Taxes; or consent to any extension or waiver of the limitation period applicable to
any Tax claim or assessment unless, in each case, Correvio reasonably determines, after
prior consultation with the Purchaser, that such action is required by Law; |
| xvi. | amend
its accounting policies or adopt new accounting policies, except as may be required by
applicable Law or GAAP; |
| xvii. | make
any capital expenditures in excess of $50,000; |
| xviii. | waive,
release, settle, agree to settle or compromise any pending or threatened suit, action,
Claim, arbitration, mediation, inquiry, proceeding or investigation against Correvio
or any of its subsidiaries; |
| xix. | engage
in any transaction with any related parties, other than transactions with subsidiaries
and under employment agreements in the ordinary course of business consistent with past
practice; |
| xx. | grant,
modify sell, lease, license, sublicense, covenant not to assert, abandon, allow to lapse,
assign, transfer, or otherwise dispose of or terminate any rights in any Business IP
or enter into any agreement relating to Intellectual Property or do or omit to do anything
to jeopardize the validity or enforceability of the Business IP, including the non payment
of any application, search, maintenance or other official fees; or disclosing any Trade
Secrets to any other person (except pursuant to sufficiently protective non-disclosure
agreements); |
| xxi. | take
any action that would be reasonably expected to cause a violation by any Person of economic
sanctions or export controls; |
| xxii. | take
any action or fail to take any action that prevents, or materially delays, impedes or
interferes with, or that would reasonably be expected to prevent or materially delay,
impede or interfere with, the ability of the Parties to consummate the transactions contemplated
by the Arrangement Agreement or the Arrangement; |
| xxiii. | enter
into any transaction or perform any act that would render, or would reasonably be expected
to render any representations and warranties made by Correvio set forth in the Arrangement
Agreement untrue or inaccurate in any respect; or |
| xxiv. | announce
an intention, enter into any formal or informal agreement, or otherwise make a commitment
to do any of the things prohibited by any of the foregoing subsections. |
| (d) | Correvio
will use all commercially reasonable efforts to cause its current insurance (or re-insurance)
policies not to be cancelled or terminated or any of the coverage thereunder to lapse
before the Outside Date, unless simultaneously with such termination, cancellation or
lapse, replacement policies underwritten by insurance and re-insurance companies of nationally
recognized standing providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums are in full
force and effect. |
| (e) | Correvio
will use all commercially reasonable efforts to cure any and all defects in chain of
title and ownership with respect to all registered Intellectual Property. |
| (f) | Correvio
will not authorize or propose, or enter into or modify any Contract, agreement, commitment
or arrangement, to do any of the matters prohibited by the interim covenants in the Arrangement
Agreement. |
| (g) | Correvio
will promptly notify the Purchaser orally and in writing upon becoming aware of any circumstance
or development that, to the knowledge of Correvio, would, or would reasonably be expected
to, constitute or result in a Material Adverse Effect. |
Covenants
relating to the Arrangement
Correvio
has covenanted and agreed to perform all obligations required to be performed by Correvio under the Arrangement Agreement, co-operate
with the Purchaser in connection therewith, and do all such other acts and things as may be necessary or desirable in order to
consummate and make effective, as soon as reasonably practicable, the transactions contemplated in the Arrangement Agreement and,
without limitation, Correvio will:
| (a) | apply for
and use all commercially reasonable efforts to obtain all Key Regulatory Approvals and
all Key Third Party Consents and, in doing so, keep the Purchaser informed in a timely
manner as to the status of the proceedings or other actions related to obtaining the
Key Regulatory Approvals and Key Third Party Consents; |
| (b) | use all
commercially reasonable efforts to satisfy all conditions precedent in the Arrangement
Agreement in its power to satisfy and take all steps set forth in the Interim Order and
Final Order applicable to it and comply promptly with all requirements which applicable
Law may impose on Correvio with respect to the Arrangement or the other transactions
contemplated by the Arrangement Agreement and including effecting all necessary registrations,
filings and submissions of information requested by Governmental Entities required to
be effected by Correvio or its subsidiaries in connection with the Arrangement and cooperating
with the Purchaser in connection with its performance of its obligations thereunder; |
| (c) | use all
commercially reasonable efforts to defend all lawsuits or other legal, regulatory or
other proceedings against Correvio challenging or affecting the Arrangement Agreement
or the consummation of the transactions contemplated thereby and use all commercially
reasonable efforts to have lifted or rescinded any injunction or restraining order or
other order relating to Correvio which may materially impede the ability of the Parties
to consummate the Arrangement or the other transactions contemplated by the Arrangement
Agreement; |
| (d) | use all
commercially reasonable efforts to obtain, and to assist the Purchaser with respect to
obtaining, as applicable, all consents, waivers or approvals under all Material Contracts,
including waivers required in connection with any change of control provisions contained
in any agreements or other arrangements of Correvio or any of its subsidiaries; |
| (e) | cooperate
with the Purchaser and use all commercially reasonable efforts to take, or cause to be
taken, all actions and do or cause to be done all things reasonably necessary, proper
or advisable on its part under applicable Law and the policies of the TSX and Nasdaq
to enable the delisting by Correvio of the Shares from the TSX and Nasdaq as soon as
reasonably practicable (and in any event in compliance with applicable Law) after the
Effective Date; |
| (f) | until the
earlier of the Effective Time and termination of the Arrangement Agreement in accordance
with its terms, subject to applicable Law, make available and cause to be made available
to Purchaser, and its representatives, information reasonably requested by Purchaser
for the purposes of preparing, considering and implementing integration and strategic
plans for the acquisition by the Purchaser of Correvio following the Effective Date; |
| (g) | until the
earlier of the Effective Time and termination of the Arrangement Agreement in accordance
with its terms, Correvio shall, to the extent not precluded by applicable Law, promptly
notify the Purchaser, in writing, and promptly provide copies of any related documentation
received, when Correvio has knowledge of: |
| i. | any
notice or other communication from any Person alleging that the consent (or waiver, permit,
exemption, order, approval, agreement, amendment or confirmation) of such Person (or
other Person) is or may be required in connection with the Arrangement Agreement or the
Arrangement; |
| ii. | any
notice or other communication from any Governmental Entity in connection with the Arrangement
or the Arrangement Agreement; |
| iii. | any
matter that has resulted in, or is reasonably likely to result in, a condition set forth
in the mutual conditions and additional conditions precedent in favour of the Purchaser
set forth in the Arrangement Agreement not being satisfied; |
| iv. | the
failure of Correvio to perform any obligations to be performed by it under the Arrangement
Agreement such that any conditions set forth in the mutual conditions precedent and additional
conditions precedent in favour of the Purchaser set forth in the Arrangement Agreement
would not be satisfied; or |
| v. | any
filing, actions, suits, claims, investigations or proceedings commenced or, to the knowledge
of Correvio, threatened orally or in writing against, or, in respect of any filing, actions,
suits, claims, investigations or proceedings existing as at the date of the Arrangement
Agreement, if any additional filing, actions, suits, claims, investigations or proceedings
are made or threatened orally or in writing, in each case relating to or involving or
otherwise affecting Correvio, its subsidiaries or any of their respective assets that
would reasonably be expected to be material to Correvio and its subsidiaries, taken as
a whole; and |
| (h) | cause to
repay, in full the Obligations (as defined in the CRG Loan) owing under the CRG Loan
in conjunction with the consummation of the Arrangement. |
Covenants
Regarding Non-Solicitation
Correvio
has agreed that it will, and will direct and cause its Representatives to, immediately to immediately cease and cause to be terminated
any solicitation, encouragement, activity, discussion or negotiation with any parties that may be ongoing with respect to an Acquisition
Proposal whether or not initiated by Correvio, discontinue access to any parties who are not the Purchaser and its Representatives
to any dataroom that contains information regarding the Correvio Group, and to the extent Correvio entered into a confidentiality
agreement with any such parties, Correvio will request the return of information regarding Correvio and its subsidiaries previously
provided to such parties and will request the destruction of all materials including or incorporating any confidential information
regarding Correvio and its subsidiaries, in each case, pursuant to any such confidentiality agreement. Correvio has agreed not
to release or permit the release of any Person from, or waive or forbear in the enforcement of, any confidentiality agreement
or other similar agreement relating to a potential Acquisition Proposal to which such third party is a party. Correvio further
agreed not to release or permit the release of any Person from, or waive or forbear in the enforcement of, any standstill or similar
agreement or obligation to which such third party is a party or by which such third party is bound (it being understood and agreed
that the automatic termination of a standstill provision due to the announcement of the Arrangement or the entry into the Arrangement
is not a violation of the foregoing).
Covenant
Regarding Acquisition Proposal
Correvio
has covenanted and agreed that it will not, and will not cause any of its Representatives, directly or indirectly, to:
| (a) | make, solicit,
initiate, entertain, encourage, promote or facilitate (including by way of furnishing
non-public information, permitting any visit to its facilities or properties or entering
into any form of agreement, arrangement or understanding) any inquiries or offers or
the making of any proposals regarding or that would be expected to constitute an Acquisition
Proposal or that may be reasonably expected to lead to an actual or potential Acquisition
Proposal; |
| (b) | participate,
directly or indirectly, in any discussions or negotiations regarding, or furnish to any
Person any non-public information or otherwise co-operate with, respond to, assist or
participate in any Acquisition Proposal or potential Acquisition Proposal or participate
in any discussions or negotiations regarding an actual or potential Acquisition Proposal,
or furnish any information or access to any Person (other than the Purchaser and its
Representatives) with respect to any inquiries, proposals or offers that constitute,
or that would reasonably be expected to lead to, an actual or potential Acquisition Proposal,
provided however that Correvio may communicate and participate in discussions with a
third party solely for the purpose of (A) advising such third party of Correvio’s
obligations under the Arrangement Agreement or (B) advising such third party that an
Acquisition Proposal does not constitute a Superior Proposal and cannot reasonably be
expected to result in a Superior Proposal; |
| (c) | remain neutral
with respect to, or agree to, approve or recommend any, Acquisition Proposal or potential
Acquisition Proposal (it being understood that publicly taking no position or a neutral
position with respect to an Acquisition Proposal for three Business Days following formal
announcement of such Acquisition Proposal will not be considered to be a violation of
this provision); |
| (d) | (A) withhold,
withdraw, amend, modify or qualify, or publicly propose to withhold, withdraw, amend,
modify or qualify, the Board Recommendation in a manner adverse to the Purchaser, the
Arrangement or the Arrangement Resolution; (B) fail to include the Board Recommendation
in this Circular; (C) endorse, approve or recommend or publicly propose to endorse, approve
or recommend any Acquisition Proposal or publicly declare it advisable that Correvio
enter into an agreement relating to any Acquisition Proposal or that Shareholders vote
in favour of an Acquisition Proposal or against Arrangement Resolution; or (D) refrain
from recommending against any Acquisition Proposal that is a take-over bid, tender offer
or exchange offer within three (3) Business Days after the commencement thereof (or in
the event that the Meeting is scheduled to occur within such three (3) Business Day period,
on or prior to the Business Day immediately prior to the date of the Meeting) (any of
the actions set forth in clauses (A) through (D), a “Change in Recommendation”);
or |
| (e) | enter into
any agreement, arrangement or understanding related to any Acquisition Proposal or requiring
it to abandon, terminate or fail to consummate the Arrangement or providing for the payment
of any break, termination or other fees or expenses to any Person in the event that the
Arrangement is completed or in the event that it completes any other transaction with
the Purchaser or with an affiliate of the Purchaser that is agreed to prior to any termination
of the Arrangement Agreement. |
However,
the Board and its representatives may consider, participate in any discussions or negotiations with and provide information to,
any arm’s length Person who has delivered a bona fide written Acquisition Proposal which did not result from a breach of
the Arrangement Agreement by Correvio and that the Board determines in good faith after consultation with its financial advisor
and outside legal counsel that such Acquisition Proposal is a Superior Proposal, or would reasonably be expected to constitute
a Superior Proposal; provided, however, that prior to taking any such action the Board will determine in good faith, after consultation
with outside legal counsel that it is necessary to take such action in order to discharge properly its fiduciary duties, and if
Correvio provides confidential non-public information to such Person, Correvio obtains a confidentiality agreement from the Person
making such Acquisition Proposal that is substantively similar to the Confidentiality Agreement, and otherwise on terms no more
favourable to such Person than the Confidentiality Agreement, including a standstill provision at least as stringent as contained
in the Confidentiality Agreement, provided that such confidentiality agreement will not preclude such Person from making a Superior
Proposal and such agreement will not restrict or prohibit Correvio from disclosing to the Purchaser any details concerning the
Acquisition Proposal or any Superior Proposal made by such Person to the extent contemplated by the Arrangement Agreement. Correvio
will be permitted to provide such Person with access to information regarding Correvio; provided that Correvio sends a copy of
any such confidentiality agreement to the Purchaser promptly upon its execution and the Purchaser is provided with a list of the
information provided to such Person and is promptly provided with access to the same information to which such Person was provided.
Nothing
in the Arrangement Agreement prohibits Correvio or the Board from taking and disclosing to the Shareholders a position contemplated
by Rule 14d-9 or Rule 14e-2(a) promulgated under the U.S. Exchange Act (or any similar communication that is required under
Canadian Securities Laws or that is required under applicable Law in connection with the making or amendment of a tender offer
or exchange offer), making a customary “stop-look-and-listen” communication to the Shareholders pursuant to Rule 14d-9(f)
under the U.S. Exchange Act (or any similar communication that is required under applicable Law) or from making any legally
required disclosure to the Shareholders pursuant to applicable Securities Laws with regard to the Arrangement or an Acquisition
Proposal; provided that the foregoing will in no way eliminate or modify the effect that such disclosure would otherwise have
under the Arrangement Agreement; provided further that this paragraph will not be deemed to permit Correvio or the Board to effect
a Change in Recommendation except in accordance with the right to accept a Superior Proposal provided under to the terms of the
Arrangement Agreement.
Correvio
has agreed to promptly (and in any event within 24 hours) notify the Purchaser, at first orally and then in writing, of any proposals,
offers or inquiries relating to or constituting or that would reasonably be expected to lead to an Acquisition Proposal or any
request for non-public information relating to Correvio or any of its subsidiaries (an “Acquisition Proposal Notice”).
Such notice will include a description of the terms and conditions of any proposal, inquiry or offer, the identity of the Person
making such proposal, inquiry or offer, a copy of the proposal, offer or inquiry (if written), and provide such other details
of the proposal, inquiry or offer as the Purchaser may reasonably request. Correvio will keep the Purchaser fully informed on
a prompt basis of the status, including any change to the material terms, of any such proposal, inquiry or offer.
Correvio
has agreed to ensure that its officers, directors and any of its financial advisors or other advisors or Representatives are aware
of Correvio’s covenants relating to non-solicitation and acquisition proposals, and Correvio will be responsible for any
breach of those covenants by such officers, directors, financial advisors or other advisors or Representatives.
Right
to Accept a Superior Proposal
If Correvio
has complied with its covenants regarding non-solicitation and acquisition proposals described above, Correvio may accept, approve,
recommend or enter into any agreement, understanding or arrangement in respect of a Superior Proposal (other than a confidentiality
agreement, the execution of which will not be subject to the conditions set out below) received prior to the date of Securityholder
Approval and terminate the Arrangement Agreement if, and only if:
| (a) | Correvio
has provided the Purchaser with an unredacted copy of a draft definitive agreement in
respect of the Superior Proposal; |
| (b) | Correvio
has provided the Purchaser with the information required in connection with an Acquisition
Proposal Notice regarding such Superior Proposal; |
| (c) | the Board
has determined in good faith, after consultation with outside legal counsel and its financial
advisors, that it is necessary in order for the Board to discharge properly its fiduciary
duties to effect a Change in Recommendation and to approve or recommend such Superior
Proposal; |
| (d) | five Business
Days (the “Superior Proposal Notice Period”) have elapsed from the
later of (A) the date the Purchaser received written notice (a “Superior Proposal
Notice”) advising it that the Board has determined that the Acquisition Proposal
constitutes a Superior Proposal and has resolved and intends to accept, approve, recommend
or enter into an agreement in respect of such Superior Proposal subject only to the requirements
relating to Correvio’s right to accept a Superior Proposal under the terms of the
Arrangement Agreement, and (B) the date the Purchaser was delivered a copy of such Superior
Proposal document; and |
| (e) | Correvio
has complied with its covenant to allow Purchaser the right to offer in writing to amend
the terms of the Arrangement Agreement during the Superior Proposal Notice Period, as
described below, and, if any offer to amend the Arrangement Agreement is delivered by
the Purchaser pursuant to the terms of the Arrangement Agreement, the Board has determined
that any amended proposal of the Purchaser would, upon acceptance by Correvio, not result
in the Superior Proposal ceasing to be a Superior Proposal. |
In the event
that Correvio provides the Purchaser with a Superior Proposal Notice on a date that is less than five Business Days prior to the
scheduled date of the Meeting, Correvio will, at the Purchaser’s request, adjourn the Meeting to a date that is not less
than five Business Days and not more than fifteen days after the date of the Superior Proposal Notice (and in such event, Correvio
will not be deemed to be in breach of its obligation under the Arrangement Agreement to call the Meeting no later than the date
agreed to by Correvio and the Purchaser due to the change in the date of the Meeting).
During the
Superior Proposal Notice Period, Correvio has agreed that the Purchaser will have the right, but not the obligation, to offer
in writing to amend the terms of the Arrangement Agreement. The Board will review any written proposal to amend the terms of the
Arrangement Agreement in good faith in order to determine, in its discretion in the exercise of its fiduciary duties, whether
any such amended proposal would, upon acceptance by Correvio, result in such Superior Proposal ceasing to be a Superior Proposal.
Each successive
material modification of any Acquisition Proposal will constitute a new Acquisition Proposal for purposes of the foregoing requirements
relating to Correvio’s right to accept a Superior Proposal, and will initiate a new Superior Proposal Notice Period.
Upon the
expiry of the Superior Proposal Notice Period, if: (i) the Purchaser has determined not to offer in writing to amend the terms
of the Arrangement Agreement; or (ii) the Board has determined that any offer by the Purchaser in writing to amend the terms of
the Arrangement Agreement would, upon acceptance by Correvio, not result in any Superior Proposal ceasing to be a Superior Proposal,
then Correvio may effect a Change in Recommendation and/or accept, approve, recommend or enter into an agreement, understanding
or arrangement in respect of such Superior Proposal, provided that Correvio must: (i) terminate the Arrangement Agreement; and
(ii) pay the Termination Fee in compliance with the Termination Fee provisions of the Arrangement Agreement, as further described
under the heading “The Arrangement – The Arrangement Agreement – Termination”.
Other
Covenants
Access
to Information; Confidentiality; Transition
From the
date of the Arrangement Agreement until the earlier of the Effective Time and the termination of the Arrangement Agreement pursuant
to its terms, subject to compliance with applicable Law and the terms of any existing Contracts: (a) Correvio will, and will cause
its Representatives to afford to the Purchaser and its Representatives, at the Purchaser’s sole expense, reasonable access
during normal business hours upon reasonable notice, to the properties, information and records relating to, and the personnel
of, the Correvio Group, including but not limited to, the related facilities, books, contracts, financial statements, forecasts,
financial projections (to the extent permitted by confidentiality agreements in force on the date of the Arrangement Agreement),
studies, records, operating Permits, Authorizations and any other documentation (whether in writing or stored in computerized,
electronic, disk, tape, microfilm or any other form), and the Purchaser and Correvio acknowledge and agree that information furnished
pursuant to the foregoing will be subject to the terms and conditions of the Confidentiality Agreement; provided, however, that
(a) the Purchaser will provide Correvio with at least one (1) Business Day prior written notice of any requested on site access
to any real property of Correvio, (b) if Correvio so requests, the Purchaser will be accompanied by a Representative of Correvio
and (c) the Purchaser and its Representatives will conduct any such activities in such a manner as not to unreasonably interfere
with the business or operations of Correvio. In no event will Correvio be obligated to provide such access or information if Correvio
determines, in its reasonable judgment and on the advice of legal counsel, that doing so is reasonably likely to (i) violate applicable
Law or any other obligation owing to a third Person, (ii) waive or jeopardize the protection of the attorney-client privilege
or any other similar privilege or immunity, (iii) expose Correvio or any of its subsidiaries to risk of Liability for disclosure
of sensitive, confidential or personal information or (iv) expose competitively sensitive information that Correvio designates,
in its sole discretion, as “outside counsel only” (it being understood that any such information so designated will
be given only to the outside counsel of the Purchaser and may not be shared, conveyed, summarized or otherwise disclosed in any
manner with the Purchaser or any of its subsidiaries or any of their respective Representatives (other than such outside counsel),
except as may be expressly agreed in writing by Correvio in advance (the limitations contemplated in clauses (i) through (iv),
but giving effect to the following proviso, the “Access Limitations”); provided that to the extent that Correvio
asserts that an Access Limitation applies, Correvio and the Purchaser will use all commercially reasonable efforts to establish
a process that would provide the Purchaser or its applicable Representatives with such access or information in a manner that
would not result in a violation of the Access Limitations. It is further agreed that, prior to the Effective Time, the Purchaser
and its Representatives will not contact any of the employees, customers, distributors or suppliers of Correvio or its subsidiaries
in connection with the transactions contemplated by the Arrangement Agreement, without the specific written authorization of Correvio,
which consent may not be unreasonably withheld, delayed or conditioned. Despite anything to the contrary contained in the Arrangement
Agreement, in no event will the Purchaser or its Representatives be permitted to conduct any environmental sampling, testing or
invasive investigations or assessments. Each of the Purchaser and Correvio will, and will cause their subsidiaries and their respective
Representatives to, as the case may be, work cooperatively and in good faith to ensure an orderly transition following the Effective
Time, including with respect to transitional planning, transitional services, and the retention of personnel (and any related
arrangements thereto). From the date of the Arrangement Agreement until the earlier of the Effective Time and the termination
of the Arrangement Agreement pursuant to its terms, Correvio will maintain the access of the Purchaser and its Representatives
to the information contained as at the date of the Arrangement Agreement in any dataroom that contains information regarding the
Correvio Group to which the Purchaser and its Representatives have access as at the date of the Arrangement Agreement.
Other
Deliveries
Concurrent
with the execution and delivery of the Arrangement Agreement, Correvio agreed to deliver to the Purchaser: (a) the Correvio Voting
Agreement executed by the Correvio Supporting Shareholders; and (b) a consent and waiver of the lenders in relation to the CRG
Loan (and any other Person identified by the Purchaser in connection with the CRG Loan) to the execution and delivery by Correvio
of the Arrangement Agreement and to any and all transactions or other actions contemplated in the Arrangement Agreement (including
the request for, and receipt of, the Interim Order and the Final Order), which consent and waiver will include a waiver from the
lenders of any events of default any non-performance of any conditions or obligations by Correvio, whether in existence prior
to the execution hereof to and including the Effective Time.
CRG currently
holds all of the issued and outstanding Warrants. In connection with the completion of the Arrangement, and concurrently with
the full repayment of the obligations owing under the CRG Loan, CRG has agreed to the cancellation of the Warrants for no consideration.
See “CRG Loan Amendment & Waiver”.
Term
The Arrangement
Agreement will be effective from the date of the Arrangement Agreement until the earlier of the Effective Time and the termination
of the Arrangement Agreement in accordance with its terms.
Termination
The Arrangement
Agreement may be terminated in certain circumstances (certain of which lead to payment of the Termination Fee, as more fully described
below), including:
| (a) | at any time
prior to the Effective Time by mutual written agreement of Correvio and the Purchaser; |
| (b) | by either
Correvio or the Purchaser, if: |
| (i) | the
Effective Time does not occur on or before the Outside Date, provided that the right
to terminate the Arrangement Agreement under this provision is not available to any Party
whose failure to fulfil any of its obligations or breach any of its covenants, representations
and warranties under the Arrangement Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before the Outside Date; provided however,
that if completion of the Arrangement is delayed by (i) an injunction or order made by
a Governmental Entity, or (ii) the Purchaser or Correvio not having obtained any regulatory
waiver, consent or approval or the Interim Order or the Final Order which is necessary
to permit the completion of the Arrangement such that the condition that the Key Regulatory
Approvals shall have been obtained will not have been satisfied or waived then, provided
that such injunction or order is being contested or appealed or such regulatory waiver,
consent or approval or the Interim Order or the Final Order is being actively sought,
as applicable, except in the case where such regulatory waiver, consent or approval or
the Interim Order or the Final Order has not been obtained as a result of the tolling
of the time period to make an application to the Court or convene and conduct the Meeting
as provided for in the Arrangement Agreement (in which case there will be no automatic
extension of the Outside Date), the Outside Date will automatically be extended for an
additional period of 30 days; |
| (ii) | any
Governmental Entity has issued an order, decree or ruling or any applicable Law is enacted
that makes consummation of the Arrangement illegal or otherwise prohibited or otherwise
restrains, enjoins or prohibits Correvio or the Purchaser from consummating the Arrangement
and such order, decree, ruling or applicable Law or enjoinment will have become final
and non-appealable; or |
| (iii) | Correvio
Securityholder Approval is not obtained at the Meeting in accordance with applicable
Laws and the Interim Order. |
| (i) | prior
to the Effective Time (1) the Board makes a Change in Recommendation, (2) the Board approves
or recommends an Acquisition Proposal, or (3) Correvio enters into a definitive agreement
with respect to a Superior Proposal; |
| (ii) | the
Meeting does not occur on or before June 1, 2020 or such later date as may be agreed
by Correvio and the Purchaser in writing, provided that the right to terminate the Arrangement
Agreement pursuant to this provision will not be available to the Purchaser if the failure
by the Purchaser to fulfil any obligation under the Arrangement Agreement is the cause
of, or results in, the failure of the Meeting to occur on or before such date; |
| (iii) | subject
to the notice and cure provisions set out in the Arrangement Agreement, Correvio is in
default of a covenant or obligation under the Arrangement Agreement such that any condition
contained in the conditions precedent listed in (a), (b) and (c) of Purchaser Conditions
above is not satisfied or is incapable of satisfaction, or any representation or
warranty of Correvio under the Arrangement Agreement is untrue or incorrect or will have
become untrue or incorrect such that the condition contained in conditions precedent
listed in (b) of Purchaser Conditions would be incapable of satisfaction; provided
that the Purchaser is not then in breach of the Arrangement Agreement so as to cause
any of the conditions set forth in the conditions precedent listed in (a) or (b) of Purchaser
Conditions not to be satisfied; or |
| (iv) | Correvio
will have breached any of its obligations under covenants regarding an Acquisition Proposal
or non-solicitation, the right to accept a Superior Proposal, the Meeting, or this Circular. |
| (i) | subject
to the notice and cure provisions set out in the Arrangement Agreement, the Purchaser
is in default of a covenant or obligation under the Arrangement Agreement such that the
condition contained in the condition precedent listed in (a) of Correvio Conditions
above is not satisfied or is incapable of satisfaction, or any representation or
warranty of the Purchaser under the Arrangement Agreement is untrue or incorrect or will
have become untrue or incorrect such that the condition contained in the condition precedent
listed in (b) of Correvio Conditions would be incapable of satisfaction; provided
that Correvio is not then in breach of the Arrangement Agreement so as to cause any representation
or warranty or any of the conditions set forth in the conditions precedent listed in
(a) and (b) of Correvio Conditions not to be satisfied; |
| (ii) | at
any time prior to receipt of the Securityholder Approval, Correvio wishes to enter into
a definitive written agreement with respect to a Superior Proposal (other than a confidentiality
agreement permitted under the Arrangement Agreement), subject to and in compliance with
the covenants provided under the Arrangement Agreement, and Correvio has paid the Termination
Fee to the Purchaser on the earlier of the termination of the Arrangement Agreement and
the execution of a definitive agreement in respect of a Superior Proposal. |
The
Termination Fee is payable by Correvio if the Arrangement Agreement is terminated in the following circumstances:
| (a) | by the Purchaser
if (A) prior to the Effective Time (1) the Board makes a Change in Recommendation, (2)
the Board approves or recommends an Acquisition Proposal, or (3) Correvio enters into
a definitive agreement with respect to a Superior Proposal; (B) the Meeting does not
occur on or before June 1, 2020 or such later day as may be agreed to by Correvio and
the Purchaser; or (C) Correvio has breached any of its obligations provided for in the
non-solicitation, Acquisition Proposal and Superior Proposal provisions of the Arrangement
Agreement or materially breached any of its obligations with respect to the Meeting and
this Circular; |
| (b) | by Correvio
if at any time prior to the receipt of the Securityholder Approval, Correvio wishes to
enter into a definitive written agreement with respect to a Superior Proposal; or |
| (c) | (A) by either
Correvio or the Purchaser if (i) the Effective Time has not occurred on or before the
Outside Date (subject to certain exceptions provided for in the Arrangement Agreement)
or (ii) the Securityholder Approval is not obtained at the Meeting in accordance with
applicable Law or the Interim Order or (B) by the Purchaser if Correvio is in default
of certain covenants or obligations under the Arrangement Agreement, provided that the
Purchaser is not in breach of the Arrangement Agreement so as to cause certain conditions
therein not to be satisfied if prior to the earlier of the termination of the Arrangement
Agreement or the Meeting: (A) an Acquisition Proposal or the intention to make an Acquisition
Proposal, with respect to Correvio is made to Correvio or is publicly announced by any
Person and not withdrawn prior to the Meeting, and (B) within nine months after the earlier
of the date of termination of the Arrangement Agreement or the Meeting either (1) the
Acquisition Proposal is accepted, recommended or approved by the Board, and if applicable,
has not expired, been withdrawn or been publicly abandoned, or (2) any Person or company
acquires more than 50% of the issued and outstanding Shares or more than 50% of the consolidated
assets of Correvio under such Acquisition Proposal. For the purposes of the foregoing,
the term “Acquisition Proposal” shall have the meaning set out in the Glossary
of Terms, except that references to “20%” shall be deemed “50%”. |
Insurance
and Indemnification
Prior to
the Effective Date, Correvio will purchase customary and normal course “run-off” policies of directors’ and
officers’ liability insurance providing protection not materially more favourable in the aggregate to the protection provided
by the policies maintained by Correvio which are in effect as of immediately prior to the Effective Time and providing protection
in respect of Claims arising from facts or events which occurred on or prior to the Effective Date and the Purchaser will, or
will cause Correvio to, maintain such tail policies in effect without any reduction in scope or coverage for six years from the
Effective Date. The Parties agreed that the premium for such tail policies will not exceed 300% of the annual premiums for the
directors’ and officers’ liability insurance policy of Correvio in effect as at the date of the Arrangement Agreement,
provided, that, if applicable, if the premiums of such tail insurance coverage exceed such amount, Correvio will have the right
to obtain a tail policy with the best coverage available for a cost not exceeding such amount.
