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The following is an excerpt from a DEF 14A SEC Filing, filed by EMERGENT BIOSOLUTIONS INC. on 4/3/2009.
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EMERGENT BIOSOLUTIONS INC. - DEF 14A - 20090403 - AUDIT_COMMITTEE
other interested parties and for providing copies or summaries to the other directors as he or she considers appropriate.
 
Under procedures approved by a majority of our independent directors, communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the lead director considers to be important for the directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we receive repetitive or duplicative communications.
 
Stockholders and other interested parties who wish to send communications on any topic to our board of directors should address such communications to Board of Directors, c/o Corporate Secretary, Emergent BioSolutions Inc., 2273 Research Boulevard, Suite 400, Rockville, Maryland 20850.
 
Independent Registered Public Accounting Firm’s Fees
 
The following table summarizes the fees of Ernst & Young LLP, our independent registered public accounting firm, billed to us for each of the last two fiscal years for audit and other services. For 2008, audit fees include an estimate of amounts not yet billed.
 
                 
Fee Category
  2008     2007  
 
Audit Fees(1)
  $ 965,241     $ 1,214,900  
Audit-Related Fees(2)
    47,500        
Tax Fees(3)
    365,742       230,661  
All Other Fees
           
                 
Total Fees
  $ 1,378,483     $ 1,445,561  
                 
 
 
(1) Audit fees consist of fees for the audit of our consolidated financial statements and other professional services provided in connection with statutory and regulatory filings or engagements.
 
(2) Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit and the review of our financial statements and which are not reported under “Audit Fees.” These services relate to the filing of our shelf registration statement.
 
(3) Tax fees consist of fees for tax compliance, tax advice and tax planning services. Tax compliance services, which relate to preparation of tax returns and claims for refunds, accounted for $119,731 of the total tax fees billed in 2008 and $82,980 of the total tax fees billed in 2007. Tax advice and tax planning services relate to assistance with tax credit and deduction studies and calculations, tax advice related to acquisitions, structure and transfer pricing and tax audits.
 
Pre-Approval Policies and Procedures
 
Our audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. These policies generally provide that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the audit committee or the engagement is entered into pursuant to one of the pre-approval procedures described below.
 
From time to time, our audit committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount.
 
Audit Committee Report
 
The audit committee has reviewed our audited financial statements for the fiscal year ended December 31, 2008 and discussed them with our management and our independent registered public accounting firm.
 
The audit committee also has received from, and discussed with, our independent registered public accounting firm various communications that our independent registered public accounting firm is required to provide to the audit committee, including the matters required to be discussed by the Statement on Auditing Standards No. 61, as


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amended (AICPA, Professional Standards , Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
 
The audit committee has received the written disclosures and the letter from our independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the audit committee concerning independence, and has discussed with our independent registered public accounting firm their independence.
 
Based on the review and discussions referred to above, the audit committee recommended to our board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2008.
 
By the Audit Committee of the Board of Directors of Emergent BioSolutions Inc.
 
Zsolt Harsanyi, Ph.D., Chair
Ronald B. Richard
Louis W. Sullivan, M.D.
 
Transactions with Related Persons
 
Consulting Agreement
 
The Hauer Group provides us strategic consulting and domestic marketing advice pursuant to a consulting agreement we initially entered in March 2006. In March 2007, we amended this consulting agreement to extend its term through March 2008. Effective as of April 1, 2008, upon the expiration of this consulting agreement, we entered into a new consulting agreement with The Hauer Group with a term that expires on April 1, 2009, unless extended by mutual agreement. Jerome Hauer, who is a member of our board of directors, is the chief executive officer of The Hauer Group, and Mr. Hauer and his wife are the sole owners of The Hauer Group. Under the terms of both the consulting agreement in effect before April 1, 2008 and the consulting agreement in effect after April 1, 2008, we agreed to pay The Hauer Group $15,000 per month for its services. Under these consulting agreements, we paid The Hauer Group approximately $180,000 in 2008 and $45,000 in the three months ended March 31, 2009.
 
Agreements with Intergen N.V.
 
