UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of April 2024
Commission File Number: 001-39032
PROFOUND MEDICAL CORP.
(Translation of the registrant’s name into English)
2400 Skymark Avenue, Unit 6, Mississauga, Ontario L4W 5K5
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover
of Form 20-F or Form 40-F.
Form 20-F ☐ Form
40-F ☒
Exhibit 99.1 of this Form 6-K is incorporated by reference into Profound Medical Corp.’s
registration statement on Form F-10 (File No. 333-263248).
EXHIBIT INDEX
The following documents, each of which is attached as an exhibit hereto, and is incorporated
by reference herein:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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PROFOUND MEDICAL CORP. |
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Date: June 3, 2024 |
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By: |
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/s/ Rashed Dewan |
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Name: Rashed Dewan |
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Title: Chief Financial Officer |
Exhibit 99.1
![](https://www.sec.gov/Archives/edgar/data/1628808/000117184324003241/logo.jpg)
PROFOUND MEDICAL CORP.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE
HELD ON MAY 15, 2024
AND
MANAGEMENT INFORMATION CIRCULAR
DATED AS OF APRIL 5, 2024
PROFOUND MEDICAL CORP.
NOTICE
OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN THAT an annual general meeting (the “Meeting”)
of the holders (the “Shareholders”) of common shares (“Common Shares”) in the capital of Profound
Medical Corp. (the “Corporation”) will be held at 2400 Skymark Avenue, Unit 6, Mississauga, Ontario, L4W 5K5, on Wednesday,
May 15, 2024 at 10:00 a.m. (Toronto time) and will be broadcast via webcast and may be accessed either by conference call at 1-800-715-9871
(Toll Free) or 1-646-307-1963 (United States) Conference ID: 7535362 or online at https://edge.media-server.com/mmc/p/vnn3gm7m is for
the following purposes:
| 1. | to receive the audited financial statements of the Corporation for the financial year ended December 31,
2023 and the accompanying report of the auditors thereon; |
| 2. | to elect the directors of the Corporation for the ensuing year; |
| 3. | to appoint the auditors of the Corporation for the ensuing year and to authorize the directors of the
Corporation to fix the auditors’ remuneration; and |
| 4. | to transact such other business as may be properly brought before the Meeting or any postponement or adjournment
thereof. |
Shareholders should refer to the accompanying management information circular
for more detailed information with respect to the matters to be considered at the Meeting.
To access the live webcast of the Meeting on May 15, 2024 at 10:00 a.m.
(Toronto time), please dial in to the conference call at 1-800-715-9871 (Toll Free) or 1-646-307-1963 (United States) Conference ID: 7535362
or online at https://edge.media-server.com/mmc/p/vnn3gm7m.
The Corporation encourages all registered Shareholders to vote in
advance of the meeting by dating and executing the accompanying form of proxy and returning it to TSX Trust Company by mail or courier,
to 100 Adelaide Street West, Suite 301, Toronto, Ontario, M5H 4H1 or via the internet at www.voteproxyonline.com by no later than by 10:00
a.m. on Monday May 13, 2024, or if the Meeting is adjourned or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays,
prior to any such adjournment or postponement. If you receive more than one form of proxy because you own Common Shares registered in
different names or addresses, each form of proxy should be completed and returned.
If you are not a registered Shareholder and receive these materials
through your broker or through another intermediary, please complete and return the accompanying voting instruction form in accordance
with the instructions provided to you by your broker or by the other intermediary.
Only Shareholders of record as of April 5, 2024 are entitled to notice
of the Meeting and to vote at the Meeting and at any postponement or adjournment thereof.
By Order of the Board of Directors
(Signed) “Arun Menawat”
Arun Menawat
Director and Chief Executive Officer
April 5, 2024
PROFOUND MEDICAL CORP.
MANAGEMENT INFORMATION CIRCULAR
SOLICITATION OF PROXIES
This management information circular (this “Circular”) is
provided in connection with the solicitation of proxies by the management of Profound Medical Corp. (the “Corporation” or
“Profound”) for use at the annual general meeting (the “Meeting”) of the holders (the “Shareholders”)
of common shares (“Common Shares”) in the capital of the Corporation. The Meeting will be held on Wednesday May 15, 2024
at 10:00 a.m. (Toronto time) at 2400 Skymark Avenue, Unit 6, Mississauga, Ontario, L4W 5K5, or at such other time or place to which the
Meeting may be adjourned, for the purposes set forth in the notice of annual general meeting accompanying this Circular (the “Notice”).
Although it is expected that the solicitation of proxies will be primarily by mail, proxies may also be solicited by telephone, facsimile
or other means of electronic communication. In accordance with National Instrument 54-101 - Communication with Beneficial Owners of
Securities of a Reporting Issuer (“NI 54-101”), arrangements have been made with brokerage houses and other intermediaries,
clearing agencies, custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of the Common Shares
held of record by such persons and the Corporation may reimburse such persons for reasonable fees and disbursements incurred by them in
doing so. The costs thereof will be borne by the Corporation.
To access the live webcast of the Meeting on May 15, 2024 at 10:00 a.m.
(Toronto time), please dial in to the conference call at 1-800-715-9871 (Toll Free) or 1-646-307-1963 (United States) Conference ID: 7535362
or online at https://edge.media-server.com/mmc/p/vnn3gm7m.
These securityholder materials are being sent to both registered and non-registered
(beneficial) owners of the securities. If you are a non-registered owner and the Corporation or its agent has sent these materials directly
to you, your name and address and information about your holdings or securities have been obtained in accordance with applicable securities
regulatory requirements from the intermediary holding on your behalf.
Accompanying this Circular (and filed with applicable securities regulatory
authorities) is a form of proxy for use at the Meeting. Each Shareholder who is entitled to attend the Meeting is encouraged to participate
in the Meeting and Shareholders are urged to vote on matters to be considered in person or by proxy.
Unless otherwise stated, the information contained in this Circular is
given as of April 5, 2024. All time references in this Circular are references to Toronto time. Unless otherwise stated, all references
to “$” are to United States dollars and references to “C$” are to Canadian dollars.
APPOINTMENT AND REVOCATION
OF PROXIES
Registered Shareholders
Appointment of Proxies
Those Shareholders who wish to be represented at the Meeting by proxy
must complete and deliver a proper form of proxy to TSX Trust Company (the “Transfer Agent”) either by mail or courier, to
100 Adelaide Street West, Suite 301, Toronto, Ontario, M5H 4H1 or via the internet at www.voteproxyonline.com.
The persons named as proxyholders in the form of proxy accompanying this
Circular are designated by management of the Corporation and are representatives of the Corporation’s management for the Meeting.
A Shareholder who wishes to appoint some other person (who need not be a Shareholder) to attend and act for and on such Shareholder’s
behalf at the Meeting other than the management nominees designated in the form of proxy may do so by either: (i) crossing out the names
of the management nominees AND legibly printing the other person’s name in the blank space provided in the accompanying form of
proxy; or (ii) completing another valid form of proxy. In either case, the completed form of proxy must be delivered to the Transfer
Agent at the place and within the time specified herein for the deposit of proxies. A Shareholder who appoints a proxy who is someone
other than the management representatives named in the form of proxy should notify the nominee of the appointment, obtain the nominee’s
consent to act as proxy and provide instructions on how the Common Shares are to be voted. The nominee should bring personal identification
to the Meeting. In any case, the form of proxy should be dated and executed by the Shareholder or an attorney authorized in writing, with
proof of such authorization attached (where an attorney executed the proxy form).
In order to validly appoint a proxy, the form of proxy must be received
by the Transfer Agent (the address is stated above or in the form of proxy) by 10:00 a.m. (Toronto time) on Monday May 13, 2024, or if
the Meeting is adjourned or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays, prior to any such adjournment or
postponement. After such time, the Chair of the Meeting may accept or reject a form of proxy delivered to him in his discretion but is
under no obligation to accept or reject any particular late form of proxy.
Revocation of a Proxy
A Shareholder who has validly given a proxy may revoke it for any matter
upon which a vote has not already been cast by the proxyholder appointed therein. In addition to revocation in any other manner permitted
by law, a proxy may be revoked with an instrument in writing signed and delivered to either the registered office of the Corporation or
the Transfer Agent, 100 Adelaide Street West, Suite 301, Toronto, Ontario, M5H 4H1, at any time up to and including the last business
day preceding the date of the Meeting, or any postponement or adjournment thereof at which the proxy is to be used, or deposited with
the Chair of such Meeting on the day of the Meeting, or any adjournment or postponement thereof. The document used to revoke a proxy must
be in writing and completed and signed by the Shareholder or his or her attorney authorized in writing or, if the Shareholder is a corporation,
under its corporate seal or by an officer or attorney thereof duly authorized.
Signature on Proxies
The form of proxy must be executed by the Shareholder or his or her duly
appointed attorney authorized in writing or, if the Shareholder is a corporation, by a duly authorized officer whose title must be indicated.
A form of proxy signed by a person acting as attorney or in some other representative capacity should indicate that person’s capacity
(following his or her signature) and should be accompanied by the appropriate instrument evidencing qualification and authority to act
(unless such instrument has been previously filed with the Corporation).
Voting of Proxies
Each Shareholder may instruct his, her or its proxy how to vote his, her
or its Common Shares by completing the blanks on the form of proxy.
The Common Shares represented by the enclosed form of
proxy will be voted or withheld from voting on any motion, by ballot or otherwise, in accordance with any indicated instructions. If a
Shareholder specifies a choice with respect to any matter to be acted upon, the Common Shares will be voted accordingly. In the absence
of such direction, such Common Shares will be voted FOR the resolutions described in the form of proxy and below.
The accompanying form of proxy confers discretionary authority upon the
persons named therein to vote on any amendments or variations to matters identified in the Notice and with respect to such other business
or matters which may properly come before the Meeting or any adjournment or postponement thereof. As of the date hereof, management of
the Corporation knew of no such amendments or variations or other matters to come before the Meeting.
Beneficial (Non-Registered) Shareholders
The information set forth in this section is of importance to many Shareholders,
as a substantial number of Shareholders do not hold Common Shares in their own name. Shareholders who hold their Common Shares through
depositories (e.g. CDS & Co., the registration name for CDS Clearing and Depository Services Inc.), brokers, intermediaries, trustees
or other persons, or who otherwise do not hold their Common Shares in their own name (referred to in this Circular as “Beneficial
Shareholders”) should note that only proxies deposited by Shareholders who are registered Shareholders (that is, shareholders
whose names appear on the records maintained by the Transfer Agent as registered holders of Common Shares) will be recognized and acted
upon at the Meeting.
Without specific instructions, brokers (or their agents and nominees) are
prohibited from voting shares for the broker’s clients. Subject to the following discussion in relation to NOBOs (as defined herein),
the Corporation does not know for whose benefit the Common Shares registered in the name of CDS & Co., a broker or another nominee,
are held.
There are two categories of Beneficial Shareholders for the purposes of
applicable securities regulatory policy in relation to the mechanism of dissemination to Beneficial Shareholders of proxy-related materials
and other securityholder materials and to request voting instructions from such Beneficial Shareholders. Non-objecting beneficial owners
(“NOBOs”) are Beneficial Shareholders who have advised their intermediary (such as brokers or other nominees) that
they do not object to their intermediary disclosing ownership information to the Corporation, consisting of their name, address, e-mail
address, securities holdings and preferred language of communication. Securities legislation restricts the use of that information
to matters strictly relating to the affairs of the Corporation. Objecting beneficial owners (“OBOs”) are Beneficial
Shareholders who have advised their intermediary that they object to their intermediary disclosing such ownership information to the Corporation.
In accordance with the requirements of NI 54-101, the Corporation is sending
the Notice, this Circular and a voting instruction form or a form of proxy, as applicable (collectively, the “Meeting Materials”),
directly to NOBOs and indirectly, through intermediaries, to OBOs. NI 54-101 permits the Corporation, in its discretion, to obtain a list
of its NOBOs from intermediaries and use such NOBO list for the purpose of distributing the Meeting Materials directly to, and seeking
voting instructions directly from, such NOBOs. As a result, the Corporation is entitled to deliver Meeting Materials to Beneficial Shareholders
in two manners: (a) directly to NOBOs and indirectly through intermediaries to OBOs; or (b) indirectly to all Beneficial Shareholders
through intermediaries. In accordance with the requirements of NI 54-101, the Corporation is sending the Meeting Materials directly to
NOBOs and indirectly, through intermediaries, to OBOs. The Corporation will pay the fees and expenses of intermediaries for their services
in delivering Meeting Materials to OBOs in accordance with NI 54-101.
The Corporation has used a NOBO list to send the Meeting Materials directly
to those NOBOs whose names appear on that list. If the Corporation has sent these materials directly to a NOBO, such NOBO’s name
and address and information about its holdings of Common Shares have been obtained from the intermediary holding such shares on the NOBO’s
behalf in accordance with applicable securities regulatory requirements. As a result, any NOBO of the Corporation can expect to receive
a voting instruction form from the Transfer Agent. NOBOs should complete and return the voting instruction form to the Transfer Agent
in the envelope provided. The Transfer Agent will tabulate the results of voting instruction forms received from NOBOs and will provide
appropriate instructions at the Meeting with respect to the shares represented by such voting instruction forms.
Applicable securities regulatory policy requires intermediaries, on receipt
of Meeting Materials that seek voting instructions from Beneficial Shareholders indirectly, to seek voting instructions from Beneficial
Shareholders in advance of shareholders’ meetings on Form 54-101F7 – Request for Voting Instructions Made by Intermediary
(“Form 54-101F7”). Every intermediary has its own mailing procedures and provides its own return instructions,
which should be carefully followed by Beneficial Shareholders in order to ensure that their Common Shares are voted at the Meeting or
any adjournment or postponement thereof. Often, the form of proxy supplied to a Beneficial Shareholder by its broker is identical to the
form of proxy provided to registered Shareholders; however, its purpose is limited to instructing the registered Shareholder how to vote
on behalf of the Beneficial Shareholder. Beneficial Shareholders who wish to appear in person and vote at the Meeting should be appointed
as their own representatives at the Meeting in accordance with the directions of their intermediaries and Form 54-101F7. Beneficial Shareholders
can also write the name of someone else whom they wish to attend at the Meeting and vote on their behalf. Unless prohibited by law, the
person whose name is written in the space provided in Form 54-101F7 will have full authority to present matters to the Meeting and vote
on all matters that are presented at the Meeting, even if those matters are not set out in Form 54-101F7 or this Circular.
