The Flowr Corp.: Exhibit 99.83 - Filed by newsfilecorp.com
| NOTICE OF MEETING AND |
| MANAGEMENT INFORMATION CIRCULAR |
| FOR THE ANNUAL GENERAL AND SPECIAL MEETING OF
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| SHAREHOLDERS OF |
| THE FLOWR CORPORATION |
THIS MANAGEMENT INFORMATION CIRCULAR IS FURNISHED IN
CONNECTION WITH THE SOLICITATION BY THE MANAGEMENT OF THE FLOWR CORPORATION OF
PROXIES TO BE VOTED AT THE ANNUAL GENERAL AND SPECIAL MEETING OF ALL
SHAREHOLDERS.
To be held at the offices of Fasken Martineau DuMoulin LLP,
333 Bay Street, Suite 2400, Bay Adelaide Centre, Toronto, Ontario, M5H 2T6 on
June 11, 2019 at 10:00 a.m. (EST)
May 9, 2019
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These materials are important and require your
immediate attention. They require Shareholders to make important
decisions. If you are in doubt as to how to deal with these materials
or the matters they describe, please contact your financial, legal,
tax or other professional advisors. |
May 9, 2019
Dear Shareholders,
On behalf of The Flowr Corporation ("Flowr" or the
"Corporation"), it is with great pleasure that we invite you to attend
our annual general and special meeting of shareholders to be held at 10:00 a.m.
(EST) on June 11, 2019. Your participation at this meeting is very important and
we encourage you to review the attached information circular (the
"Circular"), which includes information for the holders of Flowr’s common
shares.
We encourage you to vote on the matters set out in this
Circular by following the proxy instructions set out herein and returning your
proxy or voting instruction form (as applicable) by the applicable deadline. Our
aim is to provide shareholders with the information needed to cast informed
votes.
This past year has been incredibly eventful for the
Corporation. The fourth quarter of 2018 marked a major milestone for Flowr, as
the Corporation launched its medicinal and recreational sales channels after
receiving licenses in August 2018, and sold nearly 406 kilograms of premium
cannabis, despite having only 20% of its grow rooms in Kelowna 1 operational
during the quarter itself. As of today, Flowr has 10 grow rooms in Kelowna 1
licensed for use and the Corporation expects to have all 20 grow rooms fully
constructed in the third quarter of 2019. As a global leader in the premium
cannabis industry, Flowr’s design and cultivation expertise along with its
superior IP know-how enables the Corporation to grow high quality cannabis on a
large scale at what the Corporation believes will be industry-leading yields.
Once the Kelowna 1 facility is completed, the Corporation’s operational
efficiency will only improve. Completion of Kelowna 1 should enable Flowr to
begin capitalizing on strategic growth opportunities for medicinal and
recreational use with approximately 10,000 kilograms of capacity for premium
cannabis flower on an annualized basis.
As the year progresses, we are focussed on the continued build
out of our Kelowna Campus, including the construction of the Hawthorne R&D
Facility, our second facility and the Flowr Forest, and international expansion,
including with respect to our strategic investment in Holigen.
Most importantly, I would like to thank Flowr’s shareholders.
Flowr’s success is driven by your support and we are sincerely grateful to each
of you for having chosen to accompany us on this journey. We look forward to
building on our past accomplishments with your continued support.
Yours truly,
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<Signed> "Steve Klein" |
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Steve Klein |
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Chairman and Chief Strategy Officer
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The Flowr Corporation
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| THE FLOWR CORPORATION |
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| NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING OF
SHAREHOLDERS |
| to be held on
June 11, 2019 |
NOTICE IS HEREBY GIVEN that the Annual General and Special
Meeting (the "Meeting") of the holders ("Shareholders") of common
shares ("Common Shares") of The Flowr Corporation ("Flowr" or the
"Corporation") will be held at 10:00 a.m. (EST) on June 11, 2019 for the
following purposes:
| 1. |
to receive the consolidated financial statements of the
Corporation, for the year ended December 31, 2018, including the auditor’s
report thereon (the "Financial Statements"); |
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| 2. |
to elect directors of the Corporation (the
"Directors") who will serve until the end of the next annual
meeting of Shareholders or until their successors are elected or
appointed; |
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| 3. |
to re-appoint the auditor of the Corporation for the
ensuing year and to authorize the Directors to fix the remuneration to be
paid to the auditor; |
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| 4. |
to consider and, if deemed advisable, pass, with or
without variation, an ordinary resolution to approve the Corporation’s
stock option plan, as amended (the "SOP"), as more particularly
described in the attached Circular (the full text of the SOP and the
proposed ordinary resolution are attached to the Circular as Appendix "A"
and Appendix "B", respectively); |
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| 5. |
to consider and, if deemed advisable, to pass, with or
without variation, a special resolution approving the amendment of the
articles of the Corporation to change the place of the registered office
of the Corporation from 201-100 Allstate Pkwy, Markham, Ontario, L3R 6H3
to 461 King Street West, Floor 2, Toronto, Ontario M5V 1K4 (the
"Registered Office Resolution") (the full text of the Registered
Office Resolution is attached to the Circular as |
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Appendix "D"); and |
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| 6. |
to transact such further and other business as may
properly come before the Meeting or the reconvening of any adjournment or
postponement thereof. |
Additional information on the above matters can be found in the
management information circular dated May 9, 2019 (the "Circular") under
the heading "Business of the Meeting".
The board of directors of the Corporation (the "Board")
has fixed the close of business on May 10, 2019 as the record date (the
"Record Date") for the determination of Shareholders entitled to notice
of and to vote at the Meeting and at any adjournment or postponement
thereof.
The Circular, this notice of Meeting (the "Notice"), the
form of proxy and the voting instruction form (collectively, the "Meeting
Materials") are being mailed to Shareholders of record as at the Record Date
and are available online under the Corporation’s profile on the System for
Electronic Document Analysis and Retrieval ("SEDAR"), at www.sedar.com.
Shareholders are reminded to review the Meeting Materials before voting.
Whether or not you expect to attend the Meeting, you are
encouraged to promptly complete and sign the enclosed form of proxy and return
it for receipt by no later than 10:00 a.m. (EST) on June 7, 2019. If you receive
more than one proxy form because you own Common Shares registered in different
names or addresses, each proxy form should be completed and returned.
If you are a Non-Registered Shareholder (as defined in the
Circular under the heading "Non-Registered Shareholders"), accompanying
this Notice is a voting instruction form for your use. If you receive these
materials through your broker or another intermediary, please complete and sign
the materials in accordance with the instructions provided to you by such broker
or other intermediary.
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Dated this 9th day of May, 2019.
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BY ORDER OF THE BOARD OF DIRECTORS
OF |
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THE FLOWR CORPORATION |
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By: |
<Signed> "Steve Klein" |
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Name: |
Steve Klein |
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Title: |
Chairman and Chief Strategy Officer
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| MANAGEMENT
INFORMATION CIRCULAR |
This Circular is furnished to Shareholders in connection
with the solicitation of proxies by and on behalf of the management of the
Corporation for use at the Meeting and any adjournment or postponement thereof,
for the purposes set forth in the attached Notice.
The Meeting Materials are being mailed on or about May 21, 2019
to Shareholders of record as at the Record Date. The Corporation will bear all
costs associated with the preparation and mailing of the Meeting Materials, as
well as the cost of the solicitation of proxies. The solicitation will be
primarily by mail and telephone; however, officers and regular employees of the
Corporation may also directly solicit proxies (but not for additional
compensation), personally, by facsimile or by other means of electronic
transmission. Banks, brokerage houses and other custodians and nominees or
fiduciaries will be requested to forward proxy solicitation material to their
principals and to obtain authorizations for the execution of proxies and will be
reimbursed for their reasonable expenses in doing so.
All information contained in this Circular is given as of May
9, 2019 unless otherwise specifically stated. Certain capitalized terms used but
not defined herein have the meanings given to them in the Notice of Annual
General and Special Meeting of Shareholders delivered with this Circular.
Currency
Except where otherwise indicated, all dollar amounts set forth
in this Circular are in Canadian ("CAD") dollars, the presentation
currency used by the Corporation in reporting its consolidated financial
results.
GENERAL PROXY MATTERS
Voting in Person at the Meeting
A registered holder of Common Shares ("Registered
Shareholder"), their proxy or a beneficial owner who has appointed itself to
represent it at the Meeting, will appear on a list of Shareholders prepared by
Computershare Investor Services Inc. ("Computershare"), the registrar and
transfer agent for purposes of the Meeting. To vote in person at the Meeting
each Registered Shareholder or appointee will be required to register for the
Meeting by identifying himself/herself/itself at the registration desk.
Non-Registered Shareholders (as defined in this Circular under the heading
"Non-Registered Shareholders") must appoint themselves as a proxyholder
to vote in person at the Meeting.
Solicitation of Proxies
The information contained in this Circular is furnished to
Shareholders in connection with the solicitation of proxies to be used at the
Meeting. The solicitation of proxies by this Circular is being made by or on
behalf of the management of the Corporation and the total cost of the
solicitation will be borne by the Corporation. The solicitation of proxies will
be primarily by mail and telephone, but may also be in person, fax or oral
communication without special compensation being paid to officers or employees
of the Corporation. Banks, brokerage houses and other custodians and nominees or
fiduciaries will be requested to forward proxy solicitation material to their
principals or beneficial owners and to obtain authorizations for the execution
of proxies. The Corporation will reimburse these banks, brokerage houses and
other custodians and nominees or fiduciaries for the reasonable costs incurred
in obtaining authorization to execute forms of proxy from their principals or
beneficial owners.
Appointment of Proxies
The persons named in the enclosed form of proxy are Directors
and/or officers of the Corporation. Each Shareholder has the right to appoint
a person, other than the persons designated by management in the form of proxy,
to represent the Shareholder at the Meeting. A Shareholder giving a proxy can
strike out the names of the management designees printed in the accompanying
proxy form and insert the name of another designated person in the space
provided, or the Shareholder may complete another form of proxy. A proxy
designee need not be a Shareholder of the Corporation.
Those Shareholders who wish to be represented at the Meeting
by proxy must complete and deliver a proper form of proxy to Computershare
either in person, or by mail or courier, to Computershare Investor Services Inc.
8th Floor, 100 University Ave, Toronto ON M5J 2Y1, by fax at 1-866-249-7775
(toll free) or (416) 263-9524 (local) or via the Internet at
www.investorvote.com.
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The form of proxy must be deposited with Computershare by no
later than 10:00 a.m. (EST) on June 7, 2019, or if the Meeting is adjourned or
postponed, not less than 48 hours, excluding Saturdays, Sundays and statutory
holidays, preceding the time of reconvening such adjourned or postponed Meeting
before the commencement of the reconvening of such adjourned or postponed
Meeting.
If a Shareholder who has completed a form of proxy attends the
Meeting in person, any votes cast by such Shareholder on a poll will be counted
and the completed form of proxy will be disregarded.
Non-Registered Shareholders
The information set forth in this section is of importance
to many Shareholders, as a substantial number of Shareholders do not hold Common
Shares in their own name. Shareholders who hold their Common Shares through
brokers, intermediaries, trustees or other persons, or who otherwise do not hold
their Common Shares in their own name (referred to in this Circular as
"Non-Registered Shareholders") should note that only proxies deposited by
Registered Shareholders (that is, Shareholders whose names appear on the records
maintained by the registrar and transfer agent or nominee for the Common Shares
as registered holders of Common Shares) will be recognized and acted upon at the
Meeting. If Common Shares are listed in an account statement provided to a
Non-Registered Shareholder by a broker, those Common Shares will, in all
likelihood, not be registered in the Shareholder’s name. Such Common Shares will
more likely be registered under the name of the Shareholder’s broker or an agent
of that broker. In Canada, the vast majority of such shares are registered under
the name of CDS & Co. (the registration name for CDS Clearing and Depository
Services Inc., which acts as nominee for many Canadian brokerage firms). Common
Shares held by brokers (or their agents or nominees) on behalf of a broker’s
client can only be voted at the direction of the Non-Registered Shareholder.
Without specific instructions, brokers (or their agents and nominees) are
prohibited from voting shares for the broker’s clients. Subject to the following
discussion in relation to NOBOs (as defined below), the Corporation does not
know for whose benefit the Common Shares registered in the name of CDS &
Co., a broker or another agent or nominee, are held.
There are two categories of Non-Registered Shareholders for the
purposes of applicable securities regulatory policy in relation to the mechanism
of dissemination to Non-Registered Shareholders of proxy-related materials and
other securityholder materials and the request for voting instructions from such
Non-Registered Shareholders. Non-objecting beneficial owners ("NOBOs") of
Common Shares are Non-Registered Shareholders who have advised their
intermediary (such as brokers or their agents or nominees) that they do not
object to their intermediary disclosing share ownership information to the
Corporation, consisting of their name, address, e-mail address, securities
holdings and preferred language of communication. Securities legislation
restricts the use of that information to matters strictly relating to the
affairs of the Corporation. Objecting beneficial owners ("OBOs") of
Common Shares are Non-Registered Shareholders who have advised their
intermediary that they object to their intermediary disclosing such share
ownership information to the Corporation.
National Instrument 54-101 – Communication with Beneficial
Owners of Securities of a Reporting Issuer ("NI 54-101") permits the
Corporation, in its discretion, to obtain a list of its NOBOs from
intermediaries and use such NOBO list for the purpose of distributing the
Meeting Materials directly to, and seeking voting instructions directly from,
such NOBOs. As a result, the Corporation is entitled to deliver Meeting
Materials to Non-Registered Shareholders in two manners: (a) directly to NOBOs
and indirectly through intermediaries to OBOs; or (b) indirectly to all
Non-Registered Shareholders through intermediaries. In accordance with the
requirements of NI 54-101, the Corporation is sending the Meeting Materials
directly to NOBOs and indirectly through intermediaries to OBOs. The Corporation
will pay the fees and expenses of intermediaries for their services in
delivering Meeting Materials to OBOs in accordance with NI 54-101.
The Corporation has used a NOBO list to send the Meeting
Materials directly to NOBOs whose names appear on that list. If the transfer
agent, Computershare, has sent these materials directly to a NOBO, such NOBO’s
name and address and information about its holdings of Common Shares have been
obtained from the intermediary holding such shares on the NOBO’s behalf in
accordance with applicable securities regulatory requirements. As a result, such
NOBO of the Corporation can expect to receive a voting instruction form from the
Corporation’s transfer agent. NOBOs should complete and return the voting
instruction form to Computershare in the envelope provided. In addition,
Internet voting is available. Instructions in respect of the procedure for
Internet voting can be found in the voting instruction form. Computershare will
tabulate the results of voting instruction forms received from NOBOs and will
provide appropriate instructions at the Meeting with respect to the Common
Shares represented by such voting instruction forms.
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Applicable securities regulatory policy requires
intermediaries, on receipt of Meeting Materials that seek voting instructions
from Non-Registered Shareholders indirectly, to seek voting instructions from
Non-Registered Shareholders in advance of shareholders’ meetings on Form 54-101F7 – Request for Voting
Instructions Made by Intermediary ("Form 54-101F7"). Every
intermediary/broker has its own mailing procedures and provides its own return
instructions, which should be carefully followed by Non-Registered Shareholders
in order to ensure that their Common Shares are voted at the Meeting or the
reconvening of or any adjournment(s) or postponement(s) thereof. Often, the form
of proxy supplied to a Non-Registered Shareholder by its broker is identical to
the form of proxy provided to Registered Shareholders; however, its purpose is
limited to instructing the Registered Shareholder how to vote on behalf of the
Non-Registered Shareholder. Non-Registered Shareholders who wish to vote at the
Meeting should be appointed as their own representatives at the Meeting in
accordance with the directions of their intermediaries and Form 54-101F7.
Non-Registered Shareholders can also write the name of someone else whom they
wish to vote on their behalf at the Meeting. Unless prohibited by law, the
person whose name is written in the space provided in Form 54-101F7 will have
full authority to present matters to the Meeting and vote on all matters that
are presented at the Meeting, even if those matters are not set out in Form
54-101F7 or this Circular. The majority of brokers now delegate responsibility
for obtaining instructions from clients to Broadridge Financial Solutions, Inc.
("Broadridge"). Broadridge typically mails a voting instruction form in
lieu of the form of proxy. Non-Registered Shareholders are requested to complete
and return the voting instruction form to Broadridge by mail or facsimile.
Broadridge will then provide aggregate voting instructions to Computershare,
which tabulates the results and provides appropriate instructions respecting the
voting of Common Shares to be represented at the Meeting or the reconvening of
any adjournment(s) or postponement(s) thereof. By choosing to send the Meeting
Materials to NOBOs directly, the Corporation (and not the intermediary holding
Common Shares on your behalf) has assumed responsibility for (i) delivering
these materials to you; and (ii) executing your proper voting instructions.
Please return your voting instructions as specified in the request for voting
instructions.
All references to Shareholders in this Circular and the
accompanying instrument of proxy and Notice are to Registered Shareholders
unless specifically stated otherwise.
Revocation
A Registered Shareholder who has given a proxy may revoke the
proxy:
| 1. |
by completing and signing a form of proxy bearing a later
date and depositing it with Computershare as described above; |
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by depositing an instrument in writing executed by the
Shareholder or by the Shareholder’s attorney authorized in writing or by
electronic signature at the registered office of the Corporation addressed
to Steve Klein, Chairman of the Board of Directors, at any time up to and
including the close of business on the last business day preceding the day
of the Meeting, or the reconvening of any adjournment or postponement of
the Meeting, at which the proxy is to be used or by delivering such
instrument to the Chairman of the Meeting prior to the commencement of the
Meeting on the day of the Meeting or the reconvening of any adjournment or
postponement of the Meeting (which instrument should be sent by facsimile
to the Corporation at 1-855-265-5402 marked for the attention of Steve
Klein, Chairman of the Board of Directors); or |
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| 3. |
in any other manner permitted by
law. |
A Non-Registered Shareholder may revoke a voting instruction
form or a waiver of the right to receive Meeting Materials and to vote, which
has been provided to an intermediary, at any time by written notice to the
intermediary.
Voting of Proxies
The Common Shares represented by any valid proxy in favour of
the management designees named in the accompanying form of proxy will be voted
for or withheld from voting in accordance with the specific instructions made by
the Shareholder on any ballot that may be called for with respect to the
election of Directors, the re-appointment of the auditor of the Corporation and
authorization of the Directors to fix such auditor’s remuneration, approving the
SOP, approving the Registered Office Resolution and if a Shareholder specifies a
choice with respect to any matter to be acted upon, the Common Shares will be
voted accordingly. In the absence of any such specific instructions, such
Common Shares will be voted by the designated persons named by management in the
accompanying form of proxy:
| 1. |
FOR the election of the Directors named
in this Circular; |
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| 2. |
FOR the re-appointment of MNP, LLP as
auditor of the Corporation and the authorization of the Directors to fix
such auditor’s remuneration; |
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| 3. |
FOR the approval of the SOP;
and |
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| 4. |
FOR the approval of the Registered
Office Resolution. |
The accompanying form of proxy confers discretionary authority
upon the persons named therein with respect to amendments or variations to
matters identified in the Notice and with respect to such other business or
matters which may properly come before the Meeting or the reconvening of any
adjournment(s) or postponement(s) thereof. As of the date of this Circular, the
Corporation is not aware of any such amendments or variations or any other
matters to be addressed at the Meeting.
Record Date
The Record Date for determining Shareholders entitled to
receive notice of and vote at the Meeting is May 10, 2019. Shareholders of
record as at the close of business on such date are entitled to participate in
and vote at the Meeting, or the reconvening of any adjournment(s) or
postponement(s) thereof, in the manner and subject to the procedures described
in this Circular.
Voting Shares and Quorum
As of the Record Date, there were 87,045,352 Common Shares
issued and outstanding. Shareholders of record on May 10, 2019 are entitled to
receive notice of and vote at the Meeting. Each Common Share entitles the holder
thereof to one vote at the Meeting.
Pursuant the by-laws of the Corporation, a quorum for the
transaction of business at any meeting of Shareholders shall be at least two
persons present in person or represented by proxy holding not less than 10% of
the outstanding shares of the Corporation entitled to vote at the meeting.
Principal Shareholders
To the knowledge of the Directors and executive officers of the
Corporation, the only persons or companies that beneficially own, or control or
direct, directly or indirectly, voting securities carrying 10% or more of the
voting rights attached to any class of issued and outstanding voting securities
of the Corporation as at May 9, 2019 are:
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(i) |
Thomas Flow Investments Inc., governed by the laws of
Canada and owned by Thomas Flow (an employee of the Corporation). Thomas
Flow Investments Inc. owns 26,025,000 of the Common Shares, which is 19.9%
of the total issued and outstanding interests in Flowr;(1)(2)
and |
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(ii) |
Core Flow Canada Holdings Inc., governed by the laws of
the State of New York and controlled by Steve Klein (a Director and Chief
Strategy Officer of the Corporation). Core Flow Canada Holdings Inc. owns
7,821,0144 of the Common Shares and 41,598,000 class A
preferred shares of The Flowr Canada Holdings ULC (which are exchangeable
at no additional consideration for Common Shares on a one for one basis at
any time), which is 37.7% of the total issued and outstanding interests in
Flowr(2). |
Notes:
| (1) |
Thomas Flow also has the right to purchase, or direct the
sale of, securities of the Corporation from Michael Thompson, William
Street, Craig Main, and Jason Broome, in the event that any of the
foregoing individuals cease to be employed by the Corporation before the
date that is three |
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(3) years from the date of such individuals’ start of
employment with the Corporation. Such right has been exercised in respect
of certain shares held by Mark D’Angela. |
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| (2) |
For the purposes of calculating the percentage of the
total issued and outstanding interests in Flowr, the number of Common
Shares held by either Thomas Flow Investments Inc. or Core Flow Canada
Holdings Inc., as applicable, has been divided by a denominator which
includes all of the issued and outstanding Common Shares and all of the
issued and outstanding class A preferred shares of The Flowr Canada
Holdings ULC (which are exchangeable at no additional consideration for
Common Shares on a one for one basis at any time) but does not include any
Common Shares that would be issued and outstanding upon the exercise or
vesting, as applicable, of any issued and outstanding Options (as defined
herein), RSUs (as defined herein) or warrants. |
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| (3) |
The information above has been furnished by the
entities/individuals listed above. |
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| (4) |
On April 29, 2019, the Corporation announced it intended
to complete a non-brokered private placement of up to 2,400,000 Common
Shares. As of the date of this Circular, the private placement has not
closed. It is anticipated that Core Flow Canada Holdings Inc. will
subscribe for 432,000 Common Shares under the private
placement. |
THE CORPORATION
The Flowr Corporation was incorporated pursuant to the
provisions of the Business Corporations Act (Alberta) on June 1, 2016,
under the name "The Needle Capital Corp" ("Needle"). The Corporation
completed its initial public offering on September 15, 2017, and was listed on
the TSX Venture Exchange ("TSX-V") as a capital pool company until it
completed its qualifying transaction on September 21, 2018 (the "Qualifying
Transaction"). On September 20, 2018, and prior to the completion of the
Qualifying Transaction, the Corporation changed its name to "The Flowr
Corporation" and completed a consolidation of its share capital on a basis of
one post-consolidation Common Share for every thirteen (13) common shares
existing immediately before the consolidation. On September 25, 2018, the
Corporation continued from the Business Corporations Act (Alberta) to the
Business Corporations Act (Ontario). The Common Shares were listed for
trading on the TSX-V under the symbol "FLWR" on September 26, 2018.
Prior to the completion of the Qualifying Transaction, the
Corporation did not own any assets other than cash and had not conducted any
active business operations. Since its incorporation and prior to the Qualifying
Transaction, the principal activities of the Corporation consisted of the
financing through its initial public offering. As a result of the Qualifying
Transaction, the Corporation has become a vertically integrated cannabis company
focused on growing high-quality cannabis. As at December 31, 2018, the
Corporation had 121 employees (78 full-time and 43 part-time).
The head office of Flowr is located at 461 King Street West,
Floor 2, Toronto, Ontario M5V 1K4. The registered office of the Corporation is
located at 100 Allstate Parkway, Suite 201, Markham, Ontario L3R 6H3. The
Corporation will change the location of its registered office to its head office
address upon approval of the Registered Office Resolution at the Meeting.
BUSINESS OF THE MEETING
The Meeting will be constituted as an annual general and
special meeting of Shareholders.
At the Meeting, Shareholders will be asked to consider and vote
on: (a) the election of the Directors who will serve until the end of the next
annual meeting of Shareholders, or until their successors are elected or
appointed; (b) the re-appointment of MNP, LLP as auditor of the Corporation and
the authorization of the Directors to fix such auditor’s remuneration (c) the
approval of the SOP; (d) the approval of the Registered Office Resolution; and
(e) such further and other business as may properly come before the Meeting or
the reconvening of any adjournment(s) or postponement(s) thereof.
Interests of Certain Persons or Companies in the Matters to
be Acted Upon
As of the date of this Circular, there were 87,045,352 Common
Shares issued and outstanding. As at the date of this Circular, Tom Flow, the
current Directors and NEOs (as defined in this Circular under the heading
"Compensation Discussion and Analysis") of the Corporation, and their
associates or affiliates, as a group, beneficially owned, directly or
indirectly, or exercised control or direction over, an aggregate of
36,475,463 Common Shares representing approximately 41.9% of the issued
and outstanding Common Shares on a non-diluted basis. Any ownership of Common
Shares as of the date of this Circular by former Directors and NEOs is not
within the knowledge of the Corporation and has not been included in the
preceding amounts or percentages.
None of the principal holders of Common Shares or any Director,
proposed nominee for election as a Director or executive officer of the
Corporation, as the case may be, or any associate or affiliate of any of the
foregoing persons, since the beginning of the Corporation’s last financial year,
has any material interest in any proposed matter to be acted upon, other than
the election of Directors, that materially affected or will materially affect
the Corporation or any of its affiliates.
PRESENTATION OF FINANCIAL STATEMENTS
Management, on behalf of the Board, will submit the Financial
Statements to the Shareholders at the Meeting, but no vote by the Shareholders
with respect thereto is required or proposed to be taken in respect of the
Financial Statements.
The Financial Statements placed before Shareholders will be
mailed to requesting Registered Shareholders, as well as requesting
Non-Registered Shareholders on or about May 17, 2019 and are also available
under the Corporation’s profile on SEDAR at www.sedar.com.
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ELECTION OF DIRECTORS
Under the articles of the Corporation, the Board is to consist
of a minimum of three (3) and a maximum of fifteen (15) Directors. Pursuant to
the special resolution passed by Shareholders at the special meeting of
Shareholders held on December 28, 2018, the Board is empowered to determine the
number of Directors from time to time by resolution of the Board. The number of
Directors to be elected at the Meeting is eight (8). Pursuant to the OBCA, each
nominee may be elected by a plurality of the votes cast by Shareholders present
in person or represented by proxy.
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In the absence of any instructions to the contrary,
management of the Corporation proposes to nominate and the Common
Shares represented by proxies received by management will be voted
FOR the approval of the election as Directors
of each of the proposed nominees whose names are set forth under
the heading "Director Nominees of The Flowr
Corporation". |
Management does not contemplate that any of the proposed
nominees will be unable to serve as a Director but, if that should occur for any
reason prior to the Meeting, the Common Shares represented by properly executed
proxies given in favour of such nominee(s) may be voted by the persons
designated by management of the Corporation in the enclosed form of proxy, in
their discretion, in favour of another nominee selected by the Board. Each
Director elected will hold office until the next annual meeting of Shareholders,
or until their respective successors are elected or appointed in accordance with
applicable law and the Corporation’s by-laws.
RE-APPOINTMENT OF AUDITOR
At the Meeting, Shareholders will be asked to re-appoint MNP,
LLP, Chartered Professional Accountants, 50 Burnhamthorpe Road West, Suite 900,
Mississauga, Ontario L5B 3C2 ("MNP"), as the auditor of the Corporation
to hold office until the close of the next annual meeting of Shareholders, based
on the recommendation of the Audit Committee and the Board. MNP LLP, Calgary,
Alberta was first appointed auditors of Needle on November 3, 2016 and MNP,
Mississauga, Ontario were appointed auditors of the Corporation on January 24,
2018.
|
The persons named in the accompanying form of proxy
will, in the absence of specifications or instructions to withhold
from voting on the form of proxy, vote FOR the re-appointment of
MNP as the auditor of the Corporation to hold office until the next
annual meeting of Shareholders and to authorize the Directors to
fix such auditor’s remuneration.
|
If a majority of the Common Shares represented at the Meeting
are withheld from voting for the appointment of MNP as the auditors of the
Corporation, the Board will appoint another firm of chartered accountants based
upon the recommendation of the Corporation’s Audit Committee.
A summary of the external auditor service fees and billings
paid or payable to MNP, in respect of the fiscal years ended December 31, 2018
and December 31, 2017, is set out below:
Firm
|
Fiscal
Year |
Audit Fees
|
Audit-Related Fees
|
Tax Fees
|
All Other Fees
|
Total
|
MNP LLP
|
20171 |
$51,000 |
$7,500 |
$27,000 |
$110,501 |
$196,001 |
| 2018 |
$81,000 |
$38,500 |
$27,000 |
$21,950 |
$162,450 |
Notes:
| (1) |
These are the fees incurred by Needle prior to the
completion of the Qualifying Transaction and also include fees incurred by
The Flowr Corporation, the private corporation that completed the
Qualifying Transaction with Needle, as MNP LLP acted as auditor for both
entities. |
10
STOCK OPTION PLAN
The TSX-V requires that listed issuers obtain shareholder
approval every year for security based compensation arrangements that do not
have a fixed maximum aggregate of securities issuable. As described in more
detail below, the SOP is being put forth for approval by Shareholders at the
Meeting.
The SOP was first approved by the TSX-V in connection with the
Qualifying Transaction. Effective as of November 26, 2018, the SOP was amended.
Such amendment was of a "house-keeping" nature to address certain United States
securities laws matters, to reflect the adoption of the Corporation’s Long-Term
Incentive Plan, as amended effective May 9, 2019 ("LTIP") and to make
certain administrative changes to reflect the total number of securities that
may be issued pursuant to the SOP. The SOP, as amended, was approved by
Shareholders at the special meeting of Shareholders held on December 28, 2018,
and approved by the TSX-V on January 16, 2019.
Summary of Stock Option Plan
The following is a summary of the principal provisions of the
SOP and is qualified in its entirety by the full text of the SOP which is
attached as Appendix "A" hereto.
Stock options ("Options") to purchase Common Shares may
be granted to full-time and part-time employees of the Corporation or its
subsidiaries, and directors, officers, consultants or advisors of the
Corporation or its subsidiaries; provided, however, that a consultant or advisor
shall not be an eligible participant of the SOP unless such consultant or
advisor is an individual that provides bona fide services to the Corporation and
such services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly promote or
maintain a market for Corporation’s securities.
Pursuant to the SOP, the exercise price of any Option cannot be
less than the market price of the Common Shares at the time the Option is
granted. Market price is deemed to be the closing price of the Common Shares on
the TSX-V on the last trading day immediately preceding the day upon which the
Option is granted, subject to any discounts that may be granted in accordance
with the policies of the TSX-V. Options shall vest on the dates specified in the
option agreement between the Corporation and the participant optionee. The
exercise period of the Options cannot exceed ten (10) years. In the event that a
participant ceases to be eligible under the SOP due to death or incapacity,
Options that are exercisable will terminate 180 days after the date at which a
participant ceases to be eligible, or in the case of retirement, 120 days after
the date at which a participant ceases to be eligible. Subject to the provisions
of any employment contracts as it relates to exercise and vesting conditions,
where a participant is terminated without good cause, the Options that are
exercisable at the termination date will be exercisable until the earlier of (i)
30 days after that date, (ii) the date determined by the Board and (iii) the
date at which the Option expires pursuant to the SOP. Where a participant is
terminated by reason of good cause or resignation, any Options held by the
participant will expire immediately and are cancelled at such time as may be
determined by the Board.
The Board may grant Options, in accordance with the SOP, at any
time they deem to be appropriate. The maximum number of Common Shares reserved
for issuance under the SOP shall not exceed, in the aggregate, 10% of the issued
and outstanding (a) Common Shares and (b) class A preferred shares in the
capital of The Flowr Canada Holdings ULC ("Flowr ULC"), a subsidiary of
the Corporation (which are exchangeable for Common Shares at any time at the
option of the holder), from time to time, provided that the Board shall have the
right, from time to time, to increase such percentage subject to the approval of
Shareholders and such regulatory authorities, stock exchanges or
over-the-counter markets having jurisdiction over the affairs of the
Corporation. For purposes of clarity, the maximum number of Shares reserved and
set aside for issue under the SOP and under LTIP shall not exceed 20% of the
Common Shares and Flowr ULC class A preferred shares.
