Avalon Advanced Materials Inc. - Exhibit 99.2 - Filed by newsfilecorp.com
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Suite 1901 - 130 Adelaide Street West |
| Toronto, ON Canada M5H 3P5 |
| Telephone: (416) 364-4938 Fax: (416) 364-5162
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| Email: ir@avalonAM.com |
| http://www.avalonadvancedmaterials.com
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INFORMATION CIRCULAR
As at and dated
January 10, 2017
(unless otherwise noted)
GENERAL PROXY INFORMATION
Solicitation of Proxies
This information circular (this “Information Circular”) is
furnished in connection with the solicitation of proxies by the management and
the directors of AVALON ADVANCED MATERIALS INC. (the "Company") for use at
the annual and special meeting of the shareholders of the Company (the
"Meeting") to be held at The Sheraton Centre Toronto Hotel – Waterfall Garden
Room, 123 Queen Street West, Toronto, Ontario M5H 2M9, at 4:30 p.m. (Toronto
time) on Wednesday, February 22, 2017, and at all adjournments thereof for the
purposes set forth in the accompanying notice of the Meeting (the "Notice of
Meeting"). The solicitation of proxies will be made primarily by mail, using
notice and access for Non-Registered Shareholders (as defined below), and may be
supplemented by telephone or other personal contact by the directors, officers
and employees of the Company. Directors, officers and employees of the Company
will not receive any extra compensation for such activities. The Company may
also retain, and pay a fee to, one or more professional proxy solicitation firms
to solicit proxies from the shareholders of the Company in favour of the matters
set forth in the Notice of Meeting. The Company may pay brokers or other persons
holding common shares of the Company in their own names, or in the names of
nominees, for their reasonable expenses for sending proxies and this Information
Circular to beneficial owners of common shares and obtaining proxies therefrom.
The cost of the solicitation will be borne directly by the Company.
No person is authorized to give any information or to make any
representation other than those contained in this Information Circular and, if
given or made, such information or representation should not be relied upon as
having been authorized by the Company. The delivery of this Information Circular
shall not, under any circumstances, create an implication that there has not
been any change in the information set forth herein since the date hereof.
Non-Registered Shareholders
Only registered shareholders of the Company, or the persons
they appoint as their proxies, are entitled to attend and vote at the Meeting.
However, in many cases, common shares beneficially owned by a person (a
"Non-Registered Shareholder") are registered either:
| (a) |
in the name of an intermediary (an "Intermediary") with
whom the Non-Registered Shareholder deals in respect of the common shares
(Intermediaries include, among others: banks, trust companies, securities
dealers or brokers, trustees or administrators of a self-administered
registered retirement savings plan, registered retirement income fund,
registered education savings plan and similar plans); or |
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| Avalon Advanced Materials Inc.
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| Information Circular as of and dated
January 10, 2017 |
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| (b) |
in the name of a clearing agency (such as The Canadian
Depository for Securities Limited, in Canada, and the Depository Trust
Company, in the United States) of which the Intermediary is a
participant. |
In accordance with the requirements of National Instrument
54-101 (“NI 54-101”) of the Canadian Securities Administrators, the Company is
generally required to distribute copies of the Notice of Meeting, this
Information Circular and its form of proxy or voting instruction form, as
applicable, (collectively the "Meeting Materials") to the Intermediaries and
clearing agencies for onward distribution to Non-Registered Shareholders. The
Company has elected to deliver this Information Circular to Non-Registered
Shareholders by distributing a notification of meeting, along with the form of
proxy or voting instruction form, as applicable, (together, the “Mailed
Materials”) to the Intermediaries and clearing agencies for onward distribution
to Non-Registered Shareholders, and posting this Information Circular on the
website maintained by TSX Trust Company (“TSX Trust”) at http://noticeinsite.tsxtrust.com/AvalonAdvancedMaterialsASM2017.
See “Notice and Access”, below, for further information. Intermediaries are
required to forward the Mailed Materials to Non-Registered Shareholders unless
the Non-Registered Shareholders have waived the right to receive them.
Intermediaries often use service companies to forward the Mailed Materials to
Non-Registered Shareholders. Notwithstanding the foregoing, there are two kinds
of Non-Registered Shareholders, namely: (i) those who object to their name being
made known to the issuers of the securities they own (called “OBOs” for
Objecting Beneficial Owners); and (ii) those who do not object to their name
being made known to the issuers of the securities they own (called “NOBOs” for
Non-Objecting Beneficial Owners). Subject to the provisions of NI 54-101,
issuers can request and obtain a list of their NOBOs from Intermediaries via
their transfer agents and use the NOBO list for distribution of proxy-related
materials directly to NOBOs. The Company intends to take advantage of those
provisions of NI 54-101 that permit it to deliver the Mailed Materials directly
to its NOBOs, through TSX Trust, who have not waived the right to receive them.
As a result, NOBOs in Canada can expect to receive the Mailed Materials from TSX
Trust. The voting instruction forms are to be completed and returned to TSX
Trust in accordance with the instructions provided by TSX Trust either in the
envelope provided by TSX Trust or by facsimile. In this regard, TSX Trust is
required to follow the voting instructions properly received from NOBOs. TSX
Trust will tabulate the results of the voting instruction forms received from
NOBOs with respect to the common shares represented by the voting instruction
forms they receive.
The Meeting Materials are being sent to both registered
shareholders and Non-Registered Shareholders. If you are a Non-Registered
Shareholder, and the Company or its agent has sent these materials directly to
you, your name and address and information about your holdings of common shares
have been obtained in accordance with applicable securities regulatory
requirements from the Intermediary holding the common shares on your behalf.
By choosing to send these materials to you directly, the
Company (and not the Intermediary holding the common shares on your behalf) has
assumed responsibility for (i) delivering these materials to you, and (ii)
executing your proper voting instructions. Please return your voting
instructions as specified in the request for voting instructions.
Generally, OBOs who have not waived the right to receive Mailed
Materials will either:
| (a) |
be given a voting instruction form which is not signed
by the Intermediary and which, when properly completed and signed by
the OBO and returned to the Intermediary or its service company,
will constitute voting instructions which the Intermediary must follow.
Typically, the voting instruction form will consist of a one page
pre-printed form. Sometimes, instead of the one page pre-printed form, the
voting instruction form will consist of a regular printed proxy form
accompanied by a page of instructions which contains a removable label
with a bar-code and other information. In order for the form of proxy to
validly constitute a voting instruction form, the OBO must remove the
label from the instructions and affix it to the form of proxy, properly
complete and sign the form of proxy and submit it to the Intermediary or
its service company in accordance with the instructions of the
Intermediary or its service company; or |
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| Avalon Advanced Materials Inc. |
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| Information Circular as of and dated
January 10, 2017 |
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| (b) |
be given a form of proxy which has already been signed
by the Intermediary (typically by a facsimile, stamped signature),
which is restricted as to the number of common shares beneficially owned
by the OBO but which is otherwise not completed by
the Intermediary. Because the Intermediary has already signed the form of proxy,
this form of proxy is not required to be signed by the OBO when submitting the
proxy. In this case, the OBO who wishes to submit a proxy should properly
complete the form of proxy and deposit it with TSX Trust Company, 200
University Avenue, Suite 300, Toronto, Ontario, Canada M5H 4H1. |
The Company intends to pay for an Intermediary to deliver the
Mailed Materials to OBOs.
In either case, the purpose of these procedures is to permit
Non-Registered Shareholders to direct the voting of the common shares they
beneficially own. Should a Non-Registered Shareholder who receives either a
voting instruction form or a form of proxy wish to attend the Meeting and vote
in person (or have another person attend and vote on behalf of the
Non-Registered Shareholder), the Non-Registered Shareholder should strike out
the names of the persons named in the form of proxy and insert the
Non-Registered Shareholder's (or such other person's) name in the blank space
provided or, in the case of a voting instruction form, follow the directions
indicated on the form. In either case, Non-Registered Shareholders should
carefully follow the instructions of their Intermediaries and their service
companies, TSX Trust or Broadridge, as applicable, including those regarding
when and where the voting instruction form or the proxy is to be delivered.
Notice and Access
Under the notice and access rules adopted by the Canadian
Securities Administrators, public companies are permitted to advise their
shareholders of the availability of this Information Circular on an
easily-accessible website, rather than mailing paper copies.
The use of this alternative means of delivery is more
environmentally friendly as it will help reduce paper use and the Company’s
carbon footprint, and it will also reduce the Company’s printing and mailing
costs. The Company has therefore decided to deliver this Information Circular to
Non-Registered Shareholders by posting it on TSX Trust’s website at http://noticeinsite.tsxtrust.com/AvalonAdvancedMaterialsASM2017.
This Information Circular will also be available on SEDAR at www.sedar.com and on the Company’s website at http://www.avalonadvancedmaterials.com/investors/regulatory_filings/.
Non-Registered Shareholders who wish to receive paper copies of
this Information Circular may request paper copies on-line at http://noticeinsite.tsxtrust.com/AvalonAdvancedMaterialsASM2017
or by calling toll-free at 1-844-559-4938.
Requests for paper copies must be received at least five
business days in advance of the Proxy Deposit Deadline (as defined below) in
order to receive this Information Circular in advance of the Proxy Deposit
Deadline and the Meeting. This Information Circular will be sent to such
shareholders within three business days of their request, if such requests are
made before the Proxy Deposit Deadline. Those shareholders with existing
instructions on their account to receive a paper copy of the Meeting Materials
will receive a paper copy of this Information Circular.
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| Information Circular as of and dated
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Due to certain requirements of the Canada Business
Corporations Act (the “Act”), the Company is sending a paper copy of the
complete proxy package, including the Notice of Meeting, this Information
Circular, and the Annual Financial Statements and related management’s
discussion and analysis to registered shareholders. The Annual Financial
Statements and related management’s discussion and analysis are also available
on SEDAR at www.sedar.com and on the Company’s web site at http://www.avalonadvancedmaterials.com/investors/regulatory_filings/.
Appointment and Revocation of Proxies
The persons named in the form of proxy accompanying this
Information Circular are directors and/or officers of the Company. A shareholder
of the Company has the right to appoint a person or company (who need not be a
shareholder), other than the persons whose names appear in such form of proxy,
to attend and act for and on behalf of such shareholder at the Meeting and at
any adjournment thereof. Such right may be exercised by either striking out the
names of the persons specified in the form of proxy and inserting the name of
the person or company to be appointed in the blank space provided in the form of
proxy, or by completing another proper form of proxy and, in either case,
delivering the completed and executed proxy to TSX Trust Company, 200
University Avenue, Suite 300, Toronto, Ontario, Canada M5H 4H1 in time for use
at the Meeting in the manner specified in the Notice of Meeting.
A registered shareholder of the Company who has given a proxy
may revoke the proxy at any time prior to use by: (a) depositing an instrument
in writing, including another completed form of proxy, executed by such
registered shareholder or by his or her attorney authorized in writing or by
electronic signature or, if the registered shareholder is a corporation, by an
officer or attorney thereof properly authorized, either: (i) at the principal
office of the Company, 130 Adelaide Street West, Suite 1901, Toronto, Ontario,
Canada M5H 3P5, not less than 48 hours, Saturdays, Sundays and holidays
excepted, prior to the time of the holding of the Meeting or any adjournment
thereof (the “Proxy Deposit Deadline”), (ii) with TSX Trust Company, 200
University Avenue, Suite 300, Toronto, Ontario, Canada M5H 4H1, by the Proxy
Deposit Deadline, or (iii) with the chair of the Meeting on the day of the
Meeting or any adjournment thereof; (b) transmitting, by telephone or electronic
means, a revocation that complies with paragraphs (i), (ii) or (iii) above and
that is signed by electronic signature, provided that the means of electronic
signature permits a reliable determination that the document was created or
communicated by or on behalf of such shareholder or by or on behalf of his or
her attorney, as the case may be; or (c) in any other manner permitted by law
including attending the Meeting in person. Late proxies may be accepted or
rejected by the Chair of the Meeting in his or her discretion, and the Chair is
under no obligation to accept or reject any particular late proxy.
A Non-Registered Shareholder who has submitted a proxy may
revoke it by contacting the Intermediary through which the Non-Registered
Shareholder's common shares are held and following the instructions of the
Intermediary respecting the revocation of proxies.
Exercise of Discretion by Proxies
The common shares represented by an appropriate form of proxy
will be voted or withheld from voting on any ballot that may be conducted at the
Meeting, or at any adjournment thereof, in accordance with the instructions of
the shareholder thereon, and if the shareholder specifies a choice on any matter
to be acted upon, the common shares of such shareholder will be voted
accordingly. In the absence of instructions, such common shares will be voted
FOR each of the matters referred to in the Notice of Meeting as specified
thereon.
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| Information Circular as of and dated
January 10, 2017 |
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The enclosed form of proxy, when properly completed and
signed, confers discretionary authority upon the persons named therein to vote
on any amendments to or variations of the matters identified in the Notice of
Meeting and on other matters, if any, which may properly be brought before the
Meeting or any adjournment thereof. At the date hereof, management of the
Company knows of no such amendments or variations or other matters to be brought
before the Meeting. However, if any other matters which are not now known to
management of the Company should properly be brought before the Meeting, or any
adjournment thereof, the common shares represented by such proxy will be voted
on such matters in accordance with the judgment of the person named as proxy
therein.
Signing of Proxy
The form of proxy must be signed by the shareholder of the
Company or the duly appointed attorney of the shareholder of the Company
authorized in writing or, if the shareholder of the Company is a corporation, by
a duly authorized officer of such corporation. A form of proxy signed by the
person acting as attorney of the shareholder of the Company or in some other
representative capacity, including an officer of a corporation which is a
shareholder of the Company, should indicate the capacity in which such person is
signing and should be accompanied by the appropriate instrument evidencing the
qualification and authority to act of such person, unless such instrument has
previously been filed with the Company. A shareholder of the Company or his or
her attorney may sign the form of proxy or a power of attorney authorizing the
creation of a proxy by electronic signature provided that the means of
electronic signature permits a reliable determination that the document was
created or communicated by or on behalf of such shareholder or by or on behalf
of his or her attorney, as the case may be.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
Description of Share Capital
The Company is authorized to issue an unlimited number of
common shares without par value and 25,000,000 preferred shares without par
value. There are 187,594,660 common shares and no preferred shares of the
Company issued and outstanding as at January 10, 2017.
At an annual meeting of the Company, on a show of hands, every
registered holder of common shares present in person and entitled to vote and
every proxyholder duly appointed by a registered shareholder who would have been
entitled to vote shall have one vote and, on a poll, every registered
shareholder present in person or represented by proxy or other proper authority
and entitled to vote shall have one vote for each share of which such
shareholder is the registered holder. Common shares represented by proxy will
only be voted if a ballot is called for. A ballot may be requested by a
registered shareholder or proxyholder present at the Meeting or required because
the number of votes attached to common shares represented by proxies that are to
be voted against a matter is greater than 5% of the votes that could be cast at
the Meeting.
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| Information Circular as of and dated
January 10, 2017 |
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Record Date
The directors of the Company have fixed January 10, 2017 as the
record date for the determination of the shareholders of the Company entitled to
receive notice of, and to vote at, the Meeting. Shareholders of the Company of
record at the close of business on January 10, 2017 will be entitled to vote at
the Meeting.
Ownership of Securities of the Company
To the knowledge of the directors and executive officers of the
Company, no person or company beneficially owns, directly or indirectly, or
exercises control or direction over, voting securities carrying more than 10% of
the outstanding voting rights of the Company.
The officers of the Company and the individuals nominated by
management for election as directors collectively own or control, directly or
indirectly, in the aggregate, 6,543,834 common shares of the Company,
representing approximately 3.49% of the outstanding common shares as at January
10, 2017.
PARTICULARS OF MATTERS TO BE
ACTED UPON
1. Election of
Directors
The board of directors of the Company (the “Board”) currently
consists of six directors. Peter McCarter, who is currently a director of the
Company, is not standing for re-election as a director. The table below and the
notes thereto state the names of the five persons nominated by management for
election as directors, all other positions and offices with the Company now held
by them, their principal occupations or employment for the preceding five years,
the period or periods of service as directors of the Company and the number of
voting securities of the Company beneficially owned, directly or indirectly, or
over which control or direction is exercised by each of them as of the date
hereof.
