Exhibit 99.2
LI-CYCLE HOLDINGS CORP.
NOTICE OF MEETING AND
MANAGEMENT INFORMATION CIRCULAR
FOR THE ANNUAL GENERAL AND SPECIAL MEETING
OF SHAREHOLDERS OF LI-CYCLE HOLDINGS CORP.
TO BE HELD ON APRIL 28, 2022
March 8, 2022
DEAR SHAREOWNER:
We are pleased to provide you with our inaugural annual shareholder letter, following our listing as a public company on the New York Stock Exchange on August 11, 2021.
OUR STORY. By way of background, prior to founding Li-Cycle, we both worked as engineers supporting the development of lithium and associated battery material production facilities. Our time working in industry led us to the recognition of a glaring hole in the future of our increasingly electrified economy. That hole was the lack of an environmentally and economically sustainable solution for recycling lithium-ion batteries for the recovery of critical battery materials to ensure a sustainable future for our planet. We established Li-Cycle in 2016 with the mission of solving this growing global recycling and resource recovery dilemma, with the intent of generating a net positive environmental impact and financial success through a focus on People, Planet, Profit. At Li-Cycle, we are revolutionizing the battery supply industry through the implementation of a disruptive alternative to traditional mining and pyrometallurgical processing. Combining “urban mining” and Li-Cycle’s innovative, IP-protected Spoke & Hub Technologies™, we recover critical battery materials in an environmentally sustainable manner.
2021 WAS A LANDMARK YEAR FOR LI-CYCLE. We are extremely thankful for and proud of our team’s achievements and successful execution. Li-Cycle has emerged as a leading and sustainable solution provider of battery recycling and resource recovery, supporting the transition to a new energy economy, including electric vehicles (EVs).
OUR HSEQ VALUES. At the heart of Li-Cycle’s culture is a focus on Health, Safety, Environment and Quality (HSEQ). We successfully implemented and leveraged an Incident Management System across our rapidly growing operations. Sustainability is core to our business of battery recycling and resource recovery, using technology to ensure our network of Spoke & Hub operations will have minimal environmental footprint, while avoiding meaningful solid waste streams to landfill, wastewater discharge, and air emissions.
OUR ROLE IN THE ELECTRIFICATION ECOSYSTEM. The climate crisis is driving the acceleration of the adoption of electric vehicles and increased government regulations. To secure market share of future EV sales, incumbent and emerging global automotive original equipment manufacturers (OEMs)
are making significant capital investments in the lithium-ion battery mega-factory supply chain in both North America and Europe. In North America, mega-factory investments are now expected to surpass 500 gigawatt-hours (GWh) of capacity by 2025 from an estimated 45 GWh in 2021.1 In Europe, EV penetration and battery manufacturing are also expected to accelerate from approximately 37 GWh to more than 900 GWh by 2030.1 This acceleration of cell, module and pack manufacturing is increasing the need for battery scrap recycling. With 5% to 10% of lithium-ion battery manufacturing volumes typically rejected, the addressable market of manufacturing scrap in North America and Europe is expected to reach approximately 355,000 tonnes to 715,000 tonnes.
OUR GROWTH STRATEGY. We have strategically positioned our Spoke & Hub network to focus on customer needs in North America and Europe, while working opportunistically with key partners in the Asia Pacific region. We expect to be a leading provider of battery materials with our stated 2025 integrated Spoke & Hub network target. We are locating our sites close to battery production facilities and other demand centers, while also ‘baseloading’ with manufacturing scrap that will underpin returns on our capital investment. This year we have made progress toward a target annual processing capacity at our Spokes of at least 100,000 annual tonnes of lithium-ion battery equivalent input (~20 GWh of battery materials). As for our Hubs, we are planning on a global network with at least 220,000 annual tonnes of lithium-ion battery equivalent input (~45 GWh of battery materials).
OUR COMMERCIAL ADVANTAGE. In both North America and Europe, we have successfully secured key battery supply and off-take commercial agreements. On the supply side, our IP-protected processing technology is battery chemistry agnostic, allowing us to increase and diversify the number of battery supply sources to ~85 customers. Comprising end-of- life battery and manufacturing scrap sources, we have built key relationships across the supply chain including battery manufacturers, EV OEMs, service providers to EV OEMs and consumer electronics recyclers. On the off-take side, all of the black mass production at our existing Spokes is fully contracted, as are the key battery materials to be produced by our Rochester Hub.
1 | Source: December 2021 BMI, Company announcements and Li-Cycle estimates. |
OUR OPERATIONAL PROGRESS. Li-Cycle’s business model can scale efficiently with growth in customer demand. Our Spoke technology is capital-light, has a small footprint, and is replicable in a modular build fashion. We have made significant operational progress, with Spoke processing capacity currently totaling up to 65,000 tonnes in operation, construction or advanced development. Our Kingston and Rochester Spokes are fully operational, Arizona is currently being commissioned and Alabama is on track for operation in 2022. We are also in advanced development for three additional Spokes in 2023. The Ohio Spoke is to be co-located on Ultium Cells, LLC’s battery manufacturing site, and the Norway and Germany Spokes are strategically planned close to demand centers. Importantly, we commenced construction of our Rochester Hub, the first hydrometallurgical facility for post-processing materials from lithium-ion batteries in North America. As compared with incumbent pyrometallurgical processing, we expect our Hub facility to have higher resource recovery, lower capital intensity, a smaller environmental footprint, and greater employee safety. On track for commissioning in 2023, our Rochester Hub facility will produce critical battery materials, including nickel sulphate, lithium carbonate, and cobalt sulphate.
OUR STRATEGIC PARTNERSHIPS. We have entered into long-term strategic partnerships with two leading global participants, validating the Li-Cycle business model and technology. The first, Koch Strategic Platforms (KSP), invested $100 million through the purchase of a convertible note. KSP has been rapidly growing its investments related to energy transformation, specifically within the electrification ecosystem. In addition, Li-Cycle is deploying KSP’s engineering prowess in the execution of our Spoke & Hub processes, through fabrication and operational readiness support. The second, LG Chem (LGC) and LG Energy Solution (LGES), have plans to invest a total of $50 million in Li-Cycle, upon completion of commercial agreements for battery supply to our Spokes and off-take for nickel sulphate from our Rochester Hub. LGC is a leading global chemical company with expertise in active battery materials manufacturing. LGES is the largest global lithium-ion battery manufacturer for electric vehicles outside of China.
OUR FINANCIAL STRENGTH. We ended the year (October 31, 2021) with cash on hand of more than $595 million. With this strong balance sheet position, we believe we are well funded for our current pipeline of growth projects.
2021 WAS A FOUNDATIONAL YEAR FOR LI-CYCLE. We advanced the strategy and execution on our integrated Spoke & Hub business model.
• We experienced a growth inflection point in the battery materials supply chain;
• We moved strategically and expeditiously with our customers and market demand;
• We established our business model and technology with leading global participants; and
• We strengthened our balance sheet for our pipeline of growth projects.
LOOKING AHEAD IN 2022. Our leadership team is directly aligned with shareholders. Our key objectives are:
• Prioritize HSEQ at all our locations from development through operation;
• Deliver on our black mass production target of 6,500 to 7,500 tonnes in fiscal year 2022;
• Progress execution of the Rochester Hub for commissioning in 2023; and
• Maintain a strong balance sheet position.
We appreciate and are thankful for the immense support from our employees, customers and shareholders as we are Empowering a Sustainable Future through a focus on People, Planet, Profit. |
Ajay Kochhar Co-Founder, Board Director | Tim Johnston Co-Founder, Board Director |
NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING
OF SHAREHOLDERS OF LI-CYCLE HOLDINGS CORP.
To the Shareholders of Li-Cycle Holdings Corp.:
Notice is hereby given that the annual general and special meeting (the “Meeting”) of the holders (the “Shareholders”) of common shares (the “Shares”) in the capital of Li-Cycle Holdings Corp. (the “Company”) will be held on April 28, 2022 at 8:30 a.m. (Eastern Time) via live audio webcast online at www.virtualshareholdermeeting.com/LICY2022 for the following purposes:
1. | to receive the Company’s consolidated financial statements for the fiscal year ended October 31, 2021, including the auditor’s report thereon; |
2. | to elect 7 directors of the Company who will serve until the end of the next annual shareholders meeting or until their successors are elected or appointed; |
3. | to appoint the external auditor of the Company and to authorize the Company’s board of directors to fix the auditor’s remuneration; |
4. | to consider and, if thought fit, to pass a special resolution to approve the change of the municipality in which the registered office of the Company is located from Mississauga, Ontario to Toronto, Ontario; and |
5. | to consider such other business that may properly come before the Meeting or any adjournment thereof. |
You are entitled to receive notice of, and vote at, the Meeting or any postponement(s) or adjournment(s) of the Meeting if you are a Shareholder of record on March 18, 2022 (the “Record Date”).
Meeting Materials
As permitted by Canadian securities regulators, the Company is using notice-and-access to deliver (a) its management information circular in respect of the Meeting (the “Circular”), and (b) its audited consolidated financial statements for the fiscal year ended October 31, 2021 and related management’s discussion and analysis (each of which forms part of the Company’s annual report on Form 20-F) to both its registered and non-registered Shareholders. Using notice-and-access, the Company can deliver proxy-related materials by (i) posting the Circular and other proxy related materials on a website other than sedar.com (instead of mailing them to Shareholders), and (ii) sending a notice informing Shareholders that the Circular and other proxy related materials have been posted online and explaining how to access such materials. Notice-and-access reduces the Company’s printing and mailing costs and is environmentally friendly as it reduces paper and energy consumption.
You will still receive a form of proxy or a voting instruction form in the mail, which you may use to vote your Shares but, instead of receiving a paper copy of the Circular and the Company’s annual consolidated financial statements and related management’s discussion and analysis, you will receive a notice with instructions indicating how you can access those documents
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electronically, as well as how to request a paper copy (the “Notice of Meeting”). The Circular and the Company’s consolidated financial statements for the fiscal year ended October 31, 2021 and related management’s discussion and analysis are each available at materials.proxyvote.com/50202P, on our website at https://investors.li-cycle.com/events-and-presentations/, on SEDAR at sedar.com, and on EDGAR at sec.gov.
You may request a paper copy of the Circular and the Company’s annual consolidated financial statements and related management’s discussion and analysis, at no cost to you, up to one year from the date the Circular was filed on SEDAR. You may make such a request at any time prior to the Meeting online at www.proxyvote.com or by calling Broadridge Investor Communications Corporation (“Broadridge”) at 1-877-907-7643 (Canada and U.S.). Shareholders will be asked to enter the control number indicated on the form of proxy or voting instruction form they received with the Notice of Meeting. After the Meeting, requests may be made by calling 1-877-907-7643 (Canada and U.S.). To receive the Proxy Materials in advance of the voting deadline and the Meeting date, we estimate that requests for paper copies must be received by no later than April 12, 2022. If a shareholder requests a paper copy of the Proxy Materials, please note that another form of proxy or voting instruction form will not be sent. Please retain the one received with the Notice of Meeting for voting purposes.
All Shareholders are reminded to review the Circular before voting their Shares.
Your vote is important
If you are a registered Shareholder or duly appointed proxyholder, you are entitled to vote at the Meeting online. However, even if you currently plan to participate in the webcast for the Meeting, you are encouraged to consider voting your Shares in advance, so that your vote will be counted if you later decide not to or are unable to attend the Meeting for any reason.
Voting instructions and proxyholder appointments must be received by Broadridge by 8:30 a.m. (Eastern Time) on April 26, 2022 (or, if the Meeting is adjourned or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays, before the rescheduled meeting).
Beneficial (non-registered) Shareholders who hold their Shares through a broker, investment dealer, bank, trust company, custodian, nominee or other intermediary should carefully follow the instructions of their intermediary to ensure that their Shares are voted at the Meeting in accordance with their instructions.
Only registered Shareholders and duly appointed proxyholders (including beneficial (non-registered) Shareholders who have duly appointed themselves as proxyholder) will be entitled to vote at the Meeting online. Guests will be able to attend the Meeting but will not be able to submit questions, vote their shares (if any) or otherwise participate in the Meeting. Please note that registered Shareholders and duly appointed proxyholders will need the 16-digit control number indicated on the form of proxy or voting instruction form accompanying the Notice of Meeting or the 8-character Appointee Identification Number, as applicable, in order to log on to the Meeting as “Shareholder” or “Proxyholder / Appointee”. Otherwise, they will have to log on as “Guests”. Please refer to the accompanying Circular for additional details on how to log on to the Meeting.
