U.S. 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 June, 2016
Commission File No.:
001-04192
MFC Bancorp
Ltd.
(Translation of Registrant's name into English)
Suite #1860 - 400 Burrard Street, Vancouver,
British Columbia, Canada V6C 3A6
(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.
Indicate by check mark whether
the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
¨
Note:
Regulation S-T
Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report
to security holders.
Indicate by check mark whether
the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
¨
Note:
Regulation S-T
Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document
that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant
is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the
home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press
release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material
event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark
whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If "Yes" is marked,
indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b):
¨
MANAGEMENT INFORMATION CIRCULAR
for the Annual General Meeting of Shareholders
of
MFC BANCORP LTD.
to be held on July 22, 2016
June 22, 2016
These materials are important and require your
immediate attention. They require shareholders of MFC Bancorp Ltd. to make important decisions. If you are in doubt as to how to
make such decisions, please contact your financial, legal or other professional advisors. If you have any questions or require
more information with regard to voting your shares, please contact MFC Bancorp Ltd.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 22, 2016
|
TO:
|
THE HOLDERS OF COMMON SHARES OF MFC BANCORP LTD.
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NOTICE IS HEREBY GIVEN that the annual general
meeting (the "
Meeting
") of shareholders of MFC Bancorp Ltd. (the "
Company
") will be held at 1000
Cathedral Place, 925 West Georgia Street, Vancouver, B.C., Canada V6C 3L2, on Friday, July 22, 2016 at 10:00 a.m. (Pacific time),
for the following purposes:
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1.
|
to receive and consider the financial statements of the Company for the financial year ended December
31, 2015;
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2.
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to elect the board of directors of the Company for the ensuing year;
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3.
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to appoint auditors of the Company for the fiscal year ended December 31, 2016 and to authorize
the directors to fix the remuneration of the auditors for the ensuing year; and
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4.
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to transact such other business as may properly come before the Meeting and any and all adjournment(s)
or postponement(s) thereof.
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Accompanying this Notice of Annual General
Meeting are a management information circular, a form of proxy, a supplemental mailing card and a financial statement request form.
The board of directors of the Company has fixed
the close of business (New York time) on June 15, 2016 as the record date for determining shareholders who are entitled to receive
notice of the Meeting and attend and vote at the Meeting and any adjournment(s) or postponement(s) thereof. The accompanying management
information circular provides additional information relating to the matters to be dealt with at the Meeting and forms part of
this Notice of Annual General Meeting.
Registered shareholders (shareholders of record)
who are unable to attend the Meeting in person are requested to complete, sign and date the enclosed form of proxy and return the
form of proxy in the enclosed return envelope provided for that purpose. If you receive more than one form of proxy because you
own common shares registered in different names or at different addresses, each form of proxy should be completed and returned.
A form of proxy will not be valid unless it is deposited, by mail or by hand, to the attention of: Proxy Services c/o Computershare
Investor Services, PO Box 30202, College Station, TX 77842-9909, by 10:00 a.m. (Pacific time) on July 20, 2016 (or a day other
than a Saturday, Sunday or holiday which is at least 48 hours before the Meeting or any adjournment of the Meeting). The Chairman
of the Meeting has the discretion to accept proxies received after that time.
DATED at Vancouver, British Columbia, this 22
nd
day of
June, 2016.
By order of the board of directors of the Company
/s/ Gerardo Cortina
Gerardo Cortina
President and Chief Executive Officer
MANAGEMENT INFORMATION CIRCULAR
June 22, 2016
This Management Information Circular ("
Circular
")
is being furnished to holders ("
Shareholders
") of common shares ("
Common Shares
") of MFC Bancorp
Ltd. (the "
Company
" or "
MFC
") in connection with the solicitation of proxies by the board of
directors (the "
Board
") and management of the Company for use at the annual general meeting to be held at 1000
Cathedral Place, 925 West Georgia Street, Vancouver, B.C., Canada V6C 3L2, at 10:00 a.m. (Pacific time) on July 22, 2016 and any
adjournment(s) or postponement(s) thereof (the "
Meeting
"),
for the purposes set forth in the Notice of
Annual General Meeting (the "
Notice of Meeting
"), which accompanies and is part of this Circular.
The Notice of Meeting, form of proxy, supplemental
mailing card, a financial statement request form and this Circular will be mailed to Shareholders commencing on or about June 30,
2016. The information contained herein is given as of June 22, 2016, except as otherwise stated. Unless otherwise indicated, all
references in this document to "$" and "dollars" are to Canadian dollars, all references to "US$"
are to United States dollars and all references to "Euro" or "€" are to the European Union Euro.
VOTING INFORMATION
Solicitation of Proxies
The solicitation of proxies by management of
the Company will be conducted by mail and may be supplemented by telephone or other personal contact, and such solicitation will
be made without special compensation granted to the directors, officers and employees of the Company. The Company does not reimburse
Shareholders, nominees or agents for costs incurred in obtaining, from the principals of such persons, authorization to execute
forms of proxy, except that the Company has requested brokers and nominees who hold stock in their respective names to furnish
this Circular and related proxy materials to their customers, and the Company will reimburse such brokers and nominees for their
related out of pocket expenses. No solicitation will be made by specifically engaged employees or soliciting agents. The cost of
solicitation will be borne by the Company.
No person has been authorized to give any information
or to make any representation other than as contained in this Circular in connection with the solicitation of proxies. If given
or made, such information or representations must not be relied upon as having been authorized by the Company. The delivery of
this Circular shall not create, under any circumstances, any implication that there has been no change in the information set forth
herein since the date of this Circular. This Circular does not constitute the solicitation of a proxy by anyone in any jurisdiction
in which such solicitation is not authorized, or in which the person making such solicitation is not qualified to do so, or to
anyone to whom it is unlawful to make such an offer of solicitation.
Record Date
The Board has set the close of business (New
York time) on June 15, 2016 as the record date (the "
Record Date
") for determining which Shareholders shall be
entitled to receive notice of and to vote at the Meeting. Only Shareholders of record as of the Record Date ("
Registered
Shareholders
") are entitled to receive notice of and to vote at the Meeting. Persons who acquire Common Shares after the
Record Date will not be entitled to vote such Common Shares at the Meeting.
Appointment of Proxyholders
Registered Shareholders are entitled to vote
at the Meeting. A Shareholder is entitled to one vote for each Common Share that such Shareholder holds on the Record Date on the
resolutions to be voted upon at the Meeting and any other matter to come before the Meeting.
The persons named as proxyholders (the "
Designated
Persons
") in the enclosed form of proxy are directors and/or officers of the Company.
A Registered Shareholder has the right to
appoint a person or corporation (who need not be a Shareholder) to attend and act for or on behalf of that Shareholder at the Meeting,
other than the Designated Persons named in the enclosed form of proxy. A Registered Shareholder may exercise this right by striking
out the printed names and inserting the name of such other person and, if desired, an alternate to such person in the blank space
provided in the form of proxy.
In order to be voted, the completed form of
proxy must be received by the Company, by mail or by hand, to the attention of Proxy Services c/o Computershare Investor Services,
PO Box 30202, College Station, TX 77842-9909, by 10:00 a.m. (Pacific time) on July 20, 2016 (or a day other than a Saturday, Sunday
or holiday which is at least 48 hours before the Meeting or any adjournment(s) or postponement(s) of the Meeting). Shareholders
may also provide their voting instructions by telephone by calling toll free 1-800-652-VOTE (8683) or through the Internet at
www.envisionreports.com/MFCB
.
The time limit for the deposit of proxies may be waived by the Board at its discretion without notice.
A proxy may not be valid unless it is dated
and signed by the Registered Shareholder who is giving it or by that Shareholder's attorney-in-fact duly authorized by that Shareholder
in writing or, in the case of a corporation, dated and executed by a duly authorized officer, or attorney-in-fact, for the corporation.
If a form of proxy is executed by an attorney-in-fact for an individual Shareholder or joint Shareholders, or by an officer or
attorney-in-fact for a corporate Shareholder, the instrument so empowering the officer or attorney-in-fact, as the case may be,
or a notarially certified copy thereof, should accompany the form of proxy.
Revocability of Proxy
Any Registered Shareholder who has returned
a form of proxy may revoke it at any time before it has been exercised. In addition to revocation in any other manner permitted
by law, a form of proxy may be revoked by instrument in writing, including a form of proxy bearing a later date, executed by the
Registered Shareholder or by his or her attorney-in-fact duly authorized in writing or, if the Registered Shareholder is a corporation,
under its corporate seal or by a duly authorized officer or attorney-in-fact thereof. The instrument revoking the form of proxy
must be deposited at the same address where the original form of proxy was delivered at any time up to and including the last business
day preceding the date of the Meeting, or any adjournment or adjournments thereof, or with the Chairman of the Meeting on the date
of, but prior to the commencement of, the Meeting. A Registered Shareholder who has submitted a form of proxy may also revoke it
by attending the Meeting in person (or if the Shareholder is a corporation, by a duly authorized representative of the corporation
attending the Meeting) and registering with the scrutineer thereat as a Registered Shareholder present in person, whereupon such
form of proxy shall be deemed to have been revoked.
Only Registered Shareholders have the right
to revoke a form of proxy. Non-Registered Holders (as hereinafter defined) who wish to change their vote must, at least seven days
before the Meeting, arrange for their respective Intermediaries (as hereinafter defined) to revoke the form of proxy on their behalf.
Voting of Common Shares and Proxies and Exercise
of Discretion by Designated Persons
A Shareholder may indicate the manner in which
the Designated Persons are to vote with respect to a matter to be voted upon at the Meeting by marking the appropriate space. If
the instructions as to voting indicated in the proxy are certain, the Common Shares represented by the form of proxy will be voted
or withheld from voting in accordance with the instructions given in the form of proxy. If the Shareholder specifies a choice in
the form of proxy with respect to a matter to be acted upon, then the Common Shares represented will be voted or withheld from
the vote on that matter accordingly.
If no choice is specified in the form of
proxy with respect to a matter to be acted upon, the form of proxy confers discretionary authority with respect to that matter
upon the Designated Persons named in the form of proxy. It is intended that the Designated Persons will vote the Common Shares
represented by the form of proxy in favour of each matter identified in the form of proxy, including the vote for the election
of nominees to the Board and for the appointment of the independent auditors of the Company.
The enclosed form of proxy confers discretionary
authority upon the persons named therein with respect to other matters which may properly come before the Meeting, including any
amendments or variations to any matters identified in the Notice of Meeting, and with respect to other matters which may properly
come before the Meeting. At the date of this Circular, management of the Company is not aware of any such amendments, variations,
or other matters to come before the Meeting.
In the case of abstentions from, or withholding
of, the voting of the Common Shares on any matter, the Common Shares that are the subject of the abstention or withholding will
be counted for the determination of a quorum, but will not be counted as affirmative or negative on the matter to be voted upon.
NON-REGISTERED HOLDERS
Only Registered Shareholders or duly appointed
proxyholders are permitted to vote at the Meeting. Most Shareholders are "non-registered" Shareholders because the Common
Shares they own are not registered in their names but are instead registered in the name of the brokerage firm, bank or trust company
through which they purchased the Common Shares. More particularly, a person is not a Registered Shareholder in respect of Common
Shares which are held on behalf of that person (the "
Non-Registered Holder
") but which are registered either:
(a) in the name of an intermediary that the Non-Registered Holder deals with in respect of the Common Shares (an "
Intermediary
")
(Intermediaries include, among others, banks, trust companies, securities dealers or brokers and trustees or administrators or
self-administered RRSPs, RRIFs, RESPs and similar plans); or (b) in the name of a clearing agency (such as CDS Clearing and Depository
Services Inc. or the Depository Trust & Clearing Corporation) of which an Intermediary is a participant. In accordance with
the requirements set out in Canadian National Instrument 54-101 –
Communication with Beneficial Owners of Securities of
a Reporting Issuer
("
NI 54-101
"), the Company has distributed copies of the Notice of Meeting, this Circular
and the form of proxy (collectively, the "
Meeting Materials
") to the clearing agencies and Intermediaries for
onward distribution to Non-Registered Holders.
Intermediaries are required to forward the
Meeting Materials to Non-Registered Holders unless a Non-Registered Holder has waived the right to receive them. Very often, Intermediaries
will use service companies to forward the Meeting Materials to Non-Registered Holders. Generally, Non-Registered Holders who have
not waived the right to receive Meeting Materials will either:
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(a)
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be given a form of proxy which has already been signed by the Intermediary (typically by a facsimile,
stamped signature), which is restricted as to the number of Common Shares beneficially owned by the Non-Registered Holder but which
is otherwise not completed. Because the Intermediary has already signed the form of proxy, this form of proxy is not required to
be signed by the Non-Registered Holder when submitting the proxy. In this case, the Non-Registered Holder who wishes to submit
a proxy should otherwise properly complete the form of proxy and deposit it with the Company as provided above; or
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(b)
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more typically, be given a voting instruction form which is not signed by the Intermediary, and
which, when properly completed and signed by the Non-Registered Holder and returned to the Intermediary or its service company,
will constitute voting instructions (often called a "
proxy authorization form
") which the Intermediary must follow.
Typically, the proxy authorization form will consist of a one page pre-printed form. Sometimes, instead of a one page pre-printed
form, the proxy authorization form will consist of a regular printed proxy form accompanied by a page of instructions, which contains
a removable label containing a bar-code and other information. In order for the form of proxy to validly constitute a proxy authorization
form, the Non-Registered Holder must remove the label from the instructions and affix it to the form of proxy, properly complete
and sign the form of proxy and return it to the Intermediary or its service company in accordance with the instructions of the
Intermediary or its service company.
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In either case, the purpose of this procedure
is to permit Non-Registered Holders to direct the voting of the Common Shares which they beneficially own. Should a Non-Registered
Holder who receives one of the above forms wish to vote at the Meeting in person, the Non-Registered Holder should strike out the
names of the management proxyholders named in the form and insert the Non-Registered Holder's name in the blank space provided.
In either case, Non-Registered Holders should carefully follow the instructions of their Intermediary, including those regarding
when and where the proxy or proxy authorization form is to be delivered.
There are two kinds of beneficial owners –
those who object to their name being made known to the issuers of securities which they own (called OBOs for Objecting Beneficial
Owners) and those who do not object to the issuers of the securities they own knowing who they are (called NOBOs for Non-Objecting
Beneficial Owners). Pursuant to NI 54-101, issuers can obtain a list of their NOBOs from Intermediaries in order to distribute
proxy-related materials directly to NOBOs.
