Exhibit 99.7
RED WHITE & BLOOM BRANDS INC.
(formerly Tidal Royalty Corp.)
Annual General and Special Meeting
to be held on September 9, 2020
Notice of Annual General and Special Meeting
and
Information Circular
August 5, 2020
RED WHITE & BLOOM BRANDS INC.
(formerly, Tidal Royalty Corp.)
SUITE 810 – 789 WEST PENDER STREET
VANCOUVER, BC V6C 1H2
NOTICE OF ANNUAL GENERAL AND SPECIAL
MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that an annual general and special meeting (the “Meeting”) of the holders (the “Shareholders”) of common shares (the “Shares”) and of Series 2 Convertible Preferred shares of Red White & Bloom Brands Inc. (the “Company”) will be held at Suite 810 – 789 West Pender Street, Vancouver, BC on Wednesday, September 9, 2020 at 11:00 a.m. (Vancouver time) for the following purposes:
1.to receive the financial statements of the Company for the year ended July 31, 2019, together with the auditor’s report thereon;
2.fix the number of directors at five (5);
3.elect directors of the Company for the ensuing year;
4.appoint Manning Elliott LLP, Chartered Accountants, as auditor of the Company for the ensuing year and to authorize the directors fix their remuneration;
5.to consider, and if thought appropriate, to pass, with or without variation, an ordinary resolution ratifying, confirming and approving the 20% rolling stock option plan (the “2020 Option Plan”), as more particularly described in the accompanying information circular (“Circular”);
6.to consider, and if thought appropriate, to pass, with or without variation, an ordinary resolution ratifying, confirming and approving the 2020 RSU Plan, as more particularly described in the accompanying Circular; and
7.transact such other business as may properly be put before the Meeting or any adjournment or postponement thereof.
The Company’s board of directors (the “Board”) has fixed August 5, 2020 as the record date for the determination of Shareholders entitled to receive notice of and to vote at the Meeting and at any adjournment or postponement thereof. Each registered Shareholder at the close of business on that date is entitled to receive such notice and to vote at the Meeting in the circumstances set out in the accompanying Circular.
If you are a registered Shareholder of the Company and are unable to attend the Meeting in person, please complete, date and sign the accompanying form of proxy and deposit it with Company’s transfer agent, National Securities Administrators Ltd. (“National”), 760 – 777 Hornby Street, Vancouver, British Columbia, V6Z 1S4, no later than 11:00 a.m. on September 7, 2020 or at least 48 hours (excluding Saturdays, Sundays and holidays recognized in the Province of British Columbia) before the time and date of any adjournment or postponement of the Meeting.
If you are a non-registered Shareholder and received this notice (“Notice”) of Meeting and accompanying materials through a broker, a financial institution, a participant, a trustee or administrator of a self-administered retirement savings plan, retirement income fund, education savings plan or other similar self-administered savings or investment plan registered under the Income Tax Act (Canada), or a nominee of any of the foregoing that holds your securities on your behalf (the “Intermediary”), please complete and return the materials in accordance with the instructions provided to you by your Intermediary.
In view of the current and rapidly evolving COVID-19 outbreak, the Company asks that, in considering whether to attend the Meeting in person, shareholders follow the instructions of the Public Health Agency of Canada (https://www.canada.ca/en/public-health/services/diseases/2019-novel-coronavirus-infection.html). The Company encourages Shareholders not to attend the Meeting in person if experiencing any of the described COVID-19 symptoms of fever, cough or difficulty breathing. The Company may take additional precautionary measures in relation to the Meeting in response to further developments in the COVID-19 outbreak. As always, the Company encourages shareholders to vote prior to the Meeting. Shareholders are encouraged to vote on the matters before the Meeting by proxy and to join the Meeting by teleconference. To access the Meeting by teleconference, dial toll free at 1-800-319-7310, Participation Code: 77783, followed by the # sign.
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DATED at Vancouver, BC, the 5th day of August, 2020.
BY ORDER OF THE BOARD OF DIRECTORS
Signed: “Brad Rogers”
Brad Rogers
Chief Executive Officer
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RED WHITE & BLOOM BRANDS INC.
(Formerly Tidal Royalty Corp.)
SUITE 810 - 789 WEST PENDER STREET
VANCOUVER, BC V6C 1H2
INFORMATION CIRCULAR
(as at August 5, 2020 except as otherwise indicated)
SOLICITATION OF PROXIES
This information circular (the “Circular”) is provided in connection with the solicitation of proxies by the Management of Red White & Bloom Brands Inc. (the “Company”). The form of proxy which accompanies this Circular (the “Proxy”) is for use at the annual general and special meeting of the shareholders of the Company to be held on Wednesday, September 9, 2020 (the “Meeting”), at the time and place set out in the accompanying notice of Meeting (the “Notice of Meeting”). The Company will bear the cost of this solicitation. The solicitation will be made by mail, but may also be made by telephone.
APPOINTMENT AND REVOCATION OF PROXY
The persons named in the Proxy are directors and/or officers of the Company. A registered shareholder (“Registered Shareholder”) who wishes to appoint some other person to serve as their representative at the Meeting may do so by striking out the printed names and inserting the desired person’s name in the blank space provided. The completed Proxy should be delivered to National Securities Administrators Ltd. (“National”) by 11:00 a.m. (Vancouver time) on Monday, September 7, 2020 or before 48 hours (excluding Saturdays, Sundays and holidays) before any adjournment of the Meeting at which the Proxy is to be used.
The Proxy may be revoked by:
(a)signing a proxy with a later date and delivering it at the time and place noted above;
(b)signing and dating a written notice of revocation and delivering it to National, or by transmitting a revocation by telephonic or electronic means, to National, at any time up to and including the last business day preceding the day of the Meeting, or any adjournment of it, at which the Proxy is to be used, or delivering a written notice of revocation and delivering it to the Chairman of the Meeting on the day of the Meeting or adjournment of it; or
(c)attending the Meeting or any adjournment of the Meeting and registering with the scrutineer as a shareholder present in person.
Provisions Relating to Voting of Proxies
The shares represented by Proxy in the form provided to shareholders will be voted or withheld from voting in accordance with the instructions of the shareholder on any ballot that may be called for and, if the shareholder specifies a choice with respect to any matter to be acted upon, the shares will be voted accordingly. If there is no direction by the Registered Shareholder, those shares will be voted for all proposals set out in the Proxy and for the election of directors and the appointment of the auditors as set out in this Circular. The Proxy gives the person named in it the discretion to vote as such person sees fit on any amendments or variations to matters identified in the Notice of Meeting, or any other matters which may properly come before the Meeting. At the time of printing of this Circular, the management of the Company (the “Management”) knows of no other matters which may come before the Meeting other than those referred to in the Notice of Meeting.