The majority of brokers now delegate responsibility for obtaining instructions
from clients to Broadridge Financial Solutions, Inc. (“Broadridge”). Broadridge typically mails a voting instruction
form in lieu of the form of proxy. Beneficial Shareholders are requested to complete and return the voting instruction form to Broadridge
by mail or facsimile. Broadridge will then provide aggregate voting instructions to the Transfer Agent, which tabulates the results and
provides appropriate instructions respecting the voting of shares to be represented at the Meeting or any adjournment or postponement
thereof. By choosing to send the Meeting Materials to NOBOs directly, the Corporation (and not the intermediary holding Common Shares
on your behalf) has assumed responsibility for (i) delivering these materials to you; and (ii) executing your proper voting instructions.
Please return your voting instructions as specified in the request for voting instructions.
All references to Shareholders in this Circular and the accompanying form
of proxy and Notice are to registered Shareholders unless specifically stated otherwise.
VOTING SECURITIES AND PRINCIPAL
HOLDERS OF VOTING SECURITIES
Shareholders of record as of April 5, 2024 are entitled to receive notice
of and to attend and vote at the Meeting. As at the date hereof, the Corporation has 24,428,899 issued and outstanding Common Shares.
Each Common Share entitles the holder to one vote in respect of any matter that may come before the Meeting.
Pursuant to the by-laws of the Corporation, a quorum is present at the
Meeting if two or more voting persons are present in person and authorized to cast in the aggregate not less than 10% of the total number
of votes attaching to all Common Shares.
To the knowledge of the directors and officers of the Corporation, as at
the date hereof, no person or corporation beneficially owns, directly or indirectly, or exercises control or direction over, more than
10% of the issued and outstanding Common Shares other than:
Name |
Number of Common Shares
Owned or Controlled |
Percent of Outstanding
Common Shares |
Gagnon Securities LLC |
2,891,423 |
11.8% |
INDEBTEDNESS OF DIRECTORS
AND OFFICERS
No directors or officers of the Corporation, nor any proposed nominee for
election as a director of the Corporation, nor any associate or affiliate of any one of them, is or was indebted, directly or indirectly,
to the Corporation or its subsidiaries at any time since the beginning of the last completed financial year of the Corporation.
INTEREST OF INFORMED PERSONS
IN MATERIAL TRANSACTIONS
Except as disclosed in this Circular, no director or officer of the Corporation,
nor any proposed nominee for election as a director of the Corporation, nor any other insider of the Corporation, nor any associate or
affiliate of any one of them, has or has had, at any time since the beginning of the last completed financial year of the Corporation,
any material interest, direct or indirect, in any transaction or proposed transaction that has materially affected or would materially
affect the Corporation.
MATTERS TO BE CONSIDERED AT
THE MEETING
Financial Statements
The audited financial statements of the Corporation and the auditors’
report thereon as at and for the financial year ended December 31, 2023 (the “Financial Statements”) will be placed
before the Shareholders at the Meeting, but no vote by the Shareholders with respect thereto is required or proposed to be taken in respect
of the Financial Statements. The Financial Statements were audited by PricewaterhouseCoopers LLP of Toronto, Ontario and are available
under the Corporation’s profile on SEDAR+ at www.sedarplus.ca.
Election of Directors
At the Meeting, Shareholders are required to elect the directors of the
Corporation to hold office until the next annual meeting of Shareholders or until the successors of such directors are elected or appointed.
Shareholders will be asked to vote on the election of six directors at the Meeting, as further described below. There are currently six
directors of the Corporation.
The persons designated as proxyholders in the accompanying form of proxy
(absent contrary directions) intend to vote FOR the election of the directors as set forth above. The Corporation does not contemplate
that any of such nominees will be unable to serve as directors; however, if for any reason any of the proposed nominees do not stand for
election or are unable to serve as such, proxies held by the persons designated as proxyholders in the accompanying form of proxy will
be voted for another nominee in their discretion unless the Shareholder has specified in his or her form of proxy that his or her Common
Shares are to be withheld from voting in the election of directors.
The Board has adopted a policy that entitles each Shareholder to vote for
each nominee on an individual basis. In addition, the Board has adopted a policy stipulating that if the votes in favour of the election
of a director nominee at the Meeting represent less than a majority (50% + 1 vote) of the Common Shares voted and withheld, the nominee
shall, immediately following the Meeting, submit his or her resignation to the Board for consideration. The Human Resources and Corporate
Governance Committee shall consider and recommend to the Board whether or not to accept the resignation. The Board will accept the resignation
absent exceptional circumstances which would warrant the applicable director continuing to serve on the Board. The Board will determine
whether or not to accept the resignation within 90 days following the applicable annual meeting. A press release disclosing the Board’s
determination (and the reasons for rejecting the resignation, if applicable) shall be issued promptly following such determination. The
nominee will not participate in any Human Resources and Corporate Governance Committee or Board deliberations on the resignation offer.
The policy does not apply in circumstances involving contested elections.
The following table sets forth the name of each of the persons proposed
to be nominated for election as a director of the Corporation, all positions and offices in the Corporation presently held by such nominees,
the nominees’ municipality, province or state and country of residence, principal occupation within the five preceding years, the
period during which the nominees have served as directors, and the number and percentage of Common Shares and options to purchase Common
Shares (“Options”) beneficially owned by the nominees, directly or indirectly, or over which control or direction is
exercised.
Name, Age and Residence |
Positions with the Corporation and
Date First Appointed to the Board |
Principal Occupation |
Number and Percentage of Common Shares Beneficially Owned or Controlled |
Number and Percentage of Options Beneficially Owned or Controlled |
Arun Menawat
Age: 69
Bonita Springs, Florida, USA |
Chief Executive Officer and Director
June 4, 2015
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Chief Executive Officer and Director of the Corporation (since August 2016). |
425,296
1.99% |
574,060
28.1% |
Brian Ellacott(2)
Age: 67
Sanibel Island, Florida, USA |
Director
June 14, 2018
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Chief Executive Officer Belmont Medical Technologies, a medical device company (since 2017). |
68,000
0.32% |
48,300
2.36% |
Cynthia Lavoie(1)
Age: 57
Gloucester, Ontario, Canada |
Director
March 2, 2021
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President and Managing Director of AllosteRx Capital Management (Canada) Inc. (since 2018). President and Chief Investment Officer CCRM Enterprises Inc. (since Aug 2020). |
6,000
0.03% |
35,000
1.71% |
Murielle Lortie(1)(3)
Age: 55
Pointe-Claire, Québec, Canada |
Director
November 30, 2020
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Chief Operating Officer Claridge Inc. (since January 2024); Chief Financial Officer Claridge Inc. (since September 2021); Chief Financial Officer and VP Finance of Liminal BioSciences (September 2018 to September 2021). |
3,150
0.02%
|
35,000
1.71% |
Arthur Rosenthal(1)(2)(4)
Age: 77
Oro Valley, Arizona, USA |
Director
June 14, 2018
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Professor of Practice in the Biomedical Engineering Department at Boston University (since 2010). |
17,300
0.08% |
48,300
2.36% |
Kris Shah(2)
Age: 63
Mississauga, Ontario, Canada |
Director
May 18, 2022
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President, Baylis MedTech (since February 2022); President, Baylis Medical Company (2015 to February 2022). |
- |
15,000
0.73% |
Notes:
| (1) | Member of the Audit Committee. |
| (2) | Member of the Human Resources and Corporate Governance Committee. |
| (3) | Chair of the Audit Committee. |
| (4) | Chair of the Human Resources and Corporate Governance Committee. |
Director Biographies
Arun Menawat – Chief Executive Officer and Director –
Dr. Menawat has an accomplished history of executive leadership success in the healthcare industry. From April 2003 until joining Profound,
he served as the Chairman, President and CEO of Novadaq Technologies Inc., a Toronto Stock Exchange (“TSX”) and Nasdaq
listed company that marketed medical imaging and therapeutic devices for use in the operating room. Previously, he was President and Chief
Operating Officer and Director of another publicly listed medical imaging software company, Cedara Software. His educational background
includes a Bachelor of Science in Biology, University of District of Columbia, Washington, D.C., and a Ph.D. in Chemical Engineering,
from the University of Maryland, College Park, MD, including graduate research in Biomedical Engineering from the National Institute of
Health, Bethesda, MD. He also earned an Executive M.B.A. from the J.L. Kellogg School of Management, Northwestern University, Evanston,
IL.
Brian Ellacott – Director – Mr. Ellacott is an experienced
global medical device executive. Mr. Ellacott joined Belmont Medical Technologies (“Belmont Instrument LLC”) as CEO
in December 2017. Belmont Instrument LLC is a Boston-based private equity owned medical device company with a leading global position
in fluid warming and infusion systems. Prior to Belmont Instrument LLC, Mr. Ellacott was President and CEO of Laborie Medical Technologies
(“Laborie”). Laborie is a urology and gastroenterology medical device company formerly based in Toronto with manufacturing
facilities in Toronto, Montreal, Enschede, NL, Attikon, Switzerland and Portsmouth, New Hampshire. Mr. Ellacott joined private equity
owned Laborie as President and CEO in July 2013 and in four years completed 14 global acquisitions, tripling Laborie’s revenue and
increasing EBITDA eight-fold. The company was ranked as one of the fastest growing and most profitable medical device companies in the
world. Prior to joining Laborie, Mr. Ellacott served as Executive Vice President and General Manager of Invacare Corporation’s (NYSE:
IVC) C$1 billion North and South American homecare and rehabilitation business. Mr. Ellacott has also held executive positions with Baxter
International Inc. and American Hospital Supply, Inc., with assignments in Canada, Australia and the United States. Mr. Ellacott serves
on the board of Belmont Medical Technologies and Aspen Surgical Products. Mr. Ellacott holds a Bachelor of Business Administration Degree
from Wilfrid Laurier University, Waterloo, Ontario, Canada and is a dual United States and Canadian citizen.
Cynthia Lavoie – Director – Dr. Lavoie is currently
President and Managing Director of AllosteRx Capital Management (“AllosteRx”). She also serves as President and Chief Investment
Officer of CCRM Enterprises. Prior to co-founding AllosteRx, Cynthia was a General Partner with TVM Life Science Management Inc. (“TVM”),
a global venture capital group with main offices in Munich and Montreal. She was recruited to TVM from VG (VenGrowth) Partners Inc., where
she was a Partner and co-headed its life sciences fund. Cynthia is currently chair of the board of directors at Fibrocor Therapeutics,
a fibrosis company in Toronto and Board Director of Apiary Therapeutics, a cell therapy start-up based in Toronto. A seasoned healthcare
investment professional with 20 years of experience in venture capital, Dr. Lavoie’s expertise includes creating companies de novo
and leading investments into businesses developing therapeutics, devices, and diagnostic tools. Cynthia has taken active roles on boards
of companies located in Canada and the US from start-up to revenue-generating stages. These include Acer Therapeutics (NASDAQ: ACER),
Cytochroma (acquired by OPKO Health), VisualSonics (acquired by SonoSite, now FujiFilm SonoSite), and Trillium Therapeutics (NASDAQ: TRIL)
(acquired by Pfizer). Before joining the investment community, Dr. Lavoie served in a variety of academic and scientific leadership positions
for 10 years, working with research institutes and life science companies. Cynthia earned her MBA with first class honors from Rotman
School of Management at the University of Toronto and earned her Ph.D in Molecular Biology with Dean’s honors from McGill University.
Murielle Lortie – Director – Ms. Lortie has an accomplished
history of financial leadership success within the global life science industry. She currently serves as Chief Financial & Operating
Officer of Claridge Inc. Prior to joining Claridge Inc., Ms. Lortie was Chief Financial Officer of Liminal BioSciences Inc. (“Liminal”),
a Nasdaq-listed, clinical-stage biopharmaceutical company. Prior to joining Liminal, Ms. Lortie was Vice President & Chief Financial
Officer and Advisor to the CEO, Global Strategy, Mergers & Acquisitions at Pharmascience Inc. Previously, she has held senior positions
in finance at Bristol Myers Squibb, including Vice-President of Finance for Bristol Myers Squibb Canada Co. and Global Director of Finance
supporting BMS Headquarters. Ms. Lortie is a Chartered Professional Accountant and member of the Ordre des comptables professionnels agrées
du Québec. She holds a Graduate Diploma in Accountancy from Concordia University and a Bachelor of Business Administration from
Bishop’s University. She has extensive corporate governance experience, previously serving on the Boards of Bellus Health Inc. and
Pharmascience Barbados Ltd. & Pharmascience International Ltd. Ms. Lortie is currently a Board member of Bishops University.
Arthur L. Rosenthal – Director – Dr. Rosenthal
formerly served as director and Chair of Compensation Committee for LivaNova PLC, a UK global medical technology company. Prior, Dr. Rosenthal
served on the Cyberonics board of directors as a non-executive director and Chair of the Compensation Committee from January 2007 to October
2015. Since June 2010, Dr. Rosenthal has served as Professor of Practice in the Biomedical Engineering Department at Boston University.
Dr. Rosenthal has also previously served as CEO of gEyeCue, Ltd., which he co-founded, a development stage medical device company working
on a guided biopsy for lower and upper gastrointestinal cancer screening. From June 2011 until July 2012, Dr. Rosenthal served as executive
vice chairman of Cappella Medical Devices Ltd. (now ArraVasc Ltd.), a development-stage company focused on novel device solutions for
coronary artery disease. From June 2009 until June 2011, Dr. Rosenthal served as President and CEO of Cappella, Inc. Dr. Rosenthal served
as chairman, from January 2002, and CEO, commencing in January 2005, of Labcoat, Ltd. until its acquisition by Boston Scientific Corporation
in December 2008. From January 1994 to May 2000, Dr. Rosenthal was a Senior Vice President, Corporate Officer, and Chief Development Officer
of Boston Scientific, and from May 2000 until his retirement in January 2005, he was a Senior Vice President, Chief Scientific Officer,
and Executive committee member of Boston Scientific. From 2000 until 2010, Dr. Rosenthal served as a non-executive director, and from
2006 through 2009, as chairman of the Remuneration Committee, of Renovo, Ltd., a U.K. based pharmaceutical company that became publicly
traded in 2006. In July 2009, Dr. Rosenthal joined the board of Interface Biologics, Inc., a Toronto-based development stage company focused
on drug delivery devices, as a non-executive director. In April 2011, Dr. Rosenthal was elected Chairman at Interface Biologics, Inc.
From April 2013 to May 2015, Dr. Rosenthal served as non-executive director and member of the Compensation Committee of Arch Technologies,
Inc. and is currently a member of Arch’s Clinical Advisory Board. In 2015, Dr. Rosenthal was appointed to the Industrial Advisory
Committee, CURAM (National University in Galway, Ireland). Since 2003, Dr. Rosenthal has been a Fellow of the American Institute of Medical
and Biological Engineering.
