UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box: | |
[ ] | Preliminary Proxy Statement |
[ ] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
[X] | Definitive Proxy Statement |
[ ] | Definitive Additional Materials |
[ ] | Soliciting Material Under Rule 14a-12 |
NOVAGOLD RESOURCES INC.
(Name of Registrant as Specified In Its Charter)
___________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] | No fee required. |
[ ] | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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(2) | Aggregate number of securities to which transaction applies: | |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
(4) | Proposed maximum aggregate value of transaction: | |
(5) | Total fee paid: |
[ ] | Fee paid previously with preliminary materials: |
[ ] | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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(4) | Date Filed: |
Notice Of
Annual General Meeting
Of Shareholders
&
Management
Information Circular
MEETING TO BE HELD MAY 18, 2022
NOVAGOLD RESOURCES INC.
Website: www.novagold.com
|
Dated March 25, 2022
NOVAGOLD RESOURCES INC.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
Date: | May 18, 2022 |
Time: | 1:00 p.m. Pacific Time |
Location: | Live Webcast at: www.virtualshareholdermeeting.com/NG2022
|
Record Date: | March 21, 2022
|
The purposes of the annual meeting (the “Meeting”) are to:
1. | receive the Annual Report of the Directors of the Company (the “Directors”) containing the consolidated financial statements of the Company for the year ended November 30, 2021, together with the Report of the Auditors thereon; |
2. | set the number of Directors of the Company; |
3. | elect Directors of the Company for the forthcoming year; |
4. | appoint the Auditors of the Company for the forthcoming year and to authorize the Directors through the Audit Committee to fix the Auditors’ remuneration; |
5. | consider and, if deemed advisable, pass a non-binding resolution approving the compensation of the Company’s Named Executive Officers; and |
6. | transact such further and other business as may properly come before the Meeting or any adjournment thereof. |
The specific details of the matters currently proposed to be put before the Meeting are set forth in the Circular accompanying and forming part of this Notice.
Only Shareholders of record at the close of business on March 21, 2022 are entitled to receive notice of the Meeting and to vote at the Meeting.
To assure your representation at the Meeting, please complete, sign, date and return your voted proxy which will be delivered to you separately, whether or not you plan to attend. Sending your proxy will not prevent you from voting in person at the Meeting.
All proxies completed by registered shareholders must be returned to the Company:
· | by online proxy via the following website: www.proxyvote.com no later than May 16, 2022 at 4:00 p.m. Eastern time (1:00 p.m. Pacific time); |
· | by telephone by calling (800) 690-6903 and following the instructions, no later than May 16, 2022 at 4:00 p.m. Eastern time (1:00 p.m. Pacific time); or |
· | by requesting a paper copy of the proxy materials and mailing a completed proxy card to Broadridge at 51 Mercedes Way, Edgewood, NY 11717, Attn: Proxy Department, for receipt no later than May 16, 2022, at 4:00 p.m. Eastern time (1:00 p.m. Pacific time). |
Non-registered shareholders whose shares are registered in the name of an intermediary should carefully follow voting instructions provided by the intermediary. A more detailed description on returning proxies by non-registered shareholders can be found on page 4 of the attached Circular.
Kingsdale Advisors (“Kingsdale”) is acting as the Company’s strategic shareholder advisor and proxy solicitation agent. If you have any questions, please contact Kingsdale in one of the following ways:
· | call toll free in North America at 1-866-228-8818 |
· | call collect from outside of North America at 416-867-2272, or |
· | send an email to Kingsdale at contactus@kingsdaleadvisors.com. |
Your vote is important. We encourage you to vote promptly.
Internet and telephone voting are available through 4:00 p.m. Eastern Time on May 16, 2022.
By Order of the Board of Directors of
NOVAGOLD RESOURCES INC.
Gregory A. Lang
President and Chief Executive Officer
Vancouver, British Columbia
March 25, 2022
LETTER TO SHAREHOLDERS
Dear Fellow Shareholders,
We are pleased to invite you to NOVAGOLD’s 2022 Annual General Meeting of Shareholders.
Please read this Circular as it contains important, detailed information about the meeting agenda, who is eligible to vote, how to vote, the Director nominees, our governance practices, and compensation of our executives and Directors.
NOVAGOLD RESOURCES INC. (the “Company,” or “NOVAGOLD”) values engagement with our shareholders, whether at the annual meeting, at investment conferences, in one-on-one meetings, or via the Company’s electronic and social media communication channels. The Company’s Circular provides an important opportunity to reach every shareholder. This year, we thought it would be helpful to:
1. | summarize the items in this Circular being presented to shareholders for their vote, |
2. | highlight NOVAGOLD’s corporate governance practices, and |
3. | describe the Company’s shareholder engagement program. |
We are providing these materials in connection with the solicitation by the NOVAGOLD Board of Directors of proxies to be voted at our 2022 annual meeting of shareholders and at any adjournment or postponement of that meeting. The annual meeting of shareholders will be held in a virtual format on May 18, 2022 at 1:00 p.m. Pacific Time.
In light of COVID-19 and for the safety of our shareholders, employees, and other members of the community, our 2022 annual meeting of shareholders will be held in a virtual format only. Shareholders are encouraged to cast their vote in advance by proxy and participate from any geographic location with internet connectivity or by telephone. We believe this is an important step to enhancing accessibility to our annual meeting for all of our shareholders, reducing the carbon footprint of our activities, and is particularly important this year taking into account public health and safety considerations posed by COVID-19. Shareholders may view a live webcast of the annual meeting and registered shareholders and duly appointed proxyholders may submit questions digitally during the meeting at www.virtualshareholdermeeting.com/NG2022. Questions may also be submitted to management and the Board prior to the meeting via email at info@novagold.com.
MATTERS FOR SHAREHOLDER VOTING
At this year’s annual general meeting, we are asking our shareholders to vote on the following matters:
Proposal 1: Setting the Number of Directors
The Board of Directors recommends a vote FOR this proposal. See pages 6-7 for details.
Proposal 2: Election of Directors
The Board of Directors recommends a vote FOR the election of the director nominees named in this proxy statement. See pages 12-24 for further information on the nominees.
Proposal 3: Appointment of PricewaterhouseCoopers LLP as independent auditor for 2022
The Board of Directors recommends a vote FOR this proposal. See pages 9-10 for details.
Proposal 4: Advisory Approval of Executive Compensation
The Board of Directors recommends a vote FOR this proposal. See page 11 for details.
The Board of Directors knows of no other matters to be presented for action at the annual meeting. If any matter is presented from the floor of the annual meeting, the individuals serving as proxies intend to vote on these matters in the best interest of all shareholders. Your signed proxy gives this authority to Gregory Lang or Tricia Pannier.
Please refer to the material on pages 3-6 for information about how to cast your vote, how to attend the meeting virtually, and other frequently asked questions.
GOVERNANCE HIGHLIGHTS
NOVAGOLD is committed to maintaining robust corporate governance practices. Strong corporate governance helps us achieve our performance goals and maintain the trust and confidence of our investors, employees, regulatory agencies and other stakeholders. Our corporate governance practices are described in more detail on pages 91-104 and on the Governance page of our website at www.novagold.com.
Director Independence | • Nine of our eleven nominees are independent • All of our key Board committees (Audit, Compensation, and Corporate Governance and Nominations) are composed exclusively of independent Directors • Our CEO is the only executive Director |
Board Leadership | • The positions of Chairman and CEO are separate • Our Board has appointed an independent Lead Director |
Accountability and Shareholder Rights | • Extensive shareholder engagement involved reaching out to holders of approximately 90% of our shares in 2021 • All Directors stand for election annually • In uncontested elections, Directors must be elected by a majority of votes cast • Eligible shareholders may nominate Directors and submit other proposals for consideration at annual meetings; see "Shareholder Proposals" on pages 104-105 below for details on timing and other requirements for submitting shareholder proposals |
Board Practices and Governance | • Our Board regularly reviews its effectiveness • In January 2022 the Board adopted a Diversity, Equity and Inclusion Policy • In 2021 the Board adopted a written Board Charter to formalize its practices and responsibilities • The independent Directors meet in executive session without the presence of management or the non-independent Directors immediately following each Board meeting |
Share Ownership | • In August 2020, our Board increased the share ownership requirements for our Directors and our CEO • Our Directors must hold at least $128,400 (3 times their annual retainer) worth of NOVAGOLD common stock within five years of joining the Board (increased from C$50,000) • Our CEO must, within five years of commencement of employment, hold NOVAGOLD common stock valued in an amount at least equal to five times his annual base pay (increased from three times his annual base pay) • Our CFO must, within five years of commencement of employment, hold NOVAGOLD common stock valued at an amount at least equal to two times his annual base pay • Hedging or pledging of NOVAGOLD stock is prohibited for Directors as well as employees • NOVAGOLD encourages its employees to be shareholders in the Company by making share-based compensation and employee stock purchase programs available to all employees |
Board Oversight of Risk Management | • Our Board reviews NOVAGOLD’s systematic approach to identifying and assessing risks faced by NOVAGOLD and its projects • See the chart on the following page for a description of the Board’s allocation of risk assessment oversight |
SHAREHOLDER ENGAGEMENT
Maintaining an active shareholder engagement program continues to be a high priority for the Company and is an integral part of our corporate governance practices. The Board Chair, CEO, and Vice President of Corporate Communications meet regularly with large shareholders, and the Company’s Corporate Communications team is very responsive to shareholder inquiries regardless of ownership level.
In 2021, NOVAGOLD placed calls to or met in person with all its shareholders owning 40,000 shares or more; in other words, NOVAGOLD contacted or attempted to contact its owners holding approximately 90% of the Company’s issued and outstanding Common Shares entitled to vote at NOVAGOLD’s 2021 annual meeting of shareholders. We plan to continue to regularly engage with our shareholders.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE DISCLOSURES
In 2021 NOVAGOLD published its inaugural Sustainability Summary Report and posted detailed environmental, social and governance (“ESG”) information about NOVAGOLD and its flagship Donlin Gold project on NOVAGOLD’s website at www.novagold.com/sustainability. We plan to issue a Sustainability Summary in the first half of 2022 reporting on the Company’s ESG goals, activities, and performance during fiscal year 2021. NOVAGOLD will update the ESG information on its website regularly and will continue to issue annual reports on NOVAGOLD’s ESG goals and performance. We hope you find this information useful and informative.1
More information about NOVAGOLD can be found in the Annual Report on Form 10-K for the fiscal year ended November 30, 2021, which is available on the Company’s website at www.novagold.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
The Board and management team wish to thank you for your continued confidence in NOVAGOLD.
Sincerely,
Gregory A. Lang | Anthony P. Walsh | |
President and Chief Executive Officer | Independent Lead Director, Audit Committee Chair |
_____________________________
1 The contents of our website and our Sustainability Summary Report are referenced for general information only and are not incorporated by reference in this Proxy Circular.
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-ii- |
MANAGEMENT INFORMATION CIRCULAR
INFORMATION REGARDING ORGANIZATION AND CONDUCT OF MEETING
THIS MANAGEMENT INFORMATION CIRCULAR (this “Circular”) IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY OR ON BEHALF OF THE MANAGEMENT AND THE BOARD OF DIRECTORS (THE “BOARD OF DIRECTORS” OR THE “BOARD”) OF NOVAGOLD RESOURCES INC. (“NOVAGOLD” or the “Company”) for use at the Annual General Meeting of the Shareholders (the “Shareholders”) of the Company to be held virtually at www.virtualshareholdermeeting/NG2022 on Wednesday, May 18, 2022 at 1:00 p.m. Pacific time (the “Meeting”) or at any adjournment thereof, for the purposes set forth in the accompanying Notice of Meeting. This Circular, the accompanying Notice of Meeting and the form of proxy were first made available to Shareholders on March 25, 2022.
Solicitation of proxies from registered Shareholders will primarily be by mail or courier, supplemented by telephone or other personal contact by employees or agents of the Company at nominal cost, and all costs thereof will be paid by the Company. The Company has retained the services of Kingsdale Advisors (“Kingsdale”) as its strategic shareholder advisor and proxy solicitation agent to assist the Company in soliciting proxies. The Company estimates the fees for Kingsdale associated with this year’s proxy solicitation will be C$52,500 plus disbursements.
There are two kinds of non-registered, or beneficial, Shareholders – those who object to their name being made known to the issuers of securities which they own (called “OBOs” for Objecting Beneficial Owners) and those who do not object to the issuers of the securities they own knowing who they are (called “NOBOs” for Non-Objecting Beneficial Owners). In accordance with National Instrument 54-101 - Communication with Beneficial Owners of Securities of a Reporting Issuer (“NI 54-101”), the Company has elected to send the Notice of Meeting, this Circular and the related form of proxy or voting instruction form indirectly to the NOBOs and to the OBOs through their intermediaries. Unless required by the rules of the NYSE American, the Company does not intend to pay for intermediaries to forward to OBOs, under NI 54-101, the Notice Package (as defined below), and in the case of an OBO, the OBO will not receive these materials unless the OBO’s intermediary assumes the cost of delivery.
If you have any questions or need assistance completing your form of proxy or voting instruction form, please contact our strategic shareholder advisor and proxy solicitation agent, Kingsdale, toll free in North America at 1-866-228-8818, or call collect from outside North America at 416-867-2272, or by email at contactus@kingsdaleadvisors.com.
Notice and Access
The Company uses the “Notice and Access” provisions in securities laws that permit the Company to forego mailing paper copies of this Circular and proxy-related materials to Shareholders and instead make them available for review, print and download via the Internet. Registered and non-registered Shareholders have received a Notice Package (as defined below) but will not receive a paper copy of this Circular or the proxy-related materials unless they request such documents as described in the Notice Package.
In accordance with U.S. Securities and Exchange Commission (“SEC”) rules, the Company has distributed a notice (the “Notice Package”) in the form prescribed by SEC rules to the clearing agencies and intermediaries for onward distribution to non-registered Shareholders of the website location where non-registered Shareholders may access the Notice of Meeting, this Circular, the instrument of proxy (collectively, the “Meeting Materials”) and an annual report for the Company’s fiscal year ended November 30, 2021. Intermediaries are required to forward the Notice Package to non-registered Shareholders unless a non-registered Shareholder has waived the right to receive Meeting Materials. Typically, intermediaries will use a service company (such as Broadridge Financial Services Inc. (“Broadridge”)) to forward the Notice Package to non-registered Shareholders.
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
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General
Unless otherwise specified, the information in this Circular is current as of March 10, 2022. Unless otherwise indicated, all references to “$” or “US$” in this Circular refer to United States dollars. References to “C$” in this Circular refer to Canadian dollars. The Bank of Canada exchange rate of a U.S. dollar to a Canadian dollar on November 30, 2021 was 1.2792.
Copies of the Meeting Materials, as well as the Company’s annual report containing the financial statements to be presented at the Meeting and related MD&A, can be obtained under the Company’s profile at www.sedar.com, at www.sec.gov, at www.novagold.com or by entering your 16-digit control number provided in your Notice Package at www.proxyvote.com.
Record Date and Quorum
The Board of Directors of the Company has fixed the record date for the Meeting as the close of business on March 21, 2022 (the “Record Date”). If a person acquires ownership of shares subsequent to the Record Date such person may establish a right to vote by delivering evidence of ownership of common shares of the Company (“Common Shares”) satisfactory to the Board and a request to be placed on the voting list to Blake, Cassels & Graydon LLP, the Company’s legal counsel, at Suite 2600, 595 Burrard Street, Three Bentall Centre, Vancouver, BC, V7X 1L3, Attention: Trisha Robertson. Subject to the above, all registered holders of Common Shares at the close of business on the Record Date will be entitled to vote at the Meeting. No cumulative rights are authorized, and dissenter’s rights are not applicable to any matters being voted upon. Each registered Shareholder will be entitled to one vote per Common Share.
Two or more persons present in person or by proxy representing at least 25% of the Common Shares entitled to vote at the Meeting will constitute a quorum at the Meeting.
Voting Standards
Broker non-votes occur when a beneficial owner who holds company stock through a broker does not provide the broker with voting instructions as to any matter on which the broker is not permitted to exercise its discretion and vote without specific instruction. As a result, the broker will inform the inspector of election that it does not have the authority to vote on the matter with respect to those shares. Broker non-votes may exist in connection with the election of directors and all proposals other than setting the number of directors and the appointment of auditors.
The following chart describes the proposals to be considered at the meeting, the voting options, the vote required for each matter, and the manner in which votes will be counted:
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
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Matter | Voting Options | Required Vote | Impact of Abstentions or Broker Non-Votes |
Setting the Number of Directors | For; Against; Abstain | Simple majority of votes cast
| No effect (Brokers are permitted to exercise their discretion and vote without specific instruction on this matter. Accordingly, there are no broker non-votes.)
|
Election of Directors | For; Withhold | Plurality of votes – the nominees receiving the highest number of votes, up to eleven, at the meeting will be elected*
| No effect |
Appointment of Auditors | For; Withhold | Simple majority of votes cast (only votes “for” are considered votes cast) | No effect (Brokers are permitted to exercise their discretion and vote without specific instruction on this matter. Accordingly, there are no broker non-votes.)
|
Approval of Non-Binding Advisory Vote on Executive Compensation
| For; Against; Abstain | Simple majority of votes cast (only votes “for” and “against” are considered votes cast) | No effect |
* In an uncontested election, if the number of votes “withheld” for any nominee exceeds the number of votes “for” the nominee, then the Majority Voting Policy requires that the nominee shall tender their written resignation to the Chair of the Board. See “Election of Directors” for a description of the Company’s Majority Voting Policy.
Registered Shareholders
Registered Shareholders can vote their shares before the meeting online at www.proxyvote.com, by calling the phone number included on the voting card, or by mailing a completed voting card. Registered Shareholders may also vote online during the virtual meeting at www.virtualshareholdermeeting.com/NG2022. Have the 16-digit control number from your voting materials available when casting your vote.
Shareholders who do not wish to attend the Meeting or do not wish to vote at the Meeting can vote by proxy. A registered Shareholder must return the completed proxy to the Company:
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
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· | by online proxy via the following website: www.proxyvote.com no later than May 16, 2022 at 4:00 p.m. Eastern time (1:00 p.m. Pacific time); |
· | by telephone by calling (800) 690-6903 and following the instructions, no later than May 16, 2022 at 4:00 p.m. Eastern time (1:00 p.m. Pacific time); or |
· | by requesting a paper copy of the proxy materials and mailing a completed proxy card to Broadridge at 51 Mercedes Way, Edgewood, NY 11717, Attn: Proxy Department, for receipt no later than May 16, 2022, at 4:00 p.m. Eastern time (1:00 p.m. Pacific time). |
The persons named in the form of proxy are officers or directors of the Company (“Directors”). Each Shareholder has the right to appoint a person or a company (who need not be a Shareholder) to attend and act for them and on their behalf at the Meeting other than the persons designated in the form of proxy. Such right may be exercised by striking out the names of the persons designated on the form of proxy and by inserting such appointed person’s name in the blank space provided for that purpose or by completing another form of proxy acceptable to the Board.
Non-Registered Shareholders
The information set forth in this section is of significant importance to many Shareholders of the Company, as a substantial number of Shareholders do not hold Common Shares in their own name. Shareholders who do not hold their Common Shares in their own name (i.e. non-registered or beneficial Shareholders) should note that only proxies deposited by Shareholders whose names appear on the records of the Company as the registered holders of Common Shares can be recognized and acted upon at the Meeting. If Common Shares are listed in an account statement provided to a Shareholder by a broker, then, in almost all cases, those Common Shares will not be registered in the Shareholder’s name on the records of the Company. Such Common Shares will more likely be registered under the name of the Shareholder’s broker or an agent of that broker. In Canada and the United States, the vast majority of such Common Shares are registered under the name of CDS & Co. (the registration name for The Canadian Depository for Securities, which acts as nominee for many Canadian brokerage firms) or Cede & Co. (operated by The Depository Trust Company), respectively. Common Shares held by brokers or their agents or nominees can only be voted upon the instructions of the non-registered Shareholder except in limited cases for certain “routine” matters. An example of a “routine” matter includes the appointment of the Auditors, which is considered the only “routine” matter to be voted upon at the Meeting. Otherwise, without specific instructions, a broker and its agents and nominees are prohibited from voting Common Shares for the broker’s clients, which is generally referred to as a “broker non-vote.” Therefore, non-registered Shareholders should ensure that instructions respecting the voting of their Common Shares are communicated to the appropriate person if such Shareholders want their votes to count on all matters to be decided at the Meeting.
Applicable regulatory policy requires intermediaries/brokers to seek voting instructions from non-registered Shareholders in advance of shareholders’ meetings. Every intermediary/broker has its own mailing procedures and provides its own return instructions to clients, which should be carefully followed by non-registered Shareholders in order to ensure that their shares are voted at the Meeting. Most brokers now delegate responsibility for obtaining instructions from clients to Broadridge.
Although a non-registered Shareholder may not be recognized directly at the Meeting for the purposes of voting Common Shares registered in the name of their broker (or an agent of the broker), a non-registered Shareholder may attend the Meeting as the proxyholder for a registered Shareholder and vote the Common Shares in that capacity. Non-registered Shareholders who wish to attend the Meeting and indirectly vote their Common Shares as the proxyholder for a registered Shareholder should follow the voting instructions provided by the broker, bank or other nominee.
NOVAGOLD may utilize the Broadridge QuickVote™ service to assist non-registered Shareholders with voting their Common Shares over the telephone. Alternatively, Kingsdale Advisors may contact such non-registered Shareholders to assist them with conveniently voting their Common Shares directly over the phone. If you have any questions about the Meeting, please contact Kingsdale Advisors by telephone at (866) 228-8818 (toll-free in North America) or (416) 867-2272 (collect outside North America) or by email at contactus@kingsdaleadvisors.com.
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
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On any ballot that may be called for, the Common Shares represented by a properly executed proxy given in favor of the person(s) designated in the form of proxy will be voted or withheld from voting in accordance with the instructions given on the form of proxy and, if the Shareholder specifies a choice with respect to any matter to be acted upon, the Common Shares will be voted accordingly. Where no choice is specified, the proxy will confer discretionary authority and will be voted in favor of all matters referred to on the form of proxy.
The proxy also confers discretionary authority to vote for, withhold or abstain from voting, or vote against, amendments or variations to matters identified in the Notice of Meeting and with respect to other matters not specifically mentioned in the Notice of Meeting but which may properly come before the Meeting. Management has no present knowledge of any amendments or variations to matters identified in the Notice of Meeting or any business other than that referred to in the accompanying Notice of Meeting which will be presented at the Meeting. However, if any other matters properly come before the Meeting, it is the intention of the management designees named in the proxy to vote in accordance with the recommendations of the Company’s management.
Proxies must be received by Broadridge no later than May 16, 2022 at 4:00 p.m. Eastern time (1:00 p.m. Pacific time). The time limit for deposit of proxies may be waived or extended by the Chair of the Meeting at their discretion, without notice.
Participating in the Annual Meeting
Due to health concerns posed by COVID-19, the Company is conducting a virtual Meeting so Shareholders can safely participate from any geographic location with Internet connectivity.
· | To participate in the Meeting, including to vote, Registered Shareholders must access the Meeting website at www.virtualshareholdermeeting.com/NG2022 and enter the 16-digit control number found on the voting materials provided to you with this Circular. Shareholders wishing to appoint themselves or another person as their proxyholder to vote at the virtual Meeting must complete the proxy appointment process by following the instructions provided on www.proxyvote.com or the instructions from their bank or broker. If you appoint someone else as your proxyholder, the online appointment process will enable you to set up your proxyholder’s login credentials for the Meeting. Shareholders and others may view the Meeting by logging in as a guest. |
· | Whether or not you plan to participate in the Meeting, it is important that your shares be represented and voted. We encourage you to access www.proxyvote.com or follow the instructions on your Notice of Internet Availability of Proxy Materials or proxy card to vote by telephone or mail in advance of the Meeting. |
· | Shareholders can submit appropriate questions during the Meeting through www.virtualshareholdermeeting.com/NG2022 which will be addressed as practical in the question-and-answer session following the formal business portion of the Meeting. Additionally, Shareholders may submit appropriate questions prior to the Meeting via email at info@novagold.com. Submitting questions ahead of the Meeting ensures thoughtful responses from management and the Board. Additional information regarding the rules and procedures for participating in the Meeting will be set forth in our Meeting rules of conduct, which Shareholders can view during the Meeting at www.virtualshareholdermeeting.com/NG2022. |
· | We encourage you to access the Meeting before it begins. Online check-in will be available at www.virtualshareholdermeeting.com/NG2022 approximately 15 minutes before the meeting starts on May 18, 2022. |
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
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· | Shareholders who encounter any difficulties accessing the Meeting at www.virtualshareholdermeeting.com/NG2022 during the online check-in or Meeting time are invited to call the technical support number that will be posted on the Meeting log in page for assistance. |
Revocation of Proxies
A Shareholder who has given a proxy may revoke it at any time insofar as it has not been exercised. In addition to any other manner permitted by law, a Shareholder who has given an instrument of proxy may revoke it before it is voted by: i) delivering a later-dated proxy, or ii) providing written notice to the Company’s legal counsel, Blake, Cassels & Graydon LLP, at Suite 2600, 595 Burrard Street, Three Bentall Centre, Vancouver, BC, V7X 1L3, Canada, Attention: Trisha Robertson, at any time up to and including the last business day preceding the Meeting at which the proxy is to be used, or any adjournment thereof. In the case of registered Shareholders, their previously delivered proxy may also be revoked before it is exercised by voting virtually at the Meeting.
Voting Shares and Principal Holders Thereof
As of March 21, 2022, the Company had 333,192,571 Common Shares issued and outstanding without nominal or par value. Each Common Share is entitled to one vote. Except as otherwise noted in this Circular, a simple majority of votes cast at the Meeting, whether in person or by proxy, will constitute approval of any matter submitted to a vote.
The following table sets forth certain information regarding the ownership of the Company’s Common Shares as of March 10, 2022, by each Shareholder known to the Company who beneficially owns, or exercises control or direction over, directly or indirectly, more than 5% of the outstanding Common Shares of the Company as of that date, based solely on such person’s most recent Schedules 13D or 13G or Form 4 filed with the SEC.
Name of Shareholder | Number of Shares Beneficially Owned | Percentage of Outstanding Voting Securities (3) |
Electrum Strategic Resources LP (“Electrum”) (1) | 84,569,479 (2) | 25.39% |
FMR LLC | 24,142,044 | 7.25% |
Paulson & Co. Inc. | 22,226,300 | 6.67% |
BlackRock, Inc. | 19,661,519 | 5.90% |
(1) | Dr. Thomas Kaplan (Chairman of the Board) and Igor Levental (a Director) also serve as the Chairman and Chief Executive Officer, and the President, respectively, of The Electrum Group LLC (“The Electrum Group”), a privately-held global natural resources investment management company which manages the portfolio of Electrum. Mr. Levental has no voting or dispositive power over shares of the Company held by Electrum and its affiliates. | |
(2) | Includes 5,000,000 Common Shares held by affiliates of Electrum. | |
(3) | As of March 10, 2022, the Company had 333,133,927 common shares issued and outstanding. |
MATTERS TO BE ACTED UPON AT MEETING
According to the Articles of the Company, the Board shall consist of not less than three and no more than such number of Directors to be determined by resolution of Shareholders. Shareholders of the Company will be asked to consider and, if thought appropriate, to approve and adopt an ordinary resolution setting the number of Directors at eleven.
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
-6- |
In the absence of a contrary instruction, it is intended that all proxies received will be voted FOR setting the number of Directors at eleven.
The proposed nominees in the list that follows, in the opinion of management, are well qualified to direct the Company’s activities for the ensuing year and have confirmed their willingness to serve as Directors, if elected. The term of office of each Director elected will be until the next annual meeting of the Shareholders of the Company or until a successor is elected or appointed, unless the Director’s office is vacated earlier, in accordance with the Articles of the Company and the provisions of the Business Corporations Act (British Columbia).
The Board has adopted a Majority Voting Policy stipulating that Shareholders shall be entitled to vote in favor of, or withhold from voting for, each individual director nominee at a Shareholders’ meeting. If the number of Common Shares “withheld” for any nominee exceeds the number of Common Shares voted “for” the nominee, then, notwithstanding that such Director was duly elected as a matter of corporate law, the Director shall immediately tender their written resignation to the Chair of the Board. The Corporate Governance and Nominations Committee will consider such offer of resignation and will make a recommendation to the Board concerning the acceptance or rejection of the resignation. No Director who is required to tender their resignation pursuant to this policy shall participate in the Corporate Governance and Nominations Committee’s deliberations or recommendations or in the Board’s deliberations or determination. The Board must take formal action on the Corporate Governance and Nominations Committee’s recommendation within 90 days of the date of the applicable Shareholders’ meeting and shall announce its decision promptly by press release, including the reasons for its decision. The resignation will be effective when accepted by the Board. The Board will be expected to accept the resignations tendered pursuant to this policy absent exceptional circumstances. If the Board declines to accept a resignation tendered pursuant to this policy, it will include in the press release the reason or reasons for its decision. See “Statement of Corporate Governance Policies – Majority Voting Policy.”
In the absence of a contrary instruction, the person(s) designated in the form of proxy by the Company intend to vote FOR the election of the nominees whose names are set forth below. If, prior to the Meeting, any of the listed nominees shall become unavailable to serve, the persons designated in the proxy form will have the right to use their discretion in voting for a properly qualified substitute. Management does not contemplate presenting for election any person other than these nominees but, if for any reason management does present another nominee for election, the proxy holders named in the accompanying form of proxy reserve the right to vote for such other nominee at their discretion unless the Shareholder has specified otherwise in the form of proxy.
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
-7- |
Name, Province or State and Country of Residence | Age | Independence | Principal Occupation | Director Since | 2021 AGM Votes in Favor (11) (%) | Meets Share Ownership Guidelines (12) |
Dr. Elaine Dorward-King Utah, USA (1) (3) | 64 | Independent | Corporate Director | 2020 | 94.71 | On Track (8) |
Sharon Dowdall (1) (2) Ontario, Canada | 69 | Independent | Corporate Director | 2012 | 99.04 | Yes |
Dr. Diane Garrett (2) (3) Texas, USA | 62 | Independent | President and CEO of Hycroft Mining Holding Corporation | 2018 | 99.31 | Yes |
Dr. Thomas Kaplan (4) New York, USA | 59 | Non- Independent | Chairman and Chief Executive Officer of The Electrum Group | 2011 | 99.19 | Yes |
Gregory Lang (3) (5) Utah, USA | 67 | Non- Independent | President and Chief Executive Officer of NOVAGOLD RESOURCES INC. | 2012 | 99.63 | Yes (9) |
Igor Levental (2) (5) Colorado, USA | 66 | Independent | President of The Electrum Group | 2010 | 98.46 | Yes |
Kalidas Madhavpeddi (1) (3) Arizona, USA | 66 | Independent | President of Azteca Consulting LLC | 2007 | 97.95 | Yes |
Kevin McArthur Nevada, USA | 67 | Independent | Corporate Director | N/A | N/A | N/A |
Clynton Nauman (3) (6) Washington, USA | 73 | Independent | President and Chief Executive Officer of Alexco Resource Corp. | 1999 | 98.80 | Yes |
Ethan Schutt (2) (5) (6) Alaska, USA | 48 | Independent | Executive Vice President and General Counsel of Bristol Bay Native Corporation | 2019 | 99.32 | On Track (10) |
Anthony Walsh (1) (6) (7) British Columbia, Canada | 70 | Independent | Corporate Director | 2012 | 99.53 | Yes |
(1) | Member of the Compensation Committee. | |
(2) | Member of the Corporate Governance and Nominations Committee. |
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
-8- |
(3) | Member of the Environment, Health, Safety, Sustainability (“EHSS”) and Technical Committee. | |
(4) | Chairman of the Board. | |
(5) | Member of the Corporate Communications Committee. | |
(6) | Member of the Audit Committee. | |
(7) | Independent Lead Director. | |
(8) | Dr. Dorward-King was elected to the Board in May 2020 and has until August 2025 to meet the Share Ownership Guidelines. | |
(9) | Mr. Lang has met his share ownership requirements as President and Chief Executive Officer as of November 30, 2021. See “Executive Share Ownership” beginning on page 57 for details on share ownership guidelines for Executive Officers. | |
(10) | Mr. Schutt was elected to the Board in May 2019 and has until August 2025 to meet the Share Ownership Guidelines. | |
(11) | See NOVAGOLD’s news release and Report of Voting Results filed on SEDAR May 13, 2021. | |
(12) | Based on share ownership as of November 30, 2021. The Board adopted a policy requiring each Director to maintain a minimum holding of Common Shares and/or DSUs equal to $128,400. See “Directors' Share Ownership” beginning on page 74 for details on the number of securities beneficially owned, or controlled or directed, directly or indirectly, by each proposed Director. |
Refer to the Section titled “Information Concerning the Board of Directors, Director Nominees, and Executive Officers” beginning on page 12 of this Circular for further information regarding the above Directors and Director nominees.
