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MANAGEMENT INFORMATION CIRCULAR Table of Contents
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 18, 2011
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
MANAGEMENT INFORMATION CIRCULAR
This Notice and Management Information Circular,
along with accompanying materials, require your immediate attention.
If you have any questions regarding the information described in this Notice and Management
Information Circular or require assistance with voting your shares, please contact Laurel Hill Advisory
Group at 1-877-304-0211 or by email at assistance@laurelhillag.com.
are cordially invited to attend an annual and special meeting of shareholders of Aeterna Zentaris Inc. (the "Corporation") to be held at Le Centre Sheraton Montreal Hotel, Salon
Jarry & Joyce, 1201 Ren -L vesque Blvd. West, Montreal, Quebec, Canada on Wednesday, May 18, 2011, at 10:30 a.m. (Montreal time).
the meeting, in addition to the annual meeting business, shareholders are being asked to approve special resolutions authorizing the Corporation to:
the Restated Articles of Incorporation of the Corporation to provide that shareholder meetings may be held at certain places outside Canada; and 2.amend
the by-laws of the Corporation in order to, among other matters, reduce the quorum required for shareholder meetings.
Amendment to Restated Articles of Incorporation of the Corporation
In the past two years, the majority of the Corporation's shareholder base has shifted from Canada to the
United States, largely as a result of the Corporation having completed several equity financings in the United States since June 2009. In fact, the trading volume of the
Corporation's shares on the NASDAQ Stock Market now surpasses trading on the Toronto Stock Exchange by a rather significant margin. In light of this increased U.S. shareholder base of the
Corporation, the Board believes that it would be beneficial both to the Corporation and its shareholders to permit shareholder meetings to be held in certain key U.S. metropolitan areas or,
potentially, in locations in which the Corporation's principal operating subsidiaries are headquartered, namely Warren, New Jersey, U.S.A. and Frankfurt-am-Main,
Amendment to By-Laws of the Corporation
The amendments to the general by-laws, if confirmed by the shareholders at the Meeting, will, among other
things, provide greater flexibility to the Corporation in connection with the holding of meetings of shareholders by decreasing the quorum for such meetings.
The Code of General By-Laws of the Corporation has provided that the quorum for shareholder meetings shall be
the holder or holders of not less than twenty percent (20%) of the outstanding shares of the Corporation carrying voting rights at the meeting, present in person or represented by proxy or by an
authorized representative. Up until relatively recently, between 35% and 40% of the Corporation's issued and outstanding common shares were held by three significant shareholders who, historically,
were present or represented by proxy at each of the Corporation's shareholder meetings, thereby ensuring the Corporation's 20% quorum was attained. On a few
occasions in recent years, including at the 2010 annual meeting of shareholders, were it not for the votes cast by such significant shareholders, quorum would not have been
attained. Given that these shareholders have, to the best of the Corporation's knowledge, since disposed of all or a substantial portion of their common shares
and that their remaining holdings, if any, have been diluted substantially following the equity financings completed by the Corporation since June 2009, the Corporation now has a large number
of shareholders and to its knowledge as at the date of this Circular, no longer has any shareholders holding in excess of 5% of the issued and outstanding common shares.
in light of the Corporation's now widely-held shareholder base, and to ensure that the attainment of quorum will not be an issue in the future, the Board has approved an
amendment to and restatement of the by-laws of the Corporation to reduce the quorum required for shareholder meetings to the holder or holders of not less than ten percent (10%) of the
issued and outstanding shares of the Corporation carrying voting rights at the meeting, present in person or represented by proxy or by an authorized representative.
The new quorum requirement will permit shareholder meetings to be constituted so that shareholder business may be conducted
on the date fixed for the meetings, by reducing the likelihood that shareholder meetings will be adjourned due to a lack of quorum. This in turn will ensure normal
course of business will not be impeded and avoid increased costs and administrative delays that result from holding an adjourned
The Board believes that this lower shareholder quorum threshold is consistent with those of similarly sized,
widely-held, Canadian life sciences or biopharmaceutical public companies, including a number of such Canadian companies listed on a stock exchange in the United States, and is in
the best interests of the Corporation.
accompanying Notice of Meeting and Management Information Circular provides a full description of the items to be voted upon at the meeting.
encourage you to take the time now to complete and return the enclosed form of proxy or voting instruction form by 5 p.m. Eastern time on May 16, 2011 or any adjournment thereof to
ensure that your shares will be voted at the Meeting in accordance with your instructions, whether or not you are able to attend in person. If you have any questions in regards to the meeting or
require assistance with voting, please contact Laurel Hill Advisory Group toll-free at 1-877-304-0211 or via email at
The Board of Directors of the Corporation Recommends that Shareholders Vote
All Proposed Resolutions.