Kris Shah – Director – Kris Shah is the president
of Baylis Medical Technologies, Inc. (“Baylis”), a leader in the development and commercialization of innovative medical
devices in the fields of radiology and neurosurgery. Headquartered in Canada, Baylis also provides contract manufacturing services to
some of the world’s leading medical device companies. Kris joined Baylis in 1989 as a co-founder and served as president from 2015
until it was acquired by Boston Scientific in 2022. Baylis is a leading developer, manufacturer, and distributor of specialized medical
devices for interventional cardiology. Baylis had previously divested its interventional pain management business to Kimberly Clark Corporation
(now Avanos Medical, Inc.) in 2009, and its bone tumor ablation business (OsteoCool) to Medtronic plc in 2016. Kris also co-founded the
consulting business OME Group in 1991, which was sold to Ernst and Young in 2011. Kris is an active board member for AdvaMed Accel and
Intellijoint Surgical. In the past he has served on the boards of Venture Lab, MEDEC, and the Business Advisory Committee of HTX and Conavi
Medical Inc.. His list of accomplishments includes numerous patents, the Ernst and Young Entrepreneur Award for Healthcare in Quebec (2011)
and the University of Waterloo Alumni Achievement Award (2014). Kris has a B.Sc. in Electrical Engineering from the University of Waterloo.
Cease Trade Orders, Bankruptcies and Penalties
No proposed director is, or has been, within the 10 years prior to the
date hereof, a director, chief executive officer or chief financial officer of any company that:
| (a) | was the subject of a cease trade or similar order, or an order that denied such company access to any
exemptions under applicable securities legislation for a period of more than 30 consecutive days that was issued while the proposed director
was acting as director, chief executive officer or chief financial officer; or |
| (b) | was the subject of a cease trade or similar order, or an order that denied such company access to any
exemptions under applicable securities legislation for a period of more than 30 consecutive days that was issued after the proposed director
ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that
person was acting in the capacity as director, chief executive officer or chief financial officer. |
Except as set forth below, no proposed director is, or has been within
the 10 years prior to the date hereof a director or executive officer of any other issuer that, while that person was acting in that capacity,
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 the assets of that person.
Dr. Menawat was a director of Spartan Bioscience Inc.
(“Spartan”) from September 2020 to July 2021. On April 5, 2021, Spartan filed a Notice of Intention to File a Proposal
(the “NOI”) under the Bankruptcy and Insolvency Act with the Office of the Superintendent in Bankruptcy. On
June 21, 2021, the NOI proceeding was continued under the Companies’ Creditors Arrangement Act. On December 1, 2021, Spartan
entered bankruptcy.
No proposed director has, within the 10 years prior to the date hereof,
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 that person.
No proposed director has been subject to any penalties or sanctions imposed
by a court relating to securities legislation or by any securities regulatory authority or has entered into a settlement agreement with
a securities regulatory authority or has been subject to any other penalties or sanctions imposed by a court or regulatory body that would
be likely to be considered important to a reasonable securityholder in deciding whether to vote for the proposed director.
Appointment of Auditor
At the Meeting, the Shareholders are required to appoint the auditors of
the Corporation. Shareholders will be asked to vote on the appointment of PricewaterhouseCoopers LLP and to authorize the Board to fix
their remuneration.
The persons designated as proxyholders in the accompanying form of proxy
(absent contrary directions) intend to vote FOR the appointment of the auditors as set forth above.
STATEMENT OF EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Objectives
Profound has relied on the experience of the Board and the Human Resources
and Corporate Governance Committee in setting executive compensation. In considering compensation awards, the Human Resources and Corporate
Governance Committee has considered the skill level of its executives as well as comparable levels of compensation for individuals with
similar capabilities and experience. In regard to Profound’s current executive compensation arrangements, the Human Resources and
Corporate Governance Committee has considered such factors as Profound’s current financial situation, the estimated financial situation
of Profound in the mid-term and the need to attract and retain the key executives necessary for Profound’s long-term success. The
Human Resources and Corporate Governance Committee has determined that at this stage of Profound it is appropriate that compensation be
in the form of base salary, Options, a potential bonus award and certain benefits plans.
Profound has established a Human Resources and Corporate Governance Committee,
comprised of three independent directors, currently, Arthur Rosenthal (Chair), Brian Ellacott and Kris Shah. The Human Resources and Corporate
Governance Committee oversees the Corporation’s remuneration policies and practices. The principal responsibilities of the Human
Resources and Corporate Governance Committee include:
| (a) | with respect to human resources: (i) assist the Board in ensuring that the necessary policies
and processes are in place by which all employees of the Corporation, with special attention to the executive group, will be fairly and
competitively compensated; and (ii) produce a report on executive compensation for inclusion in the Corporation’s proxy statement
as required by applicable rules and regulations; and |
| (b) | with respect to corporate governance: (i) identify individuals qualified to become Board
members, and recommend that the Board select the director nominees for the next annual meeting of shareholders; and (ii) develop and
recommend to the Board the corporate governance guidelines and processes applicable to the Corporation, review these guidelines and processes
at least annually and recommend changes to the Board. |
A copy of the Human Resources and Corporate Governance Committee’s
charter is available on Profound’s website at https://profoundmedical.com/investors/#governance.
Compensation Philosophy and Objectives of Compensation Programs
The executive compensation program adopted
by Profound and applied to its executive officers is designed to:
| (a) | attract and retain qualified and experienced executives who have international business and operations
experience and will contribute to the success of Profound; |
| (b) | ensure that the compensation of the executive officers provides a competitive base compensation package,
with additional compensation to reward success and create a strong link between corporate performance and compensation; and |
| (c) | motivate executive officers to enhance long term shareholder value, with current compensation being weighted
toward at-risk long-term incentives in the form of Options and restricted share units (“RSUs”) so as to foster alignment
with the interests of the Shareholders. |
The goals of the compensation program are to attract and retain the most
qualified people with relevant experience, to motivate and reward such individuals on a short term and long-term basis, and to create
alignment between corporate performance and compensation. The Human Resources and Corporate Governance Committee and the Board intend
that the total cash components of compensation (base salary plus annual cash bonus) target the median of a benchmark group in comparable
industries with similar market capitalization (the “Compensation Peer Group”).
Aggregate compensation (including annual cash bonus and equity-based compensation)
payable to each NEO (as defined below) is based on the achievement of certain performance goals. Performance goals are established annually
and designed to align with the Corporation’s strategic objectives. As described in greater detail below, performance goals affect
equity-based compensation grants and annual cash bonuses.
Profound does not believe that its compensation programs encourage excessive
or inappropriate risk taking as: (i) employees receive both fixed and variable compensation, and the fixed (salary) portion provides a
steady income regardless of Common Share value which allows employees to focus on the business; (ii) the Share Option Plan encourages
a long term perspective due to the vesting provisions of the options (see “Share Option Plan” below); and (iii) annual
bonus is earned only if short-term objectives of the Corporation are achieved. Profound believes that the compensation program is appropriately
structured and balanced to motivate its executives and reward the achievement of annual performance goals, as well as the achievement
of long term growth in shareholder value. NEOs and directors are not permitted to purchase financial instruments, including, for greater
certainty, prepaid variable forward contracts, equity swaps, collars, or units of exchange funds, that are designed to hedge or offset
a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the NEO or director.
Aligning Management and Shareholders
The Corporation’s compensation program seeks to align management
interests with Shareholder interests through both short-term and long-term incentives linking compensation to performance. The short-term
incentive is an annual cash bonus which is linked to individual performance and the Corporation’s performance. Further, long-term
incentives of Option grants comprise a significant portion of overall compensation for the Corporation’s NEOs (as defined herein).
The Human Resources and Corporate Governance Committee believes this is appropriate because it creates a direct correlation between variations
in the Corporation’s share price (which is based in part on the Corporation’s financial performance) and the compensation
of its NEOs, thereby aligning the interests of the Corporation’s executives and Shareholders.
Clawback Policy
The Corporation has adopted a clawback policy which applies to cash bonus
awards made, and RSUs granted, to the NEOs and any other individuals as determined by the Board from time to time. Under the clawback
policy, a clawback may be triggered if an NEO is indicted for or convicted of an act involving gross negligence, fraud, theft, dishonesty
or willful misconduct. Among other remedial actions, the enforcement of the clawback policy may involve forfeiture or cancellation of
unpaid cash bonus awards or unvested RSUs and recoupment of the value of such awards. The Human Resources and Corporate Governance Committee
will continue to keep this policy under review as part of its regular risk review.
Compensation Peer Group
In reviewing and approving the Corporation’s 2023 compensation program,
the Human Resources and Corporate Governance Committee considered the recommendations of the CEO, which were based upon public disclosure
information available for the Compensation Peer Group. The Human Resources and Corporate Governance Committee retained the services of
Radford, a business unit of Aon Hewitt, as its external independent compensation advisor to review the Corporation’s executive compensation
program. In 2022, Radford assembled a benchmark peer group report to serve as a comparator for compensation purposes. The selection criteria
for the comparator companies were based on revenue, market capitalization, business focus and headcount. Radford was paid executive compensation
related fees of $11,800 in 2023 and $13,800 in 2022 and no other fees in such years. Radford was originally retained in 2017.
With the assistance of Radford’s benchmark peer group report, the
following 2023 Compensation Peer Group was established. There were no changes to the Compensation Peer Group from that in 2022.
Compensation Peer Group |
Anika Therapeutics Inc. |
Apollo Endosurgery, Inc. |
Avedro, Inc. |
Avita Medical Inc. |
Ekso Bionics Holdings Inc. |
Helius Medical Technologies Inc. |
Pulse Biosciences Inc. |
RTI Surgical, Inc. |
Senseonics Holdings Inc. |
Shockwave Medical Inc. |
SI-BONE Inc. |
Transmedics, Inc. |
Viewray Inc. |
Viveve Medical Inc. |
Base Salary
Base salary is intended to reflect an executive officer’s position
within the corporate structure, his or her years of experience and level of responsibility, and salary norms in the sector and the general
marketplace. As such, decisions with respect to base salary levels for executive officers are not based on objective identifiable performance
measures but for the most part are determined by reference to competitive market information for similar roles and levels of responsibility,
as well as more subjective performance factors such as leadership, commitment, accountability, industry experience and contribution. The
Corporation’s view is that a competitive base salary is a necessary element for retaining qualified executive officers, as it creates
a meaningful incentive for individuals to remain at Profound and not be unreasonably susceptible to recruiting efforts by the Corporation’s
competitors.
In determining the base salary of the Named Executive Officers (as defined
herein), the Board considered: (i) recruiting and retaining executives critical to the success of Profound and the enhancement of shareholder
value; (ii) providing fair and competitive compensation; (iii) balancing the interests of management and Shareholders; and (iv) rewarding
performance, both on an individual basis and with respect to operations in general.
Long-term Incentives
Long-term incentives, in the form of Options, are intended to align the
interests of Profound’s directors and its executive officers with those of the Shareholders, to provide a long-term incentive that
rewards these individuals for their contribution to the creation of shareholder value and to reduce the cash compensation Profound would
otherwise have to pay. The Share Option Plan is administered by the Board. In establishing the number of Options to be granted to any
particular executive officer, reference was made to the number of Options granted to officers of other companies involved in similar businesses.
The Board also considers previous grants of Options and the overall number of Options that are outstanding relative to the number of outstanding
Common Shares in determining whether to make any new grants of Options and the size and terms of any such grants, as well as the performance
of the executive officer as demonstrated through his or her level of effort, time, responsibility, ability, experience, level of commitment
and performance goals in determining the level of incentive stock option compensation.
Bonus Awards
The
Board will consider whether it is appropriate and in the best interests of the Corporation to award a discretionary cash bonus to executive
officers for the most recently completed financial year and if so, in what amount. A cash bonus may be awarded to reward performance that
has led to increased value for Shareholders through property acquisitions or divestitures, the formation of new strategic or joint venture
relationships and/or capital raising efforts.
Quantitative
performance objectives include the achievement of the Corporation’s revenue target, departmental and individual goals, which may
be quantitative or qualitative in nature. These have been established for each individual executive officer by the Board with alignment
of such corporate/individual goals with the CEO and include objectives such as research and product development, company productivity,
revenue growth and long-term strategic guidance of the Corporation. These corporate, departmental and individual goals form the basis
for the review of the executive officers and the determination of cash bonuses at the end of each year with the Board. These awards are
reviewed yearly to ensure that corporate performance metrics and individual goals are consistent from year to year.
Bonus
award payments are based on the following assessment of:
(a) | | whether or not the executive officers have successfully met or exceeded the established corporate,
departmental and individual performance metrics and goals; |
(b) | | the executive officers’ decisions and actions and whether or not they are aligned with
the Corporation’s long-term growth strategy and have created value for Shareholders; |
(c) | | whether any near-term goals and objectives were not met because the executive officers made
decisions in the best long-term interests of the Corporation or due to factors outside of the executive officers’ control; and/or |
(d) | | additional initiatives undertaken by the executive officers, which were not contemplated
in the initial objectives. |
The
following targets, as a percentage of base salary, were approved for each NEO for the fiscal year ending December 31, 2023:
Position |
Target |
CEO |
65% |
Other NEOs |
20 - 50% |
Benefits Plans
The
Named Executive Officers are entitled to life insurance, health and dental benefits.
Performance Graph
The following graph illustrates the cumulative return to Shareholders of
a $100 investment in Common Shares from December 31, 2018 to December 31, 2023, as compared to the cumulative total return on the Standard
& Poor’s/TSX Index and Standard & Poor’s/Nasdaq Composite Index for the same period, assuming the reinvestment of
cash distributions and/or dividends.
|
December 31, 2018
$ |
December 31, 2019
$ |
December 31, 2020
$ |
December 31, 2021
$ |
December 31, 2022
$ |
December 31, 2023
$ |
Profound Medical |
100.00 |
268.18 |
476.18 |
259.27 |
263.27 |
201.82 |
S&P/TSX Composite Index |
100.00 |
119.14 |
121.72 |
148.18 |
135.35 |
146.33 |
Nasdaq Composite Index |
100.00 |
135.23 |
194.24 |
235.80 |
157.74 |
226.24 |
![](https://www.sec.gov/Archives/edgar/data/1628808/000117184324003241/perf.jpg)
The trend shown in the above graph does not necessarily correspond to the
Corporation’s trend of compensation for the NEOs (as defined herein) for the period disclosed above. The Corporation considers a
number of factors in connection with its determination of appropriate levels of compensation including, but not limited to, the demand
for and supply of skilled professionals with experience in the medical device industry, individual performance, the Corporation’s
performance (which is not necessarily tied exclusively to the trading price of the Common Shares on the TSX and Nasdaq) and other factors
discussed under “Compensation Discussion and Analysis” above.
