Primero Mining Corp. - Exhibit 99.2 - Filed by newsfilecorp.com
NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING
AND
INFORMATION CIRCULAR
SHAREHOLDERS OF PRIMERO MINING CORP.: These materials
are important and require your immediate attention. They require you to make
important decisions. If you are in doubt as to how to make such decisions,
please contact your financial, legal, or other professional advisors. If you
have any questions or require more information with regard to voting your shares
of Primero Mining Corp., please contact Tamara Brown, Vice President, Investor
Relations, at (416) 814-3168.
APRIL 16, 2012
PRIMERO MINING CORP.
Suite 1640, 505 Burrard
Street
Vancouver, British Columbia, Canada V7X 1M6
[THIS PAGE INTENTIONALLY LEFT BLANK.]
PRIMERO MINING CORP.
Suite 1640, 505 Burrard Street
Vancouver, British Columbia,
Canada V7X 1M6
Telephone: (604) 669-0040 / Facsimile: (604) 669-0014
NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING OF
SHAREHOLDERS
TAKE NOTICE that the annual general and special meeting
(the “Meeting”) of shareholders of PRIMERO MINING CORP. (the
“Company”) will be held at Brookfield Place, Suite 4400, 181 Bay Street,
Toronto, Ontario, Canada on Monday, May 28, 2012 at 2:00 p.m. (Toronto time),
for the following purposes:
| 1. |
to receive the consolidated financial statements of the
Company for the financial year ended December 31, 2011 and the report of
the auditor; |
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| 2. |
to set the number of directors at nine; |
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| 3. |
to elect directors of the Company to hold office until
the close of the next annual general meeting; |
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| 4. |
to appoint an auditor of the Company to serve until the
close of the next annual general meeting and to authorize the directors to
fix the auditor’s remuneration; |
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| 5. |
to approve the phantom share unit plan for directors of
the Company; |
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| 6. |
to consider any permitted amendment to or variation of
any matter identified in this Notice; and |
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| 7. |
to transact such other business as may properly come
before the Meeting or any adjournments thereof. |
An information circular accompanies this Notice.
The information circular contains details of matters to be considered at the
Meeting. No other matters are contemplated; however, any permitted amendment to
or variation of any matter identified in this notice may properly be considered
at the Meeting. The Meeting may also consider the transaction of such other
business as may properly come before the Meeting or any adjournment thereof.
Regardless of whether a shareholder plans to
attend the Meeting in person, we request that each shareholder please complete,
date, and sign the enclosed form of proxy and deliver it in accordance with the
instructions set out in the form of proxy and information circular.
Non-registered shareholders who plan to attend the Meeting must follow the
instructions set out in the form of proxy or voting instruction form and in the
information circular to ensure that their shares will be voted at the Meeting. A
shareholder who holds shares in a brokerage account is not a registered
shareholder.
DATED at Vancouver, British Columbia, April 16,
2012.
BY ORDER OF THE BOARD OF DIRECTORS
(signed) Wade Nesmith
Chairman of the Board
TABLE OF CONTENTS
i
PRIMERO MINING CORP.
Suite 1640, 505 Burrard Street
Vancouver, British Columbia,
Canada V7X 1M6
Telephone: (604) 669-0040 / Facsimile: (604) 669-0014
INFORMATION CIRCULAR
(unless otherwise specified,
information is as of April 16, 2012)
This
Information Circular is furnished in connection with the solicitation of proxies
by the management of Primero Mining Corp. (the “Company” or
“Primero”) for use at the annual general and special meeting (the
“Meeting”) of its shareholders to be held at Brookfield Place, Suite
4400, 181 Bay Street, Toronto, Ontario, Canada on Monday, May 28, 2012 at 2:00
p.m. (Toronto time), for the purposes set forth in the accompanying notice of
the Meeting.
In
this Information Circular, references to “we” and “our” refer to
the Company. The “board of directors” or the “Board” refers to the board of
directors of the Company. “Common Shares” means common shares without par value
in the capital of the Company. “Primero shareholders”, “shareholders”, and
“shareholders of the Company” refer to shareholders of the Company. “Beneficial
Shareholders” means shareholders of the Company who do not hold Common Shares in
their own name and “intermediaries” refers to brokers, investment firms,
clearing houses and similar entities that own securities on behalf of Beneficial
Shareholders.
The
board of directors has approved the contents and the sending of this Management
Information Circular. All dollar amounts referred to herein are in Canadian
currency unless otherwise indicated.
GENERAL PROXY INFORMATION
Solicitation of Proxies
The
solicitation of proxies will be primarily by mail, but proxies may be solicited
personally or by telephone by directors, officers and regular employees of the
Company. The Company will bear all costs of this solicitation. We have arranged
for intermediaries to forward the meeting materials to Beneficial Shareholders
of the Common Shares held of record by those intermediaries and we may reimburse
the intermediaries for their reasonable fees and disbursements in that regard.
Appointment of Proxyholders
Joseph
Conway and David Blaiklock, the individuals named in the accompanying form of
proxy (the “Proxy”), are officers and/or directors of the Company. If
you are a shareholder entitled to vote at the Meeting, you have the right to
appoint a person or company other than either of the persons designated in the
Proxy (who is not required to be a shareholder), to attend and act for you and
on your behalf at the Meeting. You may do so either by inserting the name of
that other person in the blank space provided in the Proxy or by completing and
delivering another suitable form of proxy.
Voting by Proxyholder
The
persons named in the Proxy will vote or withhold from voting the Common Shares
represented thereby in accordance with your instructions on any ballot that may
be called for. If you specify a choice with respect to any matter to be acted upon, your Common Shares will be voted
accordingly. The Proxy confers discretionary authority on the persons named
therein with respect to:
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(a) |
each matter or group of matters identified therein for
which a choice is not specified, other than the appointment of an auditor
and the election of directors; |
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(b) |
any amendment to or variation of any matter identified
therein; and |
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(c) |
any other matter that properly comes before the
Meeting. |
In
respect of a matter for which a choice is not specified in the Proxy, the
management appointee acting as a proxyholder will vote in favour of each matter
identified on the Proxy and, if applicable, for the nominees of management for
directors and auditors as identified in the Proxy and for the phantom share unit
plan for directors of the Company. However, under New York Stock Exchange
(“NYSE”) rules, a broker who has not received specific voting instructions from
the beneficial owner may not vote the shares in its discretion on behalf of such
beneficial owner on “non-routine” proposals. Thus, such shares will be included
in determining the presence of a quorum at the Meeting and will be votes “cast”
for purposes of other proposals but will not be considered votes “cast” for
purposes of voting on the election of directors. “Routine” proposals typically
include the ratification of the appointment of the Company’s auditors. The
election of directors and the proposed resolution approving the phantom share
unit plan for directors of the Company, on the other hand, are each
“non-routine” proposals.
Registered Shareholders
If
you are a registered shareholder (a shareholder whose name appears on the
records of the Company as the registered holder of Common Shares) of the
Company, you may wish to vote by proxy whether or not you are able to attend the
Meeting in person. Registered shareholders electing to submit a proxy may do so
by:
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(a) |
completing, dating and signing the Proxy and returning it
to the Company’s registrar and transfer agent, Computershare Investor
Services Inc. (“Computershare”), by fax within North America at
1-866-249-7775, outside North America at 1-416-263-9524, or by mail or
hand delivery to 9th Floor, 100 University Avenue, Toronto,
Ontario, M5J 2Y1; |
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(b) |
using a touch-tone phone to transmit voting choices to
the toll free number given in the Proxy. Registered shareholders who
choose this option must follow the instructions of the voice response
system and refer to the enclosed Proxy for the toll free number, the
holder’s account number and the proxy access number; or |
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(c) |
using the internet at Computershare’s website,
www.investorvote.com. Registered shareholders must follow the instructions
that appear on the screen and refer to the enclosed Proxy for the holder’s
account number and the proxy access number; |
in all cases ensuring that the Proxy is received at least 48
hours (excluding Saturdays, Sundays and holidays) before the Meeting or the
adjournment thereof at which the Proxy is to be used.
Beneficial Shareholders
The
following information is of significant importance to shareholders of the
Company who do not hold Common Shares in their own name. Beneficial Shareholders
should note that the only proxies that can be recognized and acted upon at the
Meeting are those deposited by registered shareholders or as set out in the
following disclosure.
If
Common Shares are listed in an account statement provided to a Company
shareholder by a broker, then in almost all cases those Common Shares will not
be registered in the shareholder’s name on the records of the Company. Such
Common Shares will more likely be registered under the names of intermediaries.
In Canada, the vast majority of such Common Shares are registered under the
name of CDS & Co. (the registration name for The Canadian Depository for
Securities Limited, which acts as nominee for many Canadian brokerage firms)
and, in the United States, under the name of Cede & Co. as nominee for The
Depository Trust Company (which acts as depositary for many U.S. brokerage firms
and custodian banks).
2
Intermediaries
are required to seek voting instructions from Beneficial Shareholders in advance
of meetings of Company shareholders. Every intermediary has its own mailing
procedures and provides its own return instructions to clients.
There
are two kinds of Beneficial Shareholders – those who object to their identity
being made known to the issuers of securities which they own (called
“OBOs” for Objecting Beneficial Owners) and those who do not object to
the issuers of the securities they own knowing their identity (called
“NOBOs” for Non-Objecting Beneficial Owners).
Non-Objecting Beneficial Owners
The
Company is relying on the provisions of National Instrument 54-101
“Communication with Beneficial Owners of Securities of a Reporting Issuer” that
permit it to deliver proxy-related materials directly to its NOBOs. As a result,
NOBOs can expect to receive a scannable voting instruction form (“VIF”)
from Computershare. The VIF is to be completed and returned to Computershare as
set out in the instructions provided on the VIF. Computershare will tabulate the
results of the VIFs received from NOBOs and will provide appropriate
instructions at the Meeting with respect to the shares represented by the VIFs
they receive.
These
securityholder materials are being sent to both registered and non-registered
owners of the Common Shares of the Company. If you are a non-registered owner,
and the Company or its agent has sent these materials directly to you, your name
and address, and information about your holdings of securities, were obtained in
accordance with applicable securities regulatory requirements from the
intermediary holding securities on your behalf.
By
choosing to send these materials to you directly, the Company (and not the
intermediary holding securities on your behalf) has assumed responsibility for
(i) delivering these materials to you, and (ii) carrying out your voting
instructions. Please return your VIF as specified in the request for voting
instructions sent to you.
Objecting Beneficial Owners
Beneficial
Shareholders who are OBOs should follow the instructions of their intermediary
carefully to ensure that their Common Shares are voted at the Meeting.
The
form of proxy supplied to you by your broker will be similar to the Proxy
provided to registered shareholders by the Company. However, its purpose is
limited to instructing the intermediary on how to vote your Common Shares on
your behalf. Most brokers delegate responsibility for obtaining instructions
from clients to Broadridge Financial Solutions, Inc. (“Broadridge”) in
the United States and in Canada. Broadridge mails a VIF in lieu of a proxy
provided by the Company. The VIF will name the same persons as the Company’s
Proxy to represent your Common Shares at the Meeting. You have the right to
appoint a person (who need not be a shareholder of the Company, and who can be
yourself), other than any of the persons designated in the VIF, to represent
your Common Shares at the Meeting. To exercise this right, insert the name of
the desired representative, who may be you, in the blank space provided in the
VIF. The completed VIF must then be returned to Broadridge by mail or facsimile,
or provided to Broadridge by phone or over the internet, in accordance with
Broadridge’s instructions. Broadridge then tabulates the results of all
instructions received and provides appropriate instructions respecting the
voting of Common Shares to be represented at the Meeting and the appointment of
any shareholder’s representative. If you receive a VIF from Broadridge, it
must be completed and returned to Broadridge, in accordance with Broadridge’s
instructions, well in advance of the Meeting in order to have your Common Shares
voted or to have an alternate representative duly appointed to attend and vote
your Common Shares at the Meeting.
3
Notice to Shareholders in the United States
This
solicitation of proxies involves securities of an issuer located in Canada and
is being effected in accordance with the corporate laws of the Province of
British Columbia and the securities laws of applicable provinces of Canada. The
proxy solicitation rules under the United States Securities Exchange Act of
1934, as amended, are not applicable to the Company or this solicitation, and
this solicitation has been prepared in accordance with the disclosure
requirements of the securities laws of applicable provinces of Canada.
Shareholders should be aware that disclosure requirements under the securities
laws of applicable provinces of Canada differ from the disclosure requirements
under United States securities laws.
Revocation of Proxies
In
addition to revocation in any other manner permitted by law, a registered
shareholder who has given a proxy may revoke it:
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(a) |
by executing a proxy bearing a later date or by executing
a valid notice of revocation, either of the foregoing to be executed by
the registered shareholder or the registered shareholder’s authorized
attorney in writing, or, if the shareholder is a corporation, under its
corporate seal by an officer or attorney duly authorized, and by
delivering the proxy bearing a later date to Computershare, or to the
Company at the address of the registered office of the Company at Suite
1500, 1055 West Georgia Street, Vancouver, British Columbia, V6E 4N7, at
any time up to and including the last business day that precedes the day
of the Meeting or, if the Meeting is adjourned, the last business day that
precedes any reconvening thereof, or to the chairman of the Meeting on the
day of the Meeting or any reconvening thereof, or in any other manner
provided by law; or |
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(b) |
by personally attending the Meeting and voting the
registered shareholder’s Common Shares. |
A revocation of a proxy will not affect a matter on which a vote is
taken before the revocation.
INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE
ACTED UPON
To
the best of our knowledge, except as otherwise disclosed herein, no person who
has been a director or executive officer of the Company at any time since the
beginning of the Company’s last completed financial year, nor any associate or
affiliate of the foregoing persons, has any substantial or material interest,
direct or indirect, by way of beneficial ownership of securities or otherwise,
in any matter to be acted on at the Meeting other than the election of directors
and the approval of the phantom share unit plan for directors of the Company
(see “Approval of Directors’ PSU Plan”).
RECORD DATE AND VOTING SECURITIES
Record Date
The
board of directors has fixed April 16, 2012 as the record date (the
“Record Date”) for determination of persons entitled to receive
notice of the Meeting. Only shareholders of record at the close of business on
the Record Date who either (i) attend the Meeting personally or (ii) complete,
sign and deliver a form of proxy in the manner and subject to the provisions
described above, will be entitled to vote or to have their Common Shares voted
at the Meeting.
Voting Securities
Primero’s
authorized share capital consists of an unlimited number of Common Shares
without par value, and an unlimited number of preferred shares without par
value. The Common Shares are listed for trading on the Toronto Stock Exchange
(the “TSX”) under the symbol “P” and on the NYSE under the
symbol “PPP”. As of April 16, 2012, there were 88,259,831 Common Shares issued and
outstanding and no preferred shares issued and outstanding.
4
Subject
to the rights of holders of preferred shares of the Company, holders of Common
Shares are entitled to dividends if, as, and when declared by the directors.
Holders of Common Shares are entitled to one vote per Common Share at meetings
of shareholders except at meetings at which only holders of a specified class of
shares are entitled to vote. No group of shareholders of the Company has the
right to elect a specified number of directors, nor are there cumulative or
similar voting rights attached to the Common Shares.
To
the knowledge of the directors and executive officers of the Company, the only
person that beneficially owned, directly or indirectly, or exercised control
or direction over, Common Shares carrying more than 10% of the voting rights
attached to all outstanding Common Shares is Goldcorp Inc. (“Goldcorp”),
as set out in the following table:
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Number of Common |
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Percentage of Issued |
| Shareholder Name |
|
Shares Held |
|
Common Shares |
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| GOLDCORP INC. |
|
31,151,200(1)(2)
|
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35%(3)
|
_____________________
Notes:
| (1) |
This information was supplied to the Company by Goldcorp
and from the insider reports available at www.sedi.ca. |
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| (2) |
On August 6, 2010, the Company issued a US$60 million
convertible note with a term of one year, subject to a one year extension
(the “Note”) to Desarrollos Mineros San Luis, S.A. de C.V.
(“DMSL”), an indirect, wholly-owned subsidiary of Goldcorp, which
was subsequently assigned to Goldcorp. The Note carries an annual interest
rate of 3%, is convertible by Goldcorp into Common Shares at $6.00 per
Common Share (with the principal amount owing converted into Canadian
dollars by multiplying such amount by 1.05, which was the approximate
exchange rate at the time the Note was issued), and is repayable at
maturity by the Company in cash or Common Shares. Goldcorp had the option
to extend the term of the Note by one year if the Company exercised its
option to convert at the maturity date. On July 20, 2011, the Company
served notice to Goldcorp to convert the Note into Common Shares and, on
August 4, 2011, Goldcorp elected to extend the term of the Note by one
year. On October 19, 2011, the Company repaid US$30 million of the Note.
As Goldcorp elected to extend the term of the Note by one year, and the
Company did not pay the principal in cash immediately, the Company now has
the option to convert the Note to Common Shares on the second maturity
date at a price equal to the greater of (a) 90% of the volume weighted
average trading price of the Common Shares for the five trading days
ending immediately prior to the first maturity date, which was $3.74, and
(b) 90% of the volume weighted average trading price of the Common Shares
for the five trading days ending immediately prior to the second maturity
date. If the Company makes such an election to convert on the second
maturity date, the lowest price at which the debt would be converted is
$3.74 per Common Share and the Company would issue 8,422,460 Common Shares
to Goldcorp and Goldcorp will beneficially hold 39,573,660 Common Shares
(which, if such conversion occurred as at April 16, 2012, would represent
approximately 41% of the 96,682,291 Common Shares issued and outstanding).
If Goldcorp exercises its option to convert the Note, Goldcorp will
beneficially hold 36,401,200 Common Shares (which, if such conversion
occurred as at April 16, 2012, would represent approximately 39% of the
93,509,831 Common Shares issued and outstanding). Rohan Hazelton and Timo
Jauristo are directors of the Company and officers of Goldcorp. Mr.
Hazelton is the Vice President, Finance of Goldcorp and Mr. Jauristo is
the Executive Vice President, Corporate Development of Goldcorp. |
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| (3) |
Based on 88,259,831 Common shares outstanding at April
16, 2012. |
VOTES NECESSARY TO PASS RESOLUTIONS
A simple majority of affirmative votes cast at the Meeting is required to pass
the resolutions described herein.
If
there are more nominees for election as directors or appointment of the
Company’s auditor than there are vacancies to fill, those nominees receiving the
greatest number of votes will be elected or appointed, as the case may be, until
all such vacancies have been filled. If the number of nominees for election or
appointment is equal to the number of vacancies to be filled, all such nominees
will be declared elected or appointed by acclamation.
NUMBER OF AND ELECTION OF DIRECTORS
Pursuant
to the terms of the Company’s Articles, the number of directors may be fixed or
changed by ordinary resolution, subject to a limited right of the Board to
increase the number of directors between shareholder meetings. The number of
directors was last fixed by shareholders of the Company at nine and the Board
proposes that the number of directors be fixed at nine. Therefore, at
the Meeting, shareholders will be asked to approve an ordinary resolution that
the number of directors be fixed at nine.
5
The
term of office of each of the current directors will end immediately before the
election of directors at the Meeting. Unless the director’s office is earlier
vacated in accordance with the provisions of the Business Corporations Act
(British Columbia) (“BCA”), each director elected will hold office
until immediately before the election of directors at the next annual general
meeting of shareholders, or if no director is then elected, until a successor is
elected, or until he or she otherwise ceases to hold office under the BCA or the
terms of the Articles.
Majority Voting for Directors
The
Board has adopted a policy stipulating that if the votes in favour of the
election of a nominee director at a shareholders’ meeting represent less than a
majority of the shares voted and withheld, the nominee will submit his or her
resignation promptly after the meeting to the Board, to be effective upon
acceptance by the Board. The Governance and Nominating Committee will review the
circumstances of the election and make a recommendation to the Board as to
whether or not to accept the tendered resignation. The Board will determine
whether or not to accept the tendered resignation as soon as reasonably possible
and in any event within 90 days of the election. Subject to any corporate law
restrictions, the Board may fill any resulting vacancy through the appointment
of a new director. The nominee will not participate in any Governance and
Nominating Committee or Board deliberations on the resignation offer. The policy
does not apply in circumstances involving contested director elections.
Nominees for Election
All
of the nine nominees for election at the Meeting are currently directors of
Primero. All nominees have agreed to stand for election. If, however, one or
more of them should become unable to stand for election, it is likely that one
or more other persons would be nominated for election at the Meeting.
On
the closing of the acquisition of the San Dimas Mine by Primero (the “Acquisition”),
Primero entered into an agreement (the “Participation Agreement”)
with DMSL that grants to DMSL the right to nominate directors of Primero, provided
that DMSL and its affiliates (which include Goldcorp) continue to beneficially
own at least 10% of the issued and outstanding Common Shares. Timo Jauristo
and Rohan Hazelton, the Executive Vice President, Corporate Development and
Vice President, Finance, respectively, of Goldcorp have been nominated for election
as directors of Primero, pursuant to DMSL’s rights under the Participation
Agreement.
The
following disclosure sets out, as at the date of this Information Circular, (a)
the names of management’s nominees for election as directors and their
residency, (b) all major offices and positions with the Company each now holds,
(c) each nominee’s principal occupation, business or employment, (d) the period
of time during which each has been a director of the Company, and (e) the number
of Common Shares beneficially owned by each, directly or indirectly, or over
which each exercised control or direction. For each nominee’s principal
occupation, business or employment for the five preceding years, see “Election
of Directors – Principal Occupation, Business or Employment of Nominees”.
