EX-4.7 2 tm2221440d2_ex4-7.htm EXHIBIT 4.7

 

Exhibit 4.7

 

 

 

Suite 1430, 800 West Pender Street

Vancouver, British Columbia V6C 2V6

Phone: 604-562-9664

 

 

Statement of Executive Compensation

 

 

Dated this 20th day of May 2022

 

 

 

 

STATEMENT OF EXECUTIVE COMPENSATION

 

Statement of Executive Compensation

 

The following information with respect to New Found Gold Corp. (the “Company” or “NFG”) is provided in accordance with Form 51-102F6 – Statement of Executive Compensation (“Form 51-102F6”). Information contained in this Statement of Executive Compensation is as of December 31, 2021, unless otherwise indicated and all dollar amounts referenced herein are in Canadian dollars, unless otherwise specified.

 

Named Executive Officers

 

The named executive officers (NEOs) of the Company for the financial year ended December 31, 2021 were Collin Kettell, Executive Chairman and Chief Executive Officer; Craig A. Roberts, Former Chief Executive Officer; Denis Laviolette, President; Michael Kanevsky, Chief Financial Officer and Greg Matheson, Chief Operating Officer.

 

On April 14, 2022, Mr. Roberts resigned as CEO and a director of the Company and, in his place, Mr. Kettell was appointed CEO as part of a planned leadership transition. Mr. Roberts continues as a full-time consultant for the Company under the title of Lead Advisor.

 

Compensation Discussion & Analysis

 

Compensation Philosophy and Objectives

 

The objective of the Company’s compensation program is to attract and continue to retain NEOs that have the necessary attributes, experience, skills and competencies that represent the best fit for the Company and to ensure that the compensation for its NEOs is appropriate and aligned with shareholder interests. The Company’s Compensation Committee (the “Compensation Committee”) reviews director and NEO compensation on an annual basis.

 

The Company’s general philosophy is that compensation for non-executive directors and NEOs plays an important role in achieving short and long-term business objectives that ultimately drive business success and should include a mix of cash (base salary and discretionary annual bonus) and equity (stock options (“Options”)) with Options being more heavily weighted than base salary and bonuses to better align the interests of management with that of the shareholders of the Company.

 

Compensation Elements

 

The compensation of the NEOs consists of three main components: base salary, discretionary annual cash bonuses and long-term incentives, currently in the form of Options. Each element of compensation is a subjective decision by the board of directors of the Company (the “Board”) based on recommendations of the Compensation Committee. The following discussion describes the components of compensation and discusses how each component relates to the Company’s overall executive compensation objective.

 

Base Salary

 

The Company’s view is that a competitive base salary or consulting fee is a necessary element for attracting and retaining qualified executive officers. The base salary for each executive is established by the Board, on the recommendation of the Compensation Committee, based upon the position held by such executive, competitive market conditions, such executive’s related responsibilities, experience and the NEO’s skill base, the functions performed by such executive and the salary ranges for similar positions. Individual and corporate performance are also taken into account in determining base salary levels for executives. To better align the interests of management with those of the shareholders of the Company, base salary is less heavily weighted in the Company’s overall compensation of NEOs as compared to the other elements of NEO compensation.

 

1 

 

 

STATEMENT OF EXECUTIVE COMPENSATION

 

Bonuses

 

In determining to award annual bonuses, including the amounts thereof, the Board uses its discretion and takes into consideration the Company’s annual achievements, without assigning any quantifiable weight or factor in respect of any particular achievement or corporate milestone. Bonuses were granted to NEOs in 2021 based on the Compensation Committee’s assessment of the Company’s performance for the year. The purpose of granting cash bonuses specifically linked to individual and Company wide performance is to ensure management is motivated to work towards the success of the Company.

 

Long-term Incentives

 

Long-term incentives for NEOs and directors take the form of Options which are granted under the direction of the Compensation Committee in accordance with the Company’s shareholder approved stock option plan (the “Option Plan”). The purpose of granting long-term incentives is to assist the Company in compensating, attracting, retaining and motivating directors, NEOs, employees and consultants and to closely align the personal interests of such persons to that of the Company’s shareholders and motivate such individuals to work towards ensuring the long-term success of the Company. The value of Options granted to NEOs is determined on both qualitative and quantitative levels. Changes in executive positions or roles and ongoing contribution to the Company are factors which affect the decision-making process. Outstanding Options and previous grants are reviewed by the Compensation Committee on an annual basis and again when considering new Option grants. The terms of the Option Plan are also reviewed from time to time by the Compensation Committee and changes suggested are discussed with NEOs prior to approval by the Board, then regulatory and shareholder approval as necessary.

 

Peer Group

 

While the Board considers amounts paid by other companies in similar industries at similar stages of development in determining compensation, no specifically selected peer group was identified in 2021.