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If you have any questions regarding this notice, the notice-and-access procedures or the Meeting, please contact Broadridge at:
• | Canada and U.S.: 1-844-916-0609 for English and 1-844-973-0593 for French |
• | International: 1-303-562-9305 for English and 303-562-9306 for French |
Dated at Toronto, Ontario, March 8, 2022.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Carl DeLuca |
Carl DeLuca |
General Counsel and Corporate Secretary |
Li-Cycle Holdings Corp. |
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TABLE OF CONTENTS | ||||||
Page | ||||||
Notice of Annual General and Special Meeting of Shareholders of Li-Cycle Holdings Corp. | iii | |||||
Introduction | 1 | |||||
Notice to United States Shareholders | 4 | |||||
Section 1: | Voting Information | 6 | ||||
Section 2: | Business of the Meeting | 16 | ||||
1. | Receiving the Audited Annual Financial Statements | 16 | ||||
2. | Election of Directors | 16 | ||||
3. | Appointment of Auditors | 17 | ||||
4. | Change of the municipality in which the registered office of the Company is located | 18 | ||||
Section 3: | About the Director Nominees | 20 | ||||
Section 4: | Compensation Discussion and Analysis | 29 | ||||
Compensation of Executives | 29 | |||||
Compensation of Directors | 44 | |||||
Section 5: | Corporate Governance Policies and Practices | 47 | ||||
Section 6: | General and Additional Information | 60 | ||||
Schedule A – Letter from Deloitte | A-1 | |||||
Schedule B – Board Charter | B-1 | |||||
Schedule C – Audit Committee Charter | C-1 |
MANAGEMENT INFORMATION CIRCULAR
INTRODUCTION
This management information circular (the “Circular”) is furnished in connection with the solicitation of proxies by and on behalf of the management of Li-Cycle Holdings Corp. (the “Company” or “Li-Cycle”) for use at the annual general and special meeting (the “Meeting”) of shareholders of Li-Cycle (the “Shareholders”) to be held at 8:30 a.m. (Eastern time) on April 28, 2022 virtually via live audio webcast online, and at any adjournment(s) or postponement(s) thereof, for the purposes set forth in the accompanying notice of the Meeting (the “Notice of Meeting”).
No person has been authorized to give any information or make any representation in connection with the matters to be considered at the Meeting other than those contained in this Circular and, if given or made, any such information or representation must not be relied upon as having been authorized.
Meeting Information
The Meeting will be held online via live audio webcast at www.virtualshareholdermeeting.com/LICY2022.
To mitigate risks to the health and safety of our communities, Shareholders, employees and other stakeholders resulting from the public health impact of COVID-19, the Company is holding the Meeting in a virtual only format, which will be conducted via live audio webcast. All Shareholders, regardless of geographic location and equity ownership, will have an equal opportunity to participate at the Meeting and engage with directors and management of the Company. Shareholders will not be able to attend the Meeting in person.
For additional details on how to attend and participate in the Meeting, please see Section 1 - Voting Information.
Information Contained in this Circular
All information in this Circular is presented as of March 8, 2022, unless otherwise indicated.
Unless the context requires otherwise, references in this Circular to “Li-Cycle”, “we”, “us”, “our”, or “the Company” include Li-Cycle and all of its subsidiaries. Words importing the singular, where the context requires, include the plural and vice versa and words importing any gender include all genders.
Information contained on, or that can be accessed through, our website does not constitute a part of this Circular and is not incorporated by reference herein.
Explanatory Note: Completion of Business Combination with Peridot Acquisition Corp.
On August 10, 2021, Li-Cycle Corp. completed its Business Combination (as defined below) with Peridot Acquisition Corp. (“Peridot”). As part of the Business Combination, the following transactions were completed on or prior to August 10, 2021:
• | Peridot continued as a corporation existing under the laws of the Province of Ontario (the “Peridot Continuance” and Peridot, as so continued, “Peridot Ontario”), and in connection therewith, the outstanding Class A ordinary shares and Class B ordinary shares of Peridot and the outstanding warrants to purchase Class A ordinary shares of Peridot were deemed to be an equivalent number of Class A common shares, Class B common shares and warrants to purchase Class A common shares of Peridot Ontario; |
• | following the Peridot Continuance, the outstanding Class B common shares of Peridot Ontario converted into Class A common shares of Peridot Ontario on a one-for-one basis; and |
• | pursuant to a statutory plan of arrangement (the “Arrangement”) under Section 182 of the Business Corporations Act (Ontario) (the “OBCA”), among other things, (i) Peridot Ontario and Li-Cycle Holdings Corp. (the predecessor to the Company) amalgamated to form the Company, and in connection therewith, the Li-Cycle Holdings Corp. share held by Li-Cycle Corp. was exchanged for a Share of the Company, the outstanding Class A common shares and warrants to purchase Class A common shares of Peridot Ontario were exchanged for an equivalent number of common shares of the Company (the “Shares”) and warrants to purchase an equivalent number of Shares of the Company (the “Warrants”); (ii) the Share held by Li-Cycle Corp. was purchased for cancellation by the Company; (iii) the outstanding Class A preferred shares of Li-Cycle Corp. converted into, and were exchanged for, common shares of Li-Cycle Corp. on a one-for-one basis; and (iv) the Company acquired all of the issued and outstanding common shares of Li-Cycle Corp. from Li-Cycle Corp.’s shareholders in exchange for Shares of the Company having an aggregate equity value of $975 million (the Arrangement and the other transactions described above are referred to in this Circular as the “Business Combination”). |
Following the Business Combination, the Shares and Warrants were listed for trading on the New York Stock Exchange (the “NYSE”) under the symbols “LICY” and “LICY.WS”, respectively. On January 26, 2022, the Company redeemed all of the issued and outstanding Warrants.
Presentation of Financial Information
Our consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Our reporting currency is U.S. dollars.
Forward-Looking Statements
Certain statements contained in this Circular may be considered “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of
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the U.S. Securities Act of 1933, as amended, Section 21 of the U.S. Securities Exchange Act of 1934, as amended, and applicable Canadian securities laws. Forward-looking statements may generally be identified by the use of words such as “will”, “continue”, “anticipate”, “expect”, “would”, “could”, “plan”, “future” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters, although not all forward-looking statements contain such identifying words. Forward-looking statements in this Circular include but are not limited to Li-Cycle’s ability to capitalize on growth opportunities, Li-Cycle’s ability to scale the business to 100,000 tonnes per year of Spoke processing capacity and 220,000 tonnes of Hub processing capacity; the expectation to have up to 65,000 tonnes of Spoke production capacity in commissioning and operation in 2023; expected increased demand in scrap and battery recycling; the annual input capacity and production output of the Rochester Hub, its expected startup date and total capital cost; the timing of commencement of operations of the Arizona, Alabama, Ohio, Norway and Germany Spokes; and our target to meet black mass production of 6,500 to 7,500 tonnes during fiscal year 2022. These statements are based on various assumptions, whether or not identified in this Circular, which Li-Cycle believes are reasonable in the circumstances. There can be no assurance that such estimates or assumptions will prove to be correct and, as a result, actual results or events may differ materially from expectations expressed in or implied by the forward-looking statements.
These forward-looking statements are provided for the purpose of assisting readers in understanding certain key elements of Li-Cycle’s current objectives, goals, targets, strategic priorities, expectations and plans, and in obtaining a better understanding of Li-Cycle’s business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes and is not intended to serve as, and must not be relied on, by any investor as a guarantee, an assurance, a prediction or a definitive statement of fact or probability.
Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Li-Cycle, and are not guarantees of future performance. Li-Cycle believes that these risks and uncertainties include, but are not limited to, the following: Li-Cycle’s inability to economically and efficiently source, recover and recycle lithium-ion batteries and lithium-ion battery manufacturing scrap, as well as third party black mass, and to meet the market demand for an environmentally sound, closed-loop solution for manufacturing waste and end-of-life lithium-ion batteries; Li-Cycle’s inability to successfully implement its global growth strategy, on a timely basis or at all; Li-Cycle’s inability to manage future global growth effectively; Li-Cycle’s inability to develop the Rochester Hub, Arizona Spoke, Alabama Spoke and other future projects including its Ohio, Norway and Germany Spoke projects in a timely manner or on budget or that those projects will not meet expectations with respect to their productivity or the specifications of their end products; Li-Cycle’s failure to materially increase recycling capacity and efficiency; Li-Cycle may engage in strategic transactions, including acquisitions, that could disrupt its business, cause dilution to its shareholders, reduce its financial resources, result in incurrence of debt, or prove not to be successful; one or more of Li-Cycle’s current or future facilities becoming inoperative, capacity constrained or if its operations are disrupted; additional funds required to meet Li-Cycle’s capital requirements in the future not being available to Li-Cycle on commercially reasonable terms or at all when it needs them; Li-Cycle expects to incur significant expenses and may not achieve or sustain profitability; problems with the handling of lithium-ion battery cells that result in less usage of lithium-ion batteries or affect Li-Cycle’s operations; Li-Cycle’s inability to maintain and
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increase feedstock supply commitments as well as securing new customers and off-take agreements; a decline in the adoption rate of EVs, or a decline in the support by governments for “green” energy technologies; decreases in benchmark prices for the metals contained in Li-Cycle’s products; changes in the volume or composition of feedstock materials processed at Li-Cycle’s facilities; the development of an alternative chemical make-up of lithium-ion batteries or battery alternatives; Li-Cycle’s revenues for the Rochester Hub are derived significantly from a single customer; Li-Cycle’s insurance may not cover all liabilities and damages; Li-Cycle’s heavy reliance on the experience and expertise of its management; Li-Cycle’s reliance on third-party consultants for its regulatory compliance; Li-Cycle’s inability to complete its recycling processes as quickly as customers may require; Li-Cycle’s inability to compete successfully; increases in income tax rates, changes in income tax laws or disagreements with tax authorities; significant variance in Li-Cycle’s operating and financial results from period to period due to fluctuations in its operating costs and other factors; fluctuations in foreign currency exchange rates which could result in declines in reported sales and net earnings; unfavourable economic conditions, such as consequences of the global COVID-19 pandemic; natural disasters, unusually adverse weather, epidemic or pandemic outbreaks, cyber incidents, boycotts and geo-political events; failure to protect or enforce Li-Cycle’s intellectual property; Li-Cycle may be subject to intellectual property rights claims by third parties; Li-Cycle’s failure to effectively remediate the material weaknesses in its internal control over financial reporting that it has identified or if it fails to develop and maintain a proper and effective internal control over financial reporting. These and other risks and uncertainties related to Li-Cycle’s business are described in greater detail in the section entitled “Risk Factors” in its Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission and the Ontario Securities Commission in Canada on January 31, 2022. Because of these risks, uncertainties and assumptions, readers should not place undue reliance on these forward-looking statements. Actual results could differ materially from those contained in any forward-looking statement.
Currency and Exchange Rate
We express all amounts in this Circular in U.S. dollars, except where otherwise indicated. References to “$”, “US$”, “USD” or “U.S. dollars” are to U.S. dollars and references to “C$” or “CAD” are to Canadian dollars.
NOTICE TO UNITED STATES SHAREHOLDERS
Li-Cycle is a corporation organized under the laws of the Province of Ontario, Canada and is a foreign private issuer within the meaning of Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”). The solicitation of proxies for the Meeting is not subject to the proxy requirements of Section 14 of the U.S. Exchange Act, and the related regulations thereunder, by virtue of an exemption available to proxy solicitations by foreign private issuers. Accordingly, the solicitation contemplated herein is being made to U.S. Shareholders only in accordance with Canadian corporate and securities laws and this Circular has been prepared solely in accordance with disclosure requirements applicable in Canada. United States Shareholders should be aware that such requirements are different from those of the United States applicable to proxy statements under the U.S. Exchange Act. Specifically, information contained or incorporated by reference herein has been prepared in accordance with Canadian disclosure standards, which are not comparable in all respects to U.S. disclosure standards.
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In addition, as a “foreign private issuer”, we are permitted to follow certain corporate governance rules that conform to Canadian requirements in lieu of certain NYSE corporate governance rules. U.S. Shareholders should be aware that the corporate governance rules of the NYSE are different in certain respects from Canadian corporate governance requirements.