Majority Voting Policy
The Board has adopted a policy providing that in an uncontested
election of directors, any nominee who receives a greater number of votes
‘‘withheld’’ than votes ‘‘for’’ will tender his or her resignation to the Chair
of the Board promptly following the shareholders’ meeting. The Compensation,
Governance and Nominating Committee (the “CGN Committee”) of the Board will
consider the offer of resignation and will make a recommendation to the Board on
whether to accept it. In considering whether or not to accept the resignation,
the CGN Committee will consider all factors deemed relevant by members of such
Committee. The CGN Committee will be expected to accept the resignation except
in situations where the considerations would warrant the applicable director
continuing to serve on the Board. The Board will make its final decision and
announce it in a press release within 90 days following the Meeting. A director
who tenders his or her resignation pursuant to this policy will not participate
in any meeting of the Board or the CGN Committee at which the resignation is
considered.
Advance Notice By-Law
The Company has adopted a by-law (By-law No. 2) relating to the
nomination of directors by shareholders of the Company in certain circumstances.
By-Law No.2 provides a clear process for shareholders to follow for director
nominations and sets out a reasonable time frame for nominee submissions and the
provision of accompanying information. The purpose of By-law No.2 is to treat
all shareholders fairly by ensuring that all shareholders receive adequate
notice of the nominations to be considered at a meeting and can thereby exercise
their voting rights in an informed manner. In addition, By-law No.2 should
assist in facilitating an orderly and efficient meeting process. As of the date
hereof, the Company has not received notice of any director nominations in
connection with this year’s Meeting within the time periods prescribed by the
advance notice provisions contained in By-Law No.2. Assuming no nominations are
received by January 23, 2017, the only persons eligible to be nominated for
election to the Board are the below nominees.
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| Information Circular as of and dated
January 10, 2017 |
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Proxies received appointing directors and/or officers of the
Company will be voted FOR the election of the nominees named in the table below,
unless a shareholder has specified in the proxy that the common shares are to be
withheld from voting in respect thereof. Management has no reason to believe
that any of the nominees will be unable to serve as a director but, if a nominee
is for any reason unavailable to serve as a director, proxies appointing
directors and/or officers of the Company will be voted in favour of the
remaining nominees and may be voted for a substitute nominee, unless the
shareholder has specified in the proxy that the common shares are to be withheld
from voting in respect of the election of directors.
Name, Province/State and
Country of
Residence |
Position with the
Company |
Present Principal
Occupation,
Business or Employment for the
Past Five Years |
Director Since |
Common Shares
Beneficially
Owned, Directly
or Indirectly or
Controlled or
Directed*
|
Donald Bubar
Ontario, Canada |
President and CEO |
President and CEO of the Company |
February 17, 1995 |
5,361,100 |
Brian MacEachen (1)
Nova Scotia, Canada |
Director |
Business owner-operator, Executive
Consultant and Chief Financial Officer of Zonte Metals Inc.; Former
President and Chief Executive Officer of Linear Metals Corporation from
January 2008 to April 2012 and Executive Vice President of Brigus Gold
Corp. from October 2009 to July 2012 |
November 16, 1998 |
340,000 |
Alan Ferry (1)(2)
Ontario, Canada |
Director |
Self-employed businessperson, Lead
Director of Guyana Goldfields Inc. |
February 24, 2000 |
225,000 |
Jane Pagel
Ontario, Canada |
Director |
Self-employed businessperson; Interim
President and CEO Sustainable Development Technology Canada June 2014 -
June 2015; prior thereto President and CEO Ontario Clean Water 2010- 2014
|
February 24, 2016 |
34,000 |
Kenneth G. Thomas (2)
Ontario, Canada |
Director |
President, Ken Thomas &
Associates Inc. since July 2012; Director, Continental Gold Limited since
June 2012; and Director, Candente Gold Corporation since December 2012;
prior thereto, Senior Vice President, Projects, Kinross Gold Corporation
from December 2009 to June 2012 |
February 25, 2014 |
49,000 |
| Notes: |
| * As provided by the respective director as at
January 10, 2017. |
| (1) |
Member of the Company’s Audit Committee. |
| (2) |
Member of the Company’s CGN
Committee. |
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| Information Circular as of and dated
January 10, 2017 |
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Each director elected at the Meeting will hold office until the
next annual meeting or until his or her successor is duly elected or appointed.
No proposed director (including any personal holding company of
a proposed director):
| (a) |
is, as at the date of this Information Circular, or has
been, within the preceding 10 years, a director, chief executive officer
or chief financial officer of any company (including the Company)
that: |
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(i) |
was the subject of a cease trade or similar order
(including a management cease trade order whether or not such person was
named in the order) or an order that denied the relevant company access to
any exemption under securities legislation, that was in effect for a
period of more than 30 consecutive days, (an “Order”) that was issued
while the proposed director was acting in the capacity as director, chief
executive officer or chief financial officer; or |
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(ii) |
was subject to an Order that was issued after the
proposed director ceased to be a director, chief executive officer or
chief financial officer and which resulted from an event that occurred
while that person was acting in the capacity as director, chief executive
officer or chief financial officer. |
| (b) |
is, as at the date of this Information Circular, or has
been, within the preceding 10 years, a director or executive officer of
any company (including the Company) that, while that person was acting in
that capacity, or within a year of that person ceasing to act in that
capacity became bankrupt, made a proposal under any legislation relating
to bankruptcy or insolvency or was subject to or instituted any
proceedings, arrangement or compromise with creditors or had a receiver,
receiver manager or trustee appointed to hold its assets; or |
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| (c) |
has, within the 10 years before the date of this
Information Circular, became bankrupt, made a proposal under any
legislation relating to bankruptcy or insolvency or become subject to or
instituted any proceedings, arrangement or compromise with creditors or
had a receiver, receiver manager or trustee appointed to hold the assets
of the proposed director; or |
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| (d) |
has been subject to: |
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(i) |
since December 31, 2000, any penalties or
sanctions imposed by a court relating to securities legislation or by a
securities regulatory authority or has entered into a settlement agreement
with a securities regulatory authority; or |
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(ii) |
any other penalties or sanctions imposed by a court or
regulatory body that would likely be considered important to a reasonable
securityholder in deciding whether to vote for a proposed
director; |
2. Appointment
of Auditors
Deloitte LLP have been the auditors of the Company since
December 16, 2013. Shareholders will be asked to consider and, if thought
advisable, to pass an ordinary resolution to appoint Deloitte LLP to serve as
auditors of the Company until the next annual meeting of shareholders and to
authorize the directors of the Company to fix their remuneration.
The appointment of Deloitte LLP as auditors of the Company
until the next annual meeting of the shareholders and the authorization of the
directors to fix their remuneration must be authorized and approved by an
ordinary resolution of the shareholders. An ordinary resolution is a resolution
passed by by at least a majority (50%+1) of the votes cast by shareholders who
voted by proxy or in person in respect of that resolution at the Meeting.
The Board unanimously recommends that shareholders vote FOR the
ordinary resolution to appoint the auditors and authorize the directors to fix
their remuneration. Unless a shareholder directs that his or her common
shares are to be withheld from voting in connection with the appointment of
auditors, the persons named in the enclosed form of proxy intend to vote FOR the appointment of Deloitte
LLP, to serve as auditors of the Company until the next annual meeting of the
shareholders and to authorize the directors to fix their remuneration.
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| Avalon Advanced Materials Inc. |
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| Information Circular as of and dated
January 10, 2017 |
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3. Approval of
Unallocated Options under the Stock Option Plan
Matters to be Approved
In accordance with the requirements of the Toronto Stock
Exchange (the “TSX”) every three years after institution, all unallocated
options, rights and other entitlements under a security based compensation
arrangement which does not have a fixed maximum number of securities issuable
thereunder (commonly referred to as “rolling plans”), must be approved by the
majority of an issuer’s securityholders. Upon the exercise, expiration,
cancellation or other termination of any options under the Stock Option Plan,
the number of common shares equivalent to the number of options that are
exercised, terminated, cancelled or expired automatically become reserved for
issuance under the Stock Option Plan, and are available for future grants. When
options are granted under the Stock Option Plan, common shares that are reserved
for issuance are referred to as allocated. Additional common shares that may be
issued under the Stock Option Plan but which have not yet been granted are
referred to as unallocated.
As the Company’s stock option plan (the “Stock Option Plan”)
does not have a fixed maximum number of securities issuable pursuant thereto and
was approved by shareholders on January 31, 2008 and all unallocated options
issuable pursuant to the Stock Option Plan were approved by shareholders on
January 27, 2011 and February 25, 2014, the shareholders are required to approve
all unallocated options issuable pursuant to the Stock Option Plan by no later
than February 25, 2017. Shareholders are being asked at the Meeting to pass a
resolution approving all unallocated options, rights or other entitlements under
the Stock Option Plan. The Board has reapproved the Stock Option Plan and
approved the unallocated options under the Stock Option Plan.
As at January 10, 2017, the Company had 187,594,660 common
shares issued and outstanding. Accordingly, a maximum of 18,759,466 common
shares were available for issuance (representing 10% of the issued and
outstanding common shares) pursuant to options granted under the Stock Option
Plan as at such date. As at January 10, 2017, there were 11,030,000 options
granted and outstanding under the Stock Option Plan (representing 5.9% of the
issued and outstanding common shares, leaving 7,729,466 common shares
(representing 4.1% of the issued and outstanding common shares) available for
grant of further options. As of January 10, 2017, a total of 400,000 stock
options had been exercised under the Stock Option Plan (representing 0.2% of the
issued and outstanding common shares as at January 10, 2017) since the last
approval of the Stock Option Plan by the shareholders.
If the resolution approving all unallocated options, rights and
entitlements under the Stock Option Plan is not approved by the shareholders at
the Meeting, then currently outstanding options will continue in full force and
be unaffected, provided that certain amendments may be made in accordance with
the Stock Option Plan. However, no new grants of options will be made pursuant
to the Stock Option Plan and currently outstanding options that are subsequently
cancelled, terminated or expire will not be available to be re-granted by the
Company until shareholder approval is obtained.
The Board unanimously recommends that shareholders vote FOR the
following ordinary resolution (the “Stock Option Plan Resolution”), with or
without variation, relating to the approval as described above. Unless a
shareholder directs that his or her common shares are to be voted against the
Stock Option Plan Resolution, the persons named in the enclosed form of proxy
intend to vote FOR the following Stock Option Plan Resolution:
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| Information Circular as of and dated
January 10, 2017 |
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“BE IT RESOLVED THAT:
| 1. |
All unallocated options, rights or other entitlements
under the Company’s Stock Option Plan are approved up to a maximum of 10%
of the outstanding common shares of the Company. |
| |
|
| 2. |
The Company is authorized to continue to grant options,
rights or other entitlements under the Stock Option Plan until February
22, 2020, being three years from the date hereof. |
| |
|
| 3. |
The Stock Option Plan as presented in Appendix B to this
Information Circular is hereby approved. |
| |
|
| 4. |
Any one director or officer of the Company is hereby
authorized and directed for and on behalf of the Company to execute or
cause to be executed and to deliver or cause to be delivered all such
documents, and to do or cause to be done all such acts and things, as such
director or officer may deem necessary or desirable in connection with the
foregoing resolution.” |
4. Presentation
of Financial Statements
At the Meeting, the Chair of the Meeting will present to
shareholders the financial statements of the Company for the year ended August
31, 2016 and the auditors’ report thereon, which have been approved by the
Board. No vote of the shareholders of the Company is required with respect to
this item of business.
OTHER MATTERS WHICH MAY COME
BEFORE THE MEETING
The management knows of no matters to come before the
Meeting other than as set forth in the Notice of Meeting. However, if other
matters are not known to the management should properly come before the Meeting,
the accompanying proxy will be voted on such matters in accordance with the best
judgment of the persons voting the proxy.
STATEMENT OF EXECUTIVE
COMPENSATION
A. Named Executive
Officers
For the purposes of this Information Circular, a named
executive officer (“Named Executive Officer”) of the Company means each of the
following individuals:
| (a) |
a chief executive officer (“CEO”) of the
Company; |
| |
|
| (b) |
a chief financial officer (“CFO”) of the
Company; |
| |
|
| (c) |
each of the Company’s three most highly compensated
executive officers, or the three most highly compensated individuals
acting in a similar capacity, other than the CEO and CFO, at the end of
the most recently completed financial year whose total compensation was
individually, more than $150,000, as determined in accordance with
subsection 1.3(6) of Form 51-102F6, for that financial year; and |
| |
|
| (d) |
each individual who would be a Named Executive Officer
under paragraph (c) above but for the fact that the individual was neither
an executive officer of the Company, nor acting in a similar capacity, at
the end of the financial year. |
| |
|
| Avalon Advanced Materials Inc. |
Page 10 |
| Information Circular as of and dated
January 10, 2017 |
|
For the fiscal year ended August 31, 2016, the Company had five
Named Executive Officers, namely, its CEO and President, Donald Bubar, its CFO
and Vice President, Finance, R. James Andersen, its Senior Vice President,
Metallurgy and Technology Development, David Marsh, its Vice President, Sales
and Marketing, Pierre Neatby and its Vice President, Exploration, William
Mercer.
B. Compensation
Discussion and Analysis
Compensation, Governance and Nominating
Committee
The Compensation, Governance and Nominating Committee (the “CGN
Committee”) of the Board is responsible for making recommendations to the Board
with respect to the compensation of the executive officers of the Company as
well as, among other things, with respect to the Company’s stock option plan
(the “Stock Option Plan”) and any other employee benefits and/or plans and with
respect to directors’ compensation. The Board (exclusive of the CEO, who is also
a member of the Board) reviews such recommendations and gives final approval to
the compensation of the executive officers. See also Schedule A – Corporate
Governance Disclosure hereto.
The CGN Committee currently consists of Peter McCarter (Chair),
Alan Ferry and Kenneth G, Thomas, each of whom are independent, pursuant to
National Instrument 52-110 – Audit Committees. Each of Messrs. McCarter,
Ferry and Thomas has direct and extensive experience in corporate management and
compensation issues in either the mining industry and/or the financial industry.
Mr. McCarter was previously the Executive Vice-President, Corporate Affairs for
Aur Resources Inc. (“Aur”), a publicly listed international mining company, in
which role he had responsibility for managing Aur’s human resources matters. Mr.
Ferry is a member of the committee responsible for compensation matters of
Guyana Goldfields Inc. and GPM Metals Inc., which are publicly listed mineral
exploration or mining companies. Dr. Thomas served as Senior Vice President,
Projects, Kinross Gold Corporation from December 2009 to June 2012, Global
Managing Director and Director, Hatch from November 2005 to November 2009 and
Chief Operating Officer, Crystallex International Corporation from April 2003 to
October 2005. In addition he served in senior roles at Barrick Gold Corporation
from 1987 to 2001, including Senior Vice President, Technical Services, during
which times he was responsible for determining the compensation of those
employees whom he directly and indirectly supervised, which numbered in excess
of several dozen. This experience relating to executive compensation matters
collectively provides members of the CGN Committee with a suitable perspective
to make decisions on the appropriateness of the Company’s compensation policies
and practices.
The CGN Committee has not to date felt it necessary to engage
any compensation consultant or advisor to assist it in the performance of its
duties.
Compensation Objectives and Structure
The overall compensation objective adopted by the CGN Committee
is to ensure that executive compensation is fair and reasonable, rewards
management performance and is, by being competitive, sufficient to attract and
retain experienced and talented executives. Due to the nature of the mineral
industry, executive talent has significant mobility and, as a result,
competition for experienced executives in the past has been great. The Company’s
compensation policies are designed to recognize the foregoing. The foregoing
objective also recognizes the fundamental value added by a motivated and
committed management team in accomplishing the Company’s principal corporate
objectives.
Historically, the compensation provided by the Company to its
executive officers, including the CEO, has had three components: base salary,
bonuses and long term incentive compensation in the form of stock options (see
“Stock Option Plan”). Bonus compensation is a cash component of management
compensation in order to permit the recognition of outstanding individual efforts, performance,
achievements and/or accomplishments by members of the Company’s management team.
Any specific bonus amounts are awarded on the recommendation of the CGN
Committee and ultimately at the discretion of the Board, with bonus amounts for
members of the Company’s management team other than the CEO being based
primarily on the recommendations of the CEO. The appropriateness and amount of
any bonuses to the CEO and/or management team members has to date been
considered annually by the CGN Committee and Board on a discretionary basis as
no formal bonus plan based on quantitative and/or qualitative benchmarks has
been established for the Company as yet.
| |
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| Avalon Advanced Materials Inc. |
Page 11 |
| Information Circular as of and dated
January 10, 2017 |
|
Base salary is the principal component of each executive
officer’s overall compensation and reflects the fixed component of pay that
compensates the relevant executive officer for fulfilling his or her day to day
roles and responsibilities. The CGN Committee has typically in the past reviewed
the base salary levels and considered the individual performance of the CEO and
of each other executive officer and historically has compared executive
compensation for other companies operating in the mineral industry.