These securityholder materials are being
sent to both Registered Shareholders and Non-Registered Holders. If you are a Non-Registered Holder and the Company or its agent
has sent these materials directly to you, your name and address and information about your holdings of securities have been obtained
in accordance with applicable securities regulatory requirements from the Intermediary holding such securities on your behalf.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
As at June 15, 2016, being the Record Date,
there were a total of 63,142,272 Common Shares issued and outstanding. Each Common Share entitles the holder thereof to one vote
at the Meeting. The following table sets forth, as of the date hereof, to the best of the Company's knowledge and based solely
upon publicly available records and filings, the only persons or companies which beneficially own, or control or direct, directly
or indirectly, voting securities carrying 10% or more of the votes attached to the issued and outstanding Common Shares as of the
date hereof:
Name
|
Amount Owned
|
Percent of Class
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Peter Kellogg
|
20,662,400
(1)
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32.7%
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Lloyd Miller, III
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7,343,479
(2)
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11.6%
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(1)
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Mr. Kellogg controls 13,405,000 Common Shares through IAT Reinsurance Company Ltd. ("
IAT
").
In his public filings, Mr. Kellogg disclaims beneficial ownership of any shares owned by IAT. In addition, in his public filings,
Mr. Kellogg disclaims beneficial ownership of 1,200,000 Common Shares owned by his wife.
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(2)
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Mr. Miller controls such Common Shares through a number of trusts and wholly-owned corporations.
In his public filings, Mr. Miller discloses that he exercises sole dispositive and voting control over 6,838,884 of such Common
Shares and shared dispositive and voting control over 504,595 of such Common Shares.
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RECEIPT OF FINANCIAL
STATEMENTS
The directors will place before the Meeting
the consolidated financial statements of the Company for the year ended December 31, 2015, together with the auditors' report thereon,
which are included in the Company's Annual Report on Form 20-F for the year ended December 31, 2015.
ELECTION OF DIRECTORS
Shareholders will be called upon to elect seven
directors of the Company by ordinary resolution. The Board has selected Michael J. Smith, Gerardo Cortina, Indrajit Chatterjee,
Dr. Shuming Zhao, Silke Stenger, Friedrich Hondl and Jochen Dümler as its nominees.
Nominees
The following table sets forth information
regarding the nominees for election at the Meeting as directors of the Company:
Name, Place of Residence
and Present Position with
the Company
|
Principal Occupation, Business or
Employment
|
Director
Since
|
Approximate number of
Common Shares
Beneficially Owned,
Directly or Indirectly, as
of the Date Hereof
|
Michael J. Smith
Hong Kong SAR, China
Managing Director, Chairman and Director
|
Mr. Smith has been a Director of the Company since 1986 and was appointed Chairman in March 2016. He was also the Company’s Chairman from 2003 to March 2014, Chief Financial Officer from 2010 to March 2014 and President and Chief Executive Officer between 1996 and 2000 and 2010 and May 2014. Mr. Smith has served as Managing Director of the Company since May 2014. Mr. Smith has experience in corporate finance and restructuring.
|
1986
|
545,337
|
Gerardo Cortina
New York City, U.S.A.
Chief Executive Officer, President and Director
|
Mr. Cortina is the Chief Executive Officer, President, and a Director of the Company. Mr. Cortina was the managing director of Possehl Mexico S.A. de C.V. ("
Possehl
") from 1986 until June 2014.
|
2014
|
559,820
(1)
|
Indrajit Chatterjee
(2)(4)
Haryana, India
Director
|
Mr. Chatterjee is a retired businessman and formerly was responsible for marketing with the Transportation Systems Division of General Electric for India. Mr. Chatterjee is experienced in dealing with Indian governmental issues.
|
2005
|
Nil
|
Jochen Dümler
(2)
Washington, D.C., USA
Director
|
Mr. Dümler was the President and Chief Executive Officer of Euler Hermes North America from 2010 to 2015. From 2002 to 2010, Mr. Dümler was a member of the Board of Management of Euler Hermes Kreditversicherung AG and, from 1995 to 2002, he was a member of the Board of Management of PRISMA Kreditversicherung AG. Mr. Dümler is a member of the German-American Chamber of Commerce (New York City), a member of the German Executive Roundtable (Washington, D.C.) and a Board member of the German-American Partnership Program.
|
January 2016
|
Nil
|
Friedrich Hondl
(3)
Vienna, Austria
Director
|
Mr. Hondl has over 30 years of management experience in the European banking industry and has held several management positions with international banks, including Erste Group Bank, UniCredit and Deutsche Bank, where he was responsible for the international relationship business. From 2013 to 2015, he was the head of Erste Group Bank AG's Large Corporate International Division and from 2009 to 2012 he was the head of International Corporate Relationship Management of UniCredit Bank Austria AG. He also served as chairman of the supervisory board of Intermarket Bank AG since 2014 and from 2010 to 2012 was a member of the supervisory board of Oesterreichische Kontrollbank AG (OeKB). OeKB acts as Austria's Export Credit Agency (ECA) on behalf
|
October 2015
|
Nil
|
Name, Place of Residence
and Present Position with
the Company
|
Principal Occupation, Business or
Employment
|
Director
Since
|
Approximate number of
Common Shares
Beneficially Owned,
Directly or Indirectly, as
of the Date Hereof
|
|
of the Austrian government and specifically the Federal Ministry of Finance. It is a public and a private export insurer and financial institution. Within this group is the Austrian development bank. As an ECA, OeKB supports corporations financially in their export businesses and protects the business activities of Austrian companies abroad by means of export guarantees, investment guarantees and loan guarantees. Mr. Hondl has also served as a board member of a private foundation since 2007.
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Silke S. Stenger
(2)(3)(4)
Hesse, Germany
Director
|
Ms. Stenger is an independent business consultant and business leadership coach. She was a former director of MFC when MFC was KHD Humboldt Wedag International Ltd. and has been a director of KHD Humboldt Wedag International AG, Germany. Ms. Stenger was the Chief Financial Officer of Management One Human Capital Consultants Ltd. She is a certified controller (German Chamber of Commerce IHK) and IFRS accountant, specializing in corporate governance and SOX compliance. Furthermore, she is a business coach by training.
|
2013
|
Nil
|
Dr. Shuming Zhao
(2)(3)(4)
Jiangsu, China
Director
|
Dr. Zhao is the Chair Professor and Honorary Dean of the School of Business, Nanjing University, the People's Republic of China. He serves as President of the International Association of Chinese Management Research (IACMR, Third Term), Vice President of Chinese Society of Management Modernization, President for Jiangsu Provincial Association of Human Resource Management, and Vice President of Jiangsu Provincial Association of Business Management and Entrepreneurs. Since 1994, Dr. Zhao has acted as management consultant for several Chinese and international firms. Dr. Zhao is also a director of Daqo New Energy Corp. (China) and Philippe Metropolitan Bank (China) Ltd. Dr. Zhao has successfully organized and held eight international symposia on multinational business management. Since 1997, Dr. Zhao has been a visiting professor at the Marshall School of Business, University of Southern California and the College of Business, University of Missouri-St. Louis. Dr. Zhao has lectured in countries including the United States, Canada, Japan, Singapore, South Korea, the United Kingdom, Germany, the Netherlands, Portugal and Australia.
|
2004-December 2013
March 2014
|
Nil
|
Notes:
|
(1)
|
The Company entered into a share purchase agreement with Mr. Cortina in April 2014, as amended,
to acquire his interest in Possehl, pursuant to which, among other things, the Company delivered 509,820 Common Shares to Mr. Cortina
and agreed to deliver an additional 50,000 Common Shares on an annual basis over up to 11 years in the event that Possehl achieves
certain annual net income targets in each respective year.
|
|
(2)
|
Member of the Compensation Committee.
|
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(3)
|
Member of the Audit Committee.
|
|
(4)
|
Member of the Nominating and Corporate Governance Committee.
|
While management does not contemplate that
any of the nominees will be unable to serve as a director, if, prior to the Meeting, a nominee is unable to stand for re-election
as a director for any reason, the Designated Persons shall have the discretionary authority to vote for the election of any other
person or persons as a director.
At the Meeting, Shareholders will be asked
to pass an ordinary resolution to elect Michael J. Smith, Gerardo Cortina, Indrajit Chatterjee, Dr. Shuming Zhao, Silke Stenger,
Friedrich Hondl and Jochen Dümler as directors of the Company to serve a one-year term expiring at the next annual general
meeting of the Company.
Pursuant to the Advance Notice Policy of the
Company adopted by the Board on November 18, 2013 and approved by Shareholders on December 27, 2013, any additional director nominations
for the Meeting must be received by the Company in compliance with the Advance Notice Policy no later than June 22, 2016. As at
the date hereof, no such nominations have been received by the Company.
APPOINTMENT AND REMUNERATION
OF AUDITORS
Management of the Company intends to recommend
at the Meeting that Shareholders vote for the appointment of PricewaterhouseCoopers LLP ("
PwC
") as auditors of
the Company for the fiscal year ending December 31, 2016, and to authorize the directors to fix their remuneration for the ensuing
year. PwC was first appointed as auditors of the Company at its annual general and special meeting of shareholders held on December
27, 2013.
STATEMENT OF EXECUTIVE
COMPENSATION
General
Pursuant to applicable securities legislation,
the Company is required to provide a summary of all annual compensation for services in all capacities to the Company and its subsidiaries
for the most recently completed financial year in respect of the individuals comprised of any persons who acted as either the Chief
Executive Officer or the Chief Financial Officer of the Company for any part of such year, and each of the other three most highly
compensated executive officers of the Company whose total compensation for the most recently completed financial year exceeded
$150,000, and any individual who would have satisfied these criteria but for the fact that the individual was not serving as an
executive officer, nor acting in a similar capacity, at the end of the most recently completed financial year (the "
NEOs
").
Compensation Discussion and Analysis
In determining executive compensation, the
Compensation Committee aims to encourage and reward performance in order to maintain the position of the Company in a highly competitive
environment. The Compensation Committee endeavours to ensure that the Company's compensation policies:
|
·
|
attract and retain highly qualified and experienced executives and managers as well as align the
compensation level of each executive to that executive's level of responsibility;
|
|
·
|
recognize and reward contributions to the success of the Company as measured by the accomplishment
of specific performance objectives; and
|
|
·
|
ensure that a significant proportion of compensation is at risk and directly linked to the success
of the Company.
|
The Compensation Committee believes that compensation
packages for the Company's executives must be designed to attract and retain executives critical to the success of the Company,
ensure that executive compensation is linked to both individual and corporate performance and focus executives on business factors
that impact shareholder value.
The Compensation Committee also considers the recommendations of
the Chief Executive Officer for executives other than the Chief Financial Officer, and relies on Board discussions in its analysis
and recommendations. Compensation for NEOs generally consists of: (i) base salary; (ii) annual incentive bonus; (iii) long term
equity incentives granted on a discretionary basis under the Company's Equity Incentive Plan (the "
2014 Plan
");
and (iv) customary perquisites and other executive benefits.
The Company did not award any annual incentive
bonuses to NEOs in respect of fiscal 2015 and it did not grant any long-term equity incentives in 2015 or to date in 2016.
Base Salary
Base salary reflects annual compensation received
by an executive for the position he or she holds and the role he or she performs within the Company. The objective of the base
salary, consistent with market practice, is to provide a portion of compensation as a fixed cash amount. Base salaries are intended
to attract and retain talented executives and to reflect the skill and level of responsibility of an executive, taking into account
market conditions and salaries paid by the Company's competitors. Base salaries are targeted at median market values and balanced
with relative roles and responsibilities within the Company. The relative base salary of executive officers reflects their experience,
the accountability of their respective roles and the incumbent's performance in such roles. Base salaries are benchmarked internally
against similar roles and are then adjusted depending on a NEO's past performance, experience, individual qualifications, promotion
or other change in responsibilities and expected future contributions to the Company.
Annual Incentive Bonuses
The Company's annual incentive bonuses are
designed to reinforce the Company's business strategy, as approved by the Board. The objective of awarding annual performance incentives
is to provide a component of compensation that rewards near term performance results of the Company as a whole. Such incentives
focus attention on the achievement of short term profitability with lesser emphasis on revenues. The annual incentive bonuses provide
executives with the opportunity to earn cash incentives based on the achievement of individual performance objectives. Awards vary
as a percentage of base salary and incentive targets for all levels are reviewed periodically to ensure ongoing market competitiveness.
Performance objectives are based on the Company's business plan for the fiscal year, as approved by the Board, and are intended
to be challenging but achievable.
Annual incentive bonuses are an important component
of the total compensation that may be received by an NEO, primarily because they provide the NEO with the potential to receive
an annual financial reward based on the achievement of specific goals. Annual incentive bonuses are designed to achieve three important
objectives:
|
·
|
to motivate and reward eligible executives who contribute to successfully achieving Company goals;
|
|
·
|
to provide executives with a competitive total compensation package; and
|
|
·
|
to attract and retain talented executives.
|
Long-Term Equity Incentives
Long-term equity incentives are awarded pursuant
to the 2014 Plan. The purpose of the 2014 Plan is to promote the long-term success of the Company and the creation of Shareholder
value by encouraging the attraction and retention of employees and non-employee directors with exceptional qualifications, encouraging
them to focus on the critical long-range objectives of the Company and linking their interests directly to Shareholder interests
through increased share ownership. The 2014 Plan is intended to achieve this purpose by providing for awards to participants in
the form of restricted shares, restricted stock units, performance shares, performance share units, options and/or stock appreciation
rights. The Company believes it is important to have flexibility to grant various types of equity awards to its employees so that
it can react appropriately to the changing environment.
Long-term equity incentives aim to align pay
for performance, as any declines in share price have a negative impact on executive pay, while increases have a positive impact.
Such incentives also aim to mitigate against achieving short-term benefits at the expense of long-term sustainability and shareholder
value.
No long-term equity incentives were awarded
by the Company in 2015 or, to date, in 2016.
Perquisites and Other Executive Benefits
Perquisites and other executive benefits are
structured to be within a reasonably competitive range relating to comparable companies. Perquisites and other executive benefits
generally include: (i) medical and health benefits, including periodic physical consultations, dental and pharmaceutical benefits;
(ii) automobile benefits, including the lease of a vehicle along with maintenance costs thereon; and/or (iii) housing benefits.
The value of perquisites and other executive benefits received by each NEO is included in the "All Other Compensation"
column of the Summary Compensation Table below.