The enforcement by Shareholders of civil liabilities under the U.S. federal and state securities laws may be affected adversely by the fact that the Company is incorporated or organized outside the United States, that some of its officers and directors are residents of a country other than the United States, and that a substantial portion of the assets of the Company and such persons are located outside the United States. As a result, it may be difficult or impossible for the U.S. Shareholders to effect service of process within the United States upon the Company, its officers and directors, or to realize against them upon judgments of courts of the United States predicated upon civil liabilities under the federal securities laws of the United States or any state securities laws. In addition, U.S. Shareholders should not assume that the courts of Canada: (a) would enforce judgments of U.S. courts obtained in actions against such persons predicated upon civil liabilities under the federal securities laws of the United States or any state securities laws, or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the federal securities laws of the United States or any state securities laws.
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SECTION 1: VOTING INFORMATION
What will I be voting on?
You will be voting on:
(a) | the election of 7 directors of the Company who will serve until the end of the next annual Shareholders meeting or until their successors are elected or appointed (see page 16 of this Circular); |
(b) | the appointment of the Company’s external auditor and the authorization of the Company’s board of directors (the “Board”) to fix the auditor’s remuneration (see page 17 of this Circular); |
(c) | a special resolution to approve the change of the municipality in which the registered office of the Company is located from Mississauga, Ontario to Toronto, Ontario; (see page 18 of this Circular); and |
(d) | any other business that may properly come before the Meeting. |
The Board and management of the Company recommend that you vote FOR each of the 7 proposed nominees for election as directors of the Company; FOR the appointment of KPMG LLP as the external auditor of the Company and the authorization of the Board to fix their remuneration; and FOR the approval of the change of the municipality in which the registered office of the Company is located from Mississauga, Ontario to Toronto, Ontario.
Who is soliciting my proxy?
The management of Li-Cycle is soliciting your proxy. The Company’s management requests that you sign and return the form of proxy or voting instruction form, as applicable, so that your votes are exercised at the Meeting. The solicitation of proxies will be primarily by mail. However, the directors, officers and employees of the Company may also solicit proxies by telephone, by internet, in writing, or in person. The Company may also use the services of outside firms to solicit proxies. The cost of soliciting proxies will be borne by the Company.
Who is entitled to vote?
Only registered holders of Shares as at the close of business on March 18, 2022 (the “Record Date”), or their duly appointed proxyholders or representatives, are entitled to vote at the Meeting or any postponement or adjournment thereof. No person becoming a Shareholder after the Record Date will be entitled to vote at the Meeting or any postponement or adjournment thereof. The failure of a Shareholder to receive notice of the Meeting does not deprive the Shareholder of the right to vote at the Meeting.
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How many Shares are issued and outstanding and who are the principal Shareholders?
The authorized share capital of the Company consists of (i) an unlimited number of Shares, and (ii) an unlimited number of preferred shares, issuable in series. As at March 8, 2022, 168,891,877 Shares and no preferred shares were issued and outstanding. Each Share is entitled to one vote.
The following table sets forth the only persons who, to the knowledge of the directors and executive officers of the Company, directly or indirectly beneficially own or exercise control or direction over more than 10% of the Shares, the approximate number of Shares owned, controlled or directed by each such person and the percentage of the Shares so owned, controlled or directed as of March 8, 2022:
Name of Shareholder | Number of Shares Owned, Controlled or Directed | Percentage of Shares Owned, Controlled or Directed | ||||||
Ajay Kochhar(1) | 24,908,409 | 14.75 | % |
(1) | The number of Shares owned include 45,797 Shares owned directly by Mr. Kochhar and 24,862,612 Shares owned by 2829908 Delaware LLC, a Delaware limited liability company, which is a wholly-owned subsidiary of Maplebriar Holdings Inc., a company organized under the laws of the Province of Ontario (“Maplebriar Holdings”), having a sole shareholder, The Kochhar Family Trust, an irrevocable trust established under the laws of the Province of Ontario, Canada (the “Trust”). Mr. Kochhar is one of three trustees of the Trust, along with Mr. Kochhar’s brother and father, and the beneficiaries of the Trust are principally relatives of Mr. Kochhar. There is an oral agreement among Mr. Kochhar, the Trust, Maplebriar Holdings and 2829908 Delaware LLC that grants Mr. Kochhar the sole power to control the voting and disposition of the Shares held by 2829908 Delaware LLC. |
What are the quorum requirements for the Meeting?
The by-laws of the Company provide that one or more persons who are, or who represent by proxy, one or more Shareholders who, in the aggregate, hold at least 33 1⁄3% of the issued Shares entitled to be voted at the Meeting, constitute a quorum at any annual or special meeting of Shareholders.
How do I know if I am a registered Shareholder or a non-registered (beneficial) Shareholder?
You are a registered Shareholder if your Shares are registered directly in your name with our transfer agent, Continental Stock Transfer and Trust Company.
You are a non-registered Shareholder (also called a beneficial Shareholder) if your Shares are held in the name of a nominee (also called an intermediary), such as a securities broker, trustee, or other financial institution (an “Intermediary”).
Only registered Shareholders or duly appointed proxyholders are permitted to vote at the Meeting.
How do I attend the Meeting online?
This year’s Meeting will be a completely “virtual meeting” of Shareholders, conducted online via live audio webcast. Shareholders will not be able to attend the Meeting in person. In order to participate online in real-time, submit questions and vote at the Meeting, Shareholders and duly appointed proxyholders must follow the instructions below.
The steps you need to follow to participate and vote at the Meeting will depend on whether you are a registered Shareholder or a non-registered Shareholder.
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Registered Shareholders | Non-Registered Shareholders | Proxyholders (including non-registered | ||
If you are a registered Shareholder, you will receive a form of proxy containing the relevant details concerning the business of the Meeting, including a control number that must be used to vote by proxy in advance of the Meeting or join the live audio webcast on the day of the Meeting.
If you wish to participate and vote at the Meeting, do not complete the form of proxy, and instead, follow these steps:
First, log into www.virtualshareholder meeting.com/LICY2022 15 minutes before the Meeting starts. You should allow ample time to check into the virtual Meeting and to complete the related procedures.
Second, enter the control number included on your form of proxy into the “Shareholder Login” section and click “Enter Here”.
Third, follow the instructions to access the Meeting, and vote when prompted. | If you are a non-registered Shareholder and wish to participate and vote at the Meeting yourself:
First, you need appoint yourself as proxyholder. You may appoint yourself as proxyholder by (i) following the instructions on your voting instruction form, completing the voting instruction form and returning it to your Intermediary, (ii) visiting www.proxyvote.com, or (iii) telephone if your Intermediary provides you with this option. You must follow the instructions and deadlines provided by your Intermediary in order to do so.
Second, given the Meeting will take place virtually, the process for you to appoint yourself to participate and vote at the Meeting is different than it would be for an in-person Meeting. In addition to the first step above, you must follow the additional instructions on your voting instruction form very carefully, including (i) inserting your name as the “Appointee Name”, and (ii) designating an 8-character “Appointee Identification Number” in the spaces provided in your voting instruction form or online at | If you have been appointed as third-party proxyholder for a registered or non- registered Shareholder, or if you are a non-registered Shareholder and have duly appointed yourself as proxyholder, you can access the Meeting, and participate and vote at the Meeting during the live audio webcast, by following these steps:
First, log into www.virtualshareholder meeting.com/LICY2022 15 minutes before the Meeting starts. You should allow ample time to check into the virtual Meeting and to complete the related procedures.
Second, enter the Appointee Name and the Appointee Identification Number exactly as it was provided on the applicable form of proxy or voting instruction form or through www.proxyvote.com and click on “Enter Here”. If this information is not available to you, or if you do not enter it exactly as provided, you will not be able to participate and vote the Meeting as proxyholder. |
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www.proxyvote.com. Such appointee information is required for you to participate and vote at the Meeting.
Such steps must be completed prior by 8:30 a.m. (Eastern Time) on April 26, 2022 (or, if the Meeting is adjourned or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays, before the rescheduled meeting) or you will not be able to participate and vote at the Meeting.
If you are a non-registered Shareholder, have duly appointed yourself to participate and vote at the Meeting and want to know how to access the Meeting to participate and vote thereat, see the column to the right entitled “Proxyholders (including Non-Registered Shareholders who have duly appointed themselves as proxyholder)”. | Third, follow the instructions to access the Meeting and vote when prompted.
If you have been appointed as proxyholder for more than one Shareholder, you will be asked to enter the Appointee Name and the Appointee Identification Number for each separate Shareholder in order to vote the applicable Shares on their behalf.
Third-party proxyholders will be informed of the Appointee Name and 8- character Appointee Identification Number prior to the Meeting by the Shareholder who appointed them to act as proxyholder at the Meeting. Third-party proxyholders who have forgotten or misplaced the applicable Appointee Name and/or the Appointee Identification Number should contact the Shareholder who appointed them as quickly as possible. Shareholders who have forgotten or misplaced the applicable Appointee Name and/or the Appointee Identification Number must create a new one through www.proxyvote.com. |
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If you attend the Meeting, you should ensure that you have a strong, preferably high-speed, internet connection. It is your responsibility to ensure connectivity for the duration of the Meeting. The Meeting will begin promptly at 8:30 a.m. (Eastern Time) on April 28, 2022. Online check-in will begin 15 minutes prior to that time. You should allow ample time for check-in procedures. If you encounter any difficulties accessing the Meeting online during the check-in or during the Meeting time, please call the technical support number that will be posted on the Meeting log-in page.
How do I vote if I am a registered Shareholder?
Voting by proxy before the Meeting
Registered Shareholders can vote their Shares online at the Meeting or by proxy. However, even if you currently plan to participate in the webcast for the Meeting, you are encouraged to consider voting your Shares in advance, so that your vote will be counted if you later decide not to, or are unable to, attend the Meeting for any reason.
You can vote in advance of the Meeting as follows:
• | By Internet—Go to www.proxyvote.com and follow the instructions. You will need the control number found on your form of proxy. |
• | By mail – Complete, date and sign your form of proxy in accordance with the instructions set out on such form, and return it in the prepaid envelope provided to Data Processing Centre, P.O. Box 3700, STN Industrial Park, Markham (ON), L3R 9Z9 Canada. |
• | By telephone – Call 1-800-474-7493 (English) or 1-800-474-7501 (French). You will need the control number found on your form of proxy. |
Your duly completed form of proxy or your Internet or telephone voting instructions, as applicable, must be received by 8:30 a.m. (Eastern Time) on April 26, 2022 (or, if the Meeting is adjourned or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays, before the rescheduled meeting).
Appointment of a third-party proxyholder
If you vote by proxy, the individuals named on the form of proxy will vote your shares for you unless you appoint someone else to be your proxyholder. You have the right to appoint another person of your choice who need not be a shareholder to represent you at the Meeting (a “third party proxyholder”) other than the persons designated in the form of proxy. A registered Shareholder may appoint a third-party proxyholder as follows:
First, you need to appoint the third-party proxyholder by (i) following the instructions on your form of proxy, completing and returning your form of proxy to Broadridge, or (ii) visiting www.proxyvote.com.
Second, given the Meeting will take place virtually, the process for you to appoint a third-party proxyholder to participate and vote at the Meeting on your behalf is different than it would be for
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an in-person meeting. In addition to the first step above, you must follow the additional instructions on your form of proxy very carefully, including inserting an “Appointee Name” and designating an 8-character “Appointee Identification Number” in the spaces provided in your form of proxy or online at www.proxyvote.com. Such appointee information is required to participate and vote at the Meeting on your behalf.
Third, you need to inform your third-party proxyholder of the exact Appointee Name and 8-character Appointee Identification Number prior to the Meeting. Your third-party proxyholder will require both your Appointee Name and your Appointee Identification Number in order to participate and vote on your behalf at the Meeting.
The first and second steps above must be completed by 8:30 a.m. (Eastern Time) on April 26, 2022 (or, if the Meeting is adjourned or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays, before the rescheduled meeting) or neither you nor your third-party proxyholder will be able to participate and vote at the Meeting.
If you fail to provide the exact Appointee Name and Appointee Identification Number to your third-party proxyholder appointed to ..participate and vote at the Meeting on your behalf, neither you nor your third-party proxyholder will be able to participate and vote at the Meeting.
If you wish to appoint a third-party proxyholder, you are encouraged to do so online at www.proxyvote.com, as this will allow you to share the Appointee Name and the Appointee Identification Number with your third-party proxyholder easily.