The independent auditors of the Company are PricewaterhouseCoopers LLP, Chartered Professional Accountants (“PwC”), located at 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada. PwC were last appointed auditors of the Company (“Auditors”) on May 12, 2021 by the Shareholders. The Shareholders will be asked at the Meeting to vote for the appointment of PwC as Auditors until the next annual meeting of the Shareholders of the Company or until a successor is appointed, at a remuneration to be fixed by the Directors through the Audit Committee. To the Company's knowledge, a representative from PwC will be present virtually at the Meeting and will be available to respond to appropriate questions. PwC will also be permitted to make a statement if it so desires.
Principal Accountant Fees and Services
PwC fees for the fiscal years ended November 30, 2021 and 2020 were as follows:
Year Ended November 30 | ||
2021 | 2020 | |
Audit Fees (1) | C$303,000 | C$300,000 |
Audit Related Fees (2) | Nil | Nil |
Tax Fees (3) | Nil | Nil |
All Other Fees (4) | 3,000 | 4,000 |
Total | C$306,000 | C$304,000 |
(1) | “Audit Fees” are the aggregate fees billed or expected to be billed by PwC for the audit of the Company’s consolidated annual financial statements, reviews of interim financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements. | |
(2) | “Audit-Related Fees” are fees charged by PwC for assurance and related services 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.” This category comprises fees billed for review and advisory services associated with the Company’s financial reporting. | |
(3) | “Tax Fees” are fees billed by PwC for tax compliance, tax advice and tax planning. | |
(4) | “All Other Fees” are fees charged by PwC for services not described above. The fees billed by PwC in this category were for software licensing. |
Pre-Approval Policies and Procedures
All services to be performed by the Company’s Auditors must be approved in advance by the Audit Committee. The Audit Committee has considered whether the provision of services other than audit services is compatible with maintaining the Auditors’ independence and has adopted a charter governing its conduct. The charter is reviewed annually and requires the pre-approval of all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its Auditors, subject to the de minimis exceptions for non-audit services as allowed by applicable law or regulation. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such a subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting. Pursuant to these procedures, all services and related fees reported were pre-approved by the Audit Committee.
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
-9- |
The Audit Committee (referred to in this section as the “Committee”) reviewed and discussed with management and the Company's Auditors the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended November 30, 2021. Management and PwC indicated that the Company’s consolidated financial statements were fairly stated in accordance with generally accepted accounting principles. The Committee discussed significant accounting policies applied by the Company in its financial statements, as well as alternative treatments. The Committee discussed with PwC matters covered by Public Company Accounting Oversight Board (PCAOB) standards, including PCAOB AS 16 Communication with Audit Committees and the Critical Audit Matter (CAM) reported in the Company’s fiscal year 2021 audit. In addition, the Committee reviewed and discussed management’s report on internal control over financial reporting, which includes internal controls over cybersecurity and information technology systems, and the related audits performed by PwC, which confirmed the effectiveness of the Company’s internal control over financial reporting. In fiscal year 2021 there was one significant deficiency identified and remediated. There were no material weaknesses in the Company’s internal control over financial reporting, and the Company had no information security breaches in fiscal year 2021. The Committee also discussed with PwC its independence from the Company and management, including the communications PwC is required to provide to the Committee under applicable PCAOB rules. The PwC partner currently assigned to oversee the Company’s audit has done so since fiscal year 2018; therefore, in accordance with SEC rules requiring a change in audit partner every five years, PwC will assign a new partner to oversee the Company’s audit beginning with fiscal year 2023. The Committee considered the non-audit services provided by PwC to the Company and concluded that the auditors’ independence has been maintained. Based on the foregoing reviews and discussions, the Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended November 30, 2021, for filing with the SEC, which Annual Report is available on the Company’s website at www.novagold.com, under the Company’s profile on EDGAR at www.sec.gov, and on SEDAR at www.sedar.com. Finally, the Committee conducted a comprehensive review of PwC’s overall performance and determined PwC should serve as the Company’s Auditor for fiscal year 2022 and made such recommendation to the Board. The Board agreed and is asking Shareholders to approve PwC as the Company’s Auditor for fiscal year 2022.
Audit Committee of the Board
Anthony Walsh, Chair
Clynton Nauman
Ethan Schutt
In the absence of a contrary instruction, the person(s) designated in the form of proxy by the Company intend to vote FOR the appointment of PwC as auditors of the Company until the next annual meeting of Shareholders or until a successor is appointed, at a remuneration to be fixed by the Directors through the Audit Committee.
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
-10- |
Additional Matters to be Acted Upon
Non-Binding Advisory Vote on Executive Compensation
In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Exchange Act, the following proposal, commonly known as a “Say on Pay” proposal, gives our Shareholders the opportunity to vote to approve or not approve, on an advisory basis, the compensation received by Gregory Lang and David Ottewell (together, the “Named Executive Officers” or “NEOs”) during fiscal year 2021. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and our compensation philosophy, policies and practices, as disclosed under the “Compensation Discussion and Analysis” section of this Circular.
Our executive compensation program is designed to recruit and retain key individuals and reward them with compensation that has long-term growth potential while recognizing that the executives work as a team to achieve corporate results and should be rewarded accordingly. In order to align executive pay with both the Company’s performance and the creation of sustainable shareholder value, a significant portion of compensation paid to our NEOs is allocated to performance-based, short-term and long-term incentive programs to make executive pay dependent on the Company’s performance (also known as “at-risk compensation”). In addition, as an executive officer’s responsibility and ability to affect the financial results of the Company increases, the portion of their total compensation deemed “at-risk” increases. Shareholders are urged to read the “Compensation Discussion and Analysis” section of this Circular, which more thoroughly discusses how our compensation policies and procedures are aligned with our compensation philosophy.
We are asking our Shareholders to indicate their support for our NEO compensation as described in this Circular by voting FOR the following resolution:
BE IT RESOLVED, as an ordinary resolution, that the compensation paid to the named executive officers in fiscal year 2021, as disclosed in the Company’s 2022 Circular pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.
While we intend to carefully consider the voting results of this proposal, the final vote is advisory in nature and therefore not binding on us, our Board or the Compensation Committee. Our Board and Compensation Committee value the opinions of our Shareholders and will consider the outcome of this vote when making future compensation decisions for our NEOs. The Board believes that submitting the non-binding vote on compensation of the Company’s NEOs to Shareholders on an annual basis is appropriate for the Company and its Shareholders at this time.
In the absence of a contrary instruction, the person(s) designated in the form of proxy by the Company intend to vote FOR the approval of the non-binding resolution approving the compensation paid to the NEOs as disclosed in this Circular.
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
-11- |
INFORMATION CONCERNING THE BOARD OF DIRECTORS, DIRECTOR NOMINEES, AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our Directors, Director nominees and executive officers. The term for each Director expires at the next annual meeting of Shareholders or at such time as a qualified successor is appointed, upon ceasing to meet the qualifications for election as a director, upon death, upon removal by the Shareholders or upon delivery or submission to the Company of the Director's written resignation, unless the resignation specifies a later time of resignation. Each executive officer shall hold office until the earliest of the date the officer’s resignation becomes effective, the date a successor is appointed or the officer ceases to be qualified for that office, or the date the officer is terminated by the Board of Directors of the Company. The name, location of residence, age, and office held by each Director, Director nominee and executive officer, current as of March 10, 2022, has been furnished by each of them and is presented in the following table. Unless otherwise indicated, the address of each current Director, and executive officer in the table set forth on the following page is care of NOVAGOLD, 201 South Main Street, Suite 400, Salt Lake City, Utah 84111, United States.
If you have any questions or need assistance completing your form of proxy or voting instruction form, please call Kingsdale Advisors at 1-866-228-8818 or email them at contactus@kingsdaleadvisors.com.
-12- |
Committee Memberships | |||||||
Name and Municipality of Residence | Position Held | Independent
| AC | CC | CCC | CGN | EHSS |
Dr. Elaine Dorward-King Utah, USA Age: 64, Director Since: 2020 | Director | ✔ | ✔ | ✔ | |||
Sharon Dowdall Ontario, Canada Age: 69, Director Since: 2012 | Director | ✔ | ✔ | ✔C | |||
Dr. Diane Garrett Texas, USA Age: 62, Director Since: 2017 | Director | ✔ | ✔ | ✔ | |||
Dr. Thomas Kaplan New York, USA Age: 59, Director Since: 2011 | Board Chair | ||||||
Gregory Lang Utah, USA Age: 67, Director Since: 2012 | Director, President and CEO | ✔ | ✔ | ||||
Igor Levental Colorado, USA Age: 66, Director Since: 2010 | Director | ✔ | ✔C | ✔ | |||
Kalidas Madhavpeddi Arizona, USA Age: 66, Director Since: 2007 | Director | ✔ | ✔C | ✔ | |||
Kevin McArthur (1) Nevada, USA Age: 67, Director Since: N/A
| Director Nominee | ✔ | |||||
Clynton Nauman Washington, USA Age: 73, Director Since: 1999 | Director | ✔ | ✔ | ✔C | |||
Ethan Schutt Alaska, USA Age: 48, Director Since: 2019 | Director | ✔ | ✔ | ✔ | ✔ | ||
Anthony Walsh British Columbia, Canada Age: 70, Director Since: 2012 | Lead Director | ✔ | ✔C | ✔ | |||
David Ottewell Arizona, USA Age: 61, Officer Since: 2012 | Vice President and CFO | n/a | n/a | n/a | n/a | n/a | n/a |
(1) | Mr. McArthur, if elected, will be appointed to committee assignments at a Board meeting following the 2022 Meeting. |
C | Committee Chair | CCC | Corporate Communications Committee | |
AC | Audit Committee | CGN | Corporate Governance and Nominations Committee | |
CC | Compensation Committee | EHSS | EHSS and Technical Committee |
-13- |
The Securities Held listed below for each Director nominee and NEO are as of November 30, 2021. Determination of whether each person meets the share ownership guidelines is determined by calculating the number of Common Shares and DSUs, if applicable, owned by each person, multiplied by the closing price of the Common Shares on November 30, 2021 on the NYSE American.
Elaine Dorward-King, Ph.D. | ||||||
Independent
Director Since 2020
| Dr. Elaine Dorward-King has spent the majority of her career in mining, most recently serving as a non-executive director of four listed mining companies. From March 2013 until June 2019, she served as Newmont Mining Corporation’s (“Newmont”) Executive Vice President of Sustainability and External Relations, and from June 2019 until January 2020 she served as Newmont’s Executive Vice President of Environmental, Social and Governance Strategy. Prior to joining Newmont, Dr. Dorward-King spent 20 years with Rio Tinto, one of the world’s largest diversified producers of metals and minerals, in general management and Environmental Health and Safety leadership roles. Dr. Dorward-King has over 30 years of leadership experience in creating and implementing sustainable development, safety, health and environmental strategy, and programs in mining, chemical, and engineering consulting sectors. Currently Dr. Dorward-King serves on the Board of Directors of Kenmare Resources plc, one of the world’s largest producers of mineral sands products, Great Lakes Dredge and Dock Company, LLC, the largest provider of dredging services in the United States, and Sibanye-Stillwater, a leading international precious metals mining company. Dr. Dorward-King holds a Bachelor’s Degree from Maryville College and received a PhD in Analytical Chemistry from Colorado State University.
The Board has determined that Dr. Dorward-King should serve as a Director so the Company can benefit from her experience as an industry leader in the development and implementation of environmental health, safety and sustainability strategies, community relations, governmental affairs, external relations and her experience as a senior mining executive.
Dr. Dorward-King’s principal occupation for the last five years has been serving as a non-executive director (December 2019 – present) and Executive Vice President, Sustainability and External Relations at Newmont (2013 – January 2020). She served as a non-exectuive director of Bond Resources Inc. from January 2020 until April 2021.
Areas of expertise include health, safety and sustainability, community relations, and corporate leadership.
| |||||
Board / Committee Membership | Overall Attendance 100% | Securities Held | Share Ownership Guidelines | |||
Regular Meeting | Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Board Compensation EHSS & Technical | 4/4 4/4 | Nil | 3,684 | $24,867 | $128,400 | 19% (1) |
(1) | Dr. Dorward-King was first elected to the Board in May 2020 and has until August 2025 to meet the Share Ownership Guidelines. |
-14- |
Sharon Dowdall | ||||||
Independent
Director Since 2012
| Ms. Dowdall, a Director of the Company, worked in the mining industry for over 30 years. Ms. Dowdall served in senior legal capacities for Franco-Nevada Corporation (“Franco-Nevada”), a major gold-focused royalty company, and Newmont Mining Corporation, one of the world’s largest gold producers. During her 20-year tenure with Franco-Nevada, Ms. Dowdall served in various capacities, including Chief Legal Officer and Corporate Secretary and Vice President, Special Projects. Ms. Dowdall was one of the principals who transformed Franco-Nevada from an industry pioneer into one of the most successful precious metals enterprises in the world. Prior to joining Franco-Nevada, she practiced law as a partner with Smith Lyons in Toronto, a major Canadian legal firm specializing in natural resources. Ms. Dowdall is the recipient of the 2011 Canadian General Counsel Award for Business Achievement. She currently serves on the board of Olivut Resources Limited. Ms. Dowdall holds an Honours B.A. in Economics from the University of Calgary and an LLB, from Osgoode Hall Law School at York University. The Board has determined that Ms. Dowdall should serve as a Director due to her significant experience: as a natural resources lawyer, moving a precious-metals mining company from the development stage to the successful producer stage, and as a senior executive in a large international mining company.
Ms. Dowdall joined the Board in April 2012.
Ms. Dowdall has been retired since 2012. During the last five years she has served, and continues to serve, as a member of the board of Olivut Resources Limited. Ms. Dowdall was a member of the board of Foran Mining Corporation from February 2011 until May 28, 2019.
Areas of expertise include legal, corporate governance, finance, investment, valuation, securities, human resources, corporate strategy, corporate leadership, and mining industry.
| |||||
Board / Committee Membership | Overall Attendance 100% | Securities Held | Share Ownership Guidelines | |||
Regular Meeting | Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Board Compensation Governance & Nominations (Chair) | 4/4 5/5 | Nil | 38,487 | $259,787 | $128,400 | 202% |
-15- |
Diane Garrett, Ph.D. | ||||||
Independent
Director Since 2018
| Dr. Garrett, a Director of the Company, is the President and CEO of Hycroft Mining Holding Corporation (“Hycroft”), owner operator of the gold-silver Hycroft Mine in Northern Nevada. She has more than 20 years of senior management and financial expertise in natural resources. Prior to joining Hycroft, Dr. Garrett was the President and CEO of Nickel Creek Platinum Corp. (“NCP”). Before that, Dr. Garrett held the position of President and CEO of Romarco Minerals Inc. (“Romarco”), taking the multi-million-ounce Haile Gold Mine project from discovery to construction. Prior to that, she held numerous senior positions in public mining companies including VP of Corporate Development at Dayton Mining Corporation and VP of Corporate Development at Beartooth Platinum Corporation. Early in her career, Dr. Garrett was the Senior Mining Analyst and Portfolio Manager in the precious metals sector with US Global Investors. Dr. Garrett received her Ph.D. in Engineering and her Masters in Mineral Economics from the University of Texas at Austin. The Board has determined that Dr. Garrett should serve as a Director due to her significant experience: permitting, developing, and constructing gold mines, moving a precious-metals mining company from the development stage to the successful producer stage, as a senior executive in mining companies, and her technical expertise.
Dr. Garrett currently serves as the President and CEO of Hycroft and has held that position since September 2020. She also currently serves as a director of Hycroft. From 2012 to 2018 Dr. Garrett served as a director of TriStar Gold. From June 2016 until September 2020, Dr. Garrett served as a director and as President and CEO of NCP. Dr. Garrett served as the President, CEO and as a director of Romarco from November 2002 until October 2015. Romarco was acquired by OceanaGold in 2015, at which time Dr. Garrett became a director and consultant to OceanaGold before joining NCP in June 2016. Dr. Garrett also served as Chair of the board of directors of Revival Gold from January 2018 until December 31, 2019.
Areas of expertise include engineering, mining, finance and corporate leadership.
| |||||
Board / Committee Membership | Overall Attendance 92% | Securities Held | Share Ownership Guidelines | |||
Regular Meeting | Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Board EHSS & Technical | 4/4 5/5 | 7,100 | 10,157 | $116,485 | $128,400 (3) | 100% (3) |
(2) | Dr. Garrett missed one EHSS & Technical Committee meeting due to a telecommunications systems failure while she was at a third-party remote location. | |
(3) | Dr. Garrett exceeded the Share Ownership Guidelines as of November 30, 2020, and since her share ownership has not decreased (and has, in fact, increased) since that date, she is deemed to meet the Company’s Share Ownership Guidelines for Directors. |
-16- |
Thomas Kaplan, Ph.D. | ||||||
Non-Independent
Director Since 2011
| Dr. Kaplan is Chairman of the Board of the Company and is also Chairman, Chief Investment Officer and Chief Executive Officer of The Electrum Group, a privately held global natural resources investment management company which manages the portfolio of Electrum. Electrum and its affiliates are collectively the largest Shareholder of the Company. Dr. Kaplan is an entrepreneur and investor with a track record of both creating and unlocking shareholder value in public and private companies. Dr. Kaplan served as Chairman of Leor Exploration & Production LLC, a natural gas exploration and development company founded by Dr. Kaplan in 2003. In 2007, Leor’s natural gas assets were sold to EnCana Oil & Gas USA Inc., a subsidiary of Encana Corporation, for $2.55 billion. Dr. Kaplan holds Bachelors, Masters and Doctoral Degrees in History from Oxford University. The Board has determined that Dr. Kaplan should serve as the Director and Chairman to gain from his experience as a developer of and investor in mining companies as well as oil and gas companies, and because of his significant beneficial ownership in the Company.
Dr. Kaplan’s principal occupation is Chairman and Chief Executive Officer of The Electrum Group. From March 2011 to January 2018, Dr. Kaplan served as the Chairman and Chief Investment Officer of The Electrum Group. In January 2018, Dr. Kaplan became the Chairman, Chief Investment Officer and Chief Executive Officer of The Electrum Group. Dr. Kaplan served as Chair of the Board of Sunshine Silver Mines Corporation (now known as Gatos Silver, Inc.), a privately held company, from January 2020 through October 2020.
Areas of expertise include: finance, mergers and acquisitions, mining industry.
| |||||
Board / Committee Membership | Overall Attendance 100% | Securities Held | Share Ownership Guidelines | |||
Regular Meeting | Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Board (Chair) | 4/4 | 254,787 (4) | 76,824 | $2,238,374 | 128,400 | 1,743% |
(4) | See description of Electrum’s holdings and Dr. Kaplan’s relationship with Electrum under “Voting Shares and Principal Holders Thereof.” |
-17- |
Gregory Lang | |||||||
Non-Independent
Director Since 2012
| Mr. Lang is President and Chief Executive Officer of the Company. Mr. Lang has over 35 years of diverse experience in mine operations, project development and evaluation, including time as President of Barrick Gold North America, a wholly-owned subsidiary of Barrick Gold Corporation (“Barrick”). Mr. Lang held progressively responsible operating and project development positions over his 10-year tenure with Barrick and, prior to that, with Homestake Mining Company and International Corona Corporation, both of which are now part of Barrick. He holds a Bachelor of Science in Mining Engineering from the University of Missouri-Rolla and is a Graduate of the Stanford University Executive Program. The Board has determined that Mr. Lang should continue to serve as a Director to gain his insight as an experienced mine engineer, as well as his expertise in permitting, developing and operating large-scale assets, and as a successful senior executive of other large gold-mining companies.
Mr. Lang served as the President of Barrick Gold North America until December 2011 and has served as the Company’s President and Chief Executive Officer since January 2012.
During the most recent five years, Mr. Lang has served, and continues to serve, as a director of Trilogy Metals Inc. He served as a director of Sunward Resources Limited until June 2015.
Areas of expertise include: mining operations, mine development and evaluation, mine permitting, corporate leadership and mining industry.
| ||||||
Board / Committee Membership | Overall Attendance 100% | Securities Held | Share Ownership Guidelines | ||||
Regular Meeting | Common Shares # | DSUs # | PSUs # | Value of Common Shares Held as of 11/30/2021 $ | Total $ | % Met | |
Board EHSS & Technical Corporate Communications | 4/4 4/4 2/2 | 1,992,015 | Nil | 740,200 | $13,446,101 | $4,031,500 | 334% (5) |
(5) | Mr. Lang has exceeded his share ownership requirement as President and Chief Executive Officer as of November 30, 2021 based upon an amount equal to five times his annual salary as of November 30, 2021. See “Executive Share Ownership” for details on the share ownership guidelines applicable to Mr. Lang. PSUs are not included in determining whether an NEO meets the Share Ownership Guidelines. |
-18- |
Igor Levental | ||||||
Independent
Director Since 2010
| Mr. Levental, a Director of the Company, is President of The Electrum Group, a privately held global natural resources investment management company which manages the portfolio of Electrum. Electrum and its affiliates are collectively the largest Shareholder of the Company. Mr. Levental has more than 30 years of international experience in the mining industry and has held senior positions with major mining companies including Homestake Mining Company and International Corona Corporation. Mr. Levental is a Professional Engineer with a BSc in Chemical Engineering and an MBA from the University of Alberta. The Board has determined that Mr. Levental should serve as a Director for the Company to benefit from his extensive experience as an executive of large mining companies.
Mr. Levental’s primary occupation during the last five years has been President of The Electrum Group. Mr. Levental also currently serves as a director of Gatos Silver, Inc., formerly known as Sunshine Silver Mines Corporation, a position he has held since March 2019. During the most recent five years, Mr. Levental served as a director of Gabriel Resources Limited until June 2016, as a director of Trilogy Metals Inc. until June 2016, and as a director of Taung Gold International Limited until September 2017.
Areas of expertise include: corporate development, finance, mergers and acquisitions, communications, corporate governance and mining industry.
| |||||
Board / Committee Membership | Overall Attendance 100% | Securities Held | Share Ownership Guidelines | |||
Regular Meeting | Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Board Corporate Communications (Chair) | 4/4 | 99,999 | 50,333 | $1,014,741 | $128,400 | 790% |
-19- |
Kalidas Madhavpeddi | ||||||
Independent
Director Since 2007
| Mr. Madhavpeddi, a Director of the Company, has 40 years of international experience in corporate strategy, mergers and acquisitions, government relations, marketing, mining engineering and capital. He is currently the President of Azteca Consulting LLC, an advisory firm to the metals and mining sector, a position he has held since 2006. From 2010 to 2018 he was CEO of China Molybdenum International, the overseas arm of a HK listed global producer of copper, gold, cobalt, phosphates, niobium and molybdenum. His extensive career in the mining industry includes over 25 years at Phelps Dodge Corporation (now Freeport-McMoRan), as Senior Vice President and contemporaneously the President of Phelps Dodge Wire & Cable. Mr. Madhavpeddi is an alumnus of the Indian Institute of Technology, Madras, India; the University of Iowa and the Harvard Business School. The Board has determined that Mr. Madhavpeddi should serve as a Director to benefit from his long-term experience in the mining industry working as an executive in global corporate development, exploration, mergers and acquisitions, joint ventures and finance.
Mr. Madhavpeddi currently serves as a director of Dundee Precious Metals (since February 1, 2021), Glencore plc (since February 4, 2020) and Trilogy Metals Inc. (since 2012). Mr. Madhavpeddi previously served as the CEO of China Molybdenum International from September 2008 until April 2018, as Chairman of the Board of Namibia Rare Earths from 2010 until 2016, and as a director of Capstone Mining from 2012 until April 2019.
Areas of expertise include: corporate strategy, mergers and acquisitions, mining operations, exploration and capital, marketing and sales, corporate leadership and human resources/compensation.
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Board / Committee Membership | Overall Attendance 100% | Securities Held | Share Ownership Guidelines | |||
Regular Meeting | Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Board EHSS | 4/4 4/4 | 114,629 | 42,060 | $1,057,651 | $128,400 | 824% |
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Kevin McArthur | |||||
Independent
Director Nominee
| Mr. McArthur has over 40 years of experience focused on mining operations, corporate development and executive management. He currently serves as a non-executive director of Royal Gold, Inc. and First Quantum Minerals Ltd. Mr. McArthur recently served as non-executive Chair of Boart Longyear Limited from 2019 to 2021, non-executive director of Pan American Silver Corporation from 2019 to 2020, Chief Executive Officer of Tahoe Resources Inc. from 2009 to 2015 and as Executive Chair from 2015 to 2019. His prior experience includes serving as CEO of Goldcorp Inc. from 2006 to 2008 and CEO of Glamis Gold Ltd. from 1999 to 2006. His earlier career focused on mine operations and project development with Glamis Gold, BP Minerals and Homestake Mining Company. Mr. McArthur obtained a degree in Mining Engineering from the University of Nevada in 1979.
The Board has determined that Mr. McArthur should serve as a Director to gain from his experience with the design, construction and start up of some of the largest and most innovative projects in the mining industry, his corporate development experience, and his experience as a senior mining executive.
Areas of expertise include: mine development and operations, corporate leadership, business development, corporate governance, human resources and compensation.
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Securities Held | Share Ownership Guidelines | ||||
Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Nil | Nil | Nil | N/A | N/A |
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Clynton Nauman | ||||||
Independent
Director Since 1999
| Mr. Nauman, a Director of the Company, is the Chief Executive Officer of Alexco Resource Corp. and Asset Liability Management Group ULC. He was formerly President of Viceroy Gold Corporation and Viceroy Minerals Corporation and a director of Viceroy Resource Corporation, positions he held from February 1998 until February 2003. Previously, Mr. Nauman was the General Manager of Kennecott Minerals from 1993 to 1998. Mr. Nauman has over 35 years of diversified experience in the mining industry ranging from exploration and business development to operations and business management in the precious metals, base metals and coal sectors. The Board has determined that Mr. Nauman should serve as a Director to gain from his significant experience as a senior mining executive working in the areas of environment, engineering and operations.
Mr. Nauman’s principal occupation for the last five years has been CEO of Alexco Resource Corp. and of Asset Liability Management Group ULC. Mr. Nauman has served as a director of Alexco Resource Corp. since 2006.
Areas of expertise include: environmental, geology, exploration, operations, mining industry and corporate leadership.
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Board / Committee Membership | Overall Attendance 100% | Securities Held | Share Ownership Guidelines | |||
Regular Meeting | Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Board EHSS & Technical (Chair) | 4/4 4/4 | 129,445 | 42,060 | $1,157,659 | $128,400 | 902% |
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Ethan Schutt | ||||||
Independent
Director Since 2019
| Mr. Schutt, a Director of the Company, is Executive Vice President and General Counsel for Bristol Bay Native Corporation (“BBNC”). BBNC is an Alaska Native Claims Settlement Act (ANCSA) corporation dedicated to the economic and social well-being of its Alaska Native shareholders with resources generated from its lands and businesses. Prior to joining BBNC in April 2021, Mr. Schutt served as the CEO of Alaska Native Resource Development, LLC, an Alaska Native Tribal Health Consortium (ANTHC) company. ANTHC provides health services for Alaska Native people, as well as training, health education, disease and injury prevention, and rural water and sewer construction. Previously Mr. Schutt served as the Chief of Staff of ANTHC. ANTHC provides health services for Alaska Native people, as well as training, health education, disease and injury prevention, and rural water and sewer construction. Prior to joining ANTHC, Mr. Schutt first served as General Counsel, and later became the Senior Vice President of Land and Energy Development, for Cook Inlet Region Inc. (CIRI). Like BBNC, CIRI is an ANCSA corporation dedicated to the economic and social well-being of its Alaska Native shareholders with resources generated from its lands and businesses. As CIRI’s Senior Vice President of Land and Energy Development, he led a team of professionals that managed CIRI’s ANCSA lands including the exploration and leasing of those lands for oil and gas, mineral and other natural resource development. He also directed CIRI’s efforts in developing renewable and alternative energy projects. Mr. Schutt previously served as a member of the board of Doyon, Limited and served as General Counsel for Tanana Chiefs Conference. Mr. Schutt is an expert on ANCSA lands and resources and currently teaches a class on the topic at the University of Alaska Anchorage. Mr. Schutt holds a Bachelor of Science degree with honors in mathematics from Washington State University and a Juris Doctor degree from Stanford Law School. The Board has determined that Mr. Schutt should serve as a Director to gain from his experience working on Alaska Native health matters, his experience as a senior resource development executive, his legal, corporate governance and external communications expertise, and his expert understanding and knowledge of ANCSA and of Alaska.
Mr. Schutt’s principal occupations for the last five years have been Executive Vice President and General Counsel of BBNC (April 2021 – present), CEO of Alaska Native Resource Development, LLC (2020-April 2021), Chief of Staff of ANTHC (2018 – 2020), and Senior Vice President, Land and Energy Development of CIRI (2008 – 2018). Mr. Schutt also serves as a Board Trustee of the Alaska Permanent Fund Corporation.
Areas of expertise include: resource development, health and sustainability, legal, communications, corporate leadership, corporate governance, ANCSA and doing business in Alaska.
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Board / Committee Membership | Overall Attendance 100% | Securities Held | Share Ownership Guidelines | |||
Regular Meeting | Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Board Corporate Communications Governance & Nominations | 4/4 4/4 2/2 5/5 | Nil | 5,501 | $37,132 | $128,400 | 29% (6) |
(6) | Mr. Schutt was first elected to the Board in May 2019 and has until August 2025 to meet the Share Ownership Guidelines. |
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Anthony Walsh, CPA, CA | ||||||
Independent
Director Since 2012
| Mr. Walsh, a Director of the Company and Certified Public Accountant, has over 20 years of international experience in the field of exploration, mining and development. He was previously the President and CEO of Sabina Gold & Silver Corp. (“Sabina”) (2008-2011). Prior to joining Sabina, Mr. Walsh was President and CEO of Miramar Mining Corporation (1999-2007), Vice-President and CFO of Miramar Mining Corporation (1995-1999), the Senior Vice-President and CFO of a computer leasing company (1993-1995), and the CFO and Senior Vice-President, Finance of International Corona Mines Ltd., a major North American gold producer (1989-1992). From 1985 to 1989 he was Vice-President, Finance of International Corona Mines Ltd., and from 1973 to 1985 Mr. Walsh held various positions at Deloitte, Haskins & Sells, a firm of Chartered Accountants. Mr. Walsh graduated from Queen's University (Canada) in 1973 and became a member of The Canadian Institute of Chartered Accountants in 1976. Mr. Walsh joined the Board on March 19, 2012. The Board has determined that Mr. Walsh should serve as a Director to benefit from his experience as a senior executive in a variety of global mining companies and international accounting firms, as well as his expertise in finance, international accounting, corporate leadership and corporate governance.
Mr. Walsh has been retired since 2011, but currently serves as a director of Sabina and Dundee Precious Metals Ltd. Mr. Walsh previously served on the board of TMX Group Inc. (May 2012- May 2018), Avala Resources Ltd., (July 2010 - April 2016), Quaterra Resources Ltd. (June 2012 – March 2015), Dunav Resources Limited (July 2010 - March 2013), and on the board of Stornoway Diamonds Limited (September 2004 - November 2012).
Areas of expertise include corporate development, finance, accounting, mergers and acquisitions, corporate governance, corporate regulation, mining industry, and corporate leadership.
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Board / Committee Membership | Overall Attendance 100% | Securities Held | Share Ownership Guidelines | |||
Regular Meeting | Common Shares | DSUs | Value of Securities Held as of 11/30/2021 $ | Total | % Met | |
Board Compensation | 4/4 7/7 | Nil | 37,211 | $251,174 | $128,400 | 196% |
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David Ottewell | |||||
Vice President and Chief Financial Officer
Officer Since 2012
| Mr. Ottewell joined the Company on November 13, 2012, as its Vice President and Chief Financial Officer. In this role, Mr. Ottewell is responsible for all aspects of the Company’s financial management. Mr. Ottewell is a highly accomplished financial executive, with over 30 years of mining industry experience. Prior to joining the Company, he served as Vice President and Controller for Newmont Mining Corporation where he was employed since 2005, and prior to that, had a 16-year career with Echo Bay Mines Ltd., a prominent precious metals mining company with multiple operations in the Americas. Mr. Ottewell holds a Bachelor of Commerce degree from the University of Alberta and is a member of the Chartered Professional Accountants of Alberta.
Areas of expertise include: global accounting and finance, corporate disclosure, financial regulation, and mining industry.