Recently, however, the overall financial condition of the
Company and the overall depressed nature of the junior resource sector in Canada
and elsewhere has significantly factored into the setting of the cash
remuneration levels of the Company’s senior management and, in particular, has
resulted in there being no or minimal increases in the cash remuneration of
senior management for the calendar years 2014 – 2016, and a reduction in such
cash remuneration during the period 2014 – 2017 as outlined under “Base Salary
and Bonus” below. Given the nature of the Company as an exploration and
development stage resource company without existing mineral production and
without any attendant revenues derived thereon, compensation has in the past
been generally based on comparative, qualitative or subjective measures, rather
than quantitative benchmarks. No specific benchmarks, weights or percentages are
assigned to any of the measures or objectives upon which the executive
compensation is generally based.
Annual salary adjustments, if any, have historically been made
on a calendar year basis, typically being determined towards the end of each
calendar year and made effective January 1 of the following year.
Compensation Risk Management
The CGN Committee evaluates the risks, if any, associated with
the Company’s compensation policies and practices. Implicit in the mandate of
the Board is that the Company’s policies and practices respecting compensation,
including those applicable to the Named Executive Officers, be designed in a
manner which is in the best interests of the Company and its shareholders.
In particular, the Company’s executive compensation policies
incorporate a balanced compensation program design (see “Compensation Objectives
and Structure”) and include elements of fixed and variable compensation and
short and longer term incentives.
The base salary component of the compensation provided by the
Company to its executive officers is set annually. The bonus component of the
compensation provided by the Company to its executive officers in the past has
been discretionary, is currently based on qualitative or subjective measures
rather than quantitative benchmarks, and is subject to the prior approval of the
CGN Committee. Discretionary assessment of the performance of executive officers
by the Committee ensures that bonus awards align with both perceived and actual
performance and the risks associated with such performance and any bonus award.
No bonuses have been awarded to any members of senior management since 2014.
The stock option component of the compensation provided by the
Company to its executive officers is both “longer term” and “at risk” and,
accordingly, is directly linked to the achievement of longer term value
creation. Since the benefits of such compensation, if any, are generally not
realized by the executive officers until a significant period of time has passed
and that there are typically deferred vesting provisions attached to each option
grant (see “Stock Option Plan” below), the incentive for executive officers to
take inappropriate or excessive risks with regard to their compensation that are
financially beneficial to them at the expense of the Company and its
shareholders is limited.
| |
|
| Avalon Advanced Materials Inc. |
Page 12 |
| Information Circular as of and dated
January 10, 2017 |
|
The CGN Committee believes that it is unlikely that an
executive officer would take inappropriate or excessive risks at the expense of
the Company and its shareholders that would be beneficial to them with regard to
their short term compensation when their longer term compensation might be put
at risk from their actions. Due to the size of the Company, the CGN Committee is
able to monitor and consider any risks which may be associated with the
Company’s compensation policies and practices. Risks, if any, may be identified
and mitigated through regular meetings of the Board during which financial and
other information relating to the Company are reviewed, and which includes
senior executive compensation. The CGN Committee has not identified any risks
arising from the Company’s compensation policies and practices that it believes
would be reasonably likely to have a material adverse effect on the Company.
Although the Company has not as yet adopted any specific
policies in this regard, in the event that a director or an executive officer
purchases financial instruments that are designed to hedge or offset a decrease
in the market value of the Company’s equity securities granted as compensation
or held, directly or indirectly by the director or the executive officer, such
purchases must be disclosed in insider reporting filings. To date, no such
purchases have been disclosed by any director or executive officer of the
Company.
Base Salary and Bonus
The CGN Committee, in respect of the setting of salaries for
the Named Executive Officers for 2016, recommended to the Board and the Board
determined that, there would be no salary increases for the Named Executive
Officers in 2016 or 2017. This determination recognized the then current
financial situation of the Company and the overall depressed nature of the
junior resource sector in Canada.
Each of the Named Executive Officers agreed, for the seven
month period commencing June 2015 through to December 2015, to be granted, in
lieu of receiving 20% of their respective salaries (25% in the case of Mr.
Bubar) during such period, additional stock options or vacation days, being in
the case of Mr. Bubar, 38 vacation days, in the case of Messrs. Andersen and
Mercer, 30 vacation days, in the case of Mr. Marsh, 13 vacation days and options
to purchase 70,000 common shares and in the case of Mr. Neatby, options to
purchase 100,000 common shares. All of the foregoing options were granted
effective August 7, 2015, have an exercise price of $0.21 per share, have a five
year term and vested immediately.
In addition, each of the Named Executive Officers agreed, for
the eight month period commencing January 2016 through to August 2016, to be
granted, in lieu of receiving 20% of their respective salaries (25% in the case
of Mr. Bubar) during such period, additional stock options, being in the case of
Mr. Bubar, options to purchase 150,000 common shares of Avalon, in the case of
Messrs. Andersen and Marsh, options to purchase 125,000 common shares and in the
case of Messrs. Mercer and Neatby, options to purchase 100,000 common shares.
All of the foregoing options were granted effective January 12, 2016, have an
exercise price of $0.12 per share, have a five year term and vested immediately.
Effective September 1, 2016, each of the Named Executive
Officers agreed to receive 20% of their base salary (25% in the case of Mr.
Bubar) in non-cash compensation on an indefinite basis in exchange for
additional stock options, being in the case of Mr. Bubar, options to purchase
300,000 common shares of Avalon, in the case of Messrs. Andersen and Marsh,
options to purchase 250,000 common shares and in the case of Messrs. Mercer and
Neatby, options to purchase 200,000 common shares. All of the foregoing
options were granted effective November 8, 2016, have an exercise price of $0.17
per share, have a two year term and vested immediately.
| |
|
| Avalon Advanced Materials Inc. |
Page 13 |
| Information Circular as of and dated
January 10, 2017 |
|
No discretionary bonuses were awarded to any Named Executive
Officers of the Company for 2016.
Options
The CGN Committee is of the view that the granting of options
is an appropriate method of providing long-term incentives to senior management
of the Company and, in general, aligns the interests of senior management with
those of the shareholders by enabling senior management to participate in and be
rewarded by an increase in the market price of the Company’s common shares.
Participation in the Stock Option Plan also provides a significant incentive to
the participants to enter into and subsequently to continue their employment
with the Company, particularly when the Company may not have the financial
resources and/or pension and other benefit plans to attract and retain
experienced personnel. In addition, the CGN Committee is of the view that the
Company’s compensation mix must be consistent with industry norms which supports
the provision by the Company of a longer term compensation incentive. This
longer term compensation incentive is best realized by providing compensation
linked to share price performance such as options. The number and terms of
options previously granted to the named executives have been and are expected to
continue to be taken into account, as well as the number and terms of options
granted by peer group companies in determining whether and in what quantity new
option grants should be made in any year. Also, as discussed under “Base Salary
and Bonus” above, additional options have been granted to members of senior
management in lieu of receipt by them of certain specified cash salary amounts.
The Company’s current objective under the Stock Option Plan is
to allot to the CEO options to purchase 1,000,000 common shares, to the CFO and
Senior Vice President options to purchase 600,000 common shares and to officers
at the Vice President level options to purchase 400,000 common shares (the
“target allotments”). The foregoing allotments do not include the additional
options granted to the Named Executive Officers, as described under “Base Salary
and Bonus” above.
The Company typically grants one fifth of an employee’s option
allotment on an annual basis. The methodology applied by the Company permits
exceptions to be made, for example, to recognize exceptional employee
contributions and to permit flexibility in negotiating employment contracts.
Circumstances Triggering Termination and
Change of Control Benefits
As noted below under the heading “Employment Contracts”, there
are certain circumstances that trigger payments and other benefits to the CEO
upon termination and change of control. The CGN Committee views such provisions
as not only being fair and necessary to protect the CEO, but also to encourage
the CEO to pursue those transactions such as mergers or take-overs that are
beneficial to the Company and its shareholders, but that may result in the
termination of the CEO’s employment with the Company.
Summary of the Stock Option Plan
The Stock Option Plan, last approved by shareholders on
February 25, 2014, is a fixed percentage plan that provides that the maximum
number of options which may be outstanding at any time under the Stock Option
Plan and any other compensation arrangement of the Company is 10% of the
Company’s issued and outstanding common shares. Eligible Participants under the
Stock Option Plan include insiders or employees of the Company or any of its
subsidiaries, and any other person or company engaged to provide ongoing
management, consulting or advisory services to the Company.
| |
|
| Avalon Advanced Materials Inc. |
Page 14 |
| Information Circular as of and dated
January 10, 2017 |
|
As at January 10, 2017, the Company had 187,594,660 common shares issued and outstanding. Accordingly, a maximum of 18,759,466 common shares were available for issuance (representing 10% of the issued and outstanding common shares) pursuant to
options granted under the Stock Option Plan as at such date. As at January 10, 2017, there were 11,030,000 options granted and outstanding under the Stock Option Plan (representing 5.9% of the issued and outstanding common shares), leaving 7,729,466
common shares (representing 4.1% of the issued and outstanding common shares) available for grant of further options.
The following is a summary of the Stock Option Plan, which is qualified in its entirety by the full text of the Stock Option Plan attached as Appendix B hereto. Capitalized terms not defined in this Information Circular and used in this summary are
defined in the Stock Option Plan.
Purpose
The Stock Option Plan has been established as a means of compensating Eligible Persons (as defined below) for their contributions to the performance of the Company. The Stock Option Plan is intended to:
|
(a) |
provide an incentive to Eligible Persons to further the development, growth and profitability of the Company; and
|
| | |
|
(b) |
assist the Company in retaining and attracting Eligible Persons with experience and ability.
|
Eligibility
Generally, a right to purchase common shares of the Company pursuant to the terms of the Stock Option Plan may be granted to an “Eligible Person”, which includes, any insider or employee of the Company or any of its subsidiaries, and any
other person or company engaged to provide ongoing management, consulting or advisory services to the Company.
Administration
The Stock Option Plan is administered under the direction of the Board. The Board has full and complete authority to interpret the Stock Option Plan and to prescribe such rules and regulations and make such other determinations, as it deems
necessary or desirable to meet the objectives of and to administer the Stock Option Plan. The Board shall, in its discretion, subject to the terms and conditions of the Stock Option Plan, designate, from among the Eligible Persons, those to whom and
when options shall be granted, the number of common shares to be subject to each option, the exercise price for each option, the period during which the same may be exercised, the vesting period, if any, for such option(s) and the other terms and
conditions attached thereto.
Common Shares Issuable Under the Stock Option Plan
The maximum aggregate number of Shares which may be issuable pursuant to the exercise of Options granted under the Plan, when combined with any other share compensation arrangement of the Company, shall not exceed ten percent (10%) of the
Outstanding Issue. The maximum number of common shares that: (i) are issued to insiders of the Company within any one year period; and (ii) issuable to insiders of the Company at any time, under the Stock Option Plan or when combined with all of the
Company’s other security based compensation arrangements, cannot exceed 10% of the Company’s issued and outstanding common shares. All common shares subject to options that have been exercised or that have expired or have been otherwise
terminated or cancelled without having been exercised, shall be available for issuance pursuant to the
exercise of any subsequent options granted under the Stock Option Plan.
| |
|
| Avalon Advanced Materials Inc. |
Page 15 |
| Information Circular as of and dated
January 10, 2017 |
|
Grant of Options
Any Eligible Person to whom options are granted under the Stock
Option Plan (a “Participant”) at the time of the grant of an option, may hold
more than one option. The grant of each option shall be evidenced by an
agreement between the Company and the Participant setting forth the number of
common shares covered by such option, the exercise price, the option period and
any other terms and conditions attaching thereto.
Exercise Price
The exercise price for the common shares of an option must not
be less than the market price at the time an option is granted. The market price
is the closing price of the common shares on the TSX on the trading day prior to
the date of the grant of the Option, provided that if there is no closing price
on such trading day, market price shall mean the most recent closing price for
the common shares on the TSX prior to the date of grant.
Term of Options
Each option shall be exercisable during a period established by
the Board, but in no circumstances shall the term of the option exceed 10 years.
Exercise of Option
An option may be exercised at any time, or from time to time,
during its terms as to any number of whole common shares, which are then
available for purchase, provided that no partial exercise may be for less than
100 common shares. A Participant electing to exercise an option shall give
written notice of the election to the Company, together with the aggregate
amount to be paid for the common shares to be acquired pursuant to the exercise
of an option, by cheque or bank draft payable or such other form or manner of
payment acceptable to the Company.
Restrictions as to Date of Exercise
Unless otherwise decided by the Board, no option may become
exercisable until three months for persons providing management, consulting or
advisory services to the Company and 12 months for all other Eligible Persons
from the date such Option was granted.
Blackout Periods
No option shall terminate and cease to be exercisable prior to
the fifth business day following a trading blackout then in effect and, if a
trading blackout is not then in effect, prior to the fifth business day
following cessation of the most recent trading blackout.
Retirement, Disability or Death of Participant
Unless otherwise decided by the Committee, the following rules
shall apply:
| |
(a) |
in the event of the retirement, disability or death of a
Participant, the options held by such Participant shall remain exercisable
by such Participant or by such Participant’s legal representative(s) until
the earlier of: |
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| Avalon Advanced Materials Inc. |
Page 16 |
| Information Circular as of and dated
January 10, 2017 |
|
(i) 12 months after the effective date
of retirement, disability or death; and (ii) the expiry of the exercise period
of such Options and, to the extent not exercised within the aforesaid period,
shall terminate; and
| |
(b) |
in the event that the Participant ceases to be an
Eligible Person for any reason other than retirement, disability or death,
any options held by such Participant will expire on the day of
termination, unless otherwise specifically provided in any severance or
termination arrangements entered into by the Participant and the
Company. |
Adjustments
If the number of outstanding common shares shall be increased
or decreased as a result of a stock split, consolidation or reclassification or
if other changes with respect to the common shares shall occur, other than as a
result of the issuance of common shares for fair value, or if additional common
shares are issued pursuant to a stock dividend, or in the event of a merger,
amalgamation or reorganization, then the number of and/or price payable for
common shares subject to any unexercised options shall be adjusted in accordance
with applicable law and in such manner as the Board shall deem proper to
preserve the rights of the Participants under the Stock Option Plan
substantially proportionate to those existing prior to such change or event.
Assignment of Options
No option or any interest therein shall be transferable or
assignable by the Participant otherwise than by will or pursuant to the laws of
succession and no option may be exercised by anyone other than by the
Participant or the Participant’s legal representative(s).
Stock Appreciation Rights
The Company may grant stock appreciation rights to
Participants. The benchmark number of common shares specified in the relevant
stock appreciation rights agreement (a “rights agreement”) shall be deemed to be
the number of common shares reserved for issuance thereunder for purposes of
that section. A stock appreciation right shall entitle the Participant to
receive from the Company the number of common shares, disregarding fractions,
having an aggregate value equal to the excess of the “value of a common share”
over the “amount per common share” specified in the relevant rights agreement
times the number of common shares with respect to which the appreciation right
is being exercised. For purposes of the preceding sentence, the “amount per
common share” shall not be less than the market price at the date of the grant
of the relevant underlying option or appreciation right while “the value of a
common share” shall be determined for these purposes based on the weighted
average trading price of the common shares on the TSX for the five (5) trading
days preceding the date the notice of the exercise of the appreciation right is
received by the Company.
Any option granted under the Stock Option Plan may include a
stock appreciation right, either at the time of grant or by amendment adding it
to an existing Option; subject, however, to the grant of such stock appreciation
right being in compliance with the regulation and policies of the applicable
regulatory authorities. To the extent a stock appreciation right included in or
attached to an option granted is exercised, the option to which it is included
or attached shall be deemed to have been exercised to a similar extent. The
provisions of the Stock Option Plan respecting the exercise of options and the
adjustments to Options arising from certain corporate actions shall apply
mutatis mutandis to all stock appreciation rights granted.
