Exhibit 4.4
Notice of
Annual and Special Meeting of Shareholders and
Management
Proxy Circular
Wednesday, April
17, 2024
London, Ontario
NOTICE OF
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS APRIL 17, 2024
TAKE
NOTICE that the Annual and Special Meeting of Shareholders (the “Meeting”) of VersaBank (the “Bank”) will be held
via live webcast and at the VersaBank Innovation Centre of Excellence, 1979 Otter Place, London, Ontario, on Wednesday, April 17, 2024,
at 10:30 a.m. (ET) for the following purposes:
| 1. | to receive the financial statements for the fiscal year ended October 31, 2023,
and the report of the auditors thereon; |
| 2. | to re-appoint Ernst & Young LLP, as auditors of the Bank for the ensuing year
and to authorize the directors of the Bank to fix their remuneration; |
| 3. | to elect directors for the ensuing year; |
| 4. | to renew the existing Omnibus Long-Term Incentive Plan of the Bank (the “Long-Term
Incentive Plan” or “LTIP”); and |
| 5. | to transact such other business as may properly come before the Meeting or any
adjournment or postponement thereof. |
Particulars of the matters
above are set forth in the accompanying Management Proxy Circular.
The Board of Directors
of the Bank has fixed February 22, 2024, as the record date for determining Shareholders entitled to receive notice of and to vote at
the Meeting.
NOTICE FOR REGISTERED
SHAREHOLDERS: You are encouraged to complete the form of proxy accompanying this Notice of Meeting and return it to Odyssey Trust Corporation
in accordance with the instructions provided in the form of proxy, whether or not you plan to attend the Meeting. Failure to submit your
form of proxy by 10:30 a.m. (ET) on April 15, 2024, may result in your shares not being voted at the Meeting.
If you have received
this Notice of Meeting and the Management Proxy Circular from your broker or another intermediary, we encourage you to complete and return
the voting instruction form or form of proxy provided to you by your intermediary in accordance with the instructions provided with such
form.
Your vote is important!
DATED
at the City of London, in the Province of Ontario, this 22nd day of February 2024.
By order of the Board of Directors,
Brent T. Hodge
General Counsel and Corporate
Secretary
MANAGEMENT PROXY
CIRCULAR
All information
is as of February 22, 2024, and all dollar amounts are expressed in Canadian dollars, unless otherwise stated.
| PART I–VOTING AND PROXY INFORMATION |
4 |
| |
SOLICITATION OF PROXIES BY MANAGEMENT |
4 |
| |
APPOINTMENT OF PROXIES |
4 |
| |
ADVICE TO NON-REGISTERED SHAREHOLDERS |
4 |
| |
REVOCATION OF PROXIES |
5 |
| |
EXERCISE OF DISCRETION WITH RESPECT TO PROXIES |
6 |
| |
QUORUM |
6 |
| PART II – VOTING SHARES AND PRINCIPAL HOLDERS OF VOTING SHARES |
6 |
| PART III – BUSINESS TO BE TRANSACTED AT THE MEETING |
7 |
| |
1 FINANCIAL STATEMENTS |
7 |
| |
2 APPOINTMENT OF AUDITORS |
7 |
| |
3 ELECTION OF DIRECTORS |
7 |
| |
4 Renewal of The Bank’s OMNIBUS Long-Term Incentive Plan |
11 |
| PART IV – STATEMENT OF EXECUTIVE COMPENSATION |
15 |
| |
COMPENSATION DISCUSSION & ANALYSIS |
15 |
| |
PERFORMANCE GRAPH |
23 |
| |
SUMMARY COMPENSATION TABLE |
24 |
| |
TERMINATION AND CHANGE OF CONTROL BENEFITS |
26 |
| PART V – STATEMENT OF DIRECTOR COMPENSATION |
29 |
| PART VI – SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS |
31 |
| |
INCENTIVE PLAN AWARDS |
31 |
| PART VII – INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS |
33 |
| |
AGGREGATE INDEBTEDNESS OUTSTANDING |
33 |
| |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS |
33 |
| PART VIII – INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS |
34 |
| PART IX – AUDIT COMMITTEE |
34 |
| PART X – CORPORATE GOVERNANCE |
34 |
| PART XI – ADDITIONAL INFORMATION |
39 |
| |
SHAREHOLDER PROPOSALS |
39 |
| |
ADDITIONAL INFORMATION |
39 |
| |
DIRECTORS’ APPROVAL |
39 |
| SCHEDULE A – LONG-TERM INCENTIVE PLAN |
40 |
| SCHEDULE B – MANDATE OF THE BOARD OF DIRECTORS |
41 |
MANAGEMENT PROXY
CIRCULAR
PART
I – VOTING AND PROXY INFORMATION
|
SOLICITATION OF PROXIES BY MANAGEMENT
This Management
Proxy Circular is furnished to holders (“Shareholders”) of common shares (“Shares”) of VersaBank (the “Bank”)
in connection with the solicitation of proxies by or on behalf of the management of the Bank for use at the Annual and Special Meeting
of Shareholders, and any adjournment or postponement thereof (the “Meeting”). The Meeting will be held via live webcast and
at the VersaBank Innovation Centre of Excellence, 1979 Otter Place, London Ontario, on Wednesday, April 17, 2024, at 10:30 a.m. (ET) for
the purposes set forth in the accompanying Notice of Annual and Special Meeting of Shareholders (the “Notice”). It is
expected that management will solicit proxies electronically and by mail. Proxies may also be solicited personally or by telephone by
officers and directors and other representatives of the Bank, as the case may be. The cost of solicitation by or on behalf of management
will be borne by the Bank.
This
Management Proxy Circular and other proxy-related materials are being sent to both Registered and Non- Registered Shareholders (each as
defined below). The Bank is not sending proxy-related materials directly to Non- Registered Shareholders and is not relying on the notice-and-access
provisions of applicable securities laws for the delivery of proxy-related materials to either Registered or Non-Registered Shareholders.
Instead, the Bank will deliver proxy-related materials to intermediaries (as defined below under the heading “Voting and Proxy Information
– Advice to Non-Registered Shareholders”) and they will be asked to promptly forward the proxy-related materials to Non-Registered
Shareholders. If you are a Non-Registered Shareholder, your intermediary should send you a voting instruction form or form of proxy with
this Management Proxy Circular. The Bank has elected to pay for the delivery of the proxy-related materials to objecting Non-Registered
Shareholders.
APPOINTMENT OF PROXIES
The persons
named in the enclosed form of proxy and voting instruction forms are directors and/or officers of the Bank. AS A SHAREHOLDER, YOU
HAVE THE RIGHT TO APPOINT A PERSON, WHO NEED NOT BE A SHAREHOLDER, AS YOUR NOMINEE TO ATTEND AND ACT ON YOUR BEHALF AT THE MEETING
OTHER THAN THE PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY. This right may be exercised by inserting such person’s
name in the blank space provided in the form of proxy. Proxies are to be returned to Odyssey Trust Corporation in accordance with
the instructions provided in the enclosed form of proxy. A proxy is only valid at the Meeting or any adjournment or postponement
thereof.
Shareholders who
are recorded on the Bank’s share register as the registered owners of their Shares (“Registered Shareholders”) and who
plan to attend and vote their Shares in person at the Meeting should not complete or return the enclosed form of proxy. Their votes will
be taken and counted at the Meeting. Such Registered Shareholders are to register with the Bank’s transfer agent, Odyssey Trust
Corporation, upon their arrival at the Meeting.
ADVICE TO NON-REGISTERED SHAREHOLDERS
The information
in this section is of significant importance to a substantial number of Shareholders who do not hold their Shares in their own name, but
who hold their Shares indirectly through a bank, trust company, securities
broker,
trustee or other entity (an “intermediary”). Shareholders that do not hold their Shares in their own name are referred to
in this document as “Non-Registered Shareholders.”
As Shares held by
intermediaries on behalf of their clients can only be voted for or against resolutions upon the instructions of the applicable Non-Registered
Shareholder, each intermediary is required to seek instructions from such Non-Registered Shareholders as to how their Shares are to be
voted at the Meeting. For that reason, if you are a Non-Registered Shareholder, you will have received this Management Proxy Circular
from your intermediary along with a form of proxy or a voting instruction form.
Every intermediary
has its own mailing procedures and provides its own return instructions, which Non-Registered Shareholders should follow closely in order
to ensure that their Shares are voted at the Meeting. A Non-Registered Shareholder may have received from the intermediary either a request
for voting instructions or a form of proxy that is identical to the form of proxy provided to Registered Shareholders; however, the purpose
of any such form of proxy is limited to instructing the intermediary how to vote on behalf of the Non-Registered Shareholder. A Non-
Registered Shareholder must return the voting instruction form or the form of proxy to its intermediary well in advance of the Meeting
in order to have his, her or its Shares voted.
A Non-Registered
Shareholder that receives a form of proxy or voting instruction form from an intermediary cannot use that form of proxy or voting instruction
form to vote shares directly at the Meeting. Non-Registered Shareholders who wish to vote in person at the Meeting or appoint a person
as their nominee to attend and vote on their behalf at the Meeting must provide their intermediary with the appropriate documentation
in order to be appointed as proxyholder. A Non-Registered Shareholder should contact its intermediary to determine what documentation
the intermediary requires in order for such Non-Registered Shareholder or its nominee to be appointed proxyholder, and to attend and vote
their Shares at the Meeting. Only after the intermediary appoints a Non-Registered Shareholder or its nominee as a proxyholder can that
Non-Registered Shareholder or its nominee vote shares directly at the Meeting.
The majority of
intermediaries now delegate responsibility for obtaining instructions from clients to Broadridge Financial Solutions, Inc. (“Broadridge”).
Broadridge typically prepares a special voting instruction form, mails those forms to Non-Registered Shareholders and asks for appropriate
instructions respecting the voting of Shares to be represented at the Meeting. Non-Registered Shareholders are requested to complete and
return the voting instruction form to Broadridge by mail in the envelope provided. Alternatively, Non-Registered Shareholders can call
a toll-free telephone number or access Broadridge’s dedicated voting website (each as noted on the voting instruction form) to deliver
their voting instructions and vote the Shares held by them. Broadridge then tabulates the results of all voting instructions received
and provides appropriate instructions respecting the voting of Shares to be represented at the Meeting. A Non-Registered Shareholder receiving
a voting instruction form from Broadridge must complete and return such form in accordance with the instructions set out thereon well
in advance of the Meeting in order to have his, her or its Shares voted. Further, a Non-Registered Shareholder receiving a voting instruction
form from Broadridge cannot use that form to vote his, her or its Shares in person at the Meeting. If you are a Non-Registered Shareholder
receiving a Broadridge voting instruction form and you wish to vote your Shares in person at the Meeting, you should contact your intermediary
and follow their instructions for completion and return of the form of proxy or voting instruction form provided directly by them, once
received.
REVOCATION OF PROXIES
Registered
Shareholders
A Registered Shareholder
may revoke a proxy:
| (a) | by an instrument in writing executed by the Shareholder or by an attorney in writing
or, if the Shareholder is a corporation, under its corporate seal or by an officer or attorney thereof duly authorized, and deposited: |
| i. | at the registered office of the Bank (Suite 2002, 140 Fullarton Street, London,
Ontario N6A 5P2) at any time up to and including the last business day preceding the day of the Meeting or any adjournment or postponement
thereof; or |
| ii. | with the chair of the Meeting at the Meeting; or |
| (b) | in any other manner permitted by law. |
Non-Registered
Shareholders
If you are a Non-Registered
Shareholder and wish to revoke your voting instructions, follow the instructions provided by your intermediary in your voting instruction
form or contact your intermediary.
EXERCISE OF DISCRETION WITH RESPECT TO
PROXIES
Shares represented
by proxies will be voted or withheld from voting by the persons designated in the form of proxy or voting instruction form in accordance
with the direction of the Shareholders appointing them. Other than with respect to the election of directors which is addressed below,
in the event that no specifications are made in the form of proxy or voting instruction form designating management’s nominees as
proxyholders, the Shares represented by the proxies will be voted by such proxyholders FOR the matters identified in the Notice to be
voted upon at the Meeting.
As
described below under the heading “Business to be Transacted at the Meeting – Election of Directors”, voting for the
election of nominees to the Bank’s board of directors (the “Board”) must be done by cumulative voting. Unless a Shareholder
giving a proxy or voting instructions specifies that the Shares represented by such proxy or voting instructions be withheld from voting
on the election of all or any of the directors, or specifies how the Shareholder wishes to distribute the votes represented by the proxy
or voting instructions among the candidates, the persons named in the enclosed form of proxy or voting instruction form intend to vote
the Shares represented by such proxy or voting instructions FOR the election of the nominees listed herein (or any replacements
thereof) and to distribute votes among such nominees in such manner as in their discretion is most likely to cause such nominees to be
duly elected as the directors of the Bank at the Meeting.
The enclosed form
of proxy and/or voting instruction form confers discretionary authority upon the persons named therein as proxyholders with respect to
amendments and variations to matters identified in the Notice to be voted upon at the Meeting, and with respect to other matters that
may properly come before the Meeting. At the time of the preparation of this Management Proxy Circular, management of the Bank knows of
no such amendments, variations or other matters to come before the Meeting. If, however, amendments, variations or other matters which
are not now known to management of the Bank should properly come before the Meeting, the Shares represented by any proxy or voting instructions
will be voted by the persons named in the form of proxy and voting instruction form in accordance with their best judgment.
QUORUM
A quorum is present
at the Meeting if the holders of at least twenty-five percent (25%) of the Shares who are entitled to vote at the Meeting are present
in person or represented by proxyholders.
PART II – VOTING SHARES AND PRINCIPAL
HOLDERS OF VOTING SHARES
|
As of February 22,
2024, there were 25,964,424 Shares issued and outstanding. Each Share carries the right to one vote in respect of each of the matters
properly coming before the Meeting, except for the election of directors, for which cumulative voting is used (for additional details
with respect to cumulative voting, please refer to the information set out below under the heading “Business to be Transacted at
the Meeting – Election of Directors”).
The Board has fixed
February 22, 2024, as the record date for determining Shareholders entitled to receive notice of and to vote at the Meeting. Each Registered
Shareholder as of the close of business on February 22, 2024, shall be entitled to vote the Shares in his, her or its name on that date,
except to the extent that the person has transferred the ownership of any of his, her or its Shares after February 22, 2024, and the transferee
of those Shares produces properly endorsed share certificates or otherwise establishes that he, she or it owned such Shares as of February
22, 2024, and demands, not later than ten (10) days before the Meeting, that his, her or its name be included in the list of Shareholders
entitled to receive notice of and to vote at the Meeting, in which event the transferee shall be entitled to vote such Shares at the Meeting.
To the knowledge
of the Bank, as of February 22, 2024, no person or company beneficially owned, or exercised control or direction, directly or indirectly,
over more than 10% of the Shares, other than 340268 Ontario Limited, which owned 8,511,652 Shares, being approximately 32.78% of the issued
and outstanding Shares.
PART III – BUSINESS TO BE TRANSACTED
AT THE MEETING
|
The Consolidated
Financial Statements of the Bank for the fiscal years ended October 31, 2023 (“Fiscal 2023”), and 2022 (“Fiscal 2022”),
have been mailed to Shareholders with this Management Proxy Circular. Shareholders and proxyholders will have an opportunity to review
and discuss the Bank’s Fiscal 2023 results with management at the Meeting.
The directors propose
Ernst & Young LLP for re-appointment as auditors of the Bank to hold office until the close of the Bank’s next annual meeting
of Shareholders. This proposal is supported by the comprehensive review of proposals from qualified external auditors in Fiscal 2022,
and the annual review of the external auditor that was carried out in January 2024 by the Board’s Audit Committee (the “Audit
Committee”) in keeping with our commitment to follow best practices in corporate governance.
In the past, the
Board has fixed the remuneration of the auditors of the Bank. Such remuneration has been based upon the complexity of the matters dealt
with and time spent in providing services to the Bank. The Board is satisfied that the remuneration negotiated in the past with the auditors
of the Bank has been reasonable under the circumstances and reflective of the audit quality and performance of the auditors. Information
concerning the audit- related fees paid to Ernst & Young LLP during Fiscal 2023 and to KPMG LLP during Fiscal 2022 is provided on
page 22 of the Bank’s Annual Information Form for Fiscal 2023, which is available on SEDAR+ at www.sedarplus.ca and EDGAR
at www.sec.gov/edgar.
It is recommended
that Shareholders vote FOR the resolutions relating to the appointment of auditors and the authorization of the directors to fix
the remuneration of the auditors. In the absence of contrary instructions, the persons named in the enclosed form of proxy or voting instruction
form intend to vote FOR the appointment of the auditors and the authorization of the directors to fix the remuneration of the auditors.
Shareholders of
the Bank will be asked to elect ten (10) nominees as directors of the Bank by cumulative voting to hold office until the close of the
next annual general meeting of the Bank or until his or her successor is duly elected, unless his or her office is earlier vacated and
a replacement director is appointed in accordance with the by-laws of the Bank. As required under the Bank Act (Canada), where
directors are to be elected by cumulative voting, each Shareholder entitled to vote at an election of directors has the right to cast
a number of votes equal to the number of votes attached to the Shares held by the Shareholder multiplied by the number of directors to
be elected, and the Shareholder may cast all such votes in favour of one candidate or distribute them among the candidates in any
manner. If a Shareholder
has voted for more than one candidate without specifying the distribution of the votes among the candidates, the Shareholder is deemed
to have distributed the votes equally among the candidates for whom the Shareholder voted. If the number of candidates nominated for director
exceeds the number of positions to be filled, the candidates who receive the least number of votes will be eliminated until the number
of candidates remaining equals the number of positions to be filled.
All of the individuals
nominated by the Conduct Review, Governance & HR Committee (the “HR Committee”) for election to the Board at the Meeting
are currently directors of the Bank. All directors were elected to the Board at the Bank’s annual meeting of Shareholders on April
19, 2023, for a term expiring at the close of the Meeting.
Unless a Shareholder
giving a proxy or voting instructions specifies that their Shares be withheld from voting on the election of all or any of the director
nominees, or specifies how the Shareholder wishes to distribute the votes represented by his, her or its proxy or voting instructions
among the nominees, the persons named in the enclosed form of proxy or voting instruction form intend to cast the votes represented by
such proxy FOR the election of the nominees named herein (or any replacements thereof) and to distribute votes among such nominees
in such manner as in their discretion is most likely to cause such nominees to be duly elected as the directors of the Bank at the Meeting.
The Board recommends that
Shareholders vote FOR the following director nominees.
| The Honourable Thomas A. Hockin |
David A. Bratton |
Susan T. McGovern |
| David R. Taylor |
Peter M. Irwin |
Paul G. Oliver |
|
Gabrielle Bochynek
Robbert-Jan Brabander |
Richard H. L. Jankura
Arthur Linton |
|
The following table
sets forth the record of attendance at Board and committee meetings held during Fiscal 2023 for each director who is standing for re-election
at the Meeting. Additional information respecting the Bank’s current Board and its committees is contained in the Bank’s Annual
Information Form for Fiscal 2023, which can be found under the Bank’s profile on SEDAR+ at www. sedarplus.ca and EDGAR at
www.sec.gov/edgar.
Summary of Attendance
of Directors
|
Director(1) |
Number of meetings attended |
|
Board |
Audit Committee |
HR Committee |
Risk Oversight
Committee |
Innovation and Technology Committee |
| T. Hockin |
10 of 10 |
n/a |
n/a |
n/a |
n/a |
| D. Taylor |
10 of 10 |
n/a |
n/a |
n/a |
n/a |
| G. Bochynek |
10 of 10 |
n/a |
7 of 7 |
n/a |
n/a |
| R. J. Brabander |
10 of 10 |
n/a |
n/a |
11 of 11 |
4 of 4 |
| D. Bratton |
9 of 10 |
n/a |
7 of 7 |
n/a |
n/a |
| P. Irwin |
10 of 10 |
7 of 7 |
n/a |
11 of 11 |
n/a |
| R. Jankura |
10 of 10 |
7 of 7 |
n/a |
11 of 11 |
n/a |
| A. Linton |
10 of 10 |
n/a |
n/a |
n/a |
4 of 4 |
| S. McGovern |
10 of 10 |
n/a |
7 of |
n/a |
4 of 4 |
| P. Oliver |
10 of 10 |
7 of 7 |
n/a |
n/a |
n/a |
Notes:
| (1) | At the invitation of the Chair of a committee, directors regularly attend committee
meetings to which they are not a member, as observers. This table does not include instances of directors attending any such meetings
in an observer capacity. |
The information set forth in the table below,
not being within the knowledge of the Bank, has been furnished by the respective director nominees individually and is current to February
22, 2024.
| Name,
City, Province or State and Country, and Shares(1) |
Office held and date first became a director |
Principal Occupation |
 |
The
Honourable Thomas A. Hockin(2)
Rancho
Mirage, California, USA
Shares – 29,655
Series
1 Preferred Shares(4) – 3,500
|
Chair
Director since August 21, 2014
|
Retired, former Executive Director of the International Monetary Fund |
 |
Susan
T. McGovern (3)(6)(7)
Aurora,
Ontario, Canada
Shares – 36,000
Series
1 Preferred Shares(4) – Nil
|
Vice-Chair
Director since May 6, 2011
|
Executive Advisor in the Ontario Ministry of Finance |
 |
David
R. Taylor
Ilderton,
Ontario, Canada
Shares – 1,284,406
Series
1 Preferred Shares(4) – Nil |
President & Chief Executive Officer
Director since January 18, 1993
|
President & Chief Executive Officer of VersaBank |
 |
Gabrielle
Bochynek(7)
Stratford, Ontario, Canada
Shares – 12,480
Series
1 Preferred Shares(4) – Nil
|
Director since April 24, 2019 |
Principal, Human Resources and Labour Relations, The Osborne Group |
 |
Robbert-Jan
Brabander(5)(6)
Richmond
Hill, Ontario, Canada
Shares – 77,670
Series
1 Preferred Shares(4) – 935
|
Director since November 4, 2009 |
Managing Director of Bells & Whistles Communications, Inc. and former Chief Financial Officer & Treasurer of General Motors of Canada Limited |
 |
David
A. Bratton(7)
London, Ontario,
Canada
Shares
– 31,300
Series
1 Preferred Shares(4) – Nil
|
Director since September 23, 1993 |
Retired, former President of Bratton Consulting Inc. |
 |
Peter
M. Irwin(5)(8)
Toronto, Ontario,
Canada
Shares
– 22,500
Series
1 Preferred Shares(4) – Nil
|
Director since January 1, 2021 |
Retired, former Managing Director, CIBC World Markets Inc. |
 |
Richard
H. L. Jankura(5)(8)
London, Ontario, Canada
Shares
– 2,900
Series
1 Preferred Shares(4) – Nil
|
Director since May 6, 2022 |
Retired, former Chief Financial Officer, Jones Healthcare Group |
 |
Arthur
Linton(6)
Kitchener, Ontario, Canada
Shares
– 7,000
Series
1 Preferred Shares(4) – Nil
|
Director since April 22, 2020 |
Barrister and Solicitor |
 |
Paul
G. Oliver(8)
Markham, Ontario, Canada
Shares
– 56,920
Series
1 Preferred Shares(4) – 1,400
|
Director since June 2, 2005 |
Retired, former senior partner of PricewaterhouseCoopers LLP |
Notes:
| (1) | Number of Shares includes the number of Shares beneficially owned or controlled
or directed, directly or indirectly, by each director nominee. |
| (2) | Current and proposed Chair of the Board. |
| (3) | Current and proposed Vice-Chair of the Board. |
| (4) | Holders of Series 1 Preferred Shares are entitled to receive, as and when declared
by the Board, fixed non-cumulative preferential cash dividends at the rate of $0.6772 per share per annum, or $0.1693 per share per quarter.