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Securities Held | Share Ownership Guidelines | ||||
Common Shares | PSUs # | Value of Common Shares Held as of 11/30/2021 $ | Total $ | % Met | |
715,406 | 259,100 | $4,828,991 | $866,200 | 557% (7) |
(7) | Mr. Ottewell has exceeded his share ownership requirement as Vice President and Chief Financial Officer as of November 30, 2021 based upon an amount equal to two times his annual salary as of November 30, 2021. See “Executive Share Ownership” for details on the share ownership guidelines applicable to Mr. Ottewell. PSUs are not included in determining whether an NEO meets the Share Ownership Guidelines. |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SHAREHOLDER MATTERS
The following table sets forth certain information regarding the beneficial ownership of the Common Shares as of March 10, 2022 by:
· | the Company’s NEOs; |
· | the Company’s Directors and nominees; |
· | all of the Company’s executive officers and Directors as a group; and |
· | each person who is known by the Company to beneficially own more than 5% of the Company’s issued and outstanding Common Shares. |
Unless otherwise indicated, the Shareholders listed possess sole voting and investment power with respect to the shares shown. The Company’s Directors and NEOs do not have different voting rights from other Shareholders.
Name | Business Address | Amount and Nature of Beneficial Ownership (1) | Percentage of Class (2) |
Gregory Lang President & CEO, Director | 201 South Main, Suite 400 Salt Lake City, Utah 84111 USA | 4,467,528 (3) | 1.34% |
David Ottewell Vice President & CFO | 201 South Main, Suite 400 Salt Lake City, Utah 84111 USA | 1,297,330 (4) | * |
Thomas Kaplan Chairman of the Board | 535 Madison Avenue, 12th Floor USA | 85,143,488 (5) | 25.56% |
Elaine Dorward-King Director | 201 South Main, Suite 400 Salt Lake City, Utah 84111 USA | 51,050 (6) | * |
Sharon Dowdall Director | 400 Burrard Street, Suite 1860 Vancouver, BC V6C 3A6 Canada | 291,585 (7) | * |
Diane Garrett Director | 201 South Main, Suite 400 Salt Lake City, Utah 84111 USA | 258,023 (8) | * |
Igor Levental Director | 201 South Main, Suite 400 Salt Lake City, Utah 84111 USA | 391,198 (9) | * |
Kalidas Madhavpeddi Director | 201 South Main, Suite 400 Salt Lake City, Utah 84111 USA
| 397,555 (10) | * |
Kevin McArthur Nominee for Director | 201 South Main, Suite 400 Salt Lake City, Utah 84111 USA
| 0 | * |
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Name | Business Address | Amount and Nature of Beneficial Ownership (1) | Percentage of Class (2) |
Clynton Nauman Director | 201 South Main, Suite 400 Salt Lake City, Utah 84111 USA | 412,370 (11) | * |
Ethan Schutt Director | 201 South Main, Suite 400 Salt Lake City, Utah 84111 USA | 121,634 (12) | * |
Anthony Walsh Lead Director | 400 Burrard Street, Suite 1860 Vancouver, BC V6C 3A6 Canada | 203,777 (13) | * |
All Directors, nominees and executive officers as a group (15 persons) | 10,836,271 | 3.25% | |
Electrum Strategic Resources LP | 535 Madison Avenue, 12th Floor USA | 84,569,479 (14) | 25.39% |
FMR LLC | 245 Summer Street Boston, MA 02210 USA | 24,142,044 (15) | 7.25% |
Paulson & Co. Inc. | 1251 Avenue of the Americas New York, NY 10020 USA | 22,226,300 (16) | 6.67% |
BlackRock, Inc. | 55 East 52nd Street New York, NY 10055 USA | 19,661,519 (17) | 5.90% |
(1) | Under applicable U.S. securities laws, a person is considered to be the beneficial owner of securities they own (or certain persons whose ownership is attributed to them) or securities that the person can acquire within 60 days, including upon the exercise of options, warrants or convertible securities. | |
(2) | Based on 333,133,927 Common Shares outstanding as of March 10, 2022, and includes any Common Shares deemed to be beneficially owned pursuant to options that are exercisable within 60 days of March 10, 2022. | |
(3) | Includes 2,408,594 stock options exercisable within 60 days of March 10, 2022. | |
(4) | Includes 511,168 stock options exercisable within 60 days of March 10, 2022. | |
(5) | Includes 84,569,479 Common Shares held by Electrum and an affiliate. Dr. Kaplan is the Chairman and Chief Executive Officer of The Electrum Group and thereby may be deemed to have shared voting and investment power over such shares. Dr. Kaplan disclaims beneficial ownership in such shares except to the extent of a minor pecuniary interest. Also includes 239,334 stock options exercisable within 60 days of March 10, 2022. | |
(6) | includes 45,068 stock options exercisable within 60 days of March 10, 2022. | |
(7) | Includes 250,034 stock options exercisable within 60 days of March 10, 2022. | |
(8) | Includes 239,234 stock options exercisable within 60 days of March 10, 2022. | |
(9) | Includes 239,334 stock options exercisable within 60 days of March 10, 2022. | |
(10) | Includes 239,334 stock options exercisable within 60 days of March 10, 2022. | |
(11) | Includes 239,334 stock options exercisable within 60 days of March 10, 2022. | |
(12) | Includes 114,601 stock options exercisable within 60 days of March 10, 2022. | |
(13) | Includes 165,034 stock options exercisable within 60 days of March 10, 2022. | |
(14) | According to a Schedule 13D/A filed with the SEC on December 31, 2012, each of Electrum, The Electrum Group, Electrum Global Holdings LP, TEG Global GP Ltd, Leopard Holdings LLC and GRAT Holdings LLC have shared voting and dispositive power over 79,569,479 Common Shares. In addition, GRAT Holdings LLC has sole voting and dispositive power over 5,000,000 Common Shares. Electrum Global Holdings LP is the owner of all limited partnership interests of Electrum and all of the equity interests of Electrum Strategic Management LLC, the general partner of Electrum. TEG Global GP Ltd is the sole general partner of, and The Electrum Group is the investment adviser to, Electrum Global Holdings LP. The Electrum Group possesses voting and investment power with respect to assets of Electrum, including indirect investment discretion with respect to the Common Shares held by Electrum. GRAT Holdings LLC indirectly controls Electrum through Leopard Holdings LLC. The investment committee of GRAT Holdings LLC exercises voting and investment decisions on behalf of GRAT Holdings LLC. The address listed in such filing of Leopard Holdings LLC and GRAT Holdings LLC is 535 Madison Avenue, 12th Floor, New York, New York 10022 and the address listed in such filing of the Electrum Group, Electrum Global Holdings LP and TEG Global GP Ltd is 700 Madison Ave., 5th Floor, New York, New York 10065. Thomas Kaplan, Chairman of the Board of Directors of the Company, is also Chairman and Chief Executive Officer of The Electrum Group. Mr. Kaplan disclaims beneficial ownership in the Electrum shares except to the extent of a minor pecuniary interest. |
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(15) | According to a Schedule 13G/A filed with the SEC on February 9, 2022, FMR LLC has sole voting power over 3,960,880 of the shares and sole dispositive power over 24,142,044 of the shares. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of the shares. No one other person’s interest in the shares is more than 5% of the outstanding shares of the Company. | |
(16) | According to a Schedule 13G/A filed with the SEC on February 16, 2021, Paulson & Co. Inc. has sole voting and dispositive power over all such shares. | |
(17) | According to a Schedule 13G/A filed with the SEC on February 3, 2022, BlackRock, Inc. has sole voting power over 19,244,353 of the shares and sole dispositive power over 19,661,519 of the shares. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of the shares. No one other person’s interest in the shares is more than 5% of the outstanding shares of the Company. | |
* | Percentage of Common Shares beneficially owned or over which control or direction is exercised is less than 1%. |
As of March 10, 2022, there were approximately 591 registered holders of the Company’s Common Shares.
The Company has no knowledge of any other arrangements, including any pledge by any person of the Company’s securities, the operation of which may at a subsequent date result in a Change of Control of the Company.
Meetings of the Board and Board Member Attendance at the Annual Meeting
During the fiscal year ended November 30, 2021, the Board held four meetings. None of the incumbent Directors attended fewer than 75% of the aggregate of the total number of Board meetings and meetings of the committees on which each Director serves.
Board members are not required to attend the annual general meeting; however, the following eight Directors attended the Company’s annual meeting of shareholders held virtually on May 12, 2021: Elaine Dorward-King, Sharon Dowdall, Thomas Kaplan, Gregory Lang, Igor Levental, Kalidas Madhavpeddi, Ethan Schutt and Anthony Walsh.
Legal Proceedings
Neither the Company nor any of its property is currently subject to any material legal proceedings or other adverse regulatory proceedings. We do not currently know of any material legal proceedings against us or our subsidiaries involving our Directors, proposed Directors, executive officers or Shareholders of more than 5% of our voting shares, affiliates of the Company, or any associate of any such Director, executive officer, affiliate of the Company or Shareholder, or any material interest adverse to the Company or our subsidiaries. None of our Directors, proposed Directors or executive officers has, during the past ten years, been involved in any material bankruptcy, criminal or securities law proceedings.
Cease Trade Order, Bankruptcy, Penalties and Sanctions
No proposed director of the Company is, as of the date hereof or was within 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company (including the Company) that:
(a) | 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, that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or |
(b) | 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, for a period of more than 30 consecutive days, that was issued after the director or executive officer 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. |
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No proposed director of the Company:
(a) | is, as of the date hereof or was within 10 years before the date hereof, a director or executive officer of any company (including the 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 |
(b) | has, within 10 years before the date hereof, 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 the proposed director. |
No proposed director of the Company has been subject to:
(a) | any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or |
(b) | any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director. |
Family and Certain Other Relationships
There are no family relationships among the members of the Board or the members of senior management of the Company. There are no arrangements or understandings with customers, suppliers or others, pursuant to which any member of the Board or member of senior management was selected. As of March 10, 2022, Electrum held 84,569,479 Common Shares, representing approximately 25.39% of the Company’s issued and outstanding shares. Pursuant to the Unit Purchase Agreement dated December 31, 2008 between the Company and Electrum, the Company provided Electrum with the right to designate an observer at all meetings of the Company’s Board and any committee thereof so long as Electrum and its affiliates hold not less than 15% of the Company’s Common Shares. Electrum designated Igor Levental as its observer at the Company’s Board meetings. In July 2010, the Company appointed Igor Levental as a Director of the Company. In November 2011, Dr. Thomas Kaplan was appointed the Chairman of the Company’s Board. Dr. Kaplan is also the Chairman and Chief Executive Officer of The Electrum Group.
Interest of Certain Persons or Companies in Matters to be Acted Upon
Except as described in this Circular, no (i) person who has been a Director or executive officer of the Company at any time since the beginning of the Company’s last financial year, (ii) proposed nominee for election as a Director, or (iii) associate or affiliate of any of the foregoing persons, has any material interest, direct or indirect, in any matter to be acted upon at the Meeting.
compensation discussion & analysis
The following section of the Circular presents information regarding the design, governance, and implementation of the Company’s compensation program. The Compensation Committee (referred to in this section as the “Committee”) regularly reviews executive compensation.
During 2012, the Company implemented a fundamental restructuring which repositioned the Company as a pure gold play focused on permitting and developing its 50%-owned Donlin Gold property, one of the world's largest known undeveloped open-pit gold deposits. The restructuring included the spinout of the Company’s non-core properties into Trilogy Metals Inc. (formerly known as NovaCopper Inc.) to the Company’s Shareholders, the hiring of Gregory Lang as President and CEO, and his recruitment of a new executive team with demonstrated experience in permitting, engineering, building and operating large, open-pit gold mines in remote locations.
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Because of Donlin Gold’s unique attributes and the Company’s relationships with major international mining companies, the compensation program was designed to attract, retain, and incentivize individuals who have experience with complex, large-scale development properties and in senior management roles with large international mining companies.
The Board and management believe that every employee should be an owner of the Company because ownership is fundamental to aligning management’s and employees’ interests with those of Shareholders. As a result, share-based compensation is an important component of the Company’s compensation program. In August 2020, based on a recommendation from the Committee after a routine review of the Company’s executive and director compensation programs, the Board amended the Company’s share ownership guidelines to increase the minimum holding requirements for Directors and the President and CEO. The Directors’ minimum share ownership requirement increased from an amount equivalent to C$50,000 to three times the Directors’ annual retainer, or $142,800. The President and CEO’s minimum share ownership requirement increased from an amount equivalent to three times his annual base pay to five times his annual base pay.
In addition, the Company is committed to aligning management compensation with Shareholder interests through performance-based compensation. As Donlin Gold is in the development stage, the Company is not able to use typical operating company metrics (e.g., revenues, operating cash flow, production, costs, net income) as the basis for the performance-based components of its compensation program. The Committee worked extensively with management and with its compensation consultant, Mercer (Canada) Limited (“Mercer” or the “Compensation Consultant���), to define criteria for all aspects of the Company’s 2021 compensation program, including the performance-based compensation.
NOVAGOLD employees were instrumental in the achievement of important milestones relative to Donlin Gold in fiscal year 2021, including:
(i) | Completed the Donlin Gold 2021 drill program on time and under budget, even exceeding the goals of the original drill program to include additional holes and meters, |
(ii) | Made significant advances in the Donlin Gold permitting program, including securing the Clean Water Act Section 401 Certification, the water rights permits, the state pipeline right-of-way, and a third extension of the air quality permit, |
(iii) | Continued to assist with Donlin Gold’s community outreach planning and execution, including the completion of an additional five shared values statements (formerly called friendship agreements) for a total of eight shared values statements with the Yukon-Kuskokwim (Y-K) villages of Nikolai, Crooked Creek, Sleetmute, Napaskiak, Tuluksak, Upper Kalskag, Akiachak, and Akiak, and |
(iv) | Completed seven community development projects in the Y-K region, including a waste backhaul event that Donlin Gold co-sponsored with more than a dozen Y-K regional partners that removed more than 180,000 pounds of hazardous and electronic waste from more than 26 Y-K communities, and the annual Clean Up Green Up initiative with record participation of over 50 Tribes and municipalities. |
The Committee is a standing committee of the Board and is appointed by and reports to the Board, with a mandate to assist the Board in fulfilling its oversight responsibilities related to the:
· | appointment, performance evaluation, and compensation of the Company's CEO and other executive officers of the Company; |
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· | succession planning relating to the CEO, other executive officers and other key employees, including appointments, reassignments, and terminations; |
· | compensation structure for the CEO and other executive officers including annual, mid-term and long-term incentive plans involving share issuances or share awards; |
· | determination of Director compensation; and |
· | share ownership guidelines for the CEO, other executive officers, and Directors. |
The charter of the Committee is available at www.novagold.com under the Governance tab. More information regarding the responsibilities and operation of the Committee and the process by which compensation is determined are discussed starting on page 35 in “Statement of Executive Compensation” and on page 71 under the heading “Non-Executive Director Compensation”.
For the year ended November 30, 2021, the Committee consisted of four independent Directors: Kalidas Madhavpeddi (Chair), Elaine Dorward-King, Sharon Dowdall and Anthony Walsh. All current members of the Committee are non-executive Directors of the Company and satisfy all applicable independence standards of the NYSE American. The Committee met seven times in the fiscal year ended November 30, 2021. More information regarding the qualifications of each of the members of the Committee is provided in “Information Concerning the Board of Directors, Director Nominees, and Executive Officers” above.
Compensation Committee’s Relationship with its Independent Compensation Consultant
The Committee has directly engaged Mercer to provide specific support to the Committee in determining compensation for the Company’s officers and Directors, including during the most recently completed fiscal year. Such analysis and advice from the Compensation Consultant includes, but is not limited to, executive compensation policy (for example, the choice of companies to include in the Peer Group (as defined below) and compensation philosophy), total compensation benchmarking for the NEOs, and incentive plan design. In addition, this support has also consisted of: (i) the provision of general market observations throughout the year with respect to market trends and compensation governance issues; (ii) the provision of benchmark market data; and (iii) attendance at Committee meetings. Decisions made by the Committee, however, are the responsibility of the Committee and may reflect factors and considerations other than the information and recommendations provided by the Compensation Consultant. In addition to this mandate, the Compensation Consultant provides general employee compensation consulting services to the Company; however, these services are limited in size and scope and are of significantly lesser value than those provided related to executive officer and Director compensation.
The Committee Chair pre-approves a Statement of Work provided by the Compensation Consultant prior to the start of the annual executive officer and Director compensation reviews, or any other special project. The Statement of Work confirms the work that the Compensation Consultant is asked to complete and the associated fees. The Committee has assessed the independence of the Compensation Consultant pursuant to SEC rules and concluded that the Compensation Consultant’s work for the Committee does not raise any conflict of interest. The Committee regularly assesses the performance of the Compensation Consultant and may, from time to time, determine that obtaining competitive proposals is appropriate.
The fees paid to the Compensation Consultant for services performed in fiscal year 2021 were C$52,565 to assist the Committee in developing the Company’s compensation policies and programs. No other fees were paid to the Compensation Consultant for services provided to the Committee during the fiscal year ended November 30, 2021. In fiscal year 2020, Mercer was paid C$58,100 to perform similar services. The Compensation Consultant is a wholly owned subsidiary of Marsh & McLennan Companies, Inc. (MMC). Marsh Risk & Insurance Services (“Marsh”), an MMC affiliate, provides insurance broker services to the Company. The engagement of Marsh did not require or receive approval of the Board or the Committee. During the year ended November 30, 2021, Marsh billed the Company $220,931 for insurance brokerage services. With respect to the engagement of Mercer, the Committee considered various factors that may impact the independence of Mercer, including the amounts payable to Mercer and Marsh as described above, and whether any other relationships existed between Mercer or Marsh, on the one hand, and any executive officer of the Company or any member of the Board, on the other hand, and the Committee determined that a conflict of interest did not exist.
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Risk Assessment of Compensation Policies and Practices
Annually, the Committee conducts a risk assessment of the Company’s compensation policies and practices as they apply to all employees, including all executive officers. The design features and performance metrics of the Company’s cash and stock-based incentive programs, along with the approval mechanisms associated with each, are evaluated to determine whether any of these policies and practices would create risks that are reasonably likely to have a material adverse effect on the Company.
Checklist of Compensation Practices
WHAT WE DO | WHAT WE DON’T DO |
ü Base the vast majority of pay on performance; most compensation is therefore at-risk | x No repricing or exchange of underwater stock options |
ü Align pay and performance | x No special change of control provisions for executives |
ü Establish rigorous Company goals for annual incentive program | x No excessive perquisites |
ü Prohibit hedging and pledging of Company stock | x No special tax gross ups |
ü Include “double trigger” change of control provisions in equity plans | x No guaranteed annual salary increases or bonuses |
ü Apply Clawback Policy to annual incentive program and equity awards | x No plans that encourage excessive risk-taking |
As part of the review, the following characteristics of the Company’s compensation policies and practices were noted as being characteristics that the Company believes reduce the likelihood of risk-taking by the Company’s employees, including the Company’s officers and non-officers:
· | The Company’s compensation mix is balanced among fixed components such as salary and benefits, and variable components such as an annual incentive program opportunity and long-term performance-based incentives, including PSUs and stock options. |
· | The Committee, under its charter, has the authority to retain any advisor it deems necessary to fulfill its obligations and has engaged the Compensation Consultant. The Compensation Consultant assists the Committee in reviewing executive compensation and provides advice to the Committee on an as-needed basis. |
· | The annual incentive program for the executive management team, which includes each of the NEOs, is approved by the Board. Individual payments are based on a combination of quantitative and qualitative metrics, as well as discretionary factors. More information about the annual incentive program goals can be found on pages 38-55 of this Circular. |
· | Stock-based awards for all employees are recommended by the Committee and approved by the Board. |
· | The Board approves the compensation for the President and CEO based upon a recommendation by the Committee, which is comprised entirely of independent Directors. |
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· | The nature of the business in which the Company operates requires some level of risk-taking to acquire reserves and to develop mining operations in the best interest of all stakeholders. Consequently, the executive compensation policies and practices have been designed to encourage actions and behaviors directed toward increasing long-term value while limiting incentives that promote excessive risk-taking. |
Based on this assessment, the Committee concluded that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Employees of NOVAGOLD, including NEOs, and Directors are not permitted to purchase financial instruments, including, for greater clarity, prepaid variable forward contracts, equity swaps, collars, or units of exchange funds that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the employee or Director. Additionally, the Company does not permit any employees or Directors to pledge Company securities to secure personal debts or loans.
Peer Group for 2021 Executive Compensation Planning
The Committee retained the Compensation Consultant to assist the Committee in determining appropriate levels for each of the three main components of total direct compensation for the Company’s Directors and NEOs for fiscal year 2021. The Compensation Consultant’s work encompasses a review of the Company’s executive compensation philosophies relative to a comparable group of mining companies using the publicly available filings of these peer companies.
A compensation peer group of mining companies was developed using the following selection criteria:
· | Canadian and/or U.S. listed companies; |
· | market capitalization, enterprise value, and/or total assets similar to the Company; |
· | gold, diversified metals and mining, or precious metals/minerals industry; |
· | complexity of operation/business strategy relative to the Company; and |
· | experienced, full-time executive team. |
The Company considers the above selection criteria to be relevant because it results in a group of companies in our industry that are similar in size by market capitalization, enterprise value and/or assets (within a range of 33% to 300% that of NOVAGOLD), operating jurisdictions and/or stage of development.
During August 2020, based upon considerations of the selection criteria, stage of development and operating jurisdictions, the following peer group companies were selected after reviewing the company data below as of July 31, 2020, which was current information near the time the Company’s 2021 peer group was selected. The Company’s 2021 peer group below (collectively, the “Peer Group”) reflects the following changes from the 2020 peer group: i) the removal of TMAC Resources (acquired by Shandong Gold), ii) the removal of Detour Gold (acquired by Kirkland Lake Gold Ltd.), and iii) the addition of Equinox Gold.
All values in C$ millions (1)
Company Name | Market Cap. (2) | Total Assets (3) | Revenue (3) | GICS Description (4) | Primary Mining Location(s) | 1-yr TSR (5) % | 3-yr TSR (5) % | 5-yr TSR (5) % |
Pan American Silver Corp. | $10,511 | $4,466 | $1,931 | Silver | Mexico, Americas, Canada | 151% | 35% | 45% |
B2Gold Corp. | $9,681 | $3,737 | $1,688 | Gold | Burkino Faso, Côte d’Ivoire | 122% | 44% | 46% |
Alamos Gold Inc. | $5,547 | $4,650 | $878 | Gold | Canada, Mexico, Turkey, US | 65% | 18% | 28% |
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Company Name | Market Cap. (2) | Total Assets (3) | Revenue (3) | GICS Description (4) | Primary Mining Location(s) | 1-yr TSR (5) % | 3-yr TSR (5) % | 5-yr TSR (5) % |
Centerra Gold Inc. | $4,948 | $3,675 | $1,974 | Gold | Int’l. | 61% | 37% | 22% |
SSR Mining Inc. | $3,959 | $2,139 | $856 | Gold | Americas | 57% | 38% | 34% |
Hecla Mining Company | $3,854 | $3,668 | $873 | Silver | Canada, Mexico, US | 200% | 1% | 22% |
Equinox Gold Corp. | $3,829 | $3,439 | $499 | Gold | Americas | 146% | 41% | 15% |
IAMGOLD Corporation | $3,165 | $5,127 | $1,445 | Gold | Int’l. | 39% | 0% | 27% |
Coeur Mining, Inc. | $2,565 | $1,806 | $958 | Gold | Int’l. | 72% | -1% | 18% |
Pretium Resources Inc. | $2,370 | $2,090 | $674 | Gold | Canada | -11% | 2% | 14% |
OceanaGold Corporation | $1,185 | $2,874 | $690 | Gold | Philippines, New Zealand, US | -2% | 2% | 10% |
MAG Silver Corp. | $2,064 | $282 | $0 | Silver | Mexico | 54% | 10% | 19% |
Torex Gold Resources Inc. | $2,009 | $1,532 | $943 | Gold | Mexico | 38% | 1% | 16% |
Seabridge Gold Inc. | $1,725 | $455 | $0 | Gold | Canada | 44% | 22% | 38% |
New Gold Inc. | $1,487 | $3,651 | $767 | Gold | Australia, Mexico, Canada, US | 25% | -19% | -5% |
NOVAGOLD RESOURCES INC. | $4,038 | $312 | $0 | Gold | US | 50% | 30% | 25% |
Percentile Rank | 69% | 7% | - | 42% | 67% | 60% |
Data source: Mercer
(1) | Financial figures in U.S. dollars have been converted to CAD using the Bank of Canada 2019 average exchange rate: $1.000 USD = $1.327 CAD. | |
(2) | Market capitalization as of July 31, 2020. | |
(3) | Trailing 12-month revenue and most recently reported total assets. | |
(4) | S&P/JP Morgan Chase Global Industry Classification Code (GICS). | |
(5) | TSR denotes annualized Total Shareholder Return or change in share price adjusted for dividends for the 1, 3 and 5-year periods ended July 31, 2020. |
Relative to the Peer Group, NOVAGOLD’s market capitalization was at the 69th percentile, and its asset value was at the 7th percentile as of July 31, 2020, which was near the August 2020 date when the Peer Group for 2021 executive compensation planning was selected.
Peer Group for 2021 Executive Compensation Planning
The Committee followed a similar process for the selection of the peer group for 2022 executive compensation planning in the second half of fiscal year 2021. The 2022 peer group is as follows:
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Alamos Gold Inc. | Hecla Mining Company | Pan American Silver | ||
B2Gold Corp. | IAMGOLD Corporation | Pretium Resources Inc. | ||
Centerra Gold Inc. | MAG Silver Corporation | Seabridge Gold Inc. | ||
Coeur Mining Inc. | New Gold Inc. | SSR Mining Inc. | ||
Equinox Gold Corporation | OceanaGold Corp. | Torex Gold Resources Inc. |
The peer group companies for 2022 executive compensation planning are the same as those used for 2021 executive compensation planning.
Statement of Executive Compensation
This Compensation Discussion and Analysis describes and explains the significant elements of the Company’s executive compensation program which were implemented during fiscal year 2021 to attract, retain, and incentivize the Company’s NEOs.
The Company’s NEOs during fiscal 2021 were:
· | Mr. Gregory Lang, President and CEO (CEO); and |
· | Mr. David Ottewell, Vice President and CFO (CFO). |
Executive Compensation Philosophy
NOVAGOLD has a pay-for-performance philosophy and the compensation programs of the Company are designed to attract and retain executive officers with the talent and experience necessary for the success of the Company. As directed by the Committee, the Company has a compensation philosophy to pay above the median of its Peer Group companies to attract and retain above average executive talent.
Why We Pay Above Median
Factors which influence this policy include the size and scale of the Company’s flagship Donlin Gold project, which is in an extremely remote location and is much larger, and likely more complex, than any asset owned by our Peer Group companies. Our executive compensation program acknowledges that managing these resources requires an executive team with extensive experience and skills in advancing significant deposits into production. Additionally, the Company works with senior mining partners as it advances its complex, large-scale project and needs to attract and retain executives with specialized skills, knowledge, and experience which come from working for and with large mining companies. Such skills and knowledge include the areas of geology, engineering, logistical planning, preparation of feasibility studies, permitting, regulation, mine construction and operation, government and community affairs, compliance, marketing, finance, and accounting.
As part of its 2021 executive compensation planning, the Committee also referred to the compensation paid by senior mining companies to their incumbents in positions comparable to those held by the Company’s NEOs. Although not included in the Peer Group, the Committee also referenced the compensation packages of Barrick Gold Corporation, Newmont Corporation, Kirkland Lake Gold Ltd., and Kinross Gold Corporation, as: (i) the NEOs have previously worked for at least one of those senior mining companies, ii) to measure the competitiveness of the Company’s compensation programs, and (iii) the Committee considers those companies to be competitors for the Company’s executive talent. No changes to the Company’s compensation programs were made as a result of the supplemental review of the compensation programs of these senior mining companies. Ultimately, the Peer Group companies were selected to reflect the fact that the Company’s assets are in the development stage.
Our Annual Compensation Review Process
The Committee evaluates each officer position to establish skill requirements and levels of responsibility. The Committee, after referring to market information provided by its independent Compensation Consultant, Mercer, and after considering the CEO’s recommendations for compensation of the Company’s other officers, makes recommendations to the Board regarding compensation for the officers. The Company regularly meets with its major Shareholders to discuss a variety of matters relevant to the Company. At the request of the Committee, the Company includes the issue of executive compensation in such discussions and provides feedback from the Shareholders to the Committee.
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The Committee believes that the Company’s executive compensation program structure has been successful in achieving the goals set out in the Committee’s compensation philosophy, namely attracting and retaining above-average executive talent who have worked for and with large mining companies, and who have specialized skills, knowledge and experience necessary to advance the Company’s significant and complex Donlin Gold project. As such, the executive compensation program targets remained unchanged from 2020 to 2021. The Committee currently targets NEO compensation as follows:
· | Base Salary – 62.5th percentile of the Peer Group companies (as defined in the “Peer Group” section above); |
· | Total Cash Compensation (base salary & annual incentive) – 62.5th percentile of the Peer Group companies; and |
· | Total Direct Compensation (base salary, annual incentive & long-term incentive compensation) – 75th percentile of the Peer Group companies. |
Executive Compensation Objectives and Elements
In establishing compensation objectives for the NEOs, the Committee seeks to accomplish the following goals:
· | Recruit and subsequently retain highly qualified executive officers by offering overall compensation that is competitive with that offered for comparable positions at Peer Group companies; |
· | Incentivize executives to achieve important corporate and individual performance objectives and reward them when such objectives are met; and |
· | Align the interests of executive officers with the long-term interests of Shareholders through participation in the Company’s stock-based compensation plans. |
During 2021, the Company’s executive compensation package consisted of the following principal components: base salary, annual incentive cash bonus, various welfare plan benefits, 401(k) retirement account (“401(k)”), including employer matching funds for U.S. NEOs, and long-term incentives in the form of stock options and Performance Share Units (“PSUs”).
The following table summarizes the different elements of the Company’s total compensation package for all employees, including the NEOs:
Compensation Element | Objective | Key Feature | Compensation Element “At-Risk” |
Base Salary | Provide a fixed level of cash compensation for performing day-to-day responsibilities. | Base salary bands were created and are reviewed annually based on the 62.5th percentile of the Peer Group market data for base salary. Actual increases are based on individual performance. | No |
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Compensation Element | Objective | Key Feature | Compensation Element “At-Risk” |
Annual Incentive Plan | Reward for short-term achievement of corporate and individual goals. | Cash payments based on a formula. Each NEO has a target opportunity based on the 62.5th percentile of the Peer Group market data for total cash. Actual payout depends on performance against annual corporate and individual goals. | Yes |
Stock Options | Align executives’ interests with those of Shareholders, encourage retention and reward long-term Company performance. | Calculations for awards are based on targets for each NEO determined by targeting the 75th percentile of the Peer Group market data for total direct compensation. Stock option grants vest over three years and have a five-year term. | Yes |
Performance Share Units | Align executives’ interests with those of Shareholders, encourage retention and reward long-term Company performance. | Calculations for grant amounts are based on targets for each NEO determined by targeting the 75th percentile of the Peer Group market data for total direct compensation. PSU grants cliff vest at the end of a three-year performance period and actual payout, if any, depends upon performance against corporate goals as established by the Board at the time of grant. | Yes |
Employee Share Purchase Plan | Encourage ownership in the Company through the regular purchase of Company shares from the open market. | Employees may contribute up to 5% of base salary and the Company matches 50% of the employee’s contribution. | No |
Retirement Plans | Provide retirement savings. | 401(k) – Company matches 100% of the U.S. employee’s contribution up to 5% of base salary, subject to applicable IRS limitations. RRSP – Company matches 100% of the Canadian employee’s contribution up to 5% of base salary, subject to applicable CRA limitations. | No |
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Compensation Element | Objective | Key Feature | Compensation Element “At-Risk” |
Welfare Plan Benefits | Provide security to employees and their dependents pertaining to health and welfare risks. | Coverage includes medical, dental and vision benefits, short- and long-term disability insurance, life and AD&D insurance and an employee assistance plan. | No |
Annual Compensation Decision-Making Process
Each year, the executive team establishes goals for the upcoming year that include key priorities and initiatives. The CEO presents these goals to the Committee and Board for consideration and approval.
The Company’s fiscal year 2022 corporate goals and weightings include:
ADVANCE DONLIN GOLD TOWARD CONSTRUCTION DECISION:
45% WEIGHT
Advance Donlin Gold Permits and Approvals (5%)
Threshold (~70-90% rating) | Submit new APDES permit application prior to end of 2022 (due to expire June 2023)
|
Target (~90-110% rating) | ADEC deems new APDES permit application complete prior to end of 2022 (due to expire June 2023)
|
Maximum (~110-150% rating) | Target items plus: issue public notice of air quality permit in preparation for new permit issuance in 2023
|
Existing Permits (25%)
Threshold (~70-90% rating) | Obtain favorable decision upholding the 401 Certification from Alaska Superior Court and/or Alaska Dept. of Environmental Conservation (ADEC)
|
Target (~90-110% rating) | Threshold plus:
Obtain favorable decision upholding the state pipeline right-of-way
|
Maximum (~110-150% rating)
| Obtain favorable decisions on the following: i) from Alaska Superior Court and/or ADEC on the 401 Certification, ii) from Alaska Superior Court on the state pipeline right-of-way, and iii) from the Alaska Dept. of Natural Resources (ADNR) Commissioner on the water rights. For clarity, if either the 401 Certification or state pipeline right-of-way is not upheld by Alaska Superior Court or the applicable state agency the maximum shall not be achieved
|
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Donlin Gold Engineering Studies (40%)
Threshold (~70-90% rating) | Complete 2022 drill program meterage on budget
|
Target (~90-110% rating) | Complete 2022 drill program meterage on budget
Complete platforms and confirm mineralization continuity and geologic controls in selected areas of the deposit
Plan and commence the restart of field work for the Dam Safety Certification program
Update ground water model. Finalize hydrogeology plan for fieldwork and pump tests
Perform studies in preparation of FS update (i.e., geotechnical gap analysis, power trade-off, optimization studies gap analysis)
Complete phase 2 metallurgy testing and commence phase 3 testing
|
Maximum (~110-150% rating)
| Complete 2022 drill program meterage under budget
Complete target goals, plus:
Commence pump test for hydrogeology confirmation and dewatering planning.