The Purchaser
agreed that it will cause Correvio to honour all rights to advancement, indemnification or exculpation now existing in favour
of present and former officers and directors of Correvio and its subsidiaries that are expressly disclosed in the Correvio Disclosure
Letter and acknowledges that such rights will survive the completion of the Plan of Arrangement and will continue in full force
and effect for a period of not less than six years from the Effective Date.
CRG
Loan Amendment & Waiver
Pursuant
to the CRG Loan, Correvio and the other obligors under such loan must maintain at all times liquidity in an aggregate amount of
US$10,000,000, subject to certain limited exceptions (the “Liquidity Covenant”). In connection with and prior
to entering into the Arrangement Agreement, on March 12, 2020, Correvio and CRG entered into the fourth amending agreement to
the CRG Loan. Pursuant to such amendment, CRG has waived, for a period of time only, the Liquidity Covenant otherwise applicable
to Correvio. Such waiver period will end on the earlier to occur of June 30, 2020 and the termination of the Arrangement Agreement.
In addition, such amendment provides that the 2019 minimum revenue threshold for Correvio be lowered from US$36,000,000 to US$32,000,000.
Because
entering into the Arrangement Agreement and certain actions undertaken thereafter to effect the Plan of Arrangement could likely
constitute an event of default under the CRG Loan, the Company entered into a consent agreement (the “CRG Consent”)
dated March 15, 2020 with CRG. Pursuant to the CRG Consent, CRG (i) consented to the entry by the Company into the Arrangement
Agreement, and (ii) agreed that concurrent with the full repayment of the obligations owing under the CRG Loan upon the completion
of the Arrangement, the 1,500,000 purchase warrants issued by the Company to CRG in connection with the amended and restated term
loan agreement dated as of May 11, 2017 among, inter alios, Cardiome and CRG and the first amendment thereto dated March
27, 2018, and as assumed by Correvio pursuant to the assumption of warrant agreements dated May 15, 2018 granted in connection
with the CRG Loan (the “CRG Warrants”), will be cancelled for no consideration. All of the CRG Warrants are
out-of-the-money.
In connection
with the Arrangement, ADVANZ or the Purchaser intends to fully repay the CRG Loan and obtain a release from CRG in connection
therewith.
Risks
Associated with the Arrangement
In
assessing the Arrangement, Securityholders should carefully consider the risks described below, together with the other information
contained in this Circular. Additional risks and uncertainties, including those currently unknown to Correvio or not considered
to be material to Correvio, may also adversely affect the Arrangement and the business of Correvio. In addition, Securityholders
should carefully consider the risk factors described under the heading “Risk Factors” in the Annual Information Form,
which has been filed on SEDAR at www.sedar.com under filings made by Correvio.
Risks
Related to the Arrangement
Court
approval of the Arrangement may be delayed due to the COVID-19 Pandemic
The completion
of the Arrangement is subject to the approval of the Court. Court operations are currently suspended as a result of the COVID-19
pandemic. If such operations remain suspended when the hearing for the Final Order is scheduled to take place, Correvio intends
to apply to the Court to have the application for the Final Order heard on an urgent basis. However, the Court has discretion
to decline to hear such matter, in which case the application for the Final Order would be delayed until the Courts re-open. Should
such delay caused by the closure of the Courts cause delay in the entry of the Final Order such that the Arrangement could not
be completed by the Outside Date, such delay could result in the termination of the Arrangement Agreement (if the Outside Date
is not mutually extended by Correvio and the Purchaser).
The
Arrangement Agreement may be terminated in certain circumstances
Each of
Correvio and the Purchaser has the right to terminate the Arrangement Agreement in certain circumstances. Accordingly, there is
no certainty, nor can Correvio provide any assurance, that the Arrangement Agreement will not be terminated by either Correvio
or the Purchaser before the completion of the Arrangement.
If the Arrangement
Agreement is terminated, there is no assurance that the Board will be able to find a party willing to pay an equivalent or greater
price than the Arrangement Consideration to be paid pursuant to the terms of the Arrangement Agreement.
There
can be no certainty that all conditions precedent to the Arrangement will be satisfied.
The completion
of the Arrangement is subject to a number of conditions precedent, some of which are outside the control of Correvio, including
receipt of the Final Order and receipt of certain third party consents, in addition to approval of the Arrangement Resolution
as set out in this Circular. There can be no certainty, nor can Correvio provide any assurance, that these conditions will be
satisfied or, if satisfied, when they will be satisfied. A delay in obtaining satisfactory approvals could have an adverse effect
on the business, financial condition or results of operations of Correvio or could result in the termination of the Arrangement
Agreement. If the Arrangement is not completed, the dedication of substantial resources of Correvio to the completion thereof
could have a negative effect on Correvio’s current business relationships and on Correvio’s business, results of operations
or prospects. In addition, the market price of the Shares may decline if, for any reason, the Arrangement Agreement is terminated
or the Arrangement is otherwise not completed, whether or not Correvio is required to pay a Termination Fee to the Purchaser.
Correvio
will incur costs even if the Arrangement is not completed and may have to pay the Termination Fee.
Certain
costs related to the Arrangement, such as legal, accounting and certain financial advisor fees, must be paid by Correvio and the
Purchaser even if the Arrangement is not completed. Correvio and the Purchaser are generally each liable for their own costs incurred
in connection with the Arrangement. If the Arrangement is not completed, Correvio may be required to pay the Purchaser the Termination
Fee. See “The Arrangement – The Arrangement Agreement – Termination”.
The
Termination Fee provided under the Arrangement Agreement may discourage other parties from attempting to acquire Correvio.
Under the
Arrangement Agreement, Correvio would be required to pay a Termination Fee of US$3.5 million in the event the Arrangement Agreement
is terminated in certain circumstances. This Termination Fee may discourage other parties from attempting to acquire the Shares
or otherwise make an Acquisition Proposal, even if those parties would otherwise be willing to offer greater value to Correvio
or its Securityholders than that offered by the Purchaser under the Arrangement. See “The Arrangement – The Arrangement
Agreement – Termination”.
The
required securityholder approval may not be obtained.
There can
be no certainty, nor can Correvio provide any assurance, that the required securityholder approval of the Arrangement Resolution
will be obtained. The Arrangement is subject to, among other approvals, the approval of (i) at least 66⅔% of the votes cast
on the Arrangement Resolution by the Shareholders present online or represented by proxy at the Meeting and (ii) at least 66⅔%
of the votes cast on the Arrangement Resolution by the Securityholders (on an As-Converted Basis, as applicable) present online
or represented by proxy at the Meeting, voting together as a single class. If such approval is not obtained and the Arrangement
is not completed, it could have a material adverse effect on the business, operating results or prospects of Correvio.
While
the Arrangement is pending, Correvio is restricted from taking certain actions.
The Arrangement
Agreement restricts Correvio from taking certain specified actions until the Arrangement is completed without the consent of the
Purchaser. These restrictions may prevent Correvio from pursuing attractive business opportunities that may arise prior to the
completion of the Arrangement.
The
market price for the Shares may decline if the Arrangement Agreement is terminated.
If the Arrangement
Agreement is terminated for any reason or the Arrangement is otherwise not completed (including in the event it is not approved
by the Securityholders), the market price for the Shares may decline, whether or not Correvio is required to pay a Termination
Fee to the Purchaser. If the Arrangement Resolution is not approved and the Board decides to seek another merger or arrangement,
there can be no assurance that it will be able to find a party willing to pay an equivalent or more attractive price than the
aggregate consideration to be paid to the Securityholders pursuant to the Arrangement.
Securityholders
will no longer hold an interest in the Company following the Arrangement.
Following
the Arrangement, Securityholders will no longer hold any of the Securities and Securityholders will forego any future increase
in value that might result from future growth and the potential achievement of the Company’s long-term plans.
Risks
Related to the Sale of Shares for Cash
Risks
associated with the sale of Securities for the Arrangement Consideration.
Pursuant
to the provisions of the Plan of Arrangement, each Shareholder will received US$0.42 in cash for each Share held, less applicable
withholdings; each Optionholder will receive a cash payment equal to the amount, if any, by which the Share Consideration exceeds
the exercise price payable under such Option by the holder thereof to acquire the Share underlying such Option, net of applicable
withholding Taxes; each RSU holder will receive US$0.42 in cash for each RSU held, net of applicable withholding Taxes; and each
PSU holder will receive US$0.42 in cash for each PSU held, net of applicable withholding Taxes. The consideration per Share, Option,
RSU and PSU is fixed and it will not increase or decrease due to fluctuations in the market price of the Shares.
The
Arrangement Consideration may not reflect the highest quoted trading price of the Shares in the Company’s history.
The trading
price of the Shares has fluctuated significantly. There can be no assurance that the Shares would not trade for more than the
Arrangement Consideration at some point in the future if the Arrangement is not completed.
Tax
issues.
Securityholders
should consider Tax implications arising from the transactions and should seek independent advice from their own Tax and legal
advisors prior to voting in respect of the Arrangement. See “Certain Canadian Federal Income Tax Considerations”.
Risks
Relating to Correvio
Continuing
risks faced by Correvio if Arrangement not completed.
If the Arrangement
is not approved by Securityholders or if the Arrangement is not completed for any other reason, it is expected that management
will operate Correvio in a manner similar to that in which it is being operated today and Securityholders will continue to be
subject to the same risks to which they are currently subject. Such risk factors are set forth and described in the Annual Information
Form, Correvio’s annual financial statements and management’s discussion and analysis for the year ended December
31, 2019. In connection with and prior to entering into the Arrangement Agreement, on March 12, 2020, Correvio and CRG entered
into the fourth amending agreement to the CRG Loan. Pursuant to such amendment, CRG has waived, for a period of time only, the
minimum liquidity covenant otherwise applicable to Correvio. Such waiver period will end on the earlier to occur of June 30, 2020
and the termination of the Arrangement Agreement. Therefore, if the Arrangement is not completed for any reason, or is not completed
prior to June 30, 2020 (being the Outside Date), Correvio will likely be offside of its obligations under the CRG Loan. CRG could
thereafter take certain enforcement action against the Company. After the Outside Date, there can be no assurance that Correvio
will have sufficient liquidity to satisfy its obligations to CRG or otherwise. See “CRG Loan Amendment & Waiver”.
Management
time and attention diverted from the existing business of Correvio.
Significant
management time and attention will be diverted from the existing business of Correvio in order to undertake the Arrangement, which
could have an adverse impact on Correvio. For example, if management’s attention is diverted from day-to-day operations,
customers and suppliers could seek to adversely modify or terminate their existing relationships with Correvio.
Completion
of the Arrangement is subject to the condition that a Material Adverse Effect has not occurred
The completion
of the Arrangement is subject to the condition that, among other things, there shall not have occurred a Material Adverse Effect
on or prior to the date of the Arrangement Agreement which is continuing as at the Effective Date and since the date of the Arrangement
Agreement, there has not occurred a Material Adverse Effect. Although a Material Adverse Effect excludes certain events, including
events in some cases that are beyond the control of Correvio, there can be no assurance that a Material Adverse Effect will not
occur prior to the Effective Time. If such a Material Adverse Effect occurs and the Purchaser does not waive same, the Arrangement
would not proceed. See “The Arrangement - The Arrangement Agreement - Conditions to the Arrangement Becoming Effective
- Purchaser Conditions ”.
Failure
to complete the Arrangement could negatively impact Correvio’s future business, operations and the price of Shares.
If the Arrangement
is not completed for any reason, the market price for the Shares may decline if, for any reason, the Arrangement Agreement is
terminated, whether or not Correvio is required to pay a Termination Fee to Purchaser. In addition, Correvio’s clients and
strategic partners, in response to the announcement of the Arrangement, may delay or defer decisions concerning Correvio. Any
delay or deferral in those decisions by clients and/or strategic partners could have a material adverse effect on the business
and operations of Correvio if the transaction is not completed. Similarly, current and prospective Correvio employees and registered
Representatives may experience uncertainty about future roles with Correvio and this may adversely affect Correvio’s ability
to attract or retain key management, sales, marketing and registered personnel in the event the Arrangement is not completed.
See also the risks above under the heading “The Arrangement – Risks Associated with the Arrangement – Continuing
risks faced by Correvio if Arrangement not completed”.
Arrangement
Mechanics
Procedure
for Exchange of Shares, Options, RSUs and PSUs for Arrangement Consideration
If you are
a Registered Shareholder, in order to receive the Share Consideration that you are entitled to upon the completion of the Arrangement,
you must complete and sign the Letter of Transmittal enclosed with this Circular and return it, together with the certificate(s)/DRS
advice(s) representing your Shares and any other required documents and instruments, to the Depositary in accordance with the
procedures set out in the enclosed Letter of Transmittal.
See “The
Arrangement - Arrangement Mechanics - Letters of Transmittal”.
Non-Registered
Shareholders whose Shares are registered in the name of an Intermediary should contact their Intermediary for instructions and
assistance in receiving the Share Consideration to which they are entitled pursuant to the Arrangement.
As soon
as practicable following the later of the Effective Date and, if applicable, the surrender of the Letter of Transmittal, certificate(s)/DRS
advice(s) and any other required documents and instruments to the Depositary, a Shareholder will be entitled to receive the Share
Consideration payable for his, her or its Share(s) in the form of a cheque or wire transfer representing the net cash payment
payable to such former Shareholder, which the Purchaser shall cause the Depositary to (in the case of payment by cheque):
| (i) | forward
or cause to be forwarded by first class mail to the former Shareholder at the address
specified in the Letter of Transmittal; |
| (ii) | if
requested by the former Shareholder in the Letter of Transmittal, make available at the
offices of the Depositary specified in the Letter of Transmittal for pick-up by the former
Shareholder; or |
| (iii) | if
the Letter of Transmittal neither specifies an address as described in (i) above nor
contains a request as described in (ii) above, forward or cause to be forwarded by mail
to such former Shareholder at the address of such former Shareholder as shown on the
share register maintained by Correvio immediately prior to the Effective Time. |
As soon
as practicable after the Effective Date, the Depositary will deliver to each Optionholder and holders of RSUs and PSUs, the aggregate
amount of the Arrangement Consideration, net of applicable withholding Taxes, that the Optionholder or holder of RSUs or PSUs,
as applicable, is entitled to receive. Optionholders and holders of RSUs and PSUs do not need to deliver the Letter of Transmittal
or any other certificates or documentation in order to receive the applicable Arrangement Consideration. Such Arrangement Consideration
payable to Optionholders and holders of RSUs and PSUs will be delivered by way of first class mail to the address shown on the
register of Optionholders, RSU holders or PSU holders of Correvio, as applicable, maintained by or on behalf of Correvio or by
wire transfer if wire instructions are provided to Correvio. Where it is determined that delivery by mail may be delayed, the
Depositary may make arrangements to hold for pick-up a cheque at one of its office locations until it is determined that delivery
by mail will no longer be delayed.
No Securityholder
shall be entitled to receive any consideration with respect to the Shares, Options, RSUs and PSUs other than the consideration
to which a Securityholder is entitled in accordance with the Plan of Arrangement and, for greater certainty, no Securityholder
will be entitled to receive any other interest, dividends, premium or other payment in connection therewith.
For further
details regarding the Arrangement Consideration discussed above, see the Plan of Arrangement attached as Appendix “B”
to this Circular.
Letters
of Transmittal
Included
with this Circular is a Letter of Transmittal. In order to receive Share Consideration, Registered Shareholders must complete
and sign the Letter of Transmittal and deliver it, together with certificates representing their Shares or DRS advice(s) and the
other required documents, to the Depositary in accordance with the instructions contained in the Letter of Transmittal.
The Letter
of Transmittal contains procedural information relating to the Arrangement and should be reviewed carefully. The deposit of Shares
pursuant to the procedures in the Letter of Transmittal will constitute a binding agreement among the depositing Shareholder and
the Purchaser upon the terms and subject to the conditions of the Plan of Arrangement.
Copies of
the Letter of Transmittal may be obtained by contacting the Depositary. The Letter of Transmittal will also be available on SEDAR
at www.sedar.com under Correvio’s profile.
The Purchaser
reserves the right to waive or not to waive any and all errors or other deficiencies in any Letter of Transmittal or other document
and any such waiver or non-waiver will be binding upon the affected Shareholder. The granting of a waiver to one or more Shareholders
does not constitute a waiver for any other Shareholder. Correvio and the Purchaser reserve the right to demand strict compliance
with the terms of the Letter of Transmittal and the Arrangement. The method used to deliver the Letter of Transmittal and any
accompanying certificates representing Shares is at the option and risk of the Shareholder surrendering them, and delivery will
be deemed effective only when such documents are actually received by the Depositary. Correvio recommends that the necessary documentation
be hand delivered to the Depositary, and a receipt obtained therefor; otherwise, the use of registered mail with return receipt
requested, and with proper insurance obtained, is recommended.
Shareholders
whose Shares are registered in the name of a broker, investment dealer, bank, trust company, trustee or other nominee or Intermediary
should contact that nominee for assistance in depositing their Shares and should follow the instructions of such nominee in order
to deposit their Shares.
Lost
Certificates
If any certificate
representing Shares has been lost, stolen or destroyed, the registered holder of such Share(s) should complete the Letter of Transmittal
as fully as possible and forward it, together with the documentation regarding such lost, theft or destruction as set out in the
Letter of Transmittal, to the Depositary. The Depositary will assist in making arrangements for the payment of the Share Consideration
in accordance with the Arrangement. Further details are set out in the Letter of Transmittal. As a condition precedent to the
delivery of the Share Consideration in exchange for Share(s) represented by certificates which have been lost, stolen or destroyed,
the registered holder thereof will be required to indemnify Correvio, the Purchaser and the Depositary against any Claim that
may be made against Correvio, the Purchaser or the Depositary with respect to such lost, stolen or destroyed certificate.
Cancellation
of Rights After Six Years
Any certificate
which immediately before the Effective Date represented Shares and which has not been duly surrendered, with all other documents
required by the Depositary, on or before the sixth anniversary of the Effective Date, will cease to represent any Claim of any
nature whatsoever and will be deemed to have been surrendered to the Purchaser and will be cancelled. After the sixth anniversary
of the Effective Date, all Share Consideration to which the former holder of such certificate(s)/DRS advice(s) was entitled shall
be automatically cancelled without any repayment of capital in respect thereof and the Share Consideration to which such former
Shareholder was entitled shall be delivered to the Purchaser by the Depositary. Accordingly, Persons who tender certificates for
Shares after the sixth anniversary of the Effective Date will not receive Share Consideration and will not be paid any cash or
other compensation.
Dissent
Rights
The following
is a summary of the provisions of the CBCA relating to a Shareholder’s dissent and appraisal rights in respect of the Arrangement
Resolution. Such summary is not a comprehensive statement of the procedures to be followed by a Dissenting Shareholder who seeks
payment of the fair value of its Shares. This summary is qualified in its entirety by reference to the full text of the section
190 of the CBCA, which is attached as Appendix “E” to this Circular, as modified by the Plan of Arrangement and the
Interim Order (which is attached at Appendix “D” to this Circular).
The statutory
provisions dealing with the right of dissent are technical and complex. Any Shareholder seeking to exercise his, her or its Dissent
Rights should seek independent legal advice, as failure to comply strictly with the provisions of section 190 of the CBCA, as
modified by the Plan of Arrangement and the Interim Order, may result in the loss of all Dissent Rights.
The Interim
Order expressly provides Registered Shareholders with the right to dissent with respect to the Arrangement Resolution. Each Dissenting
Shareholder is entitled to be paid the fair value (determined as of immediately before the passing of the Arrangement Resolution)
of all, but not less than all, of the holder’s Shares, provided that the holder duly dissents to the Arrangement Resolution
and the Arrangement becomes effective.
To exercise
Dissent Rights, a Registered Shareholder must dissent with respect to all Shares for which it is the registered and beneficial
owner (the “Notice Shares”). A Registered Shareholder who wishes to dissent must deliver a notice of dissent
to Correvio (the “Notice of Dissent”) at its address for such purpose, Blake, Cassels & Graydon LLP, 2600
– 595 Burrard Street, Vancouver, British Columbia, V7X 1L3, Attention: Alexandra Luchenko, or by email to alexandra.luchenko@blakes.com
to be received not later than 10:00 a.m. (Pacific Time) on May 13, 2020, or two Business Days prior to any adjournment of the
Meeting and must not vote any Dissent Shares in favour of the Arrangement. Such Notice of Dissent must strictly comply with the
requirements of section 190 of CBCA, as modified by the Plan of Arrangement and the Interim Order. A Registered Shareholder must
prepare a separate Notice of Dissent for him, her or itself, if dissenting on his, her or its own behalf, and for each other Non-Registered
Shareholder who beneficially owns Shares registered in the Shareholder’s name and on whose behalf the Shareholder is dissenting
and must dissent with respect to all of the Shares registered in his, her or its name and beneficially owned by the Non-Registered
Shareholder on whose behalf the Shareholder is dissenting.
In many
cases, Shares beneficially owned by a holder are registered either (a) in the name of an Intermediary such as, among others, banks,
trust companies, securities, brokers, trustees and other similar entities, or (b) in the name of a depository, such as CDS &
Co., in Canada, or DTC, in the United States, of which the Intermediary is a participant. Accordingly, a beneficial Shareholder
will not be entitled to exercise his, her or its rights of dissent directly (unless the Shares are re-registered in the beneficial
Shareholder’s name).
A Non-Registered
Shareholder who wishes to exercise the Dissent Rights must arrange for the Registered Shareholder(s) holding its Shares to deliver
the Notice of Dissent and should seek further instructions to ensure the Registered Shareholder follows all necessary procedures
in respect of such Dissent Rights on behalf of, or in conjunction with, such Non-Registered Shareholder. The Notice of Dissent
must set out the number of Dissent Shares the Dissenting Shareholder holds.
If the Arrangement
Resolution is passed at the Meeting, Correvio must send by registered mail to every Dissenting Shareholder, a notice (the “Notice
of Intention”). A Notice of Intention is not required to be sent to any Dissenting Shareholder who voted in favour of
the Arrangement Resolution or who has withdrawn their Notice of Dissent. A Dissenting Shareholder then has 20 days after receipt
of the Notice of Intention or, if the Dissenting Shareholder does not receive a Notice of Intention, within 20 days after learning
that the Arrangement Resolution has been adopted, to send to Correvio a written notice (a “Demand Notice”)
containing the Dissenting Shareholder’s name and address, and the number of Dissent Shares the Dissenting Shareholder holds
and in respect of which it dissents and a demand for the payment of the fair value of such Dissent Shares. A Dissenting Shareholder
must within 30 days after sending the Demand Notice, send the certificates representing the Dissent Shares to Correvio or its
transfer agent or else the Dissenting Shareholder will lose its right to make a claim under section 190 of the CBCA.
Correvio
will pay to each Dissenting Shareholder for the Dissent Shares the amount determined by the directors of Correvio to be the fair
value as offered by Correvio and as may be accepted by the Dissenting Shareholder. Correvio (or a Dissenting Shareholder, if Correvio
fails to apply) may apply to the Court if no agreement on the amount to be paid for the Dissent Shares has been reached, and the
Court may:
| (a) | determine
the fair value of the Dissent Shares; |
| (b) | join
in the application each other Dissenting Shareholder who has not reached an agreement
with Correvio as to the amount to be paid for the Dissent Shares; and/or |
| (c) | make
consequential orders and give directions it considers appropriate. |
Dissenting
Shareholders who are ultimately entitled to be paid fair value for their Dissent Shares will be entitled to be paid such fair
value and will not be entitled to any other payment or consideration, including any payment or consideration that would be payable
under the Plan of Arrangement had they not exercised their Dissent Rights.
A vote against
the Arrangement Resolution does not constitute a Notice of Dissent and a Registered Shareholder is not entitled to exercise Dissent
Rights with respect to Shares if such holder votes (or instructs, or is deemed, by submission of any incomplete proxy, to have
instructed his, her or its proxyholder, to vote) or in the case of a Non-Registered Shareholder caused, or is deemed to have caused,
the Registered Shareholder to vote, in favour of the Arrangement Resolution at the Meeting.
In no circumstances
will Correvio or any other person be required to recognize a person as a Dissenting Shareholder: (i) unless such person is the
holder of the Shares in respect of which Dissent Rights are purported to be exercise immediately prior to the Effective Time;
(ii) if such person has voted or instructed a proxy holder to vote such Notice Shares in favour of the Arrangement Resolution;
or (iii) unless such person has strictly complied with the procedures for exercising Dissent Rights set out in section 190 of
the CBCA, as modified by the Plan of Arrangement and the Interim Order, and does not withdraw such Notice of Dissent prior to
the Effective Time. Nor will Correvio or any other person be required to recognize a Dissenting Shareholder as the holder of any
Shares in respect of which Dissent Rights have been validly exercised at and after the completion of the steps contemplated in
the Plan of Arrangement.
Dissent
Rights with respect to Notice Shares will terminate and cease to apply to the Dissenting Shareholder if, before full payment is
made for the Notice Shares, the Arrangement in respect of which the Notice of Dissent was sent is abandoned or by its terms will
not proceed, a court permanently enjoins or sets aside the corporate action approved by the Arrangement Resolution, or the Dissenting
Shareholder withdraws the Notice of Dissent with Correvio’s written consent. If any of these events occur, Correvio may
return the share certificates representing the Shares to the Dissenting Shareholder and the Dissenting Shareholder regains the
ability to vote and exercise its rights as a Shareholder.
If a Dissenting
Shareholder fails to strictly comply with the requirements of the Dissent Rights set out in Section 190 of the CBCA, as modified
by the Plan of Arrangement, the Interim Order and the Final Order, it will lose its Dissent Rights, Correvio will return to the
Dissenting Shareholder the certificate(s) representing the Dissent Shares that were delivered to Correvio, if any, and, if the
Arrangement is completed, that Dissenting Shareholder shall be deemed to have participated in the Arrangement on the same terms
as all other Shareholders who are not Dissenting Shareholders. Neither Correvio nor any other person shall be required to recognize
a Dissenting Shareholder as a registered or beneficial owner of Shares at or after the Effective Time, and at the Effective Time
the names of such Dissenting Shareholders shall be deleted from the register of holders of Shares maintained by or on behalf of
Correvio.
Registered
Shareholders wishing to exercise the Dissent Rights should consult their legal advisors with respect to the legal rights available
to them in relation to the Arrangement and the Dissent Rights. Registered Shareholders should note that the exercise of Dissent
Rights can be a complex, time-consuming and expensive procedure. The discussion above is only a summary of the Dissent Rights.
If, as of
the Effective Date, the aggregate number of Shares in respect of which Shareholders have duly and validly exercised Dissent Rights
exceeds 5% of the Shares then outstanding, then, pursuant to the Arrangement Agreement, the Purchaser is entitled, in its discretion,
not to complete the Arrangement.
See “The
Arrangement – The Arrangement Agreement – Conditions to the Arrangement Becoming Effective”.
CERTAIN
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following
summary describes, as of the date hereof, the principal Canadian federal income Tax considerations in respect of the Arrangement
generally applicable to a Shareholder who, for purposes of the Tax Act, and at all relevant times, deals at arm’s length
with each of Correvio and the Purchaser and is not affiliated with Correvio or the Purchaser, holds Shares as capital property,
and disposes of such Shares under the Arrangement (a “Holder”). Shares will generally be considered to be capital
property to a Holder unless the Holder holds such Shares in the course of carrying on a business of trading or dealing in securities
or the Holder acquired such Shares in a transaction or transactions considered to be an adventure or concern in the nature of
trade.
This summary
is based upon the facts set out in this Circular, the current provisions of the Tax Act and Correvio’s counsel’s understanding
of the published administrative practices of the CRA published in writing prior to the date hereof. This summary also takes into
account all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior
to the date hereof (the “Tax Proposals”) and assumes that all Tax Proposals will be enacted in the form proposed.
However, there can be no assurance that the Tax Proposals will be enacted in their current form, or at all. This summary is not
exhaustive of all possible Canadian federal income Tax considerations and, except for the Tax Proposals, does not take into account
or anticipate any changes in Law or administrative practice, whether by legislative, regulatory, administrative or judicial decision
or action, nor does it take into account or consider other federal or any provincial, territorial or foreign Tax considerations,
which may differ significantly from the Canadian federal income Tax considerations described herein.
This summary
is not applicable to a Person that is: (a) a Holder that is a “financial institution” (for the purposes of the “mark-to-market”
rules) or a “specified financial institution”, each as defined in the Tax Act; (b) a Holder an interest in which would
be a “tax shelter investment” within the meaning of the Tax Act; (c) a Holder whose “functional currency”
for the purposes of the Tax Act is the currency of a country other than Canada; (d) a Holder that acquired Shares pursuant to
the exercise of an employee stock Option or other equity-based employment compensation plan; or (e) a Holder that has entered
into, with respect to the Shares, a "derivative forward agreement" or “synthetic disposition agreement”
as those terms are defined in the Tax Act.