Unless
authority to do so with respect to one or more directors is withheld and subject
to NYSE rules, the persons designated as proxyholders in the accompanying Proxy
intend to vote the Common Shares represented by such Proxy, properly executed,
FOR the election of each of the nominees set forth in the following
disclosure. Primero’s management does not contemplate that any of the nominees
will be unable to serve as a director, but if that should occur for any reason
prior to the Meeting, it is intended that discretionary authority will be
exercised by the persons named in the accompanying Proxy to vote any proxy for
the election of any other person or persons in place of any nominee or nominees
unable to serve.
6
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Common Shares |
| Nominee Name, Position with the |
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Occupation, Business or |
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Period as a Director |
|
Beneficially Owned |
| Company and
Residency |
|
Employment(1) |
|
of
the Company |
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or Controlled(2) |
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WADE NESMITH
Director and
Chairman
of the Board
British Columbia, Canada |
|
Chairman of the Company |
|
Since October 29, 2008 |
|
279,761(3) |
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JOSEPH CONWAY(4)(5)
Directors, President and Chief
Executive Officer
Ontario,
Canada |
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President and Chief Executive
Officer of the Company |
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Since June 28, 2010 |
|
463,300(6) |
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DAVID DEMERS(7)(8)(9)
Director
British Columbia, Canada |
|
Chief Executive Officer of
Westport Innovations Inc. |
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Since October 29, 2008 |
|
146,700(10) |
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GRANT EDEY(8)(9)(11)
Director
Ontario, Canada |
|
President and Chief Executive
Officer of Khan Resources Inc. |
|
Since June 28, 2010 |
|
16,667(12) |
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ROHAN HAZELTON(5)(9)(11)
Director
British Columbia, Canada |
|
Vice President, Finance of
Goldcorp Inc. |
|
Since August 25, 2010 |
|
20,000(13) |
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TIMO JAURISTO(7)
Director
British Columbia, Canada |
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Executive Vice President,
Corporate Development of Goldcorp Inc. |
|
Since August 25, 2010 |
|
Nil(13) |
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EDUARDO LUNA(5)
Director
Mexico State, Mexico |
|
Director of the Company |
|
Since October 29, 2008 |
|
156,620(14) |
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ROBERT QUARTERMAIN(7)(8)
Director
British Columbia, Canada |
|
President and Chief Executive
Officer of Pretium Resources Inc. |
|
Since June 28, 2010 |
|
25,000(15) |
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MICHAEL RILEY(9)(11)
Director
British Columbia, Canada |
|
Director of the Company |
|
Since April 22, 2010 |
|
25,000(16)
|
________________
Notes:
| (1) |
The information as to principal occupation, business or
employment may not be within the knowledge of the management of the
Company and has been furnished by the respective nominees. |
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| (2) |
The information as to Common Shares beneficially owned,
directly or indirectly, or over which control or direction is exercised,
not being within the knowledge of management of Primero, has been
furnished to the Company or has been extracted from insider reports filed
by the respective nominees and publicly available through the Internet at
the website for the Canadian System for Electronic Disclosure by Insiders
(SEDI) at www.sedi.ca. |
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| (3) |
Of the 279,761 Common Shares beneficially owned or
controlled by Mr. Nesmith, 76,400 Common Shares are registered in the name
of Nesmith Capital Corp., 30,000 Common Shares are registered in the name
of Nesmith Investment Trust, 3,500 Common Shares are registered in the
name of Odlum Brown TFSA and 69,862 are registered in the name of RRSP
Odlum Brown ITF Wade Nesmith. Mr. Nesmith holds options to purchase 60,000
Common Shares at a per share exercise price of $4.20 expiring on July 29,
2013, options to purchase 100,000 Common Shares at a per share exercise
price of $2.70 expiring on July 9, 2019 and options to purchase 1,043,015
Common Shares at a per share exercise price of $6.00 expiring on August 6,
2015. Mr. Nesmith also has warrants to purchase 20,000 Common Shares at a
per share exercise price of $8.00 until July 20, 2015. Mr. Nesmith also
holds 1,341,026 phantom share units (“PSUs”) under the PSU Plan (as
defined under “Statement of Executive Compensation – Compensation
Discussion and Analysis – Elements of Executive Compensation – Equity
Compensation”). |
| |
|
| (4) |
Mr. Conway is a member of the Disclosure Committee, the
other members of which are David Blaiklock, Chief Financial Officer (Chair
of Disclosure Committee) and Tamara Brown, Vice President, Investor
Relations. |
| |
|
| (5) |
Mr. Luna (Chair), Mr. Conway and Mr. Hazelton are members
of the Company’s Health, Safety and Environmental
Committee. |
7
| (6) |
Mr. Conway holds options to purchase 1,294,522 Common
Shares at a per share exercise price of $6.00 expiring on August 6, 2015.
Mr. Conway also has warrants to purchase 132,000 Common Shares at a per
share price of $8.00 until July 20, 2015. Mr. Conway also holds 1,393,589
PSUs under the PSU Plan. |
| |
|
| (7) |
Mr. Demers (Chair), Mr. Jauristo and Mr. Quartermain are
members of the Company’s Human Resources Committee. |
| |
|
| (8) |
Mr. Edey (Chair), Mr. Demers and Mr. Quartermain and
members of the Company’s Governance and Nominating Committee. |
| |
|
| (9) |
Mr. Demers (Chair), Mr. Edey, Mr. Hazelton and Mr. Riley
were members of the Special Committee that was established on May 17, 2011
for the proposed business combination with Northgate Minerals Corporation
(“Northgate”). Mr. Hazelton resigned from the Special Committee on
June 28, 2011. The proposed business combination was terminated and the
Special Committee was discontinued on August 29, 2011. |
| |
|
| (10) |
Mr. Demers holds options to purchase 20,000 Common Shares
at a per share exercise price of $4.20 expiring on July 29, 2013, options
to purchase 10,000 Common Shares at a per share exercise price of $2.70
expiring on July 9, 2014 and options to purchase 179,452 Common Shares at
a per share exercise price of $6.00 expiring on August 6, 2015. Mr. Demers
also holds 28,846 Director PSUs under the Directors’ PSU Plan (both as
defined under “Approval of Directors’ PSU Plan”). |
| |
|
| (11) |
Mr. Riley (Chair), Mr. Edey and Mr. Hazelton are members
of the Company’s Audit Committee. For further information on the
composition of the Company’s Audit Committee, see the Company’s annual
information form dated as at March 30, 2012 (the “AIF”). |
| |
|
| (12) |
Mr. Edey holds options to purchase 129,452 Common Shares
at a per share exercise price of $6.00 expiring on August 6, 2015. Mr.
Edey also has warrants to purchase 6,666 Common Shares at a per share
price of $8.00 until July 20, 2015. Mr. Edey also holds 28,846 Director
PSUs under the Directors’ PSU Plan. |
| |
|
| (13) |
Mr. Hazelton is the Vice President, Finance of Goldcorp
and Mr. Jauristo is the Executive Vice President, Corporate Development of
Goldcorp. Goldcorp beneficially owns 31,151,200 Common Shares (see “Record
Date and Voting Securities – Voting Securities”) and holds the Note. If
Goldcorp exercises its option to convert the Note, Goldcorp will
beneficially hold 36,401,200 Common Shares (which, if such conversion
occurred as at April 16, 2012, would represent approximately 39% of the
93,509,831 Common Shares issued and outstanding). For more information
about the Note, see “Record Date and Voting Securities – Voting
Securities”. |
| |
|
| (14) |
Mr. Luna holds options to purchase 45,000 Common Shares
at a per share exercise price of $4.20 expiring on July 29, 2013, options
to purchase 100,000 Common Shares at a per share exercise price of $2.70
expiring on July 9, 2019 and options to purchase 1,043,015 Common Shares
at a per share exercise price of $6.00 expiring on August 6, 2015. Mr.
Luna also holds 133,334 PSUs under the PSU Plan. |
| |
|
| (15) |
Mr. Quartermain holds options to purchase 129,452 Common
Shares at a per share exercise price of $6.00 expiring on August 6, 2015.
Mr. Quartermain also has warrants to purchase 11,700 Common Shares at a
per share price of $8.00 until July 20, 2015. Mr. Quartermain also holds
28,846 Director PSUs under the Directors’ PSU Plan. |
| |
|
| (16) |
Mr. Riley holds options to purchase 164,452 Common Shares
at a per share exercise price of $6.00 expiring on August 6, 2015. Mr.
Riley also has warrants to purchase 6,680 Common Shares at a per share
price of $8.00 until July 20, 2015. Mr. Riley also holds 28,846 Director
PSUs under the Directors’ PSU Plan. |
Principal Occupation, Business or Employment of
Nominees
Wade Nesmith – Director and Chairman of the Board
Mr.
Nesmith is the Chairman of the Board and a director of Primero. He has served in
the capacity of director of the Company since October 29, 2008. He was President
from October 29, 2008 to September 28, 2009, and Chief Executive Officer from
October 29, 2008 to June 1, 2010, at which time he was appointed Executive
Chairman of the Board. On March 15, 2012, Mr. Nesmith resigned as Executive
Chairman of the Board and was appointed Chairman of the Board. He also served as
Co-Chair of the Company from November 2008 until June 1, 2010. He was the
President, Chief Executive Officer, Chief Financial Officer and a director of
0777551 B.C. Ltd., a private company that was a predecessor to the Company, from
December 2006 to December 2009. Mr. Nesmith obtained his Bachelor of Law degree
from York University – Osgoode Hall, Ontario in 1977. He is the former
Superintendent of Brokers for the Province of British Columbia from 1989 until
1992. He was a senior partner, specializing in securities law, with Lang
Michener LLP (now McMillan LLP) from 1993 until 1998, and an Associate Counsel
at Lang Michener LLP (now McMillan LLP) from January 2004 to December 2007. He
was an executive with Westport Innovations Inc. (“Westport Innovations”)
from 1998 until 2003, helping to lead their public markets activities and
retiring as President, Westport Europe. He is a founding director and remains a
director of Silver Wheaton Corp. (TSX, NYSE), and is Chairman of Selwyn
Resources Ltd. (TSX-V).
Joseph Conway – Director, President and Chief Executive
Officer
Mr.
Conway was appointed President and Chief Executive Officer of the Company on
June 1, 2010 and has been a director of the Company since June 28, 2010. Mr.
Conway has been a director of Dalradian Resources Inc. since June 2010. He
served as President and Chief Executive Officer of IAMGOLD Corporation
(“IAMGOLD”) from January 2003 until January 2010, and was a director of
IAMGOLD from January 2004 until December 2009. Mr. Conway was President, Chief
Executive Officer and a director of Repadre Capital Corporation from
September 1995 until January 2003. From 1989 until 1995, he was Vice
President and a director of Nesbitt Burns, a Canadian investment dealer. He was
a stock analyst with Walwyn Stodgell Cochran and Murray from 1987 to 1989, and a
mine and exploration geologist from 1981 to 1985. Mr. Conway has a Bachelor of
Science degree from Memorial University and a Master of Business Administration
degree from Dalhousie University.
8
David Demers – Director
Mr.
Demers has been a director of the Company since October 28, 2008. He is a
founder of Westport Innovations, a provider of proprietary technology that
allows engines to operate on clean-burning gaseous fuels, and has been Chief
Executive Officer and a director of Westport Innovations since the company was
formed in March 1995. Before founding Westport Innovations, Mr. Demers worked
for IBM Canada Ltd. and then founded and served as president of a closely-held
consulting company specializing in software marketing, finance and business
transformation for early stage technology companies. Mr. Demers obtained a
Bachelor of Physics degree in 1976 and a Bachelor of Law degree in 1978, both
from the University of Saskatchewan. Mr. Demers is also a member of the board of
directors of Cummins Westport Inc., a private company in which Westport
Innovations has a 50% investment, and Juniper Engines Inc., a private company in
which Westport Innovations has a 49% investment.
Grant Edey – Director
Mr.
Edey has been a director of the Company since June 28, 2010, and has been the
President and Chief Executive Officer of Khan Resources Inc., since July 2010
and a director of Khan Resources Inc. since February 2007. Mr. Edey was Chief
Financial Officer of IAMGOLD from 2002 until August 2007. From 1996 until 2002,
he was the Vice President, Finance, Chief Financial Officer and Corporate
Secretary of Repadre Capital Corporation. Before joining Repadre Capital
Corporation, Mr. Edey held senior positions with Strathcona Mineral Services
Limited, TransCanada Pipelines Limited, Eldorado Nuclear Limited, Rio Algom
Limited and INCO Limited. Mr. Edey has a Masters degree in Business
Administration from the Ivey School of Business, University of Western Ontario
and a Bachelor of Science (Mining Engineering) degree from Queen’s University.
Rohan Hazelton – Director
Mr.
Hazelton has been a director of the Company since August 25, 2010. Mr. Hazelton
is a Chartered Accountant with over 15 years of finance experience, ten of those
years at senior positions within the mining industry. Mr. Hazelton has been the
Vice President, Finance at Goldcorp since March 2006, where he is responsible
for, amongst other duties, Goldcorp’s sales programs. He was formerly Corporate
Controller for Goldcorp, before Goldcorp’s merger with Wheaton River, he was a
key member of Wheaton’s management team. Mr. Hazelton was a director of Gryphon
Gold Corp. from July 2005 to December 2008, and he was the director of Terrane
Metals Corporation from August 2008 to October 2010. Mr. Hazelton worked for
Deloitte & Touche LLP and Arthur Andersen LLP from September 1999 to
November 2002 as a senior auditor. From October 1996 to January 1998, he was a
commercial loans officer for Dialog Bank in Moscow, Russia. Mr. Hazelton has a
B.A. in Math and Economics from Harvard University.
Timo Jauristo – Director
Mr.
Jauristo has been a director of the Company since August 25, 2010. Mr. Jauristo
is a geologist with over 30 years of international experience in the mining
industry in gold, base metals and uranium. Mr. Jauristo has been the Vice
President of Corporate Development for Goldcorp since June 2009. From January
1990 to June 2005, Mr. Jauristo was the General Manager of Corporate Development
for Placer Dome Inc. Mr. Jauristo was the Chief Executive Officer of Zincore
Metals Inc. (“Zincore”) from October 2006 to May 2009. He was the interim Chief
Executive Officer of Southwestern Resources Inc. (“Southwestern Resources”) from
June 2005 to May 2009. Both Zincore and Southwestern Resources are junior mining
companies with exploration and development assets mostly in Peru. He was
involved in numerous merger and acquisition transactions in many of the major
gold producing regions of the world. Mr. Jauristo was also part of the team that
discovered the Osborne copper-gold deposit in Queensland.
9
Eduardo Luna – Director
Mr.
Luna has been a director of the Company since October 29, 2008 and was Executive
Vice President and President (Mexico) of the Company from June 1, 2010 to
November 30, 2011. He was Co-Chair of the Company from November 2008 until June
1, 2010, and President and Chief Operating Officer of the Company from September
28, 2009 until June 1, 2010. From July 2008 until December 2009 he was a
director of 0777551 B.C. Ltd., a private company that was a predecessor to the
Company. Mr. Luna was Chairman of Silver Wheaton Corp. from October 2004 to
April 2009 and its Chief Executive Officer from October 2004 to April 2006;
Executive Vice President of Wheaton River from June 2002 to April 2005,
Executive Vice President of Goldcorp from March 2005 to September 2007, and
President of Luismin, S.A. de C.V. from 1991 until 2007. He is a director of
Rochester Resources Ltd. He holds a degree in Advanced Management from Harvard
University, a Master of Business Administration degree from Instituto
Tecnólogico de Estudios Superiores de Monterrey and a Bachelor of Science degree
in Mining Engineering from Universidad de Guanajuato. He held various executive
positions with Minera Autlan for seven years and with Industrias Penoles for
five years. He was on two occasions President of the Mexican Mining Chamber and
he was also a former President of the Silver Institute. He serves as Chairman of
the Advisory Board of the Faculty of Mines at the University of Guanajuato and
of the Mineral Resources Council in Mexico.
Robert Quartermain – Director
Dr.
Quartermain, D.Sc., has been a director of the Company since June 28, 2010. He
has been the President and Chief Executive Officer and a director of Pretium
Resources Inc. since October 2010. He served as President of Silver Standard
Resources Inc. from January 1985 until January 2010, and as Chief Executive
Officer from January 2004 until January 2010. Dr. Quartermain worked for the
Geological Survey of Canada and in private industry on mapping and exploration
programs from 1976 until 1982. He also worked for Teck Corp. before becoming
President of Silver Standard Resources Inc. in 1985. Dr. Quartermain has a
Bachelor of Science degree in geology from the University of New Brunswick, and
a Master of Science degree in mineral exploration from Queen’s University. He
was awarded an honorary Doctor of Science degree from the University of New
Brunswick in May 2009.
Michael Riley – Director
Mr.
Riley has been a director of the Company since April 22, 2010. He retired as a
senior audit partner from Ernst & Young LLP in September 2006 more than 25
years with the firm. He became a partner in the firm’s Montreal office in 1985,
where he worked with clients in the retail, pharmaceutical, manufacturing and
resource industries. He relocated to the firm’s Vancouver office in 1995, where
his responsibilities included serving as the lead audit engagement partner for
the office’s largest Canadian and U.S.-listed public company clients in mining,
transportation, and banking. He also spent two years leading its Vancouver
office’s mergers & acquisitions due diligence practice. Mr. Riley is a
director, the Chair of the Governance Committee and a member of the Audit
Committee of Canalaska Uranium Ltd. (TSX). Mr. Riley is also a director and
Chairman of the Audit Committee of British Columbia Lottery Corporation, and a
director of the Vancouver Symphony Society and the BCAA Road Safety Foundation.
Mr. Riley has been a Chartered Accountant since 1978 and is a member of both the
Institute of Chartered Accountants of B.C. and the Ordre des comptables agréés
du Quebec. He graduated with a Bachelor of Commerce degree from Concordia
University in 1975 majoring in operations research and quantitative methods. He
also earned a graduate degree in public accounting from McGill University in
1977.
Cease Trade Orders, Bankruptcies, Penalties and Sanctions
No
proposed director is, as at the date of this Information Circular, or has been,
within the last 10 years before the date of this Information Circular, a
director, chief executive officer, or chief financial officer of any company
(including Primero) that was:
| |
(a) |
subject to an order that was issued while the proposed
director was acting in the capacity as director, chief executive officer
or chief financial officer; or |
10
| |
(b) |
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. |
Except
as set out below, no proposed director is, as at the date of this Information
Circular, or has been, within 10 years before the date of this Information
Circular, a director or executive officer of any company (including Primero)
that:
| |
(a) |
while that person was acting in that capacity, or within
a year of 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 |
| |
|
|
| |
(b) |
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. |
In
December 2003, Wade Nesmith was appointed to the board of Oxford Automotive Inc.
(“Oxford Automotive”), a private company based in Michigan. In December 2004,
with the support of its secured creditors, Oxford Automotive filed a plan of
bankruptcy for certain of its North American subsidiaries under US bankruptcy
legislation. It emerged from bankruptcy protection in March 2005. Mr. Nesmith is
the Chairman and a current director of Primero, and he is a nominee for
re-election as a director of Primero at the Meeting.
No proposed director has been subject to:
| |
(a) |
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 |
| |
|
|
| |
(b) |
any other penalties or sanctions imposed by a court or
regulatory body that would likely be considered important to a reasonable
shareholder in deciding whether to vote for a proposed
director. |
APPOINTMENT OF AUDITOR
Deloitte
& Touche LLP, Chartered Accountants, Suite 2800, 1055 Dunsmuir Street,
Vancouver, British Columbia, will be nominated at the Meeting for reappointment
as auditor of the Company to serve until the close of the next annual general
meeting of shareholders, at a remuneration to be fixed by the directors.
Deloitte & Touche LLP was first appointed auditor of the Company on October
29, 2008.
Unless
authority to do so is withheld, the persons designated as proxyholders in the
accompanying Proxy intend to vote the Common Shares represented by such Proxy,
properly executed, FOR the appointment of Deloitte & Touche LLP as
auditor of the Company to serve until the close of the next annual general
meeting of shareholders and the authorization of the directors to fix the
remuneration of the auditor.
APPROVAL OF DIRECTORS’ PSU PLAN
At
the Meeting, shareholders will be asked to approve a directors’ phantom share
unit plan (the “Directors’ PSU Plan”) by an ordinary resolution. The
board of directors approved the adoption of the Directors’ PSU Plan effective
March 27, 2012, subject to the approval of the Company’s shareholders and
acceptance by the TSX. The TSX has conditionally accepted the Directors’ PSU
Plan, subject to shareholder approval.
The
purpose of the Directors’ PSU Plan is to allow for discretionary bonuses and
similar awards as an incentive and reward for selected non-executive directors
related to the achievement of long-term financial and strategic objectives of the Company and the resulting increases
in shareholder value. The Directors’ PSU Plan is intended to promote a greater
alignment of interests between the shareholders of the Company and the selected
non-executive directors by providing an opportunity to participate in increases
in the value of the Company.
11
The
persons eligible to participate in the Directors’ PSU Plan are the members of
the board of directors of the Company, other than a member who is an officer or
employee of the Company or the Company’s subsidiaries. Unless the board of
directors at any time otherwise determines, unvested phantom share units (the
“Director PSUs”) held by persons who are no longer non-executive
directors will not be cancelled but will remain outstanding and vest in
accordance with the terms of the Directors’ PSU Plan as if such person continued
to be a non-executive director of the Company. Notwithstanding anything else in
the Directors’ PSU Plan, all unvested Director PSUs held by a person will
automatically vest immediately in the event of (a) death of the person; (b)
total disability of the person; or (c) a Change of Control. “Change of
Control” means the acquisition by any person or by any person and its joint
actors, whether directly or indirectly, of voting securities of the Company
which, when added to all of the voting securities of the Company at the time
held by such person and its joint actors, totals for the first time not less
than 30% of the outstanding voting securities of the Company.