Named Executive Officers
The following individuals are considered the “Named Executive
Officers” or “NEOs” for the purposes of the disclosure:
| (a) | each individual who, during any part of the most recently completed financial year, served as the Corporation’s
Chief Executive Officer or CEO, including an individual performing functions similar to a CEO; |
| (b) | each individual who, during any part of the most recently completed financial year, served as the Corporation’s
Chief Financial Officer or CFO, including an individual performing functions similar to a CFO; |
| (c) | each of the three most highly compensated executive officers of the Corporation, including its subsidiaries,
or the three highly compensated officers acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed
financial year whose total compensation was more than C$150,000 for the fiscal year ended December 31, 2023; and |
| (d) | each individual who would be a Named Executive Officer under paragraph (c) but for the fact the individual
was not an executive officer of the Corporation and was not acting in a similar capacity as of December 31, 2023. |
Summary Compensation Table
The following table sets forth information concerning the total compensation
for the three most recently completed financial years paid to the Named Executive Officers as of the most recently completed financial
year. Dr. Menawat is the only officer of the Corporation that also serves as a director of the Corporation.
Name and
Principal Position |
Year |
Salary
($) |
Share-Based Awards
($) |
Option-Based Awards
($) |
Non-Equity Incentive Plan Compensation
($) |
Pension
Value
($) |
All Other Compensation(1)
($) |
Total Compensation
($) |
Annual Incentive Plan
($) |
Long Term Incentive Plan
($) |
Arun Menawat
Chief Executive Officer and Director |
2023
2022
2021 |
370,244
343,750
481,022 |
454,079(2)
364,503(3)
2,261,000(4) |
-
-
661,924(5) |
65,625
208,125
341,250 |
-
-
- |
-
-
- |
-
-
- |
889,948
916,378
3,745,196 |
Rashed Dewan(7)
Chief Financial Officer |
2023
2022
2021 |
195,173
206,146
167,803 |
454,079(2)
291,602(3)
- |
-
-
692,088(5) |
20,004
44,228
30,331 |
-
-
- |
-
-
- |
-
-
- |
669,256
541,976
890,222 |
Mathieu Burtnyk(7)
Senior Vice-President, Product Leader TULSA-PRO |
2023
2022
2021 |
195,173
206,146
179,020 |
181,631(2)
291,602(3)
- |
-
-
414,543(5) |
20,004
39,955
42,253 |
-
-
- |
-
-
- |
-
-
- |
396,808
537,703
635,816 |
Abbey Goodman
Chief Commercial Officer US |
2023
2022
2021 |
324,346
218,750
175,000 |
181,631(2)
291,602(3)
- |
-
-
824,157(5) |
50,000
135,000
140,000 |
-
-
- |
-
-
- |
-
-
- |
555,977
645,352
1,139,157 |
Hartmut Warnken(8)
Chief Commercial Officer Outside US |
2023
2022
2021 |
218,071
209,117
209,280 |
-
291,602(3)
- |
-
-
430,121(5) |
8,096
15,814
52,137 |
-
-
- |
-
-
- |
-
-
- |
226,167
516,533
691,538 |
Notes:
| (1) | Nil indicates that perquisites and other personal benefits did not exceed C$50,000 or 10% of the total
salary of the NEO for the financial year. |
| (2) | The value shown is the product of the number of RSUs granted multiplied by the Common Share TSX closing
price on the grant date of C$12.38. |
| (3) | The value shown is the product of the number of RSUs granted multiplied by the Common Share TSX closing
price on the grant date of C$9.41. |
| (4) | The value shown is the product of the number of RSUs granted multiplied by the Common Share TSX closing
price on the grant date of C$22.61. |
| (5) | Option based awards granted utilize the Black-Scholes option pricing model to determine the fair value.
The input factors to determine the fair value were volatility 85%, exercise price C$22.08, interest rate 1.34% and expected life of 6
years. This methodology was chosen to be consistent with the accounting fair value used by the Corporation in its financial statements
and since the Black-Scholes option pricing model is a commonly used methodology for valuing options which provides an objective and reasonable
estimate of fair value. |
| (6) | Option based awards granted utilize the Black-Scholes model to determine the fair value. The input factors
to determine the fair value were volatility 84%, exercise price C$17.44, interest rate 0.46% and expected life of 6 years. |
| (7) | Amounts paid in Canadian dollars and converted to United States dollars for reporting purposes. On December
29, 2023, the exchange rate for Canadian dollars expressed in United States dollars (as reported by the Bank of Canada) was C$1.00 = US$0.7561. |
(8) Amounts paid in Euros and converted
to United States dollars for reporting purposes. On December 29, 2023, the exchange rate for Euro dollars expressed in United States dollars
(as reported by the Bank of Canada) was €1.00 = US$1.1059.
Outstanding Option-Based and Share-Based Awards
The following table sets forth information with respect to the unexercised
Options granted under the Share Option Plan and RSUs granted under the Corporation’s long-term incentive plan (the “LTIP”)
to the NEOs that were outstanding as of December 31, 2023.
Name and
Principal Position |
Option-Based Awards |
Share-Based Awards |
Number of Common Shares Underlying Unexercised Options |
Option Exercise
Price
(C$) |
Option Expiration Date |
Value of Unexercised In-the-Money Options
($)(6) |
Number of RSUs that have not Vested |
Market Value of RSUs that have not Vested
($)(7) |
Market Value of Vested RSUs not paid out or Distributed
($) |
Arun Menawat(1)
Chief Executive Officer and Director |
3,300
93,406
1,650
8,345
35,439
167,392
98,573
49,287 |
15.00
14.60
13.50
11.00
11.00
9.20
17.44
22.08 |
Nov 12, 2024
Aug 22, 2026
Sep 15, 2026
Nov 24, 2026
Dec 21, 2026
May 16, 2029
May 20, 2030
May 21, 2031 |
-
-
-
834
3,544
318,045
-
- |
116,668 |
979,161 |
- |
Rashed Dewan(2)
Chief Financial Officer |
3,000
5,000
7,500
4,500
2,500
27,667
51,533 |
15.00
13.50
11.00
8.50
9.20
17.44
22.08 |
Sept 8, 2025
July 19, 2026
Nov 24, 2026
Nov 16, 2027
May 16, 2029
May 20, 2030
May 21, 2031 |
-
-
750
11,700
4,750
-
- |
76,667 |
634,444 |
- |
Mathieu Burtnyk(3)
Senior Vice-President, Product Leader TULSA-PRO |
3,000
2,500
42,000
18,333
30,867 |
15.00
8.50
9.20
17.44
22.08 |
Sept 8, 2025
Nov 16, 2027
May 16, 2029
May 20, 2030
May 21, 2031 |
-
6,500
79,800
-
- |
46,667 |
391,663 |
- |
Abbey Goodman(4)
Chief Commercial Officer US |
15,000
10,000
15,333
61,367 |
11.23
15.15
17.44
22.08 |
Nov 18, 2029
Mar 12, 2030
May 20, 2030
May 21, 2031 |
-
-
-
- |
46,667 |
391,663 |
- |
Hartmut Warnken(5)
Chief Commercial Officer Outside US |
5,000
5,000
5,000
5,000
29,333
32,027 |
15.00
11.00
8.50
9.20
17.44
22.08 |
Dec 7, 2025
Nov 24, 2026
Nov 16, 2027
May 16, 2029
May 20, 2030
May 21, 2031 |
-
500
13,000
9,500
-
- |
26,667 |
223,808 |
- |
Notes:
| (1) | Dr. Menawat holds 457,392 Options, with 435,819 of these Options vested and exercisable and the remaining
balance vesting over a three year period from their respective grant dates. |
| (2) | Mr. Dewan holds 101,700 Options, with 83,868 of these Options vested and exercisable and the remaining
balance vesting over a three year period from their respective grant dates. |
| (3) | Dr. Burtnyk holds 96,700 Options, with 85,903 of these Options vested and exercisable and the remaining
balance vesting over a three year period from their respective grant dates. |
| (4) | Ms. Goodman holds 101,700 Options, with 81,365 of these Options vested and exercisable and the remaining
balance vesting over a three year period from their respective grant dates. |
| (5) | Mr. Warnken holds 81,360 Options, with 69,537 of these Options vested and exercisable and the remaining
balance vesting over a three year period from their respective grant dates. |
| (6) | The value shown is the product of the number of Common Shares underlying the Option multiplied by the
difference between the Common Share TSX closing price on December 29, 2023 of C$11.10 and the exercise price. |
| (7) | The value shown is the product of the number of outstanding RSUs multiplied by the Common Share TSX closing
price on December 29, 2023 of C$11.10. |
Incentive Plan Awards ― Value Vested or Earned During the
Year Ended December 31, 2023
The following table sets forth information with respect to the value of
Options vested during the year ended December 31, 2023 as well as the cash bonuses granted to the NEOs during the year ended December
31, 2023.
Name and
Principal Position |
Option-Based Awards Value Vested During Year
($)(1) |
Share-Based Awards Value Vested During Year
($)(2) |
Non-Equity Incentive Plan Compensation Value earned during the year
($) |
Arun Menawat
Chief Executive Officer and Director |
23,237 |
582,076 |
65,625 |
Rashed Dewan
Chief Financial Officer |
272 |
126,660 |
20,004 |
Mathieu Burtnyk
Senior Vice-President, Product Leader TULSA-PRO |
4,889 |
126,660 |
20,004 |
Abbey Goodman
Chief Commercial Officer US |
- |
126,660 |
50,000 |
Hartmut Warnken
Chief Commercial Officer Outside US |
566 |
126,660 |
8,096 |
Notes:
| (1) | The value shown is the product of the number of Common Shares underlying the Options that vested during
the year multiplied by the difference between the Common Share TSX closing price on the day the Options vested and the exercise price
of the Options that vested. |
| (2) | The value shown is the product of the number of Common Shares underlying the RSUs that vested during the
year multiplied by the Common Share TSX closing price on the day the RSUs vested. |
Termination and Change of Control Benefits
Each of Dr. Menawat, Mr. Dewan, Dr. Burtnyk, Ms. Goodman and Mr. Warnken
are a party to an executive employment agreement (the “Executive Employment Agreements”) with the Corporation. The
Executive Employment Agreements have an indefinite term and contain standard confidentiality and non-solicitation provisions. Profound
has agreed pursuant to the Executive Employment Agreements that each of Dr. Menawat, Mr. Dewan, Dr. Burtnyk, Ms. Goodman and Mr. Warnken
will receive base salaries determined by the Board and may receive discretionary bonuses, grants of Options, grants of RSUs, reimbursement
of expenses, benefits and certain perquisites as set forth in the Executive Employment Agreements, with the amounts paid in 2023 with
respect to such matters set forth in the Summary Compensation Table.
The following table sets forth information with respect to the estimated
aggregate dollar amount to which each current NEO would have been entitled if the event resulting in termination of employment occurred
on December 31, 2023.
Name |
Triggering Event |
Cash Payment |
Value of Bonus and other Benefits |
Value of Option Awards |
Total Payout |
Arun Menawat |
Termination with cause/resignation |
-(1) |
- |
-(2) |
- |
Termination without cause/Termination with a change of control |
$372,750(4) |
$279,563 |
$236,519(2) |
$888,832 |
Rashed Dewan |
Termination with cause/resignation |
-(1) |
- |
-(2) |
- |
Termination without cause/Termination with a change of control |
$195,173(5) |
$31,521(3) |
$12,617(2) |
$239,311 |
Mathieu Burtnyk |
Termination with cause/resignation |
-(1) |
- |
- (2) |
- |
Termination without cause/Termination with a change of control |
$97,587 (6) |
$34,071(3) |
$63,307(2) |
$194,965 |
Abbey Goodman |
Termination with cause/resignation |
-(1) |
- |
- (2) |
- |
Termination without cause/Termination with a change of control |
$129,125(7) |
$108,333(3) |
-(2) |
$237,458 |
Hartmut Warnken |
Termination with cause/resignation |
-(1) |
- |
-(2) |
- |
Termination without cause/Termination with a change of control |
$109,036(8) |
$25,349(3) |
$16,872(2) |
$151,257 |
Notes:
| (1) | In the event of a termination for just cause or resignation, the Corporation shall have no further obligation
to Dr. Menawat, Mr. Dewan, Dr. Burtnyk, Ms. Goodman or Mr. Warnken, as applicable, other than the payment of unpaid base salary, any bonus
declared but not yet paid, plus all outstanding vacation pay and expense reimbursement. |
| (2) | The value shown is the product of the number of Common Shares underlying the vested Options multiplied
by the difference between the Common Share TSX closing price on December 29, 2023 of C$11.10 and the exercise price. |
| (3) | The value shown is a sum of the semi annual cost of benefits and the average cash bonus paid in respect
of the years ended December 31, 2023, 2022 and 2021. |
| (4) | If Dr. Menawat’s employment is terminated without cause, he is entitled to twelve months of pay
of base aalary in lieu of notice and an amount equal to the then current target annual bonus prorated based on the number of days elapsed
in the calendar year until the date of termination as a percentage of the total number of days in such calendar year. |
| (5) | If Mr. Dewan’s employment is terminated without cause, he is entitled to the greater of: (i) twelve
months’ notice; or (ii) the minimum notice (or pay in lieu) and minimum severance, if any, to which he would be entitled under employments
standards legislation. |
| (6) | If Dr. Burtnyk’s employment is terminated without cause, he is entitled to six months’ notice
and minimum severance, if any, to which he would be entitled under employments standards legislation. |
| (7) | If Ms. Goodman’s employment is terminated without cause, she is entitled to the greater of: (i)
six months’ notice; or (ii) the minimum notice (or pay in lieu) and minimum severance, if any, to which he would be entitled under
employments standards legislation. |
| (8) | If Mr. Warnken’s employment is terminated without cause, he is entitled to the greater of: (i) six
months’ notice; or (ii) the minimum notice (or pay in lieu) and minimum severance, if any, to which he would be entitled under employments
standards legislation. |
Director Compensation
The directors of the Corporation, other than the current CEO, were paid
an annual fee of $50,000 for their services in respect of the financial year-ended December 31, 2023. The Chair of the Audit Committee
is entitled to an additional annual fee of $5,000 and the Chair of the Human Resources and Corporate Governance Committee is entitled
to an additional annual fee of $5,000. Audit Committee members are entitled to an additional annual fee of $2,500 and Human Resources
and Corporate Governance Committee members are entitled to an additional annual fee of $2,500. Directors of the Corporation are also eligible
to receive Options and/or deferred share units (“DSUs”) as an initial grant when joining the Board and on an annual
basis. During the financial year 2023, each of Mr. Brian Ellacott, Dr. Cynthia Lavoie, Ms. Murielle Lortie, Dr. Arthur Rosenthal and Mr.