This
summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or Tax advice to any particular
Shareholder. This summary is not exhaustive of all Canadian federal income Tax considerations. Consequently, Shareholders are
urged to consult their own tax advisors for advice regarding the income Tax consequences to them of disposing of their Shares
under the Arrangement, having regard to their own particular circumstances, and any other consequences to them of such transactions
under Canadian federal, provincial, local and foreign Tax laws.
This
summary does not address the Tax consequences to a holder who is a beneficial owner of Options, RSUs and PSUs. Such holders should
consult their own Tax advisors.
Holders
Resident in Canada
The following
portion of the summary is generally applicable to a Holder who, for purposes of the Tax Act, and at all relevant times, is resident
or deemed to be resident in Canada (a “Resident Holder”). Certain Canadian Resident Holders whose Shares might
not otherwise be considered capital property may, in certain circumstances, make an irrevocable election in accordance with subsection
39(4) of the Tax Act to have the Shares and every “Canadian security” as defined in the Tax Act owned by such Resident
Holder in the taxation year in which the election is made, and in all subsequent taxation years, deemed to be capital property.
Resident Holders should consult with their own tax advisors if they contemplate making such an election.
Disposition
of Shares under the Arrangement
Under the
Arrangement, Resident Holders will dispose of their Shares to the Purchaser in consideration for a cash payment, and Resident
Holders will realize a capital gain (or a capital loss) equal to the amount by which the cash payment exceeds (or is less than)
the aggregate of the adjusted cost base to the Resident Holder of such Shares and any reasonable costs of disposition. The taxation
of capital gains and capital losses is discussed below under the heading “Certain Canadian Federal Income Tax Considerations
– Holders Resident in Canada – Capital Gains and Capital Losses”.
In the case
of a Resident Holder that is a corporation, or a trust or partnership of which a corporation, trust or partnership is a member
or beneficiary, the amount of any capital loss otherwise determined resulting from the disposition of Shares may be reduced by
the amount of dividends previously received or deemed to be received to the extent and under the circumstances prescribed in the
Tax Act. Resident Holders to whom these rules may be relevant should consult their own tax advisors.
Dissenting
Resident Holders
A Resident
Holder that, as a result of exercising its Dissent Rights, disposes of Shares to Correvio will be entitled to receive a cash payment
from Correvio of an amount equal to the fair value of the holder’s Shares (a “Dissenting Resident Holder”).
A Dissenting
Resident Holder who receives a cash payment from Correvio in consideration for such Dissenting Resident Holder’s Dissenting
Shares will be deemed to have received a taxable dividend equal to the amount, if any, by which the payment received (other than
in respect of interest awarded by a court) exceeds the paid-up capital (determined for purposes of the Tax Act) attributable to
such Shares immediately before their surrender to Correvio pursuant to the Arrangement. A Dissenting Resident Holder will also
be considered to have disposed of such Dissenting Shares for proceeds of disposition equal to the payment received in respect
of such Dissenting Shares less an amount in respect of interest, if any, awarded by a court and the amount of any deemed dividend
and will realize a capital gain (or capital loss) to the extent such adjusted proceeds of disposition, less any reasonable costs
of disposition exceed (or are exceeded by) such Dissenting Resident Holder’s adjusted cost base of the Shares disposed thereof.
Any such capital gain or capital loss realized by a Dissenting Resident Holder will be treated in the same manner as described
below under the heading “Certain Canadian Federal Income Tax Considerations – Holders Resident in Canada –
Capital Gains and Capital Losses”.
Any interest
paid or deemed to be paid to a Dissenting Non-Resident Holder in respect of a Share, including interest awarded by the Court,
will be included in the Dissenting Resident Holder’s income for the purposes of the Tax Act.
Dissenting
Resident Holders should consult their own tax advisors.
Taxation
of Deemed Dividends
Dividends
deemed to be received by a Dissenting Resident Holder in respect of a payment described under “Dissenting Resident Holders”
above will be included in the Dissenting Resident Holder’s income for the purposes of the Tax Act. Such dividends received
by a Dissenting Resident Holder who is an individual (including certain trusts) will be subject to the gross-up and dividend tax
credit rules in the Tax Act normally applicable to taxable dividends received by an individual from taxable Canadian corporation.
Such dividends deemed to be received by an individual (including certain trusts) may also give rise to a liability for minimum
tax.
In the case
of a Dissenting Resident Holder that is a corporation, dividends deemed to be received will be required to be included in computing
such corporation’s income for the taxation year in which such dividends are received and will generally be deductible in
computing the corporation’s taxable income. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable
dividend received by a Dissenting Resident Holder that is a corporation as proceeds of disposition or a capital gain. Accordingly,
Dissenting Resident Holders that are corporations should consult their own tax advisors for specific advice with respect to the
potential application of this provision.
A Dissenting
Resident Holder that is a “private corporation” (as defined in the Tax Act), or any other corporation resident in
Canada and controlled, whether because of a beneficial interest in one or more trusts or otherwise, by or for the benefit of an
individual (other than a trust) or a related group of individuals (other than trusts), may be liable under Part IV of the Tax
Act to pay a refundable tax on dividends deemed to be received to the extent that such dividends are deductible in computing the
Dissenting Resident Holder’s taxable income for the year.
Capital
Gains and Capital Losses
Generally,
a Resident Holder is required to include in computing its income for a taxation year one-half of the amount of any capital gain
(a “taxable capital gain”) realized in such taxation year. Subject to and in accordance with the provisions
of the Tax Act, a Resident Holder is required to deduct one-half of the amount of any capital loss (an “allowable capital
loss”) realized in a taxation year from taxable capital gains realized by the Resident Holder in the year. Allowable
capital losses in excess of taxable capital gains may be carried back and deducted in any of the three preceding taxation years
or carried forward and deducted in any subsequent taxation year against net taxable capital gains realized in such years to the
extent and in the circumstances prescribed in the Tax Act.
Capital
gains realized by individuals and certain trusts may give rise to a liability for minimum Tax under the Tax Act.
Additional
Refundable Tax
A Resident
Holder, including a Dissenting Resident Holder that is throughout the year a “Canadian-controlled private corporation”
as defined in the Tax Act may be liable to pay an additional refundable Tax on certain investment income, including taxable capital
gains and interest.
Holders
Not Resident in Canada
The following
portion of the summary is generally applicable to a Holder who, for the purposes of the Tax Act, and at all relevant times, is
not and has not been a resident or deemed to be a resident of Canada and does not use or hold, and is not deemed to use or hold,
Shares in connection with carrying on a business in Canada (a “Non-Resident Holder”). Special rules, which
are not discussed in this summary, apply to a non-resident that is an insurer carrying on business in Canada and elsewhere, or
an “authorized foreign bank”, as defined in the Tax Act. Such non-residents should consult their own tax advisors
with respect to the Arrangement.
Disposition
of Shares under the Arrangement
A Non-Resident
Holder will not be subject to Tax under the Tax Act on any capital gain, or entitled to deduct any capital loss, realized on the
disposition of Shares under the Arrangement unless such Shares constitute “taxable Canadian property” to the Non-Resident
Holder and do not constitute “treaty-protected property”.
Generally,
the Shares will not be taxable Canadian property to a Non-Resident Holder at the time of disposition provided that, in the case
where the Shares are listed on a designated stock exchange (which includes the TSX and Nasdaq) at the time of disposition, at
no particular time during the 60-month period immediately preceding the disposition: (a) did the Non-Resident Holder, Persons
with whom the Non-Resident Holder did not deal at arm’s length, partnerships in which the Non-Resident Holder or Persons
with whom the Non-Resident Holder did not deal at arm’s length holds a membership interest directly or indirectly through
one or more partnerships, or the Non-Resident Holder together with such Persons and partnerships, own 25% or more of the issued
shares of any class of Correvio; and (b) was more than 50% of the fair market value of the Shares derived directly or indirectly
from one or any combination of real or immovable property situated in Canada, “Canadian resource properties” (as defined
in the Tax Act), “timber resource properties” (as defined in the Tax Act) and options in respect of, or interests
in, or for civil law rights in, any such properties (whether or not such property exists). Notwithstanding the foregoing, in certain
limited circumstances set out in the Tax Act, Shares could be deemed to be taxable Canadian property to a Non-Resident Holder.
Non-Resident Holders should consult their own advisors for advice as to whether their Shares constitute taxable Canadian property,
having regard to their particular circumstances.
Even if
the Shares are taxable Canadian property to a Non-Resident Holder, a taxable capital gain resulting from the disposition of Shares
will not be included in computing the Non-Resident Holder’s income for the purposes of the Tax Act if the Shares constitute
“treaty-protected property”. Shares owned by a Non-Resident Holder will generally be treaty-protected property if
the gain from the disposition of such Shares would, because of an applicable income Tax treaty or convention, be exempt from Tax
under the Tax Act. In the event that Shares constitute taxable Canadian property but not treaty-protected property to a particular
Non-Resident Holder, the Tax consequences as described above under “Certain Canadian Federal Income Tax Considerations
– Holders Resident in Canada – Disposition of Shares Under the Arrangement” and “Certain
Canadian Federal Income Tax Considerations – Holders Resident in Canada – Capital Gains and Capital Losses”
will generally apply.
A Non-Resident
Holder who disposes of taxable Canadian property that is not treaty protected property should consult its own tax adviser, including
with regard to any Canadian income Tax reporting requirement arising from the Arrangement.
Dissenting
Non-Resident Holders
A Non-Resident
Holder that, as a result of exercising its Dissent Rights, disposes of Shares to Correvio will be entitled to receive a cash payment
from Correvio of an amount equal to the fair value of the holder’s Shares (a “Dissenting Non-Resident Holder”).
A Dissenting
Non-Resident Holder who receives a cash payment from Correvio in consideration for such Dissenting Non-Resident Holder’s
Dissenting Shares will be deemed to have received a taxable dividend equal to the amount, if any, by which the payment received
in respect of such Dissenting Shares (other than in respect of interest awarded by a court) exceeds the paid-up capital of such
Dissenting Shares as determined under the Tax Act. Any such deemed dividend will be subject to non-resident withholding Tax under
the Tax Act at a rate of 25% of the gross amount of the dividend, unless the rate is reduced by an applicable income Tax treaty
or convention.
A Dissenting
Non-Resident Holder will also be considered to have disposed of such Dissenting Shares for proceeds of disposition equal to the
payment received in respect of such Dissenting Shares less an amount in respect of interest, if any, awarded by a court and the
amount of any deemed dividend. Any capital gain received by a Dissenting Non-Resident Holder on such a disposition of Dissenting
Shares will generally not be subject to Tax under the Tax Act unless the Dissenting Shares are “taxable Canadian property”
to the Dissenting Non-Resident Holder and the Dissenting Shares are not “treaty-protected property” of the Dissenting
Non-Resident Shareholder at the time of disposition, as defined in the Tax Act. See the discussion above under the heading “Certain
Canadian Federal Income Tax Considerations – Holders Not Resident in Canada – Disposition of Shares under the Arrangement”.
Any interest
paid or deemed to be paid to a Dissenting Non-Resident Holder in respect of a Share, including interest awarded by the Court,
will not be subject to Canadian withholding Tax provided such interest does not constitute “participating debt interest”
for purposes of the Tax Act.
Dissenting
Non-Resident Holders should consult their own tax advisors for specific advice with respect to the Tax consequences in their own
particular circumstances of exercising their Dissent Rights.
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
following discussion is a summary of certain anticipated U.S. federal income tax consequences of the Arrangement to U.S. Holders
(as defined below) of Shares who hold such shares as capital assets (generally, for investment purposes). This discussion is based
on the U.S. Internal Revenue Code of 1986, as amended (the “U.S. Tax Code”), applicable U.S. Treasury Regulations,
administrative interpretations court decisions and practice, all as in effect as of the date of this Circular statement/prospectus,
and all of which may change, possibly with retroactive effect, or be subject to differing interpretations, and any such change
or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion.
For purposes
of this discussion, a “U.S. Holder” is a beneficial owner of Shares that is, for U.S. federal income tax purposes,
(i) an individual that is either a citizen or resident of the United States, (ii) a corporation (or other entity that is treated
as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States,
or any State thereof, or the District of Columbia, (iii) an estate whose income is subject to U.S. federal income tax regardless
of its source, or (iv) a trust (a) if a U.S. court exercises primary supervision over the trust’s administration and one
or more U.S. persons are authorized to control all substantial decisions of the trust, or (b) that has a valid election in effect
to be treated as a U.S. person for U.S. federal income tax purposes under applicable U.S. Treasury Regulations.
This discussion
does not apply to Shareholders subject to special rules, including brokers, dealers in securities or currencies, traders in securities
that elect to use a mark-to-market method of accounting for securities holdings, tax-exempt organizations, governmental organizations,
insurance companies, real estate investment trusts, regulated investment companies, banks, mutual funds, thrifts and other financial
institutions, persons liable for alternative minimum tax, persons that own or have owned, directly, indirectly or constructively,
10% or more (by vote or value) of all of the Shares, persons that hold an interest in an entity that holds Shares, partnerships,
S corporations or other entities treated as pass-through entities for U.S. federal income tax purposes, persons that hold Shares
as part of a hedging, integration, conversion or constructive sale transaction or a straddle or other integrated transaction,
persons that acquired their Shares through the exercise of an employee stock option or otherwise as compensation, U.S. expatriates,
or persons whose functional currency is not the U.S. dollar.
This discussion
does not address Shareholders who exercise and perfect any applicable dissent or appraisal rights or who hold their Shares other
than as capital assets for U.S. federal income tax purposes. In addition, this summary does not purport to be a complete description
of all of the potential U.S. federal income tax considerations of the Arrangement that may be relevant to U.S. Holders in light
of their particular circumstances. Furthermore, it does not address any aspect of non-U.S., state, local or estate or gift taxation,
the alternative minimum tax or the 3.8% Medicare tax imposed on certain net investment income. Each Shareholder should consult
its own tax advisor as to the U.S. federal, state, local, non-U.S. and any other tax consequences of the Arrangement.
If a partnership
or other pass-through entity or arrangement holds Shares, the U.S. federal income tax treatment of a partner, beneficiary or other
stakeholder in such partnership or other pass-through entity or arrangement will generally depend on the status of that person
and activities of that person and the partnership or other pass-through entity or arrangement. A partnership or other pass-through
entity or arrangement holding Shares, and a partner, beneficiary or other stakeholder in such partnership or other pass-through
entity or arrangement should consult its own tax advisor with regard to the U.S. federal income tax treatment of the Arrangement.
We strongly
urge each Shareholder to consult its own tax advisor to determine the particular U.S. federal, state or local or non-U.S. income
or other tax consequences to it of the Arrangement.
Consequences
of the Arrangement
The exchange
of Shares for the Share Consideration pursuant to the Arrangement will be a taxable transaction for U.S. federal income tax purposes.
A U.S. Holder that exchanges Shares for the Share Consideration will recognize gain or loss equal to the difference between (i)
the amount of cash received and (ii) such U.S. Holder’s adjusted U.S. federal income tax basis in the Shares exchanged therefor
pursuant to the Arrangement. Subject to the “passive foreign investment company” rules discussed below, such gain
or loss will be long-term capital gain or loss if the Shares were held for more than one year at the time of the Arrangement.
Passive
Foreign Investment Company Rules
A non-U.S.
corporation will be classified as a “passive foreign investment company” (“PFIC”) for U.S. federal
income tax purposes if either (i) at least 75% of its gross income in a taxable year, including its pro rata share of the gross
income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income or (ii) at least
50% of its assets in a taxable year (generally, for a publicly-traded company, determined based on fair market value and averaged
quarterly over the year), including its pro rata share of the assets of any corporation in which it is considered to own at least
25% of the shares by value, are held for the production of, or produce, passive income. For this purpose, passive income generally
includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or
business) and gains from the disposition of passive assets. For purposes of the PFIC asset test, the aggregate fair market value
of the assets of a publicly-traded non-U.S. corporation is generally treated as being
equal to the sum of the aggregate value of the outstanding stock and the total amount of the liabilities of such corporation (the
“Market Capitalization”) and the excess of the fair market value of such corporation’s assets as so determined
over the book value of such assets is generally treated as a non-passive asset to the extent attributable to such corporation’s
non-passive income. If a corporation is treated as a PFIC with respect to a U.S. Holder for any taxable year, the corporation
will continue to be treated as a PFIC with respect to that U.S. Holder in all succeeding taxable years, regardless of whether
the corporation continues to meet the PFIC requirements in such years, unless certain elections are made.
Based on certain
estimates of its gross income, gross assets, the nature of its business and its Market Capitalization, Correvio does not believe
that it currently is or ever has been a PFIC. Correvio’s actual PFIC status for the current taxable year, however, is uncertain
and cannot be determined until after the end of such taxable year. In addition, the determination as to whether a non-U.S. corporation
is a PFIC for any taxable year is based on the application of complex U.S. federal income tax rules (the “PFIC rules”),
which are subject to differing interpretations. As a result of these uncertainties in the application of the PFIC rules, there
can be no assurance that the IRS will not assert that Correvio is a PFIC for any taxable year or that a court will not sustain
such an assertion.
If Correvio
was classified as a PFIC for any taxable year during which a U.S. Holder owned Shares, any gain recognized by such U.S. Holder
pursuant to the Arrangement may be subject to higher rates of tax and a deemed interest charge, unless such U.S. Holder had timely
made certain elections.
The PFIC rules
are complex and subject to uncertainties. U.S. Holders should consult their own tax advisors regarding the potential U.S. federal
income tax consequences to them if Correvio is or was classified as a PFIC, including the availability and advisability of any
elections that the taxpayer may make and the impact of any elections that such U.S. Holder may already have in effect.
Backup
Withholding and Information Reporting
Information
returns generally are required to be filed with the IRS in connection with cash payments to U.S. Holders pursuant to the
Arrangement. Backup withholding at a current rate of 24% may apply to cash paid in the transaction to a U.S. Holder, unless the
U.S. Holder furnishes a correct taxpayer identification number and otherwise complies with the backup withholding rules or provides
proof of an applicable exemption. Backup withholding is not an additional tax. Any amount withheld under the backup withholding
rules will be allowed as a refund or credit against such U.S. Holder’s U.S. federal income tax liability, provided the required
information is timely furnished to the IRS. The IRS may impose a penalty upon any taxpayer that fails to provide the correct taxpayer
identification number.
CERTAIN
FOREIGN INCOME TAX CONSIDERATIONS
Securityholders
who are resident in, or citizens of, a foreign jurisdiction are advised to consult their own tax advisors to determine the non-Canadian
tax consequences to them of the Plan of Arrangement in light of their particular situation including any tax consequences that
may arise under any relevant non-U.S., state, local, or other taxing jurisdiction.
ADDITIONAL
INFORMATION
Additional
information relating to Correvio may be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Financial information is
provided in the Company’s comparative annual financial statements and Management’s Discussion and Analysis (“MD&A”)
for the most recently completed financial year.
Shareholder
proposals to be considered at the 2021 annual general meeting of the Shareholders of the Company must be received at the principal
offices of the Company no later than December 16, 2020 in order to be included in the Circular and form of proxy for such annual
general meeting.
Correvio
will provide to any person or company, without charge to any Shareholder, upon request to the Corporate Secretary of the Company,
copies of Correvio’s Annual Information Form together with a copy of any document (or the pertinent pages of any document)
incorporated therein by reference, the Company’s comparative consolidated financial statements and MD&A for the year
ended December 31, 2019 together with the accompanying auditor’s report and any interim consolidated financial statements
of the Company that have been filed for any period after the end of the Company’s most recently completed financial year,
and the Company’s Circular in respect of the Meeting held on May 9, 2019. The Company may require the payment of a reasonable
charge if a person who is not a Shareholder of the Company makes the request for information. The Company may be contacted by
telephone at toll-free 1-833-490-0586, by fax: (604) 677-6915, by mail: Investor Relations, 1441 Creekside Drive, 6th floor, Vancouver,
British Columbia V6J 4S7, or by e-mail: inquiries@gryphonadvisors.ca.
If a registered
holder or beneficial owner of the Company’s securities, other than debt instruments, requests the Company’s annual
or interim financial statements or MD&A, the Company will send a copy of the requested financial statements and MD&A (provided
it was filed less than two years before the Company receives the request) to the person or company that made the request, without
charge. Pursuant to National Instrument 51 102 – Continuous Disclosure Obligations, the Company is required to annually
send a request form to registered holders and beneficial owners of the Company’s securities, other than debt securities,
that such registered holders and beneficial owners may use to request a copy of the Company’s annual financial statements
and MD&A, interim financial statements and MD&A, or both. Registered holders and beneficial owners should review the request
form carefully. In particular, registered holders and beneficial owners should note that, under applicable Canadian Securities
Laws, the Company is only required to deliver financial statements and MD&A to a person or company that requests them. Failing
to return a request form or otherwise specifically requesting a copy of the financial statements or MD&A from the Company
may result in a registered holder or beneficial owner not being sent these documents. Copies of these documents can also be found
at www.sedar.com.
We are required
to file with the securities commission or authority in each of the applicable provinces of Canada annual and quarterly reports,
material change reports and other information. In addition, we are subject to the informational requirements of the U.S. Exchange
Act, and, in accordance with the U.S. Exchange Act, we also file reports with, and furnish other information to, the SEC. You
may read any document we file with or furnish to the securities commissions and authorities of the provinces of Canada through
SEDAR at www.sedar.com and any document we file with, or furnish to, the SEC at the SEC’s public reference room at Station
Place, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at l-800-SEC-0330 for further information on the public
reference rooms. Certain of our filings are also electronically available on EDGAR and may be accessed at www.sec.gov.
APPROVAL
OF DIRECTORS
The contents
and sending of this Circular, including the Notice of Annual General and Special Meeting, have been approved and authorized by
the Board.
April 7,
2020
| BY
ORDER OF THE BOARD OF DIRECTORS |
| |
| “W.
James O’Shea” |
| |
| Chairman |
| Correvio
Pharma Corp. |
CONSENT
OF PIPER SANDLER & CO.
To: The
Board of Directors of Correvio Pharma Corp.
We refer
to the written fairness opinion dated March 15, 2020 (the “Fairness Opinion”), prepared for the board of directors
of Correvio Pharma Corp. (the “Board”), in connection with the Arrangement (as defined in Correvio Pharma Corp.’s
management information circular dated April 7, 2020 (the “Circular”)), among Correvio Pharma Corp., ADVANZ
PHARMA Corp. Limited and Mercury Pharma Group Limited.
We consent
to the inclusion of the Fairness Opinion, a summary of and reference to the Fairness Opinion and the use of our firm name in the
Circular. In providing such consent, we do not intend that any person other than the Board shall rely upon the Fairness Opinion.
PIPER
SANDLER & CO.
“PIPER
SANDLER & CO.”
___________________________________
Date: April
7, 2020
APPENDIX
“A”
ARRANGEMENT RESOLUTION
The text
of the Arrangement Resolution which the shareholders and holders of Options, RSUs and PSUs will be asked to pass at the Meeting
is as follows:
BE IT
RESOLVED AS A SPECIAL RESOLUTION THAT:
| (1) | the arrangement
(the “Arrangement”) under Section 192 of the Canada Business Corporations
Act (the “CBCA”) involving Mercury Pharma Group Limited (“Purchaser”)
and Correvio Pharma Corp. (“Correvio”) and shareholders, restricted
share unit holders, phantom share unit holders and option holders of Correvio, all as
more particularly described and set forth in the management information circular (the
“Circular”) of Correvio dated April 7, 2020 accompanying the notice
of this meeting (as the Arrangement may be, or may have been, modified or amended in
accordance with its terms), is hereby authorized, approved and adopted; |
| (2) | the arrangement
agreement in respect of the Arrangement as it may be amended or modified from time to
time (the “Arrangement Agreement”) between Purchaser, ADVANZ PHARMA
Corp. Limited and Correvio dated March 15, 2020 and all the transactions contemplated
therein, the actions of the directors of Correvio in approving the Arrangement and the
actions of the directors and officers of Correvio in negotiating, executing and delivering
the Arrangement Agreement and any amendments thereto are hereby ratified and approved; |
| (3) | the plan
of arrangement (the “Plan of Arrangement”) of Correvio implementing
the Arrangement, the full text of which is set out in Schedule “A” to the
Arrangement Agreement (as the Plan of Arrangement may be, or may have been, modified
or amended in accordance with its terms), is hereby authorized, approved and adopted; |
| (4) | notwithstanding
that this resolution has been passed (and the Arrangement approved) by the shareholders
and holders of Options, RSUs and PSUs of Correvio or that the Arrangement has been approved
by the Supreme Court of British Columbia (the “Court”), the directors
of Correvio are hereby authorized and empowered, without further notice to, or approval
of, the shareholders of Correvio to amend or modify the Arrangement Agreement or the
Plan of Arrangement to the extent permitted by the Arrangement Agreement or the Plan
of Arrangement; |
| (5) | any director
or officer of Correvio is hereby authorized and directed for and on behalf of Correvio
to execute, whether under corporate seal of Correvio or otherwise, and to deliver articles
of arrangement and such other documents as are necessary or desirable to the Director
under the CBCA in accordance with the Arrangement Agreement for filing, such determination
to be conclusively evidenced by the execution and delivery of such articles of arrangement
and such other documents; |
| (6) | Correvio
be and is hereby authorized to apply for a final order from the Court to approve the
Arrangement on the terms set forth in the Arrangement Agreement and the Plan of Arrangement; |
| (7) | Correvio
be and is hereby authorized to apply for the delisting of its common shares from the
Toronto Stock Exchange and the Nasdaq Stock Market (the “Delisting”)
in connection with the transactions contemplated in the Arrangement Agreement; and |
| (8) | any one
director or officer of Correvio is hereby authorized, for and on behalf and in the name
of Correvio, to execute and deliver, whether under corporate seal of Correvio or otherwise,
all such agreements, forms, waivers, notices, certificate, confirmations and other documents
and instruments, and to do or cause to be done all such other acts and things, as in
the opinion of such director or officer may be necessary, desirable or useful for the
purpose of giving effect to these resolutions, the Arrangement Agreement, completion
of the Plan of Arrangement, and the Delisting, including: |
| a. | all actions
required to be taken by or on behalf of Correvio, and all necessary filings and obtaining
the necessary approvals, consents and acceptances of appropriate regulatory authorities;
and |
| b. | the signing
of the certificates, consents and other documents or declarations required under the
Arrangement Agreement or otherwise to be entered into by Correvio; |
such
determination to be conclusively evidenced by the execution and delivery of such document, agreement or instrument or the doing
of any such act or thing.
APPENDIX
“B”
PLAN OF ARRANGEMENT
See attached.