The maximum number of Common Shares reserved for issuance in
any 12 month period to any individual employee, officer, director, consultant or
advisor shall not exceed 5% of the issued and outstanding Common Shares and
Flowr ULC class A preferred shares, and to any consultant or person providing
investor relation activities shall not exceed 2% of the issued and outstanding
Common Shares and Flowr ULC class A preferred shares. The aggregate number of
Common Shares that can be granted to insiders of the Corporation as a group
shall not exceed 10% of the issued and outstanding Common Shares and Flowr ULC
class A preferred shares.
Common Shares that were the subject of Options that have
expired, been surrendered, lapsed, cancelled or terminated shall thereupon no
longer be in reserve and may once again be subject to an Option granted under
the SOP, effectively resulting in a replenishing of the number of Options
available for grant under the SOP.
11
A resolution will be placed before the Shareholders to approve
the SOP. This approval will be effective for one year from the date of the
Meeting. If approval is not obtained at the Meeting, Options which have not been
allocated as of June 11, 2019 and Options which are outstanding as of June 11,
2019 and are subsequently cancelled, terminated or exercised will not be
available for a new grant of Options. Previously allocated Options will continue
to be unaffected by the approval or disapproval of the resolution.
The SOP benefits Shareholders by enabling the Corporation to
attract and retain personnel of the highest calibre by rewarding them for their
contribution to the generation of Shareholder value, and aligning the interests
of the Corporation’s Directors and officers with those of Shareholders.
Accordingly, the Board recommends that Shareholders vote FOR the
approval of the SOP.
Approval Required
The full text of the SOP, as well as the proposed ordinary
resolution approving the SOP, are attached to this Circular as Appendix "A" and
Appendix "B", respectively.
|
The persons named in the accompanying form of
proxy will, in the absence of specifications or instructions to
withhold from voting on the form of proxy, vote FOR
the approval of the SOP. |
As at May 9, 2019, the current Directors and NEOs (as defined
in this Circular under the heading "Compensation Discussion and
Analysis") of the Corporation, as a group, beneficially own, directly or
indirectly, or exercise control or direction over an aggregate of 29,154,667
Common Shares (44,639,610 Common Shares if all Options held by them are
exercised and all Flowr ULC class A preferred shares held by them are converted
into Common Shares), representing approximately 33.5% of the current
outstanding Common Shares on a non-diluted basis (approximately 32.2% of the
current outstanding Common Shares on a non-diluted basis if all Options held by
them are exercised and all Flowr ULC class A preferred shares held by them are
converted into Common Shares and no other Options or other convertible
securities of the Corporation are exercised or converted, as applicable) and
approximately 20.3% of the Common Shares on a fully diluted basis, excluding the
exercise of all Options and Flowr ULC class A preferred shares held by the
Directors and NEOs (approximately 31.1% of the current outstanding Common
Shares on a fully diluted basis if all Options held by them are exercised and
all Flowr ULC class A preferred shares held by them have been converted and all
other outstanding Options and other convertible securities of the Corporation
are exercised or converted, as applicable). Any ownership of Common Shares as of
the date of this Circular by former Directors and NEOs is not within the
knowledge of the Corporation and has not been included in the preceding amounts
or percentages.
As at the date of this Circular, there were 12,051,780
outstanding Options to purchase 12,051,780 Common Shares under the SOP with a
weighted average exercise price of $2.66. There were also future grants of
Options approved by the Board to purchase 785,000 Common Shares with such
Options to be granted to the applicable employee on either the start date of
employment or the expiry of the Corporation’s current blackout period for
trading in securities.
Under the SOP, as of May 9, 2019, 6,205,961 Options have been
granted and have been exercised; 2,013,750 Options have been granted and have
expired; 12,051,780 Options are outstanding; 785,000 Options have been approved
for granting subject to either, for the applicable employee, the commencement of
employment or the expiry of the Corporation’s current blackout period for
trading in securities; and 262,755 Options remain available for future
granting.
| Options granted since inception of the SOP
and either exercised or outstanding |
|
20,271,491 |
|
| Options granted subject to Shareholder approval |
|
- |
|
| Options granted subject to the expiry of
the Corporation’s current blackout period for trading in |
|
35,000 |
|
| securities |
|
|
|
| Options granted subject to the commencement
of employment for new employees |
|
750,000 |
|
| Total |
|
21,056,491 |
|
| |
|
|
|
| Options exercised since inception of the SOP |
|
6,205,961 |
|
| Options outstanding |
|
12,051,780 |
|
| Options cancelled |
|
2,013,750 |
|
| Options approved for future granting |
|
785,000 |
|
| Options available for future granting |
|
262,755 |
|
| Total |
|
21,319,246 |
|
12
LONG TERM INCENTIVE PLAN
As part of an ongoing review of the Corporation’s compensation
strategies, effective as of November 26, 2018 the Board approved the LTIP, a
copy of which is attached hereto as Appendix "C" to this Circular. The LTIP was
approved by Shareholders at the special meeting of Shareholders held on December
28, 2018. On May 9, 2019 the Board approved certain amendments to the LTIP of a
housekeeping nature in order to permit RSU Participants (as defined below) to
elect to defer the payment in respect of an award of RSUs when it becomes
payable on the applicable vesting date. Any such deferral by an RSU Participant
may be for a period of no longer than 5 years from the date of the applicable
RSU award agreement. A copy of the LTIP, including the amendments described
herein, is attached as Appendix "C" hereto. Pursuant to the terms of the LTIP,
Shareholder approval is not required for such amendment to the LTIP.
Under the terms of the LTIP the Board or, if authorized by the
Board, a committee of the Board may grant units ("Units"), which may be
either restricted share units ("RSUs") or deferred share units
("DSUs") to officers, Directors, employees or consultants of the
Corporation; provided, however, that a consultant or advisor shall not be an
eligible participant of the LTIP unless such consultant or advisor is an
individual that provides bona fide services to the Corporation and such services
are not in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the Corporation’s securities. The purpose of the LTIP is to advance the
interests of the Corporation: (a) through the motivation, attraction and
retention of key employees and Directors of the Corporation; (b) by aligning the
interests of eligible participants with the interests of Shareholders generally;
and (c) by furnishing eligible participants with an additional incentive in
their efforts on behalf of the Corporation.
As of the date of this Circular:
-
there are 197,250 RSUs issued and outstanding;
-
there are no DSUs issued and outstanding;
-
there are 290,000 RSUs granted subject to the expiry of the Corporation’s
current blackout period for trading in securities; and
-
there are 575,000 RSUs granted subject to the commencement of employment
for new employees.
Summary of the Long Term Incentive Plan
The following is a summary of the principal provisions of the
LTIP and is qualified in its entirety by the full text of the LTIP which is
attached as Appendix "C" hereto.
Pursuant to the terms of the LTIP each Unit represents the
right to receive one Common Share. Participation in the LTIP is voluntary and,
if an eligible participant agrees to participate, the grant of Units is
evidenced by an agreement between the Corporation and the participant. The
interest of any participant in any Unit may not be transferred or assigned
except by testamentary disposition or in accordance with the laws governing the
devolution of property upon death.
The maximum number of Common Shares which may be reserved and
set aside for issue under the LTIP in respect of awards of DSUs to DSU
participants and for payments in respect of awards of RSUs to RSU participants,
shall not exceed 10% of the (a) Common Shares and (b) class A preferred shares
in the capital of Flowr ULC (which are exchangeable for Common Shares at any
time at the option of the holder) (being a fixed number of 13,057,421 Common
Shares as reserved with the TSX-V), provided that the Board shall have the
right, from time to time, to increase such number of Common Shares subject to
the approval of Shareholders and such regulatory authorities, stock exchanges or
over-the-counter markets having jurisdiction over the affairs of the
Corporation. For purposes of clarity, the maximum number of Common Shares
reserved and set aside for issue under the LTIP and under the SOP shall not
exceed 20% of the Common Shares and Flowr ULC class A preferred shares. Common
Shares that were the subject of awards that have expired, been surrendered,
lapsed, cancelled or terminated shall thereupon no longer be in reserve and may
once again be subject to an award granted under the LTIP, effectively resulting
in a replenishing of the number of RSUs and DSUs available for grant under the
LTIP.
The LTIP, together with all other previously established or
proposed security based compensation arrangements of the Corporation, including
the SOP, may not result in:
13
| 1. |
the number of Common Shares reserved for issuance to
insiders at any time exceeding 10% of the issued and outstanding Common
Shares and Flowr ULC class A preferred shares; |
| |
|
| 2. |
the issuance to insiders of the Corporation of a number
of Common Shares exceeding, within a one year period, 10% of the issued
and outstanding Common Shares and Flowr ULC class A preferred shares;
or |
| |
|
| 3. |
the issuance to any one insider of the Corporation,
within a one year period, of a number of Common Shares exceeding 5% of the
issued and outstanding Common Shares and Flowr ULC class A preferred
shares. |
Restricted Share Units
An officer, Director, employee or consultant of the Corporation
who has been designated by the Corporation for participation in the LTIP and who
agrees to participate in the LTIP is an eligible participant to receive RSUs
under the LTIP (an "RSU Participant").
Unless otherwise set forth in an award agreement, an RSU will
vest as to 33 1/3% on each of the first, second and third anniversary dates of
the grant date, provided that, unless otherwise provided under the applicable
award agreement, all RSUs granted under a particular award shall vest on or
before December 31st of the calendar year which is 3 years following
the calendar year in which the service was performed in respect of which the
particular award was made (the "Final Vesting Date"), provided further
that all payments under a particular award of a U.S. taxpayer shall be made on
or before December 31st of the year in which the scheduled RSU
vesting date (determined without regard to Section 3.2.2 of the LTIP) occurs or,
if later, by the date that is two and one-half (2 ½) months after such scheduled
RSU vesting date. In the event that a vesting date occurs within a blackout
period or within 5 business days thereafter, the vesting date shall be 10
business days after the blackout period ends (the "Extension Period"). If
an additional blackout period is subsequently imposed during the Extension
Period, then the Extension Period will commence following the end of such
additional blackout period. Despite the foregoing, and unless otherwise provided
under the applicable award agreement, a vesting date will not be extended beyond
the Final Vesting Date.
On each vesting date, unless the decision has already been made
in the award agreement, on the RSU vesting date, the Corporation decides, in its
sole discretion, whether to make all payments in respect of vested RSUs to the
RSU Participant in cash, Common Shares issued from treasury or a combination
thereof based on the fair market value of the Common Shares as at such date. For
the purposes of the LTIP, the fair market value of a Common Share is the
weighted average trading price of the Common Shares on the TSX-V for the 5
trading days immediately preceding the vesting date for a RSU or DSU Termination
Date (as defined below) in respect of DSUs, as applicable.
If an RSU Participant ceases to be an eligible participant
under the LTIP due to termination with cause or voluntary termination by the RSU
Participant, all unvested RSUs previously credited to the participant’s account
are terminated and forfeited as of the termination date. If an RSU Participant
ceases to be an eligible participant under the LTIP due to termination without
cause, death, total or permanent long-term disability or retirement, any
unvested RSUs previously credited to the participant’s account will continue to
vest in accordance with their terms or, at the discretion of the Board, be
terminated and forfeited as of the termination date, subject to the provisions
of any RSU Participant’s employment contract. In the event the Corporation pays
a dividend on the Common Shares subsequent to the granting of an RSU award, the
number of RSUs relating to such award shall be increased to reflect the amount
of the dividend.
Deferred Share Units
A Director of the Corporation who has been designated by the
Corporation for participation in the LTIP and who agrees to participate in the
LTIP is an eligible participant to receive DSUs under the LTIP (a "DSU
Participant").
All DSUs awarded to a DSU Participant vest on the date on which
the DSU Participant ceases to be a Director of the Corporation (the "DSU
Termination Date"). Notwithstanding the foregoing, any payments under a
particular award of a U.S. taxpayer shall be made as soon as practicable
following a DSU Termination Date in accordance with the LTIP, but in no case
later than December 31st of the year in which such DSU Termination
Date occurs or, if later, by the date that is two and one-half (2 ½) months
after such DSU Termination Date.
On the DSU Termination Date, payment in respect of a DSU
Participant’s DSUs becomes payable and the Corporation decides, in its sole
discretion, whether to make the payment in cash, Common Shares issued from
treasury or a combination thereof based on the fair market value of the Common
Shares as at the DSU Termination Date.
14
In the event the Corporation pays a dividend on the Common
Shares subsequent to the granting of a DSU award, the number of DSUs relating to
such award shall be increased to reflect the amount of the dividend.
Amendments
The Corporation retains the right without the approval of
Shareholders:
| 1. |
to amend the LTIP or any RSUs or DSUs to: |
| |
|
|
|
(i) |
make amendments of a grammatical, typographical, clerical
and administrative nature and any amendments required by a regulatory
authority or to comply or conform with applicable laws; |
| |
|
|
|
(ii) |
change vesting provisions of the LTIP or any RSUs or
DSUs; |
| |
|
|
|
(iii) |
make any other amendments of a non-material
nature; |
| |
|
|
|
(iv) |
make amendments to the definition of "DSU Participant"
and/or "RSU Participant" or the eligibility requirements of participating
in the LTIP, where such amendment would not have the potential of
broadening or increasing insider participation; |
| |
|
|
|
(v) |
make amendments to the manner in which eligible
participants may elect to participate in the LTIP; |
| |
|
|
|
(vi) |
make any amendments to the provisions concerning the
effect of the termination of a participant’s employment or services on
such participant’s status under the LTIP; or |
| |
|
|
|
(vii) |
make any amendment which is intended to facilitate the
administration of the LTIP; or |
| |
|
|
| 2. |
to suspend, terminate or discontinue the terms and
conditions of the LTIP and the RSUs and DSUs granted under the LTIP by
resolution of the Board, provided that: |
| |
|
|
|
(i) |
no such amendment to the LTIP shall cause the LTIP in
respect of RSUs to cease to be a plan described in paragraph (k) of the
definition of "salary deferral arrangement" in subsection 248(1) of the
Income Tax Act (Canada) (the "ITA") or any successor to such
provision; |
| |
|
|
|
(ii) |
no such amendment to the LTIP shall cause the LTIP in
respect of DSUs to cease to be a plan described in regulation 6801(d) of
the ITA or any successor to such provision; and |
| |
|
|
|
(iii) |
any amendment shall be subject to the prior consent of
any applicable regulatory bodies, including the TSX-V, as may be
required. |
Any amendment to the LTIP which changes the vesting provisions
of the LTIP or any RSUs or DSUs, or any suspension, termination or
discontinuance of the terms and conditions of the LTIP and the RSUs and DSUs
granted under the LTIP, shall take effect only with respect to awards granted
after the effective date of such amendment, provided that it may apply to any
outstanding award with the mutual consent of the Corporation and the
participants to whom such awards have been granted.
Any amendment to the LTIP other than as described above shall
require the approval of Shareholders given by the affirmative vote of a simple
majority of the Common Shares (or, where required, "disinterested" Shareholder
approval) represented at a meeting of Shareholders at which a motion to approve
the LTIP or an amendment to the LTIP is presented. Specific amendments requiring
Shareholder approval include:
| 1. |
to increase the number of Common Shares reserved under
the LTIP; |
| |
|
| 2. |
to change the definition of RSU Participants or DSU
Participants or the eligibility requirements of participating in the LTIP,
where such amendment would have the potential of broadening or increasing
insider participation; |
| |
|
| 3. |
the extension of any right of a participant under the
LTIP beyond the date on which such right would originally have
expired; |
15
| 4. |
to permit RSUs or DSUs to be transferred other than by
testamentary disposition or in accordance with the laws governing the
devolution of property in the event of death; |
| |
|
| 5. |
to permit awards other than RSUs and DSUs under the LTIP;
and |
| |
|
| 6. |
to amend the amendment provisions of the LTIP so as to
increase the ability of the Board to amend the LTIP without Shareholder
approval. |
In accordance with the policies of the TSX-V, to the extent
that the Corporation grants RSUs or DSUs to eligible participants under the
LTIP, which are agreed to be settled in cash on the grant date, such RSUs and
DSUs will not reduce the pool of securities available for grant under the LTIP.
APPROVAL OF REGISTERED OFFICE RESOLUTION
At the Meeting, the Shareholders will be asked to consider, and
if deemed advisable, confirm, ratify and approve by special resolution the
Registered Office Resolution, a copy of which is attached hereto as Appendix
"D".
Approval Required
The proposed special resolution approving the amendment of the
articles of the Corporation to change the place of the registered office of the
Corporation from 201-100 Allstate Pkwy, Markham, Ontario, L3R 6H3 to 461 King
Street West, Floor 2, Toronto, Ontario M5V 1K4 is attached to this Circular as
Appendix "D". The vote required to pass the Registered Office Resolution is at
least two-thirds (662/3%) of the votes cast by the Shareholders present in
person or represented by proxy at the Shareholders’ Meeting and entitled to vote
on such resolution.
|
The persons named in the accompanying form of proxy
will, in the absence of specifications or instructions to withhold
from voting on the form of proxy, vote FOR the
approval of the Registered Office Resolution.
|
DIRECTOR NOMINEES OF THE FLOWR CORPORATION
Under the articles of the Corporation, the Board is to consist
of a minimum of three (3) and a maximum of fifteen (15) Directors. Pursuant to
the special resolution passed by Shareholders at the special meeting of
Shareholders held December 28, 2018, the Board is empowered to determine the
number of Directors from time to time by resolution of the Board. The number of
Directors to be elected at the Meeting is eight (8). Pursuant to the OBCA, each
nominee may be elected by a plurality of the votes cast by Shareholders present
or represented by proxy.
The Board has approved the nomination of the following eight
(8) individuals for election as Directors. Voting for the election of the eight
(8) nominee Directors will be conducted on an individual basis. All of the
nominees for election at the Meeting are currently Directors. All nominees have
agreed to stand for election.
The following disclosure sets out, as at the date of this
Circular, (a) the names of nominees for election as Directors, and their
residency, (b) all major offices and positions with the Corporation each now
holds, (c) each nominee’s principal occupation, business or employment, (d) the
period of time during which each has been a Director, (e) the current equity
ownership consisting of Common Shares beneficially owned, directly or
indirectly, or controlled or directed, and options or other exchangeable
securities credited to each nominee, and (f) other current public board
memberships and committees.
Common Shares beneficially owned, controlled or directed,
directly or indirectly, as at May 9, 2019 is based upon information furnished to
the Corporation by each individual Director or nominee.
Management does not contemplate that any of the nominees will
be unable to serve as a Director. If, as a result of circumstances not now
contemplated, any nominee is unable to serve as a Director, the proxy will be
voted for the election of such other person or persons as the Board may select.
Each Director elected will hold office until the next annual meeting of Shareholders, or until their respective successors are elected
or appointed in accordance with applicable law and the Corporation’s
by-laws.
16
17
18
19
20
Notes to the above Director Bios:
| (1) |
Independent Director for purposes of National Instrument
58-101 – Disclosure of Corporate Governance Practices ("NI
58-101"). |
| |
|
| (2) |
Member of the Audit Committee. If elected, it is proposed
that Ms. Basian will Chair the Audit Committee, and Messrs. Duet and
Levesque will be the other members of the Audit Committee. |
| |
|
| (3) |
The information as to country and province or state or
residence, and principal occupation, not being within the knowledge of the
Corporation, has been furnished by the respective nominees. |
| |
|
| (4) |
Each Director listed will hold his or her position as a
Director of the Corporation until the next annual meeting of Shareholders
or until his or her respective successor is elected or appointed in
accordance with applicable laws and the Corporation’s by-laws. |
| |
|
| (5) |
Securities beneficially owned, controlled or directed,
directly or indirectly, as at May 9, 2019, is based upon information
furnished to the Corporation by each individual Director or
nominee. |
| |
|
| (6) |
Member of the Human Resources & Compensation
Committee. If elected, it is proposed that Mr. Duet will Chair the Human
Resources & Compensation Committee, and Ms. Basian and Mr. Levesque
will be the other members of the Human Resources & Compensation
Committee. |
| |
|
| (7) |
Mr. Klein is also a principal of Core Flow Canada
Holdings Inc., which holds an aggregate of 49,419,014 Common Shares and
class A preferred shares of a subsidiary of the Corporation. This figure
includes the securities, other than Options, held by Messrs. Klein, Miller
and Tolia disclosed above. |
| |
|
| (8) |
Member of the Nominating & Corporate Governance
Committee. If elected, it is proposed that Mr. Levesque will Chair the
Nominating & Corporate Governance Committee, and Ms. Basian and Mr.
Duet will be the other members of the Nominating & Corporate
Governance Committee. |
| |
|
| (9) |
On April 29, 2019, the Corporation announced it intended
to complete a non-brokered private placement of up to 2,400,000 Common
Shares. As of the date of this Circular, the private placement has not
closed. It is anticipated that (i) Core Flow Canada Holdings Inc. will
subscribe for 432,000 Common shares under the private placement, (ii)
Vinay Tolia will subscribe for 40,000 Common Shares under the private
placement and (iii) Don Duet, through a family trust, will subscribe for
106,618 Common Shares under the private placement. |
| |
|
| (10) |
Dr. de Barros Teixeira is independent with respect to the
Corporation pursuant to NI 58-101. Dr. de Barros Teixeira is retained as a
consultant by Holigen Holdings Limited. The Corporation has entered into
an agreement to acquire an 19.8% interest in Holigen Holdings
Limited. |
21
| STATEMENT OF
BOARD OF DIRECTOR COMPENSATION |
Compensation arrangement for non-executive members of the Board
are designed to align with the competitive market to attract qualified and
experienced directors. The Human Resources & Compensation Committee and the
Board approved for fiscal 2019 a Director compensation package based on the
following key pillars:
Board compensation should
be competitive
to attract skilled and experience
directors. |
Compensation is set at a level that will
attract experienced and skilled candidates and retain current Directors.
The Corporation recognizes that there is significant competition for
qualified directors and that directors must select their directorships
wisely due to board limit restrictions being imposed by institutional
shareholders. |
| |
|
Board compensation
should align the interests of
Directors with those of
the Shareholders. |
The overall compensation package, including a
mix of both cash and equity components should align Directors’ interests
with those of Shareholders. |
| |
|
| Board compensation should
be fair and reasonable. |
The Corporation recognizes that Directors need
to be compensated fairly for their time and effort. The Corporation seeks
to reward Directors reasonably, reflecting the complexities, risks, skill
set and value associated with being on the Board. |
The Corporation has implemented a fixed fee Director
compensation structure, under which additional fees are not provided to
Directors on a meeting-by-meeting basis. The Corporation has adopted the fixed
fee approach based on the following:
-
Transparency to the Board, Shareholders and management.
-
Meeting attendance and preparation is expected, not rewarded.
-
Compensating for the role holistically, not the number of meetings held in
a year.
Under the fixed fee model, in 2019 the Corporation will
compensate specifically for the role and responsibilities of each individual
Director. This will be broken out by retainers for service on the Board and
individual committees. Director compensation will have two components: cash
retainers and equity-based awards.
| Cash Retainer |
An annual fixed Board retainer to be paid to
non-executive Directors establishes the competitive foundation of the
Director compensation program. Committee retainers are granted for both
the committee chair as well as committee members and serve as additional
compensation for the time and expertise required to serve on the different
committees. For 2019, the Lead Independent Director will receive a premium
on the cash retainer to account for increased responsibilities. |
| |
|
| Equity Award |
An annual equity grant in the form of Options,
RSUs or DSUs is made to non- executive Directors to align their interests
with the interests of Shareholders, to reinforce longer-term business
performance and to remain market competitive. |
Prior to the closing of the Qualifying Transaction, the former
Board members, being Douglas Osrow, Robb McNaughton and Daniel Lanskey received
options to purchase Common Shares of the Corporation.
Outlined in the table below is the 2019 Director compensation
pay structure that has been implemented by the Board. The Board currently has
three committees, being the Audit Committee, the Human Resources &
Compensation Committee ("HRCC") and the Nominating and Corporate
Governance Committee ("NCGC").
22
Based on the recommendation of the HRCC, the Board approved
compensation for Directors in 2019 as detailed in the table below:
| |
2019 |
| Fee Description
|
|
Equity |
| |
Cash Retainer |
Retainer |
| Lead Independent Director |
$45,000 |
15,000 Options |
| Non-Executive
Director 1 |
$35,000 |
15,000 Options |
| Audit Committee Chair |
$15,000 |
- |
| Audit Committee
Member2 |
$2,500 |
- |
| HRCC Chair |
$3,500 |
- |
| HRCC Member3
|
$1,750 |
- |
| NCGC Chair |
$3,500 |
- |
| NCGC Member4 |
$1,750 |
-
|
| Notes: |
| _______________________________ |
| 1 |
Other than the Lead Independent Director.
|
| 2 |
Other than the Audit Committee Chair. |
| 3 |
Other than the HRCC Chair. |
| 4 |
Other than the NCGC Chair. |
Director Summary Compensation Table
The table below sets out a summary of total compensation
applicable to each non-executive member of the Board for the 2018 and 2017
fiscal year, excluding compensation related to the issuance of securities. The
Corporation may also reimburse Directors for out-of-pocket expenses for, among
other matters, attending meetings.
Name and
Position1 |
Year |
Salary, consulting
fee, retainer or
commission
($) |
Bonus
($) |
Committee or
meeting fees
($)
|
Value of
perquisites
($)
|
Value of all other
compensation
($) |
Total
compensation
($)
|
Karen Basian
Lead Independent Director |
2018
|
- |
- |
- |
- |
- |
-
|
| 2017 |
- |
- |
- |
- |
- |
- |
Don Duet(2)
Independent Director
|
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
- |
- |
- |
- |
- |
- |
Maurice Levesque
Independent Director |
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
- |
- |
- |
- |
- |
- |
J. André de Barros
Teixeira
Independent
Director |
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
- |
- |
- |
- |
- |
- |
David Miller
Director and former General
Counsel |
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
- |
- |
- |
- |
- |
- |
David Towill3
Former Director |
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
$10,890 |
- |
- |
- |
- |
$10,890 |
Rishi Shah4
Former Director |
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
- |
- |
- |
- |
- |
|
Douglas Osrow5
Former Director |
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
- |
- |
- |
- |
- |
- |
Robb McNaughton5
Former Director
|
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
- |
- |
- |
- |
- |
- |
23
Notes:
________________________________
| 1 |
Steve Klein, Vinay Tolia and Dr. Lyle Oberg are officers
of the Corporation, and Daniel Lanskey was an officer of the Corporation
until September 21, 2018. Thomas Flow was a Director and an officer of the
Corporation until April 29, 2019. The compensation information for the
foregoing individuals is set forth under the heading "Statement of
Executive Compensation - Summary Compensation Table". Mr. Klein is not an
employee of the |
|
Corporation, but provides services as Chief Strategy
Officer. |
| 2 |
Don Duet was appointed to the Board on April 29,
2019. |
| 3 |
David Towill ceased to be a Director effective October
26, 2018. |
| 4 |
Rishi Shah ceased to be a Director effective April 29,
2019. |
| 5 |
Each of Messrs. Osrow, McNaughton and Lanskey ceased
being Directors on September 21, 2018 in connection with the completion of
the Qualifying Transaction. |
Stock Options and Other Compensation Securities
The following table discloses all compensation securities
granted or issued to each Director in the year ended December 31, 2018, other
than Directors who serve as NEOs.
Name and
Position1 |
Type
of
security
compensation |
Number of
compensation
securities,
number of
underlying
securities, and
percentage of
class |
Date of Issue or
Grant |
Issue,
conversion or
exercise price
($) |
Closing price
of
security or
underlying
security on
date
of grant
($) |
Closing price
of
security or
underlying
security at
year
end
($) |
Expiry Date |
David Towill2
Former Director |
- |
- |
- |
- |
- |
- |
- |
Rishi Shah3
Former
Director |
- |
- |
- |
- |
- |
- |
- |
Douglas Osrow4
Former
Director |
- |
- |
- |
- |
- |
- |
- |
Robb McNaughton4
Former
Director |
- |
- |
- |
- |
- |
- |
- |
David Miller
Director and former
General Counsel |
Options
|
1,050,000
|
August 24, 2018 |
$2.60
|
$2.60
|
$4.39
|
August 24, 2023 |
Karen Basian5
Lead
Independent
Director |
- |
- |
- |
- |
- |
- |
- |
Don Duet5,6
Independent
Director |
- |
- |
- |
- |
- |
- |
- |
Maurice Levesque5
Independent Director |
- |
- |
- |
- |
- |
- |
- |
J. André de Barros5
Teixeira
Independent
Director |
- |
- |
- |
- |
- |
- |
- |
Notes:
__________________________________
| 1 |
Steve Klein, Vinay Tolia and Dr. Lyle Oberg are officers
of the Corporation, and Daniel Lanskey was an officer of the Corporation
until September 21, 2018. Thomas Flow was a Director and an officer of the
Corporation until April 29, 2019. The compensation information for the
foregoing individuals is set forth under the heading "Statement of
Executive Compensation - Summary Compensation Table". Mr. Klein is not an
employee of the Corporation, but provides services as Chief Strategy
Officer. |
| 2 |
David Towill ceased to be a Director effective October
26, 2018. |
| 3 |
Rishi Shah ceased to be a Director effective April 29,
2019. |
| 4 |
Each of Messrs. Osrow, McNaughton and Lanskey ceased
being Directors on September 21, 2018 in connection with the completion of
the Qualifying Transaction. |
| 5 |
Each of Ms. Basian and Messrs. Duet, Levesque and de
Barros Teixeira were granted 15,000 Options on May 2, 2019. |
| 6 |
Don Duet was appointed to the Board on April 29,
2019. |
24
Exercise of Compensation Securities by Directors
The following table sets out each exercise by a Director of
compensation securities during 2018.
Name and
Position1
|
Type of
compensation
security
|
Number of
underlying
securities
exercised
|
Exercise
Price
per
security
($)
|
Date of
exercise
|
Closing price per
security on date of
exercise
($)
|
Difference between
exercise price and
closing price on date
of exercise
($) |
Total
value
on exercise
date
($)
|
| David
Towill2 |
-
|
- |
- |
- |
- |
- |
- |
| Rishi Shah3 |
- |
- |
- |
- |
- |
- |
- |
Douglas Osrow4
|
Options
|
240,000
|
0.10
|
September
20, 2018 |
0.15
|
0.05
|
12,000
|
Robb McNaughton4
|
Options
|
240,000
|
0.10
|
September
20, 2018 |
0.15
|
0.05
|
12,000
|
| David Miller |
- |
- |
- |
- |
- |
- |
- |
| Karen Basian |
- |
- |
- |
- |
- |
- |
- |
| Don Duet5 |
- |
- |
- |
- |
- |
- |
- |
| Maurice Levesque |
- |
- |
- |
- |
- |
- |
- |
J. André de
Barros
Teixeira |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Notes:
| 1 |
Steve Klein, Vinay Tolia and Dr. Lyle Oberg are officers
of the Corporation, and Daniel Lanskey was an officer of the Corporation
until September 21, 2018. Thomas Flow was a Director and an officer of the
Corporation until April 29, 2019. The compensation information for the
foregoing individuals is set forth under the heading "Statement of
Executive Compensation - Summary Compensation Table". Mr. Klein is not an
employee of the Corporation, but provides services as Chief Strategy
Officer. |
| 2 |
David Towill ceased to be a Director effective October
26, 2018. |
| 3 |
Rishi Shah ceased to be a Director effective April 29,
2019. |
| 4 |
Each of Messrs. Osrow, McNaughton and Lanskey ceased
being Directors on September 21, 2018 in connection with the completion of
the Qualifying Transaction. All Options held by Messrs. Osrow and
McNaughton were exercised prior to the closing of the Qualifying
Transaction. |
| 5 |
Don Duet was appointed to the Board on April 29,
2019. |
Interest of Informed Persons in Material
Transactions
Other than as disclosed below, since the commencement of the
Corporation’s most recently completed financial year, the Corporation did not
have any transactions, or any proposed transactions, with any "informed person"
(as defined in applicable securities laws), or any proposed Director of the
Corporation, or any associate or affiliate of any informed person or proposed
Director, who has a material interest or had a material interest, direct or
indirect, which has materially affected or would materially affect the
Corporation or any of its subsidiaries.
Corporate Cease Trade Orders or Bankruptcies
Except as disclosed below, to the knowledge of the Corporation
none of the persons proposed for election as Directors nor any personal holding
company owned or controlled by any of them: (a) are, as at the date of this
Circular, or have been, within the 10 years before the date of this Circular, a
director, chief executive officer or chief financial officer of any company
that: (i) was subject to a cease trade order, an order similar to a cease trade
order or an order that denied the relevant company access to any exemption under
securities legislation that was in effect for a period of more than 30
consecutive days (an "Order") that was issued while the proposed Director
was acting in the capacity as director, chief executive officer or chief
financial officer; or (ii) was subject to an Order that was issued after the
proposed Director ceased to be a director, chief executive officer or chief
financial officer and which resulted from an event that occurred while that
person was acting in the capacity as director, chief executive officer or chief
financial officer; (b) are, as at the date of this Circular, or have been within
10 years before the date of this Circular, a director or executive officer of
any company that, while that person was acting in that capacity, or within a
year of that person ceasing to act in that capacity, became bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency or was
subject to or instituted any proceedings, arrangement or compromise with
creditors or had a receiver, receiver manager or trustee appointed to hold its
assets; or (c) have, within the 10 years before the date of this Circular, become bankrupt,
made a proposal under any legislation relating to bankruptcy or insolvency, or
become subject to or instituted any proceedings, arrangement or compromise with
creditors, or had a receiver, receiver manager or trustee appointed to hold the
assets of that person.