Each
Director PSU granted under the Directors’ PSU Plan will generally vest over a
three year period or as otherwise determined by the Board. A person holding
Director PSUs is entitled to elect to receive, at vesting (subject to blackout
periods), either (1) an amount equal to the volume weighted average trading
price per Common Share over the five preceding trading days (the “Fair Market
Value”) or (2) the number of Common Shares equal to the number of Directors’
PSUs. If no election is made, the Company will pay out such Directors’ PSUs in
cash.
At
any time when a dividend is declared and paid by the Company, a person holding
Director PSUs will be credited on the payment date of such dividend with the
number of Director PSUs calculated by: (a) multiplying the amount of the
dividend per Common Share by the aggregate number of Director PSUs credited to
the person’s account as of the record date for payment of the dividend; and (b)
dividing the amount obtained in (a) above by the Fair Market Value on the date
that is three days prior to the record date for payment of the dividend.
Director
PSUs and all other rights, benefits or interests in the Directors’ PSU Plan are
non-transferable and may not be pledged or assigned or encumbered in any way and
are not subject to attachment or garnishment, except that if a person holding
Director PSU dies, the legal representatives of the deceased person will be
entitled to receive the amount of any payment otherwise payable in accordance
with the Directors’ PSU Plan.
The
Company will not issue Common Shares under the Directors’ PSU Plan to any
eligible director where such issuance would result in: (a) the total number of
Common Shares issuable at any time under the Directors’ PSU Plan to insiders, or
when combined with all other Common Shares issuable to insiders under any other
equity compensation arrangements then in place, exceeding 10% of the total
number of issued and outstanding equity securities of the Company on a
non-diluted basis; and (b) the total number of Common Shares that may be issued
to insiders during any one year period under the Directors’ PSU Plan, or when
combined with all other Common Shares issued to insiders under any other equity
compensation arrangements then in place, exceeding 10% of the total number of
issued and outstanding equity securities of the Company on a non-diluted basis.
If the Company is precluded from issuing Common Shares to an insider of the
Company, the Company will pay to the relevant director a cash amount in
accordance with the Directors’ PSU Plan.
The
board of directors may amend, without shareholder approval, the Directors’ PSU
Plan as it deems necessary or appropriate (including, without limitation, making
amendments to address tax and other issues particular to directors that are not
residents of Canada), subject to the requirements of applicable law, but no
amendment will, without the consent of a Director PSU holder or unless required
by law, adversely affect the rights of a Director PSU holder with respect to
Director PSUs to which the holder is then entitled under the Directors’ PSU
Plan. Notwithstanding the foregoing, the board of directors may not, without the
approval of the holders of a majority of the issued and outstanding equity
securities of the Company present and voting in person or by proxy at a meeting
of holders of such securities, amend the Directors’ PSU Plan to: (a) make any
amendment that will increase the vesting date value of the Director PSUs or
increase the number of Common Shares that the Company will issue to a person
holding Director PSUs; (b) extend the expiry date of the Director PSUs that have
been awarded; (c) make any amendment to remove or to exceed the insider
participation limits under the Directors’ PSU Plan; (d) increase the maximum number of Common Shares issuable
for Director PSUs under the Directors’ PSU Plan; and (e) make any amendment to
the amendment provision of the Directors’ PSU Plan.
12
Under
the Directors’ PSU Plan, the aggregate number of Common Shares that may be
reserved for issuance pursuant to Director PSUs at any given time shall not
exceed 10% of the outstanding Common Shares at such time on a non-diluted basis
(which as at the date hereof, represents 8,825,983 Common Shares), less the
aggregate number of Common Shares then reserved for issuance pursuant to other
share compensation arrangements, including without limitation the Company’s
Stock Option Plan (defined under “Securities Authorized for Issuance Under
Equity Compensation Plans – Stock Option Plan”). As of April 16, 2012, the total
number of Director PSUs awarded to non-executive directors under the Directors’
PSU Plan is 115,384 (representing approximately 0.2% of the outstanding Common
Shares of the Company), and 8,649,490 Common Shares (representing 9.8% of the
issued and outstanding Common Shares of the Company) are issuable pursuant to
options granted under the Stock Option Plan, leaving a balance of 176,493 Common
Shares (representing approximately 0.2% of the outstanding Common Shares of the
Company) available to be granted as options or awarded to non-management
directors as Director PSUs. None of the 115,384 awarded Director PSUs have been
paid out.
A
copy of the Directors’ PSU Plan is available upon request from the Company’s
Vice President, Investor Relations at Suite 1202, 120 Adelaide Street West,
Toronto, Ontario, telephone number 416-814-3168, or fax number 416-814-3170,
free of charge to security holders of the Company.
At
the Meeting, shareholders will be asked to consider and pass on the following
ordinary resolution, with or without variation (the “Directors’ PSU Plan
Resolution”):
BE IT RESOLVED AS AN ORDINARY RESOLUTION THAT:
| |
1. |
The directors’ phantom share option plan (the “Directors’
PSU Plan”), as described in the Information Circular be and is hereby
approved, the 115,384 Director PSUs that have already been awarded to
directors be and are hereby ratified and approved, and the Company be and
is hereby authorized to issue securities pursuant to the Directors’ PSU
Plan; |
| |
|
|
| |
2. |
The unallocated entitlements under the Directors’ PSU
Plan be and are hereby approved until May 28, 2015; |
| |
|
|
| |
3. |
Any director of officer of the Company be and is hereby
authorized and directed to make such other changes to the Directors’ PSU
Plan as any such director or officer may, in his or her sole discretion,
determine are necessary, desirable or useful as a consequence of the
approval of the Directors’ PSU Plan; and |
| |
|
|
| |
4. |
Any director or officer of the Company be and is hereby
authorized and directed to take all such action and execute and deliver
all such documents as any such director or officer may, in his or her sole
discretion, determine are necessary, desirable or useful to implement the
foregoing resolutions. |
An
ordinary resolution is a resolution passed by the shareholders of the Company at
a general meeting by a simple majority of the votes cast in person or by proxy.
Unless otherwise indicated and subject to NYSE rules, the persons designated as
proxyholders in the accompanying Proxy intend to vote the Common Shares
represented by such Proxy, properly executed, FOR the Directors’ PSU Plan
Resolution.
Pursuant
to the policies of the TSX, if the Directors’ PSU Plan is approved by the
shareholders at the Meeting, such plan will require shareholder approval
thereafter at least once every three years.
13
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
General
Corporate
governance refers to the policies and structure of a company’s board of
directors, whose members are elected by and are accountable to the shareholders
of that company. Corporate governance encourages establishing a reasonable
degree of independence of the board of directors from executive management and
the adoption of policies to ensure the board of directors recognizes the
principles of good management. The Board is committed to sound corporate
governance practices, as such practices are both in the interests of the Company
and shareholders and help to contribute to effective and efficient
decision-making.
The
NYSE rules require the Company to disclose any significant ways in which its
corporate governance practices differ from those followed by United States
domestic issuers under the NYSE listing standards. The Company believes that
there are no significant differences between its corporate governance practices
and those required to be followed by United States domestic issuers under the
NYSE listing standards.
The
following disclosure has been prepared under the direction of the Governance and
Nominating Committee and has been approved by the Board.
The
Company has adopted corporate governance policies, including the following which
are available on the Company’s website at www.primeromining.com:
| |
(a) |
Code of Business Conduct and Ethics; |
| |
|
|
| |
(b) |
Disclosure, Confidentiality and Insider Trading Policy;
and |
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|
|
| |
(c) |
Whistleblower Policy. |
Board of Directors
The
Board of the Company facilitates its exercise of independent supervision over
management by ensuring representation on the Board by directors who are
independent of management. Directors are considered to be independent if they
have no direct or indirect material relationship with the Company. A “material
relationship” is a relationship which could, in the view of the Company’s Board,
be reasonably expected to interfere with the exercise of a director’s
independent judgment.
The
Board has reviewed the relationship between each director and the Company with
a view to determining independence. Based on that review, six of the nine directors
are independent. Below is a summary of the basis of the Board’s determinations:
| Name |
|
Independence status |
|
Basis for determination of non-independence |
| |
|
|
|
|
| WADE NESMITH |
|
Not independent |
|
Mr. Nesmith is considered to
have a material relationship with the Company because he was Executive
Chairman from June 2010 to March 2012, Co-Chair of the Company from
November 2008 to June 2010, President of the Company from October 2008 to
September 2009, and Chief Executive Officer of the Company from October
29, 2008 until June 2010 |
| |
|
|
|
|
| JOSEPH F. CONWAY |
|
Not independent |
|
Mr. Conway is considered to
have a material relationship with the Company because he currently serves
as President and Chief Executive Officer of the Company |
| |
|
|
|
|
| DAVID R. DEMERS |
|
Independent |
|
Not applicable – no material
relationship |
14
| Name |
|
Independence status |
|
Basis for determination of non-independence |
| |
|
|
|
|
| GRANT EDEY |
|
Independent |
|
Not applicable – no material
relationship |
| |
|
|
|
|
| ROHAN HAZELTON |
|
Independent |
|
Not applicable – no material
relationship(1) |
| |
|
|
|
|
| TIMO JAURISTO |
|
Independent |
|
Not applicable – no material
relationship(1) |
| |
|
|
|
|
| EDUARDO LUNA |
|
Not independent |
|
Mr. Luna is considered to have
a material relationship with the Company because he was Executive Vice
President of the Company and President of the Company’s subsidiary Primero
Empresa Minera, S.A. de C.V. from June 2010 to November 2011,
President and Chief Operating Officer of the Company from September 2009
until June 2010, and Co-Chair of the Company from November 2008 to June
2010 |
| |
|
|
|
|
| ROBERT A. QUARTERMAIN |
|
Independent |
|
Not applicable – no material
relationship |
| |
|
|
|
|
| MICHAEL RILEY |
|
Independent |
|
Not applicable – no material
relationship |
________________
Note:
| (1) |
Under National Instrument 52-110 an individual who holds
an executive office with an affiliated entity of the issuer is considered
to have a material relationship with the issuer (and would therefore not
be independent). An “affiliated entity” includes a company that controls
the issuer. Mr. Hazelton is Vice-President, Finance of Goldcorp and Mr.
Jauristo is Executive Vice President, Corporate Development, of Goldcorp.
Goldcorp is a creditor and significant shareholder of the Company;
however, Goldcorp does not “control” the Company. Notwithstanding that Mr.
Hazelton and Mr. Jauristo are not considered, by virtue of National
Instrument 52-110, to have a material relationship with the Company, the
Board considered whether their positions with a significant shareholder
and creditor of the Company could be reasonably expected to interfere with
the exercise of their independent judgment. The Board believes that the
interests of Goldcorp are largely aligned with the interests of all
shareholders of the Company. Further, neither individual has any personal
ties to members of management or involves himself in the day-to-day
management of the Company. Based on the commonality of interests between
Goldcorp and other shareholders, the fact that Goldcorp does not control
the Company (as defined in the Securities Act of British Columbia),
and the distance that each of the individuals maintains from management of
the Company, the Board determined that Mr. Hazelton and Mr. Jauristo are
able to exercise independent judgment, notwithstanding their positions
with Goldcorp. |
Exercise of Independence by the Board
Wade
Nesmith has served as the Chairman since March 2012, prior to which time he had
been the Executive Chairman since June 2010. Mr. Nesmith is the founder of the
Company. From October 2008 to September 2009 he was President of the Company,
from October 2008 until June 2010 he was the Chief Executive Officer, and from
November 2008 to June 2010 he was Co-Chair of the Board. The Chairman is not an
independent director.
To
provide leadership to the independent directors, the Board has appointed a Lead
Director from among the independent directors, namely David Demers. Mr. Demers
has been a director of the Company since October 2008. Mr. Demers’ appointment
as Lead Director obtained unanimous approval of the directors, including the
independent directors.
The
Lead Director’s role is to focus on enhancing the effectiveness of the Board and
to help ensure that the Board functions in an independent and cohesive fashion.
In addition, the Lead Director works with the Chairman in setting agendas for
Board meetings, chairs meetings of independent directors, endeavours to ensure
that the responsibilities of the Board are understood by directors and
management and that each group understands the boundaries between Board and
management responsibilities, acts as a liaison between members of the Board and
management when necessary, and ensures that the Board has the resources
necessary to effectively carry out its functions.
When
warranted, the independent directors meet, in the absence of management and
non-independent directors, at the conclusion of scheduled Board meetings.
In addition, where a matter under consideration at a Board meeting warrants it
and to ensure that free and candid discussions can take place, the Chairman or
Lead Director may request one or more members of management or
non-independent directors to withdraw during the discussions of that matter. The
Lead Director may also call meetings of independent directors at the request of
any independent director or on his own initiative.
15
The
meetings of independent directors are chaired by the Lead Director. The
meetings provide an opportunity for independent directors to raise issues that
they do not wish to discuss in the presence of management. Since the meetings of
independent directors are held at the conclusion of each Board meeting,
independent directors are able to discuss any issues that may have arisen during
the Board meeting.
During
2011, independent directors met, without management or non-independent directors
present, on five occasions.
The independence of the Board is also fostered in the following
ways:
-
There are no members of management on the Board other than the President
and Chief Executive Officer, the past Executive Chairman and the past
Executive Vice President;
-
Special meetings of the Board may be held at any time at the call of any
two directors;
-
No two directors may sit together on the Boards of two or more reporting
issuers (including Primero) without the approval of the Board;
-
Directors may engage outside advisors, at the expense of the Company, to
assist them on matters involving their responsibilities, provided that the
approval of the Chairman or Lead Director is obtained; and
-
Directors may engage independent legal counsel at the expense of the
Company, with the approval of the Governance and Nominating Committee.
Other Reporting Issuer Experience
The
following table provides details regarding directorships and committee appointments
held by the directors in other reporting issuers. Other than as set out below
under “Interlocking Directorships”, no director of the Company serves
on the board of any other reporting issuer with any other director of the Company.
| |
|
Other Reporting Issuer |
|
Other Reporting Issuer |
| Director |
|
Directorships |
|
Committee Appointments |
| |
|
|
|
|
| WADE NESMITH |
|
Selwyn Resources Ltd. |
|
Governance Committee |
| |
|
|
|
|
|
|
Silver Wheaton Corp.
|
|
Audit Committee
Governance
Committee |
| |
|
|
|
|
JOSEPH CONWAY
|
|
Dalradian Resources
|
|
Audit Committee
Compensation Committee |
| |
|
|
|
|
| DAVID DEMERS |
|
Westport Innovations Inc. |
|
none |
| |
|
|
|
|
| GRANT EDEY |
|
Khan Resources Inc. |
|
none |
| |
|
|
|
|
| EDUARDO LUNA |
|
Rochester Resources Ltd. |
|
none |
| |
|
|
|
|
| |
|
Silver Wheaton Corp. |
|
Compensation Committee |
| |
|
|
|
|
| ROBERT QUARTERMAIN |
|
Pretium Resources Inc. |
|
none |
16
| |
|
Other Reporting Issuer |
|
Other Reporting Issuer |
| Director |
|
Directorships |
|
Committee Appointments |
| |
|
|
|
|
MICHAEL RILEY
|
|
Canalaska Uranium Ltd.
|
|
Audit Committee
Governance
Committee |
No
director of the Company is, or has been in the last three years, employed as an
executive officer of another company where any of the Company’s current
executive officers at the same time serve or served on that company’s
compensation committee.
Interlocking Directorships
Wade
Nesmith and Eduardo Luna are directors of the Company who serve together as
directors on the board of Silver Wheaton Corp. Mr. Luna has been appointed to
its Compensation Committee and Mr. Nesmith is on its Governance and Audit
Committees.
Committee Composition
There
are currently four committees of the Board: (1) the Audit Committee, (2) the
Human Resources Committee, (3) the Governance and Nominating Committee, and (4)
the Health, Safety and Environmental Committee. The Audit Committee, the Human
Resources Committee and the Governance and Nominating Committee are each
comprised solely of independent directors. In addition, on May 17, 2011, the
Board established a Special Committee of independent directors in connection
with a proposed business combination with Northgate. As the proposed business
combination was terminated on August 29, 2011, the Special Committee was
discontinued.
The
Board Committees that were in place during the financial year ended December 31,
2011, their members and the number of times each Board Committee met during the
year are set out below.
| |
|
|
|
Number of Meetings |
| Board Committee |
|
Members |
|
in 2011 |
| |
|
|
|
|
| Audit Committee |
|
Michael Riley (Chair) |
|
5 |
| |
|
Grant Edey |
|
|
| |
|
Rohan Hazelton |
|
|
| |
|
|
|
|
| Human Resources Committee |
|
David Demers (Chair) |
|
4 |
| |
|
Timo Jauristo |
|
|
| |
|
Robert Quartermain |
|
|
| |
|
|
|
|
| Governance and Nominating
Committee |
|
Grant Edey (Chair) |
|
1 |
| |
|
David Demers |
|
|
| |
|
Robert Quartermain |
|
|
| |
|
|
|
|
| Health, Safety and
Environmental Committee |
|
Eduardo Luna (Chair) |
|
Nil(1) |
| |
|
Joseph Conway |
|
|
| |
|
Rohan Hazelton |
|
|
| |
|
|
|
|
| Special Committee |
|
David Demers (Chair) |
|
5 |
| |
|
Grant Edey |
|
|
| |
|
Rohan Hazelton(2)
|
|
|
| |
|
Michael Riley |
|
|
___________________
Notes:
| (1) |
The Health, Safety and Environmental Committee did not
meet during 2011 as concerns were considered by the Board as a
whole. |
| |
|
| (2) |
Mr. Hazelton resigned from the Special Committee on June
28, 2011 and did not receive any fees for serving on the Special
Committee. |
17
Meeting Attendance Record
Directors
are expected to attend all meetings of the Board and the Committees of which
they are members, to attend such meetings fully prepared, and to remain in
attendance for the duration of the meeting. Where a director’s absence from a
meeting is unavoidable, the director is expected to contact the Chairman, the
Chief Executive Officer or the Corporate Secretary as soon as possible for a
briefing on the substantive elements of the meeting.
The
Audit Committee meets at least four times per year in conjunction with the
review and approval of annual and quarterly financial statements, management’s
discussion and analysis of operating results and related filings. Other
Committees hold regular meetings throughout the year as required. The following
tables set out the attendance of directors at meetings of the Board during the
year ended December 31, 2011.
| |
|
Number of Board |
|
Number of Board |
|
Individual |
| Name |
|
Meetings |
|
Meetings Attended |
|
Attendance Rate |
| |
|
|
|
|
|
|
| WADE NESMITH |
|
9 |
|
7(1) |
|
78% |
| |
|
|
|
|
|
|
| JOSEPH CONWAY |
|
9 |
|
9 |
|
100% |
| |
|
|
|
|
|
|
| DAVID DEMERS |
|
9 |
|
9 |
|
100% |
| |
|
|
|
|
|
|
| GRANT EDEY |
|
9 |
|
9 |
|
100% |
| |
|
|
|
|
|
|
| ROHAN HAZELTON |
|
9 |
|
9 |
|
100% |
| |
|
|
|
|
|
|
| TIMO JAURISTO |
|
9 |
|
9 |
|
100% |
| |
|
|
|
|
|
|
| EDUARDO LUNA |
|
9 |
|
7(2) |
|
78% |
| |
|
|
|
|
|
|
| ROBERT QUARTERMAIN |
|
9 |
|
9 |
|
100% |
| |
|
|
|
|
|
|
| MICHAEL RILEY |
|
9 |
|
9 |
|
100% |
______________
Notes:
| (1) |
Mr. Nesmith was unable to join the Board meetings on
August 28, 2011 and November 3, 2011. Scheduling of the August 28, 2011
meeting was made difficult as a result of travel schedules. Mr. Nesmith
conferred with the CEO and Lead Director and it was determined that he
would miss the meeting and they would relay his views, in order to
convenience other directors. During the August 28, 2011 meeting, the
directors determined that the Company would not match the AuRico Gold Inc.
(“AuRico”) bid for Northgate and the arrangement agreement with
Northgate was terminated. At the November 3, 2011 meeting, the directors
approved the financial statements and MD&A for the nine months ended
September 30, 2011. Once again, the date of this meeting was changed to
accommodate other directors and Mr. Nesmith reviewed and discussed the
third quarter results with senior management prior to the
meeting. |
| |
|
| (2) |
Mr. Luna was unable to join the Board meetings on March
15, 2011 and May 16, 2011 for health reasons. Mr. Luna conferred with the
CEO and Lead Director and it was determined that he would be excused from
the meeting and they would relay his views. During the March 15, 2011
meeting, the directors approved the purchase of silver calls and during
the May 16, 2011 meeting, the directors approved the financial statements
and MD&A for the three months ended March 31, 2011, approved the
negotiations with Northgate, the establishment of the Special Committee to
advise on the Northgate transaction, the grant of PSUs to certain of the
Company’s Mexican personnel, and the adopting of new corporate governance
policies and amendments to existing corporate governance policies, which
had been previously discussed by the Board. |
Mandate and Charters
The
Board has developed and approved a written mandate for the Board, formal
charters for each Committee and position descriptions for each of the positions
of Board Chair, Committee Chairs, Lead Director and Chief Executive Officer.
Copies of the Board mandate, Committee charters and position descriptions can be
found on our website at www.primeromining.com.
Summaries of the mandate of the Board and the responsibilities of each
Board Committee are set out below.