PLAN
OF ARRANGEMENT UNDER SECTION 192
OF THE CANADA BUSINESS CORPORATIONS ACT
ARTICLE 1
INTERPRETATION
In this
Plan of Arrangement, unless there is something in the subject matter or context inconsistent therewith and unless otherwise indicated,
the following terms shall have the respective meanings set out below and grammatical variations of those terms shall have corresponding
meanings:
| (a) | “Arrangement”
means the arrangement of Correvio under Section 192 of the CBCA, on the terms and subject
to the conditions set out in this Plan of Arrangement, subject to any amendments or variations
thereto made in accordance with Section 8.4 of the Arrangement Agreement or Article 6
of the Plan of Arrangement or made at the direction of the Court in the Final Order with
the consent of Correvio and Purchaser, each acting reasonably; |
| (b) | “Arrangement
Agreement” means the agreement made as of March 15, 2020 between Correvio,
Purchaser and ADVANZ PHARMA Corp. Limited, including the schedules thereto, as the same
may be supplemented or amended from time to time; |
| (c) | “Arrangement
Resolution” means the special resolution of the Shareholders and holders of
Options, RSUs and PSUs approving the Arrangement, this Plan of Arrangement and the Arrangement
Agreement to be considered at the Correvio Meeting; |
| (d) | “Articles
of Arrangement” means the articles of arrangement of Correvio in respect of
the Arrangement, to be filed with the Director after the Final Order is made; |
| (e) | “Business
Day” means a day other than a Saturday, a Sunday or any other day on which
commercial banking institutions in Vancouver, British Columbia or in Toronto, Ontario
are authorized or required by applicable Law to be closed; |
| (f) | “CBCA”
means the Canada Business Corporations Act including all regulations made thereunder; |
| (g) | “Consideration”
means the consideration to be received pursuant to the Plan of Arrangement in respect
of each Correvio Share that is issued and outstanding immediately prior to the Effective
Time, of $0.42 per Correvio Share; |
| (h) | “Correvio”
means Correvio Pharma Corp., a corporation incorporated under the federal laws of Canada; |
| (i) | “Correvio
Meeting” means the special meeting of the Shareholders and holders of Options,
RSUs and PSUs, including any adjournment or postponement thereof, to be called and held
in accordance with the Interim Order for the purpose of considering and, if thought fit,
approving the Arrangement Resolution; |
| (j) | “Correvio
Shares” means the common shares without par value in the capital of Correvio; |
| (k) | “Correvio
Share Letter of Transmittal” means the letter of transmittal to be delivered
by Correvio to the Shareholders providing for the delivery of Correvio Shares to the
Depositary; |
| (l) | “Court”
means the Supreme Court of British Columbia; |
| (m) | “CRA”
means the Canada Revenue Agency; |
| (n) | “Depositary”
means Computershare Investor Services Inc.; |
| (o) | “Director”
means the director appointed pursuant to Section 260 of the CBCA; |
| (p) | “Dissent
Rights” has the meaning ascribed thereto in Section 4.1; |
| (q) | “Dissenting
Shares” means the Correvio Shares held by Dissenting Shareholders in respect
of which such Dissenting Shareholders have given Notice of Dissent; |
| (r) | “Dissenting
Shareholder” means a registered holder of Correvio Shares who has duly and
validly exercised the Dissent Rights in respect of the Arrangement Resolution in strict
compliance with the Dissent Rights and who has not withdrawn or been deemed to have withdrawn
such exercise of Dissent Rights; |
| (s) | “Effective
Date” means the date upon which the Arrangement becomes effective as established
by the date of issue shown on the certificate giving effect to the Arrangement as issued
by the Director pursuant to Section 192(7) of the CBCA; |
| (t) | “Effective
Time” means 12:01 a.m. (Vancouver time) on the Effective Date or such other
time as Correvio and Purchaser may agree upon in writing; |
| (u) | “Final
Order” means the order of the Court granted pursuant to Section 192 of
the CBCA, in a form acceptable to Correvio and Purchaser, each acting reasonably, approving
the Arrangement, after a hearing upon the procedural and substantive fairness of the
terms and conditions of the Arrangement, as such order may be affirmed, amended, modified,
supplemented or varied by the Court (with the consent of Correvio and Purchaser, each
acting reasonably) at any time prior to the Effective Date or, if appealed, as affirmed
or amended (provided, however, that any such amendment is acceptable to Correvio and
Purchaser, each acting reasonably) on appeal unless such appeal is withdrawn, abandoned
or denied; |
| (v) | “Former
Correvio Shareholders” means the holders of Correvio Shares immediately prior
to the Effective Time; |
| (w) | “Governmental
Entity” (i) any multinational or supranational body or organization, nation,
government, state, province, country, territory, municipality, quasi-government, administrative,
judicial or regulatory authority, agency, board, body, bureau, commission, instrumentality,
court or tribunal or any political subdivision thereof, or any central bank (or similar
monetary or regulatory authority) thereof, any taxing authority, any ministry or department
or agency of any of the foregoing, (ii) any self-regulatory organization or stock exchange,
including the Toronto Stock Exchange and Nasdaq, (iii) any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining to government;
and (iv) any corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of such entities or other bodies pursuant to the foregoing; |
| (x) | “holder”,
when used with reference to any securities of Correvio, means the holder of such securities
shown from time to time in the central securities register maintained by or on behalf
of Correvio in respect of such securities; |
| (y) | “In-The-Money
Option” means each Option, at the Effective Time, with an exercise price per
Correvio Share less than the Consideration; |
| (z) | “Interim
Order” means the interim order of the Court to be issued following the application
therefor contemplated by Section 2.2(b) of the Arrangement Agreement, in a form
acceptable to Correvio and Purchaser, each acting reasonably, providing for, among other
things, the calling and holding of the Correvio Meeting, as such order may be affirmed,
amended, modified, supplemented or varied by the Court with the consent of both Correvio
and Purchaser, each acting reasonably; |
| (aa) | “Liability”
means, in respect of any Person, any debt, liability or obligation of any kind or nature
whatsoever, including (i) any right against such Person to payment, whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured, (ii) any right against
such Person to an equitable remedy for breach of performance, whether or not such right
to any equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured, and (iii) any obligation of such Person for
the performance of any covenant or agreement (whether for the payment of money or otherwise); |
| (bb) | “Liens”
means any mortgage, charge, pledge, hypothec, security interest, prior claim, encroachments,
option, right of first refusal or first offer, occupancy right, covenant, assignment,
lien (statutory or otherwise), defect of title, or restriction or adverse right or claim,
or other third party interest or encumbrance of any kind, in each case, whether contingent
or absolute; |
| (cc) | “Notice
of Dissent” means a notice of dissent duly and validly given by a registered
holder of Correvio Shares exercising Dissent Rights as contemplated in the Interim Order
and as described in Article 4; |
| (dd) | “Option”
means an option to acquire a Correvio Share granted pursuant to the Stock Option Plan
which is outstanding, whether or not vested; |
| (ee) | “Optionholder”
means a holder of one or more Options; |
| (ff) | “Out-Of-The-Money
Option” means an Option that is not an In-The-Money Option; |
| (gg) | “Person”
includes any individual, firm, partnership, limited partnership, limited liability partnership,
joint venture, venture capital fund, limited liability company, unlimited liability company,
association, trust, trustee, executor, administrator, legal personal representative,
estate, body corporate, corporation, company, unincorporated association or organization,
Governmental Entity, syndicate or other entity, whether or not having legal status; |
| (hh) | “Plan
of Arrangement” means this plan of arrangement and any amendments or variations
hereto made from time to time in accordance with the terms hereof or made upon the direction
of the Court in the Final Order, with the consent of Correvio and Purchaser, each acting
reasonably; |
| (ii) | “PSU
Plan” means Correvio’s Phantom Share Unit Plan adopted with effect from
May 15, 2018, or any predecessor phantom share until plan, as applicable; |
| (jj) | “PSUs”
means phantom share units issued under the PSU Plan; |
| (kk) | “Purchaser”
means Mercury Pharma Group Limited; |
| (ll) | “RSU
Plan” means Correvio’s Restricted Share Unit Plan last approved by Correvio
Shareholders on May 9, 2018; |
| (mm) | “RSUs”
means restricted share units issued under the RSU Plan; |
| (nn) | “Shareholder”
means a holder of one or more Correvio Shares; |
| (oo) | “Stock
Option Plan” means the Incentive Stock Option Plan of Correvio last approved
by Correvio Shareholders on May 9, 2018; |
| (pp) | “Tax
Act” means the Income Tax Act (Canada) including all regulations thereunder;
and |
| (qq) | “U.S.
Securities Act” means the United States Securities Act of 1933, as amended
and the rules and regulations promulgated thereunder. |
Any capitalized
terms used but not defined herein shall have the meaning ascribed to such terms in the Arrangement Agreement. In addition, words
and phrases used herein and defined in the CBCA and not otherwise defined herein or in the Arrangement Agreement shall have the
same meaning herein as in the CBCA unless the context otherwise requires.
| 1.2 | Interpretation
Not Affected by Headings, etc. |
The division
of this Plan of Arrangement into Articles, Sections, paragraphs and other portions and the insertion of headings are for convenience
of reference only and shall not affect the construction or interpretation hereof. Unless otherwise indicated, all references to
an “Article”, “Section” or “paragraph” followed by a number and/or a letter refer to the specified
Article, Section or paragraph of this Plan of Arrangement.
In this
Plan of Arrangement, unless the context otherwise requires, words used herein importing the singular include the plural and vice
versa.
In the event
that any date on which any action is required to be taken hereunder by any of the Parties is not a Business Day, such action shall
be required to be taken on the next succeeding day which is a Business Day.
Time shall
be of the essence in every matter or action contemplated hereunder. All times expressed herein or in any letter of transmittal
contemplated herein are local time (Vancouver, British Columbia) unless otherwise stipulated herein or therein.
Unless otherwise
stated, all references in this Plan of Arrangement to sums of money are expressed in lawful money of the United States.
ARTICLE 2
EFFECT OF THE ARRANGEMENT
This Plan
of Arrangement is made pursuant to, is subject to the provisions of, and forms a part of the Arrangement Agreement, except in
respect of the sequence of the steps comprising the Arrangement, which shall occur in the order set forth herein.
This Plan
of Arrangement will become effective at the Effective Time and shall be binding upon Purchaser and Correvio, the Shareholders,
the Optionholders, the holders of RSUs, the holders of PSUs and all beneficial holders of any of the following: Correvio Shares,
Options, RSUs and PSUs.
ARTICLE 3
ARRANGEMENT
Commencing
at the Effective Time, each of the events set out below shall occur and be deemed to occur in the following sequence, in each
case effective as at one minute intervals starting at the Effective Time, without any further authorization, act or formality
of or by Correvio, Purchaser or any other Person:
| (a) | At the Effective
Time: |
| (i) | each
Correvio Share held by a Dissenting Shareholder shall be deemed to be transferred by
the holder thereof, without any further act or formality on its part, free and clear
of all Liens, to Correvio and Correvio shall thereupon be obliged to pay the amount therefor
determined and payable in accordance with Article 5 hereof, and the name of such holder
shall be removed from the central securities register of Correvio as a holder of Correvio
Shares and Correvio shall be recorded as the registered holder of the Correvio Shares
so transferred and shall be deemed to be the legal owner of such Correvio Shares; |
| (ii) | each
outstanding Correvio
Share (other than Correvio Shares held by a Dissenting Shareholder who has validly exercised
and not withdrawn such holder’s Dissent Rights (which Correvio Shares will have
been transferred pursuant to Section 3.1(a)(i) above)) will, without further act
or formality by or on behalf of a holder of Correvio Shares, be irrevocably assigned
and transferred by the holder thereof to Purchaser (free and clear of all Liens) in exchange
for a cash payment equal to the Consideration in accordance with Section 5.1 less any
amounts withheld in accordance with Section 5.4, and |
| A. | the
holder of such Correvio Share shall cease to be the holder thereof and to have any rights
as a holder of such Correvio Share other than the right to receive payment in accordance
with this Plan of Arrangement; |
| B. | such
holder’s name shall be removed from the register of the Correvio Shares maintained
by or on behalf of Correvio; and |
| C. | Purchaser
shall be deemed to be the transferee and the legal and beneficial holder of such Correvio
Share (free and clear of all Liens) and shall be entered as the registered holder of
such Correvio Share in the register of the Correvio Shares maintained by or on behalf
of Correvio. |
| (iii) | Each
In-The-Money Option that is outstanding immediately prior to the Effective Time, whether
or not vested, shall, without any further action on behalf of any holder of such In-The-Money
Option and without any payment except as provided in this Plan of Arrangement, be acquired
for cancellation by Correvio in consideration for a cash payment from Correvio equal
to the product obtained by multiplying the amount by which the Consideration exceeds
the exercise price per Correvio Share of such In-The-Money Option by the number of Correvio
Shares underlying such In-The-Money Option (the “Option Consideration”),
subject to (for greater certainty) applicable withholdings in accordance with Section
5.4. All In-The-Money Options issued and outstanding immediately prior to the Effective
Time shall thereafter immediately be cancelled and the holder thereof shall thereafter
have only the right to receive the Option Consideration to which such holder is entitled
pursuant to this Section 3.1(a)(iii). |
| (iv) | Each
Out-Of-The-Money Option that is outstanding immediately prior to the Effective Time,
whether or not vested, shall, without any further action on behalf of any holder of such
Out-Of-The-Money Option, be cancelled without payment to any holder thereof and all option
agreements related thereto shall be terminated and neither Correvio nor Purchaser shall
have any Liability with respect to such option agreements or Out-Of-The-Money Options. |
| (v) | Notwithstanding
the terms of the Stock Option Plan and any stock option agreement pursuant to which Options
were granted, the Stock Option Plan and all stock option agreements shall be terminated,
and neither Correvio nor Purchaser shall have any Liability with respect to such plans
and agreements other than the payment of the Option Consideration in accordance with
this Plan of Arrangement. |
| (vi) | Each
RSU outstanding immediately prior to the Effective Time (whether vested or unvested),
notwithstanding the terms of the RSU Plan, shall be deemed to be unconditionally vested,
and such RSU shall, without any further action by or on behalf of a holder of RSUs, be
deemed to be assigned and transferred by such holder to Correvio in exchange for a cash
payment from Correvio of $0.42 (being an amount equal
to the Consideration), subject to applicable withholdings,
and each such RSU shall immediately be cancelled. Following the Effective Time, neither
Correvio nor Purchaser shall have any further Liability with respect to any Correvio
RSUs (or any Liability to any holder or former holder thereof). |
| (vii) | Each
PSU outstanding immediately prior to the Effective Time (whether vested or unvested),
notwithstanding the terms of the PSU Plan, shall be deemed to be unconditionally vested,
and such PSU shall, without any further action by or on behalf of a holder of PSUs, be
deemed to be assigned and transferred by such holder to Correvio in exchange for a cash
payment from Correvio $0.42 (being an amount equal
to the Consideration), subject to applicable withholdings,
and each such PSU shall immediately be cancelled. Following the Effective Time, neither
Correvio nor Purchaser shall have any further Liability with respect to any Correvio
PSUs (or any Liability to any holder or former holder thereof). |
| (b) | the transfers
and exchanges provided for in this Section 3.1 will be deemed to occur on the Effective
Date, notwithstanding that certain of the procedures related thereto are not completed
until after the Effective Date. |
| 3.2 | Post
Effective Time Procedures |
Subject
to the provisions of Article 5 hereof, and upon return of a properly completed Correvio Share Letter of Transmittal by a registered
Former Correvio Shareholder together with certificates representing Correvio Shares and such other documents as the Depositary
may require, Former Correvio Shareholders shall be entitled to receive the Consideration to which they are entitled pursuant to
Section 3.1(a) hereof.
ARTICLE 4
DISSENT RIGHTS
Pursuant
to the Interim Order, each registered Shareholder may exercise rights of dissent (“Dissent Rights”) under Section
190 of the CBCA as modified by this ARTICLE 4 as the same may be modified by the Interim Order or the Final Order in respect
of the Arrangement, provided that the written objection to the Arrangement Resolution contemplated by Section 190 of the
CBCA must be sent to and received by Correvio at least two days before the Correvio Meeting. Shareholders who duly exercise such
rights of dissent and who:
(a)
are ultimately determined to be entitled to be paid fair value from Purchaser, for the Dissenting Shares in respect of
which they have exercised Dissent Rights, will be deemed to have irrevocably transferred such Dissenting Shares to Correvio pursuant
to Section 3.1(a)(i) in consideration of such fair value; or
(b)
are ultimately not entitled, for any reason, to be paid fair value for the Dissenting Shares in respect of which they have
exercised Dissent Rights, will be deemed to have participated in the Arrangement on the same basis as a Shareholder who has not
exercised Dissent Rights;
but in no
case will Correvio or Purchaser or any other person be required to recognize such holders as holders of Correvio Shares after
the completion of the steps set forth in Section 3.1(a), and each Dissenting Shareholder will cease to be entitled to the
rights of a Shareholder in respect of the Correvio Shares in relation to which such Dissenting Shareholder has exercised Dissent
Rights and the central securities register of Correvio will be amended to reflect that such former holder is no longer the holder
of such Correvio Shares from and after the Effective Time.
ARTICLE 5
CERTIFICATES AND PAYMENTS
| 5.1 | Payment
of Consideration |
(a)
Following the receipt of the Final Order and prior to the Effective Date, Purchaser shall deposit or arrange to be deposited
with the Depositary a cash amount equal to the aggregate Consideration payable in accordance with the provisions of Section 3.1(a)
hereof, with the amount per Correvio Share in respect of which Dissent Rights have been exercised being deemed to be the Consideration
per Correvio Share for this purpose, net of applicable withholdings, which amount shall be held by the Depositary as agent and
nominee for such Former Correvio Shareholders for distribution to such Former Correvio Shareholders in accordance with the provisions
of this Article 5.
(b)
As soon as practicable following the later of the Effective Date and the surrender to the Depositary for cancellation of
a certificate that immediately prior to the Effective Time represented outstanding Correvio Shares that were transferred under
Section 3.1(a), together with a duly completed Correvio Share Letter of Transmittal and such additional documents and instruments
as the Depositary may reasonably require and such other documents and instruments as would have been required to effect such transfer
under the CBCA, the Securities Transfer Act (British Columbia) and the articles of Correvio after giving effect to Section 3.1(a)
the former holder of such Correvio Shares shall be entitled to receive in exchange therefor, and the Depository shall deliver
on behalf of Purchaser to each holder who immediately before the Effective Time was a holder of Correvio Shares, Options, PSUs
or RSUs a cheque, wire (or other form of immediately available funds) representing the cash which such holder is entitled in accordance
with Section 3.1 less any amounts withheld pursuant to Section 5.4, and any certificate so surrendered shall forthwith be cancelled.
(c)
Subject to Section 5.3, until surrendered as contemplated by this Section 5.1, each certificate which immediately
prior to the Effective Time represented Correvio Shares (other than Correvio Shares in respect of which Dissent Rights have been
validly exercised and not withdrawn) will be deemed after the time described in Sections 3.1(a) to represent only the right
to receive from the Depositary such payment as the holder is entitled to receive in accordance with Section 3.1 hereof, less any
amounts withheld pursuant to Section 5.4.
(d)
No holder of Correvio Shares, Options, PSUs or RSUs, shall be entitled to receive any consideration or entitlement with
respect to such Correvio Shares, Options, PSUs or RSUs, other than any consideration or entitlement to which such holder is entitled
to receive in accordance with Section 3.1, this Section 5.1 and the other terms of this Plan of Arrangement and, for greater certainty,
no such holder will be entitled to receive any interest, dividends, premium or other payment in connection therewith.
In the event
any certificate which immediately prior to the Effective Time represented any outstanding Correvio Shares that were acquired by
Purchaser or Correvio pursuant to Section 3.1 has been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the former holder of such Correvio Shares, the Depositary will deliver to such person or make available for pick up at
its offices in exchange for such lost, stolen or destroyed certificate, a cheque (or other form of immediately available funds)
representing the cash which such holder is entitled in accordance with Section 3.1 less any amounts withheld pursuant to Section
5.4 in accordance with such holder’s Correvio Share Letter of Transmittal. When authorizing such payment in relation to
any lost, stolen or destroyed certificate, the former holder of such Correvio Shares will, as a condition precedent to the delivery
of such Consideration, give a bond satisfactory to Purchaser and the Depositary in such sum as Purchaser may direct or otherwise
indemnify Purchaser in a manner satisfactory to Purchaser against any claim that may be made against Purchaser with respect to
the certificate alleged to have been lost, stolen or destroyed.
If any Former
Correvio Shareholder fails to deliver to the Depositary the certificates, documents or instruments required to be delivered to
the Depositary under Section 5.1 or Section 5.2 in order for such Former Correvio Shareholder to receive the Consideration
which such former holder is entitled to receive pursuant to Section 3.1, on or before the sixth anniversary of the Effective
Date, on the sixth anniversary of the Effective Date (i) such former holder will be deemed to have donated and forfeited
to Purchaser or its successors, any Consideration held by the Depositary in trust for such former holder to which such former
holder is entitled and (ii) any certificate representing Correvio Shares formerly held by such former holder will cease to represent
a claim of any nature whatsoever and will be deemed to have been surrendered to Correvio and will be cancelled. Neither Correvio
nor Purchaser, or any of their respective successors, will be liable to any person in respect of any Consideration (including
any consideration previously held by the Depositary in trust for any such former holder) which is forfeited to Correvio or Purchaser
or delivered to any public official pursuant to any applicable abandoned property, escheat or similar law.
The Parties,
the Depositary and any Person making any payment on their behalf shall be entitled to deduct and withhold from any consideration
or amount payable or otherwise deliverable to any Person hereunder and from all dividends, interest or other amounts payable to
any Person (including, for greater certainty, any Correvio Shareholder, any holder of In-The-Money Options, any holder of RSUs,
any holder of PSUs and any Dissenting Shareholder) such amounts as any of the Parties or the Depositary or any Person on their
behalf may be required or permitted to deduct and withhold therefrom under any provision of applicable Law in respect of Taxes.
To the extent that such amounts are so deducted, withheld and remitted, such amounts shall be treated for all purposes under this
Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.
Any exchange
or transfer of securities pursuant to this Plan of Arrangement shall be free and clear of any Liens or other claims of third parties
of any kind.
From and
after the Effective Time: (a) this Plan of Arrangement shall take precedence and priority over any and all Correvio Shares, Options,
RSUs and PSUs issued prior to the Effective Time, (b) the rights and obligations of the Shareholders, Optionholders, Warrantholders,
holders of RSUs, holders of PSUs, Correvio, Purchaser, the Depositary and any transfer agent or other depositary therefor in relation
thereto, shall be solely as provided for in this Plan of Arrangement, and (c) all actions, causes of action, claims or proceedings
(actual or contingent and whether or not previously asserted) based on or in any way relating to any Correvio Shares, Options,
RSUs and PSUs shall be deemed to have been settled, compromised, released and determined without Liability of Correvio or Purchaser
except as set forth in this Plan of Arrangement.
ARTICLE 6
AMENDMENTS
| 6.1 | Amendments
to Plan of Arrangement |
(a)
The Parties may amend, modify and/or supplement this Plan of Arrangement at any time and from time to time prior to the
Effective Time, provided that each such amendment, modification and/or supplement must (i) be set out in writing, (ii) be approved
by the Parties, each acting reasonably, (iii) filed with the Court and, if made following the Correvio Meeting, approved by the
Court, and (iv) communicated to Shareholders if and as required by the Court.
(b)
Any amendment, modification or supplement to this Plan of Arrangement may be proposed by the Parties at any time prior
to the Correvio Meeting (provided that Purchaser and Correvio shall have consented thereto) with or without any other prior notice
or communication, and if so proposed and accepted by the persons voting at the Correvio Meeting (other than as may be required
under the Interim Order), shall become part of this Plan of Arrangement for all purposes.
(c)
Any amendment, modification or supplement to this Plan of Arrangement that is approved or directed by the Court following
the Correvio Meeting shall be effective only if (i) it is consented to in writing by each of the Parties (in each case, acting
reasonably), and (ii) if required by the Court, it is consented to by some or all of the Shareholders voting in the manner directed
by the Court.
(d)
Any amendment, modification or supplement to this Plan of Arrangement may be made following the Effective Date unilaterally
by Purchaser, provided that it concerns a matter which, in the reasonable opinion of Purchaser, is of an administrative nature
required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the economic interest of
any Former Correvio Shareholder.
ARTICLE 7
FURTHER ASSURANCES
Notwithstanding
that the transactions and events set out herein will occur and are hereby deemed to occur in the order set out in this Plan of
Arrangement without any further act or formality, each of Correvio and Purchaser will make, do and execute, or cause to be made,
done and executed, any such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably
be required by any of them in order to further document or evidence any of the transactions or events set out herein.
APPENDIX
“C”
FAIRNESS OPINION
See attached.
March
15, 2020
Board
of Directors
Correvio
Pharma Corp.
1441 Creekside Drive
Vancouver BC V6J 4S7
Members
of the Board:
You
have requested our opinion as to the fairness, from a financial point of view, to the holders (the “Shareholders”)
of common shares (the “Common Shares”) in the capital of Correvio Pharma Corp. (the “Company”), of the
Consideration (as defined below), pursuant to the arrangement agreement (the “Agreement”) to be dated March 15,
2020 among the Company, Advanz Pharma Corp. Limited (the “Parent”) and Mercury Pharma Group Limited (the “Purchaser”),
a wholly-owned subsidiary of the Parent. The draft Agreement we reviewed on March 15, 2020 (the “Draft Agreement”)
provides for, among other things, the acquisition by the Purchaser of all of the issued and outstanding Common Shares for cash
consideration of U.S.$0.42 per Common Share (the “Consideration”) by way of a plan of arrangement under the Canada
Business Corporations Act (the “Arrangement”). The terms and conditions of the Arrangement will be summarized in
the Company’s management information circular (the “Circular”) to be mailed to Shareholders in connection with
a special meeting of Shareholders to be held to consider and, if deemed advisable, approve the Arrangement.
Engagement
of Piper Sandler
We
were initially contacted by the Company in mid-2018 regarding a potential advisory assignment. Piper Sandler was formally engaged
as a financial advisor by the Company pursuant to an engagement agreement (the “Engagement Agreement”) dated October
8, 2018, to provide financial advisory services to the Company.
Pursuant
to the Engagement Agreement, we will receive a transaction fee of $2,500,000 (less the amount of any fairness opinion and retainer
fees received by us) from the Company for providing our financial services, which fee is contingent upon the consummation of the
Arrangement. We will also receive a fee in the amount of $500,000 for rendering this opinion. Our opinion fee is earned on the
delivery of this opinion and is not contingent upon the consummation of the Arrangement or the conclusions reached in our opinion.
The Company has also agreed to indemnify us against certain liabilities and reimburse us for certain expenses in connection with
our services provided under the Engagement Agreement.
Board of Directors Correvio Pharma Corp. March 15, 2020 Page 2 |
On
March 15, 2020, at the request of the Board of Directors of the Company, we orally delivered our opinion to you based upon and
subject to the scope of review, assumptions and limitations and other matters described herein and contemplated by the Engagement
Agreement. This opinion provides the same opinion, in writing, as that given orally by us on March 15, 2020.
Credentials
of Piper Sandler
Piper
Sandler is an investment bank and institutional securities firm, serving the needs of corporations, private equity groups, public
entities, non-profit entities and institutional investors in the U.S. and internationally. Founded in 1895, Piper Sandler provides
a broad set of products and services, including financial advisory services; equity and debt capital markets products; public
finance services; equity research and institutional brokerage; fixed income institutional brokerage; and private equity strategies.
Piper Sandler is headquartered in Minneapolis, Minnesota and has offices across the United States along with international locations
in London, Aberdeen and Hong Kong. Piper Sandler has been a financial advisor in a large number of transactions involving public
and private companies in various industry sectors and has extensive experience in preparing valuations and fairness opinions.
This
opinion represents the opinion of Piper Sandler and its form and content have been approved by the Piper Sandler Opinion Committee
comprised of investment banking professionals of Piper Sandler, each of whom is experienced in merger, acquisition, divestiture,
valuation and fairness opinion matters.
Relationship
with Interested Parties
Neither
Piper Sandler nor any of its affiliated entities is an insider, associate or affiliate (as those terms are defined in the Securities
Act (British Columbia)) of the Company, the Parent or the Purchaser or any of their respective associates or affiliates (collectively,
the “Interested Parties”, or individually an “Interested Party”). Neither Piper Sandler nor any of its
affiliates is an advisor to any of the Interested Parties with respect to the Arrangement other than to the Company pursuant to
the Engagement Agreement.
Piper
Sandler and our affiliates have not been engaged to provide any financial advisory services, have not acted as lead or co-lead
manager on any offering of securities of the Company or any other Interested Party, and have not had a material financial interest
in any transaction involving the Company or any other Interested Party during the 24 months preceding the date on which we were
first contacted with respect to our engagement by the Company, other than: (i) we acted as lead arranger and bookrunner on the
Company’s U.S.$50 million financing in February 2017 and (ii) we acted as financial advisor with respect to the amendments
to Company’s term loan with CRG Servicing LLC in May 2018. In addition, in the ordinary course of our business, we and our
affiliates may actively trade securities of the Interested Parties for our own account or the account of our customers and, accordingly,
may at any time hold a long or short position in such securities. We may also, in the future, provide investment banking and financial
advisory services to the Interested Parties, for which we would expect to receive compensation.
Board of Directors Correvio Pharma Corp. March 15, 2020 Page 3 |
The
fees paid to Piper Sandler in connection with the foregoing activities, together with the fees payable to us pursuant to the Engagement
Agreement, are not financially material to us. No understandings or agreements exist between Piper Sandler and any Interested Party
with respect to future financial advisory or investment banking business, other than those that may arise as a result of the Engagement
Agreement.
Consistent
with applicable legal and regulatory requirements, Piper Sandler has adopted policies and procedures to establish and maintain
the independence of Piper Sandler’s Research Department and personnel. As a result, Piper Sandler’s research analysts
may hold opinions, make statements or recommendations, and/or publish research reports with respect to the Company and the Arrangement
and other participants in the Arrangement that differ from the views of Piper Sandler’s investment banking personnel.
Scope
of Review
In
connection with this opinion, we reviewed and relied upon (without attempting to verify independently the completeness or accuracy
of) or carried out, among other things, the following:
| (ii) | certain financial and
other data with respect to the Company which was publicly available, |
| (iii) | certain internal financial
statements and other financial and other data with respect to the Company that were furnished to us by the Company, |
| (iv) | financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and prospects of the Company that were furnished to us by the
Company, |
| (v) | discussions with members
of senior management and representatives of the Company concerning the matters described in clauses (ii), (iii) and (iv) above,
as well as its business, risks and prospects before and after giving effect to the Arrangement, |
Board of Directors Correvio Pharma Corp. March 15, 2020 Page 4 |
| (vi) | current and historical
reported prices and trading activity of the Common Shares and similar information for certain other companies deemed by us to be
comparable to the Company, |
| (vii) | various research publications
prepared by industry and equity research analysts regarding the Company and other selected public entities considered relevant, |
| (viii) | public information relating
to the business, operations, financial performance and security trading history of the Company and other selected public entities
considered relevant, |
| (ix) | public information with
respect to certain other transactions of a comparable nature considered relevant, and |
| (x) | such other corporate,
industry, and financial market information, investigations and analyses as we considered necessary or appropriate in the circumstances. |
We have not, to the best of our knowledge,
been denied access by the Company to any information requested by us.
Piper Sandler did not meet with the
auditors of the Company and has assumed the accuracy, completeness and fair presentation of, and has relied upon, without independent
verification, the financial statements of the Company and any reports of the auditors thereon.
Assumptions
and Limitations
We
have relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy, completeness
and fair presentation of all information that was publicly available or was furnished, or otherwise made available, to us or discussed
with or reviewed by us. We have further relied upon the assurances of the management of the Company that the financial information
provided has been prepared on a reasonable basis in accordance with industry practice, and that they are not aware of any information
or facts that would make any information provided to us incomplete or misleading. Without limiting the generality of the foregoing,
for the purpose of this opinion, we have assumed that with respect to financial forecasts, estimates and other forward-looking
information reviewed by us, that such information has been reasonably prepared based on assumptions reflecting the best currently
available estimates and judgments of the management of the Company as to the expected future results of operations and financial
condition of the Company. We express no opinion as to any such financial forecasts, estimates or forward-looking information or
the assumptions on which they were based. For purposes of rendering this opinion, we have, with your consent, relied upon and assumed
the accuracy and completeness of all of the financial, regulatory, tax, and accounting information provided to, discussed with
or reviewed by, us, without assuming any responsibility for independent verification thereof. We express no opinion concerning
any accounting, legal, tax and financial reporting matters concerning the Arrangement.