Mr. Levesque has been the President and a director of
Knightswood Financial Corp. ("KFC") since December 1996. KFC was a
publicly listed company on the TSX-V until mid 2017, and prior to December 1998
was known as First Venture Developments Ltd. Trading in the shares of KFC was
halted on June 11, 2001, pending clarification of the company’s affairs. On July
20, 2001, trading in the securities of KFC resumed under the "Inactive"
designation pending completion of the review of the company’s reorganization as
per Canadian Venture Exchange (now the TSX-V) Policy 2.6. This review resulted
in KFC no longer being deemed inactive as per Policy 2.6.
Penalties and Sanctions
Other than as disclosed herein, to the knowledge of the
Corporation none of the persons proposed for election as Directors nor any
personal holding company owned or controlled by any of them: (a) has been
subject to any penalties or sanctions imposed by a court relating to securities
legislation or by a securities regulatory authority or has entered into a
settlement agreement with a securities regulatory authority; or (b) has been
subject to any other penalties or sanctions imposed by a court or regulatory
body that would likely be considered important to a reasonable securityholder in
deciding whether to vote for the proposed Director.
Messrs. Klein and Miller are former members of the board of
directors of CNC Development, Ltd. ("CNC"). During the tenure of Messrs.
Klein and Miller, CNC exhausted its liquidity and was unable to pay the
necessary accounting and legal fees to fulfill its requirements as a publicly
listed company in the United States to file periodic reports with the SEC.
Trading in the shares of CNC was suspended and the SEC took administrative
action to delist CNC in 2013.
Indebtedness of Directors, Officers and Employees
None of the Directors, executive officers or nominees for
election as Directors or their respective associates is, or at any time since
the beginning of the most recently completed fiscal year has been, indebted to
the Corporation or any of its subsidiaries or is, or has been since the
beginning of the most recently completed fiscal year, indebted to another entity
where the Corporation or any of its subsidiaries provided a guarantee, support
agreement, letter of credit or other similar arrangement in connection with such
debt. There was no indebtedness as at May 9, 2019 to the Corporation or any of
its subsidiaries, excluding routine indebtedness, owing by present and former
officers, present Directors or nominees for election as Directors, or employees
of the Corporation and any of its subsidiaries.
26
| COMPENSATION
DISCUSSION AND ANALYSIS |
STATEMENT OF EXECUTIVE COMPENSATION
The following discussion provides information about the
Corporation’s proposed philosophy, objectives and processes regarding
compensation for its executive officers. Compensation for the Corporation’s
Chief Executive Officer, Chief Financial Officer and the next three (3) most
highly compensated executive officers (collectively, the "NEOs") is
determined by the Board. The HRCC provides recommendations to the Board with
respect to executive compensation based on advice obtained from the Board’s
compensation consultants. The Corporation’s executive compensation predominantly
based on prevailing industry compensation practices for companies of comparable
size and industry and the Corporation’s performance in achieving certain goals.
It will be the responsibility of the Board, on the
recommendation of the HRCC, as a whole to make decisions regarding executive
compensation matters. The Corporation’s compensation program supports its
commitment to delivering strong performance for Shareholders. The Corporation’s
overall objective of its compensation philosophy is the attraction, motivation
and retention of quality, experienced people to achieve the Corporation’s
strategic objectives and to align the interests of its executive officers and
employees with the long-term interests of Shareholders.
It is currently contemplated that executive compensation will
be comprised of the following components: (i) base salary, (ii) bonus and (iii)
equity incentives. Together, these components are designed to address the key
objectives of the Corporation’s compensation program.
For the purposes of this Circular:
-
"CEO" of the Corporation means each individual who served as Chief
Executive Officer of the Corporation or acted in a similar capacity for any
part of the most recently completed financial year;
-
"CFO" of the Corporation means each individual who served as Chief
Financial Officer of the Corporation or acted in a similar capacity for any
part of the most recently completed financial year; and
-
"Named Executive Officers" or "NEOs" means (i) CEO, (ii) CFO, (iii) each of
the three (3) most highly compensated executive officers of the Corporation,
including any subsidiary of the Corporation, or the three (3) most highly
compensated individuals acting in a similar capacity, other than the CEO and
CFO, at the end of the most recently completed financial year whose total
compensation was, individually, more than $150,000; and (iv) each individual
who would be a NEO under paragraph (iii) but for the fact that the individual
was neither an executive officer of the Corporation or a subsidiary of the
Corporation, nor acting in a similar capacity, at the end of that financial
year.
Named Executive Officers for 2018
During the financial year ended December 31, 2018, the
Corporation had the following NEOs:
| Vinay Tolia |
Co-Chief Executive Officer |
| Alexander Dann |
Chief
Financial Officer |
| Lyle
Oberg |
Chief
Policy and Medical Officer |
| Steve Klein |
Chief
Strategy Officer |
| Daniel Lanskey |
Former President, Chief Executive Officer and
Chief Financial Officer |
| Thomas Flow |
Former
Co-Chief Executive Officer |
| Anthony Giorgi |
Former
Chief Executive Officer |
| David Ralston |
Former
Chief Operating Officer |
Daniel Lanskey ceased to be an officer of the Corporation on
September 21, 2018 upon completion of the Qualifying Transaction.
On September 21, 2018, the Needle Capital Corp. completed its
Qualifying Transaction with The Flowr Corporation. Upon completion of the
Qualifying Transaction and as at December 31, 2018, Vinay Tolia and Thomas Flow
were the co-Chief Executive Officers of the Corporation, Alex Dann was the Chief
Financial Officer of the Corporation, Dr. Lyle Oberg was the Chief Policy and
Medical Officer of the Corporation and Steve Klein was the Chief Strategy
Officer of the Corporation. Mr. Klein is not an employee of the Corporation, but
provides services as Chief Strategy Officer. Mr. Flow stepped down as a Director
and Co-CEO on April 29, 2019. Anthony Giorgi was the former CEO of The Flowr
Corporation, the private corporation that existed prior to the completion of the
Qualifying Transaction and that completed the Qualifying Transaction with the
Corporation, and ceased to hold that position on June 21, 2018. David Ralston
was the Chief Operating Officer of the Corporation and ceased to hold that
position on November 9, 2018.
27
The summary compensation table provides for compensation paid
to the co-Chief Executive Officers (as at December 31, 2018), Chief Financial
Officer and NEOs for the calendar year ended December 31, 2018 and 2017, despite
that these individuals were not executive officers of the Corporation for the
financial year ended December 31, 2017. Such compensation was paid to these
individuals by The Flowr Corporation, a private corporation, prior to the
completion of the Qualifying Transaction.
Compensation Risk
The Board assesses the potential risks relating to the
Corporation’s policies and practices for its employees, including those related
to the Corporation’s executive compensation program. The Board considers the
Corporation’s compensation policies and practices, identifies potential risks
and considers mitigating factors. Periodically, and going forward at least
annually, the Board and the HRCC will review and discuss with management the
relationship between the Corporation’s compensation policies and practices and
its risk management, including the extent to which those policies and practices
create risks for the Corporation. Based on this assessment, the Board
determined that the Corporation’s policies and
practices do not encourage excessive or unnecessary risk taking and are not
reasonably likely to have a material adverse effect on the
Corporation.
Clawback Policy
The Corporation intends on adopting a Clawback Policy in fiscal
2019, which will provide the Board and HRCC with discretion to recover certain
incentive compensation received or realized by a senior executive officer, if
there is an incidence of misconduct resulting in the need for the Corporation to
publicly issue an accounting restatement of all or a portion of its interim or
annual financial statements. It is proposed that misconduct will be
characterized as gross negligence, intentional misconduct or fraud engaged in by
the applicable executive which resulted in the financial restatement by the
Corporation.
Independent Compensation Consultants
The Corporation has engaged independent compensation
consultants, Willis Towers Watson, to provide the Board and management with
compensation advice for compensation structures to be implemented for the
calendar year 2019.
Compensation Benchmarking and Comparator Group
For the calendar year 2017 and 2018, the Corporation did not
have a comparator group, as the Corporation was a capital pool company with no
operations.
Upon completion of the Qualifying Transaction, the Board and
management of the Corporation engaged Willis Towers Watson to assist the
Corporation with selecting a comparator group and to complete benchmarking for
the Corporation’s 2019 compensation structure.
28
For 2019, Willis Towers Watson has identified the following
peer group for the Corporation, which the Board has approved.
| 2019 Peer Group |
| Cronos Group Inc. |
HEXO Corp. |
| CannTrust Holdings Inc. |
The Supreme
Cannabis Company, Inc. |
| Jamieson Wellness Inc. |
Andrew Peller
Limited |
| Namaste Technologies Inc. |
Corby Spirit and
Wine Limited |
| Eastwood Bio-Medical Canada Inc. |
Village Farms
International, Inc. |
| Brick Brewing Co. Limited |
|
Components of Executive Compensation
Base Salaries
The base salary component is intended to provide a fixed level
of pay that reflects each NEO’s primary duties and responsibilities. While base
salaries are an important element of executive officer compensation, the size
and stage of the Corporation prevents the Corporation from paying base salaries
which are comparable to those of larger companies in the similar industry and,
accordingly, performance-based compensation elements are an integral component
of the executive compensation package. In setting base compensation levels for
executive officers, consideration will be given to objective factors such as
level of responsibility, experience and expertise as well as subjective factors
such as leadership. For 2019, the Board and management of the Corporation will
be reviewing base salaries with the advice of Willis Towers Watson, and may
adjust salaries based on the 2019 comparator group and the growth of the
Corporation.
Bonus
The Corporation does not currently have a bonus plan and
intends to implement a bonus structure, with the advice of Willis Towers Watson,
for its employees in 2019 based on the 2019 comparator group. Notwithstanding
the foregoing, the Corporation may grant cash bonuses to reflect contributions
made by certain employees to the Corporation’s development and success. In
fiscal 2018, the Board approved a cash bonus of $500,000 to Tom Flow in
recognition of his significant contribution to the Corporation, with such amount
paid in calendar year 2019.
Long-Term Incentives
Long-term incentives in the form of Options, RSUs and/or DSUs
are determined by considering overall corporate performance as well as the
performance of the individual employee. The role of the long-term incentive is
to align an executive’s and Director’s performance with the long-term
performance of the Corporation and to provide an additional incentive for
executives and Directors to enhance shareholder value. The Board generally
adheres to the following principles, as applicable, in connection with grants of
Options, RSUs and/or DSUs:
-
Options, RSUs and/or DSUs are generally granted, at the discretion of the
Board, upon initial employment and annually. In certain circumstances, the
Board may grant Options, RSUs and/or DSUs to employees and Directors based on
certain corporate achievements throughout a calendar year;
-
previous grants and existing equity ownership levels are taken into account
when considering further grants of Options, RSUs and/or DSUs;
-
Options granted as part of the long-term incentive program generally carry
a five year life and vest in equal proportions over a three (3) year period
for employees and executive officers. Previous grants to certain executive
officers of the Corporation vest on a monthly basis over a period of
thirty-six (36) months;
-
RSUs granted as part of the long-term incentive program generally carry a
three year life and vest in equal proportions over a three (3) year period for
employees and executive officers with the ability for the grantee to elect to
defer the payment in respect of an award of RSUs when it becomes payable on
the applicable vesting date. Any such deferral by an RSU Participant may be for
a period of no longer than five (5) years from the date of the applicable RSU
award agreement;
29
-
the Option price is determined by the Board or the committee of the Board
authorized to grant Options, provided that such price shall not be lower than
the closing price of the Common Shares on the TSX-V on the business day prior
to the date the Option is granted or such other price as is permitted pursuant
to the rules and regulations of the TSX-V;
-
RSUs track the share price of the Common Shares, as no exercise price is
applicable with respect to RSUs; and
-
it is expected that the Corporation’s compensation strategy and overall
program will continue to evolve and be reviewed in the future. It is
anticipated that DSUs will also be become part of the long-term compensation
package for Directors. The Corporation continues to work with its compensation
advisors to complete a compensation structure for long-term incentives that
will include RSUs and DSUs.
Long-Term Incentive Grants for 2018
Compensation
Details of all equity awards to the NEOs for the fiscal year
2018 are provided in the table below, as well as the value of such awards as of
December 31, 2018.
Named Executive Officer (Position)
|
Option Grant
(Number of Options) |
Value ($) on
12/31/2018
|
| Vinay Tolia (CEO)
|
3,635,530 |
6,507,599 |
| Steve Klein (Chief Strategy Officer) |
1,200,000 |
2,148,000 |
| Notes: |
|
| 1 |
Mr. Klein is not an employee of the
Corporation, but provides services as Chief Strategy Officer.
|
Benefits and Perquisites
The Corporation offers limited benefits and perquisites,
aligned with market competitive practice. Details of the benefits and
perquisites provided to the NEOs are disclosed in the "Value of all other
compensation" column of the 2018 summary compensation table set forth in this
Circular, including: health and dental coverage, various company-paid insurance
plans, including life insurance, and paid vacation.
In general, the Corporation will only provide a specific
perquisite when it provides competitive value and promotes retention of
executives. The limited perquisites the Corporation provides to its NEOs may
include a cellular telephone and computer equipment, commuting and parking
expenses, reasonable legal, accounting and other professional fees, housing
allowances under special circumstances, reimbursement of certain tax related
expenses, as well as payment of certain professional dues that are related
directly to the performance of the executive’s functions.
30
| SUMMARY
COMPENSATION TABLE |
The following table sets forth a summary of all compensation,
other than compensation related to the issuance of securities, earned during the
two most recently completed fiscal years ended December 31, 2018 and 2017 for
the NEOs of the Corporation.
Name and Position |
Year |
Salary, consulting
fee, retainer or
commission
($) |
Bonus7
($) |
Committee or
meeting fees
($) |
Value of
perquisites
($)
|
Value of all other
compensation
($) |
Total
compensation1
($) |
Anthony Giorgi2
Former Chief Executive
Officer of The Flowr
Corporation, a
private
corporation |
2018 |
128,969 |
- |
- |
- |
120,688 |
249,384 |
| 2017 |
80,109 |
- |
- |
- |
- |
80,109 |
Thomas Flow3
Former Executive
Director and Co-Chief
Executive Officer |
2018 |
240,000 |
- |
- |
- |
1,262 |
241,262 |
| 2017 |
201,169 |
- |
- |
- |
- |
201,169 |
Vinay Tolia3
Executive Director and
Chief Executive Officer
|
2018 |
90,000 |
- |
- |
- |
115 |
90,115 |
| 2017 |
- |
- |
- |
- |
- |
- |
David Ralston4
Former Chief Operating
Officer
|
2018 |
194,677 |
- |
- |
- |
134,595 |
329,272 |
| 2017 |
44,553 |
- |
- |
- |
- |
44,553 |
Alex Dann
Chief
Financial Officer
|
2018 |
200,000 |
- |
- |
- |
1,377 |
201,377 |
| 2017 |
33,442 |
- |
- |
- |
- |
33,442 |
Dr. Lyle Oberg3
Executive Director and
Chief Policy and
Medical Officer |
2018 |
176,666 |
- |
- |
- |
1,135 |
177,801 |
| 2017 |
80,098 |
- |
- |
- |
- |
80,095 |
Daniel Lanskey5
Former Chief Executive
Officer, Chief Financial
Officer and
President |
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
- |
- |
- |
- |
- |
- |
Steven Klein6
Executive Director and
Chief Strategy Officer
|
2018 |
- |
- |
- |
- |
- |
- |
| 2017 |
- |
- |
- |
- |
- |
- |
| Notes: |
|
| 1 |
Security based award disclosure is not included in this
table. Compensation is based on amounts received on employment start date.
|
| 2 |
Mr. Giorgi was the Chief Executive Officer of The Flowr
Corporation, a private corporation, prior to the closing of the Qualifying
Transaction, and ceased to hold that position on June 21, 2018. The Flowr
Corporation completed the Qualifying Transaction with the Corporation, to
become the resulting public entity on September 21, 2018. Mr. Giorgi’s
compensation includes severance amounts totalling $120,000.00. |
| 3 |
All compensation paid to Messrs. Flow, Tolia and Oberg
were paid in their role as officers of the Corporation, and not as a
Director. Mr. Tolia became the Chief Executive Officer of the Corporation
on August 15, 2018 and a Director on October 26, 2018. Mr. Klein is not an
employee of the Corporation, but provides services as Chief Strategy
Officer. Mr. Flow was previously the President of the Corporation, and
held the Chief Executive Officer position on an interim basis from June
2018 to August 2018. On November 9, 2018, Mr. Flow was named Co-CEO of the
Corporation. On April 29, 2019, Mr. Flow stepped down as a Director and
Co-CEO. |
| 4 |
Mr. Ralston was the Chief Operating Officer of the
Corporation until November 9, 2018. |
| 5 |
Mr. Lanskey was a Director, President, Chief Executive
Officer and Chief Financial Officer of the Corporation until completion of
the Qualifying Transaction and ceased to hold such positions on September
21, 2018. |
| 6 |
Mr. Klein is not an employee of the Corporation, but
provides services as Chief Strategy Officer. |
31
| 7 |
In fiscal 2018, the Board approved a cash bonus of
$500,000 to Tom Flow in recognition of his significant contribution to the
Corporation. The bonus was not paid until fiscal 2019 and, as such, is not
reflected in the table above. |
Stock Options and Other Compensation Securities
The following table discloses all compensation securities
granted or issued to each NEO in the year ended December 31, 2018.
Name
and Position |
Type of
security
compensation |
Number of
compensation
securities,
number of
underlying
securities,
and
percentage of
class |
Date of Issue
or
Grant |
Issue,
conversion or
exercise price
($) |
Closing price
of
security or
underlying
security on
date
of grant
($) |
Closing price
of
security or
underlying
security at
year
end
($) |
Expiry Date |
Thomas Flow1
Former Executive
Director and Co-
CEO |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Vinay Tolia1
Executive
Director
and CEO |
Options
|
3,635,530
|
August 24,
2018
|
2.60
|
2.60
|
4.39
|
August 24,
2023
|
Anthony Giorgi2
Former CEO
of The
Flowr Corporation |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
David Ralston3
Former Chief
Operating Officer |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Alex Dann4
CFO |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Dr. Lyle Oberg1, 5
Executive Director
and Chief Medical
and Policy Officer
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Daniel Lanskey6
Former
President,
CEO and CFO |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Steve Klein
Executive Director
and Chief Strategy
Officer |
Options
|
1,200,000
|
August 24,
2018
|
2.60
|
2.60
|
4.39
|
August 24,
2023
|
| Notes: |
| ________________________________ |
| |
|
|
1 |
All compensation paid to Messrs. Flow, Tolia and Oberg
were paid in their role as officers of the Corporation, and not as a
Director. Mr. Klein was granted Options in connection with his
contribution to the development of the Corporation’s business and the
closing of the Qualifying Transa ction. Mr. Klein is not an employee of
the Corporation, but provides services as Chief Strategy Officer. Mr.
Tolia became the Chief Executive Officer of the Corporation on August 15,
2018 and a Director on October 26, 2018. Mr. Flow was previously the
President of the Corporation, and held the Chief Executive Officer
position on an interim basis from June 2018 to August 2018. On November 9,
2018, Mr. Flow was named Co-CEO of the Corporation. On April 29, 2019, Mr.
Flow stepped down as a Director and Co-CEO. |
32
| 2 |
Mr. Giorgi ceased to be employed by The Flowr Corporation
on June 21, 2018. All vested Options that Mr. Giorgi held have been
exercised and no Options remain outstanding as at the date of this
Circular. |
| 3 |
Mr. Ralston ceased to be employed by the Corporation on
November 9, 2018. All vested Options that Mr. Ralston held have been
exercised and no Options remain outstanding as at the date of this
Circular. |
| 4 |
Mr. Dann held 1,181,250 Options to acquire 1,181,250
Common Shares as at December 31, 2018. The Options held by Mr. Dann have
an exercise price of $0.05, vest on a monthly basis and expire on October
30, 2022. |
| 5 |
Dr. Oberg held 618,750 Options to acquire 618,750 Common
Shares as at December 31, 2018. The Options held by Dr. Oberg have an
exercise price of $0.05, vest on a monthly basis and expire on October 30,
2022. |
| 6 |
Mr. Lanskey ceased to be an officer of the Corporation on
September 21, 2018 in connection with the closing of the Qualifying
Transaction. All vested options held by Mr. Lanskey have been exercised
and no options remain outstanding as at the date of this
Circular. |
Exercise of Compensation Securities by NEOs
The following table sets out each exercise by an NEO of
compensation securities during 2018.
Name and Position
|
Type of
compensation
security
|
Number of
underlying
securities
exercised
|
Exercise
Price per
security
($)
|
Date of
exercise
|
Closing price per
security on date
of exercise(1)
($)
|
Difference
between exercise
price and closing
price on date
of
exercise
($) |
Total value
on exercise
date
($)
|
Thomas Flow
Former Executive Director and
Co-CEO |
Options
|
2,550,000
|
0.000001
|
August
1, 2018
|
2.60
|
2.60
|
6,629,997
|
Vinay Tolia
Executive Director and CEO |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Anthony Giorgi
Former CEO of The Flowr
Corporation
|
Options
|
900,000
|
0.000001
|
May-
August,
2018 |
2.60
|
2.60
|
2,339,999
|
Options
|
100,000
|
0.05
|
October
2018 |
2.60
|
2.55
|
255,000
|
David Ralston
Former Chief Operating Officer
|
Options
|
506,250
|
0.000001
|
May-
August,
2018 |
2.60
|
2.60
|
1,316,249
|
Options
|
225,000
|
0.05
|
December
10, 2018 |
3.18
|
3.13
|
704,250
|
Alex Dann
CFO
|
Options
|
393,750
|
0.000001
|
May-
August,
2018 |
2.60
|
2.60
|
1,023,750
|
Dr. Lyle Oberg
Executive Director and Chief
Policy and Medical Officer |
Options
|
1,181,250
|
0.000001
|
May-
August,
2018 |
2.60
|
2.60
|
3,071,249
|
Daniel Lanskey
Former President, CEO and
CFO |
Options
|
18,461
|
1.30
|
October
18, 2018
|
4.97
|
3.67
|
67,752
|
Steve Klein
Director and Chief Strategy
Officer |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
| Notes: |
|
| |
|
| (1) |
For the exercise of Options prior to the
completion of the Qualifying Transaction, the closing price on the date of
exercise is based on the pricing of the Corporation’s recently completed
financings at the time of the exercise. |
33
Equity Compensation Plan Information
The following table sets out the equity compensation plan
information as at May 9, 2019:
Plan Category
|
Number of securities to be
issued upon
exercise of
outstanding options, warrants
and
rights3
(a) |
Weighted-average
exercise price
of outstanding options,
warrants and
rights
(b) |
Number of securities remaining
available for
future issuance
under equity compensation
plans
(excluding securities
reflected in column (a))
(c)1 |
Equity compensation
plans approved by
Shareholders (SOP)2 |
12,051,780
|
$2.66
|
262,755
|
Equity compensation
plans
approved by
Shareholders (LTIP) |
197,270
|
N/A
|
12,095,171
|
| Warrants |
258,270 |
$2.57 |
N/A |
| Total |
12,507,300 |
$2.66 |
12,357,926 |
| Notes: |
| ________________________________ |
| |
| 1 |
Pursuant to the terms of the LTIP and the SOP, the total
number of Common Shares which may be issued under both equity incentive
plans, in the aggregate amount, is equal to twenty per cent (20%) of the
issued and outstanding Common Shares and class A preferred shares in the
capital of Flowr ULC at any given time. The figures in column (c) above
include securities that are issuable under the LTIP. |
| 2 |
In connection with the Meeting, Shareholders are being
asked to approve an ordinary resolution to approve the SOP. |
| 3 |
The Corporation also has 258,270 broker warrants issued
and outstanding. Such broker warrants were issued in connection with the
closing of the Qualifying Transaction and also includes warrants issued by
The Needle Capital Corp. These broker warrants are included in column (a)
above. |
| PENSION PLAN
BENEFITS AND DEFERRED COMPENSATION PLANS |
The Corporation does not have a pension plan, defined benefit
plan or any retirement savings programs for NEOs or other employees of the
Corporation, and does not have a deferred compensation plan for NEOs or other
employees of the Corporation. Pursuant to the terms of the LTIP, as amended, an
RSU Participant may elect to defer the payment in respect of an award of RSUs
when it becomes payable on the applicable vesting date. Any such deferral by an
RSU Participant may be for a period of no longer than 5 years from the date of
the applicable RSU award agreement.
| TERMINATION
AND CHANGE OF CONTROL BENEFITS |
Other than Steve Klein who has not received any compensation in
his role as Chief Strategy Officer as he is not an employee of the Corporation,
and other than the Options as described herein, the Corporation or one of its
subsidiaries has entered into employment agreements with each of the NEOs who
are currently employed by the Corporation or such subsidiary under which each
NEO has agreed to continue to serve the Corporation in his current office and
perform the duties of such office in accordance with the terms set out in their
employment agreements. Under the terms of each of the executive employment
agreements, each executive has made commitments in favour of the Corporation
including non-competition and non-solicitation covenants (which survive
termination of an NEO’s termination in certain circumstances, as applicable, for
periods of 6 to 24 months per the terms of each NEO’s employment agreement), as
well as non-disclosure covenants (which survive the termination of an NEO’s
employment).
In the event of termination of an NEO’s employment, other than
for cause (as defined in the applicable employment agreements), the Corporation
will provide such executive with working notice or severance pay or a
combination of notice and severance. The following section outlines the
significant terms of each of the NEOs’ employment agreements.
In addition, under certain circumstances, and pursuant to
applicable employment standards legislation, earned bonuses may also be payable
upon termination.
Executive Employment Agreements
As at December 31, 2018, Mr. Flow was party to an employment
agreement with a subsidiary of the Corporation dated December 1, 2016, the terms
of which form the basis for the disclosure contained herein with respect to Mr.
Flow’s entitlements on a termination or a change of control (the "Flow
Agreement"). The Board has approved the terms of a new employment agreement
with a subsidiary of the Corporation, following Mr. Flow’s transition to
Managing Partner and his stepping down as a Director and Co-CEO on April 29,
2019. As at the date of this Circular, Mr. Flow and the Corporation have not
entered into the new employment agreement. Mr. Tolia is party to an employment
agreement with a subsidiary of the Corporation dated August 15, 2018, which
continues for an indefinite term, unless earlier terminated. Mr. Dann is party
to an employment agreement with a subsidiary of the Corporation dated October
10, 2017, which continues for an indefinite term, unless earlier terminated. Dr.
Oberg is party to an employment agreement with a subsidiary of the Corporation
dated September 21, 2017, which continues for an indefinite term, unless earlier
terminated. Mr. Ralston was party to an employment agreement with a subsidiary
of the Corporation dated November 22, 2017. Effective November 9, 2018, Mr.
Ralston’s employment with the Corporation ceased. Mr. Giorgi was party to an
employment agreement dated September 25, 2017 which was an agreement with
a subsidiary of The Flowr Corporation prior to completion of the Qualifying
Transaction. Effective June 21, 2018, Mr. Giorgi’s employment with The Flowr
Corporation ceased.
In connection with his termination, Mr. Ralston was provided
with an aggregate severance payment of approximately $133,333, and a total of
112,500 Options vested in accordance with the terms of his severance agreement.
In connection with his termination, Mr. Giorgi was provided with an aggregate
severance payment of $100,000, and a total of 150,000 Options vested in
accordance with the terms of his severance agreement.
As indicated above, Mr. Klein does not have an employment
agreement with the Corporation and received no compensation for his services
other than the granting of Options disclosed herein. In addition, this section
of the Circular does not provide any disclosure as it relates to Mr. Lanskey,
who was a former director and officer of the capital pool company, The Needle
Capital Corp., and ceased to hold such positions upon completion of the
Qualifying Transaction.
35
Termination upon Notice
Each of Messrs. Tolia, Dann and Oberg may terminate his
employment agreement upon providing the Corporation with not less than four (4)
weeks’ written notice. The Corporation retains the right (at its option) to
accelerate the termination date set out in the written notice by notifying the
executive that the Corporation will pay him an aggregate amount equal to:
| |
TOLIA |
DANN |
OBERG |
| Base salary through to last day of notice period |
Yes |
Yes |
Yes |
| Business expenses which have not been
reimbursed |
Yes |
Yes |
Yes |
| Value of unused vacation |
Yes |
Yes |
Yes |
| Participation in benefit plan during notice
period |
Yes |
Yes |
Yes |
The Flow Agreement did not provide for a notice period upon Mr.
Flow resigning. However, the Flow Agreement provided that Mr. Flow was entitled
to resign on notice in the event that his salary was unpaid for four (4)
consecutive months, or any failure to pay his regular salary or part thereof was
not cured within four (4) months of the date of such failure.
Termination Without Cause
In the case that the Corporation terminates the NEO’s
employment agreement without cause (as defined in each NEO’s respective
employment agreement, as applicable), the NEO shall be entitled to receive:
| |
FLOW |
TOLIA |
DANN |
OBERG |
Base salary payment |
6 months and no less
than min. under
applicable
employment
standards legislation |
Notice as required by
applicable
employment
standards legislation
and twenty six (26)
weeks
|
12 months
|
Notice as required by
applicable
employment
standards legislation
and three (3) weeks
|
Annual pro rata bonus payment up to
date of
termination |
N/A
|
N/A
|
Pro Rata (if prior
annualized bonus
paid) |
N/A
|
| |
|
|
|
|
Business expenses which have not
been
reimbursed |
Yes
|
Yes
|
Yes
|
Yes
|
| Value of unused vacation |
Yes |
Yes |
Yes |
Yes |
Continued benefits
|
N/A
|
N/A
|
Notice as required by
applicable
employment
standards legislation |
N/A
|
Unvested Options
|
N/A
|
If
certain market caps
achieved, vesting
accelerated: $1billion
market cap, 1/3
unvested will vest; $2
billion market cap,
2/3 unvested will
vest; and $3 billion
market cap, all vest.
|
N/A
|
N/A
|
36
Termination for Cause
In the case that an NEO employment agreement is terminated for
cause (as defined in each NEOs employment agreement, as applicable), the NEO’s
employment with the Corporation shall end immediately and the NEO shall be
entitled to:
| |
FLOW |
TOLIA |
DANN |
OBERG |
| Base salary up to the date of termination |
Yes |
Yes |
Yes |
Yes |
| Business expenses which have not been reimbursed |
Yes |
Yes |
Yes |
Yes |
| Value of unused vacation |
Yes |
Yes |
Yes |
Yes |
| Any benefits to which he is entitled to and which are
unpaid as of the date of termination |
Yes |
Yes |
Yes |
Yes |
Termination Due to Death
Upon termination due to death, Mr. Flow would have been
entitled to payment of base salary and benefits through the date of such
termination. The other employment agreements with NEOs do not contemplate
termination due to death.
Termination Due to Disability
Upon termination due to disability, Mr. Flow would have been
entitled to payment of three (3) months’ base salary and benefits for such three
(3) month period. The other employment agreements with NEOs do not contemplate
termination due to disability.
Change of Control
The employment agreement entered into between the applicable
subsidiary of the Corporation and Mr. Dann contains stock option acceleration
provisions upon a change of control. In particular, upon a change of control,
all unvested Options granted to Mr. Dann shall vest and become immediately
exercisable, notwithstanding any contingent vesting provision to which such
Options may have otherwise been subject.
SOP and LTIP Change of Control Provisions
SOP – Trigger Event
Except as provided for in certain NEO employment agreements, in
the case of a potential or actual Trigger Event (as defined in the SOP) the
Board may, in its discretion, without the necessity or requirement for the
agreement of any optionholder, but subject always to the prior written approval
of the TSX-V: (i) accelerate, conditionally or otherwise, on such terms as it
sees fit, the vesting date of any option; (ii) permit the conditional exercise
of any option, on such terms as it sees fit; (iii) otherwise amend or modify the
terms of the option, including for greater certainty permitting optionholders to
exercise any option, to assist the optionholder to tender the underlying shares
to, or participate in, the actual or potential Trigger Event or to obtain the
advantage of holding the underlying shares during such Trigger Event; and (iv)
terminate, following the successful completion of such Trigger Event, on such
terms as it sees fit, the options not exercised prior to the successful
completion of such Trigger Event.