 

Performance Goals

 

The Company does not have specific performance goals in respect of an NEOs compensation. Specific compensation recommendations are made to the Board of Directors by the Compensation Committee after discussion amongst the members of the Compensation Committee. Each component of compensation and the decisions of the Compensation Committee about each component have an impact on the Committee’s decisions regarding other compensation components. All of the compensation components together are intended to meet the Company’s compensation objectives, which are intended to allow the Company to attract and retain qualified and experienced executives who are motivated to achieve the Company’s business plans, strategies and goals on an annual and long-term basis, in order to increase shareholder value.

 

Risk Considerations

 

The Board reviews from time to time and at least once annually, the risks, if any, associated with the Company’s compensation policies and practices at such time. Such a review occurred at the time of preparation of this Statement of Executive Compensation. Implicit in the Board’s mandate is that the Company’s policies and practices respecting compensation, including those applicable to the Company’s executives, be designed in a manner which is in the best interests of the Company and its shareholders, and risk implications is one of many considerations which are taken into account in such design.

 

A significant portion of the Company’s executive compensation consists of Options granted under the Option Plan. Such compensation is both “long term” and “at risk” and, accordingly, is directly linked to the achievement of long-term value creation. As the benefits of such compensation, if any, are not realized by the executives until a significant period of time has passed, the ability of executives to take inappropriate or excessive risks that are beneficial to them from the standpoint of their compensation at the expense of the Company and its shareholders is extremely limited.

 

2 

 

 

STATEMENT OF EXECUTIVE COMPENSATION

 

Due to the relatively small size of the Company, and the current level of the Company’s activity, the Board is able to closely monitor and consider any risks which may be associated with the Company’s compensation policies and practices. Risks, if any, may be identified and mitigated through regular Board meetings, during which financial and other information pertaining to the Company will be reviewed, which review will include executive compensation. No risks have been identified arising from the Company’s compensation policies and practices that are reasonably likely to have a material adverse effect on the Company.

 

No director, officer or member of senior management are permitted to enter into financial instruments that are designed to hedge or offset any decrease in the market value of the Company’s equity securities that are held directly or indirectly by them or granted as compensation to them. Such prohibited financial instruments include prepaid variable forward contracts, equity swaps, collars, put or call options and similar financial instruments.

 

Performance Graph

 

The following graph compares the cumulative shareholder return for C$100 invested in common shares of the Company (the “Common Shares”) on August 11, 2020 against the cumulative shareholder return for the GDXJ Index for the period beginning August 11, 2020 and ending December 31, 2021, assuming reinvestment of all dividends. The GDXJ is an exchange traded fund (ETF) and is compiled of stocks from small and medium-capitalization companies in the gold and/or silver mining industry. The Company believes tracking its share price against the GDXJ is an appropriate measure of the relative market performance of the Company. The graph also depicts total annual compensation for the NEOs in each particular since the Company began trading on the TSX Venture Exchange on August 11, 2020.

 

 

Comparison of Cumulative Total Returns

 

The performance graph shows that cumulative shareholder returns for $100 invested in the Common Shares outperformed the GDXJ index while compensation paid to the Company’s NEOs decreased in 2021 compared to 2020 as a result of a decrease in option-based awards granted during fiscal 2021.

 

3 

 

 

STATEMENT OF EXECUTIVE COMPENSATION

 

Option-based Awards

 

The Company has the Option Plan in place for the granting of Options to the directors, officers, employees and consultants of the Company. The purpose of granting such Options is to assist the Company in compensating, attracting, retaining and motivating such persons and to closely align the personal interests of such persons to that of the Company’s shareholders. The allocation of Options under the Option Plan is determined by the Board which, in determining such allocations, considers such factors as previous grants to individuals, overall performance of the Company, share price, the role and performance of the individual in question, the amount of time directed to the Company’s affairs and time expended in serving on the Company’s committees.

 

For further information, please see “Incentive Plan Awards – Option Plan” below for a summary of the material terms of the Option Plan.

 

Compensation Governance

 

Composition of the Compensation Committee

 

The Compensation Committee must consist of three or more directors, at least two of whom must qualify as “independent” as such term is defined in National Policy 58-101 – Corporate Governance Guidelines. The Compensation Committee currently consists of three directors, Vijay Mehta (the Chair), Douglas Hurst and Collin Kettell. Mr. Mehta and Mr. Hurst are independent directors. Mr. Kettell is not considered to be independent as Mr. Kettell is an executive officer of the Company.

 

Relevant Education and Experience

 

The members of the Composition Committee have a range of skills and experience which the Company believes provides the expertise necessary to oversee the Company’s executive compensation structure. The relevant experience of the Compensation Committee members is summarized below.

 

Vijay Mehta (Chair) Mr. Mehta is a co-founder of Arkview Capital, a private equity fund that invests in diversity-oriented companies, where he is directly involved in compensation decisions. Prior to founding Arkview, Mr. Mehta was a Managing Director and member of the Investment Committee at Ziff Brothers Investments with broad responsibilities across the investment portfolio and also worked at private equity fund, Texas Pacific Group and investment bank, Morgan Stanley. Mr. Mehta graduated summa cum laude from the University of Pennsylvania’s Huntsman Program and earned an MBA from the Harvard Business School, where he was named a Baker Scholar.
   