Advice to Beneficial Holders of Shares
The information set forth in this section is of significant importance to many shareholders, as a substantial number of shareholders do not hold shares in their own name. Shareholders who hold their shares through their brokers, intermediaries, trustees or other persons, or who otherwise do not hold their shares in their own name (referred to herein as “Beneficial Shareholders”) should note that only proxies deposited by shareholders who appear on the records maintained by the Company’s registrar and transfer agent as registered holders of shares will be recognized and acted upon at the Meeting. If shares are listed in an account statement provided to a Beneficial Shareholder by a broker, then those shares will, in all likelihood, not be registered in the shareholder’s name. Such
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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). In the United States, the vast majority of such shares are registered under the name of Cede & Co., the registration name for The Depository Trust Company, which acts as nominee for many United States brokerage firms. Shares held by brokers (or their agents or nominees) on behalf of a broker’s client can only be voted or withheld at the direction of the Beneficial Shareholder. Without specific instructions, brokers and their agents and nominees are prohibited from voting shares for the broker’s clients. Therefore, each Beneficial Shareholder should ensure that voting instructions are communicated to the appropriate person well in advance of the Meeting.
Existing regulatory policy requires brokers and other intermediaries to seek voting instructions from Beneficial Shareholders in advance of shareholder meetings. The various brokers and other intermediaries have their own mailing procedures and provide their own return instructions to clients, which should be carefully followed by Beneficial Shareholders in order to ensure that their shares are voted at the Meeting. The form of instrument of proxy supplied to a Beneficial Shareholder by its broker (or the agent of the broker) is substantially similar to the instrument of proxy provided directly to registered shareholders by the Company. However, its purpose is limited to instructing the registered shareholder (i.e., the broker or agent of the broker) how to vote on behalf of the Beneficial Shareholder. The vast majority of brokers now delegate responsibility for obtaining instructions from clients to Broadridge Financial Solutions Inc. (“Broadridge”) in Canada. Broadridge typically prepares a machine-readable voting instruction form (“VIF”), mails those forms to Beneficial Shareholders and asks Beneficial Shareholders to return the VIFs to Broadridge, or otherwise communicate voting instructions to Broadridge (by way of the internet or telephone, for example). Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of shares to be represented at the Meeting. A Beneficial Shareholder who receives a Broadridge VIF cannot use that form to vote shares directly at the Meeting. The VIFs must be returned to Broadridge (or instructions respecting the voting of shares must otherwise be communicated to Broadridge) well in advance of the Meeting in order to have the shares voted. If you have any questions respecting the voting of shares held through a broker or other intermediary, please contact that broker or other intermediary for assistance.
The Notice of Meeting, Circular, Proxy and VIF, as applicable, are being provided to both registered shareholders and Beneficial Shareholders. Beneficial Shareholders fall into two categories - those who object to their identity being known to the issuers of securities which they own (“OBOs”) and those who do not object to their identity being made known to the issuers of the securities which they own (“NOBOs”). Subject to the provisions of National Instrument 54-101 - Communication with Beneficial Owners of Securities of a Reporting Issuer (“NI 54-101”), issuers may request and obtain a list of their NOBOs from intermediaries directly or via their transfer agent and may obtain and use the NOBO list for the distribution of proxy-related materials directly (not via Broadridge) to such NOBOs. If you are a Beneficial Shareholder and the Company or its agent has sent these materials directly to you, your name, address and information about your holdings of shares have been obtained in accordance with applicable securities regulatory requirements from the intermediary holding the shares on your behalf.
The Company has distributed copies of the Notice of Meeting, Circular and VIF to intermediaries for distribution to NOBOs. Unless you have waived your right to receive the Notice of Meeting, Circular and VIF, intermediaries are required to deliver them to you as a NOBO of the Company and to seek your instructions on how to vote your shares.
The Company’s OBOs can expect to be contacted by Broadridge or their brokers or their broker’s agents as set out above. The Company does not intend to pay for intermediaries to deliver the Notice of Meeting, Circular and VIF to OBOs and accordingly, if the OBO’s intermediary does not assume the costs of delivery of those documents in the event that the OBO wishes to receive them, the OBO may not receive the documentation.
Although a Beneficial Shareholder may not be recognized directly at the Meeting for the purposes of voting shares registered in the name of his broker, a Beneficial Shareholder may attend the Meeting as proxyholder for the registered shareholder and vote the shares in that capacity. NI 54-101 allows a Beneficial Shareholder who is a NOBO to submit to the Company or an applicable intermediary any document in writing that requests that the NOBO or a nominee of the NOBO be appointed as proxyholder. If such a request is received, the Company or an intermediary, as applicable, must arrange, without expenses to the NOBO, to appoint such NOBO or its nominee as a proxyholder and to deposit that proxy within the time specified in this Circular, provided that the Company or the intermediary receives such written instructions from the NOBO at least one business day prior to the time by which proxies are to be submitted at the Meeting, with the result that such a written request must be received by 11:00 a.m.
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(Vancouver time) on the day which is at least two business days prior to the Meeting. A Beneficial Shareholder who wishes to attend the Meeting and to vote their shares as proxyholder for the registered shareholder should enter their own name in the blank space on the VIF or such other document in writing that requests that the NOBO or a nominee of the NOBO be appointed as proxyholder and return the same to their broker (or the broker’s agent) in accordance with the instructions provided by such broker.
All references to shareholders in the Notice of Meeting, Circular and the accompanying Proxy are to registered shareholders of the Company as set forth on the list of registered shareholders of the Company as maintained by the registrar and transfer agent of the Company, National, unless specifically stated otherwise.
Financial Statements
The audited financial statements of the Company for the year ended July 31, 2019, together with the auditor’s report on those statements and Management Discussion and Analysis, will be presented to the shareholders at the Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
As at August 5, 2020, the Company’s authorized capital consists of an unlimited number of common shares (the “Shares”) and an unlimited number of Preferred shares without par value, of which an unlimited number are designated as Series 1 Convertible Preferred Shares (the “Series 1 Shares”) and an unlimited number are designated as Series 2 Convertible Preferred Shares (the “Series 2 Shares”). As at August 5, 2020, there were 151,421,886 Shares issued and outstanding, 3,181,250 Series 1 Shares issued and outstanding and 112,040,549 Series 2 Shares issued and outstanding. Each Share in the capital of the Company carry the right to one vote. Each Series 2 Share shall entitle the holder thereof to cast such number of votes as is equal to the number of Shares into which it is convertible.
Shareholders registered as at August 5, 2020 are entitled to attend and vote at the Meeting. Shareholders who wish to be represented by proxy at the Meeting must, to entitle the person appointed by the Proxy to attend and vote, deliver their Proxies at the place and within the time set forth in the notes to the Proxy.
To the knowledge of the directors and executive officers of the Company, as of the date of this Circular, no persons beneficially own, directly or indirectly, or exercise control or direction over, 10% or more of the issued and outstanding Shares of the Company.
SETTING NUMBER OF DIRECTORS
The persons named in the enclosed Proxy intend to vote in favour of fixing the number of directors at five (5). The Board proposes that the number of directors be fixed at five (5). Shareholders will therefore be asked to approve an ordinary resolution that the number of directors elected be fixed at five (5).
ELECTION OF DIRECTORS
The directors of the Company are elected annually and hold office until the next annual general meeting of the shareholders or until their successors are elected or appointed. The Management of the Company proposes to nominate the persons listed below for election as directors of the Company to serve until their successors are elected or appointed. In the absence of instructions to the contrary, Proxies given pursuant to the solicitation by the Management will be voted for the nominees listed in this Circular. Management does not contemplate that any of the nominees will be unable to serve as a director.