Voting Online at the Meeting
If you are a registered Shareholder and choose to vote online at the Meeting, you do not need to complete and return your form of proxy. Simply login to the Meeting and complete a ballot online during the Meeting. See “How do I attend the Meeting online” above.
How do I vote if I am a non-registered Shareholder?
Voting by proxy before the Meeting
Non-registered Shareholders can vote their Shares online at the Meeting or by proxy. However, even if you currently plan to participate in the webcast for the Meeting, you are encouraged to consider voting your Shares in advance, so that your vote will be counted if you later decide not to, or are unable to, attend the Meeting for any reason.
You can vote in advance of the Meeting as follows:
• | By Internet - Go to www.proxyvote.com and follow the instructions. You will need the control number found on your voting instruction form. |
• | By mail – Complete, date and sign your voting instruction form in accordance with the instructions set out on such form, and return it in the prepaid envelope provided to Data Processing Centre, P.O. Box 3700, STN Industrial Park, Markham (ON), L3R 9Z9 Canada. |
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• | By telephone – Call 1-800-474-7493 (English) or 1-800-474-7501 (French). You will need the control number found on your voting instruction form. |
Your duly completed voting instruction form or your Internet or telephone voting instructions, as applicable, must be received by 8:30 a.m. (Eastern Time) on April 26, 2022 (or, if the Meeting is adjourned or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays, before the rescheduled meeting).
Appointment of a Third-Party Proxyholder
As a non-registered Shareholder, you may appoint a third-party proxyholder to participate and vote at the Meeting on your behalf (other than the persons designated by management as set out on your voting instruction form), as follows:
First, you need to appoint the third-party proxyholder by (i) following the instructions on your voting instruction form, completing the voting instruction form and returning it to your Intermediary, (ii) visiting www.proxyvote.com, or (iii) telephone if your Intermediary provides you with this option. You must follow the instructions and deadlines provided by your Intermediary in order to do so.
Second, given the Meeting will take place virtually, the process for you to appoint a third-party proxyholder to participate and vote at the Meeting on your behalf is different than it would be for an in-person meeting. In addition to the first step above, you must follow the additional instructions on your voting instruction form very carefully, including (i) inserting an “Appointee Name” (i.e. the name of your third-party proxyholder), and (ii) designating an 8-character “Appointee Identification Number” in the spaces provided in your voting instruction form or online at www.proxyvote.com. Such appointee information is required to participate and vote at the Meeting on your behalf.
Third, you need to inform your third-party proxyholder of the exact Appointee Name and 8-character Appointee Identification Number prior to the Meeting. Your third-party proxyholder will require both your Appointee Name and your Appointee Identification Number in order to participate and vote on your behalf at the Meeting.
The first and second steps above must be completed by 8:30 a.m. (Eastern Time) on April 26, 2022 (or, if the Meeting is adjourned or postponed, at least 48 hours, excluding Saturdays, Sundays and holidays, before the rescheduled meeting) or neither you nor your third-party proxyholder will be able to participate and vote at the Meeting.
If you fail to provide the exact Appointee Name and Appointee Identification Number to your third-party proxyholder appointed to participate and vote at the Meeting on your behalf, neither you nor your third-party proxyholder will be able to participate and vote at the Meeting.
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If you wish to appoint a third-party proxyholder, you are encouraged to do so online at www.proxyvote.com, as this will allow you to share the Appointee Name and the Appointee Identification Number with your third-party proxyholder easily.
Voting Online at the Meeting
See “How do I attend the Meeting online” for additional information on how to login and attend the Meeting. If you do not duly appoint yourself as proxyholder then you will only be able to attend the Meeting as a guest. Guests will be able to attend the Meeting but will not be able to submit questions, vote their shares (if any) or otherwise participate in the Meeting.
How do I attend the Meeting as a guest?
If you wish to attend the Meeting as a guest, you can log into www.virtualshareholdermeeting.com/LICY2022 15 minutes before the Meeting starts. You should allow ample time to check into the virtual Meeting and to complete the related procedures. You must complete the “Guest Login” section and click “Enter Here”. Guests will be able to attend the Meeting but will not be able to submit questions, vote their shares (if any) or otherwise participate in the Meeting.
How do I change or revoke my vote?
A Shareholder who executes and returns the form of proxy or voting instruction form may revoke it in any manner permitted by law.
If you are a registered Shareholder and you change your mind about how you voted before the Meeting and/or you want to revoke your proxy, you may do so by providing new voting instructions or proxyholder appointment information at www.proxyvote.com at a later time, or a new form of proxy to Broadridge at a later date, or by delivering a signed written notice specifying your instructions to the registered office of the Company, Attention: Corporate Secretary, at any time up to and including the last business day before the date of the Meeting or any adjournment or postponement thereof. A registered Shareholder may also access the Meeting via the live audio webcast to participate and vote at the Meeting, which will revoke any previously submitted proxy.
If you are a non-registered Shareholder and you change your mind about how you voted before the Meeting and/or you want to revoke your proxy, contact your Intermediary to find out what to do. Please note that your Intermediary will need to receive any new instructions in enough time to act on them.
How will my proxy be voted?
You can choose to vote “For”, or “Withhold” or “Against”, as applicable, on the items listed on the form of proxy or voting instruction form. When you sign the form of proxy, you authorize the directors and/or officers of the Company who are named in the form of proxy to vote your Shares for you at the Meeting according to your instructions, unless you have appointed a third-party proxyholder to act as your proxy. If you return your form of proxy and do not tell us how you want to vote your Shares, your Shares will be voted (i) FOR electing each of the 7 nominee directors
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who are listed in this Circular; (ii) FOR appointing KPMG LLP as the external auditor of the Company and authorizing the Board to set the auditor’s remuneration; and (iii) FOR the adoption of the special resolution to approve the change of the municipality in which the registered office of the Company is located from Mississauga, Ontario to Toronto, Ontario. If you do not specify how you want your Shares voted, your proxyholder will vote your shares as they see fit on each item and on any other matter that may properly come before the Meeting.
In addition, the enclosed form of proxy gives the persons named on it authority to use their discretion in voting on amendments or variations to matters identified in the Notice of Meeting or on any matter that may properly come before the Meeting or at any adjournment(s) or postponement(s) of the Meeting. As of the date of this Circular, management is not aware of any such amendments, variations or other matters to be presented for action at the Meeting. If, however, other matters properly come before the Meeting, the persons named on the enclosed form of proxy will vote on them in accordance with their judgment, pursuant to the discretionary authority conferred by the form of proxy.
What votes are required to determine the matters being considered at the Meeting?
The election of directors and the appointment of auditors will each be determined by a majority of votes cast at the Meeting by proxy or in person. The approval of the special resolution to change the municipality in which the registered office of the Company is located from Mississauga, Ontario to Toronto, Ontario requires the affirmative votes of at least two-thirds of the votes cast at the Meeting by proxy or in person.
Is my vote confidential?
The confidentiality of individual Shareholder votes are preserved, except (a) where the Shareholder clearly intends to communicate his or her individual position to management, (b) where the validity of the form of proxy is in question, or (c) as necessary to comply with legal requirements.
How do I ask questions at the Meeting?
Only registered Shareholders and duly appointed proxyholders are permitted to ask questions during the Meeting. If a registered Shareholder or a duly appointed proxyholder has a question about one of the matters on the agenda to be voted on at the Meeting, such question should be submitted as soon as possible during the Meeting so that it can be addressed at the appropriate time. Questions may be asked during the Meeting by writing through the live audio webcast at www.virtualshareholdermeeting.com/LICY2022 after logging in, typing the question into the “Ask a Question” field, and clicking “Submit”. Guests will not be able to submit questions either before or during the Meeting.
The Chair of the Board and other members of management present at the Meeting will answer questions relating to matters to be voted on before a vote is held on each matter, if applicable. General questions will be addressed by them at the end of the Meeting during the question period. Questions from multiple Shareholders on the same topic or that are otherwise related may be grouped, summarized and answered together.
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All Shareholder questions are welcome. However, the Company does not intend to address questions that: are irrelevant to the Company’s operations or to the business of the Meeting; are related to non-public information about the Company; are related to personal grievances; constitute derogatory references to individuals or that are otherwise offensive to third parties; are repetitious or have already been asked by other Shareholders; are in furtherance of a Shareholder’s personal or business interest; or are out of order or not otherwise appropriate as determined by the Chair or Secretary of the Meeting in their reasonable judgment.
Who should I contact if I have questions?
If you have questions regarding the information contained in this Circular, you may contact Li-Cycle’s Investor Relations Department by phone, 1-877-542-9253, or by email, investors@li-cycle.com.
If you require assistance in completing the form of proxy you may contact Broadridge by telephone toll free at:
• | Canada and U.S.: 1-844-916-0609 for English and 1-844-973-0593 for French |
• | International: 1-303-562-9305 for English and 303-562-9306 for French |
If you are a non-registered Shareholder and have questions about your voting instruction form, please contact your Intermediary.
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SECTION 2: BUSINESS OF THE MEETING
1. | Receiving the Audited Annual Financial Statements |
At the Meeting, the Company’s consolidated financial statements for the fiscal year ended October 31, 2021 (“Fiscal 2021”), including the auditor’s report thereon, will be placed before the Meeting. No formal action will be taken at the Meeting to approve the financial statements. If any Shareholder has questions regarding the financial statements, such questions may be brought forward at the Meeting.
2. | Election of Directors |
Our articles provide that the Board will consist of a minimum of one and a maximum of ten directors. The OBCA provides that the board of an offering corporation (as defined in the OBCA, which would include the Company) must consist of not fewer than three individuals. The Board has nominated 7 directors for election at the Meeting.
Under the OBCA, a director may be removed with or without cause by a resolution passed by a majority of the votes cast by shareholders attending the meeting themselves or by proxy and who are entitled to vote. The directors are elected by our Shareholders at each annual general meeting of Shareholders, and will hold office for a term expiring at the close of the next annual meeting of Shareholders or until their respective successors are elected or appointed. The composition of our Board may be subject to the rights of the Sponsor under the Investor Agreement (each as defined below), which, among other things, provides for certain director nomination rights.
Set forth in Section 3 of this Circular – About the Director Nominees are the names of the 7 individuals who are proposed as nominees for election as directors of the Company. Each of the individuals nominated for election as directors is currently a member of the Board. All nominees have established their eligibility and willingness to serve as directors, if elected to office. Please see Section 3 of this Circular for more information about the director nominees.
The Board recommends that you vote FOR the election of the 7 individuals nominated.
If you do not specify how you want your Shares voted, the management nominees named in the form of proxy and voting instruction form for the Meeting intend to vote FOR the election of each of the director nominees listed in this Circular.
Advance Notice Provisions
Our by-laws include advance notice provisions with respect to the nomination of directors. See “Advance Notice Provisions” in Section 5 of this Circular – Corporate Governance Policies and Practices.
Investor Agreement
On the closing date of the Business Combination, Li-Cycle Corp., the holders of Class B common shares of Peridot and certain shareholders of Li-Cycle Corp. entered into an investor and registration rights agreement (the “Investor Agreement”). Under the Investor Agreement, Peridot
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Acquisition Sponsor, LLC (the “Sponsor”) has the right to designate for nomination a number of individuals for election or appointment as directors of the Company as follows: (i) during any time that the Sponsor and its affiliates collectively beneficially own at least 50% of the number of Shares held by them on the date of the closing of the Business Combination, two directors, or (ii) during any time that the Sponsor and its affiliates do not collectively satisfy the test set forth in the preceding clause (i) but do collectively beneficially own at least 25% of the number of Shares held by them on the date of the closing of the Business Combination, one director. Pursuant to its rights under the Investor Agreement, the Sponsor has designated Alan Levande and Scott Prochazka as its nominees for election as directors of the Company at the Meeting.
3. | Appointment of Auditors |
The Audit Committee conducted a review process to consider the selection of the Company’s independent registered public accounting firm for its 2022 fiscal year, which has resulted in the decision to nominate, for appointment by Shareholders, KPMG LLP (“KPMG”) as the external auditor of the Company.
On January 31, 2022, the Company, upon the recommendation of the Audit Committee and the approval of the Board, dismissed Deloitte LLP (“Deloitte”) as its independent registered public accounting firm. The reports of Deloitte on the Company’s consolidated financial statements for the past two fiscal years did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audits of the Company’s financial statements for each of the two fiscal years ended October 31, 2021 and 2020, there were no disagreements with Deloitte on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the matter in their report and there were no reportable events.
