Each of the options granted has a six-year term, subject to earlier termination upon the occurrence of certain events related to termination of employment, as specified in the Options Grant Agreement. One-third of the options become exercisable on each of the first, second and third anniversaries of the date of grant, subject to the terms of the Option Grant Agreement. The options will continue to vest upon the Retirement (as that term is defined in the Option Grant Agreement) of the recipient at any time after December 14, 2022 and prior to June 14, 2025, and will vest 30 days after the recipient’s service with Canopy terminates due to the recipient’s death or Disability (as that term is defined in the Option Grant Agreement). The exercise price of each option is CAD$4.84, which is equal to the five-day volume-weighted average price of the Common Shares on the Toronto Stock Exchange for the five trading days prior to the grant date of June 14, 2022.
The foregoing discussion of the Option Grant Agreement is qualified in its entirety by reference to the Option Grant Agreement, which is incorporated herein by reference.
Performance Share Unit Grants
The number of PSUs issued will be based on two metrics: Relative Total Shareholder Return (“RTSR”) against a custom group of cannabis industry peers approved by the Board and Adjusted EBITDA performance against predetermined targets established and recommended by the CGCN Committee and approved by the Board (as set forth below), with each weighted at 50%. The performance periods for each metric will consist of three one-year periods (fiscal year 2023, fiscal year 2024 and fiscal year 2025) and a three-year cumulative period beginning on April 1, 2022 and ending on March 31, 2025, each measured independently of one another. The PSUs will cliff vest after three years from the date of grant and the number of units vesting will vary based on performance over the defined performance periods relative to Board-approved performance targets. The following table sets forth information regarding target awards to the named executive officers identified below:
| | | | |
| Name | | Target
Number of
PSUs | |
David Klein Chief Executive Officer | | | 498,938 | |
Judy Hong Chief Financial Officer | | | 151,600 | |
Julious Grant Chief Commercial Officer | | | 203,797 | |
Pursuant to the terms of the PSUs, for each of the persons in the table above, the minimum PSU award is equal to 50% of the target number of PSUs, and the maximum PSU award is 150% of the target number of PSUs. Unvested PSUs are subject to forfeiture upon the occurrence of certain events related to termination of employment, as specified in the applicable award agreement. A participant may vest in his right to receive the applicable number of PSUs if the participant remains in continuous employment with the Company or any of its subsidiaries until June 14, 2025. In the event a U.S. resident recipient of PSUs retires (as the term “Retirement” is defined in the applicable award agreement) at any time after December 14, 2022 and prior to June 14, 2025, vested awards are payable on a pro rata basis (as set forth in the applicable award agreement). For U.S. residents, PSUs will vest 30 days after the recipient’s service with Canopy terminates due to the recipient’s death or Disability (as that term is defined in the applicable award agreement), subject to the terms of the applicable award agreement.
Amendment to Employment Agreement and Service Delivery Agreement
As of June 14, 2022, the Board amended the employment agreement of Mr. Klein and the service delivery agreement of Mr. Grant (the “Agreement Amendments”) as follows.