Devise infrastructure plan
|
Donlin Gold Resource Model (25%)
Threshold (~70-90% rating) | Validate existing resources
|
Target (~90-110% rating) | Complete DG22 geologic and resource models in third fiscal quarter (June-August 2022)
|
Maximum (~110-150% rating) | N/A – no maximum payout
|
Donlin Gold Technical Report Update (5%)
Threshold (~70-90% rating) | N/A - no payout for threshold
|
Target (~90-110% rating) | Work with Wood Canada to complete update of Donlin Gold S-K 1300 report
|
Maximum (~110-150% rating) | Include S-K 1300 as an exhibit to the 10-K to be filed in January 2022
|
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MAINTAIN/INCREASE SUPPORT FOR THE DONLIN GOLD PROJECT AMONG NATIVE ENTITIES AND OTHER STAKEHOLDERS:
30% WEIGHT
Increase Level and Geographic Footprint of Donlin Gold Project Support and Reduce the Level of Stated Opposition in Y-K Region (60%)
Threshold (~70-90% rating) | No increase in the net number of villages/groups in Y-K region with opposing resolutions
|
Target (~90-110% rating) | Reduce the level of stated opposition by 2 villages/tribal councils/organizations (moved from opposed to neutral or in favor). Sign 3 new Shared Value Statements (SVS) villages/tribal councils/organizations
|
Maximum (~110-150% rating) | Reduce the level of stated opposition by 3 villages/tribal councils/organizations (moved from opposed to neutral or in favor). Sign 5 new Shared Value Statements (SVS) villages/tribal councils/organizations. Implement 5 community investment/development projects with at least one new initiative while expanding ongoing partnerships (e.g., backhaul, clean up/green up)
|
Increase Communications with Native Corporation Partners and Key Stakeholders (40%)
Threshold (~70-90% rating) | With Donlin Gold and Barrick finalize communications plan with Calista and TKC by end of Q1/2022 for the year. Collaborate with Calista to complete Shareholder survey to gauge levels of support and knowledge of the project
|
Target (~90-110% rating) | Threshold achievements plus:
Support Donlin Gold with Barrick to conduct 6 virtual seminars to village corporations/tribes/regional organizations with a particular focus on groups/villages opposed/neutral on the project with support from Calista and TKC
Recruit 3 Community Liaisons for the project
|
Maximum (~110-150% rating) | Threshold achievements plus:
Support Donlin Gold with Barrick in conducting 10 virtual seminars to village corporations/tribes/regional organizations with a particular focus on groups/villages opposed/neutral on the project with support from Calista and TKC
Recruit 5 Community Liaisons for the project
|
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PROMOTE A STRONG ESG CULTURE INCLUDING
SAFETY, SUSTAINABILITY AND ENVIRONMENT:
10% WEIGHT
Maintain Strong Safety Focus at Donlin Gold (40%)
Threshold (~70-90% rating) | No lost-time incidents. Medical incident rate of 2.5 to 3.5, not including non-work-related medical incidents or pre-existing conditions |
Target (~90-110% rating) | No lost-time incidents and no more than 5 high potential incidents.* Medical incident rate of 1.5 to 2.5, not including non-work-related medical incidents or pre-existing conditions
|
Maximum (~110-150% rating) | No lost-time incidents and no more than 3 high potential incidents.* Medical incident rate of <1.5, not including non-work-related medical incidents or pre-existing conditions
|
*A high potential incident is an event that has reasonable potential to result in: i) fatality, ii) permanent total disability, or iii) damage to a facility, structure or equipment in excess of US $50,000
Environmental: Spills (25%)
Threshold (~70-90% rating) | No spills to water. No more than 4 spills of greater than 10 gallons each to land |
Target (~90-110% rating) | No spills to water. No more than 2 spills of greater than 10 gallons each to land. No citations for non-compliance with any permits from any issuing governmental agency
|
Maximum (~110-150% rating) | Complete target goals plus: no spills of more than de minimus levels to land |
Sustainability: Company Ratings (15%)
Threshold (~70-90% rating) | Provide 2021 Company sustainability data to ISS, Sustainalytics and CDP |
Target (~90-110% rating) | Improve Company sustainability ratings [specific ratings goals redacted] |
Maximum (~110-150% rating) | Improve Company sustainability ratings with ISS, CDP and/or Sustainalytics by more than target |
Sustainability: Company Policies (20%)
Threshold (~70-90% rating) | Develop and adopt updated Company enterprise risk management policy that incorporates ESG-related risk assessment |
Target (~90-110% rating) | Threshold goal plus:
Work with Donlin Gold to develop and adopt either a Climate Change Policy or a Biodiversity Policy
|
Maximum (~110-150% rating) | Threshold goal plus:
Work with Donlin Gold to develop and adopt both a Climate Change Policy and a Biodiversity Policy
|
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MAINTAIN A FAVORABLE REPUTATION OF THE COMPANY AND ITS PROJECT
AMONG SHAREHOLDERS:
10% WEIGHT
Shareholder Engagement (20%)
Threshold (~70-90% rating) | Proxy circular shareholder engagement campaign results in 60% eligible voter turnout at AGM
|
Target (~90-110% rating) | Proxy circular shareholder engagement campaign results in 70% eligible voter turnout at AGM and at least 80% of votes cast in support of each AGM proposal
|
Maximum (~110-150% rating) | Proxy circular shareholder engagement campaign results in 80% eligible voter turnout at AGM and at least 85% of votes cast in support of each AGM proposal
|
IR Program and Outreach (80%)
Threshold (~70-90% rating) | Reach out to 100% of top 20 shareholders* during the year and engage with 70%. Maintain 12 out of 20 top shareholders* and attract 2 additions to the holders who hold greater than 0.5 million shares
|
Target (~90-110% rating) | Reach out to 100% of top 20 shareholders* during the year and engage with 80%. Maintain 14 or more out of 20 top shareholders* and attract 3 or more additions to the holders who hold greater than 0.5 million shares
|
Maximum (~110-150% rating) | Reach out to 100% of top 20 shareholders* during the year and engage with 90%. Maintain 17 or more out of 20 top shareholders* and attract 3 or more additions to the holders who hold greater than 0.75 million shares
|
*20 top shareholders does not include passive index funds or custodial funds
MANAGE COMPANY TREASURY EFFECTIVELY AND EFFICIENTLY;
STREAMLINE CORPORATE STRUCTURE:
5% WEIGHT
Company Budget (50%)
Threshold (~70-90% rating) | Complete 2022 over budget by no more than 5% excluding payroll
|
Target (~90-110% rating) | Complete 2022 on budget
|
Maximum (~110-150% rating) | Complete 2022 under budget by 5% or better excluding payroll
|
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Maintain Effective Internal Controls Over Financial Reporting (50%)
Threshold (~70-90% rating)
| No material weaknesses |
Target (~90-110% rating)
| No material weaknesses and no unresolved significant deficiencies at year end
|
Maximum (~110-150% rating)
| No material weaknesses and no significant deficiencies identified |
Achievement of the foregoing strategic goals will be measured at the end of fiscal 2022 by assessing completion of the underlying tactical goals. Based upon the level of completion of the goals, performance ratings are determined for the Company by the Board and for each of the NEOs by the Committee. These Company and individual performance ratings are used in making decisions and calculations related to base salary increases and annual incentive payments.
The Board can exercise discretion in determining the appropriate performance rating for the Company and for the executive officers based on their evaluation of performance against goals set at the beginning of the year. The size of any payment or award is dependent on the Company and the individual performance ratings as determined by the Committee and Board. The ratings can range from 0% to 150%, with 100% representing achievement of the target goal and 150% representing the maximum allowable rating for exceeding the target goal.
The Committee makes a recommendation to the Board regarding the NEOs’ base salary and annual incentive payments. Stock option and PSU grants for NEOs are also approved by the Board and are based upon a fixed long-term incentive target for each NEO expressed as a percentage of the NEO’s base salary.
Base salary increases, if granted, are effective January 1 of each year and annual incentive payments are usually made shortly after the end of the fiscal year, which concludes each year on November 30.
The chart below illustrates the 2021 targeted and actual pay mix for the CEO and other NEO. The actual 2021 pay mix is based on compensation earned in fiscal year 2021; however, the annual incentive amounts and long-term incentive amounts earned in 2021 were paid or awarded after the close of fiscal year 2021. The NEOs’ target pay mix remains unchanged from fiscal year 2021 to fiscal year 2022.
2021 TARGET PAY MIX
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2021 ACTUAL PAY MIX
Compensation Elements
After compiling information based on salaries, bonuses and other types of cash and equity-based compensation programs obtained from the public disclosure records of the Peer Group, the Compensation Consultant reported its findings and made recommendations to the Committee regarding compensation targets for Directors and NEOs.
The Committee has set the following compensation targets for the Company’s NEOs for the 2022 fiscal year, which were unchanged from fiscal year 2021:
· | CEO |
o | Base Salary – 62.5th percentile of Peer Group |
o | Annual Incentive Target – 100% of base salary |
o | Long Term Incentive Target – 375% of base salary |
· | CFO |
o | Base Salary – 62.5th percentile of Peer Group |
o | Annual Incentive Target – 80% of base salary |
o | Long Term Incentive Target – 250% of base salary |
In addition, our NEOs receive compensation in the form of Company-paid health and welfare benefits (medical, dental, vision, life, AD&D, short-term and long-term disability insurance) and a Company match on 401(k) and Employee Stock Purchase Plan contributions, which benefits are offered on par to all employees. Our NEOs are entitled to one paid executive physical per year, and Mr. Lang receives an auto allowance. The foregoing items of NEO compensation are reflected in the Summary Compensation Table on page 60 of this Circular.
Salaries for officers are determined by evaluating the responsibilities inherent in the position held and each individual’s experience and past performance, as well as by reference to the competitive marketplace for management talent at the Peer Group companies. The Committee refers to market information provided by the Compensation Consultant on an annual basis. The Compensation Consultant matches the executives to those individuals performing similar functions at the Peer Group companies. For the 2021 fiscal year, the Company set the 62.5th percentile of this market data as a target for base salaries.
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As explained in the section "Executive Compensation Philosophy" above, the Company targets base salaries above the median of salaries paid by the Peer Group companies to assist in attracting and retaining the highly experienced people that the Company needs to be successful.
If an NEO is fully competent in their position, the NEO will be paid between 95% and 105% of the guidepost. Developing NEOs are generally paid between 80% and 94% of the guidepost and NEOs who are highly experienced and consistently perform above expectations can be paid between 106% and 125% of the guidepost. The Company most recently updated its compensation guideposts for all employees during 2019 with the assistance of Mercer. The Compensation Committee reviewed and approved the guideposts for the NEOs in March 2019.
NEO Base Salary Compared to Salary Band Guideposts
NEO | 2021 Base Salary Compared to Salary Band Guidepost | Reason |
Gregory Lang | Above: 117% of guidepost | Mr. Lang’s base salary is above the salary range guidepost for his role and level due to his past experience and current performance. Specifically, Mr. Lang brings his previous experience as President of Barrick Gold North America, his mine engineering and operations experience, his good reputation in the industry, and his excellent relationships with the Company’s stakeholders. |
David Ottewell | At: 105% of guidepost | Mr. Ottewell’s base salary has reached the salary range guidepost for his role and level as he has now served as the Company’s VP and CFO for nine years. His current and past performance has been excellent, and his previous experience as the Vice President and Controller for Newmont Corporation prepared him for the additional responsibilities incumbent upon the Vice President and CFO position at the Company. |
Base Salaries for 2022
The Board agreed with the Committee’s recommendations and approved the following base salaries to be effective as of January 1, 2022 for Mr. Lang and Mr. Ottewell:
NEO | Title | 2021 Base Salary | 2022 Base Salary | % Change |
Gregory Lang | President & CEO | $806,300 | $806,300 | 0.0% |
David Ottewell | VP & CFO | $433,100 | $446,100 | 3.0% |
At the end of each fiscal year, the Committee reviews individual performance and Company performance against the goals set by the Company for such fiscal year. The assessment of whether the Company’s goals for the year have been met includes, but is not limited to, considering the quality and measured progress at the Company’s development stage projects, strong safety record, protection of the Company’s treasury, corporate alliances and similar achievements.
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Annual Incentive Payment for 2021
Annual incentive awards for 2021 were based on performance relative to goals set at the beginning of fiscal year 2021. Performance is measured in two areas: company and individual. The ratings can range from 0% to 150%, with 100% representing achievement of the target goal and 150% representing the maximum allowable rating for exceeding the target goal.
Discussions around Company goals for the following year commence during strategy sessions that usually begin in the fall of the preceding year. The NEOs, the other officers and some managers are involved in the strategy sessions. These Company goals are reviewed and approved by the Committee and Board. Individual goals flow down from the Company goals to ensure that everyone’s efforts are aligned with the goals and linked to the success of the Company.
The Company also focuses on setting goals around its core values which include safety, sustainability, accountability, communication, empowerment, integrity, respect, and teamwork.
The 2021 Company goals included:
ADVANCE DONLIN GOLD TOWARD CONSTRUCTION DECISION:
50% WEIGHT
Advance Donlin Gold permits and approvals (15%)
Threshold (~70-90% rating) | Finalize state pipeline right-of-way (secure reissuance); finalize water right adjudications.
|
Target (~90-110% rating) | Finalize state pipeline right-of-way (secure reissuance); finalize water right adjudications; finalize BLM 17B easements (delayed due to COVID-19); obtain Susitna Fish and Game Refuge (SFGR) permits (2 total).
|
Maximum (~110-150% rating) | Target items plus: obtain third extension to air quality permit (expires end of 2021). Obtaining a third extension of an air quality permit is virtually unprecedented in Alaska or nationally. An extension is preferable to starting over with a new permit application. Restart dam safety certificate application work.
|
Achievement Description | Met target goal with exception of finalization of BLM 17B easements. 401 Certification affirmed in May 2021, but under appeal; water rights issued, but under appeal; pipeline ROW reissued in July 2021, but under appeal. SFGR permits issued November 1, 2021. Additionally, application for third extension to air permit submitted and extension expected by end of calendar year.
|
Achievement Rating | 100% |
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Existing Permits (25%)
Threshold (~70-90% rating) |
|
Target (~90-110% rating) | No successful appeals of any issued project permits/approvals.
|
Maximum (~110-150% rating) | No outstanding appeals of any issued project permits/approvals.
|
Achievement Description | 401 Certification appealed by Earthjustice/ONC to Alaska Superior Court in June 2021; water rights appealed by Earthjustice/ONC to ADNR Commissioner in July 2021 (administrative-level appeal); pipeline ROW authorization appealed by Earthjustice/ONC and separately by an adventure company operator in Alaska Superior Court in September 2021.
|
Achievement Rating | 100% |
Donlin Gold Engineering Studies (20%)
Threshold (~70-90% rating) | |
Target (~90-110% rating) | Complete 2021 work program approved by Barrick and NOVAGOLD (i.e., mine closure, tailings, and pipeline de-risking studies; additional metallurgical test work).
|
Maximum (~110-150% rating) | Achieve target goal objectives and commence pre-work for feasibility study. |
Achievement Description | 2021 drilling complete. De-risking studies completed in September 2021. Metallurgical testing underway and phase 1 completed in November 2021; phase 2 two-thirds complete in December 2021. Donlin Gold board approved additional budget funding of $3M in September 2021 and some pre-work planning workshops underway to plan to commence FS.
|
Achievement Rating | 115% |
Donlin Gold Resource Model (30%)
Threshold (~70-90% rating) | Develop updated resource model; design model confirmation drill program (March/April 2021)
|
Target (~90-110% rating) | Complete model confirmation drill program. (add details of drill program plan when available after model is completed)
|
Maximum (~110-150% rating) | Finish target goal ahead of schedule with similar scope and improved meters/day productivity or accomplish more scope (i.e., additional meters and/or holes) due to improved productivity.
|
Achievement Description | Drilling completed ahead of schedule and approximately 20% more meters were drilled than originally planned with no increase to the drilling program budget. Reconciliation of results received so far are tracking with the model, but not all assay results are in. Many companies did not complete their drill programs in 2021.
|
Achievement Rating | 140% |
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Donlin Gold Technical Report Update (10%)
Threshold (~70-90% rating) | |
Target (~90-110% rating) | Work with Wood Canada to complete update of Donlin Gold technical report. Retain reserves and resources from Second Updated Feasibility Study until updated technical report is published
|
Maximum (~110-150% rating) | |
Achievement Description | Resources and reserves retained. Final, updated technical report filed voluntarily on SEDAR and EDGAR on August 31, 2021.
|
Achievement Rating | 100% |
MAINTAIN/INCREASE SUPPORT FOR DONLIN GOLD
AMONG NATIVE ENTITIES AND OTHER STAKEHOLDERS:
25% WEIGHT
Increase Level and Geographic Footprint of Donlin Gold Project Support in Y-K Region (65%)
Threshold (~70-90% rating) | No increase in the net number of villages/groups in Y-K region with opposing resolutions
|
Target (~90-110% rating) | No increase in the net number of villages/groups in Y-K region with opposing resolutions. Sign friendship agreements with 4 more villages (already secured Crooked Creek, Nikolai and Sleetmute in 2020)
|
Maximum (~110-150% rating) | No increase in the net number of villages/groups in Y-K region with opposing resolutions. Sign friendship agreements with 6 more villages, including at least one opposed to the project
|
Achievement Description | No new opposition in Y-K region. Have signed 5 additional friendship agreements (now referred to as ‘shared value statements’) with Napaskiak, Tuluksak, Upper Kalskag, Akiachak and Akiak. Unfortunately, Tuluksak joined the appeal of the Donlin Gold water rights permits
|
Achievement Rating | 100% |
-48- |
Complete DGLLC Stakeholder Investment and Community Development Projects at Regional and State-Wide Level (35%)
Threshold (~70-90% rating) | With Donlin Gold and Barrick, identify and finish at least 4 community investment/development projects in Y-K region. Sponsor and engage in at least 4 of the following initiatives to maintain and build upon relationships with key stakeholders: (1) Iditarod, (2) Skiku, (3) Elder-mentor program, (4) Excel Alaska, (5) Bethel search and rescue, (6) Aniak Fire Rescue, (7) Bethel Basketball tournament, and (8) Campfire village programs support
|
Target (~90-110% rating) | With Donlin Gold and Barrick, identify and finish at least 6 community investment/development projects in Y-K region, including at least one project in Bethel. Sponsor and engage in at least 6 of the following initiatives to maintain and build upon relationships with key stakeholders: (1) Iditarod, (2) Skiku, (3) Elder-mentor program, (4) Excel Alaska, (5) Bethel search and rescue, (6) Aniak Fire Rescue, (7) Bethel Basketball tournament, and (8) Campfire village programs support
|
Maximum (~110-150% rating) | With Donlin Gold and Barrick, identify and finish at least 8 community investment/development projects in Y-K region, including at least one project in Bethel. One project must be a regional, multi-partner program that includes at least 3 key stakeholders. Sponsor and engage in all of the following initiatives to maintain and build upon relationships with key stakeholders: (1) Iditarod, (2) Skiku, (3) Elder-mentor program, (4) Excel Alaska, (5) Bethel search and rescue, (6) Aniak Fire Rescue, (7) Bethel Basketball tournament, and (8) Campfire village programs support
|
Achievement Description | Completed seven of the eight community investment/development projects listed (the Bethel basketball tournament was canceled due to COVID). Additionally, the Waste Removal program was completed with more than 180,000 pounds of waste removed from more than 26 villages with the participation of more than a dozen regional partners. The Clean Up Green Up initiative with a record 50+ Tribes and municipalities that participated was completed in 2021
|
Achievement Rating | 120% |
PROMOTE A STRONG SAFETY, SUSTAINABILITY AND ENVIRONMENTAL CULTURE:
10% WEIGHT
Maintain strong safety focus at Donlin Gold (40%)
Threshold (~70-90% rating) | No lost-time incidents. Medical incident Rate of 2.5 to 3.5, not including non-work-related medical incidents or pre-existing conditions
|
Target (~90-110% rating) | No lost-time incidents, medical incident rate of 1.5 to 2.5, not including non-work-related medical incidents or pre-existing conditions
|
Maximum (~110-150% rating) | No lost-time incidents, medical incident rate of <1.5, not including non-work-related medical incidents or pre-existing conditions
|
Achievement Description
| Medical incident rate of 1.27. No lost-time incidents, although one significant injury had the potential to become a lost time incident. Downward discretion applied to rating due to the significant injury even though maximum achievement metrics met
|
Achievement Rating | 100% |
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Environmental (25%)
Threshold (~70-90% rating) | No spills to water. No more than 4 spills of greater than 10 gallons each to land
|
Target (~90-110% rating) | No spills to water. No more than 2 spills to land of greater than 10 gallons each to land. No citations for non-compliance with any permits from any issuing governmental agency
|
Maximum (~110-150% rating) | Complete target goals plus: Zero to no more than 1 spill of 10 gallons to land
|
Achievement Description
| No spill incidents that met the rating criteria. Received two administrative Notices of Violation (NOV): i) one related to stormwater for failure to file an administrative report in 2019 and failure to train all staff in 2018 even though there was no field program that year, and ii) one under our air permit for failure to submit one operating report in 2020. No penalties issued for either NOV. State 2021 on-site permit compliance inspection yielded no instances of non-compliance for this year’s field program
|
Achievement Rating | 100% |
Environmental, Social, Governance (ESG) and Sustainability Report (35%)
Threshold (~70-90% rating)
| Establish common reporting framework with Barrick for Donlin Gold; develop reporting format for initial NOVAGOLD ESG and Sustainability report for website
|
Target (~90-110% rating) | Establish common reporting framework with Barrick for Donlin Gold; develop reporting format for initial NOVAGOLD ESG and Sustainability report for website and annual report; publish by April 2021
|
Maximum (~110-150% rating)
| Complete target goals plus: develop method for quarterly updates of ESG and Sustainability metrics on website going forward (in print format annually) |
Achievement Description
| Report published April 26, 2021. Framework for reporting ESG metrics for Donlin Gold established between NOVAGOLD and Barrick and data scheduled to be submitted quarterly; updated on website annually. NOVAGOLD’s ISS Social score improved from 5 to 3, Governance improved from 6 to 5, no change to ISS Environmental score (remained a 9). ISS ESG grade improved to a C- (one position). Sustainalytics rating improved from 48.7 (Severe Risk) to 29.2 (Medium Risk)
|
Achievement Rating | 110% |
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MAINTAIN A FAVORABLE REPUTATION OF THE COMPANY AND ITS PROJECT AMONG SHAREHOLDERS:
10% WEIGHT
Shareholder Engagement (20%)
Threshold (~70-90% rating) | Proxy circular shareholder engagement campaign results in 60% eligible voter turnout at AGM
|
Target (~90-110% rating) | Proxy circular shareholder engagement campaign results in 70% eligible voter turnout at AGM and at least 80% of votes cast in support of each AGM proposal.
|
Maximum (~110-150% rating) | Proxy circular shareholder engagement campaign results in 80% eligible voter turnout at AGM and at least 85% of votes cast in support of each AGM proposal.
|
Achievement Description | 71.58% eligible voter turnout All directors received at least 94% Auditors 98.87% Amendments to Company Articles 98.99% Say on Pay 96.52%
|
Achievement Rating | 110% |
IR Program and Outreach (80%)
Threshold (~70-90% rating) | Reach out to 100% of top 20 shareholders during the year and engage with 70%. Maintain 12 out of 20 top shareholders and attract 2 additions to the holders who hold greater than 0.5 million shares
|
Target (~90-110% rating) | Reach out to 100% of top 20 shareholders during the year and engage with 80%. Maintain 14 or more out of 20 top shareholders and attract 3 or more additions to the holders who hold greater than 0.5 million shares
|
Maximum (~110-150% rating) | Reach out to 100% of top 20 shareholders during the year and engage with 90%. Maintain 17 or more out of 20 top shareholders and attract 3 or more additions to the holders who hold greater than 0.75 million shares
|
Achievement Description | Maintained 18 of 20 top shareholders. Reached out to all top 20 shareholders and met or had exchanges with 19. Five existing shareholders added greater than 0.75 million shares, and added three new shareholders with greater than 0.75 million shares
Additionally, Scotia Capital initiated analyst coverage of NOVAGOLD in July 2021 with a rating of Sector Perform and a one-year price target of $11
|
Achievement Rating | 110% |
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��
MANAGE COMPANY TREASURY EFFECTIVELY AND EFFICIENTLY,
STREAMLINE CORPORATE STRUCTURE:
5% WEIGHT
Company Budget (25%)
Threshold (~70-90% rating) | Complete 2021 over budget by no more than 5% excluding payroll
|
Target (~90-110% rating) | Complete 2021 on budget
|
Maximum (~110-150% rating) | Complete 2021 under budget by 5% or better excluding payroll
|
Achievement Description | Finished 2021 on budget
|
Achievement Rating | 100% |
Streamline Corporate Structure (45%)
Threshold (~70-90% rating) | [Descriptions redacted]
|
Target (~90-110% rating) |
|
Maximum (~110-150% rating) |
|
Achievement Description |
|
Achievement Rating | 100% |
Streamline Corporate Structure (5%)
Threshold (~70-90% rating) | |
Target (~90-110% rating) | Divest of NovaGold Argentina Inc.’s interest in Minas San Roque S.A.
|
Maximum (~110-150% rating) | Divest of NovaGold Argentina Inc.’s interest in Minas San Roque S.A. and book a receivable
|
Achievement Description | Closed on sale of NovaGold Argentina’s interest in Minas San Roque S.A. on November 3, 2021. Collected C$250K; C$1,750K due in two installments in 2022 and 2023. Sale proceeds subject to 13.5% tax in Argentina
|
Achievement Rating | 150% |
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Maintain Effective Internal Controls Over Financial Reporting (25%)
Threshold (~70-90% rating) | No material weaknesses |
Target (~90-110% rating) | No material weaknesses and no unresolved significant deficiencies at year end
|
Maximum (~110-150% rating) | No material weaknesses and no significant deficiencies identified
|
Achievement Description | One significant deficiency from prior year discovered by management in Q1 2021; has been remediated. No material weaknesses in 2021
|
Achievement Rating | 100% |
The Committee and Board determined that overall the 2021 Company goals were successfully achieved at the levels as described above, and the resulting Company rating was 111%, calculated as follows:
Goal Category | Category Weight | Achievement by Category | Weighted Achievement by Category |
Donlin Gold | 50% | 115.00% | 57.50% |
Maintain/Increase Support for Donlin Gold | 25% | 107.00% | 26.75% |
Safety/Environment | 10% | 103.50% | 10.35% |
Favorable Reputation | 10% | 110.00% | 11.00% |
Manage Treasury/Streamline Corporate Structure | 5% | 102.50% | 5.13% |
Totals: | 100% | 110.73% |
The formula for determining NEO annual incentive payments each year is as follows:
STEP 1: | Company Performance Rating multiplied by 80%
(A x B)
| PLUS | Individual Performance Rating multiplied by 20%
(C x D)
|
The sum of Step 1 is multiplied by: | |||
STEP 2: | The NEO’s annual incentive target (%)
E
| MULTIPLIED BY | The NEO’s annual base salary ($)
F
|
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The Company performance component is weighted more heavily than the individual performance component in the formula above for each of the NEOs due to the level of influence the NEOs are expected to have over the Company’s performance.
NEO Individual Performance Ratings
In establishing the individual performance ratings for 2021, the Committee considered the following factors with respect to each of the NEOs.
NEO | Fiscal Year 2021 Individual Performance Rating | 2021 Performance Highlights |
Gregory Lang | 126% | • Commendable leadership of NOVAGOLD’s executive team as they continue to respond to the COVID-19 pandemic.
• Provided direct support to Donlin Gold LLC to ensure completion of Donlin Gold 2021 drill program on time and on budget, including completing more drill holes than were contemplated in the original 2021 drill program.
• Served as Chair of the Donlin Gold LLC board in 2021, overseeing strategic advancement of the project in the areas of permitting, engineering, and community relations.
• Facilitated a continued good working relationship with Barrick, co-owner of Donlin Gold.
|
David Ottewell | 135% | • Lead role in safeguarding the Company’s treasury, ending fiscal 2021 on budget.
• No deficiencies in internal controls over financial reporting in fiscal 2021.
• Lead role in efforts to streamline NOVAGOLD’s corporate structure. In 2021, was instrumental in selling the Company’s ownership interest in the Minas San Roque project.
• Provided valuable support, review, and input on the financial model in the 2021 Technical Report on Donlin Gold prepared by Wood Canada. |
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The NEOs’ annual incentive payment for fiscal 2021 performance was paid in fiscal 2022. The following table describes the 2021 annual incentive payment calculation for NEOs based on performance in 2021 applying the annual incentive calculation formula above to the columns below as follows:
((A x B) + (C x D)) x (E x F) = G
A | B | C | D | E | F | G | |
nEO | 2021 Company | 2021 Individual | Annual Incentive Target (as a % of annual base salary) | 2021 Annual Base Salary | 2021 Annual Incentive payment | ||
Weight | Performance Rating | Weight | Performance Rating | ||||
Gregory Lang | 80% | 111% | 20% | 126% | 100% | $806,300 | $919,182 |
David Ottewell | 80% | 111% | 20% | 135% | 80% | $433,100 | $401,224 |
The foregoing table shows the actual annual incentive payment made to each NEO for their performance in 2021 in column G. The table in the section titled "Grants of Plan-Based Awards" below displays the target and maximum annual incentive payouts available to each NEO for fiscal year 2021.
Stock-Based Incentive Plans (Long-Term Incentives)
Stock-based grants are generally awarded to officers at the commencement of their employment and periodically thereafter. Annual grants of stock options and/or PSUs are made based on a target percentage of base salary for each NEO. The purpose of granting stock options and/or PSUs is to assist the Company in compensating, attracting, retaining, and motivating directors, officers, employees, and consultants of the Company, and to closely align the personal interests of such persons to those of the Shareholders. These equity vehicles were chosen because the Company believes that these vehicles best incentivize the team to focus their efforts on increasing Shareholder value over the long-term.
The Committee targeted the 75th percentile of the total direct compensation data provided by the Compensation Consultant for the NEOs. The Company uses two different plans for stock-based grants for its NEOs: the Stock Award Plan (stock options) and the PSU Plan. The percentage of stock options versus PSUs granted is determined by the Committee for each grant. The Company’s Stock Award Plan was adopted on May 11, 2004, and the PSU Plan was adopted on May 26, 2009. The Stock Award Plan is for the benefit of the officers, Directors, employees and consultants of the Company or any subsidiary company, and the PSU Plan is for the benefit of the officers, employees and consultants of the Company or any subsidiary company.
Stock options granted to the NEOs pursuant to the Stock Award Plan for performance in 2021 have a five-year life and vest over three years: 1/3 on the first anniversary of the grant date, 1/3 on the second anniversary of the grant date, and 1/3 on the third anniversary of the grant date. PSUs granted to the NEOs pursuant to the PSU Plan as of the date hereof have a three-year performance period between the grant date and the maturity date when a vesting determination is made.
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On March 17, 2020, the Board approved an amendment to reduce the number of shares subject to the Stock Award Plan, to effect certain other U.S. tax related updates as a result of the Tax Cuts and Jobs Act of 2017 (the “TCJA”), and to modify the definition of Fair Market Value in the Stock Award Plan. The amendment (i) reduced the aggregate number of shares to be delivered upon the exercise of all awards granted under the Stock Award Plan from a maximum of 10% of the issued and outstanding shares of the Company at the time of grant to a maximum of 8%, on a non-diluted basis, (ii) removed the ability to grant new awards that qualify as performance-based compensation under Section 162(m) of the U.S. Internal Revenue Code, as amended, as a result of the repeal of the exemption for qualified performance-based compensation for grants made after the date of repeal, and (iii) removed the reference to using the last recorded sale of a board lot of Common Shares the day immediately preceding the date in question from the definition of Fair Market Value, leaving the closing price of the Common Shares the day immediately preceding the date in question as the predominant method of determining Fair Market Value. This amendment to the Stock Award Plan was submitted to the TSX for approval, and conditional approval was obtained on March 19, 2020. This amendment to the Stock Award Plan was approved by the Shareholders on May 14, 2020.
