Notice to attend the annual general meeting of Recipharm AB (publ)

The shareholders in Recipharm AB (publ), reg. no. 556498-8425, are hereby invited to attend the Annual General Meeting (“AGM”) to be held on Monday 13 May 2019 at 3.00 pm at IVA Konferenscenter, Grev Turegatan 16 in Stockholm, Sweden.

Notification to attend etc.

Shareholders who wish to attend the AGM must

  • be recorded in the share register kept by Euroclear Sweden AB no later than on Tuesday 7 May 2019; and
  • notify the Company of their intention to attend the AGM at the latest by Wednesday 8 May 2019.

Notification to participate in the AGM must be in writing via the booking form available on the Company’s website www.recipharm.com or by e-mail to AGM2019@recipharm.com. Notification can also be made by telephone at +46-8-602 45 44. The notification shall state name, personal identification number/ company registration number, address, telephone number and number of shares held.

Proxies

Shareholders represented by proxy must issue a written, signed and dated proxy. If the proxy is issued by a legal entity, a certified copy of the valid registration certificate (Sw. registreringsbevis) of the legal entity (or similar document for non-Swedish legal entity) must be attached to the proxy. The proxy may not be older than one year unless it states that it is valid for a longer period of time (the validity of the proxy may not exceed five years).

In order to facilitate the registration, proxies in its original as well as registration certificates and other authorization documents should be sent to the Company at the address Recipharm AB (publ), Att: Anna Krantz, Box 603, SE-101 32 Stockholm, well in advance before the meeting.

Proxy forms for shareholders who wish to attend the meeting by proxy will be available on the Company website, www.recipharm.com.

Shareholding in the name of a nominee

In order to be entitled to participate in the meeting, shareholders who hold their shares through nominees (Sw. förvaltare) must request a temporary registration of the shares in their own name, with Euroclear Sweden AB. Shareholders who wishes to obtain such registration must contact the nominee regarding this well in advance of 7 May 2019.

Proposal for agenda

  1. Opening of the meeting
  2. Election of Chairman of the meeting
  3. Preparation and approval of the voting list
  4. Approval of the agenda
  5. Election of one or two persons to approve the minutes
  6. Determination as to whether the meeting has been duly convened
  7. Presentation of the annual report and the auditor’s report as well as the consolidated annual report and the auditor’s report on the consolidated annual report
  8. Statement by the CEO
  9. Adoption of the profit and loss statement and the balance sheet as well as the consolidated profit and loss statement and the consolidated balance sheet
  10. Resolution in respect of appropriation of the Company’s profit or loss as set forth in the adopted balance sheet
  11. Resolution in respect of discharge of the board members and the CEO from liability
  12. Determination of number of board members and auditors
  13. Determination of fees for board members and auditors
  14. Election of board members and Chairman of the Board of Directors
  15. Election of auditor
  16. Determination of the rules of procedure for the appointment of the Nomination Committee and the instruction for the Nomination Committee
  17. Resolution in respect of guidelines for remuneration for senior executives
  18. Resolution to implement a share savings program for 2019, including:
    (a) approval of the program;
    (b) authorization for the Board of Directors to resolve on direct issues of shares of series D;
    (c) authorization for the Board of Directors to resolve to repurchase of shares of series D
  19. Resolution in respect of authorization for the board to issue shares and/or convertible bonds
  20. Closing of the meeting

Proposals by the nomination committee

The Nomination Committee has consisted of Axel Calissendorff, Chairman of the Nomination Committee, representing Flerie Participation AB, Lars Backsell, Chairman of the Board of Directors of Recipharm AB, Johan Lannebo, representing Lannebo Fonder, and Ossian Ekdahl, representing Första AP-fonden.

Election of chairman of the meeting (item 2)

The Nomination Committee proposes that Lars Backsell is elected as Chairman of the meeting.

Determination of number of board members and auditors (item 12)

The Nomination Committee proposes that the board shall consist of eight (seven) board members elected by the general meeting. The Nomination Committee also proposes that the Company shall have one registered auditing company as auditor.