The following table sets out the names of the nominees for election as directors, the offices they hold within the Company, their occupations, the length of time they have served as directors of the Company, and the number of shares of the Company which each beneficially owns, directly or indirectly, or over which control or direction is exercised, as of the date of this Circular.
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Name, province or state and country of residence and position, if any, held in the Company | Principal occupation during the past five years | Served as director of the Company since | Number of shares of the Company beneficially owned, directly or indirectly, or controlled or directed at present(1) |
Brad Rogers (2)(4) Chief Executive Officer and Director | See “Details of Directors Not Previously Elected by a Shareholder Vote” below. | April 24, 2020 | 2,400,000 Shares
2,400,000 Series 2 Shares |
Johannes (Theo) van der Linde Chief Financial Officer, Corporate Secretary and Director | Mr. van der Linde is a Chartered Accountant with 20 years’ extensive finance, administration and public accounting experience in diverse industries including mining, oil & gas, financial services, manufacturing and retail. During the last nine years of his career Mr. van der Linde has been focused on the mining industry working with Junior Exploration and producing mining Companies at various stages of growth and in several jurisdictions including South Africa, West- Africa, Peru, Sri-lanka and the United States. Mr. van der Linde currently acts a mining consultant as the President of Executive Management Solutions Ltd. | July 20, 2017 | Nil |
Michael Marchese Director | See “Details of Directors Not Previously Elected by a Shareholder Vote” below. | April 24, 2020 | 3,080,000 Shares
3,080,000 Series 2 Shares |
William Dawson(2)(4) Director | See “Details of Directors Not Previously Elected by a Shareholder Vote” below. | April 24, 2020 | 148,000 Shares
148,000 Series 2 Shares |
Brendan Purdy (2)(3)(4) Director | Corporate Secretary and director of Global Blockchain Technologies Corp.; CEO and President of Element 79 Capital Inc.; former CEO and director of Enforcer Gold Corp.; director of each of Supreme Metals Corp. and ZTest Electronics Inc.; former director, CEO and chairman of High Hampton Holdings Corp. (CSE:HC) from November 2016 to December 2017; CEO and Director of Seaway Energy Services from April, 2016 to October 2016; a Director of Greenock Resources Inc. from October 2015 to February, 2016. | July 20, 2017 | Nil |
Notes:
(1)The information as to Shares beneficially owned or controlled has been provided by the nominees themselves.
(2)A member of the audit committee.
(3)Chair of the audit committee.
(4)A member of the compensation committee.
No proposed director is being elected under any arrangement or understanding between the proposed director and any other person or company.
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DETAILS OF DIRECTORS NOT PREVIOUSLY ELECTED BY A SHAREHOLDER VOTE
Mr. Brad Rogers
Mr. Rogers is the Chief Executive Officer and a director of the Company. Prior to the business combination agreement between Tidal Royalty Corp. (“Tidal”) and MichiCann Medical Inc. (“MichiCann”) to form the Company, he acted as Michicann’s Chief Executive Officer and previously served as President of Canntrust, one of Canada’s leading licensed cannabis producers. Under Mr. Roger’s direction, Canntrust created the Canadian cannabis market’s Gold Standard by producing quality, pharmaceutically standardized product across flower and extract. A recognized expert in cannabis production and a creative brand-building marketer, Mr. Rogers was instrumental in leading CannTrust into early profitability. He was the driving force behind its capital raises and IPO that peaked at a $1.5 billion market cap.
Utilizing industry-leading scientific expertise and a disciplined “data driven” approach, Mr. Rogers managed CannTrust’s growth from 20 employees to more than 500 before his departure. Directed the creation of four adult consumer cannabis brands – Liiv; SYNR.G, Xscape and Peak Leaf across National Distribution. To meet the needs of both the medical and recreational markets, he also supervised the opening of the first two phases of CannTrusts’s Perpetual Harvest Facility in Niagara which is expected to reach an annual output exceeding 100,000 kilograms. Mr. Rogers also worked on developing such innovative product extensions as beverages, vape pens, and edibles.
In addition, Mr. Rogers was part of the team that built one of the first ever commercially scaled cannabis production facilities in the world (for medicinal cannabis use) in 2014. That company (Metrum) was successfully sold in 2016 to Canopy Growth (NYSE:WEED) for over $450 million.
He holds an MBA from the Richard Ivey School of Business, proudly supports Toronto’s Centre for Addiction and Mental Health, the Trillium Gift of Life Network, and Inner City EQAO Mentoring.
Mr. Michael Marchese
Mr. Marchese is a director of the Company. Prior to the business combination agreement between Tidal and Michicann to form the Company, Mr. Marchese was the president, director and co-founder of MichiCann, and played a major role in starting, developing and organizing the company. He also co-founded Aleafia Health Inc. and directed its branding. (TSX: ALEF: OTC: ALEAF, FRA: ARAH). He continues to advise the company. For the past several decades, Mr. Marchese has successfully operated his own branding company, Marchese Design, and has developed identities and communications programs for such leading brands as Aleafia, Tutto Gourmet Foods, V Grace Bay, Turks & Caicos and Royal Group Technologies and its successor company, the Vision Group.
Mr. William Dawson
Mr. Dawson is a director of the Company and a Chartered Professional Accountant and Chartered Accountant with more than 40 years of experience in the field. Mr. Dawson has served as the Chief Financial Officer of SBG – Skill Based Games Inc. since 2014 and the President and Chief Executive Officer of Play Games for Fun Limited Since 2013. Mr. Dawson previously served as Chief Financial Officer of Oakshire Holdings Limited from 2011 to 2018, Pong Game Studios Corporation from 2011 to 2018, Caliburger Canada Incorporated from 2015 to 2017 and Blow Canada Inc. from 2014 to 2017. Mr. Dawson holds a BA in economics and finance as well as an MBA from York University.
Management recommends the approval of each of the nominees listed above for election as a director of the Company for the ensuing year.
Management does not contemplate that any of its nominees will be unable to serve as directors. If any vacancies occur in the slate of nominees listed above before the Meeting, then the Designated Persons intend to exercise discretionary authority to vote the Shares and Series 2 Shares represented by proxy for the election of any other persons as directors.
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Corporate Cease Trade Orders or Bankruptcies
Other than as set out below, no director or proposed director of the Company is, or within the ten years prior to the date of this Circular has been, a director or executive officer of any company, including the Company, that while that person was acting in that capacity:
(a)was the subject of a cease trade order or similar order or an order that denied the company access to any exemption under securities legislation for a period of more than 30 consecutive days; or
(b)was subject to an event that resulted, after the director ceased to be a director or executive officer of the company being the subject of a cease trade order or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or
(c)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.
Brendan Purdy was an independent director of Boomerang Oil, Inc. (“Boomerang”) when cease trade orders were issued by the BCSC and ASC in 2015 due to Boomerang failing to file its annual audited financial statements for the fiscal year ended September 30, 2014, and its management's discussion and analysis relating thereto, as required under Part 5 of National Instrument 51-102 – Continuous Disclosure Obligations. Boomerang continues to be subject to renewed cease trade orders.