18
Mandate of the Board
The
directors are stewards of the Company, responsible for the overall management
and direction of the Company. The Board has the responsibility to oversee the
conduct of the Company’s business, to supervise management and to act with a
view towards the best interests of the Company. Among other things, the Board is
responsible for the following matters:
| |
• |
strategic planning, including: |
| |
|
|
|
| |
|
o |
participation with management in the development of, and
annual approval of, a strategic plan that takes into consideration, among
other things, the risks and opportunities of the business; |
| |
|
|
|
| |
|
o |
approval of annual capital and operating budgets that
support the Company’s ability to meet its strategic objectives; |
| |
|
|
|
| |
|
o |
directing management to develop, implement and maintain a
reporting system that accurately measures the Company’s performance
against its business plans, |
| |
|
|
|
| |
|
o |
approval of entry into, or withdrawal from, lines of
business that are, or are likely to be, material to the Company;
and |
| |
|
|
|
| |
|
o |
approval of material acquisitions and
divestitures; |
| |
|
|
|
| |
• |
financial and corporate matters, including: |
| |
|
|
|
| |
|
o |
taking reasonable steps to ensure the implementation and
integrity of the Company’s internal control and management information
systems; |
| |
|
|
|
| |
|
o |
approval of financings and the incurrence of material
debt outside the ordinary course of business; and |
| |
|
|
|
| |
|
o |
approval of commencement or settlement of material
litigation; |
| |
|
|
|
| |
• |
business and risk management, including: |
| |
|
|
|
| |
|
o |
ensuring that management identifies the principal risks
of the Company’s business and implements appropriate systems to manage the
risks; |
| |
|
|
|
| |
|
o |
approval of any plans to hedge sales; and |
| |
|
|
|
| |
|
o |
evaluation of, and assessing, information provided by
management and others about the effectiveness of risk management systems;
and |
| |
|
|
|
| |
• |
policies and procedures, including: |
| |
|
|
|
| |
|
o |
approval of, and monitoring of compliance with, all
significant policies and procedures that govern the Company’s
operations; |
| |
|
|
|
| |
|
o |
approving and acting as guardian of the Company’s
corporate values; and |
| |
|
|
|
| |
|
o |
directing management to ensure that the Company operates
within applicable laws and regulations and to the highest ethical and
moral standards. |
A
copy of the terms of reference for the Board, setting out its mandate and the
duties and responsibilities of its members, is attached as Appendix “A” to this
Information Circular.
19
Audit Committee
| Chair: |
Michael Riley |
| Other Members: |
Grant Edey |
| |
Rohan Hazelton
|
The
full text of the Audit Committee Charter is available for viewing on our website
at www.primeromining.com. More information about the Audit Committee, as well as
a copy of its Charter, is contained in the AIF, filed under the Company’s
profile on SEDAR at www.sedar.com.
The
Audit Committee is responsible for overseeing the policies and practices
relating to integrity of financial and regulatory reporting, as well as internal
controls to achieve the objectives of safeguarding of corporate assets;
reliability of information; and compliance with policies and laws. Within this
mandate, the Audit Committee’s role is to support the Board in meeting its
responsibilities to shareholders, review and enhance the independence of the
external auditor, facilitate effective communication between management and the
external auditor, provide a link between the external auditor and the Board, and
increase the integrity and objectivity of financial reports and public
disclosure.
The
Audit Committee has complete and unrestricted direct access to the external
auditor and is responsible for approving the nomination, and establishing the
independence, of the external auditor. The role of the Audit Committee has been
discussed at various times with the external auditor.
Human Resources Committee
| Chair: |
David Demers |
| Other Members: |
Timo Jauristo |
| |
Robert Quartermain
|
The
Human Resources Committee assists the Board in fulfilling its responsibilities
relating to human resources and compensation issues. This Committee is
responsible for establishing a plan of continuity for members of senior
management and for ensuring that the Company has an executive compensation plan
that is both motivational and competitive to enable the Company to attract,
retain and inspire performance of management of a quality and nature that will
enhance the sustainable profitability and growth of the Company. The Human
Resources Committee is also responsible for reviewing and making recommendations
to the Board with respect to the compensation philosophy and guidelines for the
Company, and for ensuring the production of an annual report on executive
compensation for review and approval by the Board. This Committee reviews the
terms of reference and corporate goals and objectives of the Chief Executive
Officer and Chairman and leads the annual evaluation process of performance of
the Chief Executive Officer and Chairman. It also reviews and recommends
compensation for directors, benefit plans, incentive awards and terms of
employment agreements, and administers the Company’s Stock Option Plan.
Governance and Nominating Committee
| Chair: |
Grant Edey |
| Other Members: |
David Demers |
| |
Robert Quartermain
|
The
Governance and Nominating Committee enhances the Company’s performance
by providing a focus on governance. It also assesses and makes recommendations
relating to effectiveness of the Board. This Committee is responsible for establishing
and leading the process for identifying, recruiting, appointing, re-appointing
and providing ongoing development for directors. As part of its mandate, this
Committee, among other things, develops and reviews a long-term plan for Board
composition, reviews the Board’s relationship with management to ensure
the Board functions independently, develops criteria for directors, recommends
nominees for election as directors and for appointment to committees and reviews
and monitors orientation and education of directors.
20
Health, Safety and Environmental Committee
| Chair: |
Eduardo Luna |
| Other Members: |
Joseph Conway |
| |
Rohan Hazelton
|
The
Health, Safety and Environmental Committee’s purpose is to review and recommend
corporate policies and monitor activities as they relate to health, safety and
environmental matters, to review and recommend corporate policies and programs
in connection with social issues affecting communities where the Company
conducts operations, and review and monitor activities as they relate to
compliance with environmental regulations.
Position Descriptions
Set
out below are brief descriptions of the mandate of certain positions. The
Governance and Nominating Committee annually reviews the position description
for the Chairman, Lead Director and Committee Chairs. The Human Resources
Committee annually reviews the position description for the Chief Executive
Officer.
The Chairman
The
Chairman’s general mandate is to ensure the effective and independent conduct of
the Board. The Chairman manages the affairs of the Board and monitors its
effectiveness, sets agendas and manages meetings of the Board. The Chairman
assists the Chief Executive Officer in executing his general mandate to
implement the Company’s strategic and operating plans and to enhance shareholder
value. The position description can be found on our website at
www.primeromining.com.
The Lead Director
The
Lead Director’s general mandate is to enhance the effectiveness of the Board and
to help ensure that the Board functions in an independent and cohesive fashion.
The Lead Director also works as a liaison between members of the Board and
management when necessary. The position description can be found on our website
at www.primeromining.com.
The Chief Executive Officer
The
Chief Executive Officer’s general mandate is to implement the Company’s
strategic and operating plans and to enhance shareholder value. The Chief
Executive Officer is responsible for the overall day-to-day management of the
Company and the implementation of policies, and strategy of the Company. The
position description can be found on our website at www.primeromining.com.
The Committee Chairs
The
general mandate of a Committee Chair is to plan and chair meetings of committee
members to ensure the committee fulfills the duties and responsibilities
delegated by the Board. The Chair of each Committee leads the committee in
undertaking its duties and responsibilities, sets agendas for, and chairs,
meetings, and ensures the committee is composed of members with the appropriate
skills and experience. The position description can be found on our website at
www.primeromining.com.
Orientation and Continuing Education
The
Governance and Nominating Committee is responsible for establishing and
monitoring the orientation and continuing education of directors. That
Committee, in conjunction with the Chairman and the Chief Executive Officer, is
responsible for orientation of new directors. The orientation program includes
the provision of written information about duties and obligations of directors
generally and the business and operations of the Company, documents from recent
Board meetings and opportunities to meet with senior management, other directors
and the Chair of the Audit Committee. The Chairman meets with each new director
to discuss the Company, the Board and the responsibilities of directors. Each new director will be
provided with a copy of the Board Manual, which contains the charters of each
Committee as well as all corporate governance-related policies.
21
Directors
are provided with regular investor relations reports about the Company and its
competitors, as well as copies of all analysts’ reports. The Board will hold an
annual strategy session. All directors have been provided with the opportunity
to visit the Company’s operations.
The
Governance and Nominating Committee facilitates continuing education of all
directors by periodically canvassing the directors to determine their training
and education needs and interests, arranging opportunities for directors to
visit the Company’s facilities and operations, arranging for attendance by
directors at seminars or conferences of interest and relevance and facilitating
presentations by outside experts to the Board or Committees on relevant matters.
Directors are expected to attend all scheduled Board and committee meetings in
person, although attendance by telephone is acceptable in appropriate
circumstances. Directors are expected to be fully prepared for each meeting in
order to actively participate in the Board’s deliberations.
The
following table provides details regarding various continuing education events
held for, or attended by, the Company’s directors during the financial
year ended December 31, 2011.
| Date |
|
Description of Event |
|
Attendees |
| |
|
|
|
|
| Various |
|
San Dimas Mine
visit(1) |
|
Wade Nesmith
Joseph Conway
Eduardo Luna |
| |
|
|
|
|
| Various |
|
Deloitte Directors’ Series |
|
Michael Riley
|
| |
|
|
|
|
| Various |
|
IFRS Financial Reporting
Seminars |
|
Michael Riley
|
| |
|
|
|
|
| Various |
|
Ernst & Young Mining
Industry Presentations |
|
Michael Riley
|
| |
|
|
|
|
| March 2011 |
|
Annual Conference of
Prospectors and Developers Association of Canada |
|
Joseph Conway
Eduardo Luna |
| |
|
|
|
|
| August 2011 |
|
New York Stock Exchange Tour
and Bell Ringing |
|
Wade Nesmith
Joseph Conway |
| |
|
|
|
|
| October 2011 |
|
Corporate Board Member and NYSE
Euronext: Annual Boardroom Summit |
|
Wade Nesmith
|
| |
|
|
|
|
| October 2011 |
|
Coxe Advisors LLP (Don Coxe):
Commodity Markets Presentation |
|
Wade Nesmith
Eduardo Luna |
| |
|
|
|
|
| October 2011 |
|
Kitco Metals Inc. (Jon Nadler):
Commodity Markets Presentation |
|
Wade Nesmith
Eduardo Luna |
| |
|
|
|
|
| November 2011 |
|
CICA Audit Committee Conference
|
|
Michael Riley
|
________________
Note:
| (1) |
A visit to the San Dimas Mine for all directors is
planned for 2012. |
Ethical Business Conduct
The
Board has adopted a Code of Business Conduct and Ethics for the Company, its
Directors, officers and employees. The Code sets out expectations for the
conduct of the Company’s business in accordance with all applicable laws, rules
and regulations and the highest ethical standards. Employees are required to
sign the Code when they are engaged. The Code also includes an acknowledgement,
to be completed on-line annually by each director and officer, that the
individual has read and considered the Code. The full text of the Code may be
viewed on our website at www.primeromining.com.
22
The
Board is not aware of any departures from the Code during 2011. The Board
monitors compliance with the Code by conducting an annual online survey of all
supervisors, management, executives and directors, which survey verifies, among
other things, that the respondent is aware of, and had reviewed the Code, and
where necessary has reported any deviations from the Code.
Directors
and officers who have a material interest in any transaction or agreement to
which the Company is a party are expected to disclose that interest to the Board
and, in the case of a director who has a disclosable interest under the BCA, is
not entitled to vote on the matter at meetings of the Board. As part of
the orientation process, directors are provided with information regarding
conflicts of interest. In instances where the Board deems it necessary, a
committee of independent directors may be struck and delegated the authority to
deal with a particular matter. During 2011, the Board established a Special
Committee for the proposed business combination with Northgate. The proposed
business combination was terminated and the Special Committee was discontinued
on August 29, 2011.
The
Company has also adopted a Whistleblower Policy to complement the Code. The
Whistleblower Policy provides a mechanism for directors, officers, and employees
of the Company or any subsidiary who believe that a violation of the Code has
occurred or who have concerns regarding various matters (including financial
statement disclosure issues, accounting matters, internal controls, fraud and
misrepresentations) to report the violation or concerns. Where the reporting
person does not wish to, or is not able to, discuss a concern with his or her
immediate supervisor, reports may be submitted to the Corporate Secretary. Reports
may be made anonymously. The Corporate Secretary undertakes an initial review
of the matter and reports results to the Audit Committee, which then may take
corrective and disciplinary actions if appropriate.
Nomination of Directors
The
Governance and Nominating Committee, which is comprised entirely of independent
directors, is responsible for identifying, screening and recommending eligible
nominees for election as directors. A more full description of the
responsibilities of this Committee is set out under “Governance and Nominating
Committee” above.
The
Governance and Nominating Committee will annually review the general and
specific criteria for candidates to be considered for nomination as directors,
with a view to ensuring the composition of the Board provides the best mix of
skills and experience to guide the long-term strategy and business operations of
the Company. As part of this process, the Committee will consider the
competencies and skills required by the Board as a whole and the particular
competencies and skills that each current director possesses. The review will
take into account the diversity of background, skills and experience of the
directors, being the key characteristics that the Committee believes are
required for effective Board participation. All directors are encouraged to
identify potential candidates and the Chief Executive Officer is asked to
provide comment.
The
Committee will screen all potential nominees and review their individual
characteristics and skills against the identified criteria and bearing in mind
competencies and skills that may be lacking in the current makeup of the Board.
Consideration will also be given to the perceived ability of a nominee to devote
the time and effort needed to fulfilling his or her duties as a member of the
Board. Where necessary the Committee may also engage search firms to seek out
candidates for Board positions.
For
2012, no new nominees for director were put forward for consideration. The Governance
and Nominating Committee reviewed the qualifications of the current directors,
all of whom have been nominated for election as directors in 2012, against the
mix of skills and experience that it determined best for the Company and concluded
that there are currently no gaps in skills or experience that need to be filled.
Corporate Disclosure Policy
The
Board has approved a Disclosure, Confidentiality and Insider Trading Policy, as
well as a Disclosure Controls and Procedures Policy, which together are intended
to ensure that all material information relating to the Company is communicated
appropriately, and in a timely manner, to the public and shareholders. These
policies also apply to the dissemination of annual and quarterly
reports, press releases and other reports. The Disclosure, Confidentiality and
Insider Trading Policy may be viewed on our website at www.primeromining.com. In
addition to annual general meetings, meetings between management of the Company
and various investors and investment analysts occur occasionally, all of which
will be governed by the above policies.
23
Assessments and Performance Reviews
The
Governance and Nominating Committee conducts an annual review of the performance
of the Board and the Board Committees. The Governance and Nominating Committee
has designed a written questionnaire that is sent to each director on an annual
basis to evaluate the Board as a whole as well as the Board committees. The
questionnaire asks directors to evaluate the Board’s composition, function and
meetings. In addition, each committee is evaluated with respect to its
understanding of its role and responsibilities, the involvement of each
committee member, its composition, and conduct of meetings. Finally, each
director is interviewed by the Lead Director and Chairman with respect to board
function and individual performance.
The
questionnaires are prepared, sent by and summarized by the Chair of the
Governance and Nominating Committee. The Governance and Nominating Committee
discusses the results of the assessments, and the Chair of the Governance and
Nominating Committee then presents a final report to the Board.
With
respect to 2011, the overall conclusion from these questionnaires and formal
discussions was that the Board and the committees generally function well.
AUDIT COMMITTEE
For
information regarding the Audit Committee, see the Company’s AIF under the
heading “Additional Information – Audit Committee”, including a copy of the
Audit Committee charter which is attached as Schedule “A” to the AIF. The AIF is
available under the Company’s profile at on SEDAR at www.sedar.com and a copy of
the AIF is available upon request from the Company’s Vice President, Investor
Relations at Suite 1202, 120 Adelaide Street West, Toronto, Ontario, telephone
number 416-814-3168, or fax number 416-814-3170, free of charge to security
holders of the Company. The Company may require the payment of a reasonable
charge from any person or company who is not a security holder of the Company,
who requests a copy of the AIF.
STATEMENT OF EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Primero
is a Canadian-based precious metals producer with operations in Mexico. The
Company is focused on building a portfolio of high quality, low cost precious
metals assets in the Americas through acquiring, exploring, developing and
operating mineral resource properties. Primero currently has one producing
property, the San Dimas Mine, located in Mexico’s San Dimas district, on the
border of Durango and Sinaloa states, and one exploration property, Ventanas,
located in Durango state, Mexico.
The
Company’s Common Shares are listed on the TSX under the symbol “P” and on the
NYSE under the symbol “PPP”. In addition, the Company’s common share purchase
warrants trade on the TSX under the symbol “P.WT”.
Additional
information about Primero and its operations is available in its audited
consolidated financial statements and management’s discussion and analysis for
the year ended December 31, 2011, which can be accessed on SEDAR at
www.sedar.com.
The
worldwide mining industry has experienced considerable growth over the past
several years, which has significantly increased the demand for executives with
mining-related skills and experience. Merger activities in the industry have led
to stronger competitors with substantial financial resources and robust
production profiles. At the same time, fewer people have entered the mining
industry over the past two decades, constraining the supply of potential employees. As a result, the Company operates in a
highly competitive market for executives and has designed its executive
compensation program so as to attract, retain and motivate highly-qualified
individuals with the mining and other related skills and experience necessary to
execute the Company’s strategic plan and create sustainable value for Primero’s
shareholders.
24
The
Company has designed its executive compensation program to emphasize
performance-based incentives that reward its executives for the achievement of
specific annual and long-term business goals. Given the Company’s emphasis on
performance-based compensation, it is critical that its incentive programs
reward executives for performance-based measures that they are able to
influence. This presents a challenge because Primero operates in a commodity
business with substantially all of its cash flow derived from the sale of gold
and silver. As a result, the Company’s financial performance is directly related
to the prices of these metals which fluctuate widely and are affected by
numerous factors that are difficult to predict and beyond the Company’s control.
For this reason, Primero has designed its incentive programs to emphasize its
long-term operational value drivers of performance (production, cost and
resource growth) over more cyclical measures of financial performance.
Furthermore, precious metals companies are required to make significant
substantial and sustained investment in exploration and development, at the
expense of current earnings. For this reason, the Company has designed its
incentive programs to emphasize long-term performance.
Objectives of Compensation Program
The
primary goal of Primero’s executive compensation program is to attract and
retain the key executives necessary for Primero’s long term success, to
encourage executives to further the long-term development of Primero and its
operations, and to motivate top-quality, experienced executives. Primero
considers base salary, an annual incentive award, incentive stock options and
PSUs to be the key elements of its executive compensation program.
Overview of Compensation Philosophy
The following executive compensation principles guide the Company’s
overall compensation philosophy:
-
to recruit and subsequently retain highly qualified executive officers by
offering overall compensation which is competitive with that offered for
comparable positions in other mineral resource companies of a comparable size
and stage of business development;
-
to motivate executives to achieve important corporate and personal
performance objectives and reward them when such objectives are met; and
-
to align the interests of executive officers with the long-term interests
of shareholders through participation in the Company’s equity plans.
Compensation Review Process
Role of the Human Resources Committee
The
Human Resources Committee is responsible for recommending the compensation of
the Company’s executive officers to the Board. When considering the appropriate
executive compensation to be paid to the executive officers, the Human Resources
Committee has regard to a number of factors including:
-
recruiting and retaining executives critical to the success of Primero and
the enhancement of shareholder value;
-
providing fair and competitive compensation;
-
aligning the interests of management and shareholders;
-
rewarding performance, both on an individual basis and with respect to
operations generally; and
25
- available financial resources.
In
addition, the Human Resources Committee receives a recommendation from the
President and Chief Executive Officer (see “Statement of Executive Compensation
– Compensation Discussion and Analysis –Compensation Review Process – Role of
President and Chief Executive Officer”). The Committee reviews the basis for the
recommendation made to it and has discretion to modify any of the recommendation
prior to making its recommendation to the Board.
The
Human Resources Committee is comprised of three independent directors who meet
at least twice a year. The members of the Human Resources Committee are David
Demers (Chair), who has served on this committee since July 2010, Timo Jauristo,
who has served on this committee since November 2010, and Robert Quartermain,
who has served on this committee since July 2010. Each member has experience
in executive compensation by virtue of his experience as current or former directors
and officers of public corporations. The Board believes the Human Resources
Committee collectively has the knowledge, experience and background required
to fulfill its mandate.
With respect to the financial year ended December 31, 2011, the Human Resources
Committee:
-
recommended that the Company adopt the recommendations of the third-party
compensation advisor (see “Statement of Executive Compensation – Compensation
Discussion and Analysis – Compensation Review Process – Role of the Third
Party Compensation Advisor”);
-
recommended that the Company enter into an employment agreement with Renaud
Adams (see “Statement of Executive Compensation – Executive Employment
Agreements, Termination and Change in Control Provisions”);
-
recommended that the Company make grants under its PSU Plan (see “Statement
of Executive Compensation – Compensation Discussion and Analysis – Elements of
Executive Compensation – Equity Compensation”);
-
recommended that the Company continue its annual performance-based cash
incentives program, and make awards under such program (see “Statement of
Executive Compensation – Compensation Discussion and Analysis – Elements of
Executive Compensation – Annual Performance-Based Cash Incentives”); and
-
recommended that the Company grant options to executives and directors
under its Stock Option Plan (see “Securities Authorized for Issuance Under
Equity Compensation Plans – Stock Option Plan”).
Subsequent to the financial year ended December 31, 2011, the Human Resources
Committee:
-
recommended that the Company adjust certain achievement factors and
performance weightings in its annual performance-based cash incentives program
for 2012 including replacing the achievement factor relating to shareholder
value with the Human Resources Committee’s judgment of management’s
performance at long-term shareholder value creation;
-
recommended that the Company adopt the Directors’ PSU Plan and grant
Director PSUs to directors under such plan (see “Approval of Directors’ PSU
Plan”);
-
recommended that the Company enter into new employment agreements for the
Company’s executives including Joseph Conway, David Blaiklock and Renaud Adams
as, due to the Company having entered into employment agreements with each of
the executives at different times and at different stages of the Company’s
development, certain terms in the employment agreements needed to be made
consistent (see “Statement of Executive Compensation – Executive Employment
Agreements, Termination and Change in Control Provisions”); and
26
- recommended that the Company enter into an agreement with Wade Nesmith for
his transition from Executive Chairman to Chairman of the Board (see
“Statement of Executive Compensation – Executive Employment Agreements,
Termination and Change in Control Provisions”).
