3 years ago

Annual Report 2008 - AMG Advanced Metallurgical Group NV

Annual Report 2008 - AMG Advanced Metallurgical Group NV

have provisions in their

have provisions in their contracts that pertain to a change of control. Additionally, the AMG Option Plan has a provision that permits the Management Board to cancel or modify the options granted to Management Board members and other employees, upon a change of control. Other than the above-mentioned agreements, the Company is not party to any other important agreements that will come into force, be amended or terminated upon a change of control pursuant to a public takeover offer. Dutch Corporate Governance Code The Company endorses the Corporate Governance Code’s principles as applicable to the Company in 2008 and applies virtually all best practice provisions as included in the Dutch Corporate Governance Code applicable to the Company in 2008. Deviations from the best practice provisions involve the remuneration policies of the Company. In particular these deviations stem from the specialized nature of the Company’s business, a reflection of local market practice in which executives may be employed and the recognition of pre-existing contractual agreements. AMG was formed in March 2007 through the merger of eight operating companies. The members of the Management Board had pre-existing contracts as executives of certain of the operating companies that formed AMG. These contracts reflect local market conditions and customary provisions in the countries in which the executives may have been employed. They have provisions that do not fully comply with the Corporate Governance Code’s best practices. In view of the specialized nature of AMG’s business and the qualifications and expertise of the present members of the Management Board, AMG intends to honor its existing contractual commitments to those members of the Management Board, in order to retain their services and to maintain their commitment to the Company. In 2008, the Remuneration Committee of the Supervisory Board developed an appropriate remuneration policy for the present members of the Management Board and any future members of the Management Board for the years 2009 and beyond, in the light of various factors including the Company’s existing contractual commitments to the present members of the Management Board. In doing so, the Remuneration Committee has sought advice from compensation and benefit consultants on remuneration packages offered by companies similar to the Company in terms of size and complexity. The (revised) remuneration policy for members of the Management Board as proposed by the Supervisory Board will be submitted for adoption by the General Meeting of Shareholders in its Annual Meeting to be held in May 2009. This (revised) remuneration policy is part of and can be found in the Report of the Supervisory Board set forth in this Annual Report. Below are the best practice provisions included in the Dutch Corporate Governance Code applicable to the Company in 2008, not (fully) applied during 2008. II.2.1 Options to acquire shares are a conditional remuneration component, and become unconditional only when the Management Board members have fulfilled predetermined performance criteria after a period of at least three years from the grant date. The members of the Management Board have been granted unconditional options. II.2.2 If the company, notwithstanding best practice provision II.2.1, grants unconditional options to management board members, it shall apply performance criteria when doing so and the options should, in any event, not be exercised in the first three years after they have been granted. The members of the Management Board have been granted unconditional options that do not have any performance criteria required to be met. Additionally, the options have a vesting schedule which permits a majority of the options to be exercised within the first three years after having been granted. 60 Corporate Governance

II.2.7 The maximum remuneration in the event of dismissal is one year’s salary (the ‘fixed’ remuneration component). If the maximum of one year’s salary would be manifestly unreasonable for a Management Board member who is dismissed during his first term of office, such board member shall be eligible for a severance pay not exceeding twice the annual salary. Each member of the Management Board has a contract of employment with AMG. That contract provides for a term of two years with severance of two years’ compensation payable in the event of termination by the Company without cause. Each member also has a contract entered into by the member with a now-constituent entity of AMG prior to the formation of AMG. With respect to each member, other than Dr. Walter, the contracts generally provide for a comparable term and severance. In the case of Dr. Walter, his original contract, dated October 1, 2006, specified a term of five years; no reference is made to payments of severance in the event of termination. III.7.1 A supervisory board member shall not be granted any shares and/or rights to shares by way of remuneration. The General Meeting of Shareholders approved granting shares to members of the Supervisory Board as part of their remuneration. III.7.2 Any shares held by a Supervisory Board member in the company on whose board he sits are long-term investments. The undertaking by members of the Supervisory Board not to transfer or otherwise dispose of shares in AMG’s share capital until the earlier of the third anniversary of the date of the grant and the first anniversary of the date on which such member ceases to be a member of the Supervisory Board is limited to shares granted as part of their annual remuneration and does not extend to any other shares in the Company held by such member. Conflict of Interest In February 2009 the Company acquired 3,938,200 common shares of Timminco at a price of C$3.55 per share (a total cost of C$13,980,610), as part of a C$25 million private placement by Timminco, the balance of which was fully subscribed by other investors. The proceeds of this private placement were used for general corporate purposes, including repayment of funds drawn on Timminco’s revolving credit facility. The acquisition of the Timminco shares was approved by the Management Board and the Supervisory Board in accordance with articles 11, 12 and 13 of the Rules of Procedure of the Management Board. Neither Dr. Schimmelbusch, who also serves as Chairman and CEO of Timminco, nor Mr. Spector, who also serves as Vice-Chairman and a Director of Timminco, participated in the discussion or the vote on the acquisition of the shares in the meeting of the Management Board. Mr. Messman, who also serves as a Director of Timminco, did not participate in the discussion or the vote on the acquisition of the shares in the meeting of the Supervisory Board. Accordingly, best practice provisions II.3.2 up to and including II.3.4 as well as best practice provisions III.6.1 up to and including III.6.3 of the Dutch Corporate Governance Code have been complied with. No further conflicts of interest that were of material significance to the Company and/ or members of the Management Board and Supervisory Board were reported in the period starting January 1, 2008 up to and including February 28, 2009 other than the conflict of interest described above. Further during this period the Company did not enter into any material transaction with a shareholder holding an interest of 10% or more in the Company’s share capital. Corporate Governance 61

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