INOVIO BIOMEDICAL CORPORATION
CORPORATE GOVERNANCE POLICY
May 5, 2006
Inovio Biomedical Corporation
11494 Sorrento Valley Road
San Diego, California
92121
ix
TABLE OF CONTENTS
1. SUMMARY 4
What is Corporate Governance 4
Background 4
2. DIRECTORS AND OFFICERS OF THE COMPANY 5
Board of Directors of the Company (the “Board”) 5
Officers of the Company 5
4. CORPORATE GOVERNANCE GUIDELINES 6
COMPOSITION OF BOARD OF DIRECTORS 6
CONDUCT 7
5. COMMITTEES ISSUES 11
Audit Committee CHARTER 12
Compensation Committee CHARTER 18
Nomination and Corporate Governance Committee 21
APPENDIX A i
APPENDIX B iii
Statement of Policy iii
We Insist on Honest and Ethical Conduct iii
RECORD KEEPING…………………………………………………………………………………………………..V
Provide Full, Fair, Accurate, Timely and Understandable Disclosure vi
Special Ethical Obligations for Employees with Financial Reporting Responsibilities vii
We Comply With all Laws, Rules and Regulations viii
government and third-party investigations…………………………………………………….. viii
POLITICAL ACTIVITIES……………………………………………………………………………………….....VIII
MONEY LAUNDERING………………………………………………………………………………………….…IX
FOREIGN CORRUPT PRACTICES ACT COMPLIANCE…………………………………………………………IX
Compliance Procedures; Reporting Violations; and Effect of Violations ix
Administration x
Reporting Violations and Questions x
No Retaliation x
Internal Investigation x
Retention of Reports and Complaints x
Consequences of a Violation x
At Will Employment xi
Compliance Procedures; Reporting Violations; and Effect of Violations xi
APPENDIX C xii
APPENDIX D xiii
1. SUMMARY
What is Corporate Governance
Corporate governance refers to the process and structure used to direct and manage the business and affairs of a Company. Corporate governance processes and structures define the division of power among the shareholders, the board of directors and the management of the Company and establish accountability.
Background
In September 1998, in response to growing concerns about companies misapplying U.S. GAAP in order to manage earnings expectations, former SEC Chairman Arthur Levitt launched an initiative aimed at improving the credibility and transparency of financial disclosure. At the request of the U.S. Securities and Exchange Commission (the "SEC"), the New York Stock Exchange ("NYSE") and National Association of Securities Dealers ("NASD") sponsored the Blue Ribbon Committee. In February 1999, the Blue Ribbon Committee released its report containing ten recommendations aimed at strengthening the role of corporate audit committees in overseeing the financial reporting process. The specifics of the Blue Ribbon Committee's recommendations on audit committees dealt with the composition and mandate of the audit committee, and in particularly, the processes by which the audit committee could enhance the independence of outside auditors. The American Stock Exchange LLP ("AMEX") has adopted certain requirements put forward by the Blue Ribbon Report on Audit Committees.
Recent developments in the United States have refocused attention on the importance of effective audit committees for the integrity of the financial reporting system. On July 30, 2002, President Bush signed the Sarbanes-Oxley Act of 2002 ("SOX"), considered by many to be our generation's most sweeping legislation affecting accounting, disclosure and corporate governance.
The board of directors of Inovio Biomedical Corporation (the “Company”) believes it is in the best interest of the Company and its shareholders to comply with the corporate governance standards set out in the report released by Blue Ribbon Committee, the AMEX policies and the SOX. To that end, it has adopted this Corporate Governance Policy (the "Policy") and has established a Nomination and Corporate Governance Committee to ensure the practices and procedures described in the Policy are complied with.