In the event that: (i) an actual or potential Trigger Event is
not completed within the time specified therein; or (ii) all of the shares
subject to an option that were tendered by an optionholder in connection with an
actual or potential Trigger Event are not taken up or paid for by the offeror in
respect thereof, then the Board may, in its discretion, without the necessity or
requirement for the agreement of any optionholder, permit the shares received
upon such exercise, or in the case of subparagraph (ii) above the shares that
are not taken up and paid for, to be returned by the optionholder to the
Corporation and reinstated as authorized but unissued shares and, with respect
to such returned shares, the related options may be reinstated as if they had
not been exercised and the terms for such options becoming vested will be
reinstated pursuant to the SOP. If any shares are returned to the Corporation,
the Corporation will immediately refund the exercise price to the optionholder
for such shares.
37
LTIP – Change of Control
Except as provided for in certain executive employment
agreements, in the case of a Change of Control (as defined in the LTIP), at the
sole discretion of the Board, the Corporation: (i) shall determine the
adjustment price, if any, to the number and type of Common Shares (or other
securities or other property) that thereafter shall be made subject of and
issuable as payment under outstanding RSUs or DSUs; (ii) shall determine the
number and type of shares (or other securities or other property) subject to and
issuable as payment under outstanding RSUs or DSUs; (iii) shall determine the
acquisition price with respect to the settlement or payment of any outstanding
RSUs or DSUs; provided, however that the number of Common Shares covered by any
RSUs or DSUs or to which such RSUs or DSUs relate shall always be a whole
number; and (iv) may convert or exchange for or into any other security or any
other property or cash, any outstanding RSUs or DSUs that are still capable of
being exercised, upon giving to any such RSU or DSU participant to whom such
RSUs or DSUs have been granted at least thirty (30) days’ written notice of its
intention to convert or exchange such RSUs or DSUs and, during such notice
period, the RSUs and DSUs may be exercised by any such holder of RSUs or DSUs
without regard to any vesting conditions attached thereto, and on the expiry of
such period of notice, the unexercised portion of the RSUs or DSUs shall lapse
and be cancelled.
In addition to the foregoing, the Board or any company which is
or would be the successor to the Corporation or which may issue securities in
exchange for Common Shares upon the occurrence of a Change of Control may offer
any RSU or DSU holder the opportunity to obtain new or replacement awards for
securities into which the Common Shares are changed or are convertible or
exchangeable, on a basis proportionate to the number of Common Shares issuable
under the outstanding RSUs and DSUs.
The Board may also, in its sole discretion, cancel any or all
outstanding RSUs or DSUs and pay to the holders of any such RSUs or DSUs, in
cash, the value of such RSUs and DSUs based upon the price per Common Shares
received or to be received by other Shareholders in the event of a Change of
Control.
Estimated Incremental Payment on Change of Control and/or
Termination
The following table provides details regarding the estimated
incremental payments by the Corporation to the NEOs indicated below under the
above-described agreements in the event of: (i) termination upon notice; (ii)
termination without cause; (iii) termination with cause; (iv) termination upon
death; (v) termination upon disability; (vi) termination upon change of control
(as defined in the applicable employment agreements of the NEOs); and (vii)
Trigger Event under the SOP, assuming, in each case, that the event took place
on December 31, 2018. For purposes of the table below, Change of Control under
the LTIP has not been included, as no RSUs and/or DSUs were issued and
outstanding as at December 31, 2018.
|
Event |
Termination
Upon
Notice |
Termination
without
Cause |
Termination
with
Cause |
Termination
Upon
Death |
Termination
Upon
Disability |
Change of
Control |
Trigger Event1 |
Thomas Flow2
Severance
Deferred
Compensation
Other Benefits
Total |
-
-
-
- |
$120,000
-
-
$120,000 |
-
-
-
- |
-
-
-
- |
$60,000
-
$345
$60,345 |
-
-
-
- |
-
-
-
- |
Vinay Tolia
Severance
Deferred
Compensation
Other Benefits
Total |
-
-
-
- |
$120,000
-
-
$120,000 |
-
-
-
- |
-
-
-
- |
-
-
-
- |
-
-
-
- |
$5,784,534
-
-
$5,784,534 |
Alex Dann
Severance
Deferred
Compensation
Other Benefits
Total |
-
-
-
- |
$200,000
-
$115
$200,115 |
-
-
-
- |
-
-
-
- |
-
-
-
- |
-
-
-
- |
$4,367,125
-
-
$4,367,125 |
38
|
Event |
Termination
Upon
Notice |
Termination
without
Cause |
Termination
with
Cause |
Termination
Upon
Death |
Termination
Upon
Disability |
Change of
Control |
Trigger Event1 |
Dr. Lyle Oberg
Severance
Deferred
Compensation
Other Benefits
Total |
-
-
-
- |
$16,667
-
-
$16,667 |
-
-
-
- |
-
-
-
- |
-
-
-
- |
-
-
-
- |
$2,197,125
-
-
$2,197,125 |
Steve Klein
Severance
Deferred
Compensation
Other Benefits
Total |
-
-
-
- |
-
-
-
- |
-
-
-
- |
-
-
-
- |
-
-
-
- |
-
-
-
- |
$1,909,330
-
-
$1,909,334 |
| Notes: |
| ____________________________________ |
| 1 |
The figures in this table assume payment of
cash consideration for unvested Options held by the optionees in the event
of a Trigger Event, using the closing price of the Common Shares on
December 31, 2018 of $4.39. |
| 2 |
As at the date of this Circular, Mr. Flow and
the Corporation have not entered into a new employment agreement.
|
39
| STATEMENT OF
CORPORATE GOVERNANCE PRACTICES |
Board of Directors
The Board is currently comprised of eight (8) Directors. If all
of the Director nominees are successfully elected, the Board will consist of
four (4) independent Directors. In order to facilitate the exercise of
independent judgement in carrying out its responsibilities, the Board will
continue to hold in camera meetings of independent Directors after
certain meetings of the Board (in particular, meetings relating to the review
and approval of quarterly and annual financial statements). The Board has
concluded that four (4) of the proposed Directors (being Ms. Basian and
Messrs. Duet, Levesque and de Barros Teixeira) are independent from
management of the Corporation for the purposes of NI 58-101. Messrs. Tolia,
Oberg, Klein and Miller are not considered independent because they are or were
previously officers of the Corporation. Mr. Klein was not an employee of the
Corporation, but provided services in his capacity as Chief Strategy Officer.
Karen Basian is currently the Lead Independent Director of the
Board and, if elected, and is expected to be named Lead Independent Director
subsequent to the Meeting. The Lead Independent Director responsibilities
include leadership of the Board and its efficient and independent organization
and operation.
Summary of Director Qualifications and Expertise
The NCGC annually conducts a self-assessment of the Board’s
performance, an assessment of Board members and its committees, with each
committee assessing its members, and to recommend to the Board nominees for
appointment of new Directors to fill vacancies or meet additional needs of the
Board. Through the Board evaluation process and ongoing monitoring of the needs
of the Corporation, desired expertise and skill sets are identified and
individuals that possess the required experience and skills are contacted by the
Corporation. Prospective new Director nominees are intended to be interviewed by
the Chair of the NCGC, the Lead Independent Director, Chairman and the CEO and
considered by the entire NCGC for recommendations to the Board as potential
nominee Directors.
The matrix below illustrates the mix of experience, knowledge
and understanding possessed by the members of the Board in the categories that
are relevant to the Corporation that enable the Board to better carry out its
fiduciary responsibilities.
|
STEVE
KLEIN
|
DAVID
MILLER
|
VINAY
TOLIA
|
DR. LYLE
OBERG
|
KAREN
BASIAN
|
DR. J.
ANDRÉ DE
BARROS
TEIXEIRA |
MAURICE
LEVESQUE
|
DON DUET
|
| Accounting |
x
|
x
|
|
|
x
|
|
|
x
|
| Corporate Finance / M&A |
x |
x |
x |
x |
x |
|
x |
|
| Executive Leadership |
x |
|
x |
x |
x |
x |
x |
x |
| Economics / Business |
x |
x |
x |
x |
x |
x |
x |
x |
| Financial Literacy |
x |
x |
x |
x |
x |
x |
x |
x |
| Governance |
|
|
|
x |
x |
x |
x |
x |
| Government / Regulatory |
|
|
|
x |
|
|
x |
x |
| HR
& Compensation |
|
|
|
|
x |
x |
|
x |
| Industry Experience |
x |
x |
x |
x |
|
x |
|
|
| International Business |
|
|
|
x |
x |
x |
|
x |
| Legal |
x |
x |
|
|
|
|
|
|
| Risk Management |
|
|
|
x |
|
|
x |
x |
| Strategic Planning
|
x
|
x
|
x
|
x
|
x
|
x
|
x |
x
|
Mandate of the Board of Directors
The Board does not have a written mandate. The duties and
responsibilities of the Board are to supervise the management of the business
and affairs of the Corporation, and to act with a view towards the best
interests of the Corporation. The Board is responsible for the oversight and
review of:
40
-
the strategic planning process of the Corporation;
-
identifying the principal risks of the Corporation’s business and ensuring
the implementation of appropriate systems to manage these risks;
-
succession planning, including appointing, training and monitoring senior
management;
-
a communications policy for the Corporation to facilitate communications
with investors and other interested parties; and
-
the integrity of the Corporation’s internal control and management
information systems.
The Board discharges its responsibilities directly and through
its committees, currently consisting of the Audit Committee, the HRCC and the
NCGC.
The Board and the Chief Executive Officer have not developed a
written position description for the Chief Executive Officer position. The Chief
Executive Officer reports to and is subject to the general direction of the
Board pursuant to the executive employment agreement between the Corporation and
Mr. Tolia. The Chief Executive Officer’s duties include overseeing the
day-to-day operations of the Corporation, strategic planning and business
development.
The Board has developed formal charters for each Committee.
Copies of the Committee charters are located on the Corporation’s website at
www.flowr.ca, which are not incorporated by reference into this Circular.
Meetings of the Board of Directors
The Board meets at least once each quarter, with additional
meetings held when appropriate. Meetings of the Board may be held in person and
by teleconference or other electronic means, as needed to discharge its
responsibilities. Independent Directors meet in camera without
non-independent Directors or management present on an as-needed basis
(particularly with respect to meetings related to the review and approval of
quarterly and annual financial statements). Board members are expected to attend
all Board meetings and meetings of committees on which they serve.
The following table provides the record of attendance of each
member of the Board for all meetings of the Board and each committee, which were
held since the completion of the Qualifying Transaction on September 21, 2018,
but does not include matters approved by way of written resolution. The HRCC and
NCGC were first constituted on December 28, 2018 but no meetings of either
committee were held in 2018.
Director1
|
Board
Meetings2
|
Audit
Committee
Meetings |
Overall
|
| # |
% |
# |
% |
# |
% |
| David Towill3 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
| Steve Klein4 |
2/2 |
100 |
1/1 |
100 |
3/3 |
100 |
| David Miller5 |
1/2 |
50 |
1/1 |
100 |
2/3 |
66 |
| Thomas Flow |
2/2 |
100 |
N/A |
N/A |
2/2 |
100 |
| Dr. Lyle Oberg |
2/2 |
100 |
N/A |
N/A |
2/2 |
100 |
| Vinay Tolia6 |
2/2 |
100 |
N/A |
N/A |
2/2 |
100 |
| Rishi Shah7 |
2/2 |
100 |
1/1 |
100 |
3/3 |
100 |
| Karen Basian |
1/1 |
100 |
N/A |
N/A |
1/1 |
100 |
| Donald Duet8 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
| Maurice Levesque |
1/1 |
100 |
N/A |
N/A |
1/1 |
100 |
| J. André de Barros Teixeira |
0/1 |
0 |
N/A |
N/A |
01 |
0 |
| Notes: |
| ________________________________ |
| |
|
1 |
The table above provides information for board and
committee attendance subsequent to the completion of the Qualifying
Transaction, as it provides a more accurate description of the activities
of the Board subsequent to the closing of the Qualifying Transaction.
|
41
| 2 |
This table does not reflect matters passed by the Board
by way of written resolution, and does not include meetings of the HRCC
and NCGC as the first meetings of those committees occurred in
2019. |
| 3 |
Attendance records for Mr. Towill’s participation in
Board and Audit Committee meetings relate only to the period prior to Mr.
Towill’s resignation as a Director on October 26, 2018. Mr. Towill was a
member of the Audit Committee until October 26, 2018. No meetings of the
Audit Committee and Board were held in 2018 prior to October 26,
2018. |
| 4 |
Mr. Klein was a member of the Audit Committee from
October 26, 2018 until December 28, 2018. Attendance records for Mr.
Klein’s participation in |
|
Audit Committee meetings relate only to the period
between October 26, 2018 and December 28, 2018. |
| 5 |
Mr. Miller was a member of the Audit Committee from
September 21, 2018 until December 28, 2018. Attendance records for Mr.
Miller’s participation in Audit Committee meetings relate only to the
period between September 21, 2018 and December 28, 2018. |
| 6 |
Mr. Tolia was appointed to the Board on October 26, 2018.
Attendance records for Mr. Tolia’s participation in Board meetings relate
only to the period subsequent to October 26, 2018. |
| 7 |
Mr. Shah was the Audit Committee Chair from October 26,
2018 until December 28, 2018. Attendance records for Mr. Shah’s
participation in Audit Committee meetings relate only to the period
between September 21, 2018 and December 28, 2018. Mr. Shah stepped down
from the Board on April 29, 2019. |
| 8 |
Mr. Duet was appointed to the Board on April 29,
2019. |
Board Renewal and Term Limits
The Corporation has not adopted a formal policy on Director
term limits. It has been the Corporation’s practice to elect Directors on an
annual basis to hold office until a successor is appointed or until the
conclusion of the next annual meeting of Shareholders. Management believes that
the current approach allows the Corporation to undergo Board renewal as
necessary. In addition, the Corporation relies on its current Director nominee
selection process, in addition to the Corporation’s various policies (as
described below), when selecting Director nominees for election to the Board on
an annual basis.
Independence of the Board
For the purposes of NI 58-101, an "independent director" is a
director who has no direct or indirect material relationship with the
Corporation. A "material relationship" is in turn defined as a relationship
which could, in the view of the Board, be reasonably expected to interfere with
such member’s independent judgment. In determining whether a particular Director
is an "independent director" or a "non-independent director", the Board
considers the factual circumstances of each Director in the context of these
guidelines.
The Board is currently comprised of eight (8) members, four of
which are "independent directors" for the purposes of NI 58-101. The independent
Directors are Karen Basian, Don Duet, Maurice Levesque and J. André de Barros
Teixeira. Messrs. Klein, Miller, Tolia and Oberg are not independent for the
purposes of NI 58-101 due to being, or having been, a member of the
Corporation’s management team. Mr. Klein is not an employee of the Corporation,
but provided services as the Chief Strategy Officer.
Chairman and Lead Independent Director
The roles of the Chairman and CEO are separated. In addition,
Karen Basian is the Lead Independent Director of the board and subsequent to the
Meeting it is expected that the Board will re-appoint Ms. Basian as Lead
Independent Director. The Lead Independent Director is independent and with the
assistance of the Chairman is responsible for the management, development and
effective functioning of the Board and provides leadership in every aspect of
its work. The Lead Independent Director’s key responsibilities include setting
the Board meeting agenda in consultation with the Chairman and CEO and chairing
all Board meetings with the Chairman. In the absence of the Lead Independent
Director, one of the other independent Directors will assume the
responsibilities of the Lead Independent Director. The Lead Independent Director
will provide leadership to the Directors and ensures the Board is independent
from management. The Lead Independent Director and each committee can also
engage outside consultants without consulting management. This helps ensure they
receive independent advice as they feel necessary.
Committee Composition
There are currently three standing committees of the Board: (a)
the Audit Committee, (b) the HRCC, and (c) the NCGC. All three committees are
comprised solely of independent Directors.
Committee chairs are responsible for the effective organization
and operation of the relevant committee he or she chairs and is required to
provide leadership in discharging the mandate set out in the committee charter.
The chair also acts as primary liaison between the relevant committee and the Corporation’s
management where necessary. The chair of each committee reports directly to the
Board.
42
The Board intends to review the composition of the Audit
Committee, HRCC and the NCGC subsequent to the Meeting. Any changes in
membership of the committees will be disclosed by the Corporation at the
appropriate time.
Succession Planning
The NCGC and HRCC (with the advice of the Chairman and CEO)
have primary oversight of succession planning for senior management, the
performance of the CEO, and the CEO’s assessments of the other senior officers.
The Board, as a whole, conducts reviews of succession options relating to senior
management positions as required.
The independent Directors are expected to participate in the
assessment of the CEO’s performance every year. The Board approves all NEO
appointments.
Selection of New Board Members
The NCGC considers candidates for Board membership who are
suggested by members of the committee, other Board members, members of
management and Shareholders as well as outside consultants retained specifically
for the purpose of identifying Board candidates. Once the NCGC has identified
prospective nominees for directorship, the Board is responsible for selecting
such candidates. The NCGC seeks to identify Director candidates with solid
business and other appropriate experience and expertise, having regard to the
nature of the Corporation’s business and the current composition of the Board,
and commitment to devoting the time and attention necessary to fulfill their
duties to the Corporation.
The NCGC considers the following general factors in evaluating
a prospective candidate to the Board, which include (i) the extent to which the
candidate will enhance the objective of having Directors with diverse
viewpoints, and (ii) backgrounds, experience, expertise, skills and other
demographics of Director candidates. The Corporation believes that the
backgrounds and qualifications of its Directors, considered as a group, should
provide a mix of skills, experience, and knowledge, which will ensure that the
Board is able to continue to fulfill its responsibilities. The NCGC also
considers the independence of Directors and proposed Directors. The Corporation
has not adopted a formal policy on term limits for its Directors, as it believes
the process used by the NCGC in selecting appropriate nominees for election to
the Board on an annual basis will ensure that the Board undergoes regular
renewal, as necessary.
Assessments and Performance Reviews
The Board, on an annual basis, receives a recommendation from
the NCGC for assessing the performance and effectiveness of the Board, its
committees and the individual Directors. In order to facilitate this, the NCGC
is responsible for developing and recommending to the Board a process for
assessing criteria that considers the solicitation and receipt of comments from
any Directors and the competencies and skills each Director is expected to bring
to the Board.
Each individual committee and the Board, in the assessment
process to be overseen by the NCGC (as described above), assesses its own
performance and that of the individual Directors of which each is comprised, as
well as each committee’s own respective charter.
Orientation and Education
The NCGC is expected to develop, recommend and oversee the
Board’s orientation program for new Directors. This program will be designed to
assist new Directors to understand the role of the Board and its committees, the
contribution individual Directors are expected to make to the Corporation
(including the commitment of time and energy that the Corporation expects) and
the nature and operation of the Corporation’s business. In addition, new
Directors are oriented to the roles of the Board, individual Directors and the
business and affairs of the Corporation through discussions with the
Corporation’s management and the incumbent Directors and by periodic
presentations from senior management on major business, industry and competitive
issues. Management, along with Board advisors, provide information to the Board
and its committees as necessary to keep the Directors up-to-date with corporate
governance requirements and best practices, the Corporation and its business and
the environment in which it operates, as well as developments concerning the
responsibilities of Directors.
The Board currently does not provide continuing education for
its Directors. The Directors are encouraged to attend industry and governance
related education sessions independently to ensure they are abreast of emerging
trends impacting the Corporation. By using a Board composed of experienced
professionals with a wide range of financial and industry expertise, the
Corporation ensures that the Board operates effectively and efficiently.
43
Code of Business Conduct and Ethics
The Board has adopted a written Code of Business Conduct and
Ethics ("Code"). The Code is applicable to all Directors, officers and
employees of the Corporation, as well as consultants and contract workers who
perform work on behalf of the Corporation. The Code constitutes written
standards that are designed to promote integrity and to deter wrongdoing. In
particular, the Code addresses the following issues:
| • compliance with laws, rules and regulations |
• protection and proper use of corporate assets
and opportunities |
| • conflicts of interest |
• confidentiality of company information |
| • fair dealing |
• disclosure matters |
| • reporting of any breaches of company policies and
applicable laws |
|
Interested parties may request a copy of the Code by writing to
the Chief Financial Officer, at 461 King Street W., Floor 2, Toronto, Ontario
M5V 1K4 or may obtain a copy under the Corporation’s profile on SEDAR, online at
www.sedar.com.
In keeping with the reporting requirements contained within the
Code, employees are encouraged to report any instance of non-compliance with the
Code to the CEO or CFO and in certain instances the Audit Committee. The Board
periodically reviews the Corporation’s policies, including the Code and may
revise and update the Code on an annual basis. All new Directors, officers and
employees of the Corporation and any subsidiaries, as well as consultants and
contract workers who perform work on behalf of the Corporation, are advised of
the Code and its importance.
The Corporation is governed by the provisions of the OBCA.
Pursuant to the OBCA, a Director or officer of the Corporation must disclose in
writing or by requesting that it be entered in the minutes of meetings of the
Board, the nature and extent of any interest that he or she has in a material
contract or material transaction, whether made or proposed, with the
Corporation, if the Director or officer: (a) is a party to the contract or
transaction; (b) is a director or an officer, or an individual acting in a
similar capacity, of a party to the contract or transaction; or (c) has a
material interest in a party to the contract or transaction. The interested
Director cannot vote on any resolution to approve the contract or transaction,
subject to certain limited exceptions.
Committees of the Board
Audit Committee
The Audit Committee is currently comprised of three Directors,
Ms. Basian (Chair), and Messrs. Duet and Levesque. All members of the Audit
Committee are financially literate for purposes of National Instrument 52-110 –
Audit Committees ("NI 52-110"). Each of Ms. Basian and Messrs. Duet and
Levesque are independent for purposes of NI 52-110. If elected at the Meeting,
it is expected that Ms. Basian (as Chair) and Messrs. Duet and Levesque will be
appointed to the Audit Committee.
The responsibilities and operation of the Audit Committee are
set out in the Corporation’s Audit Committee Charter, the text of which is
included as Appendix "E" hereto.
The relevant education and experience of each member of the
Audit Committee, and proposed members of the Audit Committee subsequent to the
Meeting, is provided above, under the heading "Director Nominees of The Flowr
Corporation".
The Audit Committee has the authority to pre-approve non-audit
services which may be required from time to time, as set forth in the Audit
Committee charter.
In accordance with NI 52-110, the Audit Committee will, from
time to time, implement and oversee procedures for the receipt, retention and
treatment of complaints received by the Corporation regarding accounting,
internal accounting controls or auditing matters and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters. In this regard, the Corporation has established a reporting
policy, which is contained within the Code.
44
A summary of the external auditor service fees and billings
paid or payable to the Corporation’s external auditors in respect of the last
two fiscal years ended December 31 is set out below:
|
Fiscal Year |
|
Audit
Fees |
|
|
Audit-Related |
|
|
Tax
Fees |
|
|
All
Other Fees |
|
|
Total |
|
| |
|
|
|
|
Fees |
|
|
|
|
|
|
|
|
|
|
| 2018 |
$ |
81,000 |
|
$ |
38,500 |
|
$ |
27,000 |
|
$ |
21,950 |
|
$ |
162,450 |
|
| 20171 |
$ |
51,000 |
|
$ |
7,500 |
|
$ |
27,000 |
|
$ |
110,501 |
|
$ |
196,001 |
|
| Notes: |
|
| ____________________________ |
| 1 |
These are the fees incurred by The Needle
Capital Corp. prior to the completion of the Qualifying Transaction and
also include fees incurred by The Flowr Corporation, the private
corporation, that completed the Qualifying Transaction with The Needle
Capital Corp., as MNP LLP acted as auditor for both entities.
|
Nominating and Corporate Governance Committee
The NCGC is comprised of three Directors, Ms. Basian and
Messrs. Duet and Levesque (Chair). The relevant education and experience
of each proposed member of the NCGC is provided above, under the heading
"Director Nominees of The Flowr Corporation". If elected at
the Meeting, Ms. Basian and Messrs. Duet and Levesque (as Chair) will be
appointed to the NCGC, and therefore the NCGC will be comprised of all
independent Directors for the purposes of NI 58-101.
The NCGC oversees the Corporation’s approach to corporate
governance matters. A copy of the NCGC’s Charter is located on the Corporation’s
website at www.flowr.ca, which is not incorporated by reference herein.
The mandate of the NCGC includes:
- identifying qualified individuals to serve as members of the Board,
including incumbent Directors;
- recommending candidates for election or re-election, including persons to
fill newly created Director positions or Board vacancies;
- recommending Directors for committee membership;
- leading the Board in its annual self-evaluation;
- orienting and developing Board members; and
- developing and monitoring the Corporation’s corporate governance
guidelines.
Any recommendation made by the NCGC will be presented to the
Board for approval to ensure additional oversight of the process.
Human Resources and Compensation Committee
The HRCC is comprised of three Directors, Ms. Basian and
Messrs. Duet (Chair) and Levesque. If elected at the Meeting, Ms. Basian and
Messrs. Duet (as Chair) and Levesque will be appointed to the HRCC, and
therefore the HRCC will be comprised of all independent Directors for the
purposes of NI 58-101.
The members of the HRCC will be appointed annually by the
Board, and each member of the HRCC will serve at the pleasure of the Board until
the member resigns, is removed, or ceases to be a member of the Board. In
addition to the education and experience of each member of the HRCC provided
above, under the heading "Director Nominees of The Flowr Corporation",
the members of the HRCC have the following (i) direct experience relevant to
their responsibilities on the HRCC in determining executive compensation and
(ii) skills and experience that enable the HRCC to make decisions on the
suitability of the Corporation’s compensation policies and practices:
-
Ms. Basian: as CFO and SVP Operations at 724 Solutions (SVNX:TO) Ms. Basian
led Human Resources. She is also currently the Chairman of the Human Resources
& Compensation Committee of goeasy (GSY:TO);
-
Mr. Duet: is currently the CEO and Founder of Concourse, where matters
relating to executive compensation are overseen by Mr. Duet. Mr. Duet was also
formerly an executive and Board member of Vapor.io, where Mr. Duet was
involved in compensation related matters and decision making. In addition,
during his tenure with Goldman Sachs, Mr. Duet gain key insights into
compensation related matters at both the regional and global level.; and
45
- Mr. Levesque: is currently a member of the board of directors of Imperial
Ginseng Products Ltd. (TSX-V) and Bluewater Acquisition Corp. (TSX-V), where
matters relating to executive compensation are addressed and reviewed. Mr.
Levesque is also the Chairman and Chief Executive Officer of Qwest Investment
Management Corp., where Mr. Levesque has direct oversight over compensation
related matters.
Although the HRCC is comprised entirely of independent
Directors, any recommendations of the HRCC must be approved by the Board to
ensure an objective process for determining the compensation of its Directors
and NEOs.
A copy of the HRCC Charter is located on the Corporation’s
website at www.flowr.ca, which is not incorporated by reference herein. To
fulfil its responsibilities and duties in developing the Corporation’s approach
to compensation issues, the HRCC shall:
-
Review and approve corporate goals and objectives relevant to compensation
of the CEO and evaluate the performance of the CEO in light of these corporate
goals and objectives.
-
Review corporate goals and objectives relevant to compensation of the NEOs
(other than the CEO), and other direct reports of the CEO as approved by the
CEO and receive a report annually from the CEO of the performance those NEOs
and other direct reports against such corporate goals and objectives.
-
Ensure that the Corporation’s security-based compensation plans and all
amendments to such plans which require the approval of the Shareholders are
approved by the Board and by Shareholders, as may be required.
-
Approve and evaluate performance measures for executive incentive plans.
-
Review any proposed disclosure of executive compensation. Without limiting
the foregoing, annually review any report on executive compensation (including
any discussion or analysis thereof) and recommend to the Board that it be
included in the Corporation’s annual report, management information circular
or other documents prepared for an annual meeting of Shareholders.
Position Descriptions
The Board has not developed written position descriptions for
the Chairman, the Lead Independent Director or the chairs of the
committees of the Board. The responsibilities of the Chairman and the Lead
Independent Director include leadership of the Board and its efficient
organization and operation.
Each committee chair is responsible for the effective
organization and operation of the relevant committee he or she chairs and is
required to provide leadership in discharging the mandate set out in the
committee charter. The chair also acts as primary liaison between the relevant
committee and the Corporation’s management where necessary. The chair of each
committee reports directly to the Board.
Timely Disclosure, Confidentiality and Insider Trading
Policy
The Board has adopted a Timely Disclosure, Confidentiality and
Insider Trading Policy designed to promote consistent disclosure practices aimed
at informative, timely and broadly disseminated disclosure of material
information to the public in accordance with all applicable legal and regulatory
requirements. It is applicable to all persons in a special relationship with the
Corporation. The Timely Disclosure, Confidentiality and Insider Trading Policy
prohibits selective disclosure of material information regarding the Corporation
or its business. In addition, the Timely Disclosure, Confidentiality and Insider
Trading Policy addresses securities trading matters, and provides for trading
blackout periods and quiet periods.
Directors’ and Officers’
Liability Insurance
The Corporation annually renews and purchases insurance
coverage for Directors’ and Officers’ liability. The current term (September 20,
2018 to September 20, 2019) premium of approximately $136,500 covers Directors’
and officers’ liability for an aggregate limit as set forth in the policy. The
policy provides for deductibles ranging from $nil to $25,000 depending upon the
nature of the claim. There is no deductible for any claim made by a Director or
officer when indemnification has not been granted. This premium is paid entirely
by the Corporation.
The Corporation indemnifies Directors and officers of the
Corporation ("Indemnified Persons") for the full amount of any cost
reasonably incurred by an Indemnified Person in connection with any proceeding
that may be made or asserted against or affect an Indemnified Person or in which
an Indemnified Person is required by law to participate or in which an Indemnified Person participates at the request of the
Corporation if it relates to, arises from or is based on an Indemnified Person’s
service in an indemnified capacity.
46
AUDITOR
Flowr’s current auditors are MNP, LLP, Chartered Professional
Accountants, 50 Burnhamthorpe Road West, Suite 900, Mississauga, Ontario L5B
3C2. MNP LLP, Calgary, Alberta was first appointed auditors of The Needle
Capital Corp. on November 3, 2016 and MNP, Mississauga, Ontario were appointed
auditors of The Flowr Corporation, the private corporation that completed the
Qualifying Transaction with The Needle Capital Corp., on January 24, 2018.
MANAGEMENT CONTRACTS
The management functions of the Corporation are not to any
substantial degree performed other than by the Directors and officers of the
Corporation.
ADDITIONAL INFORMATION
Additional information relating to the Corporation is available
under the Corporation’s profile on SEDAR, online at www.sedar.com. Financial
information relating to the Corporation is provided in the Financial Statements
and the accompanying management’s discussion and analysis for the Corporation’s
most recently completed financial year. Copies of the Financial Statements and
the related management’s discussion and analysis for the most recently completed
financial year are available to anyone, upon request to the Chief Financial
Officer of the Corporation at 461 King Street W., Floor 2, Toronto, Ontario M5V
1K4, and without charge to Shareholders, and are also available under the
Corporation’s profile on SEDAR, online at www.sedar.com.
47
DIRECTORS’ APPROVAL
The contents of this Circular and its sending to Shareholders
have been approved by the Board.
Dated this 9th day of May, 2019.
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BY ORDER OF THE BOARD OF DIRECTORS
OF |
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THE FLOWR CORPORATION |
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By: |
<Signed> "Steve Klein" |
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Name: |
Steve Klein |
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Title: |
Chairman and Chief Strategy Officer
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48
APPENDIX "A" - STOCK OPTION PLAN, AS AMENDED
AMENDED AND RESTATED
STOCK OPTION PLAN
The Flowr Corporation (the "Corporation") hereby adopts
this Amended and Restated Stock Option Plan (the "Plan") for Eligible
Participants of the Corporation and its Subsidiaries.
ARTICLE 1
PURPOSE
The purpose of the Plan is to attract, retain and motivate
Eligible Participants, and to advance the interest of the Corporation and its
Subsidiaries by affording such Eligible Participants with the opportunity
through share options to acquire an increased proprietary interest in the
Corporation.