Your vote is important, regardless of the number of shares you own. Vote Your Shares Today.
Thank you for your continued support.
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the annual and special meeting of shareholders of Aeterna Zentaris Inc. (the "Corporation" or "Aeterna
Zentaris") will be held at Le Centre Sheraton Montreal Hotel, Salon Jarry & Joyce, 1201 Ren -L vesque Blvd. West, Montreal, Quebec, Canada on
Wednesday, May 18, 2011, at 10:30 a.m. (Montreal time) for the following purposes:
receive the audited consolidated financial statements of the Corporation as at and for the year ended December 31, 2010, together with the
auditors' report thereon; 2.to
elect directors; 3.to
consider and, if deemed advisable, to adopt a special resolution authorizing the Corporation to apply for a Certificate of Amendment under the Canada Business Corporations Act to amend the Restated
Articles of Incorporation of the Corporation to provide that shareholder meetings may be held at
certain places outside Canada; 4.to
consider and, if deemed advisable, to adopt an ordinary resolution confirming the repeal of the existing Code of General By-Laws of the
Corporation and its replacement by a new By-Law One, enacted and approved by the Board of Directors on March 22, 2011; 5.to
appoint auditors and authorize the directors to determine their compensation; and 6.to
transact such other business as may properly come before the meeting.
record date for the determination of shareholders of Aeterna Zentaris entitled to receive notice of and to vote at the meeting is March 24, 2011.
shareholders of Aeterna Zentaris, it is very important that you read this material carefully and vote your shares, either by proxy or in person at the meeting.
following pages tell you more about how to exercise your right to vote your shares and provide additional information relating to the matters to be dealt with at the meeting.
order of the Board of Directors,
Montreal, Quebec, Canada, March 24, 2011
Shareholders unable to attend the meeting are requested to complete and sign the enclosed form of proxy and return it in the stamped envelope provided. To be valid, proxies must
reach the office of Computershare Trust Company of Canada, Share Ownership Management, 1500 University Street, 7th Floor, Montreal, Quebec, H3A 3S8, no later than
forty-eight (48) hours (excluding Saturdays, Sundays and holidays) at the close of business on the date of the meeting or any adjournment or postponement thereof. The time limit for the deposit
of proxies may be waived by the Chair of the Meeting without notice.
Aeterna Zentaris Inc., 1405 du Parc-Technologique Boulevard, Quebec City, Quebec, Canada, G1P 4P5
MANAGEMENT INFORMATION CIRCULAR
| Page | |||||
| SECTION 1. INTRODUCTION | 1 | ||||
| SECTION 2. INFORMATION CONCERNING VOTING AT THE MEETING | 1 | ||||
| 2.1 | Your Vote is Important | 1 | |||
| 2.2 | Voting | 1 | |||
| 2.3 | How to Vote Registered Shareholders | 2 | |||
| 2.4 | How to Vote Non-Registered Shareholders | 3 | |||
| 2.5 | Completing the Form of Proxy | 4 | |||
| 2.6 | Changing your Vote | 4 | |||
| SECTION 3. VOTING SHARES, QUORUM AND PRINCIPAL SHAREHOLDERS | 4 | ||||
| 3.1 | Voting Shares and Quorum | 4 | |||
| 3.2 | Principal Shareholders | 5 | |||
| SECTION 4. PRESENTATION OF THE FINANCIAL STATEMENTS | 5 | ||||
| SECTION 5. ELECTION OF DIRECTORS | 5 | ||||
| SECTION 6. DISCLOSURE OF COMPENSATION | 7 | ||||
| 6.1 | Remuneration of Directors | 7 | |||
| 6.2 | Compensation of Executive Officers | 9 | |||
| 6.3 | Compensation Discussion & Analysis | 10 | |||
| 6.4 | Incentive Plan Awards Value Vested or Earned During the Year | 16 | |||
| 6.5 | Other Forms of Compensation | 16 | |||
| 6.6 | Securities Authorized for Issuance under Equity Compensation Plans | 19 | |||
| 6.7 | Performance Graph | 19 | |||
| 6.8 | Summary | 20 | |||
| SECTION 7. EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS | 21 | ||||
| SECTION 8. APPOINTMENT OF AUDITORS AND AUDIT COMMITTEE DISCLOSURE | 23 | ||||
| 8.1 | Appointment of Auditors | 23 | |||
| 8.2 | Audit Committee Disclosure | 23 | |||
| 8.3 | Composition of the Audit Committee | 23 | |||
| 8.4 | Education and Relevant Experience | 23 | |||
| 8.5 | Pre-Approval Policies and Procedures | 24 | |||