Role of President and Chief Executive Officer
The President and Chief Executive Officer plays a role in executive
compensation decisions, by:
-
making recommendations to the Board regarding the Company’s annual business
goals and objectives that provide the structure by which the annual goals and
objectives of other executive officers and employees of the Company are
aligned;
-
making recommendations to the Human Resources Committee regarding the
Company’s annual and long-term quantitative goals and the annual qualitative
goals for the other executive officers; and
-
making recommendations to the Human Resources Committee regarding executive
officer base salary adjustments, target annual incentive awards and actual
payouts, stock-based grants, and PSU grants and actual payouts.
Role of Third Party Compensation Advisor
During
the financial year ended December 31, 2011, the Human Resources Committee
retained Roger Gurr & Associates, a third party compensation advisor (the
“Consultant”), to assess the Company’s approach to executive and Board
compensation. The Consultant was originally retained in March 2010. The
Consultant delivered a report entitled “Review of Senior Executive and Director
Compensation” dated June 26, 2011 (the “Consultant’s Report”), regarding
executive and director compensation for 2011, and provided an update thereon in
December 2011. In addition, the Consultant assessed the compensation relating to
the transition of Wade Nesmith from Executive Chairman to Chairman of the Board
in February 2012 and the Consultant assessed the risk profile of the Company’s
compensation program in March 2012 (see “Statement of Executive Compensation –
Compensation Discussion and Analysis – Risk Assessment”).
For
the financial years ended December 31, 2011 and 2010, the Company paid the
Consultant $31,500 and $45,700, respectively, as detailed below:
| |
|
Fees Paid to |
|
Fees Paid to |
| |
|
Consultant in Year |
|
Consultant in Year |
| |
|
Ended |
|
Ended |
| Nature of
Services |
|
December 31, 2011 |
|
December 31, 2010 |
| |
|
|
|
|
| Executive Compensation-Related
Fees(1) |
|
$31,500 |
|
$45,700 |
| |
|
|
|
|
| All Other Fees(2) |
|
Nil |
|
Nil |
| |
|
|
|
|
| Total |
|
$31,500 |
|
$45,700 |
______________________
Notes:
| (1) |
“Executive Compensation-Related Fees” include the
aggregate fees billed by the Consultant for services related to
determining compensation for the Company’s directors and executive
officers. |
| |
|
| (2) |
“All Other Fees” include the aggregate fees billed for
all other services provided by the Consultant that are not Executive
Compensation-Related Fees. |
Based
upon a review of compensation strategies of similar mining companies, the
Consultant’s Report recommended an overall compensation strategy for 2011 that
included salary, annual performance-based cash-incentives and long-term
incentive awards in the form of stock options and/or PSUs. The Human Resources
Committee considered the Consultant’s Report and advice, and his recommendations
are reflected in the executive compensation program and executive employment
agreements described below.
27
Elements of Executive Compensation
Named Executive Officers
The
following individuals are the Company’s named executive officers (“Named
Executive Officers” or “NEOs”) for the fiscal year ended December 31,
2011:
- Joseph Conway, President and Chief Executive Officer (since June 1, 2010);
- David Blaiklock, Chief Financial Officer (since July 6, 2009);
- Renaud Adams, Chief Operating Officer (since November 1, 2011);
- Wade Nesmith, Chairman (since March 15, 2012), Executive Chairman (from
June 1, 2010 until March 15, 2012), President (from October 29, 2008 until
September 28, 2009), Chief Executive Officer (from October 29, 2008 until
June 1, 2010), and Co-Chair (from November 28, 2008 until June 1, 2010); and
- Eduardo Luna, Executive Vice President and President (Mexico) (from June
1, 2010 to November 30, 2011), President and Chief Operating Officer (from
September 28, 2009 until June 1, 2010), and Co- Chair (from November 28, 2008
until June 1, 2010).
Summary of Elements of Executive Compensation
Guided
by its executive compensation principles and policies, the Human Resources
Committee uses several components in its executive compensation program. For the
financial year ended December 31, 2011, Primero’s executive compensation program
consisted of the following elements:
-
base salary;
-
annual performance-based cash incentives (short-term incentives);
-
equity-based compensation consisting of stock options and PSUs (long-term
incentives); and
-
other compensation, including long-term disability, life insurance and
other standard benefits offered by Primero to its employees.
The
specific rationale, design, determination of amounts and related information
regarding each of these components are outlined below.
| Element of
Compensation |
|
Description |
|
Relationship to Corporate Objectives |
| |
|
|
|
|
| Base Salary |
|
Base salaries are fixed and are
used as the base to determine other elements of compensation and benefits.
|
|
Competitive base salaries
enable the Company to attract and retain highly qualified executives.
|
| |
|
|
|
|
| Annual Performance-Based Cash Incentives
|
|
Annual performance-based cash
incentives are a variable element of compensation designed to reward the
Company’s executive officers for maximizing the overall annual performance
of the Company. |
|
Short-term incentives motivate
executives to achieve near-term corporate objectives and reward them when
objectives are met or exceeded. |
28
| Element of
Compensation |
|
Description |
|
Relationship to Corporate Objectives |
| |
|
|
|
|
| Stock Options |
|
Stock options are a variable
element of compensation intended to reward the Company’s executive team
for its success in achieving sustained shareholder value reflected in
stock price. |
|
Long-term incentives encourage
executives to remain with the Company, and align the interests of
executives with long-term interests of shareholders. |
| |
|
|
|
|
| Phantom Share Units |
|
PSUs are a variable element of
compensation intended to reward the Company’s executive team for its
success in achieving sustained shareholder value reflected in stock price.
|
|
Long-term incentives encourage
executives to remain with the Company, and align the interests of
executives with long-term interests of shareholders. |
Benchmarking
The
Human Resources Committee believes that it is appropriate to establish
compensation levels based in large part on benchmarking against similar
companies, both in terms of compensation practices as well as levels of
compensation. In this way, the Company can gauge whether its compensation is
competitive in the marketplace for its talent, as well as ensure that the
Company’s compensation is reasonable. Accordingly, the Human Resources Committee
reviews compensation levels for the NEOs against compensation levels of
comparable companies.
In
developing a reasonable justifiable group of mining comparator companies, the
following primary factors were considered: companies with producing gold and/or
silver mines with at least one significant asset; companies currently developing
a gold and/or silver mine with significant assets expected to be in production
in the next two years; and companies with production levels (now or anticipated
in the next two years) in the range of 100,000 to 800,000 equivalent ounces of
gold. In addition, the following secondary factors were considered: companies
with operating and/or development activities in a foreign location (i.e. other
than Canada or the United States of America); companies with activities
concentrated in Mexico, Central and South America; and companies with a market
capitalization in the range of that expected of the Company over the next years
of towards $1 billion. The Human Resources Committee reviews the primary and
secondary factors for the comparator companies each year.
The
following are the comparable companies used for the financial year ended
December 31, 2011: Alamos Gold Inc.; Aurizon Mines Ltd.; Breakwater Resources
Ltd.; Coeur d’Alene Mines Corp.; Detour Gold Corp.; Gammon Gold Inc. (now
AuRico); Golden Star Resources Ltd.; Hecla Mining Co.; HudBay Minerals Inc.;
Jaguar Mining Inc.; Minefinders Corp. Ltd.; Nevsun Resources Ltd.; New Gold
Inc.; Northgate (now AuRico); Pan American Silver Corp.; and Semafo Inc.
Base Salary
The
Human Resources Committee arrived at its recommendations for base salaries after
reviewing the Consultant’s Report, and recommended base salary midpoints between
the median and 75th percentile of the comparator group, with ranges
at 20% above and below the midpoints. Base salaries for the
President and Chief Executive Officer and the Executive Chairman are reviewed
annually by the Human Resources Committee and any increases are recommended at
the beginning of a fiscal year. Base salaries for the other NEOs are recommended
by the President and Chief Executive Officer and reviewed by the Human Resources
Committee.
The
Human Resources Committee has reviewed the base salaries for 2012 and, upon the
advice of the President and Chief Executive Officer based on his understanding
of the marketplace, as of the date of this Information Circular, has approved
increases to the Chief Financial Officer’s base salary from $325,000 per year to
$335,000 per year. With the transition of Wade Nesmith from Executive Chairman
to Chairman of the Board, it is also expected that the Human Resources Committee will annually
review the fees payable to Mr. Nesmith as Chairman.
29
Annual Performance-Based Cash Incentives
Based
on the Human Resources Committee’s recommendation, for 2011, the Board adopted
an annual performance-based cash incentive award for each eligible NEO (an
“Eligible NEO”). Awards were based upon an Eligible NEO’s targets and
attainment of annual Company and personal performance goals, other than for Mr.
Adams who was appointed Chief Operating Officer on November 1, 2011.
Target Levels
The
target levels, which applies a percentage based on the seniority of the officer’s
position, and his industry experience and recognition, are set out below:
| Named Executive
Officer |
|
Target Level |
| |
|
|
| JOSEPH CONWAY |
|
90% |
| |
|
|
| DAVID BLAIKLOCK |
|
60% |
| |
|
|
| RENAUD ADAMS |
|
55% |
| |
|
|
| WADE NESMITH |
|
70% |
| |
|
|
| EDUARDO LUNA |
|
80%
|
For
Mr. Conway, Mr. Nesmith and Mr. Luna, the annual performance-based cash
incentive was calculated as follows: 90% of the Eligible NEO’s base salary
multiplied by the target level multiplied by the Company’s achievement factor;
plus 10% of the Eligible NEO’s base salary multiplied by the Eligible NEO’s
target level multiplied by the Eligible NEO’s personal achievement factor. For
Mr. Blaiklock, the annual performance-based cash incentive was calculated as
follows: 80% of the Eligible NEO’s base salary multiplied by the target level
multiplied by the Company’s achievement factor; plus 20% of the Eligible NEO’s
base salary multiplied by the Eligible NEO’s target level multiplied by the
Eligible NEO’s personal achievement factor. The President and Chief
Executive Officer and the Human Resources Committee may exercise discretion to
award annual performance-based cash incentives if goals have not been met due to
unexpected circumstances.
Company Achievement Factor
The Company achievement factor is based upon the following metrics and
weightings:
| Metrics |
|
Weightings |
| |
|
|
| Budget Production and Costs |
|
30% |
| |
|
|
| Shareholder Return |
|
30% |
| |
|
|
| Reserve Replacement |
|
20% |
| |
|
|
| Safety/Environmental Performance |
|
20% |
| |
|
|
| Total |
|
100% |
Various
thresholds relating to the above corporate achievement categories were
established. The better the Company’s performance against those thresholds, the
higher the achievement factor (ranging from 0.5, where the threshold is met, to
2.0, where the threshold is significantly exceeded). The Company performance
factor and the related thresholds were established with the intention that
achieving an annual performance-based cash incentive would require a significant
effort by Eligible NEOs and would be a challenge for the Company. For budget
production and cash costs, the Company’s results for 2011 were compared to
budget. Attaining budget would result in an achievement factor of 0.5, while
performance at significantly better than budget would result in an achievement
factor of 2.0. For reserve replacement, the reserves at December 31, 2011 were
compared to those at December 31, 2010. The minimum achievement factor ranged
from 0.5 for achievement of 90% reserve replacement to 2.0 for achievement of
175% reserve replacement. For shareholder return, if the Company’s return
achieved 90% of the S&P/TSX Global Gold Index return from January 1, 2011 to
December 31, 2011, the minimum achievement factor of 0.5 would be assigned and
if a return of 175% was achieved, an achievement factor of 2.0 would be
assigned. For safety/environmental performance, any significant violation of
safety or environmental policies could result in no award, and performance
relative to established safety and environmental targets would be considered in
determining the appropriate achievement factor.
30
For
2011, the Human Resources Committee considered the achievement factors and
determined that, for purposes of determining the annual performance-based cash
incentives awards, the challenges faced by the Eligible NEOs in the Company’s
first year of operations may have been underestimated and that expectations on
production growth and operational metrics may have been overestimated. The
achievement factor of 0.40 was based primarily on the reserve replacement metric
with no contribution from production, operating costs and shareholder return,
and some contribution from safety/environmental performance, taking into
consideration the causes of a fatality at the mine site in 2011. Although the
Human Resources Committee does not believe the Company achievement factor for
2011 fairly represents the performance of the Company and that management has
performed significantly better than this factor would suggest, it was determined
that the Company achievement factor not be adjusted and remain at 0.40.
Eligible NEO’s Achievement Factor
Generally,
each Eligible NEO’s performance factor is based upon their attainment of
personal goals approved by the Board (other than for Mr. Adams who was hired
November 1, 2011) upon the recommendation of the Human Resources Committee. For
2011, the Human Resources Committee determined the Eligible NEO achievement
factors considering recommendations from the Chief Executive Officer (other than
for Mr. Conway and Mr. Nesmith). Where personal contributions were significant,
or where otherwise appropriate in the circumstances, the Human Resources
Committee used discretion to adjust certain factors upwards or downwards, or
award a set amount.
Mr.
Conway’s personal goals included matters relating to the building of the
Company’s portfolio of precious metals assets, the hiring of key personnel and
tax strategies. For 2011, Mr. Conway’s achievement factor was determined to be
50%. Mr. Blaiklock’s personal goals included matters relating to the Company’s
tax strategies, financial planning and controls and procedures. For 2011,
because of achievements relating in particular to the development of the finance
department and the Company’s tax restructuring, Mr. Blaiklock’s performance
significantly exceeded expectations and he was awarded an annual
performance-based cash incentive of $125,000. Mr. Adams’ award was based on the
operational initiatives begun under his leadership following his appointment in
late 2011, and was fixed at $50,000. Mr. Nesmith’s personal goals included
matters relating to the listing of the Company on the NYSE and marketing. For
2011, Mr. Nesmith’s personal performance factor was 50%. Mr. Luna retired from
his position as Executive Vice President and President (Mexico) on November 30,
2011 and he was awarded an annual performance-based cash incentive of $125,000
in recognition of his role in the leadership and management of the extended
transition of the ownership of San Dimas to Primero.
Annual Performance-Based Cash Incentives Awarded
Annual
performance-based cash incentives for the financial year ended December 31, 2011
were determined in January 2012 and awarded in April 2012 on the basis described
above. The annual performance-based cash incentive amounts, as disclosed in the
following table, will be reported as income for 2012 by the respective Eligible
NEO.
31
| |
|
Annual Performance- |
| |
|
Based Cash Incentive |
| Named Executive Officer |
|
Amounts |
| |
|
|
| JOSEPH CONWAY |
|
$220,000 |
| |
|
|
| DAVID BLAIKLOCK |
|
$125,000 |
| |
|
|
| RENAUD ADAMS |
|
$50,000 |
| |
|
|
| WADE NESMITH |
|
$115,000 |
| |
|
|
| EDUARDO LUNA |
|
$125,000 |
Equity Compensation
The
Company’s Stock Option Plan and the Company’s PSU plan (the “PSU Plan”)
serve two purposes: (a) to align the interests of the Company’s directors and
executive officers with those of Primero’s shareholders, and (b) to provide a
long-term incentive to reward those individuals for their contribution to
generation of shareholder value. The vesting element encourages the executive to
remain with the organization.
Recommendations
for the grant of long-term incentive awards to executive officers, other than
the President and Chief Executive Officer, are made to the Human Resources
Committee by the President and Chief Executive Officer. In determining the
number and composition of long-term incentive award grants to the NEOs, the
Board has regard to several considerations, including the number of stock
options and PSUs granted to officers of the comparable companies, previous
grants of options and PSUs, the overall number of outstanding options relative
to the number of outstanding Common Shares, and the responsibility, ability,
experience, level of commitment, and the degree of time and effort expended, of
the executive officer.
Stock Option Plan
For
a detailed discussion of the Stock Option Plan, see “Securities
Authorized for Issuance Under Equity Compensation Plans – Stock Option Plan”.
The
Company’s Disclosure, Confidentiality and Insider Trading Policy provides
that employees shall trade Common Shares only within predetermined trading periods
and shall not trade Common Shares if they are aware of undisclosed material
information. Optionees may exercise their stock options only within these permitted
trading periods.
PSU Plan
In
2010, the Board approved the PSU Plan, which allows for an incentive and reward
related to the achievement of long-term financial and strategic objectives of
the Company and the resulting increase in shareholder value. The PSU Plan is
intended to promote a greater alignment of interests between the shareholders
and executive officers and employees by providing a non-dilutive opportunity to
participate in increases in the value of the Company.
The
PSU Plan provides contingent future compensation based on Common Share price
performance, but is payable only in cash and represents no potential for share
dilution. Each PSU granted under the PSU Plan in 2010 will vest on the third
anniversary of grant. Each PSU granted under the PSU Plan in 2011 will vest
over a three year period or as otherwise determined by the Board. Upon
vesting, a holder of a unit is entitled to receive, at that time, an amount
equal to the average trading price per Common Share over the 20 preceding trading
days. However, in the event of death or total disability of a holder or a termination
of the employment of a holder without cause or if a holder resigns because of
a material reduction in position, duties or remuneration within 12 months after
a change of control, such holder’s PSUs will immediately vest and be paid
out based on the then average trading price.
32
With respect to the financial year ended December 31, 2011, the Board,
on the recommendation of the Human Resources Committee granted to the Named
Executive Officers an aggregate of 1,673,076 PSUs, as follows:
| |
|
Total Number of |
|
Total Share-Based |
| Name |
|
PSUs |
|
Awards ($) |
| |
|
|
|
|
| JOSEPH CONWAY |
|
461,538 |
|
$1,200,000(1)
|
| |
|
|
|
|
| DAVID BLAIKLOCK |
|
150,000 |
|
$390,000(1) |
| |
|
|
|
|
| RENAUD ADAMS |
|
330,769 |
|
$950,000(1) |
| |
|
|
|
|
| WADE NESMITH |
|
730,769 |
|
$1,900,000(2)
|
| |
|
|
|
|
| EDUARDO LUNA |
|
Nil |
|
Nil |
| |
|
|
|
|
| Total |
|
1,673,076 |
|
$4,440,000 |
__________________
Notes:
| (1) |
On March 31, 2012, the Company awarded PSUs valued at
$1,200,000, $390,000 and $600,000 to Mr. Conway, Mr. Blaiklock and Mr.
Adams, respectively, for services rendered by the NEOs in 2011; each PSU
was priced at $2.60, being the closing price of Common Shares on the TSX
on March 30, 2012, resulting in 461,538 PSUs, 150,000 PSUs and 230,769
PSUs being awarded to Mr. Conway, Mr. Blaiklock and Mr. Adams,
respectively. In addition, Mr. Adams was awarded 100,000 PSUs on November
8, 2011 and these PSUs are valued at $3.50 each, being the market value of
the Common Shares on the date of grant. |
| |
|
| (2) |
In connection with Mr. Nesmith’s transition from
Executive Chairman to Chairman of the Board, the Company awarded PSUs
valued at $1,900,000 to him for his past services as Executive Chairman;
each PSU was priced at $2.60, being the closing price of Common Shares on
the TSX on March 30, 2012, resulting in 730,769 PSUs being awarded to Mr.
Nesmith. This figure does not include PSUs valued at $375,000 that the
Company awarded to Mr. Nesmith as Chairman of the Board for services to be
rendered in 2012; each PSU was priced at $2.60, being the closing price of
Common Shares on the TSX on March 30, 2012, resulting in 144,231 PSUs
being awarded to Mr. Nesmith. See “Statement of Executive Compensation –
Executive Employment Agreements, Termination and Change in Control
Provisions”. |
Hedging Policy
Although
the Company has not adopted a policy disallowing insiders from purchasing
financial instruments designed to hedge or offset any decrease in market value
of Common Shares or any other securities of the Company, the Company is not
aware of any insiders having adopted such practice.
Risk Assessment
In
March 2012, the Human Resources Committee retained the Consultant to review the
risks associated with the Company’s compensation policies and practices. The
Consultant reported that the nature of the business in which the Company
operates requires some level of risk taking to achieve growth of reserves and
production targets in the best interests of all stakeholders. The Human
Resources Committee considered the Consultant’s report and the implications of
such associated risks. The executive compensation policy seeks to encourage
actions and behaviours directed towards increasing long term value while
modifying and limiting incentives that promote excessive risk-taking.
The
Human Resources Committee reviews each of the elements of compensation annually
and is satisfied that the executive compensation policy provides the necessary
framework and governance to align the interests of executives, other key
employees, shareholders and other stakeholders, including local communities in
which the Company operates. These annual reviews are based upon the underlying
philosophy that guides the Human Resources Committee in the design of the key
elements of compensation as follows:
- Provide total compensation that is competitive to attract, retain and
motivate high calibre executives in a mining marketplace with a shortage of
executive talent;
33
-
Appropriately balance the mix or relative value of the key elements of
compensation (salary, annual performance-based cash incentives, long term
incentives) so as to discourage excessive risk taking;
-
Strengthen and maintain the link between pay and performance, both company
and individual;
-
Provide an important portion of total compensation that is variable and “at
risk” for the executives; and
-
Defer a significant portion of “at risk” compensation to keep executives
focused on continuous long term performance.