Douglas Hurst Mr. Hurst has over 30 years experience in the mining and natural resource industries having acted as a geologist, consultant, mining analyst, senior executive and board member. Mr. Hurst was a founding executive of International Royalty Corporation, which was purchased by Royal Gold for $700 million and more recently, was one of the founders of Newmarket Gold Inc., which was purchased for $1.0 billion by Kirkland Lake Gold Ltd. in November 2016. In his capacity as a senior executive and/or director, Mr. Hurst was involved with compensation matters of each of the foregoing companies and is currently or has been involved with the compensation matters of several other public companies, including Calibre Mining Inc., Northern Vertex Mining Corp. and Newcore Gold Ltd. Mr. Hurst holds a Bachelor of Science in Geology from McMaster University (1986).
   
Collin Kettell Mr. Kettell is the founder, Executive Chairman and Chief Executive Officer of the Company and is responsible for co-founding Nevada King Gold Corp., for which he serves as a director and Chief Executive Officer, and Palisades Goldcorp Ltd., for which he serves as a director and Chief Executive Officer. In his capacity as a senior executive and/or director, Mr. Kettell is currently, or has been, involved with the compensation matters of each of Nevada King Gold Corp. and Palisades Goldcorp Ltd.

 

 

 

4 

 

 

STATEMENT OF EXECUTIVE COMPENSATION

 

Compensation Committee Responsibilities

 

The Compensation Committee is appointed by and reports to the Board. The Committee assists the Board in discharging the Board’s oversight responsibilities relating to the attraction, compensation, evaluation and retention of key senior management personnel, and in particular, the Chief Executive Officer, primarily through:

 

●reviewing and assessing the overall compensation strategy of the Company based on industry standards and characteristic needs and objectives of the Company, including consultation with independent experts;

 

●setting compensation parameters;

 

●assessing the CEO’s performance against pre-agreed objectives;

 

●reviewing performance assessments of other senior officers, new executive appointments, terminations and employment agreements;

 

●making recommendations to the Board on salary changes, short-term and long-term incentive plans or benefit plans; and

 

●reviewing and recommending disclosure pertaining to all of the foregoing.

 

Summary Compensation Table

 

The following table contains a summary of the compensation paid to the NEOs of the Company during the three most recently completed financial years.

 

                                      Non-Equity Incentive Plan
compensation		                    
Name and
Principal
Position		     Year       Salary
($)		       Share-
based
awards
($)		       Option-
based
awards ($)		       Annual
incentive
plans
($)		     Long-term
incentive
plans
($)		     Pension
value
($)		     All other
compensation
($)		     Total
compensation
($)		  
Collin Kettell     2021       300,000       N/A       1,291,220       100,000     Nil     N/A     N/A     1,691,220  
CEO,     2020       269,070       N/A       15,233,481       75,000     Nil     N/A     N/A     15,577,551  
Executive Chairman and Director (1), (3)     2019       9,967       N/A       475,140       152,432     Nil     N/A     N/A     637,539  
                                                                 
Craig Roberts     2021       300,000       N/A       1,291,220       100,000     Nil     N/A     N/A     1,691,220  
Former CEO     2020       250,000       N/A       4,722,549       325,000     Nil     N/A     N/A     5,297,549  
and Former Director (2), (4)     2019       N/A       N/A       N/A       N/A     N/A     N/A     N/A     N/A  
                                                                 
Michael Kanevsky     2021       72,000       N/A       Nil       Nil     Nil     N/A     N/A     72,000  
CFO     2020       72,900       N/A       Nil       Nil     Nil     N/A     N/A     72,900  
    2019       94,500       N/A       Nil       Nil     Nil     N/A     N/A     94,500  
                                                                 
Denis Laviolette     2021       210,000       N/A       1,291,220       70,000     Nil     N/A     N/A     1,571,220  
President and Director (5)     2020       195,000       N/A       1,281,825       75,000     Nil     N/A     N/A     1,551,825  
    2019       290,000       N/A       589,124       Nil     Nil     N/A     N/A     879,124  

 

5 

 

 

STATEMENT OF EXECUTIVE COMPENSATION

 

                   Non-Equity Incentive Plan
compensation		          
Name and
Principal
Position		  Year   Salary
($)		   Share-
based
awards
($)		   Option-
based
awards ($)		   Annual
incentive
plans
($)		  

Long-term

incentive
plans

($)

  Pension
value
($)		   All other
compensation
($)		  Total
compensation
($)		 
Greg Matheson   2021    195,000    N/A    544,192    65,000   Nil   N/A   N/A   804,192 
Chief Operating Officer   2020    157,083    N/A    291,310    33,000   Nil   N/A   N/A   481,393 
   2019    130,000    N/A    66,520    Nil   Nil   N/A   N/A   196,520 

 