Individual Bankruptcies
No director or proposed director of the Company has, within the ten years prior to the date of this Circular, become bankrupt or made a proposal under any legislation relating to bankruptcy or insolvency, or been 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 individual.
Penalties or Sanctions
None of the proposed directors have been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority, has entered into a settlement agreement with a securities regulatory authority or has been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable security holder making a decision about whether to vote for the proposed director.
STATEMENT OF EXECUTIVE COMPENSATION
Named Executive Officers
During the financial year ended July 31, 2019, the Company had four Named Executive Officers (“NEOs”) being, Johannes (Theo) van der Linde, Chief Financial Officer (“CFO”), Brendan Purdy, interim Chief Executive Officer (“CEO”), Terry Taouss, former President and Paul Rosen, former CEO.
“Named Executive Officer” means: (a) each CEO, (b) each CFO, (c) the most highly compensated executive officer of the company, including any of its subsidiaries, or the most highly compensated individual 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 more than $150,000; and (d) each individual who would be a NEO under (c) above but for the fact that the individual was neither an executive officer of the Company, nor acting in a similar capacity, at the end of that financial year.
DIRECTOR AND NAMED EXECUTIVE OFFICER COMPENSATION TABLE
Set out below is a summary of compensation paid or accrued during the Company’s two most recently completed financial years to the Company’s NEOs and directors for services provided and for services to be provided, directly or indirectly, to the Company or any subsidiary thereof.
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Director and Named Executive Officer Compensation Table
Table of compensation excluding compensation securities | |||||||
Name and principal position | Year | Salary, consulting fee, retainer or commission ($) | Bonus ($) | Committee or meeting fees | Value of perquisites ($) | Value of all other compensation ($) | Total compensation |
Johannes (Theo) van der Linde (1) CFO, Corporate Secretary and Director | 2019 | 81,250 | Nil | Nil | Nil | Nil | 81,250 |
Brendan Purdy (2) | 2019 | Nil | Nil | Nil | Nil | Nil | Nil |
Terry Taouss (3) | 2019 | 189,824 | Nil | Nil | Nil | Nil | 18,200 |
Paul Rosen(4) | 2019 | 195,833 | Nil | Nil | Nil | Nil | 195,833 |
Stuart Wooldridge(5) | 2019 | 18,200 | Nil | Nil | Nil | Nil | 18,200 |
Brian Penny(6) | 2019 | 16,014 | Nil | Nil | Nil | Nil | 16,014 |
Brad Rogers(7) | 2019 | - | - | - | - | - | - |
Michael Marchese(7) | 2019 | - | - | - | - | - | - |
William Dawson(7) | 2019 | - | - | - | - | - | - |
Notes:
(1)Mr. van der Linde was appointed as CFO and a director of the Company on July 20, 2017. Mr. van der Linde was appointed as Corporate Secretary of the Company on August 16, 2018. All of the compensation received by Mr. van der Linde was in respect of his position as CFO of the Company.
(2)Mr. Purdy was appointed as a director of the Company on July 20. 2017. Mr. Purdy was appointed as the interim CEO of the Company on February 22, 2019 and resigned as interim CEO on April 24, 2020.
(3)Mr. Taouss was appointed as President of the Company on July 5, 2018 and resigned on January 22, 2019. All of the compensation received by Mr. Taouss was in respect of his position as President of the Company.
(4)Mr. Rosen resigned as a director of the Company on February 22, 2019 and as an officer of the Company on April 24, 2020. All of the compensation received by Mr. Rosen was in respect of his position as CEO of the Company.
(5)Mr. Wooldridge was appointed as a director of the Company on July 22, 2002 and resigned on April 24, 2020.
(6)Mr. Penny was appointed as a director of the Company on June 22, 2016 and resigned on June 28, 2019.
(7)Each of Messrs. Rogers, Marchese and Dawson were appointed as directors of the Company on April 24, 2020.
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Stock Options and Other Compensation Securities
The following table sets forth all compensation securities granted or issued to each NEO and director of the Issuer on a post-consolidated basis during the year ended July 31, 2019 for services provided or to be provided, directly or indirectly, to the Issuer or any of its subsidiaries:
Compensation Securities | |||||||
Name and position | Type of compensation security | Number of compensation securities, number of underlying securities | 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 |
Paul Rosen(1) Former CEO and Director | Options | 125,000 options exercisable into 125,000 Shares | 12/12/2018 | $1.84 (USD) | $1.84 (USD)
| $4.16 (USD) | 12/12/23 |
Johannes (Theo) van der Linde CFO and Director | Options | 12,500 options exercisable into 12,500 Shares 21,875 options exercisable into 21,875 Shares | 12/12/2018
04/26/2019 | $1.84 (USD)
$4.16 (USD) | $1.84 (USD)
$4.16 (USD) | $4.16 (USD)
$4.16 (USD) | 12/12/23
04/26/24 |
Terry Taouss(2) | Options | 62,500 options exercisable into 62,500 Shares | 12/12/2018 | $1.84 (USD) | $1.84 (USD)
| $4.16 (USD) | 12/12/23 |
Brian Penny | Options | 31,250 options exercisable into 31,250 Shares | 04/26/2019 | $4.16 (USD) | $4.16 (USD) | $4.16 (USD) | 04/26/24 |
Stuart Wooldridge | Options | 45,313 options exercisable into 45,313 Shares | 04/26/2019 | $4.16 (USD) | $4.16 (USD) | $4.16 (USD) | 04/26/24 |
Notes:
(1)The options issued to Mr. Rosen were subsequently cancelled on March 22, 2019 following his resignation on February 22, 2019.
(2)The options issued to Mr. Taouss were subsequently cancelled on March 22, 2019 following his resignation on February 22, 2019.
Exercise of Compensation Securities by Directors and Named Executive Officers
No compensation securities were exercised by any director or NEO during the year ended July 31, 2019.
External Management Companies
None of the NEOs or directors of the Company have been retained or employed by an external management company which has entered into an understanding, arrangement or agreement with the Company to provide executive management services to the Company, directly or indirectly.
Stock Option Plans and Other Incentive Plans
On July 27, 2020 the Board approved a restricted share unit plan (the “2020 RSU Plan”) and a 20% rolling stock option plan (the “2020 Option Plan” and together with the 2020 RSU Plan, the “2020 Plans”) to grant restricted share units (“RSU’s”) and incentive stock options (“Options”) to directors, officers, key employees and consultants of the Company. Pursuant to the 2020 RSU Plan and the 2020 Option Plan, the Company may reserve up to a maximum of 20% of the issued and outstanding Shares at the time of grant pursuant to awards granted under the 2020 Plans. Previously, the Company had a 10% rolling stock option plan that was implemented which authorized
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the Board to grant stock options to directors, officers, employees and consultants to acquire up to 10% of the issued and outstanding Shares of the Company.
2020 Option Plan
The 2020 Option Plan of the Company is designed to give each Option holder an interest in preserving and maximizing shareholder value in the longer term, to enable the Company to attract and retain individuals with experience and ability and to reward individuals for current performance and expected future performance. The Board considers Option grants when reviewing executive officer compensation packages as a whole.