Determination of fees for board members and auditors (item 13)

The Nomination Committee proposes that the total remuneration for the Board of Directors shall amount to SEK 2,270,000 (previous SEK 1,765,000 but then for seven board members), of which SEK 500,000 (previous SEK 400,000) shall be paid to the Chairman of the Board of Directors and SEK 250,000 (previous SEK 220,000) shall be paid to each of the other board members elected by the general meeting and who are not employees of the group. The Nomination Committee proposes that a fee of SEK 100,000 (previous SEK 70,000) shall be paid to the Chairman of the Audit Committee and that a fee of SEK 50,000 (previous SEK 45,000) shall be paid to each of the other two members. The Nomination Committee proposes that a fee of SEK 40,000 (previous SEK 35,000) shall be paid to the Chairman of the Remuneration Committee and that a fee of SEK 30,000 (previous SEK 25,000) shall be paid to the other member.

The Nomination Committee proposes that the audit fees shall be paid in accordance with approved invoices.

Election of board members and chairman of the board of directors (item 14)

As members of the Board of Directors until the end of the next annual general meeting, the Nomination Committee proposes re-election of Marianne Dicander Alexandersson, Lars Backsell, Carlos von Bonhorst, Anders G. Carlberg, Thomas Eldered and Helena Levander and new election of Eva Sjökvist Saers and Ashwini Kakkar. Wenche Rolfsen has declined to be re-elected.

The Nomination Committee also proposes re-election of Lars Backsell as the Chairman of the Board of Directors.

Election of auditor (item 15)

The Nomination Committee proposes that the registered auditing company Ernst & Young AB shall be re-elected as auditor for the period until the next AGM 2020. Ernst & Young AB has informed that, if Ernst & Young AB is re-elected as auditor, Jennifer Rock-Baley will continue as the responsible auditor. The Nomination Committee’s proposal is recommended by the Company’s Audit Committee.     

Determination of the rules of procedure for the appointment of the Nomination Committee and the instruction for the Nomination Committee (item 16)

The Nomination Committee shall consist of four members – one representative from each of the three largest shareholders in terms of voting rights who wish to appoint a member of the Nomination Committee and the Chairman of the Board. In these instructions, ‘three largest shareholders in terms of voting rights’ refers to the three largest shareholders in terms of voting rights registered and grouped as owners by Euroclear Sweden AB.

The Chairman of the Board shall, as soon as possible after the information about the largest shareholders in terms of voting rights becoming known, contact the three largest shareholders in terms of voting rights in order to ascertain if they wish to appoint members of the Nomination Committee. If one or more of the three largest shareholders in terms of voting rights refrains from appointing a member of the Nomination Committee, the Chairman of the Board shall offer other major shareholders the opportunity to appoint a member of the Nomination Committee. Should such offer be made, it shall be made in turn to the largest shareholders in terms of voting rights (i.e. first to the fourth largest shareholder in terms of voting rights, thereafter to the fifth largest shareholder in terms of voting rights, and so on). This procedure is continued until the Nomination Committee consists of four members including the Chairman of the Board.

Information concerning ownership/owner groups held in Euroclear Sweden AB’s registers as of the last banking day in September shall constitute the basis for determining which shareholders are entitled to appoint a member of the Nomination Committee. At its first meeting, the Nomination Committee shall elect a Chairman. The Chairman of the Board of Directors or other board member shall not be the Chairman of the Nomination Committee. The Nomination Committee’s term of office shall run until a new Nomination Committee has been appointed.