Kris Shah were granted 5,000 DSUs. Except as set out below, directors are not eligible to receive other compensation.
Summary Compensation Table
The following table sets forth information concerning compensation paid to the non-executive
directors for the year ended December 31, 2023.
Name |
Fees Earned
($) |
Option-based awards
($) |
Share-based awards
($)(1) |
All Other Compensation
($) |
Total
($) |
Brian Ellacott |
57,500 |
- |
45,408 |
- |
102,908 |
Kenneth Galbraith |
20,778(2) |
- |
- |
- |
20,778 |
Cynthia Lavoie |
52,500 |
- |
45,408 |
- |
97,908 |
Murielle Lortie |
55,000 |
- |
45,408 |
- |
100,408 |
Arthur Rosenthal |
56,556 |
- |
45,408 |
- |
101,964 |
Kris Shah |
51,555 |
- |
45,408 |
- |
96,963 |
Notes:
| (1) | The directors were granted 5,000 DSUs each. The value shown is the product of the number of DSUs issued multiplied by the Common Share
TSX closing price on the grant date, September 8, 2023, of C$12.38. |
| (2) | Mr. Galbraith ceased being a member of the Board on May 17, 2023. |
Outstanding Option-Based and Share-Based Awards
The following table sets forth information with respect to the unexercised
Options granted under the Share Option Plan and DSUs granted under the LTIP to the non-executive directors that were outstanding as of
December 31, 2023.
Name |
Option-Based Awards |
Share-Based Awards |
Number of Common Shares Underlying Unexercised Options |
Option Exercise
Price
(C$) |
Option Expiration Date |
Value of Unexercised In-the-Money Options
($)(5) |
Number
of DSUs that have not Vested |
Market or payout value of DSUs that have not vested
($) |
Market or payout value of vested DSUs not paid out or distributed
($)(6) |
Brian Ellacott(1) |
3,300
10,000
10,000
10,000 |
10.20
11.23
17.44
22.08 |
June 15, 2028
Nov 18, 2029
May 20, 2030
May 21, 2031 |
2,179
-
-
- |
- |
- |
122,139 |
Cynthia Lavoie(2) |
10,000
10,000 |
28.16
22.08 |
March 3, 2031
May 21, 2031 |
-
- |
- |
- |
122,139 |
Murielle Lortie(3) |
10,000
10,000 |
23.02
22.08 |
Dec 15, 2030
May 21, 2031 |
-
- |
- |
- |
122,139 |
Arthur Rosenthal(4) |
3,300
10,000
10,000
10,000 |
10.20
11.23
17.44
22.08 |
June 15, 2028
Nov 18, 2029
May 20, 2030
May 21, 2031 |
2,179
-
-
- |
- |
- |
122,139 |
Kris Shah |
- |
- |
- |
- |
- |
- |
122,139 |
Notes:
| (1) | Mr. Ellacott holds 33,300 Options, with 29,560 of these Options vested and exercisable and the remaining
balance vesting over a three year period from their respective grant dates. |
| (2) | Dr. Lavoie holds 20,000 Options, with 14,175 of these Options vested and exercisable and the remaining
balance vesting over a three year period from their respective grant dates. |
| (3) | Ms. Lortie holds 20,000 Options, with 14,800 of these Options vested and exercisable and the remaining
balance vesting over a three year period from their respective grant dates. |
| (4) | Dr. Rosenthal holds 33,300 Options, with 29,560 of these Options vested and exercisable and the remaining
balance vesting over a three year period from their respective grant dates. |
| (5) | The value shown is the product of the number of Common Shares underlying the Option multiplied by the
difference between the Common Share TSX closing price on December 29, 2023 of C$11.10 and the exercise price. |
| (6) | The value shown is the product of the number of outstanding DSUs multiplied by the Common Share TSX closing
price on December 29, 2023 of C$11.10. |
Incentive Plan Awards ― Value Vested or Earned During the
Year Ended December 31, 2023
The following table sets forth information with respect to the value of
Options vested during the year ended December 31, 2023 as well as the cash bonuses granted to non-executive directors during the
year ended December 31, 2023.
Name |
Option-Based Awards Value Vested During Year
($)(1) |
Share-Based Awards Value Vested During the Year
($)(2) |
Non-Equity Incentive Plan Compensation Value earned during the year
($) |
Brian Ellacott |
- |
- |
- |
Cynthia Lavoie |
- |
- |
- |
Murielle Lortie |
- |
- |
- |
Arthur Rosenthal |
- |
- |
- |
Kris Shah |
- |
- |
- |
Notes:
| (1) | The value shown is the product of the number of Common Shares underlying the Options that vested during
the year multiplied by the difference between the Common Share TSX closing price on the day the Options vested and the exercise price
of the Options that vested. |
| (2) | The value shown is the product of the number of Common Shares underlying the DSUs that vested during the
year multiplied by the Common Share TSX closing price on the day the DSUs vested. |
Share Option Plan
The Corporation's amended and restated share option plan (the “Share
Option Plan”) is administered by the Board which may, from time to time, delegate to a committee of the Board, all or any of
the powers conferred to the Board under the Share Option Plan. The Share Option Plan was originally adopted by the Board on June 4, 2015,
and then amended and restated on December 8, 2016 and again on July 13, 2018.
The amendments made on July 13, 2018 were as follows: (i) inclusion of
the Insider Participation Limits (as defined herein); (ii) removal of TSX Venture Exchange (“TSXV”) required participation
limits since the Corporation was no longer listed on the TSXV; (iii) clarification to the share reserve since the Corporation was listed
on the TSX and pursuant to the Share Option Plan, the reserve changed from a fixed number to a fixed percentage as described below; (iv)
inclusion of an additional amendment to the list of amendments that require Shareholder approval (being removing or exceeding the Insider
Participation Limits); and (v) other amendments of a housekeeping nature.
The Share Option Plan provides that the Board may from time to time, in
its discretion, grant to directors, officers, employees, consultants and any other person or entity engaged to provide ongoing services
to the Corporation non-transferable Options, provided that the maximum number of Common Shares reserved for issuance under the Share Option
Plan is equal to 13% of the issued and outstanding shares in the capital of the Corporation at the time of any Option grant. If any Option
is exercised, cancelled, expired, surrendered or otherwise terminated for any reason, the number of Common Shares in respect of which
the Option is exercised, cancelled, expired, surrendered or otherwise terminated, as the case may be, will again be available for purchase
pursuant to Options granted under the plan. As at December 31, 2023, 1,474,809 Options have been granted under the Share Option Plan,
which represents 6.9% of the issued and outstanding Common Shares of the Corporation as at December 31, 2023. As at December 31, 2023,
1,218,581 Options are available for grant under the Share Option Plan, which represents 5.7% of the issued and outstanding shares in the
capital of the Corporation as at December 31, 2023.
The aggregate number of Common Shares that may be (i) issued to insiders
of the Corporation within any one-year period, or (ii) issuable to insiders of the Corporation at any time, in each case, under the Share
Option Plan alone or when combined with all other security-based compensation arrangements of the Corporation, cannot exceed 10% of the
outstanding Common Shares (the “Insider Participation Limits”).
The Board shall determine the exercise price of the Options, provided that,
it cannot be less than the Market Price of the Common Shares on the date of grant. For the purposes of the Share Option Plan, “Market
Price” means the volume-weighted average price of the Common Shares on the stock exchange where the majority of trading volume
and value of the Common Shares occurs, for the five trading days immediately preceding the relevant date on which the Market Price is
to be determined.
The expiry date for an Option shall not be later than the 10th anniversary
of the date an Option is granted, subject to the expiry date falling with a corporate blackout period or within 5 business days following
the expiry of such a blackout period, in which case the expiry date will be extended to the 10th business day following the expiry of
the blackout period.
Unless otherwise specified by the Board, each Option generally vests and
becomes exercisable as to 1/4 on the first anniversary of the date of grant and as to 1/36 on the first day of each calendar month thereafter.
The Board has the discretion to permit accelerated vesting of Options.
The Corporation does not provide any financial assistance to optionees
to facilitate the purchase of Common Shares issued pursuant to the exercise of Options under the Share Option Plan. Options granted under
the Share Option Plan are not transferable or assignable (except to an optionee’s estate) and no Options may be exercised by anyone
other than the optionee or his or her legal representative during the lifetime of the optionee.
The Share Option Plan contains the following provisions regarding the exercise
and cancellation of Options following a change in the employment status of an optionee. In the event of:
| (a) | an optionee’s retirement, the optionee will continue to participate in the plan and each Option
that has vested or that vests within 12 months following the retirement date continues to be exercisable until the earlier of the Option’s
expiry date and the date that is 12 months from the retirement date, and any Options that have not been exercised by such time will immediately
expire and be cancelled; |
| (b) | an optionee’s death or disability, each vested Option is exercisable until the earlier of the Option’s
expiry date and 6 months following the date of death or disability, as applicable, and any Options that have not been exercised by such
time will immediately expire and be cancelled; |
| (c) | a termination without cause for an employee optionee, or the termination by the Corporation or an affiliate
of a consulting agreement or arrangement (other than for breach) or the death or disability of a consultant, each vested Option is exercisable
until the earlier of the Option’s expiry date and 90 days following the date of termination, death or disability, as applicable,
and any Options that have not been exercised by such time will immediately expire and be cancelled; |
| (d) | a termination for cause or resignation of an employee optionee, or the termination by the Corporation
or an affiliate of a consulting agreement or arrangement (for breach) or the voluntary termination by the consultant, all Options (whether
vested or unvested) terminate on the date of termination or resignation, as applicable; and |
| (e) | a director (who is not an employee or consultant) ceases to hold office, each vested Option is exercisable
until the earlier of the Option’s expiry date and 60 days following the cessation date, and any Options that have not been exercised
by such time will immediately expire and be cancelled. |
The Board may from time to time, without notice and without Shareholder
approval, amend, modify, change, suspend or terminate the Share Option Plan or any Options granted thereunder as it, in its discretion
determines appropriate, provided, however, that no such amendment, modification, change, suspension or termination of the Share Option
Plan or any Option granted thereunder may materially impair any rights of an optionee or materially increase any obligations of an optionee
under the plan without the consent of the optionee, unless the Board determines such adjustment is required or desirable in order to comply
with any applicable securities laws or stock exchange requirements. Amendments that can be made by the Board without Shareholder approval
include, but are not limited to, housekeeping amendments, amendments to comply with applicable law or stock exchange rules, amendments
necessary for Options to qualify for favorable treatment under applicable tax laws, amendments to the vesting provisions of the Share
Option Plan or any Option, amendments to include or modify a cashless exercise feature, amendments to the termination or early termination
provisions of the Share Option Plan or any Option, and amendments necessary to suspend or terminate the Share Option Plan. Shareholder
approval is required for the following amendments to be made to the Share Option Plan:
(a) | | increase to the number of Common Shares reserved for issuance under the Share Option Plan,
except pursuant to the provisions in the plan that permit the Board to make equitable adjustments in the event of transactions affecting
the Corporation or its capital; |
(b) | | reduce the exercise price of an Option, except pursuant to the provisions in the plan that
permit the Board to make equitable adjustments in the event of transactions affecting the Corporation or its capital; |
(c) | | extend the term of an Option beyond the original expiry date, except where an expiry date
would have fallen within a blackout period or within 5 business days following the expiry of such a blackout period; |
(d) | | permit an Option to be exercisable beyond 10 years from its date of grant, except where an
expiry date would have fallen within a blackout period; |
(e) | | permit Options to be transferred other than for normal estate settlement purposes; |
(f) | | remove or exceeds the Insider Participation Limits; |
(g) | | permit awards, other than the Options, to be granted under the Share Option Plan; or |
(h) | | delete or reduce the range of amendments which require Shareholder approval. |
As required by section 613 of the TSX Company Manual, the Corporation’s
annual burn rate, which represents the number of Options granted under the Share Option Plan divided by the weighted average number of
Common Shares outstanding as at the end of a fiscal year, was 10.2% in 2021, 7.3% in 2022 and 6.9% in 2023.
Description of the Corporation’s LTIP
On May 20, 2020, the Shareholders approved the adoption of the LTIP. The
LTIP is an incentive-based equity compensation plan that provides for the grant of RSUs and DSUs.
The RSUs may be granted to any director, officer, employee or consultant
of the Corporation or any of its affiliates and any such person’s personal holding company, as designated by the Board in a resolution
(the “RSU Participants”) upon the terms and conditions set forth in a grant agreement. The DSUs may be granted to any
director of the Corporation who has been designated by the Corporation for participation in the LTIP and who has agreed to participate
in the LTIP (the “DSU Participants”, together with the RSU Participants, the “Participants”), upon
the terms and conditions set forth in a grant agreement. Subject to Board approval, once each fiscal year, a DSU Participant may elect
to be paid up to 100% of this or her annual board retainer in the form of DSUs, with the remaining balance (if any) being paid in cash.
The LTIP was amended and restated by the Board on April 3, 2023, with respect
to the revisions to the LTIP’s amendment provision intended to more closely track the TSX amendment provision requirements and governance
best practices (as further described below). Other than the revisions to the amendment provision, none of the amendments made to the LTIP
required Shareholder approval. The amendments made to the LTIP that did not require Shareholder approval include decreasing the maximum
number of Common Shares issuable pursuant to the LTIP from 13% of the outstanding Common Shares to 4.9% of the outstanding Common Shares,
provided that, the maximum number of Common Shares which may be reserved for issuance pursuant to all of the Corporation's security-based
compensation arrangements shall not in the aggregate exceed 13% of the issued and outstanding Common Shares including new non-employee
director participation limits, including a new default vesting schedule for DSUs, permitting DSU Participants holding vested DSUs to elect
settlement timing (subject to certain restrictions), providing the Corporation with the ability to elect whether vested DSUs are settled
in Common Shares or cash, including a clawback provision, and other amendments of an administrative or “housekeeping” nature.
These amendments do not require Shareholder approval because of the LTIP’s amendment provision that allows these amendments to be
made without Shareholder approval.
The LTIP is intended to advance the interests of the Corporation by: (i)
providing Participants with additional incentives; (ii) rewarding the performance of the Participants through the issuance of the Units;
(iii) increasing the proprietary interest of the Participants in the success of the Corporation; (iv) encouraging the Participants to
remain with the Corporation or its affiliates; and (v) attracting new directors, employees, officers and consultants to the Corporation
or its affiliates.
The LTIP will be administered by the Board and the Human Resources and
Corporate Governance Committee. The Board is responsible for, among other things, granting the RSUs to the RSU Participants, granting
the DSUs to the DSU Participants, determining the terms of such grants, and interpreting the LTIP and all agreements entered into thereunder.