On February 10, 2009, we entered into an amended and restated marketing agreement with Intergen N.V. The marketing agreement amends and restates a prior amended and restated marketing agreement. The marketing agreement is effective as of November 5, 2008, the date the prior agreement expired in accordance with its terms. Yasmine Gibellini, the chairperson and a major shareholder of Intergen, is the sister of Fuad El-Hibri, our chief executive officer and chairman of our board of directors. Under the marketing agreement, we appointed Intergen as our marketing representative for the sale and promotion of BioThrax, recombinant Protective Antigen (rPA) anthrax vaccine, anthrax immune globulin, recombinant botulinum vaccine and botulinum immune globulin in Saudi Arabia, Qatar and United Arab Emirates, unless the export of such products to any of these countries is prohibited by the U.S. government. The appointment is non-exclusive. We agreed to pay Intergen a fee equal to 17.5% of net sales of the marketed products pursuant to customer contracts in Saudi Arabia, and 15% in Qatar and United Arab Emirates. Under the marketing agreement, we agreed to reimburse Intergen for out-of-pocket expenses attributable to a particular purchase contract up to a specified percentage of net sales under that contract. The term of the marketing agreement expires on November 5, 2009, and will be extended automatically for successive one-year terms unless terminated by either party. Either party may terminate the marketing agreement on 90 days notice. We have not paid Intergen any fees to date under this agreement.
 
In January 2000, we entered into a termination and settlement agreement with Intergen under which we were obligated to pay Intergen a $70,000 settlement payment when we received more than $3.0 million in the aggregate pursuant to contracts for sale of anthrax vaccine to a party other than the U.S. government. This settlement payment was made in February 2009.


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Registration Rights
 
In September 2006, we granted registration rights with respect to shares of our common stock to our principal stockholders. The following table sets forth the number of shares of our common stock subject to these registration rights that are held by our 5% stockholders and their affiliates.
 
         
    Number of Shares of
 
Name
  Common Stock  
 
Intervac, L.L.C. 
    7,681,835  
BioPharm, L.L.C. 
    3,665,043  
Biovac, L.L.C. 
    1,599,155  
Intervac Management, L.L.C. 
    719,275  
 
Demand registration rights.   Subject to specified limitations, holders of these registrations rights may, beginning 90 days after our initial public offering, require that we register all or part of our common stock subject to the registration rights for sale under the Securities Act of 1933. These holders may demand registration of our common stock so long as the offering price to the public of the shares requested to be registered is at least $25,000,000. We are required to effect only one demand registration, subject to specified exceptions.
 
Incidental registration rights.   If we propose to register any of our common stock under the Securities Act of 1933, subject to specified exceptions, either for our own account or for the account of other security holders, holders of registration rights are entitled to notice of the registration and to include shares of common stock subject to the registration rights in the registered offering.
 
Limitations and expenses.   With specified exceptions, the right to include shares in a registration is subject to the right of underwriters for the offering to limit the number of shares included in the offering. We are required to pay one-half of all fees, costs and expenses of any demand registration, other than underwriting discounts and commissions.
 
Outside Legal Counsel
 
We have engaged Wilmer Cutler Pickering Hale and Dorr LLP, or WilmerHale, to provide legal services to us, including with respect to general corporate, securities law and licensing matters and for litigation strategy and counseling. Denise Esposito, our senior vice president, legal affairs and general counsel is married to a former partner at WilmerHale, who did not participate in providing legal services to the Company. We incurred fees for legal services rendered by WilmerHale of approximately $1,473,000 in 2008. Ms. Esposito’s husband was not affiliated with WilmerHale during 2009. We engage WilmerHale in the ordinary course of our business on an arm’s length basis and pay WilmerHale based on its standard rates.
 
Policies and Procedures for Related Person Transactions
 
In March 2007, our board of directors adopted written policies and procedures for the review of any transaction, arrangement or relationship in which Emergent BioSolutions is a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.
 
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our general counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.


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A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the committee will review and consider:
 
  •  the related person’s interest in the related person transaction;
 
  •  the approximate dollar value of the amount involved in the related person transaction;
 
  •  the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
 
  •  whether the transaction was undertaken in the ordinary course of our business;
 
  •  whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;
 
  •  the purpose of, and the potential benefits to us of, the transaction; and
 
  •  any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.
 
The committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is consistent with our best interests. The committee may impose any conditions on the related person transaction that it deems appropriate.
 
In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, the board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
 
  •  interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $1 million dollars or 2% of the annual gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of our annual gross revenues; and
 
  •  a transaction that is specifically contemplated by provisions of our charter or bylaws.
 