On March 17, 2020, the Board approved an amendment to the PSU Plan to effect certain other U.S. tax related updates as a result of the TCJA, and to modify the definition of Market Value in the PSU Plan. The amendment (i) removed the ability to grant new awards that qualify as performance-based compensation under Section 162(m) of the U.S. Internal Revenue Code, as amended, as a result of the repeal of the exemption for qualified performance-based compensation for grants made after the date of repeal, and (ii) removed the reference to using the sale of a board lot of Common Shares from the definition of Market Value, leaving the arithmetic average of the closing price of the Common Shares on the applicable stock exchange for the five trading days preceding the applicable date as the predominant method of determining Market Value. This amendment to the PSU Plan was submitted to the TSX for approval, and conditional approval was obtained on March 19, 2020. This amendment to the PSU Plan was approved by the Shareholders on May 14, 2020.
The value of each NEO’s long-term incentive (LTI) award is calculated as follows:
The NEO’s annual base salary ($) | MULTIPLIED BY | LTI Target % |
Half of the resulting LTI award value is then divided by the Black-Scholes value of the Company’s Common Shares at fiscal year-end to arrive at the number of stock options to be granted. Inputs used in the Black-Scholes valuation model include the Company’s historical stock price to determine the stock’s volatility, the expected life of the option, which is based on the average length of time similar option grants in the past have remained outstanding prior to exercise, and the vesting period of the grant.
The remaining half of the LTI award value is divided by the closing price of the Company’s Common Shares on the NYSE American at fiscal year-end to determine the number of PSUs to be granted.
The Board of Directors approved the grant of 818,000 stock options and 304,200 PSUs in aggregate to Mr. Lang and Mr. Ottewell effective December 1, 2021, in recognition of their performance during fiscal year 2021. These grants comprise 50% of each NEO’s LTI award value in stock options and 50% in PSUs.
The PSUs granted to the NEOs on December 1, 2021 will mature in three years on or about December 1, 2024. The Committee anticipates that future PSU grants to the NEOs will mature over three years. The number of PSUs vesting for each NEO granted for 2021 performance will be based on the Company’s Common Share price performance relative to the share price performance of the S&P/TSX Global Gold Index between the PSU grant date and December 1, 2024 (the “Performance Period”). The Committee has determined that applying other types of performance criteria to the PSUs based upon Company revenues or production targets is inappropriate at this time as the Company’s assets are in the development stage. The Company’s share price performance over the Performance Period will be converted to a percentage relative to the share price performance of the S&P/TSX Global Gold Index over the same Performance Period. The table below sets out the adjustment factors for determining the number of PSUs that will vest on or shortly after the maturity date upon the Committee’s certification of the Company’s share price performance relative to that of the S&P/TSX Global Gold Index over the applicable Performance Period:
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Company’s Share Price Return Relative to the S&P/TSX Global Gold Index Over the Performance Period | PSU Vest %* |
Greater than 25% | 150% |
25% | 150% |
20% | 140% |
15% | 130% |
10% | 120% |
5% | 110% |
0% | 100% |
-5% | 90% |
-10% | 80% |
-15% | 70% |
-20% | 60% |
-25% | 50% |
Less than -25% | Payout subject to Board discretion |
*In the event the Company’s share price return is negative over the Performance Period, vesting shall be capped at 100%. |
Stock options granted to the NEOs in fiscal year 2022 based on performance in fiscal year 2021 represented approximately 0.25% of the total Common Shares issued and outstanding as of November 30, 2021. PSUs granted to the NEOs in fiscal year 2022 based on performance in fiscal year 2021 represented approximately 0.09% of the total Common Shares issued and outstanding as of November 30, 2021. Stock options granted to all Company Directors, employees, and service providers in fiscal year 2022 based on performance in fiscal year 2021 represented approximately 0.57% of the total Common Shares issued and outstanding as of November 30, 2021. PSUs granted to all Company employees and service providers in fiscal year 2022 based on performance in fiscal year 2021 represented approximately 0.16% of the total Common Shares issued and outstanding as of November 30, 2021.
The following table describes the long-term incentive awards to NEOs granted in fiscal 2022 based on performance in fiscal 2021:
NEO | Long-term Incentive Target (as a % of Base Pay) % | Stock Option Grant # | Stock Option Grant as % of Total Shares Outstanding (1) % | Stock Option exercise Price $ |
PSU Grant # | PSU Grant as % of Total Shares Outstanding (1) % |
Gregory Lang | 375 | 602,300 | 0.18 | 6.75 | 224,000 | 0.07 |
David Ottewell | 250 | 215,700 | 0.06 | 6.75 | 80,200 | 0.02 |
(1) | As of November 30, 2021, the Company had a total of 332,415,547 Common Shares issued and outstanding. |
In order to align the interests of the Company’s senior executives with those of its Shareholders, the Company first implemented share ownership guidelines for its senior executives in April 2009 and updated them for the President and CEO effective August 12, 2020. Under the guidelines, a senior executive can satisfy the applicable share ownership requirement by holding Common Shares. Stock options and unvested PSUs do not count toward this requirement. Pursuant to the guidelines, senior executives must meet their share ownership requirements within five years of becoming a senior executive or within three years of any change to the executive’s share ownership requirements. There are no equity holding period requirements.
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For the President and CEO, the share ownership requirement is that amount equal to the value of five times his annual base salary. In the case of the CFO, the share ownership requirement is that amount equal to the value of two times his annual base salary and, in the case of other executives, one times their annual base salary. Upon meeting the share ownership requirement, an executive is deemed to have met the share ownership requirement going forward, regardless of changes in the price of a Common Share, so long as: (i) the executive’s share ownership does not drop below the number of shares held at the time they first met the share ownership requirement, and (ii) the applicable share ownership requirement remains the same. Executives are not permitted to purchase financial instruments, including, for greater certainty, prepaid variable forward contracts, equity swaps, collars, or units of exchange funds that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the executive. Executives are also not permitted to pledge Company securities to secure personal debts or loans.
Fiscal Year End NEO Share Ownership
The following table outlines the aggregate value of the Common Shares held by each NEO employed by the Company as of November 30, 2021.
NEO | Eligible Share Holdings (Common Shares) # | Share Ownership Guidelines | ||
Requirement $ | Proportion of Requirement Met (1) % | |||
Gregory Lang | 1,992,015 | 5 X base salary | 4,031,500 (2) | 334 |
David Ottewell | 715,406 | 2 X base salary | 866,200 (3) | 557 |
(1) | Based on the closing Common Share price on the NYSE American on November 30, 2021 of $6.75. | |
(2) | Based on Mr. Lang’s annual salary effective January 1, 2021. Mr. Lang has until January 1, 2026 to meet the share ownership requirement equal to $4,031,500. Mr. Lang’s annual salary remained unchanged from 2021 to 2022. | |
(3) | Based on Mr. Ottewell’s annual salary effective January 1, 2021. Mr. Ottewell has until January 1, 2026 to meet the share ownership requirement equal to $866,200. Mr. Ottewell received a subsequent annual salary increase effective January 1, 2022 and has until January 1, 2027 to meet the share ownership requirement associated with his 2022 annual salary. |
The purpose of the Company’s retirement plans is to assist eligible employees with accumulating capital toward their retirement savings. The Company has a RRSP plan for Canadian employees, whereby employees may contribute a portion of their base pay and receive a dollar-for-dollar match from the Company of up to 5% of their base pay, subject to CRA limitations. The Company has a 401(k) retirement savings plan for U.S. employees whereby they may contribute a portion of their pay and receive a dollar-for-dollar match from the Company of up to 5% of their pay, subject to IRS limitations.
The Company’s benefit programs provide employees with health and welfare benefits. The programs consist of medical, dental, vision, life, disability and accidental death and dismemberment insurance, and an employee assistance plan. The only benefits that NEOs receive beyond those provided to other employees is eligibility for a paid annual executive physical, and Mr. Lang receives an auto allowance.
Advisory Vote on Executive Compensation
In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Exchange Act, the Company is asking you pursuant to this Circular to consider and, if deemed advisable, pass a non-binding resolution approving the compensation of the Company’s NEOs as disclosed herein (the “Executive Compensation Resolution”). See the “Non-Binding Advisory Vote on Executive Compensation” section under Additional Matters to be Acted Upon on page 11 in this Circular. At the Company’s annual meeting of shareholders held on May 12, 2021, approximately 96% of votes cast indicated approval of an advisory say-on-pay proposal with respect to the 2020 fiscal year compensation of the Company’s NEOs.
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The Committee has reviewed and discussed with management the Company's Compensation Discussion and Analysis included herein. Based on such review and discussions, the Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's Annual Report on Form 10-K for the year ended November 30, 2021 and the Company's Circular for the year ended November 30, 2021.
Submitted by the following members of the Compensation Committee of the Board of Directors:
Kalidas Madhavpeddi, Chair
Elaine Dorward-King
Sharon Dowdall
Anthony Walsh
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TABULAR DISCLOSURE OF EXECUTIVE COMPENSATION
The summary compensation table below sets out NEO compensation, including annual salary earned, incentive awards granted, and all other compensation earned, during the fiscal years ended November 30, 2021, 2020 and 2019. Additional information on the components of the total compensation package, including a discussion of the proportion of each element to total compensation, is discussed above under "Compensation Discussion & Analysis".
Name and Principal Position | Fiscal Year | Salary $ | Stock Awards (1) $ | Option Awards (2) $ | Non-Equity Incentive Plan Compensation (3) $ | All Other Compensation (4) $ | Total Compensation $ |
Gregory Lang, President and CEO | 2021 2020 2019
| 804,342 780,900 759,975 | 1,504,881 1,417,142 1,423,899 | 1,467,584 1,425,388 1,420,554 | 919,182 876,736 828,400 | 52,059 51,272 50,752 | 4,748,048 4,551,438 4,483,580 |
David Ottewell, Vice President and CFO | 2021 2020 2019
| 431,775 416,183 404,042 | 534,978 503,303 491,632 | 521,456 506,456 490,523 | 401,224 377,816 357,696 | 26,221 25,576 26,863 | 1,915,654 1,829,334 1,770,756 |
(1) | Amounts are based on the grant date fair value, calculated in accordance with FASB Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“ASC 718”), utilizing the assumptions discussed in Note 13 to the Company’s consolidated financial statements for the fiscal year ended November 30, 2021. | |
(2) | Amounts are based on the grant date fair value, calculated in accordance with ASC 718, utilizing the assumptions discussed in Note 13 to the Company’s consolidated financial statements for the fiscal year ended November 30, 2021. Option-based awards granted during the years ended November 30, 2019, 2020 and 2021 include vested and unvested amounts. | |
(3) | Annual incentive payments were made subsequent to fiscal year-end. | |
(4) | Amounts in fiscal year 2021 include: |
· | For Mr. Lang, $14,479 in 401(k) Company matching contributions, $20,109 in ESPP Company matching contributions, $621 in Company-paid life insurance premiums, $15,000 for auto allowance and $1,850 for a Company-paid executive physical. |
· | For Mr. Ottewell, $14,479 in 401(k) Company matching contributions, $10,794 in ESPP Company matching contributions and $948 in Company-paid life insurance premiums. |
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Grants of Plan-Based Awards in Fiscal 2021
The following table provides information related to plan-based awards granted to our NEOs during fiscal year 2021 based on performance in fiscal 2020.
Grants of Plan-Based Awards | |||||||||
NEO | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of Stock or Units # | All Other # | Exercise or Base Price of Option Awards | Grant Date Fair Value of Stock and Option Awards (4) $ | ||
Target $ | Maximum | Target | Maximum | ||||||
Gregory Lang | 01-Dec-2020 | 147,400 | 221,100 | - | 398,800 | 9.96 | 2,577,563 | ||
806,300 | 1,209,450 | - | - | - | - | ||||
David Ottewell | 01-Dec-2020 | 52,400 | 78,600 | - | 141,700 | 9.96 | 1,046,871 | ||
346,480 | 519,720 | - | - | - | - |
(1) | Annual Incentive Plan estimated payments based upon performance targets for fiscal year 2021. The Annual Incentive Plan does not provide a threshold or minimum payout. | |
(2) | The performance criteria for Performance Share Unit Awards granted December 1, 2020 will be measured and paid out in December 2023, depending upon the level of achievement during the performance period. The PSU Plan does not provide a threshold or minimum payout. | |
(3) | Grants under the Stock Award Plan. | |
(4) | Amounts are based upon the grant date fair value, calculated in accordance with ASC 718, utilizing the assumptions discussed in Note 13 to the Company’s consolidated financial statements for the fiscal year ended November 30, 2021. |
No stock option awards were re-priced during fiscal year 2021.
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Outstanding Equity Awards at Fiscal Year-End
The following table sets out information concerning all option-based and share-based awards outstanding for each NEO as of November 30, 2021.
NEO | Option-Based Awards (1) | Share-Based Awards | |||||
Number of Securities Underlying Unexercised Options # Exercisable | Number of Securities Underlying Unexercised Options # Unexercisable | Option Exercise Price | Option Expiration Date | Value of Unexercised in-the-money Options (2) $ | Number of Unearned Shares, Units or Other Rights that have not Vested # | Market or Payout Value of Unearned Shares, Units or Other Rights that have not Vested (3) $ | |
Gregory Lang | 1,047,400 | - | $3.85 | 30-Nov-2022 | 3,037,460 | ||
646,000 | 323,000 | $3.67 | 30-Nov-2023 | 2,984,520 | |||
182,000 | 364,000 | $6.96 | 30-Nov-2024 | - | |||
- | 398,800 | $9.96 | 30-Nov-2025 | - | |||
388,100 | 2,619,675 (4) | ||||||
204,700 | 1,381,725 (5) | ||||||
147,400 | 994,950 (6) | ||||||
David Ottewell | 35,007 | - | $3.85 | 30-Nov-2022 | 101,520 | ||
223,067 | 111,533 | $3.67 | 30-Nov-2023 | 1,030,568 | |||
64,667 | 129,333 | $6.96 | 30-Nov-2024 | - | |||
- | 141,700 | $9.96 | 30-Nov-2025 | - | |||
134,000 | 904,500 (4) | ||||||
72,700 | 490,725 (5) | ||||||
52,400 | 353,700 (6) |
(1) | The option-based awards listed in this table vest as follows: 1/3 on the first anniversary of the Grant Date, 1/3 on the second anniversary of the Grant Date, and 1/3 on the third anniversary of the Grant Date. | |
(2) | Based on the price of the Company’s Common Shares on the NYSE American as of November 30, 2021 of $6.75 less the option exercise price, as applicable. | |
(3) | Based on the price of the Company’s Common Shares on the NYSE American as of November 30, 2021 of $6.75. The Payout Value assumes that these PSUs are paid out at 100% of the grant amount. | |
(4) | The performance period for these PSUs ended on November 30, 2021. Subsequent to November 30, 2021, it was determined that these PSUs would vest and be paid out at 93% of the grant amount. | |
(5) | The performance period for these PSUs is scheduled to end on November 30, 2022. The payout, if any, is scheduled to be made on or shortly after December 1, 2022. | |
(6) | The performance period for these PSUs is scheduled to end on November 30, 2023. The payout, if any, is scheduled to be made on or shortly after December 1, 2023. |
Option Exercises and Stock Vested in Fiscal 2021
The following table provides information regarding stock that vested from PSU grants during fiscal 2021 and stock options that were exercised by the Company’s NEOs during fiscal 2021. Stock award value is calculated by multiplying the number of vested PSUs by the market value of the underlying shares on the vesting date.
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NEO | Option Awards | Stock Awards | ||
Number of Shares Acquired on Exercise (1) # | Value Realized on Exercise $ | Number of Shares Acquired on Vesting (2) # | Value Realized on Vesting $ | |
Gregory Lang | 1,111,800 | 3,820,331 | 277,500 | 2,763,900 |
David Ottewell | 264,393 | 1,754,380 | 92,550 | 921,798 |
(1) | A portion of these shares were withheld to cover the exercise price of the options. | |
(2) | Certain PSU grants made on December 1, 2017 matured and were paid out on December 1, 2020 in common shares of the Company at 150% of the PSU grant amount, which shares are represented in this column. None of these shares were withheld by the Company and each NEO provided the Company with cash in an amount to cover the estimated value of the associated withholding taxes for each NEO. |
Realized and Realizable Pay (Supplemental Table)
To facilitate the Shareholders’ comparison of executive pay and performance, the Company is also disclosing the average annual “realized” and “realizable” compensation, as well as the total annual “realized” and “realizable” compensation, over the last five fiscal years for our CEO and the other NEO. Realized and realizable compensation are calculated similarly as described in the table below, but those amounts differ from the amounts in the “Summary Compensation Table” shown on page 60, prepared as required by the SEC. Realized and realizable compensation provide additional representations of executive compensation but are not a substitute for the “Summary Compensation Table”. Summary compensation table compensation (SCT), realized compensation and realizable compensation in the charts below includes the following elements of compensation found in the “Summary Compensation Table,” however, the valuation methodology of certain of these elements differs, as noted below:
Compensation type | SCT | Realized | Realizable |
Base Salary | · This value is equivalent to the aggregate value in the “Summary Compensation Table” | ||
Bonus (Annual incentive plan) | · This value is equivalent to the aggregate value in the “Summary Compensation Table” | ||
PSUs | · The value of the unvested award calculated in accordance with ASC 718. | · The value of such awards at vesting shown in the year of the award grant rather than the year of vesting and payout. | · The realized value, if any, plus, for unvested awards, the value based on the price of the Company’s Common Shares on the NYSE American as of November 30, 2021 of $6.75 and assuming a performance multiplier of 1.0x the grant amount. |
Option awards | · The value of the unvested award calculated in accordance with ASC 718. | · The value received upon exercise shown in the year of the option grant rather than the year of exercise. | · The realized value, if any, plus, for unexercised options, the value based on the price of the Company’s Common Shares on the NYSE American as of November 30, 2021 of $6.75 less the option exercise price, as applicable. |
As shown in the chart below, realized compensation for our CEO was lower than the five-year average annual compensation reported in the “Summary Compensation Table” (excluding “All Other Compensation”) primarily due to the time between grant, vesting and exercise of option awards and due to the time required for vesting and payout of PSU awards. Beginning in fiscal year 2018, the time between grant and vesting for option awards and PSU awards was extended to three years; option and PSU awards made prior to fiscal year 2018 vested over two years. Additionally, the elimination of the performance multiplier in the formula to calculate long-term incentive value, which is used to determine the number of PSUs and options granted to each NEO, resulted in a decrease in PSU grants and option grants beginning with those made in fiscal year 2018.
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Realized pay and realizable pay in fiscal year 2017 is the same for the CEO and for the other NEO as all fiscal year 2017 grants of option awards have vested and were exercised, and all fiscal year 2017 grants of PSU awards were paid out at 82% of the grant amount. The 2017 realized pay and realizable pay amounts represent the actual value ultimately received by the CEO and the other NEO for salary, annual incentive, and options and PSUs granted during fiscal year 2017. Any realized value attributable to options and PSUs granted in fiscal year 2017 was received in fiscal 2019 and subsequent years.
We believe our executive compensation program must be consistent and internally equitable to motivate our employees to perform in ways that enhance shareholder value. We are committed to internal pay equity, and the Compensation Committee monitors the relationship between the pay of our executive officers and the pay of our non-executive employees. The Compensation Committee reviewed a comparison of our CEO’s annual total compensation in fiscal year 2021 to that of all other Company employees for the same period. The calculation of annual total compensation of all employees was determined in the same manner as the “Total Compensation” shown for our CEO in the "Summary Compensation Table" on page 60 of this Circular. Pay elements that were included in the annual total compensation for each employee are:
· | salary received in fiscal year 2021 |
· | annual incentive payment received for performance in fiscal year 2021 |
· | grant date fair value of stock option and PSU awards granted in fiscal year 2021 |
· | Company-paid 401(k) Plan or RRSP match made during fiscal year 2021 |
· | Company-paid ESPP match made during fiscal year 2021 |
· | Company-paid life insurance premiums during fiscal year 2021 |
· | auto allowance paid in fiscal year 2021 |
· | reimbursement for Company-paid executive physical during fiscal year 2021 |
Our calculation includes all employees as of November 30, 2021. We applied a Canadian to U.S. dollar exchange rate to the compensation elements paid in Canadian currency.
We determined the compensation of our median employee by: (i) calculating the annual total compensation described above for each of our employees, (ii) ranking the annual total compensation of all employees except for the CEO from lowest to highest (a list of thirteen employees), and (iii) since we have an odd number of employees when not including the CEO, determining that the employee ranked seventh on the list is the median employee (the “Median Employee”).
In adopting the pay ratio rule, the SEC expressly sought to provide flexibility to each company to determine the methodology that best suits its own facts and circumstances. Our pay ratio should not be compared to other companies’ pay ratios because it is based on a methodology specific to the Company and certain material assumptions, adjustments and estimates have been made in the calculation of the pay ratio.
The annual total compensation for fiscal year 2021 for our CEO was $4,748,048 and for the Median Employee was $435,199. The resulting ratio of our CEO’s pay to the pay of our Median Employee for fiscal year 2021 is 10.9 to 1.
The following graph depicts the Company’s cumulative total Shareholder returns over the five most recently completed fiscal years assuming a C$100 investment in Common Shares on November 30, 2016, compared to an equal investment in the S&P/TSX Composite Index (TSX ticker: ˄TSX) and in the S&P/TSX Global Gold Index (TSX ticker: ˄TTGD) on November 30, 2016. The Company does not currently issue dividends. The Common Share performance as set out in the graph is not indicative of future price performance.
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C$ | 2017 | 2018 | 2019 | 2020 | 2021 |
Value based on C$100 invested in the Company on November 30, 2016 | 81 | 80 | 150 | 211 | 141 |
Value based on C$100 invested in the S&P/TSX Composite Index on November 30, 2016 | 110 | 107 | 124 | 129 | 159 |
Value based on C$100 invested in the S&P/TSX Global Gold Index on November 30, 2016 | 102 | 88 | 131 | 169 | 160 |
Pension Benefits and Nonqualified Deferred Compensation
The Company has no pension and no plans that provide for nonqualified deferred compensation to its NEOs.
Executive Employment Agreements
The Company has entered into employment agreements with each of the NEOs regarding, among other matters, the duties, tasks and responsibilities of each. Pursuant to an employment contract with the Company effective January 9, 2012, Mr. Lang is employed by the Company as President and CEO. Mr. Ottewell has entered into an employment agreement with NovaGold USA, Inc., a wholly owned subsidiary of the Company, effective November 13, 2012, and is employed as Vice President and Chief Financial Officer of the Company. References in this section to the “Company”, as such references relate to Mr. Ottewell, are to NovaGold USA, Inc., except with respect to a change of control in which case such references are to a change of control of the Company. The employment agreements continue indefinitely, unless and until terminated.
Compensation
Mr. Lang’s salary is reviewed at least annually by the Board. The Compensation Committee makes recommendations to the Board regarding appropriate salary adjustments. Mr. Ottewell’s salary is reviewed at least annually by the CEO. The CEO may make recommendations to the Board or the Compensation Committee of the Board regarding appropriate salary adjustments. The Company is obligated to provide the NEOs with group life, long-term disability, extended medical and dental insurance coverage in accordance with the policies and procedures of the Company in effect from time to time.
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Termination
Just Cause
The Company may terminate a Named Executive Officer’s employment at any time for just cause.
Without Just Cause
The Company may terminate a Named Executive Officer’s employment at any time without just cause upon making a severance payment in an amount equal to the Named Executive Officer’s annual salary at the time of termination plus the annual incentive earned in the previous fiscal year, multiplied by two.
The Company will also continue the Named Executive Officer’s group health and dental insurance benefits, if any, for a maximum period of 12 months or until such time as he subsequently becomes covered by another group health plan or otherwise loses eligibility for Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage, whichever is earlier, in accordance with COBRA and unless prohibited or restricted by applicable law. The Company will reimburse the Named Executive Officer on a tax-free basis for such COBRA premium payments. If the Company is unable to continue such group health and dental insurance benefits, or to provide them to the Named Executive Officer on a tax-favored basis, the Company will instead pay to the Named Executive Officer an amount equal to the present value of the Company’s cost of providing such benefits, such amount to be paid as soon as possible following the Executive’s termination but in any case by March 15 of the year following the year of termination. In addition, the Company will also pay to the Named Executive Officer, as soon as practical following termination of employment but in any event no later than March 15 of the year following the year of termination, a lump sum payment equal to the Company’s cost of providing group life and long-term disability insurance coverage to the Named Executive Officer for a period of 12 months.
Material Breach or Default
A Named Executive Officer may terminate his employment agreement upon a material breach or default of any term of the employment agreement by the Company; provided, in the case of Mr. Lang, that Mr. Lang must advise the Company in writing of such breach or default within 90 days of the date he has become aware (or reasonably should have become aware) of the breach or default, and such breach or default has not been cured by the Company within 30 days from the receipt of such written notice and, in the case of Mr. Ottewell, that if such material breach or default is capable of being remedied by the Company, it has not been remedied within 30 days after written notice of the material breach or default has been delivered to the Company. If an employment agreement is terminated by the Named Executive Officer as a result of a material breach or default of any term of the employment agreement by the Company, the Named Executive Officer is entitled to receive the compensation to which the Named Executive Officer would be entitled if he were terminated without just cause.
Resignation
A Named Executive Officer may terminate his employment at any time upon providing three months’ notice in writing to the Company.
Death or Disability
The Company may terminate a Named Executive Officer’s employment at any time upon the Named Executive Officer’s death or his becoming permanently disabled or disabled for a period exceeding 180 consecutive days or 180 non-consecutive days calculated on a cumulative basis over any two-year period during the term of the employment agreement. If the employment agreement is terminated due to the senior officer’s death or disability, the Company will pay to the Named Executive Officer (or his estate) his then current salary accrued as of the date of termination and a lump sum equal to his then-current annual salary.
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Change of Control
The employment agreements provide for certain payments upon a “double-trigger”, which requires a “change of control”, as defined below, and, within the 12-month period immediately following a change of control, either:
· | a material change (other than a change that is clearly and exclusively consistent with a promotion) in the Named Executive Officer’s positions, duties, responsibilities, titles or offices with the Company in effect immediately prior to any change of control; |
· | a material reduction in the Named Executive Officer’s base salary in effect immediately prior to any change of control; |
· | any material breach by the Company of any material provision of the employment agreement; or |
· | any action or event that would constitute a constructive dismissal of the Named Executive Officer at common law. |
If the Named Executive Officer advises the Company in writing of the condition set forth above within 90 days of the date the Named Executive Officer has become aware (or reasonably should have become aware) of the condition, and the Company has not cured the condition within 30 days from the receipt of written notice, the Named Executive Officer’s employment will be deemed to have been terminated by the Company. The Company will, immediately upon such termination, and in all cases on or before March 15 of the year following the year in which such termination occurs, make a lump sum payment to the Named Executive Officer in an amount equal to the Named Executive Officer’s annual salary at the time of termination plus the Named Executive Officer’s annual incentive earned in the previous fiscal year, multiplied by two. The Named Executive Officer will also be entitled to the same benefits as if he were terminated without just cause.
For the purposes of the employment agreements, a “change of control” means any of the following:
· | at least 50% in fair-market value of all of the Company’s assets are sold to a party or parties acting jointly or in concert (as determined pursuant to the Ontario Securities Act, as amended (the “OSA”)) in one or more transactions occurring within a period of two years; |
· | a direct or indirect acquisition of voting shares of the Company by a person or group of persons acting jointly or in concert that, when taken together with any voting shares owned directly or indirectly by such person or group of persons at the time of the acquisition, constitutes 40% or more of the Company’s outstanding voting shares, provided that the direct or indirect acquisition of voting shares of the Company by Electrum, including all persons acting jointly or in concert with Electrum, shall not constitute a “change of control” unless the acquisition of such additional voting shares, when taken together with any voting shares or securities convertible into voting shares held directly or indirectly by Electrum at the time of acquisition, constitutes 50% or more of the Company’s outstanding voting shares (all such convertible securities owned by Electrum will be deemed to be fully converted or exercised and the number of the Company’s outstanding voting shares will be adjusted to reflect such conversion or exercise); |
· | a majority of the nominees of the then-incumbent Board of Directors of the Company standing for election to the Company’s Board of Directors are not elected at any annual or special meeting of the Company’s Shareholders; or |
· | the Company is merged, amalgamated, consolidated or reorganized into or with another body corporate or other legal person and, as a result of such business combination, more than 40% of the voting shares of such body corporate or legal person immediately after such transaction are beneficially held in the aggregate by a person or body corporate (or persons or bodies corporate acting jointly or in concert) and such person or body corporate (or persons or bodies corporate acting jointly or in concert) beneficially held less than 40% of the Company’s voting shares immediately prior to such transaction. |
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Release
In order for a Named Executive Officer to receive the severance payment and the payments with respect to group health, dental, life and disability coverage in the event of termination without just cause or upon breach or default by the Company under an employment agreement, the severance payment upon the Named Executive Officer’s death or disability or the severance payment and the payments upon a double-trigger event, the Named Executive Officer must agree to enter into a separation agreement and release in a form agreeable to the Company, including a release of claims in the form provided by the Company, on or prior to the date of the expiration of any consideration period under applicable law.
Non-Solicitation
The Named Executive Officers are subject to non-solicitation provisions for a period of six months following termination of their employment for any reason.
Potential Payments Upon Termination or Change of Control
The following table describes the estimated potential payments and benefits under the Company’s compensation and benefit plans and contractual agreements to which the Named Executive Officers would have been entitled if a termination of employment or change of control occurred on November 30, 2021. The actual amounts to be paid out can only be determined at the time of the Named Executive Officer’s departure from the Company. The amounts reported in the table below do not include payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of the Named Executive Officers or include distributions of plan balances under the Company’s 401(k) plan or savings plans. The amounts reported assume payment of all previously earned and unpaid salary, vacation pay and short- and long-term incentive awards.
Named Executive Officer | Termination for “Just Cause” or Resignation $ | Termination without “Just Cause” or Breach or Default by the Company $ | Death or Disability $ | Change of Control (1) $ | Double-Trigger (2) $ | |||||||||||||||
Gregory Lang | ||||||||||||||||||||
Cash severance | - | 3,450,964 | 806,300 | - | 3,450,964 | |||||||||||||||
Acceleration of equity awards (3) | - | - | - | 8,641,655 | 2,376,675 | |||||||||||||||
Present value of group health and dental plan premiums (4) | - | 25,769 | - | - | 25,769 | |||||||||||||||
Present value of group life and long-term disability premiums (5) | - | - | - | - | 6,872 | |||||||||||||||
Total Termination Benefits | - | 3,476,733 | 806,300 | 8,641,655 | 5,860,280 | |||||||||||||||
David Ottewell | ||||||||||||||||||||
Cash severance | - | 1,668,648 | 433,100 | - | 1,668,648 | |||||||||||||||
Acceleration of equity awards (3) | - | - | - | 2,036,588 | 844,425 | |||||||||||||||
Present value of group health and dental plan premiums (4) | - | 23,148 | - | - | 23,148 | |||||||||||||||
Present value of group life and long-term disability premiums (5) | - | - | - | - | 8,796 | |||||||||||||||
Total Termination Benefits | - | 1,691,796 | 433,100 | 2,036,588 | 2,545,017 | |||||||||||||||
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(1) | Represents the value of all outstanding PSUs and stock options granted on or before December 1, 2018, the vesting of which will be fully accelerated upon the occurrence of a “change of control” under the Performance Share Unit Plan and the Stock Award Plan. | |
(2) | Represents payments upon the occurrence of a double-trigger event under: i) the executive employment agreements in the case of cash, and ii) the Performance Share Unit Plan and the Stock Award Plan for awards made after January 2019. Excludes accelerated vesting of PSUs and stock options granted prior to January 2019 to which the Named Executive Officers may be entitled upon the occurrence of a “change of control” under the Performance Share Unit Plan and the Stock Award Plan, which are reported under “Change of Control.” | |
(3) | Value based on the closing price of the Company’s common shares on November 30, 2021 on the NYSE American of $6.75. For stock options, the exercise price has been deducted. | |
(4) | Represents reimbursement to the Named Executive Officer for premium payments for group health and dental insurance benefits, excluding gross ups to cover taxes and including a 2% COBRA administration markup. | |
(5) | Represents a lump sum payment equal to the Company’s cost of providing group life and long-term disability insurance coverage to the Named Executive Officer for a period of twelve months following termination. |
Non-Executive DIRECTOR COMPENSATION
The Company has targeted non-executive Director total direct compensation above the median of the Peer Group for the following reasons:
· | the Company seeks to attract directors with experience working for larger companies than that of our Peer Group because of our large joint venture partner; and |
· | the Company seeks to attract directors with experience working for larger companies than that of our Peer Group because of the scale and quality of the Company’s Donlin Gold asset under development in comparison to our Peer Group’s assets. |
Compensation targets for non-executive Directors are:
· | For annual cash retainers – 25th percentile of the market |
· | For chair fees and meeting fees – 62.5th percentile of the market |
· | For total direct compensation including equity awards – 75th percentile of the market |
At the request of the Compensation Committee, a review of non-executive Directors’ compensation was conducted in the fourth quarter of fiscal year 2021. The Compensation Committee, after referring to market information provided by Mercer, determined to recommend the following changes to the Directors’ fiscal year 2022 compensation program from that established by the Board for fiscal year 2021: i) the Lead Director annual premium is no longer offset by fees received for acting as chair of a Board committee, and ii) the annual premium received by all Board committee chairs is $13,200 per year, excluding the Audit Committee Chair premium which remains unchanged at $17,000 per year. The non-executive Directors’ full compensation package is described below.