The Board has sole discretion to determine the key employees to whom it recommends that grants be made and to determine the terms and conditions of the Options forming part of such grants. The Board approves ranges of Option grants for each level of executive officer. Individual grants are determined by an assessment of an individual’s current and expected future performance, level of responsibilities and the importance of the position to the Company.
The number of Options which may be issued under the Option Plan in the aggregate and in respect of any fiscal year is limited under the terms of the 2020 Option Plan and cannot be increased without shareholder approval.
2020 RSU Plan
The 2020 RSU Plan provides for granting of RSU’s for the purposes of advancing the interests of the Company through motivation, attraction and retention of employees, officers, consultants and directors by granting equity-based compensation incentives, in addition to the Company’s 2020 Option Plan.
RSUs granted pursuant to the 2020 RSU Plan will be used to compensate participants for their individual performance-based achievements and are intended to supplement stock option awards in this respect, the goal of such grants is to more closely tie awards to individual performance based on established performance criteria.
The 2020 Plans has been used to provide stock options and RSU’s which are granted in consideration of the level of responsibility of the executive as well as his or her impact or contribution to the longer-term operating performance of the Company. In determining the number of Options or RSU’s to be granted to the executive officers, the Compensation Committee with consultation of the Board takes into account the number of Options or RSU’s, if any, previously granted to each executive officer, and the exercise price of any outstanding Options to ensure that such grants are in accordance with the policies of the CSE and closely align the interests of the executive officers with the interests of shareholders.
The Compensation Committee with consultation of the Board has the responsibility to administer the compensation policies related to the executive management of the Company, including option-based and share-based awards.
Employment, consulting and management agreements
Other than as set out below, the Company has not entered into any other contract, agreement, plan or arrangement that provides for payments to a NEO or a director at, following or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement a change in control of the Company or a change in an NEOs or directors’ responsibilities.
The Company entered into a management consulting agreement with Johannes (Theo) van der Linde effective July 20, 2017 with regard to his services as Chief Financial Officer of the Company. Pursuant to the agreement, the Company agreed to pay Mr. van der Linde a base salary of $72,000 per annum and shall continue indefinitely until terminated by either party in accordance with the terms of the agreement. The agreement provides for a severance clause of three months’ notice for termination. In the event that Mr. van der Linde resigns for “Good Cause” following a “Change of Control” (as those terms are defined in the applicable agreement), Mr. van der Linde will be entitled to two times the annual pro-rated fee paid.
The Company entered into an informal verbal agreement with Paul Rosen effective July 20, 2017 with regard to his services as CEO of the Company. Pursuant to the informal verbal agreement, the Company agreed to pay Mr. Rosen a base salary of $300,000 per annum and shall continue indefinitely until terminated by either party. The agreement does not contain severance or change of control provisions. Subsequent to the year ended July 31, 2018, Mr. Rosen’s salary was increased to $400,000 per annum. Mr. Rosen ceased to act as an officer and director of the Company effective February 2019.
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The Company entered into an informal verbal agreement with Terry Taouss effective July 5, 2018 with regard to his services as President of the Company. Pursuant to the informal verbal agreement, the Company agreed to pay Mr. Taouss a base salary of $175,000 per annum, with possible bonuses to be awarded at the discretion of the Company and shall continue indefinitely until terminated by either party. The agreement provides for a severance clause of twelve months’ notice for termination. The agreement does not contain change of control provisions. Subsequent to the year ended July 31, 2018, Mr. Taouss’ salary was increased to $250,000. Mr. Taouss ceased to act as an officer of the Company effective February 2019.
Oversight and description of director and named executive officer compensation
The Board is responsible for determining, by way of discussions at board meetings, the compensation to be paid to the NEOs and directors of the Company. The Board conducts reviews with regard to the compensation of the directors and the executive officers once a year.
Director Compensation
For the financial year ended July 31, 2019, the Company did not employ a nominating committee. All tasks related to developing and monitoring the approach to the nomination of directors to the Board were performed by the members of the Board.
Other than as set forth in the foregoing, no director of the Company who is not a Named Executive Officer has received, during the most recently completed financial year, compensation pursuant to:
(a)any standard arrangement for the compensation of directors for their services in their capacity as directors, including any additional amounts payable for committee participation or special assignments;
(b)any other arrangement, in addition to, or in lieu of, any standard arrangement, for the compensation of directors in their capacity as directors; or
(c)any arrangement for the compensation of directors for services as consultants or expert.
Named Executive Officer Compensation
For the financial year ended July 31, 2019, the Company did not have a formal compensation program with specific performance goals nor did it employ a compensation committee. All tasks related to developing and monitoring the Company’s approach to the compensation of officers were performed by the members of the Board. The compensation of each of the NEOs was reviewed, recommended and approved by the Company’s independent directors.
The Board considers the performance of each NEO along with the Company’s ability to pay compensation and the Company's results of operation for the period. As the objectives of the Company’s compensation procedures are to align the interests of employees with the interests of shareholders, a significant portion of total compensation is based upon overall corporate performance.
Compensation is designed to achieve the following key objectives:
·to support our overall business strategy and objectives;
·to provide market competitive compensation that is substantially performance-based;
·to provide incentives that encourage superior corporate performance and retention of highly skilled and talented NEOs; and
·to align executive compensation with corporate performance and therefore shareholders' interests.
Our compensation package is comprised of short-term compensation in the form of base salary or service fees, medium-term compensation in the form of discretionary cash bonuses and long-term compensation in the form of option-based awards. The Company does not have a formal compensation program which sets benchmarks for performance by NEOs. Base salary is determined by the Board largely based on market standards. In addition, the Board may consider, on an annual basis, an award of bonuses to key executives and senior management. The amount and award of such bonuses is discretionary, depending on, among other factors, the financial performance of the Company and the position of a participant. The Board considers that the payment of such discretionary annual cash bonuses satisfies the medium-term compensation component. No bonuses were awarded for the financial year ended July 31, 2019. Lastly, the Company chooses to grant stock options to executive officers to satisfy the long-term compensation component.
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The Board has not directly considered the implications of the risks associated with our compensation policies and practices. The Company does not have a set policy preventing an NEO or director from purchasing financing instruments such as prepaid variable forward contracts, equity swaps, collars or units of exchange funds designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by such person. The Company does not use a peer group to determine compensation.
Since the end of the July 31, 2019 financial year, the Board has established a Compensation Committee. The charter of the Compensation Committee is summarized below under “Corporate Governance Disclosure – Compensation Committee”.
Pension Disclosure
The Company does not have a pension plan that provides for payments or benefits to the NEOs or directors at, following, or in connection with retirement. The Company does not have any form of deferred compensation plan.
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
None of the current or former directors, executive officers, employees of the Company, the proposed nominees for election to the Board, or their respective associates or affiliates, are or have been indebted to the Company since the beginning of the most recently completed financial year of the Company.
INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS
TO BE ACTED UPON
No director or executive officer of the Company or any proposed nominee of Management of the Company for election as a director of the Company, nor any associate or affiliate of the foregoing persons, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, since the beginning of the Company’s last financial year in matters to be acted upon at the Meeting, other than the election of directors, the appointment of auditors and the confirmation of the Option Plan.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
None of the persons who were directors or executive officers of the Company or a subsidiary at any time during the Company’s last completed financial year, the proposed nominees for election to the Board, any person or company who beneficially owns, directly or indirectly, or who exercises control or direction over (or a combination of both) more than 10% of the issued and outstanding Shares of the Company, nor the associates or affiliates of those persons, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any transaction or proposed transaction which has materially affected or would materially affect the Company.