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the compensation committee in the manner specified in its charter.
 
Under the audit committee charter that was in place prior to our initial public offering, the audit committee was responsible for reviewing and approving related person transactions. In reviewing such transactions, the audit committee considered the nature of and business reason for such transactions, how the terms of such transactions compared to those which might be obtained from unaffiliated third parties and whether such transactions were otherwise fair to and in the best interests of, or not contrary to, our best interests. In addition, all related person transactions required prior approval, or later ratification, by the audit committee. There were no related person transactions in 2008 with respect to which these policies and procedures were not followed.


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EXECUTIVE OFFICERS OF THE REGISTRANT
 
Our executive officers and their respective ages and positions as of March 23, 2009 are as follows:
 
             
Name
 
Age
  Position
 
Fuad El-Hibri
    51     Chairman of the Board of Directors and Chief Executive Officer
Daniel J. Abdun-Nabi
    54     President and Chief Operating Officer
R. Don Elsey
    55     Senior Vice President, Finance and Administration, Chief Financial Officer and Treasurer
Denise Esposito
    42     Senior Vice President, Legal Affairs, General Counsel and Secretary
Kyle W. Keese
    47     Senior Vice President, Manufacturing Operations
Stephen Lockhart
    52     Senior Vice President, Product Development
 
Fuad El-Hibri.   For more information about Mr. El-Hibri, see his biography under the caption “Proposal One — Election of Directors.”
 
Daniel J. Abdun-Nabi.   For more information about Mr. Abdun-Nabi, see his biography under the caption “Proposal One — Election of Directors.”
 
R. Don Elsey.   Mr. Elsey has served as senior vice president, finance and administration since May 2007, chief financial officer since March 2006 and treasurer since June 2005. Mr. Elsey previously served as vice president, finance from June 2005 to May 2007. Mr. Elsey served as the director of finance and administration at IGEN International, Inc., a biotechnology company, and its successor BioVeris Corporation, from April 2000 to June 2005. Prior to joining IGEN, Mr. Elsey served as director of finance at Applera, a genomics and sequencing company, and in several finance positions at International Business Machines, Inc. Mr. Elsey received an M.B.A. in finance and a B.A. in economics from Michigan State University. Mr. Elsey is a certified management accountant.
 
Denise Esposito.   Ms. Esposito has served as senior vice president, legal affairs and general counsel since April 2007 and secretary since January 2008. Ms. Esposito previously served as vice president and deputy general counsel from December 2004 to April 2007. Ms. Esposito was a partner at the law firm Wilmer Cutler Pickering Hale and Dorr LLP from January 2000 to December 2004. Ms. Esposito received a J.D. from the University of Michigan School of Law and a B.A. in economics from Rutgers University.
 
Kyle W. Keese.   Mr. Keese has served as senior vice president, manufacturing operations since January 2008. Mr. Keese previously served as senior vice president, corporate affairs from May 2007 to January 2008, senior vice president, marketing and communications from March 2006 to May 2007 and vice president, sales and marketing of Emergent BioSolutions from June 2004 to March 2006 and of BioPort Corporation from June 2003 to June 2004. Mr. Keese served as vice president, business development for Antex Biologics, Inc., a biotechnology company, from March 2001 to May 2003, when we acquired substantially all of the assets of Antex. Prior to joining Antex, Mr. Keese served in various business development, marketing and sales management positions at IGEN International and Abbott Laboratories and as an officer in the U.S. Navy. Mr. Keese received an M.B.A. from National University and a B.A. in mathematics and computer science from Tulane University.
 
Stephen Lockhart.   Dr. Lockhart has served as senior vice president, product development since June 2008. Dr. Lockhart previously served as the president of our subsidiary, Emergent BioSolutions Product Development UK Ltd., from October 2007 to June 2008. Prior to joining Emergent, Dr. Lockhart served as assistant vice president in charge of global bacterial vaccine clinical research at Wyeth Pharmaceuticals, a pharmaceutical and health care product company, from January 2005 until October 2007 and as senior director of global bacterial vaccine clinical research at Wyeth from August 2000 to January 2005. Dr. Lockhart received an M.A. from Cambridge University and received his advanced medical and research degrees from the University of Oxford. Dr. Lockhart is a Fellow of the Faculty of Pharmaceutical Medicine.


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