Some specific controls that are in place to mitigate certain risks are
as follows:
-
Business continuity and executive retention risk: total compensation
is reviewed annually to ensure it remains competitive year over year;
-
Environmental and safety risk: the environment and safety are
important factors used to assess the ongoing performance of the Company and
which have an important impact upon executive pay in that major negative
environmental and/or safety events may result in reduced annual
performance-based cash incentive awards and/or no long term incentives
awarded;
-
Cash flow risk: salary levels are fixed in advance, annual
performance-based cash incentive awards are limited, in that they are linked
to performance and are a percentage of salary, with the maximum annual
performance-based cash incentive awards pre-determined. The only open ended
award (i.e. having no payout limit) available to executives are PSUs, the
payout value of which is linked to the Company’s future stock price;
-
Cash flow risk associated with PSU Plan: a limited number of PSUs
are available, the number issued is based upon current stock price and the
life of a PSU is limited to three years. The most significant cash flow risk
is associated with a rapid increase in share price over a three year period.
The cash flow impact is calculated by the Company each year and amounts are
accrued in the financial statements over the vesting period. Since an increase
in share price is likely a result of the Company’s success and positive cash
flows, it is unlikely that sufficient funds would not be available over a
three years period; and
-
Stock dilution risk (from annual issuances of long term incentives in
the form of stock options): the Stock Option Plan limits total potential
dilution to 10% of the issued and outstanding Common Shares, there are target
annual issuances as a percentage of salary for each executive, and each
issuance has vesting provisions to defer actual dilution, while enhancing
executive retention and providing a long term focus.
Performance Graph
In
July 2008, the Company, which was then known as “Apoka Capital Corporation”,
listed on the TSX Venture Exchange (the “TSXV”) as a “Capital Pool
Company”. In October 2008, the Company completed its qualifying transaction
under the TSXV’s Capital Pool Company policy (the “Qualifying
Transaction”) by acquiring privately-owned Mala Noche Resources Corp.
(“Mala Noche”). The Qualifying Transaction was a reverse takeover under
Canadian GAAP and the policies of the TSXV whereby the Company acquired all of
the outstanding securities of Mala Noche in exchange for Common Shares and
options to purchase Common Shares. In October 2008, the Company, which changed
its name to “Mala Noche Resources Corp.” upon completion of the Qualifying
Transaction, commenced trading on the TSXV as a Tier 2 Mining Issuer.
On
August 6, 2010, the Company completed the Acquisition. To fund the cash portion
of the purchase price for the Acquisition, on July 20, 2010, the Company
completed an offering of 50,000,000 subscription receipts at an offering price
of $6.00 per subscription receipt for gross proceeds of $300 million.
Immediately before the completion of the Acquisition, the Company consolidated
its Common Shares on the basis of one new Common Share for every 20 pre-consolidated Common Shares. On the
closing of the Acquisition, each subscription receipt was automatically
converted into one post-consolidation Common Share of the Company and 0.4 of one
common share purchase warrant. Each whole warrant entitles the holder to
purchase one additional post-consolidation Common Share at a price of $8.00 per
share until July 20, 2015.
34
In
conjunction with the Acquisition, on August 18, 2010, the Company’s Common
Shares ceased trading on the TSXV and, on August 19, 2010, the Company’s Common
Shares commenced trading on the TSX.
On
a post-consolidation basis, the following graph compares the total cumulative
return for $100 invested in Common Shares on July 18, 2008 against the total
cumulative return of the S&P/TSX Venture Composite Index and the S&P/TSX
Composite Index over the period during which Primero has been a reporting
issuer:
| |
July 18, |
|
December |
|
December |
|
August 19, |
|
December |
|
December |
| |
2008 |
|
31, 2008 |
|
31, 2009 |
|
2010(1) |
|
31, 2010 |
|
31, 2011 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Primero |
$100 |
|
$25 |
|
$100 |
|
$131 |
|
$115 |
|
$81 |
| |
|
|
|
|
|
|
|
|
|
|
|
| S&P/TSX Venture Composite
Index |
$100 |
|
$35 |
|
$66 |
|
$64 |
|
$100 |
|
$65 |
| |
|
|
|
|
|
|
|
|
|
|
|
| S&P/TSX Composite Index
|
$100 |
|
$66 |
|
$87 |
|
$87 |
|
$99 |
|
$88
|
_______________________
Note:
| (1) |
On August 18, 2010, the Company’s Common Shares ceased
trading on the TSXV and, on August 19, 2010, the Company’s Common Shares
commenced trading on the TSX. |
Overall
compensation for the Company’s NEOs increased significantly from 2008 to 2010
and then decreased in 2011. While the Company’s share price performance from
2008 to 2010 did not increase significantly overall, the trend in the above
graph shows the Company’s share price performance generally following, with
increased volatility, that of the S&P TSX Venture Composite Index until
December 2009. Between December 2009 and August 2010, the Company’s share price
performance outperformed the S&P TSX Venture Composite Index.
35
Between August 2010 and December 2010 and between December 2010
and December 2011, the Company’s share price performance underperformed the
general trend of the S&P TSX Composite Index over the respective periods.
The
Company’s approach to executive compensation has transitioned from that of an
exploration company to a junior gold and silver producer. When the Company was
focused on exploration properties, its executive compensation was primarily
option-based. As part of its strategy to acquire mining operations, the Company
reevaluated its approach to executive compensation and added salary,
performance-based cash incentives and long-term incentive award components. A
portion of the base salary for each of Mr. Conway, Mr. Blaiklock, Mr. Nesmith
and Mr. Luna was deferred until the Company completed a fundamental acquisition
and stock options were granted concurrently with the closing of such an
acquisition. Following the Acquisition in August 2010, the Company’s executive
compensation program has focused on performance-based incentives. For 2010, PSUs
and options were granted to the NEOs, the value of which is dependent upon the
Company’s future share price performance, and the annual performance-based cash
incentives awarded reflect the fact that the Company did not meet all of its
target performance measures. For 2011, the Company continued to favour the use
of long-term incentives for compensation with a significant portion of NEO
compensation being PSUs, the ultimate value of which received is related
directly to the Company’s share price performance, and the annual
performance-based cash incentives awarded reflect the Company’s 0.4 achievement
factor as well as the challenges faced by the NEOs including the proposed
business combination with Northgate, which was terminated, and the tax
restructuring (see the Company’s AIF, filed under the Company’s profile on SEDAR
at www.sedar.com).
Summary Compensation Table
The
following table sets out information concerning the compensation earned or awarded
to the Named Executive Officers during the financial years ended December 31,
2011, 2010 and 2009:
| |
|
|
|
|
|
|
|
|
|
Non-equity incentive |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
plan compensation
($) |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Long- |
|
|
|
|
|
|
| |
|
|
|
|
|
Share-based |
|
Option-based |
|
Annual |
|
term |
|
Pension |
|
All other |
|
Total |
| Name and current |
|
|
|
Salary |
|
awards |
|
awards |
|
incentive |
|
incentive |
|
value |
|
compensation |
|
compensation |
| principal position |
|
Year |
|
($) |
|
($) |
|
($) |
|
plans |
|
plans |
|
($) |
|
($)(1) |
|
($) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JOSEPH CONWAY(2)
President and CEO
|
|
2011
2010
2009 |
|
600,000
350,000
N/A |
|
1,200,000(3)
4,943,266(4)
N/A |
|
Nil
2,330,140(5)
N/A |
|
220,000
46,667
N/A |
|
N/A
N/A
N/A |
|
N/A
N/A
N/A |
|
N/A
N/A
N/A |
|
2,020,000
7,670,073
N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DAVID BLAIKLOCK(6)
CFO
|
|
2011
2010
2009 |
|
325,000
206,250
Nil |
|
390,000(3)
422,500(4)
Nil |
|
Nil
974,827(5)(7)
Nil |
|
125,000
22,000
Nil |
|
N/A
N/A
N/A |
|
N/A
N/A
N/A |
|
N/A
33,000
66,000 |
|
840,000
1,658,577
66,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RENAUD ADAMS(8)
COO
|
|
2011
2010
2009 |
|
68,333
N/A
N/A |
|
950,000(3)
N/A
N/A |
|
366,000(9)
N/A
N/A |
|
50,000
N/A
N/A |
|
N/A
N/A
N/A |
|
N/A
N/A
N/A |
|
N/A
N/A
N/A |
|
1,434,333
N/A
N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WADE NESMITH(10)
Executive Chairman
|
|
2011
2010
2009 |
|
400,000
300,000
Nil |
|
1,900,000(11)
2,471,633(4)
Nil |
|
Nil
2,455,427(5)(7)
Nil |
|
115,000
40,000
Nil |
|
N/A
N/A
N/A |
|
N/A
N/A
N/A |
|
N/A
7,500
30,000 |
|
2,415,000
5,274,560
30,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EDUARDO LUNA(12)
Executive Vice
President and
President (Mexico) |
|
2011
2010
2009
|
|
366,667
300,000
Nil
|
|
Nil
2,471,633(4)
Nil
|
|
Nil
2,455,427(5)(7)
Nil
|
|
125,000
40,000
Nil
|
|
N/A
N/A
N/A
|
|
N/A
N/A
N/A
|
|
10,312(13)
7,500
30,000
|
|
501,979
5,274,560
30,000
|
__________________
Notes:
| (1) |
None of the NEOs received perquisites that in the
aggregate are worth $50,000 or more, or are worth 10% or more of the NEO’s
total salary for a financial year. Amounts disclosed in this column
include consulting fees paid to each of Mr. Blaiklock, Mr. Nesmith and Mr.
Luna pursuant to consulting services agreements that were in place from
July 1, 2009, November 1, 2008 and November 1, 2008, respectively, until
March 31, 2010. |
| |
|
| (2) |
Mr. Conway was appointed President and CEO of the Company
on June 1, 2010. |
| |
|
| (3) |
The Company awarded PSUs on March 31, 2012 for services
rendered by the NEOs in 2011. Each PSU was priced at $2.60, being the
closing price of Common Shares on the TSX on March 30, 2012, resulting in
461,538 PSUs, 150,000 PSUs and 230,769 PSUs being awarded to Mr. Conway, Mr. Blaiklock and Mr. Adams,
respectively. In addition, Mr. Adams was awarded 100,000 PSUs on November
8, 2011 and these PSUs are valued at $3.50 each, being the market value of
the Common Shares on the date of grant. |
36
| (4) |
On August 6, 2010, the Company awarded 865,384 PSUs to
Mr. Conway, 50,000 PSUs to Mr. Blaiklock, 432,692 PSUs to Mr. Nesmith and
432,692 PSUs to Mr. Luna. These PSUs are valued at $5.25 each, being the
market value of the Common Shares on the date of grant, and vest on August
6, 2013 if the NEO is employed by the Company. On February 27, 2011, the
Company awarded 100,000 PSUs to Mr. Conway, 40,000 PSUs to Mr. Blaiklock,
50,000 PSUs to Mr. Nesmith and 50,000 PSUs to Mr. Luna, in respect of
services rendered in 2010. These PSUs are valued at $4.00 each, being the
market value of the Common Shares on the date of grant, and vest over a
three-year period. For Mr. Luna, his figure includes 332,692 PSUs that
were awarded on August 6, 2010 and cancelled as of November 30, 2011 upon
his retirement as Executive Vice President and President (Mexico) of the
Company. |
| |
|
| (5) |
On August 6, 2010, Mr. Conway, Mr. Blaiklock, Mr. Nesmith
and Mr. Luna were granted options to purchase 1,294,522 Common Shares,
384,904 Common Shares, 1,043,015 Common Shares and 1,043,015 Common
Shares, respectively, one-third of which vested on each of August 6, 2010
and August 6, 2011, and one-third of which is to vest on August 6, 2012,
at a per share exercise price of $6.00 expiring on August 6, 2015. These
options have a grant date fair value of $1.80 each, calculated using the
Black-Scholes option pricing model with a per share exercise price of
$6.00, expected life of 3 years, and volatility of 57%. |
| |
|
| (6) |
Mr. Blaiklock was appointed CFO of the Company on July 6,
2009. |
| |
|
| (7) |
On July 9, 2009, Mr. Blaiklock, Mr. Nesmith and Mr. Luna
were granted options to purchase, on a post-consolidation basis, 60,000
Common Shares, 100,000 Common Shares and 100,000 Common Shares,
respectively, 40% of which vested on July 9, 2009 and 30% of which vested
on each of July 9, 2010 and July 9, 2011, at a per share exercise price of
$2.70 expiring on July 9, 2019. In accordance with Canadian GAAP, these
options were deemed granted on June 28, 2010, being the date on which
shareholders of the Company approved amendments to the Company’s stock
option plan. These options have a fair value on the deemed grant date of
$5.78 each, calculated using the Black-Scholes option pricing model with a
per share exercise price of $2.70, expected life of 6 years, and
volatility of 75%. |
| |
|
| (8) |
Mr. Adams was appointed COO of the Company on November 1,
2011. |
| |
|
| (9) |
On November 8, 2011, Mr. Adams was granted options to
purchase 300,000 Common Shares, one-third of which is to vest on each of
November 8, 2012, November 8, 2013 and November 8, 2014, at a per share
exercise price of $3.47 expiring on November 8, 2016. These options have a
grant date fair value of $1.22 each, calculated using the Black-Scholes
option pricing model with a per share exercise price of $3.47, expected
life of 3.5 years, and volatility of 47%. |
| |
|
| (10) |
Mr. Nesmith was appointed Chairman of the Company on
March 15, 2012. He was Executive Chairman of the Company from June 1, 2010
until March 15, 2012, President of the Company from October 29, 2008 until
September 28, 2009, CEO of the Company from October 29, 2008 until June 1,
2010, and Co-Chair of the Company from November 28, 2008 until June 1,
2010. |
| |
|
| (11) |
In connection with Mr. Nesmith’s transition from
Executive Chairman to Chairman of the Board, on March 31, 2012, the
Company awarded him PSUs for his past services. Each PSU was priced at
$2.60, being the closing price of Common Shares on the TSX on March 30,
2012, resulting in 730,769 PSUs being awarded to Mr. Nesmith. In addition,
on March 31, 2012, the Company awarded PSUs valued at $375,000 (being
144,231 PSUs at $2.60 each) to Mr. Nesmith as Chairman of the Board for
services to be rendered in 2012, and this award is not reflected in this
figure. |
| |
|
| (12) |
Mr. Luna was Executive Vice President and President
(Mexico) of the Company from June 1, 2010 until November 30, 2011. He was
President and COO of the Company from September 28, 2009 until June 1,
2010, and Co-Chair of the Company from November 28, 2008 until June 1,
2010. Mr. Luna remains an officer of a Mexican subsidiary of the
Company. |
| |
|
| (13) |
From December 1, 2011 until December 31, 2011, Mr. Luna
received his compensation as an advisor on an independent contractor basis
in the amount of US$6,250 (approximately $6,146 based upon the Bank of
Canada noon spot rate of exchange for one United States dollar expressed
in Canadian dollars at the end of the financial year ended December 31,
2011, which was $1.017) and as a director in the amount of
$4,166. |
The
fair value of the options in the above table is estimated using the
Black-Scholes option pricing model, as is standard practice. However, option
pricing models require the input of highly subjective assumptions, particularly
as to the expected volatility of the stock. Changes in these assumptions can
materially affect the fair value estimate and therefore it is management’s view
that the existing models may not provide a single reliable measure of the fair
value of the Company’s stock option grants. The Company uses an option-pricing
model because there is no market for which options may be freely traded and in
any event the Company does not allow its employee options to be traded. Readers
are cautioned not to assume that the value derived from the model is the value
that an optionee might receive if the options were freely-traded, nor assume
that these amounts are the same as those reported for by the employee as income
received for tax purposes. For financial statement purposes, the fair value of
options is charged to the statement of operations rateably over the vesting
period, whereas for the purposes of this Information Circular the fair value is
shown in totality on the date of grant
The
fair value of the PSUs in the above table is estimated based on the market value
of the Common Shares on the grant date. For financial statement purposes, the
fair value of PSUs is charged to the statement of operations rateably over the
vesting period, whereas for the purposes of this Information Circular the fair
value is shown in totality on the date of grant.
As
of the date of this Information Circular, Primero does not offer any benefits to
its Named Executive Officers other than as disclosed in this Information
Circular. See “Statement of Executive Compensation – Executive Employment Agreements, Termination and Change in
Control Provisions” for a discussion of benefits awarded pursuant to the terms
of executive employment agreements between the Company and each of Mr. Conway,
Mr. Blaiklock, Mr. Adams, Mr. Nesmith and Mr. Luna.
37
Incentive Plan Awards
For
a discussion of the Company’s Stock Option Plan see “Securities Authorized for
Issuance Under Equity Compensation Plans – Stock Option Plan”, and for a
discussion of the Company’s PSU Plan see “Executive Compensation – Compensation
Discussion and Analysis – Elements of Executive Compensation – Equity
Compensation – PSU Plan”.
Outstanding Share-Based and Option-Based
Awards
The
following table sets out the awards granted to Named Executive Officers that are
outstanding at the end of the fiscal year ended December 31, 2011. This table
includes awards granted before the most recently completed financial year.
| |
|
Option-based
Awards |
|
Share-based Awards |
| |
|
|
|
|
|
|
|
|
|
|
|
Market or |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
payout |
|
Market or |
| |
|
|
|
|
|
|
|
|
|
Number |
|
value of |
|
payout value |
| |
|
Number of |
|
|
|
|
|
Value of |
|
of shares |
|
share- |
|
of vested |
| |
|
securities |
|
|
|
|
|
unexercised |
|
or units |
|
based |
|
share-based |
| |
|
underlying |
|
Option |
|
|
|
in-the- |
|
of shares |
|
awards |
|
awards not |
| |
|
unexercised |
|
exercise |
|
|
|
money |
|
that have |
|
that have |
|
paid out or |
| |
|
options |
|
price |
|
Option |
|
options |
|
not vested |
|
not vested |
|
distributed |
| Name |
|
(#) |
|
($) |
|
expiration date |
|
($)(1) |
|
(#)(2) |
|
($)(3) |
|
($)(4) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JOSEPH CONWAY
President and CEO |
|
1,294,522 |
|
6.00 |
|
August 6, 2015 |
|
Nil |
|
965,384 |
|
4,943,266 |
|
N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DAVID BLAIKLOCK
CFO |
|
60,000
348,904 |
|
2.70
6.00 |
|
July 9, 2019
August 6, 2015 |
|
33,000
Nil |
|
90,000
|
|
422,500
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RENAUD ADAMS
COO |
|
300,000
|
|
3.47
|
|
November 8, 2016 |
|
Nil
|
|
100,000
|
|
350,000
|
|
N/A
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WADE NESMITH
Executive
Chairman(5) |
|
60,000
100,000
1,043,015 |
|
4.20
2.70
6.00 |
|
July 29, 2013
July 9, 2019
August 6, 2015 |
|
Nil
55,000
Nil |
|
482,692
|
|
2,471,633
|
|
N/A
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EDUARDO LUNA
Executive Vice
President and President
(Mexico)(6) |
|
45,000
100,000
1,043,015
|
|
4.20
2.70
6.00
|
|
July 29, 2013
July 9, 2019
August 6, 2015
|
|
Nil
55,000
Nil |
|
150,000 |
|
725,000 |
|
N/A |
___________________
Notes:
| (1) |
The value of unexercised “in-the-money options” at the
financial year-end is the difference between the option exercise price and
the market value of the underlying Common Shares on the TSX on December
31, 2011. The market value is the closing price of Primero’s Common Shares
on the TSX on December 30, 2011, the last day the Common Shares traded on
the TSX during the year ended December 31, 2011, which was $3.25 per
share. |
| |
|
| (2) |
Does not include 1,573,076 PSUs granted to Mr. Conway,
Mr. Blaiklock, Mr. Adams and Mr. Nesmith on March 31, 2012 in respect of
services rendered in 2011. |
| |
|
| (3) |
The Company valued the PSUs at the market value of the
Common Shares on the date of grant, which was $5.25 per share for the PSUs
awarded on August 6, 2010, $4.00 per share for the PSUs awarded on
February 27, 2011 and $3.50 per share for the PSUs awarded on November 8,
2011. |
| |
|
| (4) |
No PSUs granted to the NEOs had vested at the end of the
fiscal year ended December 31, 2011. |
| |
|
| (5) |
Mr. Nesmith was Executive Chairman of the Company from
June 1, 2010 to March 15, 2012. |
38
| (6) |
Mr. Luna was Executive Vice President and President
(Mexico) of the Company from June 1, 2010 to November 30, 2011. In
connection with Mr. Luna’s retirement, of the 432,692 PSUs awarded to Mr.