Pursuant to the LTIP, the number of RSUs (including fractional RSUs) granted at any particular time will be calculated by dividing (i)
the dollar amount of such grant by (ii) the market value of a Common Share on the applicable grant date, which is equal to the volume
weighted average trading price of all Common Shares traded on the TSX (or other exchange where the Common Shares are listed) for the five
(5) trading days immediately preceding such date (the “Market Value”). The number of DSUs (including fractional DSUs)
granted at any particular time will be calculated by dividing (i) the dollar amount of such grant by (ii) the Market Value of a Common
Share on the applicable grant date.
The RSUs will vest 1/3 on each of the first, second and third anniversary
dates of the original grant, provided that the RSU Participant is continuously employed by or in service with the Corporation, or any
of its affiliates, until the respective vesting date. The Board would have the option to add any performance-based vesting criteria at
its discretion. After the RSUs have vested, a Canadian RSU Participant may deliver a settlement notice to the Corporation in respect of
any or all vested RSUs it desires to settle. U.S. RSU Participants must settle any vested RSUs within 70 days after such RSUs vested unless
otherwise specified in the grant agreement. The Corporation may elect to settle the vested RSUs in cash, in Common Shares issued from
treasury, or a combination thereof. Since the form of settlement (i.e. cash and/or Common Shares) is at the option of the Corporation,
all RSUs must settle no later than December 31 in the third calendar year following the year in which the services giving rise to the
RSUs were rendered.
DSUs granted prior to April 3, 2023 and any DSUs that a director elects
to receive in lieu of annual cash board retainers will vest on the DSU termination date, which is the date on which the DSU Participant
ceases to be a director and, if applicable, an employee of the Corporation for any reason. DSUs granted on or after April 3, 2023 will
vest 1/3 on each of the first, second and third anniversary dates of the original grant, provided that the DSU Participant is continuously
in service with the Corporation, or any of its affiliates, until the respective vesting date.
After the DSUs have vested and following a DSU Participant ceasing to hold
all positions with the Corporation, a Participant may elect when to settle the Participant’s vested DSUs (subject to certain restrictions)
and the Corporation will elect to settle such DSUs in such DSU Participant’s notional account for cash, Common Shares issued from
treasury, or a combination thereof. U.S. DSU Participant’s shall settle any vested DSUs within 70 days on the date from such DSU
Participant incurs a “separation from service” within the meaning of Section 409A of U.S. Internal Revenue Code of 1986.
The maximum number of Common Shares which may be reserved for issuance
under the LTIP cannot exceed 4.9% of the issued and outstanding Common Shares from time to time on a non-diluted basis (representing an
aggregate of 1,047,158 Common Shares as at December 31, 2023), provided that the Board may make appropriate adjustments in the Common
Shares issuable or amounts payable to preclude a dilution or enlargement of the benefits under the LTIP as a result of a consolidation,
share split or similar change in the capital structure of the Corporation, subject to any required approval by any stock exchange or regulatory
authority. As at December 31, 2023, an aggregate of 568,396 Units, representing approximately 2.7% of the issued and outstanding Common
Shares, are outstanding under the LTIP. As at December 31, 2023, an aggregate of 478,761 Units, representing approximately 2.2% of the
issued and outstanding Common Shares, are available for grant under the LTIP.
Certain other restrictions on grants apply, including that: (i) the number
of Common Shares issuable to insiders (as a group), at any time, under the LTIP and any other security-based compensation arrangements,
including the Share Option Plan, shall not exceed 10% of the Corporation’s issued and outstanding Common Shares; (ii) the number
of Common Shares issued to insiders (as a group), within a one-year period, under the LTIP and any other security-based compensation arrangements
cannot exceed 10% of the Corporation’s issued and outstanding Common Shares; and (iii) the Corporation is prohibited from granting
to any individual non-employee director of the Corporation more than $150,000 worth of awards under any security-based compensation arrangement
of the Corporation (with no more than $100,000 attributable to stock options) annually based on the grant date fair value of the Units,
other than in respect of awards granted to non-employee directors in lieu of cash fees on a value for value basis.
Under the LTIP, the Corporation will not provide financial assistance to
Participants in connection with the settlement of Units by Participants. Except as the Board may otherwise determine, if a RSU Participant
ceases to be a RSU Participant for any reason, including, without limitation, as a result of his or her resignation, voluntary or involuntary
termination (including with or without cause), retirement, disability, or death, any unvested RSUs held by such RSU Participant shall
expire. Each DSU Participant is entitled to terminate his or her participation in the LTIP by filing a termination notice with the designated
officer of the Corporation. Thereafter, any portion of such DSU Participant’s annual board retainer payable and all subsequent annual
board retainers shall be paid in cash.
In no event may the rights or interests of a Participant under the LTIP
be assigned, encumbered, pledged, transferred or alienated in any way, except to the extent that certain rights may pass to a beneficiary
or legal representative upon death of a Participant, by will or by the laws of succession and distribution.
Any Unit which is subject to recovery, cancellation, forfeiture, revocation
or recoupment under applicable laws, stock exchange listing requirements or policies adopted by the Corporation, including the Corporation’s
clawback policy, will be subject to such deductions, cancellations, forfeitures, revocations, recoupments and clawbacks as may be required
pursuant to such laws, stock exchange listing requirements or policies.
In the event of a change of control, merger, amalgamation, arrangement,
business combination or other transaction pursuant to which the Common Shares of the Corporation are converted into, or exchanged for,
other property, whether in the form of securities of another entity, cash or otherwise, any surviving or acquiring company must, (i) assume
any Unit outstanding under the LTIP on substantially the same economic terms and conditions as the LTIP; or (ii) substitute or replace
restricted share units and deferred share units, as applicable for those RSUs and DSUs outstanding under the LTIP on substantially the
same economic terms and conditions. In the event any surviving or acquiring company neglects or refuses (as determined by the Board, acting
reasonably) to assume any Units or to substitute or replace similar restricted share units and deferred share units, as applicable, for
those outstanding RSUs and DSUs in connection with a such an event, then with respect to any Units held by Participants, the vesting of
such Units will automatically accelerate and be fully vested. Additionally, the Board may, in its discretion: (a) terminate, conditionally
or otherwise and on such terms as it sees fit, the RSUs not settled following successful completion of such event; and (b) accelerate,
conditionally or otherwise and on such terms as it sees fit, the vesting of Units or otherwise modify the terms of the Units to assist
the Participants to obtain the advantage of holding Common Shares during the event.
In the event of a potential change of control following a take-over bid,
the Board may, in its discretion, conditionally or otherwise and on such terms as it sees fit, accelerate the vesting of all of a Participant’s
unvested Units to a date prior to the expiry date of such take-over bid or offer, such that all of a Participant’s Units will immediately
vest at such time. In such event, all RSUs so vested may be settled conditionally or otherwise, from such date until their respective
expiry date so as to permit the Participant to tender the Common Shares received upon such settlement pursuant to the take-over bid or
offer.
The Board may make certain amendments to the LTIP or to any Unit outstanding
thereunder without seeking shareholder approval, including, but not limited to, housekeeping amendments, amendments to comply with applicable
law or stock exchange rules, amendments necessary for Units to qualify for favorable treatment under applicable tax laws, amendments to
the vesting provisions of the LTIP or any Unit, amendments to the termination or early termination provisions of the LTIP or any Unit,
and amendments necessary to suspend or terminate the LTIP. Only the following types of amendments will not be able to be made without
obtaining shareholder approval:
| · | increasing the number of Common Shares reserved for issuance under the LTIP (other than as a result of
a share split or similar change in the capital structure of the Corporation); |
| · | permitting awards to be transferred or assigned other than for normal estate settlement purposes; |
| · | permitting the introduction or reintroduction of non-employee directors as participants on a discretionary
basis or increasing limits previously imposed on non-employee director participation; |
| · | removing or exceeding the participation limits on insiders; |
| · | amendments which delete or reduce the range of amendments which require approval by the Shareholders;
and |
| · | amendments required to be approved by shareholders under applicable laws or the rules, regulations and
policies of any stock exchange on which the Common Shares are listed. |
As required by section 613 of the TSX Company Manual, the Corporation’s
annual burn rate, which represents the number of Units granted under the LTIP divided by the weighted average number of Common Shares
outstanding as at the end of a fiscal year, was 1.1% in 2021, 2.4% in 2022 and 2.7% in 2023.
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth the securities of the Corporation that are
authorized for issuance under the Share Option Plan and the LTIP as at the end of the Corporation’s most recently completed financial
year.
Plan Category |
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 |
Equity compensation plans approved by securityholders |
2,778,173 |
C$16.19 per Common Share |
734,968 |
Equity compensation plans not approved by securityholders |
Nil |
Nil |
Nil |
Total |
2,778,173 |
C$16.19 per Common Share |
734,968 |
CORPORATE GOVERNANCE
The Board is committed to a high standard of corporate governance practices.
The Board believes that this commitment is not only in the best interests of the Shareholders but that it also promotes effective decision
making at the Board level. The Board is of the view that its approach to corporate governance is appropriate and continues to work to
align with the recommendations currently in effect and contained in National Policy 58-201 - Corporate Governance Guidelines which
are addressed below.
Board Mandate
The Board has responsibility for the stewardship of the Corporation. The
Board has adopted a written mandate for the Board (the “Mandate”) to confirm and enhance the Board’s ongoing
duty and responsibility for stewardship of the Corporation, a copy of which is available on the Corporation’s website at www.profoundmedical.com.
and attached hereto as Schedule “A”. The Board is ultimately responsible for supervising the management of the business and
affairs of the Corporation and, in doing so, is required to act in the best interests of the Corporation. The Board generally discharges
its responsibilities either directly or through the Audit Committee and the Human Resources and Corporate Governance Committee. Specific
responsibilities of the Board set out in the Mandate include:
(a) | | Appointing Management – including approval of the Chief Executive Officer, the compensation
of the executive officers and the oversight of succession planning programs; |
(b) | | Board Organization – including responding to recommendations received from the Human
Resources and Corporate Governance Committee, but the Board retains the responsibility for managing its own affairs; |
(c) | | Strategic Planning – including the review and approval of the Corporation’s business,
financial and strategic plans on at least an annual basis; |
(d) | | Monitoring of Financial Performance and Other Financial Reporting Matters – including
the review of the Corporation’s ongoing financial performance and results of operations and review and approval of the Corporation’s
audited and interim consolidated financial statements and management’s discussion and analysis of financial conditions and results
of operations; |
(e) | | Risk Management – including the identification of the Corporation’s principal
business risks and the implementation of appropriate systems to effectively monitor and manage such risks; |
(f) | | Policies and Procedures – including the approval and monitoring of all policies and
procedures including those related to corporate governance, ethics and confidentiality; |
(g) | | Communication and Reporting – including the oversight of the timely and accurate disclosure
of financial reports and other material corporate developments; and |
(h) | | Other Responsibilities – including those related to position descriptions, orientation
and continuing education, nomination of directors and Board evaluations and matters in respect of any disposition, material commitment
or venture, or significant expenditure in either monetary or business terms. |
Composition of the Board
Director Independence
Brian Ellacott, Cynthia Lavoie, Murielle Lortie, Arthur Rosenthal and Kris
Shah are all “independent” as such term is defined by National Instrument 58-101 – Disclosure of Corporate
Governance Practices. Arun Menawat is non-independent as he is the Chief Executive Officer of the Corporation. Each of the independent
directors has no direct or indirect material relationship with the Corporation, including any business or other relationship, which could
reasonably be expected to interfere with the director’s ability to act with a view to the best interests of the Corporation or which
could reasonably be expected to interfere with the exercise of the director’s independent judgment.
If the Chairman is not independent, the independent directors may select
one of their members to be appointed lead independent director of the Board (“Lead Independent Director”) for such
term as the independent directors may determine. The Lead Independent Director is responsible for chairing meetings of the independent
directors and seeking to ensure that the Board is able to carry out its role.
Dr. Arun Menawat acts as Chairman of the Board. Since Dr. Menawat is not
independent, Brian Ellacott has been appointed Lead Independent Director of the Board.
The table below shows the current Board and committee membership.
|
Committees |
Year Appointed |
Audit |
Human Resources and Corporate Governance Committee |
Independent Board Members |
Brian Ellacott |
2018 |
- |
Member |
Cynthia Lavoie |
2021 |
Member |
- |
Murielle Lortie |
2020 |
Chair |
- |
Arthur Rosenthal |
2018 |
Member |
Chair |
Kris Shah |
2022 |
- |
Member |
Not Independent – Management |
Arun Menawat (Chairman) |
2015 |
- |
- |
Meetings of Independent Directors
The entire complement of independent directors on the Board and each of
the committees meet regularly without management present. The Chairman of the Board conducts these sessions at Board meetings and the
Chair of each committee conducts them at committee meetings. During the last financial year ended December 31, 2023, there were eight
such meetings of the independent directors.
Chairman of the Board
Dr. Arun Menawat is the Chief Executive Officer of the Corporation and
as a result does not meet the Board’s independence standards. The primary functions of the Chairman are to facilitate the operations
and deliberations of the Board and the satisfaction of the Board’s responsibilities under its Mandate. The Chairman’s key
responsibilities include duties relating to providing overall leadership to the Board, chairing board and Shareholder meetings, acting
as a liaison between management, the members of the Board and the Chairs of the various committees of the Board, and communicating with
Shareholders and regulators. The responsibilities of the Chairman are reviewed by the Human Resources and Corporate Governance Committee
and considered by the Board for approval each year.
Director Term Limits and Other Mechanics
of Board Renewal
The Board has not established any term limits for directors, as the Board
takes the view that term limits are an arbitrary mechanism for removing directors which can result in valuable, experienced directors
being forced to leave the Board solely because of length of service. The Board’s priorities continue to be ensuring the appropriate
skill sets are present amongst the Board to optimize the benefit to the Corporation. The Board conducts annual evaluations of the individual
directors, the committees of the Board and the Chairman of the Board, which are overseen by the Human Resources and Corporate Governance
Committee, to ensure these objectives are met. See “Board Assessments”.
Board Meetings
The Board holds a minimum of one regular quarterly meeting and a corporate
strategy session each year, as well as additional meetings as required. An in camera session of the directors is held at each
regularly scheduled Board and committee meeting, as demeed necessary, so that the independent members of the Board have an opportunity
to meet without the presence of management members of the Board.