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| Avalon Advanced Materials Inc. |
Page 17 |
| Information Circular as of and dated
January 10, 2017 |
|
Takeover Bids
If a person (an “Offeror”) makes a formal bid (as defined in
the Securities Act (Ontario)) for common shares (an “Offer”) then:
| |
(a) |
all unvested options will become vested and exercisable,
despite any vesting schedule applicable to any unexercised options;
and |
| |
|
|
| |
(b) |
the Company will give each Participant currently holding
an option written notice of the number of options eligible for exercise by
the optionee. |
Following the Company’s notice, a Participant may exercise his
or her option in whole or in part so as to permit each Participant to tender the
common shares received on exercise (the “Optioned Shares”) pursuant to the
Offer. If:
| |
(a) |
the Offer is not completed within the time specified in
the Offer; or |
| |
|
|
| |
(b) |
the Participant does not tender the Optioned Shares
pursuant to the Offer; or |
| |
|
|
| |
(c) |
the Offeror does not take up and pay for all of the
Optioned Shares tendered by the Participant pursuant to the
Offer, |
then certain provisions as set out in the Stock Option Plan,
apply to the Participant and the Optioned Shares.
Substitution Events
In the event of a change of control pursuant to which the
common shares are converted into, or exchanged for, other property, whether in
the form of securities of another company or otherwise (a “Substitution Event”),
then any surviving or acquiring entity must substitute or replace similar
options for those options that remain outstanding and unexercised under the
Stock Option Plan on the same terms and conditions as the Stock Option Plan and
the applicable option agreement (the “Substituted Options”), except that the
terms shall include the right to acquire on exercise the same form of
consideration paid to the holders of common shares in the transaction effecting
the Substitution Event. The amount of such consideration that a Substituted
Option will entitle the Participant to acquire following the Substitution Event
shall be that amount that a Participant would have obtained had such Participant
exercised the Option immediately prior to the Substitution Event with the result
common shares received on such exercise would have been subject to the
Substitution Event. The exercise price for a Substituted Option following the
Substitution Event shall be the amount as the Board may determine as would
provide the Participant with an equal economic result (assuming the Participant
exercised the Substituted Option immediately after the Substitution Event but
not at any later time) as the Participant would have obtained had such
Participant exercised the Option immediately prior to the Substitution Event.
Amendments to the Stock Option Plan
The amendment procedures state the type of modifications to the
Stock Option Plan or to the terms and conditions of an outstanding Option that
must specifically be approved by the holders of the common shares, namely:
| |
• |
amendments to reduce the exercise price of an option held
by a Participant either directly or indirectly by means of the
cancellation of an option and the reissue of a similar option and, for so
long as the common shares are listed on the TSX, “disinterested Shareholder
approval” (as that term is used in the policies of the TSX) shall be
required for any amendment of an option which reduces the exercise price
of an option held by a Participant, if at the time of the proposed
amendment the Participant is an insider of the Company; |
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| Avalon Advanced Materials Inc. |
Page 18 |
| Information Circular as of and dated
January 10, 2017 |
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| |
• |
amendments that extend the period available to exercise
an option beyond the expiry of the original exercise period of such
option; |
| |
|
|
| |
• |
amendments that increase the number of common shares
reserved for issuance under the Stock Option Plan; |
| |
|
|
| |
• |
amendments to amend the provisions dealing with
restrictions on transfer of options in the Stock Option Plan; |
| |
|
|
| |
• |
amendments that materially modify the requirements as to
eligibility for participation in the Stock Option Plan; |
| |
|
|
| |
• |
amendments that add any form of financial assistance and,
if applicable, any amendment to any existing financial assistance
provision which is more favourable to Participants; and |
| |
|
|
| |
• |
amendments that otherwise require approval by the
shareholders (or disinterested shareholders as the case may be) in
accordance with the requirements of the TSX or any applicable regulatory
authority. |
Except as listed above, the Board may from time to time in its
absolute discretion amend, modify or change the terms and provisions of the
Stock Option Plan (including the form of the option agreement) and/or any option
provided that any such amendment, modification and/or change shall be subject to
any required approvals of any applicable regulatory authority. Without limiting
the generality of the foregoing, the Board may make certain amendments,
modifications and/or changes to the Stock Option Plan as outlined in the Stock
Option Plan, without seeking shareholder approval, including any amendment to
the vesting provisions of the Stock Option Plan or any option, any amendment to
the termination provisions of any option, whether or not such option is held by
an insider, provided such amendment does not entail an extension of the expiry
date beyond the original expiry date and the addition or modification of a
cashless exercise feature, payable in cash or common shares, which provides for
a deduction of the number of common shares reserved for issuance pursuant to the
Stock Option Plan equal to the number of common shares that would otherwise have
been issuable upon the exercise of the relevant option.
Except as listed above, the Board or the CEO of the Company
together with the CFO of the Company, with the consent of the affected optionee,
but subject to the terms and conditions of the Stock Option Plan and any
approvals required by any applicable regulatory authority, may from time to time
amend the terms and conditions of any option which has been granted.
C. Performance
Graph
The following graph and table compares the yearly percentage
change in the cumulative total shareholder return of the common shares for the
period from August 31, 2011 to August 31, 2016 with the cumulative total return
of the S&P/TSX Composite Total Return Index for the same period. The graph
and table assume $100 invested in common shares on August 31, 2011 and in the
S&P/TSX Composite Total Return Index, which assumes dividend reinvestment.
| |
|
| Avalon Advanced Materials Inc. |
Page 19 |
| Information Circular as of and dated
January 10, 2017 |
|
Cumulative Total Return on $100
Investment
There is no direct correlation between the market performance
of the Company’s common shares and executive compensation except that any
increase in the market price of the common shares will increase the value of any
options held by the relevant executives. The CGN Committee and the Board
generally evaluate performance by reference to the achievement of corporate
objectives rather than by short term changes in the Company’s common share
price, which typically has in the past been significantly influenced by overall
economic, market and industry conditions. Indirectly, however, the Board
determined that there would be no salary increases for the Named Executive
Officers in 2016, in recognition of the then current financial situation of the
Company and the overall depressed nature of the junior resource sector in
Canada. See discussion under “Base Salary and Bonus” above for further
details.
Comparison of Cumulative Total Return
Month / Year
|
August
31, 2011 |
August
31, 2012 |
August
31, 2013 |
August
31, 2014 |
August
31, 2015 |
August
31, 2016 |
| Avalon Advanced Materials Inc. |
$100.00 |
$40.14 |
$19.04 |
$10.55 |
$3.90 |
$4.59 |
| S&P/TSX Composite Total Return Index |
$100.00 |
$96.40 |
$105.34 |
$133.92 |
$122.29 |
$132.92 |
D. Summary
Compensation Table
The table below contains a summary of the compensation paid to
the Named Executive Officers during the three most recently completed financial
years.
| |
|
| Avalon Advanced Materials Inc. |
Page 20 |
| Information Circular as of and dated
January 10, 2017 |
|
Name and
Principal
Position
|
Year
|
Salary
($) |
Share
based
awards
($) |
Option-
based
awards (1)
($)
|
Non-Equity incentive plan compensation ($) |
Pension
Value (2)
($) |
All other
compen-
sation (3)
($) |
Total
compen-
sation
($) |
Annual
incentive plans |
Long-term
incentive
plans |
Donald Bubar(4)
President and CEO |
2016 |
300,000 |
Nil |
21,578 |
Nil |
Nil |
Nil |
998 |
322,576 |
| 2015 |
316,667 |
Nil |
52,812 |
Nil |
Nil |
Nil |
1,023 |
370,502 |
| 2014 |
400,000 |
Nil |
137,373 |
Nil |
Nil |
Nil |
1,938 |
539,311 |
R. James Andersen
CFO and VP,
Finance |
2016 |
240,000 |
Nil |
23,423 |
Nil |
Nil |
Nil |
Nil |
263,423 |
| 2015 |
250,000 |
Nil |
30,761 |
Nil |
Nil |
Nil |
Nil |
280,761 |
| 2014 |
300,000 |
Nil |
79,283 |
Nil |
Nil |
Nil |
Nil |
379,283 |
David Marsh
Senior VP,
Metallurgy and
Technology
Development |
2016 |
290,286 |
Nil |
23,423 |
Nil |
Nil |
Nil |
1,023 |
314,732 |
| 2015 |
295,532 |
Nil |
36,602 |
Nil |
Nil |
Nil |
Nil |
332,134 |
| 2014 |
356,667 |
Nil |
51,263 |
Nil |
Nil |
Nil |
Nil |
407,930 |
Pierre Neatby
VP, Sales and
Marketing |
2016 |
208,000 |
Nil |
16,507 |
Nil |
Nil |
Nil |
Nil |
224,507 |
| 2015 |
216,667 |
Nil |
30,279 |
Nil |
Nil |
Nil |
748 |
247,694 |
| 2014 |
256,667 |
Nil |
24,735 |
Nil |
Nil |
Nil |
748 |
282,150 |
William Mercer
VP, Exploration |
2016 |
208,000 |
Nil |
10,547 |
Nil |
Nil |
Nil |
1,023 |
219,570 |
| 2015 |
210,758 |
Nil |
18,048 |
Nil |
Nil |
Nil |
Nil |
228,806 |
| 2014 |
256,667 |
Nil |
33,869 |
Nil |
Nil |
Nil |
Nil |
290,536 |
Notes:
| (1) |
These amounts represent the “grant date fair value” of
options granted to the respective Named Executive Officer, which have been
determined by using the Black-Scholes model, a mathematical valuation
model that ascribes a value to an option based on a number of factors in
valuing the option-based awards, including the exercise price of the
option, the price of the underlying security on the date the option was
granted, and assumptions with respect to the volatility of the price of
the underlying security and the risk-free rate of return. Calculating the
value of options using this methodology is very different from a simple
“in- the-money” value calculation. In fact, options that are well
out-of-the-money can still have a significant “grant date fair value”
based in a Black-Scholes valuation, especially where, as in the case of
the Company, the price of the common shares underlying the option is
highly volatile. Accordingly, caution must be exercised in comparing grant
date fair value amounts with cash compensation or an in-the-money option
value calculation. The same caution applies to the total compensation
amounts shown in the last column above, which are based in part the grant
date fair value amounts set out in the column for Option-based awards.
These values are consistent with the accounting values used in the
Company’s financial statements. The Company selected the Black-Scholes
model given its prevalence of use within North America. |
| (2) |
The Company does not have a pension plan. |
| (3) |
Medical expenses paid by the Company on behalf of the
respective Named Executive Officer. |
| (4) |
Mr. Bubar does not receive any additional compensation
for serving as a director of the Company. |
E. Employment
Contracts
Bubar Employment
Agreement
The Company employs Donald Bubar as the Company’s President and
CEO pursuant to an employment agreement effective as of January 1, 2011 (the
“Bubar Agreement”). The Bubar Agreement is for an indefinite term and can be
terminated by either party. If the Bubar Agreement is terminated by Mr. Bubar,
Mr. Bubar must provide notice of at least 30 days and Mr. Bubar is entitled to
be paid the then current salary under the Bubar Agreement prorated until the end
of the notice period, and thereafter all obligations of the Company to Mr. Bubar
will terminate. If the Bubar Agreement is terminated by the Company without cause, the
Company will pay to Mr. Bubar a lump sum payment equal to three times his annual
base salary amount in effect at the time. In the event of a change of control of
the Company (as defined in the Bubar Agreement), and, if within one year of the
change of control, Mr. Bubar’s employment with the Company is terminated by the
Company or Mr. Bubar elects to terminate the Bubar Agreement, the Company will
be obligated to pay to Mr. Bubar a lump sum in cash equal to three times his
annual base salary amount in effect at the time.
| |
|
| Avalon Advanced Materials Inc. |
Page 21 |
| Information Circular as of and dated
January 10, 2017 |
|
Andersen Employment Agreement
The Company employs R. James Andersen as the Company’s
Vice-President, Finance and CFO pursuant to an employment agreement effective
January 1, 2011 (the “Andersen Agreement”). The Andersen Agreement is for an
indefinite term and can be terminated by either party. If the Andersen Agreement
is terminated by Mr. Andersen, Mr. Andersen must provide notice of at least 30
days and Mr. Andersen is entitled to be paid the then current salary under the
Andersen Agreement prorated until the end of the notice period, and thereafter
all obligations of the Company to Mr. Andersen will terminate. If the Andersen
Agreement is terminated by the Company without cause, the Company will pay to
Mr. Andersen a lump sum payment equal to three months of salary plus two months
of salary for every full or partial year of employment, recognizing that Mr.
Andersen’s employment began on June 11, 2001, to a maximum of three times his
annual base salary amount in effect at the time. In the event of a change of
control of the Company (as defined by the Andersen Agreement) and if within one
year of the change of control, Mr. Andersen’s employment with the Company is
terminated or in the event Mr. Bubar’s employment with the Company is
terminated, Mr. Andersen can elect to terminate the Andersen Agreement and the
Company will be obligated to pay to Mr. Andersen a lump sum in cash equal to
three times his annual base salary amount in effect at the time.
Marsh Employment Agreement
The Company employs David Marsh as the Company’s Senior
Vice-President, Metallurgy and Technology Development pursuant to an employment
agreement effective August 1, 2012 (the “Marsh Agreement”). The Marsh Agreement
is for an indefinite term and can be terminated by either party. If the Marsh
Agreement is terminated by Mr. Marsh, Mr. Marsh must provide notice of at least
30 days and Mr. Marsh is entitled to be paid the then current salary under the
Marsh Agreement prorated until the end of the notice period, and thereafter all
obligations of the Company to Mr. Marsh will terminate. If the Marsh Agreement
is terminated by the Company without cause, the Company will pay to Mr. Marsh a
lump sum payment equal to three months of salary plus one month of salary for
every full or partial year of employment, recognizing that Mr. Marsh’s
employment began on August 1, 2012, to a maximum of 12 months. In the
event of a change of control of the Company (as defined in the Marsh
Agreement) and if within one year of the change of control, Mr. Marsh’s
employment with the Company is terminated by the Company, the Company will pay
to Mr. Marsh a lump sum in cash equal to 12 months of salary plus an additional
one month’s salary for every full or partial year of employment, recognizing
that Mr. Marsh’s employment began on August 1, 2012, to a maximum of 24 months.
Neatby Employment Agreement
The Company employs Pierre Neatby as the Company’s
Vice-President, Sales and Marketing pursuant to an employment agreement
effective January 1, 2011 (the “Neatby Agreement”). The Neatby Agreement is for
an indefinite term and can be terminated by either party. If the Neatby
Agreement is terminated by Mr. Neatby, Mr. Neatby must provide notice of at
least 30 days, and Mr. Neatby is entitled to be paid the then current salary
under the Neatby Agreement prorated until the end of the notice period, and
thereafter all obligations of the Company to Mr. Neatby will terminate.
If the Neatby Agreement is terminated by the Company without cause, the Company
will pay to Mr. Neatby a lump sum payment equal to three months of salary plus
one month of salary for every full or partial year of employment, recognizing
that Mr. Neatby’s employment began on July 1, 2010, to a maximum of 24 months. In the event of a change of control of the Company
(as defined in the Neatby Agreement) and if within one year of the change of
control, Mr. Neatby’s employment with the Company is terminated by the Company,
the Company will pay to Mr. Neatby a lump sum in cash equal to 12 months of
salary plus an additional one month’s salary for every full or partial year of
employment, recognizing that Mr. Neatby’s employment began on July 1, 2010, to a
maximum of 24 months.
| |
|
| Avalon Advanced Materials Inc. |
Page 22 |
| Information Circular as of and dated
January 10, 2017 |
|
Mercer Employment Agreement
The Company employs William Mercer as the Company’s
Vice-President Exploration pursuant to an employment agreement effective January
1, 2011 (the “Mercer Agreement”). The Mercer Agreement is for an indefinite term
and can be terminated by either party. If the Mercer Agreement is terminated by
Mr. Mercer, Mr. Mercer must provide notice of at least 30 days, and Mr. Mercer
is entitled to be paid the then current salary under the Mercer Agreement
prorated until the end of the notice period, and thereafter all obligations of
the Company to Mr. Mercer will terminate. If the Mercer Agreement is
terminated by the Company without cause, the Company will pay to Mr. Mercer a
lump sum payment equal to three months of salary plus one month of salary for
every full or partial year of employment, recognizing that Mr. Mercer’s
employment began on January 1, 2011, to a maximum of 24 months. In the event of
a change of control of the Company (as defined in the Mercer Agreement) and if
within one year of the change of control, Mr. Mercer’s employment with the
Company is terminated by the Company, the Company will pay to Mr. Mercer a lump
sum in cash equal to 12 months of salary plus an additional one month’s salary
for every full or partial year of employment, recognizing that Mr. Mercer’s
employment began on January 1, 2011, to a maximum of 24 months.