ARTICLE 2
INTERPRETATION
| 2.1 |
Definitions |
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In this Plan, the following terms have the following
meanings: |
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(a) |
"Applicable Laws" means the requirements relating
to the establishment and operation of stock option plans and the issue
and/or transfer of shares under any applicable securities and other laws
or any order, policy, by-law, rule or regulation of any regulatory body or
stock exchange (including but not limited to the TSXV) having jurisdiction
or authority over the securities of the Corporation or its Subsidiaries or
the Plan, in any country or jurisdiction in which Options are granted to
Optionees and/or in which Optionees reside at the date of exercise of
their Options; |
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(b) |
"Blackout Period" means the blackout period of the
Corporation pursuant to the Corporation’s policies during which the
trading of Shares is prohibited; |
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(c) |
"Board" means the Board of Directors of the
Corporation; |
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(d) |
"Business Day" means any day other than a Saturday
or Sunday on which banks are open for business in the city of Toronto,
Ontario; |
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(e) |
"Cause" means (i) any act or omission of the
Optionee which, pursuant to Applicable Laws constitutes a serious reason
for termination of employment or services; or (ii) as specified in such
Optionee’s employment or services agreement with the Corporation or a
Subsidiary; |
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(f) |
"Eligible Participant" means (subject to any
Applicable Laws) a full-time or part- time employee of the Corporation or
a Subsidiary, director, officer, consultant or advisor of the Corporation
or a Subsidiary (for so long as such Person holds any such position,
excluding any period of statutory, contractual or reasonable notice of
termination of employment or deemed employment), and the Corporation and
the Eligible Participant are responsible for ensuring and confirming that
the Eligible Participant is a bona fide Eligible Participant;
provided, however, that a consultant or advisor shall not be an Eligible
Participant unless such consultant or advisor is an individual that
provides bona fide services to the Corporation and such services are not
in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a
market for Corporation’s securities. |
- 2 -
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(g) |
"Flowr ULC Shares" means the class A preferred
shares in the capital of The Flowr Canada Holdings ULC, a subsidiary of
the Corporation, exchangeable for Class B preferred shares in the capital
of the Corporation (or following completion of the Transaction, common
shares in the capital of The Needle Capital Corp.) at any time at the
option of the holder; |
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(h) |
"Good Reason" means any of the following that
results in the Optionee’s voluntary resignation of employment or services
within 30 days of the occurrence thereof: (a) a reduction by the
Corporation of at least 20% in the Optionee’s annual base salary or other
annual remuneration, or (b) a breach by the Corporation of any material
obligation under any employment or services agreement with an Optionee, as
applicable, that remains not remedied 10 days after the Optionee provides
written notice thereof to the Corporation, or (c) a change by the
Corporation in the Optionee’s principal work or services location more
than 100 kilometers; provided, that in no event will the Optionee be
deemed to have resigned for Good Reason unless: (i) the action described
in the preceding clause (a) or (c), as applicable, was performed without
the consent of the Optionee; (ii) the Optionee has given written notice to
the Corporation stating that he/she is invoking a "Resignation for Good
Reason," stating the specific circumstances the Optionee claims to
constitute Good Reason; and (iii) the Corporation fails to reasonably cure
such circumstances within 10 days following receipt of such
notice; |
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(i) |
"Incapacity" means any medical condition
whatsoever (including physical or mental illness) which leads to the
Optionee’s absence from his job function for a continuous period of six
months without the Optionee being able to resume functions on a full time
basis at the expiration of such period and which, in light of the position
held by the Optionee, the Board determines would cause undue hardship to
the Corporation which cannot be accommodated; and unsuccessful attempts to
return to work for periods of less than 15 days shall not interrupt the
calculation of such six month period; |
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(j) |
"Insider" has the meaning ascribed thereto
pursuant to the rules and regulations of the TSXV; |
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(k) |
"Market Price" means: |
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(i) |
the closing price of the Shares on the TSXV or such other
stock exchange on which the Shares may then be listed and primarily traded
on the Business Day prior to the date the Option is granted or prior to
the date of the applicable event for which pricing is required herein, as
applicable, or such other price as is permitted pursuant to the rules and
regulations of the TSXV or such other stock exchange on which the Shares
may then be listed and primarily traded; or |
- 3 -
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(ii) |
if the Shares or any other security in respect of which a
determination of Market Price is being made are not listed on any stock
exchange, the Market Price shall be determined by the Board, acting
reasonably and in good faith, which determination shall be
conclusive; |
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(l) |
"Option" means the right to purchase Shares
granted under the Plan pursuant to the terms and conditions of an Option
Certificate; |
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(m) |
"Optionee" means an Eligible Participant who holds
Options granted under the Plan pursuant to an Option
Certificate; |
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(n) |
"Option Certificate" means the certificate issued
by the Corporation evidencing the grant of an Option to an Eligible
Participant and the terms and conditions of such Option substantially in
the form of Schedule 4.4 hereto; |
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(o) |
"Option Price" means the purchase price per
Optioned Share determined in accordance with Section 5.1; |
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(p) |
"Optioned Shares" means the Shares which may be
purchased by an Optionee pursuant to an Option; |
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(q) |
"Person" means a natural person, partnership,
limited partnership, limited liability partnership, a corporation, joint
stock company, trust, estate, unincorporated association, joint venture or
other entity or governmental entity, and pronouns have a similarly
extended meaning; |
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(r) |
"Plan" means this Amended and Restated Stock
Option Plan; |
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(s) |
"Shareholder" means a holder of Shares; |
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(t) |
"Shares" means the common shares in the capital of
the Corporation or, in the event of any adjustment contemplated by Section
3.2, the shares or other securities in the capital of the Corporation or
other Person to which an Optionee may be entitled upon the exercise of any
Options pursuant to such adjustment; |
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(u) |
"Subsidiary" has the meaning set forth in the
Business Corporations Act (Ontario); |
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(v) |
"Termination Date" means the date on which an
Optionee ceases to be an Eligible Participant as a result of a termination
of employment or services with the Corporation or a Subsidiary for any
reason, including death, Incapacity, retirement, resignation (with or
without Good Reason) or Cause. For the purposes of the Plan, an Optionee’s
employment with, or provision of services to, the Corporation or a
Subsidiary shall be considered to have terminated, (i) in the case of
death, retirement, resignation (with or without Good Reason) or Cause,
effective on the last day of the Optionee’s actual and active employment
with, or provision of services to, the Corporation or a Subsidiary whether
such day is selected by agreement with the individual, unilaterally by the
Corporation or the Subsidiary and whether with or without advance notice
to the Optionee, or (ii) in the case of an Incapacity of the Optionee, the
effective date of termination as specified in the written notice from
the Corporation or its Subsidiary to such Optionee. For the
avoidance of doubt, no period of notice or pay in lieu of notice that is
given or that ought to have been given under applicable laws in respect of
such termination of employment that follows or is in respect of a period
after the Optionee’s last day of actual and active employment shall be
considered as extending the Optionee’s period of employment for the
purposes of determining his entitlement under the Plan; |
- 4 -
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(w) |
"Transaction" means the series of transactions
through which the businesses of The Flowr Corporation and The Needle
Capital Corp. will be combined pursuant to the business combination
agreement dated August 27, 2018 between the Corporation and The Needle
Capital Corp.; |
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(x) |
"Trigger Event" means: (a) the sale by the
Corporation of all or substantially all of its assets; (b) the acceptance
by the Shareholders, representing in the aggregate fifty percent (50%) or
more of all of the issued Shares, of any offer, whether by way of a
takeover bid or otherwise, for all or any of the outstanding Shares; (c)
the acquisition, by whatever means, by a person (or two or more persons
who, in such acquisition, have acted jointly or in concert or intend to
exercise jointly or in concert any voting rights attaching to the Shares
acquired), directly or indirectly, of beneficial ownership of such number
of Shares or rights to Shares, which together with such person’s then-
owned Shares and rights to Shares, if any, represent (assuming the full
exercise of such rights) fifty percent (50%) or more of the combined
voting rights attached to the then-outstanding Shares; (d) the entering
into of any agreement by the Corporation to merge, consolidate,
restructure, amalgamate, initiate an arrangement or be absorbed by, into
or with another corporation; (e) the passing of a resolution by the Board
or Shareholders to substantially liquidate the assets of the Corporation
or wind up the Corporation’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 Corporation in circumstances where the business of
the Corporation is continued and the shareholdings remain substantially
the same following the re-arrangement); or (f) the circumstance in which
individuals who were members of the Board immediately prior to a meeting
of the Shareholders involving a contest for the election of directors no
longer constitute a majority of the Board following such election;
and |
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(y) |
"TSXV" means the TSX Venture Exchange, or any
primary successor exchange on which the Shares are posted for
trading. |
| 2.2 |
Gender and Number |
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Any reference in this Plan to gender shall include all
genders and words importing the singular number only shall include the
plural and vice versa. |
- 5 -
| 2.3 |
Headings |
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The division of the Plan into subsections and clauses and
the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation of the plan. |
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| 2.4 |
Schedules |
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The schedules and appendices to the Plan form an integral
part of the Plan and any reference to the "Plan" herein shall include
reference to such schedules and appendices, as
applicable. |
ARTICLE 3
SHARES RESERVED FOR ISSUANCE
| 3.1 |
Maximum Shares Reserved |
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Subject to adjustment as provided under Section 3.2, the
maximum number of Shares issuable upon the exercise of all Options granted
under the Plan shall not exceed, in the aggregate, 10% of the issued and
outstanding a) common shares of the Corporation and b) Flowr ULC Shares,
from time to time. For purposes of clarity, the maximum number of Shares
reserved and set aside for issue under this Plan and under Flowr’s
long-term incentive plan shall not exceed 20% of the Shares and Flowr ULC
Shares. Options shall not be granted under the Plan for a number of Shares
in excess of the maximum number of Shares reserved for issuance.
Notwithstanding the foregoing, and subject to Applicable Law, if any
Option expires or otherwise terminates for any reason without having been
exercised in full, the number of Shares in respect of the Option that has
expired or terminated shall again be available for issuance under the
Plan. |
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| 3.2 |
Adjustment of Options |
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The existence of any Options does not affect in any way
the right or power of the Corporation or its shareholders to make,
authorize or determine any adjustment, recapitalization, reorganization or
any other change in the Corporation’s capital structure or its business,
or any amalgamation, combination, merger or consolidation involving the
Corporation, to create or issue any bonds, debentures, shares or other
securities of the Corporation or to determine the rights and conditions
attaching thereto, to effect the dissolution or liquidation of the
Corporation or any sale or transfer of all or any part of its assets or
business, or to effect any other corporate act or proceeding, whether of a
similar character or otherwise, whether or not any such action referred to
in this section would have an adverse effect on this Plan or any Option
granted hereunder. |
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If there is a change in the outstanding Shares by reason
of any stock dividend or split, recapitalization, reclassification,
amalgamation, consolidation, combination or exchange of shares, or other
corporate change, the Board shall make, subject where required to the
prior approval of the TSXV, appropriate substitution or adjustment in (a)
the number or kind of Shares or other securities reserved for issuance
pursuant to the Plan, and (b) the number and kind of Shares or other
securities subject to unexercised Options theretofore granted and in the
exercise price of such securities. |
- 6 -
No fractional Shares shall be issued
upon the exercise of an Option. If, as a result of any adjustment under this
Section 3.2 an Optionee would be entitled to a fractional Share, the Optionee
shall have the right to acquire only the adjusted number of full Shares rounded
down to the next full Share and no payment or other adjustment shall be made
with respect to the fractional Shares so disregarded.
ARTICLE 4
GRANT OF OPTIONS
| 4.1 |
Grant of Options |
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The Corporation may grant to any Eligible Participants
designated by the Board one or more Options at an Option Price over such
whole number of Optioned Shares as the Board decides. |
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| 4.2 |
Period for granting Options |
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Subject to Applicable Law, Options may be granted at any
time that the Board thinks appropriate except that no Option shall be
granted after the termination of the Plan or at any time when any Eligible
Participant is prohibited from being granted an Option under any dealing
restrictions contained in any Applicable Laws to which the Corporation
and/or the Eligible Participant is subject. |
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| 4.3 |
Approvals and Consents |
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The grant of an Option will be subject to obtaining any
approval or consent required under the provisions of any Applicable
Laws. |
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| 4.4 |
Option Certificate |
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Each Option granted by the Board shall be evidenced by an
Option Certificate between the Optionee and the Corporation substantially
in the form attached as Schedule 4.4 with such amendments as are approved
by the Board, or such other form as may be acceptable to the Board, which
shall be subject to the terms and conditions of the Plan and to such other
terms and conditions as set out in the Option Certificate as the Board may
deem appropriate. |
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| 4.5 |
Options Personal to Optionee |
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An Option is personal to the Optionee to whom it is
granted. Except to the extent specifically authorized by the Board or
contemplated herein, an Option, part of an Option or any rights in respect
of an Option may not be sold, transferred, assigned, pledged,
hypothecated, charged or otherwise encumbered or disposed of. Option(s)
held by an Optionee may be transmitted to the administrator, liquidator or
executor of the Optionee’s estate. Options shall not be assignable or
transferable by the Optionee, whether voluntarily or by operation of law,
except by will or by the laws of succession of the domicile of the
deceased Optionee. |
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| 4.6 |
Disclaimer of Options |
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An Optionee may disclaim an Option, in whole or in part,
in writing to the Corporation within 30 days after the Date of Grant. No
consideration will be paid for the disclaimer of
an Option. To the extent that an Option is disclaimed it
will be deemed never to have been granted. |
- 7 -
| 4.7 |
Listing Conditions |
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Each Option is subject to the requirement that, if at any
time counsel to the Corporation shall determine that the listing,
registration or qualification of the Optioned Shares upon any securities
exchange or under any Applicable Law, or the consent or approval of any
securities exchange or any governmental or regulatory body, is necessary
as a condition of, or in connection with, the exercise of such Option or
the issuance or purchase of Optioned Shares thereunder, such Option may
not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained on conditions acceptable to the Board. Furthermore, as a
condition of receiving any Option, the Optionee agrees to comply with all
Applicable Laws and agrees to furnish to the Corporation all information
and undertakings as may be required to permit compliance with such
Applicable Laws. Nothing herein shall be deemed to require the Corporation
to apply for or to obtain such listing, registration, qualification,
consent or approval. |
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| 4.8 |
Limitations on Option Grants |
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Notwithstanding any other provision of this Plan, unless
disinterested Shareholder approval is obtained in accordance with the
policies of the TSXV, the aggregate number of Options: |
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(a) |
granted to any one Eligible Participant in a 12 month
period shall not exceed 5% of the issued and outstanding Shares and Flowr
ULC Shares; |
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(b) |
granted to any one Eligible Participant that is a
consultant of the Corporation or a Subsidiary in a 12 month period shall
not exceed 2% of the issued and outstanding Shares and Flowr ULC
Shares; |
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(c) |
granted to all Persons retained to provide investors
relations activities in a 12 month period shall not exceed 2% of the
issued and outstanding Shares and Flowr ULC Shares; |
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(d) |
granted to all Persons retained to provide investors
relations activities will contain vesting provisions such that vesting
occurs over at least 12 months with no more than 1\4 of the options
vesting in any 3 month period; and |
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(e) |
granted to the Insiders of the Corporation as a group
shall not exceed 10% percent of the issued and outstanding Shares and
Flowr ULC Shares. |
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| 4.9 |
Hold Period |
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All Options granted hereunder may be subject to and
legended with a four month hold period commencing on the date the Options
were granted pursuant to the rules of the Exchange and applicable
securities laws. Without limiting the generality of the foregoing, in the
event that Options are granted to officers or directors, or at a discount
to Market Price as permitted by the TSXV, the following legend will appear
on the Option Certificate: |
- 8 -
WITHOUT PRIOR WRITTEN APPROVAL OF TSX VENTURE EXCHANGE AND
COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR
OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF TSX VENTURE EXCHANGE OR
OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL
[INSERT DATE THAT IS FOUR MONTHS AND A DAY FROM THE GRANT DATE]
ARTICLE 5
OPTION PRICE
| 5.1 |
Option Price |
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The Option Price per Optioned Share at the time any
Option is granted shall be a price not lower than the Market Price per
Share as determined by the Board, or such lower price permitted by the
policies of the TSXV. |
ARTICLE 6
TERMS OF OPTION CERTIFICATE
| 6.1 |
Option Certificate |
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Unless otherwise modified by the Board generally or in
regard to specific Options, and subject to any Applicable Law, each Option
Certificate shall have the following terms: |
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(a) |
Subject to Article 12, the term of any Option shall not
be greater than 10 years from the date of the grant; |
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(b) |
Options shall be exercisable if vested in accordance with
Section 7.1, except as otherwise provided herein or in the Option
Certificate; |
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(c) |
to the extent the right to purchase Optioned Shares has
vested, Options shall be exercisable in accordance with Section 8.1,
except as otherwise provided herein or in the Option
Certificate; |
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(d) |
an Option Certificate may not be assigned or transferred
by any Optionee and shall be exercisable only by the Optionee, subject to
Sections 9.1(a) and 4.6, with respect to the death of an Optionee;
and |
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(e) |
the exercise of any Option will be contingent upon
receipt by the Corporation of payment of the full Option Price of such
Optioned Shares. |
- 9 -
ARTICLE 7
VESTING
| 7.1 |
Vesting Specified in the Option
Certificate |
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Except as otherwise set forth in this Plan, an Optionee’s
right to purchase the Optioned Shares shall vest on such dates and only in
respect of such number of Optioned Shares as specified in the relevant
Option Certificate. |
ARTICLE 8
EXERCISE OF OPTIONS
| 8.1 |
Exercise of Options |
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Options shall be exercisable at any time and from time to
time as specified in the Option Certificate as to all or any lesser number
of the Optioned Shares in respect of which the Optionee’s right to
purchase Optioned Shares has vested. |
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| 8.2 |
Manner of Exercise |
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Options that have vested shall be exercised by written
notice to the Corporation in the manner provided in Section 14.1 and in
the form required by the Corporation, if any, specifying the number of
Optioned Shares in respect of which such Option is then being exercised
(the "Notice") and such notice shall be accompanied by a certified cheque,
bank draft, or wire transfer in respect of the then applicable Option
Price per Optioned Share being exercised. |
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| 8.3 |
Issuance of Shares |
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Subject to Section 8.4, following the exercise of the
Option, the Corporation shall take all actions reasonably necessary to
issue such Optioned Shares to the Optionee. |
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| 8.4 |
Obligation to Issue Shares |
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The Corporation’s obligation to issue Optioned Shares to
an Optionee pursuant to the exercise of an Option may be subject
to: |
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(a) |
completion of such registration or other qualifications
of such Optioned Shares or obtaining approval of such governmental
authority or stock exchange as the Corporation shall determine to be
necessary or advisable in connection with the authorization, issuance or
sale of the Optioned Shares; |
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(b) |
the receipt of full payment for the Optioned
Shares; |
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(c) |
the admission of such Optioned Shares to listing on any
stock exchange on which the Shares may be listed or proposed to be listed;
and |
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|
|
|
(d) |
the receipt from the Optionee of such representations,
agreements and undertakings as to future dealings in such Optioned Shares
as may be necessary to comply with Applicable
Laws. |
- 10 -
ARTICLE 9
TERMINATION OF EMPLOYMENT OR SERVICE OF
OPTIONEE
| 9.1 |
Termination Event |
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|
|
|
|
(a) |
Unless otherwise provided hereunder or in the Option
Certificate or as otherwise determined by the Board in its sole
discretion, in the event of termination as a result of retirement,
Incapacity or death of an Optionee, the Optionee (or the administrator,
executor or liquidator of the Optionee’s estate): |
| |
|
|
|
|
|
(i) |
may exercise any Options to the extent that the Options
were exercisable at the Termination Date and the right to exercise such
Options terminates on the earlier of: (i) in the case of Optionee’s death
or Incapacity, the date that is 180 days after the Termination Date, and
in the case of Optionee’s retirement, the date that is 120 days after the
Termination Date; (ii) the date on which the particular Option expires
pursuant to this Plan; and (iii) the date determined by the Board in the
event of a Trigger Event, provided that if an Optionee (or his legal
representative) does not exercise his Options on or prior to such date,
such Options shall immediately expire and are cancelled on such date. Any
Options held by the Optionee that were not exercisable at the Termination
Date immediately expire and are cancelled on such date; and |
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|
(ii) |
such Optionee’s eligibility to receive further grants of
Options under the Plan ceases as of the Termination Date. |
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(b) |
Unless otherwise provided hereunder or in the Option
Certificate, or as otherwise determined by the Board in its sole
discretion, in the event of termination without Cause or resignation for
Good Reason (whether such termination occurs with or without any or
adequate reasonable notice, or with or without any or adequate
compensation in lieu of such reasonable notice), then any Options held by
Optionee that are exercisable at the Termination Date, continue to be
exercisable by Optionee until the earlier of: (i) the date that is 30 days
after the Termination Date; and (ii) the date on which the particular
Option expires pursuant to this Plan; and (iii) the date determined by the
Board in the event of a Trigger Event, provided that if an Optionee does
not exercise his Options on or prior to such date, such Options shall
immediately expire and are cancelled on such date. Any Options held by
Optionee that are not exercisable at the Termination Date immediately
expire and are cancelled on the Termination Date. |
| |
|
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|
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(c) |
Unless otherwise provided hereunder or in the Option
Certificate, in the event of Termination by reason of (i) Cause or (ii)
resignation by Optionee, other than for Good Reason, then any Options held
by the Optionee, whether or not exercisable at the Termination Date,
immediately expire and are cancelled on such date or at a time as may be
determined by the Board, in its sole discretion. |
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|
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|
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(d) |
In no event can an Optionee’s Options be exercisable
after the date that is one year after the Termination
Date. |
- 11 -
ARTICLE 10
SHAREHOLDER RIGHTS
| 10.1 |
Shareholder Rights |
| |
|
|
An Optionee shall have no rights whatsoever as a
shareholder in respect of any of the Optioned Shares (including any right
to vote or to receive dividends or other distributions therefrom), unless
and only to the extent that the Optionee shall from time to time duly
exercise an Option and become a Shareholder. |
ARTICLE 11
TRIGGER EVENT
| 11.1 |
Trigger Event |
| |
|
|
|
(a) |
Notwithstanding any other provision of this Plan, in the
event of an actual or potential Trigger Event, the Board may, in its
discretion, without the necessity or requirement for the agreement of any
Eligible Participant, but subject always to the prior written approval of
the TSXV: (i) accelerate, conditionally or otherwise, on such terms as it
sees fit, the vesting date of any Option; (ii) permit the conditional
exercise of any Option, on such terms as it sees fit; (iii) otherwise
amend or modify the terms of the Option, including for greater certainty
permitting Eligible Participants to exercise any Option, to assist the
Eligible Participants to tender the underlying Shares to, or participate
in, the actual or potential Trigger Event or to obtain the advantage of
holding the underlying Shares during such Trigger Event; and (iv)
terminate, following the successful completion of such Trigger Event, on
such terms as it sees fit, the Options not exercised prior to the
successful completion of such Trigger Event. The determination of the
Board in respect of any such Trigger Event shall for the purposes of this
Plan be final, conclusive and binding. |
| |
|
|
|
(b) |
Notwithstanding any other provision of this Plan, in the
event that: (i) an actual or potential Trigger Event is not completed
within the time specified therein; or (ii) all of the Shares subject to an
Option that were tendered by an Eligible Participant in connection with an
actual or potential Trigger Event are not taken up or paid for by the
offeror in respect thereof, then the Board may, in its discretion, without
the necessity or requirement for the agreement of any Eligible
Participant, permit the Shares received upon such exercise, or in the case
of subparagraph (ii) above the Shares that are not taken up and paid for,
to be returned by the Eligible Participant to the Corporation and
reinstated as authorized but unissued Shares and, with respect to such
returned Shares, the related Options may be reinstated as if they had not
been exercised and the terms for such Options becoming vested will be
reinstated pursuant to this Section 11.1. If any Shares are returned to
the Corporation under this Section 11.1, the Corporation will immediately
refund the exercise price to the Eligible Participants for such
Shares |
- 12 -
ARTICLE 12
BLACKOUT PERIODS
| 12.1 |
Blackout Periods |
| |
|
|
|
|
(a) |
The expiration of the term of an Option will be the later
of a date set out in the Option Certificate or a date after such
expiration date should such date fall within or immediately after a
Blackout Period, if applicable, provided that: |
| |
|
|
|
|
|
(i) |
the Blackout Period is formally self-imposed by the
Corporation as a result of the bona fide existence of undisclosed material
information; |
| |
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|
|
|
|
(ii) |
the Blackout Period must expire upon the general
disclosure of the undisclosed material information and the period of time
provided to exercise the Option after the lifting of the Blackout Period
cannot be more than 10 Business Days; |
| |
|
|
|
|
|
(iii) |
the foregoing extension will not be permitted where the
Eligible Participant or the Corporation is subject to a cease trade order
in respect of the Corporation’s securities; and |
| |
|
|
|
|
|
(iv) |
all Eligible Participants under the Plan are eligible for
the extension, under the same terms and conditions. |
| |
|
|
|
|
(b) |
For certainty, if a Blackout Period is in effect, this
means that the maximum term of an Option that would otherwise expire
during such Blackout Period is 10 years, plus the length of the Blackout
Period, plus 10 Business Days. |
ARTICLE 13
TERMS AND CONDITIONS OF OPTIONS GRANTED
TO U.S. PARTICIPANTS
| 13.1 |
This Article 13 applies only to U.S. Participants. In
this Article 13, the following words and phrases shall have the following
meanings: |
| |
|
|
|
(a) |
"Code" means the U.S. Internal Revenue Code of
1986, as amended. |
| |
|
|
|
(b) |
"Disability" means, with respect to any U.S.
Participant, that such U.S. Participant is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted, or can be expected to last, for a continuous period of
not less than 12 months. The preceding definition of the term "Disability"
is intended to comply with, and will be interpreted consistently with,
sections 22(e)(3) and 422(c)(6) of the Code. |
| |
|
|
|
(c) |
"Fair Market Value" means (i) the closing price of
the Shares on the TSXV or such other stock exchange on which the Shares
may then be listed and primarily traded on the Business Day prior to the
date the Option is granted or prior to the date of the applicable event
for which pricing is required herein, as applicable; or (ii) if the Shares
are not listed on any stock exchange, Fair Market Value shall be
determined by the Board, acting reasonably and in good faith and in
accordance with the principles under section 409A of the Code and
applicable guidance thereunder. |
- 13 -
|
(d) |
"Grant Date" means, for purposes of Articles 13
and 14, the date on which the grant of an Option becomes effective by the
Corporation completing the actions necessary to grant the Option and
creating a legally binding right in the Optionee, including specifying the
Optionee, the number of Shares subject to the Option granted to such
Optionee, and the Option Price of the Option. |
| |
|
|
|
(e) |
"Incentive Stock Option" means an Option that is
intended to qualify as an "incentive stock option" pursuant to section 422
of the Code. |
| |
|
|
|
(f) |
"Non-qualified Stock Option" means an Option that
is not an Incentive Stock Option. |
| |
|
|
|
(g) |
"Parent" means any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the
Corporation, if at the time of granting the option, each of the
corporations other than the Corporation owns stock possessing 50% or more
of the combined voting power of all classes of stock in one of the other
corporations in such chain. The preceding definition of the term "Parent"
is intended to comply with, and will be interpreted consistently with,
section 424(f) of the Code. |
| |
|
|
|
(h) |
"Subsidiary" means any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, if at the time of granting the option, each corporation
(other than the last corporation) in such chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. The preceding definition of the
term "Subsidiary" is intended to comply with, and will be
interpreted consistently with, section 424(f) of the Code. |
| |
|
|
|
(i) |
"U.S. Employee" means an Eligible Participant who
is an employee of the Corporation (or of any Subsidiary) for purposes of
section 422 of the Code. |
| |
|
|
|
(j) |
"U.S. Participant" means an Optionee who is a
citizen of the United States or a resident of the United States, in each
case as defined in section 7701(a)(30)(A) and section 7701(b)(1) of the
Code, and such other Optionees to the extent their Options awarded under
the Plan are subject to U.S. federal income tax under the Code. |
| |
|
|
|
(k) |
"10% Shareholder" means any Person who owns,
taking into account the constructive ownership rules set forth in section
424(d) of the Code, more than 10% of the total combined voting power of
all classes of stock of the Corporation (or of any Parent or
Subsidiary). |
| |
|
|
| 13.1 |
Any adjustment, amendment or termination of outstanding
Options granted to U.S. Participants will be undertaken in accordance with
section 409A of the Code on a basis consistent with the regulations
thereunder, to the extent applicable. |
| |
|
|
| 13.2 |
Except as otherwise provided in this Section 13.3, the
Option Price will be not less than 100% of the Fair Market Value of a
Share on the applicable Grant Date but (i) the Board
may designate an Option Price below the Fair Market Value of
a Share on the Grant Date if the Option is granted in substitution for a
stock option previously granted by an entity that is acquired by or merged
with the Corporation or a Subsidiary if the number of Shares covered by
the Option and the Option Price are proportionately adjusted in a manner
compliant with the Treasury Regulations issued under Section 409A of the
Code; and (ii) the Board may grant an Option with the Option Price less
than 100% of the Fair Market Value on the applicable Grant Date if such
Option otherwise qualifies for exemption from Section 409A of the
Code. |
- 14 -
| 13.3 |
Each Option Certificate with respect to an Option granted
to a U.S. Participant shall specify whether the related Option is an
Incentive Stock Option or a Non-qualified Stock Option. If no such
specification is made in an Option Certificate, the related Option will be
a Non- qualified Stock Option. |
| |
|
|
| 13.4 |
Notwithstanding any other provision of this Plan to the
contrary, the aggregate number of Shares available for Incentive Stock
Options shall not exceed 12,155,000 Shares, subject to adjustment pursuant
to Section 3.2 of this Plan and in accordance with the requirements of
sections 422 and 424 of the Code. |
| |
|
|
| 13.5 |
In addition to the other terms and conditions of this
Plan (and notwithstanding any other term or condition of this Plan to the
contrary), the following limitations and requirements will apply to an
Incentive Stock Option: |
| |
|
|
|
(a) |
An Incentive Stock Option may be granted only to a U.S.
Employee. |
| |
|
|
|
(b) |
The aggregate Fair Market Value of the Shares (determined
as of the applicable Grant Date) with respect to which Incentive Stock
Options are exercisable for the first time by any U.S. Participant during
any calendar year (pursuant to this Plan and all other plans of the
Corporation and of any Parent or Subsidiary) will not exceed US$ 100,000
or any other limitation subsequently set forth in section 422(d) of the
Code. To the extent that such limitation is exceeded, the options in
excess of such limitation will be treated as Non-qualified Stock
Options. |
| |
|
|
|
(c) |
The Option Price payable upon exercise of an Incentive
Stock Option will be not less than 100% of the Fair Market Value of a
Share on the applicable Grant Date but the Option Price payable upon
exercise of an Incentive Stock Option granted to a U.S. Participant who is
a 10% Shareholder on the applicable Grant Date will be not less than 110%
of the Fair Market Value of a Share on the applicable Grant Date.
Notwithstanding the foregoing, the Board may designate an Option Price
below Fair Market Value of a Share on the Grant Date (or 110% of the Fair
Market Value on the Grant Date, as applicable) if the Option is granted in
substitution for a stock option previously granted by an entity that is
acquired by or merged with the Corporation or a Subsidiary if the number
of Shares covered by the Option and the Option Price are proportionately
adjusted in a manner compliant with the Treasury Regulations issued under
section 424 of the Code. |
| |
|
|
|
(d) |
No Incentive Stock Option may be granted more than 10
years after the earlier of (i) the date on which the Board adopts the Plan
(or the most recent amendment and restatement of the Plan as applicable) or (ii) the date
on which the Shareholders approve the Plan (or the most recent amendment
and restatement of the Plan as applicable). |
- 15 -
| |
(e) |
An Incentive Stock Option will terminate and no longer be
exercisable no later than the earlier of the term set by the Board and 10
years after the applicable Grant Date (or if the Optionee is a 10%
Shareholder, five years after the applicable Grant Date). |
| |
|
|
| |
(f) |
If a U.S. Participant has been granted an Incentive Stock
Option and ceases to be a U.S. Employee, then, to retain its status as an
Incentive Stock Option for U.S. federal tax purposes such Option must be
exercised within the time limits set forth below. Failure to exercise such
Incentive Stock Options within the following time limits will result in
the Option ceasing to be an Incentive Stock Option. The limitations below
are not intended to extend the term of an Option as set forth in the Plan
or any applicable Option Certificate. The limitations below merely reflect
the period during which an Option intended to be an Incentive Stock Option
must be exercised (assuming it otherwise could be exercised during such
period) in order retain Incentive Stock Option tax
treatment. |
| |
(i) |
To retain its Incentive Stock Option status, an Incentive
Stock Option of a U.S. Participant who ceases to be a U.S. Employee due to
Disability must be exercised (to the extent such Incentive Stock Option
was exercisable on the date of termination due to Disability) by such U.S.
Participant (or the U.S. Participant’s Guardian) within one year following
the date of termination due to Disability (but in no event beyond the term
of such Incentive Stock Option). |
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(ii) |
To retain its Incentive Stock Option status, an Incentive
Stock Option of a U.S. Participant who ceases to be a U.S. Employee for
any reason other than the death or Disability of such U.S. Participant,
such Incentive Stock Option must be exercised (to the extent such
Incentive Stock Option was exercisable on the date of termination) by such
U.S. Participant within three months following the date of termination
(but in no event beyond the term of such Incentive Stock
Option). |
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| |
(iii) |
An Incentive Stock Option of a U.S. Participant who
ceases to be a U.S. Employee by reason of death can be exercised by the
estate in accordance with the terms of the Plan and applicable Option
Certificate during the period specified in the Plan or the applicable
Option Certificate without loss of Incentive Stock Option
treatment. |
For greater clarity, under no
circumstances shall the above limitations with respect to the period of time in
which an Incentive Stock Option must be exercised to retain its status as an
Incentive Stock Option be construed to extend the time during which an Option
may be exercised pursuant to its terms as set forth in the Plan or applicable
Option Certificate
If an Incentive Stock Option ceases to
be an Incentive Stock Option by virtue of failure to timely exercise the Option
as described above, but the Option remains exercisable pursuant to its terms, the Option will be
treated as a Non-qualified Stock Option and the provisions set forth in
the Plan or the Option Certificate will apply with respect to the period
during which the Option may be exercised.