Luna in August 2010, 100,000 PSUs remain outstanding and 332,692 PSUs were
cancelled as of November 30, 2011, and of the 50,000 PSUs awarded to him
in February 2011, all 50,000 PSUs remain
outstanding. |
Incentive Plan Awards – Value Vested or Earned during the
Year ended December 31, 2011
The
following table sets out, for each NEO, the value of option-based and
share-based awards vested, and the value earned of non-equity incentive plan
compensation, during the year ended December 31, 2011:
Name |
|
Option-based awards –
Value vested
during
the year
($) |
|
Share-based awards –
Value vested
during
the year
($) |
|
Non-equity incentive
plan compensation –
Value earned during
the year
($) |
| |
|
|
|
|
|
|
JOSEPH CONWAY
President
and CEO |
|
Nil(1)
|
|
Nil
|
|
220,000
|
| |
|
|
|
|
|
|
DAVID BLAIKLOCK
CFO |
|
16,920(2)
|
|
Nil
|
|
125,000
|
| |
|
|
|
|
|
|
|
RENAUD ADAMS
COO |
|
N/A(3) |
|
Nil |
|
50,000 |
| |
|
|
|
|
|
|
WADE NESMITH
Executive
Chairman(4) |
|
28,200(5)
|
|
Nil
|
|
115,000
|
| |
|
|
|
|
|
|
EDUARDO LUNA
Executive
Vice President and President
(Mexico)(6) |
|
28,200(7)
|
|
Nil
|
|
125,000
|
__________________
Notes:
| (1) |
This figure does not include 431,507 options that are
exercisable at $6.00 per share (the closing price on the vesting date for
these options was $4.06 per share). |
| |
|
| (2) |
The closing price on the vesting date of 18,000 options,
which are exercisable at $2.70 per share, was $3.64. This figure does not
include 116,301 options that are exercisable at $6.00 per share (the
closing price on the vesting date for these options was $4.06 per
share). |
| |
|
| (3) |
No options granted to Mr. Adams vested during the year
ended December 31, 2011. |
| |
|
| (4) |
Mr. Nesmith was Executive Chairman from June 1, 2010 to
March 15, 2012. |
| |
|
| (5) |
The closing price on the vesting date of 30,000 options,
which are exercisable at $2.70 per share, was $3.64. This figure does not
include 347,671 options that are exercisable at $6.00 per share (the
closing price on the vesting date for these options was $4.06 per
share). |
| |
|
| (6) |
Mr. Luna was Executive Vice President and President
(Mexico) from June 1, 2010 to November 30, 2011. |
| |
|
| (7) |
The closing price on the vesting date of 30,000 options,
which are exercisable at $2.70 per share, was $3.64. This figure does not
include 347,671 options that are exercisable at $6.00 per share (the
closing price on the vesting date for these options was $4.06 per
share). |
Executive Employment Agreements, Termination and Change in
Control Provisions
During
the year ended December 31, 2011, Mr. Conway, Mr. Blaiklock, Mr. Adams, Mr.
Nesmith and Mr. Luna were each party to certain executive employment agreements
with Primero (the “Executive Employment Agreements”). Pursuant to the
terms of the Executive Employment Agreements, they were eligible to participate
in the Company’s equity-based compensation plans and were entitled to receive,
at the discretion of the Board, annual performance-based cash incentives. During
the year ended December 31, 2011, in the event of a termination without cause,
the terminated executive was entitled to either a certain amount of notice,
termination payment, or a combination of notice and termination payment, and in
certain cases, an annual performance-based cash incentive or benefits payment.
The Executive Employment Agreements also included dual-trigger “Change in
Control” provisions that would trigger the payment of severance to an executive
if at any time within 12 months after the occurrence of a “Change in Control”
(in the case of Mr. Conway, Mr. Blaiklock and Mr. Nesmith) or at any time during
the first year of the term of the executive’s Executive Employment Agreement (in
the case of Mr. Adams): (a) the executive was terminated without cause, or (b)
the executive resigned because of a material reduction or change in his or her position, duties, or remuneration. The
amount of the severance payment upon termination without cause or resignation
related to a Change in Control was to be based on the base salary and equal to
200% of base salary in the case of Mr. Conway, Mr. Adams, Mr. Nesmith and Mr.
Luna, and 150% of the base salary in the case of Mr. Blaiklock. In addition, all
outstanding options granted to a terminated employee, and any options agreed to
be issued to such employee upon the occurrence of a certain event, were to vest
immediately, subject to the terms of the Company’s Stock Option Plan, and
continue to be exercisable for the duration of the relevant term. The Executive
Employment Agreements are effective until such time as they are terminated in
accordance with the terms of the agreements. Any waiver to the terms of the
Executive Employment Agreements must be consented to in writing by the
non-waiving party, and in the case of the Company, approved by the Board.
39
On
March 1, 2012, Mr. Conway, Mr. Blaiklock and Mr. Adams entered into new
executive employment agreements with Primero (the “New Executive Employment
Agreements”) as part of Primero’s harmonization of its employment agreements
with executives. The New Executive Employment Agreements supercede the Executive
Employment Agreements, and while many of the terms and conditions are similar to
the previous agreements, the termination provisions have now been aligned so
that for each of these executives, the amount of the severance payment upon
termination without cause or termination after a Change in Control is equal to
200% of base salary plus two times the average annual performance-based cash
incentive awarded to the executive in the two prior years plus 10% of 200% of
the base salary (in lieu of other benefits).
The
Executive Employment Agreement with Mr. Nesmith was terminated on March 15, 2012
upon his transition from Executive Chairman to Chairman of the Board. In
connection with this transition, upon the recommendation of the Human Resources
Committee, the Company entered into an engagement agreement with Mr. Nesmith for
a three-year term pursuant to which the Company will pay Mr. Nesmith a fee of
$250,000 per year, granted him a bonus in consideration of services as Executive
Chairman in 2011 of the number of PSUs equal to $1.9 million on the grant date
vesting over a three-year period, and granted him an additional bonus for
services to be rendered as Chairman in 2012 of PSUs equal to 1.5 times his
yearly fee vesting over a three-year period. Mr. Nesmith will not receive other
standard benefits made available by the Company. Upon a “Change in Control” all
PSUs held by Mr. Nesmith will immediately vest. If the Company terminates the
engagement, the Company will pay all fees payable for the balance of the
three-year term of the engagement agreement and will grant Mr. Nesmith his full
PSU entitlement and all of his PSUs will immediately vest on the date of
termination or grant. On Mr. Nesmith’s resignation, all unvested PSUs will be
cancelled and all fees and vested PSUs will immediately be paid by the Company.
The
Executive Employment Agreement with Mr. Luna was terminated on November 30, 2011
upon his retirement as Executive Vice President and President (Mexico). In
connection with Mr. Luna’s retirement, upon the recommendation of the Human
Resources Committee, the Company agreed to pay Mr. Luna his annual
performance-based cash incentive for 2011 on an annualized basis and Mr. Luna’s
unvested stock options will vest on the earlier of the original vesting schedule
or his resignation as a director of the Company, and of the 432,692 PSUs awarded
to Mr. Luna in August 2010, 100,000 PSUs remain outstanding and vest in
accordance with the terms of the PSU Plan and 332,692 PSUs were cancelled as of
November 30, 2011, and of the 50,000 PSUs awarded to him in February 2011, all
50,000 PSUs remain outstanding and vest in accordance with the terms of the PSU
Plan. On November 30, 2011, the Company engaged Mr. Luna as an advisor on an
independent contractor basis for cash compensation of US$75,000 per year with a
benefits plan.
The
estimated incremental payments from the Company to each executive employee upon
termination without cause or resignation related to a Change in Control, and
without cause (not related to a Change in Control), assuming the triggering
event occurred on December 31, 2011, are as follows:
40
| |
|
|
|
|
|
Termination Without Cause |
| NEO |
|
Element |
|
Change in Control Payments |
|
Payments |
| |
|
|
|
|
|
|
| JOSEPH CONWAY |
|
Salary |
|
$1,200,000 |
|
$1,200,000(1) |
| CEO |
|
|
|
|
|
|
|
|
Annual Performance- Based Cash Incentive |
|
Two times the average amount of annual performance-based
cash incentives paid to the executive in the two years prior to the termination
or resignation date.(2) |
|
Two times the average amount of annual performance-based
cash incentives paid to the executive in the two years prior to the termination
date.(2) |
| |
|
|
|
|
|
|
| |
|
Benefits |
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
| DAVID BLAIKLOCK |
|
Salary |
|
$487,500 |
|
$487,500(3) |
| CFO |
|
|
|
|
|
|
|
|
Annual Performance- Based Cash Incentive |
|
One and one-half times the average amount of annual
performance-based cash incentives paid to the executive in the two years
prior to the termination or resignation date.(4) |
|
One and one-half times the average amount of annual
performance-based cash incentives paid to the executive in the two years
prior to the termination date.(4) |
| |
|
|
|
|
|
|
| |
|
Benefits |
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
| RENAUD ADAMS |
|
Salary |
|
$820,000 |
|
$820,000(1) |
| COO |
|
|
|
|
|
|
|
|
Annual Performance- Based Cash Incentive |
|
Two times the target annual performance-based cash
incentive applicable for the 2011 calendar year (as if the applicable performance
objectives had been achieved during the year) on an annualized basis. |
|
Two times the target annual performance-based cash
incentive applicable for the 2011 calendar year (as if the applicable performance
objectives had been achieved during the year) on an annualized basis. |
| |
|
|
|
|
|
|
|
|
Benefits |
|
10% of 200% of base salary (or a continuation of
benefits for 18 months, at the sole discretion of the Company). |
|
10% of 200% of base salary (or a continuation of
benefits for 18 months, at the sole discretion of the Company). |
| |
|
|
|
|
|
|
| WADE NESMITH |
|
Salary |
|
$800,000 |
|
$800,000(1) |
| Executive |
|
|
|
|
|
|
| Chairman |
|
Annual Performance- Based Cash Incentive |
|
Two times the average amount of annual performance-based
cash incentives paid to the executive in the two years prior to the termination
or resignation date.(2) |
|
Two times the average amount of annual performance-based
cash incentives paid to the executive in the two years prior to the termination
date.(2) |
| |
|
|
|
|
|
|
| |
|
Benefits |
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
| EDUARDO LUNA |
|
Salary |
|
N/A |
|
N/A |
| Executive Vice |
|
|
|
|
|
|
| President and |
|
Annual Performance- |
|
N/A |
|
N/A |
| President |
|
Based Cash Incentive |
|
|
|
|
| (Mexico)(5) |
|
|
|
|
|
|
| |
|
Benefits |
|
N/A |
|
N/A |
________________
Notes:
| (1) |
The terminated executive would have been entitled to 24
months notice, payment in lieu of notice based on the full base salary, or
a combination of payment and notice. |
| |
|
| (2) |
If not paid annual performance-based cash incentives
during such two year period, the terminated executive would have been paid
an annual performance-based cash incentive of at least two times the
amount of the target annual performance-based cash incentive set by the
Board in accordance with the terms of the applicable Executive Employment
Agreement. |
41
| (3) |
Mr. Blaiklock would have been entitled to 18 months
notice, payment in lieu of notice based on the full base salary, or a
combination of payment and notice. |
| |
|
| (4) |
If not paid annual performance-based cash incentives
during such two year period, Mr. Blaiklock would have been paid an annual
performance-based cash incentive of at least one and one-half times the
amount of the target annual performance-based cash incentive set by the
Board in accordance with the terms of his Executive Employment
Agreement. |
| |
|
| (5) |
The Executive Employment Agreement with Mr. Luna was
terminated on November 30, 2011 upon his retirement as Executive Vice
President and President (Mexico). |
Director Compensation
The
Human Resources Committee recommended that, for the financial year ended December
31, 2011, the Board adopt the director compensation strategy recommended in
the Consultant’s Report. In such report, the Consultant reviewed the Company’s
approach to the cash compensation of directors, which was based upon a 2010
report of the Consultant, and concluded that the current approach is market
competitive and recommended that no changes be made to Board cash compensation.
Under the current compensation structure, each director receives an annual retainer,
as well as meeting and travel day fees, and the Lead Director and Committee
Chairs receive an additional annual retainer. The Board is satisfied that this
compensation structure is reasonable and will assist in attracting and retaining
superior candidates for Board service.
| Services
Provided |
|
Compensation Payable |
| |
|
|
| Lead Director |
|
$80,000 per
year |
| |
|
|
| Board Member |
|
$50,000 per
year |
| |
|
|
| Chair, Audit Committee |
|
$20,000 per
year |
| |
|
|
| Chair, Human Resources Committee |
|
$10,000 per
year |
| |
|
|
| Chair, Other Committee |
|
$5,000 per year
|
| |
|
|
| Meeting Fees |
|
$1,500 per
meeting |
| |
|
|
| Travel Day Fees |
|
$1,500 per day
|
In
addition to the cash compensation set out above, in connection with the proposed
business combination with Northgate, on May 17, 2011 the Board established a
Special Committee and approved a fee for serving on the Special Committee of
$30,000 per member.
In
the Consultant’s Report, the Consultant also recommended that the directors be
granted PSUs. In March 2012, the Board approved, subject to TSX and shareholder
approval with respect to any Common Share issuances, the Directors’ PSU Plan.
For a detailed discussion of the Directors’ PSU Plan, see “Approval of
Directors’ PSU Plan”. On March 31, 2012, based on the recommendation the Human
Resources Committee, each of Primero’s independent directors (other than Mr.
Hazelton and Mr. Jauristo, as nominee directors of Goldcorp) were granted 28,846
Director PSUs representing 1.5 times the board member compensation of $50,000
for services to be rendered in the year 2012.
42
The
following disclosure summarizes the amount of compensation provided to each
of the directors during the Company’s most recently completed financial
year ended December 31, 2011, but excludes the compensation of Mr. Conway, Mr.
Nesmith and Mr. Luna. See “Statement of Executive Compensation – Summary
Compensation Table” for a summary of the compensation paid to Mr. Conway,
Mr. Nesmith and Mr. Luna during the financial year ended December 31, 2011.
| |
|
|
|
|
|
Accounting |
|
Non-equity |
|
|
|
|
|
|
| |
|
|
|
|
|
Fair Value |
|
incentive |
|
|
|
|
|
|
| |
|
|
|
Share- |
|
of Option- |
|
plan |
|
|
|
All other |
|
|
| |
|
Fees |
|
based |
|
based |
|
compen- |
|
Pension |
|
compen- |
|
|
| |
|
earned |
|
awards |
|
awards |
|
sation |
|
Value |
|
sation |
|
Total |
| Name |
|
($) |
|
($)(1) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DAVID DEMERS |
|
138,000 |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
138,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GRANT EDEY |
|
126,000 |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
126,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ROHAN HAZELTON |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TIMO JAURISTO |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ROBERT QUARTERMAIN |
|
68,000 |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
68,000 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| MICHAEL RILEY |
|
124,000 |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
Nil |
|
124,000 |
__________________
Note:
| (1) |
Does not include Director PSUs valued at $75,000 that the
Company awarded to each of Mr. Demers, Mr. Edey, Mr. Quartermain and Mr.
Riley on March 30, 2012 for services to be rendered in 2012. Each Director
PSU was priced at $2.60, being the closing price of Common Shares on the
TSX on March 30, 2012, resulting in 28,846 Director PSUs being awarded to
each of Mr. Demers, Mr. Edey, Mr. Quartermain and Mr.
Riley. |
Incentive Plan Awards
For
a discussion of the Company’s Stock Option Plan see “Securities Authorized for
Issuance Under Equity Compensation Plans – Stock Option Plan”.
In
March 2012, the Board approved the Directors’ PSU Plan (defined under “Approval
of Directors’ PSU Plan”) with Common Share issuances thereunder being subject to
TSX and shareholder approval. For a detailed discussion of the Directors’ PSU
Plan, see “Approval of Directors’ PSU Plan”.
Outstanding Share-Based and Option-Based Awards
The following table sets out the awards granted
to each of Primero’s directors that are outstanding at the end of the fiscal
year ended December 31, 2011, but excludes awards granted to Mr. Conway, Mr.
Nesmith and Mr. Luna. See “– Incentive Plan Awards – Outstanding Share-Based and
Option-Based Awards” for a summary of the awards granted to Mr. Conway, Mr.
Nesmith and Mr. Luna during the financial year ended December 31, 2011. This
table includes awards granted before the most recently completed financial year.
43
| |
|
Option-based Awards
|
|
Share-based Awards |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Market or |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
payout |
| |
|
|
|
|
|
|
|
|
|
|
|
Market or |
|
value of |
| |
|
|
|
|
|
|
|
|
|
Number of |
|
payout |
|
vested |
| |
|
Number of |
|
|
|
|
|
|
|
shares or |
|
value of |
|
share- |
| |
|
securities |
|
|
|
|
|
Value of |
|
units of |
|
share-based |
|
based |
| |
|
underlying |
|
Option |
|
|
|
unexercised |
|
shares that |
|
awards that |
|
awards not |
| |
|
unexercised |
|
exercise |
|
|
|
in-the-money |
|
have not |
|
have not |
|
paid out or |
| |
|
options |
|
price |
|
Option |
|
options |
|
vested |
|
vested |
|
distributed |
| Name |
|
(#) |
|
($) |
|
expiration date |
|
($)(1) |
|
(#)(2) |
|
($) |
|
($) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DAVID DEMERS |
|
20,000 |
|
4.20 |
|
July 29, 2013 |
|
Nil |
|
N/A |
|
N/A |
|
N/A |
| |
|
10,000 |
|
2.70 |
|
July 9, 2014 |
|
5,500 |
|
|
|
|
|
|
| |
|
179,452 |
|
6.00 |
|
August 6, 2015 |
|
Nil |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GRANT EDEY |
|
129,452 |
|
6.00 |
|
August 6, 2015 |
|
Nil |
|
N/A |
|
N/A |
|
N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ROHAN HAZELTON |
|
Nil |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TIMO JAURISTO |
|
Nil |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
|
N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ROBERT QUARTERMAIN |
|
129,452 |
|
6.00 |
|
August 6, 2015 |
|
Nil |
|
N/A |
|
N/A |
|
N/A |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| MICHAEL RILEY |
|
164,452 |
|
6.00 |
|
August 6, 2015 |
|
Nil |
|
N/A |
|
N/A |
|
N/A |
___________________
Notes:
| (1) |
The value of unexercised “in-the-money options” at the
financial year-end is the difference between the option exercise price and
the market value of the underlying Common Shares on the TSX on December
31, 2011. The market value is the closing price of Primero’s Common Shares
on the TSX on December 30, 2011, the last day the Common Shares traded on
the TSX during the year ended December 31, 2011 which was $3.25 per
share. |
| |
|
| (2) |
Does not include Director PSUs valued at $75,000 that the
Company awarded to each of Mr. Demers, Mr. Edey, Mr. Quartermain and Mr.
Riley on March 30, 2012 for services to be rendered in 2012. Each Director
PSU was priced at $2.60, being the closing price of Common Shares on the
TSX on March 30, 2012, resulting in 28,846 Director PSUs being awarded to
each of Mr. Demers, Mr. Edey, Mr. Quartermain and Mr.
Riley. |
Incentive Plan Awards – Value Vested or Earned during the
Year ended December 31, 2011
The
following table sets out, for each of Primero’s directors other than Mr. Conway,
Mr. Nesmith and Mr. Luna, the value of option-based and share-based awards
vested, and the value earned of non-equity incentive plan compensation, during
the year ended December 31, 2011. See “Statement of Executive Compensation –
Incentive Plan Awards – Incentive Plan Awards – Value Vested or Earned during
the Year ended December 31, 2011” for a summary of such information for Mr.
Conway, Mr. Nesmith and Mr. Luna:
| |
|
|
|
|
|
Non-equity incentive |
| |
|
Option-based awards – |
|
Share-based awards – |
|
plan compensation – |
| |
|
Value vested during the |
|
Value vested during the |
|
Value earned during the |
| |
|
year |
|
year |
|
year |
| Name |
|
($) |
|
($) |
|
($) |
| |
|
|
|
|
|
|
| DAVID DEMERS |
|
Nil(1) |
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
| GRANT EDEY |
|
Nil(2) |
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
| ROHAN HAZELTON |
|
Nil |
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
| TIMO JAURISTO |
|
Nil |
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
| ROBERT QUARTERMAIN |
|
Nil(3) |
|
Nil |
|
Nil |
44
| |
|
|
|
|
|
Non-equity incentive |
| |
|
Option-based awards – |
|
Share-based awards – |
|
plan compensation – |
| |
|
Value vested during the |
|
Value vested during the |
|
Value earned during the |
| |
|
year |
|
year |
|
year |
| Name |
|
($) |
|
($) |
|
($) |
| |
|
|
|
|
|
|
| MICHAEL RILEY |
|
Nil(4) |
|
Nil |
|
Nil |
___________________
Notes:
| (1) |
This figure does not include 59,817 options that are
exercisable at $6.00 per share (the closing price on the vesting date for
these options was $4.06 per share). |
| |
|
| (2) |
This figure does not include 43,150 options that are
exercisable at $6.00 per share (the closing price on the vesting date for
these options was $4.06 per share). |
| |
|
| (3) |
This figure does not include 43,150 options that are
exercisable at $6.00 per share (the closing price on the vesting date for
these options was $4.06 per share). |
| |
|
| (4) |
This figure does not include 54,817 options that are
exercisable at $6.00 per share (the closing price on the vesting date for
these options was $4.06 per share). |
Directors’ and Officers’ Liability Insurance
The
Company maintains a directors’ and officers’ liability insurance policy. The
policy provides coverage for costs incurred to defend and settle claims against
directors and officers of the Company to an annual limit of US$50 million with a
US$100,000 deductible per claim, except for US securities claims, in which case
the deductible is US$250,000. The cost of coverage for the term November 15,
2011 to November 15, 2012 was US$264,450. Directors and officers do not pay any
portion of the premiums and no indemnity claims were made or became payable in
2011.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
Stock Option Plan
The
Company’s amended and restated 2010 stock option plan dated for reference May
29, 2010 (the “Stock Option Plan”) was approved by shareholders of the
Company at the annual and special meeting of shareholders held on June 28, 2010
and was implemented upon the Common Shares becoming listed on the TSX on August
19, 2010. A copy of the Stock Option Plan is attached as Schedule D to the
information circular dated June 2, 2010 for the annual and special meeting of
shareholders held on June 28, 2010, which can be accessed on SEDAR at
www.sedar.com.
As
of December 12, 2010, the Board approved an amendment, effective January 1,
2011, to the Stock Option Plan, in order for the Company to comply with the
amendments to the Income Tax Act (Canada) (the “ITA”) first
announced in March 2010 and effective January 1, 2011. As a result of such
amendments to the ITA, the Company is responsible for withholding and remittance
of source deductions on the exercise of stock options. As the withholding and
remittance requirements apply to public company options as of the time of
exercise on the same basis as if the taxable benefit were the payment of a cash
bonus to the employee, the Company is required to ensure sufficient cash is
available in the course of the option exercise to allow the Company to meet its
remittance obligations. The Board and the TSX considers such amendment to be of
a “housekeeping” nature and, therefore, did not require shareholder approval.