Notes

(1)On April 14, 2022, Mr. Kettell was appointed CEO.
(2)Mr. Roberts was appointed CEO on March 6, 2020 and resigned on April 14, 2022 as part of a planned leadership transition.
(3)Mr. Kettell served as a director of the Company for the financial years ended December 31, 2021, December 31, 2020 and December 31, 2019, for which role he was compensated Nil, Nil and Nil, respectively.
(4)Mr. Roberts was appointed as a director of the Company on March 6, 2020 and served as a director for the financial year ended December 31, 2021 and the financial period beginning March 6, 2020 and ended December 31, 2020, for which role he was compensated Nil and Nil, respectively. Mr. Roberts resigned as a director of the Company on April 14, 2022.
(5)Mr. Laviolette served as a director of the Company for the financial years ended December 31, 2021, December 31, 2020 and December 31, 2019, for which role he was compensated Nil, Nil and Nil, respectively.
(6)The weighted average grant date fair value of the Options granted during the financial year ended December 31, 2021 was $4.95 per Option, the weighted average grant date fair value of the Options granted during the financial year ended December 31, 2020 was $1.68 per Option and the weighted average grant date fair value of the Options granted during the financial year ended December 31, 2019 was $0.38 per Option. The Company uses the Black-Scholes Option Pricing model which is an industry accepted model for valuing share-based payments under IFRS 2.

 

Options were priced using the following weighted average assumptions to estimate the fair value of options granted:

 

   Grant date   Expected   Average risk-free   Expected   Expected 
Year  share price   dividend yield   interest rate   life   volatility 
2021  $6.79    Nil    0.93%   5.0    97.07%
2020  $2.35    Nil    0.40%   5.0    97.30%
2019  $0.50    Nil    1.64%   5.0    103.0%

 

Employment, Consulting and Management Agreements

 

The Company has entered into management services agreements with companies controlled by certain NEOs, the material terms of which are summarized below.

 

Argentum Management Services Agreement

 

Collin Kettell, Executive Chairman and Director, provides management services to the Company through Argentum Capital Corp. (“Argentum”). The Company entered into a management services agreement with Argentum dated March 1, 2020, with respect to the provision of certain management and administrative consulting services provided by Argentum to the Company (the “Argentum Agreement”). Pursuant to the terms and conditions of the Argentum Agreement, Argentum provides certain management consulting services to the Company as may be requested by and at the direction of the Board from time to time, including: (i) guidance, advice and services with respect to strategic planning, future growth, projects and business activities; (ii) guidance and advice in relation to the day to day operation and business of the Company; (iii) guidance and advice concerning proposed acquisitions, divestitures, joint ventures and business combinations, (iv) guidance and advice concerning any mineral properties owned by the Company or interests in mineral properties acquired by the Company and other mutually agreed services. Argentum is paid a base fee rate of $25,000 per month (the “Argentum Base Fee”), subject to annual review by the Board. Argentum is also eligible for an incentive fee and the grant of Options pursuant to the Option agreement as determined by the Board at its discretion. See “Termination and Change of Control Benefits” for further information with respect to certain of the Company’s additional obligations under the Argentum Agreement.

 

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STATEMENT OF EXECUTIVE COMPENSATION

 

Flotsam Management Services Agreement

 

Craig Roberts, former Chief Executive Officer, provided management services to the Company through Flotsam Cove Holdings Ltd. (“Flotsam”). The Company entered into a management services agreement with Flotsam dated March 1, 2020, with respect to the provision of certain management and administrative consulting services provided by Flotsam to the Company (the “Flotsam Agreement”). Pursuant to the terms and conditions of the Flotsam Agreement, Flotsam provided certain management consulting services to the Company as may be requested by and at the direction of the Board from time to time, including: (i) guidance, advice and services with respect to strategic planning, future growth, projects and business activities; (ii) guidance and advice in relation to the day to day operation and business of the Company; (iii) guidance and advice concerning proposed acquisitions, divestitures, joint ventures and business combinations, (iv) guidance and advice concerning any mineral properties owned by the Company or interests in mineral properties acquired by the Company and other mutually agreed services. Flotsam was paid a base fee rate of $25,000 per month (the “Flotsam Base Fee”), subject to annual review by the Board. The Flotsam Agreement was terminated on April 14, 2022 as part of a planned leadership transition pursuant to which Collin Kettell was appointed CEO. See “Termination and Change of Control Benefits” for further information with respect to certain of the Company’s additional obligations under the Flotsam Agreement.

 

Bruno Management Services Agreement

 

Denis Laviolette, President and Director, provides his management services to the Company through Bruno Management Services Corporation (“Bruno”). The Company entered into a management services agreement with Bruno dated March 1, 2020, with respect to the provision of certain management and administrative consulting services provided by Bruno to the Company (the “Bruno Agreement”). Pursuant to the terms and conditions of the Bruno Agreement, Bruno provides certain management consulting services to the Company as may be requested by and at the direction of the Board from time to time, including: (i) guidance, advice and services with respect to strategic planning, future growth, projects and business activities; (ii) guidance and advice in relation to the day to day operation and business of the Company; (iii) guidance and advice concerning proposed acquisitions, divestitures, joint ventures and business combinations, (iv) guidance and advice concerning any mineral properties owned by the Company or interests in mineral properties acquired by the Company, (v) guidance and advice in connection with the communications with our shareholders and responding to shareholder inquiries and other mutually agreed services. Bruno is paid a base fee rate of $17,500 per month (the “Bruno Base Fee”), subject to annual review by the Board. Bruno is also eligible for an incentive fee and the grant of Options as determined by the Board at its discretion. See “Termination and Change of Control Benefits” for further information with respect to certain of the Company’s additional obligations under the Bruno Agreement.