- 16 -
| |
|
For purposes of this Subsection 13.6(f), the employment
of a U.S. Participant holding an Incentive Stock Option will not be
considered interrupted or terminated upon (a) sick leave, military leave
or any other leave of absence approved by the Corporation that does not
exceed 90 days in the aggregate but if re-employment upon the expiration
of any such leave is guaranteed by contract or applicable law, such 90 day
limitation will not apply, or (b) a transfer from one office of the
Corporation (or of any Parent or Subsidiary) to another office of the
Corporation (or of any Parent or Subsidiary) or a transfer between the
Corporation and any Parent or Subsidiary. |
| |
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|
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(g) |
An Incentive Stock Option granted to a U.S. Participant
may be exercised during such U.S. Participant’s lifetime only by such U.S.
Participant. |
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|
| |
(h) |
An Incentive Stock Option granted to a U.S. Participant
may not be transferred, assigned, pledged, hypothecated or otherwise
disposed of by such U.S. Participant, except by will or by the laws of
descent and distribution. |
| 13.6 |
If this Plan is not approved by the Shareholders as
required by Section 422 of the Code within 12 months after the date on
which this Plan is adopted by the Board, any Incentive Stock Option
granted under this Plan will automatically be deemed to be a Non-qualified
Stock Option. |
ARTICLE 14
CALIFORNIA OPTIONS
Notwithstanding any other provision of this Plan, the
provisions of this Article 14 shall apply to any Option granted or proposed to
be granted to a resident of California, unless such Option is otherwise exempt
from the applicable securities laws of California (a "California
Option").
| 14.1 |
Maximum Grant and Exercise Periods |
| |
|
|
A California Option may not be exercised more than 10
years after the Grant Date. No California Option shall be granted to such
a Participant after ten years from the earlier of the date of adoption of
the Plan by the Board or the date of shareholder approval. |
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|
| 14.2 |
Post-Termination Exercise Period |
| |
|
|
Unless employment is terminated for cause as defined by
applicable law, the terms of the Plan or Option Certificate or a contract
of employment, the right to exercise a California Option in the event of
termination of employment of the Optionee, to the extent that the Optionee
is entitled to exercise on the date employment terminates, continues until
at least the earlier of the expiration of the term of the California
Option under the Plan or applicable Option Certificate
or: |
- 17 -
| |
(a) |
at least six months from the date of termination, if
termination was caused by death or disability; or |
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|
| |
(b) |
at least 30 days from the date of termination, if
termination was caused by other than death or
disability. |
| 14.3 |
Shareholder Approval. |
| |
|
|
The Plan or any increase in the maximum aggregate number
of common shares issuable thereunder as provided in Section 3.1 (the
"Authorized Shares") shall be approved by a majority of the outstanding
securities of the Corporation entitled to vote by the later of (a) a
period beginning twelve (12) months before and ending twelve (12) months
after the date of adoption thereof by the Board or (b) the first issuance
of any security pursuant to the Plan in the State of California (within
the meaning of Section 25008 of the California Corporations Code). Awards
granted prior to security holder approval of the Plan or in excess of the
Authorized Shares previously approved by the security holders shall become
exercisable no earlier than the date of security holder approval of the
Plan or such increase in the Authorized Shares, as the case may be, and
such Awards shall be rescinded if such security holder approval is not
received in the manner described in the preceding sentence.
Notwithstanding the foregoing, a foreign private issuer, as defined by
Rule 3b-4 of the Securities Exchange Act of 1934, as amended (17 C.F.R.
240.3b-4), shall not be required to comply with this section 14.3 provided
that the aggregate number of persons in California granted options under
all option plans and agreements and issued securities under all purchase
and bonus plans and agreements does not exceed 35. |
ARTICLE 15
AMENDMENTS
| 15.1 |
Amendments to the Plan |
| |
|
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|
|
(a) |
Subject to Section 15.1(b), the Board reserves the right
to amend or modify the Plan as follows at any time if and when it is
deemed advisable in its absolute discretion, subject to the prior written
approval of the TSXV and obtaining shareholder approval, if applicable,
and each Optionee hereby consents to any such change. Such changes
are: |
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|
(i) |
minor changes of a "housekeeping nature" which includes
amendments to eliminate any ambiguity or correct or supplement any
provision contained herein which may be incorrect or incompatible with any
other provision hereof; |
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|
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|
|
(ii) |
amending Options issued under the Plan, including with
respect to the period for exercising options (provided that the period
during which an option is exercisable does not exceed the time period set
out in Section 6.1(a) (subject to Article 12) and that such option is not
held by an Insider), vesting period, exercise method and frequency, Option
Price (provided that such Option is not held by an Insider) and method of
determining the Option Price, assignability and transfer and effect of termination of an Optionee’s
employment or provision of services or cessation of an Optionee’s
directorship; |
- 18 -
| |
|
(iii) |
accelerating vesting or extending the expiration date of
any Option, (provided that such option is not held by an Insider),
provided that the period during which an Option is exercisable does not
exceed 10 years from the date the Option is granted; |
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(iv) |
in order to enable the Corporation to consummate a
Trigger Event; and |
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(v) |
in order to comply with any requirements of all
applicable regulatory authorities or stock exchange. |
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| |
(b) |
Subject to Applicable Law, the following amendments to
the Plan or to Options issued pursuant to the Plan shall not be made
without prior approval of the TSXV and approval of the Shareholders (such
approval to exclude, in certain circumstances, the votes of Insiders in
accordance with the rules of the TSXV): |
| |
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|
| |
|
(i) |
changing the class of Eligible Participants eligible to
participate under the Plan; |
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|
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|
| |
|
(ii) |
a reduction in the Option Price of an Option held by an
Insider of the Corporation; |
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|
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|
(iii) |
an extension of the term of an Option held by an Insider
of the Corporation; |
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|
|
|
| |
|
(iv) |
an increase in the maximum number of Shares issuable
pursuant to Options granted under this Plan; |
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|
| |
|
(v) |
the limitations under this Plan on the number of Options
that may be granted to any one Person or any category of
Persons; |
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|
(vi) |
the maximum term of Options; and |
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|
(vii) |
amendments to this Section 15.1. |
ARTICLE 16
GENERAL
| 16.1 |
Notice |
| |
|
|
Any notice required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given if
delivered by hand, mailed by first class mail, postage prepaid or by
facsimile and addressed to the recipient, and if to the Corporation at its
principal office and if to the Optionee, at the address indicated in the
Option Certificate or at the Optionee’s last known address shown in the
records of the Corporation or any Subsidiary. It is the responsibility of
the Optionee to advise the Corporation of any change in address, and
neither the Corporation nor any Subsidiary shall have any responsibility
for any failure by the Optionee to do so. Any Optionee may change his, her or
its address from time to time by notice in writing to the Corporation. The
Corporation shall give written notice to each Optionee of any change of
the Corporation’s address. Any such notice, if mailed, shall be deemed to
have been received on the fifth business day next following the date of
mailing, if delivered, on the date of delivery and, if sent by facsimile,
on the day following receipt of the facsimile. |
- 19 -
| 16.2 |
Employment and Participation |
| |
|
|
Nothing contained in the Plan nor any action taken
pursuant to the Plan shall confer upon any Optionee any right with respect
to employment, engagement to service or in continuance of employment,
engagement or service with the Corporation or any of its Subsidiaries or
interfere in any way with the right of the Corporation or any of its
Subsidiaries to terminate an Optionee’s employment, engagement or service
at any time or for any reason. The Plan does not give any Optionee any
right to claim any benefit or compensation except to the extent
specifically provided in the Plan. Nothing in the Plan or the Optionee’s
opportunity to participate in the Plan shall be construed to provide the
Optionee with any rights whatsoever to participate or continue to
participate in the Plan, or to compensation or damages in lieu of
continued participation or the right to participate in the Plan upon the
Optionee ceasing to be an Eligible Participant for any reason
whatsoever. |
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|
| 16.3 |
Tax Withholding |
| |
|
|
The Corporation will withhold from any amount of cash
payment (including from any type of employment income or other amounts
otherwise payable to an Optionee) made to an Optionee who exercises or
surrenders Options an amount sufficient to satisfy all federal,
provincial, state and local withholding requirements in respect of income
tax, social security, or similar amounts (the "withholding
requirements"). |
| |
|
|
In the case of an Option pursuant to which Shares may be
delivered and if no cash withholding is performed to satisfy the
withholding requirements, the Board will either require that the Optionee
or other appropriate person remit to the Corporation an amount sufficient
to satisfy the withholding requirements, or make other arrangements
satisfactory to the Board with regard to such requirements, prior to the
delivery of any shares or removal of restrictions thereon, or may permit
the Optionee or such other person to elect at such time and in such manner
as the Board provides to have the Corporation hold back from the Shares to
be delivered, or to deliver to the Corporation, Shares having a value
calculated to satisfy the withholding requirement. The Board may make such
Share withholding mandatory with respect to any Option at the time such
Option is granted to an Optionee. |
| |
|
| 16.4 |
Termination or Suspension of the Plan |
| |
|
|
The Board at any time may suspend or terminate the Plan.
An Option may not be granted under the Plan while the Plan is suspended or
after it is terminated. |
- 20 -
| 16.5 |
Administration |
| |
|
|
|
|
(a) |
The Plan shall be administered by the Board, which shall
be empowered to interpret the Plan from time to time and to adopt, amend
and rescind rules and regulations for carrying out the Plan. Subject to
Applicable Law and certain amendments for which shareholder approval is
required, as set out herein, and the prior written approval of the TSXV,
where applicable, the Board shall have the power to: |
| |
|
|
|
|
|
(i) |
adopt rules and regulations for implementing the
Plan; |
| |
|
|
|
|
|
(ii) |
determine and designate from time to time those Persons
who shall be eligible to participate in the Plan and to whom Options are
to be granted, the number and type of Options to be granted to each such
Optionee, the vesting conditions in connection therewith and, subject to
Article 4 and Applicable Law, the Option Price; |
| |
|
|
|
|
|
(iii) |
determine the time or times when, and the manner in
which, each Option shall be exercisable and the duration of the exercise
term; |
| |
|
|
|
|
|
(iv) |
subject to Article 4 and Applicable Law, change the
Option Price under an Option Certificate; |
| |
|
|
|
|
|
(v) |
interpret and construe the provisions of the
Plan; |
| |
|
|
|
|
|
(vi) |
restrict or limit the Shares and the nature of such
restrictions and limitations, if any; |
| |
|
|
|
|
|
(vii) |
accelerate the exercisability or waive the termination of
any Options, based on such factors as the Board may determine; |
| |
|
|
|
|
|
(viii) |
make exceptions to the Plan in circumstances which the
Board determines; |
| |
|
|
|
|
|
(ix) |
delegate part or all of the authority, powers, discretion
or obligations of the Board pursuant to this Plan to a committee of the
Board; and |
| |
|
|
|
|
|
(x) |
take such other steps as it or they determine to be
necessary or desirable to give effect to the Plan. |
| |
|
|
|
|
(b) |
Any decision or determination made or action taken by the
Board arising out of or in connection with the interpretation and
administration of the Plan shall be final and conclusive, and the
interpretation and construction of any provision of the Plan by the Board
shall be final and conclusive. |
| |
|
|
|
|
(c) |
No member of the Board or any Person acting pursuant to
authority delegated by it, shall be liable for any action or determination
in connection with the Plan made or taken in good faith, and each member
of the Board and each such Person shall be entitled to indemnification
with respect to any such action or determination in the manner provided
for by the Corporation. |
- 21 -
| 16.6 |
No Undertaking or Representation |
| |
|
|
The Optionees, by participating in the Plan, shall be
deemed to have accepted all risks associated with acquiring Shares
pursuant to the Plan. The Corporation hereby informs each Optionee that
the Options and the Optioned Shares are subject to Applicable Laws. The
Corporation, its Subsidiaries and the Board make no undertaking,
representation, warranty or guarantee as to the future value or price, or
as to the continued listing on the TSXV or other market, of any Shares
issued in accordance with the provisions of the Plan, and shall not be
liable to any Optionee for any loss whatsoever resulting from that
Optionee’s participation in the Plan or as a result of the amendment,
suspension or termination of the Plan or any Option. |
| |
|
|
The Optionee (including, if applicable, his legal
personal representative) shall have no legal or equitable rights, claims,
or interest in any specific property or assets of the Corporation or its
Subsidiaries. No assets of the Corporation or its Subsidiaries shall be
held in any way as collateral security for the fulfillment of the
obligations of the Corporation and/or its Subsidiaries, as applicable,
under this Plan. Any and all of the Corporation’s, and if applicable
Subsidiaries’, assets shall be, and remain, the general unpledged,
unrestricted assets of the Corporation and such Subsidiary. |
| |
|
| 16.7 |
Applicable Law |
| |
|
|
This Plan and the provisions hereof shall be governed by
and interpreted and enforced in accordance with the laws of the Province
of Ontario, without recourse to conflict of laws rules, and the laws of
Canada applicable thereto. |
| |
|
| 16.8 |
Other Employee Benefits |
| |
|
|
The amount or value deemed to be or received by an
Optionee as a result of the exercise of an Option or as a result of the
sale of a Share received or purchased upon an exercise of an Option will
not constitute compensation with respect to which any other employee
benefits of that Optionee are determined including, without limitation,
benefits under any bonus, pension, profit-sharing, insurance and salary
continuation plan, nor will it be a basis to calculate any amount of
termination or severance after the Optionee’s Termination Date. In the
event that the employment of the Optionee is terminated by the Corporation
either with or without Cause, and with or without reasonable notice, the
Optionee shall have no rights to any particular grants which have been
made to him other than as set forth in the Plan or other separate written
agreement with the Optionee, and the Optionee will not be entitled to
recover damages nor to be paid any benefits or to recover any compensation
which the Optionee would or may otherwise have been entitled to under the
Plan if the Optionee had remained actively employed by the Corporation.
This Plan document and the Option Certificate represent the entire
agreement between the Optionee and the Corporation with respect to any and
all matters described in it. Neither the Optionee nor the Corporation
relies upon or regards as material, any representations or any writing
that has not been incorporated into the Plan or the Option Certificate or
made part of the Plan or Option Certificate. |
- 22 -
| 16.9 |
Compliance with Applicable Law |
| |
|
|
If any provision of the Plan or any Option contravenes
any Applicable Law, then such provision may in the sole discretion of the
Board be amended to the extent considered necessary or desirable to bring
such provision into compliance therewith. |
| |
|
| 16.10 |
Severability |
| |
|
|
If any provision of this Plan shall be determined by any
court of competent jurisdiction to be illegal, invalid or unenforceable,
that provision shall be severed from this Plan and the remaining
provisions shall continue in full force and effect. |
| |
|
| 16.11 |
Entire Plan |
| |
|
|
This Plan constitutes the entire stock option plan for
Eligible Participants of the Corporation and its Subsidiaries and
supersedes any prior stock option plans for such Eligible
Participants. |
[Signature Page Follows]
EXECUTED and effective as of _________, 2019.
| |
THE FLOWR CORPORATION |
| |
|
| |
Per: Authorized Signing Officer
|
| APPENDIX "A" - STOCK OPTION PLAN, AS
AMENDED |
| |
| |
| SCHEDULE 4.4 |
| FORM OF OPTION CERTIFICATE |
| |
| THE FLOWR CORPORATION |
| AMENDED AND RESTATED |
| STOCK OPTION PLAN |
| |
| STOCK OPTION PLAN |
| OPTION CERTIFICATE |
| (Non-U.S. Participant) |
This Certificate is issued pursuant to the provisions of the
The Flowr Corporation (the "Corporation") stock option plan (the
"Plan") and evidences that [name] is the holder (the
"Optionee") of an option (the "Option") to purchase [number of
shares] common shares (the "Shares") in the capital stock of
the Corporation at a purchase price of CAD$[exercise price] per Share
(the "Option Price").
The Plan provides for the granting of stock options that either
(i) are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 of the United States Internal Revenue Code of 1986, as amended (the
"Code"), or (ii) do not qualify as Section 422 Stock Options
("Non-Qualified Stock Options"). This Option is intended to be a
Non-Qualified Stock Option.
Subject to the provisions of the Plan and the Employment
Agreement (as defined below):
| |
(a) |
the effective date of the grant of the Option is
[enter date] ("Effective Date"); |
| |
(b) |
the Option expires at 5:00 p.m. (EST) on [expiry
date]; and |
| |
(c) |
All unvested Options to purchase Shares granted herein
shall vest [enter vesting schedule]. |
To exercise Options, the Optionee must follow the exercise
procedures established by the Corporation, as described in Article 8 of the
Plan, substantially in the form attached as Appendix "A". Options may be
exercised only to the extent they are vested. Payment of the Option Price for
the Options may be made as provided in Article 8 of the Plan. Upon exercise of
the Options, the Optionee understands that the Corporation may be required to
withhold taxes.
The Option and any Shares issued on the exercise of the Option
may be subject to escrow requirements, resale restrictions and may be subject to
and legended with a four month hold period commencing on the date the Option was
granted pursuant to the rules of the TSX Venture Exchange (the
"Exchange") and applicable securities laws.
This Certificate and the Option evidenced hereby is not
assignable, transferable or negotiable and is subject to the detailed terms and
conditions contained in the Plan, the terms and conditions of which the Optionee
hereby expressly agrees with the Corporation to be bound by. This Certificate is
issued for convenience only and in the case of any dispute with regard to any
matter in respect hereof, the provisions of the Plan and the records of the
Corporation shall prevail.
All terms not otherwise defined in this Certificate shall have
the meanings given to them under the Plan.
Dated this __________ day of _____________, 2019.
THE FLOWR CORPORATION
Per:
__________________________
Authorized Signatory
| APPENDIX "A" |
| THE FLOWR CORPORATION |
| |
| STOCK OPTION PLAN |
| EXERCISE NOTICE |
| TO: |
THE FLOWR CORPORATION (the
"Corporation") |
1. The undersigned (the "Optionee"), being the holder of
an option (the "Option") to purchase ________________ common shares of
the Corporation (the "Shares") at the exercise price of ______ per Share,
hereby irrevocably gives notice, pursuant to the stock option plan of the
Corporation (the "Plan"), of the exercise of the Option to acquire and
hereby subscribes for ____________ of such Shares.
2. The Optionee tenders herewith a certified cheque or bank
draft payable to the Corporation in an amount equal to the aggregate Option
Price of the aforesaid Option, as exercised, and directs the Corporation to
issue a share certificate evidencing said Shares in the name of the Optionee to
be mailed to the Optionee at the following address:
___________________________________
___________________________________
___________________________________
___________________________________
3. By executing this Exercise Notice, the Optionee hereby
confirms that the undersigned has read the Plan and agrees to be bound by the
provisions of the Plan. All terms not otherwise defined in this Exercise Notice
shall have the meanings given to them under the Plan or the attached Option
Certificate.
4. The Optionee is resident in __________________ [name of
state/province].
5. The undersigned Optionee hereby represents, warrants,
acknowledges and agrees that the certificate(s) representing the Shares may be
subject to and legended with a four month hold period commencing on the date the
Options were granted pursuant to the rules of the Exchange and applicable
securities laws.
DATED the ________day of ____________________, __________.
| APPENDIX "B" – RESOLUTION TO APPROVE STOCK
OPTION PLAN |
| |
| ORDINARY RESOLUTION OF THE SHAREHOLDERS OF |
| THE FLOWR CORPORATION |
| |
| TO APPROVE THE STOCK OPTION PLAN
|
BE IT RESOLVED AS AN ORDINARY RESOLUTION OF THE SHAREHOLDERS
THAT:
| 1. |
the stock option plan, as amended (the "SOP") of
The Flowr Corporation (the "Corporation"), attached as Appendix "A"
to the Corporation’s management information circular dated May 9, 2019
(the "Circular"), be and the same is hereby approved; |
| |
|
| 2. |
the maximum number of common shares reserved for issuance
under the SOP shall not exceed, in the aggregate, 10% of the issued and
outstanding (a) common shares of the Corporation and (b) class A preferred
shares in the capital of The Flowr Canada Holdings ULC, a subsidiary of
the Corporation (which are exchangeable for common shares of the
Corporation at any time at the option of the holder) from time to time,
provided that the board of directors of the Corporation shall have the
right, from time to time, to increase such number of common shares of the
Corporation subject to the approval of shareholders of the Corporation and
such regulatory authorities, stock exchanges or over-the-counter markets
having jurisdiction over the affairs of the Corporation. For purposes of
clarity, the maximum number of common shares reserved and set aside for
issue under the SOP and under Flowr’s long-term incentive plan shall not
exceed 20% of the common shares of the Corporation and Flowr Canada
Holdings ULC class A preferred shares; |
| |
|
| 3. |
the board of directors of the Corporation be authorized
to revoke this resolution before it is acted upon without requiring
further approval of the shareholders of the Corporation in that
regard; |
| |
|
| 4. |
future shareholder approval of the SOP will be required
on or before the first anniversary of the date of approval of this
resolution; and |
| |
|
| 5. |
any one director or officer of the Corporation be and is
hereby authorized and directed, for and on behalf of the Corporation, to
perform all such acts and deeds and things and execute, under the
corporate seal of the Corporation or otherwise, deliver and file all
documents and instruments and take such other actions as such director or
officer may determine to be necessary or desirable to implement this
resolution and the matters authorized hereby, such determination to be
conclusively evidenced by the execution and delivery of any such documents
or instruments and the taking of any such
actions. |
APPENDIX "C" – LONG TERM INCENTIVE PLAN
THE FLOWR CORPORATION LONG TERM INCENTIVE PLAN
ARTICLE 1
| 1.1 |
Purpose, Plan Definitions and
Interpretation |
| |
|
|
|
| 1.1.1 |
The purpose of this Plan (as defined below) is to advance
the interests of Flowr (as defined below): |
| |
|
|
|
|
(a) |
through the motivation, attraction and retention of key
employees and directors of Flowr; (b) by |
| |
|
|
|
|
aligning the interests of Participants (as defined below)
with the interests of the shareholders of Flowr generally; and (c) by
furnishing Participants with an additional incentive in their efforts on
behalf of Flowr. |
| |
|
|
|
| 1.1.2 |
In this Plan, the following terms have the following
meanings: |
| |
|
|
|
|
(a) |
"Account" means a Deferred Share Unit Account or a
Restricted Share Unit Account, as applicable; |
| |
|
|
|
|
(b) |
"Applicable Law" includes, without limitation, all
applicable securities, corporate, tax and other laws, rules, regulations,
instruments, notices, blanket orders, decision documents, statements,
circulars, procedures and policies including, without limitation, the
policies, rules and by-laws of the Exchange; |
| |
|
|
|
|
(c) |
"Applicable Withholding Taxes" means any and all
taxes and other source deductions or other amounts which Flowr is required
by Applicable Law to withhold from any amounts paid or credited to a
Participant under the Plan; |
| |
|
|
|
|
(d) |
"Award" means an award of Deferred Share Units
and/or Restricted Share Units under this Plan; |
| |
|
|
|
|
(e) |
"Award Agreement" means the agreement in writing
between Flowr and a Participant evidencing the terms and conditions under
which an Award has been granted under this Plan; |
| |
|
|
|
|
(f) |
"Beneficiary" means, subject to Applicable Law,
any person designated by a Participant to receive any amount payable under
the Plan in the event of a Participant’s death or, failing designation,
the Participant’s estate; |
| |
|
|
|
|
(g) |
"Blackout Period" means the period during which
the relevant Participant is prohibited from trading in any securities of
Flowr due to trading restrictions imposed by Flowr in accordance with its
securities trading policies; |
| |
|
|
|
|
(h) |
"Board" means the board of directors of
Flowr; |
| |
|
|
|
|
(i) |
"Change of Control" means the occurrence of any
one or more of the following events: |
| |
|
|
|
|
|
(i) |
any merger, business combination, consolidation,
amalgamation, arrangement or similar transaction in which voting
securities of Flowr possessing more than fifty percent (50%) of the total
combined voting power of Flowr’s outstanding voting securities are
transferred to a person or group of persons acting jointly or in concert
different from the persons holding those securities immediately prior to
such transaction; |
| |
|
|
|
|
|
(ii) |
any acquisition, directly or indirectly, by a person or
group of persons acting jointly or in concert of beneficial ownership of
voting securities of Flowr possessing more than fifty percent (50%) of the
total combined voting power of Flowr’s outstanding securities; |
| |
|
|
|
|
|
(iii) |
a transaction or event that results in the directors of
Flowr immediately prior to such transaction or event ceasing to constitute
a majority of the Board following such transaction or
event; |
| |
(iv) |
any sale, transfer or other disposition of all or
substantially all of the assets of Flowr in one or a series of related
transactions; |
| |
|
|
| |
(v) |
a liquidation, dissolution or winding-up of Flowr;
or |
| |
|
|
| |
(vi) |
any transaction or series of transactions involving Flowr
or any of its affiliates that the Board in its discretion deems to be a
Change of Control; |
|
|
provided however, that a Change of Control shall not be
deemed to have occurred if such Change of Control results solely from the
issuance, in connection with a bona fide financing or series of financings
by Flowr, of voting securities of Flowr or any rights or entitlements to
acquire voting securities of Flowr which are convertible into or
exchangeable for voting securities. Notwithstanding the foregoing, the
determination of "Change of Control" under any employment agreement
between a Participant and Flowr shall be determined and administered
separately from this Plan; |
| |
|
|
| |
(j) |
"Compensation Committee" means the Human Resources
and Compensation Committee or similar committee of the Board, and if no
such committee is in place, the Audit Committee of the Board; |
| |
|
|
| |
(k) |
"Consultant" has the meaning given to it in the
policies of the Exchange; |
| |
|
|
| |
(l) |
"Date of Grant" of a Unit means the date such Unit
is granted to a Participant under the Plan, as evidenced by an Award
Agreement between Flowr and the Participant; |
| |
|
|
| |
(m) |
"Deferred Share Unit" or "DSU" means a unit
designated as a "Deferred Share Unit" representing the right to receive
one Share in accordance with the terms set forth in the Plan; |
| |
|
|
| |
(n) |
"Deferred Share Unit Account" has the meaning set
forth in Section 4.1.1; |
| |
|
|
| |
(o) |
"Disability" means, in respect of any Participant,
the Participant’s inability, due to debilitating physical incapacity, to
substantially perform his or her duties and responsibilities as an
employee or director of Flowr for 90 consecutive days or a total of 180
days in any consecutive 12 - month period; |
| |
|
|
| |
(p) |
"DSU Final Payment Date" means, with respect to a
Deferred Share Unit granted to a DSU |
| |
|
|
| |
|
Participant, December 31 of the calendar year following
the calendar year in which the DSU Termination Date occurred; |
| |
|
|
| |
(q) |
"DSU Gross Payment" has the meaning set forth in
Section 4.3.2(b)(i); |
| |
|
|
| |
(r) |
"DSU Participant" means a director of Flowr who
has been designated by Flowr for participation in the Plan and who has
agreed to participate in the Plan and to whom Deferred Share Units have or
will be granted hereunder; |
| |
|
|
| |
(s) |
"DSU Termination Date" of a DSU Participant means,
the day that the DSU Participant ceases to be a director of Flowr for any
reason including, without limiting the generality of the foregoing, as a
result of Retirement, death, voluntary or involuntary termination without
cause, or permanent disability; |
| |
|
|
| |
(t) |
"DSU Whole Shares" has the meaning set forth in
Section 4.3.2(c)(i); |
| |
|
|
| |
(u) |
"Eligible Person" means an officer, director,
employee or Consultant of Flowr or any of its subsidiaries; provided,
however, that a Consultant shall not be an Eligible Person unless such
Consultant is an individual that provides bona fide services to Flowr and
such services are not in connection with the offer or sale of securities
in a capital-raising transaction, and do not directly or indirectly
promote or maintain a market for Flowr’s
securities; |
2
| |
(v) |
"Exchange" means the TSX Venture Exchange or, if
the Shares are not then listed and posted for trading on the TSX Venture
Exchange, on such stock exchange in Canada or the United States on which
such Shares are listed and posted for trading as may be selected for such
purpose by the Board; |
| |
|
|
| |
(w) |
"Extension Period" has the meaning set forth in
Section 3.2.2; |
| |
|
|
| |
(x) |
"Fair Market Value" means, with respect to a Share
on any date, the weighted average trading price of the Shares on the
Exchange for the five days on which Shares were traded immediately
preceding that date; provided that if the Shares are not listed for
trading on a stock exchange on such date, the Fair Market Value shall be
the price per Share as the Board, acting in good faith, may
determine; |
| |
|
|
| |
(y) |
"Flowr" or the "Corporation" means The
Flowr Corporation and, where the context requires it, includes its
subsidiaries, affiliates, successors and assigns; |
| |
|
|
| |
(z) |
"Flowr ULC Shares" means the class A preferred
shares in the capital of The Flowr Canada |
| |
|
|
| |
|
Holdings ULC, a subsidiary of Flowr, exchangeable for
common shares in the capital of Flowr at any time at the option of the
holder; |
| |
|
|
| |
(aa) |
"Insider" has the meaning given to that term in
the Securities Act (Ontario), as amended from time to time, and
shall include associates and affiliates of the Insider; |
| |
|
|
| |
(bb) |
"ITA" means the Income Tax Act (Canada),
R.S.C. 1985, c.1 (5th Supp.), including the regulations promulgated
thereunder, as amended from time to time; |
| |
|
|
|
(cc) |
"Leave of Absence" means any period during which,
pursuant to the prior written approval of Flowr or by reason of
Disability, the Participant is considered to be on an approved leave of
absence or on Disability and does not provide any services to
Flowr; |
| |
|
|
| |
(dd) |
"Outstanding Issue" is determined on the basis of
the number of Shares and Flowr ULC Shares that are outstanding immediately
prior to the Share issuance in question; |
| |
|
|
| |
(ee) |
"Participant" means an RSU Participant or a DSU
Participant, as applicable; |
| |
|
|
| |
(ff) |
"Participant Information" has the meaning set
forth in Section 6.6.4(b); |
| |
|
|
| |
(gg) |
"Plan" means this Long Term Incentive Plan, as the
same may be amended or varied from time to time; |
| |
|
|
| |
(hh) |
"Restricted Share Unit" or "RSU" means a
unit designated as a "Restricted Share Unit" representing the right to
receive one Share in accordance with the terms set forth in the
Plan; |
| |
|
|
| |
(ii) |
"Restricted Share Unit Account" has the meaning
set forth in Section 3.1.1; |
| |
|
|
| |
(jj) |
"Retirement" means the normal retirement of the
Participant from employment with or from appointment as a director of
Flowr or the early retirement of the Participant pursuant to any
applicable retirement plan of Flowr, all as determined by the Board,
acting reasonably; |
| |
|
|
| |
(kk) |
"RSU Final Vesting Date" means, with respect to a
Restricted Share Unit granted to an RSU Participant, December 31 of the
calendar year which is three (3) years after the calendar year in which
the service was performed in respect of which the particular Award was
made; |
| |
|
|
| |
(ll) |
"RSU Gross Payment" has the meaning set forth in
Section 3.3.2(b)(i); |
| |
|
|
| |
(mm) |
"RSU Participant" means an Eligible Person who has
been designated by Flowr for participation in the Plan and who has agreed
to participate in the Plan and to whom Restricted Share Units have or will
be granted hereunder; |
3
| |
(nn) |
"RSU Participant Termination Date" of an RSU
Participant means, where the Participant’s employment with or service to
Flowr has been terminated, the Participant’s last day of active employment
with or service to Flowr, regardless of the reason for the termination of
employment or termination of services; |
| |
|
|
|
(oo) |
"RSU Vesting Date" means, with respect to a
Restricted Share Unit granted to an RSU Participant, the date determined
in accordance with Section 3.2; |
| |
|
|
| |
(pp) |
"RSU Whole Shares" has the meaning set forth in
Section 3.3.2(c)(i); |
| |
|
|
| |
(qq) |
"Share" means a common share in the capital of
Flowr; |
| |
|
|
| |
(rr) |
"United States" means the United States of
America, its territories and possessions, any state of the United States
and the District of Columbia; |
| |
|
|
| |
(ss) |
"Units" means Deferred Share Units and/or
Restricted Share Units, as applicable; |
| |
|
|
|
(tt) |
"U.S. Person" has the meaning set forth in Rule
902(k) of Regulation S under the U.S. Securities Act and generally
includes, but is not limited to, any natural person resident in the United
States, any partnership or corporation organized under the laws of the
United States and any estate or trust of which any executor, administrator
or trustee is a U.S. Person; |
| |
|
|
| |
(uu) |
"U.S. Securities Act" means the United States
Securities Act of 1933, as amended; |
| |
|
|
| |
(vv) |
"U.S. Taxpayer" means a Participant whose Award(s)
under the Plan is subject to Section 409A of the United States Internal
Revenue Code of 1986, as amended; |
| |
|
|
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(ww) |
"Vested Deferred Share Units" has the meaning set
forth in Section 4.2.1; |
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|
|
| |
(xx) |
"Vested Restricted Share Units" has the meaning
set forth in Section 3.2.4; and |
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|
|
| |
(yy) |
"Vested Units" mean Vested Deferred Share Units
and/or Vested Restricted Share Units, as
applicable. |
In this Plan, unless the context requires otherwise, words
importing the singular number may be construed to extend to and include the
plural number, and words importing the plural number may be construed to extend
to and include the singular number.