Should any change in ownership occur among the largest shareholders in terms of voting rights and a shareholder who has previously not been entitled to appoint a member of the Nomination Committee thereby becomes a larger shareholder than any of those who have appointed a member of the Nomination Committee (“new major shareholder”), the Nomination Committee shall, if the new major shareholder expresses a desire to appoint a member of the Nomination Committee, decide that the member of the Nomination Committee who represents the smallest shareholder in terms of voting rights shall be dismissed and replaced by the member appointed by the new major shareholder. Should a new major shareholder wish to appoint a member of the Nomination Committee, this shareholder shall notify this to the Nomination Committee’s chairperson. Such notification shall include the name of the person whom the new major shareholder appoints as member of the Nomination Committee.

A shareholder who has appointed a member of the Nomination Committee has the right to dismiss the member and appoint a new member.

The Nomination Committee shall submit proposals for:

(a) Chairman of the AGM,

(b) number of board members to be elected by the AGM,

(c) Chairman and other members elected as the Board of Directors by the AGM;

(d) fees and other remuneration to each of the board members elected by the AGM and to members of the committees of the Board of Directors,

(e) auditors,

(f) fees to auditors;

(g) the election of the Nomination Committee, or a resolution on rules of procedures for the appointment of the Nomination Committee, and a resolution on the instructions for the Nomination Committee, and

(h) remuneration for the members of the Nomination Committee.

Should the Nomination Committee’s proposal entail a deviation from the Swedish Corporate Governance Code, the Nomination Committee shall, at the same time as it submits its proposal, provide the company with an explanation for the deviation.

No fee shall be paid to the members of the Nomination Committee. The members of the Nomination Committee are entitled to payment from the company for proven reasonable expenses for the execution of their duties, such as, for example, the cost of recruitment services.

These rules of procedure for appointment of the Nomination Committee and instructions for the Nomination Committee at Recipharm AB (publ) shall apply until further notice.

Proposals by the board

Dividend (item 10)

The board proposes that the AGM decides on a dividend of SEK 1.25 per share and that the record date for the dividend shall be Wednesday 15 May 2019. If the AGM decides in accordance with the proposal, the dividend will be paid to shareholders on Monday 20 May 2019.

Resolution in respect of guidelines for remuneration of senior executives (item 17)

The Board of Directors proposes that the AGM shall resolve on guidelines for remuneration and other terms of employment for senior executives according to the following.

These guidelines for remuneration of senior executives include salary and other terms for the CEO and other senior executives in Recipharm. Other senior executives are those who, besides the CEO, constitute the group management.

The opinion of Recipharm is that remuneration shall be paid according to competitive terms, which enables senior executives to be recruited and retained. Remuneration of senior executives may consist of basic salary, annual bonus, pension, other benefits and share-based incentive programs. The remuneration of the CEO and other senior executives shall be based on factors such as duties, expertise, experience, position and performance. Furthermore, the relationship between basic salary and annual bonus shall be proportionate to employees’ responsibilities and duties. The annual bonus shall be linked to pre-determined criteria designed to promote the Company’s creation of value in the long-term. The remuneration shall not discriminate on grounds of gender, ethnic background, national origin, age, disability, religion or other irrelevant factors.

In addition to salary, the CEO and other senior executives are generally entitled to an annual bonus of up to 40 percent of the base salary, annual pension equivalent to up to 35 percent of annual salary or according to collective agreements, sick pay equivalent to 75-90 percent of the monthly salary during the first 3-6 months of a period of sickness. The CEO and other senior executives generally have the right to health insurance and company car as well as other benefits in accordance with local practice. When possible, the pension arrangements shall be in accordance with current collective agreements. In addition to the bonus, approved share or share-price related incentive programs may be added.

Regarding senior executives, provided that collective agreements do not state otherwise, the employee and the employer have a mutual notice period of up to six months. In addition to salary during the notice period, severance pay of up to six months of salary may occur.

Senior executives residing outside Sweden may receive other remuneration or benefits that are competitive in the country of their residence, preferably equivalent to those of other senior executives residing in Sweden.

The board members are paid fees determined by the general meeting. Board members elected by the shareholders’ meeting shall, in specific cases, receive a fee for services within their respective areas of expertise, which do not constitute work of the board. These services shall be remunerated according to market terms, which shall be approved by the board.