Such dividends are paid quarterly on the last day of January, April, July and October in each year. |
| (5) | Current and proposed member of the Risk Oversight Committee. |
| (6) | Current and proposed member of the Innovation and Technology Committee. |
| (7) | Current and proposed member of the HR Committee. |
| (8) | Current and proposed member of the Audit Committee. |
Majority Voting
The Bank has a majority
voting policy for the election of directors, which is applicable at any meeting of Shareholders where an uncontested election of directors
is held. A director nominee in an uncontested election who receives more “withheld” votes than votes in his or her favour
is expected to promptly tender his or her resignation to the Chair of the Board for consideration; however, such resignation is not effective
until it is accepted by the Board. The Board will submit the nominee’s resignation to the HR Committee for consideration. The HR
Committee will then recommend to the Board whether or not to accept the resignation. A director who tenders his or her resignation will
not participate in any meetings of the Board or the HR Committee to consider whether the resignation shall be accepted. Within 90 days
of receiving the final voting results in respect of the uncontested election, the Board will issue a press release announcing whether
it has accepted the director nominee’s resignation or explaining its reasons for not accepting the resignation; absent extenuating
circumstances, the Board expects that such resignations will be accepted.
| 4 | RENEWAL OF THE BANK’S OMNIBUS LONG-TERM INCENTIVE PLAN |
At the Meeting, Shareholders
will be asked to approve the resolution set forth below (the “LTIP Renewal Resolution”) to renew the Bank’s Omnibus
Long Term Incentive Plan (the “LTIP”). The complete text of the LTIP is set out in Schedule “A” to this Management
Proxy Circular and a summary of its material terms is provided below.
Any existing options
that were granted prior to the effective date of the LTIP pursuant to the stock option plan of Pacific & Western Bank (the “Bank
Stock Option Plan”) and the stock option plan of PWC (the “PWC Stock Option Plan” and, together with the Bank Stock
Option Plan, the “Previous Stock Option Plans”) will continue in accordance with their terms. The Previous Stock Option Plans
were not re-approved by the Shareholders at the Annual Meeting of Shareholders held on April 24, 2019 and the Bank has not granted any
further options under either plan.
The LTIP will allow
for a variety of equity based awards that provide different types of incentives to be granted to certain of our officers, employees and
consultants (in the case of options (“Options”), performance share units (“PSUs”) and restricted share units (“RSUs”))
and non-employee directors (in the case of deferred share units (“DSUs”)). Options, PSUs, RSUs and DSUs are collectively referred
to herein as “Awards”. Each Award will represent the right to receive Shares, or in the case of PSUs, RSUs and DSUs, Shares
or cash, in accordance with the terms of the LTIP. The following discussion is qualified in its entirety by the text of the LTIP.
Under the terms of
the LTIP, our Board, or if the Board by resolution so decides, a committee of the Board and/or any member of the Board, may grant Awards
to eligible participants, as applicable. Participation in the LTIP is voluntary and, if an eligible participant agrees to participate,
the grant of Awards will be evidenced by a grant agreement with each such participant. The interest of any participant in any Award is
not assignable or transferable, whether voluntary, involuntary, by operation of law or otherwise, other than by will or the laws of descent
and distribution.
The LTIP will provide
that appropriate adjustments, if any, will be made by our Board in connection with a reclassification, reorganization or other change
of our Shares, share split or consolidation, distribution, merger or amalgamation, in the Shares issuable or amounts payable to preclude
a dilution or enlargement of the benefits under the LTIP.
The maximum number
of Shares reserved for issuance, in the aggregate, under the Bank’s LTIP or pursuant to awards under any other established share
compensation arrangement, will not exceed 10% of the aggregate number of Shares issued and outstanding from time to time. As of the date
of this Management Proxy Circular, there are 25,964,424 Shares issued and outstanding, and the Bank has options outstanding under the
LTIP to purchase up to 874,393 common shares (representing approximately 3.367% of the current issued and outstanding Shares), leaving
unallocated options with respect to an aggregate of 1,195,945 Shares available for future grants (representing approximately 4.60% of
the outstanding Shares), based on the number of currently outstanding Shares. For the purposes of calculating the maximum number of Shares
reserved for issuance under the LTIP, any issuance from
treasury by the Bank
that is issued in reliance upon an exemption under applicable stock exchange rules applicable to share compensation arrangements used
as an inducement to person(s) or company(ies) not previously employed by and not previously an insider of the Bank shall not be included.
All of the Shares covered by the exercised, cancelled or terminated Awards will automatically become available Shares for the purposes
of Awards that may be subsequently granted under the LTIP. As a result, the LTIP is considered an “evergreen” plan, which
requires shareholder approval every three years pursuant to the rules of the Toronto Stock Exchange (“TSX”). The LTIP was
last approved by Shareholders at the Annual and Special Meeting of Shareholders held on April 21, 2021.
The maximum number
of Shares that may be: (i) issued to insiders of the Bank within any one-year period, and (ii) issuable to insiders of the Bank at any
time, in each case, under the LTIP alone, or when combined with all of the Bank’s other security-based compensation arrangements,
cannot exceed 10% of the aggregate number of Shares issued and outstanding from time to time determined on a non-diluted basis. The LTIP
does not provide for a maximum number of shares which may be issued to an individual pursuant to the LTIP or any other share compensation
arrangement (expressed as a percentage or otherwise).
An Option shall
be exercisable during a period established by our Board which shall commence on the date of the grant and shall terminate no later than
ten years after the date of the granting of the Option or such shorter period as the Board may determine. The minimum exercise price of
an Option will be determined based on the closing price of the Shares on the TSX on the last trading day before the date such Option is
granted. The LTIP will provide that the exercise period shall automatically be extended if the date on which it is scheduled to terminate
shall fall during a black-out period. In such cases, the extended exercise period shall terminate 10 business days after the last day
of the black-out period. In order to facilitate the payment of the exercise price of the Options, the LTIP has a cashless exercise feature
pursuant to which a participant may elect to undertake either a broker assisted ‘‘cashless exercise’’ or a ‘‘net
exercise’’ subject to the procedures set out in the LTIP, including the consent of our Board, where required. If a participant
elects to exercise Options under the “net exercise” procedures, the participant would receive a number of Shares equal to
(a) the number of Shares underlying the Options multiplied by (b) the market value of the Shares at such date less the exercise price
of such Options, (c) divided by the market value of the Shares at such date, subject to acceptance by the Board and provided that satisfactory
arrangements have been made to pay any applicable withholding taxes.
The following table
describes the impact of certain events upon the rights of holders of Options under the LTIP, including termination for cause, resignation,
retirement, termination other than for cause, and death or disability, subject to the terms of a participant’s employment agreement,
grant agreement and the change of control provisions described below:
| Event Provisions |
Provisions |
| Termination for cause |
Immediate forfeiture of all vested unvested and options. |
| Resignation, retirement and termination other than for cause |
Forfeiture of all unvested options and the earlier of the original expiry date and 90 days after resignation to exercise vested options or such longer period as our Board may determine in its sole discretion. |
| Death or disability |
Forfeiture of all unvested options and the earlier of the original expiry date and 12 months after date of death or disability to exercise vested options or such longer period as our Board may determine in its sole discretion. |
The terms and conditions
of grants of RSUs, PSUs and DSUs, including the quantity, type of award, grant date, vesting conditions, vesting periods, settlement date
and other terms and conditions with respect to these Awards, will be set out in the participant’s grant agreement. Impact of certain
events upon the rights of holders of these types of Awards, including termination for cause, resignation, retirement, termination other
than for cause and death or disability, will be set out in the participant’s grant agreement. For each PSU awarded under the LTIP,
the Board will establish (i) the applicable performance criteria and other vesting conditions, and (ii) the period of time in which such
performance criteria and other vesting conditions must be met, in order for a participant to be entitled to receive Shares in exchange
for his or her PSUs. Subject to the provisions of any award agreement and the provisions of the LTIP, all vested RSUs and PSUs will be
settled as soon as practicable following the date on which the Board determines that the performance criteria and/or other vesting conditions
with respect to the RSU and/or PSU have been met, but in all cases RSUs and PSUs will be settled prior to (i) three years following the
date of grant of the RSU or PSU, if settled by payment of cash equivalent or through purchases by the Bank on the participant’s
behalf on the open market, or (ii) ten years following the date of grant of the RSU or PSU, if the RSU or PSU will be settled by the issuance
of Shares from treasury.
Non-employee directors
may elect to receive all or a portion of their annual retainer fees in the form of a grant of DSUs in each fiscal year. The number of
DSUs will be calculated as the amount of the non-employee director’s annual retainer fee elected to be paid in DSUs divided by the
market value (as defined in the LTIP). Each non-employee director will be entitled to redeem his or her DSUs during the period commencing
on the business day immediately following his or her termination date and ending on the date that is not later than the 90th day following
such termination date, or such shorter redemption period as set out in the relevant DSU agreement.
Pursuant to the
LTIP, when dividends (other than stock dividends) are paid on Shares, participants will receive additional DSUs, RSUs and/or PSUs (“Dividend
Share Units”), as applicable, as of the dividend payment date. The number of Dividend Share Units to be granted to a participant
will be determined by multiplying the aggregate number of DSUs, RSUs and/or PSUs, as applicable, held by the participant on the relevant
record date by the amount of the dividend paid by the Bank on each Share, and dividing the result by the market value (as defined in the
LTIP) on the dividend payment date. Any Dividend Share Units granted to a participant will be subject to the same vesting conditions and
settlement terms as applicable to the related DSUs, RSUs and/or PSUs in accordance with the applicable award agreement.
In connection with
a change of control of the Bank, our Board will take such steps as are reasonably necessary or desirable to cause the conversion or exchange
or replacement of outstanding Awards into, or for, rights or other securities of substantially equivalent (or greater) value in the continuing
entity, provided that our Board may accelerate the vesting of Awards if: (i) the required steps to cause the conversion or exchange or
replacement of Awards are impossible or impracticable to take or are not being taken by the parties required to take such steps (other
than the Bank); or (ii) the Bank has entered into an agreement which, if completed, would result in a change of control and the counterparty
or counterparties to such agreement require that all outstanding Awards be exercised immediately before the effective time of such transaction
or terminated on or after the effective time of such transaction. If a participant is terminated without cause during the 12 month period
following a change of control, or after the Bank has signed a written agreement to effect a change of control but before the change of
control is completed, then any unvested Awards (based on the performance achieved up to the termination date in respect of PSUs) will
immediately vest and may be exercised within 30 days of such date.
Our Board may, in
its sole discretion, suspend or terminate the LTIP at any time, or from time to time, amend, revise or discontinue the terms and conditions
of the LTIP or of any securities granted under the LTIP and any grant agreement relating thereto, subject to any required regulatory and
TSX approval, provided that such suspension, termination, amendment, or revision will not adversely alter or impair any Award previously
granted except as permitted by the terms of the LTIP or as required by applicable laws.
Our Board may amend
the LTIP or any securities granted under the LTIP at any time without the consent of a participant provided that such amendment shall:
(i) not materially adversely alter or impair any Award previously granted except as permitted by the terms of the LTIP or upon the consent
of the applicable participant(s); and (ii) be
in compliance with
applicable law and with prior approval if required, of the shareholders of the Bank and of the TSX or any other stock exchange upon which
the Bank has applied to lists its shares, provided however that shareholder approval shall not be required for the following amendments
and our Board may make any changes which may include but are not limited to:
| · | any amendment to the vesting provisions of the LTIP
and any Award granted under the LTIP; |
| · | any amendment regarding the
provisions governing the effect of termination of a participant’s employment, contract or office; |
| · | any amendment which accelerates the date on which
any Award may be exercised under the LTIP; |
| · | any amendment necessary
to comply with applicable law or the requirements of the TSX or any other regulatory body; |
| · | any amendment of a ‘‘housekeeping’’
nature, including, without limitation, to clarify the meaning of an existing provision of the LTIP, correct or supplement any provision
of the LTIP that is inconsistent with any other provision of the LTIP, correct any grammatical or typographical errors or amend the definitions
in the LTIP; |
| · | any amendment regarding the administration of
the LTIP; and |
| · | any other amendment, fundamental
or otherwise, not requiring shareholder approval under applicable laws or the applicable rules of the TSX or any other stock exchange
upon which the Bank has applied to list its Shares. |
provided that the alteration,
amendment or variance does not:
| · | increase the maximum number
of Shares issuable under the LTIP, other than an adjustment pursuant to a change in capitalization; |
| · | reduce the exercise price
of Awards benefitting including cancellation and reissuance of an Award, except in the case of an adjustment pursuant to a change in capitalization; |
| · | extend expiration date of an Award, except in the
case of an extension due to black-out period; |
| · | remove or exceed the insider participation limits; |
| · | amend the transfer provisions of the Awards; |
| · | amend the definition of eligible
participant that would permit the issuance of Options, RSUs or PSUs to non- employee directors; or |
| · | amend the amendment provisions of the LTIP. |
The above summary
is qualified in its entirety by the full text of the LTIP, which is set out in Schedule “A” to this Management Proxy Circular.
The Board encourages Shareholders to read the full text of the LTIP before voting on the LTIP Renewal Resolution.
The Board and
management of the Bank recommend the approval of the LTIP Renewal Resolution. To be effective, the LTIP Renewal Resolution, which is set
out below must be approved by not less than a majority of the votes cast by the holders of Shares present in person or represented by
proxy at the Meeting.
SHARES REPRESENTED
BY PROXIES IN FAVOUR OF MANAGEMENT WILL BE VOTED IN FAVOUR OF THE LTIP RENEWAL RESOLUTION, UNLESS A SHAREHOLDER HAS SPECIFIED IN THE PROXY
THAT HIS, HER, OR ITS SHARES ARE TO BE VOTED AGAINST THE LTIP RENEWAL RESOLUTION.
The LTIP Renewal Resolution
to be passed is set out below:
WHEREAS:
| 1. | The Board of Directors of the VersaBank (the “Bank”) adopted an omnibus
long-term incentive plan (the “LTIP”) on February 23, 2021, which does not have a fixed maximum number of common shares issuable; |
| 2. | the shareholders of the Bank approved the LTIP at the Annual and Special Meeting
of Shareholders held on April 21, 2021; |
| 3. | the rules of the Toronto Stock Exchange provide that all unallocated options, rights
or other entitlements under a compensation arrangement which does not have a fixed number of maximum securities issuable, be approved
every three years; |
“BE
IT RESOLVED THAT:
| 1. | the renewal of the LTIP dated April 21, 2021, set out in Schedule A to the Management
Information Circular of the Bank is hereby approved; |
| 2. | all unallocated options, rights or other entitlements under the LTIP be and are hereby approved; |
| 3. | the Bank shall have the ability to continue granting options, rights or other
entitlements under the LTIP until April 17, 2027, which is the date that is 3 years from the date of the shareholder meeting at which
shareholder approval is being sought; and |
| 4. | any officer or director of the Bank be, and hereby is, authorized and empowered
to make all such arrangements, to do and perform all such acts and things, and to execute and deliver all such documents, in the name
and on behalf of the Bank, or otherwise, as such officer and director deems desirable or necessary in order to effectuate fully the purposes
of each and all of the foregoing resolutions. |
PART
IV – STATEMENT OF EXECUTIVE COMPENSATION
|
COMPENSATION DISCUSSION
& ANALYSIS
The following Compensation
Discussion & Analysis provides a description of the strategy, processes and decisions made pertaining to the oversight, design and
payout of the Bank’s compensation for its Named Executive Officers (“NEOs”) for Fiscal 2023. The NEOs as of October
31, 2023, were David Taylor, President & Chief Executive Officer (“President & CEO”); Shawn Clarke, Chief Financial
Officer (“CFO”) and each of the next three most highly compensated executive officers of the Bank being Michael Dixon, Senior
Vice President, Point-of-Sale Financing, Nick Kristo, Chief Credit Officer and John Asma, Treasurer & SVP, Deposit Services. Please
note, effective December 13, 2023, Shawn Clarke was appointed as Chief Operating Officer and John Asma was appointed as Chief Financial
Officer.
Compensation
Governance
The Board has delegated
the responsibility for oversight of the Bank’s compensation program to the HR Committee, which reports regularly to the Board.
The HR Committee
is comprised of independent directors within the meaning of National Instrument 58-101 – Disclosure of Corporate Governance Practices
(“NI 58-101”). They are currently David A. Bratton (Chair), Susan T. McGovern and Gabrielle Bochynek. No member of the HR
Committee has ever been an officer or employee of the Bank or any of its affiliates, and no member is an active chief executive officer
with a publicly traded company.
Mr. Bratton has been
a member of the Board since 1993. Mr. Bratton has over 30 years of human resource management experience. He holds Master of Business Administration,
Fellow Certified Management Consultant, and Certified Human Resources Leader designations. Mr. Bratton was an affiliate professor at the
Rotman School of Business for 18 years.
Ms.
McGovern has been a member of the Board since 2011. She has more than 30 years of experience in the federal government, the Ontario government,
the broader public sector, private corporations and the not-for-profit sector. Currently, she is an Executive Advisor in the Ontario Ministry
of Finance. As a senior leader, her strengths include corporate development and governance, human resource management, strategic communications,
stakeholder engagement, public policy development, philanthropic advancement and political acuity.
Ms. Bochynek has
been a member of the Board since 2019. She holds a Bachelor of Arts degree and Certified Human Resources Leader designation and has over
30 years of human resources experience. Her background includes expertise in executive compensation, employee and labor relations, change
management and organizational restructuring. She is Principal, Human Resources & Labor Relations, with the Osbourne Group and formerly
Chief Human Resources Officer at North York General Hospital.
The Board believes
that the members of the HR Committee have the qualifications and experience in human resources governance matters and, in particular,
executive compensation to fulfill their responsibilities.
The HR Committee
held 7 meetings during Fiscal 2023. The President & CEO and the Chief Human Resources Officer attend HR Committee meetings but do
not have the right to vote. The HR Committee regularly holds in-camera sessions without management present. The HR Committee may also
engage the services of an independent compensation consultant at their discretion.
Currently, the HR Committee’s
responsibilities with respect to human resources matters include the following:
| (a) | Annually review the Bank’s overall compensation plan and the policies pertaining
thereto to ensure that they are consistent with the Bank’s goals of attracting and retaining the best people, aligning executive
interests with those of the Bank, and paying for performance. Survey information is obtained from the Chief Human Resources Officer, as
well as from compensation consulting companies and other external independent sources, to ensure that compensation paid to executives
is appropriate and competitive. |
| (b) | Consider the implications of risks associated with the Bank’s compensation policies and practices. |
| (c) | Approve, at the beginning of each fiscal year, performance measurements for calculating
the annual incentive award of the President & CEO. |
| (d) | Review the compensation of the President & CEO, and recommend same to the Board for approval. |
| (e) | Report to the full Board on a timely basis as to the actual calculations of total
compensation of the President & CEO. |
| (f) | Review staff compensation, including ranges and benefit programs. |
| (g) | Review staff incentive awards. |
| (h) | Recommend to the Board for approval the annual incentive award pool for executives. |
| (i) | Review a report from the Chief Internal Auditor on the alignment of the Bank’s
compensation policies with the Financial Stability Board’s Principles for Sound Compensation Practices. |
With regard to the
HR Committee’s consideration of the implications of risks associated with the Bank’s compensation policies and practices and
compliance with Financial Stability Board Principles for Sound Compensation Practices, the Board, through the HR Committee, monitors and
manages any such risks by taking actions that include the following:
| (a) | Actively overseeing the Bank’s compensation systems, and monitoring and reviewing
compensation policies and procedures to ensure they are operating as intended. |
| (b) | Recommending the amount of the annual incentive award pool for executives to the Board for approval. |
| (c) | Reviewing decisions made by the President & CEO concerning executive compensation and providing input. |
| (d) | Establishing appropriate performance measures for the President & CEO at the
beginning of the fiscal year and assessing overall performance and recommending compensation decisions to the Board at the end of the
fiscal year. |
| (e) | Ensuring that the performance measures assigned to the President & CEO, which
are derived from the Bank’s Business Plan, are within the Bank’s tolerance for risk. |
| (f) | Ensuring the compensation decisions for employees in control functions (finance,
risk, compliance, and internal audit) are based on enterprise and individual performance, and are not based on the performance of the
specific businesses supported by the control function. |
VersaBank retained
the services of MNP LLP on September 18, 2023 to conduct an external market analysis of VersaBank’s Director Compensation Program.
The mandate included the collection of compensation and program structure data to develop considerations aligned with the Bank’s
compensation philosophy. The Bank has previously engaged MNP LLP in its capacity as a leading professional service firm in the areas of
accounting, consulting, tax and digital services. The Board of directors regularly review and approve other services that MNP LLP provides
to the Bank at the request of Management.
VersaBank retained
the services of Korn Ferry on June 29, 2022 to conduct an assessment of the Bank’s compensation structure and current job descriptions
for senior executives, management and staff to develop a pay equity plan to align with the Pay Equity Act which establishes a proactive
pay equity regime for federally regulated workplaces. The mandate included the collection of job descriptions, assessment and determination
of job grades within the Bank and recommendations for any instances of pay equity. Korn Ferry also provided training to Bank staff members
on the Pay Equity Committee to complete job evaluations and determining pay grades going forward.
Executive
Compensation-Related Fees
Executive
Compensation-Related fees paid to MNP LLP by the Bank during the year ended October 31, 2023, were $5,933. Executive
Compensation-Related fees paid to MNP LLP by the Bank during the year ended October 31, 2022, were $0. Executive
Compensation-Related fees were for professional services rendered by MNP LLP related to determining compensation for the
company’s directors.
Executive Compensation-Related fees
paid to Korn Ferry by the Bank during the year ended October 31, 2023, were $51,068. Executive Compensation-Related fees paid to
Korn Ferry during the year ended October 31, 2022, were $45,005. Executive Compensation-Related fees were for professional services
rendered by Korn Ferry for services related to determining pay equity compliance compensation for executive officers, management and
staff.
All Other
Fees
All other fees paid
to MNP LLP by the Bank during the year ended October 31, 2023, were $131,000. All other fees paid to MNP LLP during the year ended October
31, 2022, were $149,921. All other fees were for professional services rendered by MNP LLP for services in the areas of internal audit,
information technology, digital services, and consulting.
No other fees were paid to Korn Ferry during
the years ended October 31, 2023 and October 31, 2022.
Executive Compensation
Philosophy
The key components
of the Bank’s compensation plan for NEOs are base salary, short-term (annual) incentive awards, and long-term incentives. NEOs are
also entitled to certain employee benefits, including a pension supplement payment.
The Bank’s compensation
plan is designed to attract and retain highly qualified individuals, while creating an incentive to align efforts with shareholder interests
and motivate NEOs to deliver company performance that will create real long-term shareholder value.
The Bank’s
overall objective is to set total compensation at approximately the seventy-fifth percentile of the total compensation paid for comparable
positions at comparable companies, being Home Capital Group Inc., Equitable Group Inc., Canadian Western Bank and Sagen MI Canada Inc.
(the “Comparable Companies”). The Bank considers compensation information of these entities as a frame of reference in determining
NEO compensation due to
management’s
belief that the Comparable Companies are the Canadian financial institutions that are similar to the Bank. In particular, the Comparable
Companies represent mid-sized, federally regulated financial institutions that may raise deposits solely or partly through a brokerage
network. However, since the Comparable Companies vary from the Bank in terms of business model, asset size, and organization structure,
compensation data from the Comparable Companies is used as a frame of reference only, and not a definitive target for NEO compensation.
Other elements that are considered when determining total compensation for NEOs are set forth below.
More detail on each
component of the Bank’s compensation plan and its purpose within total compensation is described in the table under the heading
“Statement of Executive Compensation – Compensation Discussion and Analysis – Type of Compensation” below, and
in subsequent sections of this Management Proxy Circular.
Decision Making
Process
The Board, through
the HR Committee, actively oversees the Bank’s overall compensation plan and monitors and reviews the Bank’s compensation
practices to ensure they operate as intended.
The Chief Human
Resources Officer provides the HR Committee with market data, as required, including information concerning compensation paid at the Comparable
Companies, to assist the HR Committee in its deliberations.