Board of Directors Correvio Pharma Corp. March 15, 2020 Page 5 |
We
have relied upon and assumed, without independent verification, that: (i) the representations and warranties of all parties
to the Agreement and all other related documents and instruments that are referred to therein are true and correct, (ii) each
party to such agreements will fully and timely perform all of the covenants and agreements required to be performed by such party,
(iii) the final executed version of the Agreement will be, in all material respects, the same as the Draft Agreement that
we reviewed in advance of rendering this opinion, and (iv) the Arrangement will be consummated pursuant to the terms of the Agreement
without amendments thereto and (iv) all conditions to the consummation of the Arrangement will be satisfied without waiver
by any party of any conditions or obligations thereunder. Additionally, we have assumed that all the necessary regulatory approvals
and consents required for the Arrangement will be obtained in a manner that will not adversely affect the Company or the contemplated
benefits of the Arrangement.
In
arriving at our opinion, we have not performed any appraisals or valuations of any specific assets or liabilities (fixed, contingent
or other) of the Company, and have not been furnished or provided with any such appraisals or valuations, nor have we evaluated
the solvency of the Company under applicable laws relating to bankruptcy, insolvency or similar matters. We express
no opinion regarding the liquidation value of the Company or any other entity. We have also assumed that neither the Company,
the Parent nor the Purchaser is party to any material pending transaction, including without limitation any financing, recapitalization,
acquisition or merger, divestiture or spin-off, other than the Arrangement.
Without
limiting the generality of the foregoing, we have undertaken no independent analysis of any pending or threatened litigation, regulatory
action, possible unasserted claims or other contingent liabilities, to which the Company or any of its affiliates is a party or
may be subject, and at the direction of the Company and with its consent, our opinion makes no assumption concerning, and therefore
does not consider, the possible assertion of claims, outcomes or damages arising out of any such matters.
This
opinion is necessarily based upon the information available to us and facts and circumstances as they exist and are subject to
evaluation on the date hereof; events occurring after the date hereof could materially affect the assumptions used in preparing
this opinion. In the analysis and in preparing our opinion, we have made a number of assumptions with respect to industry performance,
general business and economic conditions, and other matters, many of which are beyond the control of Piper Sandler, the Company
and any other party involved in connection with the Arrangement.
Board of Directors Correvio Pharma Corp. March 15, 2020 Page 6 |
Our
opinion is conditional upon all assumptions described herein being correct.
We
are not expressing any opinion herein as to the price at which the Common Shares may trade following announcement of the Arrangement
or at any future time. We have not undertaken to reaffirm or revise this opinion or otherwise comment upon any events occurring
after the date hereof and do not have any obligation to update, revise or reaffirm this opinion.
This
opinion is provided to the Board of Directors of the Company in connection with its consideration of the Arrangement and is not
intended to be and does not constitute a recommendation to any securityholder of the Company as to how such securityholder should
act or vote with respect to the Arrangement or any other matter.
Except
with respect to the use of this opinion in connection with the Circular in accordance with the Engagement Letter, this opinion
shall not be disclosed, referred to, published or otherwise used (in whole or in part), nor shall any public references to us be
made, without our prior written approval.
This
opinion addresses solely the fairness, from a financial point of view, to Shareholders of the Consideration and does not address
any other terms or agreement relating to the Arrangement or any other terms of the Agreement. We were not requested to opine as
to, and this opinion does not address, the basic business decision to proceed with or effect the Arrangement, the merits of the
Arrangement relative to any alternative transaction or business strategy that may be available to the Company, the Parent’s
and the Purchaser’s ability to fund the Consideration or any other terms contemplated by the Agreement or the fairness of
the Arrangement to any other class of securities, creditor or other constituency of the Company. Furthermore, we express no opinion
with respect to the amount or nature of compensation to any officer, director or employee of any party to the Arrangement, or any
class of such persons, relative to the compensation to be received by Shareholders in the Arrangement or with respect to the fairness
of any such compensation.
The
preparation of a fairness opinion, such as this opinion, is a complex process and is not necessarily amenable to partial analysis
or summary description. We believe that our analyses must be considered as a whole and that selecting portions of the analyses
or the factors considered by us, without considering all factors and analyses together, could create an incomplete or misleading
view of the process underlying our opinion. Accordingly, this opinion should be read in its entirety.
Fairness
Methodology
Board of Directors Correvio Pharma Corp. March 15, 2020 Page 7 |
The
following is a summary of the material financial analyses performed by Piper Sandler in connection with the preparation of our
opinion. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as
to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances.
In considering the fairness, from a financial point of view, to the Shareholders of the Consideration to be received by such Shareholders
pursuant to the Arrangement, we did not attribute any particular weight to any specific approach or methodology but evaluated
the information as a whole and applied judgments based on our experience in rendering such opinions. Therefore, this summary does
not purport to be a complete description of the analyses performed by Piper Sandler or of its presentation to the Board of Directors
of the Company.
Piper
Sandler performed the following financial analyses in connection with rendering this opinion:
| (i) | selected
public companies analysis; |
| (ii) | precedent
transactions analysis; and |
| (iii) | discounted
cash flow analysis. |
Selected
Public Companies Analysis
Piper
Sandler reviewed selected historical financial data of the Company and estimated financial data of the Company based on projections
provided by the Company’s management and compared them to corresponding financial data, where applicable, for selected publicly-traded
companies considered by Piper Sandler, based on our experience and judgment as a financial advisor, comparable to the Company
in terms of operating characteristics, geography, commercial focus, growth prospects and risk profile. We calculated and compared
financial multiples for the selected companies based on the market trading prices of their fully diluted shares, public filings
and Wall Street research. With respect to each of the selected companies, Piper Sandler calculated enterprise value as a multiple
of reported and estimated revenue for calendar years 2019 and 2020. Revenue estimates used for this analysis were based on Wall
Street research analyst consensus.
Precedent
Transactions Analysis
Piper
Sandler reviewed publicly available information for selected completed merger and acquisition transactions involving specialty
pharmaceutical and life sciences companies that we, based on our experience and judgment as a financial advisor, deemed relevant
to consider in relation to the Company and the Arrangement. Piper Sandler calculated and compared financial multiples for the
selected transactions based on press releases, filings and other publications supporting an estimate of each transaction size
and revenue attributable to the acquired entity. With respect to each of the precedent transactions, Piper Sandler calculated
transaction value as a multiple of estimated revenue for the trailing twelve-month period preceding the transaction announcement.
Board of Directors Correvio Pharma Corp. March 15, 2020 Page 8 |
Discounted
Cash Flow Analysis
Piper
Sandler performed a discounted cash flow analysis to calculate a range of theoretical enterprise values for the Company, using
the projections provided by the Company’s management, based on the net present value of free cash flows from June 30, 2020
to December 31, 2023 and a terminal value at December 31, 2023 that we calculated using a range of perpetuity growth rates discounted
back to June 30, 2020. We derived the discount rate using a weighted average cost of capital analysis, which, with respect to
the cost of equity capital, took into consideration, among other things, the equity risk premiums of comparable companies and
Company-specific inputs.
Conclusion
Based
upon and subject to the foregoing and based upon such other factors as we consider relevant, it is our opinion that the Consideration
is fair, from a financial point of view, to the Shareholders as of the date hereof.
Sincerely,
PIPER
SANDLER & CO.
APPENDIX
“D”
COURT MATERIALS
See attached.
APPENDIX
“E”
DISSENT RIGHTS
SECTION
190 OF THE CANADA BUSINESS CORPORATIONS ACT
Right
to dissent
190 (1) Subject
to sections 191 and 241, a holder of shares of any class of a corporation may dissent if the corporation is subject to an order
under paragraph 192(4)(d) that affects the holder or if the corporation resolves to
| (a) | amend
its articles under section 173 or 174 to add, change or remove any provisions restricting
or constraining the issue, transfer or ownership of shares of that class; |
| (b) | amend
its articles under section 173 to add, change or remove any restriction on the business
or businesses that the corporation may carry on; |
| (c) | amalgamate
otherwise than under section 184; |
| (d) | be
continued under section 188; |
| (e) | sell,
lease or exchange all or substantially all its property under subsection 189(3); or |
| (f) | carry
out a going-private transaction or a squeeze-out transaction. |
Further
right
(2) A
holder of shares of any class or series of shares entitled to vote under section 176 may dissent if the corporation resolves to
amend its articles in a manner described in that section.
If one
class of shares
(2.1) The
right to dissent described in subsection (2) applies even if there is only one class of shares.
Payment
for shares
(3) In
addition to any other right the shareholder may have, but subject to subsection (26), a shareholder who complies with this section
is entitled, when the action approved by the resolution from which the shareholder dissents or an order made under subsection
192(4) becomes effective, to be paid by the corporation the fair value of the shares in respect of which the shareholder dissents,
determined as of the close of business on the day before the resolution was adopted or the order was made.
No partial
dissent
(4) A
dissenting shareholder may only claim under this section with respect to all the shares of a class held on behalf of any one beneficial
owner and registered in the name of the dissenting shareholder.
Objection
(5) A
dissenting shareholder shall send to the corporation, at or before any meeting of shareholders at which a resolution referred
to in subsection (1) or (2) is to be voted on, a written objection to the resolution, unless the corporation did not give notice
to the shareholder of the purpose of the meeting and of their right to dissent.
Notice
of resolution
(6) The
corporation shall, within ten days after the shareholders adopt the resolution, send to each shareholder who has filed the objection
referred to in subsection (5) notice that the resolution has been adopted, but such notice is not required to be sent to any shareholder
who voted for the resolution or who has withdrawn their objection.
Demand
for payment
(7) A
dissenting shareholder shall, within twenty days after receiving a notice under subsection (6) or, if the shareholder does not
receive such notice, within twenty days after learning that the resolution has been adopted, send to the corporation a written
notice containing
| (a) | the
shareholder’s name and address; |
the
number and class of shares in respect of which the shareholder dissents; and
| (b) | a
demand for payment of the fair value of such shares. |
Share
certificate
(8) A
dissenting shareholder shall, within thirty days after sending a notice under subsection (7), send the certificates representing
the shares in respect of which the shareholder dissents to the corporation or its transfer agent.
Forfeiture
(9) A
dissenting shareholder who fails to comply with subsection (8) has no right to make a claim under this section.
Endorsing
certificate
(10) A
corporation or its transfer agent shall endorse on any share certificate received under subsection (8) a notice that the holder
is a dissenting shareholder under this section and shall forthwith return the share certificates to the dissenting shareholder.
Suspension
of rights
(11) On
sending a notice under subsection (7), a dissenting shareholder ceases to have any rights as a shareholder other than to be paid
the fair value of their shares as determined under this section except where
| (a) | the
shareholder withdraws that notice before the corporation makes an offer under subsection
(12), |
| (b) | the
corporation fails to make an offer in accordance with subsection (12) and the shareholder
withdraws the notice, or |
| (c) | the
directors revoke a resolution to amend the articles under subsection 173(2) or 174(5),
terminate an amalgamation agreement under subsection 183(6) or an application for continuance
under subsection 188(6), or abandon a sale, lease or exchange under subsection 189(9), |
in which
case the shareholder’s rights are reinstated as of the date the notice was sent.
Offer
to pay
(12) A
corporation shall, not later than seven days after the later of the day on which the action approved by the resolution is effective
or the day the corporation received the notice referred to in subsection (7), send to each dissenting shareholder who has sent
such notice
| (a) | a
written offer to pay for their shares in an amount considered by the directors of the
corporation to be the fair value, accompanied by a statement showing how the fair value
was determined; or |
| (b) | if
subsection (26) applies, a notification that it is unable lawfully to pay dissenting
shareholders for their shares. |
Same terms
(13) Every
offer made under subsection (12) for shares of the same class or series shall be on the same terms.
Payment
(14) Subject
to subsection (26), a corporation shall pay for the shares of a dissenting shareholder within ten days after an offer made under
subsection (12) has been accepted, but any such offer lapses if the corporation does not receive an acceptance thereof within
thirty days after the offer has been made.
Corporation
may apply to court
(15) Where
a corporation fails to make an offer under subsection (12), or if a dissenting shareholder fails to accept an offer, the corporation
may, within fifty days after the action approved by the resolution is effective or within such further period as a court may allow,
apply to a court to fix a fair value for the shares of any dissenting shareholder.
Shareholder
application to court
(16) If
a corporation fails to apply to a court under subsection (15), a dissenting shareholder may apply to a court for the same purpose
within a further period of twenty days or within such further period as a court may allow.
Venue
(17) An
application under subsection (15) or (16) shall be made to a court having jurisdiction in the place where the corporation has
its registered office or in the province where the dissenting shareholder resides if the corporation carries on business in that
province.
No security
for costs
(18) A
dissenting shareholder is not required to give security for costs in an application made under subsection (15) or (16).
Parties
(19) On
an application to a court under subsection (15) or (16),
| (a) | all
dissenting shareholders whose shares have not been purchased by the corporation shall
be joined as parties and are bound by the decision of the court; and |
| (b) | the
corporation shall notify each affected dissenting shareholder of the date, place and
consequences of the application and of their right to appear and be heard in person or
by counsel. |
Powers
of court
(20) On
an application to a court under subsection (15) or (16), the court may determine whether any other person is a dissenting shareholder
who should be joined as a party, and the court shall then fix a fair value for the shares of all dissenting shareholders.
Appraisers
(21) A
court may in its discretion appoint one or more appraisers to assist the court to fix a fair value for the shares of the dissenting
shareholders.
Final
order
(22) The
final order of a court shall be rendered against the corporation in favour of each dissenting shareholder and for the amount of
the shares as fixed by the court.
Interest
(23) A
court may in its discretion allow a reasonable rate of interest on the amount payable to each dissenting shareholder from the
date the action approved by the resolution is effective until the date of payment.
Notice
that subsection (26) applies
(24) If
subsection (26) applies, the corporation shall, within ten days after the pronouncement of an order under subsection (22), notify
each dissenting shareholder that it is unable lawfully to pay dissenting shareholders for their shares.
Effect
where subsection (26) applies
(25) If
subsection (26) applies, a dissenting shareholder, by written notice delivered to the corporation within thirty days after receiving
a notice under subsection (24), may
| (a) | withdraw
their notice of dissent, in which case the corporation is deemed to consent to the withdrawal
and the shareholder is reinstated to their full rights as a shareholder; or |
| (b) | retain
a status as a claimant against the corporation, to be paid as soon as the corporation
is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights
of creditors of the corporation but in priority to its shareholders. |
Limitation
(26) A
corporation shall not make a payment to a dissenting shareholder under this section if there are reasonable grounds for believing
that
| (a) | the
corporation is or would after the payment be unable to pay its liabilities as they become
due; or |
| (b) | the
realizable value of the corporation’s assets would thereby be less than the aggregate
of its liabilities. |
APPENDIX
“F”
STATEMENT OF EXECUTIVE COMPENSATION
Composition
and Mandate of the Compensation Committee
The Compensation
Committee of the Board consists of Dr. Glickman (Chair), Mr. Willms and Dr. De Cian. Dr. Glickman was appointed to the
Compensation Committee on June 21, 2016 and continues to serve as the Chair of the Compensation Committee. Mr. Willms was appointed
to the Compensation Committee on June 22, 2015 and Dr. De Cian was appointed to the Compensation Committee on March 13, 2019.
All members
of the Compensation Committee are independent directors. The Compensation Committee is charged, on behalf of the Board, amongst
other matters, to develop, review and approve compensation policies and practices applicable to executive officers, including
determining the benchmarks, criteria and performance metrics upon which executive compensation such as base salary, annual bonuses,
equity compensation and other benefits are based. The Compensation Committee also has the mandate to annually review the Company’s
compensation policies and practices to consider whether they are aligned with the Company’s risk management principles and
whether they might, or are reasonably likely to, encourage executives and other employees to take inappropriate or excessive risks
and whether any of the Company’s compensation policies or practices might present or could give rise to material risks to
the Company, or otherwise affect the risks faced by the Company and management of those risks.
All members
of the Compensation Committee have direct experience that is relevant to their responsibilities in executive compensation, as
set out below:
| · | Richard
M. Glickman, the Chair of the Compensation Committee, recently retired from his role
as the Chief Executive Officer and Chairman of the Board for Aurinia Pharmaceuticals.
He previously was co-founder, Chairman and Chief Executive Officer of Aspreva Pharmaceuticals.
Prior to establishing Aspreva, Dr. Glickman was the co-founder and Chief Executive Officer
of StressGen Biotechnologies Company. Since 2000, Dr. Glickman has served as the Chair
of the Board of Vigil Health Solutions Inc., a healthcare services company. Dr.
Glickman has also served as Chair of the Board for ESSA Pharmaceuticals Inc. since 2010.
Dr. Glickman was also the founder and a director of Ontario Molecular Diagnostics and
co-founded Probtec Company. He has previously served as Chairman of Life Sciences B.C.,
director of the Canadian Genetic Disease Network and as a member of the Canadian federal
government’s National Biotechnology Advisory Committee. Dr. Glickman
sits on a variety of private and public boards and has served on numerous compensation
committees. Dr. Glickman has participated in the design, establishment and implementation
of executive compensation and benefit programs and also participated in, and overseen,
the design, establishment and implementation of compensation and benefit programs for
non-executive employees. In Dr. Glickman’s executive leadership roles, the
Vice-President of Human Resources reported to him. Dr. Glickman also sits on the Company’s
Audit Committee and GN Committee. |
| · | Arthur
H. Willms was previously President and Chief Operating Officer of Westcoast Energy Inc.
and has sat on numerous corporate and non profit boards and board committees. In
prior executive roles, Mr. Willms participated in the design, establishment and implementation
of executive compensation and benefit programs and also participated in, and oversaw,
the design, establishment and implementation of compensation and benefit programs for
non-executive employees. In Mr. Willms’ executive leadership roles, he has
had direct experience in performance management of executive, senior level and rank and
file employees in small and larger organizations. In his role as a manager and motivator
of people, he has experience in establishing, monitoring and evaluating strategic and
annual personnel and group performance objectives. Mr. Willms is also the Chair of the
Company’s Audit Committee. |
| · | Dr.
Vanda De Cian joined the Board in March 2019. Dr. De Cian was previously Vice President,
Corporate Drug Development at Chiesi Farmaceutici S.p.A., a multinational company headquartered
in Parma, Italy. Prior to Chiesi, Dr. De Cian held senior positions at Pharmacia Corp.
over several years and assisted in Pharmacia’s transition subsequent to its acquisition
by Pfizer Inc. During her pharmaceutical career Dr. De Cian was involved in the clinical
development of several drugs including FoscarnetTM, MycobutinTM,
CidofovirTM, RescriptorTM, AptivusTM and Zyvox TM.
Since 2012, Dr. De Cian has managed her own consulting business advising several international
companies on implementing cost-efficient drug development processes. Dr. De Cian has
direct experience in performance management of employees and has experience in establishing,
monitoring and evaluating strategic and annual personnel and group performance objectives.
Dr. De Cian also sits on the Company’s GN Committee. |
Compensation
Discussion and Analysis
Compensation
Program and Strategy
The success
of the Company depends on the talent and efforts of its employees and the leadership and performance of its executives. The Company
believes that it is in the shareholders’ interest that the compensation program is structured in a manner that makes the
attraction, retention and motivation of the highest quality employees a reality.
The Compensation
Committee is charged, on behalf of the Board, to develop, review and approve compensation policies and practices applicable to
executive officers, including determining the benchmarks, criteria and performance metrics upon which executive compensation such
as base salary, annual cash incentive, equity compensation and other benefits are based. As described below, the Compensation
Committee approves the compensation of each of our Named Executive Officers (“NEOs”). In 2019, our NEOs were:
1.
Dr. Mark Corrigan, Chief Executive Officer (as of March 14, 2019)(1)
2.
Dr. William Hunter, Chief Executive Officer (effective July 3, 2012 to March 13, 2019)(2)(3)
3.
Mr. Justin Renz, President and Chief Financial Officer(4)
4.
Ms. Sheila Grant, Chief Operating Officer
5.
Mr. Hugues Sachot, Chief Commercial Officer
6.
Mr. David McMasters, Corporate General Counsel
______________
| (1) | Dr.
Corrigan was appointed Chief Executive Officer on March 14, 2019. |
| (2) | Dr.
Hunter resigned as President on January 1, 2019. |
| (3) | Dr.
Hunter resigned from his position as Chief Executive Officer on March 13, 2019. He remains
a member of the Board. |
| (4) | Mr.
Renz was appointed President on January 1, 2019 |
The Company’s
executive compensation program and strategy is designed to (i) be competitive in order to help attract and retain the talent
needed to lead and grow the Company’s business, (ii) provide a strong incentive for executives and key employees to
work toward achievement of the Company’s goals and strategic objectives and (iii) ensure that the interests of management
and shareholders of the Company are aligned. To further these objectives, the Compensation Committee designs pay and performance
systems that reflect the level of job responsibility, and incumbent specific considerations while aligning the Company’s
compensation programs with those of similarly complex specialty pharmaceutical and biotechnology companies. It also aligns pay-for-performance-based
compensation programs to the achievement of objectives that will drive future success and enhance shareholder value by linking
a significant portion of executive annual awards to overall corporate performance and attainment of specific value enhancing goals.
The Company’s
compensation program and strategy for its executive officers consists primarily of three main elements: base salary, an annual
cash incentive and equity-based compensation, currently consisting of grants of stock options (“Options”) and
restricted share units (“RSU’s”) or phantom share units (“PSU’s”) for executive
officers residing in France.
Base salary
is intended to provide a base compensation that reflects the executive’s experience and responsibilities and which is competitive
with salaries of executives with similar responsibilities and experience at comparable companies, particularly pharmaceutical
and biotechnology companies. Base salary provides regular compensation for assuming the responsibilities of the position and is
paid in cash.
Annual cash
incentives and equity-based compensation are intended to provide a greater incentive for executives to work toward achievement
of the Company’s goals and strategic objectives, reward the achievement of short-term and long-term goals and objectives
of the Company, and to better align the compensation of the Chief Executive Officer, other executives and key employees with the
long-term interests of shareholders. They are awarded annually on a discretionary basis by the Board, based on the recommendations
of and subjective assessment by the Compensation Committee, regarding the Company’s success in creating shareholder value,
and the achievement by the Company and the executives of various objectives. The short-term incentive portion of compensation,
payable in cash, is determined following the end of each financial year and is designed to motivate and reward executives for
the achievement of the Company’s short-term goals and objectives. The Company’s equity-based compensation, currently
payable by the grant of Options and RSU’s, is awarded on a prospective, going-forward basis, to motivate and reward executives
for the achievement of long-term performance of the Company and to retain key employees, rather than as compensation for performance
in the prior year. In general, past discretionary awards of Options and RSU’s are taken into account when making discretionary
awards of Options and RSU’s in subsequent years. Long term incentives also include PSU’s awarded for executive officers
residing in France In addition, such awards may be made in situations where the Compensation Committee determines the executive
compensation for certain executives and other personnel, including equity-based compensation, is low compared to comparable companies
and that equity-based compensation for certain executives and other employees should be increased, in order to assist the Company
to retain and attract key executive talent, and to further align the compensation of the executive officers and other key employees
with the long-term interests of shareholders. The Company’s Option Plan is described in more detail below. The Company does
not have a formal policy for allocating between long-term and currently paid compensation or for allocating between cash and non-cash
compensation or among different forms of compensation. The Compensation Committee responds to current circumstances when determining
the pay mix each year.
Role
of Executive Officers in Compensation Decisions
The Compensation
Committee assesses the performance of the Chief Executive Officer and makes recommendations to the Board, and the Board makes
all decisions regarding his or her compensation. The Compensation Committee consults with and receives input and recommendations
from the Chief Executive Officer regarding the performance, assessment and compensation of the other executive officers, and makes
recommendations to the Board for approval regarding the compensation of such executives. Although the Compensation Committee generally
considers recommendations of the Chief Executive Officer, decisions are made by the Compensation Committee and the Board and may
reflect factors and consideration other than information and recommendations provided by the Chief Executive Officer.
Setting
Executive Compensation
Performance
goals are typically determined early in the year for each executive officer and relate to matters which assist and help facilitate
the Company’s overall strategic goals and objectives. These performance goals are assessed by the Compensation Committee
and can be altered at the discretion of the Compensation Committee, if appropriate, due to changes in business factors or conditions.
In general,
the Company annually determines the corporate objectives for each year during the first quarter of the fiscal year. Following
the end of the year, the Compensation Committee assesses such objectives and, based on such assessment, the Compensation Committee
determines an aggregate incentive value for each executive officer. The Compensation Committee then recommends to the Board discretionary
awards of annual cash incentive bonuses, discretionary grants of PSU’s ”) for executive officers residing in France,
discretionary grants of Options under the Company’s Incentive Stock Option Plan (the “Option Plan”) and
discretionary grants of RSU’s under the Company’s Restricted Share Unit Plan (the “RSU Plan”) for
the Chief Executive Officer and other executive officers of the Company.
The awarding
of annual cash incentives and equity-based compensation is subject to the discretion of the Compensation Committee and the Board,
exercised annually, as more fully described herein, and is at risk and not subject to any minimum amount. Furthermore, if the
Compensation Committee determines that the compensation of the Company for certain executives and other personnel, including equity-based
compensation, is low compared to comparable companies, the Compensation Committee may determine to award equity-based compensation
to assist the Company in retaining and attracting key executive talent and to further align the compensation of the executive
officers and other key employees with long-term interests of shareholders. The Compensation Committee and the Board may also,
in their discretion, adjust weighting to objectives for the Chief Executive Officer or other executives, and, in their discretion,
determine to award a higher or lower annual incentive value to one or more executive officers than achievement of applicable corporate
objectives might otherwise suggest, based on their assessment of the challenges and factors that might have impacted the ability
to achieve the objective or attain the highest assessment ranking, or other factors such as rewarding individual performance or
recognizing the ability (or inability) of the Company to achieve its goals and strategic objectives and create shareholder value.
Factors that the Compensation Committee and Board may consider in exercising such discretion include, among other things, risk
management and regulatory compliance, performance of executive officers in managing risk and whether payment of the incentive
compensation might present or could give rise to material risks to the Company or otherwise affect the risks faced by the Company,
and management of those risks.
As part
of its review of management compensation and incentive programs, the Compensation Committee periodically retains external independent
consultants to review and provide benchmark data of a comparator group of publicly listed companies. Such comparator groups usually
include Canadian and U.S. companies in the biotechnology and pharmaceutical industries with a market capitalization in the range
of approximately ½ to 2 times the Company’s market capitalization that represent companies within the same industry
and of a similar size, geographic reach, ownership structure, complexity and business characteristics as the Company so as to
be appropriate for purposes of benchmarking executive compensation and assessing whether the Company’s executive compensation
is competitive, in the interest of attracting and retaining key executives. In assessing the general competitiveness of the compensation
of the Company’s Chief Executive Officer, Chief Financial Officer and the Company’s three other most highly compensated
NEOs, the Compensation Committee considers base salary, total cash compensation and total direct compensation (including the value
of long-term incentives) relative to a comparator group.
In 2017,
the Compensation Committee engaged Mercer, a Marsh & McLennan company, to assist in a comprehensive benchmarking analysis
on the total direct compensation (base salary, annual short and long-term incentives) for the NEOs. The following companies were
included in the comparator group: Emergent Biosolutions Inc., AMAG Pharmaceuticals Inc., Sucampo Pharmaceuticals Inc., Supernus
Pharameuticals Inc., Spectrum Pharmaceuticals, Inc., Corcept Therapeutics Inc., Arena Pharmaceuticals Inc., and Zogenix Inc. The
Compensation Committee considered the advice from Mercer, where appropriate, but also performed its own assessment of competitive
compensation requirements to establish the total direct compensation for the NEOs.
Executive
Compensation-Related Fees
In addition
to the consulting services provided by Mercer, management may in certain years purchase Mercer’s annual compensation survey
for use in assisting in the compensation review of non-executive officers. The Compensation Committee mandate requires that the
Compensation Committee must pre-approve other services Mercer or any of its affiliates, or other compensation consultants that
may be retained by the Compensation Committee, provide to the Company at the request of management. Mercer was first retained
to provide compensation services to the Company or the Compensation Committee in 2007. The Compensation Committee understands
that Mercer has established safeguards to maintain the independence of its executive compensation consultants which include compensation
protocols, internal reporting relationships and formal policies to prevent potential conflicts of interest. No fees were billed
by Mercer, or any of its affiliates, for services relating to director and executive compensation provided by Mercer in 2019 and
2018.
In addition
to advice obtained from compensation consultants, the Compensation Committee undertakes its own assessment of the competitiveness
of the Company’s compensation and incentive programs, based on information obtained from such consultants and other information
that may be available to the Compensation Committee. Decisions as to compensation are made by the Compensation Committee and the
Board and may reflect factors and considerations other than the information and, if applicable, recommendations provided by compensation
consultants.
2019
Executive Compensation Elements
For the
year ended December 31, 2019, the principal components of compensation for the Company’s NEOs were: base salary, annual
cash incentive bonus program and equity-based incentive program.
In general,
the Company targets to achieve competitive compensation based on a comparator group. Individual elements comprise base salary,
total cash compensation (base salary plus short-term incentive pay), and total direct compensation (total cash compensation plus
long-term incentive awards). The elements of compensation are targeted to be approximately at the 50th percentile of
the comparator group when applicable, in the discretion of the Compensation Committee. However, the Compensation Committee exercises
discretion in adjusting individual components of compensation with a goal of total direct compensation approximating the 50th
percentile of the comparator group.