 

BM Strategic Management Services Agreement

 

Michael Kanevsky, Chief Financial Officer, provides his services to the Company through a third-party management services agreement with BM Strategic (the “BM Strategic Management Services Agreement”). Pursuant to the terms of the BM Strategic Management Services Agreement, BM Strategic provides all CFO services to the Company.

 

Matheson Agreement

 

The Company entered into a management services agreement with Greg Matheson, Chief Operating Officer (“Matheson”), on August 11, 2020, with respect to the provision of certain management consulting services provided by Mr. Matheson to the Company (the “Matheson Agreement”). Pursuant to the terms and conditions of the Matheson Agreement, Matheson provides certain management consulting services to the Company as may be requested by and at the direction of the Board from time to time, including: (i) overseeing the day-to-day operational functions of the Company; (ii) leading the Company’s mineral exploration /mining team; (iii) Coordinating studies on the Company’s mineral exploration/mining projects; (iv) organizing and developing mineral exploration/mining activities; (v) ensuring the safe operation of all mineral exploration, mining, technical services and other general service activities; (vi) leading the Company in meeting its environmental,

 

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STATEMENT OF EXECUTIVE COMPENSATION

 

health and safety system requirements; (vii) participating in the development of resource development strategies; and (viii) ensuring the workforce of the Company is informed on direction and targets through a coordinated communication and re-engagement plan. Matheson is paid a base fee rate of $16,250 per month (the “Matheson Base Fee”), subject to annual review by the Board. Matheson is also eligible for an incentive fee and the grant of Options as determined by the Board at its discretion. See “Termination and Change of Control Benefits” for further information with respect to certain of the Company’s additional obligations under the Bruno Agreement.

 

Incentive Plan Awards

 

Outstanding Share-based and Option-based Awards

 

The following table discloses the particulars of all awards for each NEO outstanding at the end of the Company’s financial year ended December 31, 2021, including awards granted before this most recently completed financial year:

  

   Option-based Awards  Share-based Awards
Name  Number of
securities
underlying
unexercised
options
(#)		  Option
exercise price
($)		  Option
expiration
date		  Value of
unexercised
in-the-
money
Options
($)		  Number of
shares or units
of shares that
have not
vested
(#)		  Market or
payout value
of share-based
awards that
have not
vested
($)		  Market or
payout value
of vested
share-based
awards not
paid out or
distributed
($)
Collin Kettell
CEO, Executive Chairman and Director		 

4,280,000

261,000

  4.10
6.79		  2025-12-31
2026-04-29		 

20,886,400

571,590

  Nil  Nil  Nil
Craig Roberts
Former CEO and Former Director		 

1,100,000

125,000

1,250,000

700,000

261,000

 

1.00

1.075

1.40

4.10

6.79

  2025-04-15
2025-05-23
2025-08-11
2025-12-31
2026-04-29		 

8,778,000

988,125

9,475,000

3,416,000

571,590

  Nil  Nil  Nil
Michael Kanevsky
CFO		  Nil  N/A  N/A  N/A  Nil  Nil  Nil
Denis Laviolette
President and Director		 

100,000

50,000

1,000,000

50,000

261,000

 

1.00

1.075

1.40

4.10

6.79

  2025-04-15
2025-05-23
2025-08-11
2025-12-31
2026-04-29		 

798,000

395,250

7,580,000

244,000

571,590

  Nil  Nil  Nil
Greg Matheson
Chief Operating Officer		 

25,000

125,000

50,000

110,000

 

1.075

1.40

4.10

6.79

  2025-05-23
2025-08-11
2025-12-31
2026-04-29		 

197,625

947,500

244,000

240,900

  Nil  Nil  Nil

 

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STATEMENT OF EXECUTIVE COMPENSATION

 

Incentive Plan Awards – Value Vested or Earned During the Year

 

The following table summarizes the value of each incentive plan award vested or earned by each NEO during the financial year ended December 31, 2021:

 

         Non-equity incentive plan
   Option-based awards –  Share-based awards – Value  compensation – Value earned
   Value vested during the year  vested during the year  during the year
Name  ($)  ($)  ($)
Collin Kettell
CEO, Chairman and Director		  Nil  Nil  Nil
Craig Roberts
Former CEO and Former Director		  Nil  Nil  Nil
Michael Kanevsky
CFO		  Nil  Nil  Nil
Denis Laviolette
President and Director		  Nil  Nil  Nil
Greg Matheson
Chief Operating Officer		  Nil  Nil  Nil

 

Option Plan

 

On June 17, 2020, the Company’s shareholders approved the Option Plan. The purpose of the Option Plan is to provide the Company with a share-related mechanism to attract, retain and motivate qualified directors, officers, employees, and consultants, to reward those individuals from time to time for their contributions toward the long-term goals of the Company and to enable and encourage those individuals to acquire Common Shares as long-term investments. The Company is required to obtain shareholder approval of the Option Plan on a yearly basis in accordance with the policies of the TSX Venture Exchange (the “TSXV”).