APPOINTMENT OF AUDITOR
Auditor
Management intends to nominate Manning Elliott LLP, Chartered Accountants, of Vancouver, British Columbia, for re-appointment as auditor of the Company. Forms of proxies given pursuant to this solicitation will, on any poll, be voted as directed and, if there is no direction, for the re-appointment of Manning Elliott LLP, Chartered Accountants, as the auditor of the Company to hold office for the ensuing year with remuneration to be fixed by the directors.
MANAGEMENT CONTRACTS
Other than as disclosed below, no Management functions of the Company are to any substantial degree performed by a person or company other than the directors or NEOs of the Company.
The Company entered into a management agreement (the “Management Contract”) with Pender Street Corporate Consulting Ltd. (“PSCC”) of Suite 810 – 789 West Pender Street, Vancouver, British Columbia, V6C 1H2 dated for reference January 1, 2018, and subsequently assigned to Partum Advisory Services Corp. (“Partum”) on April 3, 2019, as amended on April 1, 2020 to provide certain corporate, accounting and administrative services to the Company in accordance with the terms of the Management Contract for a monthly fee of $6,000 plus applicable taxes and reimbursement of all out-of-pocket expenses incurred on behalf of the Company. The Management Contract is for an initial term of 12 months, to be automatically renewed for further 12 month periods, unless either
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party gives 90 days’ notice of non-renewal, in which case the Management Contract will terminate. The Management Contract can be terminated by either party on 90 days’ written notice. It can also be terminated by the Company for cause without prior notice or upon the mutual consent in writing of both parties. If there is a take-over or change of control of the Company resulting in the termination of the Management Agreement, Partum is entitled to receive an amount equal to six months of fees payable as a lump sum payment due on the day after the termination date.
Partum was not indebted to the Company during the Company’s last completed financial year, and the Management Contract remains in effect.
During the most recently completed financial year, the Company paid or accrued a total $563,916 in corporate, accounting and administrative service fees.
AUDIT COMMITTEE
The Company is required to have an audit committee (the “Audit Committee”) comprised of not less than three directors, a majority of whom are not officers, control persons or employees of the Company or an affiliate of the Company.
Audit Committee Charter
The text of the Audit Committee’s charter is attached as Schedule “A” to this Circular.
Composition of Audit Committee and Independence
The Company’s current Audit Committee consists of Brad Rogers, Brendan Purdy and William Dawson.
National Instrument 52-110 - Audit Committees (“NI 52-110”) provides that a member of an audit committee is “independent” if the member has no direct or indirect material relationship with the Company, which could, in the view of the Company’s Board, reasonably interfere with the exercise of the member’s independent judgment. Of the Company’s current Audit Committee members, Brendan Purdy and William Dawson are “independent” within the meaning of NI 52-110. Brad Rogers is not “independent” as he is also the CEO of the Company.
NI 52-110 provides that an individual is “financially literate” if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements. All of the members of the Audit Committee are “financially literate” as that term is defined. The following sets out the Audit Committee members’ education and experience that is relevant to the performance of his responsibilities as an audit committee member.
Relevant Education and Experience
Brad Rogers – Mr. Rogers previously served as President of Canntrust, one of Canada’s leading licensed cannabis producers. Under Mr. Roger’s direction, Canntrust created the Canadian cannabis market’s Gold Standard by producing quality, pharmaceutically standardized product across flower and extract. A recognized expert in cannabis production and a creative brand-building marketer, Mr. Rogers was instrumental in leading CannTrust into early profitability. He was the driving force behind its capital raises and IPO that peaked at a $1.5 billion market cap. In addition, Mr. Rogers was part of the team that built one of the first ever commercially scaled cannabis production facilities in the world (for medicinal cannabis use) in 2014. That company (Metrum) was successfully sold in 2016 to Canopy Growth (NYSE:WEED) for over $450 million. He holds an MBA from the Richard Ivey School of Business.
Brendan Purdy – Mr. Purdy is a practicing securities lawyer, with experience in public companies, and the capital markets. Mr. Purdy received his J.D. from the University of Ottawa, received a Bachelor of Management and Organizational Studies degree from the University of Western Ontario. Mr. Purdy has significant cannabis industry experience, in both his private practice and in his capacity as management and director of public cannabis issuers. Mr. Purdy most recently acted as Director, CEO, and Chairman of High Hampton Holdings Corp. (CSE: HC), a CSE-listed cannabis investment company focused on acquisitions of cannabis distribution companies, branding opportunities, and state licensed producers in California, USA. Mr. Purdy was involved in identifying and facilitating the acquisition of CoachellaGro Corp., a California-based corporation holding 10.8 acres of land within the designated cannabis cultivation zone in Coachella, California.
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William Dawson – Mr. Dawson is a Chartered Professional Accountant and Chartered Accountant with more than 40 years of experience in the field. Mr. Dawson has served as the Chief Financial Officer of SBG – Skill Based Games Inc. since 2014 and the President and Chief Executive Officer of Play Games for Fun Limited Since 2013. Mr. Dawson previously served as Chief Financial Officer of Oakshire Holdings Limited from 2011 to 2018, Pong Game Studios Corporation from 2011 to 2018, Caliburger Canada Incorporated from 2015 to 2017 and Blow Canada Inc. from 2014 to 2017. Mr. Dawson holds a BA in economics and finance as well as an MBA from York University.
Audit Committee Oversight
Since the commencement of the Company’s most recently completed financial year, the Audit Committee of the Company has not made any recommendations to nominate or compensate an external auditor which were not adopted by the Board.
Reliance on Certain Exemptions
Since the commencement of the Company’s most recently completed financial year, the Company has not relied on:
(d)the exemption in section 2.4 (De Minimis Non-audit Services) of NI 52-110; or
(e)an exemption from NI 52-110, in whole or in part, granted under Part 8 (Exemptions).
Pre-Approval Policies and Procedures
The Audit Committee has not adopted any specific policies and procedures for the engagement of non-audit services.
Audit Fees
The following table sets forth the fees paid by the Company and its subsidiaries to Manning Elliott LLP, Chartered Accountants, for services rendered in the last two fiscal years:
|
| 2019 | 2018 |
|
| ($) | ($) |
Audit fees(1) |
| 60,375 | 22,000 |
Audit related fees(2) |
| 525 | Nil |
Tax fees(3) |
| 5,801.25 | 2,250 |
All other fees(4) |
| 3,517.50 | 12,500 |
Total |
| 70,218.75 | 36,750 |
Notes:
(1)“Audit fees” include aggregate fees billed by the Company’s external auditor in each of the last two fiscal years for audit fees.
(2)“Audited related fees” include the aggregate fees billed in each of the last two fiscal years for assurance and related services by the Company’s external auditor that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit fees” above. The services provided include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation.