On January 31, 2022, the Company provided Deloitte with a copy of the above disclosures, and requested that Deloitte furnish it with a letter addressed to the U.S. Securities and Exchange Commission (the “SEC”) stating whether it agrees with the above statements. A copy of the letter from Deloitte dated January 31, 2022, is attached as Schedule A to this Circular.
On January 31, 2022, the Board, acting on the recommendation of the Audit Committee, appointed KPMG as the Company’s external auditor for its 2022 fiscal year to replace Deloitte as the Company’s independent registered public accounting firm for the fiscal year ending October 31, 2022. During the fiscal years ended October 31, 2021 and October 31, 2020 and through the date hereof, neither the Company nor anyone on its behalf has consulted with KPMG regarding: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Deloitte concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; (ii) any matter that was the subject of a disagreement within the meaning of Item 16F(a)(1)(iv) of Form 20-F of the U.S. Securities Exchange Act of 1934 and the related instructions; or (iii) any reportable event within the meaning of Item 16F(a)(1)(v) of Form 20-F of the U.S. Securities Exchange Act of 1934. The appointment of KPMG is subject to shareholder approval at the Meeting.
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The Board recommends that you vote FOR the appointment of KPMG as external auditor of the Company and the authorization of the Board to fix the remuneration of the Company’s external auditor.
If you do not specify how you want your Shares voted, the management nominees named in the form of proxy and voting instruction form for the Meeting intend to vote FOR the appointment of KPMG as auditor of the Company and the authorization of the Board to fix the remuneration of the Company’s external auditor.
Auditor Service Fees
Reference is made to the “Principal Accountant Fees and Services” section of Li-Cycle’s 2021 Annual Report on Form 20-F for the financial year ended October 31, 2021 for disclosure of information relating to the Audit Committee required under National Instrument 52-110 – Audit Committees (“NI 52-110”) as well as under Section 5 of this Circular – Corporate Governance Policies and Practices, below. A copy of the Company’s Form 20-F for the financial year ended October 31, 2021 is accessible on SEDAR at sedar.com, on EDGAR at sec.gov, on our website at https://investors.li-cycle.com/financials/sec-filings/, or by contacting Li-Cycle by phone at 1-877-542-9253 or by email at investors@li-cycle.com.
The Company has an Audit Committee Pre-approval of Audit and Non-Audit Services Policy. See “Pre-approval of Audit and Non-Audit Services Policy” in Section 5 of this Circular – Corporate Governance Policies and Practices.
4. | Change of the municipality in which the registered office of the Company is located |
Pursuant to the OBCA, a corporation may by special resolution change the municipality or geographic township in which its registered office is located to another place in the Province of Ontario. The Company’s current registered office is located at 2351 Royal Windsor Drive, Unit 10 Mississauga, Ontario, L5J 4S7. The Company wishes to change its registered office to 207 Queens Way West, Suite 590, Toronto, Ontario, M5J 1A7, which is now the municipal location of the Company’s head office.
The Board recommends that you vote FOR the approval of the special resolution, the full text of which is set out below, approving the change of the municipality in which the registered office of the Company is located from Mississauga, Ontario to Toronto, Ontario (the “Change of Municipality Resolution”).
If you do not specify how you want your Shares voted, the management nominees named in the form of proxy and voting instruction form for the Meeting intend to vote FOR the approval of the Change of Municipality Resolution.
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The following is the text of the special resolution which will be put forward for approval by Shareholders at the Meeting:
“BE IT RESOLVED AS A SPECIAL RESOLUTION THAT the change of the municipality in which the registered office of the Company is located from Mississauga, Ontario to Toronto, Ontario, be hereby approved.”
Approval of the Change of Municipality Resolution will require an affirmative vote of at least two-thirds of the votes cast by Shareholders by proxy or in person at the Meeting.
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SECTION 3: ABOUT THE DIRECTOR NOMINEES
Description of Proposed Director Nominees
The following sets out certain information regarding our director nominees.
RICK FINDLAY
Independent Management Consultant
Rick Findlay has served as a director of the Company since the
consummation of the Business Combination on August 10, 2021, and
previously served in such capacity at its predecessor, Li-Cycle Corp.
Mr. Findlay has been consulting in the environment and recycling
sectors for over 25 years across Canada and internationally. This has
included strategy, organization design, processing design, technology
development, and financial management. From 2012 to 2014, he was
Director of Oversight and Operations for the Province of Ontario’s
Age: 64
waste diversion programs, including batteries. Mr. Findlay is
currently chief executive officer of LINCit, a firm that focuses on
Toronto, Ontario, Canada
scaling up clean technology ventures. He has previously started a few
Director Since: August 10, 2021
other firms, two being in environmental management and medical
technology. He also co-founded and built an international consulting
Independent
firm, PSTG Consulting, advising small to global companies across a
variety of sectors, and local to national governments. Mr. Findlay is a
Top Four Relevant Competencies:
Certified Management Consultant, with a Bachelor in Industrial
Engineering and a Master of Business Administration. He also has a
—
Industry Knowledge
GCB.D designation (ESG Competent Boards Certificate).
—
Safety, Health, Environment & CSR
—
Information Technology
—
HR and Executive Compensation
Board/Committee Membership
Attendance(1)
Attendance
Total
Board of Directors
5 of 5
Audit Committee
1 of 1
100%
Compensation Committee
3 of 3
HSEQ Committee
1 of 1
Securities Held as at October 31, 2021
Market Value of
Restricted
Share Ownership
Year
Shares
Options
Total
Shares and Vested
Share Units
Requirement(4)
Options(2)(3)
2021
523,090
25,692
299,325
848,107
9,632,576
Meets
Other Public Board Directorships and Committee Memberships
Company
Committee
None
—
Public Board Interlocks
None
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TIM JOHNSTON
Co-Founder and Executive Chairman of Li-Cycle Holdings
Corp.
Tim Johnston has served as our Co-Founder and Executive
Chairman since the consummation of the Business Combination on
August 10, 2021, and previously served in such capacity at its
predecessor, Li-Cycle Corp. With more than 15 years of experience,
Mr. Johnston has overseen the development and operation of leading
battery material, large-scale infrastructure and battery technology
assets, with
multidisciplinary technical
and management
Age: 36
experience, specializing in project management and transactional
analysis for global lithium and battery materials companies.
Toronto, Ontario, Canada
Mr. Johnston is also the Co-Founder and Director of Li-Metal Corp.;
Director Since: August 10, 2021
a Director of Lacero Solutions Inc.; a General Partner and member
of the Investment Committee of Blue Horizon Capital; a partner of
Non-Independent by reason of the fact that he is
Blue Horizon Advisors; and an Advisory Board Member of 5E
our Executive Chairman
Advanced Materials, Inc. (NASDAQ:FEAM and ASX:5EA). A
graduate of the University of Queensland’s Mechanical Engineering
Top Four Relevant Competencies:
Program, Mr. Johnston is a chartered professional engineer and CFA
charter holder.
—
Industry Knowledge
—
Operational Experience
—
Capital Projects
—
High-Growth Enterprises
Board/Committee Membership
Attendance(1)
Attendance Total
Board of Directors
5 of 5
100%
HSEQ Committee
1 of 1
Securities Held as at October 31, 2021
Market Value of
Restricted
Share Ownership
Year
Shares
Options
Total
Shares and Vested
(5)
Share Units
(2)(3)(6)
Requirement
Options
2021
11,092,964
108,096
935,161
12,136,221
150,838,401
Meets
Other Public Board Directorships and Committee Memberships
Company
Committee
Li-Metal Corp. (CSE:LIM)—Director
—
Public Board Interlocks
Mr. Tse, Mr. Johnston and Mr. Wellings all serve on the Board of Li-Metal Corp.
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AJAY KOCHHAR
Co-Founder and President & Chief Executive Officer of
Li-Cycle Holdings Corp.
Ajay Kochhar has served as our President and Chief
Executive Officer, Co-Founder, and a director since the
consummation of the Business Combination on August 10,
2021, and previously served in such capacity at its
predecessor, Li-Cycle Corp. Before founding Li-Cycle, Mr.
Kochhar gained
extensive technology and project
development experience through progressive roles with
Age: 30
Hatch’s industrial cleantech and advisory practices. While
working in that space, he garnered in-depth engineering and
Oakville, Ontario, Canada
project management experience through clean technology
Director Since: August 10, 2021
development in the lithium, cobalt, nickel, copper, gold,
lead, zinc, molybdenum, and rare earth metals industries. His
Non-Independent by reason of the fact that he is our
technical expertise spans the entire project lifecycle, from
President & Chief Executive Officer
conceptual and pre-feasibility study to construction and
commissioning. Mr. Kochhar is a graduate of the University
Top Four Relevant Competencies:
of Toronto and holds a Bachelor of Applied Science (BASc)
in Chemical Engineering.
—
Industry Knowledge
—
Strategic Planning and M&A
—
Capital Projects
—
High-Growth Enterprises
(1)
Attendance
Board/Committee Membership
Attendance
Total
Board of Directors
5 of 5
100%
Securities Held as at October 31, 2021
Market Value of
Restricted Share
Shares and
Share Ownership
Year
Shares
Units
Options
Total
Vested
Requirement(5)
Options(2)(3)(7)
2021
24,908,409
108,096
476,196
25,492,701
325,178,604
Meets
Other Public Board Directorships and Committee Memberships
Company
Committee
None
—
Public Board Interlocks
None
22
ALAN LEVANDE
Corporate Director
Alan Levande has served as a director of the Company since
the consummation of the Business Combination on August 10,
2021. Mr. Levande was Peridot’s Chairman and Chief
Executive Officer from August 2020 until the completion of
the Business Combination. Mr. Levande also serves as Vice
Chairman of Peridot Acquisition Corp. II. Mr. Levande is a
career energy executive with broad experience across the
power, utilities, renewables, midstream and upstream value
chains. Most recently, Mr. Levande was Co-Chief Executive
Officer of Covey Park Energy LLC, a natural gas company that
Age: 65
was acquired for $2.2 billion in 2019 by a public company,
New Preston, Connecticut, USA
from June 2013 to July 2019. Previously, Mr. Levande was a
Director Since: August 10, 2021
Co-Founder and Senior Managing Director at Tenaska Capital
Management LLC, a $4 billion private equity manager focused
Non-Independent by reason of his previous
on investments in the power and energy sectors, from 2003 to
employment with Peridot
2012. Mr. Levande began his career in energy investment
banking, where he spent 20 years with Goldman Sachs and
Top Four Relevant Competencies:
Salomon Brothers covering power, utilities, renewables and
natural resources. In all of Mr. Levande’s prior roles, Mr.
—
Executive Leadership
Levande was actively involved in sourcing and executing
large-scale, complex mergers and acquisitions. Mr. Levande
received his B.S. and M.B.A. from The Wharton School of
—
Finance
The University of Pennsylvania.
—
Board Experience
—
HR and Executive Compensation
Board/Committee Membership
Attendance(1)
Attendance Total
Board of Directors
5 of 5
Compensation Committee
3 of 3
100%
Nominating and Governance Committee
1 of 1
Securities Held as at October 31, 2021
Market Value of
Restricted
Share Ownership
Year
Shares
Options
Total
Shares and Vested
(4)
Share Units
(2)(3)
Requirement
Options
2021
933,660
25,692
—
959,352
12,081,560
Meets
Other Public Board Directorships and Committee Memberships
Company
Committee
Peridot Acquisition Corp. II (NYSE:PDOT.U) – Vice Chairman
Audit, Compensation, Nominating
Public Board Interlocks
Mr. Prochaska and Mr. Levande both serve on the board of Peridot Acquisition Corp. II.
23
SCOTT PROCHAZKA
Corporate Director
Scott Prochazka has served as a director of the Company since
the consummation of the Business Combination on August 10,
2021. Mr. Prochazka most recently served as the President and
Chief Executive Officer and a director of CenterPoint Energy,
an NYSE-listed, Fortune 500 energy delivery company with
electric transmission and distribution, power generation and
natural gas distribution operations (“CenterPoint”) from
January 1, 2014 to February 20, 2020. Prior to that role, Mr.