 

As at the date hereof, there are 13,641,125 Options issued and outstanding, with 2,880,800 remaining available for issuance under the Option Plan. The general terms and conditions of the Option Plan are reflected in the disclosure below.

 

Administration The Option Plan is administered by the Board, or such director or other senior officer or employee of the Company as may be designated as administrator by the Board. The Board or such committee may make, amend and repeal at any time, and from time to time, such regulations not inconsistent with the Option Plan.
   
Number of Shares The maximum number of Common Shares issuable under the Option Plan shall not exceed 10% of the number of Common Shares issued and outstanding as of each the date on which the Board grants the Option (the “Award Date”). The number of Common Shares underlying Options that have been cancelled, that have expired without being exercised in full, and that have been issued upon exercise of Options shall not reduce the number of Common Shares issuable under the Option Plan and shall again be available for issuance thereunder.
   
Securities Each Option entitles the holder thereof (an “Option Holder”) to purchase one Common Share at an exercise price determined by the Board.

 

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STATEMENT OF EXECUTIVE COMPENSATION

 

Participation Any director, senior officer, management company, employee or consultant of the Company (including any subsidiary of the Company), as the Board may determine.
   
Exercise Price The exercise price of an Option will be determined by the Board in its sole discretion, provided that the exercise price will not be less than the Discounted Market Price (as defined in the policies of the TSXV) (or, if the Common Shares are not listed for trading on the TSXV, then the permittable discounted market price on such exchange or quotation system on which the Common Shares are then listed or quoted for trading) or such other price as may be required or permitted by the TSXV from time to time.
   
  The Board may, at the time an Option is awarded or upon renegotiation of the same, attach restrictions relating to the exercise of the Option, including vesting provisions. Any such restrictions shall be recorded in the applicable written agreement between the Company and an Option Holder giving effect to an award of Options.
   
Exercise Period The exercise period of an Option will be the period from and including the Award Date through to and including the expiry date that will be determined by the Board at the time of grant (the “Expiry Date”), provided that the Expiry Date of an Option will be no later than the tenth anniversary of the Award Date of the Option, provided that such date does not fall within a Blackout Period (as defined in the Option Plan).
   
Cessation of Employment Subject to certain limitations, in the event that an Option Holder ceases employment with the Company, other than by reason of death, the Expiry Date of the Option will be 90 days after the date which the Option Holder ceases employment (the “Termination Date”), unless the Option Holder is terminated for cause, in which case the Expiry Date will be the Termination Date.
   
  In the event that an Option Holder should die while he or she is still director, senior officer, management company, employee or consultant of the Company, the Expiry Date will be 12 months from the date of death of the Option Holder.
   
  Subject to certain limitations, any unvested Option which vests on or after the Termination Date (or date of death, if applicable) but prior to the Expiry Date, will be exercisable by the Option Holder until the Expiry Date. Any unvested Option held by an Option Holder who ceases employment as a result of termination for cause, will not vest and will terminate as of the Termination Date.
   
  In the event that the Option Holder holds his or her Option as an employee or consultant retained by the Company to provide Investor Relations Activities (as defined in the TSXV’s Corporate Finance Manual) and ceases to be an employee or consultant of the Company other than by reason of death, the Expiry Date will be the date such Option Holder ceases to be an employee or consultant of the Company.
   
Acceleration Events If the Company seeks shareholder approval for a transaction which would constitute an Acceleration Event (as defined in the Option Plan) or third party makes a bona fide formal offer to the Company or its shareholders which would constitute an Acceleration Event, the Board may (i) permit the Option Holders to exercise their Options, as to all or any of such

 

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STATEMENT OF EXECUTIVE COMPENSATION

 

  Options that have not previously been exercised (regardless of any vesting restrictions), but in no event later than the Expiry Date of the Option, so that the Option Holders may participate in such transaction; and (ii) require the acceleration of the time for the exercise of the Options and of the time for the fulfilment of any conditions or restrictions on such exercise.
   
  Notwithstanding any other provision of the Option Plan or the terms of any Option, if at any time when Options remains unexercised and the Company completes any transaction which constitutes an Acceleration Event, all outstanding unvested Options will automatically vest.
   
  Any proposed acceleration of vesting provisions is subject to the policies and necessary approvals of the TSXV, if applicable.
   
Limitations The maximum number of Common Shares which may be issuable, at any time, to Insiders (as defined in the Option Plan) under the Option Plan, together with any other share-based compensation arrangements of the Company, will be 10% of the total number of Common Shares issued and outstanding. The maximum number of Common Shares which may be issued, within any one-year period, to Insiders under the Option Plan, together with any other share-based compensation arrangements of the Company, will be 10% of the total number of Common Shares issued and outstanding. The total number of Options awarded to any one individual in any twelve-month period will not exceed 5% of the issued and outstanding Common Shares of the Company at the Award Date unless the Company has obtained disinterested shareholder approval as required by the TSXV.
   