Base
Salary
The base
salary levels for the NEOs are based on the executive’s overall experience and responsibilities and are reviewed annually.
The salaries are determined after considering the salary levels of other executives with similar responsibilities and experience
and comparing salary levels of comparable executives at comparable companies, with particular emphasis on pharmaceutical and biotechnology
companies. The salaries of the NEOs, other than the Chief Executive Officer, are determined primarily on the basis of the Compensation
Committee’s review of the Chief Executive Officer’s assessment of each executive officer’s performance during
the prior year. The salaries for the NEOs are approved by the Board based on the recommendation of the Compensation Committee,
together with recommendations from the Chief Executive Officer. External sources and advisors are consulted from time to time
when the Compensation Committee considers it necessary or desirable.
Annual
Cash Incentive Bonus Program
The annual
cash incentive bonus program generally provides a performance-based cash incentive to NEOs. The program awards for individual
performance that leads to the achievement of annual corporate objectives.
The executive
officers, in the discretion of the Compensation Committee and the Board, are entitled to receive a target annual cash incentive
bonus value, which is expressed as a percentage of base salary. The annual cash incentive bonus value for each of the NEOs varies,
and ranges between 40% to 100% of base salary. However, the actual annual cash incentive bonus that each NEO receives can be higher
or lower than the target value based on the formula for determining the amount of actual annual cash incentive bonus that each
NEO may be entitled to under the program, and which may be subject to, and in the discretion of the Compensation Committee and
the Board, further adjustments.
The formula
for determining the amount of annual cash incentive bonus value that each NEO may be entitled to receive was generally as follows:
| Base
Salary |
x |
Bonus
Target % |
x |
Corporate
Performance Result |
x |
Individual
Performance Result |
| |
|
|
|
|
|
|
At the beginning
of 2019, key corporate objectives were set by the Board to represent a broad range of activities that span the Company’s
global business. The 2019 corporate objectives were as set out on the table below. In determining the corporate performance result,
the corporate objectives are weighted to reflect the relative priority, importance and impact of each objective on the Company’s
success. Objectives are set with targets that represent significant “stretch” goals for the organization.
After the
year-end results are compiled, performance relative to the corporate objectives is measured to determine a corporate performance
result. The Board gives consideration to how challenging each goal was and considers other business, commercial and organizational
factors that may have impacted achievement of the goals in arriving at its final assessment of the corporate performance result.
The individual
performance result is based on each NEO’s achievement of his or her functional and individual goals (set at the beginning
of each year) and demonstrated leadership competencies as assessed by the Chief Executive Officer and Compensation Committee.
The CEO’s individual goals are generally the same as the corporate objectives. The other NEOs’ functional and individual
goals contain a spectrum of commercial, financial, technical, scientific and special project goals specific to the NEO’s
area of responsibility. The Compensation Committee and CEO do not use quantitative targets and formulas to assess individual executive
performance. The Compensation Committee determines the individual performance result of the Chief Executive Officer and approves
the recommendations made by the Chief Executive Officer for the individual performance result of the other NEOs.
The amount
determined pursuant to the formula was intended to be guidance for the Compensation Committee’s consideration. The Compensation
Committee may, in its discretion, determine that an annual incentive value in the amounts determined pursuant to the formula,
lesser or greater amounts, or no annual incentive amount at all, will be awarded.
For 2019,
the objectives and relative achievements of those objectives were:
| Area |
Goal |
Corporate
Performance Result |
| Commercial
|
Revenue
targets |
Partially
achieved |
| Finance |
Cash
raise |
Partially
achieved |
| Regulatory |
US
Brinavess® NDA submission |
Not
achieved |
| Business
Development |
Complete
transformational transaction |
Partially
achieved |
| Human
Resources |
Employee
engagement |
Achieved |
The 2019
corporate performance result was determined by the Compensation Committee after reviewing the results for each 2019 objective.
The Compensation Committee determined that a 50% score appropriately reflected the Company’s overall corporate performance
result against its targeted achievement level.
For 2019,
the Compensation Committee awarded the NEOs an incentive bonus of 50% of their individual bonus targets based on personal performance;
however, the Compensation Committee determined that the bonus would only be paid to the NEOs upon the closing of a corporate sale
transaction.
The amount
of cash incentive bonuses for 2019 that would be payable to the NEOs in the event that such condition is met is set out in the
following table.
| Summary
of Executive Cash Incentive Bonuses For 2019 Fiscal Year |
| |
|
|
| Employee |
Base
Salary(3) |
Cash
Bonus |
| Mark Corrigan (1) |
C$551,493 (4) |
C$275,746 (4) |
| William Hunter(2) |
C$137,978 |
C$121,391 |
| Justin Renz |
C$583,836 (4) |
C$145,959 (4) |
| Sheila Grant |
C$408,700 |
C$81,740 |
| Hugues Sachot |
C$493,186 (5) |
C$98,637 (5) |
| David McMasters |
C$440,531 (4) |
C$88,106 (4) |
| Total |
C$2,615,724 |
C$811,579 |
________________
| (1) | Dr.
Corrigan was appointed Chief Executive Officer on March 14, 2019. |
| (2) | Dr.
Hunter resigned from his position as Chief Executive Officer on March 13, 2019. He remains
a member of the Board. |
| (3) | Reflects
annual base salaries in effect in 2019. All dollar amounts are reflected in Canadian
dollars. |
| (4) | The
exchange rate used for conversion of U.S. dollars into Canadian dollars was US$1.00 =
C$1.3269, being the annual average of the Bank of Canada rates for 2019. |
| (5) | The
exchange rate used for conversion of EURO into Canadian dollars was EUR 1.00 = C$1.4855,
being the annual average of the European Central Bank rates for 2019. |
The Compensation
Committee determined, and the Board accepted and approved, a total cash incentive bonus pool in the amount of C$640,410 in respect
of 2019 that may be paid to the Company’s non-executive employees at the discretion of the Chief Executive Officer. The
Company has a discretionary bonus plan for non-executive employees. The non-executive employees, in the discretion of the Compensation
Committee and the Board, are entitled to receive a target annual cash incentive bonus value, which is expressed as a percentage
of base salary. The annual cash incentive bonus value is based upon the achievement of corporate objectives approved by the Board
and the individual performance of each non-executive employee. The Compensation Committee may, in its discretion, determine that
an annual incentive value in the amounts determined pursuant to the formula, lesser or greater amounts, or no annual incentive
amount at all, will be awarded.
Equity-Based
Incentives
The Board
and the Compensation Committee believe that in order to (i) assist the Company in attracting and retaining management and
key employees and non-management directors and providing such employees and directors with incentive to continue in the service
of the Company, (ii) create a greater commonality of interests between such employees and directors and the shareholders
of the Company through incentive compensation based on the value of the Company’s Common Shares and (iii) where appropriate,
provide such employees and directors an incentive to create or realize value for shareholders of the Company through potential
partnership opportunities, licensing transactions or alternative strategies, the compensation of executive officers, other key
employees and non-management directors should include equity-based compensation that is at least competitive with peer companies,
including the comparator group. The Company’s equity-based compensation currently is made in the form of Options granted
under the Option Plan and RSUs granted under the RSU Plan.
The Company
does not have share ownership guidelines or share retention requirements for directors or executive officers. The Company does
not have a policy which prohibits executive officers or directors purchasing financial instruments for the purpose of hedging
or offsetting a decrease in market value of the Company’s equity securities. None of the NEOs or directors purchased any
such instruments during the most recently completed financial year or hold any such instruments.
The Compensation
Committee and the Board remain committed to the motivation and reward of executives for the long-term performance of the Company
and the retention of key employees of the Company and will continue to seek ways to assure the alignment of the Company’s
compensation program and strategy with shareholder interests.
Incentive
Stock Option Plan
The Option
Plan was approved by shareholders of the Company in May 2018. Under the Option Plan, the Board may, in its discretion, grant Options
to purchase Common Shares to directors, officers, employees, contractors and consultants of the Company or any of its subsidiaries.
In addition, the Chief Executive Officer, provided he or she at such time is a director of the Company, may in his or her discretion,
subject to certain limitations and periodic review of the Compensation Committee, grant Options to purchase Common Shares to employees
of the Company or any of its subsidiaries. The exercise price of Options granted under the Option Plan is established at the time
of grant and must be not less than the closing price of the Common Shares on the Toronto Stock Exchange (the “TSX”)
immediately preceding the date of the grant. The vesting terms of Options are established at the time of grant. For a more complete
description of the Option Plan, please see “Securities Authorized for Issuance Under Equity Compensation Plans –
Incentive Stock Option Plan”.
As described
above, the Company makes annual grants of Options under the Option Plan on a prospective, going-forward basis. The Options granted
to executive officers and other key employees are typically granted by the Board, based on the recommendations of the Compensation
Committee. In addition, grants of Options are also made to non-management directors. In determining whether or not to make option
grants, the Board, the Compensation Committee and the Chief Executive Officer take into account previous and other awards of equity-based
compensation to the grantees and others. In granting Options both to executive officers and other employees, as well as non-management
directors, the Board, based on the recommendations of the Compensation Committee, determines the value that the Board wishes to
grant as equity-based compensation and then determines the number of the Options to be granted based on the estimated fair value
of the Options. The fair value of the Options is calculated based on a standard Black-Scholes-Merton model, which the Compensation
Committee and the Board conclude produces a meaningful and reasonable estimate of fair value.
The number
of Options granted to the NEOs in 2019 was as follows:
| Mark Corrigan |
1,000,000 |
| William Hunter |
20,000 |
| Justin Renz |
175,000 |
| Sheila Grant |
100,000 |
| Hugues Sachot | - |
| David McMasters | 100,000 |
The Company’s
annual burn rate under the Option Plan and the Predecessor Option Plan was 3.7% in 2017, 3.1% in 2018 and 3.6% in 2019. The burn
rate is calculated by dividing the number of stock options granted under the Option Plan or Predecessor Option Plan, as applicable,
during the year by the weighted average number of Common Shares or Predecessor Shares outstanding for the year.
RSU and
Phantom Share Unit Plan
The RSU
Plan was approved by shareholders of the Company in May 2018. Pursuant to the RSU Plan, the Board may, in its discretion, award
RSUs to directors, employees and eligible consultants of the Company or any of its subsidiaries. Each RSU awarded conditionally
entitles the participant to receive one Common Share (or the cash equivalent) upon attainment of the RSU vesting criteria.
The RSU
Plan was established to assist the Company in the recruitment and retention of highly qualified employees and consultants by providing
a means to reward superior performance, to motivate participants under the RSU Plan to achieve important corporate and personal
objectives and, through the issuance of share units to participants under the plan, to better align the interests of participants
with the long-term interests of shareholders.
RSUs were
not granted to NEOs in 2019.
A Phantom
Share Unit Plan (“PSU Plan”) was established to assist the Company in the recruitment and retention of highly
qualified employees and consultants by providing a means to reward superior performance, to motivate participants under the PSU
Plan to achieve important corporate and personal objectives and, through the issuance of Phantom Share Units (“PSUs”)
to participants under the PSU Plan, to better align the interests of participants with the long-term interests of shareholders.
Only employees and consultants that are not eligible for RSUs in their local jurisdiction are eligible under the PSU plan. No
PSUs shall be paid out or settled by the issuance or provision of shares or any other securities of the Company. Each PSU awarded
conditionally entitles the participant to receive the cash equivalent of the closing market value of the units upon the attainment
of the PSU vesting criteria.
A total
of 50,375 PSUs were granted to Hugues Sachot in 2019.
The Company’s
annual burn rate under the RSU Plan and Predecessor RSU Plan was 0.2% in 2017, 0.2% in 2018 and 0.3% in 2019. The burn rate is
calculated by dividing the number of RSU’s granted under the RSU Plan or Predecessor RSU Plan, as applicable, during the
year by the weighted average number of Common Shares or Predecessor Shares outstanding for the year.
Compensation
Risk Review
The Compensation
Committee has reviewed the Company’s compensation policies and practices and considered whether they might, or are reasonably
likely to, encourage executives and other employees to take inappropriate or excessive risks and whether any of the Company’s
compensation policies or practices might present or could give rise to the material risks to the Company or otherwise affect the
risks faced by the Company, and management of those risks. The Compensation Committee intends to conduct such a review on an annual
basis.
The mandate
of the Board includes, as part of its ongoing stewardship functions, identifying and documenting the financial risks and other
risks the Company must face in the course of its business, and ensuring that such risks are appropriately managed, and that appropriate
processes for risk assessment, management and internal control are in place. In connection with its review, the Compensation Committee
considers the financial and other risks identified by the Board, as well as the Company’s internal controls and other policies
and practices for management of such risks and, in particular, considers whether there may be any risks arising from the Company’s
compensation policies and practices that may reasonably be likely to have a material effect on the Company.
The Compensation
Committee believes that the Company’s compensation policies and practices encourage and reward prudent and responsible actions
and appropriate risk taking over the long term to increase shareholder value, and should not lead to irresponsible or excessive
risk taking which may have potential to increase short term revenues or profits at the expense of achieving the Company’s
long-term strategic goals and objectives. The Compensation Committee has concluded that any risks arising from the Company’s
employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. The Compensation
Committee will periodically reassess risk if compensation policies should change as a result of business needs.
As part
of its consideration and deliberations, the Compensation Committee considered, among other things, the following:
| · | The
role and responsibilities of senior management in risk assessment, risk management and
internal controls. |
| · | The
role of the Board in identifying the risks the Company faces and ensuring that such risks
are appropriately managed. |
| · | The
corporate and personal objectives that are considered and assessed as part of the determination
of the amount of the annual incentive amount for executive officers and whether such
objectives are likely to motivate executives and employees to take appropriate and responsible
risks which are consistent with long-term growth of the Company, and not encourage irresponsible
or excessive risks which have the potential to increase short term revenues or profits
at the expense of achieving the Company’s long-term strategic goals and objectives. |
| · | The
extent to which the Company’s compensation policies and practices include effective
risk management and regulatory compliance as part of the performance metrics used in
determining compensation. As discussed above, risk assessment and risk management are
included as part of the Compensation Committee’s assessment of performance of executive
officers for purposes of determining the annual incentive value to which executive officers
may be entitled, and in exercising discretion in determining the amounts of such annual
incentive values. |
| · | The
extent to which the Company’s compensation expense to executive officers is a significant
percentage of the Company’s revenues. |
| · | The
extent to which incentive compensation may be awarded by the Company upon accomplishment
of tasks where risks to the Company from such tasks may extend over a significantly longer
time period. |
| · | The
extent to which the Company’s executive compensation policies and practices may
reward short-term rather than long-term objectives. |
| · | The
maximum annual incentive value that senior executives are entitled to receive, subject
to and in the discretion of the Compensation Committee and Board. |
| · | Policies
and practices the Company uses to identify and mitigate compensation policies and practices
that could encourage executive officers and other employees to take inappropriate or
excessive risks, including the Company’s executive compensation recovery policy. |
Executive
Compensation Recovery Policy
The Company
has in place a policy pursuant to which, in the event the Compensation Committee or the Board determines that one or more executives
of the Company have engaged in fraud, theft, embezzlement, serious misconduct or negligence, irrespective of whether it directly
caused or directly contributed to the need for a material restatement of the Company’s financial results, the Compensation
Committee will review all incentive-based compensation awarded to executives. The Compensation Committee will oversee a Recovery
Committee which may in its sole discretion, seek to recover all or a portion of the incentive-based compensation awarded or received
during the previous 36-months.
Performance
Graph
The following
table and graph compare the cumulative total shareholder return on $100 invested in Common Shares of the Company with $100 invested
in the S&P/TSX Composite Index from December 31, 2014 to December 31, 2019 (the Company’s most recent financial year
end). All dollar amounts are reflected in Canadian dollars. All references to Correvio Pharma Corp. prior to the Arrangement are
in reference to Cardiome Pharma Corp. (the “Predecessor”).
| Year
End |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
| |
|
|
|
|
|
|
| Correvio
Pharma Corp. |
C$100.00
|
C$104.21 |
C$35.11 |
C$17.88 |
C$31.37 |
C$5.056 |
| S&P/TSX
Composite Index |
C$100.00
|
C$91.68 |
C$111.01 |
C$121.11 |
C$110.34 |
C$135.59 |
The trend
in overall compensation paid to the NEOs over the past five years has generally not tracked the performance of the market price
of the Common Shares, nor has it tracked the S&P/TSX Composite Index during the period. The Company has not included market
price targets of the Shares as a component of the Company’s executive compensation program and strategy.
Compensation
of Executive Officers
The following
table provides a summary of the total compensation earned during the years ended December 31, 2019, December 31, 2018 and December
31, 2017 for the each of the Company’s NEOs.
Summary
Compensation Table(1)
| |
|
|
|
|
Non-equity incentive plan
compensation
|
|
|
|
|
Name and principal
position |
Fiscal
Year |
Salary
|
Share-
based
awards
(C$)(2) |
Option-
based
awards
(C$)(3) |
Annual
incentive
plans (C$)(4) |
Long-term
incentive
plans
(C$) |
Pension
value
|
All other
compensation
|
Total
compensation |
Mark Corrigan
Chief Executive Officer(5) |
2019 |
551,493 |
Nil |
2,176,130 |
275,746(12) |
Nil |
Nil |
53,877 |
3,057,246 |
| William L. Hunter |
2019 |
137,978 |
Nil |
32,641 |
121,391 |
Nil |
Nil |
65,966 |
357,976 |
President and Chief
Executive Officer(6) |
2018 |
685,500 |
Nil |
549,876 |
582,675 |
Nil |
Nil |
Nil |
1,818,051 |
| |
|
|
|
|
Non-equity incentive plan
compensation
|
|
|
|
|
Name and principal
position |
Fiscal
Year |
Salary
|
Share-
based
awards
(C$)(2) |
Option-
based
awards
(C$)(3) |
Annual
incentive
plans
C$)(4) |
Long-term
incentive
plans
(C$) |
Pension
value
|
All other
compensation
|
Total
compensation |
|
2017 |
669,500 |
Nil |
749,856 |
200,00 |
Nil |
Nil |
Nil |
1,619,356 |
| Justin Renz |
2019 |
583,836 |
Nil |
482,854 |
145,959(12) |
Nil |
Nil |
Nil |
1,212,649 |
| President & Chief |
2018 |
518,280 |
Nil |
180,019 |
187,877 |
Nil |
Nil |
Nil |
886,176 |
| Financial Officer(7) |
2017 |
320,592 |
Nil |
606,548 |
103,239 |
Nil |
Nil |
Nil |
1,030,379 |
| Sheila M. Grant |
2019 |
408,700 |
Nil |
277,797 |
81,740(12) |
Nil |
Nil |
Nil |
768,237 |
| Chief Operating Officerer(8) |
2018 |
396,800 |
Nil |
152,743 |
150,800 |
Nil |
Nil |
Nil |
700,343 |
| |
2017 |
310,000 |
Nil |
234,330 |
93,000 |
Nil |
Nil |
Nil |
637,330 |
| Hugues Sachot |
2019 |
493,186 |
261,358 |
Nil |
98,637(12) |
Nil |
Nil |
Nil |
853,181 |
| Chief Commercial Officer(9) |
2018 |
493,232 |
139,790 |
Nil |
167,469 |
Nil |
Nil |
Nil |
800,491 |
| |
2017 |
461,381 |
173,834 |
Nil |
73,235 |
Nil |
Nil |
Nil |
708,450 |
| David McMaster |
2019 |
440,531 |
Nil |
275,917 |
88,106(12) |
Nil |
Nil |
Nil |
804,554 |
| Corporate General |
2018 |
417,863 |
Nil |
150,016 |
141,879 |
Nil |
Nil |
Nil |
709,758 |
| Counsel(10) |
2017 |
409,059 |
Nil |
231,034 |
98,044 |
Nil |
Nil |
Nil |
738,137 |
Notes:
| (1) | All
dollar amounts in the Summary Compensation Table and footnotes are reflected in Canadian
dollars. The average rates of exchange used to convert U.S. dollar amounts to Canadian
dollar amounts for the respective fiscal years were: 2019 – 1.3269; 2018 –
1.2957; 2017 – 1.2986. |
| (2) | Share-based
awards represent the fair value of PSUs granted in the year under the PSU Plan. The fair
value of the PSUs is calculated as the number of PSUs granted multiplied by the grant
date fair market value. |
| (3) | Option-based
awards represent the fair value of stock options granted in the year under the Stock
Option Plan and Predecessor Option Plan. The fair value of Options granted is calculated
as of the grant date using the Black-Scholes option pricing model. Under this method,
the weighted average fair value of Options granted to the NEOs in 2019 was 2.45; 2018
- $1.21 ; 2017 - $1.92 using the following assumptions: |
| |
2019 |
2018 |
2017 |
| Annual
dividends per share |
Nil |
Nil |
Nil |
| Expected
stock price volatility |
71.6% |
61.5% |
64.5% |
| Risk-free
interest rate |
2.0% |
2.3% |
1.1% |
| Expected
life of options (in years) |
3.9 |
4.0 |
3.7 |
There
is no dividend yield because the Company does not pay, and does not intend to pay, cash dividends on the Shares. The expected
stock price volatility is based on the historical volatility of our average monthly stock closing prices over a period equal to
the expected life of each option grant. The risk-free interest rate is based on yields from government bond yields with a term
equal to the expected term of the Options being valued. The expected life of options represents the period of time that the Options
are expected to be outstanding based on historical data of Optionholder exercise and termination behaviour. We estimate forfeitures
at the time of grant and, if necessary, revise that estimate if actual forfeitures differ and adjust stock-based compensation
accordingly.
| (4) | Non-equity
annual incentive plan compensation relates to discretionary cash bonuses that were granted
to NEOs for the respective fiscal years. |
| (5) | Dr.
Mark Corrigan was appointed Chief Executive Officer of the Company on March 14, 2019.
|
| (6) | Dr.
William Hunter was appointed interim Chief Executive Officer of the Company on July 3,
2012 and Chief Executive Officer of the Company on a full-time basis in March 2013. He
served on the Board as an independent director until his appointment as interim Chief
Executive Officer on July 3, 2012 and has served since that time as a non-independent
director. Dr. Hunter did not receive any fees relating to his position as a director
in 2014, 2015, 2016, 2017 or 2018. Dr. Hunter resigned on March 13, 2019 as Chief Executive
Officer. |
| (7) | Mr.
Renz was appointed Chief Financial Officer on May 16, 2017. He was appointed President
and Chief Financial Officer on January 1, 2019. |
| (8) | Ms.
Grant was appointed Chief Operating Officer on March 26, 2013. |
| (9) | Mr.
Sachot was Senior Vice President, Sales from June 22, 2015 to May 15, 2017, at which
time he was appointed Chief Commercial Officer. |
| (10) | Mr.
McMasters was appointed Corporate General Counsel on November 1, 2012. |
| (11) | Fees
earned as a director. |
| (12) | These
cash incentive bonuses were earned in 2019 but are payable upon the closing of a corporate
sale transaction. |
Outstanding
Option-Based and Share-Based Awards
The following
tables set forth, for each NEOs, all of the option-based and share-based grants and awards outstanding on December 31, 2019.
| |
Option-based
awards |
|
| Name |
Number
of securities underlying unexercised Options |
Option
exercise price |
Option
expiration date |
Value
of unexercised in-the-money Options as at Dec. 31, 2019 |
| (#) |
($) |
($) |
| Mark
H. Corrigan |
14,000 |
11.66 |
June
22, 2020 |
Nil |
| |
12,500 |
4.09(1) |
August
10, 2021 |
Nil |
| |
12,500 |
5.20(1) |
August
13, 2022 |
Nil |
| |
20,000 |
4.88(1) |
June
19, 2023 |
Nil |
| |
600,000 |
5.19(1) |
March
15, 2024 |
Nil |
| |
400,000 |
5.19(1) |
June
25, 2024 |
Nil |
| William
L. Hunter |
130,000 |
10.35 |
March
26, 2020 |
Nil |
| 450,000 |
2.49 |
March
13, 2021 |
Nil |
| 400,000 |
4.01 |
March
13, 2021 |
Nil |
| 250,000 |
6.15 |
March
13, 2021 |
Nil |
| 20,000 |
3.00 |
June
25, 2024 |
Nil |
| Justin
Renz |
275,000 |
4.82(1) |
May 18,
2022 |
Nil |
| 150,000 |
2.53(1) |
March
23, 2023 |
Nil |
| 175,000 |
5.19(1) |
March
15, 2024 |
Nil
|
| Sheila
M. Grant |
32,700 |
10.35 |
March
26, 2020 |
Nil |
| 75,000 |
6.15 |
June
21, 2021 |
Nil |
| 125,000 |
4.01 |
March
21, 2022 |
Nil |
| |
125,000 |
2.49 |
March
23, 2023 |
Nil |
| 100,000 |
5.23 |
March
15, 2024 |
Nil |
| Hugues
Sachot |
32,700 |
10.35 |
March
26, 2020 |
Nil |
| David
McMasters |
32,700 |
10.35 |
March
26, 2020 |
Nil |
| 75,000 |
6.42(1) |
June
21, 2021 |
Nil |
| 125,000 |
4.02(1) |
March
21, 2022 |
Nil |
| 125,000 |
2.53(1) |
March
23, 2023 |
Nil |
| 100,000 |
5.19(1) |
June
25, 2024 |
Nil |
| Name |
Number
of shares or units of shares that have not vested |
Market
or payout value of share-based awards that have not vested ($) |
Market
or payout value of vested share-based awards not paid out or distributed ($) |
| (#) |
| Mark
H. Corrigan |
Nil |
Nil |
Nil |
| William
L. Hunter |
Nil |
Nil |
Nil |
| Justin
Renz |
Nil |
Nil |
Nil |
| Sheila
M. Grant |
Nil |
Nil |
Nil |
| Hugues
Sachot |
81,112 |
43,800 |
Nil |
| David
McMasters |
Nil |
Nil |
Nil |
| (1) | These
stock options were granted in U.S. dollars. The exchange rate used for conversion of
U.S. dollars into Canadian dollars was US$1.00 = C$1.3269 being the annual average of
the Bank of Canada rates for 2019. |
Value
Vested or Earned During Fiscal 2019
The following
table sets forth, for each NEO, the value vested for all outstanding option-based and share-based awards and the value earned
for all non-equity incentive plan compensation during the year ended December 31, 2019.
| Name |
Option-based
awards –
Value vested during 2019
($) |
Share-based
awards –
Value vested during 2019
($) |
Non-equity
incentive plan compensation - Value earned during 2019
($) |
| Mark
H. Corrigan |
Nil |
Nil |
275,746(1) |
| William
L. Hunter |
1,042,303 |
Nil |
121,391 |
| Justin
Renz |
33,388(1) |
Nil |
145,949(1) |
| Sheila
M. Grant |
32,845 |
Nil |
81,740 |
| Hugues
Sachot |
Nil |
61,587 |
98,637(2) |
| David
McMasters |
32,065(1) |
Nil |
88,106(1) |
| (1) | The exchange
rate used for conversion of U.S. dollars into Canadian dollars was US$1.00 = C$1.3269,
being the annual average of the Bank of Canada rates for 2019. |
| (2) | The exchange
rate used for conversion of EURO into Canadian dollars was EUR 1.00 = C$1.4855, being
the annual average of the European Central Bank rates for 2019. |
Pension
Plan Benefits
The Company
does not provide retirement benefits for directors and officers.
Employment
Contracts with Named Executive Officers
The Company
has entered into employment agreements with each of the NEOs listed below.
Mark
Corrigan
On March
14, 2019, Dr. Mark Corrigan was appointed Chief Executive Officer of the Company. Dr. Corrigan received an annual salary of US$525,000
and was eligible for an annual discretionary performance bonus. Dr. Corrigan was granted 1,000,000 incentive stock options which
vest over three years on the last day of each month in equal instalments, commencing from the date of grant. Dr. Corrigan is eligible
for discretionary annual cash bonuses and stock option grants, if certain milestones agreed to between the Company and Dr. Corrigan
are met. He is entitled to six weeks of paid vacation each year. Dr. Corrigan’s salary is reviewed annually by the Company.
William
Hunter
On
July 3, 2012, Dr. William Hunter was appointed interim Chief Executive Officer and President of the Company and was to devote
his best efforts and at least 60% of all of his business time to the performance of his duties. In March 2013, Dr. Hunter was
appointed full-time President and Chief Executive Officer. With this appointment, Dr. Hunter’s annual salary was increased
to $550,000. In addition, Dr. Hunter was granted 150,000 incentive stock options which vest over three years on the last day of
each month in equal instalments, commencing from the date of grant, and 50,000 incentive stock options which will vest only if
certain performance condition is met. Effective January 1, 2014, Dr. Hunter’s annual salary was increased to $650,000. In
August 2014, Dr. Hunter was granted 100,000 incentive stock options which vest over three years on the last day of each month
in equal instalments, commencing from the date of grant. Under an employment agreement dated January 1, 2015, Dr. Hunter’s
annual salary was increased to $669,500. In 2015, Dr. Hunter was granted 130,000 incentive stock options, which vest over three
years on the last day of each month in equal instalments, commencing from the date of grant. There was no change to Dr. Hunter’s
salary in 2016. In 2016, Dr. Hunter was granted 250,000 incentive stock options, which vest over three years on the last day of
each month in equal instalments, commencing from the date of grant. In 2017, Dr. Hunter was granted 400,000 incentive stock options,
which vest over three years on the last day of each month in equal instalments, commencing from the date of grant. Effective January
1, 2018, Dr. Hunter’s annual salary was increased to $685,500. In 2018, Dr. Hunter was granted 450,000 incentive stock options,
which vest over three years on the last day of each month in equal instalments, commencing from the date of grant. In 2019, Dr.