Prochazka held several positions at CenterPoint since 2011,
including Executive Vice President, Chief Operating Officer
and Senior Vice President and Division President, Electric
Age: 55
Operations. Mr. Prochazka is a director of Peridot Acquisition
Houston, Texas, USA
Corp. II and Black Hills Corporation. Mr. Prochazka received
Director Since: August 10, 2021
his B.S. in Chemical Engineering from the University of Texas
in Austin.
Independent
Top Four Relevant Competencies:
—
Executive Leadership
—
Strategic Planning and M&A
—
Operational Experience
—
Finance
Board/Committee Membership
Attendance(1)
Attendance Total
Board of Directors
4 of 5
Audit Committee
1 of 1
86%
HSEQ Committee
1 of 1
Securities Held as at October 31, 2021
Market Value of
Restricted
Shares and
Share Ownership
Year
Shares
Share Units
Options
Total
Vested
Requirement(4)
Options(2)(3)
2021
30,000
25,692
—
55,692
388,200
Met
Other Public Board Directorships and Committee Memberships
Company
Committee
Peridot Acquisition Corp. II (NYSE:PDOT.U) – Director
Audit (Chair), Compensation, Nominating
Black Hills Corporation (NYSE: SKH) – Director
Compensation
Public Board Interlocks
Mr. Prochaska and Mr. Levande both serve on the board of Peridot Acquisition Corp. II.
24
ANTHONY TSE
Corporate Director
Anthony has over 27 years of private and public corporate experience in
numerous high-growth industries, spanning technology media and telecoms,
natural resources and specialty chemicals, and more recently the ESG and
energy transition sectors, in particular the EV and lithium battery value chain.
His roles have been predominantly in senior management, with a focus on
strategy, M&A and corporate finance internationally – he has managed
businesses and operations across four continents spanning Greater China and
Asia region, Australia, North and South America. In the past 20 years, he has
led and or participated in over 80 M&A and corporate finance transactions,
Age: 51
with an aggregate value of US$5.4 billion and has extensive capital markets
Hong Kong
experience in US, Canada, Australia and Hong Kong.
Director Since: August 10, 2021
Anthony has served as a director of the Company since the consummation of
the Business Combination on August 10, 2021, and previously served in such
capacity at its predecessor, Li-Cycle Corp. He is the former Managing
Independent
Director and Chief Executive Officer of Galaxy Resources (formerly ASX:
GXY), which merged with Orocobre (formerly ASX: ORE) in 2021. In this
Top Four Relevant Competencies:
role, Anthony grew the company from an initial US$20 million market
capitalization and managed a global portfolio of assets, including mining
—
Executive Leadership
operations and development projects in Australia, Canada and Argentina,
built one of the largest capacity and most technologically advanced lithium
processing facilities in China, and established a strategic customer network in
—
Industry Knowledge
the lithium battery and materials space across the Asia region, as well as North
America and Europe. The merged company, now known as Allkem (ASX:
—
Operational Experience
AKE), is the world’s fifth largest lithium producer and has a market
capitalization of just under US$5 billion. Anthony is currently also a Board
—
International
Director of Li-Metal (CSE: LIM), a developer of lithium metal and lithium
metal anode technologies for next generation lithium solid-state batteries; a
Senior Advisor to Sicona Battery Technologies (a leading developer of
silicon-composite materials for next generation lithium battery anode
technologies) and was recently appointed as Operating Partner to the Global
Private Equity Group of Franklin Templeton (NYSE: BEN), a global asset
management organization operating in 165 countries with over 70 years of
investment experience and US$1.55 trillion in assets under management.
(1)
Attendance
Board/Committee Membership
Attendance
Total
Board of Directors
5 of 5
Nominating and Governance Committee
1 of 1
100%
HSEQ Committee
1 of 1
Securities Held as at October 31, 2021
Market Value of
Restricted
Share Ownership
Year
Shares
Options
Total
Shares and Vested
(4)
Share Units
(2)(3)
Requirement
Options
2021
227,844
25,692
—
253,536
2,948,301
Meets
Other Public Board Directorships and Committee Memberships
Company
Committee
Li-Metal Corp. (CSE:LIM) – Director
Audit, Compensation
Public Board Interlocks
Mr. Tse, Mr. Johnston and Mr. Wellings all serve on the Board of Li-Metal Corp.
25
MARK WELLINGS
Corporate Director
Mark Wellings has served as a director of the Company since
the consummation of the Business Combination on August 10,
2021, and previously served in such capacity at its
predecessor, Li-Cycle Corp. Mr. Wellings is a finance
professional with over 30 years of international experience in
both the mining industry and mining finance sector. Mr.
Wellings initially worked in the mining industry both in
Canada and Australia in exploration, development and
Age: 58
production capacities. He then joined the investment dealer
Toronto, Ontario, Canada
GMP Securities L.P. where he co-founded the firm’s
corporate finance mining practice. During over 18 years at
Director Since: August 10, 2021
GMP Securities L.P., Mr. Wellings was responsible for, and
advised on, some of the Canadian mining industry’s largest
Independent
transactions, both in equity financing and mergers and
acquisitions. Since then, he has been appointed to several
Top Four Relevant Competencies:
public and private boards and is also the Co-Chairman of
Lithium Royalties Corp., the Chairman of Adventus Mining
—
Board Experience
Corp., the Chairman of Superior Gold Inc. and a director of
Li-Metal Corp. Mr. Wellings is a Professional Engineer and
—
Finance
holds a Master of Business Administration degree and a
Bachelor of Applied Science degree in Geological
—
Strategic Planning and M&A
Engineering.
—
HR and Executive Compensation
Board/Committee Membership
Attendance(1)
Attendance Total
Board of Directors
5 of 5
Audit Committee
1 of 1
100%
Compensation Committee
3 of 3
Nominating and Governance Committee
1 of 1
Securities Held as at October 31, 2021
Market Value of
Restricted
Share Ownership
Year
Shares
Options
Total
Shares and Vested
Share Units
Requirement(4)
Options(2)(3)
2021
187,538
25,692
87,003
300,233
3,246,963
Meets
Other Public Board Directorships and Committee Memberships
Company
Committee
Superior Gold Inc. (TSXV:SGI) – Chairman
Audit, Compensation & Nominating
Adventus Mining Corporation (TSXV:ADZN) – Chairman
Compensation (Chair), Audit
Li-Metal Corp. (CSE:LIM) – Director
Audit, Compensation
Public Board Interlocks
Mr. Tse, Mr. Johnston and Mr. Wellings all serve on the Board of Li-Metal Corp.
26
Notes:
(1) | Attendance for meetings held from the closing of the Business Combination, on August 10, 2021, to and including October 31, 2021. |
(2) | The market value of Shares held as at October 31, 2021 is calculated based on the closing price of the Shares on the NYSE of $12.94 on October 29, 2021. |
(3) | The Company does not grant options as part of its compensation program for non-employee directors. For non-employee directors, the Share options shown above consist of options granted by Li-Cycle Corp. under the Legacy Stock Option Plan and/or the Legacy LTIP that vested under the Arrangement during Fiscal 2021. For the purposes of the Company’s minimum equity ownership requirements for non-employee directors, as approved by the Board, the value of vested Share options has been determined based on the in-the-money value of options on the measurement date, and reduced based on an assumed tax rate of 25%. For more information, see Section 4: Compensation Discussion and Analysis – Outstanding Options-based and Share-based Awards. |
(4) | To calculate equity ownership for the purpose of the Company’s minimum equity ownership requirements for non-employee directors, as approved by the Board, the Company will include: (i) Shares; (ii) vested options, and (iii) vested RSUs. The Company’s minimum share ownership requirements for non-employee directors are described in Section 4: Compensation Discussion and Analysis – Director Share Ownership Guidelines. |
(5) | Mr. Johnston and Mr. Kochhar are subject to the Company’s executive share ownership guidelines, which are described in Section 4: Compensation Discussion and Analysis – Executive Share Ownership Guidelines. |
(6) | Mr. Johnston holds 758,290 vested Share options, including options to acquire 399,100 Shares at a price of $0.02 per Share, 159,640 Shares at a price of $0.02 per Share and 199,550 Shares at a price of $0.36 per Share. |
(7) | Mr. Kochhar holds 299,325 vested Share options, including options to acquire 159,640 Shares at a price of $0.02 per Share and 139,685 at a price of $0.36 per Share. |
Cease Trade Orders
To the knowledge of Li-Cycle and based on information provided by the proposed director nominees, none of the proposed director nominees are, as at the date of this Circular, or have been, within the last 10 years before the date of this Circular, a director, chief executive officer (“CEO”) or chief financial officer (“CFO”) of any company, including Li-Cycle, that: (i) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemptions under securities legislation, that was in effect for a period of more than 30 consecutive days (collectively, an “Order”) and that was issued while the proposed director nominee was acting in the capacity of a director, CEO or CFO; or (ii) was subject to an Order that was issued after the proposed director nominee ceased to be a director, CEO or CFO and which resulted from an event that occurred while that person was acting in the capacity as director, CEO or CFO.
Bankruptcy
To the knowledge of Li-Cycle and based on information provided by the proposed director nominees, none of the proposed director nominees are, as at the date of this Circular, or have been within the 10 years before the date of this Circular, a director or executive officer of any company, including Li-Cycle 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.
27
To the knowledge of Li-Cycle and based on information provided by the proposed director nominees, none of the proposed director nominees are, as at the date of this Circular, or have been within the last 10 years before the date of this Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director nominee.
Securities Penalties or Sanctions
Except as set out below, to the knowledge of Li-Cycle and based upon information provided by the proposed director nominees, none of the proposed director nominees have (i) been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (ii) been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed nominee director.
In addition to co-founding Li-Cycle, Mr. Johnston served as a director and the president and chief executive officer of Desert Lion Energy Inc. (“Desert Lion”), a lithium exploration and development company whose securities were listed on the TSX Venture Exchange (the “TSXV”), from February 2018 to July 2019, when Desert Lion was sold to a third party. In mid- 2019, the TSX-V initiated a review of the Desert Lion senior management team, including Mr. Johnston, to assess their suitability to act as directors or officers of a listed issuer as a result of certain incorrect statements and omissions made by Desert Lion in its press releases for a financing transaction and its listing application with the TSX-V for approval of the issuance of shares in connection with such transaction. On May 11, 2020, the TSX-V made a procedural determination that requires Mr. Johnston to make a written application to and obtain the prior written acceptance from the Compliance & Disclosure Department of the TSX-V for any proposed involvement by Mr. Johnston as a director or officer of (or to perform similar functions for) any TSX-V-listed issuer. At that time, the TSX-V advised Mr. Johnston that its determination and restrictions on Mr. Johnston were based on the TSX-V’s conclusions that Desert Lion had contravened TSX-V requirements during his tenure as the chief executive officer and president and a director of Desert Lion. Mr. Johnston subsequently commenced an appeal before the British Columbia Securities Commission (the “BCSC”) of the TSX-V’s jurisdiction to render its decision. In a decision dated February 19, 2021, the BCSC: (i) concluded that the TSX-V had the jurisdiction to issue its procedural determination and that there was no proper basis for the BCSC to interfere with that determination, and, as a result, the BCSC dismissed Mr. Johnston’s appeal, and (ii) noted that the TSX-V had committed on the record of those proceedings that the TSX-V had not reached any conclusions regarding the suitability of Mr. Johnston to be a director or officer of a TSX-V listed company in the future. To the knowledge of the Company, the TSX-V has not taken any additional steps regarding its May 11, 2020 determination.
28
SECTION 4: COMPENSATION DISCUSSION AND ANALYSIS
Compensation of Executives
Introduction
The following section provides an overview of the objectives, policies and practices that have been applied in determining the compensation paid to the Company’s executive officers in Fiscal 2021. Following the Business Combination, the Company revised its executive compensation program to align with its transition to being a public Company. The Company will continue to evaluate its executive compensation program on an annual basis and with a view to ensuring that the program remains in line with the Company’s development and market practices.