Severance Payments after Termination or
Termination after a Change of Control
If a severance payment triggering event had occurred on August
31, 2016, the severance payments that would be contractually payable to each of
the Named Executive Officers after termination and after termination following a
change of control would be approximately as follows:
Name |
Termination without a change
of control
of the Company ($) |
Termination following a change
of control
of the Company ($) |
| Donald Bubar |
1,200,000 |
1,200,000 |
| R. James Andersen |
875,000 |
900,000
|
| David Marsh |
240,000 |
510,000
|
| Pierre Neatby |
216,667 |
411,667
|
| William Mercer |
195,000 |
390,000
|
| Total |
2,726,667
|
3,411,667
|
F. Incentive
Plan Awards
Outstanding Option-Based and Share-Based
Awards
The following table sets out, for each Named Executive Officer,
the incentive options (option-based awards) and share-based awards, outstanding
as at August 31, 2016. The closing price of the Company’s shares on the TSX on
August 31, 2016 was $0.20.
| |
|
| Avalon Advanced Materials Inc. |
Page 23 |
| Information Circular as of and dated
January 10, 2017 |
|
| Name |
Option-Based Awards |
Share-Based Awards |
Number of
securities
underlying
unexercised
options
(#) |
Option
exercise price
($) |
Option
expiration
date
|
Value of
unexercised
in-the-money
options(1)
($) |
Number of
shares or
units of
shares that
have not
vested
(#) |
Market or
payout value
of share-
based awards
that have not
vested
($) |
Market or
payout value
of vested
share- based
awards not
paid out or
distributed
($) |
| Donald Bubar |
250,000(3) |
2.62 |
Nov28/16 |
Nil |
Nil |
Nil |
Nil |
| 200,000(2) |
1.75 |
Aug31/17 |
| 200,000(2) |
1.19 |
Feb28/18 |
| 150,000(3) |
0.59 |
Jan06/19 |
| 200,000(2) |
0.81 |
Mar04/19 |
| 150,000(4) |
0.22 |
Nov23/19 |
| 200,000(2) |
0.36 |
Feb29/20 |
| 150,000(4) |
0.12 |
Jan11/21 |
12,000 |
Nil |
Nil |
Nil |
| 200,000(2) |
0.13 |
Feb28/21 |
14,000 |
Nil |
Nil |
Nil |
| R. James Andersen |
200,000(3) |
4.47 |
Aug31/16 |
Nil |
Nil |
Nil |
Nil |
| 120,000(2) |
1.75 |
Aug31/17 |
| 120,000(2) |
0.88 |
May31/18 |
| 150,000(3) |
0.59 |
Jan06/19 |
| 120,000(2) |
0.54 |
May31/19 |
| 125,000(4) |
0.22 |
Nov23/19 |
| 120,000(2) |
0.30 |
May31/20 |
| 125,000(4) |
0.12 |
Jan11/21 |
10,000 |
Nil |
Nil |
Nil |
| 120,000(2) |
0.25 |
May31/21 |
Nil |
Nil |
Nil |
Nil |
| David Marsh |
400,000(2) |
1.54 |
Jul01/17 |
Nil |
Nil |
Nil |
Nil |
| 40,000(2) |
0.59 |
Jan06/19 |
| 120,000(2) |
0.54 |
May31/19 |
| 125,000(4) |
0.22 |
Nov23/19 |
| 120,000(2) |
0.30 |
May31/20 |
| 70,000(4) |
0.21 |
Aug06/20 |
| 125,000(4) |
0.12 |
Jan11/21 |
10,000 |
Nil |
Nil |
Nil |
| 120,000(2) |
0.25 |
May31/21 |
Nil |
Nil |
Nil |
Nil |
| Pierre Neatby |
80,000(2) |
1.75 |
Aug31/17 |
Nil |
Nil |
Nil |
Nil |
| 80,000(2) |
0.88 |
May31/18 |
| 80,000(2) |
0.54 |
May31/19 |
| 50,000(4) |
0.22 |
Nov23/19 |
| 80,000(2) |
0.30 |
May31/20 |
| 100,000(4) |
0.21 |
Aug06/20 |
| 100,000(4) |
0.12 |
Jan11/21 |
8,000 |
Nil |
Nil |
Nil |
| 80,000(2) |
0.25 |
May31/21 |
Nil |
Nil |
Nil |
Nil |
| |
|
| Avalon Advanced Materials Inc. |
Page 24 |
| Information Circular as of and dated
January 10, 2017 |
|
| Name |
Option-Based Awards |
Share-Based Awards |
Number of
securities
underlying
unexercised
options
(#) |
Option
exercise price
($) |
Option
expiration
date
|
Value of
unexercised
in-the-money
options(1)
($) |
Number of
shares or
units of
shares that
have not
vested
(#) |
Market or
payout value
of share-
based awards
that have not
vested
($) |
Market or
payout value
of vested
share- based
awards not
paid out or
distributed
($) |
| William Mercer |
400,000(3) |
1.59 |
Jun 20/17 |
Nil
|
Nil
|
Nil
|
Nil
|
| 80,000(2) |
0.70 |
Dec01/18 |
| 100,000(4) |
0.22 |
Nov23/19 |
| 80,000(2) |
0.22 |
Nov30/19 |
| 80,000(2) |
0.12 |
Nov30/20 |
6,400 |
Nil |
Nil |
Nil |
| 100,000(4) |
0.12 |
Jan11/21 |
8,000 |
Nil |
Nil |
Nil |
| Notes: |
| |
|
| (1) |
The value of the in-the-money options currently held by
each Named Executive Officer is based on the closing market price of the
Company’s common shares on the TSX as at August 31, 2016, being $0.20,
less the option exercise price. |
| (2) |
These options vest as to 25% thereof on each of the first
four anniversaries of the date of grant thereof and have a term of five
years. |
| (3) |
These options vest as to 50% thereof on each of the date
of grant and the first anniversary thereof and have a term of five years.
|
| (4) |
These options were 100% vested on the date of grant and
have a term of five years. |
Value Vested or Earned During the Year
The following table sets forth, for each Named Executive
Officer, the value of all incentive plan awards vested or earned during the year
ended August 31, 2016:
Name |
Option-Based Awards-
Value vested during
the
year
($) (1) |
Share-Based Awards-
Value vested during
the
year
($) |
Non-Equity Incentive
Plan Compensation-
Value earned during the
year
($) |
| Donald Bubar |
Nil |
Nil |
Nil |
| R. James Andersen |
Nil |
Nil |
Nil |
| David Marsh |
Nil |
Nil |
Nil |
| Pierre Neatby |
Nil |
Nil |
Nil |
| William Mercer |
Nil |
Nil |
Nil |
| Note: |
|
| |
|
|
(1) |
The value of the options vested during the year for each
Named Executive Officer is based on the closing market price of the
Company’s common shares on the TSX on the vesting date less the option
exercise price. |
G. Pension Plan
Benefits
There are no pension plan benefits in place for the Named
Executive Officers.
| |
|
| Avalon Advanced Materials Inc. |
Page 25 |
| Information Circular as of and dated
January 10, 2017 |
|
H. Termination and
Change of Control Benefits
Except as set forth above under “Employment Contracts”, the
Company is not party to any compensatory plan, contract or arrangement where a
Named Executive Officer is entitled to receive any compensation from the
Company in the event of resignation, retirement or any other termination of
employment of such persons, change of control of the Company or a change in the
Named Executive Officer's responsibilities following a change of control.
I. Director
Compensation
The following table describes director compensation for
non-executive directors for the year ended August 31, 2016:
Name(1) |
Fees
earned
($) |
Share-
based
awards
($)(2)
|
Option-
based
awards
($)(3)
|
Non-equity
incentive plan
compensation
($)(4) |
Pension
value
($)(5) |
All other
compensation
($)(6)
|
Total
compensation
($) |
| Alan Ferry |
15,300 |
Nil |
Nil |
Nil |
Nil |
Nil |
15,300 |
| Phil Fontaine(7) |
6,700 |
Nil |
Nil |
Nil |
Nil |
Nil |
6,700 |
| Brian MacEachen |
22,500 |
Nil |
Nil |
Nil |
Nil |
Nil |
22,500 |
| Peter McCarter |
18,300 |
Nil |
Nil |
Nil |
Nil |
Nil |
18,300 |
| Jane Pagel(7) |
5,800 |
Nil |
16,319 |
Nil |
Nil |
Nil |
22,119 |
| Kenneth G. Thomas |
13,700 |
Nil |
Nil |
Nil |
Nil |
Nil |
13,700 |
| Notes: |
| (1) |
This director compensation table does not include
information for Donald Bubar who is both a director and a Named Executive
Officer. The compensation paid to Mr. Bubar for the financial year ended
August 31, 2016 has been reflected in the Named Executive Officer summary
compensation table. The Company did not pay any additional compensation to
Mr. Bubar for serving as a director of the Company. |
| (2) |
The Company does not currently have any share-based award
plans. |
| (3) |
These amounts represent the “grant date fair value” of
options granted to the respective director, which have been determined by
using the Black- Scholes model, a mathematical valuation model that
ascribes a value to an option based on a number of factors in valuing the
option-based awards, including the exercise price of the option, the price
of the underlying security on the date the option was granted, and
assumptions with respect to the volatility of the price of the underlying
security and the risk-free rate of return. Calculating the value of
options using this methodology is very different from a simple
“in-the-money” value calculation. In fact, options that are well
out-of-the-money can still have a significant “grant date fair value”
based in a Black-Scholes valuation, especially where, as in the case of
the Company, the price of the common shares underlying the option is
highly volatile. Accordingly, caution must be exercised in comparing grant
date fair value amounts with cash compensation or an in-the-money option
value calculation. The same caution applies to the total compensation
amounts shown in the last column above, which are based in part the grant
date fair value amounts set out in the column for Option-based awards.
These values are consistent with the accounting values used in the
Company’s financial statements. The Company selected the Black-Scholes
model given its prevalence of use within North America. |
| (4) |
The Company does not have a non-equity incentive plan.
|
| (5) |
The Company does not have any pension plans. |
| (6) |
The Company does not have any other benefit plans for its
directors. |
| (7) |
Mr. Fontaine served as a director until February 24,
2016. Ms. Pagel became a director on February 24, 2016.
|
Compensation of Directors
Directors of the Company (excluding Donald Bubar, who is an
officer of the Company) are paid a base yearly fee of $10,000 plus a fee of $400
per Board or Committee meeting attended in person or by conference telephone. An
additional fee of $3,000 is paid to each of the Chair of the Board and the Chair
of any other permanent committee of the Board.
In addition, pursuant to the Stock Option Plan, the Company
typically grants options to purchase common shares to directors of the Company.
During the year ended August 31, 2016, 225,000 options were granted to a new
director.
| |
|
| Avalon Advanced Materials Inc. |
Page 26 |
| Information Circular as of and dated
January 10, 2017 |
|
Directors are also reimbursed for their out-of-pocket expenses
incurred in attending directors’ and committee meetings.
The directors are indemnified by the Company against all costs,
charges and expenses reasonably incurred by such director in respect of any
action or proceeding to which such director is made a party by reason of being a
director of the Company, subject to the limitations in respect thereof contained
in the Act.
The Company maintains insurance coverage with respect of
directors’ and officers’ liability which is limited to $20,000,000 per claim and
$20,000,000 per policy period, subject to deductibles of $150,000 to $250,000 as
defined in the policy. The current policy is for a one-year term and expires on
July 20, 2017. The premium paid by the Company in respect of said insurance in
fiscal 2016 was $81,600.
Option-Based and Share-Based Awards to
Directors
The table below sets out for each non-officer director the
incentive options (option-based awards) and share-based awards outstanding as of
August 31, 2016. The closing price of the Company’s shares on the TSX on August
31, 2016 was $0.20.
| Name(1) |
Option-Based Awards |
Share-Based Awards |
Number of
securities
underlying
unexercised
options
(#) |
Option
exercise price
($) |
Option
expiration
date
|
Value of
unexercised
in-the-money
options(2)
($) |
Number of
shares or
units of
shares that
have not
vested
(#) |
Market or
payout value
of share-
based awards
that have not
vested
($) |
Market or
payout value
of vested
share- based
awards not
paid out or
distributed
($) |
| Alan Ferry |
50,000(4) |
3.43 |
Dec01/16 |
Nil |
Nil |
Nil |
Nil |
| 50,000(4) |
1.99 |
Aug27/17 |
| 50,000(4) |
0.99 |
Apr29/18 |
| 50,000(4) |
0.84 |
Mar05/19 |
| 75,000(4) |
0.48 |
Jul14/19 |
| 50,000(5) |
0.22 |
Nov23/19 |
| Brian MacEachen |
50,000(4) |
3.43 |
Dec01/16 |
Nil |
Nil |
Nil |
Nil |
| 50,000(4) |
1.01 |
Apr19/18 |
| 50,000(4) |
0.99 |
Apr29/18 |
| 50,000(4) |
0.72 |
Mar12/19 |
| 75,000(4) |
0.48 |
Jul14/19 |
| 60,000(5) |
0.22 |
Nov23/19 |
| Peter McCarter |
50,000(4) |
3.43 |
Dec01/16 |
Nil |
Nil |
Nil |
Nil |
| 175,000(4) |
1.44 |
Nov27/17 |
| 50,000(5) |
0.22 |
Nov23/19 |
| Jane Pagel |
225,000(3) |
0.14 |
Feb 24/21 |
13,500 |
Nil |
Nil |
Nil |
| |
|
| Avalon Advanced Materials Inc. |
Page 27 |
| Information Circular as of and dated
January 10, 2017 |
|
| Name(1) |
Option-Based Awards |
Share-Based Awards |
Number of
securities
underlying
unexercised
options
(#) |
Option
exercise price
($) |
Option
expiration
date
|
Value of
unexercised
in-the-money
options(2)
($) |
Number of
shares or
units of
shares that
have not
vested
(#) |
Market or
payout value
of share-
based awards
that have not
vested
($) |
Market or
payout value
of
vested
share- based
awards not
paid out or
distributed
($) |
| Kenneth G. Thomas |
225,000(3) |
0.81 |
Mar04/19 |
Nil |
Nil |
Nil |
Nil |
| 50,000(5) |
0.22 |
Nov23/19 |
| Notes: |
| (1) |
This table does not include information for Donald Bubar
who is both a director and a Named Executive Officer. See “Incentive Plan
Awards” above. The Company did not pay any additional compensation to Mr.
Bubar for serving as a director of the Company. |
| (2) |
The value of unexercised in-the-money options is
calculated by determining the difference between the market value of the
underlying securities at August 31, 2016 and the exercise price of the
options. The closing market price of the Company's common shares as at
August 31, 2016 was $0.20 per common share. |
| (3) |
These options vest as to 25% thereof on each of the first
four anniversaries of the date of grant thereof and have a term of five
years. |
| (4) |
These options vest as to 50% thereof on each of the date
of grant and the first anniversary thereof and have a term of five years.
|
| (5) |
These options were 100% vested on the date of grant and
have a term of five years. |
Value Vested or Earned During the Year
The following table sets forth, for each non-officer director,
the value of all incentive plan awards vested or earned during the year ended
August 31, 2016:
Name(1) |
Option-Based Awards-
Value vested during
the
year
($)(2) |
Share-Based Awards-
Value vested during
the
year
($) |
Non-Equity Incentive
Plan Compensation-
Value earned during the
year
($) |
| Alan Ferry |
Nil |
Nil |
Nil |
| Phil Fontaine(3) |
Nil |
Nil |
Nil |
| Brian MacEachen |
Nil |
Nil |
Nil |
| Peter McCarter |
Nil |
Nil |
Nil |
| Jane Pagel(3) |
Nil |
Nil |
Nil |
| Kenneth G. Thomas |
Nil |
Nil |
Nil |
| Notes: |
| (1) |
This table does not include information for Donald Bubar
who is both a director and a Named Executive Officer. See “Incentive Plans
Awards” above. The Company did not pay any additional compensation to Mr.