Hunter was granted 20,000 incentive stock options which vested immediately. On January 1, 2019, Dr. Hunter resigned as President
and on March 13, 2019, Dr. Hunter resigned as Chief Executive Officer of the Company. Upon resignation, Dr. Hunter received payments
in accordance with his employment agreement and all outstanding unvested stock option grants vested immediately with a 24-month
exercise period for all outstanding grants. Dr. Hunter was eligible for discretionary annual cash bonuses and stock option grants,
if certain milestones agreed to between the Company and Dr. Hunter were met. He was entitled to six weeks of paid vacation each
year. Dr. Hunter’s salary was reviewed annually by the Company. Subsequent to Dr. Hunter’s resignation, in 2019 Dr.
Hunter was granted 20,000 incentive stock options which vested immediately based on his role as a non-executive member of the
Board.
Justin
Renz
Mr. Justin
Renz was appointed Chief Financial Officer of the Company May 16, 2017. Mr. Renz received an annual salary of US$395,000 and was
entitled to a signing bonus and eligible for an annual discretionary performance bonus. On January 1, 2019, Mr. Renz was appointed
President and Chief Financial Officer of the Company. His annual salary was increased to US$440,000. Mr. Renz was granted 275,000,
150,000, 175,000 and nil incentive stock options in 2017, 2018, 2019 and 2020, respectively, which vest over three years on the
last day of each month in equal instalments, commencing from the date of grant. Mr. Renz is eligible for discretionary annual
cash bonuses and stock option grants, if certain milestones agreed to between the Company and Mr. Renz are met. He is entitled
to four weeks of paid vacation each year. Mr. Renz’s salary is reviewed annually by the Company.
Sheila
Grant
Ms. Sheila
Grant was appointed Chief Operating Officer of the Company on March 26, 2013, devoting 80% of her business time to perform her
duties, in consideration for an annual salary of $228,000. In October 2017, Ms. Grant agreed to devote 100% of her business time
to perform her duties in consideration for an annual salary of $387,500. Ms. Grant received grants of 75,000, 125,000, 125,000,
100,000 and nil incentive stock options in 2016, 2017, 2018, 2019 and 2020, respectively, which vest over three years on the last
day of each month in equal instalments, commencing from the date of grant. Ms. Grant is eligible for discretionary annual cash
bonuses and stock option grants, if certain milestones agreed to between the Company and Ms. Grant are met. She is entitled to
six weeks of paid vacation each year. Ms. Grant’s salary is reviewed annually by the Company.
Hugues
Sachot
On December
31, 2013, Mr. Hugues Sachot was appointed Senior Vice President, International. Mr. Sachot received annual compensation of EUR
280,000 from his consulting agreement and was entitled to a signing bonus and eligible for an annual discretionary performance
bonus. Mr. Sachot assumed the position of Senior Vice President, Sales on June 22, 2015. On January 1, 2016, Mr. Sachot signed
an employment agreement, with his annual compensation increasing to EUR 300,000 from his consulting and employment agreements.
On May 15, 2017, he was appointed Chief Commercial Officer. In 2016, 2017, 2018, 2019 and 2020, Mr. Sachot received grants of
25,596, 42,922, 46,106, 50,375 and nil PSUs, respectively, which vest over three years on the anniversary date of each grant in
equal instalments. Mr. Sachot is eligible for discretionary annual cash bonuses and stock option grants, if certain milestones
agreed to between the Company and Mr. Sachot are met. He is entitled to six weeks of paid vacation each year. Mr. Sachot’s
salary is reviewed annually by the Company.
David
McMasters
On November
1, 2012, Mr. David McMasters was appointed Corporate General Counsel. Mr. McMasters received an annual Salary of US$315,000. Mr.
McMasters received grants of 75,000, 125,000, 125,000, 100,000 and nil incentive stock options in 2016, 2017, 2018, 2019 and 2020,
respectively, which vest over three years on the last day of each month in equal instalments, commencing from the date of grant.
Mr. McMasters is eligible for discretionary annual cash bonuses and stock option grants, if certain milestones agreed to between
the Company and Mr. McMasters are met. He is entitled to six weeks of paid vacation each year. Mr. McMasters’s salary is
reviewed annually by the Company.
Estimated
Termination Payments
Dr. Mark
Corrigan has an employment agreement with indefinite terms and may be terminated by him upon at least 60 days’ written notice,
in which case he will be entitled to receive any unpaid salary earned by him up to the last day of employment, accrued vacation,
expenses incurred up to the date of termination, and, contingent on execution of a release of claims in favor of the Company,
bonus owed (including, if applicable, a prorated bonus, if any, earned in respect of the fiscal year in which his employment is
terminated). Should his employment be terminated by the Company without cause, or, be terminated by Dr. Corrigan for good reason
(as defined in his employment agreement), he is entitled to receive, among other things, any unpaid salary earned by him up to
the last day of employment, accrued vacation, expenses incurred up to the date of termination, and, contingent on execution, delivery
and non-revocation of a release of claims in favor of the Company, (i) bonus owed with respect to any fiscal year prior to the
year in which his employment is terminated, (ii) a bonus for 2019 of US$207,812.50 contingent on certain performance criteria
outlined by the Board, (iii) a lump sum severance payment equal to 24 months of salary, (iv) an additional fixed bonus amount
equivalent to 50% of his base salary, and (v) amounts for benefits (such amounts to which Dr. Corrigan is entitled, collectively,
the “Corrigan Termination Payments”). If upon or within 24 months of a change of control of the Company, his employment
is terminated by the Company for any reason other than for just cause, or, is terminated by Dr. Corrigan for good reason (as defined
in his employment agreement), he is entitled to receive, in addition to the Corrigan Termination Payments, and contingent on execution,
delivery and non-revocation of a release of claims in favor of the Company, a further lump sum amount equal to one-year base salary.
For Options granted to Dr. Corrigan, in all cases, except for termination for just cause, all unvested Options that otherwise
would have vested during the 24-month period following the last day of employment, will vest immediately, and if applicable, he
may exercise such Options at any time within the 24-month period following the last day of employment.
Mr. Justin
Renz, Ms. Sheila Grant and Mr. David McMasters have employment agreements with indefinite terms and may be terminated by them
upon at least 60 days’ written notice, in which case they will be entitled to receive any unpaid salary earned by the executive
up to the last day of employment, accrued vacation and bonus owed (including, if applicable, a prorated bonus, if any, earned
in respect of the fiscal year in which his employment is terminated) and expenses incurred up to the date of termination. Should
their employment be terminated by the Company without cause, or, be terminated by the executive for good reason (as defined in
the executive’s employment agreement), they are entitled to receive, among other things, any unpaid salary earned by them
up to the last day of employment, accrued vacation, expenses incurred up to the date of termination, and (i) bonus owed with respect
to any fiscal year prior to the year in which their employment is terminated, (ii) a lump sum severance payment equal to 24 months
of salary, (iii) bonus equivalent to the annualized average of the previous three years’ bonus payments received by the
executive, and (iv) amounts for benefits (such amounts to which each of the executives is entitled, collectively, the “Non-CEO
Termination Payments”). If upon or within 24 months of a change of control of the Company, their employment is terminated
by the Company for any reason other than for just cause, or, is terminated by Mr. Renz, Ms. Grant and Mr. McMasters for good reason
(as defined in each executive’s employment agreement), they are entitled to receive, in addition to the Non-CEO Termination
Payments, a lump sum severance amount equal to two times the greater of (i) the average of the bonus made to the executive in
each of the two immediately preceding fiscal years, and (ii) the amount of the executive’s target bonus opportunity for
the fiscal year in which the executive’s employment is terminated. For Options granted prior to January 1, 2019, in all
cases, except for termination with cause, all unvested Options held by Mr. Renz, Ms. Grant and Mr. McMasters will vest immediately
on their last day of employment and if applicable, they may exercise such Options at any time within the 24-month period following
the last day of employment. For Options granted subsequent to January 1, 2019 to Mr. Renz, Ms. Grant and Mr. McMasters, (i) if
their employment is terminated by them for good reason (as defined in each executive’s employment agreement), all unvested
Options that otherwise would have vested during the 24-month period following the last day of employment, will vest immediately,
and if applicable, they may exercise such Options at any time within the 24-month period following the last day of employment;
or (ii) if terminated by the Company for any reason other than for just cause, such Options, that otherwise would have vested
during the 6-month period following the last day of employment will immediately vest, and if applicable, they may exercise such
Options at any time within the 6-month period following the last day of employment.
Mr. Hugues
Sachot’s employment and consulting agreements have indefinite terms and may be terminated by Mr. Sachot upon at least 90
days’ written notice. Should Mr. Sachot’s agreements be terminated by the Company without cause, he is entitled
to receive any salary and bonus owed and expenses incurred up to the date of termination. In addition, he is entitled to a lump
sum severance payment equal to 12 months of salary and all unvested Options held by Mr. Sachot will vest pursuant to an accelerated
schedule over 12 months. Following a change of control of the Company, if Mr. Sachot’s agreements are terminated by
the Company for any reason other than for just cause, he is entitled to receive any salary and bonus owed and expenses incurred
up to the date of termination. In addition, he is entitled to a lump sum severance payment equal to 24 months of salary and car
cost, and one year’s bonus. All unvested Options held by Mr. Sachot will vest immediately on his last day of employment.
The table
below reflects amounts that would have been payable to each NEO if his or her employment had been terminated on December 31, 2019
either (i) without cause or (ii) following or in connection with a change of control.
| |
Termination
Without Cause |
Termination
Following
Change of Control(1) |
| Name |
Severance
($) |
Accelerated
Vesting of Options
($)(2) |
Continuation
of Benefits
($) |
Severance
($) |
Accelerated
Vesting of Options
($)(2) |
Continuation
of Benefits
($) |
| Mark
Corrigan |
1,668,991(3) |
- |
63,691(3) |
2,438,179(3) |
- |
95,537(3) |
| William
Hunter(5) |
- |
- |
- |
- |
- |
- |
| Justin
Renz |
1,315,621(3) |
- |
63,691(3) |
1,899,457(3) |
- |
95,537(3) |
| Sheila
M. Grant |
925,913 |
- |
48,000 |
1,252,873 |
- |
72,000 |
| Hugues
Sachot |
653,930(4) |
- |
- |
1,158,839(4) |
- |
31,803(4) |
| David
McMasters |
992,256(3) |
- |
63,691(3) |
1,344,680(3) |
- |
95,537(3) |
Notes:
| (1) | Represents
the amount each NEO would be entitled to receive if his or her employment with the Company
was terminated upon completion of a change of control. |
| (2) | Represents
the value of unvested in-the-money Options that will vest upon termination of employment
as at December 31, 2019. |
| (3) | The
exchange rate used for conversion of U.S. dollars into Canadian dollars was U.S.$1.00
= Cdn.$1.3269, being the annual average of the Bank of Canada rates for 2019. |
| (4) | The
exchange rate used for conversion of EURO into Canadian dollars was EUR 1.00 = Cdn.$1.4855,
being the annual average of the European Central Bank rates for 2019. |
| (5) | Dr.
Hunter resigned on March 13, 2019 and would not receive a termination payment following
a change of control. |
Directors’
and Senior Executives’ Liability Insurance and Indemnity Agreements
The Company
maintains directors’ and senior executives’ liability insurance which, subject to the provisions contained in the
policy, protects the directors and senior executives, as such, against certain claims made against them during their term of office.
For the policy year ended December 15, 2019, such insurance provided for an aggregate of US$30,000,000 annual protection against
liability (less a deductible of up to US$1,500,000 payable by the Company depending on the nature of the claim). For the policy
year ending December 15, 2020, the Company extended the term of US$15,000,000 of the previous year’s policy, (less a deductible
of up to US$5,000,000 payable by the Company depending on the nature of the claim). The annual premium paid by the Company for
this extension of insurance is US$1,531,000. The Company has also entered into indemnity agreements with directors and senior
officers of the Company to provide certain indemnification to such directors and senior officers, as permitted by the CBCA.
On December
13, 2019, the Company notified its insurers of a claim against the above-mentioned insurance. On December 12, 2019, a putative
securities class action complaint was filed against the Company and certain of the Company’s current and past officers (collectively
the “Defendants”) in the United States District Court for the Southern District of New York. The Court appointed
co-lead plaintiffs on February 25, 2020. The complaint purports to be on behalf of investors who purchased or otherwise acquired
Correvio securities during the period October 23, 2018 to December 5, 2019, inclusive (the “Class Period”),
and the Company damaged thereby.
The complaint
alleges, among other things, that the Company made materially false and misleading statements and omissions regarding our business,
operational and compliance policies. Specifically, the complaint alleges that the Company made false and/or misleading statements
and/or failed to disclose that data supporting the resubmitted NDA for BRINAVESS did not minimize the significant health and safety
issues observed in connection with the drug’s original NDA and that the foregoing substantially diminished the likelihood
that the FDA would approve the resubmitted NDA, which purportedly artificially inflated the market value of our securities. An
amended complaint is due on May 1, 2020.
The plaintiffs
have not specified an amount of alleged damages in the action. Because this action is in the early stages, the possible loss or
range of losses, if any, arising from the litigation cannot be estimated. The Company believes that the claims asserted in the
complaint are without merit and intends to defend the lawsuit vigorously.
Compensation
of Directors
Director
Compensation Table
For the
most recently completed fiscal year, each non-management director of the Company received total compensation for services provided
to the Company in his or her capacity as director and/or consultant and/or expert as follows:
| Name |
Fees
earned (C$) |
Share-based
awards (C$) |
Option-based
awards
(C$)(3) |
Non-equity
incentive plan compensation
(C$) |
Pension
value
(C$) |
All
other compensation
(C$) |
Total
(C$) |
| W.
James O’Shea(2) |
143,712 |
Nil |
40,351 |
Nil |
Nil |
Nil |
184,063 |
| Richard
M. Glickman(4) |
118,653 |
Nil |
32,641 |
Nil |
Nil |
Nil |
151,294 |
| Vanda
De Cian |
66,139 |
Nil |
90,845 |
Nil |
Nil |
Nil |
156,984 |
| Arthur
H. Willms(5) |
106,163 |
Nil |
32,641 |
Nil |
Nil |
Nil |
138,804 |
| Robert
J. Meyer |
126,094 |
Nil |
32,281 |
Nil |
Nil |
Nil |
158,375 |
Notes:
| (1) | All
dollar amounts in the Director Compensation Table and footnotes are reflected in Canadian
dollars. The exchange rate used for conversion of U.S. dollars into Canadian dollars
was U.S.$1.00 = Cdn. $1.3269, being the annual average of the Bank of Canada rates for
2019. |
| (2) | Chairman
of the Board and Chair of the Corporate Governance and Nomination Committee. |
| (3) | Calculated
as of the grant date using the Black-Scholes option pricing model. The value shown is
calculated by multiplying the number of stock options granted by the Black-Scholes valuation
factor ($2.04). |
| (4) | Chair
of the Compensation Committee. |
| (5) | Chair
of the Audit Committee. |
Effective
January 2014, the Board, based on a recommendation of the Compensation Committee, set the annual retainer fee payable to non-management
directors, other than the Chair of the Board and the Lead Independent Director, for acting as board members at US$25,000 and the
annual retainer payable to the Chair of the Board and the Lead Independent Director at US$75,000. The additional annual retainer
for each of the Chairs of the Audit Committee and Corporate Governance and Nominating Committee was US$25,000. The Board also
determined that the amount non-management directors were entitled to receive per teleconference Board or committee meeting was
US$1,500 and for each Board or committee meeting attended in person was US$3,000. Effective June 2014, the Corporate Governance
and Nominating Committee was separated into the Compensation Committee and the Corporate Governance and Nomination Committee upon
the appointment of a sixth director. The annual retainer payable to the Chair of the Compensation Committee was US$25,000 and
the annual retainer payable to the Chair of the Corporate Governance and Nomination Committee was US$15,000. Effective June 21,
2016, the role of Lead Independent Director was eliminated.
Based on
the recommendation of the Compensation Committee and Mercer's benchmarking analysis, effective January 1, 2018, the Board
removed all compensation based on attendance of meetings and moved to a retainer-only compensation model. The annual retainer
fee payable to non-management Board members was changed to US$50,000 and the retainer payable to the Chair of the Board was changed
to US$90,000. The additional annual retainers for members of the Audit Committee and the Chair of the Audit Committee
are US$13,000 and US$25,000, respectively. The additional annual retainers for members of the Compensation Committee and
the Chair of the Compensation Committee are US$10,000 and US$25,000, respectively. The additional annual retainers for members
of the GN Committee and the Chair of the GN Committee are US$7,000 and US$15,000, respectively. On December 10, 2019, the
Board agreed to waive retainer fees going forward, until such time as the Board deems it appropriate to re-instate retainer fees.
In granting
Options to non-management directors, the Board determines the number of Common Shares which the Board wishes the directors to
have the right to acquire and then determines the value of the awards which are calculated applying a standard Black-Scholes-Merton
model.
Outstanding
Option-Based and Share-Based Awards
The
following table sets forth, for each non-management director of the Company, all of the option-based and share-based awards outstanding
on December 31, 2019.
| |
Option-based
Awards |
Share-based
Awards |
|
| Name |
Number
of securities underlying unexercised Options |
Option
exercise price |
Option
expiration date |
Value
of unexercised in-the-money Options as at Dec. 31, 2019 |
Number
of shares or units of shares that have not vested |
Market
or payout value of share-based awards that have not vested |
Market
or payout value of vested share-based awards not paid out or distributed |
| (#) |
($) |
($) |
(#) |
($) |
($) |
| W. James
O’Shea |
14,000 |
11.66 |
June
22, 2020 |
Nil |
Nil |
Nil |
Nil |
| |
17,500 |
4.09(1) |
August
10, 2021 |
Nil |
Nil |
Nil |
Nil |
| |
17,500 |
5.20(1) |
August
13, 2022 |
Nil |
Nil |
Nil |
Nil |
| |
25,000 |
4.88(1) |
June
19, 2023 |
Nil |
Nil |
Nil |
Nil |
| |
25,000 |
3.07(1) |
June
25, 2024 |
Nil |
Nil |
Nil |
Nil |
| Richard
M. Glickman |
10,000 |
11.66 |
June
22, 2020 |
Nil |
Nil |
Nil |
Nil |
| |
12,500 |
4.01 |
August
10, 2021 |
Nil |
Nil |
Nil |
Nil |
| |
12,500 |
5.05 |
August
13, 2022 |
Nil |
Nil |
Nil |
Nil |
| |
20,000 |
4.85 |
June
19, 2023 |
Nil |
Nil |
Nil |
Nil |
| |
20,000 |
3.00 |
June
25, 2024 |
Nil |
Nil |
Nil |
Nil |
| Vanda
de Cian |
30,000 |
5.19(1) |
March
15, 2024 |
Nil |
Nil |
Nil |
Nil |
| |
5,000 |
3.07(1) |
June
25, 2024 |
Nil |
Nil |
Nil |
Nil |
| Arthur
H. Willms |
14,000 |
11.66 |
June
22, 2020 |
Nil |
Nil |
Nil |
Nil |
| |
12,500 |
4.01 |
August
10, 2021 |
Nil |
Nil |
Nil |
Nil |
| |
12,500 |
5.05 |
August
13, 2022 |
Nil |
Nil |
Nil |
Nil |
| |
20,000 |
4.85 |
June
19, 2023 |
Nil |
Nil |
Nil |
Nil |
| |
20,000 |
3.00 |
June
25, 2024 |
Nil |
Nil |
Nil |
Nil |
| Robert
J. Meyer |
10,100 |
12.92(1) |
September
25, 2020 |
Nil |
Nil |
Nil |
Nil |
| |
12,500 |
4.09(1) |
August
10, 2021 |
Nil |
Nil |
Nil |
Nil |
| |
12,500 |
5.20(1) |
August
13, 2022 |
Nil |
Nil |
Nil |
Nil |
| |
20,000 |
4.88(1) |
June
19, 2023 |
Nil |
Nil |
Nil |
Nil |
| |
20,000 |
3.07(1) |
June
25, 2024 |
Nil |
Nil |
Nil |
Nil |
| (1) | These
stock options were granted in U.S. dollars. The exchange rate used for conversion of
U.S. dollars into Canadian Dollars was US$1.00 – C$1.3269, being the annual average
Bank of Canada rate for 2019. |
Value
Vested or Earned During 2019 Financial Year
The following
table sets forth, for each non-management director of the Company, the value vested for all outstanding option-based and share-based
awards and the value earned for all non-equity incentive compensation during the twelve-month period ended December 31, 2019.
| Name |
Option-based
awards –
Value vested during 2019
($) |
Share-based
awards –
Value vested during 2019
($) |
Non-equity
incentive plan compensation –
Value earned during 2019
($) |
| W.
James O’Shea |
2,603 |
Nil |
Nil |
| Richard
Glickman |
2,800 |
Nil |
Nil |
| Vanda
de Cian |
531(1) |
Nil |
Nil |
| Arthur
H. Willms |
2,800 |
Nil |
Nil |
| Name |
Option-based
awards –
Value vested during 2019
($) |
Share-based
awards –
Value vested during 2019
($) |
Non-equity
incentive plan compensation –
Value earned during 2019
($) |
| Robert
J. Meyer |
2,123(1) |
Nil |
Nil |
| (1) | The exchange
rate used for conversion of U.S. dollars into Canadian dollars was US$1.00 = C$1.3269,
being the annual average of the Bank of Canada rates for 2019. |
Securities
Authorized For Issuance Under Equity Compensation Plans
The following
table provides information as of December 31, 2019 with respect to compensation plans under which equity securities of the
Company are authorized for issuance.
| |
Number
of securities to
be issued
upon exercise
of outstanding
Options,
warrants
and rights |
Weighted
average
exercise
price
of outstanding
Options,
warrants
and rights |
Number
of securities remaining
available
for future issuance under equity
compensation
plans (excluding securities
reflected
in column (a)) |
| Plan
Category |
(a) |
(b) |
(c) |
| Equity
compensation plans approved by securityholders |
Options
– 4,696,200
RSUs
– 123,131 |
Options
- $4.81
RSUs
- nil |
Options
– 2,226,579
RSUs
– 1,261,425 |
| Equity
compensation plans not approved by securityholders |
- |
- |
- |
Total |
Options
– 4,696,200
RSUs
– 123,131 |
Options
- $4.81
RSUs
- nil |
Options
– 2,226,579
RSUs
– 1,261,425 |
Summary
of Option Plan
The Option
Plan was approved by shareholders of the Company in May 2018 and became effective on May 15, 2018. Pursuant to the Option Plan,
the Board may, in its discretion, grant Options to purchase Common Shares of the Company to directors, officers, employees, contractors
and consultants of the Company or any of its subsidiaries. In addition, the Chief Executive Officer of the Company, provided the
Chief Executive Officer at such time is a director of the Company, may in his or her discretion, subject to certain limitations,
grant Options to employees of the Company or any of its subsidiaries.
Upon completion
of the Arrangement on May 15, 2018 whereby the Company succeeded the reporting obligations of the Predecessor, each option (each,
a “Predecessor Option”) to purchase common shares (“Predecessor Shares”) of the Predecessor
pursuant to the stock option plan of the Predecessor (the “Predecessor Option Plan”) outstanding prior to the
effective time of the Arrangement was deemed to be exchanged for one Option to purchase the number of Common Shares equal to the
number of Predecessor Shares subject to the Predecessor Option immediately prior to the effective time. Each replacement Option
has an exercise price equal to the exercise price of the Predecessor Option. The Option Plan is identical in every relevant respect
to the Predecessor Option Plan.
The maximum
number of Common Shares currently available for issue under the Option Plan is a rolling number equal to 12.5% of the Common Shares
issued and outstanding at the time of grant. Under the Option Plan, the maximum number of Options issuable to insiders is restricted
to 10% of the issued and outstanding Common Shares.
As at December
31, 2019, Options to purchase an aggregate of 4,696,200 Common Shares, representing approximately 7.8% of then outstanding Common
Shares on a fully diluted basis (8.5% on a non-diluted basis), were outstanding and unexercised. The remaining number of Common
Shares available to be issued pursuant to Options granted from and after December 31, 2019 was 2,226,579, representing approximately
3.7% of the issued and outstanding Common Shares on a fully diluted basis (4.0% on a non-diluted basis).
Subject
to the provisions of the Option Plan, the Board or the Chief Executive Officer of the Company has authority to determine the limitations,
restrictions and conditions, if any, applicable to the exercise of Options granted under the Option Plan. The Board or the Chief
Executive Officer of the Company establishes the exercise price of Options granted under the Option Plan at the time of grant,
which price must be not less than the closing price of the Common Shares on the TSX on the date immediately preceding the date
of the grant. Eligible persons (namely, any director, officer, employee, dependent contractor or consultant of the Company or
any of its subsidiary companies (“Eligible Persons”)) granted Options under the Option Plan (“Participants”)
may receive Options on more than one occasion and may receive Options having different terms on the same date.
The Board
or the Chief Executive Officer of the Company establishes the vesting terms of Options at the time of grant. Replacement Options
granted in exchange for Predecessor Options to officers, employees, consultants and contractors generally vest over three years,
or over the contract term for contracts with a duration of less than three years, on the last day of each month in equal instalments,
commencing from the date of grant.
The vesting
periods for Options granted to officers and certain key individuals may be accelerated if certain performance conditions are met.
Options granted to each non-executive director upon becoming a director of the Company vest over three years, with 25% vesting
immediately and 25% vesting at the end of each 12-month period commencing from the date of the grant of the Options. Thereafter,
annual Option grants made to non-executive directors vest immediately upon grant. All Options are subject to the provisions described
below regarding exercise following the Participant ceasing to be a director, officer, employee, contractor or consultant of the
Company. Future Options may be granted on similar terms or such other terms as the Board or the Chief Executive Officer of the
Company may determine at the time of the grant, except all future Options must be exercised not later than five years from the
date of grant (subject to extension pursuant to the terms of the Option Plan for Options that would otherwise expire during a
blackout period).
The maximum
number of Common Shares which may be reserved for issuance under Options to an individual Participant is 5% of the number of Common
Shares that are outstanding (on a non-diluted basis) immediately prior to the grant, excluding Common Shares issued under the
Option Plan or other securities based compensation arrangements (the “Outstanding Issue”). The following limits
are placed on issuances of Options to insiders under the Option Plan: (i) the number of securities issuable to insiders under
all securities based compensation arrangements cannot exceed 10% of the Company’s outstanding securities; (ii) the number
of securities issued to insiders under all securities based compensation arrangements within a one-year period cannot exceed 10%
of the Company’s total issued and outstanding securities; and (iii) the maximum number of Common Shares which may be issued
to any one insider under the Option Plan within a one-year period is 5% of the Outstanding Issue.
The Option
Plan includes a limit on non-employee director participation whereby the maximum number of Common Shares issuable under the Option
Plan together with any Common Shares issued pursuant to any other security based compensation arrangements of the Company to non-employee
directors will not exceed 1% of the total number of issued and outstanding Common Shares on a non-diluted basis. In addition,
under the Option Plan, the award value of all equity based awards that are to be settled by the issuance of Common Shares from
treasury to any non-employee director may not exceed $150,000 per year per eligible director, of which a maximum of $100,000 may
be awarded in Options.
Replacement
Options granted in exchange for Predecessor Options granted under the Predecessor Option Plan must be exercised no later than
five years after the date of grant or such lesser period as may be determined by the Board or the Chief Executive Officer of the
Company, provided that the expiry date of any Option that expires during a trading blackout shall be extended to the tenth business
day after the end of such blackout period. Options may be exercised on a basis whereby the optionholder receives the intrinsic
value of the exercised Options (the difference between the aggregate market price of the Common Shares underlying the exercised
Options and the aggregate exercise price of the Common Shares underlying the exercised Options) in the form of Common Shares issued
from treasury. In addition, optionholders have a cash surrender right which entitles the holder, subject to such limitations,
restrictions or conditions as may from time to time be determined by the Board or Chief Executive Officer, to surrender Options
and receive the intrinsic value of the surrendered Options (the difference between the aggregate market price of the Common Shares
underlying the surrendered Options and the aggregate exercise price of the Common Shares underlying the surrendered Options) in
cash.
Subject
to the foregoing, and except as otherwise determined by the Board (or, subject to the provisions of the Option Plan, the Chief
Executive Officer of the Company): (i) if a Participant ceases to be an officer, employee, contractor or consultant of the Company
or any of its subsidiaries for any reason other than death, the Options held by such Participant will cease to be exercisable
30 days after the termination date (not including days on which the Participant is restricted from trading pursuant to any policy
of the Company prohibiting trading during “trading blackout” periods); (ii) if a Participant ceases to be an Eligible
Person by virtue of ceasing for any reason other than death to be a director of the Company, each Option held by the Participant
will cease to be exercisable twelve months after the Participant ceases to be a director; (iii) Options are not assignable or
transferable other than by will or the laws of decent or distribution, provided however that if a Participant dies prior to Options
held by the Participant ceasing to be exercisable, the legal representatives of the Participant may exercise the Options within
twelve months after the date of death, if the Options were by their terms exercisable on the date of death; and (iv) if the expiry
of an Option other than an incentive stock option, occurs during a trading blackout period or within two business days of a trading
blackout period, the expiry date of such Options is automatically extended until the tenth business day following the end of the
trading blackout period.
If a Participant
is a U.S. citizen or resident, the Option Plan provides that, in certain circumstances, the Options may be characterized as “incentive
stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, of the United States,
but only if designated by the Company. Where this is the case, the terms of the Option Plan provide for certain additional restrictions.
These restrictions include a restriction on the maximum aggregate number of Common Shares that may be issued as incentive stock
options. The Option Plan fixes the maximum number of Options that may be issued as incentive stock options at 575,000. The number
of Common Shares issuable pursuant to Options granted under the Option Plan may be adjusted if any share reorganization, special
distribution or corporate reorganization occurs, subject to prior approval of relevant stock exchanges.