In conjunction with
the President & CEO, the HR Committee establishes performance measurements for the President & CEO at the beginning of the fiscal
year, and the Board monitors progress against the performance measures throughout the year. At the end of the year, the HR Committee receives
a report from the Chair of the Board on the results of the President & CEO’s performance appraisal; the HR Committee, in turn,
reports on such results to the Board.
The HR Committee
recommends to the Board for approval any changes to salary and incentive awards payable to the President & CEO.
The President &
CEO has final approval for all compensation decisions concerning NEOs and other staff, other than himself and other than the total amount
of the annual incentive award pool for executives, which is reviewed and recommended by the HR Committee to the Board for approval. The
HR Committee reviews the balance of the compensation decisions after the fact and provides comment and advice for consideration regarding
future compensation decisions.
Type of Compensation
| Description |
Form |
Eligibility |
Performance Period |
| Base Salary |
Cash |
All employees |
Reviewed annually |
| Short-Term (Annual) Incentive Awards |
Cash |
All employees |
One year |
| Long-Term Incentive Awards |
Chief Executive Officer Share Purchase Program |
President & CEO |
5 years |
| |
Employee Share Purchase Plan |
All employees (except the President & CEO) |
One year |
| |
Executive Share Award Program |
All employees at the position of vice president or above |
5 years
|
| |
Stock Options |
All employees |
7 years |
| Other – Pension Supplement |
Cash |
All employees |
Not applicable |
Base Salary
NEOs are paid a base
salary that is commensurate with each NEO’s position and level of responsibility within the Bank. The actual base salary paid is
determined with consideration to past and current performance, internal equity, salaries paid at the Comparable Companies, salary surveys
including Mercer’s Executive, Management and Professional Survey, and the potential impact of the position on the Bank’s performance.
Base salaries for executives who report directly to the President & CEO are approved by the President & CEO, upon recommendation
of the Chief Human Resources Officer and are reviewed after the fact by the HR Committee.
Short-Term (Annual)
Incentive Awards
NEOs and other executives
are eligible to participate in the Bank’s short-term incentive award program. The key goals of the short-term incentive award program
are to align executive efforts to achieve the objectives set out in the Bank’s Business Plan, to encourage the effective management
of risk, to pay for performance, and to encourage teamwork.
Factors considered
in determining whether and in what amount short-term incentive awards are paid to the NEOs and certain other executives of the Bank (other
than the President & CEO) include: (i) individual results against the predetermined performance objectives; (ii) the executive’s
business unit results; and (iii) the Bank’s overall results. For NEOs and executives, other than the President & CEO, individual
performance objectives that reflect the executive’s key responsibility areas are set at the beginning of each fiscal year and are
intended to align executive efforts with the business, financial, risk management and strategic objectives of the Bank as set out in its
Business Plan. Periodically throughout the year, the performance objectives are re-visited to monitor results to date, and to determine
if the stated objectives require modification based on factors that may include a change in job responsibilities or a change in business
priorities. At the end of each fiscal year, the actual results achieved by the executive, their business unit and the Bank are reviewed
and any extenuating circumstances are considered. The HR Committee reviews and recommends to the Board for approval the annual short-term
incentive award pool for the NEOs and other executives, excluding the President & CEO. The final decision on allocating short-term
incentive award payments from the approved award pool among the NEOs and other executives (other than the President & CEO) is made
by the President & CEO. The HR Committee reviews the President & CEO’s decisions after the fact.
With respect to the
President & CEO, performance measurements derived from the Board approved Business Plan for his short-term incentive award are approved
by the HR Committee at the beginning of each fiscal year. At the end of the fiscal year, a determination is made by the Board on the advice
of the HR Committee as to the amount of any short-term incentive award payable to the President & CEO in respect of such fiscal year.
In determining the amount of the short-term incentive award (if any), the Board has discretion to consider subjective measures, including
the implementation of the Bank’s philosophy with respect to risk, enterprise risk management and corporate reputation, and the Board
may also consider any extraordinary circumstances.
For Fiscal 2023,
the President & CEO’s key performance measures were established in three main categories. Under the performance objectives,
financial metrics related to shareholder value have been attributed a 70% weighting in the assessment, financial metrics related to operational
results have been attributed a 20% weighting, and the remaining 10% was attributed to individual performance in key management areas that
have a significant impact on the Bank’s results, including (i) the development/execution of strategic vision, (ii) communication,
and (iii) leadership development. The financial metrics used to determine the President & CEO’s performance as it relates to
shareholder value and operational results are key business targets derivable directly from the Bank’s Fiscal 2023 Business Plan
and are as outlined in the following charts:
Shareholder
Value Performance Measures
Notes:
| (1) | This is a non-GAAP financial measure. Return on average common equity for the
Bank is defined as annualized net income of the Bank less amounts relating to preferred share dividends, divided by average common shareholders’
equity (which is average shareholders’ equity less amounts relating to preferred shares recorded in equity). For further details
regarding non-GAAP financial measures and a reconciliation to their most comparable GAAP measure, please see the Bank’s Management’s
Discussion & Analysis for Fiscal 2023, available on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov/edgar. |
| (2) | Net interest margin or spread is defined as net interest income as a percentage
of average total assets. For further details regarding non- GAAP financial measures and a reconciliation to their most comparable GAAP
measure, please see the Bank’s Management’s Discussion & Analysis for Fiscal 2023, available on SEDAR+ at www.sedarplus.ca
and EDGAR at www.sec.gov/edgar |
Operational
Results Performance Measures
Note:
| (1) | The efficiency ratio is calculated as non-interest expenses, excluding restructuring
charges, as a percentage of total revenue. For further details regarding non-GAAP financial measures and a reconciliation to their most
comparable GAAP measure, please see the Bank’s Management’s Discussion & Analysis for Fiscal 2023, available on SEDAR+
at www.sedarplus.ca and EDGAR at www.sec.gov/edgar |
The extent to which
each performance category target is met multiplied by its weighting determines the number of points earned. The total number of points
earned is then multiplied by 85% of the President & CEO’s base salary to arrive at the short-term incentive award amount payable
to the President & CEO (subject to any adjustments that
the Board considers
appropriate after considering applicable subjective measures). The target annual incentive award for the President & CEO is 85% of
base salary with a maximum cap of 135% of base salary.
Further details respecting
the performance metrics considered in determining the payments made to NEOs under the short-term incentive award program in respect of
Fiscal 2023 and the payments made to NEOs thereunder in respect of each of the last three fiscal years of the Bank can be found below
under the headings “Statement of Executive Compensation – Compensation Discussion and Analysis – Fiscal 2023 Incentive
Awards Paid” and “Statement of Executive Compensation – Summary Compensation Table”, respectively.
Long-Term Incentive
Awards
Under the Bank’s
long-term incentive award program, NEOs (excluding the President & CEO) are eligible to participate in the Bank’s Employee Share
Purchase Plan (the “ESPP”) and Executive Share Award Program (the “ESAP”), and the President & CEO participates
in Chief Executive Officer Share Purchase Program (“CEOSPP”). Each of these programs is discussed in greater detail below.
Employee Share Purchase
Program
The Bank maintains
the ESPP, in which all employees of the Bank (excluding the President & CEO) are eligible to participate. The ESPP encourages ownership
of the Bank’s securities and aligns the interests of employees, including NEOs (but excluding the President & CEO), more closely
with those of Shareholders. Pursuant to the ESPP, employees can purchase Common Shares on the open market with up to an aggregate amount
of twenty percent (20%) of their base salary and are eligible for a fifty percent (50%) reimbursement for the cost of such Common Shares.
All Common Shares purchased by employees under the ESPP are to be held for a minimum of one year from the date of purchase. Reimbursement
amounts paid to employees under the ESPP are a taxable benefit.
Executive Share Award
Program
The Bank’s
employees at the vice president level and above (excluding the President & CEO) are eligible to participate in the ESAP. The objective
of the ESAP is to encourage ownership of the Bank’s securities and to provide a long-term incentive that aligns the participant’s
interests with those of Shareholders. At the end of each fiscal year, the President & CEO determines the number of Common Shares to
be awarded to each participant as a long-term incentive. Such Share award will be determined by considering the results the Bank achieved
relative to its long- term targets in the previous fiscal year and the results the participant obtained relative to his or her long-term
incentive objectives. The participant will purchase a number of Shares equal to his or her Shares award on the open market and will be
fully reimbursed for the cost of such Common Shares. All Common Shares purchased under the ESAP are to be held for a minimum of five years
from the date of purchase, unless otherwise agreed in writing. Additionally, the Common Shares may be sold in the event of the participant’s
death, retirement, resignation or termination. Reimbursement amounts paid to participants under the ESAP are a taxable benefit.
Stock Option Incentive
Plan
The Corporation
has a common share Stock Option Incentive Plan (“Stock Option Plan”), the purpose of which is to align the interests of the
participants with the longer-term interests of the shareholders of the Bank. All NEOs are entitled to participate in the Stock Option
Plan.
The Stock Option
Plan provides a compensation opportunity that encourages share ownership. The Bank’s officers, employees and consultants are eligible
to participate. As of February 22, 2024, there are 874,393 stock options outstanding pursuant to the Stock Option Plan.
Factors considered
prior to granting additional stock options are an individual’s past and current performance, level of responsibility, internal equity,
stock options previously granted, the cost of the stock options, stock options granted by Comparable Companies, and compensation survey
information.
An aggregate of 1,500 stock options in the
Bank were granted in Fiscal 2023.
Chief Executive Officer Share Purchase Program
The objective of
the CEOSPP is to encourage ownership of the Bank’s securities, and to provide a long-term incentive that aligns the President &
CEO’s interests with those of Shareholders. Under the CEO Compensation Policy and Procedures, performance measurements for the long-term
incentive award are approved by the HR Committee at the beginning of each fiscal year and each performance measure is assigned a weighting
to reflect its relative importance to the Bank’s long-term success. At the end of each fiscal year, the Board on the advice of the
HR Committee will determine the number of Shares to be awarded to the President & CEO as a long-term incentive. Such award will be
determined by considering the results the Bank achieved relative to the performance measurements in respect of such fiscal year. In making
this determination, the Board has discretion to adjust the long-term incentive award payable to the President & CEO on the basis of
subjective measures, including the implementation of the Bank’s philosophy with respect to risk, enterprise risk management and
corporate reputation, and the Board may also take into account any extraordinary circumstances.
The performance measures
and relative weighting in respect of Fiscal 2023 are as outlined in the following chart:
Long-Term
Incentive Award Performance Measures
The extent to which
each performance category target has been met multiplied by its weighting determines the number of points earned. The total number of
points earned is divided by 100 and multiplied by 30,000 to determine the number of Shares awarded to the President & CEO (subject
to any adjustments that the Board considers appropriate after considering applicable subjective measures). The President & CEO will
purchase such number of Shares awarded to him under the CEOSPP on the open market and will be reimbursed for the full cost of such Shares.
All Shares purchased under the CEOSPP are to be held for a minimum of five years from the date of purchase, unless otherwise agreed in
writing. Additionally, such Shares may be sold in the event of death, retirement, resignation or termination (including termination as
a result of a change of control). Reimbursement amounts paid to the President & CEO under the CEOSPP are a taxable benefit.
See “Statement
of Executive Compensation – Summary Compensation Table” below for additional information concerning the long-term incentive
awards paid to the NEOs in respect of each of the last three fiscal years of the Bank.
Other – Pension Supplement
Although the Bank
does not have a formal pension plan, all employees of the Bank, including NEOs, are entitled to an annual cash payment in lieu of pension
contributions. A pension supplement is considered a normal component of a competitive executive compensation arrangement. The pension
supplement payment calculation for NEOs is based on a variety of factors, which may include age, life expectancy, current interest rates
and inflation rates. The pension supplement amounts paid to each NEO in the previous fiscal year is described in the notes to the table
found under “Statement of Executive Compensation – Summary Compensation Table” below.
Incentive
Award Deferral and Compensation Recoupment Policy
All or a portion
of any incentive-based compensation payable to the Bank’s executive officers may be deferred in accordance with the Compensation
Recoupment Policy approved and adopted by the Board of Directors on December 1, 2023.
Changes
to NEO Compensation
There were no significant
changes to executive compensation in Fiscal 2023.
Purchase
of Financial Instruments to Offset a Decrease in the Market Value of Equity Securities
The Bank’s
NEOs and directors are not permitted to purchase financial instruments, including, for greater certainty, prepaid variable forward contracts,
equity swaps, collars, or units of exchange funds that are designed to hedge or offset a decrease in market value of equity securities
of the Bank granted as compensation or held, directly or indirectly, by the NEO or director.
PERFORMANCE GRAPH
The following
chart compares the cumulative Bank total shareholder return (“TSR”) on $100 invested in shares of Pacific & Western Bank
(a predecessor by amalgamation to the Bank) on November 1, 2016, with the equivalent cumulative value invested in the TSX composite index
for the same period.
| Summary: |
|
|
|
|
|
|
| |
31-Oct-18 |
31-Oct-19 |
31-Oct-20 |
31-Oct-21 |
31-Oct-22 |
31-Oct-23 |
| VB(1) |
$100.00 |
$93.19 |
$93.48 |
$209.65 |
$131.77 |
$146.10 |
| S&P/TSX Composite Index |
$100.00 |
$109.69 |
$103.68 |
$139.99 |
$129.27 |
$125.59 |
Note:
| (1) | The TSR return in respect of the Bank contemplates an investment in shares of Pacific
& Western Bank on November 1, 2016, and the exchange of such shares for Shares in connection with the Amalgamation. |
During
the period November 1, 2016, to October 31, 2023, the Bank’s trend in total executive compensation, defined as base salary and incentive
awards paid, increased to reflect the success of initiatives such as the Point-of-Sale Financing program, the Insolvency Trustee Integrated
Banking (“TIB”) Services initiative and the overall Bank’s financial results.
While the Bank believes
TSR has an influence on total executive compensation, it does not expect a direct correlation will always exist between TSR and total
executive compensation since other factors are considered when making executive compensation decisions. Those factors include changes
to NEO responsibilities and corresponding increases in compensation, adjustments to compensation necessary to reflect changes in market
conditions, and compensation paid to reward NEOs for results that may not be reflected immediately in TSR.
SUMMARY COMPENSATION
TABLE
The following table sets
forth all compensation earned by the Bank’s NEOs, for services to the Bank in Fiscal 2023.
|
Name
and principal position(1) |
Year |
Salary
($) |
Share-
based awards
($) |
Option-
based awards
($) |
Non-equity
incentive plan compensation ($) |
Pension
value
($) |
All
other compensation
($) |
Total
compensation
($) |
|
Annual
incentive plans
($) |
Long-
term incentive plans
($) |
David Taylor
President & CEO
(Avstar Inc.)(3) |
2023
2022
2021 |
750,000
700,000
650,000 |
17,295(2)
nil
nil |
nil
nil
nil |
0(4)
756,067
670,000 |
509,255(5)
461,999
651,633 |
nil
nil
nil |
397,266(6)
645,073
499,201 |
1,656,522
2,563,140
2,470,834 |
|
Shawn Clarke
Chief Financial Officer |
2023
2022
2021 |
366,000
350,000
315,000 |
nil
nil
nil |
Nil
97,650
nil |
0(4)
350,000
300,000 |
29,800(7)
20,000
29,831 |
nil
nil
nil |
176,538(8)
317,033
275,026 |
572,338
1,134,683
919,857 |
| Nick Kristo |
2023 |
285,000 |
nil |
nil |
110,000(4) |
29,807(7) |
nil |
142,449(9) |
567,256 |
| Chief Credit Officer |
2022 |
271,500 |
nil |
80,135 |
190,000 |
20,401 |
nil |
251,716 |
813,753 |
| |
2021 |
258,500 |
nil |
nil |
170,000 |
30,142 |
nil |
223,395 |
682,037 |
|
Michael Dixon
Senior Vice President, Point-of-Sale Financing |
2023
2022
2021 |
285,000
271,500
258,500 |
nil
nil
nil |
nil
80,135
nil |
135,000(4)
230,000
180,000 |
29,520(7)
20,000
29,791 |
Nil
nil
nil |
145,713(9)
249,911
206,220 |
595,233
851,546
674,511 |
|
John Asma
Treasurer & SVP, Deposit Services |
2023
2022 |
285,000
250,000
|
nil
nil |
nil
nil |
100,000(4)
55,000 |
28,080(7)
24,100 |
nil
nil |
172,956(10)
32,049 |
586,036
361,149 |
Notes:
| (1) | Name and Principal Position as at October 31, 2023. |
| (2) | This amount reflects a convertible preferred share issued to David Taylor in DRT
Cyber Inc. Such share would convert to a 10% common share interest in DRT Cyber Inc. upon a change in control event. |
| (3) | Avstar Inc. is David Taylor’s personal holding company. |
| (4) | See section below entitled “Fiscal 2023 Incentive Awards Paid”. |
| (5) | This amount is the cost of Shares acquired pursuant to the terms of the CEOSPP.
The Shares must be held for a period not less than five years, subject to certain exceptions. |
| (6) | Of this amount, $336,843 was the amount of pension supplement paid to David Taylor. |
| (7) | This amount was paid as a reimbursement for the cost of Shares acquired pursuant
to the terms of the EASP. The Shares much be held for a period not less than five years, subject to certain exceptions. |
| (8) | Of this amount, $156,047 was the amount of pension supplement paid to Shawn Clarke. |
| (9) | Of this amount, $121,758 was the amount of pension supplement paid to Nick Kristo and Michael Dixon. |
| (10) | Of this amount, $151,940 was the amount of pension supplement paid to John Asma. |
Fiscal 2023 Incentive
Awards Paid
The following summarizes key rationale
for the incentive award paid to each NEO for Fiscal 2023:
David Taylor, President & CEO
Short-Term Incentive
Award
While David Taylor
met or exceeded many key performance targets in Fiscal 2023 he did not receive a short-term incentive award for Fiscal 2023. The delay
in obtaining the US Bank license was one factor in this decision. His incentive award will be reconsidered in Fiscal 2024 based on performance
achieved including the approval of the bank’s ability to operate in USA.
Shawn Clarke, Chief
Financial Officer
While Shawn Clarke
met or exceeded many key performance targets in Fiscal 2023 he did not receive a short-term incentive award for Fiscal 2023. The delay
in obtaining the US Bank license was one factor in this decision. His incentive award will be reconsidered in Fiscal 2024 based on performance
achieved including the approval of the bank’s ability to operate in USA.
Michael Dixon, Senior
Vice President, Point-of-Sale Financing
In his role as
Senior Vice President, Point-of-Sale Financing Mr. Dixon is responsible for the strategic management, oversight and overall performance
of the Bank’s Point-of-Sale Financing activities, including the Bank’s Receivable Purchase Program both in Canada and the
US.
Over the course
of Fiscal 2023, the Point-of-Sale Financing team successfully navigated through an increasingly competitive and economically stressed
marketplace, including rising interest rates and inflation. Despite these challenges, the Point-of-Sale Financing team substantially exceeded
all of its objections for asset growth, income, expenses and portfolio risk management.
Under Mr. Dixon’s
leadership, Point-of-Sale Financing increased its receivable purchase volume by more than 30% over the previous year, which led to the
group’s overall asset growth of 30%%, despite a large portfolio sale, all while maintaining nil delinquencies and losses throughout
the year. As at October 31, 2023, Point-of-Sale Financing assets equated to more than 75% of the Bank’s total lending assets.
Through
Fiscal 2023, Point-of-Sale Financing added new vendor partners, both in Canada and the US, and Mr. Dixon led the successful restructuring
of several existing partner programs including minimum volume agreements, all of which provide the opportunity for continued material
organic growth within the Point-of-Sale Financing group. In addition, Mr. Dixon has been tasked with further expanding the bank’s
Point-of-Sale Financing products into the US, which will assist in obtaining the long-term objectives of the Bank.
Nick Kristo, Chief Credit Officer
In his role as Chief
Credit Officer, Mr. Kristo is responsible for the credit risk management of the Bank’s lending portfolio. Over the course of fiscal
2023, Mr. Kristo played a key role with the Bank’s loan growth in an increasingly challenging economic environment through efficient
management of loan provisions and increased risk monitoring and client relief programs.
Credit policy, risk
monitoring and risk management frameworks continue to evolve to assist in the support of the growth of both the Commercial Banking and
Point-of-Sale loan portfolios. VersaBank had achieved record loan levels during the fiscal period while maintaining a loan portfolio that
benefited with limited delinquency and no credit losses.
Mr. Kristo continues
to promote the credit risk culture to staff and ensures that the Bank operates within the tolerances established within VersaBank’s
credit risk appetite.
John Asma, Treasurer
& SVP, Deposit Services
In his current role
as Chief Financial Officer, Mr. Asma leads the Finance & Accounting Department and maintains oversight of the Deposit Services and
Treasury functions.
Under Mr. Asma’s
leadership as Treasurer and SVP, Deposit Services, the Trustee Insolvency Banking (TIB) Program had another successful year and made a
significant contribution with the TIB book growing by 8% in 2023. In addition, over $2.1 billion in broker deposits were raised during
the year, efficiently and at competitive rates to fund the asset growth.
Mr. Asma steered
the Bank’s relationships with its deposit broker and interbank counterparty network and was instrumental in establishing new relationships
and deepening existing ones.
Mr. Asma continues
to steer the Finance and Accounting Department towards excellence and his leadership will play a crucial role in driving financial strategy
and ensuring operational efficiency across the organization. In addition, Mr. Asma will drive the branch integration and laying down of
the deposit network in the US post the Bank’s acquisition of a US Bank.
TERMINATION AND CHANGE
OF CONTROL BENEFITS
The following table
sets out the estimated amount of potential payments to the NEOs if their termination or change of control clauses or retirement clauses
were triggered on October 31, 2023. Further detail regarding the termination clauses in each NEO’s employment agreement is set out
under “Termination and Change of Control Benefits – Employment Contracts” below.
|
Name
|
Entitlement ($) |
| Termination |
Change of control |
Retirement |
| David Taylor(1) |
$5,122,491 |
$5,122,491 |
$1,000,000 |
| Shawn Clarke(2) |
$1,244,580 |
nil |
nil |
| Michael Dixon(2) |
$1,131,074 |
nil |
nil |
| Nick Kristo(2) |
$1,200,623 |
nil |
Nil |
| John Asma (2) |
$34,409 |
nil |
nil |
Notes:
| (1) | In the case of termination without cause or in the case of change of control, whereby
the employment agreement will be deemed to be terminated, any outstanding unvested stock options shall also become exercisable at the
date of termination. In addition, all stock options |
held
by Mr. D. Taylor shall expire on the earlier of the expiry date and two years from such date of termination. Further, at the option of
Mr. D. Taylor, any stock options are to be redeemed by the Bank at a price calculated as the difference between the stock option exercise
price and the average price of the Shares for the four trading days prior to the date of termination and the termination date.
| (2) | In the case of termination without cause. |
Employment Contracts
At October 31, 2023, each of David Taylor,
Shawn Clarke, Michael Dixon, Nick Kristo and John Asma had an Executive Employment Agreement with the Bank. The following tables outline
the key terms of such agreements.
| David Taylor |
| Position |
President & CEO |
|
| Annual salary |
$750,000 |
| Annual short-term incentive awards |
Discretionary |
| Annual long-term incentive awards |
Entitled to participate in the CEOSPP. |
| Other benefits |
Entitled to usual benefits provided to executives. |
| Retirement |
Entitled to receive an annual pension supplement payment (the Bank does not have a pension plan). Entitled to receive a retirement allowance of $1,000,000. |
| Termination |
If Mr. D. Taylor’s employment with the Bank is terminated without cause, he is to receive an amount equal to 24 months total compensation less any withholding taxes and other required deductions. Mr. D. Taylor is to immediately receive this amount if the Bank is sold, subject to a change of control, merged or liquidated, or if its normal operations are changed in such a manner so as to eliminate Mr. D. Taylor’s services or the President & CEO position. For the purpose of this termination clause ‘total compensation’ is to include annual salary and allowances and shall include incentive awards and pension supplement paid or approved to be paid in each case during the 24 months immediately preceding the termination date. In addition, all options to purchase shares of the Bank held by Mr. D. Taylor shall become exercisable on the date of termination and expire on the earlier of the original expiry date of the options or two years after the termination date. Alternatively, at Mr. D. Taylor’s discretion, these options are to be repurchased by the Bank at a price calculated as the difference between the option exercise price and the average price of the Shares for the four trading days prior to the termination date and the termination date. |
| Shawn Clarke |
| Position |
Chief Financial Officer |
|
| Annual salary |
$366,000 |
| Annual short-term incentive awards |
Discretionary |
| Annual long-term incentive awards |
Entitled to participate in the ESPP and the ESAP. |
| Other benefits |
Entitled to usual benefits provided to executives. |
| Retirement |
Entitled to receive an annual pension supplement payment (the Bank does not have a pension plan). |
| Termination |
If Mr. Clarke’s employment is terminated without cause, he is to receive an amount equal to one month’s total compensation for each completed year of service, with a minimum of 12 months and a maximum of 24 months total compensation, less any withholding taxes and other required deductions. For the purpose of this termination clause ‘total compensation’ is to include Mr. Clarke’s then current base salary, an amount equivalent to the most recent incentive award paid, benefits, vehicle benefit, pension supplement and all allowances paid. |
| Nick Kristo |
| Position |
Chief Credit Officer |
|
| Annual salary |
$285,000 |
| Annual short-term incentive awards |
Discretionary |
| Annual long-term incentive awards |
Entitled to participate in the ESPP and the ESAP. |
| Other benefits |
Entitled to usual benefits provided to executives. |
| Retirement |
Entitled to receive an annual pension supplement payment (the Bank does not have a pension plan). |
| Termination |
If Mr. Kristo’s
employment is terminated without cause, he is to receive an amount equal to one month’s total compensation for each completed year
of service, with a minimum of 12 months and a maximum of 24 months total compensation, less any withholding taxes and other required
deductions. For the purpose of this termination clause ‘total compensation’ is to include Mr. Kristo’s then current
base salary, an amount equivalent to the most recent incentive award paid, benefits, vehicle benefit, pension supplement and any and
all allowances paid. |
| Michael Dixon |
| Position |
Senior Vice President, Point-of-Sale Financing |
|
| Annual salary |
$285,000 |
| Annual short-term incentive awards |
Discretionary |
| Annual long-term incentive awards |
Entitled to participate in the ESPP and the ESAP. |
| Other benefits |
Entitled to usual benefits provided to executives. |
| Retirement |
Entitled to receive an annual pension supplement payment (the Bank does not have a pension plan). |
| Termination |
If Mr.