ARTICLE 2
GRANT OF UNITS
| 2.1 |
Grant of Units |
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|
|
| 2.1.1 |
Subject to the terms of the Plan, the Board may make
grants of Deferred Share Units to DSU Participants and Restricted Share
Units to RSU Participants in such number, at such times and on such terms
and conditions, as the Board may, in its sole discretion, determine and
thereafter Flowr shall provide an Award Agreement to each Participant;
provided that: |
| |
|
|
|
(a) |
The maximum number of Shares which may be reserved and
set aside for issue under this Plan in respect of Awards of Deferred Share
Units to DSU Participants and for payments in respect of Awards of
Restricted Share Units to RSU Participants shall not exceed, in the
aggregate, 10% of the Shares and Flowr ULC Shares (being 13,057,421 Shares
of the Corporation), provided that the Board shall have the right, from
time to time, to increase such number subject to the approval of
shareholders of the Corporation and such regulatory authorities, stock
exchanges or over-the- counter markets having jurisdiction over the
affairs of the Corporation. For purposes of clarity, the maximum number of
Shares reserved and set aside for issue under this Plan and under Flowr’s
stock option plan shall not exceed 20% of the Shares and Flowr ULC
Shares; |
4
|
(b) |
Shares that were the subject of Awards that have expired,
been surrendered, lapsed, cancelled or terminated shall thereupon no
longer be in reserve and may once again be subject to an Award granted
under this Plan; and |
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(c) |
under no circumstances shall this Plan, together with all
of Flowr’s other previously established or proposed stock options,
restricted share units, deferred share units, stock option plans, employee
stock purchase plans or any other compensation or incentive mechanisms
involving the issuance or potential issuance of Shares, result, at any
time, in: |
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|
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(i) |
the number of Shares reserved for issuance to Insiders at
any time exceeding 10% of the Outstanding Issue; |
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|
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(i) |
the issuance to Insiders, within a one year period, of a
number of Shares exceeding 10% of the Outstanding Issue; or |
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|
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(ii) |
the issuance to any one Insider, within a one year
period, of a number of Shares exceeding 5% of the Outstanding
Issue. |
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| 2.1.2 |
Awards that are Restricted Share Units may only be
granted to RSU Participants and Awards that are Deferred Share Units may
only be granted to DSU Participants; provided that the participation in
the Plan is voluntary. In determining the Participants to whom Awards may
be granted and the number of Restricted Share Units and Deferred Share
Units to be awarded pursuant to each Award, the Board may (but is not
required to) take into account the following factors, as
applicable: |
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|
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(a) |
compensation data for comparable benchmark positions
among Flowr’s competitors or companies in comparable industries; |
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(b) |
the duties and seniority of the Participant; |
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|
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(c) |
the performance of the Participant in the prior year
relative to the performance measures of Flowr for the relevant performance
period; |
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|
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(d) |
individual and/or departmental contributions and
potential contributions to the success of Flowr; and |
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|
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|
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(e) |
such other factors as the Board shall deem relevant in
connection with accomplishing the purposes of the Plan. |
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|
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| 2.1.3 |
The Board may at any time appoint the Compensation
Committee to, among other things, interpret, administer and implement this
Plan on behalf of the Board in accordance with such terms and conditions
as the Board may prescribe, consistent with this Plan. The Board will take
such steps that in its opinion are required to ensure that the
Compensation Committee has the necessary authority to fulfill its
functions under this Plan. |
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|
|
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| 2.1.4 |
All grants of Deferred Share Units and Restricted Share
Units under this Plan will be evidenced by Award Agreements. Any one
executive officer of Flowr is authorized and empowered to execute and
deliver, for and on behalf of Flowr, an Award Agreement to each
Participant. |
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| 2.2 |
Forfeited Units |
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|
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| 2.2.1 |
For greater certainty, no Participant shall have any
entitlement to receive any payment (whether in cash, Shares or otherwise)
in respect of any Units which have been forfeited under this Plan, by way
of damages, payment in lieu or otherwise. |
5
ARTICLE 3
RESTRICTED SHARE UNITS
| 3.1 |
Restricted Share Unit Grants and
Accounts |
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|
| 3.1.1 |
An Account, to be known as a "Restricted Share Unit
Account", shall be maintained by Flowr for each |
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RSU Participant that has been granted Restricted Share
Units. On each Date of Grant, the Restricted Share Unit Account will be
credited with the Restricted Share Units granted to an RSU Participant on
that date. |
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|
|
| 3.1.2 |
The establishment of the Plan in respect of Restricted
Share Units shall be an unfunded obligation of Flowr. Neither the
establishment of the Plan in respect of Restricted Share Units nor the
grant of any Restricted Share Units or the setting aside of any funds by
Flowr (if, in its sole discretion, it chooses to do so) shall be deemed to
create a trust. Legal and equitable title to any funds set aside for the
purposes of the Plan in respect of Restricted Share Units shall remain in
Flowr and no RSU Participant shall have any security or other interest in
such funds. Any funds so set aside shall remain subject to the claims of
creditors of Flowr present or future. Amounts payable to any RSU
Participant under the Plan in respect of Restricted Share Units shall be a
general, unsecured obligation of Flowr. The right of the RSU Participant
or Beneficiary to receive payment pursuant to the Plan in respect of
Restricted Share Units shall be no greater than the right of other
unsecured creditors of Flowr. |
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| 3.2 |
Vesting |
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|
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| 3.2.1 |
Subject to Sections 3.2.2 and 3.2.3 and unless otherwise
set forth in the applicable Award Agreement that specifies a different
vesting date or dates, a Restricted Share Unit granted under this Plan
shall vest on the dates set forth below, and in either case, each such
date is a "Scheduled Vesting Date": |
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|
|
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(a) |
as to 331/3% of the Restricted Share Units
with respect to such Award, on the first anniversary of the Date of
Grant; |
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|
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(b) |
as to 331/3% of the Restricted Share Units
with respect to such Award, on the second anniversary of the Date of
Grant; |
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|
|
(c) |
as to 331/3% of the Restricted Share Units
with respect to such Award, on the third anniversary of the Date of Grant;
provided; however, that all Restricted Share Units granted under a
particular Award shall vest on or before the RSU Final Vesting Date for
such Restricted Share Units. |
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|
|
| 3.2.2 |
Subject to Section 3.2.3, in the event that a Scheduled
Vesting Date for a Restricted Share Unit granted under this Plan occurs
within a Blackout Period or within five business days after a Blackout
Period, the RSU Vesting Date for such Restricted Share Unit shall be ten
business days after the date the Blackout |
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|
|
Period ends (the "Extension Period"); provided
that if an additional Blackout Period is subsequently imposed by Flowr
during the Extension Period, then such Extension Period shall be deemed to
commence following the end of such additional Blackout Period to enable
the RSU Vesting Date for such Restricted Share Unit to be ten business
days after the end of the last imposed Blackout Period. |
| |
|
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| 3.2.3 |
If any Applicable Law, including any law in respect of a
Blackout Period, would apply at any particular time to prevent payment in
respect of a Restricted Share Unit pursuant to Section 3.3.1 to be made on
or before the RSU Final Vesting Date for such Restricted Share Unit, then,
subject to Applicable Law, the RSU Vesting Date for such Restricted Share
Unit will be accelerated by the Board to ensure that such payment is made
on or before the RSU Final Vesting Date for such Restricted Share
Unit. |
| |
|
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| 3.2.4 |
All Restricted Share Units recorded in an RSU
Participant’s Restricted Share Unit Account which have vested in
accordance with this Plan and which have not been forfeited hereunder by
the Participant on the |
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|
|
|
RSU Participant Termination Date are referred to herein
as "Vested Restricted Share Units". |
| |
|
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| 3.2.5 |
For greater certainty, no RSU Participant nor any
Beneficiary or other person claiming through an RSU Participant shall be
entitled to any benefit hereunder in respect of any Restricted Share Units
that are not Vested Restricted Share Units. |
6
| 3.2.6 |
Notwithstanding anything else herein contained, Flowr
may, in its discretion, at any time permit the acceleration of vesting of
any or all Restricted Share Units, all in the manner and on the terms as
may be authorized by the Board. |
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| 3.3 |
Payment in Respect of Restricted Share
Units |
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|
|
|
| 3.3.1 |
Payment in respect of an Award of a Restricted Share Unit
granted to an RSU Participant shall become payable on each RSU Vesting
Date for such Restricted Share Unit in accordance with Section 3.3.2;
provided, however that, unless otherwise provided under the applicable
Award Agreement, all payments under a particular Award shall be made on or
before the RSU Final Vesting Date for such Restricted Share Unit, and
provided further that all payments under a particular Award of a U.S.
Taxpayer shall me made on or before December 31st of the year
in which the Scheduled Vesting Date (determined without regard to Section
3.2.2) occurs or, if later, by the date that is two and one-half (2 ½)
months after such Scheduled Vesting Date. |
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| 3.3.2 |
On each RSU Vesting Date in respect of an Award of
Restricted Share Units granted to an RSU Participant: |
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|
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|
|
(a) |
Unless the decision has already been made in the Award
Agreement, on the RSU Vesting Date, Flowr shall decide, in its sole
discretion, to make all payments in respect of an Award of a Restricted
Share Unit to an RSU Participant in cash, in Shares issued from treasury,
or in a combination of cash and Shares issued from treasury, in the manner
described in this Section 3.3.2; |
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|
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|
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(b) |
where Flowr decides to make all payments in respect of an
Award of a Restricted Share Unit to an RSU Participant in cash, Flowr
shall pay to the RSU Participant a cash amount equal to the amount by
which: |
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|
|
(i) |
the product that results by multiplying: (A) the number
of Restricted Share Units credited to the RSU Participant’s Restricted
Share Unit Account as at the RSU Vesting Date that are Vested Restricted
Share Units; by (B) the Fair Market Value of a Share on the RSU Vesting
Date (such amount referred to as the "RSU Gross Payment");
exceeds |
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(ii) |
all Applicable Withholding Taxes in respect of such
payment; |
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|
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(c) |
where Flowr decides to make all payments in respect of an
Award of a Restricted Share Unit to an RSU Participant in Shares issued
from treasury, Flowr shall: |
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|
|
(i) |
determine the number of whole Shares that the RSU
Participant has the right to receive under such Award (the "RSU Whole
Shares") as the quotient (rounded down to the nearest whole number)
obtained by dividing: (A) the RSU Gross Payment; by (B) the Fair Market
Value of a Share determined on the RSU Vesting Date; and |
| |
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(ii) |
subject to Section 3.3.2(e), on the RSU Vesting Date, or
such other date as set out in the Award Agreement, issue that number of
Shares from treasury that is equal to the number of RSU Whole Shares
determined under Section 3.3.2(c)(i); |
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|
(d) |
where Flowr decides to make payments in respect of an
Award of a Restricted Share Unit to an RSU Participant in a combination of
cash and Shares issued from treasury, Flowr shall: |
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|
(i) |
issue from treasury a number of Shares not to exceed the
number that would be issued if Section 3.3.2(c) applied; and |
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|
(ii) |
pay to the RSU Participant a cash amount equal to the
amount by which the RSU Gross Payment exceeds the aggregate Fair Market
Value on the date of issuance of the Shares issued from treasury, net of
any Applicable Withholding Taxes; and |
7
|
(e) |
where Flowr decides to make any payments in respect of an
Award of a Restricted Share Unit to an RSU Participant in Shares issued
from treasury, Flowr shall have the right to withhold, or to require the
RSU Participant to remit to Flowr in advance of the issue of such Shares,
an amount sufficient to satisfy any Applicable Withholding Taxes. For
greater certainty, Flowr may decide in its sole discretion to satisfy any
Applicable Withholding Taxes by withholding from the Shares otherwise
deliverable to the RSU Participant such number of Shares having a value,
determined as of the date that the withholding tax obligation arises,
equal to the amount of the total withholding tax obligation. |
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|
|
| 3.3.3 |
In the event of the acceleration of an Award of
Restricted Share Units pursuant to Section 5.2.1(d), the payment
provisions of this Section 3.3 shall apply. |
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|
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| 3.4 |
Dividends Paid on Shares |
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|
|
| 3.4.1 |
Subject to Section 3.4.2, in the event Flowr pays a
dividend on the Shares subsequent to the granting of an Award, the number
of Restricted Share Units relating to such Award (that are not Vested
Restricted Share Units) (the "Original RSU") shall be increased by
an amount equal to: |
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|
|
|
(a) |
the product of: (i) the aggregate number of Original RSUs
held by the RSU Participant on the record date for such dividend; and (ii)
the per Share amount of such dividend (or, in the case of any dividend
payable in property other than cash, the per Share fair market value of
such property as determined by the Board), divided by |
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|
|
(b) |
the Fair Market Value of a Share calculated as of the
date that is three days prior to the record date for the
dividend. |
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|
|
| 3.4.2 |
In the event that Flowr pays a dividend on the Shares in
additional Shares, the number of Original RSUs shall be increased by a
number equal to the product of: (a) the aggregate number of Original RSUs
held by the RSU Participant on the record date of such dividend; and (b)
the number of Shares (including any fraction thereof) payable as a
dividend on one Share, and in such circumstance the Participant’s
Restricted Share Unit Account shall be credited to reflect such
increase. |
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|
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| 3.4.3 |
Additional RSUs credited pursuant to this Section 3.4
will become vested and will be settled and paid out at the same time as
the underlying Original RSUs to which they relate. |
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| 3.5 |
Termination of Employment or Leave of
Absence |
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|
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| 3.5.1 |
Subject to Section 3.2.1 and the provisions of any
applicable Award Agreement, upon the RSU Participant ceasing to be an
Eligible Person due to involuntary termination with cause or voluntary
termination by the |
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|
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RSU Participant, all Restricted Share Units previously
credited to such RSU Participant’s Restricted Share |
| |
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|
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Unit Account which did not become Vested Restricted Share
Units on or prior to the RSU Participant Termination Date shall be
terminated and forfeited as of the RSU Participant Termination
Date. |
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|
|
| 3.5.2 |
Upon the RSU Participant ceasing to be an Eligible Person
by reason of involuntary termination without cause, death, total or
permanent long-term disability (as reasonably determined by the Board) or
Retirement of the RSU Participant, any Restricted Share Units previously
credited to such RSU Participant’s Restricted |
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|
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Share Unit Account which did not become Vested Restricted
Share Units on or prior to the RSU Participant Termination Date, shall
continue to vest in accordance with their terms and pursuant to Section
3.2.1 or, at the sole discretion of the Board, be terminated and forfeited
as of the RSU Participant Termination Date. |
| |
|
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| 3.5.3 |
Upon an RSU Participant commencing a Leave of Absence,
unless otherwise determined by the Board in its sole discretion, any
Restricted Share Units previously credited to such RSU Participant’s
Restricted Share Unit Account shall continue to vest in accordance with
their terms pursuant to Section 3.2.1. |
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|
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| 3.5.4 |
If the relationship of the RSU Participant with Flowr is
terminated for any reason prior to the vesting of the Restricted Share
Units, whether or not such termination is with or without notice, adequate
notice or legal notice or is with or without legal or just cause, the RSU
Participant’s rights shall be strictly limited to
those provided for in this Section 3.5, or as
otherwise provided in the applicable Award Agreement between the RSU Participant
and Flowr. Unless otherwise specifically agreed to in writing by Flowr, the RSU
Participant shall have no claim to, or in respect of, any Restricted Share Units
which may have or would have vested had due notice of termination of employment
been given, nor shall the RSU Participant have any entitlement to damages or
other compensation or any claim for wrongful termination or dismissal in respect
of any Restricted Share Units or loss of profit or opportunity which may have or
would have vested or accrued to the RSU Participant if such wrongful termination
or dismissal had not occurred or if due notice of termination had been given.
This provision shall be without prejudice to the RSU Participant’s rights to
seek compensation for lost employment income or lost employment benefits (other
than those accruing under or in respect of the Plan and any Restricted Share
Units) in the event of any alleged wrongful termination or dismissal. |
8
ARTICLE 4
DEFERRED SHARE UNITS
| 4.1 |
Deferred Share Unit Grants and Accounts |
| |
|
| 4.1.1 |
An Account, to be known as a "Deferred Share Unit
Account", shall be maintained by Flowr for each DSU Participant that
has been granted Deferred Share Units. On each Date of Grant, the Deferred
Share Unit Account will be credited with the Deferred Share Units granted
to a DSU Participant on that date. |
| |
|
| 4.1.2 |
The establishment of the Plan in respect of Deferred
Share Units shall be an unfunded obligation of Flowr. Neither the
establishment of the Plan in respect of Deferred Share Units nor the grant
of any Deferred Share Units or the setting aside of any funds by Flowr
(if, in its sole discretion, it chooses to do so) shall be deemed to
create a trust. Legal and equitable title to any funds set aside for the
purposes of the Plan in respect of Deferred Share Units shall remain in
Flowr and no DSU Participant shall have any security or other interest in
such funds. Any funds so set aside shall remain subject to the claims of
creditors of Flowr present or future. Amounts payable to any DSU
Participant under the Plan in respect of Deferred Share Units shall be a
general, unsecured obligation of Flowr. The right of the DSU Participant
or Beneficiary to receive payment pursuant to the Plan in respect of
Deferred Share Units shall be no greater than the right of other unsecured
creditors of Flowr. |
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|
| 4.2 |
Vesting |
| |
|
| 4.2.1 |
All Deferred Share Units recorded in a DSU Participant’s
Deferred Share Unit Account shall vest on the DSU Participant’s DSU
Termination Date and shall be referred to herein as "Vested Deferred
Share Units" as of that date, unless otherwise determined by the Board
in its sole discretion. |
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|
| 4.2.2 |
DSU Participants will not have any right to receive any
benefit under the Plan in respect of a Deferred Share Unit until the DSU
Termination Date. |
| |
|
| 4.3 |
Payment in Respect of Deferred Share
Units |
| |
|
| 4.3.1 |
Payment in respect of an Award of a Deferred Share Unit
granted to a DSU Participant shall become payable on the DSU Termination
Date of the DSU Participant in the amount and in the manner referred to in
Section 4.3.2. All payments to be made by Flowr in respect of a Deferred
Share Unit in Shares issued from treasury shall occur on the DSU
Termination Date and all payments to be made by Flowr in respect of a
Deferred Share Unit in cash shall occur on or before the DSU Final Payment
Date for such Deferred Share Unit. Notwithstanding the foregoing, any
payment in respect to an award of a Deferred Share Unit granted to a U.S.
Taxpayer shall be paid as soon as practicable following the DSU
Termination Date in accordance with Schedule A hereto, but in no case
later than December 31st of the year in which such DSU
Termination Date occurs, or if later the date that is two and one-half (2
½) months after such DSU Termination Date. |
| |
|
| 4.3.2 |
On the DSU Termination Date in respect of an Award of
Deferred Share Units granted to a DSU Participant: |
9
|
(a) |
Flowr shall decide, in its sole discretion, to make all
payments in respect of an Award of a Deferred Share Unit to a DSU
Participant in cash, in Shares issued from treasury, or in a combination
of cash and Shares issued from treasury, in the manner described in this
Section 4.3.2; |
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(b) |
where Flowr decides to make all payments in respect of an
Award of a Deferred Share Unit to a DSU Participant in cash, Flowr shall
pay to the DSU Participant a cash amount equal to the amount by
which: |
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|
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(i) |
the product that results by multiplying: (A) the number
of Deferred Share Units credited to the DSU Participant’s Deferred Share
Unit Account as at the DSU Termination Date that are Vested Deferred Share
Units; by (B) the Fair Market Value of a Share on the |
| |
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|
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DSU Termination Date (such amount referred to as the
"DSU Gross Payment"); exceeds |
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(ii) |
all Applicable Withholding Taxes in respect of such
payment; |
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|
|
(c) |
where Flowr decides to make all payments in respect of an
Award of a Deferred Share Unit to a DSU Participant in Shares issued from
treasury, Flowr shall: |
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|
|
|
|
|
(i) |
determine the number of whole Shares that the DSU
Participant has the right to receive under such Award (the "DSU Whole
Shares") as the quotient (rounded down to the nearest whole number)
obtained by dividing: (A) the DSU Gross Payment; by (B) the Fair Market
Value of a Share determined on DSU Termination Date; and |
| |
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(ii) |
subject to Section 4.3.2(e), issue that number of Shares
from treasury that is equal to the number of DSU Whole Shares determined
under Section 4.3.2(c)(i); |
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(d) |
where Flowr decides to make payments in respect of an
Award of a Deferred Share Unit to a DSU Participant in a combination of
cash and Shares issued from treasury, Flowr shall: |
| |
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|
|
(i) |
issue from treasury a number of Shares not to exceed the
number that would be issued if Section 4.3.2(c) applied; and |
| |
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|
|
(ii) |
pay to the DSU Participant a cash amount equal to the
amount by which the DSU Gross Payment exceeds the aggregate Fair Market
Value on the date of issuance of the Shares issued from treasury, net of
any Applicable Withholding Taxes; and |
| |
|
|
|
|
(e) |
where Flowr decides to make any payments in respect of an
Award of a Deferred Share Unit to a DSU Participant in Shares issued from
treasury, Flowr shall have the right to withhold, or to require the DSU
Participant to remit to Flowr in advance of the issuance of such Shares,
an amount sufficient to satisfy any Applicable Withholding Taxes. For
greater certainty, Flowr may decide in its sole discretion to satisfy any
Applicable Withholding Taxes by withholding from the Shares otherwise
deliverable to the DSU Participant such number of Shares having a value,
determined as of the date that the withholding tax obligation arises,
equal to the amount of the total withholding tax obligation. |
| |
|
|
|
| 4.3.3 |
In the event of the acceleration of an Award of Deferred
Share Units pursuant to Section 5.2.1(d), the payment provisions of this
Section 4.3 shall apply. |
| |
|
|
|
| 4.3.4 |
For greater certainty, no amount will be paid to, or in
respect of, a DSU Participant under the Plan or pursuant to any other
arrangement, and no other Deferred Share Units will be granted to such DSU
Participant to compensate for a reduction in the fair market value of a
Share, nor will any other form of benefit be conferred upon, or in respect
of, a DSU Participant for such purpose. |
10
| 4.4 |
Dividends Paid on Shares |
| |
|
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| 4.4.1 |
Subject to Section 4.4.2, in the event Flowr pays a
dividend on the Shares subsequent to the granting of an Award, the number
of Deferred Share Units relating to such Award (that are not Vested
Deferred Share Units) (the "Original DSU") shall be increased by an
amount equal to: |
| |
|
|
|
(a) |
the product of: (i) the aggregate number of Original DSUs
held by the DSU Participant on the record date for such dividend; and :
(ii) the per Share amount of such dividend (or, in the case of any
dividend payable in property other than cash, the per Share fair market
value of such property as determined by the Board); divided by |
| |
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|
|
(b) |
the Fair Market Value of a Share calculated as of the
date that is three days prior to the record date for the
dividend. |
| |
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|
|
(c) |
Additional DSUs credited pursuant to this Section 4.4
will be settled and paid out at the same time as the underlying Original
DSUs to which they relate. |
| |
|
|
| 4.4.2 |
In the event that Flowr pays a dividend on the Shares in
additional Shares, the number of Original DSUs shall be increased by a
number equal to the product of: (a) the aggregate number of Original DSUs
held by the DSU Participant on the record date of such dividend; and (b)
the number of Shares (including any fraction thereof) payable as a
dividend on one Share, and in such circumstance the Participant’s
Deferred |
| |
|
|
|
Share Unit Account shall be credited to reflect such
increase. |
ARTICLE 5
ADJUSTMENTS AND CHANGE OF
CONTROL
| 5.1 |
Adjustments |
| |
|
|
| 5.1.1 |
Appropriate adjustments to this Plan and to Awards shall
be made, and shall be conclusively determined, by the Board to give effect
to adjustments in the number of Shares resulting from subdivisions,
consolidations, substitutions, reorganizations or reclassifications of the
Shares, or changes in the capital of Flowr (including any such changes
resulting from a Change of Control). Any dispute that arises at any time
with respect to any such adjustment will be conclusively determined by the
Board, and any such determination will be binding on Flowr, the
Participant and all other affected parties. |
| |
|
|
| 5.2 |
Change of Control |
| |
|
|
| 5.2.1 |
In the event of a Change of Control or proposed Change of
Control: |
| |
|
|
|
(a) |
the Board shall, in an appropriate and equitable manner,
determine any adjustment to the number and type of Shares (or other
securities or other property) that thereafter shall be made the subject of
and issuable as payment under Awards; |
| |
|
|
|
(b) |
the Board shall, in an appropriate and equitable manner,
determine the number and type of Shares (or other securities or other
property) subject to and issuable as payment under outstanding
Awards; |
| |
|
|
|
(c) |
the Board shall, in an appropriate and equitable manner,
determine the acquisition price with respect to settlement or payment of
any Award; provided, however, that the number of Shares covered by any
Award or to which such Award relates shall always be a whole
number; |
| |
|
|
|
(d) |
the Board shall, in its sole discretion, determine the
manner in which all unvested Awards granted under this Plan will be
treated including, without limitation, requiring the acceleration of the
time for the vesting of such Awards by the Participants and the time for
the expiry of such Awards; |
| |
|
|
|
(e) |
the Board or any company which is or would be the
successor to Flowr or which may issue securities in exchange for Shares
upon the occurrence of a Change of Control may offer any Participant the
opportunity to obtain a new or replacement award for securities into which
the Shares are changed or are convertible or exchangeable, on
a basis proportionate to the number of Shares issuable under the Award
(and otherwise substantially upon the terms of the Award being replaced,
or upon terms no less favourable to the Participant) including, without
limitation, the periods during which the Award may be exercised and expiry
dates; and in such event, the Participant shall, if he or she accepts such
offer, be deemed to have released his or her Award and such Award shall be
deemed to have lapsed and be cancelled; and |
11
|
(f) |
the Board may convert or exchange for or into any other
security or any other property or cash, any Award that is still capable of
being exercised, upon giving to the Participant to whom such Award has
been granted at least 30 days’ written notice of its intention to convert
or exchange such Award, and during such period of notice, the Award, to
the extent it has not been exercised, may be exercised by the Participant
without regard to any vesting conditions attached thereto, and on the
expiry of such period of notice, the unexercised portion of the Award
shall lapse and be cancelled. |
|
Subsections (a) through (f) of this Section 5.2.1 may be
utilized independently of, successively with, or in combination with each
other and Section 5.1.1 and nothing therein contained shall be construed
as limiting or affecting the ability of the Board to deal with Awards in
any other manner. All determinations by the Board under this Article 5
will be final, binding and conclusive for all purposes. |
| |
|
| 5.2.2 |
The Board may, in its sole discretion, cancel any or all
outstanding Awards and pay to the holders of any such Awards, in cash, the
value of such Awards based upon the price per Share received or to be
received by other shareholders of Flowr in the event of a Change of
Control. |
| |
|
| 5.2.3 |
The grant of any Awards under this Plan will in no way
affect Flowr’s right to adjust, reclassify, reorganize or otherwise change
or exchange its capital or change its business structure, to complete a
Change of Control or to merge, amalgamate, reorganize, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets or engage in any like transaction. |
| |
|
| 5.2.4 |
No adjustment or substitution provided for in this
Article 5 will require Flowr to issue a fractional share in respect of any
Awards and the total substitution or adjustment with respect to each Award
will be limited accordingly. |
ARTICLE 6
ADMINISTRATION
| 6.1 |
Administration |
| |
|
| 6.1.1 |
The Plan shall be administered by Flowr in accordance
with the provisions hereof. All costs and expenses of administering the
Plan will be paid by Flowr. Flowr may, from time to time, establish
administrative rules and regulations and prescribe forms or documents
relating to the operation of the Plan as it may deem necessary to
implement or further the purpose of the Plan and amend or repeal such
rules and regulations or forms or documents. In administering the Plan,
the Board or the Compensation Committee may seek recommendations from the
Chairman, Chief Executive Officer or Chief Financial Officer of Flowr or
such other advisors as they deem appropriate. The Board may also delegate
to the Compensation Committee or any director, officer or employee of
Flowr such duties and powers relating to the Plan as it may see fit. Flowr
may also appoint or engage a trustee, custodian or administrator to
administer or implement the Plan. |
| |
|
| 6.1.2 |
Flowr shall keep or cause to be kept such records and
accounts as may be necessary or appropriate in connection with the
administration of the Plan and the discharge of its duties. At such times
as Flowr shall determine, Flowr shall furnish the Participant with a
statement setting forth the details of his or her Units including Date of
Grant and the Vested Units held by each Participant. |
| |
|
| 6.1.3 |
(a) Any notice, statement, certificate or other
instrument required or permitted to be given to a Participant or any
person claiming or deriving any rights through him or her shall be given
by: |
12
| |
(i) |
delivering it personally to the Participant or to the
person claiming or deriving rights through him or her, as the case may
be; |
| |
|
|
| |
(ii) |
other than in the case of a delivery of Shares, sending
it to the Participant via facsimile or similar means of electronic
transmission to the facsimile or e-mail address which is maintained for
the Participant in Flowr’s personnel records; or |
| |
|
|
| |
(iii) |
mailing it postage paid (provided that the postal service
is then in operation) or delivering it to the address which is maintained
for the Participant in Flowr’s personnel
records. |
| |
(b) |
Any notice, statement, certificate or other instrument
required or permitted to be given to Flowr shall be given by mailing it
postage paid (provided that the postal service is then in operation),
delivering it to Flowr at its principal address, or (other than in the
case of a payment) sending it by means of facsimile or similar means of
electronic transmission, to the attention of the Chief Financial Officer
of Flowr. |
| |
|
|
| |
(c) |
Any notice, statement, certificate or other instrument
referred to in Section 6.1.3(a) or 6.1.3(b), if delivered, shall be deemed
to have been given or delivered on the date on which it was delivered, if
mailed (provided that the postal service is then in operation), shall be
deemed to have been given or delivered on the third business day following
the date on which it was mailed and if by facsimile or similar means of
electronic transmission, on the next business day following
transmission. |
| 6.2 |
Amendments |
| |
|
| 6.2.1 |
Flowr retains the right without shareholder approval
to: |
| |
(a) |
amend the Plan or any Restricted Share Units or Deferred
Share Units from time to time to |
| |
|
|
|
|
|
(i) |
make amendments of a grammatical, typographical, clerical
and administrative nature and any amendments required by a regulatory
authority or to comply or conform with Applicable Laws, |
| |
|
|
|
| |
|
(ii) |
change vesting provisions of the Plan or any Restricted
Share Units or Deferred Share Units, |
| |
|
|
|
| |
|
(iii) |
make any other amendments of a non-material nature, (iv)
make amendments to the definition |
| |
|
|
|
| |
|
of "DSU Participant" and/or "RSU Participant" or the
eligibility requirements of participating in this Plan, where such
amendment would not have the potential of broadening or increasing Insider
participation, (v) make amendments to the manner in which Participants may
elect to participate in the Plan, (vi) make any amendments to the
provisions concerning the effect of the termination of a Participant’s
employment or services on such Participant’s status under this Plan, or
(vii) make any amendment which is intended to facilitate the
administration of this Plan; or |
| |
|
|
|
| |
(b) |
suspend, terminate or discontinue the terms and
conditions of the Plan and the Restricted Share Units and Deferred Share
Units granted hereunder by resolution of the Board, provided
that: |
| |
|
|
|
| |
|
(i) |
no such amendment to the Plan shall cause the Plan in
respect of Restricted Share Units to cease to be a plan described in
paragraph (k) of the definition of "salary deferral arrangement" in
subsection 248(1) of the ITA or any successor to such provision; |
| |
|
|
|
| |
|
(ii) |
no such amendment to the Plan shall cause the Plan in
respect of Deferred Share Units to cease to be a plan described in
regulation 6801(d) of the ITA or any successor to such provision;
and |
| |
|
|
|
| |
|
(iii) |
any amendment shall be subject to the prior consent of
any applicable regulatory bodies, including the Exchange, as may be
required. |
| 6.2.2 |
Any amendment to the Plan made in accordance with Section
6.2.1(a)(ii) or 6.2.1(b) shall take effect only with respect to Awards
granted after the effective date of such amendment, provided that it may
apply to any outstanding Award with the mutual consent of Flowr and the