Meeting Attendance
Name |
Board Meetings Attended in 2023 |
Committee Meetings Attended in 2023 |
No. |
% |
No. |
% |
Arun Menawat |
6 of 6 |
100% |
- |
- |
Brian Ellacott |
6 of 6 |
100% |
2 of 2(3) |
100% |
Kenneth Galbraith(1) |
1 of 2 |
50% |
2 of 3(2)(3) |
67% |
Cynthia Lavoie |
6 of 6 |
100% |
4 of 4(2) |
100% |
Murielle Lortie |
6 of 6 |
100% |
4 of 4(2) |
100% |
Arthur Rosenthal |
6 of 6 |
100% |
4 of 4(2)(3) |
100% |
Kris Shah |
6 of 6 |
100% |
1 of 1(3) |
100% |
Notes:
| (1) | Mr. Galbraith ceased being a member of the Board on May 17, 2023. |
| (3) | Human Resources and Corporate Governance Committee. |
Orientation and Continuing Education
Pursuant to the Mandate, it is the responsibility of the Board to provide
an orientation program for new directors and ongoing educational opportunities for all directors. New directors are expected to participate
in an initial information session on the Corporation in the presence of its senior executive officers to learn about, among other things,
the business of the Corporation, its financial situation and its strategic planning. All directors will receive a record of public information
about the Corporation, as well as other relevant corporate and business information including corporate governance practices of the Corporation,
the structure of the Board and its standing committees, its corporate organization, the charters of the Board and its standing committees,
the Code (as defined herein) and other relevant corporate policies.
Continuing education opportunities are directed at enabling individual
directors to maintain or enhance their skills and abilities as directors, as well as ensuring that their knowledge and understanding of
the Corporation’s affairs remains current. Directors are kept informed as to matters which may impact the Corporation’s operations
through regular reports and presentations at Board and committee meetings.
Code of Business Conduct and Ethics
The Corporation has adopted a written Code of Business Conduct and Ethics
(the “Code”) for directors, officers and employees. The objective of the Code is to provide guidelines for maintaining
the integrity, reputation, honesty, objectivity and impartiality of the Corporation and its subsidiaries. The Code addresses compliance
with laws, conflicts of interest, corporate opportunity, confidentiality, fair dealing with customers, suppliers, competitors, officers
and employees, protection and proper use of company assets and accounting complaints. The Board has the ultimate responsibility for the
stewardship of the Code and is responsible for considering any request for waivers from the Code. Any waiver of the Code’s provisions
is subject to the disclosure and other provisions of applicable securities laws and the applicable rules of any and all securities exchanges
on which the securities of the Corporation are listed and posted for trading. A copy of the Code is available on the Corporation’s
website at www.profoundmedical.com.
The Board monitors compliance with the Code and reviews it on at least
an annual basis to determine whether updates are appropriate. Where a director or officer has any interest in or a perceived conflict
involving a contract or business relationship with the Corporation, that director or officer is excluded from all discussions and deliberations
regarding the contract or relationship and such director abstains from voting in respect thereof. Directors and executive officers have
disclosed to the Corporation all directorships held by such member and the existence and nature of any interests that could result in
a conflict situation with the Corporation.
The Board has also adopted a whistleblower policy (the “Whistleblower
Policy”) relating to the reporting of inappropriate activity to encourage and promote a culture of ethical business conduct.
The Whistleblower Policy is intended to encourage and facilitate the reporting of questionable accounting, internal accounting controls
or auditing matters.
Nomination of Directors
The Human Resources and Corporate Governance Committee has the responsibility
for reviewing the composition of the Board by taking into account, among other things, its size and the particular competencies and skills
of its members. The Human Resources and Corporate Governance Committee, in consultation with the Chairman of the Board and Chief Executive
Officer, will then identify potential Board nominees and recommend such nominees for election as directors based on the competencies and
skills each new member possesses in the context of the needs of the Corporation. The Board as a whole is then responsible for nominating
new directors. The Human Resources and Corporate Governance Committee is composed entirely of independent directors.
The Board seeks nominees that have the following characteristics: (i) a
track record in general business management; (ii) special expertise in an area of strategic interest to the Corporation; (iii) the ability
to devote time; and (iv) support for the Corporation’s mission and strategic objectives.
While the Corporation has not adopted a written policy relating to the
identification and nomination of women directors, it recognizes that diversity is an economic driver of competitiveness for companies
and it strives to promote an environment and culture conducive to the appointment of well qualified persons so that there is appropriate
diversity to maximize the achievement of corporate goals. Gender of a potential candidate is one component in the overall list of factors
the Human Resources and Corporate Governance Committee considers when selecting candidates for executive officer and senior manager appointments,
and membership on the Board and its committees. The Human Resources and Corporate Governance Committee is of the opinion that if gender
was the overriding factor governing the selection of Board nominees, it could unduly restrict the Board’s ability to select the
most appropriate nominees and candidates. The Corporation has not adopted targets regarding women on the Board or women in executive officer
and senior management positions as it does not believe that such targets are necessary at this time given the size of the Board and that
the director nomination process recognizes the benefits of diversity. There are currently two women on the Board.
Director and Executive Compensation
The Human Resources and Corporate Governance Committee oversees the remuneration
policies and practices of the Corporation. The principal responsibilities of the Human Resources and Corporate Governance Committee include:
(i) considering the Corporation’s overall remuneration strategy and, where information is available, verifying the appropriateness
of existing remuneration levels using external sources for comparison; (ii) comparing the nature and amount of the Corporation’s
directors’ and executive officers’ compensation to performance against goals set for the year while considering relevant comparative
information, independent expert advice and the financial position of the Corporation, and (iii) making recommendations to the Board in
respect of director and executive officer remuneration matters, with the overall objective of ensuring maximum Shareholder benefit from
the retention of high quality board and executive team members.
Board Assessments
The Board is responsible for ensuring that there is a process in place
for annually evaluating the effectiveness and contribution of the Chief Executive Officer, the Board, the committees of the Board, the
Chairman of the Board and the individual directors based on their applicable terms of reference or position description.
The objective of the assessments is to ensure the continued effectiveness
of the Board in the execution of its responsibilities and to contribute to a process of continuing improvement. In addition to any other
matters the Board deems relevant, the assessments may consider in the case of the Board or a committee, the applicable terms of reference,
the applicable position descriptions, as well as the competencies and skills each individual director is expected to bring to the Board.
The Human Resources and Corporate Governance Committee annually reviews
and makes recommendations to the Board on the method and content of such evaluations and oversees the evaluation process.
Board Committees
The
Board has two standing committees, being the Audit Committee and the Human Resources and Corporate Governance Committee. Below is a description
of the committees and their current membership.
Audit Committee
The Audit Committee oversees the accounting and financial reporting practices
and procedures of the Corporation’s financial statements. The principal responsibilities of the Audit Committee include: (i) the
integrity of the consolidated financial statements of the Corporation; (ii) the Corporation’s compliance with legal and regulatory
requirements; (iii) the public accountants’ qualifications and independence; and (iv) the performance of the Corporation’s
internal audit function and public accountants. The Audit Committee shall oversee the preparation of and review the report required by
the rules of any and all securities regulatory bodies to which the Corporation is subject to be included in the Corporation’s annual
proxy statement. The Audit Committee Charter is attached hereto as Schedule “B”.
Composition of the Audit Committee
The following are the current members of the Audit Committee:
Name |
Independence |
Financial Literacy |
Cynthia Lavoie |
Independent |
Financially Literate |
Murielle Lortie |
Independent |
Financially Literate |
Arthur Rosenthal |
Independent |
Financially Literate |
Relevant Education and Experience
The relevant education and experience of each member of the Audit Committee,
is provided above, under the heading “Election of Directors”. All of the Audit Committee members are independent of
management of the Corporation as required by the TSX and each member is financially literate in that each has the ability to read and
understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable
to the breadth and complexity of the issues that can reasonably be expected to be raised by the Corporation’s financial statements.
Audit Committee Oversight
At no time since the commencement of the Corporation’s most recently
completed financial period was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the
Board.
Pre-Approval Policies and Procedures
The Audit Committee has adopted specific policies and procedures for the
engagement of non-audit services as described in Schedule “B” attached hereto.
External Auditor Service Fees (By Category)
The aggregate fees billed by the Corporation’s external auditor in
the last two fiscal years as follows:
Financial Year Ending |
Audit Fees(1) |
Audit Related Fees |
Tax Fees(2) |
All Other Fees |
December 31, 2023 |
$386,000 |
$0 |
$69,000 |
$0 |
December 31, 2022 |
$441,000 |
$0 |
$114,000 |
$0 |
Notes:
| (1) | Audit fees includes annual audit, quarterly reviews and work performed in relation to offerings. |
| (2) | Tax fees includes fees related to annual tax returns and scientific research credit return along with
tax and transfer pricing advice. |
Human Resources and Corporate Governance Committee
The Human Resources and Corporate Governance Committee is comprised of
Brian Ellacott, Kris Shah and Arthur Rosenthal. All three members are independent directors.
The key responsibilities of the Human Resources and Corporate Governance Committee include:
(a) | | Annually review and approve corporate goals and objectives relevant to compensation of executive
officers for whom compensation is required to be individually reported under applicable securities laws, evaluate the NEOs’ performance
in light of those goals and objectives, and set the NEOs’ respective compensation levels based on this evaluation. |
(b) | | Annually review the Chief Executive Officer’s evaluation of the performance of the
other officers of the Corporation and such other senior management and key employees of the Corporation or any subsidiary of the Corporation
as may be identified to the Committee by the Board (collectively, the “Designated Executives”) and review the Chief
Executive Officer’s recommendations with respect to the amount of compensation to be paid to the Designated Executives. |
(c) | | Annually review, assess the competitiveness and appropriateness of and approve the compensation
package of each of the Designated Executives. |
(d) | | Review and approve any employment contracts or arrangements with each of the Designated Executives,
including any retiring allowance arrangements or any similar arrangements to take effect in the event of a termination of employment. |
(e) | | Review and recommend to the Board compensation policies and processes and in particular,
the compensation policies and processes for the Designated Executives. |
(f) | | In determining the long-term incentive component of the Chief Executive Officer’s compensation
and each Designated Executive’s compensation, consider the Corporation’s performance and relative shareholder return, the
value of similar incentive awards to executives at comparable companies, and the awards given to Corporation executives in past years. |
(g) | | Make recommendations to the Board with respect to incentive compensation and equity-based
plans, and review and make recommendations with respect to the performance or operating goals for participants in such plans. |
(h) | | Have the sole authority to retain and terminate any compensation consultant to be used to
assist in the evaluation of director, Chief Executive Officer or senior executive compensation and have sole authority to approve the
consultant’s fees and other retention terms. |
(i) | | Adopt, administer, approve and ratify awards under incentive compensation and stock plans,
including amendments to the awards made under any such plans, and review and monitor awards under such plans. |
(j) | | Review and report to the Board on the appropriateness of the succession planning of the Corporation,
including appointing, training and monitoring senior management. |
(k) | | Review the significant human resources policies, plans and programs of the Corporation to
ensure they are supportive of the Corporation’s near and long-term strategies. |
(l) | | Undertake on behalf of, and in an advisory capacity to, the Board such other initiatives
as may be necessary or desirable to assist the Board in discharging its responsibility to ensure that appropriate human resources development,
performance evaluation, compensation and management development programs are in place and operating effectively. |
Position Descriptions
The Board has developed written position descriptions which identify the
responsibilities of the Chairman of the Board and the Chief Executive Officer. The Board has not developed written position descriptions
for the Chair of each committee of the Board. The Board believes that the charters of the Audit Committee and the Human Resources and
Corporate Governance Committee adequately delineate the roles of the Chairs of such committees. Each of the Audit Committee and the Human
Resources and Corporate Governance Committee are responsible for reviewing their respective charters on a regular basis and to recommend
to the Board any changes as considered appropriate from time to time.
AUDITOR
The auditors of the Corporation are PricewaterhouseCoopers LLP, Chartered
Professional Accountants, Licensed Public Accountants, PwC Tower, 18 York Street, Suite 2500, Toronto, ON M5J 0B2. PricewaterhouseCoopers
LLP has served as the Corporation’s auditor since June 22, 2015.
MANAGEMENT CONTRACTS
The Corporation does not currently have any management contracts in place.
ADDITIONAL INFORMATION
Financial information pertaining to the Corporation is provided in the
Financial Statements and related management’s discussion and analysis. Copies of the Financial Statements and related management’s
discussion and analysis can be obtained by contacting Stephen Kilmer, Investor Relations, at 2400 Skymark Avenue, Unit 6, Mississauga,
Ontario, L4W 5K5. Additional information relating to the Corporation is available on the SEDAR+ website at www.sedarplus.ca.
DIRECTOR APPROVAL
The contents of this Circular and the sending thereof to the Shareholders,
directors and auditor of the Corporation have been approved by the Board.
(Signed) “Arun Menawat”
Arun Menawat
Director and Chief Executive Officer
April 5, 2024
SCHEDULE “A”
PROFOUND MEDICAL CORP.
(the “Company”)
BOARD MANDATE
INTRODUCTION
The term “Company” herein shall refer to Profound Medical Corp.
and the term “Board” shall refer to the Board of Directors of the Company.
The Board is elected by the shareholders and is responsible for the stewardship
of the business and affairs of the Company. The Board seeks to discharge such responsibility by reviewing, discussing and approving the
Company’s strategic planning and organizational structure and supervising management to oversee that the foregoing enhances and
preserves the underlying value of the Company.
Although directors may be elected by the shareholders to bring special
expertise or a point of view to Board deliberations, they are not chosen to represent a particular constituency. The best interests of
the Company as a whole must be paramount at all times.
QUALIFICATIONS OF DIRECTORS
A majority of the directors will be “independent.” No director
will be deemed independent unless the Board affirmatively determines the director has no material relationship with the Company, directly
or as an officer, shareholder or partner of an organization that has a material relationship with the Company. The Board will observe
all additional criteria for determining director independence pursuant to the rules of any and all securities exchange(s) on which the
securities of the Company are listed and posted for trading, and other governing laws and regulations. The Board shall consider and affirmatively
determine whether each individual director is independent on an annual basis.
DUTIES OF DIRECTORS
The Board discharges its responsibility for overseeing the management of
the Company’s business by delegating to the Company’s senior officers the responsibility for day-to-day management of the
Company. The Board discharges its responsibilities both directly and through its committees, the Audit Committee and the Human Resources
and Corporate Governance Committee. Only independent members may serve on any of the foregoing committees of the Board. In addition to
these regular committees, the Board may appoint ad hoc committees periodically to address certain issues of a more short-term nature.
Each of the standing committees of the Board will have its own charter. The charter will set forth the responsibilities of each committee,
procedures of the committee and how the committee will report to the Board.
Directors must fulfill their responsibilities consistent with their fiduciary
duty to the Company in compliance with all applicable laws and regulations. Directors will take into consideration the interests of shareholders,
employees, the members of communities in which the Company operates, and all other stakeholders in the Company.