Dixon’s employment is terminated without cause, he is to receive an amount equal to one month’s total compensation for
each completed year of service, with a minimum of 12 months and a maximum of 24 months total compensation, less any withholding
taxes and other required deductions. For the purpose of this termination clause ‘total compensation’ is to include Mr.
Dixon’s then current base salary, an amount equivalent to the most recent incentive award paid, benefits, vehicle benefit,
pension supplement and any and all allowances paid. |
| John Asma |
| Position |
Treasurer & SVP Deposit Services |
|
| Annual salary |
$285,000 |
| Annual short-term incentive awards |
Discretionary |
| Annual long-term incentive awards |
Entitled to participate in the ESPP and the ESAP. |
| Other benefits |
Entitled to usual benefits provided to executives. |
| Retirement |
Entitled to receive an annual pension supplement payment (the Bank does not have a pension plan). |
| Termination |
If Mr. Asma’s
employment is terminated without cause, he is to receive an amount equal to one month’s total compensation for each completed year
of service (commencing June 27, 2022) to a maximum of 24 months total compensation, less any withholding taxes and other required deductions.
For the purpose of this termination clause ‘total compensation’ is to include Mr. Asma’s then current base salary,
an amount equivalent to the most recent incentive award paid, benefits, vehicle benefit, pension supplement and any and all allowances
paid |
PART
V – STATEMENT OF DIRECTOR COMPENSATION
|
In Fiscal 2023, non-management
directors were compensated for acting as directors of the Bank through a combination of methods including: base retainer; Chair and director
Board retainers; Committee member and Committee Chair annual retainers; excess meeting fees; and a director share purchase program (the
“DSPP”). The director compensation fees set out in the tables below reflect those in place as at October 31, 2023. Annual
retainers were paid to directors, excluding the President & CEO, on the following basis for Fiscal 2023. Remuneration paid to the
President & CEO of the Bank, Mr. D. Taylor, is included in the Summary Compensation Table above. Mr. D. Taylor is not compensated
as a director of the Bank.
Base Retainer
| |
Retainer ($) |
| Director (including Chair and Vice Chair of the Board) |
15,900 |
Board Retainer
| |
Retainer ($) |
| Chair of the Board |
151,400 |
| Vice Chair of the Board |
39,850 |
| Director |
24,850 |
Committee Retainers
| |
Retainer ($) |
| Audit Committee Chair |
35,650 |
| Risk Oversight Committee Chair |
31,000 |
| HR Committee Chair |
31,000 |
| Innovation and Technology Committee Chair |
31,000 |
| Audit Committee Member |
23,850 |
| Risk Oversight Committee Member |
21,200 |
| HR Committee Member |
21,200 |
| Innovation and Technology Committee Member |
21,200 |
Excess Meeting Fees
The retainers outlined
were based on the assumption of a fixed number of meetings occurring during the fiscal year. If the fixed number of meetings were exceeded
during the year, directors, excluding the President & CEO, were paid meeting attendance fees as follows:
| |
Per Meeting Fee ($) |
| Board > 10 Board meetings during the year |
1,435 |
| Audit Committee > 6 meetings during the year |
1,985 |
| Risk Oversight Committee > 6 meetings during the year |
1,655(1) |
| HR Committee > 6 meetings during the year |
1,655 |
| Innovation and Technology Committee > 6 meetings during the year |
1,655 |
| Directors – Attendance at special meetings such as the Meeting and with the Office of the Superintendent of Financial Institutions (OSFI) |
1,435 |
Note:
| (1) | Meeting attendance fees are $995 per meeting for credit review only meetings. |
In addition, for Fiscal
2023, the DSPP provided that directors of the Bank, other than the President & CEO, were eligible for reimbursement for the purchase
of Shares and/or preferred shares of the Bank. Reimbursement under the DSPP is equal to 50% for Shares and preferred shares of the Bank
purchased on the open market, up to a total annual maximum reimbursement amount of $10,950.00. All securities purchased under the DSPP
are required to be held for a minimum of one year from the date of purchase.
The Bank pays the
membership costs for each of its directors to belong to the Institute of Corporate Directors, and customary payments for mileage and travel
time for attending meetings and expense reimbursements for out-of- pocket travel costs incurred in connection with attending meetings.
Each director is also entitled to a reimbursement of up to $5,000 annually toward a relevant training and development program of their
choice, in accordance with the Director Orientation and Professional Development Program (see “Corporate Governance – Orientation
and Continuing Education” below).
The following table sets
out the compensation provided to directors for Fiscal 2023:
|
Name |
Fees earned ($) |
Share-based awards ($) |
All other compensation ($) |
Total ($) |
| Hon. Thomas A. Hockin |
168,735 |
nil |
2,700(1) |
171,435 |
| Gabrielle Bochynek |
65,040 |
nil |
930(1)
10,950(2) |
76,920 |
| Robbert-Jan Brabander |
99,360 |
nil |
1,240(1)
10,950(2) |
111,550 |
| David A. Bratton |
73,404 |
nil |
|
73,404 |
| Peter M. Irwin |
94,195 |
nil |
620(1)
10,950(2) |
105,765 |
| Richard H. L. Jankura |
103,995 |
nil |
620(1)
10,950(2)
6,000(3) |
121,565 |
| Arthur Linton |
63,385 |
nil |
1,395(1) |
64,780 |
| Susan T. McGovern |
96,240 |
nil |
620(1)
10,950(2) |
107,810 |
| Paul G. Oliver |
79,819 |
nil |
1,2401)
10,950(2) |
92,009 |
Notes:
| (1) | This is an amount representing travel time. |
| (2) | This is an amount reimbursed pursuant to the DSPP. |
| (3) | This is an amount that was paid to Mr. Jankura as a consulting fee for services
provided as member of the Auditor Selection Committee of the Bank in F2023. |
PART
VI – SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
|
INCENTIVE PLAN AWARDS
Stock Option
Incentive Plan
As a result of the
Amalgamation, the Bank maintained two stock option plans, consisting of the stock option plan of Pacific & Western Bank and the stock
option plan of PWC (collectively, the “Predecessor Stock Option Plans”). As of October 31, 2023, there were no remaining options
outstanding under the Predecessor Stock Option Plans. On April 24, 2019, the Shareholders were not asked to re-approve the Predecessor
Stock Option Plans at the annual meeting of Shareholders. Accordingly, the Bank is no longer able to grant any further options under either
plan.
On April 21, 2021,
the shareholders approved a new Omnibus Long-Term Incentive Plan (the “LTIP”) which allows for Shares to be issued up to a
maximum of 10% of the then outstanding Shares. As of October 31, 2023, 874,393 shares had been issued under the LTIP.
The following table
lists the number of Shares to be issued upon the exercise of outstanding stock options, the weighted-average exercise price of the outstanding
stock options, and the number of Shares remaining for future issuance under equity compensation plans of the Bank as at October 31, 2023.
No preferred shares of the Bank are issuable pursuant to any of the Bank’s equity compensation plans. Additional information on
the Stock Option Plans can be found above under “Statement of Executive Compensation – Stock Option Incentive Plan”.
|
Plan category |
Number of securities
to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights ($) |
Number of securities remaining available for future issuance under equity compensation plans |
| Equity compensation plans approved by Shareholders |
874,393(1) |
15.90 |
1,195,945(2) |
| Equity compensation plans not approved by Shareholders |
n/a |
n/a |
n/a |
| Total |
874,393 |
15.90 |
1,195,945 |
Notes:
| (1) | This figure is as of October 31, 2023 and represents 3.36% of the issued and outstanding Shares as of
such date. |
| (2) | The maximum number of options available for issuance under the Stock Option Plan
is a rolling 10% of issued and outstanding Shares. As of October 31, 2023, options to acquire 2,596,442 Shares is the maximum number of
options that could be outstanding under the Stock Option Plan. |
The following table sets outs the burn
rate percentage in respect of equity securities under the Stock Option Plans for the fiscal years ended 2023, 2022, and 2021.
| |
Stock Option Plans |
| 2023 |
2022 |
2021 |
| Burn
Rate(1) |
0.006% |
3% |
0% |
Note:
| (1) | The number of awards granted each year, expressed as a percentage of the weighted
average number of outstanding Shares at the end of the fiscal year. |
The following tables set out for each NEO the
stock options outstanding at October 31, 2023, and the value of compensation paid to each NEO under the Stock Option Plans in Fiscal 2023.
| |
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 ($) |
Market or payout value of vested share-based awards not paid out or distributed ($) |
| David
Taylor(1) |
0 |
0 |
n/a |
$0 |
n/a |
n/a |
n/a |
| Shawn Clarke |
31,500 |
15.90 |
December 31,
2026 |
$0 |
n/a |
n/a |
n/a |
| Michael Dixon |
25,850 |
15.90 |
December 31,
2026 |
$0 |
n/a |
n/a |
n/a |
| Nick Kristo |
25,850 |
15.90 |
December 31,
2026 |
$0 |
n/a |
n/a |
n/a |
| John Asma |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
Notes:
| (1) | Mr. Taylor exercised his 40,000 options on September 15, 2023 at $7.00 per share. |
Name |
Option-based
awards – Value
vested during the
year
($) |
Non-equity incentive
plan
compensation – Value
earned during the year
($) |
| David Taylor |
nil |
n/a |
| Shawn Clarke |
nil |
n/a |
| Michael Dixon |
nil |
n/a |
| Nick Kristo |
nil |
n/a |
| John Asma |
n/a |
n/a |
|
Name |
Number
of Options vested during Fiscal 2023 |
Expiry Date |
Vesting date
during Fiscal 2023 |
Exercise price
at time of vesting ($) |
Market price of Shares at time of vesting ($) |
| David Taylor |
n/a |
n/a |
n/a |
n/a |
n/a |
| Shawn Clarke |
10,500 |
December 31, 2026 |
January 1, 2023 |
$15.90 |
$10.44 |
| Michael Dixon |
8,616 |
December 31, 2026 |
January 1, 2023 |
$15.90 |
$10.44 |
| Nick Kristo |
8,616 |
December 31, 2026 |
January 1, 2023 |
$15.90 |
$10.44 |
| John Asma |
n/a |
n/a |
n/a |
n/a |
n/a |
PART
VII – INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
|
AGGREGATE INDEBTEDNESS OUTSTANDING
The table below shows the aggregate indebtedness
to the Bank or its subsidiaries of all officers, directors, employees and former officers, directors and employees as at February 22,
2024.
| AGGREGATE
INDEBTEDNESS ($)(1)(2) |
| Purpose |
To the Bank or its subsidiaries |
To another entity |
| Share purchases |
1,537,667(3)(4) |
n/a |
| Other |
6,182,608 |
n/a |
Notes:
| (1) | Routine indebtedness, as defined under Canadian securities laws, has not been reported. |
| (2) | Subject to restrictions under applicable laws, employees are eligible for loans
at an interest rate of 50 basis points over cost of funds to assist them with home purchases and to assist with other credit requirements.
Lending limits for employees are, like those for other customers, based on household income and risk profile. |
| (3) | To the knowledge of the Bank, the amount shown represents loans in connection with the purchase of securities
of the Bank. |
| (4) | Of this amount, $500,000 was previously a loan extended for an “other”
purpose, which was subsequently combined and is now included in the aggregate indebtedness total attributable to share purchases. |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE
OFFICERS
| Name
and principal Position(1)(2) |
Involvement of the Bank |
Largest amount outstanding during Fiscal 2023 ($) |
Amount outstanding as at February 22, 2024 ($) |
Financially assisted securities purchases during Fiscal 2023 (#) |
Security for indebtedness |
Amount forgiven during Fiscal 2023 ($) |
| Securities purchase programs |
David Taylor
President & CEO |
Bank as Lender |
1,500,000 |
1,500,000(3) |
nil |
n/a |
nil |
|
Jonathan Taylor
Chief Human Resources Officer |
Bank as Lender |
37,666.67 |
37,666.67
(4) |
nil |
n/a |
nil |
| Other programs |
| David Taylor (Avstar Inc.) President & CEO |
Bank as Lender |
3,600,000 |
3,600,000(5) |
nil |
n/a |
nil |
Notes:
| (1) | Under applicable Canadian securities laws, “executive officer” means
an individual who is: a chair, vice chair or president; a vice president in charge of a principal business unit, division or function;
or, performing a policy-making function in respect of the Bank. |
| (2) | Routine indebtedness, as defined under Canadian securities laws, has not been reported in this table. |
| (3) | A loan of $1,300,000 is provided at the Bank’s 5 year rate plus 0.50% fixed
at 2.62%, repayable on demand. The loan is evidenced by an unsecured promissory note. An additional loan in the amount of $200,000 was
granted to Mr. Taylor on February 6, 2023 at the fixed rate of 3.81% for a term of 5 years and is evidenced by an unsecured promissory
note. Mr. D. Taylor is currently a director and he is nominated for re-election to the Board at the Meeting. |
| (4) | This amount represents a loan originally funded in the amount of $160,000 in February
2007 for the purchase of shares. It was renewed in March 2022 for a 5 year term at a fixed rate of 2.62% |
| (5) | This amount represents loans to a related party; one at the Bank’s 5 year
rate plus 0.50% fixed at 2.51% for a tern of 5 years, and the second at the rate of 4.94% for a term of 5 years. The loans are secured
by a fixed charge collateral mortgage. |
PART
VIII – INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
|
To the knowledge
of the Bank, no informed person (as defined in NI 51-102) of the Bank, no proposed director or executive officer of the Bank, nor any
associate or affiliate of any informed person or any proposed director or executive officer of the Bank, has any interest, direct or indirect,
in: (i) any transaction since the commencement of the Bank’s most recently completed financial year or in any proposed transaction
which has materially affected or would materially affect the Bank or any of its subsidiaries; or (ii) by way of beneficial ownership of
securities or otherwise, in any matter to be acted upon at the Meeting, other than the election of directors.
PART
IX – AUDIT COMMITTEE
|
Audit Committee Information & Disclosure
is provided on pages 21 to 28 of the Bank’s Annual Information Form for Fiscal 2023, which is available on SEDAR+ at www.sedarplus.ca
and EDGAR at www.sec.gov/edgar.
PART
X – CORPORATE GOVERNANCE
|
Board of Directors
A director is considered
to be independent where the Board determines that the director has no direct or indirect material relationship to the Bank or its subsidiaries.
“Material relationship” is defined in National Instrument 52-110 – Audit Committees as any relationship which could,
in the view of the Board, be reasonably expected to interfere with the exercise of a director’s independent judgment. Annually,
the Board, in consultation with the HR Committee, reviews a director’s relationship with the Bank in order to determine whether
the director is or continues to be independent.
Every member of
the Board, with the exception of Mr. D. Taylor, is independent. Mr. D. Taylor is the President & CEO of the Bank, and, by virtue of
his executive officer position, he has a material relationship to the Bank and is not independent.
The current Chair
of the Board, The Honourable Mr. Hockin, is an independent director. The roles and responsibilities of the Chair are set out in the Mandate
of the Chair of the Board (a copy of which can be found on the Bank’s website). The Chair is to exemplify the Board responsibility
for the stewardship of the Bank. Among other duties, the Chair is to liaise with management of the Bank for the purpose of setting meetings
of the Board and is to lead the meetings, and he is to ensure that the responsibilities of the Board and management, and the boundaries
between them, are well understood and respected. The Chair is also to ensure the Board works as a cohesive team and is to provide the
leadership to achieve this, and he is to encourage the active participation of all members. The Chair is to ensure that there are adequate
resources available to support the work of the Board, and to ensure that procedures are adopted to ensure that the Board can conduct its
work effectively and efficiently. Further, the Chair is to ensure that a process is in place by which the effectiveness of the Board,
and the contribution of individual directors, is assessed, and to ensure that where functions are delegated to committees, the functions
are carried out and results are reported to the Board.
During Fiscal 2023,
the Bank continued its practice of concluding each quarterly Board meeting with the independent directors of the Bank and each meeting
of the committees by holding an in-camera session without the non- independent director or any other member of management present. In
addition, in order for independent directors of the Board and each committee to have a forum in which to address issues or concerns, the
Board and each committee has discretion to conclude all Board meetings and each meeting of the committees with an in-camera session without
management and non-independent directors present. During the year, the Board held seven such in-camera meeting sessions, including the
four regularly scheduled quarterly meetings. Each committee is required to hold in-camera sessions at quarterly meetings, as stipulated
in their respective mandate. During the year each committee held five such in-camera meeting sessions, with the exception of the Risk
Oversight Committee and the Innovation and Technology Committee which held four in-camera meeting sessions.
Position Descriptions
and Mandates
The Bank has Board
approved Mandates for the Chair of the Board, Vice Chair of the Board and for the Chair of each Board committee and for each committee
(copies of which can be found on the Bank’s website). The Board has also approved written job descriptions for various senior management
roles, including the President & CEO. The job description of the President & CEO outlines his responsibilities, both generally
and with respect to business planning and marketing, human resource policies and human resource management, enterprise risk management,
legal and regulatory environment, and reporting to the Board. Also attached to the President & CEO’s job description is a detailed
chart of authorities that outlines the approval process for various control and strategic requirements and proposals.
Level of Share
Ownership Required
Within five years of
the later of May 1, 2017, or the date of appointment, directors are expected to accumulate Shares and/or preferred shares equivalent to
five times the Board retainer. The Chair is expected to accumulate Shares and/or preferred shares equivalent to three times his respective
Board retainer within the same time frame. For purposes of determining compliance with this requirement, the director’s Shares are
valued at the higher of cost or market value at October 31 annually.
Ethical Business
Conduct
The Board has adopted
a written Code of Conduct for the directors, officers, and employees of the Bank. The Code of Conduct is available with the Bank’s
other publicly disclosed documents at www.sedarplus.ca and on the Bank’s website at www.versabank.com/codes-and-commitments.
A copy may also be requested by contacting the Bank’s Corporate Secretary at the registered office of the Bank (Suite 2002, 140
Fullarton Street, London, Ontario N6A 5P2).
The Board has delegated
compliance oversight to the Chief Compliance Officer. On a quarterly basis, the Board receives a Compliance Report from the Chief Compliance
Officer. Any matters of non-compliance form part of the report. The Board also receives an annual confirmation from the Chief Human Resources
Officer with respect to compliance with the Code of Conduct during the preceding year.
A primary element
within the Code of Conduct is a section with respect to conflicts of interest. This section provides a definition of conflict of interest,
including a cross-reference to the Bank’s Related Party Transactions Policy & Procedures. The conflict of interest section within
the Code of Conduct provides details on the procedure to be followed if a conflict of interest situation arises, with the basic premise
being the elevation of notice respecting the situation up to the Board. A list of conflict of interest matters is maintained by the legal
department, and each director and officer of the Bank is required to annually attest that he or she is not a party to a material contract
or proposed material contract, and is not a director or officer of any entity who is, and does not have a material interest in any person
who is, a party to a material contract or proposed material contract with the Bank.
The Bank has also
adopted anonymous employee reporting procedures which allows employees and officers of the Bank to anonymously and confidentially report,
in writing, suspected unethical or improper conduct in violation of
the Code of Conduct
to the Chair of the HR Committee, as well as concerns regarding accounting or auditing matters to the Chair of the Audit Committee.
Nomination
of Directors
Currently, the HR Committee,
comprised entirely of independent directors, sets criteria for the selection of directors to ensure that the competencies, skills and
personal qualities of the Board members allows the Board to discharge its duties and adds value to the Bank. In that regard, the HR Committee
has developed a Directors Skill and Competencies Matrix (“Skills Matrix”). The Skills Matrix is reviewed and updated at least
annually. The Skills Matrix below shows the principal areas of experience and expertise that each of the nominees brings to the Board.
| |
Bochynek |
Brabander |
Bratton |
Hockin |
Irwin |
Jankura |
Linton |
McGovern |
Oliver |
Taylor |
| Audit/Accounting |
|
√ |
|
√ |
√ |
√ |
√ |
|
√ |
√ |
| CEO/Sr. Executive Experience |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Credit Risk |
|
√ |
|
√ |
√ |
√ |
√ |
|
√ |
√ |
| Executive Compensation/Human Resources |
√ |
√ |
√ |
√ |
|
|
√ |
√ |
√ |
√ |
| Financial Knowledge |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Financial Service Industry Experience |
|
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Governance/Board |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Government Relations/Public Policy |
√ |
|
√ |
√ |
|
|
√ |
√ |
|
√ |
| Innovation & Technology |
|
√ |
√ |
|
√ |
√ |
√ |
√ |
√ |
√ |
| Legal/Regulatory |
√ |
√ |
|
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Marketing/Branding/Communications |
√ |
√ |
|
√ |
|
√ |
√ |
√ |
|
√ |
| Risk Management |
|
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
| Strategic Planning |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
√ |
From time to time
it is both necessary and desirable for new director candidates to be identified and appointed to the Board. The HR Committee, with input
from the President & CEO, evaluates the needs of the Board in accordance with the Skills Matrix and seeks out candidates with suitable
backgrounds and strengths to fill those needs. The credentials of the identified candidate(s) are reviewed and discussed by the HR Committee,
and are compared against the current needs of the Board. Any conflicts or impediments, as well as the time expected and required of directors,
are addressed. The Chair of the HR Committee reports the HR Committee’s recommendation to the full Board. If thought advisable,
the full Board approves the appointment of the identified candidate as a director, subject to a positive result on background checks as
required by the Bank’s Assessment Policy for Responsible Persons.