Bubar for serving as a director of the Company. |
| (2) |
The value of the options vested during the year for each
director is based on the closing market price of the Company’s common
shares on the TSX on the vesting date less the option exercise price.
|
| (3) |
Mr. Fontaine served as a director until February 24,
2016. Ms. Pagel became a director on February 24, 2016.
|
| |
|
| Avalon Advanced Materials Inc. |
Page 28 |
| Information Circular as of and dated
January 10, 2017 |
|
SECURITIES AUTHORIZED FOR
ISSUANCE
UNDER EQUITY
COMPENSATION PLANS
The following table provides information as at August 31, 2016
with respect to common shares issuable by the Company pursuant to the Stock
Option Plan, the only equity compensation plan of the Company:
Plan Category |
Number of securities
to be issued
upon
exercise of
outstanding options,
warrants and rights
(#) |
Weighted-average
exercise price of
outstanding
options, warrants
and rights
($) |
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
first column)
(#) |
| Equity compensation plans approved by
securityholders (1) |
10,640,000 |
0.96 |
7,312,420 |
| Equity compensation plans not approved by
securityholders |
N/A |
N/A |
N/A |
| Total |
10,640,000 |
0.96 |
7,312,420
|
| Note:
|
|
| (1) |
The Stock Option Plan had 7,312,420 options available for
issuance which, when added to the 10,640,000 outstanding options, is equal
to 10% of the Company’s issued capital as at August 31, 2016.
|
INDEBTEDNESS OF DIRECTORS
AND EXECUTIVE OFFICERS
There is no indebtedness of any director, executive officer,
employee, former directors, former executive officers or former employees, or
proposed nominee for election as a director of the Company to, or guaranteed or
supported by, the Company or any subsidiary thereof either pursuant to an
employee stock purchase program or any other programs of the Company or a
subsidiary or otherwise, nor has there been any such indebtedness of the Company
to, or guaranteed or supported by, the Company or any subsidiary during the
financial year ended August 31, 2016.
INTEREST OF CERTAIN PERSONS
IN MATTERS TO BE ACTED UPON
No person who has been a director or an executive officer of
the Company at any time since the beginning of its last financial year, no
person or company by whom, or on whose behalf, directly or indirectly,
solicitation has been made, no proposed nominee for election as a director of
the Company, nor any associate or affiliate of the aforementioned persons has
any material interest, direct or indirect, by way of beneficial ownership of
securities or otherwise, in any matter to be acted upon at the Meeting, except
as disclosed in this Information Circular. The directors and executive officers
of the Company have an interest in the Stock Option Plan Resolution approving
all unallocated entitlements under the Stock Option Plan as such persons are
eligible to be granted options under the Stock Option Plan, see “Particulars of
Matters to be Acted Upon – Approval of Unallocated Options under the Stock
Option Plan”.
INTEREST OF INFORMED PERSONS
IN MATERIAL TRANSACTIONS
Other than as disclosed herein, no informed person (within the
meaning of National Instrument 51-102 – Continuous Disclosure
Obligations) of the Company, no proposed nominee for election as a director
of the Company, nor any associate or affiliate of any of the foregoing has or had any
material interest, direct or indirect, in any transaction since the commencement
of the Company’s most recently completed financial year or in any proposed
transaction which has materially affected or would materially affect the Company
or any of its subsidiaries.
| |
|
| Avalon Advanced Materials Inc. |
Page 29 |
| Information Circular as of and dated
January 10, 2017 |
|
STATEMENT OF CORPORATE
GOVERNANCE PRACTICES
National Instrument 58-101 – Disclosure of Corporate
Governance Practices (“NI 58-101”) requires that if management of an issuer
solicits proxies from its securityholders for the purpose of electing directors
that certain prescribed disclosure in respect of corporate governance matters be
included in its information circular. The TSX also requires listed companies to
provide, on an annual basis, the corporate governance disclosure which is
prescribed by NI 58-101.
The prescribed corporate governance disclosure for the Company
is that contained in Form 58-101F1 which is attached to NI 58-101 (“Form
58-101F1 Disclosure”). Schedule A attached hereto sets forth the corporate
governance practices of the Company, relative to Form 58-101F1 Disclosure.
ADDITIONAL INFORMATION
Additional information relating to the Company can be found at
www.sedar.com and on the Company’s website at
www.avalonadvancedmaterials.com. Financial
information is provided in the Company’s comparative financial statements and
related management’s discussion and analysis for the financial year ended August
31, 2016.
A copy of the following documents may be obtained, without
charge, upon request to the Corporate Secretary of the Company at Suite 1901,
130 Adelaide Street West, Toronto, Ontario, Canada M5H 3P5, Telephone: (416)
364-4938, Fax: (416) 364-5162:
| (a) |
the comparative financial statements of the Company for
the financial year ended August 31, 2016 together with the accompanying
report of the auditors thereon and related management’s discussion and
analysis and any interim financial statements of the Company for periods
subsequent to August 31, 2016 and related management’s discussion and
analysis; and |
| |
|
| (b) |
this Information Circular. |
APPROVAL
The contents of this Information Circular and the sending
thereof to the shareholders of the Company have been approved by the directors
of the Company.
DATED at Toronto, Ontario this 10th day of January,
2017.
| |
By ORDER of the Board of
Directors |
| |
 |
| |
Donald S. Bubar |
| |
President and Chief Executive Officer
|
| |
|
| Avalon Advanced Materials Inc. |
Page 30 |
| Information Circular as of and dated
January 10, 2017 |
|
SCHEDULE A
CORPORATE GOVERNANCE
DISCLOSURE
National Policy 58-201 – Corporate Governance Guidelines
establishes corporate governance guidelines which apply to all public
companies. The Company has reviewed its own corporate governance practices in
light of these guidelines and, as prescribed by NI 58-101, hereby discloses its
corporate governance practices.
| Disclosure Requirements |
Comments |
| |
|
| Disclose the identity of directors who are independent. |
• |
Alan
Ferry |
| |
• |
Brian
MacEachen |
| |
• |
Peter
McCarter |
| |
• |
Jane
Pagel |
| |
• |
Kenneth
G. Thomas |
| |
For more information about each director, please
refer to the section entitled “Election of Directors” of this Information
Circular. |
| |
|
| Disclose the identity of directors who are not independent, and
describe the basis for that determination. |
Donald Bubar, the President and Chief Executive
Officer of the Company, is considered not independent by virtue of his
position with the Company. |
| |
|
| Disclose whether or not a majority of directors are
independent. |
The Board is currently composed of six directors.
After consideration of the criteria set forth in applicable securities
legislation, the Board has concluded that five of the current directors
are independent. |
| |
|
| If a director is presently a director of another
issuer that is a reporting issuer (or the equivalent) in a jurisdiction or
a foreign jurisdiction, identify both the director and the other issuer. |
• |
Donald
Bubar – Not applicable |
| |
|
| • |
Alan
Ferry – GPM Metals Inc., Guyana Goldfields Inc. and Plateau Uranium Inc. |
| |
|
| • |
Brian
MacEachen – Not applicable |
| |
|
| • |
Peter
McCarter – Not applicable |
| |
|
| • |
Jane
Pagel – BluMetric Environmental Inc. |
| |
|
| • |
Kenneth G. Thomas - Continental Gold Inc. and
Candente Gold Corporation |
| |
|
| Avalon Advanced Materials Inc. |
Page 31 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| Disclose whether or not the independent directors hold
regularly scheduled meetings at which non- independent directors and
members of management are not in attendance. If the independent directors
hold such meetings, disclose the number of meetings held since the
beginning of the issuer’s most recently completed financial year. |
The Board meets without management present (and
therefore without the presence of non-independent directors) at the end of
Board meetings. In the fiscal year ended August 31, 2016, six such in
camera meetings were held. |
|
|
|
| Disclose whether or not the chair of the board is an
independent director. If the board has a chair or lead director who is an
independent director, disclose the identity of the independent chair or
lead director, and describe his or her role and responsibilities. |
Brian MacEachen is the Chair of the Board and is an
|
| independent director. |
| The Chair has the responsibility, among other
things, of ensuring that the Board discharges its responsibilities
effectively. The Chair acts as a liaison between the Board and the
President and CEO and chairs Board meetings. |
|
|
|
| Disclose the attendance record of each director for all board
meetings held since the beginning of the issuer’s most recently completed
financial year. |
The Board held six meetings in the financial year
ended August 31, 2016 with the attendance record of each director as
follows: |
| |
• |
Alan
Ferry – 6/6 board meetings |
| |
|
|
| |
• |
Donald
Bubar – 5/6 board meetings |
| |
|
|
| |
• |
Phil
Fontaine1 – 3/4 board meetings |
| |
|
|
| |
• |
Brian
MacEachen – 6/6 board meetings |
| |
|
|
| |
• |
Peter
McCarter – 6/6 board meetings |
| |
|
|
| |
• |
Jane
Pagel1 – 2/2 board meetings |
| |
|
|
| |
• |
Kenneth
G. Thomas – 6/6 board meetings |
| |
1 Mr. Fontaine was a director until
February 24, 2016. Ms. Pagel |
| |
became a director on February 24, 2016 |
|
|
|
| Disclose the text of the board’s written mandate. |
Refer to Appendix “A” following this section.
|
|
|
|
| Disclose whether or not the board has developed
written position descriptions for the chair and the chair of each board
committee. If the board has not developed written position descriptions
for the chair and/or the chair of each board committee, briefly describe
how the board delineates the role and responsibilities of each such
positions. |
The Board has developed and adopted a written
position description for each of the following, as recommended by the CSA
Guidelines: |
| |
| •
Chair of the Board; |
| •
Chair of the Audit Committee; and |
| • Chair
of the CGN Committee |
| |
|
| Avalon Advanced Materials Inc. |
Page 32 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| Disclose whether or not the board and CEO have developed a
written position description for the CEO. If the board and CEO have not
developed such a position description, briefly describe how the board
delineates the role and responsibilities of the CEO. |
The Board and the President and CEO have developed
a written position description for the President and CEO, and the Board
has adopted such position description. |
|
|
|
|
Briefly describe what measure the board takes to orient new directors
regarding:
(i) the role of the board, its committees
and its directors, and
(ii) the nature and operation of the issuer’s
business. |
The Company held an orientation program for its new
director on March 7, 2016. A manual enclosing copies of all corporate
policies and mandates is distributed to the new directors at their
orientation session. The Company distributes copies of corporate policies
and mandates if and when updates are undertaken. In addition, the Board as
a whole and the Company informally provide such orientation and education
as required. The Board has had significant input into the Company’s
strategic plan, which has resulted in a significant increase in the level
of education provided to the Board. In light of the Company’s size and
scope of operations, the Board believes this approach is practical and
effective. |
|
|
|
| Briefly discuss what measures, if any, the board takes to
provide continuing education for its directors. If the board does not
provide continuing education, describe how the board ensures that its
directors maintain the skill and knowledge necessary to meet their
obligations as directors. |
There is currently no formal continuing education
program in place. Each director is responsible for ensuring that he or she
maintains the skill and knowledge necessary to meet his or her obligations
as a director, and directors are entitled, at the Company’s expense, to
attend seminars they determine necessary to keep them up-to-date with
current issues relevant to their service as directors of the Company.
|
| |
|
| Avalon Advanced Materials Inc. |
Page 33 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| Disclose whether or not the board has adopted a written code
for the directors, officers and employees. If the board has adopted a
written code: |
The Board has adopted a written Code of Business
Conduct and Ethics which is reviewed on a yearly basis by the Board. In
the 2016 fiscal year no conflicts of interest were identified.
|
| (i)
|
disclose how a person or company
may obtain a copy of the code, |
(i) |
the
Company’s Code of Business Conduct and Ethics referred to above can be
viewed on the Company’s website at www.avalonadvancedmaterials.com or a copy may be
obtained by written request to the Company’s Corporate Secretary, at Suite
1901, 130 Adelaide Street West, Toronto, Ontario, Canada M5H 3P5. |
| |
|
|
|
| (ii)
|
describe how the board monitors
compliance with its code, or if the board does not monitor compliance,
explain whether and how the board satisfies itself regarding compliance
with its code, and |
(ii) |
the
Board monitors compliance with its Code of Business Conduct and Ethics by
requiring that each director, officer and employee annually affirm, in
writing, that he or she has read and understood the Code of Conduct and
has agreed to abide by it in all aspects. |
| |
|
|
|
| (iii)
|
provide a cross-reference to any
material change report filed since the beginning of the issuer’s most
recently completed financial year that pertains to any conduct of a
director or executive officer that constitutes a departure from the code.
|
(iii) |
none.
|
| Describe any steps the board takes to ensure directors exercise
independent judgment in considering transactions and agreements in respect
of which a director or executive officer has a material interest. |
Each director and executive officer is required to
fully disclose his or her interest in respect of any transaction or
agreement to be entered into by the Company. Once such interest has been
disclosed, the Board as a whole determines the appropriate level of
involvement the director or executive officer should have in respect of
the transaction or agreement. |
| |
|
| Avalon Advanced Materials Inc. |
Page 34 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| Describe any other steps the board takes to encourage and
promote a culture of ethical business conduct. |
In addition to the Code of Business Conduct and
Ethics, the Board has also adopted a Sustainability Policy which has
replaced the Company’s former Safety and Environmental Policy that was
adopted by the Board in 2006. The Sustainability Policy builds on the
measureable framework concept that was included in the Company’s former
Safety and Environmental Policy and sets out more detailed action items for
each of the four categories of Health and Safety, Environment, Community and
People. The Company believes that sustainability means adopting leading
industry standards for the management of health, safety and the environment,
transparently engaging with local communities and stakeholders, treating
those with whom the Company works with respect and creating a workplace
where employees are valued, engaged and encouraged to succeed.
A description of each of the four sustainability categories follows: |
| |
• |
Health
and Safety – As a core value, the Company’s objective is to create an
injury free workplace and to enhance the wellbeing of employees,
contractors and the communities in which it operates. |
| |
• |
Environment - The preservation and protection of the long term
health, function and viability of the natural environment is a key
objective. |
| |
• |
Community – The Company is committed to being a responsible
corporate citizen and contributing to the social and economic well-being
of the communities associated with its activities. |
| |
• |
People - A workplace based on mutual respect,
fairness and integrity is a fundamental component of the Company’s core
values. The Company creates a workplace where employees are encouraged to
innovate and grow within the organization over the long term.
|
| |
|
| Avalon Advanced Materials Inc. |
Page 35 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| Describe the process by which the board identifies new
candidates for board nomination. |
The CGN Committee is responsible for recommending
candidates for nomination to the Board, and governing the desirable
characteristics for directors. In making such recommendations, the CGN
Committee considers: |
| |
(a) |
the
competencies and skills that the Board considers to be necessary for the
Board, as a whole, to possess; |
| |
(b) |
the
competencies and skills that the Board considers each existing director to
possess; and |
| |
(c) |
the competencies and skills each new nominee will
bring to the boardroom. |
| Disclose whether or not the board has a nominating committee
composed entirely of independent directors. |
The CGN Committee is composed of three directors,
all of whom are independent. |
|
|
|
| If the board has a nominating committee, describe the
responsibilities, powers and operation of the nominating committee. |
The CGN Committee is responsible for, among other
things, identifying and recommending to the Board new candidates for the
Board, annually reviewing the credentials of existing Board members to
assess their suitability for re-election and ensuring that appropriate
orientation and continuing education programs for new Board members and
continuing education, as required, for all Board members are in place.
|
| The CGN Committee meets as often as is necessary to
carry out its responsibilities. |
| The CGN Committee is permitted access to all
records and corporate information that it determines are required in order
to perform its duties. The CGN Committee has the authority to engage
independent counsel and other advisors as it determines necessary to carry
out its duties and to set and pay the compensation for any advisors
engaged by it. |
|
|
|
| Describe the process by which the board determines compensation
for the issuer’s directors and officers. |
The CGN Committee of the Board is responsible for
reviewing the compensation of the Company’s directors and officers and
making recommendations to the Board with respect thereto. See also
“Statement of Executive Compensation – B. Compensation Discussion and
Analysis” of this Information Circular. |
|
|
|
| Disclose whether or not the board has a compensation committee
composed entirely of independent directors. |
The CGN Committee is composed of three directors,
all of whom are independent. |
| |
|
| Avalon Advanced Materials Inc. |
Page 36 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| If the board has a compensation committee, describe the
responsibilities, powers and operation of the compensation committee. |
The CGN Committee reviews compensation levels for
all officers and in particular compensation levels for the CEO. The CGN
Committee is responsible for, among other things, developing or approving
performance goals and corporate objectives which the President and CEO is
responsible for meeting, determining or recommending to the Board the
compensation of the President and CEO, and reviewing the adequacy and form
of compensation of the Board and members of the committees of the Board in
light of the responsibilities and risks involved in being a director, in
the case of the Board, and a Chair, in the case of Board committees. The
CGN Committee meets as often as is necessary to carry out its
responsibilities. The CGN Committee is permitted access to all records and
corporate information that it determines are required in order to perform
its duties. The CGN Committee has the authority to engage independent
counsel and other advisors as it determines necessary to carry out its
duties and to set and pay the compensation for any advisors engaged by it.