The board shall be entitled to deviate from the guidelines in individual cases if there are special reasons for doing so.

Resolution to implement a share savings program for 2019 (item 18)

The AGMs of 2014 – 2018 decided to implement share savings programs for all employees of the Recipharm group (“Previous Programs”). The board’s intention is to make the structure of Previous Programs long-lasting, which is why the board intends to make similar proposals to be decided upon by the AGMs in the years to come. The board therefore proposes that the AGM approves a share savings program for 2019 (the “Program”), which is to include all employees in the group according to the following.

Objective and motivation

The main purpose of the Program is to increase the possibilities to recruit and retain employees in the group. Ownership commitment among the participants of the Program is also expected to increase the interest for the operations and the results, as well as raise the motivation and the affinity with Recipharm. The Program will constitute a competitive and motivating incitement for senior executives and other key members of the Recipharm group. The board therefore proposes that the AGM resolves to approve a share savings program for 2019 mainly based on the Previous Programs and based on the following conditions and principles.

Preconditions for participation

The Program will cover all employees in the Recipharm group operating in Sweden and other countries. Participation in the Program requires that participants, with their own funds, during the period from July 2019 to July/August 2020, acquires shares of series B in Recipharm (“Saving Shares”) at market price on Nasdaq Stockholm and for an amount not exceeding 5 percent of each participant’s annual fixed gross salary. Participation for senior executives, members of the subsidiaries executive groups and selected key employees, who are also eligible for the Performance Shares as described below, requires that participants acquire Saving Shares for an amount not exceeding 10 percent of the annual fixed gross salary.

Scope and dilution of shares

The maximum number of shares covered by the Program amounts to 1,119,026 shares of series B, corresponding to approximately 1.62 percent of the number of issued shares after dilution and approximately 0.54 percent of the votes after dilution. Considering the number of shares estimated to be issued according to the group’s other outstanding share saving programs, the total dilution effect for the 2019 Program and other outstanding programs is expected to amount to a total of approximately 1.80 percent of issued shares after dilution and approximately 0.60 percent of the votes after dilution. The expected dilution has been calculated on actual allocated shares in the 2016 and 2017 program and actual allocated shares and shares expected to be allocated in relationship with actual number of participants in the 2018 program. For the 2019 program the expected dilution has been calculate with the parameters disclosed in section “Estimated costs and value of the Program, and effects on key ratios”.

Safety measures

To ensure the delivery of Matching Shares and Performance Shares (see definitions below) the board proposes an authorization for the board to decide upon a directed issue of convertible and redemption shares of series D, which are to be repurchased and converted to shares of series B within the Program, according to item 18(b) and 18(c) below.

Estimated costs and value of the Program, and effects on key ratios

The Program will be accounted for in accordance with IFRS 2 which stipulates that the rights should be recorded as a personnel expense in the income statement during the vesting period. Based on the assumptions of a share price of SEK 136.5 (closing share price on 9 April 2019), a participation of 50 percent, no annual employee turnover among the participants of the Program and full satisfaction of performance conditions, the cost for the Program, excluding social security costs, is estimated to approximately SEK 76.4 million. The cost will be allocated over the years 2019-2022. The estimated social security costs will be recorded as a personnel expense in the income statement by current reservations. The social security costs are estimated to around SEK 30.5 million with the assumptions above, an average social security tax rate of 30 percent and an annual share price increase for Recipharm’s shares of series B of 10 percent during the vesting period.

However, the board assess that the positive effects on the financial results of Recipharm, which are expected to arise from the Program, will outweigh the costs related to the Program.

Preparation of the matter

The Program has been initiated by the Board of Directors of Recipharm and has been worked out in detail in cooperation with external advisors. The Program has been prepared in the Remuneration Committee and processed at the board meetings held in the beginning of 2019.

Resolution on the adoption of share savings program for 2019 (item 18(a))

With reference to the description above, the board proposes that the AGM decides to adopt a share savings program substantially based on the terms and principles below.