  The total number of Options awarded to any one consultant of the Company in any twelve-month period will not exceed 2% of the issued and outstanding Common Shares of the Company at the Award Date unless consent is obtained from the TSXV.
   
  The total number of Options awarded to all persons retained by the Company to provide Investor Relations Activities will not exceed 2% of the issued and outstanding Common Shares of the Company, in any twelvemonth period, calculated at the Award Date unless consent is obtained from the TSXV. Options granted to persons retained to provide Investor Relations Activities will vest in stages over not less than twelve months with no more than one quarter of the Options vesting in any three-month period.
   
Amendments Subject to certain exceptions and any applicable regulatory approval, the Board may amend the Option Plan and the terms and conditions of any Option previously awarded or thereafter to be awarded for the purpose of complying with any changes in any relevant law, TSXV policy, rule or regulation applicable to the Option Plan, any Option or the Common Shares, or for any other purpose which the Board may deem desirable or necessary and may be permitted by all relevant laws, rules and regulations, provided that any such amendment will not materially impair any right of any Option Holder pursuant to any Option awarded prior to such amendment.
   
  The Board may only amend the provisions of the Option Plan relating to the following if the Board obtains the approval of the shareholders of the Company: (i) persons eligible to be granted Options under the Option Plan; (ii) the maximum number or percentage of Common Shares reserved

 

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STATEMENT OF EXECUTIVE COMPENSATION

 

  for issuance upon exercise of Options available under the Option Plan; (iii) the limitations on grants of Options to any one person, Insiders, consultants, or persons involved in Investor Relations Activities; (iv) the method for determining the exercise price for Options; (v) the maximum term of Options; (vi) the expiry and termination provisions applicable to Options; or (vii) amendments to the amendment provisions of the Option Plan.
   
  Disinterested shareholders of the Company must approve any amendment to Options held by an Insider at the time of the amendment that would have the effect of decreasing the exercise price of such Options.
   
Termination The Board may terminate the Option Plan any time provided that such termination shall not alter the terms or conditions of any Option or impair any right of any Option Holder pursuant to any Option awarded prior to the date of such termination and notwithstanding such termination, the Company, such Options and such Option Holders shall continue to be governed by the provisions of the Option Plan.

 

The full text of the Option Plan is available under the Company’s profile on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

 

Pension Plan Benefits

 

The Company has not established at this time any pension plans or deferred compensation plans for directors or NEOs that provide for payments or benefits at, following, or in connection with retirement.

 

Termination and Change of Control Benefits

 

Termination and Change of Control Benefits

 

As of the date hereof, other than as described below, we do not have any contract, agreement, plan or arrangement that provides for payments to the NEOs at, following, or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement, a change in control of the Company or a change in a director or NEO’s responsibilities.

 

For the purposes of this section, “Change of Control” means change in control of the Company, which includes the acquisition by a person of 50% or more of the voting securities of the Company, the removal of 50% or more of the incumbent members of the Board, or a transaction the result of which is that the current voting shareholders of the Company own less than 50% of the voting shares of the resulting or successor corporation, or the sale of all or substantially all of the Company’s assets.

 

Argentum Management Services Agreement

 

Under the terms of the Argentum Agreement, at any time within 60 days following a Change of Control, Argentum or the Company may elect to terminate the Argentum Agreement. Upon such termination, the Company is obliged to compensate Argentum (i) a termination fee equal to 24 months of the Argentum Base Fee, (ii) an amount equal to any incentive fee paid to Argentum within the 24 months preceding termination in connection with a Change of Control and (iii) any accrued liabilities owing to Argentum under the Argentum Agreement. The estimated incremental payments to Argentum that would result from a Change of Control occurring as at December 31, 2021 would be $600,000.

 

Flotsam Management Services Agreement

 

Under the terms of the Flotsam Agreement, at anytime within 60 days following a Change of Control of the Company, Flotsam or the Company may elect to terminate the Flotsam Agreement. Upon such termination, the Company is obliged to compensate Flotsam (i) a termination fee equal to 24 months of the Flotsam Base Fee,

 

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STATEMENT OF EXECUTIVE COMPENSATION

 

(ii) an amount equal to any incentive fee paid to Flotsam within the 24 months preceding termination in connection with a Change of Control and (iii) any accrued liabilities owing to Flotsam under the Flotsam Agreement. The estimated incremental payments to Flotsam that would result from a Change of Control occurring as at December 31, 2021 would be $600,000.

 

Bruno Management Services Agreement

 

Under the terms of the Bruno Agreement, at any time within 60 days following a Change of Control, Bruno or the Company may elect to terminate the Bruno Agreement. Upon such termination, the Company is obliged to compensate Bruno (i) a termination fee equal to 24 months of the Bruno Base Fee, (ii) an amount equal to any incentive fee paid to Bruno within the 24 months preceding termination in connection with a Change of Control and (iii) any accrued liabilities owing to Bruno under the Bruno Agreement. The estimated incremental payments to Bruno that would result from a Change of Control occurring as at December 31, 2021 would be $420,000.