|
|
|
|
| If a compensation consultant or advisor has, at any time since
the beginning of the issuer’s most recently completed financial year, been
retained to assist in determining compensation for any of the issuer’s
directors and officers, disclose the identity of the consultant or advisor
and briefly summarize the mandate for which they have been retained. If
the consultant or advisor has been retained to perform any other work for
the issuer, state that fact and briefly describe the nature of the work.
|
Not applicable. |
| |
|
| Avalon Advanced Materials Inc. |
Page 37 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| If the board has standing committees other than the audit,
compensation and nominating committees, identify the committees and
describe their function. |
The governance responsibilities in the CGN
Committee’s mandate include: |
| |
• |
to develop and enforce policy in the area of corporate
governance and the practices of the Board in light of the Company’s
particular circumstances, the changing needs of investors and the Company,
and changes in corporate governance guidelines; |
| |
|
|
| |
• |
to prepare and recommend to the Board annually a statement
of corporate governance practices to be included in the Company’s
information circular and ensure that such disclosure is complete and
provided in accordance with the regulatory requirements; |
| |
|
|
| |
• |
to monitor developments in the area of corporate governance
and the practices of the Board and advise the Board accordingly; and
|
| |
|
|
| |
• |
to develop, implement and maintain
appropriate policies with respect to disclosure, confidentiality and
insider trading. |
| |
|
| Avalon Advanced Materials Inc. |
Page 38 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| Disclose whether or not the board, its committees and
individual directors are regularly assessed with respect to their
effectiveness and contribution. If assessments are regularly conducted,
describe the process used for the assessments. |
The CGN Committee of the Board has implemented a
process for periodically assessing the effectiveness of the Board as a
whole, as well as its committees and individual directors. As part of the
assessment process, each director receives a comprehensive survey which
covers, among other matters, the overall functioning of the Board and each
Board committee, including its composition, structure and processes; the
management structure and reporting functions; the Company’s strategic
direction and commitment to sustainability; the Board’s operational
oversight, the Board’s relationship with management; and other relevant
aspects of the Board’s responsibilities and processes. The completed
surveys are then compiled into a report which is provided to the CGN
Committee. The CGN Committee reviews the results of the Board surveys and
puts forward any recommendations it feels appropriate to address any
comments or concerns expressed by directors. The report, along with the
recommendations of the CGN Committee, is then presented to the Board for
further discussion. |
|
|
|
|
|
|
If assessments are not regularly conducted, describe
how the board satisfies itself that the board, its committees, and its
individual directors are performing effectively. |
Historically, Board effectiveness has been assessed
by the Board as a whole, considering the operation of the committees of
the Board, the adequacy of information provided to the directors, the
quality of communication between the Board and management and the historic
growth and performance of the Company. The Board undertook a formal
assessment process in the 2015 fiscal year. |
| |
|
| Avalon Advanced Materials Inc. |
Page 39 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| Disclose whether or not the issuer has adopted term limits for
the directors on its board or other mechanisms of board renewal and, if
so, include a description of those director term limits or other
mechanisms of board renewal. If the issuer has not adopted director term
limits or other mechanisms of board renewal, disclose why it has not done
so. |
The Company has not adopted term limits for
directors. The Company believes that in taking into account the nature and
size of the Board and the Company, it is more important to have relevant
experience than to impose set time limits on a director’s tenure, which
may create vacancies at a time when a suitable candidate cannot be
identified and as such would not be in the best interests of the Company.
In lieu of imposing term limits, the Company regularly encourages sharing
and new perspectives through regularly scheduled Board meetings, meetings
with only independent directors in attendance, as well as through
continuing education initiatives. The CGN Committee is responsible for
analyzing the skills and experience necessary for the Board and evaluating
the need for director changes to ensure that the Company has highly
knowledgeable and motivated Board members, while ensuring that new
perspectives are available to the Board. |
| |
|
| Avalon Advanced Materials Inc. |
Page 40 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
| Disclose whether the issuer has adopted a written policy
relating to the identification and nomination of women directors. If the
issuer has not adopted such a policy, disclose why it has not done so. |
The Company has not adopted a written
policy on the identification and nomination of female executive officers
or directors, or a target for the number of women in these roles. The
Company currently has six directors and six executive officers, one of
whom is female (being 17% of the directors and 0% of the executive
officers, respectively). Of the Company’s seven officers, one is female
(being approximately 14% of the officers). |
| |
| Disclose whether and, if so, how the board or
nominating committee considers the level of representation of women on the
board in identifying and nominating candidates for election or reelection
to the board. If the issuer does not consider the level of representation
of women on the board in identifying and nominating candidates for
election or re-election to the board, disclose the issuer’s reasons for
not doing so. |
| |
| The Company does not believe that
quotas, strict rules or targets necessarily result in the identification
or selection of the best candidates for directors or officers of the
Company. However, it is mindful of the benefit of diversity in the
workplace and on the Board, and the need to maximize its effectiveness and
the effectiveness of the Board and the Board’s decision- making abilities.
The CGN Committee is committed to a merit-based system for Board
composition, with an aim to retain the most qualified candidates for the
applicable position. The CGN Committee and the Board are also committed to
equality of opportunity and take concrete steps to increase the
representation of women in management within the Company. |
| |
| Disclose whether and, if so, how the issuer
considers the level of representation of women in executive officer
positions when making executive officer appointments. If the issuer does
not consider the level of representation of women in executive officer
positions when making executive officer appointments, disclose the
issuer’s reasons for not doing so. |
| |
| Disclose whether the issuer has adopted a target
regarding women on the issuer’s board. If the issuer has not adopted a
target, disclose why it has not done so. |
| |
| Disclose whether the issuer has adopted a target
regarding women in executive officer positions of the issuer. If the
issuer has not adopted a target, disclose why it has not done so. |
| |
| Disclose the number and proportion (in percentage
terms) of directors on the issuer’s board who are women. |
| |
| Disclose the number and proportion (in percentage
terms) of executive officers of the issuer, including all major
subsidiaries of the issuer, who are women. |
| |
|
| Avalon Advanced Materials Inc. |
Page 41 |
| Information Circular as of and dated
January 10, 2017 |
|
| Disclosure Requirements |
Comments |
|
|
|
| The audit committee should be composed entirely of independent
directors and should have a specifically defined mandate. |
The Board has an Audit Committee composed of three
directors, each of whom is independent. (Messrs. MacEachen, Ferry and
McCarter). A copy of the Audit Committee Charter can be found on the
Company’s website. Additional information regarding the Audit Committee is
contained in the Company’s annual report on Form 20-F for the year ended
August 31, 2016 (the “Form 20-F”) under the heading “Committees –
Audit Committee”. The Form 20-F is available under the Company’s profile
on SEDAR at www.sedar.com. |
| |
|
| Avalon Advanced Materials Inc. |
Page 42 |
| Information Circular as of and dated
January 10, 2017 |
|
APPENDIX A
AVALON ADVANCED MATERIALS INC.
(the “Company”)
MANDATE OF THE BOARD OF DIRECTORS
Mandate
The Board of Directors (the “Board”) of the Company is
responsible for, on behalf of the shareholders, the stewardship of the Company
and, in particular, for the supervision of the management of its business and
affairs.
The Board discharges its responsibilities directly and through
delegation to the various committees of the Board.
Directors of the Company are to exercise their business
judgement in a manner consistent with their fiduciary duties. In particular,
directors are required to act honestly and in good faith, with a view to the
best interests of the Company and to exercise the care, diligence and skill that
a reasonably prudent person would exercise in comparable circumstances.
Duties and Responsibilities
| 1. |
Managing the Affairs of the Board |
Subject to their legal obligations and to the Articles and
By-laws of the Company, the Board retains the responsibility for managing its
own affairs, including:
| |
a. |
planning its composition and size; |
| |
|
|
| |
b. |
selecting its Chair; |
| |
|
|
| |
c. |
nominating candidates for election to the
Board; |
| |
|
|
| |
d. |
creating committees and appointing the members of such
committees; determining director compensation; and |
| |
|
|
| |
e. |
determining director
compensation. |
| 2. |
Oversight of Management and Human
Resources |
Board has the responsibility for:
| |
a. |
the appointment and succession of the Chief Executive
Officer (the "CEO") and other officers of the Company, the monitoring of
the performance of the CEO and other officers of the Company, and the
providing of advice and counsel to the CEO and other officers of the
Company in the execution of their duties; |
| |
|
| Avalon Advanced Materials Inc. |
Page 43 |
| Information Circular as of and dated
January 10, 2017 |
|
| |
b. |
approving decisions relating to senior management,
including: |
| |
|
|
|
| |
|
i. |
the appointment of officers; |
| |
|
|
|
| |
|
ii. |
the compensation, including incentive compensation, of
the officers of the Company; |
| |
|
|
|
| |
|
iii. |
succession planning; and |
| |
|
|
|
| |
|
iv. |
the employment contracts, termination and other special
arrangements with executive officers, or other employee
groups; |
| |
c. |
approving and/or reviewing certain matters relating to
all employees, including: |
| |
|
|
|
| |
|
i. |
annual salary policies and/or programs; |
| |
|
|
|
| |
|
ii. |
benefit and incentive
programs; |
| 3. |
Business Strategy and Objectives |
The Board has the responsibility to:
| |
a. |
participate with management in the development of, and
ultimately approve, the Company’s strategic plan and objectives; |
| |
|
|
| |
b. |
approve the entering into, or withdrawing from, areas of
business that are, or are likely to be, significant or material to the
Company; |
| |
|
|
| |
c. |
approve material investments, acquisitions and
divestitures by the Company; |
| |
|
|
| |
d. |
approve major transactions and contracts and other
arrangements or commitments that may have a significant or material impact
on the Company; and |
| |
|
|
| |
e. |
review management’s implementation of appropriate
community and environmental stewardship and safety and health management
systems and programs. |
| 4. |
Financial and Corporate Issues |
The Board has the responsibility to:
| |
a. |
approve the annual and quarterly financial statements of
the Company, including the notes thereto, and the release thereof by
management; |
| |
|
|
|
| |
b. |
under the auspices of the Audit Committee: |
| |
|
|
|
| |
|
i. |
oversee the processes implemented to ensure that the
financial performance and results of the Company are reported fairly,
accurately and in a timely manner in accordance with generally accepted
accounting standards and in compliance with legal and regulatory
requirements; and |
| |
|
|
|
| |
|
ii. |
monitor the implementation, reliability and integrity of
the Corporation’s internal control and management information
systems; |
| |
c. |
approve an annual budget and operating plan for the
Company and monitor the Company’s performance against such budget and
plan; and |
| |
|
|
| |
d. |
approve debt and equity financings, listings of
securities and other matters related to the capital of the
Company. |
| |
|
| Avalon Advanced Materials Inc. |
Page 44 |
| Information Circular as of and dated
January 10, 2017 |
|
| 5. |
Business and Risk Management |
The Board has the responsibility to:
| |
a. |
review with management (a) the processes utilized by
management to identify, assess and manage risk and (b) review the
implementation by management of appropriate systems to manage such risks;
and |
| |
|
|
| |
b. |
receive regular reports from management on matters
relating to health, safety, community relations and the
environment. |
| 6. |
Policies and Procedures |
The Board has the responsibility to:
| |
a. |
direct management to ensure the Company operates at all
times within applicable laws and regulations and to the highest ethical
and moral standards and promote a culture of integrity throughout the
Company consistent with the Company’s Code of Business Conduct and
Ethics; |
| |
|
|
| |
b. |
review management’s implementation of appropriate
community and environmental stewardship and safety and health management
systems; |
| |
|
|
| |
c. |
develop the Company’s approach to corporate governance,
including developing a set of corporate governance principles and
guidelines that are applicable to the Company; and |
| |
|
|
| |
d. |
develop and/or approve all requisite or appropriate Board
charters, policies and procedures and review regularly the content
thereof. |
| 7. |
Compliance Reporting and Corporate
Communications |
The Board has the responsibility to:
| |
a. |
oversee the implementation of policies to foster the
timely disclosure of any developments that have a significant and/or
material impact on the value of the Company and/or its shares; |
| |
|
|
| |
b. |
approve the Management Proxy Circular, Annual Information
Form, Management’s Discussion and Analysis, the Annual Report and all
other corporate disclosure documents; |
| |
|
|
| |
c. |
ensure the Company has in place effective communication
processes with shareholders and other stakeholders, with financial,
regulatory and other recipients and with the media; and |
| |
|
|
| |
d. |
approve interaction with shareholders on all items
requiring shareholder response or approval. |
Approved by the Board of Directors on January 29, 2013.
| |
|
| Avalon Advanced Materials Inc. |
Page 45 |
| Information Circular as of and dated
January 10, 2017 |
|
APPENDIX B
AVALON ADVANCED MATERIALS INC.
(the “Company”)
STOCK OPTION PLAN
Section 1 – Purpose
| 1.1 |
The Stock Option Plan (the “Plan”) has been established
as a means of compensating Eligible Persons (as defined herein) for their
contributions to the performance of the Company. The Plan is intended
to: |
| |
|
|
|
(a) |
provide an incentive to Eligible Persons to further the
development, growth and profitability of the Company; and |
| |
|
|
|
(b) |
assist the Company in retaining and attracting Eligible
Persons with experience and ability. |
Section 2 – Definitions
| 2.1 |
In this Plan, unless the context otherwise requires, the
following terms shall have the following
meanings: |
| |
“Board” |
means the board of directors of the Company; |
| |
|
|
|
“Committee” |
means either the Board or a committee of the Board
comprised of such members of the Board as may be designated by the Board;
|
| |
|
|
| |
“Company” |
means Avalon Advanced Materials Inc., and any successor
company thereto; |
| |
|
|
|
“Eligible Person” |
means an Insider or employee of the Company or any of its
subsidiaries, and any other person or company engaged to provide ongoing
management, consulting or advisory services to the Company; |
| |
|
|
| |
“Exchange” |
means the Toronto Stock Exchange; |
| |
|
|
| |
“Insider” |
means an insider of the Company, as defined in the
Securities Act (Ontario); |
| |
|
|
|
“Market Price” |
means the closing price of the Shares on the Exchange on
the trading day prior to the date of the grant of an Option, provided that
if there is no closing price on such trading day, “Market Price” shall
mean the most recent closing price for the shares on the Exchange prior to
the date of grant; |
| |
|
|
|
“Option” |
means an option granted by the Company to a Participant
to purchase authorized but unissued Shares pursuant to the terms of the
Plan; |
| |
|
|
|
“Outstanding Issue” |
means that number of Shares issued and outstanding
immediately prior to the date of grant of the Option; |
| |
|
|
| |
“Participant” |
means an Eligible Person to whom Options are granted
under the Plan; |
| |
|
|
| |
“person” |
has the meaning ascribed thereto in the Securities Act
(Ontario); |
| |
|
|
|
“Plan” |
means this Stock Option Plan, either as originally
adopted or as amended from time to time, as the case may be;
|
| |
|
| Avalon Advanced Materials Inc. |
Page 46 |
| Information Circular as of and dated
January 10, 2017 |
|
| |
“Regulatory Authority” |
means any applicable securities regulatory authority or
any stock exchange or exchanges, including the Exchange upon which any of
the Company’s securities are from time to time listed for trading and any
other applicable regulatory authority; |
| |
|
|
| |
“Shareholders” |
means holders of Shares; |
| |
|
|
| |
“Shares” |
means the common shares of the Company; and |
| |
|
|
| |
“Trading Blackout” |
has the meaning ascribed thereto in Section 5.7.