Risk Management
The Company has taken steps to ensure its executive
compensation program does not incent risk outside the Company's risk appetite. Some of the risk management initiatives currently
employed by the Company are as follows:
|
·
|
appointing a Compensation Committee comprised entirely of independent directors to oversee the
executive compensation program; and
|
|
·
|
use of discretion in adjusting bonus payments (if any) up or down as the Compensation Committee
deems appropriate and recommends.
|
The Board and the Compensation Committee have
discussed and assessed risk related to the Company's compensation policies and practices and are of the view that, when looked
at in their totality, the Company's compensation policies and practices do not incentivize risk taking outside the Company's risk
appetite. The Company does not have any formal policy respecting the purchase by an NEO or a director of financial instruments.
Compensation Governance
The Company has a Compensation Committee, comprised
entirely of independent directors, being Silke S. Stenger, Indrajit Chatterjee, Jochen Dümler and Dr. Shuming Zhao. The Compensation
Committee is responsible for, among other things, developing the Company's approach to executive compensation and periodically
reviewing the compensation of the directors. The Compensation Committee reviews and approves annual salaries, bonuses and other
forms and items of compensation for the Company's senior officers and employees. Except for plans that are, in accordance with
their terms or as required by law, administered by the Board or another particularly designated group, the Compensation Committee
also administers and implements the 2014 Plan, the Prior Plans and all other stock-based and equity-based benefit plans (including
performance-based plans) of the Company, recommends changes or additions to those plans and reports to the Board on compensation
matters. The Board adopted a revised charter for the Compensation Committee on October 26, 2013, a copy of which is available online
at MFC's website at www.mfcbancorpltd.com. The responsibilities, powers and operation of the Compensation Committee are detailed
in the Compensation Committee's charter.
The members of the Compensation Committee have
direct experience relevant to executive compensation from their broad business experience and are well-versed in executive compensation
matters. The members similarly bring a wide range of skills and experience that helps them make decisions in respect of the Company's
compensation policies and practices and assess performance on both an individual and an organizational level. These skills and
experiences include, but are not limited to: industry knowledge; operational experience; financial knowledge; and international
business experience.
Performance Graph
The following chart compares the cumulative
total return assuming a US$100 investment in the Common Shares with the cumulative total return of the Russell 2000 Index over
the five most recently completed financial years, assuming that the US$100 investment was made on January 1, 2011 and assuming
the reinvestment of dividends.
|
1/1/11
|
31/12/11
|
31/12/12
|
31/12/13
|
31/12/14
|
31/12/15
|
MFC Bancorp Ltd.
|
US$100.00
|
US$92.22
|
US$115.82
|
US$111.30
|
US$102.07
|
US$28.11
|
Russell 2000 Index
|
US$100.00
|
US$95.82
|
US$111.49
|
US$154.78
|
US$162.35
|
US$155.18
|
The performance of the Common Shares as set
out in the graph above does not necessarily indicate future price performance. Executive compensation has generally followed the
trend in shareholder returns. As described above, the Compensation Committee considers various factors in determining the compensation
of the NEOs. The Compensation Committee does not consider the price of the Common Shares to be a strong indicator of performance.
Option- and Share-Based Awards
Pursuant to the terms of the 2014 Plan and
the Prior Plans, the Board currently administers and implements the 2014 Plan and the Prior Plans and recommends changes or additions
thereto. The Compensation Committee assists the Board in these respects. The Board determines all option- and share-based awards
to be granted pursuant to the 2014 Plan and any special terms, including any exercise price or vesting provisions applicable thereto.
When determining whether to grant new option- or share-based awards to executive officers, the Board takes into account previous
grants of such awards.
For a summary of the material provisions of
the 2014 Plan, please refer to the section of this Circular entitled "Securities Authorized for Issuance under Equity Compensation
Plans".
Summary Compensation Table
During the fiscal year ended December 31, 2015,
the Company paid an aggregate of approximately $4.0 million in cash compensation to its officers, excluding directors' fees. The
following table (and notes thereto) states the name of each NEO, his or her total annual compensation, consisting of salary, bonus
and other annual compensation, and long-term compensation, for example the 2014 Plan and/or Prior Plan awards, for the three most
recently completed financial years of the Company.
SUMMARY COMPENSATION TABLE
(1)
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Share-
based
Awards
($)
|
Option-
based
Awards
($)
|
Non-equity Incentive
Compensation Plan
Compensation
($)
(2)
|
Pension
Value
($)
|
All Other
Compensation
($)
|
Total
Compensation
($)
|
Annual
Incentive
Plans
|
Long-
term
Incentive
Plans
|
Gerardo Cortina
President and Chief Executive Officer and former Managing Director
Mexico
(3)
|
2015
2014
2013
|
840,645
589,356
399,735
|
-
-
-
|
-
-
-
|
226,328
154,630
-
|
-
-
-
|
-
-
-
|
123,026
(4)
94,146
(4)
4,363
(5)
|
1,189,999
838,132
404,098
|
Michael J. Smith
Managing Director and Chairman and former Chief Executive Officer and Chief Financial Officer
(6)
|
2015
2014
2013
|
596,895
432,038
310,246
|
-
-
-
|
-
-
-
|
135,083
114,492
106,759
|
-
-
-
|
-
-
-
|
275,278
(7)
2,115,498
(8)
196,448
(7)
|
1,007,256
2,662,028
613,453
|
Samuel Morrow
(9)
Chief Financial Officer and Deputy Chief Executive Officer
|
2015
2014
2013
|
312,332
201,901
85,825
|
-
-
-
|
-
211,434
(10)
-
|
205,840
111,517
-
|
-
-
-
|
-
-
-
|
3,259
(11)
13,152
(11)
9,720
(12)
|
521,431
538,004
95,545
|
Ferdinand Steinbauer
Treasurer
(13)
|
2015
2014
|
462,182
390,864
|
-
-
|
-
-
|
205,840
153,775
|
-
-
|
-
-
|
-
5,578
(8)
|
668,022
550,217
|
Guy Konsbruck
Executive Vice-President of a Subsidiary
(14)
|
2015
2014
|
473,923
322,198
|
-
-
|
-
-
|
140,491
26,652
|
-
-
|
-
-
|
-
27,315
(8)
|
614,414
376,165
|
Notes:
|
(1)
|
Compensation amounts were translated into Canadian dollars at the applicable exchange rate at the
date of the transactions, or, for practical reasons, the average exchange rates for the applicable periods, when they approximate
the exchange rate as at the dates of the transactions.
|
|
(2)
|
All awards under MFC's non-equity incentive compensation plans are paid during the financial year they were earned.
|
|
(3)
|
Mr. Cortina was appointed the Company's Chief Executive Officer in May 2014.
|
|
(4)
|
Consists of housing and car allowances and other customary perquisites.
|
|
(5)
|
Consists of customary perquisites.
|
|
(6)
|
Mr. Smith ceased acting as the Company's Chief Financial Officer and Chairman in March 2014 and
Chief Executive Officer in May 2014. Mr. Smith was appointed the Company's Managing Director in May 2014 and as Chairman in March
2016.
|
|
(7)
|
Consists of housing allowances and expenses.
|
|
(8)
|
Consists of (i) housing allowances of US$0.2 million and (ii) termination benefits of approximately
US$1.8 million which were paid to Mr. Smith in full and final settlement of the Company's obligations under Mr. Smith's former
independent consulting agreement with the Company as a result of the occurrence of a change of control under the terms of such
agreement.
|
|
(9)
|
Mr. Morrow was appointed as our Deputy Chief Executive Officer in May 2014 and as our Chief Financial
Officer in June 2014.
|
|
(10)
|
The fair value of option-based compensation at the date of grant is determined using the Black-Scholes-Merton
model, with the following assumptions: a weighted average expected life of 5 years, expected volatility of 34.72%, risk-free interest
rate of 1.64% and expected dividend yield of 3.03%. The Company uses this model because it is a generally accepted valuation model
for stock options.
|
|
(11)
|
Consists of housing allowance and other customary perquisites.
|
|
(12)
|
Consists of housing allowance.
|
|
(13)
|
Mr. Steinbauer was appointed as our Treasurer in May 2014.
|
|
(14)
|
Mr. Konsbruck was appointed as Executive Vice-President of a subsidiary in May 2014.
|
Incentive Plan Awards
Outstanding Share-based Awards and Option-based
Awards for NEOs
The following table states the name of each
NEO, the number of options available for exercise, the option exercise price and the expiration date for each option. As at December
31, 2015 the value of "in-the-money" unexercised options held by the NEOs was $nil.
Name
|
Option-based Awards
|
Share-based Awards
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
|
Option
Exercise
Price
(US$)
|
Option
Expiration
Date
(dd/mm/yyyy)
|
Value of
Unexercised
In-the-
Money
Options
($)
|
Number
of
Shares
or Units
of
Shares
That
Have
Not
Vested
(#)
|
Market or
Payout
Value of
Share-
based
Awards
That
Have Not
Vested
($)
|
Market or
Payout Value
of Vested
Share-based
Awards Not
Paid Out or
Distributed
($)
|
Gerardo Cortina
President and Chief Executive Officer and former Managing Director
Mexico
|
Nil
|
Nil
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Michael J. Smith
Managing Director and Chairman and former Chief Executive Officer and Chief Financial Officer
|
190,000
|
7.81
|
01/01/2016
|
Nil
|
Nil
|
Nil
|
Nil
|
Samuel Morrow
Chief Financial Officer
|
100,000
|
8.01
|
02/04/2019
|
Nil
|
Nil
|
Nil
|
Nil
|
Ferdinand Steinbauer
Treasurer
|
200,000
|
7.81
|
01/01/2016
|
Nil
|
Nil
|
Nil
|
Nil
|
Guy Konsbruck
Executive Vice-President of a Subsidiary
|
Nil
|
Nil
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Incentive Plan Awards – Value Vested
or Earned During the Year for NEOs
The table below discloses the aggregate dollar
value that would have been realized by an NEO if options under option-based awards had been exercised on the vesting-date, as well
as the aggregate dollar value realized upon vesting of share-based awards by an NEO.
Name
|
Option-based Awards
– Value Vested During
the Year
($)
(1)
|
Share-based Awards –
Value Vested During the
Year
($)
|
Non-equity Incentive Plan
Compensation – Value
Earned During the Year
($)
|
Gerardo Cortina
President and Chief Executive Officer and former Managing Director Mexico
|
Nil
|
Nil
|
Nil
|
Michael J. Smith
Managing Director and Chairman and former Chief Executive Officer and Chief Financial Officer
|
Nil
|
Nil
|
Nil
|
Samuel Morrow
Chief Financial Officer
|
Nil
|
Nil
|
Nil
|
Ferdinand Steinbauer
Treasurer
|
Nil
|
Nil
|
Nil
|
Guy Konsbruck
Executive Vice-President of a Subsidiary
|
Nil
|
Nil
|
Nil
|
Note:
|
(1)
|
The amount represents the aggregate dollar value that would have been realized if the options had
been exercised on the vesting date, based on the difference between the closing price of the Common Shares of the Company on the
New York Stock Exchange and the exercise price on such vesting date.
|
Narrative Discussion
Pension Plan Benefits
As at December 31, 2015, the Company did not
have any defined benefit, defined contribution or deferred compensation plans for any of its NEOs.
Employment Agreements
Michael Smith
In July 2014, the Company entered into a two-year
consulting agreement with Mr. Smith in connection with his appointment as Managing Director of the Company. Pursuant to the agreement,
among other things, the Company agreed to pay Mr. Smith an annual base fee of US$460,000 and an annual discretionary bonus and
provide him certain customary perquisites. The agreement also entitles Mr. Smith to receive under the 2014 Plan: (i) 100,000 restricted
stock units, 50% of which "time only" vested on the first anniversary of the grant date and the balance of which will
vest on the second anniversary of the grant date; and (ii) performance share units with a target value of 200% of Mr. Smith's annual
base fee.
If Mr. Smith's engagement with the Company
is terminated by the Company for any reason other than for just cause or by Mr. Smith for good reason, he will be entitled to a
lump sum cash payment equal to his base fee for the balance of the term following such termination. Assuming Mr. Smith's engagement
is terminated by the Company other than for just cause, or by Mr. Smith for good reason, effective December 31, 2015, the Company
would have been required to make a payment to Mr. Smith in the aggregate amount of US$230,000 pursuant to the terms of his consulting
agreement.
Gerardo Cortina
The Company entered into an employment agreement
with Mr. Cortina effective May 2014, in connection with his appointment as the President and Chief Executive Officer of the Company.
Pursuant to the agreement, the Company will pay Mr. Cortina an annual base salary of US$650,000 (subject to annual review) and
an annual discretionary bonus and provide him certain customary perquisites. The agreement also entitles Mr. Cortina to receive
performance share units under the 2014 Plan with a target value of no less than 100% of his base salary for each of the years ending
December 31, 2014, 2015 and 2016.
If Mr. Cortina's employment is terminated by
the Company other than for just cause or by Mr. Cortina for good reason, he will be entitled to a severance payment, payable in
eighteen equal monthly instalments, equal to one and a half times the sum of (i) his current annual base salary and (ii) the higher
of (A) his current bonus and (B) the average bonus received by him in the three years prior to termination. Assuming Mr. Cortina's
employment is terminated by the Company other than for just cause or by Mr. Cortina for good reason, effective December 31, 2015,
the Company would have been required to make a severance payment to Mr. Cortina in the aggregate amount of US$1.21 million pursuant
to the terms of his employment agreement. If Mr. Cortina's employment is terminated by the Company other than for just cause or
by Mr. Cortina for good reason in contemplation of, or within six months of, a change of control, he will be entitled to a lump
sum cash payment equal to two times the sum of (i) his current annual base salary and (ii) the average bonus received by him in
the three years prior to termination. Assuming Mr. Cortina's employment is terminated by the Company other than for just cause
or by Mr. Cortina for good reason in contemplation of, or within six months of, a change of control, effective December 31, 2015,
the Company would have been required to make a lump sum cash payment to Mr. Cortina in the aggregate amount of US$1.62 million
pursuant to the terms of his employment agreement.
Samuel Morrow
The Company entered into an employment agreement
with Mr. Morrow, the Company's Chief Financial Officer, effective May 2014 (as amended), in connection with his appointment as
an officer of the Company. Pursuant to the agreement, the Company will pay Mr. Morrow an annual base salary of US$210,000 (subject
to annual review), currently US$302,400, and an annual discretionary bonus and provide him certain customary perquisites. The agreement
also entitles Mr. Morrow to receive performance share units under the 2014 Plan with a target value of at least 50% of his base
salary for each of the years ending December 31, 2014, 2015 and 2016.