| 8.6 | External Auditor Service Fees | 24 | |||
| SECTION 9. PROPOSED AMENDMENT TO THE CORPORATION'S ARTICLES | 24 | ||||
| SECTION 10. RESTATEMENT OF GENERAL BY-LAWS | 25 | ||||
| SECTION 11. STATEMENT OF CORPORATE GOVERNANCE PRACTICES | 27 | ||||
| SECTION 12. INDEBTEDNESS OF DIRECTORS AND OFFICERS | 27 | ||||
| SECTION 13. INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS | 27 | ||||
| SECTION 14. INSURANCE OF DIRECTORS AND OFFICERS | 27 |
| Page | ||||
| SECTION 15. SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING OF | ||||
| SHAREHOLDERS | 28 | |||
| SECTION 16. ADDITIONAL INFORMATION | 28 | |||
| SECTION 17. MAIL SERVICE INTERRUPTION | 28 | |||
| SECTION 18. DIRECTORS' APPROVAL | 28 | |||
| SCHEDULES: | ||||
| Schedule A: | Statement of Corporate Governance Practices | A-1 | ||
| Schedule B: | Mandate of the Board of Directors | B-1 | ||
| Schedule C: | Audit Committee Charter | C-1 | ||
| Schedule D: | Mandate of the Corporate Governance, Nominating and Human Resources Committee | D-1 | ||
| Schedule E: | Code of Ethical Conduct | E-1 | ||
| Schedule F: | By-Law One | F-1 |
MANAGEMENT INFORMATION CIRCULAR
SECTION 1 INTRODUCTION
This management information circular (the "Circular") is being furnished in connection with the solicitation of proxies
by and on behalf of the management of Aeterna Zentaris Inc. (the "Corporation" or "Aeterna Zentaris") for use at the annual and special meeting of shareholders of the Corporation
(the "Meeting") and any adjournment(s) or postponement(s) thereof. No person has been authorized to give any information or make any representation in connection with any matters to be
considered at the Meeting other than those contained in this Circular and, if given or made, any such information or representation must not be relied upon as having been
addition to solicitation by mail, employees or agents of the Corporation may solicit proxies by telephone or by other means. The cost of any such solicitation will be borne entirely by the
Corporation. The Corporation may also reimburse brokers and other persons holding the Corporation's common shares (the "Common Shares") in their names, or in the names of nominees, for their
costs incurred in sending proxy materials to beneficial or non-registered owners and obtaining their proxies or voting instructions. Furthermore, the Corporation has appointed Laurel Hill
Advisory Group ("Laurel Hill") as its soliciting agent pursuant to an agreement entered into between the Corporation and Laurel Hill on January 17, 2011. Laurel Hill is entitled to receive a
fixed fee of CAN$25,000 plus variable fees. The costs of this solicitation of proxies will be borne by the Corporation. Laurel Hill has established the following toll-free telephone line
to answer shareholders' questions in relation to the Meeting: 1-877-304-0211.
contained in this Circular is given as of March 24, 2011 unless otherwise specifically stated. The Corporation's directors and executive officers are generally paid in their home
country currency. All directors' and executive compensation information included in this Circular is presented in US dollars, unless otherwise indicated, and, to the extent a director or officer has
been paid in a currency other than US dollars (Canadian dollars or euros), the amounts have been converted from such person's home country currency to US dollars based on the following average
exchange rates: for the financial year ended December 31, 2010: 1.000 = US$1.326 and CAN$1.000 = US$0.970; for the financial year ended December 31, 2009:
1.000 = US$1.388 and CAN$1.000 = US$0.876$; and for the financial year ended December 31, 2008: 1.000 = US$1.464 and CAN$1.000
SECTION 2 INFORMATION CONCERNING VOTING AT THE MEETING
2.1 Your Vote is Important
As a shareholder of the Corporation, it is very important that you read the following information on how to vote your Common Shares, either by proxy or in person at the Meeting.
These security holder materials are being sent to both registered and non-registered shareholders of the Corporation. If you are a non-registered shareholder, and the
Corporation 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 Common Shares on your behalf. By choosing to send these materials directly to registered shareholders and certain non-registered