Director Term
Limits and Other Mechanisms of Board Renewal
While the Board
recognizes the objective of term limits in encouraging director independence, preventing entrenchment and promoting diverse perspectives,
the Board is of the view that the adoption of arbitrary term limits unreasonably discounts the value, skills and insights offered by retaining
experienced board members. Accordingly, the Board believes the Bank and its shareholders are better served through the employment of a
measured approach to Board renewal, including a focus on the board competencies required to support the achievement of the Business Plan
and the use of a rigorous annual Board and director performance assessment process.
Diversity
on the Board and in Senior Management Positions
Board
The Bank’s
Board recognizes the value of having a diverse roster of directors for effective decision making, and views diversity at the board level
as an important element in strong corporate governance. Although diversity has always been a factor considered in the nomination of directors,
the Board adopted the Board and Senior Management Diversity Policy (the “Diversity Policy”) with the goal of increasing the
number of women who serve as directors on the Board.
In accordance with
the Diversity Policy, in reviewing Board composition the HR Committee is to consider all aspects of diversity, including skills, experience,
gender, age, ethnicity and geographic background. The HR Committee also considers the balance of skills background, experience and knowledge
on the Board and the diversity representation of the Board as part of the annual performance and effectiveness evaluations of the Board
and committees.
The Diversity Policy
has set a target that at least 25% of independent directors on the Bank’s Board be women. As at October 31, 2023, the Board had
two female directors, representing 20% of independent directors (20% in Fiscal 2022). The Board recognizes a number of directors may retire
in the next few years which will present an opportunity to further increase the number of women on the board and exceed the policy objective.
Senior Management
The Bank and its
Board recognize and embrace the benefits of having a diverse senior management team for effective decision making, and view diversity
at the senior management level as an important element in the effective management of the Bank’s activities. A diverse senior management
team will include and make use of differences in skills, experience, gender, age, ethnicity and geographic background. In this regard,
the Bank considers the representation of women in senior management when identifying potential candidates.
The Diversity Policy
has set a target that at least 25% of the senior management team be women. As at October 31, 2023, 5 of 20 members of senior management
(25%) were women (26% in Fiscal 2022). The Board, through recommendations by the HR Committee, annually reviews the Diversity Policy objectives
and targets as set out in the Diversity Policy.
Compensation
As noted above, the Bank currently has an HR
Committee comprised entirely of independent directors. As part of its Mandate, this Committee is to assess the level and nature of directors’
fees, as well as other compensation.
The HR Committee recently engaged MNP
LLP to provide an independent report on the competitiveness of current Board compensation.
In addition, the
HR Committee annually reviews the compensation of the President & CEO and recommends the compensation to be set for the President
& CEO to the Board for approval. The Committee annually approves, at the beginning of the fiscal year, performance measurements for
calculating the annual incentive award of the President
& CEO, and recommends
to the Board any incentive award payable to the President & CEO. The HR Committee also recommends the executive incentive award pool
to the Board for approval.
In addition, part
of the HR Committee’s mandate is to review officer and management appointments to ensure that the Bank has enough experienced and
skilled personnel to carry out its business activities in a prudent manner, and to assess the suitability and integrity of officers in
accordance with the Bank’s Assessment Policy for Responsible Persons. The HR Committee reviews employee, including officers’,
compensation ranges and benefit programs and aggregate employee incentive awards. Additional information on this subject can be found
above, including in the sections titled “Executive Compensation Philosophy” and “Decision Making Process”. The
HR Committee is also responsible for an annual review of a number of human resources related Board approved policies, including the Compensation
Plan for all employees. The Compensation Plan addresses the base salary component of the total compensation package and other significant
benefits and programs.
Other Board
Committees
In addition to the
Audit Committee and the HR Committee, the Bank also has a Risk Oversight Committee and an Innovation and Technology Committee.
The Risk Oversight
Committee is currently comprised of three independent directors: Richard Jankura (Chair), Robbert-Jan Brabander, and Peter Irwin. The
Risk Oversight Committee is responsible for oversight of the Bank’s Enterprise Risk Management Framework and Risk Appetite Framework,
and reviewing policies developed and implemented for identifying, evaluating, measuring and managing the significant risks to which the
Bank is exposed, and ensuring that those policies remain appropriate and prudent. It is responsible for recommending and reviewing, at
least annually, all policies governing management of credit risk, market risk, structural risk, and liquidity and funding management risk,
to ensure that they remain prudent and appropriate and are being adhered to.
The Innovation and
Technology Committee is comprised of three independent directors: Robbert-Jan Brabander (Chair), Art Linton and Susan McGovern. The Innovation
and Technology Committee is responsible for assisting the Board in operational risk management by monitoring the development and implementation
of the Bank’s Operational Risk Management Framework to manage against operational risks to which the Bank is exposed. The Innovation
and Technology Committee assists in ensuring that management has effective policies, processes and procedure to manage information technology
risks.
Assessments
The Mandate of the
HR Committee provides that the members of the Board are required to complete an annual confidential assessment whereby each director is
asked to complete a Board and committee performance assessment survey. The Board utilizes the services of an independent consultant to
conduct the board assessment process. The consultant utilizing an online survey tool, circulated the assessment materials and the assessments
were returned directly to the consultant. The Board members were given the opportunity to have a telephone interview with the consultant
to discuss any concerns. The consultant then compiled the information and prepared a report on the results of the assessments which was
then discussed by the HR Committee and the full Board. The HR Committee follows up on recommendations that arise from the assessment process.
In addition, and
in accordance with the Mandate of the Chair of the Board, the Chair of the Board conducts an annual assessment of the performance of the
President & CEO of the Bank, and the results of that assessment are reviewed by the full Board.
Orientation and
Continuing Education
The Director Orientation
and Professional Development Program is designed to enhance the directors’ knowledge of, and ability to execute their responsibilities
to, the Bank. All new directors are assigned an existing board member as a mentor and are provided with a package of information, including
information respecting Board and committee
composition, management
information, and other relevant policies and procedures. New Audit Committee members receive additional information pertinent to his or
her role on that committee.
In order to keep
the directors up-to-date on operations and those matters that affect the business of the Bank, directors receive written material and
presentations from management, and may receive presentations from outside experts, on various aspects of the Bank’s operations as
well as on emerging issues. This process may be initiated at the request of the Board, a committee, an individual director, or management.
In addition, each committee has the authority to engage independent counsel and other advisors as determined to be necessary to permit
them to carry out their duties.
Directors are encouraged
to enroll in a relevant professional development program, and the expenses incurred are reimbursed to a fixed maximum amount. Where applicable,
directors are required to keep their professional accreditations current.
Mandate
A copy of the Mandate of the Board of Directors
is attached hereto as Schedule B.
PART XI – ADDITIONAL INFORMATION
|
SHAREHOLDER PROPOSALS
There were no shareholder
proposals submitted for consideration at this Meeting. The final date for submitting shareholder proposals for inclusion in the Management
Proxy Circular for next year’s annual shareholder meeting is November 30, 2024, and such submissions must comply with the requirements
of the Bank Act (Canada) and the Bank’s by-laws.
ADDITIONAL INFORMATION
The Bank’s
Consolidated Financial Statements and Management’s Discussion & Analysis for Fiscal 2023 contain additional financial information
about the Bank. Information pertaining to the Bank’s Audit Committee can be found in the Bank’s Annual Information Form for
Fiscal 2023. These documents and other additional information about the Bank are available on SEDAR+ at www.sedarplus.ca and EDGAR
at www.sec.gov/edgar. Copies of the information referred to above can be obtained free of charge upon request in writing to the
Corporate Secretary at the registered office of the Bank (Suite 2002, 140 Fullarton Street, London, Ontario N6A 5P2).
The Bank’s auditor
is Ernst & Young LLP, and Odyssey Trust Corporation is the Bank’s transfer agent.
DIRECTORS’ APPROVAL
This Management Proxy Circular has
been approved by the Board.
By Order of the Board,
Brent T. Hodge
General Counsel and Corporate Secretary
February 22, 2024
London, Ontario
|
SCHEDULE A – LONG-TERM INCENTIVE PLAN
|
OMNIBUS
LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
| Article 1 —DEFINITIONS. |
1 |
| |
|
| Section 1.1 |
Definitions. |
1 |
| |
|
|
| Article 2 —PURPOSE AND ADMINISTRATION OF THE PLAN; GRANTING OF AWARDS. |
6 |
| |
|
| Section 2.1 |
Purpose of the Plan. |
6 |
| Section 2.2 |
Implementation and Administration of the Plan. |
6 |
| Section 2.3 |
Eligible Participants. |
6 |
| Section 2.4 |
Shares Subject to the Plan. |
7 |
| Section 2.5 |
Participation Limits. |
7 |
| |
|
|
| Article 3 -OPTIONS |
7 |
| |
|
| Section 3.1 |
Nature of Options. |
7 |
| Section 3.2 |
Option Awards. |
7 |
| Section 3.3 |
Exercise Price. |
8 |
| Section 3.4 |
Expiry Date; Blackout Period. |
8 |
| Section 3.5 |
Option Agreement. |
8 |
| Section 3.6 |
Exercise of Options. |
8 |
| Section 3.7 |
Method ouf Exercise and Payment of Purchase Price. |
8 |
| Section 3.8 |
Termination of Employment. |
9 |
| |
|
|
| Article 4 —DEFERRED SHARE UNITS |
10 |
| |
|
| Section 4.1 |
Nature of DSUs. |
10 |
| Section 4.2 |
DSU Awards. |
10 |
| Section 4.3 |
Redemption of DSUs. |
11 |
| |
|
|
| Article 5 -SHARE UNITS |
12 |
| |
|
| Section 5.1 |
Nature of Share Units. |
12 |
| Section 5.2 |
Share Unit Awards. |
12 |
| Section 5.3 |
Performance Criteria and Performance Period Applicable to PSU Awards. |
13 |
| Section 5.4 |
Share Unit Vesting Determination Date. |
13 |
| |
|
|
| Article 6 —GENERAL CONDITIONS. |
13 |
| |
|
| Section 6.1 |
General Conditions applicable to Awards. |
13 |
| Section 6.2 |
Dividend Share Units. |
14 |
| Section 6.3 |
Unfunded Plan. |
14 |
| |
|
|
| Article 7 —ADJUSTMENTS AND AMENDMENTS. |
14 |
| |
|
| Section 7.1 |
Adjustment to Shares Subject to Outstanding Awards. |
14 |
| Section 7.2 |
Amendment or Discontinuance of the Plan. |
15 |
| Section 7.3 |
Change of Control. |
16 |
| |
|
|
| Article 8 —MISCELLANEOUS |
17 |
| |
|
| Section 8.1 |
Currency. |
17 |
| Section 8.2 |
Sub-Plans. |
17 |
| Section 8.3 |
Compliance and Award Restrictions. |
17 |
| Section 8.4 |
Use of an Administrative Agent and Trustee. |
18 |
| Section 8.5 |
Tax Withholding. |
18 |
| Section 8.6 |
Reorganization of the Company. |
19 |
| Section 8.7 |
Governing Laws. |
19 |
| Section 8.8 |
Successors and Assigns. |
19 |
| Section 8.9 |
Severability. |
19 |
| Section 8.10 |
No Liability. |
19 |
| Section 8.11 |
Effective Date of the Plan. |
19 |
OMNIBUS LONG-TERM
INCENTIVE PLAN
VersaBank
(the “Company”) hereby establishes an Omnibus Long-Term Incentive Plan for certain qualified directors, officers, employees
and Consultants (as defined herein), providing ongoing services to the Company and/or its Subsidiaries (as defined herein) that can have
a significant impact on the Company's long-term results.
ARTICLE 1—DEFINITIONS
Where
used herein or in any amendments hereto or in any communication required or permitted to be given hereunder, the following terms shall
have the following meanings, respectively, unless the context otherwise requires:
“active
employment” means the period in which a Participant who is an employee of the Company or an Affiliate performs work for the Company
or an Affiliate. For certainty, “active employment” shall be deemed to only include any period constituting the minimum notice
of termination period that is required to be provided to an employee Participant pursuant to applicable employment standards legislation
but shall exclude any other period that follows the later of the end of the statutory notice period or the employee Participant's last
day of performing work for the Company or an Affiliate;
“Affiliates”
has the meaning given to this term in the Securities Act (Ontario), as such legislation may be amended, supplemented or replaced
from time to time;
“Associate”,
where used to indicate a relationship with a Participant, means (i) any partner of that Participant, and (ii) the spouse of that Participant
and that Participant's children, as well as that Participant's relatives and that Participant's spouse's relatives, if they share that
Participant's residence;
“Award
Agreement” means, individually or collectively, an Option Agreement, RSU Agreement, PSU Agreement and/or DSU Agreement, as the
context requires;
“Awards”
means Options, RSUs, PSUs and/or DSUs granted to a Participant pursuant to the terms of the Plan;
“Black-Out
Period” means the period of time during which, pursuant to any policies or determinations of the Company or applicable law,
securities of the Company may not be traded by Insiders or other specified persons;
“Board”
means the board of directors of the Company as constituted from time to time; “Broker” has the meaning ascribed thereto
in Section 3.7(1) hereof;
“Business
Day” means a day other than a Saturday, Sunday or statutory holiday, when banks are generally open for business in London, Ontario,
Canada for the transaction of banking business;
“Cancellation”
has the meaning ascribed thereto in Section 2.4(1) hereof;
“Cash Equivalent” means:
| (a) | in the case of Share Units, the amount of money equal to the Market Value multiplied
by the number of vested Share Units in the Participant's Account, net of any applicable taxes in accordance with Section 8.5, on the Share
Unit Settlement Date; |
| (b) | in the case of DSU Awards, the amount of money equal to the Market Value multiplied
by the whole number of DSUs then recorded in the Participant's Account which the Non- Employee Director requests to redeem pursuant to
the DSU Redemption Notice, net of any applicable taxes in accordance with Section 8.5, on the date the Company receives, or is deemed
to receive, the DSU Redemption Notice; |
“Change
of Control” means unless the Board determines otherwise, the happening, in a single transaction or in a series of related transactions,
of any of the following events:
| (a) | any transaction (other than a transaction described in clause (b) below) pursuant
to which any person or group of persons acting jointly or in concert acquires the direct or indirect beneficial ownership of securities
of the Company representing 50% or more of the aggregate voting power of all of the Company's then issued and outstanding securities entitled
to vote in the election of directors of the Company, other than any such acquisition that occurs upon the exercise or settlement of options
or other securities granted by the Company under any of the Company's equity incentive plans. |
| (b) | there is consummated an arrangement, amalgamation, merger, consolidation or similar
transaction involving (directly or indirectly) the Company and, immediately after the consummation of such arrangement, amalgamation,
merger, consolidation or similar transaction, the shareholders of the Company immediately prior thereto do not beneficially own, directly
or indirectly, either (i) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving
or resulting entity in such amalgamation, merger, consolidation or similar transaction, or (ii) more than 50% of the combined outstanding
voting power of the parent of the surviving or resulting entity in such arrangement, amalgamation merger, consolidation or similar transaction,
in each case in substantially the same proportions as their beneficial ownership of the outstanding voting securities of the Company immediately
prior to such transaction; |
| (c) | (i) the sale, lease, exchange, license or other disposition of all or substantially
all of the Company's assets to a person other than a person that was an Affiliate of the Company at the time of such sale, lease, exchange,
license or other disposition, or (ii) a sale, lease, exchange, license or other disposition to an entity, more than fifty percent (50%)
of the combined voting power of the voting securities of which are beneficially owned by shareholders of the Company in substantially
the same proportions as their beneficial ownership of the outstanding voting securities of the Company immediately prior to such sale,
lease, exchange, license or other disposition; |
| (d) | the passing of a resolution by the Board or shareholders of the Company to substantially
liquidate the assets of the Company or wind up the Company's business or significantly rearrange its affairs in one or more transactions
or series of transactions or the commencement of proceedings for such a liquidation, winding-up or re-arrangement (except where such re-arrangement
is part of a bona fide reorganization of the Company in circumstances where the business of the Company is continued and the shareholdings
remain substantially the same following the re-arrangement); |
| (e) | individuals who, on the Effective Date, are members of the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment
or election (or nomination for election) |
of any new Board
member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will,
for purposes of the Plan, be considered as a member of the Incumbent Board; or
| (f) | any other matter determined by the Board to be a Change of Control. |
“Code
of Conduct” means any code of ethics adopted by the Company, as modified from time to time;
"Company”
means VersaBank, a Schedule I bank governed by the Bank Act (Canada);
“Consultant”
means a Person (including an individual whose services are contracted for through another Person) with whom the Company or a Subsidiary
has a written contract for services for an initial, renewable or extended period of twelve months or more;
“disability”
has the meaning attributed thereto in the Participant's Employment Agreement or written agreement with the Company or an Affiliate
and if there is no such defined term or agreement, means the Participant's inability to substantially fulfil his or her duties on behalf
of the Company as a result of illness or injury for a continuous period of nine (9) months or more or for an aggregate period of twelve
(12) months or more during any consecutive twenty-four (24) month period.
“Dividend Share
Units” has the meaning ascribed thereto in Section 6.2 hereof;
“DSU”
means a deferred share unit, which is a bookkeeping entry equivalent in value to a Share credited to a Participant's Account in accordance
with Article 4 hereof;
“DSU
Agreement” means a written notice from the Company to a Participant evidencing the grant of DSUs and the terms and conditions
thereof, substantially in the form set out in Schedule "A", or such other form as the Board may approve from time to time;
“DSU Redemption Deadline”
has the meaning ascribed thereto in Section 4.3(1) hereof;
“DSU Redemption Notice” has
the meaning ascribed thereto in Section 4.3(1) hereof; "Eligible Participants" has the meaning ascribed thereto in Section
2.3(1) hereof;
“Employment
Agreement” means, with respect to any Participant, any written employment agreement between the Company or a Subsidiary and such
Participant;
“Exercise
Notice” means a notice in writing signed by a Participant and stating the Participant's intention to exercise or settle a particular
Award, if applicable;
“Exercise Price”
has the meaning ascribed thereto in Section 3.2 hereof; "Expiry Date" has the meaning ascribed thereto in Section 3.4 hereof;
“Insider”
means a "reporting insider" of the Company as defined in National Instrument 55-104 — Insider Reporting Requirements
and Exemptions and the TSX Company Manual in respect of the rules governing security-based compensation arrangements, as amended from
time to time;
"Market
Value" means at any date when the market value of Shares of the Company is to be determined, the closing price of the Shares on the
trading day prior to such date on the TSX, or, if the Shares are not listed on the TSX at the relevant time, such other stock exchange
upon which the Shares are then listed, or if the Shares of the Company are not listed on any stock exchange,
the value as is
determined solely by the Board, acting reasonably and in good faith based on the reasonable application of a reasonable valuation method
not inconsistent with Canadian tax law;
“Non-Employee
Directors” means members of the Board who, at the time of execution of an Award Agreement, if applicable, and at all times
thereafter while they continue to serve as a member of the Board, are not officers or employees of the Company or a Subsidiary;
“Option”
means an option granted by the Company to a Participant entitling such Participant to acquire one Share from treasury at the Exercise
Price, but subject to the provisions hereof;
“Option
Agreement” means a written notice from the Company to a Participant evidencing the grant of Options and the terms and conditions
thereof, substantially in the form set out in Schedule “B”, or such other form as the Board may approve from time to time;
“Participants”
means Eligible Participants that are granted Awards under the Plan;
“Participant's
Account” means an account maintained to reflect each Participant's participation in RSUs, PSUs and/or DSUs under the Plan;
“Performance
Criteria” means criteria established by the Board which, without limitation, may include criteria based on the Participant's
personal performance, the financial performance of the Company and/or of its Subsidiaries and/or achievement of corporate goals and strategic
initiatives, and that may be used to determine the vesting of the Awards, when applicable;
“Performance
Period” means the period determined by the Board pursuant to Section 5.3 hereof;
“Person”
means, without limitation, an individual, sole proprietorship, partnership, unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body corporate and a trustee executor, administrator, or other legal representative, and pronouns
which refer to a Person shall have a similarly extended meaning;
“Plan”
means this Omnibus Long-Term Incentive Plan, as amended and restated from time to time, including, for greater certainty, any sub-plan
adopted by the Board in accordance with Section 8.2 hereof;
“PSU”
means a right awarded to a Participant to receive a payment in the form of Shares (or the Cash Equivalent) as provided in Article
4 hereof and subject to the terms and conditions of the Plan;
“PSU
Agreement” means a written notice from the Company to a Participant evidencing the grant of PSUs and the terms and conditions
thereof, substantially in the form set out in Schedule “C”, or such other form as the Board may approve from time to time;
“Regulatory
Authorities” means the TSX and all securities commissions or similar securities regulatory bodies having jurisdiction over the
Corporation;
“RSU”
means a restricted share unit awarded to a Participant to receive a payment in the form of Shares (or the Cash Equivalent) as provided
in Article 5 hereof and subject to the terms and conditions of the Plan;
“RSU
Agreement” means a written notice from the Company to a Participant evidencing the grant of RSUs and the terms and conditions
thereof, substantially in the form set out in Schedule “C”, or such other form as the Board may approve from time to time;
“Share
Compensation Arrangement” means a stock option, employee stock purchase plan, long-term incentive plan or any other compensation
or incentive mechanism involving the issuance or potential issuance of Shares to one or more Eligible Participants of the Company or
a Subsidiary, including this Plan. For greater certainty, a “Share Compensation Arrangement” does not include a security-based
compensation arrangement used as an inducement to person(s) or company(ies) not previously employed by and not previously an Insider
of the Company;
“Shares” means
the common shares in the capital of the Company;
“Share Unit”
means a RSU and/or PSU, as the context requires;
“Share
Unit Settlement Notice” means a notice by a Participant to the Company electing the desired form of settlement of vested RSUs
or PSUs;
“Share
Unit Vesting Determination Date” has the meaning described thereto in Section 5.4 hereof;
“Subsidiary”
means a company, partnership or other body corporate that is controlled, directly or indirectly, by the Company;
“Surrender” has
the meaning ascribed thereto in Section 3.7(3); “Surrender Notice” has the meaning ascribed thereto in Section 3.7(3);
“Tax
Act” means the Income Tax Act (Canada) and its regulations thereunder, as amended from time to time;
“Termination
Date” means (i) with respect to a Participant who is an employee or officer of the Company or a Subsidiary, such Participant's
last day of active employment, (ii) with respect to a Participant who is a Consultant, the date such Consultant ceases to provide services
to the Company or a Subsidiary, and (iii) with respect to a Participant who is a Non-Employee Director, the date such Person ceases to
be a director of the Company or Subsidiary, effective on the last day of the Participant's actual and active Board membership whether
such day is selected by agreement with the individual, unilaterally by the Corporation and whether with or without advance notice to
the Participant, provided that if a Non-Executive Director becomes an employee of the Company or any of its Subsidiaries, such Participant's
Termination Date will be such Participant's last day of active employment, and “Terminate” and “Terminated”
have corresponding meanings.
“Trading Day”
means any day on which the TSX is opened for trading;
“transfer”
includes any sale, exchange, assignment, gift, bequest, disposition, mortgage, lien, charge, pledge, encumbrance, grant of security interest
or any arrangement by which possession, legal title or beneficial ownership passes from one Person to another, or to the same Person
in a different capacity, whether or not voluntary and whether or not for value, and any agreement to effect any of the foregoing and
“transferred”, “transferring” and similar variations have corresponding meanings.