(3)“Tax fees” include the aggregate fees billed in each of the last two fiscal years for professional services rendered by the Company’s external auditor for tax compliance, tax advice and tax planning. The services provided include tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities.
(4)“All other fees” include the aggregate fees billed in each of the last two fiscal years for products and services provided by the Company’s external auditor, other than “Audit fees”, “Audit related fees” and “Tax fees” above.
Exemption in Section 6.1
The Company is a “venture issuer” as defined in NI 52-110 and is relying on the exemption in section 6.1 of NI 52-110 relating to Parts 3 (Composition of Audit Committee) and 5 (Reporting Obligations).
CORPORATE GOVERNANCE DISCLOSURE
National Instrument 58-101 - Disclosure of Corporate Governance Practices, requires all reporting issuers to provide certain annual disclosure of their corporate governance practices with respect to the corporate governance guidelines (the “Guidelines”) adopted in National Policy 58-201. These Guidelines are not prescriptive, but have
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been used by the Company in adopting its corporate governance practices. The Board and Management consider good corporate governance to be an integral part of the effective and efficient operation of Canadian corporations. The Company’s approach to corporate governance is set out below.
Board of Directors
Management is nominating five individuals to the Board, all of whom are current directors of the Company.
The Guidelines suggest that the board of directors of every reporting issuer should be constituted with a majority of individuals who qualify as “independent” directors under NI 52-110, which provides that a director is independent if he or she has no direct or indirect “material relationship” with the Company. The “material relationship” is defined as a relationship which could, in the view of the Company’s Board, reasonably interfere with the exercise of a director’s independent judgement. All of the current members of the Board are considered “independent” within the meaning of NI 52-110, except for Brad Rogers, who is the CEO of the Company and Johannes (Theo) van der Linde who is the CFO of the Company.
The Board has a stewardship responsibility to supervise the management of and oversee the conduct of the business of the Company, provide leadership and direction to Management, evaluate Management, set policies appropriate for the business of the Company and approve corporate strategies and goals. The day-to-day management of the business and affairs of the Company is delegated by the Board to the CEO and the President. The Board will give direction and guidance through the President and CEO to Management and will keep Management informed of its evaluation of the senior officers in achieving and complying with goals and policies established by the Board.
The Board recommends nominees to the shareholders for election as directors, and immediately following each annual general meeting appoints an Audit Committee and, going forward, will appoint a Compensation Committee and the chairperson of each committee. The Board establishes and periodically reviews and updates the committee mandates, duties and responsibilities of each committee, elects a chairperson of the Board and establishes his or her duties and responsibilities, appoints the CEO, CFO and President of the Company and establishes the duties and responsibilities of those positions and on the recommendation of both the CEO and the President, appoints the senior officers of the Company and approves the senior management structure of the Company.
The Board exercises its independent supervision over management by its policies that (a) periodic meetings of the Board be held to obtain an update on significant corporate activities and plans; and (b) all material transactions of the Company are subject to prior approval of the Board. The Board shall meet not less than three times during each year and will endeavour to hold at least one meeting in each fiscal quarter. The Board will also meet at any other time at the call of the President, or subject to the Articles of the Company, of any director.
The mandate of the Board, as prescribed by the Business Corporations Act (British Columbia) (the “Act”), is to manage or supervise management of the business and affairs of the Company and to act with a view to the best interests of the Company. In doing so, the Board oversees the management of the Company’s affairs directly and through its committees.
Directorships
The following directors of the Company are also directors of other reporting issuers as stated:
•Brendan Purdy is a director of Conscience Capital Inc., Rotonda Ventures Corp., Supreme Metals Corp., and Organic Flower Investments Group Inc.
•Johannes (Theo) van der Linde is a director of MegumaGold Corp., Slam Exploration Ltd., Elcora Advanced Materials Corp., Organic Flower Investments Group Inc. and Boksburg Ventures Inc.
Orientation and Continuing Education
The Board’s practice is to recruit for the Board persons with extensive experience in the cannabis sector and in public company matters. Prospective new board members are provided a reasonably detailed level of background information, verbal and documentary, on the Company’s affairs and plans prior to obtaining their consent to act as a director.
The Board provides training courses to the directors as needed, to ensure that the Board is complying with current legislative and business requirements.
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Ethical Business Conduct
The Board encourages and promotes a culture of ethical business conduct through communication and supervision as part of their overall stewardship responsibility. In addition, the Board has adopted a Corporate Conduct and Code of Ethics Policy (the “Code”) to be followed by the Company’s directors, officers, employees and principal consultants and those of its subsidiaries. The Code is also to be followed, where appropriate, by the Company’s agents and representatives, including consultants where specifically required. The purpose of the Code is to, among other things, promote honest and ethical conduct, avoid conflict of interest, protect confidential information and comply with the applicable government laws and securities rules and regulations.
Nomination of Directors
The Board identifies new candidates for board nomination by an informal process of discussion and consensus-building on the need for additional directors, the specific attributes being sought, likely prospects, and timing. Prospective directors are not approached until consensus is reached. This process takes place among the Chairman and a majority of the non-executive directors.
Compensation Committee
The text of the Compensation Committee’s charter is attached as Schedule “B” to this Circular.
The Compensation Committee will operate under supervision of the Board and will have overall responsibility for reviewing and recommending the compensation of the Company's CEO, other executive officers and key employees, overseeing the Company's compensation and benefits policies, plans and programs and general oversight of the Company's compensation structure. The Compensation Committee will be appointed annually by the Board of Directors and will consist of a minimum of three directors, a majority of whom will be independent.
Meetings of the Compensation Committee shall occur as often as considered necessary or appropriate and shall generally occur without the presence of management. The CEO may not be present for any portion of any meeting at which the compensation of the CEO is being deliberated or voted upon.
Assessments
The Board annually reviews its own performance and effectiveness as well as the effectiveness and performance of its committees. Effectiveness is subjectively measured by comparing actual corporate results with stated objectives. The contributions of individual directors are informally monitored by other Board members, bearing to mind the business strengths of the individual and the purpose of originally nominating the individual to the Board.
The Board monitors the adequacy of information given to directors, communication between Board and Management and the strategic direction and processes of the Board and its committees.
The Board believes its corporate governance practices are appropriate and effective for the Company, given its size and operations. The Company’s corporate governance practices allow the Company to operate efficiently, with checks and balances that control and monitor Management and corporate functions without excessive administration burden.
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PARTICULARS OF MATTERS TO BE ACTED UPON
APPROVAL AND RATIFICATION OF 20% ROLLING STOCK OPTION INCENTIVE PLAN
At the Meeting, shareholders will be asked to consider, and if thought advisable, to approve by way of ordinary resolution, approval of a 20% rolling stock option plan (the “2020 Option Plan”), a copy of which is attached hereto as Schedule “C”.
The Board has, by resolution, adopted the 2020 Option Plan to replace the existing stock option incentive plan (the “2018 Option Plan”) and proposes to implement it upon receipt of approval of the 2020 Option Plan by the shareholders. The 2020 Option Plan is substantively similar to the 2018 Option Plan except that it increases the number of Shares reserved under it. The number of Shares proposed to be granted under the 2020 Plan is a maximum of 20% of the issued and outstanding Shares at the time of grant. Upon the 2020 Option Plan receiving shareholder approval, the 2020 Option Plan will be implemented and all of the options presently governed by the 2018 Option Plan will thereafter be governed by the 2020 Option Plan and the 2018 Option Plan will terminate.