Market compensation data was sourced from compensation data disclosed in the proxy statements of other publicly traded companies. As with the Company’s NEOs, the data was collected from the proxy statements of the companies included in NOVAGOLD’s 2022 Peer Group consisting of: Alamos Gold Inc., B2Gold Corp., Centerra Gold Inc., Coeur Mining Inc., Equinox Gold Corporation, Hecla Mining Company, IAMGOLD Corporation, MAG Silver Corporation, New Gold Inc., OceanaGold Corp., Pan American Silver, Pretium Resources Inc., Seabridge Gold Inc., SSR Mining Inc., and Torex Gold Resources Inc.
The largest portion of compensation paid to the non-executive Directors is in DSUs and stock option awards, which aligns the long-term interests of the non-executive Directors with those of the Shareholders as the value of the DSUs and stock option awards is dependent upon the Company’s share price performance. Paying a larger portion of compensation to non-executive Directors in equity rather than cash also aligns the compensation program with the Company’s strategy of protecting its treasury.
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The table below describes the full compensation structure approved for non-executive Directors beginning in fiscal year 2022.
Activity | Compensation | |
Membership on Board – Annual Retainer (1) | $42,800 | per annum |
Chairman of the Board | $130,000 | per annum |
Lead Director | $19,000 | per annum |
Preparation and attendance at Board and Committee meetings | $1,100 | per meeting |
Audit Committee Chair | $17,000 | per annum |
All Other Committee Chairs | $13,200 | per annum |
(1) | At least 50% of the annual retainers are paid to Directors in the form of DSUs. |
Non-Executive Director Compensation Table
The table below summarizes the compensation provided to the Company’s non-executive Directors during the fiscal year ended November 30, 2021.
Director | Fees Earned or Paid in Cash $ | Stock Awards (1) $ | Option Awards (2) $ | All Other Compensation $ | Total $ |
Elaine Dorward-King | 32,550 | 26,750 | 129,381 | - | 188,681 |
Sharon Dowdall | 108,591 | 32,100 | 129,404 | - | 270,095 |
Diane Garrett | 34,600 | 21,400 | 129,381 | - | 185,381 |
Thomas Kaplan | 134,400 | 42,800 | 129,381 | - | 306,581 |
Igor Levental | 52,100 | 21,400 | 129,381 | - | 202,881 |
Kalidas Madhavpeddi | 51,100 | 21,400 | 129,381 | - | 201,881 |
Clynton Nauman | 46,600 | 21,400 | 129,381 | - | 197,381 |
Ethan Schutt | 44,500 | 21,400 | 129,381 | - | 195,281 |
Anthony Walsh | 63,500 | 21,400 | 129,404 | - | 214,304 |
(1) | The 2021 share-based grants for Directors are DSUs that vest when the Directors retire from the Board of the Company. The Company grants DSUs quarterly in arrears. Accordingly, the “Stock Awards” column in the table above includes DSUs granted to Directors with respect to the fourth quarter of fiscal 2020 and the first three quarters of fiscal 2021. Amounts are based upon the grant date fair value, calculated in accordance with ASC 718, utilizing the assumptions discussed in Note 13 to the Company’s consolidated financial statements for the fiscal year ended November 30, 2021. The number of DSUs granted and the fair value on each grant date calculated in accordance with ASC 718 are as follows: |
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December 1, 2020 | March 1, 2021 | June 1, 2021 | September 1, 2021 | |||||
Non-Executive Director | Fair Value $ | DSUs # | Fair Value $ | DSUs # | Fair Value $ | DSUs # | Fair Value $ | DSUs # |
Elaine Dorward-King | 5,350 | 535 | 5,350 | 593 | 8,025 | 787 | 8,025 | 1,126 |
Sharon Dowdall | 5,350 | 535 | 5,350 | 593 | 10,700 | 1,050 | 10,700 | 1,501 |
Diane Garrett | 5,350 | 535 | 5,350 | 593 | 5,350 | 525 | 5,350 | 750 |
Thomas Kaplan | 10,700 | 1,070 | 10,700 | 1,186 | 10,700 | 1,050 | 10,700 | 1,501 |
Igor Levental | 5,350 | 535 | 5,350 | 593 | 5,350 | 525 | 5,350 | 750 |
Kalidas Madhavpeddi | 5,350 | 535 | 5,350 | 593 | 5,350 | 525 | 5,350 | 750 |
Clynton Nauman | 5,350 | 535 | 5,350 | 593 | 5,350 | 525 | 5,350 | 750 |
Ethan Schutt | 5,350 | 535 | 5,350 | 593 | 5,350 | 525 | 5,350 | 750 |
Anthony Walsh | 5,350 | 535 | 5,350 | 593 | 5,350 | 525 | 5,350 | 750 |
(2) | The Company grants stock options to Directors annually. The stock option grants for Directors made on December 1, 2020 vest 1/3 upon the first anniversary of the grant, 1/3 upon the second anniversary of the grant, and the final 1/3 on the third anniversary of the grant. Amounts are based upon the grant date fair value, calculated in accordance with ASC 718, utilizing the assumptions discussed in Note13 to the Company’s consolidated financial statements for the fiscal year ended November 30, 2021. Each Canadian resident Director was granted a total of 36,500 stock options in a single grant during fiscal 2021, and each non-Canadian resident Director was granted a total of 35,200 stock options in a single grant during fiscal 2021. The fair value of these stock options on the grant date, December 1, 2020, calculated in accordance with ASC 718, is reflected in this column. |
DSU Plan
The DSU Plan has been established to promote the interests of the Company by attracting and retaining qualified persons to serve on the Board and to provide the Directors with an opportunity to receive a portion of their compensation for serving as a Director in the form of securities of the Company. This vehicle also aligns the interests of non-executive Directors with those of the Shareholders by linking Directors’ compensation to long-term Shareholder value.
Under the DSU Plan, each non-executive Director can elect to receive between no less than 50% and up to a maximum of 100% of their annual retainer in the form of DSUs. Directors are not eligible to receive the underlying Common Shares until they retire from service with the Company. This plan has been in effect since December 1, 2009. More information about the DSU Plan can be found beginning on page 87.
The number of DSUs granted is determined quarterly by dividing the quarterly retainer amount by the volume weighted adjusted share price for the last five days of such quarter.
The following table sets forth the 2021 DSUs earned by each non-executive Director for service in fiscal year 2021, and the aggregate value of such payments is based on the $6.75 closing price of the Common Shares on the NYSE American on November 30, 2021. A total of 29,423 DSUs were granted to all non-executive Directors for service in fiscal year 2021, which number represents 0.009% of the Common Shares issued and outstanding as of November 30, 2021.
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DSUs Earned in Fiscal 2021 | ||||||||||
Q1 | Q2 | Q3 | Q4 | Total | ||||||
Director | Value $ | # of DSUs | Value $ | # of DSUs | Value $ | # of DSUs | Value $ | # of DSUs | Value $ | # of DSUs |
Elaine Dorward-King | 4,002 | 593 | 5,312 | 787 | 7,600 | 1,126 | 7,762 | 1,150 | 24,676 | 3,656 |
Sharon Dowdall | 4,002 | 593 | 7,087 | 1,050 | 10,131 | 1,501 | 10,347 | 1,533 | 31,567 | 4,677 |
Diane Garrett | 4,002 | 593 | 3,543 | 525 | 5,062 | 750 | 5,170 | 766 | 17,777 | 2,634 |
Thomas Kaplan | 8,005 | 1,186 | 7,087 | 1,050 | 10,131 | 1,501 | 10,347 | 1,533 | 35,570 | 5,270 |
Igor Levental | 4,002 | 593 | 3,543 | 525 | 5,062 | 750 | 5,170 | 766 | 17,777 | 2,634 |
Kalidas Madhavpeddi | 4,002 | 593 | 3,543 | 525 | 5,062 | 750 | 5,170 | 766 | 17,777 | 2,634 |
Clynton Nauman | 4,002 | 593 | 3,543 | 525 | 5,062 | 750 | 5,170 | 766 | 17,777 | 2,634 |
Ethan Schutt | 4,002 | 593 | 3,543 | 525 | 5,062 | 750 | 5,170 | 766 | 17,777 | 2,634 |
Anthony Walsh | 4,002 | 593 | 3,543 | 525 | 5,062 | 750 | 5,170 | 766 | 17,777 | 2,634 |
This supplemental table has been included to provide shareholders with additional compensation information for the prior year. The Company believes this supplemental table better enables shareholders to understand non-executive Director compensation considering the Company’s practice of granting DSUs quarterly in arrears. However, this supplemental information is not intended to be a substitute for the information provided in the Non-Executive Director Compensation Table beginning on page 72, which has been prepared in accordance with the SEC’s disclosure rules.
The information contained in this supplemental table differs substantially from the compensation information contained in the Non-Executive Director Compensation Table beginning on page 72 because the stock awards column in the Non-Executive Director Compensation Table reports awards actually granted during fiscal 2021, as opposed to equity awards granted in respect of that specific performance year. In addition, the value of DSUs earned by the non-executive Directors in this supplemental table is not based on the grant date fair value but rather the closing price of the Company’s Common Shares on November 30, 2021.
The Board established a policy in April 2009, which was updated in August 2020, requiring each Director to maintain a minimum holding of Common Shares and/or DSUs equal to three times the annual retainer paid to Board members (currently $42,800/year). Directors must meet these share ownership requirements within five years of becoming a Director or within three years of any change to the share ownership requirements, whichever is later. Until a Director meets their share ownership requirement, they may not sell or otherwise dispose of any securities of the Company unless, in connection with a stock option exercise, options or Common Shares are withheld or sold to cover the option exercise price, taxes, and/or fees. There are no equity holding period requirements. Upon meeting the share ownership requirement, a Director is deemed to have met the share ownership requirement going forward, regardless of changes in the price of a Common Share, so long as: (i) the Director’s share ownership does not drop below the number of shares held at the time they first met the share ownership requirement, and (ii) the applicable share ownership requirement remains the same. Directors are not permitted to purchase financial instruments, including, for greater certainty, prepaid variable forward contracts, equity swaps, collars, or units of exchange funds that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the Director. Directors are also not permitted to pledge Company securities to secure personal debts or loans.
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The following table outlines the aggregate value of the Common Shares and/or DSUs held by each non-executive Director on November 30, 2021.
(1) | Common Shares and/or DSUs. | |
(2) | Based on the Company’s closing Common Share price on the NYSE American as of November 30, 2021 of $6.75. | |
(3) | Dr. Dorward-King became a Director on May 14, 2020 and has until May 14, 2025 to meet the share ownership requirements. | |
(4) | Dr. Garrett exceeded the Share Ownership Guidelines as of November 30, 2020, and since her share ownership has not decreased (and has, in fact, increased) since that date, she is deemed to meet the Company’s Share Ownership Guidelines for Directors. | |
(5) | Mr. Schutt became a Director on May 16, 2019 and has until May 16, 2024 to meet the share ownership requirements. |
Outstanding Option-Based and Share-Based Awards
The following table sets information concerning all option-based and share-based awards outstanding for each non-executive Director as of November 30, 2021 including awards granted before the most recently completed fiscal year.
Option-Based Awards | Share-Based Awards | |||||||
Director | Grant Date | Number of Securities Underlying Unexercised Options # | Option Exercise Price $ | Option Expiration Date | Value of Unexercised in-the-money Options (1) $ | Number of Shares or Units of Shares that have not Vested # | Market or Payout Value of Shares or Units of Shares that have not Vested (2) $ | Market or Payout Value of Vested Share-Based Awards not Paid Out or Distributed $ |
Elaine Dorward-King | 15-May-2020 | 100,000 | $11.70 | 14-May-2025 | — | |||
01-Dec-2020 | 35,200 | $9.96 | 30-Nov-2025 | — | ||||
3,684 | 24,867 | — | ||||||
Sharon Dowdall | 01-Dec-2017 | 104,400 | C$5.00 | 30-Nov-2022 | 298,705 | |||
01-Dec-2018 | 96,000 | C$4.90 | 30-Nov-2023 | 282,176 | ||||
01-Dec-2019 | 56,200 | C$9.24 | 30-Nov-2024 | — | ||||
01-Dec-2020 | 36,500 | C$13.00 | 30-Nov-2025 | — | ||||
38,487 | 259,787 | — |
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Option-Based Awards | Share-Based Awards | |||||||
Director | Grant Date | Number of Securities Underlying Unexercised Options # | Option Exercise Price $ | Option Expiration Date | Value of Unexercised in-the-money Options (1) $ | Number of Shares or Units of Shares that have not Vested # | Market or Payout Value of Shares or Units of Shares that have not Vested (2) $ | Market or Payout Value of Vested Share-Based Awards not Paid Out or Distributed $ |
Diane Garrett | 07-May-2018 | 100,000 | $4.75 | 06-May-2023 | 200,000 | |||
01-Dec-2018 | 91,300 | $3.67 | 30-Nov-2023 | 281,204 | ||||
01-Dec-2019 | 54,300 | $6.96 | 30-Nov-2024 | — | ||||
01-Dec-2020 | 35,200 | $9.96 | 30-Nov-2025 | — | ||||
10,157 | 68,560 | — | ||||||
Thomas Kaplan | 01-Dec-2017 | 100,100 | $3.85 | 30-Nov-2022 | 290,290 | |||
01-Dec-2018 | 91,300 | $3.67 | 30-Nov-2023 | 281 204 | ||||
01-Dec-2019 | 54,300 | $6.96 | 30-Nov-2024 | — | ||||
01-Dec-2020 | 35,200 | $9.96 | 30-Nov-2025 | — | ||||
76,824 | 518,562 | — | ||||||
Igor Levental | 01-Dec-2017 | 100,100 | $3.85 | 30-Nov-2022 | 290,290 | |||
01-Dec-2018 | 91,300 | $3.67 | 30-Nov-2023 | 281,204 | ||||
01-Dec-2019 | 54,300 | $6.96 | 30-Nov-2024 | — | ||||
01-Dec-2020 | 35,200 | $9.96 | 30-Nov-2025 | — | ||||
50,333 | 339,748 | — | ||||||
Kalidas Madhavpeddi | 01-Dec-2017 | 100,100 | $3.85 | 30-Nov-2022 | 290,290 | |||
01-Dec-2018 | 91,300 | $3.67 | 30-Nov-2023 | 281,204 | ||||
01-Dec-2019 | 54,300 | $6.96 | 30-Nov-2024 | — | ||||
01-Dec-2020 | 35,200 | $9.96 | 30-Nov-2025 | — | ||||
42,060 | 283,905 | — | ||||||
Clynton Nauman | 01-Dec-2017 | 100,100 | $3.85 | 30-Nov-2022 | 290,290 | |||
01-Dec-2018 | 91,300 | $3.67 | 30-Nov-2023 | 281,204 | ||||
01-Dec-2019 | 54,300 | $6.96 | 30-Nov-2024 | — | ||||
01-Dec-2020 | 35,200 | $9.96 | 30-Nov-2025 | — | ||||
42,060 | 283,905 | — | ||||||
Ethan Schutt | 17-May-2019 | 100,000 | $3.87 | 16-May-2024 | 288,000 | |||
01-Dec-2019 | 54,300 | $6.96 | 30-Nov-2024 | — | ||||
01-Dec-2020 | 35,200 | $9.96 | 30-Nov-2025 | — | ||||
5,501 | 37,132 | — | ||||||
Anthony Walsh | 01-Dec-2017 | 69,400 | C$5.00 | 30-Nov-2022 | 198,565 | |||
01-Dec-2018 | 96,000 | C$4.90 | 30-Nov-2023 | 282,176 | ||||
01-Dec-2019 | 56,200 | C$9.24 | 30-Nov-2024 | — | ||||
01-Dec-2020 | 36,500 | C$13.00 | 30-Nov-2025 | — | ||||
37,211 | 251,174 | — |
(1) | Based on the price of the Company’s Common Shares on the: i) TSX as of November 30, 2021 of C$8.66 less the option exercise price, or ii) NYSE American as of November 30, 2021 of $6.75 less the option exercise price, as applicable. Canadian amounts were converted to US dollars using the November 30, 2021 exchange rate of C$1.2792 = US$1.00 as quoted by The Bank of Canada. | |
(2) | Based on the price of the Company’s Common Shares on the NYSE American as of November 30, 2021 of $6.75. |
Value Vested or Earned During the Year
An award of 36,500 stock options was granted to each of the Canadian resident non-executive Directors during the fiscal year ended November 30, 2021; and an award of 35,200 stock options was granted to each of the non-Canadian resident, non-executive Directors during the fiscal year ended November 30, 2021. One-third of these stock options granted in fiscal year 2021 vested on the first anniversary of the grant date, with another one-third scheduled to vest on the second anniversary of the grant date, and the final one-third scheduled to vest on the third anniversary of the grant date. The total number of non-executive Director stock options that vested during the fiscal year ending November 30, 2021 was 665,297, which represented 0.2% of the Company’s issued and outstanding Common Shares as of that date.
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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The Company has adopted the Stock Award Plan, the PSU Plan and the DSU Plan. The Company last asked for and received Shareholder approval of these plans at the Annual Meeting of Shareholders held on May 14, 2020. The intent of these equity plans is to allow the Company to provide a flexible mix of compensation components to attract, retain, and motivate the performance of the plan participants in alignment with the success of the Company and its Shareholders, to encourage share ownership by executive officers and Directors, and to preserve cash where possible. The Company feels that DSUs align Directors’ interests to those of the Shareholders more effectively than other equity programs. These equity plans assist to further align the interests of executive officers and Directors with the long-term interests of Shareholders.
Equity Compensation Plan Information
The Company currently grants equity under the Stock Award Plan, the PSU Plan, and the DSU Plan to attract and retain Directors, officers, employees, and Eligible Consultants to the Company and to motivate them to advance the Company’s interests by affording them the opportunity to acquire an equity interest in the Company through options and performance-based share awards.
The following table sets out information concerning the number and price of securities to be issued under equity compensation plans to employees and others. All of the compensation plans referenced below have been approved by Shareholders. The Company does not have any equity compensation plans which have not been approved by Shareholders.
Equity Compensation Plan Information as of November 30, 2021
Plan Category | Number of securities to (a) |
(b) | Number of securities in column (a)) (c) |
Equity compensation plans approved by security holders | |||
Stock Award Plan | 8,601,303 (1) | C$7.03/$5.42 (2) | 17,991,941 (3) |
PSU | 1,583,100 (4) | n/a | 8,389,366 (5) |
DSU | 306,321 (6) | n/a | 3,017,834 (7) |
Equity compensation plans not approved by security holders | — | — | — |
Total | 10,490,724 | 29,399,141 |
(1) | The options issued and outstanding represent approximately 2.59% of the Company’s Common Shares issued and outstanding as of November 30, 2021. | |
(2) | Of the 8,601,303 options issued and outstanding, 1,166,898 have a weighted average exercise price of C$7.03 and 7,434,405 have a weighted average exercise price of $5.42. | |
(3) | The number of options available for future issuance is a number equal to eight percent of the issued and outstanding Common Shares from time to time, less the number of outstanding options. The 17,991,941 options available for future issuance represent 5.41% of the Company’s issued and outstanding Common Shares as of November 30, 2021. | |
(4) | Assumes vesting at 100% of PSU grant amount. PSUs can vest anywhere from 0% to 150% of the PSU grant amount depending upon performance against established quantitative performance criteria. The PSUs issued and outstanding represent approximately 0.48% of the Company’s Common Shares issued and outstanding as of November 30, 2021. | |
(5) | The number of PSUs available for future issuance is a number equal to three percent of the issued and outstanding Common Shares from time to time, less the number of outstanding PSUs. The 8,389,366 PSUs available for future issuance represent 2.52% of the Company’s issued and outstanding Common Shares as of November 30, 2021. |
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(6) | The DSUs issued and outstanding represent approximately 0.09% of the Company’s Common Shares issued and outstanding as of November 30, 2021. | |
(7) | The number of DSUs available for future issuance is a number equal to one percent of the issued and outstanding Common Shares from time to time, less the number of outstanding DSUs. The 3,017,834 DSUs available for future issuance represent 0.91% of the Company’s issued and outstanding Common Shares as of November 30, 2021. |
Equity Compensation Plan Information as of March 10, 2022
Plan Category | Number of securities to (a) |
(b) |
(c) |
Equity compensation plans approved by security holders | |||
Stock Award Plan | 9,789,991 (1) | C$7.50/$5.75 (2) | 16,860,723 (3) |
PSU | 1,293,200 (4) | n/a | 8,700,818 (5) |
DSU | 323,939 (6) | n/a | 3,007,400 (7) |
Equity compensation plans not approved by security holders | — | — | — |
Total | 11,407,130 | 28,568,941 |
(1) | The options issued and outstanding represent approximately 2.94% of the Company’s Common Shares issued and outstanding as of March 10, 2022. | |
(2) | Of the 9,789,991 options issued and outstanding, 1,239,699 have a weighted average exercise price of C$7.50 and 8,550,292 have a weighted average exercise price of $5.75. | |
(3) | The number of options available for future issuance is a number equal to eight percent of the issued and outstanding Common Shares from time to time, less the number of outstanding options. The 16,860,723 options available for future issuance represent 5.06% of the Company’s issued and outstanding Common Shares as of March 10, 2022. | |
(4) | Assumes vesting at 100% of PSU grant amount. PSUs can vest anywhere from 0% to 150% of the PSU grant amount depending upon performance against established quantitative performance criteria. The PSUs issued and outstanding represent approximately 0.39% of the Company’s Common Shares issued and outstanding as of March 10, 2022. | |
(5) | The number of PSUs available for future issuance is a number equal to three percent of the issued and outstanding Common Shares from time to time, less the number of outstanding PSUs. The 8,700,818 PSUs available for future issuance represent 2.61% of the Company’s issued and outstanding Common Shares as of March 10, 2022. | |
(6) | The 323,939 DSUs issued and outstanding represent approximately 0.10% of the Company’s Common Shares issued and outstanding as of March 10, 2022. | |
(7) | The number of DSUs available for future issuance is a number equal to one percent of the issued and outstanding Common Shares from time to time, less the number of outstanding DSUs. The 3,007,400 DSUs available for future issuance represent 0.90% of the Company’s issued and outstanding Common Shares as of March 10, 2022. |
Shares for Issuance from Plans Approved by Shareholders | Stock Award Plan | PSU | DSU |
Maximum number of Common Shares authorized for issuance to any one insider or such insider’s associate under each plan within a one-year period | 10% of the total Common Shares outstanding | ||
Maximum number of Common Shares reserved for issuance to any one person under each plan | 5% of the total Common Shares outstanding | 9,500,000 (1) | No Limit |
Maximum number of Common Shares authorized for issuance to insiders, at any time, under all share compensation arrangements of the Company | 10% of the total Common Shares outstanding |
(1) | As of March 10, 2022, this represents approximately 2.85% of the Company’s Common Shares issued and outstanding. |
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General Information – Stock Based Incentive Plans
Background
The Board originally adopted the Stock Award Plan in 2004 for the benefit of the Company’s Directors, executives, employees and consultants, and Shareholders most recently approved the Stock Award Plan, as amended, in 2020. The Stock Award Plan has been established to assist the Company in the recruitment and retention of highly qualified executives, employees and eligible consultants by providing a means to reward performance, to motivate participants under the Stock Award Plan to achieve important corporate and personal objectives and, through the proposed issuance by the Company of Common Shares under the Stock Award Plan, to better align the interests of participants with the long-term interests of Shareholders.
Prior Grants under the Stock Award Plan
Stock Award Plan | |
Name and Position | Number of Awards (1) |
Gregory Lang, Director, President & Chief Executive Officer | 3,458,760 |
David Ottewell, Vice President and Chief Financial Officer | 886,000 |
Executive Officers as a Group | 6,200,960 |
Non-Executive Directors as a group | 2,724,600 |
All Company Employees and Eligible Consultants (excluding Executive Officers and Non-Executive Directors) | 864,431 |
Total: | 9,789,991 (2) |
(1) | Options outstanding as of March 10, 2022. | |
(2) | Represents 2.94% of the issued and outstanding Common Shares as at March 10, 2022. |
Summary of the Stock Award Plan
Set out below is a summary of the Stock Award Plan, which is qualified in its entirety by reference to the complete copy of the Stock Award Plan incorporated by reference to Appendix A to the Company’s definitive proxy statement filed with the SEC on March 26, 2020.
Eligible Participants
Under the Stock Award Plan, Awards (as defined in the Stock Award Plan) may be granted to Directors, executives, employees and other eligible consultants of the Company and employees of its designated subsidiaries and certain enumerated affiliates. As of March 10, 2022, there were 13 employees of which 5 were executives, 5 eligible consultants and 9 non-executive Directors of the Company eligible to participate in the Stock Award Plan. The total number of Common Shares reserved for issuance in connection with Awards granted or that may be granted under the Stock Award Plan is eight percent (8%) of the total number of issued and outstanding Common Shares. Based on the total number of issued and outstanding Common Shares, a total of 16,860,723 Common Shares is available for issuance under the Stock Award Plan as of March 10, 2022. As of March 10, 2022, the total number of Common Shares issuable in connection with outstanding, unexercised Award grants under the Stock Award Plan is 9,789,991, which represents, in the aggregate, 2.94% of the total number of the Company’s issued and outstanding Common Shares. Of the 9,789,991 outstanding, unexercised Awards, Awards to purchase 6,415,011 Common Shares are fully vested, with 3,374,980 remaining unvested.
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Summary of Award Types
Under the Stock Award Plan, stock options (“options”), stock appreciation rights (“SARs”) and tandem SARs (“Tandem SARs”) may be granted to participants at any time as determined by the Board. The participant’s Award agreement shall list the term of the Award, as determined by the Board, as well as the period during which the Award may be exercised. The term of a Tandem SAR may not exceed the term of the option portion of the Award, which may not exceed five years, and a free-standing SAR’s term may not exceed five years, provided however, that if at any time the expiry of the term of an Award should be determined to occur either during a period in which the trading of Common Shares by the holder of the Award is restricted under the insider trading policy or other policy of the Company or within ten business days following such a period, such expiry date will be deemed to be the date that is the tenth business day following the date of expiry of such restriction. All Awards must be granted with an exercise price no less than “fair market value” of the Common Shares on the date of grant. Unless determined otherwise by the Board, fair market value is generally defined under the Stock Award Plan as the last recorded sale price of the Common Shares on the TSX (for Canadian resident participants) or the NYSE American (for non-Canadian resident participants) for the preceding trading date. All options granted under the Stock Award Plan are nonqualified stock options for purposes of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).
A SAR may be granted in tandem with an option granted under the Stock Award Plan or on a free-standing basis and may be exercised upon such terms and conditions as the Board, in its sole discretion, determines. Upon exercise of a SAR, the participant shall be entitled to receive payment from the Company in an amount equal to the excess of the fair market value of a Common Share on the date of exercise over the price at which the SAR was originally granted (which shall not be less than the fair market value of a Common Share on the date of the SAR grant). All payments shall be made in Common Shares, the number of which shall be calculated by dividing the payment amount by the fair market value of the Common Shares on the exercise date.
Tandem SARs give the awardee the right to surrender to the Company all or a portion of the related option and to receive a distribution of Common Shares in an amount equal to the excess of the fair market value of a specified number of shares as of the date the SAR is exercised over the exercise price of the related option. To the extent a Tandem SAR is exercised, the related option will terminate at the time of such exercise. The effect of the exercise of a SAR or Tandem SAR would be a reduction in the total number of shares issued by the Company to a participant versus the exercise of an equivalent stock option.
The total number of Common Shares that may be issued to an individual participant under the Stock Award Plan upon the exercise of Awards granted thereunder shall not exceed, in the aggregate, 5% of the Company’s total number of issued and outstanding Common Shares at the date of grant of such Award. In addition, no individual participant may be granted any Award or Awards for more than ten million Common Shares in any calendar year. The maximum number of shares issuable to insiders (as that term is defined by the TSX) pursuant to the Stock Award Plan together with any shares issuable pursuant to any other share compensation arrangement, at any time, shall not exceed 10% of the total number of issued and outstanding Common Shares. The number of Common Shares issued to insiders pursuant to the Stock Award Plan, together with any Common Shares issued pursuant to any other share compensation arrangement, within any one-year period, shall not exceed 10% of the total number of issued and outstanding Common Shares.
Administration
The Stock Award Plan is administered by the Compensation Committee appointed by the Board. Subject to the terms of the Stock Award Plan, the Compensation Committee may determine, among other things, the persons to whom Awards may be granted, the number of Awards to be granted to any participant, and the exercise price and the schedule and dates for vesting of Awards granted. The Compensation Committee may, but is not required to, impose a vesting schedule on any Award made under the Stock Award Plan.
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If a participant ceases to be engaged by the Company for any reason other than death, they will have the right to exercise any vested Award not exercised prior to such termination within the lesser of six months from the date of the termination, unless otherwise extended by the Board, in its absolute discretion, or the expiry date of the Award; provided that if the termination is for just cause the right to exercise the vested Award shall terminate on the date of termination unless otherwise determined by the Board. The unvested portion of all Awards shall terminate on the date of termination.
The Board shall have the power to, at any time and from time to time, either prospectively or retrospectively, and without Shareholder approval, amend, suspend or terminate the Stock Award Plan or any Award granted under the Stock Award Plan, including, without limiting the generality of the foregoing, changes of a clerical or grammatical nature and changes regarding the vesting of Awards; provided, however, that:
(a) such amendment, suspension or termination is in accordance with applicable laws and the rules of any stock exchange on which the Common Shares are listed, and with respect to Awards held by participants who are subject to U.S. federal income tax, in a manner consistent with the requirements of Section 409A of the U.S. Internal Revenue Code of 1986, as amended, to the extent applicable;
(b) no such amendment, suspension or termination shall be made at any time to the extent such action would materially adversely affect the existing rights of a participant with respect to any then outstanding Award, as determined by the Board acting in good faith, without their consent in writing; and
(c) the Board shall obtain Shareholder approval of the following:
(i) | any amendment to the maximum number of Common Shares issuable pursuant to the Stock Award Plan, other than as contemplated by the Stock Award Plan; |
(ii) | any amendment that would reduce the award price of an outstanding Award other than as contemplated by the Stock Award Plan; and |
(iii) | any amendment that would extend the term of any Award granted under the Stock Award Plan beyond the expiry date. |
In the event of, among other things, a take-over bid affecting the Company, the Board of the Company will notify each awardee under the Stock Award Plan of the full particulars of the offer whereupon Awards will become vested and may be exercised.
Transferability
No Awards granted under the Stock Award Plan shall be transferable or assignable other than by will or by the laws of succession. However, if permitted by all applicable laws and the rules of the TSX or the NYSE American, as applicable, a participant may assign any Award to a trust or a similar legal entity.
New Plan Benefits
The benefits that will be awarded or paid under the Stock Award Plan cannot currently be determined. Awards granted under the Stock Award Plan are within the discretion of the Compensation Committee, and the Compensation Committee has not determined future awards. As of March 10, 2022, the closing price of a Common Share on the TSX was C$9.94, and the closing price of a Common Share on the NYSE American was $7.79.
Certain United States Federal Income Tax Consequences
The following is a summary of the principal U.S. federal income tax consequences generally applicable to Awards made under the Stock Award Plan. The following description applies to Awards that are subject to U.S. federal income tax. The grant of options, SARs or Tandem SARs should not result in taxable income to a participant at the time of grant. When Awards are paid out, the participant will recognize ordinary income equal to the fair market value of the Common Shares and cash received in settlement of the Awards, less any exercise price paid, and the Company will be entitled at that time to a corporate income tax deduction (for U.S. federal income tax purposes) for the same amount, subject to the general rules concerning deductibility of compensation. A participant’s basis in any Common Shares received will equal the amount recognized as ordinary income with respect to such Common Shares plus any exercise price paid. If, as usually is the case, the Common Shares are a capital asset in the participant’s hands, any additional gain or loss recognized on a subsequent sale or exchange of the Common Shares will not be ordinary income but will qualify as capital gain or loss.
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Change of Control
The Board approved an amendment to the Stock Award Plan to require a double trigger for accelerated vesting of Awards in the event of a change of control. With respect to grants made on or after January 23, 2019, if the employment of an awardee is terminated by the Company other than for cause or if the awardee resigns for good reason, in each case, within 12 months following a change of control, all of the awardee’s unvested Awards shall vest immediately prior to the awardee’s date of termination.