 

Matheson Agreement

 

Under the terms of the Matheson Agreement, at any time within 60 days following a Change of Control, Mr. Matheson or the Company may elect to terminate the Matheson Agreement. Upon such termination, the Company is obliged to compensate Matheson (i) a termination fee equal to 24 months of the Matheson Base Fee, (ii) an amount equal to any incentive fee paid to Matheson within the 24 months preceding termination in connection with a Change of Control and (iii) any accrued liabilities owing to Mr. Matheson under the Matheson Agreement. The estimated incremental payments to Mr. Matheson that would result from a Change of Control occurring as at December 31, 2021 would be $390,000.

 

Separation Event Benefits

 

The following table presents the estimated total Change of Control and termination benefits of its NEOs, assuming the separation event occurred on December 31, 2021.

 

   Separation Event 
NEO  Resignation  Termination with
Cause		  Termination
without Cause		   Change of
Control		 
Collin Kettell,
CEO, Executive Chairman and Director		  Nil  Nil  $450,000   $600,000 
Craig A. Roberts,
Former CEO and Former Director		  Nil  Nil  $450,000   $600,000 
Michael Kanevsky, CFO  Nil  Nil   Nil    Nil 
Denis Laviolette,
President and Director		  Nil  Nil  $315,000   $420,000 
Greg Matheson, COO  Nil  Nil  $292,500   $390,000 

 

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STATEMENT OF EXECUTIVE COMPENSATION

 

Director Compensation

 

Director Compensation Table

 

The following table discloses all amounts of compensation provided by the Company to its directors who are not NEOs for the financial period ended December 31, 2021. For further details with respect to the compensation of directors who are also NEOs, please see “Statement of Executive Compensation – Summary Compensation Table” herein.

 

Name  Fees
Earned (1)
($)		   Share-
based
Awards
($)		   Option-
based
Awards
($) (1)		   Non-equity
incentive
plan
compensation
($)		  Pension
value
($)		   All other
compensation
($)		  Total
compensation
($)		 
Dr. Quinton Hennigh, Ph.D.   40,000    N/A    173,152   N/A   N/A   N/A   213,152 
Douglas Hurst   30,839    N/A    1,200,122   N/A   N/A   N/A   1,230,961 
John Anderson (2)   9,290    N/A    173,152   N/A   N/A   N/A   213,152 

 

Notes

 

(1)The weighted average grant date fair value of the Options granted during the financial year ended December 31, 2021 was $5.73 per Option. The Company uses the Black-Scholes Option Pricing model which is an industry accepted model for valuing share-based payments under IFRS 2. Options were priced using the following weighted average assumptions to estimate the fair value of options granted:

 

    Grant date   Expected  Average risk-free   Expected   Expected 
Year   share price   dividend yield  interest rate   life   volatility 
2021   $8.15   Nil   0.94%   5.0    92.27%

 

(2) John Anderson ceased to be a director of the Company on May 10, 2021.

 

Outstanding Share-based and Option-based Awards

 

The following table discloses the particulars of all awards for each director that is not also a NEO outstanding at the end of the Company’s financial year ended December 31, 2021, including awards granted before this most recently completed financial year:

 

          Option-based Awards     Share-based Awards
                                  Market or
                              Market or   payout value
    Number of               Value of     Number of   payout value   of vested
    securities               unexercised     shares or units   of share-based   share-based
    underlying               in-the-     of shares that   awards that   awards not
    unexercised     Option     Option   money     have not   have not   paid out or
    options     exercise price     expiration   options     vested   vested   distributed
Name   (#)     ($)     date   ($)     (#)   ($)   ($)

Dr. Quinton Hennigh, Ph.D.

 

 

 

 

 

 

 

 

 

 

200,000

200,000

150,000

35,000

 

 

 

 

 

 

 

 

 

 

 

 

0.50

1.40

4.10

6.79

 

 

 

 

 

 

 

 

2024-12-17

2025-08-11

2025-12-31

2026-04-29

 

 

 

 

 

 

 

 

1,696,000

1,516,000

732,000

76,650

 

 

 

 

 

 

 

 

Nil

 

 

 

 

 

 

 

Nil

 

 

 

 

 

 

 

Nil

 

 

 

Douglas Hurst     200,000       8.62     2026-05-17     72,000     Nil   Nil   Nil

 

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STATEMENT OF EXECUTIVE COMPENSATION

 

Incentive Plan Awards – Value Vested or Earned During the Year

 

The following table summarizes the value of each incentive plan award vested or earned by each director that is not also a NEO during the financial year ended December 31, 2021:

 

         Non-equity incentive plan
   Option-based awards –  Share-based awards – Value  compensation – Value earned
   Value vested during the year  vested during the year  during the year
Name  ($)  ($)  ($)
Dr. Quinton Hennigh, Ph.D.  Nil  Nil  Nil
Douglas Hurst  Nil  Nil  Nil

 

 15