If Mr. Morrow's employment is terminated by
the Company other than for just cause or by Mr. Morrow for good reason, he will be entitled to a severance payment, payable in
twelve equal monthly instalments, equal to of the sum of (i) his current annual base salary and (ii) the higher of (A) his current
bonus and (B) the average bonus received by him in the three years prior to termination. Assuming Mr. Morrow's employment is terminated
by the Company other than for just cause or by Mr. Morrow for good reason, effective December 31, 2015, the Company would have
been required to make a severance payment to Mr. Morrow in the aggregate amount of US$382,483 pursuant to the terms of his employment
agreement. If Mr. Morrow's employment is terminated by the Company other than for just cause or by Mr. Morrow for good reason in
contemplation of, or within six months of, a change of control, he will be entitled to a lump sum cash payment equal to one and
one quarter times the sum of (i) his current annual base salary and (ii) the average bonus received by him in the three years prior
to termination. Assuming Mr. Morrow's employment is terminated by the Company other than for just cause or by Mr. Morrow for good
reason in contemplation of, or within six months of, a change of control, effective December 31, 2015, the Company would have been
required to make a lump sum cash payment to Mr. Morrow in the aggregate amount of US$478,104 pursuant to the terms of his employment
agreement.
Ferdinand Steinbauer
The Company entered into an employment agreement
with Mr. Steinbauer effective June 2014, in connection with his appointment as the Treasurer of the Company. Pursuant to the agreement,
the Company will pay Mr. Steinbauer an annual base salary of €325,000 (subject to annual review) and an annual discretionary
bonus and provide him certain customary perquisites. The agreement also entitles Mr. Steinbauer to receive performance share units
under the 2014 Plan with a target value of at least 50% of his base salary for each of the years ending December 31, 2014, 2015
and 2016.
If Mr. Steinbauer's employment is terminated
by the Company other than for just cause or by Mr. Steinbauer for good
reason, he will be entitled to a severance
payment, payable in fifteen equal monthly instalments, equal to one and one quarter times the sum of (i) his current annual base
salary and (ii) the higher of (A) his current bonus and (B) the average bonus received by him in the three years prior to termination.
Assuming Mr. Steinbauer's employment is terminated by the Company other than for just cause or by Mr. Steinbauer for good reason,
effective December 31, 2015, the Company would have been required to make a severance payment to Mr. Steinbauer in the aggregate
amount of €578,473 pursuant to the terms of his employment agreement. If Mr. Steinbauer's employment is terminated by the
Company other than for just cause or by Mr. Steinbauer for good reason in contemplation of, or within six months of, a change of
control, he will be entitled to a lump sum cash payment equal to one and a half times the sum of (i) his current annual base salary
and (ii) the average bonus received by him in the three years prior to termination. Assuming Mr. Steinbauer's employment is terminated
by the Company other than for just cause or by Mr. Steinbauer for good reason in contemplation of, or within six months of, a change
of control, effective December 31, 2015, the Company would have been required to make a lump sum cash payment to Mr. Steinbauer
in the aggregate amount of €694,168 pursuant to the terms of his employment agreement.
Director Compensation
The following table provides a summary of compensation,
consisting wholly of directors' fees, paid by the Company during the fiscal year ended December 31, 2015 to the directors of the
Company.
DIRECTOR COMPENSATION TABLE
(1)
|
Name
|
Fees
Earned
($)
|
Share-
based
Awards
($)
|
Option-
based
Awards
($)
|
Non-equity
Incentive Plan
Compensation
($)
|
Pension
Value
($)
|
All Other
Compensation
($)
|
Total
($)
|
Peter R. Kellogg
(2)
|
52,064
|
-
|
-
|
-
|
-
|
-
|
52,064
|
Dr. Shuming Zhao
|
78,493
|
-
|
-
|
-
|
-
|
-
|
78,493
|
Friedrich Hondl
(3)
|
13,616
|
-
|
-
|
-
|
-
|
-
|
13,616
|
Indrajit Chatterjee
|
118,251
|
-
|
-
|
-
|
-
|
-
|
118,251
|
William C. Horn III
(4)
|
67,959
|
-
|
-
|
-
|
-
|
-
|
67,959
|
Silke S. Stenger
|
148,549
|
-
|
-
|
-
|
-
|
-
|
148,549
|
Notes:
|
(1)
|
Compensation provided to the Company's Managing Director and former Chief Executive Officer and
Chief Financial Officer, Michael Smith, and the Company's Chief Executive Officer and President, Gerardo Cortina, is disclosed
in the table above under the heading "Summary Compensation Table".
|
|
(2)
|
Mr. Kellogg resigned as a director of the Company on July 20, 2015.
|
|
(3)
|
Mr. Hondl was appointed as a director in October 2015.
|
|
(4)
|
Mr. Horn resigned as a director of the Company on July 20, 2015.
|
Narrative Discussion
A total of $0.5 million was paid to directors
of the Company for services rendered as directors or for committee participation or assignments, during the most recently completed
financial year. The Company's non-executive directors are each paid an annual fee of US$25,000 and US$2,500 for each directors'
meeting attended as well as additional fees, as applicable, for their respective participation on the Company's Audit, Nominating
and Corporate Governance and Compensation Committees. The Company also reimburses its directors and officers for expenses incurred
in connection with their services as directors and officers.
Incentive Plan Compensation for Directors
Outstanding Share-based Awards and Option-based
Awards for Directors
The following table states the name of each
director, the number of options available for exercise, the option exercise price and the expiration date for each option. As at
December 31, 2015 the value of "in-the-money" unexercised options held by the directors was $nil.
Name
|
Option-based Awards
|
Share-based Awards
|
Number of
Securities
Underlying
Unexercised
Options
(#)
|
Option
Exercise
Price
(US$)
|
Option
Expiration
Date
(dd/mm/yyyy)
|
Value of
Unexercised
In-the-
money
Options
($)
|
Shares
or
Units
of
Shares
That
Have
Not
Vested
(#)
|
Market or
Payout
Value
of Share-
Based
Awards That
Have Not
Vested
($)
|
Market or
Payout Value
of Vested
Share-based
Awards Not
Paid Out or
Distributed
($)
|
Peter R. Kellogg
(1)
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Dr. Shuming Zhao
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Friedrich Hondl
(2)
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Indrajit Chatterjee
|
55,000
|
7.81
|
01/01/2016
|
Nil
|
Nil
|
Nil
|
Nil
|
William C. Horn III
(3)
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Silke S. Stenger
|
Nil
|
N/A
|
N/A
|
Nil
|
Nil
|
Nil
|
Nil
|
Notes:
|
(1)
|
Mr. Kellogg resigned as a director of the Company on July 20, 2015.
|
|
(2)
|
Mr. Hondl was appointed as a director in October 2015.
|
|
(3)
|
Mr. Horn resigned as a director of the Company on July 20, 2015.
|
Incentive Plan Awards – Value Vested
or Earned During the Year for Directors
The table below discloses the aggregate dollar
value that would have been realized by each director if options under option-based awards had been exercised on the vesting-date,
as well as the aggregate dollar value realized upon vesting of share-based awards by each director.
Name
|
Option-based Awards
– Value Vested During
the Year
($)
|
Share-based Awards –
Value Vested During the
Year
($)
|
Non-equity Incentive Plan
Compensation – Value
Earned During the Year
($)
|
Peter R. Kellogg
(1)
|
Nil
|
Nil
|
Nil
|
Dr. Shuming Zhao
|
Nil
|
Nil
|
Nil
|
Friedrich Hondl
(2)
|
Nil
|
Nil
|
Nil
|
Indrajit Chatterjee
|
Nil
|
Nil
|
Nil
|
William C. Horn III
(3)
|
Nil
|
Nil
|
Nil
|
Silke S. Stenger
|
Nil
|
Nil
|
Nil
|
Notes:
|
(1)
|
Mr. Kellogg resigned as a director of the Company on July 20, 2015.
|
|
(2)
|
Mr. Hondl was appointed as a director in October 2015.
|
|
(3)
|
Mr. Horn resigned as a director of the Company on July 20, 2015.
|
SECURITIES AUTHORIZED
FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets out securities authorized
for issuance under the Company's equity compensation plans as of December 31, 2015:
Plan Category
|
Number of Common
Shares to Be Issued Upon
Exercise of Outstanding
Options, Warrants and
Rights
(a)
(1)
|
Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
(b)
|
Number of Common Shares
Remaining Available for Issuance
under Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
(c)
|
Equity compensation plans approved by securityholders
|
2,232,500
|
US$7.83
|
2,877,018
|
Total
|
2,232,500
|
US$7.83
|
2,877,018
|
Notes:
|
(1)
|
Options to purchase 2,032,500 common shares of the Company at US$7.81 per share expired on January
1, 2016. These options were issued under the Prior Plans. The total number of common shares to be issued upon exercise of outstanding
options, warrants and rights is 200,000 as of the date hereof.
|
2014 Plan
At the Company's annual and special meeting
of the Shareholders held in November 2014 (the "
Effective Date
"), the Shareholders passed a resolution approving
the 2014 Plan to promote the long-term success of the Company and the creation of Shareholder value by encouraging the attraction
and retention of employees and non-employee directors with exceptional qualifications, encouraging them to focus on the critical
long-range objectives of the Company and linking their interests directly to Shareholder interests through increased share ownership.
The 2014 Plan replaced the Prior Plans. However, each applicable Prior Plan will continue to govern prior awards granted under
such Prior Plan until all awards granted under such Prior Plan prior to the Effective Date have been exercised, forfeited, cancelled,
expired or otherwise terminated in accordance with the terms thereof. The 2014 Plan permits the grant of options, restricted stock
rights, restricted stock, performance shares, performance share units and stock appreciation rights.
Subject to adjustment for changes in capitalization,
the total number of Common Shares subject to all awards under the 2014 Plan is 2,000,000 Common Shares plus the number of Common
Shares remaining available under the Prior Plans on the Effective Date, being 877,018, for an aggregate of 2,877,018 Common Shares.
The maximum number of Common Shares which may
be issued as incentive stock options under the 2014 Plan is limited to 2,000,000. Further, the maximum number of Common Shares
that may be granted to any one participant in the 2014 Plan, who is a Covered Employee (as defined in the 2014 Plan) during the
fiscal year where such participant's employment commences, shall be 400,000 and 350,000 for all other fiscal years.
In addition, the aggregate fair value of Awards
(as defined in the 2014 Plan) granted to any one non-employee director cannot exceed $100,000 in any one year, and the aggregate
number of securities issuable to all non-employee directors cannot exceed 1% of the Company's issued and outstanding Common Shares.
There are nil Common Shares issuable pursuant
to existing awards under the 2014 Plan as of the date hereof.
Prior Plans
As of the date hereof, there are 200,000 Common
Shares issuable pursuant to existing awards under the 2008 Equity Incentive Plan, which was replaced by the 2014 Plan.
CORPORATE GOVERNANCE
DISCLOSURE
The disclosure noted below is in accordance
with National Instrument 58-101 –
Disclosure of Corporate Governance Practices
. The section references in this section
are to Form 58-101F1 –
Corporate Governance Disclosure
.
|
(a)
|
Indrajit Chatterjee, Dr. Shuming Zhao, Silke S. Stenger, Friedrich Hondl and Jochen Dümler
are independent directors of the Company.
|
|
(b)
|
Michael J. Smith and Gerardo Cortina are executive officers of the Company and are therefore not
independent directors.
|
|
(c)
|
A majority of the Company's directors are independent.
|
|
(d)
|
The following director is also a director of another reporting issuer (or the equivalent in a foreign
jurisdiction), as identified next to his name:
|
Director
|
Reporting Issuers or Equivalent in a Foreign Jurisdiction
|
Dr. Shuming Zhao
|
Daqo New Energy Corp.
|
|
(e)
|
The independent directors of the Company hold regularly-scheduled meetings at which non-independent
directors and members of management are not in attendance. During fiscal 2015 (the Company's most recently completed financial
year), the independent directors held four meetings at which non-independent directors and members of management were not in attendance.
In addition, the Board holds frequent meetings and has open communication in order to facilitate open and candid discussion among
its independent directors.
|
|
(f)
|
The Board is satisfied that the autonomy of the Board and its ability to function independently
of management are protected through measures such as the Audit Committee, the Compensation Committee and the Nominating and Corporate
Governance Committee being composed of all independent directors and each committee being chaired by an independent director. In
addition, in order to provide leadership for its independent directors, the Board encourages its independent members to discuss
matters separate from the non-independent Board members and to seek the advice of financial, legal or other consultants when necessary.
|
|
(g)
|
The following table shows the attendance record of each director for all Board meetings held during
fiscal 2015:
|
Director
|
Board Meetings Attended
|
% of Board Meetings Attended
|
Michael J. Smith
|
5
|
100%
|
Dr. Shuming Zhao
|
5
|
100%
|
Indrajit Chatterjee
|
5
|
100%
|
Friedrich Hondl
(1)
|
1
|
100%
|
Peter R. Kellogg
(2)
|
3
|
100%
|
William C. Horn III
(3)
|
3
|
100%
|
Silke S. Stenger
|
5
|
100%
|
Gerardo Cortina
|
5
|
100%
|
Notes:
|
(1)
|
Mr. Hondl was appointed to the Board in October 2015 and has attended all of the Board meetings
held (including all Board actions by written consent in lieu of a meeting) since his appointment.
|
|
(2)
|
Mr. Kellogg resigned as a director of the Company in July 2015. Prior to his resignation, he attended
all of the Board meetings held (including all Board actions by written consent in lieu of a meeting) since his appointment.
|
|
(3)
|
Mr. Horn resigned as a director of the Company in July 2015. Prior to his resignation, he attended
all of the Board meetings held (including all Board actions by written consent in lieu of a meeting) since his appointment.
|
The Board has adopted the following
mandate and terms of reference for directors:
The
Business Corporations Act
,
S.B.C. 2002, c.57, MFC's governing statute, provides that directors must "manage or supervise the management of the business
and affairs of MFC". In practice, as the Board cannot "manage" a corporation such as MFC in the sense of directing
its day-to-day operations, the overarching role and legal duty of the Board is to "supervise" the management of MFC's
business and affairs. Accordingly, the Board oversees development of the overall strategic direction and policy framework for MFC.
This responsibility is discharged through Board oversight of MFC's management, which is responsible for the day-to-day conduct
of the business.