For Awards granted prior to January 23, 2019, in the event of a change of control, all outstanding Awards will become vested, whereupon such Award may be exercised in whole or in part by the holder.
For purposes of the Stock Award Plan and Performance Share Unit Plan, a “change of control” means the acquisition by any person or by any person and a “joint actor,” as defined in the Stock Award Plan, whether directly or indirectly, of voting securities, as defined in the Securities Act (British Columbia) of the Company, which, when added to all other voting securities of the Company at the time held by such person or by such person and a joint actor, totals for the first time not less than 50% of the outstanding voting securities of the Company or the votes attached to those securities are sufficient, if exercised, to elect a majority of the Board.
Burn Rate
The Stock Award Plan burn rate for each of the three most recently closed fiscal years is shown in the table below. These burn rates for past fiscal years are not necessarily indicative of future burn rates.
Stock Award Plan | |
Fiscal Year | Burn Rate |
2019 | 0.88% |
2020 | 0.54% |
2021 | 0.38% |
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Background
The Board adopted the Performance Share Unit (“PSU”) Plan in 2009 for the benefit of the Company’s executives, employees and consultants. The PSU Plan has been established to assist the Company in the recruitment and retention of highly qualified executives, employees, and eligible consultants by providing a means to reward performance, to motivate participants under the PSU Plan to achieve important corporate and personal objectives and, through the proposed issuance by the Company of Common Shares under the PSU Plan, to better align the interests of participants with the long-term interests of Shareholders.
The Board intends to use PSUs issued under the PSU Plan, as well as options issued under the Stock Award Plan, as part of the Company’s overall executive and employee compensation plan. Since the value of PSUs increase or decrease with the price of the Common Shares, PSUs reflect a philosophy of aligning the interests of executives and employees with those of the Shareholders by tying executive compensation to share price performance. In addition, PSUs assist in the retention of qualified and experienced executives and employees by rewarding those individuals who make a long-term commitment to the Company.
Outstanding Grants Under The PSU Plan
Performance Share Unit Plan | |
Name and Position | Number of Units (1) |
Gregory Lang President & CEO | 576,100 |
David Ottewell Vice President & CFO | 205,300 |
Executive Officers as a Group | 1,126,000 |
All Company Employees and Eligible Consultants (excluding Executive Officers) | 167,200 |
Total | 1,293,200 (2) |
(1) | PSU grants outstanding as of March 10, 2022 (does not include Common Shares issued under PSU Plan). | |
(2) | Represents 0.39% of the issued and outstanding Common Shares as of March 10, 2022. |
Summary of the PSU Plan
Set out below is a summary of the PSU Plan, which reflects the proposed amendments and is qualified in its entirety by reference to the complete copy of the PSU Plan incorporated by reference to Appendix C to the Company’s definitive proxy statement filed with the SEC on March 26, 2020.
Eligible Participants
The PSU Plan is administered by the Compensation Committee of the Board or such other committee of the Board as may be designated by the Board. Employees and eligible consultants of the Company and its designated subsidiaries are eligible to participate in the PSU Plan. As of March 10, 2022, there were approximately 13 employees and 5 consultants eligible to participate in the PSU Plan. All of the Company’s current, full-time, permanent employees have received grants under the PSU Plan to date. In accordance with the terms of the PSU Plan, the Company, under the authority of the Board, will approve those employees and eligible consultants who are entitled to receive PSUs and the number of PSUs to be awarded to each participant. PSUs awarded to participants are credited to them by means of an entry in a notional account in their favor on the books of the Company. Each PSU awarded conditionally entitles the participant to receive up to a maximum of 1.5 Common Shares (or the cash equivalent) upon attainment of the PSU vesting criteria.
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Vesting
The PSUs vest upon the expiry of a time-based vesting period, assuming the recipient remains in continuous service with the Company through the end of such vesting period. The duration of the vesting period applicable to a specific PSU grant shall be determined at the time of the grant by the Compensation Committee. In addition, the Compensation Committee may establish other terms or conditions with respect to the vesting of PSUs, including without limitation, provisions which make the vesting of PSUs conditional upon (i) the achievement of corporate or personal objectives, including the attainment of milestones relating to financial, operational, strategic or other objectives of the Company, (ii) the market price of the Company’s Common Shares from time to time and/or the return to Shareholders, and/or (iii) any other performance criteria relating to the participant or the Company. Any such conditions shall be set out in a grant agreement, may relate to all or any portion of the PSUs in a grant, and may be graduated such that different percentages of the PSUs in a grant will vest depending on the extent of satisfaction of one or more such conditions. The Board may, in its discretion and having regard to the best interests of the Company, subsequent to the grant date of a PSU, waive any such terms or conditions or determine that they have been satisfied.
Once the PSUs in a grant vest, the participant is entitled to receive the equivalent number of Common Shares or cash equal to the Market Value (as defined below) of the equivalent number of Common Shares. The vested PSUs may be settled through the issuance of Common Shares from treasury, by the delivery of Common Shares purchased in the open market, in cash or in any combination of the foregoing (at the discretion of the Company). If settled in cash, the award amount shall be equal to the number of Common Shares in respect of which the participant is entitled multiplied by the Market Value of a Common Share on the payout date. Market Value per share as at any date is defined in the PSU Plan (if the Common Shares are listed and posted for trading on the TSX and/or the NYSE American) as the arithmetic average of the closing price of the Common Shares traded on the TSX or the NYSE American for the five (5) trading days immediately preceding such date. The PSUs may be settled on the payout date, which shall be the third anniversary of the date of the grant or such other date as the Committee may determine at the time of the grant, which in any event shall be no later than the expiry date for such PSUs. The expiry date of PSUs will be determined by the Committee at the time of grant. All unvested, expired or previously settled PSUs are available for future grants.
Maximum Number of Common Shares Issuable
Under the PSU Plan, the maximum number of Common Shares reserved and available for issuance from treasury is a variable number equal to three percent (3%) of the issued and outstanding Common Shares of the Company (on a non-diluted basis) from time to time. As of March 10, 2022, three percent (3%) of the issued and outstanding Common Shares represents 9,994,018 Common Shares.
The PSU Plan provides that the maximum number of Common Shares issuable to insiders (as that term is defined by the TSX) pursuant to the PSU Plan, together with any Common Shares issuable pursuant to any other security-based compensation arrangement of the Company, will not exceed 10% of the total number of issued and outstanding Common Shares. In addition, the maximum number of Common Shares issued to insiders under the PSU Plan, together with any Common Shares issued to insiders pursuant to any other security-based compensation arrangement of the Company within any one-year period, will not exceed 10% of the total number of issued and outstanding Common Shares. The PSU Plan limits the number of PSUs that may be granted to any one person to 9,500,000 per year.
Cessation of Entitlement
Unless otherwise determined by the Company in accordance with the PSU Plan, PSUs which have not vested on a participant’s termination date shall terminate and be forfeited. Except with respect to a participant whose PSUs are subject to U.S. federal income tax, if a participant who is an employee ceases to be an employee as a result of termination of employment without cause, at the Company’s discretion (unless otherwise provided in the applicable grant agreement), all or a portion of such participant’s PSUs may be permitted to continue to vest, in accordance with their terms, during any statutory or common law severance period or any period of reasonable notice required by law or as otherwise may be determined by the Company in its sole discretion. All forfeited PSUs are available for future grants.
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Transferability
PSUs are not assignable or transferable by a participant other than by operation of law, except, if and on such terms as the Company may permit, to a spouse or minor children or grandchildren or a personal holding company or family trust controlled by the participant, the sole shareholders or beneficiaries of which, as the case may be, are any combination of the participant, the participant’s spouse, minor children or minor grandchildren, and after the participant’s lifetime shall inure to the benefit of and be binding upon the participant’s designated beneficiary, on such terms and conditions as are appropriate for such transfers to be included in the class of transferees who may rely on a Form S-8 registration statement under the U.S. Securities Act of 1933, as amended, to sell Common Shares received pursuant to the PSUs.
New Plan Benefits
The benefits that will be awarded or paid under the PSU Plan cannot currently be determined. Awards granted under the PSU Plan are within the discretion of the Compensation Committee, and the Compensation Committee has not determined future awards. As of March 10, 2022, the closing price of a Common Share on the TSX was C$9.94, and the closing price of a Common Share on the NYSE American was $7.79.
Amendments to the PSU Plan
The PSU Plan provides that the Company may, without notice, at any time and from time to time, and without Shareholder approval, amend the PSU Plan or any provisions thereof in such manner as the Company, in its sole discretion, determines appropriate:
(a) | for the purposes of making formal minor or technical modifications to any of the provisions of the PSU Plan; |
(b) | to correct any ambiguity, defective provision, error or omission in the provisions of the PSU Plan; |
(c) | to change the vesting provisions of PSUs to reflect revised performance metrics or to accelerate vesting in the event that performance criteria is achieved earlier than expected; |
(d) | to change the termination provisions of PSUs or the PSU Plan which does not entail an extension beyond the original expiry date of the PSUs; or |
(e) | for the purposes of preserving the intended tax treatment of the benefits provided to a participant by the PSU Plan and PSU awards; |
provided, however, that:
(1) | no such amendment of the PSU Plan may be made without the consent of each affected participant if such amendment would adversely affect the rights of such affected participant(s) under the PSU Plan; and |
(2) | Shareholder approval shall be obtained in accordance with the requirements of the TSX or the NYSE American for any amendment that results in: |
(i) | an increase in the maximum number of Common Shares issuable pursuant to the PSU Plan other than as already contemplated in the PSU Plan; |
(ii) | an extension of the expiry date for PSUs granted under the PSU Plan; |
(iii) | granting of other types of compensation through Common Share issuance; |
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(iv) | expansion of the rights of a participant to assign PSUs beyond what is currently permitted in the PSU Plan; |
(v) | the addition of new categories of participants, other than as already contemplated in the PSU Plan; |
(vi) | changes in eligible participants that may permit the introduction or reintroduction of non-employee directors on a discretionary basis; or |
(vii) | an amendment of the Board’s authority to amend provisions of the PSU Plan. |
Certain United States Federal Income Tax Consequences
The following is a summary of the principal U.S. federal income tax consequences generally applicable to PSUs awarded under the PSU Plan. The following description applies to PSUs that are subject to U.S. federal income tax. The grant of PSUs should not result in taxable income to a participant at the time of grant. When PSUs are paid out, the participant will recognize ordinary income equal to the fair market value of the Common Shares and cash received in settlement of the PSUs, and the Company will be entitled at that time to a corporate income tax deduction (for U.S. federal income tax purposes) for the same amount, subject to the general rules concerning deductibility of compensation. A participant’s basis in any Common Shares received will equal the fair market value of the Common Shares at the time the participant recognized ordinary income. If, as usually is the case, the Common Shares are a capital asset in the participant’s hands, any additional gain or loss recognized on a subsequent sale or exchange of the Common Shares will not be ordinary income but will qualify as capital gain or loss.
Section 409A of the Code may apply to PSUs granted under the PSU Plan. For such awards subject to Section 409A, certain U.S. officers may experience a delay of up to six months in the settlement of the PSUs in Common Shares.
Change of Control
The Board approved an amendment to the Performance Share Unit Plan to require a double trigger for accelerated vesting of PSUs in the event of a change of control. With respect to grants made on or after January 23, 2019, if at any time within 12 months from the date of a change of control: (i) a participant’s relationship with the Company is terminated by the Company other than for cause or (ii) a participant resigns for good reason, all outstanding PSUs held by such participant shall become vested and the payout date in connection with such participant’s vested PSUs shall be accelerated to the date of such participant’s termination or resignation for good reason and the Company shall issue Common Shares to such participants with respect to such vested PSUs in accordance with Sections 6 and 8 of the Performance Share Unit Plan; provided that in the event that any PSUs are subject to performance-based vesting conditions, then the vesting of such PSUs shall accelerate only to the extent that such performance-based vesting conditions have been satisfied and further provided that if a performance-based vesting condition is, in the Board’s discretion, capable of being partially performed, then vesting shall be accelerated on a pro rata basis to reflect the degree to which the vesting condition has been satisfied, as determined by the Board.
For PSUs granted prior to January 23, 2019, all outstanding PSUs will become vested on any change of control and the payout date in connection with such vested PSUs will be accelerated to the date of such change of control.
“Change of control” has the same meaning under the Performance Share Unit Plan as under the Stock Award Plan. See page 82 above for a description, which forms a part of this summary.
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Burn Rate
The Performance Share Unit Plan burn rate for each of the three most recently closed fiscal years is shown in the following table. These burn rates for past fiscal years are not necessarily indicative of future burn rates.
Performance Share Unit Plan | |
Fiscal Year | Burn Rate |
2019 | 0.25% |
2020 | 0.14% |
2021 | 0.10% |
Background
The Board adopted the Deferred Share Unit (“DSU”) Plan in 2009 for the benefit of the Company’s non-executive Directors. Currently there are nine non-executive Directors participating in the DSU Plan. The DSU Plan has been established to assist the Company in the recruitment and retention of qualified persons to serve on the Board and, through the proposed issuance by the Company of Common Shares under the DSU Plan, to promote better alignment of the interests of Directors and the long-term interests of Shareholders.
The Board intends to use the DSUs issued under the DSU Plan, as well as options issued under the Stock Award Plan, if any, as part of the Company’s overall director compensation plan. Since the value of DSUs increase or decrease with the price of the Common Shares, DSUs reflect a philosophy of aligning the interests of Directors with those of the Shareholders by tying compensation to long term share price performance.
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Prior Grants under the DSU Plan
Deferred Share Unit Plan | |
Name of Non-Executive Director | Number of Units (1) |
Elaine Dorward-King | 5,982 |
Sharon Dowdall | 41,551 |
Diane Garrett | 11,689 |
Thomas Kaplan | 79,888 |
Igor Levental | 51,865 |
Kalidas Madhavpeddi | 43,592 |
Clynton Nauman | 43,592 |
Ethan Schutt | 7,033 |
Anthony Walsh | 38,743 |
Non-Executive Directors as a Group | 323,935 (2) |
(1) | DSUs outstanding as of March 10, 2022. | |
(2) | Represents 0.10% of the issued and outstanding Common Shares as at March 10, 2022. The group outstanding total varies slightly from the DSU Plan total outstanding due to rounding. |
Summary of the DSU Plan
Set out below is a summary of the DSU Plan. A complete copy of the DSU Plan is incorporated by reference to Appendix E to the Company’s definitive proxy statement filed with the SEC on March 26, 2020.
Administration of Plan
The DSU Plan provides that non-executive Directors (each, a “Participant”) will receive 50%, and may elect to receive up to 100%, of their annual compensation amount (the “Annual Base Compensation”) in DSUs. The cash portion of Annual Base Compensation shall be paid to the Participant quarterly. A DSU is a unit credited to a Participant by way of a bookkeeping entry in the books of the Company, the value of which is equivalent to the value of one Common Share. All DSUs paid with respect to Annual Base Compensation will be credited quarterly to the Participant by means of an entry in a notional account in their favor on the books of the Company (a “DSU Account”) when such Annual Base Compensation is payable. The Participant’s DSU Account will be credited on a quarterly basis with the number of DSUs, calculated to the nearest thousandth of a DSU, determined by dividing the dollar amount of compensation payable in DSUs on the grant date by the Share Price of a Common Share at that time. Share Price is defined in the DSU Plan as (if the Common Shares are listed and posted for trading on the TSX) the closing price of the Common Shares on the TSX averaged over the last five (5) consecutive trading days of the fiscal quarter. Fractional Common Shares will not be issued and any fractional entitlements will be rounded down to the nearest whole number.
Generally, a Participant in the DSU Plan shall be entitled to redeem their DSUs during the period commencing on the business day immediately following the date upon which the Participant ceases to hold any position as a Director of the Company and its subsidiaries and is no longer otherwise employed by the Company or its subsidiaries, including in the event of death of the Participant (the “Termination Date”), and ending on the 90th day following the Termination Date, provided, however that for eligible U.S. Participants, redemption will be made upon such Participant’s “separation from service” as defined under Internal Revenue Code Section 409A. Redemptions under the DSU Plan may be settled in Common Shares issued from treasury, Common Shares purchased by the Company on the open market for delivery to the Participant, cash, or any combination of the foregoing, subject to the restrictions set forth in the DSU Plan.
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Maximum Number of Common Shares Issuable
The maximum number of Common Shares reserved and available for issuance from treasury under the DSU Plan is a variable number equal to one percent (1%) of the issued and outstanding Common Shares of the Company (on a non-diluted basis) from time to time. As of March 10, 2022, one percent (1%) of the issued and outstanding Common Shares represents 3,331,339 Common Shares reserved and available for issuance under the DSU Plan.
The DSU Plan provides that the maximum number of Common Shares issuable to insiders (as that term is defined by the TSX) pursuant to the DSU Plan, together with any Common Shares issuable pursuant to any other security-based compensation arrangement of the Company, will not exceed 10% of the total number of outstanding Common Shares. In addition, the maximum number of Common Shares issued to insiders under the DSU Plan, together with any Common Shares issued to insiders pursuant to any other security-based compensation arrangement of the Company within any one-year period, will not exceed 10% of the total number of outstanding Common Shares.
Transferability
No right to receive payment of deferred compensation or retirement awards shall be transferable or assignable by any Participant under the DSU Plan except by will or laws of descent and distribution.
New Plan Benefits
The benefits that will be awarded or paid under the DSU Plan cannot currently be determined. The amount of DSUs paid under the DSU Plan is dependent on the level of Annual Base Compensation as determined by the Board, the election of the individual Participants, and the Share Price at the end of each fiscal quarter. As of March 10, 2022, the closing price of a Common Share on the TSX was C$9.94, and the closing price of a Common Share on the NYSE American was $7.79.
Amendments to the DSU Plan
The DSU Plan provides that the Board may at any time, and from time to time, and without Shareholder approval, amend any provision of the DSU Plan, subject to any regulatory or stock exchange requirement at the time of such amendment, including, without limitation:
(a) | for the purposes of making formal minor or technical modifications to any of the provisions of the Plan including amendments of a “clerical” or “housekeeping” nature; |
(b) | to correct any ambiguity, defective provision, error or omission in the provisions of the DSU Plan; |
(c) | amendments to the termination provisions of the DSU Plan; |
(d) | amendments necessary or advisable because of any change in applicable securities laws; |
(e) | amendments to the transferability of DSUs provided for in the DSU Plan; |
(f) | amendments relating to the administration of the DSU Plan; or |
(g) | any other amendment, fundamental or otherwise, not requiring Shareholder approval under applicable laws or the rules of the Toronto Stock Exchange or the NYSE American; |
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provided, however, that:
1) | no such amendment of the DSU Plan may be made without the consent of each affected Participant in the DSU Plan if such amendment would adversely affect the rights of such affected Participant(s) under the DSU Plan; and |
2) | Shareholder approval shall be obtained in accordance with the requirements of the TSX and the NYSE American for any amendment: |
(i) | to increase the maximum number of Common Shares which may be issued under the DSU Plan; |
(ii) | to the amendment provisions of the DSU Plan; or |
(iii) | to the definition of “Participant”. |
Certain United States Federal Income Tax Consequences
The following is a summary of the principal U.S. federal income tax consequences generally applicable to DSUs awarded under the DSU Plan. The following description applies to DSUs that are subject to U.S. federal income tax. The grant of DSUs and the crediting of DSUs to a Participant’s DSU Account should not result in taxable income to the Participant at the time of grant. When DSUs are paid out, the Participant will recognize ordinary income equal to the fair market value of the Common Shares and cash received in settlement of the DSUs, and the Company will be entitled at that time to a corporate income tax deduction (for U.S. federal income tax purposes) for the same amount, subject to the general rules concerning deductibility of compensation. A Participant’s basis in any Common Shares received will equal the fair market value of the Common Shares at the time the Participant recognized ordinary income. If, as usually is the case, the Common Shares are a capital asset in the Participant’s hands, any additional gain or loss recognized on a subsequent sale or exchange of the Common Shares will not be ordinary income but will qualify as capital gain or loss. To the extent that a Participant’s DSUs are subject to U.S. federal income tax and to taxation under the Income Tax Act (Canada), DSUs awarded under the DSU Plan are intended to comply with Section 409A of the Internal Revenue Code and to avoid adverse tax consequences under paragraph 6801(d) of the regulations under the Income Tax Act (Canada). To that end, the DSU Plan includes certain forfeiture provisions that could apply to DSUs awarded under the DSU Plan in limited circumstances.
Burn Rate
The DSU Plan burn rate for each of the three most recently closed fiscal years is shown in the following table. These burn rates for past fiscal years are not necessarily indicative of future burn rates.
Deferred Share Unit Plan | |
Fiscal Year | Burn Rate |
2019 | 0.01% |
2020 | 0.01% |
2021 | 0.01% |
INDEBTEDNESS OF DIRECTORS AND OFFICERS
As of November 30, 2021, and the date hereof, the aggregate indebtedness to the Company and its subsidiaries of all executive officers, Directors and employees, and their respective associates, and former executive officers, Directors and employees of the Company or any of its subsidiaries was $nil.
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INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
No informed or related person of the Company, which includes each person who has been a Director or executive officer of the Company since the beginning of the most recently completed fiscal year, nor any proposed nominee for election as Director, nor any associate or affiliate of such informed person or proposed nominee, has had any material interest, direct or indirect, in any transaction entered into by the Company since the beginning of the most recently completed fiscal year, or in any proposed transaction which has materially affected or would materially affect the Company or any of its subsidiaries. Generally speaking, under SEC rules, any transaction in which a related person has a material interest, other than transactions involving aggregate amounts less than $120,000, must be approved or ratified by the Audit Committee. The policies apply to all executive officers, directors and their immediate family members. Since December 1, 2020, there were no related person transactions under the relevant standards. Please refer to the section titled “Ethical Business Conduct” beginning on page 95 of this Circular for a discussion about the Company’s policies and procedures governing related party transactions.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Board is committed to sound corporate governance practices, which are both in the interest of Shareholders and contribute to effective and efficient decision making. As part of the Company’s commitment to effective corporate governance, the Board, with the assistance of the Audit and Corporate Governance and Nominations Committees, monitors changes in legal requirements and best practices.
Set out below is a description of certain corporate governance practices of the Company, as required by National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”) and National Policy 58-201 – Corporate Governance Guidelines (“NP 58-201”).
The Company has a Board comprised of ten Directors, led by Dr. Thomas Kaplan as Chairman and Anthony Walsh as independent Lead Director. The Board has proposed increasing the Board size to eleven Directors and has proposed a slate of eleven Director nominees for Shareholder approval.
Dr. Kaplan is the Chairman, Chief Executive Officer and Chief Investment Officer of The Electrum Group, the investment adviser to the Company’s largest shareholder, Electrum. The Board elected Dr. Kaplan as Chairman because of Electrum’s significant ownership interest in the Company (25.39% as of March 10, 2022) as well as Dr. Kaplan’s extensive experience as an entrepreneur, developer of and investor in public and private natural resources companies. As described below, to ensure independence in Board governance, the Board has appointed an independent Lead Director to coordinate discussion among the independent members of the Company’s Board and to lead Board meetings if Dr. Kaplan is unavailable. Anthony Walsh currently serves as the Board’s independent Lead Director.
NP 58-201 recommends that boards of directors of reporting issuers be composed of a majority of independent directors. With eight of the ten current Directors considered independent, the Board is currently composed of a majority of independent directors. The eight independent Directors are: Elaine Dorward-King, Sharon Dowdall, Diane Garrett, Igor Levental, Kalidas Madhavpeddi, Clynton Nauman, Ethan Schutt and Anthony Walsh. If elected to serve on the Company’s Board, Kevin McArthur will be considered an independent Director. Gregory Lang is the President and CEO of the Company and therefore deemed non-independent. Thomas Kaplan, the Chairman of the Board, is not considered to be independent as a result of his relationship to the Company’s largest Shareholder.
The Company has taken steps to ensure that adequate structures and processes are in place to permit the Board to function independently of management. The Board holds regular meetings every quarter. Between the scheduled meetings, the Board meets as required. The independent Directors are afforded an opportunity to meet separately from the non-independent Directors and any representatives of management at every Board meeting. The independent Directors meet in camera at least annually and on an as-needed basis. During fiscal year 2021, the independent Directors met four times. Management also communicates informally with the Directors on a regular basis and solicits advice from members or advisors on matters falling within their areas of special knowledge or experience.
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The Board has five standing subcommittees: Audit, Compensation, Corporate Communications, Corporate Governance and Nominations, and Environment, Health, Safety, Sustainability (EHSS) and Technical. Each of the foregoing subcommittees has its own charter, copies of which are available on the Company’s website at: www.novagold.com under the Governance tab. Special committees are appointed from time to time with respect to specific matters.
The Board and its standing subcommittees meet regularly outside the presence of Company management to engage in open discussion about Company strategy, management’s performance, and any items of special concern or note that may impact the Company. Depending upon the topic, the Board or its standing subcommittees may meet with experts of their choosing, such as the Compensation Consultant, the Company’s Auditors or outside legal counsel, for example, outside the presence of management. The Board believes this practice of meeting without Company management from time-to-time results in frank discussions, assessments and the effective oversight of risks and opportunities facing the Company.
The following Directors and Director nominees currently serve on the following boards of directors of other reporting issuers:
Name | Reporting Issuer |
Elaine Dorward-King | Great Lakes Dredge and Dock Company, LLC (NASDAQ: GLDD) Kenmare Resources plc (LSE: KMR, ISE: KMR) Sibanye-Stillwater (JSE: SSW) |
Sharon Dowdall | Olivut Resources Ltd. (TSX-V: OLV) |
Diane Garrett | Hycroft Mining Holding Company (NASDAQ: HYMC) |
Thomas Kaplan | None |
Gregory Lang | Trilogy Metals Inc. (TSX, NYSE American: TMQ) |
Igor Levental | Gatos Silver, Inc. (TSX, NYSE: GATO) |
Kalidas Madhavpeddi | Dundee Precious Metals Inc. (TSX:DPM) Glencore plc (LSE: GLEN, JSE: GLN) Trilogy Metals Inc. (TSX, NYSE American: TMQ) |
Kevin McArthur | First Quantum Minerals Inc. (TSX: FM) Royal Gold Inc. (NASDAQ: RGLD) |
Clynton Nauman | Alexco Resource Corp. (TSX:AXR) |
Ethan Schutt | None |
Anthony Walsh | Dundee Precious Metals Inc. (TSX:DPM) Sabina Gold & Silver Corporation (TSX:SBB) |
Independence of Directors
The Board determined that the following Directors qualify as independent under the applicable Board and committee standards of the NYSE American, SEC rules and National Instrument 58-101: Dr. Dorward-King, Ms. Dowdall, Dr. Garrett, Messrs. Levental, Madhavpeddi, Nauman, Schutt and Walsh. Dr. Kaplan is not considered to be independent because he is the Chairman, Chief Executive Officer and Chief Investment Officer of The Electrum Group, which manages the portfolio of Electrum, the largest Shareholder of the Company. Mr. Lang is not considered to be independent because he is the Company’s President and Chief Executive Officer. Mr. McArthur will be considered an independent Director if his election to the Board is approved by the Shareholders at the Meeting.
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Board Charter
The Board is responsible for the overall stewardship of the Company. On May 12, 2021, the Board adopted a written Charter which is available on the Company’s website at www.novagold.com under the Governance tab. The Board discharges its stewardship responsibilities directly and through the delegation of specific responsibilities to committees of the Board. The Board works with management to establish the goals and strategies of the Company, to identify principal risks, to select and assess senior management and to review significant operational and financial matters.
The Board has appointed an Audit Committee to assist the Board in monitoring (i) the integrity of the financial statements of the Company, (ii) the independent auditors’ qualifications and independence, (iii) the performance of the Company’s internal financial controls and audit function and the independent auditors, and (iv) compliance by the Company with legal and regulatory requirements. The members of the Audit Committee are appointed annually by the Board following the annual general meeting of shareholders. The members of the Audit Committee are required to meet the independence and experience requirements of the NYSE American and Section 10A(m)(3) of the Exchange Act, and the rules and regulations of the SEC. At least one member of the Audit Committee is required to be an “audit committee financial expert” as defined by the SEC. The Company’s Audit Committee consists of fully independent members and the Company’s “audit committee financial expert” is Anthony Walsh. The Audit Committee meetings are held quarterly at a minimum. The Audit Committee met four times in the fiscal year ended November 30, 2021. The Audit Committee Charter is available on the Company’s website at www.novagold.com under the Governance tab.
Position Descriptions
The position descriptions for the chairs of each Board committee are contained in the committee charters. The chair of each of the following committees: Audit, Compensation, Corporate Communications, Corporate Governance and Nominations, and EHSS and Technical, is required to ensure the Committee meets regularly and performs the duties as set forth in its charter, and reports to the Board on the activities of the Committee. The Board has developed a written position description for the Chair of the Board and this position is presently held by Dr. Thomas Kaplan. The Chair of the Board is principally responsible for overseeing the operations and affairs of the Board. The Board has also developed a written position description for the Independent Lead Director, who is responsible for leading discussions of the independent Directors and for conducting Board meetings in the absence of the Board Chair. The Independent Lead Director position is presently held by Anthony Walsh. Both position descriptions are available on the Company’s website at www.novagold.com under the Governance tab.
The Board has developed a written position description for the CEO. The CEO is primarily responsible for the overall management of the business and affairs of the Company. In this capacity, the CEO shall establish the strategic and operational priorities of the Company and provide leadership to the management team. The CEO is directly responsible to the Board for all the Company’s activities.
Orientation and Continuing Education
The Company provides an orientation and education program to new directors. This program consists of providing education regarding directors’ responsibilities, corporate governance issues, committee charters as well as recent and developing issues related to corporate governance and regulatory reporting. The Company provides orientation in matters material to the Company’s business and in areas outside of the specific expertise of the Board members. All new members of the Board have historically been experienced in the mining sector or in resource development; therefore, general orientation about mining or resource development has not been necessary.
Continuing education helps Directors keep up to date on changing governance issues as well as requirements and legislation or regulations in their field of experience. The Board recognizes the importance of ongoing education for the Directors and senior management of the Company and the need for each Director and officer to take personal responsibility for this process. To facilitate ongoing education, the CEO or the Board may from time to time, as required:
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· | request that Directors or officers determine their training and education needs; |
· | arrange visits to the Company’s projects or operations; |
· | arrange funding for attendance at seminars or conferences of interest and relevance to their position; |
· | encourage participation or facilitate presentations by members of management or outside experts on matters of particular importance or emerging significance. |
During fiscal year 2021, Directors participated in educational sessions and received educational materials on the topics outlined below.
Educational Topic | Date | Audience |
Considerations for determining Directors’ status as independent or non-independent
Considerations for designating Named Executive Officers pursuant to Section 16 of the Securities Exchange Act
Canadian Securities Administrators’ request for comment on the potential regulation of short-sellers
| January 2021 | Corporate Governance and (Ms. Dowdall, Dr. Garrett, Mr. Levental and Mr. Schutt) |
Financial Accounting Standards Board new accounting standard regarding fair value measurement calculation and disclosures | March 2021 | Audit Committee (Mr. Nauman, Mr. Schutt and Mr. Walsh) |
ESG: Navigating the Board’s Role
- Six module course
| March – April 2021 | Dr. Dorward-King and Dr. Garrett
|
ISS and Glass Lewis Ratings of Company Environmental, Social and Governance (“ESG”) Matters
| May 2021 | Board of Directors (all members) |
Diversity, Equity and Inclusion | May 2021 | Corporate Governance and (Ms. Dowdall, Dr. Garrett, Mr. Levental and Mr. Schutt)
|
U.S. Supreme Court case regarding CARES Act eligibility for Alaska Native Claims Settlement Act corporations
| May 2021 | EHSS and Technical Committee (Dr. Dorward-King, Dr. Garrett, Messrs. Lang, Madhavpeddi and Nauman)
|
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Educational Topic | Date | Audience |
Compensation Governance Trends
- COVID-19 Impact on Compensation - Social Justice Impact on Compensation - Mining Sector Trends - Performance-Based Equity Trends - Trends in ESG Disclosures
| August 2021 | Compensation Committee (Dr. Dorward-King, Ms. Dowdall, Messrs. Madhavpeddi and Walsh)
|
U.S. House of Representatives Bill HR4618, entitled “Short Sale Transparency and Market Fairness Act”
| November 2021 | Corporate Governance and (Ms. Dowdall, Dr. Garrett, and Mr. Levental and Mr. Schutt)
|
NOVAGOLD Environmental, Social and Governance Materiality Assessment Summary Results
| November 2021 | Board of Directors (all members) |
In addition, the Board encourages senior management to participate in professional development programs and courses and supports management’s commitment to training and developing employees.