Participants to whom such Awards have been
granted. |
13
| 6.2.3 |
Any amendment to the Plan other than as described in
Section 6.2.1 shall require the approval of the shareholders of Flowr
given by the affirmative vote of a simple majority of the common shares
(or, where required, "disinterested" shareholder approval) represented at
a meeting of the shareholders of Flowr at which a motion to approve the
Plan or an amendment to the Plan is presented. Specific amendments
requiring shareholder approval include: |
| |
|
|
|
(a) |
to increase the number of Shares reserved under the
Plan; |
| |
|
|
|
(b) |
to change the definition of RSU Participants or DSU
Participants or the eligibility requirements of participating in this
Plan, where such amendment would have the potential of broadening or
increasing Insider participation; |
| |
|
|
|
(c) |
the extension of any right of a Participant under this
Plan beyond the date on which such right would originally have
expired; |
| |
|
|
|
(d) |
to permit RSUs or DSUs to be transferred other than by
testamentary disposition or in accordance with the laws governing the
devolution of property in the event of death; |
| |
|
|
|
(e) |
to permit awards other than RSUs and DSUs under the Plan;
and |
| |
|
|
|
(f) |
to amend this Section 6.2.3 so as to increase the ability
of the Board to amend the Plan without shareholder approval. |
| |
|
|
| 6.3 |
Currency |
| |
|
|
| 6.3.1 |
All payments and benefits under the Plan shall be
determined and paid in the lawful currency of Canada. |
| |
|
|
| 6.4 |
Beneficiaries and Claims for Benefits |
| |
|
|
| 6.4.1 |
Subject to the requirements of Applicable Law, a
Participant shall designate in writing a Beneficiary to receive any
benefits that are payable under the Plan upon the death of such
Participant. The Participant may, subject to Applicable Law, change such
designation from time to time. Such designation or change shall be in such
form and executed and filed in such manner as the Board may from time to
time determine |
| |
|
|
| 6.5 |
Representations and Covenants of
Participants |
| |
|
|
| 6.5.1 |
Each Award Agreement will contain representations and
covenants of the Participant that: |
| |
|
|
|
(a) |
in respect of an RSU Participant, the RSU Participant is
an Eligible Person; |
| |
|
|
|
(b) |
in respect of a DSU Participant, the DSU Participant is a
director; |
| |
|
|
|
(c) |
the Participant has not been induced to enter into such
Award Agreement by the expectation of employment or continued employment
or appointment or continued appointment with Flowr; |
| |
|
|
|
(d) |
the Participant is aware that the grant of the Award is
exempt from the obligation under applicable Canadian securities laws to
file a prospectus qualifying the distribution of the Shares to be
distributed thereunder under any applicable Canadian securities laws and
that any Shares issued under the Plan or an Award may contain required
restrictive legends; and |
| |
|
|
|
(e) |
upon vesting of an Award which is settled in Shares, the
Participant or their legal representative, as the case may be, will prior
to and upon any sale or disposition of any Shares received pursuant to an
Award, comply with all Applicable Law. |
| |
|
|
| 6.6 |
General |
| |
|
|
| 6.6.1 |
The transfer of an employee among Flowr and its
subsidiaries shall not be considered a termination of employment for the
purposes of the Plan, so long as such Participant continues to be an
Eligible Person. |
14
| 6.6.2 |
The determination by the Board of any question which may
arise as to the interpretation or implementation of the Plan or any of the
Units granted hereunder shall be final and binding on all Participants and
other persons claiming or deriving rights through any of them. |
| |
|
|
| 6.6.3 |
The Plan shall enure to the benefit of and be binding
upon Flowr and its successors and assigns. The interest of any Participant
under the Plan in any Unit shall not be transferable or alienable by the
Participant either by pledge, assignment or in any other manner
whatsoever, otherwise than by testamentary disposition or in accordance
with the laws governing the devolution of property in the event of death;
and after the Participant’s lifetime shall enure to the benefit of and be
binding upon the Participant’s Beneficiary. |
| |
|
|
| 6.6.4 |
(a) |
Flowr’s grant of any Units hereunder is subject to
compliance with Applicable Law. |
| |
|
|
|
(b) |
As a condition of participating in the Plan, each
Participant agrees to comply with all such Applicable Law and agrees to
furnish to Flowr all information and undertakings as may be required to
permit compliance with such Applicable Law. Each Participant shall provide
the Board with all information (including personal information) the Board
requires in order to administer the |
| |
|
|
|
|
Plan (the "Participant Information"). |
| |
|
|
|
(c) |
Flowr may, without amending the Plan, modify the terms of
Restricted Share Units and Deferred Share Units granted to Participants
who provide services to Flowr from outside of Canada in order to comply
with the Applicable Law of such foreign jurisdictions. Any such
modification to the terms of Restricted Share Units or Deferred Share
Units with respect to a particular Participant shall be reflected in the
Award Agreement for such Participant. |
| |
|
|
|
(d) |
The terms of the Plan and Restricted Share Units and
Deferred Share Units granted hereunder to Participants subject to taxation
on employment income under the United States Internal Revenue Code
of 1986, as amended, shall be determined by taking into consideration
the provisions applicable to such persons as set forth in Schedule "A"
hereto. |
| |
|
|
|
(e) |
The Board may from time to time transfer or provide
access to Participant Information to a third party service provider for
purposes of the administration of the Plan provided that such service
providers will be provided with such information for the sole purpose of
providing services to the Board in connection with the operation and
administration of the Plan. The Board may also transfer and provide access
to Participant Information to Flowr for purposes of preparing financial
statements or other necessary reports and public filings and facilitating
payment or reimbursement of Plan expenses. By participating in the Plan,
each Participant acknowledges that Participant Information may be so
provided and agrees and consents to its provision on the terms set forth
herein. Flowr shall not disclose Participant Information except (i) as
contemplated above in this Section 6.6.4(e) and in Section 6.6.8, (ii) in
response to regulatory filings or other requirements for the information
by a governmental authority or regulatory body, or (iii) for the purpose
of complying with a subpoena, warrant or other order by a court, person or
body having jurisdiction over Flowr to compel production of the
information. |
| |
|
|
| 6.6.5 |
Nothing herein or otherwise shall be construed so as to
confer on any Participant any rights as a shareholder of Flowr with
respect to any Shares reserved for the purpose of any Award, including for
greater certainty, no Award shall confer any entitlement as to dividends
(except as set forth herein) or voting rights on a Participant. |
| |
|
|
| 6.6.6 |
Neither designation as a Participant nor the grant of any
Units to any Participant entitles any Participant to any additional grant
of any Units under the Plan. Neither the Plan nor any action taken
hereunder shall interfere with the right of Flowr to terminate a
Participant’s employment, if applicable, at any time. Neither any period
of notice, if any, nor any payment in lieu thereof, upon termination of
employment shall be considered as extending the period of employment for
the purposes of the Plan. |
| |
|
|
| 6.6.7 |
Participation in the Plan shall be entirely voluntary and
any decision not to participate shall not affect any person’s relationship
with Flowr. |
15
| 6.6.8 |
By participating in the Plan, the Participant agrees,
acknowledges and consents to: |
| |
|
|
|
(a) |
the disclosure to Flowr and applicable directors,
officers, employees, consultants, representatives and agents of Flowr, the
Exchange and all tax, securities and other regulatory authorities of all
Participant Information; and |
| |
|
|
|
(b) |
the collection, use and disclosure of such personal
information by the persons described in (a) above of all Participant
Information in accordance with their requirements, including the provision
to third party service providers, from time to time. |
| |
|
|
| 6.6.9 |
Nothing contained in this Plan will restrict or limit or
be deemed to restrict or limit the right or power of the Board in
connection with any allotment and issuance of Shares which are not
allotted and issued under this Plan including, without limitation, with
respect to other compensation or incentive arrangements. |
| |
|
|
| 6.6.10 |
This Plan is established under the laws of the Province
of Ontario and the rights of all parties and the construction of each and
every provision of the Plan and any Units granted hereunder shall be
construed according to the laws of the Province of
Ontario. |
ARTICLE 7
UNITED STATES SECURITIES LAWS
| 7.1.1 |
Units shall not be granted under the Plan, and Shares
shall not be issued with respect to such Units, unless the grant of the
Units or the issuance of such Shares, respectively, shall comply with all
relevant provisions of law, including, without limitation, any applicable
state securities laws, the U.S. Securities Act, the rules and regulations
thereunder and the requirements of any stock exchange or market upon which
the Shares may then be listed or quoted. Any such issuance of Shares shall
be further subject to the approval of counsel for Flowr with respect to
such compliance, including the availability of an exemption from
registration for the issuance and sale of such Shares. The inability of
Flowr to obtain from any regulatory body the authority deemed by Flowr to
be necessary for the lawful issuance and sale of any Shares under the
Plan, or the unavailability of an exemption from registration for the
issuance and sale of any Shares under the Plan, shall relieve Flowr of any
liability with respect to the non-issuance or sale of such
Shares. |
| |
|
| 7.1.2 |
If the Shares issuable upon vesting of Units have not
been registered under the U.S. Securities Act, as a condition to the grant
of the Units and the issuance of such Shares, Flowr may require the
Participant to represent and warrant in writing that the Units and Shares
are being purchased only for investment and without any then present
intention to sell or distribute such Units or Shares. At the option of
Flowr, a stop - transfer order against such Shares may be placed on the
shareholder register and records of Flowr, and a legend indicating that
the Shares may not be pledged, sold or otherwise transferred unless an
opinion of counsel is provided stating that such transfer is not in
violation of any applicable law or regulation, may be stamped on the
certificates representing such Shares in order to assure an exemption from
registration. Flowr also may require such other documentation as may from
time to time be necessary to comply with federal and state securities
laws. Flowr has no obligation to undertake registration of Units or Shares
to be issued under the Plan. |
16
Schedule A
Special Provisions Applicable to Participants Subject to
Section 409A of the United States Internal Revenue Code
This schedule sets forth special provisions of the Plan that
apply to Participants subject to section 409A of the United States Internal
Revenue Code of 1986, as amended. Terms defined in the Plan and used herein
shall have the meanings set forth in the Plan, as amended from time to time.
| 1. |
Definitions |
| |
|
|
| 1.1 |
In this Schedule, the following terms have the following
meanings: |
| |
|
|
|
(a) |
"Code" means the United States Internal Revenue
Code of 1986, as amended, and any applicable United States Treasury
Regulations and other binding regulatory guidance thereunder; |
| |
|
|
|
(b) |
"Section 409A" means section 409A of the
Code; |
| |
|
|
|
(c) |
"Separation From Service" shall mean the
separation from service with Flowr within the meaning of U.S. Treas. Regs.
§ 1.409A-1(h). Whether a Separation From Service has occurred with respect
to an employee of Flowr is determined based on whether the facts and
circumstances indicate that Flowr and the Participant reasonably
anticipated that no further services would be performed after a certain
date or that the level of bona fide services the Participant would perform
after such date (whether as an employee or independent contractor) would
permanently decrease to no more than twenty percent (20%) of the average
level of bona fide services performed (whether as an employee or an
independent contractor) over the immediately preceding thirty six (36)
month period (or the full period of services to Flowr if the Participant
has been providing services to Flowr less than thirty six (36) months)).
Separation from service shall not be deemed to occur while the Participant
is on military leave, sick leave or other bona fide leave of absence if
the period does not exceed six (6) months or, if longer, so long as the
Participant retains a right to reemployment with Flowr under an applicable
statute or by contract. For this purpose, a leave is bona fide only if,
and so long as, there is a reasonable expectation that the Participant
will return to perform services for Flowr. Notwithstanding the foregoing,
a twenty-nine (29) month period of absence will be substituted for such
six (6) month period if the leave is due to any medically determinable
physical or mental impairment that can be expected to result in death or
can be expected to last for a continuous period of no less than twelve
(12) months and that causes the Participant to be unable to perform the
duties of his or her position of employment. For this purpose, "Flowr"
includes all entities that would be considered a single employer for
purposes of U.S. Treasury Regulations; provided that, in applying those
regulations, the language "at least 50 percent" shall be used instead of
"at least 80 percent" each place it appears therein. Whether a Separation
from Service has occurred with respect to a consultant (independent
contractor) or a Director will be determined pursuant to of U.S. Treas.
Regs. § 1.409A-1(h) and other applicable IRS guidance. In some instances a
director may have a Separation From Service upon resignation as a director
even if the director then becomes an officer or employee of
Flowr; |
| |
|
|
|
(d) |
"Specified Employee" means a US Taxpayer who meets
the definition of "specified employee" as defined in Section
409A(a)(2)(B)(i) of the Code; and |
| |
|
|
| 2. |
Compliance with Section 409A |
| |
|
|
| 2.1 |
Notwithstanding any provision of the Plan to the
contrary, it is intended that any payments under the Plan either be exempt
from or comply with Section 409A, and all provisions of the Plan shall be
construed and interpreted in a manner consistent with the requirements for
avoiding taxes or penalties under Section 409A. Each payment made in
respect of Restricted Share Units and Deferred Share Units shall be deemed
to be a separate payment for purposes of Section 409A. Each US Taxpayer is
solely responsible and liable for the satisfaction of all taxes and
penalties that may be imposed on or for the account of such US Taxpayer in
connection with the Plan (including any taxes and penalties under Section
409A), and neither Flowr nor any of its subsidiaries shall have any
obligation to indemnify or otherwise hold such US Taxpayer (or any
beneficiary) harmless from any or all of such taxes or
penalties. |
17
| 2.2 |
Solely to the extent required by Section 409A, any
payment which is subject to Section 409A shall comply with the
following: |
| |
|
|
|
(a) |
if a U.S. Taxpayer experiences a Separation from Service,
such event will be treated as a DSU Termination Date and an RSU
Participant Termination Date, as applicable, for purposes of payment
Awards under the Plan. A payment which becomes payable on account of a DSU
Termination Date or an RSU Participant Termination Date (for any reason,
whether or not such termination is voluntary or involuntary, with or
without notice, adequate notice or legal notice or is with or without
legal or just cause or on account of Retirement, death or permanent
disability) shall be payable by reason of such circumstance only if the
circumstance is a Separation From Service. Generally, payments that become
payable on account of a DSU Termination Date or an RSU Participant
Termination Date (i.e. upon a U.S. Taxpayer’s Separation from Service)
will be paid as soon as administratively feasible following such
Separation from Service, but in any case by December 31st of
the year in which such Separation from Service occurs, or, if later, the
date that is two and one-half (2 ½) months after such Separation from
Service, provided that if such payment has become payable on account of a
Separation From Service of a U.S. Taxpayer who is determined to be a
Specified Employee, such payment shall not be paid before the date which
is six months after such Specified Employee’s Separation From Service (or,
if earlier, the date of death of such Specified Employee). Following any
applicable six month delay of payment, all such delayed payments shall be
made to the Specified Employee in a lump sum on the earliest possible
payment date; |
| |
|
|
|
(b) |
a payment which becomes payable on account of a Change of
Control shall not be payable by reason of such circumstance unless the
circumstance is a "change in ownership," change in effective control," or
"change in ownership of a substantial portion of assets" as defined under
Section 409A (hereinafter, a "409A Change of Control");
and |
| |
|
|
|
(c) |
Notwithstanding anything to the contrary in the Plan,
including but not limited to Sections 3.2.6 and 5.2.1, a payment which is
scheduled to become payable on account of an RSU Scheduled Vesting Date or
other specified date shall not be accelerated on account of accelerated
vesting or other intervening payment event unless such event itself
qualifies as a Separation From Service, a 409A Change of Control or other
payment event expressly permitted under Section 409A. |
| |
|
|
|
(d) |
Notwithstanding Article 5, Section 6.2 and any other
provisions of the Plan, any adjustment or amendment of an outstanding
Award, any acceleration of the time of payment with respect to an Award,
any substitution of another award for an outstanding Award, and any
termination of the Plan or an outstanding Award, will be available and
will be undertaken only to the extent permitted under Section
409A. |
| |
|
|
|
(e) |
Section 6.6.1 of the Plan shall not apply to U.S.
Taxpayers, and instead the following will apply. The transfer of an
employee among Flowr and its subsidiaries or related entities shall not be
considered a termination of employment for purposes of the Plan unless
such transfer results in a termination of employment with all entities
that would be considered a single employer for purposes of U.S. Treasury
Regulations and thus results in a Separation from Service. |
| |
|
|
| 2.3 |
A US Taxpayer shall be required to pay to Flowr, and
Flowr shall have the right and is hereby authorized to withhold, from any
cash or other compensation payable under the Plan, or from any other
compensation or amounts owing to the US Taxpayer, the amount of any
required Applicable Withholding Taxes in respect of amounts paid under the
Plan and to take such other action as may be necessary in the opinion of
Flowr to satisfy all obligations for the payment of such withholding and
taxes. |
18
| 3. |
Amendment of Schedule |
| |
|
| 3.1 |
Notwithstanding Section 6.2 of the Plan, the Board shall
retain the power and authority to amend or modify this schedule to the
extent the Board in its sole discretion deems necessary or advisable to
comply with any guidance issued under Section 409A. Such amendments may be
made without the approval of any US Taxpayer. |
19
APPENDIX "D" – REGISTERED OFFICE RESOLUTION
SPECIAL RESOLUTION OF THE SHAREHOLDERS OF
THE FLOWR
CORPORATION
TO APPROVE CHANGING THE PLACE OF THE REGISTERED OFFICE OF THE
CORPORATION
BE IT RESOLVED AS AN SPECIAL RESOLUTION OF THE SHAREHOLDERS
THAT:
| 1. |
the articles of The Flowr Corporation (the
"Corporation") be and they are hereby amended to change the place
in which the registered office of the Corporation is situated from 201-100
Allstate Pkwy, Markham, Ontario, L3R 6H3 to 461 King Street West, Floor 2,
Toronto, Ontario M5V 1K4; |
| |
|
| 2. |
any one director or officer be and is hereby authorized
to send to the Director appointed under the OBCA articles of amendment of
the Corporation in the prescribed form, and any one or more directors are
hereby authorized to prepare, execute and file articles of amendment in
the prescribed form in order to give effect to this special resolution,
and to execute and deliver all such other deeds, documents and other
writings and perform such other acts as may be necessary or desirable to
give effect to this special resolution; |
| |
|
| 3. |
notwithstanding the foregoing, the Directors of the
Corporation are hereby authorized, without further approval of or notice,
to revoke this special resolution; and |
| |
|
| 4. |
any acts taken prior to the effective date of this
resolution by any Director or officer of the Corporation in connection
with the foregoing resolutions or the subject matter thereof are hereby
approved, ratified, sanctioned and confirmed. |
| APPENDIX "E"
– AUDIT COMMITTEE CHARTER |
THE FLOWR CORPORATION
Audit Committee Charter
Audit Committee Charter
| THE FLOWR
CORPORATION |
| AUDIT COMMITTEE CHARTER
|
1. Purpose
The Audit Committee (the "Committee") is a standing
committee of the Board of Directors (the "Board") of The Flowr
Corporation (the "Corporation") appointed as required by (i) National
Instrument 52-110 - Audit Committees ("NI 52-110") (ii) Rule 5605
of the NASDAQ Stock Market Rules (including Rule 5605(c)(2)(A)) ("Rule
5605"); and (iii) Rule 10A-3 of the United States Securities Exchange Act of
1934, as amended ("Rule 10A-3"). The purpose of the Committee is to
oversee the accounting and financial reporting processes of the Corporation and
the audits of the financial statements of the Company, and to assist the Board
in fulfilling its oversight responsibilities for (i) the integrity of the
Corporation’s financial statements, (ii) the process for identifying the
Corporation’s principal financial risks and the control systems in place to
monitor them; (iii) the Corporation’s compliance with legal and regulatory
requirements, and (iv) the qualifications and independence of the auditor of the
Corporation (the "external auditor").
2. Authority
The Committee has authority to conduct or authorize
investigations into any matter within its scope of responsibility. It is
empowered to:
| (a) |
Recommend to the Board the public accounting firm to be
nominated for appointment by the Corporation’s shareholders as the
independent external auditor |
| |
|
| (b) |
Be directly responsible for the appointment,
compensation, retention and oversight of the work of the external auditor
engaged for the purpose of preparing or issuing an auditor’s report or
performing other audit, review or attest services for the Corporation,
subject to the appointment of the Corporation’s external auditor by the
Corporation’s shareholders, as described above.. The external auditor will
report directly to the Committee. |
| |
|
| (c) |
Resolve any disagreements between management and the
external auditor regarding financial reporting. |
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|
| (d) |
Pre-approve permitted non-audit services performed by the
Corporation’s external auditor. |
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|
| (e) |
Retain independent counsel, accountants, or others to
advise the Committee or assist in its duties and to set and pay their
applicable compensation. |
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|
| (f) |
Meet with the Corporation’s officers, external auditor or
outside counsel, as necessary and communicate directly with the
Corporation’s shareholders. |
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|
| (g) |
Delegate authority, to the extent permitted by applicable
law, to one or more designated members of the Committee, including the
authority to pre-approve all permitted non-audit services, provided that
such decisions are reported to the full Committee at its next scheduled
meeting. |
| |
|
| (h) |
Take such other actions as are authorized by this Charter
or by other Corporation policies approved by the
Board. |
3. Composition
| (a) |
The Committee must consist of at least three directors,
as determined by resolution of the Board from time to time. |
| |
|
| (b) |
No member of the Committee can have participated in the
preparation of the Corporation’s or any of its subsidiaries’ financial
statements at any time during the past three years. |
| |
|
| (c) |
The Board, or any committee delegated by the Board, will
recommend to the Board applicable directors for appointment to the
Committee and the Chair of the Committee. |
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|
| (d) |
If and whenever a vacancy exists on the Committee, the
remaining members may exercise all of its powers so long as there continue
to be at least three members on the Committee. If at any time a vacancy
exists on the Committee that the Board is required to fill, the Board may
appoint a new member to fill such vacancy by ordinary resolution of the
Board. |
| |
|
| (e) |
Subject to the exemptions contemplated by NI 52-110, Rule
10A-3 and Rule 5605, each member of the Committee shall be independent,
pursuant to the requirements of NI 52-110, Rule 10A-3 and Rule
5605. |
| |
|
| (f) |
Each Committee member must be financially literate as
defined in NI 52-110 and must be able to read and understand fundamental
financial statements, including a company’s balance sheet, income
statement, and cash flow statement. |
| |
|
| (g) |
At least one member of the Committee must be an "audit
committee financial expert" under Item 407 of Regulation S-K or otherwise
have past employment experience in finance or accounting, requisite
professional certification in accounting or other comparable experience or
background which results in the individual’s financial
sophistication. |
| |
|
| (h) |
The Board or the Committee may, from time to time,
establish policies limiting the number of committees which Committee
members may be appointed to. |
4. Meetings
| (a) |
The Committee must meet at least four times per year, and
at least annually, privately, with each of management and the external
auditor. |
| |
|
| (b) |
The greater of two members or 50% of the members of the
Committee shall constitute a quorum. All resolutions of the Committee
shall be made by a majority of its members present at a meeting duly
called and held. All Committee members are expected to attend each
meeting, in person or by telephone or video conference. Any decision or
determination of the Committee reduced to writing and signed by all of the
members of the Committee shall be fully as effective as if it had been
made at a meeting duly called and held. |
| |
|
| (c) |
The Committee may invite such officers, directors and
employees of the Corporation as it deems necessary or advisable from time
to time to attend meetings of the Committee and assist in the discussion
and consideration of the duties of the
Committee. |
| (d) |
The time at which and place where the meetings of the
Committee shall be held and the calling of meetings and the procedure in
all things at such meetings shall be determined by the Committee.
Following a Committee meeting, the Committee Chair shall report on the
Committees’ activities to the Board at the next Board meeting. The
Committee must keep and approve minutes of its meetings in which shall be
recorded all action taken by it, which minutes must be made available to
the Board as soon as practicable after each meeting of the
Committee. |
5. Responsibilities
The Committee must:
| (a) |
Review significant accounting and reporting issues and
understand their impact on the financial statements, including but not
limited to: |
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|
|
|
(i) |
complex or unusual transactions and highly judgmental
areas; |
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|
|
|
(ii) |
major issues regarding accounting principles and
financial statement presentation, including any significant changes in the
Corporation’s selection or application of accounting principles; |
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|
|
|
(iii) |
any significant variances with comparative reporting
periods; and |
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|
|
|
(iv) |
the effect of regulatory and accounting initiatives, as
well as off-balance sheet structures, on the financial statements of the
Corporation. |
| |
|
|
| (b) |
Review analyses prepared by management and/or the
external auditor relating to significant financial reporting issues and
judgments made in connection with the preparation of the financial
statements, including analyses of the effects of the selection or
application of the Corporation’s accounting principles. |
| |
|
|
| (c) |
Review compliance with covenants under any loan
agreements. |
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|
|
| (d) |
Review disclosure requirements for commitments and
contingencies. |
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|
|
| (e) |
Review with management and the external auditor the
results of the audit, including any difficulties encountered. This review
will include any restrictions on the scope of the external auditor’s
activities or on access to requested information, any significant
disagreements with management, and adjustments raised by external
auditors, whether or not included in the financial reports. |
| |
|
|
| (f) |
Review and discuss the annual audited financial
statements and quarterly financial statements with management and the
external auditor, including the Corporation’s disclosures under
"Management’s Discussion and Analysis of Financial Condition and Results
of Operations" ("MD&A"), including the discussion of critical
accounting estimates included therein. |
| |
|
|
| (g) |
Review and recommend to the Board for approval, prior to
public disclosure, the annual and quarterly financial statements, MD&A
and annual and interim profit or loss press releases. |
| |
|
|
| (h) |
Review disclosures made by the Chief Executive Officer
and the Chief Financial Officer during the certification process about
significant deficiencies or material weakness in the design or operation
of internal controls or any fraud that involves management or other
employees who have a significant role in the Corporation’s internal
controls and, if applicable, understand the basis upon which the
certifying officers concluded that any particular deficiency or
combination of deficiencies did or did not constitute a material
weakness. |
| (i) |
Review and recommend to the Board for approval, prior to
public disclosure, financial information and earnings guidance provided
externally, including to analysts and rating agencies if applicable. This
review may be general (i.e., the types of information to be disclosed and
the type of presentations to be made). |
| |
|
| (j) |
Satisfy itself that adequate procedures are in place, and
periodically assess the adequacy of those procedures, for the review of
any public disclosure of financial information extracted or derived from
the financial statements, other than the statements themselves, the
MD&A or the press releases referred to above. |
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|
| (k) |
Review and oversee all related party transactions for
potential conflict of interest situations on an ongoing basis. The term
"related party transactions" shall refer to transactions that would be
required to be disclosed to the U.S. Securities and Exchange Commission
pursuant to Form 20-F, Item 7.B., notwithstanding that the Corporation may
file its annual reports on a different form. |
| |
|
| (l) |
Annually review and assess the Corporation’s policies in
effect from time to time, including its Timely Disclosure, Confidentiality
and Insider Trading Policy and make recommendations to the
Board. |
6. Internal Control
The Committee shall also:
| (a) |
Consider the effectiveness of the Corporation’s system
for internal control over financial reporting, including information
technology security and control. |
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|
| (b) |
Review the scope of the external auditor’s review of
internal control over financial reporting, and obtain reports on
significant findings and recommendations, together with management’s
responses. |
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|
| (c) |
Review the external auditor’s management letters and
management’s responses to such letters. |
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|
| (d) |
As requested by the Board, discuss with management and
the external auditor the Corporation’s identifiable risks arising from any
financial, operational or other deficiencies, the adequacy and
effectiveness of the Corporation’s accounting and financial controls
relating thereto, and the steps management has taken to monitor and
control identified risks. |
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|
| (e) |
Annually review the Corporation’s disclosure controls and
procedures, including any significant deficiencies in, or material
non-compliance with same, and the steps management has taken to monitor
and control such deficiencies or instances of
non-compliance. |
7. External Audit
The Committee shall also:
| (a) |
Review the external auditor’s proposed audit scope and
approach. |
| (b) |
Review the performance of the external auditor. Annually
review the report of the external auditor on matters required to be
communicated to the Committee under Section 5135 (auditors’ responsibility
to consider fraud) and Section 5751 (communications with those having
oversight responsibility for the financial reporting process-independence)
of the Canadian Institute of Chartered Accountants handbook and Rule
5605(c) (ensuring independence of external auditor). |
| |
|
|
| (c) |
Report any conclusions with respect to the external
auditor to the Board. |
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|
|
| (d) |
Establish and periodically assess the Corporation’s
hiring policies for partners, employees and former partners and employees
of the current or prior external auditor. |
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|
|
| (e) |
At least once per year, meet privately with the external
auditor to discuss any matters that the Committee or the external auditor
believes should be discussed privately. |
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|
|
| (f) |
Review and pre-approve, in accordance with NI 52-110 and
Rule 2-01(c)(7) of Regulation S-X, any non-audit services, provided by the
Corporation’s external auditor, taking into consideration whether the
delivery of non-audit services will interfere with the independence of the
auditors. The pre-approval of non-audit services may be further delegated
to one or more independent members of the Committee, provided that said
pre-approval is presented to the Committee at its first scheduled meeting
following such approval. The pre-approval requirement is satisfied with
respect to the provision of de minimis non-audit services if: |
| |
|
|
|
(i) |
the aggregate amount of all such non-audit services
provided to the Corporation which were not pre-approved constitutes not
more than 5% of the total amount of fees paid by the Corporation and its
subsidiaries to the external auditor during the fiscal year in which the
non-audit services are provided; |
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|
|
|
(ii) |
the services were not recognized by the Corporation or
its subsidiaries, at the time of the engagement, to be non-audit services;
and |
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|
|
|
(iii) |
the services are promptly brought to the attention of the
Committee and approved, prior to the completion of the audit, by the
Committee or by one or more members of the Committee to whom authority to
grant such approvals has been delegated by the Committee. |
| |
|
|
| (g) |
The Committee may from time to time establish specific
pre-approval policies and procedures in accordance with NI
52-110. |
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|
|
| (h) |
The Committee shall be responsible for assuring the
regular rotation of the lead audit partner of Company’s external auditor
and considering regular rotation of the accounting firm serving as
Company’s external auditor. |
| |
|
|
| (i) |
The Committee shall be responsible for obtaining and
reviewing on a periodic basis, and at least annually, a formal written
statement from the external auditor delineating all relationships between
the external auditor and Company. The Committee is responsible for
discussing with the external auditor any disclosed relationships or
services that may impact the objectivity and independence of
the external auditor and for taking or recommending that the Board
take appropriate action in response to the external auditor’s report to satisfy
itself of the external auditor’s independence. |
8. Compliance
The Committee shall also:
| (a) |
Annually review the effectiveness of the Corporation’s
system of monitoring compliance with laws and regulations and the results
of management’s investigation and follow-up (including disciplinary
action) of any instances of non- compliance. |
| |
|
| (b) |
Establish and periodically assess the adequacy of
procedures for: (i) the receipt, retention and treatment of complaints
received by the Corporation regarding accounting, internal accounting
controls, or auditing matters; and (ii) the confidential, anonymous
submission by employees regarding questionable accounting or auditing
matters. |
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|
| (c) |
Review findings of any examinations by regulatory
agencies, and any external auditor’s observations made regarding those
findings. |
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|
| (d) |
Review the process for communicating the Code of Business
Conduct and Ethics to Corporation personnel, and for monitoring compliance
therewith. |
9. Reporting Responsibilities
The Committee shall also:
| (a) |
Report to the Board about Committee activities and issues
that arise with respect to the quality or integrity of the Corporation’s
financial statements, the Corporation’s compliance with legal or
regulatory requirements, the performance and independence of the
Corporation’s external auditor and internal controls over financial
reporting. |
| |
|
| (b) |
Review any other reports the Corporation issues that
relate to Committee responsibilities. |
| |
|
| (c) |
Liaise with the external auditor and the Board to ensure
that any material issues that have arisen related to compliance and
governance have been addressed and that appropriate actions have been
identified and undertaken to mitigate the issues identified. |
| |
|
| (d) |
The Committee shall at least annually evaluate its own
performance and the contents of this Charter, and recommend to the Board
such changes to the Charter as the Committee deems
appropriate. |
10. Other responsibilities
The Committee shall also:
| (a) |
Discuss with management the Corporation’s major polices
with respect to risk assessment and risk management. |
| |
|
| (b) |
Perform other activities related to this Charter as
requested by the Board. |
| (c) |
Institute and oversee special investigations as required
with respect to the discharge of the Committee’s duties
hereunder. |
| |
|
| (d) |
Ensure appropriate disclosure of this Charter as may be
required by applicable law. |
11. Funding
The Corporation shall provide for appropriate funding, as
determined by the Committee, for payment of:
| (a) |
Compensation to the external auditor; |
| |
|
| (b) |
Compensation to any counsel and advisers employed by the
Committee pursuant to the terms of this Charter; and |
| |
|
| (c) |
Ordinary administrative expenses of Committee that are
necessary or appropriate in carrying out its
duties. |