“TSX”
means the Toronto Stock Exchange; and
ARTICLE 2—PURPOSE AND ADMINISTRATION
OF THE PLAN; GRANTING OF AWARDS
| Section 2.1 | Purpose of the Plan. |
The
purpose of the Plan is to advance the interests of the Company by: (i) providing Eligible Participants with additional incentives; (ii)
encouraging share ownership by such Eligible Participants; (iii) increasing the proprietary interest of Eligible Participants in the success
of the Company; (iv) promoting growth and profitability of the Company; (v) encouraging Eligible Participants to take into account long-
term corporate performance; (vi) rewarding Eligible Participants for sustained contributions to the Company and/or significant performance
achievements of the Company; and (vii) enhancing the Company's ability to attract, retain and motivate Eligible Participants.
| Section 2.2 | Implementation and Administration of the
Plan. |
| (1) | The Plan shall be administered and interpreted by the Board or, if the Board by
resolution so decides, by a committee of the Board and/or any member of the Board. In such circumstances, all references to the term “Board"
in this Plan will be deemed to be references to the such committee and/or member of the Board, except as may otherwise be determined by
the Board. |
| (2) | Subject to the terms and conditions set forth in the Plan, the Board shall have
the sole and absolute discretion to: (i) designate Participants; (ii) determine the type, size, and terms, and conditions of Awards to
be granted; (iii) determine the method by which an Award may be settled, exercised, canceled, forfeited, or suspended; (iv) determine
the circumstances under which the delivery of cash with respect to an Award may be deferred either automatically or at the Participant's
or the Board's election; (v) interpret and administer, reconcile any inconsistency in, correct any defect in, and supply any omission
in the Plan and any Award granted under, the Plan; (vi) establish, amend, suspend, or waive any rules and regulations and appoint such
agents as the Board shall deem appropriate for the proper administration of the Plan; (vii) accelerate the vesting, delivery, or exercisability
of, or payment for or lapse of restrictions on, or waive any condition in respect of, Awards; and (viii) make any other determination
and take any other action that the Board deems necessary or desirable for the administration of the Plan or to comply with any applicable
law. |
| (3) | No member of the Board will be liable for any action or determination taken or
made in good faith in the administration, interpretation, construction or application of the Plan, any Award Agreement or other document
or any Awards granted pursuant to the Plan. |
| (4) | The day-to-day administration of the Plan may be delegated to such officers and
employees of the Company as the Board determines. |
| (5) | Unless otherwise expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions regarding the Plan or any Award or any documents evidencing any Award granted pursuant to the Plan
shall be within the sole discretion of the Board, may be made at any time, and shall be final, conclusive, and binding upon all persons
or entities, including, without limitation, the Company, any Subsidiary, any Participant, any holder or beneficiary of any Award, and
any shareholder of the Company. |
| Section 2.3 | Eligible Participants. |
| (1) | The Persons who shall be eligible to receive Options, RSUs and PSUs shall be the
officers, employees or Consultants of or to the Company or a Subsidiary, providing ongoing services to the Company and/or its Subsidiaries,
and the Persons who shall be eligible to receive DSUs shall be the Non-Employee Directors (collectively, “Eligible Participants”). |
| (2) | Participation in the Plan shall be entirely voluntary and any decision not to participate
shall not affect an Eligible Participant's relationship, employment or appointment with the Company or a Subsidiary. |
| (3) | Notwithstanding any express or implied term of the Plan to the contrary, the granting
of an Award pursuant to the Plan shall in no way be construed as a guarantee of employment or appointment by the Company or a Subsidiary. |
| Section 2.4 | Shares Subject to the Plan. |
| (1) | Subject to Section 2.4(2) and to adjustment pursuant to provisions of Article 7
hereof, the total number of Shares reserved and available for grant and issuance pursuant to Awards under the Plan or pursuant to awards
under any other established Share Compensation Arrangement, shall not exceed ten percent (10%) of the total issued and outstanding Shares
from time to time, or such other number as may be approved by the TSX and the shareholders of the Company from time to time. For the purposes
of this Section 2.4(1), in the event that the Company cancels or purchases to cancel any of its issued and outstanding Shares (“Cancellation”)
and as a result of such Cancellation, the Company exceeds the limit set out in this Section 2.4(1), no approval of the Company's shareholders
will be required for the issuance of Shares on the exercise of any Options which were granted prior to such Cancellation. The Plan is
considered an “evergreen” plan, since the Shares covered by Awards which have been exercised shall be available for subsequent
grants under the Plan and the number of Awards available to grant increases as the number of issued and outstanding Shares increases from
time to time. |
| (2) | For greater certainty, any issuance from treasury by the Company that is or was
issued in reliance upon an exemption under applicable stock exchange rules applicable to security based compensation arrangements used
as an inducement to Persons not previously employed by and not previously an Insider of the Company shall not be included in determining
the maximum Shares reserved and available for grant and issuance under Section 2.4(1). |
| (3) | Shares in respect of which an Award is exercised, granted under the Plan (or any
other Share Compensation Arrangement) but not exercised prior to the termination of such Award, not vested or settled prior to the termination
of such Award due to the expiration, termination, cancellation or lapse of such Award, or settled in cash in lieu of settlement in Shares,
shall, in each case, be available for Awards to be granted thereafter pursuant to the provisions of the Plan. All Shares issued from treasury
pursuant to the exercise or the vesting of the Awards granted under the Plan shall, when the applicable Exercise Price, if any, is received
by the Company in connection therewith, be so issued as fully paid and non-assessable Shares. |
| Section 2.5 | Participation Limits. |
Subject to
adjustment pursuant to provisions of Article 7 hereof, the aggregate number of Shares (i) issued to Insiders under the Plan or any
other proposed or established Share Compensation Arrangement within any one-year period, and (ii) issuable to Insiders at any time
under the Plan or any other proposed or established Share Compensation Arrangement, shall in each case not exceed ten percent (10%)
of the total issued and outstanding Shares from time to time determined on a non-diluted basis. Any Awards granted pursuant to the
Plan to a Participant prior to the Participant becoming an Insider, shall be excluded for the purposes of the limits set out in this
Section 2.5.
ARTICLE 3—OPTIONS
| Section 3.1 | Nature of Options. |
Each Option is an option
granted by the Company to a Participant entitling such Participant to acquire one Share from treasury at the Exercise Price, subject to
the provisions hereof.
| Section 3.2 | Option Awards. |
| (1) | The Board shall, from time to time, in its sole discretion, (i) designate the
Eligible Participants who may receive Options under the Plan, (ii) determine the number of Options, if any, to be granted to each Eligible
Participant and the date or dates on which such Options shall be granted, |
(iii)
determine the price per Share to be payable upon the exercise of each such Option (the “Exercise Price”), (iv) determine the
relevant vesting provisions (including Performance Criteria, if applicable) and (v) determine the Expiry Date, the whole subject to the
terms and conditions prescribed in the Plan, in any Option Agreement and any applicable rules of the TSX and any other stock exchange
on which the Shares are listed or posted for trading.
| (2) | All Options granted herein shall vest in accordance with the terms of the resolutions
of the Board approving such Options and the terms of the Option Agreement entered into in respect of such Options. |
| Section 3.3 | Exercise Price. |
The
Exercise Price for any Option shall be fixed by the Board when such Option is granted, but shall not be less than the Market Value of
the Shares underlying the Option at the time of the grant.
| Section 3.4 | Expiry Date; Blackout Period. |
Subject
to Section 7.2, each Option must be exercised no later than ten (10) years after the date the Option is granted or such shorter period
as set out in the Participant's Option Agreement, at which time such Option will expire (the “Expiry Date”). Notwithstanding
any other provision of the Plan, each Option that would expire during or within ten (10) Business Days immediately following a Black-Out
Period shall expire on the date that is ten (10) Business Days immediately following the expiration of the Black-Out Period. Where an
Option will expire on a date that falls immediately after a Black-Out Period, and for greater certainty, not later than ten (10) Business
Days after the Black-Out Period, then the date such Option will expire will be automatically extended by such number of days equal to
ten (10) Business Days less the number of Business Days after the Black-Out Period that the Option expires.
| Section 3.5 | Option Agreement. |
Each
Option must be confirmed by an Option Agreement. The Option Agreement shall contain such terms that may be considered necessary in order
that the Option will comply with any provisions respecting options in the income tax or other laws in force in any country or jurisdiction
of which the Participant may from time to time be a resident or citizen or the rules of any Regulatory Authority.
| Section 3.6 | Exercise of Options. |
| (1) | Subject to the provisions of the Plan, a Participant shall be entitled to exercise
an Option granted to such Participant, subject to vesting limitations which may be imposed by the Board at the time such Option is granted
and set out in the Option Agreement. |
| (2) | Prior to its expiration or earlier termination in accordance with the Plan, each
Option shall be exercisable as to all or such part or parts of the optioned Shares and at such time or times and/or pursuant to the achievement
of such Performance Criteria and/or other vesting conditions as the Board may determine in its sole discretion. |
| (3) | No fractional Shares will be issued upon the exercise of Options granted under
the Plan and, accordingly, if a Participant would become entitled to a fractional Share upon the exercise of an Option, or from an adjustment
pursuant to Section 7.1, such Participant will only have the right to acquire the next lowest whole number of Shares, and no payment or
other adjustment will be made with respect to the fractional interest so disregarded. |
| Section 3.7 | Method of Exercise and Payment of Purchase
Price. |
| (1) | Subject to the provisions of the Plan and the alternative exercise procedures
set out herein, an Option granted under the Plan may be exercisable (from time to time as provided in Section 3.6 hereof) by the Participant
(or by the liquidator, executor or administrator, as the case may be, of the estate of the Participant) by delivering an exercise notice
substantially in the form appended to the Option Agreement (an “Exercise Notice”) to the Company in the form and manner |
determined by the
Board from time to time, together with a bank draft, certified cheque, wire transfer or other form of payment acceptable to the Company
in an amount equal to the aggregate Exercise Price of the Shares to be purchased pursuant to the exercise of the Options and any applicable
tax withholdings.
| (2) | Pursuant to the Exercise Notice, and subject to the approval of the Board, a Participant
may choose to undertake a “cashless exercise” with the assistance of a broker (the “Broker”) in order to facilitate
the exercise of such Participant's Options. The “cashless exercise” procedure may include a sale of such number of Shares
as is necessary to raise an amount equal to the aggregate Exercise Price for all Options being exercised by that Participant under an
Exercise Notice and any applicable tax withholdings. Pursuant to the Exercise Notice, the Participant may authorize the Broker to sell
Shares on the open market by means of a short sale and forward the proceeds of such short sale to the Company to satisfy the Exercise
Price and any applicable tax withholdings, promptly following which the Company shall issue the Shares underlying the number of Options
as provided for in the Exercise Notice. |
| (3) | In addition, in lieu of exercising any vested Option in the manner described in
this Section 3.7(1) or Section 3.7(2), and pursuant to the terms of this Section 3.7(3) but subject to Section 3.6(3), a Participant may,
by surrendering an Option (“Surrender”) with a properly endorsed notice of Surrender to the Corporate Secretary of the Company,
substantially in the form appended to the Option Agreement (a “Surrender Notice”), elect to receive that number of
Shares calculated using the following formula, subject to acceptance of such Surrender Notice by the Board and provided that arrangements
satisfactory to the Company have been made to pay any applicable withholding taxes: |
X = (Y * (A-B)) / A
Where:
X
= the number of Shares to be issued to the Participant upon exercising such Options; provided that if the foregoing calculation results
in a negative number, then no Shares shall be issued;
Y = the number of Shares underlying the
Options to be Surrendered;
A = the Market Value of the Shares as at
the date of the Surrender; and
B = the Exercise Price of such Options.
| (4) | No share certificates shall be issued and no person shall be registered in the
share register of the Company as the holder of Shares until actual receipt by the Company of an Exercise Notice and payment for the Shares
to be purchased. |
| (5) | Upon the exercise of an Option pursuant to Section 3.7(1) or Section 3.7(3), the
Company shall, as soon as practicable after such exercise but no later than ten (10) Business Days following such exercise, forthwith
cause the transfer agent and registrar of the Shares to deliver to the Participant (or as the Participant may otherwise direct) such number
of Shares as the Participant shall have then paid for and as are specified in such Exercise Notice. |
| Section 3.8 | Termination of Employment. |
| (1) | Subject to a written Employment Agreement of a Participant or Option Agreement
and as otherwise determined by the Board, each Option shall be subject to the following conditions: |
| (a) | Termination for Cause. Upon a Participant ceasing to be an Eligible Participant
for “cause”, all unexercised vested or unvested Options granted to such Participant shall |
terminate
on the Termination Date as specified in the notice of termination. For the purposes of the Plan, the determination by the Company that
the Participant was discharged for cause shall be binding on the Participant. Subject to the terms of the Employment Agreement, “cause”
shall include, among other things, gross misconduct, theft, fraud, breach of confidentiality or breach of the Code of Conduct and any
reason determined by the Company to be cause for termination; provided that, in respect of a termination for cause, in the event that
an Ontario employee Participant's conduct or actions giving rise to cause does not constitute wilful misconduct, disobedience or wilful
neglect of duty, in each case, that is not trivial and has not been condoned by the Company or an applicable Affiliate, the Ontario employee
Participant shall be entitled to such minimum statutory entitlements in respect of the incentive compensation or any other applicable
rights pursuant to this Plan to the end of the statutory notice period as may be required by applicable employment standards legislation.
| (b) | Resignation, Retirement and Termination other than for Cause. In the case
of a Participant ceasing to be an Eligible Participant due to such Participant's resignation, retirement or termination other than for
“cause”, as applicable, subject to any later expiration dates determined by the Board, all Options shall expire on the earlier
of ninety (90)
days after the effective date of such Termination Date or the expiry date of such Option, to the extent such Option was vested and exercisable
by the Participant on the effective date of such Termination Date, and all unexercised unvested Options granted to such Participant shall
terminate on the effective date of such resignation, retirement or termination. |
| (c) | Death or Disability. In the case of a Participant ceasing to be an Eligible
Participant due to death or disability, as applicable, subject to any later expiration dates determined by the Board, all Options shall
expire on the earlier of twelve (12) months after the effective date of such death or disability, or the expiry date of such Option, to
the extent such Option was vested and exercisable by the Participant on the effective date of such death or disability, and all unexercised
unvested Options granted to such Participant shall terminate on the effective date of such death or disability. |
| (2) | For the avoidance of doubt, subject to applicable employment standards legislation,
a Participant shall have no entitlement to damages or other compensation whatsoever arising from, in lieu of, or related to not receiving
any awards or compensation which would have vested or been granted after the Termination Date including but not limited to damages in
lieu of notice at common law. |
ARTICLE 4—DEFERRED
SHARE UNITS
| Section 4.1 | Nature of DSUs. |
A
DSU is a unit granted to Non-Employee Directors representing the right to receive a Share or the Cash Equivalent, subject to restrictions
and conditions as the Board may determine at the time of grant. Conditions may be based on continuing service as a Non-Employee Director
(or other service relationship), vesting terms and/or achievement of pre-established Performance Criteria.
| (1) | Subject to the Company's director compensation policy determined by the Board from
time to time, each Non-Employee Director may elect to receive all or a portion his or her annual retainer fee in the form of a grant of
DSUs in each fiscal year. The number of DSUs shall be calculated as the amount of the Non-Employee Director's annual retainer fee elected
to be paid by way of DSUs divided by the Market Value. At the discretion of the Board, fractional DSUs will not be issued and any fractional
entitlements will be rounded down to the nearest whole number. |
| (2) | Each DSU must be confirmed by a DSU Agreement that sets forth the terms, conditions
and limitations for each DSU and may include, without limitation, the vesting and terms of the DSUs and the provisions applicable on a
Termination Date, and shall contain such terms that may be considered necessary in order that the DSU will comply with any provisions
respecting DSUs in the income tax or other laws in force in any country or jurisdiction of which the Participant may from time to time
be a resident or citizen or the rules of any Regulatory Authority. |
| (3) | Any DSUs that are awarded to a Non-Employee Director who is a resident of Canada
or employed in Canada (each for purposes of the Tax Act) shall be structured so as to be considered to be a plan described in section
7 of the Tax Act or to meet requirements of paragraph 6801(d) of the Income Tax Regulations adopted under the Tax Act (or any successor
to such provisions). |
| (4) | Subject to vesting and other conditions and provisions set forth herein and in
the DSU Agreement, the Board shall determine whether each DSU awarded to a Non-Employee Director shall entitle the Non-Employee Director:
(i) to receive one Share issued from treasury; (ii) to receive the Cash Equivalent of one Share; (iii) to receive either one Share from
treasury, the Cash Equivalent of one Share or a combination of cash and Shares, as the Board may determine in its sole discretion on redemption;
or (iv) to entitle the Non-Employee Director to elect to receive either one Share from treasury, the Cash Equivalent of one Share or a
combination of cash and Shares. |
| Section 4.3 | Redemption of DSUs. |
| (1) | Each Non-Employee Director shall be entitled to redeem his or her DSUs during the
period commencing on the Business Day immediately following the Termination Date and ending on the date that is not later than the 90*^
day following the Termination Date, or such shorter redemption period set out in the relevant DSU Agreement (the “DSU Redemption
Deadline”), by providing a written notice of settlement to the Company setting out the number of DSUs to be settled and the
particulars regarding the registration of the Shares issuable upon settlement, if applicable (the “DSU Redemption Notice”).
In the event of the death of a Non-Employee Director, the Notice of Redemption shall be filed by the administrator or liquidator of
the estate of the Non-Employee Director. |
| (2) | If a DSU Redemption Notice is not received by the Company on or before the DSU
Redemption Deadline, the Non-Employee Director shall be deemed to have delivered a DSU Redemption Notice on the DSU Redemption Deadline
and, if not otherwise set out in the DSU Agreement, the Board shall determine the number of DSUs to be settled by way of Shares, the Cash
Equivalent or a combination of Shares and the Cash Equivalent and delivered to the Non-Employee Director, administrator or liquidator
of the estate of the Non-Employee Director, as applicable. |
| (3) | Subject to Section 8.5 and the DSU Agreement, settlement of DSUs shall take place
promptly following the Company's receipt or deemed receipt of the DSU Redemption Notice through: |
| (a) | in the case of settlement DSUs for their Cash Equivalent, delivery of bank draft,
certified cheque, wire transfer or other acceptable form of payment to the Non-Employee Director representing the Cash Equivalent; |
| (b) | in the case of settlement of DSUs for Shares, delivery of a Share to the Non-Employee Director; or |
| (c) | in the case of settlement of DSUs for a combination of Shares and the Cash Equivalent,
a combination of (a) and (b) above. |
ARTICLE 5—SHARE
UNITS
| Section 5.1 | Nature of Share Units. |
A
Share Unit is an Award entitling the recipient to acquire Shares, at such purchase price (which may be zero) as determined by the Board,
subject to such restrictions and conditions as the Board may determine at the time of grant. Conditions may be based on continuing employment
(or other service relationship) and/or achievement of pre-established performance goals and objectives.
| Section 5.2 | Share Unit Awards. |
| (1) | Subject to the provisions herein set forth and any shareholder or regulatory approval
which may be required, the Board shall, from time to time, in its sole discretion, (i) designate the Eligible Participants who may receive
RSUs and/or PSUs under the Plan, (ii) fix the number of RSUs and/or PSUs, if any, to be granted to each Eligible Participant and the date
or dates on which such RSUs and/or PSUs shall be granted, and (iii) determine the relevant conditions and vesting provisions (including,
in the case of PSUs, the applicable Performance Period and Performance Criteria, if any) and Restriction Period of such RSUs and/or PSUs,
the whole subject to the terms and conditions prescribed in the Plan and in any RSU Agreement or PSU Agreement, as applicable. |
| (2) | Each RSU must be confirmed by an RSU Agreement that sets forth the terms, conditions
and limitations for each RSU and may include, without limitation, the vesting and terms of the RSUs and the provisions applicable in the
event employment or service terminates, and shall contain such terms that may be considered necessary in order that the RSUs will comply
with any provisions respecting RSUs in the income tax or other laws in force in any country or jurisdiction of which the Participant may
from time to time be a resident or citizen or the rules of any Regulatory Authority. |
| (3) | Each PSU must be confirmed by a PSU Agreement that sets forth the terms, conditions
and limitations for each PSU and may include, without limitation, the applicable Performance Period and Performance Criteria, vesting
and terms of the PSUs and the provisions applicable in the event employment or service terminates, and shall contain such terms that may
be considered necessary in order that the PSUs will comply with any provisions respecting PSUs in the income tax or other laws in force
in any country or jurisdiction of which the Participant may from time to time be a resident or citizen or the rules of any Regulatory
Authority. |
| (4) | Any RSUs or PSUs that are awarded to an Eligible Participant who is a resident
of Canada or employed in Canada (each for purposes of the Tax Act) shall be structured so as to be considered to be a plan described in
section 7 of the Tax Act or in such other manner to ensure that such award is not a “salary deferral arrangement” as defined
in the Tax Act (or any successor to such provisions). |
| (5) | Subject to the vesting and other conditions and provisions set forth herein and in
the RSU Agreement and/or PSU Agreement, the Board shall determine whether each RSU and/or PSU awarded to a Participant shall entitle the
Participant: (i) to receive one Share issued from treasury; (ii) to receive the Cash Equivalent of one Share; (iii) to receive either
one Share from treasury, the Cash Equivalent of one Share or a combination of cash and Shares, as the Board may determine in its sole
discretion on settlement; or (iv) to elect to receive either one Share from treasury, the Cash Equivalent of one Share or a combination
of cash and Shares. |
| (6) | The applicable settlement period in respect of a particular Share Unit shall be
determined by the Board. Except as otherwise provided in the Award Agreement or any other provision of the Plan, all vested RSUs and PSUs
shall be settled as soon as practicable following the Share Unit Vesting Determination Date (as defined in Section 5.4) but in all cases
prior to (i) three (3) years following the date of grant of Share Unit, if such Share Unit are settled by payment of Cash Equivalent or
through purchases by the Company on the Participant's behalf on the open market, |
or
(ii) ten (10) years following the date of grant of Share Unit, if such Share Unit are settled by issuance of Shares from treasury. Following
the receipt of such settlement, the PSUs and RSUs so settled shall be of no value whatsoever and shall be removed from the Participant's
Account.
| Section 5.3 | Performance Criteria and Performance
Period Applicable to PSU Awards. |
| (1) | For each award of PSUs, the Board shall establish the period in which any Performance
Criteria and other vesting conditions must be met in order for a Participant to be entitled to receive Shares in exchange for all or a
portion of the PSUs held by such Participant (the “Performance Period”). |
| (2) | For each award of PSUs, the Board shall establish any Performance Criteria and
other vesting conditions for a Participant to be entitled to receive Shares in exchange for his or her PSUs. |
| Section 5.4 | Share Unit Vesting Determination Date. |
The
vesting determination date means the date on which the Board determines if the Performance Criteria and/or other vesting conditions with
respect to a RSU and/or PSU have been met (the “Share Unit Vesting Determination Date”), and as a result, establishes
the number of RSUs and/or PSUs that become vested, if any.
ARTICLE 6—GENERAL
CONDITIONS
| Section 6.1 | General Conditions applicable to Awards. |
Each Award, as applicable,
shall be subject to the following conditions:
| (1) | Employment
- The granting of an Award to a Participant shall not impose upon the Company or a Subsidiary
any obligation to retain the Participant in its employ in any capacity. For greater certainty,
the granting of Awards to a Participant shall not impose any obligation on the Company to
grant any awards in the future nor shall it entitle the Participant to receive future grants. |
| (2) | No Rights
as a Shareholder - Neither the Participant nor such Participant's personal representatives
or legatees shall have any rights whatsoever as shareholder in respect of any Shares covered
by such Participant's Awards until the date of issuance of a share certificate to such Participant
(or to the liquidator, executor or administrator, as the case may be, of the estate of the
Participant) or the entry of such person's name on the share register for the Shares. Without
in any way limiting the generality of the foregoing, no adjustment shall be made for dividends
or other rights for which the record date is prior to the date such share certificate is
issued or entry of such person's name on the share register for the Shares. |
| (3) | Conformity to Plan — In the event that an Award is granted or an
Award Agreement is executed which does not conform in all particulars with the provisions of the Plan, or purports to grant Awards on
terms different from those set out in the Plan, the Award or the grant of such Award shall not be in any way void or invalidated, but
the Award so granted will be adjusted to become, in all respects, in conformity with the Plan. |
| (4) | Non-Transferability — Except as set forth herein, Awards are not transferable.