The Board
may amend, suspend or terminate the Option Plan in accordance with applicable legislation, subject to TSX and shareholder approval.
The Option Plan requires shareholder approval for amendments to the Option Plan or Options granted under the Option Plan to:
| (a) | increase
the number of Common Shares that can be issued under the Option Plan, including an increase
to the fixed maximum number of securities issuable under the Option Plan, either as a
fixed number or a fixed percentage of the Company’s outstanding capital represented
by such securities; |
| (b) | reduce the
exercise price or purchase price of outstanding Options (including cancellation of outstanding
Options for the purpose of exchange for reissuance at a lower exercise price to the same
person); |
| (c) | extend the
expiry date of an Option (except for an extension to the expiry date of an Option if
the Option expires during or within ten business days after a blackout period) or amend
the Option Plan to permit the grant of an Option with an expiry date of more than five
years from the day the Option is granted; |
| (d) | if at any
time the Option Plan is amended to exclude participation by non-employee directors or
to include limits on participation by non-employee directors, expand the class of eligible
recipients of Options under the Option Plan that would permit the introduction or reintroduction
of non-employee directors on a discretionary basis or an increase on limits previously
imposed on non-employee director participation; |
| (e) | expand the
transferability or assignability of Options (other than “incentive stock options”,
the transferability of which may not be amended), other than to a spouse or other family
member, an entity controlled by the optionholder or spouse or family member, a Registered
Retirement Savings Plan or Registered Retirement Income Fund of the optionholder, spouse
or family member, a trustee, custodian or administrator acting on behalf of, or for the
benefit of, the optionholder, spouse or family member, any person recognized as a permitted
assign in such circumstances in securities or stock exchange regulatory provisions, or
for estate planning or estate settlement purposes; |
| (f) | amend the
Option Plan to increase any maximum limit of the number of securities that may be: |
| (i) | issued
to insiders of the Company within any one-year period; or |
| (ii) | issuable
to insiders of the Company at any time, |
which
may be specified in the Option Plan, when combined with all of the Company’s other security based compensation arrangements,
to be in excess of 10% of the Company’s total issued and outstanding securities, respectively;
| (g) | if the Option
Plan has a fixed maximum number of securities issuable, add or amend any provision that
allows for the exercise of Options without cash consideration, whether the optionholder
receives the intrinsic value in the form of securities from treasury or the intrinsic
value in cash, where the provision so added or amended does not provide for a full deduction
of the underlying Common Shares from the maximum number issuable under the Option Plan
or, if the Option Plan does not have a fixed maximum number of securities issuable, the
addition or amendment of any provision that allows for the exercise of Options without
cash consideration where a deduction may not be made for the number of Common Shares
underlying the Options from the Option Plan reserve; and |
| (h) | change the
amendment provisions of the Option Plan; |
provided
that shareholder approval will not be required for increases or decreases or substitution or adjustment to the number or kind
of shares or other securities reserved for issuance pursuant to the Option Plan or the number and kind of shares subject to unexercised
Options granted and in the option exercise price of such shares and the making of provisions for the protection of the rights
of Participants under the Option Plan in accordance with the section or sections of the Option Plan which provide for such increase,
decrease, substitution, adjustments or provisions in respect of certain events, including any change in the outstanding Common
Shares by reason of any stock dividend or any recapitalization, amalgamation, subdivision, consolidation, combination or exchange
of shares, other corporate change or reorganization, amalgamation or consolidation of the Company, or for the amendment of such
section or sections.
Under the
Option Plan, the Board has authority to make without shareholder approval all other amendments to the Option Plan including, but
not limited to, (i) typographical, clerical or administrative changes (including a change to correct or rectify an ambiguity,
immaterial inconsistency, defective provision, mistake, error or omission or clarify the Option Plan’s provisions or a change
to the provisions relating to the administration of the Option Plan); (ii) changing provisions relating to the manner of exercise
of Options, including changing or adding any form of financial assistance provided by the Company to Participants or, if the Option
Plan has a fixed maximum number of securities issuable, adding or amending provisions relating to a cashless exercise which provisions
so added or amended provide for a full deduction of the underlying Common Shares from the maximum number issuable under the Option
Plan; (iii) changing the terms, conditions and mechanics of grant, vesting, exercise and early expiry, provided that no such change
may extend an outstanding option’s expiry date; (iv) changing the provisions for termination of Options so long as the change
does not permit the Company to grant an Option with an expiry date of more than five years or extend an outstanding Option’s
expiry date; (v) changes designed to respond to or comply with any applicable law, tax, accounting, auditing or regulatory or
stock exchange rule, provision or requirement, to avoid tax on optionholders under any applicable tax legislation or to avoid
unanticipated consequences deemed by the Board to be inconsistent with the purpose of the Option Plan; and (vi) certain changes
to provisions on the transferability of Options (other than “incentive stock options”, the transferability of which
may not be amended) which do not require shareholder approval as described above.
No amendment
of the Option Plan or any Option may be made that will materially prejudice the rights of any Participant under any Option previously
granted to the Participant without the consent of such Participant.
Summary
of RSU Plan
The RSU
Plan was last approved by shareholders on May 9, 2018 and became effective on May 15, 2018. Pursuant to the RSU Plan, the Board
may, in its discretion, award RSUs to directors, employees and eligible consultants of the Company or any of its subsidiaries.
Each RSU awarded conditionally entitles the participant to receive one Common Share (or the cash equivalent) upon attainment of
the RSU vesting criteria. In addition, the Chief Executive Officer of the Company, provided the Chief Executive Officer at such
time is a director of the Company, may in his or her discretion, subject to certain limitations, award RSUs to employees of the
Company or any of its subsidiaries.
Upon completion
of the Arrangement in May 2018, each Predecessor restricted share unit (the “Predecessor RSUs”) was redeemed
for a cash payment of an amount equal to its fair market value, as determined by the Board, and the Company adopted the RSU Plan.
The RSU Plan is identical in every relevant respect to the Predecessor restricted share unit plan (the “Predecessor RSU
Plan”) pursuant to which the Predecessor RSUs were issued.
The vesting
of RSUs is conditional upon the expiry of a time-based vesting period. The duration of the vesting period and other vesting terms
applicable to the grant of the RSUs shall be determined at the time of the grant by the Committee.
Once the
RSUs vest, the participant is entitled to receive the equivalent number of underlying Common Shares or cash equal to the Market
Value (as defined below) of the equivalent number of Common Shares. The vested RSUs may be settled through the issuance of Common
Shares from treasury, by the delivery of Common Shares purchased in the open market, in cash or in any combination of the foregoing
(at the discretion of the Company). If settled in cash, the amount shall be equal to the number of Common Shares in respect of
which the participant is entitled multiplied by the Market Value of a Common Share on the payout date. “Market Value”
per share is defined in the RSU Plan and means, as at any date (if the Common Shares are listed and posted for trading on the
TSX), the arithmetic average of the closing price of the Common Shares traded on the TSX for the five trading days on which a
board lot was traded immediately preceding such date. The RSUs may be settled on the payout date, which shall be the third anniversary
of the date of the grant or such other date as the Committee may determine at the time of the grant, which in any event shall
be no later than the expiry date for such RSUs. The expiry date of RSUs will be determined by the Committee at the time of grant.
However, the maximum term for all RSUs is two years after the participant ceases to be an employee or eligible consultant of the
Company. All unvested or expired RSUs are available for future grants.
RSUs may
be granted in accordance with the RSU Plan, provided the aggregate number of Common Shares that may be issued upon the payout
of RSUs outstanding pursuant to the RSU Plan from time to time shall not exceed 2.5% of the number of issued and outstanding Common
Shares from time to time. There were 123,131 RSUs outstanding as of December 31, 2019, which represents approximately 0.2% of
then outstanding Common Shares on a fully diluted basis (0.2% on a non-diluted basis). The remaining number of Common Shares available
to be issued pursuant to RSUs granted from and after December 31, 2019 was 1,261,425, representing approximately 2.1% of the issued
and outstanding Common Shares on a fully diluted basis (2.3% on a non-diluted basis).
The RSU
Plan provides that the maximum number of Common Shares issuable to Insiders (as that term is defined by the TSX) pursuant to the
RSU Plan, together with any Common Shares issuable pursuant to any other security-based compensation arrangement of the Company,
will not exceed 10% of the total number of outstanding Common Shares. In addition, the maximum number of Common Shares issued
to Insiders under the RSU Plan, together with any Common Shares issued to Insiders pursuant to any other security-based compensation
arrangement of the Company within any one-year period, will not exceed 10% of the total number of outstanding Common Shares.
The RSU
Plan includes a limit on non-employee director participation whereby the maximum number of RSUs issuable under the RSU Plan together
with any Common Shares issued pursuant to any other security based compensation arrangements of the Company to non-employee directors
will not exceed 1% of the total number of issued and outstanding Common Shares on a non-diluted basis. In addition, under the
RSU Plan, the award value of all equity based awards that are to be settled by the issuance of Common Shares from treasury to
any non-employee director may not exceed $150,000 per year per eligible director, of which a maximum of $100,000 may be awarded
in Options.
Unless otherwise
determined by the Company in accordance with the RSU Plan, RSUs which have not vested on a participant’s termination date
shall terminate and be forfeited. If a participant who is an employee ceases to be an employee as a result of termination of employment
without cause, in such case, at the Company’s discretion (unless otherwise provided in the applicable grant agreement),
all or a portion of such participant’s RSUs may be permitted to continue to vest, in accordance with their terms, during
any statutory or common law severance period or any period of reasonable notice required by law or as otherwise may be determined
by the Company in its sole discretion. Vested RSUs will be paid out in accordance with their terms. All forfeited RSUs are available
for future grants.
RSUs are
not assignable or transferable other than by operation of law or upon death pursuant to a will or the laws of descent and distribution.
The Board
may, without notice, at any time and from time to time, without shareholder approval, amend the RSU Plan or any provisions thereof
in such manner as the Board, in its sole discretion, determines appropriate including, without limitation:
| (a) | for the
purposes of making formal minor or technical modifications to any of the provisions of
the RSU Plan; |
| (b) | to correct
any ambiguity, defective provision, error or omission in the provisions of the RSU Plan; |
| (c) | to change
the vesting provisions of RSUs; |
| (d) | to change
the termination provisions of RSUs or the RSU Plan that does not entail an extension
beyond the original expiry date of the RSU; |
| (e) | to preserve
the intended tax treatment of the benefits provided by the RSU Plan, as contemplated
therein; or |
| (f) | any amendments
necessary or advisable because of any change in applicable laws; |
provided,
however, that:
| (g) | no such
amendment of the RSU Plan may be made without the consent of each affected participant
if such amendment would adversely affect the rights of such affected participant(s) under
the RSU Plan; and |
| (h) | shareholder
approval shall be obtained in accordance with the requirements of the TSX for any amendment
that results in: |
| (i) | an increase
in the maximum number of Common Shares issuable pursuant to the RSU Plan other than as
already contemplated in the RSU Plan; |
| (ii) | an
extension of the expiry date for RSUs granted to Insiders under the RSU Plan; |
| (iii) | other
types of compensation through Common Share issuance; |
| (iv) | expansion
of the rights of a participant to assign RSUs beyond what is currently permitted in the
RSU Plan; or |
| (v) | the
addition of new categories of participants, other than as already contemplated in the
RSU Plan. |
No amendment
of the RSU Plan or any RSU may be made that will materially prejudice the rights of any participant under any RSU previously granted
to the participant without the consent by such participant.
Indebtedness
of Directors and Executive Officers
No current
or former director or executive officer of the Company, no proposed nominee for election as a director of the Company, and no
associate of any such director, executive officer or proposed nominee, at any time during the most recently completed financial
year has been indebted to the Company or any of its subsidiaries or had indebtedness to another entity that is, or has been, the
subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company
or any of its subsidiaries.
APPENDIX
“G”
CORPORATE GOVERNANCE PRACTICES
Effective
June 30, 2005, National Instrument 58-101 – Disclosure of Corporate Governance Practice (“NI 58-101”)
and National Policy 58-201 – Corporate Governance Guidelines (“NP 58-201”) were adopted in each
of the provinces and territories of Canada. NI 58-101 requires issuers to disclose the corporate governance practices that they
have adopted. NP 58-201 provides guidance on governance practices. The Company is also subject to National Instrument 52-110 –
Audit Committees (“NI 52-110”), which has been adopted in each of the provinces and territories of Canada
and which prescribes certain requirements in relation to audit committees. In addition to the disclosure provided below, the disclosure
on the Audit Committee of Correvio Pharma Corp. (the “Company”) required by NI 52-110 can be located in the
Company’s Annual Information Form dated March 27, 2020 at www.sedar.com.
General
The
Company is committed to sound and comprehensive corporate governance policies and practices and is of the view that its corporate
governance policies and practices, outlined below, are comprehensive and consistent with NP 58-201 and NI 52-110.
Board
of Directors
The
Board of Directors of the Company (the “Board”) encourages sound and comprehensive corporate governance policies
and practices designed to promote the ongoing development of the Company.
Composition
of the Board
The
Company’s Board is currently composed of seven directors, a majority of whom are independent directors. An “independent”
board member, as further defined in NI 52-110, means that such member has no “material relationship” with the issuer.
A “material relationship” is a relationship which could, in the view of the Board, be reasonably expected to interfere
with the exercise of a member’s judgment.
| Director |
Independent |
| Mark
H. Corrigan |
No |
| Vanda
de Cian |
Yes |
| Richard
M. Glickman |
Yes |
| William
L. Hunter |
No |
| Robert
J. Meyer |
Yes |
| W.
James O’Shea |
Yes |
| Arthur
H. Willms |
Yes |
The following
table outlines other reporting issuers that Board members are directors of:
| Board
Member |
Reporting
Issuer |
| Mark
H. Corrigan |
Novelion
Therapeutics Inc. |
| Board
Member |
Reporting
Issuer |
| Vanda
de Cian |
- |
| Richard
M. Glickman |
Aurinia
Pharmaceuticals, ESSA Pharma Inc., Vigil Health Solutions Inc. |
| William
L. Hunter |
Rex
Bionics Plc., Adherium Plc. |
| Robert
J. Meyer |
Chimerix,
Inc., Translate Bio, Inc. |
| W.
James O’Shea |
- |
| Arthur
H. Willms |
Naikun
Wind Energy Group Inc., Pacific Autism Family Centre Foundation |
W.
James O’Shea served as Chair of the Board. The role of the Chair is to provide leadership to the Board in discharging its
mandate and also assist the Board in discharging its stewardship function which includes ensuring the integrity of management,
strategic planning, identifying risks, succession planning, adopting a communication policy, internal
control and management information systems and the Company’s approach to corporate governance. The Chair provides advice
and mentorship to the senior management of the Company, particularly with respect to matters of strategic significance to the
Company. The Chair promotes delivery of information to the Board and is responsible for scheduling and organization of meetings
of directors.
The
following table illustrates the attendance record of each director for all Board meetings held in 2019.
| Board
Member |
Meetings
Attended |
| Mark
H. Corrigan |
16(1)
out of 17 |
| Vanda
de Cian |
12(2)
out of 17 |
| Richard
M. Glickman |
17
out of 17 |
| William
L. Hunter |
17
out of 17 |
| Robert
J. Meyer |
16
out of 17 |
| W.
James O’Shea |
17
out of 17 |
| Arthur
H. Willms |
16
out of 17 |
| (1) | Dr.
Mark Corrigan was appointed Chief Executive Officer of the Company on March 14, 2019.
|
| (2) | Dr.
Vanda de Cian was appointed to the Board on March 12, 2019 |
The independent directors of the Board meet at the end of each quarter’s regularly scheduled Board meeting, at which time
non-independent directors and members of management are not present. The Chair encourages open and candid discussions among the
independent directors by providing them with an opportunity to express their views on key topics before decisions are taken.
The
following table illustrates the attendance record of directors who sit on the major committees of the Board for committee meetings
held in 2019.
| Board
Member |
Audit
Committee - Meetings Attended |
Governance
and Nominating Committee -Meetings Attended |
Compensation
Committee -Meetings Attended |
| Mark
H. Corrigan |
|
1(1)
out of 2 |
2(1)
out of 5 |
| Vanda
de Cian |
|
1(2)
out of 2 |
2(2)
out of 5 |
| Richard
M. Glickman |
3
out of 4 |
2
out of 2 |
5
out of 5 |
| W.
James O’Shea |
4
out of 4 |
2
out of 2 |
|
| Arthur
H. Willms |
4
out of 4 |
|
4
out of 5 |
| (1) | Dr.
Mark Corrigan was appointed Chief Executive Officer of the Company on March 14, 2019.
|
| (2) | Dr.
Vanda de Cian was appointed to the Board on March 12, 2019 |
Board
Mandate
The
Board has adopted a Board Mandate in which it explicitly assumes responsibility for stewardship of the Company. The Board is mandated
to represent the shareholders to select the appropriate Chief Executive Officer, assess and approve the strategic direction of
the Company, ensure that appropriate processes for risk assessment, management and internal control are in place, monitor management
performance against agreed benchmarks, and assure the integrity of financial reports. A copy of the Board Mandate is attached
hereto as Exhibit A.
Position
Descriptions
The
Board has adopted and approved written position descriptions for the Chair of the Board and the Chairs of each of the Audit Committee,
the Compensation Committee and the Corporate Governance and Nomination Committee (the “GN Committee”).
The
Chief Executive Officer of the Company also has a written position description that has been approved by the Board.
Board
of Directors Tenure
The
Board has not adopted policies imposing an arbitrary term or retirement age limit in connection with individuals nominated for
election as directors as it does not believe that such a limit is in the best interests of the Company at this time. The GN Committee
annually reviews the composition of the Board, including the age and tenure of individual directors. The Board strives to achieve
a balance between the desirability to have a depth of experience from its members and the need for renewal and new perspectives.
The
GN Committee has determined that the Board is highly effective and well composed and that no appreciable benefit would be derived
from the introduction of term or retirement age limits at this time.
Board
and Senior Management Diversity
The
Board is committed to nominating the best individuals to fulfill director roles and executive officer positions. The Board believes
that diversity is important to ensure that Board members and senior management provide the necessary range of perspectives, experience
and expertise required to achieve effective stewardship and management. The Company has adopted a Board Diversity Policy which
outlines its approach to achieving and maintaining diversity on the Board. In addition to balancing skills, experience, independence,
and knowledge, the Company will strive for the appropriate balance of diversity which takes into consideration the Designated
Groups, as defined by the CBCA, namely, women, Aboriginal peoples, persons with disabilities
and members of visible minorities.
The
GN Committee is responsible for monitoring the implementation and effectiveness of the Board Diversity Policy. As such, the GN
Committee assesses on a periodic basis and reports on the following to the Board:
| · | The
mix of diversity, talents, quality, and skills on the Board and in senior management
positions; and |
| · | Progress
made on diversity pursuant to the Board Diversity Policy. |
Currently
the Company has one female board member (representing 14% of the Board) and one female executive officer (representing 17% of
the Company’s executive officers). The Company does not have representation from the other Designated Groups within the
Board or within senior management. The Company has not adopted a target number or percentage
(or range) for members of the Designated Groups to hold positions on the Board or to be members of senior management by a specific
date. However, when assessing the composition of the Board or identifying suitable candidates for appointment or re-election
to the Board, the GN Committee will:
| · | Seek
to include diverse candidates in any director search; |
| · | Periodically
review Board of Directors recruitment and selection protocols to ensure diversity remains
a component of all searches; |
| · | Review
the need for mechanisms of board renewals; and |
| · | Consider
the level of representation of the four designated groups on the Board. |
Each
year, the GN Committee reviews the general and specific criteria applicable to candidates to be considered for nomination to the
Board. The GN Committee aims to maintain the composition of the Board in a way that provides the best mix of skill and experience
to guide the Company’s long-term strategy and ongoing business operations.
The
Company is a global company operating in twelve countries, representing more than fifteen nationalities and sixteen languages.
No matter where it operates and across every aspect of the business, it strives to create a diverse and inclusive culture, reflecting
a diversity of competencies, genders, races, ages, personal qualities, geographical representation, business and cultural background,
experience and overall expertise. The Company’s commitment to diversity is further reflected in the Equal Employment Opportunity
Policy, which recognizes the Company’s commitment to offer equal employment opportunities or practices without discrimination
based on race, colour, ancestry, place of origin, political belief, religion, sex, marital status, family status, physical or
mental disability, sex, sexual orientation, gender identity or expression, age or criminal or summary conviction unrelated to
employment.
When
we hire executives, including the CEO and any executive officers reporting to the CEO, we consider all dimensions of diversity,
including gender and non-gender representation. We do not establish specific diversity targets at the group executive level or
the board due to the small size of this group and the need to carefully consider a broad range of criteria. We believe that embracing
diversity involves continually seeking to learn, engage, reflect and act in order to ensure we are meeting the needs of all our
stakeholders.
Orientation
and Continuing Education
It
is the mandate of the GN Committee to ensure that a process is established for the orientation and education of new directors
which addresses the nature and operation of the Company’s business and their responsibilities and duties as directors (including
the contribution individual directors are expected to make and the commitment of time and resources that the Company expects from
its directors).
With
respect to the continuing education of directors, the GN Committee ensures that directors receive adequate information and continuing
education opportunities on an ongoing basis to enable directors to maintain their skills and abilities as directors and to ensure
their knowledge and understanding of the Company’s business remains current.
Ethical
Business Conduct
The
Company has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to the directors, officers
and employees of the Company and each of its subsidiaries. Additionally, consultants and contractors for the Company are expected
to abide by the Code. The Code is disclosed on the Company’s website at: www.Correvio.com.
It
is recognized within the Code that in certain situations, compliance may be difficult to monitor. The Code sets out a framework
for compliance. A compliance officer is appointed by the Board to deal with questions or concerns relating to compliance that
cannot be dealt with by management. The Board has also adopted a Whistle Blower Policy which sets forth the procedures for (i)
the receipt, retention and treatment of complaints and concerns regarding accounting, internal accounting controls and auditing
matters; and (ii) the confidential and anonymous submission of complaints or concerns regarding questionable accounting or auditing
matters.
In
considering transactions and agreements in respect of which a director or executive officer has a material interest, the Board
ensures that the individual director or executive officer abstains from the discussion and conclusion with respect to the transaction
or agreement, as the case may be.
The
Company is committed to maintaining the highest standards of corporate governance and this philosophy is continually communicated
by the Board to management which in turn is emphasized to the employees of the Company on a continuous basis.
Nomination
of Directors
It
is the mandate of the GN Committee to identify and recommend qualified candidates for the Board. In assessing whether identified
candidates are suitable for the Board, the GN Committee considers: (i) the Board Diversity Policy; (ii) the competencies and skills
considered necessary for the Board as a whole; (iii) the competencies and skills that the existing directors possess and the competencies
and skills nominees will bring to the Board; and (iv) whether nominees can devote sufficient time and resources to his or her
duties as a member of the Board. In addition, the GN Committee assesses the participation, contribution and effectiveness of the
individual members of the Board on an annual basis. All members of the GN Committee are independent in accordance with the mandate
of the GN Committee.
Compensation
The
Compensation Committee is responsible for board compensation, establishment of salaries of executive management and senior staff
and employee-employer relations. The Compensation Committee reviews and makes recommendations to the Board regarding the corporate
goals and objectives, performance and compensation of the Chief Executive Officer of the Company on an annual basis and the issuance
of stock options to employees, consultants and directors. The Compensation Committee is also responsible for reviewing the recommendations
of the Chief Executive Officer regarding compensation of the senior officers, the compensation policy of the Company (including
internal structure, annual review and relationship to market levels and changes) and any significant changes in the Company’s
benefit plan and human resources policies. The Compensation Committee is comprised of independent directors in accordance with
the mandate of the Compensation Committee.
In
addition, the Compensation Committee reviews and recommends changes to the compensation of the members of the Board based on a
comparison of peer companies and issues relevant to the Company. The Compensation Committee also reviews and makes recommendations
regarding annual bonus policies for employees, the incentive-compensation plans and equity-based plans for the Company and reviews
executive compensation disclosure before the Company publicly discloses this information. The Compensation Committee annually
reviews the Company’s compensation policies and practices to consider whether they are aligned with the Company’s
risk management principles and whether they might, or are reasonably likely to, encourage executives and other employees to take
inappropriate or excessive risks and whether these policies or practices might present or could give rise to material risks to
the Company, or otherwise affect the risks faced by the Company and management of those risks.
Further
information pertaining to the compensation of directors and officers can be found in Appendix “F” to this Circular.
Assessments
It
is the Board’s mandate, in conjunction with the GN Committee, to assess the participation, contributions and effectiveness
of the Chair and the individual members of the Board on an annual basis. The Board also monitors the effectiveness of the Board
and its committees and the actions of the Board as viewed by the individual directors and senior management. It is the responsibility
of the GN Committee to assess the Company’s contingency plan for management succession.
EXHIBIT
A – BOARD MANDATE
ARTICLE
I. CORREVIO PHARMA CORP.
“A
committed, cohesive and effective board adds value, first and foremost, by selecting the right CEO for the company. Beyond this,
the board contributes to value in a number of ways discussed below. These include assessing and approving the strategic direction
of the company, ensuring that management has in place appropriate processes for risk assessment, management and internal control,
monitoring performance against agreed benchmarks, and assuring the integrity of financial reports. When boards add value by fulfilling
their responsibilities in these areas, it will result in greater transparency and understanding of a company’s situation
by its major shareholders.”
| Source: | Beyond
Compliance: Building a Governance Culture - Final Report issued by Joint Committee on
Corporate Governance. |
ARTICLE
II. PURPOSE
The
board of directors (the “Board”) of Correvio Pharma Corp. (the “Company”) is responsible for the proper
stewardship of the Company. This requires the Board to oversee the management of the business and affairs of the Company. The
Board is mandated to represent all stakeholders of the Company in the selection of an appropriate Chief Executive Officer (“CEO”),
assess and approve the strategic direction of the Company, ensure that appropriate processes for risk assessment, management and
internal control are in place, monitor management performance against agreed bench marks, and assure the integrity of financial
reports.
ARTICLE
III. MEMBERSHIP AND REPORTING
| 1. | The
Board will be comprised of a majority of independent directors and will have no more
than nine members. |
| 2. | Appointments
to the Board will be reviewed on an annual basis. The Corporate Governance and Nomination
Committee, in consultation with the CEO, is responsible for identifying and recommending
new nominees with appropriate skills to the Board. |
| 3. | The
chairman of the Board (the “Chairman”) will be (a) a non-management director;
or (b) a management director if the Board appoints a lead independent director as soon
as reasonably practicable. The Chairman will be appointed by a vote of the Board on an
annual basis. |
| 4. | The
Board will report to the shareholders of the Company. |
| 5. | Each
member of the Board will act in a manner such that they are able to fulfill their fiduciary
duties; to act honestly and in good faith, with a view to the best interests of the Company
and to exercise the care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances. |
ARTICLE
IV. TERMS OF REFERENCE
Meetings
1. The
Board will meet as required, but at least once quarterly.
| 2. | The independent
directors will meet as required, without the non-independent directors and members of
management, but at least once quarterly. |
Meeting
Preparation and Attendance
| 3. | In
connection with each meeting of the Board and each meeting of a committee of the Board
of which a director is a member, each director will: |
| (a) | review
thoroughly the materials provided to the directors in connection with the meeting and
be adequately prepared for the meeting; and |
| (b) | attend
each meeting, in person, by phone or by video-conference depending on the format of the
meeting, to the extent practicable. |
Corporate
Planning
| (a) | adopt
a strategic planning process and approve a strategic plan each year; and |
| (b) | approve
and monitor the operational plans and budgets of the Company submitted by management
at the beginning of each fiscal year. |
Risk
Management and Ethics
| (a) | ensure
that the business of the Company is conducted in compliance with applicable laws and
regulations and according to the highest ethical standards; |
| (b) | identify
and document the financial risks and other risks that the Company must face in the course
of its business and ensure that such risks are appropriately managed; and |
| (c) | ensure
that appropriate policies and procedures are in place regarding public disclosures, including
periodic review and approval of changes to the Disclosure Policy. |
Supervision
of Management
| (a) | to the
extent feasible, satisfy itself as to the integrity of the CEO and other executive officers
and that all such officers are creating a culture of integrity throughout the Company
consistent with the Company’s Code of Business Conduct and Ethics; |
| (b) | ensure
that the CEO is appropriately managing the business of the Company; |
| (c) | ensure
appropriate succession planning is in place; |
| (d) | establish
corporate objectives for CEO annually and evaluate the performance of CEO against these
corporate objectives; |
| (e) | consider
and approve major business initiatives and corporate transactions proposed by management;
and |
| (f) | ensure
the integrity of the Company’s internal control and management information systems. |
Management
of Board Affairs
| (a) | develop
a process for the orientation and education of new members of the Board; |
| (b) | support
continuing education opportunities for all members of the Board; |
| (c) | in conjunction
with the Corporate Governance and Nomination Committee, assess the participation, contributions
and effectiveness of the Chairman, and individual board members on an annual basis; |
| (d) | monitor
the effectiveness of the Board and its committees and the actions of the Board as viewed
by the individual directors and senior management; |
| (e) | establish
the committees of the Board it deems necessary to assist it in the fulfillment of its
mandate; and |
| (f) | disclose
on an annual basis the mandate, composition of the board and its committees. |
Approved:
April 5, 2018
Reviewed:
December 13, 2019
APPENDIX
“H”
ELECTRONIC MEETING GUIDE
See attached.
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Pharma Corp.’s
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CONTACT
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North American
Toll Free Phone:
1-833-490-0586
| @ |
E-mail:
inquiries@gryphonadvisors.ca |
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