The Board's primary responsibilities
are to supervise the management of MFC, to establish an appropriate corporate governance system, and to set a tone of high professional
and ethical standards. The Board is also responsible for:
|
·
|
selecting and assessing members of the Board;
|
|
·
|
choosing, assessing and compensating the Chief Executive Officer of MFC, approving the compensation
of all executive officers and ensuring that an orderly management succession plan exists;
|
|
·
|
reviewing and approving MFC's strategic plan, operating plan, capital budget and financial goals,
and reviewing its performance against those plans;
|
|
·
|
adopting a code of conduct and a disclosure policy for MFC, and monitoring performance against
those policies;
|
|
·
|
ensuring the integrity of MFC's internal control and management information systems;
|
|
·
|
approving MFC's financial statements and related public disclosures prior to such disclosure;
|
|
·
|
approving any major changes to MFC's capital structure, including significant investments or financing
arrangements; and
|
|
·
|
reviewing and approving any other issues which, in the view of the Board or management, may require
Board scrutiny.
|
Directors are expected to attend
Board meetings and meetings of the committees on which they serve and to spend the time needed and meet as frequently as necessary
to properly discharge their duties and responsibilities.
It shall be the policy of the Board
that a majority of the members of the Board, and all of the members of the Audit Committee, the Nominating and Corporate Governance
Committee and the Compensation Committee, shall meet the independence requirements of applicable law and the rules of the Securities
and Exchange Commission, including the independence requirements of the
Sarbanes-Oxley Act of 2002
, the applicable
Canadian securities commissions and the New York Stock Exchange in effect from time to time (subject to any exceptions allowed
by such rules and any waivers granted by such authorities).
Chairman of the Board
The Board has developed and approved
the following position description for the Chairman of the Board:
Position: Chairman of the Board
Reports to: the Board
General Accountability
The Chairman of the Board reports
and is accountable to the Board of Directors and the management of the Company through the Chief Executive Officer. The Chairman
acts as the communicator of Board decisions where appropriate.
Nature and Scope
The Chairman performs the following
additional functions, among others:
|
·
|
provides independent advice and counsel to the Chief Executive Officer;
|
|
·
|
ensures that the directors are properly informed and that sufficient information is provided to
enable the directors to form appropriate judgements;
|
|
·
|
in concert with the Chief Executive Officer, develops and sets agendas for meetings of the Board;
|
|
·
|
acts as Chairman at meetings of the Board;
|
|
·
|
recommends to the Board, after consultation with the directors, management and the Nominating and
Corporate Governance Committee, the appointment of members of the Committees of the Board;
|
|
·
|
recommends an annual schedule for Board and Committee meetings;
|
|
·
|
assesses and makes recommendations to the Board as a whole, the Committees of the Board and individual
directors;
|
|
·
|
acts as Chair of Shareholder meetings; and
|
|
·
|
ensures that regularly, upon completion of ordinary business of a meeting of the Board, the Directors
hold discussions without management present.
|
Chairman of the Nominating
and Corporate Governance Committee
The Board has developed and approved
the following position description for the Chairman of the Nominating and Corporate Governance Committee:
Position: Chairman of the Nominating
and Corporate Governance Committee
Reports to: the Board
General Accountability
The Chairman of the Nominating and
Corporate Governance Committee reports to the Board. The Chairman, working with the committee and outside advisors as necessary,
ensures that the Nominating and Corporate Governance Committee mandate is met, especially with regards to the appropriate tone
from the top, governance processes, regulatory compliance, and succession planning.
As needed, he or she also performs
other responsibilities and functions as directed by the Board in the discharge of its charter.
Nature and Scope
The Chairman performs the following
functions:
|
·
|
manages the process of the committee, its efficiency during meetings, and helps ensure that the
committee discharges the responsibility in its mandate;
|
|
·
|
sets and approves the agenda of each meeting;
|
|
·
|
through outside counsel and other assistance, remains informed on any issues that may arise to
affect MFC's compliance policies and practices;
|
|
·
|
assists in monitoring compliance with MFC's stated policies and procedures regarding governance;
|
|
·
|
ensures that all members of the committee have full opportunity to participate and to actively
question management and any outside experts as necessary, to ensure that the committee mandate regarding appropriate governance
policies, procedures and disclosure is met; and
|
|
·
|
provides guidance and opinions as necessary to the Chief Executive Officer, Chief Financial Officer
and MFC's Compliance Officer, as applicable, to establish and ensure adherence to MFC's governance and compliance practices.
|
Chairman of the Audit Committee
The Board has developed and approved
the following position description for the Chairman of the Audit Committee:
Position: Chairman of the Audit Committee
Reports to: the Board
General Accountability
The Chairman of the Audit Committee
reports to the Board. The Chairman, working with the committee and outside auditors, ensures that the Audit Committee complies
with its charter.
As needed, he or she also performs
other responsibilities and functions as directed by the Board in the discharge of its charter.
Nature and Scope
The Chairman performs the following
functions:
|
·
|
manages the process of the committee and ensures that the committee discharges the responsibility
in its charter;
|
|
·
|
reviews and approves the agenda of each meeting prior to the meeting;
|
|
·
|
through consultation with management and auditors, remains informed on any issues that may arise
as part of a quarterly review or annual audit;
|
|
·
|
ensures that all members of the committee have full opportunity to participate and to actively
question management and the auditors, in order to satisfy themselves that the committee mandate regarding overseeing full and fair
disclosure of MFC's financial position is met; and
|
|
·
|
provides guidance and opinions as necessary to management to facilitate the continued improvement
of MFC's financial control and disclosure practices.
|
Chairman of the Compensation
Committee
The Board has developed and approved
the following position description for the Chairman of the Compensation Committee:
Position: Chairman of the Compensation
Committee
Reports to: the Board
General Accountability
The Chairman of the Compensation
Committee reports to the Board. The Chairman, working with the committee and using outside information as necessary, ensures that
the Compensation Committee mandate is met, especially with regards to the appropriate total compensation for the executive officers.
As needed, he or she also performs
other responsibilities and functions as directed by the Board in the discharge of its charter.
Nature and Scope
The Chairman performs the following
functions:
|
·
|
manages the process of the committee and ensures that the committee discharges the responsibility
in its mandate;
|
|
·
|
reviews and approves the agenda of each meeting prior to the meeting;
|
|
·
|
through consultation with management and the use of outside benchmarks, such as competitive compensation
surveys, remains informed on any issues that may arise within MFC with regard to compensation of its executives;
|
|
·
|
ensures that all members of the committee have full opportunity to participate and to actively
question management and any outside experts, as necessary, to ensure that the committee mandate regarding recommending the Chief
Executive Officer's compensation and approving the compensation package of MFC's other executive officers is met; and
|
|
·
|
provides guidance and opinions, as necessary, to the Chief Executive Officer and to MFC's human
resources officer, if applicable, to enable the continued improvement of MFC's compensation practices.
|
Chief Executive Officer
The Board has developed and approved
the following position description for the Chief Executive Officer:
|
·
|
responsible for the management and operational control of the Company; and
|
|
·
|
provides vision, leads the development of long term strategy and drives profitable growth and shareholder
value.
|
Major responsibilities:
|
·
|
leads and manages the Company within the guidelines established by the Board;
|
|
·
|
communicates a clear vision for the Company to team members, investors, customers and business
partners;
|
|
·
|
recommends to the Board strategic directions for the Company's business and when approved by the
Board, successfully implements the corresponding strategic, business and operational plans;
|
|
·
|
directs and monitors the activities of the Company in a manner that ensures agreed upon targets
are met and that the assets of the Company are safeguarded and optimized in the best interests of all the shareholders;
|
|
·
|
develops and implements operational policies to guide the Company within the limits prescribed
by its bylaws and the strategy framework adopted by the Board;
|
|
·
|
develops and recommends the corporate and organizational structure and staffing to the Board;
|
|
·
|
leads the Company and its key managers to successfully deliver on established financial and strategic
goals and, where appropriate, recruits top notch executives to help drive positive change;
|
|
·
|
develops and maintains an annual (or more frequently if required) Board approved plan for the development
and succession of senior management;
|
|
·
|
manages and oversees communications and disclosure to the Shareholders, the public and regulatory
bodies in a transparent comprehensive and honest manner;
|
|
·
|
meets regularly with and maintains relationships with the financial community; and
|
|
·
|
meets regularly, and as required, with the Chairman and committees of the Board to review material
issues and to ensure that Board members are provided in a timely manner with all information and access to management necessary
to permit the Board to fulfill its statutory and other obligations.
|
Managing Director
The Board has developed and approved
the following position description for the Managing Director:
|
·
|
responsible for providing transitional support to the Company's management; and
|
|
·
|
leads the Company's efforts with respect to its interest in certain strategic projects.
|
Major responsibilities:
|
·
|
to provide guidance and support to the Company's Chief Executive Officer and other management;
|
|
·
|
to formulate and develop strategic plans with respect to the strategic projects;
|
|
·
|
to identify, pursue and investigate new strategic projects;
|
|
·
|
to be the lead representative of the Company for any negotiations or discussions with third parties
respecting strategic projects and oversee management activities in connection therewith;
|
|
·
|
to report and make recommendations to the Board of Directors with respect to strategic projects;
|
|
·
|
to implement and execute the Company's policies and strategies respecting strategic projects;
|
|
·
|
to act as a liaison between management and the Board of Directors on all matters relating to strategic
projects; and
|
|
·
|
such other matters as the Managing Director and the Board may agree upon from time to time.
|
|
4.
|
Orientation and Continuing Education
|
The Board has delegated to the Nominating
and Corporate Governance Committee the responsibility of, among other things, orienting new directors and developing and monitoring
continuing education for existing directors. The Nominating and Corporate Governance Committee shall develop with management and
monitor the process of orienting new directors and continuing education for existing directors. New director orientation may include
meeting with the management of MFC, background materials and presentations regarding the business of MFC. Directors shall be provided
with information regarding corporate governance and procedures of the Board and the committees on which the directors will serve.
|
5.
|
Ethical Business Conduct
|
|
(a)
|
The Board has adopted a written Code of Business Conduct and Ethics and Insider Trading Policy
(the "
Code of Ethics
").
|
|
(i)
|
The Code of Ethics can be obtained by written request to the President of MFC at 1860 – 400
Burrard Street, Vancouver, British Columbia V6C 3A6, Canada. A copy of the Code of Ethics is also available online at MFC's website
at www.mfcbancorpltd.com.
|
|
(ii)
|
The current Code of Ethics was adopted by the Board on October 26, 2013. It is intended that the
Board will continue to conduct such assessment of its performance annually pursuant to the Code of Ethics. The Board will be assessing
other mechanisms by which it can monitor compliance with the Code of Ethics in an efficient manner.
|
|
(iii)
|
There has been no conduct of any director or officer that would constitute a departure from the
Code of Ethics, and therefore, no material change reports have been filed in this regard since the beginning of MFC's most recently
completed financial year.
|
|
(b)
|
Pursuant to the terms of reference for directors which has been adopted by the Board, directors,
officers and employees of MFC are instructed to disclose to the Board or the Audit Committee any material transaction or relationship
that could reasonably be expected or give rise to a breach of the Code of Ethics, including actual or apparent conflicts of interest
with MFC, and to obtain approval from the Board or Audit Committee before making any decision or taking any action that could reasonably
be expected to involve a conflict of interest in a matter to be considered by the Board or the Audit Committee and are asked to
leave the meeting for the duration of the discussion related to the matter at hand and to abstain from voting with respect to such
matter.
|
|
(c)
|
The Board encourages and promotes a culture of ethical business conduct through the adoption and
monitoring of the Code of Ethics which includes an insider trading policy and such other policies that may be adopted by the Board
from time to time. The Board conducts regular reviews with management for compliance with such policies.
|
|
6.
|
Nomination of Directors
|
|
(a)
|
The Board has appointed a Nominating and Corporate Governance Committee, which is responsible for
assisting the Board in identifying new director nominees. When identifying candidates for membership on the Board, the Nominating
and Corporate Governance Committee takes into account all factors it considers appropriate, which may include independence under
applicable standards, relevant skills and experience, business judgment, service on boards of directors of other companies, personal
and professional integrity, including commitment to MFC's core values, openness and ability to work as part of a team, willingness
to commit the required time to serve as a Board member, and familiarity with MFC and its industry. The Nominating and Corporate
Governance Committee shall actively seek and evaluate qualified individuals to become new directors as needed. The Nominating and
Corporate Governance Committee shall review and develop the Board's criteria for selecting new directors, including standards for
director independence. The Committee shall establish procedures to
|
solicit, review, and recommend to the
Board, potential director nominees proposed by shareholders. The Committee shall select or recommend that the Board select the
director nominees for the annual meeting of shareholders. As part of the process, the Nominating and Corporate Governance Committee
is empowered to conduct any investigation it deems necessary or appropriate to enable it to carry out its duties and to retain
search firms to assist in the nomination process.
|
(b)
|
The Nominating and Corporate Governance Committee is composed entirely of independent directors.
|
|
(c)
|
The responsibilities, powers and operation of the Nominating and Corporate Governance Committee
are detailed in its charter, which is available online at MFC's website at www.mfcbancorpltd.com.
|
|
(a)
|
The Board has appointed a Compensation Committee, which is responsible for, among other things,
developing the Company's approach to executive compensation and periodically reviewing the compensation of the directors. The Compensation
Committee reviews and approves annual salaries, bonuses and other forms and items of compensation for the Company's senior officers
and employees. Except for plans that are, in accordance with their terms or as required by law, administered by the Board or another
particularly designated group, the Compensation Committee also administers and implements all of the Company's stock option and
other stock-based and equity-based benefit plans (including performance-based plans), recommends changes or additions to those
plans and reports to the Board on compensation matters.
|
|
(b)
|
The Compensation Committee is composed entirely of independent directors.
|
|
(c)
|
The responsibilities, powers and operation of the Compensation Committee are detailed in its charter,
which is available online at MFC's website at www.mfcbancorpltd.com.
|
|
8.
|
Risk Management Committee
|
|
(a)
|
In 2016, the Board approved an
ad hoc
Risk Management Committee, which reviews and reports
to the Board respecting the Company's business risks and risk mitigation strategies.
|
|
(b)
|
The Risk Management Committee is currently composed of Gerardo Cortina, Jochen Dümler and
Friedrich Hondl.
|
The Board intends that individual
director assessments be conducted by other directors, taking into account each director's contributions at Board meetings, service
on Board committees, experience base and their general ability to contribute to one or more of the Company's major needs. However,
the Board has not yet implemented such a process of assessment.
INDEBTEDNESS OF DIRECTORS
AND EXECUTIVE OFFICERS
Except as otherwise disclosed herein, no individual
who is or was a director or executive officer of the Company, any proposed nominee for election as a director of the Company or
any associate of such director, officer or proposed nominee, was indebted to the Company or any of its subsidiaries or was indebted
to another entity that was the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding
provided by the Company or any of its subsidiaries.