2. DIRECTORS AND OFFICERS OF THE COMPANY
Board of Directors of the Company (the “Board”)
The Board currently consists of:
Name / Type of DirectorAvtar Dhillon / non-independent
Felix Theeuwes / independent
James L. Heppell / independent
Riaz Bandali / independent
Simon Benito / independent
Tazdin Esmail / independent
Officers of the Company
The current officers of the Company are:
Name / Position HeldJames L. Heppell / Chairman of the Board
Avtar Dhillon / President and Chief Executive Officer (the “CEO”)
Peter Kies / Chief Financial Officer
Bob Goodenow / Vice President, Business Development
Dietmar P. Rabussay / Vice President, Research and Development
George McHugh / Vice President, Operations
Doug Murdock / Director, Intellectual Property and Corporate Secretary
3. CORPORATE GOVERNANCE GUIDELINES
The following Corporate Governance Guidelines have been adopted by the Board of the Company to assist the Board in the exercise of its responsibilities. These Corporate Governance Guidelines reflect the Board’s commitment to monitor the effectiveness of policy and decision making both at the Board and management level, with a view to enhancing long-term stockholder value. These Corporate Governance Guidelines are not intended to change or interpret any Federal or state law or regulation, including the Delaware General Corporation Law, or the Certificate of Incorporation or By-laws of the Company. These Corporate Governance Guidelines are subject to modification from time to time by the Board.
1. Composition of Board of Directors
a. Size of Board. The Board believes that it should generally have no fewer than three and no more than nine members. The size of the Board could, however, be increased or decreased if determined to be appropriate by the Board. For example, it may be desirable to increase the size of the Board in order to accommodate the availability of an outstanding candidate for director.
b. Board Membership Criteria. The Board seeks members from diverse professional and personal backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. This assessment will include consideration of diversity, skills and experience in the context of the needs of the Board.
c. Independence of the Board. The Board will be constituted with a majority of individuals who qualify as "independent directors" pursuant to the AMEX policy as set out in Appendix A to this Policy, unless the Company utilizes an available exemption.
d. Director Service on other Public Company Boards
(i) Conflicts of Interest
Directors should advise the Chairman of the Board before accepting an invitation to serve on the board of another Company. If the Chairman determines a conflict of interest exists by serving on the Board of another Company, the Director is expected to act in accordance with the Chairman’s recommendation or to step down from the Board of the Company.
(ii) New Directors. The Nomination and Corporate Governance Committee will identify and recommend candidates for election to the Board. Please refer to “Nomination and Corporate Governance Committee.” The recruitment of members of the Board is based upon the capabilities and experience of the candidates in relation to the needs of the Board.
e. Assessment of the Board. The Nomination and Corporate Governance Committee will carry out an annual review of the Board and each of the directors' contributions to the Board, and will provide such information to the Board for its review. The assessment of the Board will relate to the ongoing governance and operation of the Board and its effectiveness in discharging its responsibilities. The assessment of directors will be comprised of an examination of each individual director’s ability to contribute to the effective decision-making of the Board.
f. Directors' Tenure and Succession
(a) Term Limits. The Board does not favor term limits for directors, but believes that it is important to monitor overall Board performance. Therefore, the Nomination and Corporate Governance Committee shall annually consider whether each director should continue to sit on the Board. This will allow each director the opportunity to confirm his or her desire to continue as a member of the Board, and also allow the Board an opportunity to review director performance and suitability.
(b) Resignation Policy - Non-independent Directors. Non-independent directors shall offer to resign from the Board upon their resignation, removal or retirement as an officer of the Company. The Board has discretion as to whether or not it should accept a tendered resignation.
2. Conduct
a. Directors' Duties. The basic responsibility of the directors is to exercise their business judgment to act in what they reasonably believe to be in the best interests of the Company and its shareholders. In discharging that obligation, directors should be entitled to rely on the honesty and integrity of the Company’s officers, employees, outside advisors and independent auditors.
Directors are expected to attend Board meetings, meetings of committees on which they serve and meetings of stockholders absent exceptional cause, and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. Directors are expected to review meeting materials prior to Board, committee and stockholder meetings and, when possible, should communicate in advance of meetings any questions or concerns that they wish to discuss so that management will be prepared to address the same. Each director’s attendance at, and preparation for; Board meetings, stockholder meetings and meetings of committees on which they serve, shall be considered by the Board when voting on director nominees.
b. Decisions and Transactions Requiring the Approval of the Board.