|
| 2.2 |
In this Plan, unless the context requires otherwise,
references to the male gender include the female gender and the neuter,
and words importing the singular include the plural and vice
versa. |
| |
|
| 2.3 |
Any reference made in this Plan to Sections is a
reference to Sections of this Plan. |
Section 3 – Administration of the Plan
| 3.1 |
The Plan is under the direction of the Committee that, in
addition to the specific powers conferred upon it hereunder, has full and
complete authority to interpret the Plan and to prescribe such rules and
regulations and make such other determinations, as it deems necessary or
desirable to meet the objectives of and to administer the Plan. Without
limiting the generality of the foregoing, for greater certainty, the
Committee shall, subject to the terms and conditions of the Plan, have the
power and authority to: |
| |
|
|
|
(a) |
adopt rules and regulations for implementing the
Plan; |
| |
|
|
|
(b) |
determine the eligibility of persons to participate in
the Plan; |
| |
|
|
|
(c) |
interpret and construe the provisions of the
Plan; |
| |
|
|
|
(d) |
approve the definitive terms and provisions of any Option
agreement to be entered into between the Company and each Participant
(subject to such being in accordance with the terms of this Plan);
and |
| |
|
|
|
(e) |
take such other steps as they determine to be necessary
or desirable to give effect to the Plan. |
Section 4 – Number of Shares Issuable under the Plan
| 4.1 |
The maximum aggregate number of Shares which may be
issuable pursuant to the exercise of Options granted under the Plan, when
combined with any other share compensation arrangement of the Company,
shall not exceed ten percent (10%) of the Outstanding Issue. |
| |
|
| 4.2 |
The maximum number of Shares that (i) are issued to
Insiders within any one year period; and (ii) issuable to Insiders at any
time, under the Plan or when combined with all of the Company’s other
security based compensation arrangements, cannot exceed 10% of the
Outstanding Issue. |
| |
|
| 4.3 |
All Shares subject to Options that have been exercised or
that have expired or have been otherwise terminated or cancelled without
having been exercised, shall be available for issuance pursuant to the
exercise of any subsequent Options granted under the
Plan. |
| |
|
| Avalon Advanced Materials Inc. |
Page 47 |
| Information Circular as of and dated
January 10, 2017 |
|
Section 5 – Options
| 5.1 |
Subject to Section 4, the Committee shall, in its
discretion, subject to the terms and conditions of the Plan, designate,
from among the Eligible Persons, those to whom and when Options shall be
granted, the number of Shares to be subject to each Option, the Specified
Price for each Option, the period during which the same may be exercised,
the vesting period, if any, for such Option(s) and the other terms and
conditions attached thereto. Any Participant, at the time of the grant of
an Option, may hold more than one Option. The grant of each option shall
be evidenced by an agreement between the Company and the Participant
setting forth the number of Shares covered by such Option, the exercise
price, the Option period and any other terms and conditions attaching
thereto. |
| |
|
| 5.2 |
The exercise price for the Shares subject to an Option
shall be not less than the Market price. |
| |
|
| 5.3 |
Subject to the provisions of Section 5.5, each Option
shall be exercisable during a period established by the Committee, but in
no circumstances shall the term of an Option exceed 10 years. |
| |
|
| 5.4 |
An Option may be exercised at any time, or from time to
time, during its term as to any number of whole Shares, which are then
available for purchase, provided that no partial exercise may be for less
than 100 whole Shares. A Participant electing to exercise an Option shall
give written notice of the election to the Company, together with the
aggregate amount to be paid for the Shares to be acquired pursuant to the
exercise of an Option, by cheque or bank draft payable in Toronto or such
other form or manner of payment acceptable to the Company. |
| |
|
| 5.5 |
Unless otherwise decided by the Committee, the following
rules shall apply: |
| |
(a) |
in the event of the retirement, disability or death of a
Participant, the Options held by such Participant shall remain exercisable
by such Participant or by such Participant’s legal representative(s) until
the earlier of (i) 12 months after the effective date of retirement,
disability or death; and (ii) the expiry of the exercise period of such
Options and, to the extent not exercised within the aforesaid period,
shall terminate; and |
| |
|
|
| |
(b) |
in the event that the Participant ceases to be an
Eligible Person for any reason other than retirement, disability or death,
any Options held by such Participant will expire on day of termination,
unless otherwise specifically provided in any severance or termination
arrangements entered into by the Participant and the
Company. |
| 5.6 |
No Option or any interest therein shall be transferable
or assignable by the Participant otherwise than by will or pursuant to the
laws of succession and no Option may be exercised by anyone other than by
the Participant or his or her legal representative(s). |
| |
|
| 5.7 |
Notwithstanding the provisions of Section 5.3 and Section
5.5, no Option shall terminate and cease to be exercisable prior to the
fifth (5th) business day following the cessation of any
restricted trading period imposed by the Company by which the directors,
officers and/or employees of the Company are prohibited from trading in
securities of the Company (a ”Trading Blackout”) then in effect and, if a
Trading Blackout is not then in effect, prior to the fifth
(5th) business day following cessation of the most recent
Trading Blackout. |
| |
|
| 5.8 |
Unless otherwise decided by the Committee, no Option may
become exercisable until three (3) months for persons providing
management, consulting or advisory services to the Company and 12 months
for all other Eligible Persons from the date such Option was
granted. |
| |
|
| 5.9 |
The grant of Options shall be subject to the following
limitations and requirements: |
| |
|
| Avalon Advanced Materials Inc. |
Page 48 |
| Information Circular as of and dated
January 10, 2017 |
|
| |
(a) |
the number of Shares reserved for issuance pursuant to
Options granted to any one consultant shall not exceed 2% of the
Outstanding Issue in any 12-month period; |
| |
|
|
| |
(b) |
the aggregate number of Shares reserved for issuance
pursuant to Options granted to Persons employed to provide “Investor
Relations Activities” (as that term is defined in National Instrument
45-106) shall not exceed 2% of the Outstanding Issue in any 12-month
period; and |
| |
|
|
| |
(c) |
if the Participant is an employee or consultant, there
shall be a representation by the Company and the Participant that the
Participant is a bona fide employee or consultant, as the case may
be, of the Company. |
Section 6 - Stock Appreciation Rights
| 6.1 |
The Company may grant stock appreciation rights hereunder
to Participants, with the specific terms, and conditions thereof to be as
provided herein and as provided in the regulations and policies of the
Regulatory Authorities. The benchmark number of shares specified in the
relevant stock appreciation rights agreement (a “rights agreement”) shall
be deemed to be the number of shares reserved for issuance thereunder for
purposes of that section. |
| |
|
|
A stock appreciation right granted hereunder shall
entitle the Participant to receive from the Company that number of Shares,
disregarding fractions, having an aggregate value equal to excess of the
value of a Share over the amount per Share specified in the relevant
rights agreement times the number of Shares with respect to which the
appreciation right is being exercised. For purposes of the proceeding
sentence, the “amount per Share” shall not be less than the Market Price
at the date of the grant of the relevant underlying option or appreciation
right while “the value of a Share” shall be determined for these purposes
based on the weighted average trading price of the Share on the Exchange
for the five (5) trading days preceding the date the notice of the
exercise of the appreciation right is received by the Company. |
| |
|
|
Any Option granted under the Plan may include a stock
appreciation right, either at the time of grant or by amendment adding it
to an existing Option; subject, however, to the grant of such stock
appreciation right being in compliance with the regulation and policies of
the Regulatory Authorities. To the extent a stock appreciation right
included in or attached to an Option granted hereunder is exercised, the
Option to which it is included or attached shall be deemed to have been
exercised to a similar extent. The provisions of the Plan respecting the
exercise of Options and the adjustments to Options arising from certain
corporate actions shall apply mutatis mutandis to all stock appreciation
rights granted hereunder. |
Section 7 - Effect of Takeover Bid
| 7.1 |
If a person (an “Offeror”) makes a formal bid (as defined
in the Securities Act (Ontario)) for Shares (an “Offer”) then: |
| |
|
|
|
(a) |
all unvested Options will become vested and exercisable,
despite any vesting schedule applicable to any unexercised Options;
and |
| |
|
|
|
(b) |
the Company will give each Participant currently holding
an Option written notice of the number of Options eligible for exercise by
the Optionee. |
Following the Company’s notice, a
Participant may exercise his or her Option in whole or in part so as to permit
each Participant to tender the Shares received on exercise (the “Optioned
Shares”) pursuant to the Offer. If:
| |
(a) |
the Offer is not completed within the time specified in
the Offer; or |
| |
|
| Avalon Advanced Materials Inc. |
Page 49 |
| Information Circular as of and dated
January 10, 2017 |
|
| |
(b) |
the Participant does not tender the Optioned Shares
pursuant to the Offer; or |
| |
|
|
| |
(c) |
the Offeror does not take up and pay for all of the
Optioned Shares tendered by the Participant pursuant to the
Offer, |
then the Participant will return to the
Company the Optioned Shares or, in the case of clause (c) above, the Optioned
Shares that are not taken up and paid for, and the Company will reinstate the
Optioned Shares as authorized but unissued Shares and the terms of the Option
including any vesting schedule, as set forth in the Plan and the Option
agreement will again apply to the Option. If a Participant returns any Optioned
Shares to the Company under this Section 7, the Company will refund the exercise
price to the Participant for those Optioned Shares. The Participant will not be
entitled to sell the Optioned Shares except pursuant to the Offer.
Section 8 – Participant Not a Shareholder
| 8.1 |
No Participant shall have any rights as a Shareholder
with respect to any Shares covered by any Option until such time as and to
the extent only that such Option has been
exercised. |
Section 9 – Effects of Alteration of Capital Stock
| 9.1 |
If the number of outstanding Shares shall be increased or
decreased as a result of a stock split, consolidation or reclassification
or if other changes with respect to the Shares shall occur, other than as
a result of the issuance of Shares for fair value, or if additional Shares
are issued pursuant to a stock dividend, or in the event of a merger,
amalgamation or reorganization, then the number of and/or price payable
for Shares subject to any unexercised Options shall be adjusted in
accordance with applicable law and in such manner as the Committee shall
deem proper to preserve the rights of the Participants under the Plan
substantially proportionate to those existing prior to such change or
event. |
Section 10 – Amendment and Discontinuance
|
10.1 |
(a) |
The Board may (i) discontinue the Plan at any time except
that such discontinuance may not alter or impair any Option previously
granted to a Participant under the Plan; and (ii) subject to any necessary
approval of the Exchange (and any other applicable Regulatory Authority)
and, subject to subsection (b) hereof, from time to time amend the Plan in
its absolute discretion without the approval of the Shareholders. For
example, the Board’s discretion will include, without limitation,
authority to make amendments to: (i) alter, extend or accelerate the
vesting provisions of Options; (ii) clarify ambiguity, inconsistency or
omission in the Plan and other amendments of a clerical or housekeeping
nature; (iii) alter the termination provisions of an Option or of the
Plan, provided that such change does not entail an extension beyond the
expiry date of such Option (iv) modify the mechanics of exercise; and (v)
add a cashless exercise feature. |
| |
(b) |
The Shareholders shall be required to approve any
amendment to the Plan or any Option which: |
| |
i. |
reduces the exercise price of an Option held by a
Participant either directly or indirectly by means of the cancellation of
an Option and the reissue of a similar Option and, for so long as the
Shares are listed on the Exchange, “disinterested Shareholder approval”
(as that term is used in the policies of the Exchange) shall be required
for any amendment of an Option which reduces the exercise price of an
Option held by a Participant, if at the time of the proposed amendment the
Participant is an Insider of the Company; |
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ii. |
extends the period available to exercise an Option beyond
the expiry of the original exercise period of such Option, other than as
provided in Section 5.7; |
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iii. |
increases the number of Shares reserved for issuance
under the Plan (other than pursuant to the provisions of Section
9.1); |
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iv. |
amends Section 5.6; |
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v. |
materially modifies the requirements as to eligibility
for participation in the Plan; |
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vi. |
adds any form of financial assistance and, if applicable,
any amendment to any existing financial assistance provision which is more
favourable to Participants; and |
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vii. |
otherwise requires approval by Shareholders (or
disinterested Shareholders as the case may be) in accordance with the
requirements of the Exchange or any applicable Regulatory
Authority. |
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(c) |
Subject to the matters set out in Section 10.1 (b), the
Committee may from time to time in its absolute discretion amend, modify
or change the terms and provisions of the Plan (including the form of the
Option agreement) and/or any Option provided that any such amendment,
modification and/or change shall be subject to any required approvals of
any applicable Regulatory Authority. Without limiting the generality of
the foregoing, the Board may make the following types of amendments,
modifications and/or changes to the Plan without seeking Shareholder
approval: |
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(i) |
amendment of a “housekeeping” or ministerial nature,
including any amendment for the purpose of curing any ambiguity, error or
omission in the Plan or to correct or supplement any provisions of the
Plan; |
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(ii) |
amendments necessary to comply with the provision of
applicable law (including, without limitation, the rules, regulations and
policies of any applicable Regulatory Authority); |
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(iii) |
amendments necessary in order for Options to qualify for
favourable treatment under applicable taxation laws; |
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(iv) |
amendments respecting administration of the
Plan; |
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(v) |
any amendment to the vesting provisions of the Plan or
any Option; |
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(vi) |
any amendment to the termination provisions of any
Option, whether or not such Option is held by an Insider, provided such
amendment does not entail an extension of the expiry date beyond the
original expiry date; |
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(vii) |
the addition or amendment of any form of financial
assistance provided by the Company for the acquisition by Participants of
common shares under the Plan provided the terms thereof are not more
favourable to participants than the existing terms and provisions of the
Plan; |
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(viii) |
the addition or modification of a cashless exercise
feature, payable in cash or Shares, which provides for a deduction of the
number of Shares reserved for issuance pursuant to the Plan equal to the
number of Shares that would otherwise have been issuable upon the exercise
of the relevant Option; |
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(ix) |
change the definition of “Eligible Persons” under the
Plan; and |
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(x) |
any other amendment, whether fundamental or otherwise,
not requiring Shareholder approval under applicable law or by any
applicable Regulatory Authority. |
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| Information Circular as of and dated
January 10, 2017 |
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(d) |
Subject to subsection (b) hereof, the Board or the Chief
Executive Officer of the Company together with the Chief Financial Officer
of the Company, with the consent of an affected Optionee, but subject to
the terms and conditions of the Plan and any approvals required by any
applicable Regulatory Authority, may from time to time amend the terms and
conditions of any Option which has been theretofore
granted. |
Section 11 - Laws
| 11.1 |
The Plan and all matters to which reference is made
herein shall be governed by and interpreted in accordance with the laws of
the Province of British Columbia or Ontario as may be applicable and those
of Canada insofar as they may apply. |
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| 11.2 |
No Option may be exercised nor will the Company have any
obligation to issue Shares pursuant thereto if such exercise or issue
would be contrary to or violate any applicable law or any applicable rule
or regulation of any applicable Regulatory
Authority. |
Section 12 – Compliance with Statutes and Regulations
| 12.1 |
The granting of Options and the issue of Shares under
this Plan shall be carried out in compliance with applicable statutes and
with the rules and regulations of any applicable Regulatory Authority. If
the Committee determines that, in order to comply with any such statutes
or regulations, certain action is necessary or desirable as a condition of
or in connection with the granting of an Option or the issue or purchase
of Shares under an Option, that Option may not be exercised in whole or in
part unless that action shall have been completed in a manner satisfactory
to the Committee. |
Section 13 – Participation Voluntary
| 13.1 |
The participation of an Eligible Person in the Plan is
entirely voluntary and not obligatory and shall not be interpreted as
conferring upon such Eligible Person any rights or privileges other than
those rights and privileges expressly provided in the Plan. In particular,
participation in the Plan does not constitute a condition of employment
nor a commitment on the part of the Company to ensure the continued
employment of such Eligible Person. |
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| 13.2 |
The Plan does not provide any guarantee against any loss
of profit, which may result from fluctuations in the market price of the
Shares. |
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13.3 |
The Company does not assume responsibility for the income
or other tax consequences for the Eligible Persons participating in the
Plan and Eligible Persons are advised to consult with their own tax
advisors. |
Section 14 - Withholding Taxes, etc.
| 14.1 |
For certainty and notwithstanding any other provision of
the Plan, the Company may take such steps as it considers necessary or
appropriate for the deduction or withholding of any income taxes or other
amounts which the Company is required by any law or regulation or any
governmental authority whatsoever to deduct or withhold in connection with
any Shares issued pursuant to the Plan, including without limiting the
generality of the foregoing: (a) withholding of all or any portion of any
amount otherwise owing to a Participant; (b) the suspension of the issue
of Shares to be issued under the Plan until such time as the Participant
has paid to the Company an amount equal to any amount which the Company is
required to deduct or withhold by law with respect to such taxes or other
amounts; and/or (c) withholding and causing to be sold, by it as a trustee
on behalf of the Participant, such number of Shares as it determines to
be necessary to satisfy the withholding
obligation. By participating in the Plan, the Participant consents to such sale
and authorizes the Company to effect the sale of such Shares on behalf of the
Participant and to remit the appropriate amount to the applicable government
authorities. The Company shall not be responsible for obtaining any particular
price for the Shares nor shall the Company be required to issue any Shares under
the Plan unless the Participant has made suitable arrangements with the Company
to fund any withholding obligation.” |
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| Information Circular as of and dated
January 10, 2017 |
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Section 15 – Coming into Effect
| 15.1 |
The Plan shall come into effect on the later
of: |
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(a) |
approval by the Board; |
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(b) |
approval by the Exchange; and |
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(c) |
approval by the Shareholders. |
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