No current or former director, executive officer
or employee is indebted to the Company as at the date of this Circular.
INTEREST OF INFORMED
PERSONS IN MATERIAL TRANSACTIONS
Except as otherwise disclosed herein, no informed
person of the Company, proposed nominee for election as a director of the Company, nor any affiliate or associate of any such informed
person or proposed nominee, has had any material interest, direct or indirect, in any transaction since the commencement of the
Company's most recently completed financial year or in any proposed transaction which has materially affected or would materially
affect the Company or any of its subsidiaries, except with an interest arising from the ownership of Common Shares where such person
or company will receive no extra or special benefit or advantage not shared on a
pro rata
basis by all holders of the same
class of shares who are resident in Canada. For the purposes of this Circular, an "informed person" means (i) a director
or officer of the Company, (ii) a director or officer of a person or company that is itself an informed person, or (iii) any person
or company who beneficially owns, directly or indirectly, and/or exercises control or direction over voting securities of the Company
carrying more than 10% of the voting rights attaching to all outstanding voting securities of the Company.
MANAGEMENT CONTRACTS
Except as otherwise disclosed herein, no management
functions of the Company are performed to any substantial degree by a person other than the directors or executive officers of
the Company.
AUDIT COMMITTEE DISCLOSURE
Pursuant to National Instrument 52-110
–
Audit Committees
("
NI 52-110
"), the Company is required to disclose certain information as set
out in Form 52-110F1 –
Audit Committee Information Required in an AIF
, which is set out in Schedule "A"
attached hereto.
INTEREST OF CERTAIN PERSONS
IN MATTERS TO BE ACTED UPON
Except as otherwise disclosed herein, no individual
who has been a director or executive officer of the Company at any time since the beginning of the last financial year of the Company,
or any proposed management nominee for election as a director, or any associate or affiliate thereof, has any material interest,
direct or indirect, by way of beneficial ownership of Common Shares or otherwise, in any matter to be acted upon at the Meeting
other than the election of the directors.
REGISTRAR AND TRANSFER
AGENT
The registrar and transfer agent for the Company
is Computershare with an office at 480 Washington Boulevard, 27th Floor, Jersey City, New Jersey 07310, USA.
OTHER BUSINESS
Management of the Company knows of no other
matters to come before the Meeting other than as referred to in the Notice of Meeting. However, if any other matters which are
not known to the management of the Company shall properly come before the Meeting, the form of proxy given pursuant to the solicitation
by management of the Company will be voted on such matters in accordance with the best judgment of the Designated Persons voting
the form of proxy.
ADDITIONAL INFORMATION
AND AVAILABILITY OF DOCUMENTS
The Company
files annual and other reports, proxy statements and other information with certain Canadian securities regulatory authorities
and with the Securities and Exchange Commission (the "
SEC
") in the United States. The documents filed with the
SEC are available to the public at the SEC's website at www.sec.gov. The documents filed with the Canadian securities regulatory
authorities are available under the Company's profile on SEDAR at www.sedar.com.
Financial information concerning the Company
is contained in its annual audited financial statements and management's discussion and analysis for the year ended December 31,
2015 and its interim financial statements and management's discussion and analysis for the three months ended March 31, 2016, which
can be found at the above mentioned websites. The Company will provide to any person or company, upon request to the President
of the Company, one copy of the Company's financial statements and management's discussion and analysis.
DATED effective the 22
nd
day
of June, 2016.
SCHEDULE "A"
AUDIT COMMITTEE DISCLOSURE
THE AUDIT COMMITTEE'S CHARTER (THE "CHARTER")
|
1.
|
PURPOSE; LIMITATIONS ON DUTIES.
|
The purpose of the Audit Committee
(the "
Audit Committee
" or the "
Committee
") of the Board of Directors (the "Board")
of MFC Bancorp Ltd. (the "
Company
") is to (a) assist the Board in monitoring: (i) the integrity of the financial
statements of the Company; (ii) the compliance by the Company with legal and regulatory requirements regarding financial disclosure;
(iii) the independent auditor's qualifications and independence; and (iv) the performance of the Company's internal audit function
and independent auditor; and (b) prepare the annual report of the Committee required by applicable U.S. Securities and Exchange
Commission (the "
SEC
") and applicable Canadian securities commissions ("
CSC
") disclosure rules.
While the Committee has the responsibilities
and powers set forth in this charter (the "
Charter
"), it is not the duty of the Committee to plan or conduct audits
or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with the
English language version of International Financial Reporting Standards as issued by the International Accounting Standards Board
("
IFRS
") and applicable rules and regulations. These are the responsibilities of management and the independent
auditor and nothing herein is to be construed as changing such responsibilities. Because the primary function of the Committee
is oversight, absent knowledge to the contrary (the details of which shall be promptly reported to the Board), the Committee shall
be entitled to rely on the expertise, skills and knowledge of management, the internal auditing department (if any) and the Company's
independent auditors and the integrity and accuracy of information provided to the Committee by such persons.
This Charter supersedes the Charter
of the Audit Committee approved in July 2006 and any other prior Charters of the Audit Committee.
|
2.
|
COMPOSITION; FINANCIAL EXPERT.
|
The Committee shall consist of at
least three (3) directors of the Board. All members of the Committee must be directors who meet the knowledge and independence
requirements of applicable law and the rules of the SEC, including the independence requirements of the
Sarbanes-Oxley
Act of 2002
(the "
Sarbanes-Oxley Act
"), the applicable CSC and the New York Stock Exchange (the "
NYSE
")
in effect from time to time (subject to any exceptions allowed by such rules and any waivers granted by such authorities).
To the extent practicable, at least
one member of the Committee shall qualify as an "audit committee financial expert," as defined in the SEC's rules and
regulations in effect from time to time. The Company will disclose in the annual report required by Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "
1934 Act
") (which may incorporate proxy circular disclosure by reference,
to the extent permitted by SEC rules) whether or not it has at least one member who is an audit committee financial expert. In
any event (as required by the NYSE
Listed Company Manual
), the Committee must include at least one (1) member who the Board
determines has accounting or related financial management expertise (which the Board may presume with respect to a person who qualifies
as an "audit committee financial expert"). CSC and NYSE rules on the conduct of the Committee require that each member
of the Committee be financially literate (as such qualification is interpreted by the Board in its business judgment), which generally
means 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 Company's financial statements, or must become financially literate within a reasonable period of time after his or her appointment
to the audit committee.
A member of the Committee may not
serve on the audit committees of more than two (2) other public companies unless the Board determines that such simultaneous service
would not impair the ability of such member to effectively serve on the Committee and such determination is disclosed either on
or through the Company's website or in its annual proxy circular. If this disclosure is made on or through the
Company's website, the Company must
disclose that fact in its annual proxy circular and provide its website address.
The members of the Committee shall
be appointed by and serve at the discretion of the Board and shall serve until their successors are appointed. Committee members
will be elected annually for a term of one (1) year. Vacancies will be filled by a majority vote of the Board, subject to such
new committee member(s) satisfying the independence requirements established by laws and regulations in Canada and the United States.
Except as expressly provided in this Charter or the Articles of the Company, the Committee shall fix its own rules of procedure.
The Board may remove a member of the Committee at any time in its sole discretion by ordinary resolution of the Board.
The Board, or in the event of its
failure to do so, the majority of the members of the Committee, must appoint a chairman from the directors of the Committee (the
"
Chairman
"). If the Chairman is not present at any meeting of the Committee, an acting Chairman for the meeting
shall be chosen by majority vote of the Committee from among the members present. In the case of a deadlock on any matter or vote,
the Chairman shall refer the matter to the Board. The Committee may appoint a secretary who need not be a director of the Board
or Committee.
|
4.
|
REPORTS TO BOARD; MEETINGS, MINUTES.
|
|
4.1
|
Recommendations; Reports.
|
Regularly report to the Board on the
Committee's activities, its conclusions with respect to the independent auditor and any issues that arise with respect to the quality
or integrity of the Company's financial statements, compliance with legal or regulatory requirements, the performance and independence
of the Company's independent auditor or the performance of the internal audit function, and make appropriate recommendations to
the Board.
If necessary and appropriate, the Committee
shall meet (with such frequency as it determines) with each of the independent auditor, internal auditors (or other personnel responsible
for the Company's internal audit function) and management in separate executive sessions to discuss any matters that the Committee
or these groups believe should be discussed privately.
Other meetings will be held with such
frequency, and at such times, as the Chairperson, or a majority of the Committee determines, but not less than four times annually.
Special meetings of the Committee may be called by the Chairperson and will be called promptly upon the request of any two (2)
Committee members.
Unless the Committee or the Board adopts
other procedures, the provisions of the Company's Articles applicable to meetings of Board committees will govern meetings of the
Committee.
Minutes of each meeting will be kept
with the regular corporate records.
|
5.
|
SPECIFIC RESPONSIBILITIES AND DUTIES.
|
The Board delegates to the Committee
the express authority to do the following, to the fullest extent permitted by applicable law and the Company's charter documents:
Be solely and directly responsible
for recommending to the Board, for the Board's recommendation to the shareholders, the appointment and retention of the independent
auditor and, where appropriate, the termination of the independent auditor. Be solely and directly responsible for the terms of
hiring, compensation, evaluation and oversight of the work of the independent auditor (including resolution of disagreements between
management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company. Such independent auditor shall report directly to and be ultimately
accountable to the Board and the Committee. The Committee has the ultimate authority to approve all audit engagement fees and terms,
with the costs of all engagements to be borne by the Company.
Review the experience and qualifications
of the senior members of the independent auditor's team.
Prior to the commencement of the
annual audit, discuss with the independent auditor the overall scope and plan for the audit. Review, evaluate and approve the annual
engagement proposal of the independent auditor.
|
(d)
|
Lead Audit Partner Review, Evaluation and Rotation.
|
Review and evaluate the lead partner
of the independent auditor. Ensure that the lead audit partner having primary responsibility for the audit and the reviewing audit
partner of the independent auditor are rotated at least every five (5) years and that other audit partners (as defined by the SEC)
are rotated at least every seven (7) years.
|
(e)
|
Pre-Approval of Audit and Non-Audit Services.
|
Pre-approve all audit services and
all non-audit services permitted to be performed by the independent auditor. The authority to pre-approve non-audit services may
be delegated by the Committee to one (1) or more of its members, but such member's or members' non-audit service approval decisions
must be reported to the full Committee at the next regularly Committee scheduled meeting. The Committee's Pre-Approval Policy is
set forth as Exhibit "A" attached hereto, which may be amended or supplemented by the Committee from time to time.
|
(f)
|
Statement from Independent Auditor
.
|
At least annually, obtain and review
a report from the independent auditor describing:
|
(i)
|
the independent auditor's internal quality-control procedures;
|
|
(ii)
|
any material issues raised by the most recent internal quality-control review (including any peer
review or Public Company Accounting Oversight Board review of the independent auditor) or by any inquiry or investigation by governmental
or professional authorities, within the preceding five (5) years, respecting one or more independent audits carried out by the
independent auditor, and any steps taken to deal with any such issues; and
|
|
(iii)
|
all relationships between the independent auditor and the Company and any other factors that might
affect the independence of the auditors (to assess the independent auditor's independence).
|
As necessary and appropriate, review
and approve the Company's hiring policies regarding partners, employees and former partners and employees of the present and former
independent auditors of the Company.
As necessary and appropriate, review
with the independent auditor any audit problems or difficulties the independent auditor may have encountered in the course of its
audit work, and management's responses, including: (i) any restrictions on the scope of activities or access to requested information;
and (ii) any significant disagreements with management.
|
(i)
|
Outside Auditor Independence.
|
As part of general discussions with
the independent auditor, review, if necessary, any disclosed relationships or services that may impact the objectivity and independence
of the independent auditor and take or recommend that the Board take appropriate action to oversee the independence of the outside
auditors.
|
(j)
|
Material Communications.
|
As part of general discussions with
the independent auditor, discuss, if necessary, any communications between the audit team and the independent auditor's national
office regarding auditing or accounting issues presented during the independent auditor's engagement.
|
(k)
|
Accounting Adjustments.
|
As part of general discussions with
the independent auditor, discuss, if necessary, any accounting adjustments that were noted or proposed by the independent auditor
but were
"
passed
"
on (as immaterial or otherwise).
|
(l)
|
Management or Internal Control Letters.
|
As part of general discussions with
the independent auditor, discuss, if necessary, any "management" or "internal control" letter issued, or proposed
to be issued, by the independent auditor to the Company, including a discussion of any "material weakness" or "significant
deficiency" in the design or operation of internal control over financial reporting, and any steps taken to resolve the issue.
|
(m)
|
Internal Audit Function.
|
Discuss with the independent auditor
the responsibilities, budget and staffing of the Company's internal audit function.
Review the budget, qualifications,
activities, effectiveness and organizational structure of the internal audit function and the performance, appointment and replacement
of the lead internal auditor and review summaries of material audit reports and management's responses.
Review and discuss with management
and the independent auditor the Company's annual audited financial statements and related notes and the Company's disclosures under
"
Management's Discussion and Analysis" of the Company's
financial position and results of operations for the purpose of recommending approval by the Board prior to the public release
of such information and/or filing with the applicable regulatory agencies. Discuss with the independent auditor the results of
the annual audit, the matters required to be communicated by the independent auditor under professional standards and any other
matters the Committee deems appropriate. Obtain from the independent auditor assurance that the audit was conducted in accordance
with IFRS and applicable securities law, including the effectiveness of internal controls. Recommend to the Board whether the annual
audited financial statements should be included in the Company's Annual Report on Form 20-F and filed with the CSC.
|
(b)
|
Quarterly Financials.
|
Review and discuss with management
and the independent auditor, as appropriate, the Company's
quarterly financial statements and related
notes and the Company's
"
Management's Discussion and Analysis"
of the Company's financial position and results of operations, including the results of the independent auditor's reviews of the
quarterly financial statements and the matters required to be communicated by the independent auditor under professional standards
and other matters that the Committee deems material, and approve all quarterly financial statements and financial information prior
to the public release of such information.
|
(c)
|
Accounting Principles.
|
Review with management and the independent
auditor major issues regarding financial reporting and accounting standards, including any material changes in the selection or
application of such standards or principles followed in prior years and prior quarters, including key accounting decisions affecting
the financial statements, alternatives thereto and the rationale for decisions made.
Review reports prepared by management,
by internal auditors or by the independent auditor relating to significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements, including an analysis of the effect of alternative IFRS methods on
the Company's financial statements.