Awards may be exercised only by: |
| (a) | the Participant to whom the Awards were granted; |
| (b) | with the Board's prior written approval and subject to such conditions as the
Board may stipulate, such Participant's family or retirement savings trust or any registered retirement savings plans or registered retirement
income funds of which the Participant is and remains the annuitant; |
| (c) | upon the Participant's death, by the legal representative of the Participant's estate; or |
| (d) | upon the Participant's incapacity, the legal representative having authority to
deal with the property of the Participant; |
provided
that any such legal representative shall first deliver evidence satisfactory to the Company of entitlement to exercise any Award. A person
exercising an Award may subscribe for Shares only in the person's own name or in the person's capacity as a legal representative.
| (5) | No Guarantee — For greater certainty, the granting of Awards to a
Participant shall not impose any obligation on the Corporation to grant any Awards in the future nor shall it entitle the Participant
to receive future grants. No amount will be paid to or in respect of a Participant under the Plan or pursuant to any other arrangement,
and no Awards will be granted to such Participant to compensate for any downward fluctuation in the price of the Shares, nor will any
other form of benefit be conferred upon or in respect of the Participant for such purpose. |
| (6) | Acceptance of Terms — Participation in the Plan by any Participant
shall be construed as acceptance of the terms and conditions of the Plan by the Participant and as to the Participant's agreement to be
bound thereby. |
| Section 6.2 | Dividend Share Units. |
When
dividends (other than stock dividends) are paid on Shares, Participants shall receive additional DSUs, RSUs and/or PSUs, as applicable
(“Dividend Share Units”) as of the dividend payment date. The number of Dividend Share Units to be granted to the Participant
shall be determined by multiplying the aggregate number of DSUs, RSUs and/or PSUs, as applicable, held by the Participant on the relevant
record date by the amount of the dividend paid by the Company on each Share, and dividing the result by the Market Value on the dividend
payment date, which Dividend Share Units shall be in the form of DSUs, RSUs and/or PSUs, as applicable. Dividend Share Units granted to
a Participant in accordance with this Section 6.2 shall be subject to the same vesting conditions and settlement terms as applicable to
the related DSUs, RSUs and/or PSUs in accordance with the respective Award Agreement.
| Section 6.3 | Unfunded Plan. |
Unless
otherwise determined by the Board, the Plan shall be unfunded. To the extent any Participant or his or her estate holds any rights by
virtue of a grant of Awards under the Plan, such rights (unless otherwise determined by the Board) shall be no greater than the rights
of an unsecured creditor of the Company.
ARTICLE 7—ADJUSTMENTS
AND AMENDMENTS
| Section 7.1 | Adjustment to Shares Subject to Outstanding
Awards. |
| (1) | In the event of any stock dividend, stock split, combination or exchange of Shares,
merger, consolidation, spin-off or other distribution (other than normal cash dividends) of the Company's assets to shareholders, or any
other change in the Shares, the Board will make such proportionate adjustments, if any, as the Board in its discretion, subject to regulatory
approval, may deem appropriate to reflect such change (for the purpose of preserving the value of the Awards), with respect to (i) the
number or kind of Shares or other securities reserved for issuance pursuant to the Plan; and (ii) the number or kind of Shares or other
securities subject to unexercised Awards previously granted and the exercise price of those Awards provided, however, that no substitution
or adjustment will obligate the Company to issue or sell fractional Shares. The existence of any Awards does not affect in any way the
right or power of the Company or an Affiliate or any of their respective shareholders to make, authorize or determine any adjustment,
recapitalization, reorganization or any other change in the capital structure or the business of, or any amalgamation, merger or consolidation
involving, to create or issue any |
bonds,
debentures, shares or other securities of, or to determine the rights and conditions attaching thereto, to effect the dissolution or liquidation
of or any sale or transfer of all or any part of the assets or the business of, or to effect any other corporate act or proceeding relating
to, whether of a similar character or otherwise, the Company or such Affiliate, whether or not any such action would have an adverse effect
on the Plan or any Award granted hereunder.
| Section 7.2 | Amendment or Discontinuance of the Plan. |
| (1) | The Board may, in its sole discretion, suspend or terminate the Plan at any time
or from time to time and/or amend or revise the terms of the Plan or of any Award granted under the Plan and any agreement relating thereto,
provided that such suspension, termination, amendment, or revision shall: |
| (a) | not materially adversely alter or impair any Award previously granted except as
permitted by the terms of the Plan or upon the consent of the applicable Participant(s); and |
| (b) | be in compliance with applicable law and with the prior approval, if required,
of the shareholders of the Company and of the TSX or any other stock exchange upon which the Company has applied to list its Shares. |
| (2) | If the Plan is terminated, the provisions of the Plan and any administrative guidelines
and other rules and regulations adopted by the Board and in force on the date of termination will continue in effect as long as any Award
or any rights awarded or granted under the Plan remain outstanding and, notwithstanding the termination of the Plan, the Board will have
the ability to make such amendments to the Plan or the Awards as they would have been entitled to make if the Plan were still in effect. |
| (3) | Subject to Section 7.2(4), the Board may from time to time, in its discretion and
without the approval of shareholders, make changes to the Plan or any Award that do not require the approval of shareholders under Section
7.2(1) which may include but are not limited to: |
| (a) | a change to the vesting provisions of this Plan and any Award granted under the Plan; |
| (b) | a change to the provisions governing the effect of termination of a Participant's
employment, contract or office; |
| (c) | a change to accelerate the date on which any Award may be exercised under the Plan; |
| (d) | an amendment of the Plan or an Award as necessary to comply with applicable law
or the requirements of any exchange upon which the securities of the Company are then listed or any other Regulatory Authority, the Plan,
the Participants or the shareholders of the Company; |
| (e) | any amendment of a “housekeeping” nature, including without limitation
those made to clarify the meaning of an existing provision of the Plan or any agreement, correct or supplement any provision of the Plan
that is inconsistent with any other provision of the Plan or any agreement, correct any grammatical or typographical errors or amend the
definitions in the Plan regarding administration of the Plan; |
| (f) | any amendment regarding the administration of the Plan; or |
| (g) | any other amendment, fundamental or otherwise, not requiring shareholder approval
under applicable laws or the applicable rules of the TSX or any other stock exchange upon which the Company has applied to list its Shares. |
| (4) | Notwithstanding the foregoing or any other provision of the Plan, shareholder
approval is required for the following amendments to the Plan: |
| (a) | any increase in the maximum number of Shares that may be issuable from treasury pursuant
to Awards granted under the Plan, other than an adjustment pursuant to Section 7.1; |
| (b) | any reduction in the exercise price of an Award including cancellation and reissuance
of an Award, except in the case of an adjustment pursuant to Section 7.1; |
| (c) | any extension of the Expiration Date of an Award, except in case of an extension
due to a Black-Out Period; |
| (d) | any amendment to remove or to exceed the insider participation limit set out in
Section 2.5; |
| (e) | any amendment to the definition of Eligible Participant that would permit the
issuance of Options, RSUs or PSUs to Non-Employee Directors; |
| (f) | any amendment to Section 6.1(4); and |
| (g) | any amendment to Section 7.2(3) or Section 7.2(4) of the Plan. |
| Section 7.3 | Change of Control. |
| (1) | Despite any other provision of the Plan, but subject to Section 7.2(3), in the
event of a Change of Control, all unvested Awards then outstanding will, as applicable, be substituted by or replaced with awards of the
surviving corporation (or any Affiliate thereof) or the potential successor (or any Affiliate thereto) (the “continuing entity")
on the same terms and conditions as the original Awards, subject to appropriate adjustments that do not diminish the value of the
original Awards. |
| (2) | If, upon a Change of Control, the continuing entity fails to comply with Section
7.3(1), the vesting of all then outstanding Awards (and, if applicable, the time during which such Awards may be exercised) will be accelerated
in full. |
| (3) | No fractional Shares or other security will be issued upon the exercise of any Award
and accordingly, if as a result of a Change of Control, a Participant would become entitled to a fractional Share or other security, such
participant will have the right to acquire only the next lowest whole number of Shares or other security and no payment or other adjustment
will be made with respect to the fractional interest so disregarded. |
| (4) | Despite anything else to the contrary in the Plan, in the event of a potential
Change of Control, the Board will have the power, in its sole discretion, to modify the terms of the Plan and/or the Awards to assist
the Participants in tendering to a take-over bid or other transaction leading to a Change of Control. For greater certainty, in the event
of a take-over bid or other transaction leading to a Change of Control, the Board has the power, in its sole discretion, to accelerate
the vesting of Awards and to permit Participants to conditionally exercise their Awards, such conditional exercise to be conditional upon
the take-up by such offeror of the Shares or other securities tendered to such take-over bid in accordance with the terms of the take-over
bid (or the effectiveness of such other transaction leading to a Change of Control). If, however, the potential Change of Control referred
to in this Section 7.3(4) is not completed within the time specified (as the same may be extended), then despite this Section 7.3(4) or
the definition of "Change of Control”, (i) any conditional exercise of vested Awards will be deemed to be null, void and of
no effect, and such conditionally exercised Awards will for all purposes be deemed not to have been exercised, and (ii) Awards which vested
pursuant to this Section 7.3(4) will be returned by the |
Participant to
the Company and reinstated as authorized but unissued Shares and the original terms applicable to such Awards will be reinstated.
| (5) | If the Board has, pursuant to the provisions of Section 7.3(4) permitted the conditional
exercise of Awards in connection with a potential Change of Control, then the Board will have the power, in its sole discretion, to terminate,
immediately following actual completion of such Change of Control and on such terms as it sees fit, any Awards not exercised (including
all vested and unvested Awards). |
ARTICLE 8—MISCELLANEOUS
Unless
otherwise specifically provided, all references to dollars in the Plan are references to Canadian dollars.
The
Board may, from time to time, establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities
or tax laws of various jurisdictions. The Board will establish such sub-plans by adopting supplements to this Plan containing (a) such
limitations on the Board's discretion under the Plan as the Board deems necessary or desirable, or (b) such additional terms and conditions
not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be
deemed to be part of the Plan, but each supplement will apply only to Participants within the affected jurisdiction and the Company will
not be required to provide copies of any supplements to Participants in any jurisdiction which is not subject to such supplement.
| Section 8.3 | Compliance and Award Restrictions. |
| (1) | The Company's obligation to issue and deliver Shares under any Award is subject
to: (i) the completion of such registration or other qualification of such Shares or obtaining approval of such Regulatory Authority as
the Company shall determine to be necessary or advisable in connection with the authorization, issuance or sale thereof; (ii) the admission
of such Shares to listing on any stock exchange on which such Shares may then be listed; and (iii) the receipt from the Participant of
such representations, agreements and undertakings as to future dealings in such Shares as the Company determines to be necessary or advisable
in order to safeguard against the violation of the securities laws of any jurisdiction. The Company shall take all reasonable steps to
obtain such approvals, registrations and qualifications as may be necessary for the issuance of such Shares in compliance with applicable
securities laws and for the listing of such Shares on any stock exchange on which such Shares are then listed. |
| (2) | The Participant agrees to fully cooperate with the Company in doing all such things,
including executing and delivering all such agreements, undertakings or other documents or furnishing all such information as is reasonably
necessary to facilitate compliance by the Company with such laws, rule and requirements, including all tax withholding and remittance
obligations. |
| (3) | No Awards will be granted where such grant is restricted pursuant to the terms
of any trading policies or other restrictions imposed by the Company. |
| (4) | The Company is not obliged by any provision of the Plan or the grant of any Award
under the Plan to issue or sell Shares if, in the opinion of the Board, such action would constitute a violation by the Company or a Participant
of any laws, rules and regulations or any condition of such approvals. |
| (5) | If Shares cannot be issued to a Participant upon the exercise or settlement of an
Award due to legal or regulatory restrictions, the obligation of the Company to issue such Shares will terminate |
and, if applicable,
any funds paid to the Company in connection with the exercise of any Options will be returned to the applicable Participant as soon as
practicable.
| (6) | At the time a Participant ceased to hold Awards which are or may become exercisable,
the Participant ceases to be a Participant. |
| (7) | Nothing contained herein will prevent the Board from adopting other or additional
compensation arrangements for the benefit of any Participant or any other Person, subject to any required regulatory, shareholder or other
approval. |
| Section 8.4 | Use of an Administrative Agent and Trustee. |
The
Board may in its sole discretion appoint from time to time one or more entities to act as administrative agent to administer the Awards
granted under the Plan and to act as trustee to hold and administer the assets that may be held in respect of Awards granted under the
Plan, the whole in accordance with the terms and conditions determined by the Board in its sole discretion. The Company and the administrative
agent will maintain records showing the number of Awards granted to each Participant under the Plan.
| Section 8.5 | Tax Withholding. |
| (1) | Notwithstanding any other provision of the Plan, all distributions, delivery of
Shares or payments to a Participant (or to the liquidator, executor or administrator, as the case may be, of the estate of the Participant)
under the Plan shall be made net of applicable source deductions. If the event giving rise to the withholding obligation involves an issuance
or delivery of Shares, then, the withholding obligation may be satisfied by (a) having the Participant elect to have the appropriate number
of such Shares sold by the Company, the Company's transfer agent and registrar or any trustee appointed by the Company pursuant to Section
8.4 hereof, on behalf of and as agent for the Participant as soon as permissible and practicable, with the proceeds of such sale being
delivered to the Company, which will in turn remit such amounts to the appropriate governmental authorities, or (b) any other mechanism
as may be required or appropriate to conform with local tax and other rules. Notwithstanding any other provision of the Plan, the Company
shall not be required to issue any Shares or make payments under this Plan until arrangements satisfactory to the Company have been made
for payment of all applicable withholdings obligations. |
| (2) | The sale of Shares by the Company, or by a Broker, under Section 8.5(1) or under
any other provision of the Plan will be made on the TSX (or any other stock exchange on which the Shares are listed or posted for trading).
The Participant consents to such sale and grants to the Company an irrevocable power of attorney to effect the sale of such Shares on
his behalf and acknowledges and agrees that (i) the number of Shares sold will be, at a minimum, sufficient to fund the withholding obligations
net of all selling costs, which costs are the responsibility of the Participant and which the Participant hereby authorizes to be deducted
from the proceeds of such sale; (ii) in effecting the sale of any such Shares, the Company or the Broker will exercise its sole judgment
as to the timing and the manner of sale and will not be obligated to seek or obtain a minimum price; and (iii) neither the Company nor
the Broker will be liable for any loss arising out of such sale of the Shares including any loss relating to the pricing, manner or timing
of the sales or any delay in transferring any Shares to a Participant or otherwise. |
| (3) | The Participant further acknowledges that the sale price of the Shares will fluctuate
with the market price of the Shares and no assurance can be given that any particular price will be received upon any sale. The Company
makes no representation or warranty as to the future market value of the Shares or with respect to any income tax matters affecting the
Participant resulting from the grant or exercise of an Award and/or transactions in the Shares. Neither the Company, nor any of its directors,
officers, employees, shareholders or agents will be liable for anything done or omitted to be done by such person or any other person
with respect to the price, time, quantity or other conditions and circumstances of the issuance of Shares under the Plan, |
with respect to any fluctuations in
the market price of Shares or in any other manner related to the Plan.
| (4) | Notwithstanding the first paragraph of this Section 8.5, the applicable tax withholdings
may be waived where the Participant directs in writing that a payment be made directly to the Participant's registered retirement savings
plan in circumstances to which regulation 100(3) of the regulations of the Tax Act apply. |
| Section 8.6 | Reorganization of the Company. |
The
existence of any Awards shall not affect in any way the right or power of the Company or its shareholders to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital structure or its business, or any amalgamation, combination,
merger or consolidation involving the Company or to create or issue any bonds, debentures, shares or other securities of the Company or
the rights and conditions attaching thereto or to affect the dissolution or liquidation of the Company or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding, whether of a similar nature or otherwise.
| Section 8.7 | Governing Laws. |
The
Plan and all matters to which reference is made herein shall be governed by and interpreted in accordance with the laws of the Province
of Ontario and the federal laws of Canada applicable therein.
| Section 8.8 | Successors and Assigns. |
The
Plan shall be binding on all successors and assigns of the Company and a Participant, including without limitation, the personal legal
representatives of a Participant, or any receiver or trustee in bankruptcy or representative of the Company's or Participant's creditors.
The
invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision and
any invalid or unenforceable provision shall be severed from the Plan.
| Section 8.10 | No Liability. |
No
member of the Board, or any committee or other subdelegate shall be liable for any action or determination taken or made in good faith
in the administration, interpretation, construction or application of the Plan or any Award granted hereunder.
| Section 8.11 | Effective Date of the Plan. |
The Plan was approved by the Board and shall
take effect on April 21, 2021.
SCHEDULE “A”
FORM OF NON-EMPLOYEE
DIRECTOR DSU AWARD AGREEMENT
VERSABANK
DSU AWARD AGREEMENT
This
DSU Award Agreement (this “Agreement”), dated as of •, is made by and between VersaBank (the “Company”) and
• (the “Grantee").
WHEREAS,
the Company has adopted the Omnibus Long-Term Incentive Plan (as may be amended from time to time, the “Plan");
AND
WHEREAS, the Board has determined that the non-employee directors of the Company may elect to receive a portion of his or her then
current annual Board retainer fee in the form of a grant of DSUs (as defined in the Plan) in each fiscal year, which retainer fee shall
be payable in four equal quarterly instalments (the “Director's Remuneration”).
NOW,
THEREFORE, for and in consideration of the premises and the mutual covenants of the parties contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, for themselves and
for their successors and assigns, hereby agree as follows:
(a) Grant.
The portion or percentage of the Director's Remuneration credited as DSUs for the fiscal year shall be determined on the first business
day following the last day of each fiscal quarter of such fiscal year for which the Grantee's Director's Remuneration is payable and with
respect to which such deferral election, if any, is effective (with respect to each such quarter, the “Date of Grant"), and
shall equal a number of DSUs, rounded down to the nearest whole number, determined by dividing the dollar amount of such Director's Remuneration
so deferred for such quarter by the Market Value (as defined in the Plan) of one Share as of such Date of Grant. All DSUs to be credited
to the Grantee shall be subject to the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. DSUs shall
be credited to a separate book-entry account maintained on the books of the Company for the Grantee.
(b) Incorporation
by Reference, Etc. The provisions of the Plan are incorporated herein by reference. Except as otherwise expressly set forth herein,
this Agreement shall be construed in accordance with the provisions of the Plan and any interpretations, amendments, rules, and regulations
promulgated by the Board from time to time pursuant to the Plan. In the event of any inconsistency or conflict between the provisions
of the Plan and any this Agreement, the provisions of the Plan shall prevail. Any capitalized terms not otherwise defined in this Agreement
shall have the definitions set forth in the Plan. The Board shall have final authority to interpret and construe the Plan and this Agreement
and to make any and all determinations under them, and its decision shall be binding and conclusive upon the Grantee and his or her legal
representatives in respect of any questions arising under the Plan or this Agreement.
| 2. | Vesting; Forfeiture. The DSUs shall [be fully vested
on the applicable Date of Grant and shall not be subject to forfeiture.] |
| 3. | Settlement. The Company shall settle the DSUs granted hereunder as soon
as possible after receiving or being deemed to receive a DSU Redemption Notice, at which time the Company shall, subject to any required
tax withholding and the execution of any required documentation, deliver to the Grantee [the Cash Equivalent (as defined in the Plan)
of] one (1) Share for each DSU (and, upon such settlement, the DSUs shall cease to be credited to the Grantee's account) less an amount
equal to any |
federal, state,
provincial, and local income and employment taxes required to be withheld. Such settlement will occur not later than the 90t^
day following the Termination Date.
4. Method
of Electing to Defer Director's Remuneration. Unless otherwise permitted or determined by the Board, to elect to receive DSUs, the
Grantee shall complete and deliver to the Company a written election (as set out in Appendix I attached). The Grantee's written election
shall, subject to any minimum or maximum amount that may be determined by the Board from time to time, designate the portion or percentage
of the Director's Remuneration to be paid in the form of DSUs, with the remaining portion or percentage to be paid in cash in accordance
with the Company's regular practices of paying such cash compensation. In the absence of a designation to the contrary, the Grantee's
election set forth in Appendix I shall continue to apply to all subsequent Director's Remuneration payments until the Grantee submits
another written election in accordance with this paragraph. A Grantee shall only file one election no later than the last day of the fiscal
year preceding the fiscal year in respect of which the Director's Remuneration becomes payable and the election shall be irrevocable for
that fiscal year.
5. Tax
Withholding. The Company shall be entitled to require, as a condition to the payment of any cash in settlement of the DSUs granted
hereunder, that the Grantee remit an amount in cash or other property having a value sufficient to satisfy all federal, state, provincial,
and local or other applicable withholding taxes relating thereto. In addition, the Company shall have the right and is hereby authorized
to withhold from the cash otherwise deliverable upon settlement of the DSUs, or from any compensation or other amount owing to the Grantee,
the amount (in cash or, in the discretion of the Company, other property) of any applicable withholding taxes in respect of the settlement
of the DSUs and to take such other action as may be necessary in the discretion of the Company to satisfy all obligations for the payment
of such taxes.
6. Compliance
with Legal Requirements. The granting and settlement of the DSUs, and any other obligations of the Company under this Agreement, shall
be subject to all applicable federal, state, provincial and local laws, rules, and regulations and to such approvals by any regulatory
or governmental agency (including stock exchanges) as may be required. The Committee shall have the right to impose such restrictions
on the DSUs as it deems reasonably necessary or advisable under applicable securities laws and the rules and regulations of the TSX.
(a) Transferability.
The DSUs are non-transferable or assignable except in accordance with the Plan.
(b) Inconsistency.
This Agreement is subject to the terms and conditions of the Plan and, in the event of any inconsistency or contradiction between the
terms of this Agreement and the Plan, the terms of the Plan shall govern.
(c) Severability.
Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision
had never been contained herein.
(d) Entire
Agreement. This Agreement and the Plan embody the entire agreement and understanding among the parties and supersede and pre-empt
any prior understandings, agreements or
representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(e) Successors
and Assigns. This DSU Agreement shall bind and enure to the benefit of the Grantee and the Corporation and their respective successors
and permitted assigns.
(f) Time
of the Essence. Time shall be of the essence of this Agreement and of every part hereof.
(g) Governing
Law. This Agreement and the DSUs shall be governed by and interpreted and enforced in accordance with the laws of the Province
of Ontario and the federal laws of Canada applicable therein.
(h) Counterparts.
This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute
one and the same agreement.
By
signing this Agreement, the Grantee represents, warrants and acknowledges that the Grantee (i) has been provided a copy of and has read
and understands the Plan and agrees to the terms and conditions of the Plan and this Agreement, (ii) has requested and is satisfied that
the foregoing be drawn up in the English language (Le soussigné reconnait qu'il a exigé que ce qui precede soit rédigé
et execute en anglais et s'en declare satisfait.), (iii) has participated in the trade and acceptance of DSUs voluntarily, and (iv)
has not been induced to participate in the Plan by expectation of engagement, appointment, employment, continued engagement, continued
appointment or continued employment, as application with the Company or its Affiliates. For absolute certainty, by accepting and executing
this Agreement, the Grantee specifically represents, warrants and acknowledges that the Grantee has read and understood the terms and
conditions set out in Sections 2.8(1) and 2.8(2) and the definitions of “active employment” and “Termination Date”
of which (i) state that the Grantee shall have no entitlement to damages or other compensation whatsoever arising from, in lieu of, or
related to not receiving any incentive compensation or any other applicable rights pursuant to this Agreement and the Plan which would
have vested or been granted after a termination including but not limited to damages in lieu of notice at common law; and (ii) have the
effect that no period of common law reasonable notice that exceeds the Grantee's minimum statutory notice period under ap icable employment
standards legislation (if any), shall be used for the purposes of calculating the Grantee's entitlements under this Agreement or the
Plan. By accepting and executing this Agreement, the Grantee further waives any eligibility to receive damages or payment in lieu of any
forfeited incentive compensation or any other applicable rights pursuant to this Agreement or the Plan that would have vested or accrued
during any common law reasonable notice period that exceeds the Grantee's minimum statutory notice period under the applicable employment
standards leqislation (if any).
IN WITNESS WHEREOF
the parties hereof have executed this Agreement as of the day of , 20 .