The Board has adopted a Code of Business Conduct and Ethics (the “Ethics Code”) for the Company’s Directors, officers and employees. The Ethics Code is available on SEDAR at www.sedar.com, on the Company’s website at www.novagold.com under the Governance tab, or may be obtained by contacting the Company at the address given under “Additional Information” at the end of this Circular.
The Board has ultimate responsibility for monitoring compliance with and enforcing the Ethics Code. The Board has delegated this compliance monitoring responsibility to the Corporate Governance and Nominations Committee which, among other things, reviews the Ethics Code periodically. The Board has delegated the responsibility of monitoring complaints regarding accounting, internal controls, cybersecurity matters, or auditing matters to the Audit Committee. Monitoring of accounting, internal control, cybersecurity and auditing matters, as well as violations of the law, the Ethics Code and other Company policies or directives, occurs through the Board’s and the Committees’ regular oversight of the Company’s operations. In addition, the Company maintains an independent, anonymous whistleblower hotline which is accessible by telephone, email or internet to which complaints or concerns may be reported. Concerns or questions regarding the Ethics Code may also be raised directly with the Company’s outside counsel. The Company’s Anti-Corruption, Anti-Bribery, Anti-Fraud Policy (the “Policy”), also available on the Company’s website at www.novagold.com under the Governance tab, establishes Formal Reporting Channels for Directors, officers, employees and agents to report suspected Policy violations or concerns related to the implementation of the Policy and mandates use of the Formal Reporting Channels in the event of specified circumstances. The Company commits to conduct appropriate, fair and thorough investigations of all concerns raised and to not tolerate retaliatory action against any individual for reporting, in good faith, concerns regarding known or suspected violations of any of the Company’s policies.
Certain Company Directors serve as directors or officers of other reporting issuers or have significant shareholdings in other companies. To the extent that such other companies may participate in business ventures in which the Company may participate, the Directors may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. The Ethics Code explicitly addresses such situations and provides that a Director who is in a position where their private interests conflict with the interests of NOVAGOLD or may have an adverse effect on the Director’s motivation or the proper performance of their job must notify the Chair of the Corporate Governance and Nominations Committee of the existence of an actual or potential conflict of interest. In the event that such a conflict of interest arises at a meeting of the Board, the Director who has such a conflict is obligated to disclose the interest and to refrain from discussing and from voting for or against the approval of such matter. Any Director who may have an interest in a transaction or agreement with the Company is required to disclose such interest and abstain from discussions and voting in respect to same if the interest is material as required by the Business Corporations Act (British Columbia). In considering related party transactions, the Board, and management, if applicable, will assess the materiality of related party transactions on a case-by-case basis with respect to both the qualitative and quantitative aspects of the proposed related party transaction. Company officers and employees are similarly required by the Ethics Code to disclose all actual or potential conflicts of interest and to protect the Company’s confidential information and business opportunities. Related party transactions that are in the normal course are subject to the same processes and controls as other transactions; that is, they are subject to standard approval procedures and management oversight but will also be considered by management for reasonability against fair value determined on an arms-length basis. Related party transactions that are found to be material are subject to review and approval by the Company’s Audit Committee, which is comprised of independent Directors.
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Nomination of Directors
The Corporate Governance and Nominations Committee (referred to in this section as the “Committee”), which met five times during fiscal 2021, advises and makes recommendations to the Board on recruitment and nomination of members to the Board. On an annual basis, the Committee assesses the appropriate size of the Board with a view to determining the impact of the number of directors and the effectiveness of the Board, and recommending to the Board, if necessary, a reduction or increase in the size of the Board. Annually or as required, the Committee recruits and identifies potential candidates and considers their appropriateness for membership on the Board. The Committee is responsible for reviewing any Shareholder proposals to nominate candidates for Director. Shareholders may submit names of persons to be considered for nomination, and the Committee will consider such persons in the same way it evaluates other individuals for nomination as a new Director. For the Company’s policies regarding Shareholder requests for nominations, see the section entitled "Shareholder Proposals" in this Circular. None of the current nominees were nominated by a Shareholder. The Committee abides by a diversity policy contained in the Committee’s Charter aimed at selecting nominees to the Board with a variety of personal qualities, relevant experience, educational achievement, race, ethnicity, age, gender and cultural backgrounds. It is the job of the Committee to ensure that the background and skills of the Directors align with the Company’s strategic direction. The Committee’s Charter is available on the Company website at: www.novagold.com under the Governance tab. All members of the Committee are independent Directors. The Company aims to have a well-rounded Board that will guide the organization’s strategy on economic, environmental and societal topics of highest relevance during the current and future lifecycle of its operations.
Board Diversity
At present three of the Company’s ten Directors, or 30% of the Company’s Directors, are women. All three of the Company’s current female Directors are included in the slate of eleven Director nominees presented to Shareholders at the 2022 Meeting. If the slate of Directors nominated by the Board is elected by the Shareholders at the 2022 Meeting, 27% of the Board, or three of eleven Directors, will be women. The Company’s written policies regarding the representation of women on the Board and the Committee’s consideration of the representation of women in the Director identification and selection process are described below. For the reasons explained, the Board and the Committee determined not to adopt specific representation targets for women on the Board.
The following chart summarizes the skills, experience and demographic diversity of the slate of Directors presented to the Shareholders for approval at the 2022 Meeting.
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Board of Directors Slate | ||||||||||||
Elaine Dorward- King | Sharon Dowdall | Diane Garrett | Thomas Kaplan | Gregory Lang | Igor Levental | Kalidas Madhav- peddi | Kevin McArthur | Clynton Nauman | Ethan Schutt | Anthony Walsh | ||
Skills and Experience | ||||||||||||
Board of Directors Experience | X | X | X | X | X | X | X | X | X | X | X | |
Mining Industry Experience (general) | X | X | X | X | X | X | X | X | X | |||
Mine Development & Operations | X | X | X | X | X | |||||||
CEO/Senior Executive Experience | X | X | X | X | X | X | X | X | X | X | X | |
Human Resources/Compensation | X | X | X | X | X | |||||||
Finance/M&A/Capital Allocation | X | X | X | X | X | X | X | |||||
Financial Literacy | X | X | X | X | X | X | X | X | X | X | X | |
Accounting (Audit Committee Financial Expert) | X | X | ||||||||||
Government/Public Policy | X | X | X | X | X | |||||||
Environmental Science/Policy/Regulation | X | X | X | |||||||||
Risk Management | X | X | X | X | X | |||||||
Corporate Governance | X | X | X | X | X | X | X | X | X | X | X | |
Native Alaskan/Yupik Culture | X | X | ||||||||||
Alaska Politics | X | |||||||||||
Board Tenure | ||||||||||||
Years | 2 | 10 | 4 | 11 | 10 | 12 | 15 | 0 | 23 | 3 | 10 | |
Gender | ||||||||||||
Male | X | X | X | X | X | X | X | X | ||||
Female | X | X | X | |||||||||
Non-Binary | ||||||||||||
Age | ||||||||||||
Years Old | 64 | 69 | 62 | 59 | 67 | 66 | 66 | 67 | 73 | 48 | 70 | |
Race / Ethnicity | ||||||||||||
African American/Black | ||||||||||||
Asian, Hawaiian, or Pacific Islander | ||||||||||||
Indian/South Asian | X | |||||||||||
White/Caucasian | X | X | X | X | X | X | X | |||||
Hispanic/Latino | ||||||||||||
Native American/Alaskan Native | X | |||||||||||
Jewish | X | X | ||||||||||
Other | ||||||||||||
Board Diversity, Equity and Inclusion Policy
In January 2022, the Board adopted a Diversity, Equity and Inclusion Policy (the “DEI Policy”) to formalize a framework for inclusion and to promote diversity in the Board of the Company. The DEI Policy states that diversity, for purposes of Board composition, includes, but is not limited to, business and industry skills and experience, gender, ethnicity, and age. The DEI Policy also sets out the Board’s principles and a process to achieve the Board’s diversity aspirations. A copy of the Board Diversity, Equity and Inclusion Policy can be found on the Company website at: www.novagold.com under the Governance tab.
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Board Nomination Process
The Corporate Governance and Nominations Committee’s Charter mandates that the Committee consider the following attributes of candidates for the Board: “(1) relevant knowledge and experience in areas including mining, business, finance, accounting, international business, government, and technology; (2) personal qualities of leadership, character, judgment and whether the candidate possesses a reputation in the community at large of integrity, trust, respect, competence and adherence to the highest ethical standards; (3) diversity in ethnicity, race, gender, age, and cultural background; and (4) whether the candidate is free of conflicts and has the time required for preparation, participation and attendance at meetings.” (Emphasis added.) The importance of diversity is incorporated in the Committee’s annual assessment of the long-term plan for the composition of the Board that considers: “the current strengths, competencies, skills and experience of the Board members; diversity in experience, race, ethnicity, gender, age, and cultural background; length of service and potential retirement; and the strategic direction of the Company.” (Emphasis added.)
In January 2015 the Board adopted an amendment to the Committee’s Charter which provides:
Consistent with the objective of ensuring gender diversity, for every open Board position at least one-half of the candidates recommended by the Committee for consideration by the Board shall be female.
The Board believes that these written policies with regard to gender diversity on the Board are consistent with its objective of ensuring that the Board comprises the necessary range of background, experience, values and perspectives to optimize the Company’s opportunities for success. The additional commitment to recommending at least 50% female candidates for Board consideration in the ongoing process of refreshing the Board will ensure that a sufficiently gender diverse list of potential candidates is considered without compromising the Board’s fundamental commitment to make an objective assessment of who is the best person to fill a vacancy on the Board. Accordingly, the Board determined not to set targets for the percentage of women, or other aspects of diversity, on the Board.
Board Renewal
The topic of director term limits was discussed by both the Corporate Governance and Nominations Committee (referred to in this section as the “Committee”) and the Board. The Board has not adopted any director term limits. With regard to the nomination of directors, the Board notes that the Committee’s Charter mandates that the Committee annually “develop and update a long-term plan for the composition of the Board . . . and report to the Board thereon.” This process shall include a “review [of] the desired experience, mix of skills and other qualities to assure appropriate Board composition, taking into account the current Board members and the specific needs of the Company and the Board.” Included among the criteria to be considered by the Committee in this annual evaluation is the “length of service and potential retirement” of current Directors.
In addition, the Committee regularly conducts a Board self-assessment process with the assistance of outside legal counsel which provides each Director with the opportunity to assess how the Board is functioning and to make suggestions for improvements. The assessment process expressly addresses the organization and management of the Board, including its overall composition as well as the composition of each committee; the conduct of Board meetings, including management’s preparation for and participation in those meetings; the clarity and appropriateness of each Board committee’s charter; the performance of the Board with respect to a broad range of functions, including appointment and oversight of management, development and implementation of the Company’s business strategies, risk management, and regulatory reporting compliance; and Board compensation. The most recent of these assessments was completed in January 2022, and the Board discussed the results of the assessment at its January 2022 meeting to determine what action, if any, could further enhance the operations of the Board and its committees.
The Board is committed to regular evaluations of its composition, organization, operations, and effectiveness. The Board concluded that these governance processes are a more appropriate manner in which to ensure proper Board composition and function than adopting a mandatory tenure or retirement age policy.
What changed in 2021? The Committee continued a search for Board candidates with the assistance of a third-party executive search firm. The Committee focused on searching for candidates with expertise in large scale mining operations, engineering or technical skills relevant to mining. As described above, the Board adopted a Board Charter and a Board Diversity, Equity and Inclusion Policy, both of which inform the candidate search and selection process.
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What is changing in 2022? The Committee continued its search for Board candidates with the assistance of a third-party executive search firm. The Committee focused on searching for candidates with expertise in large scale mining operations, engineering or technical skills relevant to mining, as well as senior executive experience. The Committee considered a number of prospective candidates of both genders, and the Board unanimously nominated Kevin McArthur to stand for election to the Board at the Meeting. A biography for Mr. McArthur appears in the section on page 21 above titled “Information Concerning The Board Of Directors, Director Nominees, And Executive Officers.” The Board is also asking Shareholders to approve a Board size of eleven Directors to accommodate the slate of Directors nominated by the Board to stand for election at the Meeting. If the slate of Directors nominated by the Board is elected by the Shareholders, 27% of the Board, or three of eleven Directors, will be women.
One of the five Company executives at the level of Vice President and above, or 20% of Company executives, is female. Overall, of the Company’s thirteen employees as of March 10, 2022, six, or 46%, are women, and one of the thirteen, or 8%, self-identifies as a member of a racial or ethnic minority. The Company’s written policies regarding the representation and selection of women at the Company and executive level are described below. For the reasons explained, the Board and the Company determined not to adopt specific representation targets for women at the executive level.
Management Diversity, Equity and Inclusion Statement
Empowering every employee to be their best, affording every employee the opportunity to make a difference, and giving every employee a chance to be heard are core Company values. Selection of individuals for executive and other positions with the Company is guided by the Company’s Diversity, Equity and Inclusion Statement (provided below), and the Company’s policy which prohibits discrimination and harassment in any aspect of employment based on race, color, religion, ancestry, national origin, ethnicity, age, gender, pregnancy, genetic information (including of a family member), marital status, parenthood, disability, veteran status, sexual orientation, gender identity, gender expression or other protected status. The Company’s Board and management acknowledge the importance of all aspects of diversity including gender, race, ethnic origin, business skills and experience, because it is right to do so and because it is good for our business. When considering candidates for executive positions, the Board’s evaluation takes into account the broadest possible assessment of each candidate’s skills and background with the overriding objective of ensuring that the Company has the appropriate balance of skills, experience, and capacity that the Company needs to be successful. In the context of this overriding objective, the Company has determined not to set targets for the percentage of women, or other aspects of diversity, in executive officer positions.
During 2021, Company management adopted the following Diversity, Equity and Inclusion Statement applicable to employees:
NOVAGOLD RESOURCES INC. (“NOVAGOLD”) is committed to fostering, cultivating, and preserving a culture of diversity, equity and inclusion.
Our employees are one of the most valuable assets we have. The collective sum of the individual differences, life experiences, knowledge, inventiveness, innovation, self-expression, unique capabilities, and talent that our employees invest in their work represents a significant part of our culture, reputation, and NOVAGOLD’s achievements.
NOVAGOLD is dedicated to creating an inclusive work environment for everyone. We embrace and celebrate the unique experiences, perspectives, and cultural backgrounds that each employee brings to our workplace. NOVAGOLD strives to foster an environment where our employees feel respected, valued and empowered, and our team members are at the forefront in helping us promote and sustain an inclusive workplace.
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NOVAGOLD’s diversity initiatives are applicable—but not limited—to our practices and policies on recruitment and selection; compensation and benefits; professional development and training; promotions; and the ongoing development of a work environment built on the premise of gender and diversity equity. To that end, we seek out qualified diverse candidates to encourage them to apply for open positions, either from within or outside of the company. We also seek out opportunities to develop a pipeline of qualified diverse candidates in a particular profession when we are unable to find them ourselves.
We encourage:
§ | Respectful communication and cooperation among all employees. |
§ | Teamwork and employee participation, fostering the representation of all employee perspectives. |
§ | Work/life balance through flexible work schedules to accommodate employees’ varying needs. |
§ | Learning about and, where appropriate, providing assistance in the communities near NOVAGOLD’s projects to promote a greater understanding and respect for diversity in those communities. |
Employees who believe they have been subjected to any kind of discrimination that conflicts with the company’s diversity policy and initiatives should seek assistance from a supervisor or an HR representative.
In response to concerns raised by some Shareholders during the post-proxy season engagement campaign held following the 2017 Meeting, the Board adopted a policy in January 2018 to limit the number of outside public company boards on which Company directors may serve. The Board Service Policy provides that Company directors who serve as the CEO of a public company may serve only on NOVAGOLD’s Board and on one other public company board (presumably the board of the company where they serve as CEO). Company Directors who do not serve as the CEO of a public company may serve on no more than four public company boards in addition to serving on NOVAGOLD’s Board. The Board Service Policy allows the Governance and Nominations Committee to consider whether there are factors related to an incumbent Director’s or candidate’s other board or executive obligations that warrant a waiver of the limitations established by the Board Service Policy. Any such waiver must be approved by the Board. All Company Directors and nominees are in compliance with the Board Service Policy. A copy of the Board Service Policy can be found on the Company website at: www.novagold.com under the Governance tab.
The Board has adopted an Insider Trading Policy applicable to all Directors and employees. The Insider Trading Policy prohibits Directors and employees from trading in the Company’s securities during blackout periods and while in possession of material, non-public information about the Company. It also discusses requirements applicable to Directors and certain officers regarding obligations to report their transactions in the Company’s securities. A copy of the Insider Trading Policy can be found on the Company website at: www.novagold.com under the Governance tab.
Anti-Corruption, Anti-Bribery, Anti-Fraud Policy
The Company is committed to protecting its reputation, revenues, assets and information from corruption, bribery, fraud, deceit or other improper conduct by directors, officers, employees or agents. The Board has adopted a Code of Business Conduct and Ethics (described in the section titled “Ethical Business Conduct” above) which embodies NOVAGOLD’s commitment to conduct its business in accordance with all applicable laws, rules and regulations and the highest ethical standards. The Anti-Corruption, Anti-Bribery, Anti-Fraud Policy sets out NOVAGOLD’s expectations and requirements relating to the prohibition, recognition, reporting, and investigation of suspected corruption, bribery, fraud, deceit, or other improper conduct. A copy of the Anti-Corruption, Anti-Bribery, Anti-Fraud Policy is available on the Company website at: www.novagold.com under the Governance tab.
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Anti-Hedging and Anti-Pledging Policy
Pursuant to our Insider Trading Policy, Directors and all employees, including our executive officers, are prohibited from engaging in hedging transactions with respect to our securities. The policy’s prohibition applies broadly and is not limited to certain types of hedging transactions. In addition, holding our securities in margin accounts or otherwise pledging our securities for a loan are also prohibited.
Executive Compensation Clawback Policy
In response to concerns about the lack of a Company clawback policy raised by some shareholders during the post-proxy season engagement campaign held following the 2017 Meeting, the Board adopted an Executive Compensation Clawback Policy in November 2017. The policy states that in the event the Company is required to prepare an accounting restatement of its financial statements due to material noncompliance with any financial reporting requirement under the securities laws, at the Board’s direction, the Company will seek to recover any incentive compensation awarded or paid to an NEO for a fiscal year if the result of a performance measure upon which the award was based or paid is subsequently restated or otherwise adjusted in a manner that would reduce the size of the award or payment. Prior to the adoption of this policy, the Company was waiting for the SEC to issue a final clawback rule before it adopted a clawback policy; however, the SEC has not issued a final rule. Therefore, the Company opted to adopt a policy in response to shareholder concerns. A copy of the Executive Compensation Clawback Policy can be found on the Company website at: www.novagold.com under the Governance tab.
NOVAGOLD is committed to having a positive influence in the communities where we operate, which includes ensuring that we respect human rights. Accordingly, the Board has adopted a Human Rights Policy. The policy acknowledges that the primary duty to protect and secure human rights rests with government. NOVAGOLD accepts and embraces the duty of business to respect human rights as defined in Universal Declaration of Human Rights, the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, the United Nations Global Compact and the United Nations Guiding Principles on Business and Human Rights. NOVAGOLD has identified seven areas of salient human rights risks associated with our business activities and relationships. NOVAGOLD identified these risks based on management’s experience in the gold mining industry, through engagement with stakeholders potentially affected by our operations, and through interaction with the Native Alaskan people who own, occupy, or use the lands on which our Donlin Gold project is located and lands that may otherwise be impacted by the project. A complete copy of the Human Rights Policy is available on the Company website at: www.novagold.com under the Governance tab.
Environmental, Social and Governance Matters
NOVAGOLD recognizes the importance of considering environmental, social and governance (ESG) issues as we develop the Donlin Gold project in conjunction with Barrick, Donlin Gold LLC, Calista Corporation (“Calista”) and The Kuskokwim Corporation (TKC), and as we operate the Company on a day-to-day basis for the benefit of our Shareholders, our employees and our other stakeholders. In addition to other items described in this Circular, below are some of the actions the Company is taking to meet these commitments:
· | Our Board has established the Environment, Health, Safety, Sustainability and Technical Committee (the “EHSS Committee”) comprised of Directors with knowledge and experience in the areas of environmental stewardship and compliance, social license, worker safety and technical expertise in the permitting, planning, development, and operation of large mines. While the Board is ultimately responsible for oversight of the Company’s ESG performance, the EHSS Committee reviews the Company’s environmental and social progress and performance at every EHSS Committee meeting and provides strategic direction to management on these matters. The EHSS Committee provides a report at each regular Board meeting. |
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· | NOVAGOLD actively participates in the development and implementation of the Donlin Gold LLC Community Development and Strategic Plan, which includes guiding principles around establishing trust and key initiatives to educate and engage stakeholders, invest in communities, and monitor and evaluate the environment in the Y-K region in conjunction with Donlin Gold LLC’s Native Corporation partners, Calista and TKC. Donlin Gold LLC’s strategic investment priorities in the Y-K region include: 1) environmental concerns & stewardship; 2) community and economic development; 3) cultural traditions; 4) education and workforce development; 5) health, safety & wellness; and 6) community and partner engagement. NOVAGOLD assists Donlin Gold LLC with their overall community outreach planning and execution. NOVAGOLD also provides support to Donlin Gold LLC to emphasize local hire of individuals and suppliers for the project in accordance with Donlin Gold LLC’s agreements with Calista and TKC. |
· | NOVAGOLD focuses on the health and safety of our employees and those at Donlin Gold LLC, including contractors. Donlin Gold LLC also invests in community safety programs in the Y-K region. Our goal is zero lost time incidents in 2022 at Donlin Gold, and to accomplish that we work with Donlin Gold LLC to develop and implement comprehensive health and safety training programs for all Donlin Gold LLC employees and contractors prior to any field program start-up, and we continuously monitor and report on the effectiveness of the programs, including Donlin Gold LLC and contractor safety performance. |
· | NOVAGOLD supports a project development plan for Donlin Gold that considers risks and opportunities in all phases: exploration, development, operation, and closure and reclamation. We work with local communities and Calista and TKC, who offer a wealth of traditional knowledge about the local environment, which we incorporate into the development of the location, layout and design of the project infrastructure to avoid sensitive and culturally important habitats, resources and landscapes while enhancing the project’s efficiencies. |
· | NOVAGOLD continues to work with Donlin Gold LLC to improve environmental conditions in the Y-K region. In 2022 we will continue to work with Donlin Gold LLC to build upon the successful, annual initiative to remove hazardous waste from villages in the Y-K region and dispose of the waste safely. We will also invest in a range of other environmental and infrastructure projects in villages throughout the Y-K region. |
· | At NOVAGOLD, we will continue to engage with our Shareholders, consider their perspectives, and make changes to our practices as appropriate when it comes to corporate governance matters. |
· | We will continue to offer NOVAGOLD’s employees benefits that enable them to stay healthy, maintain a work-life balance, and plan for retirement. These benefits currently include: i) comprehensive health and wellness benefits, ii) retirement savings programs, iii) life insurance and income protection benefits, iv) holiday and time-off benefits, v) flexibility to help balance work and family responsibilities, vi) opportunities to develop professional skills and knowledge, and vii) opportunities to become NOVAGOLD shareholders through our employee stock purchase plan, PSU plan and Stock Award plan. |
Climate Change and Carbon Footprint Considerations
NOVAGOLD recognizes that climate change is underway and could potentially pose risks to the Company’s project. NOVAGOLD also recognizes that the Donlin Gold project must be constructed and operated in an efficient manner that not only ensures compliance with our project permits but minimizes the impact to the environment. At present, NOVAGOLD does not have any mines under construction or in operation; however, as part of our planning for eventual construction and operation we do consider how climate change might impact our assets under development and how we can minimize our carbon footprint. The Donlin Gold project received a Record of Decision from the U.S. Army Corps of Engineers (the “Corps”) and the U.S. Bureau of Land Management in August 2018. The Corps issued a final Environmental Impact Statement for Donlin Gold in April 2018 that includes a thorough environmental analysis of the project and addressed comments from the public concerning potential impacts of climate change on the project and its impact on the environment. Both documents are available for review at www.donlingoldeis.com.
NOVAGOLD is committed to providing fair and equal access to information that may affect the investment decisions of security holders and the public. The goal of the Corporate Disclosure Policy is to raise awareness of the Company’s approach to disclosure, to promote compliance among the Board, management, employees, consultants and any other insiders, and to ensure that NOVAGOLD’s disclosure practices remain consistent at all levels. The Corporate Disclosure Policy was adopted to ensure that all communications to shareholders and the investing public about the Company and its subsidiaries are: a) complete, factual, accurate and timely, and b) broadly disseminated in accordance with all applicable legal and regulatory requirements.
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In 2018, the Board approved an update to the policy, which most notably includes a section that provides a framework for Board member engagement with Company security holders. A copy of the Corporate Disclosure Policy can be found on the Company website at: www.novagold.com under the Governance tab.
Other Board Committees – EHSS and Technical; Corporate Communications
In addition to the Audit Committee, Compensation Committee, and Corporate Governance and Nominations Committee, the Board has also established the EHSS and Technical Committee and the Corporate Communications Committee. The EHSS and Technical Committee’s objective is to provide oversight for the development, implementation and monitoring of the Company’s health, safety, environmental, and sustainability policies, including the Company’s ESG performance and disclosures, in addition to overseeing the technical aspects of the Company’s projects. The Corporate Communications Committee has general responsibility for all regulatory disclosure requirements and for overseeing the Company’s disclosure practices in accordance with its Corporate Disclosure Policy and shall, together with management, be primarily responsible for the preparation of all press releases, investor presentations and other corporate communication materials. Special committees are appointed from time to time with respect to specific matters.
The Corporate Governance and Nominations Committee, with the assistance of outside counsel, circulates a Board assessment questionnaire to all Directors requesting information about the effectiveness of the Board and each committee, as well as about the interaction between the Board and Company management. The assessment expressly addresses the organization and management of the Board, including its overall composition as well as the composition of each committee; the conduct of Board meetings, including management’s preparation for and participation in those meetings; the clarity and appropriateness of each Board committee’s charter; the performance of the Board with respect to a broad range of functions, including appointment and oversight of management, development and implementation of the Company’s business strategies, risk management, and regulatory reporting compliance; and Board compensation. The questionnaire also requests evaluation of the competencies and skills each Director is expected to bring to their particular role on the Board or on a committee, as well as any other relevant facts. Completed assessment questionnaires are returned to the Company’s outside counsel to protect the anonymity of the responder, thus encouraging honest and open responses. Outside counsel presents a summary of the questionnaire responses to the Corporate Governance and Nominations Committee Chair, and then presents the summary to the Board and management as appropriate. The most recent Board assessment was completed in January 2022.
The Board is responsible for selecting and appointing executive officers and senior management and for monitoring their performance. The performance of senior management is measured annually against pre-set objectives. The Corporate Governance and Nominations Committee is responsible for overseeing the development and implementation of a process for assessing the effectiveness of the Board, its committees and its members.
See “Matters to be Acted Upon at Meeting – Election of Directors” for a description of the Company’s Majority Voting Policy.
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Compensation Committee Interlocks and Insider Participation
The Board has a Compensation Committee, as more fully described under the heading “Compensation Discussion and Analysis”.
None of the Compensation Committee members is or has been an executive officer or employee of the Company or any of its subsidiaries. No executive officer of the Company is or has been a director or member of the compensation committee of another entity having an executive officer who is or has been a director or a member of the Compensation Committee of the Company.
Shareholder Communication with the Board
Shareholders who are interested in communicating directly with members of the Board, or the Board as a group, may do so by writing directly to the individual Board member or to the Board generally c/o Blake, Cassels & Graydon LLP, Attn: Corporate Secretary, NOVAGOLD RESOURCES INC., Suite 2600, 595 Burrard Street, Three Bentall Centre, Vancouver, British Columbia, Canada, V7X 1L3. The Company's Secretary will forward communications directly to the appropriate Board member. If the correspondence is not addressed to a particular Board member, the communication will be forwarded to a Board member to bring to the attention of the Board. The Company's Secretary will review all communications before forwarding them to the appropriate Board member. The Board has requested that items unrelated to the duties and responsibilities of the Board, such as junk mail and mass mailings, business solicitations, advertisements and other commercial communications, surveys and questionnaires, and resumes or other job inquiries, not be forwarded.
Management is not aware of any matters to come before the Meeting other than those set forth in the Notice of Meeting. If any other matter properly comes before the Meeting, it is the intention of the person named in the proxy to vote the shares represented thereby in accordance with their best judgment on such matter.
Additional information relating to the Company is available on the Company’s website at www.novagold.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The Company will furnish to Shareholders, free of charge, a hard copy of the Company’s financial statements and management’s discussion and analysis and/or a hard copy of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2021, upon request to Investor Relations at NOVAGOLD RESOURCES INC., 400 Burrard Street, Suite 1860, Vancouver, British Columbia, V6C 3A6, Canada, Telephone 604-669-6227, Toll-Free 866-669-6227, Fax 604-669-6272. Financial information is provided in the Company’s annual financial statements and management’s discussion and analysis for its most recently completed fiscal year.
There are no other material facts to the knowledge of the Board relating to the matters for which this Circular is issued which are not disclosed herein.
Pursuant to the rules of the SEC, shareholder proposals intended to be presented at the 2023 annual meeting of the Shareholders of the Company, and to be included in the Company’s proxy materials for the 2023 annual meeting of the Shareholders of the Company, must be received by us at our office in Vancouver, British Columbia by no later than November 25, 2022, which is approximately 120 calendar days before the anniversary date on which our Circular was released to Shareholders in connection with this year's annual meeting of the Shareholders of the Company, if such proposals are to be considered timely. If the date of the next annual meeting is changed by more than 30 days from the anniversary date of this year’s annual meeting of the Shareholders of the Company, then the deadline to submit a proposal to be considered for inclusion in next year’s proxy circular and form of proxy, is a reasonable time before we begin to print and mail proxy circular materials. The inclusion of any shareholder proposal in the proxy materials for the 2023 annual meeting of the Shareholders of the Company will be subject to the applicable rules of the SEC, including, but not limited to, Rule 14a-8 promulgated under the Exchange Act.
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The Company’s Articles do not provide a method for a shareholder to submit a proposal for consideration at the 2023 annual general meeting of the Shareholders. However, the BCBCA, in Part 5, Division 7, “Shareholder Proposals”, sets forth the procedure by which a person who:
a) | is a registered owner or beneficial owner of one or more shares of the Company that carry the right to vote at general meetings; and | |
b) | has been a registered owner or beneficial owner of one or more such shares for an uninterrupted period of at least 2 years before the date of the signing of the proposal, |
may submit a written notice setting out a matter that the submitter wishes to have considered at the next annual general meeting of the Company (a “proposal”).
The BCBCA also sets out the requirements for a valid proposal and provides for the rights and obligations of the Company and the submitter upon a valid proposal being made. In general, for a proposal to be valid, it must be:
· | supported in writing by holders of shares that, in the aggregate, either (i) constitute at least 1% of the issued shares of the Company that carry the right to vote at general meetings; or (ii) have a fair market value of C$2,000; |
· | accompanied by a declaration containing certain prescribed information; and |
· | submitted to the registered office of the Company at least three months before the anniversary of the Company’s last annual general meeting. |
Pursuant to the advance notice provisions of the Articles of the Company, shareholder director nominations must be made not less than 30 days prior to the date of an annual meeting, or if the Company has implemented “notice-and-access” (as defined in National Instrument 54-101) for the meeting, not less than 40 days prior to the date of the annual meeting; provided, however, that in the event that the annual meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made, notice of a shareholder director nomination may be made not later than the close of business on the tenth day following such public announcement. To comply with the universal proxy rules, once effective, shareholders who intend to solicit proxies for shareholder director nominations must provide notice that sets forth the information required by Rule 14a-19 under the Securities Exchange Act of 1934, as amended, no later than March 19, 2023. Shareholder director nominations must be made by a registered owner or beneficial owner of shares of the Company entitled to vote at the annual meeting. The notice of a shareholder director nomination must be delivered to the Company Secretary in writing and must contain certain prescribed information as specified in the Company’s Articles.
The SEC’s rules permit the Company to deliver a single set of proxy materials to one address shared by two or more Shareholders. This practice, known as “householding,” is intended to reduce the Company’s printing and postage costs. The Company has delivered only one set of proxy materials to shareholders who hold their shares through a bank, broker or other holder of record and share a single address, unless the Company has received contrary instructions from any Shareholder at that address. However, any such street name holder residing at the same address who wishes to receive a separate copy of the proxy materials may make such a request by contacting the bank, broker or other holder of record, or Broadridge Financial Solutions, Inc. at (866) 540-7095, or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. Street name holders residing at the same address who would like to request householding of Company materials may do so by contacting the bank, broker or other holder of record, or Broadridge at the phone number or address listed above.
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The foregoing contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. The contents and the sending of the Circular have been approved by the Board.
By Order of the Board of Directors of
NOVAGOLD RESOURCES INC.
Gregory A. Lang
President and Chief Executive Officer
Vancouver, British Columbia
March 25, 2022
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