Discuss earnings press releases with
management and the independent auditor, if appropriate (including the type and presentation of information to be included in earnings
press releases, as well as financial information), prior to the public release of such information.
|
(f)
|
Regulatory and Accounting Developments.
|
Review with management and the independent
auditor the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the Company's financial
statements.
|
5.4
|
Risk Assessment and Risk Management.
|
Discuss guidelines and policies, as
they arise, with respect to financial risk exposure, financial statement risk assessment and risk management periodically with
management, internal auditor, and independent auditor, and the Company's plans or processes to monitor, control and minimize such
risks and exposures.
|
5.5
|
Financial Reporting Processes.
|
|
(a)
|
Internal and External Controls.
|
In consultation with the independent
auditor, the internal auditors and the Company's financial and accounting personnel, review the integrity, adequacy and effectiveness
of the Company's control environment, and the adequacy and effectiveness of the Company's accounting and financial controls, both
internal and external, and elicit any recommendations for the improvement of such internal control procedures or particular areas
where new or more detailed controls or procedures are desirable.
Review major issues as to the adequacy
of the Company's internal controls and any special audit steps adopted in light of material control deficiencies.
|
(c)
|
Reports from Independent Auditor.
|
Obtain and review timely reports
from the independent auditor regarding:
|
(i)
|
all critical accounting policies and practices to be used by the Company;
|
|
(ii)
|
all alternative treatments of financial information within IFRS that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor;
and
|
|
(iii)
|
all other material written communications between the independent auditor and management, including
any management letter or schedule of unadjusted differences.
|
|
5.6
|
Legal and Regulatory Compliance.
|
|
(a)
|
Annual Report and Proxy Circular on Form 20-F.
|
Prepare any report of the Committee
required to be included in the Company's annual report on Form 20-F and/or proxy circular as required under applicable laws and
rules.
As necessary and appropriate, review
reports and/or communications provided to the Committee by management, auditors, the general counsel, tax advisors or any regulatory
agency regarding regulatory compliance, transactions with affiliates, and other legal matters that may have a material effect on
the Company's financial statements and the consideration
of those matters in preparing the
financial statements.
|
(c)
|
Code of Conduct; Waivers.
|
Assist,
as necessary, the Nominating and Corporate Governance Committee in monitoring the Company's compliance with the Code of Business
Conduct and Ethics and Insider Trading Policy or as otherwise required by applicable law or exchange listing standards and covering
the conduct and ethical
behavior of directors, officers and employees.
Establish procedures for:
|
(i)
|
the receipt, retention and treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters; and
|
|
(ii)
|
the confidential, anonymous submission by Company employees of concerns regarding questionable
accounting or auditing matters,
|
in substantially the form as set
forth in Exhibit C attached hereto, which may be amended or supplemented by the Committee from time to time.
|
5.7
|
Annual Evaluation of Committee; Charter.
|
Annually evaluate the performance of
the Committee. Review and reassess the adequacy of this Charter each year and recommend any proposed changes to the Board, as appropriate.
|
6.
|
ADVISORS AND COUNSEL; RELIANCE; INVESTIGATIONS; COOPERATION.
|
|
6.1
|
Retention of Advisors and Counsel.
|
The Committee has the power, in its
sole discretion, to obtain advice and assistance from, and to retain at the Company's expense, such independent counsel and other
advisors and experts as it determines necessary or appropriate to carry out its duties, and in connection therewith to receive
appropriate funding, determined by it, from the Company.
|
6.2
|
Administrative Expenses.
|
The Committee may determine the level
and cost of ordinary administrative expenses necessary or appropriate in carrying out its duties, with such costs to be borne by
the Company.
The Committee will act in reliance
on management, the Company's independent auditor, advisors and experts, as it deems necessary or appropriate.
The Committee has the power, in its
discretion, to conduct any investigation it deems necessary or appropriate to enable it to carry out its duties with such costs
to be borne by the Company.
|
6.5
|
Required Participation of Employees.
|
The Committee shall have unrestricted
access to the Company's employees, independent auditor, internal auditors, and internal and outside counsel, and may require any
employee of the Company or representative of the Company's outside counsel or independent auditor to attend meetings of the
Committee or to meet with any members
of the Committee or representative of the Committee's counsel, advisors or experts.
Except as expressly set forth in
this Charter or the Company's Articles or Corporate Governance Guidelines, or as otherwise provided by applicable law or the rules
of NYSE, the Committee shall establish its own rules and procedures.
EXHIBIT A
MFC BANCORP LTD.
AUDIT COMMITTEE
Audit and Non-Audit Services Pre-Approval
Policy
|
I.
|
Statement of Principles
|
In accordance with the requirements
of the SEC rules and securities regulations, including the independence requirements of the Sarbanes-Oxley Act, and National Instrument
52-110 of the Canadian Securities Administrators, and to safeguard the continued independence of its independent auditor, all audit
and non-audit services to be rendered by the Company's independent auditor and any related entities to the Company and its subsidiaries
(collectively, the "
Company
") must be the subject of pre-approval by the Audit Committee of the Board in order
to assure that they do not impair the auditor's independence from the Company. Furthermore, the Audit Committee is responsible
for the appointment, compensation and oversight of the work of the independent auditor.
As set forth in this Policy, unless
a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be
provided by the independent auditor. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require
specific pre-approval by the Audit Committee.
The appendices to this Policy describe
the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any
general pre-approval is twelve (12) months from the date of pre-approval, unless the Audit Committee considers a different period
and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the independent
auditor without obtaining specific pre-approval from the Audit Committee. The Audit Committee will revise the list of general pre-approved
services from time to time, based on subsequent determinations.
The purpose of this Policy is to
set forth the procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee's
responsibilities to pre-approved services performed by the independent auditor to management.
The independent auditor has reviewed
this Policy and believes that implementation of the policy will not adversely affect the auditor's independence.
The Audit Committee may delegate
pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
The annual Audit services engagement
terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee will approve, if necessary,
any changes in terms, conditions and fees resulting from changes in audit scope, Company structure or other items. In addition
to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval of
other Audit services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has
pre-approved the Audit services in Exhibit B. The general pre-approval of the range of services set forth on Exhibit B will be
brought to the Audit Committee on an annual basis for review, any modification thought appropriate and approval. In connection
with such review, the Audit Committee will be provided a written description of the nature and scope, including the fee structure
and terms of any oral or
written side agreement(s), for all
tax services to be considered for general pre-approval under Exhibit B. The potential effects of these tax services on the independence
of the auditor will be discussed with them.
In the case of proposed engagements
of the auditor involving any of the services covered under the range of pre-approved services under Exhibit B where the fees for
a particular engagement are expected to exceed a total of CDN$200,000, specific pre-approval must be obtained under the provisions
of Section VI below.
All other Audit services not listed
in Exhibit B must be specifically pre-approved by the Audit Committee under the provisions of Section VII below.
|
IV.
|
Audit-related Services
|
Audit-related services are assurance
and related services that are reasonably related to the performance of the audit or review of the Company's financial statements
or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor, and has pre-approved Audit-related services in Exhibit B. All other Audit-related
services not listed in Exhibit B must be specifically pre-approved by the Audit Committee.
The Audit Committee believes that
the independent auditor can provide Tax services to the Company such as tax compliance, tax planning and tax advice without impairing
the auditor's independence. However, the Audit Committee will not permit the retention of the independent auditor in connection
with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment
of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved the Tax
services in Exhibit B. All Tax services involving large and complex transactions not listed in Exhibit B must be specifically pre-approved
by the Audit Committee.
All other permissible services not
listed in Exhibit B must be specifically pre-approved by the Audit Committee. Where particular pre-approval is required, the Audit
Committee has delegated the authority to effect such pre-approval to the Chairman of the Audit Committee.
Under no circumstances may the Audit
Committee delegate its responsibilities to the Company's management.
For greater certainty, if an engagement
with the independent auditor for a particular service is contemplated that is neither prohibited nor covered under the range of
services under Exhibit B, in order for such an engagement to proceed it must be the subject of individual pre-approval under Section
VII.
It is the responsibility of the Company's
management to determine whether a particular service is covered by the pre-approved range of services set forth on Exhibit B. Management
should seek the guidance of the Chairman of the Audit Committee where there is any ambiguity about whether a particular service
is pre-approved.
A list of the SEC's prohibited non-audit
services is included in Exhibit B. The SEC's rules and relevant guidance should be consulted to determine the precise definitions
of these services and the applicability of exceptions to certain of the prohibitions.
Requests or applications to provide
services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent
auditor and the Chief Financial Officer. If the individual service is a tax service, a written description of the nature and scope,
including fee structure and terms of any oral or written side agreement, is to be provided. The potential effect of the tax service
on the independence of the auditor is to be discussed with the auditor.
All requests or applications for
services to be provided by the independent auditor that do not require specific approval by the Audit Committee will be submitted
to the Chief Financial Officer and must include a detailed description of the services to be rendered. The Chief Financial Officer
will determine whether such services are included within the list of services that have received the general pre-approval of the
Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the independent auditor.
Pre-approved non-audit services will be provided by the auditor
pursuant to an engagement letter with the appropriate entity of the Company that satisfies each of the following requirements:
|
a.
|
the engagement letter will be in writing and signed by the auditor; and
|
|
b.
|
the engagement letter will set out the particular non-audit services to be provided by the auditor which, unless individually
pre-approved, will be within the categories of pre-approved non-audit services described in Exhibit B.
|
|
IX.
|
Reports of Services to the Audit Committee
|
At every regularly scheduled meeting of the
Audit Committee, the Company's management will report on all new pre-approved engagements of the auditor since the last such report.
The auditor may comment on the report if it wishes to do so. All engagement letters entered into going forward will be made available
to the Audit Committee on request.
EXHIBIT B
Pre-approved Range of Services
Type of service
|
Description
|
Audit services
|
Financial statement audit
|
·
Recurring
audit of consolidated financial statements including subsidiary company and statutory audits, tax services and accounting consultations
required to perform an audit in accordance with generally accepted auditing standards
·
Quarterly
reviews
·
Review
of tax provision reported in the consolidated and other financial statements
·
Review
of complex accounting issues with the auditor's national office in order to reach an audit judgment
|
Regulatory financial filings
|
·
Statutory
and regulatory filings including prospectuses and registration statements
·
Services
relating to filings with the SEC relating to the Securities Act of 1933, as amended, and the 1934 Act, including issuance of comfort
letters
|
Internal control attestation services
|
·
Attestation services relating to the report on the entity's internal controls as specified in Section 404 of the Sarbanes-Oxley Act and any similar requirements that may be introduced under other legislation/ regulations
|
Audit related services
|
Employee benefit plan audits
|
·
Audit of pension and other employee benefit plans and funds
|
Financial due diligence in connection with acquisitions and divestitures
|
·
Assistance
in financial and tax due diligence, including review of financial statements, financial data and records, tax returns, tax forms
and tax filings, discussion with target's finance and accounting personnel
·
Accounting
consultation and audits in connection with acquisitions and divestitures
|
Other attest services
|
·
Attest services that are not required by statute or regulation
|
Application and general control reviews
|
·
Review of IT and general controls related to specific applications, including overall general computer controls, excluding those that are a part of the financial statement audit
|
Consultation regarding U.S. generally accepted accounting principles ("
GAAP
") and/or IFRS
|
·
Discussions, review and testing of impact of new pronouncements, acquisition accounting, and other GAAP or IFRS topics
|
Financial statement translation
|
·
Translation of statutory or regulatory financial statements and related information
|
Tax services
|
Tax compliance
|
·
Preparation and/or review of income, capital, sales, use,
|
Type of service
|
Description
|
|
property, excise, local, value-added tax ("
VAT
"), GST and/or PST and returns, filings and forms. Consultation regarding handling of items for tax returns, required disclosures, elections, and filing positions available
|
Tax consulting
|
·
Assistance
with tax audits, examinations or requests for information.
·
Responding
to requests regarding technical interpretations, applicable laws and regulations, and tax accounting
·
Tax
advice on mergers, acquisitions, restructurings, financings, intercompany transactions, foreign tax credits, foreign income taxes,
tax accounting, foreign earnings and profits, capital tax, sales tax, use tax, property taxes, the treatment in any jurisdiction
of foreign subsidiary income, VAT, GST and/or PST, excise tax or equivalent taxes in the jurisdiction
·
Assistance
with tax appeals that are not in front of a tax court or its equivalent
·
Advice
regarding tax legislation or codes including interpretations, procedures and advance tax rulings or private letter rulings thereof,
or their equivalent, in applicable jurisdictions in the following areas: income, capital, sales, use, property, excise, local,
VAT and GST and/or PST.
|
Transfer pricing
|
·
Advice and assistance with respect to transfer pricing matters, including preparation of reports used by the company to comply with taxing authority documentation requirements regarding royalties, services and intercompany pricing and assistance with tax exemptions
|
Customs and duties
|
·
Compliance reviews and advice on compliance in the areas of tariffs and classification, origin, pricing, and documentation. Assistance with customs audits or requests for information
|
Expatriate tax services
|
·
Preparation
of individual income tax returns and personal tax advice (except for those in a financial reporting oversight role with respect
to the company as specifically defined for this purpose by applicable rules/regulations)
·
Advice
on impact of changes in local tax laws and consequences of changes in compensation programs or practices
·
Compliance
and advice in relation to benefits and compensation, stock options, and tax equalization policies
|
Other services
|
Valuation
|
·
Valuation
services for the preparation for non-financial reporting tax-only valuations
·
Valuation
services to review and comment on valuations prepared by the Company or third parties
|
Benchmarking
|
·
Benchmarking and surveys related to best practices with respect to financial reporting practices.
|
Type of service
|
Description
|
Information services, if applicable
|
·
Annual
licence for PricewaterhouseCooper's Comperio product
·
Licence(s)
for PricewaterhouseCooper's Tax News Network product
|
Other
|
·
Fact finding services and forensic investigations under the supervision of the Audit Committee; environmental audits; non-financial systems design and implementation.
|
Prohibited Non-Audit Services
The auditor may not act in any capacity where
it could reasonably be seen to:
|
•
|
function in the role of the Company's management;
|
|
•
|
serve in an advocacy role on behalf of the Company.
|
The auditor will not be asked to provide any
services in the following areas:
|
•
|
Bookkeeping or other services related to the accounting records or financial statements
|
|
•
|
Financial information systems design and implementation
|
|
•
|
Appraisal preparation or valuation services (other than tax-only valuation services as described
above under "Other Services—Valuation") , fairness opinions or contribution-in-kind reports
|
|
•
|
Internal audit outsourcing
|
|
•
|
Management decision-making responsibilities or functions
|
|
•
|
Human resource services or functions
|
|
•
|
Broker or dealer, investment adviser or investment banking services
|
|
•
|
Legal services or services requiring licensing as a legal practitioner
|
|
•
|
Expert advocacy services unrelated to the audit
|
EXHIBIT C
MFC BANCORP LTD.