Management believes the new 2020 Option Plan will provide the Company with a sufficient number of Shares issuable under the 2020 Option Plan to fulfill the purpose of the 2020 Option Plan, namely, to secure for the Company and its shareholders the benefits of incentive inherent in share ownership by the directors, officers, key employees and consultants of the Company who, in the judgment of the Board, will be largely responsible for its future growth and success.
Approval Requirements
As, in certain circumstances, approval of the 2020 Option Plan by Disinterested Shareholders (as hereafter defined) may be required, we believe it prudent to seek Disinterested Shareholder approval of the 2020 Option Plan at the Meeting.
Shareholders who are not Related Persons (as defined above) entitled to benefit under the 2020 Option Plan (the “Disinterested Shareholders”) will be asked at the Meeting to approve implementation of the 2020 Option Plan. As at the date of this Circular and based on the information available to us, votes attaching to an aggregate 5,628,000 Shares and 5,628,000 Series 2 Shares held by the directors and officers of the Company entitled to benefit under the 2020 Option Plan are not eligible to vote on the resolution to approve implementation of the 2020 Option Plan.
Accordingly, at the Meeting, Shareholders are being asked to consider and, if thought advisable, approve an ordinary resolution in the following form:
“BE IT RESOLVED THAT:
(1)the 2020 Option Plan of the Company, approved by the directors of the Company on July 27, 2020, substantially in the form attached at Schedule “C” to the Circular of the Company dated August 5, 2020, be and the same is hereby ratified, confirmed and approved;
(2)any director or officer be and is hereby authorized to amend the 2020 Option Plan should such amendments be required by applicable regulatory authorities; and
(3)any one director or officer of the Company be and is hereby authorized and directed to do all such things and to execute and deliver all documents and instruments as may be necessary or desirable to carry out the terms of this resolution.”
Unless otherwise instructed, the persons named in the enclosed proxy or voting instruction form intend to vote such proxy or voting instruction form in favour of the approval of the 2020 Option Plan. The directors of the Company recommend that shareholders vote in favour of the approval of the 2020 Option Plan. To be adopted, this resolution is required to be passed by the affirmative vote of a majority of the votes cast at the Meeting.
Following approval of the 2020 Option Plan by the Company’s Disinterested Shareholders, further shareholder approval will not be required for option grants made under the 2020 Option Plan.
APPROVAL AND RATIFICATION OF RESTRICTED SHARE UNIT
On July 27, 2020, the Board implemented and adopted a restricted share unit plan (the “2020 RSU Plan”), reserving for issuance, combined with any equity securities granted under all other compensation arrangements adopted by the Company, including the 2020 Option Plan, a maximum of 20% of the issued and outstanding Shares at the time of grant.
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At the Meeting, shareholders will be asked to consider, and if thought advisable, to ratify, confirm and approve by way of ordinary resolution, a restricted share unit plan (the “2020 RSU Plan”), a copy of which is attached hereto as Schedule “D”.
The Board has, by resolution, adopted the 2020 RSU Plan and proposes to implement it upon receipt of approval of the shareholders.
The Company has reserved for issuance a maximum of 20% of the issued and outstanding Shares at the time of grant, combined with any equity securities granted under all other compensation arrangements adopted by the Company, including the 2020 Option Plan.
Approval Requirements
As, in certain circumstances, approval of the 2020 RSU Plan by Disinterested Shareholders (as hereafter defined) may be required, we believe it prudent to seek Disinterested Shareholder approval of the 2020 RSU Plan at the Meeting.
Shareholders who are not Related Persons (as defined above) entitled to benefit under the 2020 RSU Plan (the “Disinterested Shareholders”) will be asked at the Meeting to approve implementation of the 2020 RSU Plan. As at the date of this Circular and based on the information available to us, votes attaching to an aggregate 5,628,000 Shares and 5,628,000 Series 2 Shares held by the directors and officers of the Company entitled to benefit under the 2020 RSU Plan are not eligible to vote on the resolution to approve implementation of the 2020 RSU Plan.
At the Meeting, Disinterested Shareholders will be asked to pass a resolution approving the 2020 RSU Plan, a copy of which is attached hereto as Schedule “D”.
Accordingly, at the Meeting, Disinterested Shareholders are being asked to consider and, if thought advisable, approve an ordinary resolution in the following form:
“BE IT RESOLVED THAT:
(1)the 2020 RSU Plan, approved by the directors of the Company on July 27, 2020, substantially in the form attached at Schedule “D” to the Circular of the Company dated August 5, 2020, be and the same is hereby ratified, confirmed and approved;
(2)any director or officer be and is hereby authorized to amend the 2020 RSU Plan of the Company should such amendments be required by applicable regulatory authorities; and
(3)any one director or officer of the Company be and is hereby authorized and directed to do all such things and to execute and deliver all documents and instruments as may be necessary or desirable to carry out the terms of this resolution.”
Unless otherwise instructed, the persons named in the enclosed proxy or voting instruction form intend to vote such proxy or voting instruction form in favour of the approval of the 2020 RSU Plan. The directors of the Company recommend that shareholders vote in favour of the approval of the 2020 RSU Plan. To be adopted, this resolution is required to be passed by the affirmative vote of a majority of the votes cast by Disinterested Shareholders at the Meeting.
General Matters
It is not known whether any other matters will come before the Meeting other than those set forth above and in the Notice of Meeting, but if any other matters do arise, the person named in the Proxy intends to vote on any poll, in accordance with his or her best judgement, exercising discretionary authority with respect to amendments or variations of matters set forth in the Notice of Meeting and other matters which may properly come before the Meeting or any adjournment of the Meeting.
ADDITIONAL INFORMATION
Additional information relating to the Company may be found on SEDAR at www.sedar.com. Financial information about the Company is provided in the Company’s comparative annual financial statements to July 31, 2019, copies of which, together with Management’s Discussion and Analysis thereon, can be found on the Company’s SEDAR profile at www.sedar.com. Additional financial information concerning the Company may be obtained by any securityholder of the Company free of charge by contacting the Company, at Suite 810 - 789 West Pender Street, Vancouver, British Columbia, V6C 1H2 or by telephone at 604-687-2038.
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BOARD APPROVAL
The contents of this Circular have been approved and its mailing authorized by the directors of the Company.
DATED at Vancouver, British Columbia, the 5th day of August, 2020.
ON BEHALF OF THE BOARD
Signed: “Brad Rogers”
Brad Rogers
Chief Executive Officer
RED WHITE & BLOOM BRANDS INC.
Schedule “A”
Audit Committee Charter
(SEE ATTACHED)
RED WHITE & BLOOM BRANDS INC.
Schedule “B”
Compensation Committee Charter
(SEE ATTACHED)
RED WHITE & BLOOM BRANDS INC.
Schedule “C”
2020 Stock Option Plan
(SEE ATTACHED)
RED WHITE & BLOOM BRANDS INC.
Schedule “D”
2020 Restricted Share Unit Plan
(SEE ATTACHED)