Certain decisions and transactions of the Company must receive the approval of the Board prior to becoming executed. The CEO and his management team may not proceed with any of the following transactions without the prior approval of the Board or a committee of the Board that has been delegated the requisite authority:
· approval of the annual and quarterly financial statements;
· approval of the annual budget;
· approval of the annual business plan of the Company;
· any equity or debt financing, other than debt incurred in the ordinary course of business;
· entering into any material strategic alliance, partnership or other material business relationship;
· acquisition and assignment of material assets (including fixed assets), outside of the Company’s business plan;
· the creation of subsidiaries;
· payment of dividends;
· approval of proxy solicitation material;
· any issuance or redemption of securities by the Company;
· making expenditures, borrowing or guaranteeing in excess of $100,000, outside of the annual budget;
· appointment or discharge of any Vice-President or more senior officer of the Company (a “ Senior Officer”);
· determining the salary, bonus and all other compensation paid to Senior Officers;
· initiating or defending any law suits or other legal actions; and
· entering into any engagements with lawyers or accountants where the fee is likely to exceed $100,000 per annum.
The CEO will prepare an annual budget and operating plan for each upcoming fiscal year of the Company and have the annual budget and operating plan submitted to, and approved by, the Board prior to the start of that fiscal year
c. Board Meetings
(i) Selection of Agenda Items and Executive Sessions. The Chairman and CEO will establish the agenda for Board meetings. Each Board member is free to suggest the inclusion of items on the agenda. Each Board member is also free to raise (at any Board meeting) subjects that are not on the agenda for that meeting. The Board will meet at least three times a year, in executive session with only the independent directors present. The Chair or his replacement will preside at all executive sessions which shall be disclosed in the Company’s annual proxy statement. The annual proxy statement shall also disclose how interested persons may communicate with any such person or the directors who meet in executive session as a group.
(ii) Distribution of Materials. The Company shall distribute, sufficiently in advance of meetings to permit meaningful review, any written materials that are important to the Board's understanding of the agenda items and other topics to be considered at a Board meeting. In the event of a pressing need for the Board to meet on short notice or if such materials would otherwise contain highly confidential or sensitive information, it is recognized that written materials may not be available in advance of the meeting.
(iii) Attendance of Non-Directors. The Board encourages the CEO to bring members of management from time to time into Board meetings to:
· provide management insight into items being discussed by the Board;
· make presentations to the Board;
· bring managers with significant potential for advancement into contact with the Board.
Attendance of management personnel at Board meetings is at the discretion of the Board. Should the CEO desire to add additional members of management as attendees on a regular basis, this should be suggested to the Board for its concurrence.
(iv) Number of Meetings. The Board shall hold a minimum of four meetings per year.
d. Share Ownership by Directors. The Board encourages the directors to purchase shares of the Company but notes that the number of shares of the Company’s stock owned by each director is a personal decision.
e. Director Compensation. The Board will periodically review directors’ fees and other compensation, including how such compensation relates to director compensation for companies of comparable size and complexity. As part of such review, the Board also will consider the impact that excessive director compensation could potentially have on director independence. The Board’s review will include an examination of both direct and indirect forms of compensation to the Company's directors, including charitable contributions to organizations in which a director is affiliated, and consulting or similar arrangements.
f. Prohibition on Financial Assistance to Directors and Officers. Subject to certain limited circumstances set out in SOX, the Company will not, directly or indirectly, including through any subsidiary, extend or maintain credit, arrange for the extension of credit, or renew an extension of credit, in the form of a personal loan to or for any director or Senior Officer.
g. Continuing Director Education. Directors are encouraged to participate in continuing education programs.
h. Assessing Board Performance. The Board will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. The Board will utilize the results of this self-evaluation process in assessing and determining the characteristics and critical skills required of prospective candidates for election to the Board.
i. Access to Officers and Employees. Board members have complete and open access to the CEO and Senior Officers. Board members who wish to have access to other members of management should coordinate such access through the CEO. .