PROCEDURES FOR THE SUBMISSION OF COMPLAINTS
AND CONCERNS REGARDING
ACCOUNTING, INTERNAL ACCOUNTING CONTROLS
OR AUDITING MATTERS
|
1.
|
MFC Bancorp Ltd. (the "
Company
") has designated its Audit Committee of its Board
of Directors (the "
Committee
") to be responsible for administering these procedures for the receipt, retention,
and treatment of complaints received by the Company or the Committee directly regarding accounting, internal controls, or auditing
matters.
|
|
2.
|
Any employee of the Company may on a confidential and anonymous
basis submit concerns regarding questionable accounting controls or auditing matters to the
Committee by setting
forth such concerns in a letter addressed directly to the Committee with a legend on the envelope such as "Confidential"
or "To be opened by Committee only". If an employee would like to discuss the matter directly with a member of the Committee,
the employee should include a return telephone number in his or her submission to the Committee at which he or she can be contacted.
All submissions by letter to the Committee can be sent to:
|
MFC Bancorp
Ltd.
c/o Audit Committee
Attn: Chairperson
1860 - 400 Burrard
Street
Vancouver, British
Columbia
V6C 3A6
|
3.
|
Any complaints received by the Company that are submitted as set forth herein will be forwarded
directly to the Committee and will be treated as confidential if so indicated.
|
|
4.
|
At each meeting of the Committee, or any special meetings called by the Chairperson of the Committee,
the members of the Committee will review and consider any complaints or concerns submitted by employees as set forth herein and
take any action it deems necessary in order to respond thereto.
|
|
5.
|
All complaints and concerns submitted as set forth herein will be retained by the Committee for
a period of seven (7) years.
|
|
1.
|
COMPOSITION OF THE AUDIT COMMITTEE
|
The Audit Committee is currently composed of
three directors, namely Friedrich Hondl, Silke S. Stenger and Dr. Shuming Zhao. Each member is independent and financially literate
as such terms are defined in NI 52-110.
|
2.
|
RELEVANT EDUCATION AND EXPERIENCE
|
The following describes the education and experience
of each of the members of the Audit Committee which provides the member with:
|
(a)
|
an understanding of the accounting principles used by MFC to prepare its financial statements;
|
|
(b)
|
the ability to assess the general application of such accounting principles in connection with
the accounting for estimates, accruals and reserves;
|
|
(c)
|
experience preparing, auditing, analyzing or evaluating financial statements that present a breadth
and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably
be expected to be raised by MFC's financial statements, or experience actively supervising one or more individuals engaged in such
activities; and
|
|
(d)
|
an understanding of internal controls and procedures for financial reporting.
|
Friedrich Hondl is an experienced European
banking executive and former member of the Supervisory Board of Oesterreichische Kontrolbank AG, the Austrian Export Credit Agency.
From 2013 to 2015, Mr. Hondl was the head of Erste Group Bank AG's Large Corporate International Division and, from 2009 to 2012,
he was the head of International Corporate Relationship Management of UniCredit Bank Austria AG. Mr. Hondl has also served as Chairman
of the Supervisory Board of Intermarket Bank AG since 2014.
Silke S. Stenger is an independent business
consultant and business leadership coach. She was a former director of MFC when MFC was KHD Humboldt Wedag International Ltd. and
has been director of KHD Humboldt Wedag International AG, Germany. Ms. Stenger was the Chief Financial Officer of Management One
Human Capital Consultants Ltd. She is a certified controller (German Chamber of Commerce IHK) and IFRS accountant, specializing
in corporate governance and SOX compliance. Furthermore, she is a business coach by training.
Dr. Zhao is the Chair Professor and Honorary
Dean of the School of Business, Nanjing University, the People's Republic of China. He serves as President of the International
Association of Chinese Management Research (IACMR, Third Term), Vice President of Chinese Society of Management Modernization,
President for Jiangsu Provincial Association of Human Resource Management, and Vice President of Jiangsu Provincial Association
of Business Management and Entrepreneurs. Since 1994, Dr. Zhao has acted as management consultant for several Chinese and international
firms. Dr. Zhao is also a director of Daqo New Energy Corp. (China) and Philippe Metropolitan Bank (China) Ltd. Dr. Zhao has successfully
organized and held eight international symposia on multinational business management. Since 1997, Dr. Zhao has been a visiting
professor at the Marshall School of Business, University of Southern California and the College of Business, University of Missouri-St.
Louis. Dr. Zhao has lectured in countries including the United States, Canada, Japan, Singapore, South Korea, the United Kingdom,
Germany, the Netherlands, Portugal, and Australia.
|
3.
|
RELIANCE ON CERTAIN EXEMPTIONS
|
Not applicable.
|
4.
|
RELIANCE OF THE EXEMPTION IN SUBSECTION 3.3(2) OR SECTION 3.6
|
Not applicable.
|
5.
|
RELIANCE ON SECTION 3.8
|
Not applicable.
|
6.
|
AUDIT COMMITTEE OVERSIGHT
|
Not applicable.
|
7.
|
PRE-APPROVED POLICIES AND PROCEDURES
|
The Audit Committee pre-approves all services
provided by MFC's independent auditors. All of the services and fees described under the categories of "Audit Fees",
"Audit Related Fees", "Tax Fees" and "All Other Fees" were reviewed and approved by the audit committee
before the respective services were rendered.
The aggregate fees for audit services
rendered for the audit of our annual financial statements for the year ended December 31, 2015 by PricewaterhouseCoopers LLP were
$2,679,000 (before goods and services tax). The aggregate fees for audit services rendered for the audit of our annual financial
statements for the year ended December 31, 2014 by PricewaterhouseCoopers LLP were $2,707,500 (before goods and services tax).
$27,500 and $nil were billed by PricewaterhouseCoopers
LLP during the years ended December 31, 2015 and 2014 for assurance or related services that were reasonably related to the performance
of the audit or review of the Company's financial statements and that were not reported under the caption "Audit Fees"
above.
During the fiscal year ended December
31, 2015, the aggregate fees billed for tax compliance, tax advice and tax planning by PricewaterhouseCoopers LLP were $100,800
(before goods and services tax). During the fiscal year ended December 31, 2014, the aggregate fees billed for tax compliance,
tax advice and tax planning by PricewaterhouseCoopers LLP were $184,000 (before goods and services tax).
For the fiscal year ended December 31,
2015, the aggregate fees billed by PricewaterhouseCoopers LLP for all services not related to audit or tax were C$40,000 (before
goods and services tax). For the fiscal year ended December 31, 2014, the aggregate fees billed by PricewaterhouseCoopers
LLP for all services not related to audit or tax were $40,000 (before goods and services tax), which related to certain financial
due diligence matters.
|
IMPORTANT ANNUAL MEETING INFORMATION
|
Using
a
black ink
pen, mark your votes with an
X
as shown in this example.
Please do not write outside the designated areas.
|
x
|
Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead
of mailing your proxy, you may choose one of the voting
methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN
THE TITLE BAR.
Proxies
submitted by the Internet or telephone must be received by 10 a.m. Pacific Daylight Time on July 20, 2016.
Vote
by Internet
• Go to
www.envisionreports.com/MFCB
• Or scan the QR code with your smartphone
•
Follow the steps outlined on the secure website
Vote
by telephone
•
Call toll free 1-800-652-VOTE (8683) within the USA, US territories &
Canada on a touch tone telephone
• Follow the instructions provided by the recorded message
|
Annual Meeting Proxy Card
|
|
|
IF
YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION
IN THE ENCLOSED ENVELOPE.
|
|
|
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT OF MFC BANCORP LTD. (THE “COMPANY”) FOR AN ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 22, 2016 AT 10:00 AM (THE “MEETING”).
|
|
1.
|
The election of the following directors of the Company:
|
|
|
FOR
|
WITHHOLD
|
|
|
01 -
Michael J. Smith
|
¨
|
¨
|
|
|
|
|
|
|
|
02 -
Gerardo Cortina
|
¨
|
¨
|
|
|
|
|
|
|
|
03 -
Indrajit Chatterjee
|
¨
|
¨
|
|
|
|
|
|
|
|
04 -
Dr. Shuming Zhao
|
¨
|
¨
|
|
|
|
|
|
|
|
05 -
Silke Stenger
|
¨
|
¨
|
|
|
|
|
|
|
|
06 -
Friedrich Hondl
|
¨
|
¨
|
|
|
|
|
|
|
|
07 -
Jochen Dümler
|
¨
|
¨
|
|
|
|
FOR
|
WITHHOLD
|
2.
|
The appointment of the auditors for the fiscal year ended December 31, 2016 (as set forth in the notice of meeting and management information circular delivered to the Company’s shareholders in connection with the Meeting) and the authorization of the directors to fix the remuneration of the auditors for the ensuing year.
|
¨
|
¨
|
IF VOTING BY
MAIL, YOU
MUST
COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
|
1 U P X
|
|
NOTES:
|
1.
|
This proxy confers discretionary authority with respect to amendments or variations of the matters
identified in the Notice of Meeting or other matters which might properly come before the Meeting or any adjournment or postponements
thereof.
|
|
2.
|
A shareholder has the right to appoint a person (who need not be a shareholder) to represent
him or her at the Meeting, or any adjournment or postponement thereof, other than the persons specified on the reverse side. If
you desire to designate as proxyholder a person other than Samuel Morrow or Rene Randall, you should strike out their names and
insert on the space provided the name of the person you desire to designate as proxyholder or complete another proper Form of Proxy.
|
|
3.
|
A proxy, to be valid, must be dated and signed by a shareholder or his or her attorney authorized
in writing or, where a shareholder is a corporation, by a duly authorized officer or attorney of the corporation. If a proxy is
executed by an attorney for an individual shareholder, or by an officer or attorney of a corporate shareholder not under its seal,
the instrument so empowering the officer or the attorney, as the case may be, or a notarial copy thereof must accompany the proxy
instrument. If this proxy is not dated, it will be deemed to bear the date on which it was mailed to shareholders. If the securities
are registered in the name of more than one owner (for example, joint ownership, trustees, executors, etc.), then all those registered
should sign this proxy.
|
|
4.
|
A proxy, to be effective, must be deposited with Computershare by 10:00 a.m. (Pacific Daylight
time) on July 20, 2016 (or a day other than Saturday, Sunday or holiday which is at least 48 hours before the Meeting or any adjournment
or adjournments thereof).
|
|
5.
|
The securities represented by this proxy will be voted in favour or withheld from voting or voted
against each of the matters described herein, as applicable, in accordance with the instructions of the holder, on any ballot that
may be called for and, if the holder has specified a choice with respect to any matter to be acted upon, the securities will be
voted accordingly.
|
|
6.
|
The securities represented by this proxy will be voted as directed by the holder, however, if
such direction is not made in respect of any matter, this proxy will be voted as recommended by management.
|
|
7.
|
This proxy should be read in conjunction with the accompanying documentation provided by management.
|
Important
notice regarding the Internet availability of proxy materials for the Annual General Meeting of shareholders.
The
Management Information Circular / Proxy Statement and the 2015 Annual Report to Shareholders are available at:
www.envisionreports.com/MFCB
|
IF
YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION
IN THE ENCLOSED ENVELOPE.
|
|
Proxy — MFC BANCORP LTD.
|
|
THIS
PROXY IS SOLICITED ON BEHALF OF MANAGEMENT OF MFC BANCORP LTD.
(THE
“COMPANY”) FOR AN ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON
JULY
22, 2016 (THE “MEETING”).
The undersigned, registered shareholder of the Company,
hereby appoints Samuel Morrow or failing him, Rene Randall, or instead of him, ____________________________, as proxyholder, with
power of substitution, to attend and vote in respect of all shares registered in the name of the undersigned at the Meeting and
at any adjournment or postponement thereof. The undersigned revokes any proxy previously given with reference to the Meeting or
any adjournment or postponement thereof. Without limiting the general powers conferred, the said proxyholder is directed to vote
as indicated upon the following matters.
(Continued and to be marked, dated and signed, on the other side)
Change
of Address
— Please print new address below.
|
|
Comments
— Please print your comments below.
|
C
|
Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
|
Please sign as name appears hereon. Joint owners should
each sign.When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
Date (mm/dd/yyyy) — Please print date below.
|
|
Signature 1 — Please keep signature within the box.
|
|
Signature 2 — Please keep signature within the box.
|
/ /
|
|
|
|
|
|
IF VOTING
BY MAIL, YOU
MUST
COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
|
|
MFC BANCORP
LTD.
SUPPLEMENTAL
MAILING LIST FORM
National Instrument
51-102
Continuous Disclosure Obligations
mandates that MFC BANCORP LTD. (the "Company") send annually a request
form to registered holders and beneficial owners of securities to enable such holders and owners to request a copy of the Company’s
annual financial statements and related MD&A and/or interim financial statements and related MD&A (collectively, the "Statements"),
in accordance with the procedures set out in National Instrument 54-101
Communication with Beneficial Owners of Securities
of a Reporting Issuer
. If you wish to receive either or both of the Statements, you must complete this form and forward it
to the Company at the following address:
MFC BANCORP
LTD.
Suite 1860
– 400 Burrard Street
Vancouver,
British Columbia
Canada V6C
3A6
Please note
that both registered holders and beneficial owners should return the form; registered holders will not automatically receive the
Statements (registered holders are those with shares registered in their name; beneficial owners have their shares registered
in an agent, broker, or bank's name).
*******
If you wish to receive the Statements,
please complete below and return.
(Please PRINT your name and address)
|
|
Interim Financial Statements and MD&A
|
|
|
|
|
|
Annual Financial Statements and MD&A
|
|
|
|
(Name of Shareholder)
|
|
|
|
|
|
(Number and Street) (Apartment/Suite)
|
|
|
|
|
|
(City, Province/State)
|
|
|
|
|
|
(Postal Code)
|
|
|
|
|
|
(Email Address)
|
|
|
Signed:
|
|
|
(Signature of Shareholder or Authorized Signatory)
|
|
|
Dated:
|
|
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.
MFC BANCORP LTD.
|
|
|
|
|
By:
|
/s/ Samuel Morrow
|
|
|
Samuel Morrow
|
|
|
Chief Financial Officer
|
|
|
|
|
Date:
|
June 27, 2016
|
|
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