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VERSABANK |
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By: |
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Authorized Signing Officer |
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[Insert
Participant's Name] |
APPENDIX “I”
VERSABANK
(THE “COMPANY”)
DEFFERED SHARE
UNIT ELECTION NOTICE
All capitalized
terms used herein but not otherwise defined shall have the meanings ascribed to them in the DSU Award Agreement.
Pursuant to the
Omnibus Long-Term Incentive Plan of the Company (the “Plan”), I hereby elect to receive % of my Director's Remuneration
in the form of DSUs in lieu of cash.
I confirm that:
| (a) | I have received and reviewed a copy of the terms and conditions of the Plan and
have reviewed, considered and agreed to be bound by the terms of this Election Notice, the Plan and the DSU Award Agreement. |
| (b) | I have requested and am satisfied that the Plan, the DSU Award Agreement and the
foregoing be drawn up in the English language. Le soussigné reconnait qu'iI a exigé que Ie Regime et ce qui précéde
soient rédigés et exécutés en anglais et s'en declare satisfait. |
| (c) | I recognize that when DSUs are redeemed in accordance with the terms of the Plan
and the DSU Award Agreement, income tax and other withholdings as required will arise at that time. |
| (d) | The value of DSUs is based on the Market Value of the Shares of the Company and therefore is not guaranteed. |
The foregoing is only
a brief outline of certain key provisions of the Plan and the DSU Award Agreement. For more complete information, reference should be
made to the Plan.
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(Name of Participant) |
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SCHEDULE “B”
FORM OF OPTION
AGREEMENT
VERSABANK
OPTION AGREEMENT
This
Stock Option Agreement (the “Option Agreement”) is granted by VersaBank (the “Company”), in favour of the optionee
named below (the “Optionee”) pursuant to and on the terms and subject to the conditions of the Company's Omnibus Long-Term
Incentive Plan (the "Plan"). Capitalized terms used and not otherwise defined in this Option Agreement shall have the meanings
set forth in the Plan.
The terms of the option (the “Option”),
in addition to those terms set forth in the Plan, are as follows:
| 1. | Optionee. The Optionee is
•. |
| 2. | Number
of Shares. The Optionee may purchase up to • Shares of the Company (the “Option
Shares”) pursuant to this Option, as and to the extent that the Option vests and becomes
exercisable as set forth in section 6 of this Option Agreement. |
| 3. | Exercise Price. The exercise
price is Cdn $• per Option Share (the “Exercise Price”). |
| 4. | Date Option Granted. The Option was granted on •. |
| 5. | Expiry Date. The Option
terminates on •. (the “Expiry Date”). |
| 6. | Vesting. The Option to
purchase Option Shares shall vest and become exercisable as follows: |
| 7. | Exercise
of Options. In order to exercise the Option, the Optionee shall notify the Company
in the form annexed hereto as Appendix I, pay the Exercise Price to the Company as required
by the Plan, whereupon the Optionee shall be entitled to receive a certificate representing
the relevant number of fully paid and non-assessable Shares in the Company. |
| 8. | Transfer of Option. The Option is not-transferable or assignable
except in accordance with the Plan. |
| 9. | Inconsistency.
This Option Agreement is subject to the terms and conditions of the Plan and any Employment
Agreement and, in the event of any inconsistency or contradiction between the terms of this
Option Agreement and the Plan or any Employment Agreement, the terms of the Employment Agreement
shall govern. |
| 10. | Severability. Wherever possible, each provision of this Option Agreement
shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Option Agreement is
held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision or any other jurisdiction, but this Option Agreement shall be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. |
| 11. | Entire Agreement.
This Option Agreement and the Plan embody the entire agreement and understanding among
the parties and supersede and preempt any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject matter hereof
in any way. |
| 12. | Successors and Assigns. This Option Agreement shall bind and enure
to the benefit of the Optionee and the Company and their respective successors and permitted assigns. |
| 13. | Time of the Essence. Time
shall be of the essence of this Agreement and of every part hereof. |
| 14. | Governing
Law. This Agreement and the Option shall be governed by and interpreted and enforced
in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable
therein. |
| 15. | Counterparts. This Option Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. |
By
signing this Agreement, the Optionee represents, warrants and acknowledges that the Optionee (i) has been provided a copy of and has read
and understands the Plan and agrees to the terms and conditions of the Plan and this Option Agreement, (ii) has requested and is satisfied
that the foregoing be drawn up in the English language (Le soussigné reconnai“t qu'il a exigé que ce qui precede
soit rédigé et execute en anglais et s'en declare satisfait.), (iii) has participated in the trade and acceptance of
Options voluntarily, and (iv) has not been induced to participate in the Plan by expectation of engagement, appointment, employment, continued
engagement, continued appointment or continued employment, as application with the Company or its Affiliates. For absolute certainty,
by accepting and executing this Agreement, the Optionee specifically represents, warrants and acknowledges that the Optionee has read
and understood the terms and conditions set out in Sections 2.8(1) and 2.8(2) and the definitions of “active employment” and
“Termination Date” of which (i) state that the Optionee shall have no entitlement to damages or other compensation whatsoever
arising from, in lieu of, or related to not receiving any incentive compensation or any other ap icable rights pursuant to this Agreement
and the Plan which would have vested or been granted after a termination including but not limited to damages in lieu of notice at common
law; and (ii) have the effect that no period of common law reasonable notice that exceeds the Optionee's minimum statutory notice oeriod
under aoolicable employment standards legislation (if any), shall be used for the purposes of calculating the Optionee's entitlements
under this Agreement or the Plan. By accepting and executing this Agreement, the Optionee further waives any eligibility to receive damages
or payment in lieu of any forfeited incentive compensation or any other applicable rights pursuant to this Agreement or the Plan that
would have vested or accrued during any common law reasonable notice period that exceeds the Optionee's minimum statutory notice period
under the applicable em oyment standards legislation (if any).
IN WITNESS WHEREOF the parties hereof have
executed this Option Agreement as of the day
of , 20a.
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VERSABANK |
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By: |
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Authorized Signing Officer |
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[Insert Participant's Name] |
APPENDIX
I
VERSABANK
ELECTION
TO EXERCISE STOCK OPTIONS
TO:
VERSABANK (the "Company")
The
undersigned Optionee hereby elects to exercise Options granted by the Company to the undersigned pursuant to an Option Agreement dated
, 20
under the Company's Omnibus Long-Term Incentive Plan (the “Plan”), for the number Shares set forth below. Capitalized
terms used herein and not otherwise defined shall have the meanings given to them in the Plan.
| Number of Shares to be Acquired: |
_________________________________ |
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| Exercise Price (per Share): |
Cdn.$ _________________________________ |
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| Aggregate Purchase Price: |
Cdn.$ _________________________________ |
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| Amount enclosed that is payable on account of any source deductions relating to this Option exercise (contact the Company for details of such amount): |
Cdn.$ _________________________________ |
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| a Or check here if alternative arrangements have been made with the Company. |
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and hereby tenders
a bank draft, certified cheque, wire transfer or other form of payment confirmed as acceptable by the Company for such aggregate purchase
price, and, if applicable, all source seductions, and directs such Shares to be registered in the name of
I
hereby agree to file or cause the Company to file on my behalf, on a timely basis, all insider reports and other reports that I may be
required to file under applicable securities laws. I understand that this request to exercise my Options is irrevocable.
DATED this day of
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Signature of Participant |
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Name of Participant (Please Print) |
APPENDIX
II
VERSABANK
SURRENDER
NOTICE
TO:
VERSABANK (the "Company")
The
undersigned Optionee hereby elects to surrender
Options granted by the Company to the undersigned pursuant to an Award Agreement dated ,
20 under the Company's Omnibus Long-Term Incentive Plan (the “Plan”) in exchange for
Shares as calculated in accordance with Section 3.7(3) of the Plan. Capitalized terms used herein and not otherwise defined shall have
the meanings given to them in the Plan.
| Amount enclosed that is payable on account of any source deductions relating to this surrender of Options (contact the Company for details of such amount): |
Cdn.$ _________________________________ |
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| a Or check here if alternative arrangements have been made with the Company |
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Please
issue a certificate or certificates representing the Shares in the name of ____________________________________________________________
I
hereby agree to file or cause the Company to file on my behalf, on a timely basis, all insider reports and other reports that I may be
required to file under applicable securities laws. I understand that this request to exercise my Options is irrevocable.
DATED this day of
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Signature of Participant |
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Name of Participant (Please Print) |
Schedule
“C”
Form of
RSU/PSU Agreement
VERSABANK
[RSU / PSU] GRANT AGREEMENT
This
[RSU / PSU] grant agreement (“Grant Agreement”) is entered into between VersaBank (the “Company”) and the Participant
named below (the “Recipient”) of the [RSUs l PSUs] (“Units”) pursuant to the Company's Omnibus Long-Term
Incentive Plan (the “Plan”). Capitalized terms used and not otherwise defined in this Grant Agreement shall have the meanings
set forth in the Plan.
The terms of the Units,
in addition to those terms set forth in the Plan, are as follows:
| 1. | Recipient. The Recipient
is •. |
| 2. | Grant of [RSUs I PSUs1
The Recipient is granted • Units. |
| 3. | Vestinq. The Units shall vest as follows: •. |
| 4. | [Performance
Criteria. Settlement of the Units shall be conditional upon the achievement
of the following Performance Criteria within the Performance Period set forth herein: •.] |
| 5. | Settlement. The Units
shall be settled as follows: • |
| 6. | Date of Grant. The Units
were granted to the Recipient on •. |
| 7. | Transfer
of Units. The Units are non-transferable or assignable except in accordance with
the Plan. |
| 8. | Inconsistency.
This Agreement is subject to the terms and conditions of the Plan and, in the event of any
inconsistency or contradiction between the terms of this Grant Agreement and the Plan, the
terms of the Plan shall govern. |
| 9. | Severability.
Wherever possible, each provision of this Grant Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this Grant Agreement
is held to be invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Grant Agreement shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein. |
| 10. | Entire
Agreement. This Grant Agreement and the Plan embody the entire agreement and understanding
among the parties and supersede and pre-empt any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject matter hereof
in any way. |
| 11. | Successors
and Assigns. This Grant Agreement shall bind and enure to the benefit of the Recipient
and the Corporation and their respective successors and permitted assigns. |
| 12. | Time of
the Essence. Time shall be of the essence of this Agreement and of every part hereof. |
| 13. | Governing
Law. This Grant Agreement and the Units shall be governed by and interpreted and
enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada
applicable therein. |
| 14. | Counterparts. This Grant Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together constitute one and the same agreement. |
By
signing this Grant Agreement, the Recipient represents, warrants and acknowledges that the Recipient (i) has been provided a copy of and
has read and understands the Plan and agrees to the terms and conditions of the Plan and this Grant Agreement, (ii) has requested and
is satisfied that the foregoing be drawn up in the English language (Le soussigné reconnai“t qu'il a exigé que
ce qui precede soit rédigé et execute en anglais et s'en declare satisfait.), (iii) has participated in
the trade and acceptance of Units voluntarily, and (iv) has not been induced to participate in the Plan by expectation of engagement,
appointment, employment, continued engagement, continued appointment or continued employment, as application with the Company or its Affiliates.
For absolute certainty, by accepting and executing this Agreement, the Recipient specifically represents, warrants and acknowledges
that the Recipient has read and understood the terms and conditions set out in Sections 2.8(1) and 2.8(2) and the definitions of “active
employment" and “Termination Date" of which
(i)
state that the Recipient shall have no entitlement to damages or other compensation whatsoever arising from, in lieu of, or related to
not receiving any incentive compensation or any other applicable rights pursuant to this Agreement and the Plan which would have vested
or been granted after a termination including but not limited to damages in lieu of notice at common law; and (ii) have the effect that
no period of common law reasonable notice that exceeds the Recipient's minimum statutory notice period under applicable employment standards
legislation (if any), shall be used for the purposes of calculating the Recipient's entitlements under this Agreement or the Plan. By
accepting and executing this Agreement, the Recipient further waives any eligibility to receive damages or payment in lieu of any forfeited
incentive compensation or any other applicable rights pursuant to this Agreement or the Plan that would have vested or accrued during
any common law reasonable notice period that exceeds the Recipient's minimum statutory notice period under the applicable employment standards
legislation (if any).
IN WITNESS WHEREOF the parties hereof
have executed this Grant Agreement as of the day
of ,
20a.
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VERSABANK |
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Authorized Signing Officer |
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[Insert Participant's Name] |
SCHEDULE
B – MANDATE OF THE BOARD OF DIRECTORS
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BOARD APPROVED: June 6, 2023
Purpose
The purpose or role
of the Board has two fundamental elements: decision-making and oversight. The decision- making function is exercised with respect to the
formulation with management of fundamental policies and strategic goals and through the approval of certain significant actions. The oversight
function concerns the review of management decisions, the adequacy of systems and controls and the implementation of policies. The Board
establishes formal delegations of authority, defining the limits of management’s power and authority and delegating to management
certain powers to manage the business of the Bank. The delegations of authority conform to statutory limitations specifying responsibilities
of the board that cannot be delegated to management. Any responsibilities not delegated to management remain with the Board and its committees.
Organization of the
Board of Directors
The Board shall
consist of ten (10) directors, a majority of whom must be resident Canadians at the time of their election or appointment. The Board shall
be constituted by a majority of independent directors12.
Every director, in exercising
any of the powers of a director and any of the duties of a director, shall:
| (a) | act honestly and in good faith with a view to the best interests of the Bank; and |
| (b) | exercise the care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances. |
Meetings of the Board
of Directors
In order for the
Board to transact business at a meeting, a majority of directors must be present. The Board shall meet at least once each quarter and
shall schedule a sufficient number of meetings (whether in person or by video conference) to carry out its mandate. There shall be an
in-camera session at each quarterly Board meeting with only independent directors present.
The members of the
Board of Directors are expected to attend all meetings of the Board and its committees in person, when at all possible. Attendance by
video conference may be used to facilitate a director’s attendance.
Directors are expected
to devote the appropriate amount of time necessary to review meeting materials such that they are able to engage in informed discussion
and make informed decisions.
Reporting from Committees
Certain functions
of the Board may be delegated to committees of the Board. Such delegation will be confirmed by the Board approval of committee mandates.
Unless waived by
the Board, the Chair of each Board Committee shall provide a verbal summary report to the Board on material matters considered during
a meeting of such committee at the next meeting of the Board.
1A Director
is independent if he or she meets the independence criteria as set out in the Bank’s Director Independence Policy.
2
If the death, disability or resignation of a member has resulted in a vacancy of the Committee that the Board is required to fill,
a Committee member appointed to fill such vacancy is exempt from the requirement for a period ending on the later of the next annual
meeting and the date that is six months from the day the vacancy was created, so long as the Board has determined that a reliance on
this exemption will not materially adversely affect the ability of the Committee to act independently and to satisfy its other requirements.
Resources and Authority
The Board shall have
unrestricted access to management of the Bank and, if determined necessary by the Board, to any employee of the Bank, its subsidiaries
or affiliates. The Board shall have the authority to retain and terminate independent legal counsel, consultant or other advisors to assist
it in fulfilling its responsibilities and to set and pay the compensation of these advisors without consulting or obtaining the approval
of any officer of the Company.
Duties and Responsibilities
of the Board of Directors
The members of the
Board of Directors have responsibility for the stewardship of the Bank and are charged with the following duties:
| (a) | Approve the by-laws of the Bank. |
| (b) | Appoint a Chair of the Board who shall be an independent director, subject to exceptional circumstances. |
| (c) | In the event that the Chair of the Board is not an independent director, an independent
lead director shall be appointed. |
| (d) | Exercise independent judgment in directing and overseeing the operations of the Bank. |
| (e) | Establish an Audit Committee and approve the mandate and members for such committee. |
| (f) | Establish a Conduct Review, Governance & HR Committee and approve the mandate
and members for such committee. |
| (g) | Establish a Risk Oversight Committee and approve the mandate and the members for such committee. |
| (h) | Establish an Innovation and Technology Committee and approve the mandate and the
members for such committee. |
| (i) | Approve the mandates for each of the Bank’s oversight functions, and all
other management related mandates. |
| (j) | Establish any other board committees that the Board of Directors deems advisable
and approve the mandates for such committees. |
| (k) | Understand directors’ responsibilities and regularly evaluate objectively
the individual director, the Board Committee and the Boards’ effectiveness in fulfilling those responsibilities. |
| (l) | Review director remuneration. |
| (m) | Approve all major changes to the Bank’s organizational structure. |
| (n) | Review policies for the Bank as recommended by management and approve all policies. |
| (o) | Review and approve the Recovery Plan and the Recovery Plan Policy every two years or as needed. |
| 2. | Liquidity and Market Risk |
| (a) | Understand the liquidity and funding needs of the Bank. |
| (b) | Establish appropriate and prudent liquidity and funding management policies for
the Bank, taking into account the Bank’s significant operations, including policies on the sources, types and levels of liquidity
that are to be maintained by the Bank, and policies that are designed to prevent the Bank’s funding from becoming unduly concentrated
with respect to source, type, term to maturity or currency of denomination. |
| (c) | Review liquidity and market risk policies at least once a year to ensure that they
remain appropriate and prudent. |
| (d) | Obtain, on a regular basis, reasonable assurance that the Bank has ongoing, appropriate
and effective liquidity, funding and market risk processes, and that the Bank’s liquidity, funding and market risk management policies
are being adhered to. |
| (a) | Ensure the Bank has appropriate and prudent policies on the areas and types of
credit, both on and off-balance sheet, in which the Bank is willing to engage. |
| (b) | Review management’s assessment of asset quality and asset quality trends,
credit quality administration and underwriting standards, and the effectiveness of portfolio credit risk management systems and processes
to enable management to monitor and control credit risk. |
| (c) | Ensure that procedures and controls for managing credit risk are in place, including: |
| i. | Defined and prudent levels of decision-making authority for approving credit exposures; |
| ii. | An effective assessment and rating system for credit risk; and |
| iii. | An ongoing, appropriate and effective process for managing credit exposures that
warrant special attention. |
| i. | Operational Risk Management |
| (a) | Review and approve, at least annually, the Bank’s Operational Risk Management
Framework and the Operational Risk section of the Bank’s Risk Appetite Statement. |
| (b) | Review, at least annually, and approve the Bank’s Operational Risk Policy. |
| (c) | Understand the operational risks that the Bank is exposed to. |
| (d) | Establish appropriate and prudent policies on operational risks that are inherent in the Bank’s
operations. |
| (e) | Review operational risk policies at least once a year to ensure they remain appropriate and prudent. |
| (a) | Appoint and when appropriate remove the President & CEO for the Bank and ensure
that the Chair of the Board conducts an annual assessment of such officer’s performance. |
| (b) | Approve the Executive Agreement of the President & CEO. |
| (c) | Annually approve the base salary of the President & CEO. |
| (d) | Monitor the performance of the President & CEO in accordance with annual performance
measurements for calculating the incentive award of the President & CEO. |
| (e) | Approve, upon recommendation of the Conduct Review, Governance & HR Committee,
the annual incentive award of the President & CEO. |
| (f) | At least annually, review and approve, upon recommendation of the Conduct Review,
Governance & HR Committee, the duties and responsibilities of the President & CEO. |
| (g) | At least annually, review and approve, upon recommendation of the Conduct Review,
Governance & HR Committee, the Chart of Authorities. |
| (h) | Approve, upon recommendation of the Conduct Review, Governance & HR Committee,
the annual incentive award pool for Executives. |
| (i) | Appoint officers for the Bank who are suitably qualified and capable of managing
the operations of the Bank effectively and prudently. |
| (j) | Understand the responsibilities and accountabilities assigned to officers of the Bank. |
| (k) | Evaluate, on a regular basis, the effectiveness and prudence of the officers in
managing the operations of the Bank and the risks to which the Bank is exposed. |
| (l) | Satisfy itself as to the integrity of the President & CEO and other officers,
and satisfy itself that the President & CEO and other officers create a culture of integrity throughout the Bank. |
| (m) | Review the Bank’s Management Succession Plan submitted by management. |
| (n) | Review the Bank’s Human Resources Plan submitted by management. |
| (o) | Regularly satisfy itself that the Bank’s compensation plans are consistent
with the sustainable achievement of the Bank’s business objectives, the prudent management of its operations and the risks to which
it is exposed, and adherence to its processes, policies, procedures and controls. |
| (p) | Establish standards of business conduct and ethical behaviour for the Bank’s
directors, officers, and other personnel, and obtain on a regular basis reasonable assurance that the Bank has an ongoing, appropriate
and effective process for ensuring adherence to those standards. |
| iii. | Outsourcing and Business Continuity |
| (a) | Review all major contracts after approval by management and approve all major
contracts out of the ordinary course of business. |
| (b) | Review all arrangements involving an outsourcing of significant operations. |
| (c) | Review disaster recovery plans as submitted by management. |
| iv. | Related Party Transactions |
| (a) | Approve related party transactions when required by the Bank’s governing legislation. |
| 5. | Legal and Regulatory Risk |
| (a) | Review, at least annually, and approve the Bank’s Regulatory Compliance Management Policy. |
| (b) | Review and approve, at least annually, the Bank’s Regulatory Compliance
Management Framework and any changes to the Framework. |
| (c) | Understand material regulatory compliance risks that the Bank is exposed to. |
| ii. | Financial Statements, Public Documents & Other Financial Filings |
| (a) | Approve the annual financial statements of the Bank. |
| (b) | Approve the annual MD & A. |
| (c) | Approve a Corporate Disclosure Policy for the Bank. |
| (a) | Establish the business objectives of the Bank, consider and approve the Bank’s
business strategy and its business plans for significant operations, and review those things annually to ensure that they remain appropriate
and prudent in light of the Bank’s current and anticipated business and economic environment, resources and results. |
| (b) | Evaluate, at least quarterly, the Bank’s actual operating and financial results
against forecast results, in light of the Bank’s business objectives, business strategy and business plans. |
| (c) | Obtain, on a regular basis, reasonable assurance that the Bank has an ongoing,
appropriate and effective strategic management process. |
| (d) | Approve all significant acquisitions and dispositions. |
| (a) | Understand the capital needs of the Bank and approve changes to capital. |
| (b) | Establish appropriate and prudent capital management policies for the Bank, taking
into account the Bank’s significant operations, including policies on the quantity and quality of capital needed to support the
current and planned operations of the Bank that reflect both the risks to which the Bank is exposed and its regulatory capital requirements. |
| (c) | Review capital policies at least once a year to ensure that they remain appropriate and prudent. |
| (d) | Obtain, on a regular basis, reasonable assurance that the Bank has an ongoing,
appropriate and effective capital management process, and that the Bank’s capital management policies are being adhered to. |
| (a) | Be aware of increased reputational risk to the Bank which can potentially impact
the Bank’s image in the community or lower public confidence in it, resulting in the loss of business, legal action or increased
regulatory oversight. |
| (a) | Review and approve at least annually the Bank’s Risk Appetite Framework and Risk Appetite Statement. |
| (b) | Review, at least annually, and approve the Bank’s Enterprise Risk Management Policy. |
| (c) | Review, at least annually, and approve the Bank’s Enterprise Risk Management Framework. |
| (d) | Review periodic reports related to management’s assessment of the Bank’s
risk management performance relative to the Risk Appetite Statement and the Risk Magnitude Scale, and any other reports used by management
to assess and discuss the categories of risk faced by the Bank. |
| (e) | Understand risks rated moderate and higher faced by the Bank. |
| (a) | Approve the appointment of the Chief Internal Auditor, as recommended by the Audit Committee. |
| (b) | Approve changes respecting the incumbent holding the position of Chief Internal
Auditor, as recommended by the Audit Committee. |
| (a) | Recommend the appointment of the external auditor to the shareholders. |
| (b) | Upon recommendation of the Audit Committee, approve the compensation of the external auditor. |
| (c) | Require the external auditor to report directly to the Audit Committee. |
| (a) | Review such information as required to obtain reasonable assurance that the Bank
has a control environment and that the Bank is in control. |