In Fiscal 2021, the Company’s CEO, CFO and other three most highly compensated executive officers (collectively, the “Named Executive Officers” or “NEOs”) were:
• | Ajay Kochhar, Chief Executive Officer; |
• | Tim Johnston, Executive Chairman; |
• | Bruce MacInnis, Chief Financial Officer; |
• | Kunal Phalpher, Chief Strategy Officer; and |
• | Chris Biederman, Chief Technology Officer. |
Overview and Compensation Committee
Compensation Objectives
The Company’s executive compensation program is designed to achieve the following objectives:
• | provide market-competitive compensation opportunities in order to attract and retain talented, high-performing and experienced executive officers, whose knowledge, skills and performance are critical to the Company’s success; |
• | motivate these executive officers to achieve the Company’s business and financial objectives; |
• | reward the Company’s executive officers for their performance and contribution to the Company’s short-term and long-term objectives and success; |
��
• | align the interests of the Company’s executive officers with those of the shareholders by tying a meaningful portion of compensation directly to the long-term value and growth of the business; |
• | continue to foster an entrepreneurial and results-driven culture; and |
29
• | provide the appropriate balance of short-term and long-term incentives to encourage appropriate levels of risk-taking and prudent decision-making by the Company’s executive team. |
Compensation Governance
Our Board has adopted a written charter for the compensation committee of the Board (the “Compensation Committee”) that establishes the Compensation Committee’s purpose and its responsibilities with respect to executive compensation. The charter provides that the Compensation Committee will, among other things, oversee the compensation strategy and policies for the Company’s executive officers and directors; establish, review and report on compensation of the Company’s executive officers; administer equity-based and certain other compensation plans; and review executive compensation disclosure for inclusion in the Company’s public disclosure documents, in accordance with applicable rules and regulations.
Our Compensation Committee currently consists of Rick Findlay (Chair), Alan Levande and Mark Wellings. Rick Findlay and Mark Wellings are considered by the Board to be independent, and Alan Levande is considered by the Board to be non-independent for purposes of National Instrument 58-101 of the Canadian Securities Administrators—Disclosure of Corporate Governance Practices (“NI 58-101”), by reason of his previous employment with Peridot. Given that Mr. Levande was not an employee or executive officer of Li-Cycle or its predecessors prior or subsequent to the Business Combination and the limited operations of Peridot prior to the Business Combination (none of which form part of the continuing operations of the Company), the Board has determined that Mr. Levande’s participation on the Compensation Committee is not reasonably expected to impede the Compensation Committee’s objective determination of the compensation of the Company’s directors and officers. Further, the Board’s determination regarding Mr. Levande’s non-independence does not affect his ability to serve on the Compensation Committee under the NYSE’s phase-in rules for newly public companies.
The members of the Compensation Committee have direct experience that is relevant to their responsibilities regarding executive compensation. In the course of their professional lives, all members of the Committee have been involved with the establishment and monitoring of compensation programs, as well executive recruitment and as succession planning programs:
• | Mr. Findlay has extensive experience as a management consultant, company founder/CEO and corporate director; |
• | Mr. Wellings is a seasoned corporate director and finance industry executive and currently serves on the compensation committees of two other public companies (being Superior Gold Inc. and Adventus Mining Corporation, where he is the committee chair); and |
• | Mr. Levande has served as a CEO and director of various companies in the energy industry, and currently serves on the compensation committee of Peridot Acquisition Corp. II, a NYSE-listed special purpose acquisition company. |
For more information on the skills and experience of our Compensation Committee members please see their biographies in Section 3 of this Circular – About the Nominee Directors.
30
Compensation Risk Oversight
The Compensation Committee is responsible for periodically reviewing the Company’s incentive compensation arrangements to determine whether they encourage excessive risk-taking. The Committee is also responsible for reviewing and discussing, at least annually, the relationship between the Company’s risk management policies and practices and its incentive compensation arrangements, and evaluating compensation policies and practices that could mitigate any such risk. To date, the Compensation Committee has not identified any risks arising from our compensation policies and practices that are reasonably likely to have a material adverse effect on the Company. To identify and mitigate compensation policies and practices that could encourage an executive officer to take inappropriate or excessive risks, we have adopted the following practices:
• | short-term incentives for our executive officers are contingent on performance; |
• | equity awards for our executive officers are subject to the approval of our Board; |
• | minimum share ownership guidelines require executive officers to own equity interests in the Company, to ensure that their long-term interests are aligned with those of the Company’s shareholders; |
• | our Insider Trading Policy prohibits our executive officers and directors from purchasing financial instruments that hedge or offset (or 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 officer or director; |
• | our executive employment agreements include clawback provisions which provide that the Company can require the reimbursement of all or a portion of any performance-based incentive compensation awarded to the NEOs after each fiscal year, if wrongdoing has occurred following the effective date of the employment agreement, including without limitation in the following circumstances: (i) the Company is required to restate its financial statements; (ii) the NEO engaged in gross negligence, intentional misconduct or fraud that caused or partially caused the need for the restatement; and/or (iii) the amount of the performance-based compensation that would have been awarded to, or the profit realized by, the NEO had the financial results been properly reported would have been lower than the amount actually awarded or received; and |
• | all directors and employees are subject to the Company’s Code of Conduct, which has been adopted by our Board and provides for, among other things, a commitment to the highest level of ethical conduct and to avoid even the appearance of improper behaviour. |
Compensation Consultant
In January 2021, Willis Towers Watson, an independent executive compensation consulting firm, was retained to provide services to the Board of Directors and the Remuneration and Nominating Committee of Li-Cycle Corp. in connection with the Company’s transition from a privately-held
31
business to a public company. Following the Business Combination, Willis Towers Watson continued to provide services to the Board and the Compensation Committee of the Company. In Fiscal 2021, Willis Towers Watson provided services to the Board and the Compensation Committee on executive compensation and non-executive director compensation matters generally, including the advising in respect of the following:
• | establishing a peer comparator group of public companies with similar attributes to the Company for the purpose of benchmarking its compensation programs; |
• | designing a new compensation program for the executive officers of the Company, effective upon the completion of the Business Combination, including revised base salary levels, short-term and long-term incentive plan target levels, revised mix of compensation elements, and the introduction of minimum executive share ownership levels; |
• | designing a new compensation program for the non-executive directors of the Company, including cash and equity components; and |
• | revising the Company’s executive employment agreements to align with comparable public company practices. |
The following table outlines the fees paid to Willis Towers Watson for services provided during Fiscal 2021 and the financial year ended October 31, 2020.
Advisor | Executive Compensation- Related Fees ($) | All Other Fees ($) | ||||||||||||||
Fiscal 2021 | Fiscal 2020 | Fiscal 2021 | Fiscal 2020 | |||||||||||||
Willis Towers Watson | 241,769 | — | 41,500 | (1) | — |
(1) | These fees were charged for services to management of Li-Cycle on a variety of matters, including global pay structure for levels below the executive officer level. The services were not required to be pre-approved by the Compensation Committee. |
None of our executive officers have any affiliation with Willis Towers Watson. The Compensation Committee reviewed the information and advice provided by Willis Towers Watson, among other factors, in making its executive compensation decisions and recommendations to the Board in respect of Fiscal 2021. The Compensation Committee ultimately makes its own recommendations and decisions on compensation matters.
Subsequent to Fiscal 2021, the Compensation Committee retained Meridian Compensation Partners to provide independent advice on compensation of the Company’s executive officers and non-employee directors. Meridian does not provide any other services to the Company. The Compensation Committee has assessed the independence of Meridian, and concluded that Meridian is independent and does not have any conflict of interest with the Company or any of its directors or executive officers. The Committee reviews the independence of its compensation consultants annually.
32
Comparator Group
Our compensation comparator group was developed in Fiscal 2021 by Willis Towers Watson, and reviewed and approved by our Compensation Committee. It was used to inform compensation decisions in terms of level of pay and pay mix for executive officers, including the NEOs for Fiscal 2021. Criteria used for establishing the comparator group included (i) organization size, with financial characteristics and growth profile such as revenue, market capitalization and enterprise value similar to those of the Company, (ii) country of domicile, and (iii) GICS sub-industry.
The comparator group for Fiscal 2021 included the following companies:
• | Allied Motion Technologies Inc.ï,· Atkore Inc. |
• | Canoo Inc. |
• | Casella Waste Systems, Inc. |
• | Ecovyst Inc. |
• | Eos Energy Enterprises, Inc. |
• | Fisker Inc. |
• | Heritage-Crystal Clean, Inc |
• | Hyliion Holdings Corp. |
• | Livent Corporation |
• | Lordstown Motors Corp. |
• | Materion Corporation |
• | Romeo Power, Inc. |
• | The Shyft Group, Inc. |
• | US Ecology, Inc. |
• | Vicor Corporation |
Compensation Components
In connection with our transition from a privately-held business to a publicly traded company in August 2021, and in furtherance of the Company’s stated compensation objectives, the Company introduced a new executive compensation plan, effective upon the completion of the Business Combination, including a mix of base salary, short-term incentives and long-term equity incentives.
Base Salary
The executive officers’ base salaries were increased upon the completion of the Business Combination to revised levels determined following advice from the independent compensation consultant and having regard to comparable roles and companies.
The Company seeks to maintain base salary amounts consistent with industry norms, with flexibility to deviate in certain circumstances as appropriate. Base salaries for executive officers, including NEOs, are established based on the scope of their responsibilities, competencies and
33
their prior relevant experience, taking into account compensation paid in the market for similar positions, the market demand for such executives and the executive’s total compensation package. Base salaries are reviewed annually and may be increased for merit reasons, based on the executive’s success in meeting or exceeding individual and Company objectives. Additionally, base salaries can be adjusted as warranted throughout the year to reflect promotions or other changes in the scope or breadth of an executive’s role or responsibilities, as well as to maintain market competitiveness.
Short-Term Incentives
The Company’s compensation program for NEOs and other executive officers includes eligibility for annual cash bonuses. Annual bonuses are designed to motivate our executive officers to meet our business and financial objectives generally and the Company’s annual financial performance targets in particular.
In Fiscal 2021, the NEOs were eligible to earn an annual bonus based on a target percentage of base salary. These target percentages of base salary were increased, upon the completion of the Business Combination. For the CEO and Executive Chair, the target annual bonus was 40% of base salary for the period from November 1, 2020 to August 9, 2021, and increased to 120% of base salary for the period from August 10, 2021 to October 31, 2021. For the NEOs, the target annual bonus was 40% of base salary for the period from November 1, 2020 to August 9, 2021, and increased to 80% of base salary for the CFO and 70% of base salary for the other NEOs, for the period from August 10, 2021 to October 31, 2021.
For the CEO and the Executive Chair, the annual bonus awards were based 100% on the Company’s Fiscal 2021 objectives, while for the other NEOs, the annual bonus awards were based 70% on the Company’s Fiscal 2021 objectives and 30% on individual performance measures.
The Compensation Committee selected total black mass production, Spoke development, North American Hub development and capital raising as the key Company objectives for Fiscal 2021. These metrics were viewed as critically important to the execution of the Company’s business strategy for the year. Individual performance measures for the NEOs were also established by management and reviewed and approved by the Compensation Committee.
The Company’s key Fiscal 2021 objectives and corresponding results are highlighted below:
• | Black Mass Production – Produced 2,261 tonnes of black mass from Spoke operations in Ontario and New York; |
• | Spoke Development – Incremental Spoke developments announced, including the Arizona Spoke and the Alabama Spoke, while defining a path forward for additional Spokes internationally; |
• | North American Hub Development – Advanced the definitive feasibility study and key permitting workstreams to enable ground-breaking and construction start of the Company’s first commercial Hub in Rochester, New York; and |
• | Capital Raising – Raised over $600 million during calendar 2021 to finance the Company’s growth objectives. |
34
In aggregate, the Company’s Fiscal 2021 objectives and the individual performance measures for the NEOs were all assessed at target and therefore were paid in full (on a pro rata basis, having regard for the increase in base salaries and target percentages of base salaries, effective upon the completion of the Business Combination).
The actual short-term incentive amounts awarded to our NEOs for Fiscal 2021 are set forth in the “Summary Compensation Table” below.
Short-Term Incentives: Approved Design Changes for Fiscal 2022
We believe the decisions we made during Fiscal 2021 have positioned the Company’s business for long-term growth and future value creation. For the fiscal year ending October 31, 2022, the Compensation Committee selected the following corporate objectives under the Company’s short-term incentive compensation program:
• | prioritizing safety and sustainability (20%); |
• | progressing the execution of the Rochester Hub Project on time and on budget (45%); and |
• | expanding production of black mass (35%). |
The components of the annual bonus remain unchanged for 2022, with 100% of the annual bonus of the CEO and Executive Chair based on Company objectives, and, for the other NEOs, 70% based on Company objectives and 30% based on individual performance measures.