The
Stock Option Plan was implemented in order to attract and retain directors,
officers, employees, and consultants, and to motivate these individuals to
advance the interests of the Company by way of stock options granted under the
Stock Option Plan. Under the Stock Option Plan, the number of Common Shares that
may be issued on the exercise of options granted under the plan must not exceed
10% of the issued and outstanding shares of the Company at the time an option is
granted (less any Common Shares reserved for issuance under other share
compensation arrangements). Any increase in the number of outstanding Common
Shares will result in an increase in the number of shares that are available to
be issued under the plan in the future, and any exercise of an option previously granted under the plan will result in an additional
grant being available under the plan. However, all validly outstanding options
existing at the time the Stock Option Plan came into effect were counted for the
purposes of calculating what may be issued under the Stock Option Plan.
45
The following is a summary of the material terms of the Stock Option
Plan:
Eligible
Persons. “Service Providers” are eligible to receive grants of options under
the Stock Option Plan. “Service Providers” is defined as bona fide directors,
officers, employees, management company employees and consultants and also
includes a company of which 100% of the share capital is beneficially owned by
one or more individual Service Providers.
Number
of Securities Issuable. A maximum of 10% of the Company’s issued and
outstanding Common Shares at the time the Common Shares are reserved for
issuance, less any Common Shares reserved for issuance under other share
compensation arrangements, may be reserved for issuance under the Stock Option
Plan. As of April 16, 2012, options to purchase an aggregate of 8,649,490 Common
Shares (net of cancelled options), representing approximately 9.8% of the issued
and outstanding Common Shares, are outstanding under the Stock Option Plan.
Options to purchase an aggregate of 176,493 Common Shares, representing
approximately 0.2% of the issued and outstanding Common Shares, remain available
for issuance under the Stock Option Plan.
Exercise
Price. While the Common Shares are listed on the TSX, the exercise price of
options granted under the plan will be the greater of the closing price for the
Common Shares on the TSX on the last trading day before the date of grant of the
option and the weighted average of the trading prices for the Common Shares on
the five trading days before the date of grant of the option. However,
notwithstanding the foregoing, certain options grants that were disclosed in the
prospectus offering completed in July 2010 were issued at an exercise price of
$6.00 per Common Share, being the greater of the prospectus offering price and
the market price, as defined in the rules, regulations and policies of the TSX
(the “TSX Policies”).
Vesting.
Vesting of options is in accordance with the vesting and exercise provisions
provided in the optionee’s employment agreement or, if there is no such
agreement, at the discretion of the Board. On a change of control or take-over
bid, the options held by an optionee may be exercised in full or in part at any
time before the applicable vesting periods for those options, if and to the
extent provided in the optionee’s employment agreement, or at the discretion of
the Board. A change of control occurs, for the purposes of the Stock Option
Plan, in the circumstances set out in the optionee’s employment agreement or, if
not defined in the applicable employment agreement, on the acquisition of a
number of the voting securities of the Company, which, including all the other
voting securities of the Company held by the acquirer, results in such entity
holding for the first time at least 30% of the outstanding voting securities of
the Company.
Term
of Options. Options granted under the Stock Option Plan will have a maximum
term of 10 years from their date of grant.
Extension
of Expiry Period. If an option which has been previously granted is set to
expire during a period in which trading in securities of the Company by the
option holder is restricted by a black-out, or within 9 business days of the
expiry of a black-out period, the expiry date of the option will be extended to
10 business days after the trading restrictions are lifted.
Termination
of Exercise Right. No option may be exercised after an optionee has left the
employ or service of the Company except as follows:
| |
(a) |
notwithstanding any other exceptions, if and to the
extent provided in the optionee’s employment agreement; |
| |
|
|
| |
(b) |
in the event of an optionee’s death, any vested option
held by the optionee at the date of death will be exercisable by the
optionee’s lawful personal representatives, heirs or executors until the
earlier of 12 months after the date of death and the date of expiration of
the term otherwise applicable to such option; |
46
| |
(c) |
vested options will expire 90 days after the date the
optionee ceases to be employed by, provide services to, or be a director
or officer of, the Company, and any unvested options shall immediately
terminate; and |
| |
|
|
| |
(d) |
if an optionee is dismissed for cause, such optionee’s
options, whether or not they are vested at the date of dismissal, will
immediately terminate. |
No
Assignment. Subject to the provisions of the Stock Option Plan, all options
will be exercisable only by the optionee to whom they are granted and will not
be assignable or transferable.
Amendments
Requiring Shareholder Approval. Shareholder approval is required for the
following amendments to the Stock Option Plan:
| |
(a) |
an increase to the aggregate percentage of securities
issuable under the plan; |
| |
|
|
| |
(b) |
a reduction in the exercise price of an outstanding
option; |
| |
|
|
| |
(c) |
an extension of the term of any option beyond the expiry
date, except as provided in connection with a black-out period; |
| |
|
|
| |
(d) |
any amendment to permit assignments or exercises other
than by the optionee other than as set out in the plan; |
| |
|
|
| |
(e) |
amendment to the individuals eligible to receive options
under the plan; |
| |
|
|
| |
(f) |
an amendment to the plan to provide for other types of
compensation through equity issuance, other than an amendment in the
nature of a substitution and/or adjustment made by the Board in response
to a change to, event affecting, exchange of, or corporate change or
transaction affecting the Common Shares; and |
| |
|
|
| |
(g) |
an amendment which is required to be approved by
shareholders under applicable law (including, without limitation, the TSX
Policies). |
Amendments
Without Shareholder Approval. Subject to the TSX Policies, the Stock Option
Plan may be amended without shareholder approval for the following:
| |
(a) |
amendments of a “housekeeping” nature; |
| |
|
|
| |
(b) |
amendments necessary to comply with the provisions of
applicable law (including, without limitation, the TSX
Policies); |
| |
|
|
| |
(c) |
amendments respecting the administration of the Stock
Option Plan; |
| |
|
|
| |
(d) |
any amendment to the vesting provisions of the plan or
any option; |
| |
|
|
| |
(e) |
any amendment to the early termination provisions of the
plan or any option, whether or not such option is held by an insider,
provided such amendment does not entail an extension beyond the original
expiry date; |
| |
|
|
| |
(f) |
the addition of any form of financial assistance by the
Company for the acquisition by all or certain categories of participants
of Common Shares under the plan, and the subsequent amendment of any such
provision which is more favourable to
participants; |
47
| |
(g) |
the addition or modification of a cashless exercise
feature, payable in cash or Common Shares, which provides for a full
deduction of the number of underlying Common Shares from the plan
reserve; |
| |
|
|
| |
(h) |
amendments necessary to suspend or terminate the plan;
and |
| |
|
|
| |
(i) |
any other amendment, whether fundamental or otherwise,
not requiring shareholder approval under applicable law (including,
without limitation, the TSX Policies). |
General
Amendments. Subject to the requirements of applicable law and TSX Policies
requiring shareholder or other approval, the Stock Option Plan provides that the
Board may amend, suspend, terminate, or discontinue the plan or any option, or
revoke or alter any action taken under the plan or option, except that the Board
may not undertake any such action if it were to adversely alter or impair an
option unless it first obtains the written consent of the affected optionee.
Equity Compensation Plan Information
The
following table summarizes information, as at December 31, 2011, in relation to
compensation plans under which equity securities of Primero are authorized for
issuance:
| |
|
|
|
|
|
Number of securities |
| |
|
|
|
|
|
remaining available |
| |
|
|
|
|
|
for future issuance |
| |
|
Number of securities to |
|
Weighted-average |
|
under equity |
| |
|
be issued upon exercise |
|
exercise price of |
|
compensation plans |
| |
|
of outstanding options, |
|
outstanding options, |
|
(excluding securities |
| |
|
warrants and rights |
|
warrants and rights |
|
reflected in column (a)) |
| Plan
Category |
|
(a) |
|
(b) |
|
(c) |
|
|
|
|
|
|
|
| Equity compensation plans approved by
securityholders(1) |
|
8,574,490 |
|
5.54 |
|
251,493(2) |
| |
|
|
|
|
|
|
| Equity compensation plans not approved by
securityholders |
|
Nil
|
|
Nil |
|
Nil |
| |
|
|
|
|
|
|
| Total |
|
8,574,490 |
|
5.54 |
|
251,493 |
____________________
Notes:
| (1) |
For a summary of the main aspects of the Company’s Stock
Option Plan, see “Securities Authorized for Issuance Under Equity
Compensation Plans – Stock Option Plan”. |
| |
|
| (2) |
A maximum of 10% of the Company’s issued and outstanding
Common Shares at the time the Common Shares are reserved for issuance,
less any Common Shares reserved for issuance under other share
compensation arrangements, may be reserved for issuance under the Stock
Option Plan. As of December 31, 2011, the maximum number of Common Shares
reserved for issuance under the Stock Option Plan was 8,825,983 Common
Shares (being 10% of the 88,259,831 Common Shares then issued and
outstanding). |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
No
executive officers or directors, or former executive officers or directors, nor
any associate of such individuals, is as at the date hereof, or has been since
the beginning of the financial year ended December 31, 2011, indebted to the
Company or any of its subsidiaries in connection with a purchase of securities
or otherwise. In addition, no indebtedness of these individuals to another
entity has been the subject of a guarantee, support agreement, letter of credit
or similar arrangement or understanding of the Company or any of its
subsidiaries.
48
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
As
of the date of this Information Circular, no informed person of the Company,
proposed director of the Company, or any associate or affiliate of any informed
person or proposed director, has had a material interest in any transaction
since the commencement of the Company’s most recently completed financial year
or has a material interest in any proposed transaction which has materially
affected or would affect the Company or any of its subsidiaries.
ADDITIONAL INFORMATION
Additional
information relating to the Company, including the Company’s audited
consolidated financial statements and management’s discussion and analysis for
the year ended December 31, 2011, can be found on SEDAR at www.sedar.com. Copies
of the Company’s audited consolidated financial statements and management’s
discussion and analysis for the year ended December 31, 2011 are available upon
request from the Company’s Vice President, Investor Relations at Suite 1202, 120
Adelaide Street West, Toronto, Ontario, telephone number 416-814-3168, or fax
number 416-814-3170. Copies of these documents will be provided free of charge
to security holders of the Company. The Company may require the payment of a
reasonable charge from any person or company who is not a security holder of the
Company, who requests a copy of any such document.
Financial
information is provided in the Company’s audited consolidated financial
statements, the report of the auditor, and management’s discussion and analysis
for the year ended December 31, 2011, which will be placed before shareholders
at the Meeting.
As
at the date of this Information Circular, management of Primero is not aware of
any other matters which may come before the Meeting other than as set forth in
the Notice of Meeting that accompanies this Information Circular. If any other
matter properly comes before the Meeting, it is the intention of the persons
named in the enclosed Proxy to vote the shares represented thereby in accordance
with their best judgment on such matter.
The
contents of this Information Circular and its distribution to shareholders of
Primero have been approved by the board of directors.
DATED at Vancouver, British Columbia on April 16, 2012.
BY ORDER OF THE BOARD OF DIRECTORS
(signed) Wade Nesmith
Chairman of the Board
49
APPENDIX “A”
TERMS OF RERFERENCE FOR THE BOARD OF DIRECTORS
| |
A. |
Primero Mining Corp. (“Primero Mining” or the “Company”)
Board of directors (the “Board”) has a primary responsibility to promote
and act in the best interests of the Company and is accountable to the
shareholders as a whole. |
| |
|
|
| |
B. |
The directors are stewards of the Company, responsible
for the overall management and direction of the Company. The Board has the
responsibility to oversee the conduct of the Company's business and to
supervise management, which is responsible for the day-to-day operation of
the Company. In supervising the conduct of the business, the Board,
through the Chief Executive Officer (the “CEO”) sets the standards of
conduct for the Company. |
| |
|
|
| |
C. |
These terms of reference are prepared to assist the Board
and management in clarifying responsibilities and ensuring effective
communication between the Board and
management. |
| II. |
COMPOSITION AND BOARD
ORGANIZATION |
| |
A. |
Nominees for directors are initially considered and
recommended by the Board’s Governance and Nominating Committee in
conjunction with the Board Chair and Lead Director, approved by the entire
Board and elected annually by the shareholders. |
| |
|
|
| |
B. |
A majority of directors comprising the Board must qualify
as independent directors. |
| |
|
|
| |
C. |
Certain of the Board's responsibilities may be delegated
to Board committees. The responsibilities of those committees will be as
set forth in their terms of reference. |
| III. |
DUTIES AND RESPONSIBILITIES |
| |
A. |
Managing the Affairs of the Board |
| |
|
|
| |
|
The Board operates by delegating certain of its
authorities, including spending authorizations, to management, and by
reserving certain powers to itself. The legal obligations of the Board are
described in Section IV. Subject to these legal obligations and to the
Notice of Articles and Articles of the Company, the Board retains the
responsibility for managing its own affairs,
including: |
| |
i) |
annually reviewing the skills and experience represented
on the Board in light of the Company’s strategic direction and approving a
Board composition plan recommended by the Governance and Nominating
Committee; |
| |
|
|
| |
ii) |
appointing, determining the composition of and setting
the terms of reference for, Board committees; |
| |
|
|
| |
iii) |
determining and implementing an appropriate process for
assessing the effectiveness of the Board, the Board Chair and Lead
Director, committees and directors in fulfilling their
responsibilities; |
| |
|
|
| |
iv) |
assessing the adequacy and form of director
compensation; |
| |
|
|
| |
v) |
assuming responsibility for the Company’s governance
practices; |
A-1
| |
|
vi) |
establishing new director orientation and ongoing
director education processes; |
| |
|
|
|
|
| |
|
vii) |
ensuring that the independent directors meet regularly
without executive directors and management present; |
| |
|
|
|
|
| |
|
viii) |
setting the terms of reference for the Board;
and |
| |
|
|
|
|
| |
|
ix) |
appointing the secretary to the Board. |
| |
|
|
|
|
| |
B. |
Human Resources |
| |
|
|
|
|
| |
|
The Board has the responsibility to: |
| |
|
|
|
|
| |
|
i) |
provide advice and counsel to the CEO in the execution of
the CEO’s duties; |
| |
|
|
|
|
| |
|
ii) |
appoint the CEO and plan CEO succession; |
| |
|
|
|
|
| |
|
iii) |
set terms of reference for the CEO; |
| |
|
|
|
|
| |
|
iv) |
annually approve corporate goals and objectives that the
CEO is responsible for meeting; |
| |
|
|
|
|
| |
|
v) |
monitor and, at least annually, review the CEO’s
performance against agreed upon annual objectives; |
| |
|
|
|
|
| |
|
vi) |
to the extent feasible, satisfy itself as to the
integrity of the CEO and other senior officers, and that the CEO and other
senior officers create a culture of integrity throughout the
Company; |
| |
|
|
|
|
| |
|
vii) |
set the CEO’s compensation; |
| |
|
|
|
|
| |
|
viii) |
approve the CEO’s acceptance of significant public
service commitments or outside directorships; |
| |
|
|
|
|
| |
|
ix) |
approve decisions relating to senior management,
including: |
| |
|
|
|
|
| |
|
|
a) |
review senior management structure including such duties
and responsibilities to be assigned to officers of the Company; |
| |
|
|
|
|
| |
|
|
b) |
on the recommendation of the CEO, appoint and discharge
the officers of the Company who report to the CEO; |
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c) |
review compensation plans for senior management including
salary, incentive, benefit and pension plans; and |
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d) |
employment contracts, termination and other special
arrangements with executive officers, or other employee groups. |
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x) |
approve certain matters relating to all employees,
including: |
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a) |
the Company’s broad compensation strategy and
philosophy; |
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b) |
new benefit programs or material changes to existing
programs; and |
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xi) |
ensure succession planning programs are in place,
including programs to train and develop
management. |
A-2
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C. |
Strategy and Plans |
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The Board has the responsibility to: |
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i) |
adopt and periodically review a strategic planning
process for the Company; |
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ii) |
participate with management in the development of, and
annually approve, a strategic plan for the Company that takes into
consideration, among other things, the risks and opportunities of the
business; |
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iii) |
approve annual capital and operating budgets that support
the Company’s ability to meet its strategic objectives; |
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iv) |
direct management to develop, implement and maintain a
reporting system that accurately measures the Company's performance
against its business plans; |
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v) |
approve the entering into, or withdrawing from, lines of
business that are, or are likely to be, material to the Company;
and |
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vi) |
approve material divestitures and acquisitions. |
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D. |
Financial and Corporate Issues |
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The Board has the responsibility to: |
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i) |
take reasonable steps to ensure the implementation and
integrity of the Company's internal control and management information
systems; |
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ii) |
review and approve release by management of any materials
reporting on the Company’s financial performance or providing guidance on
future results to its shareholders and ensure the disclosure accurately
and fairly reflects the state of affairs of the Company, and is in
accordance with generally accepted accounting principles, including
interim results press releases and interim financial statements, any
guidance provided by the Company on future results, Company information
circulars, annual information forms, annual reports, offering memorandums
and prospectuses; |
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iii) |
declare dividends; |
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iv) |
approve financings, issue and repurchase of shares, issue
of debt securities, listing of shares and other securities, issue of
commercial paper, and related prospectuses and recommend changes in
authorized share capital to shareholders for their approval; |
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v) |
approve the incurring of any material debt by the Company
outside the ordinary course of business; |
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vi) |
approve the commencement or settlement of litigation that
may have a material impact on the Company; and |
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vii) |
recommend the appointment of external auditors and
approve auditors’ fees. |
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E. |
Business and Risk Management |
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The Board has the responsibility
to: |
A-3
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i) |
ensure management identifies the principal risks of the
Company’s business and implements appropriate systems to manage these
risks; |
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ii) |
approve any plans to hedge sales; and |
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iii) |
evaluate and assess information provided by management
and others about the effectiveness of risk management systems. |
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F. |
Policies and Procedures |
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The Board has the responsibility to: |
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i) |
approve and monitor, through management, compliance with
all significant policies and procedures that govern the Company’s
operations; |
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ii) |
approve and act as the guardian of the Company’s
corporate values, including: |
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a) |
approve and monitor compliance with a Code of Business
Conduct and Ethics for the Company and ensure it complies with applicable
legal or regulatory requirements, such as relevant securities
commissions; |
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b) |
require management to have procedures to monitor
compliance with the Code of Business Conduct and Ethics and report to the
Board through the Audit Committee; and |
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c) |
disclose any waivers granted from a provision of the Code
of Business Conduct and Ethics in a manner that meets or exceeds
regulatory requirements. |
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iii) |
direct management to ensure the Company operates at all
times within applicable laws and regulations and to the highest ethical
and moral standards; and |
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iv) |
periodically review the Company’s Environmental, Health
and Safety Policy and regularly review the Company’s Environmental, Health
and Safety Reports. |
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G. |
Compliance Reporting and Corporate
Communications |
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The Board has the responsibility to: |
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i) |
ensure the Company has in place effective communication
processes with shareholders and other stakeholders and financial,
regulatory and other recipients; |
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ii) |
approve and periodically review the Company’s
communications policy; |
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iii) |
ensure the Board has measures in place to receive
feedback from shareholders; |
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iv) |
approve interaction with shareholders on all items
requiring shareholder response or approval; |
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v) |
ensure the Company’s financial performance is adequately
reported to shareholders, other security holders and regulators on a
timely and regular basis; |
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vi) |
ensure the financial results are reported fairly and in
accordance with generally accepted accounting
principles; |
A-4
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vii) |
ensure the CEO and CFO certify the Company’s annual and
interim financial statements, annual and interim MD&A and Annual
Information Form, and that the content of the certification meets all
legal and regulatory requirements; |
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viii) |
ensure timely reporting of any other developments that
have a significant and material effect on the Company; and |
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ix) |
report annually to the shareholders on the Board’s
stewardship for the preceding year. |
| IV. |
GENERAL LEGAL OBLIGATIONS OF THE BOARD OF
DIRECTORS |
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A. |
The Board is responsible for: |
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i) |
directing management to ensure legal requirements have
been met, and documents and records have been properly prepared, approved
and maintained; |
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ii) |
recommending changes in the Notice of Articles and
Articles, matters requiring shareholder approval, and setting agendas for
shareholder meetings; and |
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iii) |
supervising the management of the business and affairs of
the Company |
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B. |
The Business Corporations Act (British Columbia)
identifies the following as legal requirements for each member of the
Board (in addition to any statute or rule of law or equity relating to
duties or liabilities of directors): |
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i) |
to act honestly and in good faith with a view to the best
interests of the Company, known as the director’s fiduciary duty, which
dictates a strict standard of conduct imparting loyalty and good faith,
including the following obligations: |
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a) |
to disclose in writing to the Company any conflicts of
interest (that is, any direct or indirect interest of the director in a
contract or transaction that is material to the Company) in sufficient
detail to allow the other directors to understand the nature and extent of
that interest; and if the director fails to do so, to account to the
Company for any resulting profits from such conflict of
interest; |
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b) |
not to profit from the director’s fiduciary position, or
place himself or herself in a position that may put personal interests
ahead of the Company’s interests, including by not appropriating or
diverting corporate opportunities or benefits; |
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c) |
to maintain confidential information of the Company and
not use such information for personal benefit; and |
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d) |
to disclose to the Board information vital to the
business of the Company in the director’s possession; |
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ii) |
to exercise the care, diligence and skill that a
reasonably prudent individual would exercise in comparable circumstances,
known as the directors’ duty of care, which includes devoting reasonable
time and attention to the affairs of the Company; and |
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iii) |
to act in accordance with the Business Corporations
Act (British Columbia) and any regulations thereto, and the Notice of
Articles and Articles of the Company. |
A-5
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