  1. The Program will encompass all employees of the Recipharm group who are active in Sweden as well as other countries. Participation in the Program requires that participants, with their own funds, during the period from July 2019 to July/August 2020, acquires Saving Shares in Recipharm at market price on Nasdaq Stockholm and for an amount not exceeding 5 percent of each participant’s annual fixed gross salary. Participation for senior executives, members of the subsidiaries’ managerial groups and selected key employees, who are also eligible for the Performance Shares as described below, requires that participants acquire Saving Shares for an amount not exceeding 10 percent of the annual fixed gross salary.
  2. The duration of the Program is suggested to be set at just above 3 years from the effective date of the Program (“Saving Period”).
  3. A participant who keeps the Saving Shares during the entire Saving Period, and additionally remain employed in the group during the entire Saving Period, will, after the expiration of the Saving Period, receive one new Saving Share of series B for every old Saving Share (“Matching Share”), free of charge.
  4. The senior executives within the company group, members of local managerial groups and selected key employees will, in addition to Matching Shares, also be eligible for free additional shares of series B in Recipharm (”Performance Shares”), provided that the participant remains employed within the group for the entire Saving Period, and also fulfils certain requirements of performance. These requirements of performance involve that the yield on the Recipharm share remains positive during the entire Saving Period and that the outcome of the Program is made dependent on the total yield in relation to certain predetermined reference companies. The CEO of the company is entitled to a maximum of six Performance Shares per Saving Share, and certain other senior executives (including affiliates’ CEOs) are entitled to a maximum of four Performance Shares respectively. Members of local managerial groups (excluding affiliates’ CEOs) and selected key employees are entitled to one Performance Share per Saving Share. As a board member (who is, moreover, one of the main owners of the company), the current CEO of the company, Thomas Eldered will refrain from participating in the Program.
  5. The number of Matching Shares and Performance Shares can be subject of recalculation in the event of an intervening bonus issue, preferential issue, split, and/or other similar measures.
  6. The board, or the remuneration committee of the company, shall be responsible for the further construction of the detailed conditions for the Program, within the scope of the conditions and guidelines stated above. The board shall have the right to make necessary adjustments in order to observe legislation, market conditions or restrictions of certain jurisdictions. The board shall also, in the event that participation and/or delivery of shares to participants outside Sweden cannot be fulfilled at reasonable costs and with a reasonable amount of administrative efforts, have the right to make adjustments, encompassing inter alia a right to decide upon a cash deduction-offer to an employee. Furthermore, it is proposed that the board shall have the right to make other amendments, if the board finds it suitable, if changes occur within the Recipharm group or its surroundings, which imply that the Program does no longer fulfils its overarching purpose.
  7. The maximum number of shares covered by the Program amounts to 1,119,026 shares of series B, corresponding to approximately 1.62 percent of the number of issued shares after dilution and approximately 0.54 percent of the votes after dilution. Considering the number of shares estimated to be issued under the group’s other outstanding share saving programs, the expected total dilution effect amounts to approximately 1.80 percent of the issued shares after dilution and approximately 0.60 percent of the number of votes after dilution.

Resolution on authorization for the Board of Directors to decide on a direct issue of shares of series D (item 18(b))

The board proposes that the AGM resolves to authorize the board to, at one or several occasions during the period until the next AGM, issue of up to 1,119,026 shares of series D, each with a quota value of SEK 0.50. The new shares may, with deviation from the shareholders’ preferential rights, be subscribed for by a bank or a securities company. The amount to be paid for each new share (the subscription price) shall correspond to the share’s quota value at the time of the subscription.

The purpose of the authorization and the reason for deviation from the shareholders’ preferential rights is to assure delivery of shares to the participants in accordance with all Recipharm’s share saving programs.