In addition to the Board’s primary roles of overseeing corporate
performance and providing quality, depth and continuity of management to meet the Company’s strategic objectives, principal duties
include, but are not limited to the following categories:
Appointment of Management
| 1. | The Board has the responsibility for approving the appointment of the Chief Executive Officer and all
other officers of the Company and approving the compensation of the executive officers for whom compensation is required to be individually
reported under applicable securities laws (or “named executive officers”), following a review of the recommendations of the
Human Resources and Corporate Governance Committee. To the extent feasible, the Board shall satisfy itself as to the integrity of the
named executive officers and other executive officers and ensure the named executive officers and other executive officers create a culture
of integrity throughout the Company. |
| 2. | The Board from time to time delegates to senior management the authority to enter into certain types of
transactions, including financial transactions, subject to specified limits. Investments and other expenditures above the specified limits
and material transactions outside the ordinary course of business are reviewed by and subject to the prior approval of the Board. |
| 3. | The Board oversees that succession planning programs are in place, including programs to appoint, train,
develop and monitor management. |
Board Organization
| 4. | The Board will respond to recommendations received from the Human Resources and Corporate Governance Committee,
but retains the responsibility for managing its own affairs by giving its approval for its composition and size, the selection of the
Chair of the Board, candidates nominated for election to the Board, committee and committee chair appointments, committee charters and
director compensation. |
| 5. | The Board supports the separation of the role of the Chair of the Board from the role of Chief Executive
Officer. In the event the Chair of the Board is not independent, the independent directors shall appoint an independent lead director. |
| 6. | The Board may delegate to Board committees matters it is responsible for, including the approval of compensation
of the Board and management, the conduct of performance evaluations and oversight of internal controls systems, but the Board retains
its oversight function and ultimate responsibility for these matters and all other delegated responsibilities. |
| 7. | Independent directors will meet in camera as needed. Normally, such meetings will occur at the end of
regularly schedule board meetings. |
| 8. | The Board has the authority to hire independent legal, financial or other advisors as it deems necessary. |
Strategic Planning
| 9. | The Board has oversight responsibility to participate directly, and through its committees, in reviewing,
questioning and approving the mission of the business and its objectives and goals. |
| 10. | The Board is responsible for adopting a strategic planning process and approving and reviewing, on at
least an annual basis, the business, financial and strategic plans by which it is proposed the Company may reach those goals, and such
strategic plans will take into account, among other things, the opportunities and risks of the business. |
| 11. | The Board has the responsibility to provide input to management on emerging trends and issues and on strategic
plans, objectives and goals that management develops. |
Monitoring of Financial Performance and Other Financial Reporting Matters
| 12. | The Board is responsible for enhancing congruence between shareholder expectations, Company plans and
management performance. |
| 13. | The Board is responsible for: |
| a. | adopting processes for monitoring the Company’s progress toward its strategic and operational goals,
and to revise and alter its direction to management in light of changing circumstances affecting the Company; and |
| b. | taking action when Company performance falls short of its goals or as other special circumstances warrant. |
| 14. | The Board shall be responsible for approving the audited consolidated financial statements; interim consolidated
financial statements and the notes and Management’s Discussion and Analysis accompanying such consolidated financial statements. |
| 15. | The Board is responsible for reviewing and approving material transactions outside the ordinary course
of business and those matters the Board is required to approve under the Company’s governing statute, including the payment of dividends,
issuance, purchase and redemption of securities, acquisitions and dispositions of material property, plant and equipment and material
capital expenditures. |
Risk Management
| 16. | The Board has responsibility for the identification of the principal risks of the Company’s business
and ensuring the implementation of appropriate systems to effectively monitor and manage such risks with a view to the long-term viability
of the Company and achieving a proper balance between the risks incurred and the potential return to the Company’s shareholders. |
| 17. | The Board is responsible for the Company’s internal control and management information systems. |
Policies and Procedures
| 18. | The Board is responsible for: |
| a. | developing the Company’s approach to corporate governance and approving and monitoring compliance
with all significant policies and procedures related to corporate governance; and |
| b. | approving policies and procedures designed to ensure the Company operates at all times within applicable
laws and regulations and to the highest ethical and moral standards and, in particular, adopting a written code of business conduct and
ethics which is applicable to directors, officers and employees of the Company and which constitutes written standards that are reasonably
designed to promote integrity and to deter wrongdoing. |
| 19. | The Board enforces its policy respecting confidential treatment of the Company’s proprietary information
and Board deliberations. |
| 20. | The Board is responsible for monitoring compliance with the Company’s Code of Ethics. Any waivers
from the code that may be granted for the benefit of the Company’s directors or executive officers must be granted by the Board
(or a Board committee) only. |
Communications and Reporting
| 21. | The Board has approved and will revise from time to time as circumstances warrant a Corporate Disclosure
Policy to address communications with shareholders, employees, financial analysts, the media and such other outside parties as may be
appropriate. |
| 22. | The Board is responsible for: |
| a. | overseeing the accurate reporting of the financial performance of the Company to shareholders, other security
holders and regulators on a timely and regular basis; |
| b. | overseeing that the financial results are reported fairly and in accordance with Canadian generally accepted
accounting standards and related legal disclosure requirements; |
| c. | taking steps to enhance the timely disclosure of any other developments that have a significant and material
impact on the Company; |
| d. | reporting annually to shareholders on its stewardship for the preceding year; and |
| e. | overseeing the Company’s implementation of systems that accommodate feedback from stakeholders. |
Position Descriptions
| 23. | The Board is responsible for: |
| a. | if deemed necessary, developing position descriptions for the Chair of the Board, the chair of each Board
committee and the Chief Executive Officer (which will include delineating management’s responsibilities); |
| b. | approving the corporate goals and objectives that the Chief Executive Officer is responsible for meeting;
and |
| c. | developing a position description for the directors which sets out the expectations and responsibilities
of directors, including basic duties and responsibilities with respect to attendance at Board meetings and advance review of meeting materials. |
Orientation and Continuing Education
| 24. | The Board is responsible for: |
| a. | ensuring all new directors receive a comprehensive orientation, that they fully understand the role of
the Board and its committees, as well as the contribution individual directors are expected to make (including the commitment of time
and resources that the Company expects from its directors) and that they understand the nature and operation of the Company’s business;
and |
| b. | providing continuing education opportunities for all directors, so that individuals may maintain or enhance
their skills and abilities as directors, as well as to ensure their knowledge and understanding of the Company’s business remains
current. |
Human Resources of Directors
| 25. | In connection with the nomination or appointment of individuals as directors, the Board is responsible
for: |
| a. | considering what competencies and skills the Board, as a whole, should possess; |
| b. | assessing what competencies and skills each existing director possesses; |
| c. | considering the appropriate size of the board with a view to facilitating effective decision making; and |
| d. | considering whether or not each new nominee can devote sufficient time and resource to his or her duties
as a board member. |
in carrying out each of these responsibilities, the Board will
consider the advice and input of the Human Resources and Corporate Governance Committee.
| 26. | While the Board does not restrict the number of public company boards on which a director may serve, each
director should ensure that he or she is able to devote sufficient time and resources to carrying out their duties as a board member effectively.
As a general rule, directors are not permitted to join a board of another public company on which two or more other directors of the Company
serve. |
| 27. | The Board supports the principle that its membership should represent a diversity of backgrounds, experience
and skills. |
| 28. | Director nominees shall be selected by a majority of the independent directors. |
Board Evaluation
| 29. | The Board is responsible for ensuring that the Board, its committees and each individual director are
regularly assessed regarding his, her or its effectiveness and contribution. An assessment will consider, in the case of the Board or
a Board committee, its mandate or charter and in the case of an individual director, any applicable position description, as well as the
competencies and skills each individual director is expected to bring to the Board. |
Annual Review
| 30. | The Human Resources and Corporate Governance Committee shall review and reassess the adequacy of this
mandate at least annually and otherwise as it deems appropriate and recommend changes to the Board, as necessary. The Human Resources
and Corporate Governance Committee will ensure this mandate or a summary that has been approved by the Human Resources and Corporate Governance
Committee is disclosed in accordance with all applicable securities laws or regulatory requirements in the Company’s annual management
information circular or such other annual filing as may be permitted or required by applicable securities regulatory authorities. |
SCHEDULE “B”
PROFOUND MEDICAL CORP.
(the “Company”)
AUDIT COMMITTEE CHARTER
A.
Purpose
The Audit Committee shall be directly responsible for the appointment,
compensation and oversight of the work of the Company’s public accountants. The Audit Committee shall monitor: (1) the integrity
of the consolidated financial statements of the Company; (2) the Company’s compliance with legal and regulatory requirements; (3)
the public accountants’ qualifications and independence; and (4) the performance of the Company’s internal audit function
and public accountants. The Audit Committee shall oversee the preparation of and review the report required by the rules of any and all
securities regulatory bodies to which the Company is subject to be included in the Company’s annual proxy statement.
B.
Committee Membership
The Audit Committee shall consist of no fewer than three members. Each
member of the Audit Committee shall be unrelated and independent, and the composition of the Audit Committee shall satisfy the independence,
experience and financial expertise requirements of any and all securities exchange(s) on which the securities of the Company are listed
and posted for trading and all other applicable securities and other laws. The Board shall appoint the members of the Audit Committee
annually, considering the recommendation of the Human Resources and Corporate Governance Committee, and further considering the views
of the Chair of the Board and the Chief Executive Officer, as appropriate. The members of the Audit Committee shall serve until their
successors are appointed.
The Board shall have the power at any time to change the membership of
the Audit Committee and to fill vacancies in it, subject to such new member(s) satisfying the independence, experience and financial expertise
requirements referred to above. Except as expressly provided in this Charter or the by-laws of the Company, or as otherwise provided by
law or the rules of the stock exchanges to which the Company is subject, the Audit Committee shall fix its own rules of procedure.
C.
Committee Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint or replace
the public accountants (subject, if applicable, to shareholder ratification), and shall approve all audit engagement fees and terms and
all non-audit engagements with the public accountants. The Audit Committee shall consult with management but shall not delegate these
responsibilities. In its capacity as a committee of the Board, the Audit Committee shall be directly responsible for the oversight of
the work of the public accounting firm (including resolution of disagreements between management and the public accounting firm regarding
financial reporting) for the purpose of preparing or issuing an audit report or related work, and the public accounting firm shall report
directly to the Audit Committee. The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain
and set and pay the compensation for special legal, accounting or other consultants to advise the committee and carry out its duties,
and to conduct or authorize investigations into any matters within its scope of responsibilities.
The Audit Committee may request any officer or employee of the Company
or the Company’s outside counsel or public accountants to attend a meeting of the Audit Committee or to meet with any members of,
or consultants to, the Audit Committee.
The Audit Committee shall have the ability to communicate directly with
the public accountants and the Company’s internal auditor, if any.
The Audit Committee, or another board committee comprised solely of independent
directors if so designated by the Audit Committee, shall review all related party transactions on an ongoing basis, including to the extent
required by any and all securities exchange(s) on which the securities of the Company are listed and posted for trading.
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.
The Audit Committee shall annually review the Audit Committee’s own performance.
In performing its functions, the Audit Committee shall undertake those
tasks and responsibilities that, in its judgment, would most effectively contribute and implement the purposes of the Audit Committee.
The following functions are some of the common recurring activities of the Audit Committee in carrying out its oversight responsibility:
| · | Review and discuss with management and the public accountants the Company’s annual audited consolidated
financial statements, including disclosures made in Management’s Discussion and Analysis of Financial Condition and Results of Operations
and recommend to the Board whether the audited consolidated financial statements should be included in the Company’s annual report. |
| · | Review and discuss with management and the public accountants the Company’s quarterly financial
statements, including disclosures made in Management’s Discussion and Analysis of Financial Condition and Results of Operations
or similar disclosures, prior to the filing of its quarterly report. |
| · | Review and discuss with management and the public accountants the financial information and consolidated
financial statements contained in any prospectus, registration statement, annual information form, circular or other material disclosure
document of the Company, in each case prior to the filing of such documents. |
| · | Review and discuss with management and the public accountants, as applicable: (a) major issues regarding
accounting principles and consolidated financial statement presentations, including any significant changes in the Company’s selection
or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special
audit steps adopted in light of material control deficiencies; (b) analyses prepared by management or the public accountants setting forth
significant financial reporting issues and judgments made in connection with the preparation of the consolidated financial statements,
including analyses of the effects of alternative IFRS methods on the consolidated financial statements; (c) any management letter provided
by the public accountants and the Company’s response to that letter; (d) any problems, difficulties or differences encountered in
the course of the audit work, including any disagreements with management or restrictions on the scope of the public accountants’
activities or on access to requested information and management’s response thereto; (e) the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, on the consolidated financial statements of the Company; and (f) prior to their
release, earnings press releases, as well as financial information and earnings guidance (generally or on a case-by-case basis) provided
to analysts and rating agencies. |
| · | Discuss with management the Company’s major financial risk exposures and the steps management has
taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. |
| · | Obtain and review a report from the public accountants at least annually regarding: (a) the public accountants’
internal quality control procedures; (b) any material issues raised by the most recent quality control review, or peer review, of the
firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or
more independent audits carried out by the firm; (c) any steps taken to deal with any such issues; and (d) all relationships between the
public accountants and the Company. |
| · | Evaluate the qualifications, performance and independence of the public accountants, including a review
and evaluation of the lead partner of the public accountants and taking into account the opinions of management. |
| · | Ensure the lead audit partner of the public accountants and the audit partner responsible for reviewing
the audit are rotated at least every five years if required by applicable securities laws. |
| · | Discuss with management and the public accountants any accounting adjustments that were noted or proposed
by the public accountants but were passed (as immaterial or otherwise). |
| · | Establish procedures for: (a) the receipt, retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters; and (b) the confidential, anonymous submission by employees of
the Company of concerns regarding questionable accounting or auditing matters. |
| · | Review disclosures made by the Company’s principal executive officer or officers and principal financial
officer or officers regarding compliance with any certification obligations required by applicable laws and the rules promulgated thereunder,
including the Company’s disclosure controls and procedures and internal controls for financial reporting and evaluations thereof. |
| · | Review with management and approve the Company’s investment policies for its securities portfolio
and review the portfolio management performance. |
| · | Review the performances of the Chief Financial Officer and other senior executives involved in the financial
reporting process, review financial and accounting personnel succession planning within the Company and, where possible, consult on the
appointment of, or departure of, individuals occupying these positions. |
D.
Limitations of Audit Committee’s Roles
While the Audit Committee has the responsibilities and
powers set forth in this Charter, it is not the duty of the Audit Committee to prepare consolidated financial statements, plan or conduct
audits or to determine that the Company’s consolidated financial statements and disclosures are complete and accurate and are in
accordance with IFRS principles and applicable rules and regulations. These are the responsibilities of management and the public accountants.
B-3
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