Resolution on authorization for the board to decide on a repurchase of shares of series D (item 18(c))

The board proposes that the AGM resolves to authorize the board to, for the period until the next AGM, decide on a repurchase of shares of series D. Repurchase may only take place by way of an acquisition offer directed to all holders of shares of series D and shall encompass all outstanding shares of series D. Purchases shall be made at a price per share corresponding to the quota value per share applicable at the time of subscription. Payment of repurchased shares shall be made in cash.

The purpose of the authorization is to hedge to undertakings of the delivery of shares in accordance with all Recipharm’s share saving programs.

The board’s opinion, pursuant to Chapter 19, section 22 of the Swedish Companies Act, on the proposal to authorize the board to decide on a repurchase of shares of series D is available in accordance to the section “Documents” below.

Resolution in respect of authorization for the board to resolve to issue of shares and/or convertible bonds (item 19)

Recipharm has a clear acquisition strategy aimed at enabling the Company to participate in the consolidation of CDMO industry. Through acquisitions, Recipharm is offered the opportunity to have access to both new technologies and extended capacity, and new customers and markets. Through acquisitions, Recipharm also strengthen its presence in emerging markets.

The Board of Directors proposes that the AGM authorizes the Board of Directors to, on one or several occasions during the period until the next AGM, with or without deviation from the shareholders’ preferential rights, resolve on share issues and/or issues of convertible bonds that involve the issue of or conversion to a maximum of 6,800,000 shares of series B, corresponding to a dilution of approximately 10.0 percent of the share capital and approximately 3.3 percent of the voting rights, based on the current number of shares in the Company.

The purpose of the authorization and the reason for the deviation from the shareholders’ preferential rights, if any, is to enable the Company to carry out issues of shares and/or convertible bonds in a time-efficient way to finance acquisitions or investments in new or existing businesses. The issuance of shares or convertible bonds under the authorisation shall, in case of deviation from the shareholders’ preferential rights, be made at a subscription price according to the prevailing market conditions at the time of the issuance of the shares and/or convertible bonds. Payment for subscribed shares and/or convertible bonds shall be made in cash, in kind or by way of set-off.

OTHER INFORMATION

Number of shares and votes

As per 12 April 2019 the total number of shares in the Company amounts to 67,775,793 representing a total of 204,781,515 votes, whereof 15,222,858 shares of series A, 52,182,935 shares of series B and 370,000 shares of series D. The Company holds 10,121 shares of series B and 370,000 shares of series D.

Majority requirement of the proposed resolutions in items 18-19

A resolution pursuant to item 18(a) is only valid if approved by shareholders representing at least nine-tenths of the votes cast as well as the shares represented at the AGM. The items 18(a), 18(b) and 18(c) are conditional upon each other.

Resolutions pursuant to item 18(b), 18(c) and 19 are only valid if approved by shareholders representing at least two-thirds of the votes cast as well as the shares represented at the shareholders’ meeting.

Documents

The Board of Directors’ complete proposal pursuant to items 16 and 18, the Board of Directors’ reports and the auditor’s statements pursuant to the Swedish Companies Act (SFS 2005:551), the Nomination Committee’s statement regarding the proposals relating to the Board of Directors and information about the proposed board members will, no later than on 12 April 2019, be held available at the Company’s website, www.recipharm.com, at the Company’s office at Drottninggatan 29 in Stockholm and will be sent free of charge to shareholders who so request and provide their postal address or email address. The annual report and the audit report will be available at the Company’s website and at the Company’s office at the address set out above as from 17 April 2019.  

The shareholders’ right to submit questions

The Board of Directors and the CEO shall, if any shareholder so requests and the board believes that it may be done without significantly harming the Company, provide information regarding circumstances that may affect the assessment of an item on the agenda, circumstances that can affect the assessment of the Company’s or its subsidiaries’ financial position and the Company’s relationship to other companies within the group as well as the consolidated financial statements. Anyone wishing to submit questions in advance can do so by sending them to the Company at the address mentioned above.

____________________

Stockholm, April 2019

RECIPHARM AB (PUBL)

The Board of Directors