Long-Term Incentives
In connection with the Business Combination, the Company adopted a 2021 Incentive Award Plan (the “Incentive Award Plan”) to provide different types of equity-awards to be granted to eligible directors, officers, employees and consultants of the Company and its subsidiaries, including but not limited to options and restricted share units (“RSUs”). Equity-based awards are a variable element of compensation that enable the Company to reward its NEOs and other executive officers for their sustained contributions to the Company. Equity awards reward performance and continued employment by an executive officer, with associated benefits to the Company of attracting and retaining employees generally. The Company believes that options and RSUs and other equity-based compensation will provide its executive officers, including NEOs, with a strong link to long-term corporate performance and the creation of shareholder value.
The Compensation Committee is responsible for administering the Incentive Award Plan in conjunction with our senior executive officers. The Compensation Committee has used an independent compensation consultant to assist in determining appropriate equity-based awards which are benchmarked against a peer comparator group. Previous equity-based awards may be taken into account when considering new grants. Recommendations of the Compensation Committee are put before the Board for approval.
For more information on the material terms and conditions of the Incentive Award Plan, see “Incentive Award Plan”, below.
Upon the completion of the Business Combination, any outstanding awards granted prior to Fiscal 2021 were fully vested. Accordingly, to support continued alignment with our compensation philosophy and objectives, each of the Company’s executive officers received a grant of options and/or RSUs upon completion of the Business Combination. These options have a term of ten years and have an exercise price of $10.93, being the closing sale price for a Share on the NYSE on the day immediately prior to the date of grant. The options vest over a three-year period in increments of one third per annum, with the first tranche vesting on August 10, 2022. The RSUs
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were granted with effect on December 10, 2021, being the date following the effectiveness of a registration statement on Form S-8 filed by the Company with the SEC to register the Shares issuable pursuant to the terms of the RSUs. The RSUs vest over a three-year period in increments of one third per annum, with the first tranche vesting on August 10, 2022, subject to the participant’s continued employment with the Company.
Executive Share Ownership Guidelines
The Company’s senior executive officers are required to maintain an equity interest in the Company through the ownership of Shares (or similar instruments such as options and RSUs) equal to at least three times base salary for the CEO and Executive Chair and two times base salary for the other senior executive officers, within five years from the later of August 10, 2021 and the date of appointment of such senior executive officer.
Summary Compensation Table
The following table shows the compensation earned by, paid to, or awarded to the NEOs in Fiscal 2021.1 As we became a reporting issuer during Fiscal 2021, in accordance with applicable securities laws, compensation information has not been presented with respect to prior years.
Non-Equity Incentive Plan Compensation(5) | ||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary(2) ($) | Share- based Awards(3) ($) | Option- based Awards(4) ($) | Annual Incentive Plans | Long- term Incentive Plans | Pension Value ($) | All Other Compensation(6) ($) | Total Compensation ($) | |||||||||||||||||||||
Ajay Kochhar Chief Executive Officer | 2021 | 286,850 | 1,181,500 | 1,181,500 | 200,055 | — | — | 12,092 | 2,861,997 | |||||||||||||||||||||
Tim Johnston Executive Chairman | 2021 | 286,850 | 1,181,500 | 1,181,500 | 200,055 | — | — | 713 | 2,850,618 | |||||||||||||||||||||
Bruce MacInnis Chief Financial Officer | 2021 | 220,916 | — | 2,077,000 | — | — | — | 445,286 | 2,743,202 | |||||||||||||||||||||
Kunal Phalpher Chief Strategy Officer | 2021 | 215,246 | 450,000 | 450,000 | 110,141 | — | — | 10,103 | 1,235,490 | |||||||||||||||||||||
Chris Biederman Chief Technology Officer | 2021 | 200,525 | 450,000 | 450,000 | 103,902 | — | — | 886 | 1,205,313 |
(1) | In the above table, all compensation is disclosed in U.S. dollars. A portion of the Salary and/or All Other Compensation for each NEO was paid in Canadian dollars. Those Canadian dollar amounts have been converted to U.S. dollars using the Bank of Canada’s average exchange rate between November 1, 2020 and October 31, 2021 (being the period of Fiscal 2021) of CA$1.00=U.S$0.7955. |
(2) | Represents the actual base salary earned in Fiscal 2021. For the period from November 1, 2020 to August 9, 2021, the annual base salary of each of our NEOs was as follows: $250,000 for Mr. Kochhar, $250,000 for Mr. Johnston, CA$250,000 for Mr. MacInnis, CA$250,000 for Mr. Phalpher and CA$225,000 Mr. Biederman. These base salaries were increased, for the period from August 10, 2021 to October 31, 2021, as follows: $450,000 for Mr. Kochhar, $450,000 for Mr. Johnston, $325,000 for Mr. MacInnis, $300,000 for Mr. Phalpher and $300,000 for Mr. Biederman. |
(3) | Represents the grant date fair value of RSUs granted under our Incentive Award Plan in connection with the closing of the Business Combination. The RSUs were granted with effect on December 10, 2021, being the date following the effectiveness of a registration statement on Form S-8 filed by the Company with the SEC to register the Shares issuable thereunder. |
(4) | Represents the grant date fair value of options awarded under our Incentive Award Plan in connection with the closing of the Business Combination, calculated using the Black-Scholes Merton option pricing model, a common and widely-accepted valuation methodology. For the key assumptions used to determine the Share option value for the Fiscal 2021 grants using the Black-Scholes Merton option pricing model, see Note 12 of the Company’s annual financial statements included in our Form 20-F for the year ended October 31, 2021. |
(5) | See “Short-Term Incentives” above. |
(6) | Represents the value of the employer’s contribution to the employee’s registered retirement savings plan contributions and employee benefits coverage (such as health insurance and life insurance). The Company generally contributes 5% of each NEO’s base salary into a defined contribution registered retirement savings plan, subject to Revenue Canada maximums. In the case of Mr. MacInnis, this also includes an amount of $444,647 paid pursuant to his retirement agreement described under “Employment Arrangements, Termination and Change in Control Benefits,” below. |
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Outstanding Option-Based and Share-based Awards
The following table indicates, for each of the NEOs, all option-based and share-based awards outstanding as of October 31, 2021.
Option-Based Awards | Share-Based Awards | |||||||||||||||||||||||||
Name and Principal Position | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | Value of Unexercised In-The- Money Options(3) ($) | Number of Shares or Units of Shares That Have Not Vested(4) (#) | Market or Payout Value of Share-Based Awards That Have Not Vested(4) ($) | Market or Payout Value of Vested Share-Based Awards Not Paid Out or Distributed ($) | |||||||||||||||||||
Ajay Kochhar | 159,640 | (1) | 0.02 | April 11, 2023 | 2,062,549 | — | — | — | ||||||||||||||||||
139,685 | (1) | 0.37 | July 19, 2024 | 1,755,840 | ||||||||||||||||||||||
176,871 | (2) | 10.93 | August 10, 2031 | 355,511 | ||||||||||||||||||||||
Tim Johnston | 399,100 | (1) | 0.02 | September 12, 2022 | 5,156,372 | — | — | — | ||||||||||||||||||
159,640 | (1) | 0.02 | April 11, 2023 | 2,062,549 | ||||||||||||||||||||||
199,550 | (1) | 0.37 | July 19, 2024 | 2,508,344 | ||||||||||||||||||||||
176,871 | (2) | 10.93 | August 10, 2031 | 355,511 | ||||||||||||||||||||||
Bruce MacInnis | 310,928 | (2) | 10.93 | August 10, 2031 | 624,965 | — | — | — | ||||||||||||||||||
Kunal Phalpher | 159,640 | (1) | 0.02 | April 11, 2023 | 2,062,549 | — | — | — | ||||||||||||||||||
139,685 | (1) | 0.37 | July 19, 2024 | 1,755,840 | ||||||||||||||||||||||
67,365 | (2) | 10.93 | August 10, 2031 | 135,404 | ||||||||||||||||||||||
Chris Biederman | 67,365 | (2) | 10.93 | August 10, 2031 | 135,404 | — | — | — |
(1) | These Share options are governed by the terms of the stock option plan (the “Legacy Stock Option Plan”) or the long-term incentive plan (the “Legacy LTIP”) established by Li-Cycle Corp. prior to the completion of the Business Combination. Pursuant to the Arrangement, outstanding options to purchase common shares of Li-Cycle Corp. were exchanged for options to purchase Shares (with the number of Shares subject to each such option and the exercise price being adjusted in accordance with the terms of the Arrangement), and some of those options to purchase Shares, at the election of the holder, remained outstanding upon completion of the Business Combination and governed by the terms of the Legacy Option Plan or the Legacy LTIP, as applicable. The Board succeeded to the authority and responsibility of the Li-Cycle Corp. board of directors with respect to each such option and each such option is subject to administrative procedures consistent with those in effect under the Incentive Award Plan. Following the consummation of the Business Combination, no further awards have or will be made under the Legacy Stock Option Plan or the Legacy LTIP. |
(2) | These Share options were granted under the Incentive Award Plan. For a description of the terms of the Incentive Award Plan, see “Incentive Plans –Incentive Award Plan”, below. |
(3) | Options are “in-the-money” if the market price of the Shares covered by the options is greater than the option exercise price. Values for Share options are calculated based on the difference between the closing market price of the Shares on the NYSE on October 29, 2021, which was $12.94, and the exercise price. Actual value realized will be the difference between the market price and the option exercise price upon exercise of the options. |
(4) | Although not outstanding as of October 31, 2021, in connection with the closing of the Business Combination, the NEOs were granted RSUs under the Incentive Award Plan as follows: 108,096 to Mr. Kochhar; 108,096 to Mr. Johnston; 41,171 to Mr. Phalpher; and 41,171 to Mr. Biederman. The RSUs were granted with effect on December 10, 2021, being the date following the effectiveness of a registration statement on Form S-8 filed by the Company with the SEC to register the Shares issuable thereunder: See “Incentive Plans –Incentive Award Plan”, below. |
Incentive Plan Awards-Value Vested or Earned During the Year
The following table indicates, for each of the NEOs, (a) the aggregate dollar value that would have been realized if all of the option-based awards which vested during Fiscal 2021 had been exercised on their respective vesting dates; (b) the aggregate dollar value that was realized for RSUs that vested in Fiscal 2021; and (c) the value of the non-equity incentive plan compensation earned during Fiscal 2021.
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Name | Option-Based Awards-Value Vested During the Year(1) ($) | Share-Based Awards- Value Vested During the Year ($) | Non-Equity Incentive Plan Compensation – Value Earned During the Year(2) ($) | |||||||||
Ajay Kochhar | 3,216,746 | — | 200,055 | |||||||||
Tim Johnston | 8,203,101 | — | 200,055 | |||||||||
Bruce MacInnis | — | — | — | |||||||||
Kunal Phalpher | 3,216,746 | — | 110,141 | |||||||||
Chris Biederman | — | — | 103,902 |
(1) | Represents the value of potential gains from share options of Li-Cycle Corp. that vested under the Arrangement during Fiscal 2021 (the “Rollover Options”). All of these share options were granted under the Legacy Stock Option Plan and/or the Legacy LTIP. Values are calculated based on the difference between closing market price of the Shares on the NYSE on the date prior to the vesting date ($10.93 per Share) and the exercise price of the Rollover Options. Actual value realized will be the difference between the market price and the option exercise price upon exercise of the Rollover Options. |
(2) | The value in this column is the value of the annual performance incentive awards earned by each of the NEOs for their performance during Fiscal 2021, which is discussed under “Short-Term Incentives”, above. |
Securities Authorized For Issuance Under Equity Compensation Plans
Equity Compensation Plan Information as of October 31, 2021
The following table shows information, as at October 31, 2021, on compensation plans under which Shares are authorized for issuance.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options or Vesting of RSUs ($) | Weighted Average Exercise Price of Outstanding Options or Average Grant Price of Outstanding RSUs ($) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (#) | |||||||||
Equity Compensation Plans Approved by Shareholders |
| |||||||||||
Legacy Stock Option Plan and Legacy LTIP(1) | 4,242,707 | $ | 0.79 | — | ||||||||
Incentive Award Plan(2) | 1,770,609 | $ | 10.93 | (3) | 13,028,910 | |||||||
Equity Compensation Plans Not Approved by Shareholders |
| |||||||||||
— | — | — | — | |||||||||
Total | 6,013,316 | $ | 2.81 | (3) | 13,028,910 |
(1) | Prior to the completion of the Business Combination, Li-Cycle Corp. maintained a stock option plan (the “Legacy Stock Option Plan”) and a long-term incentive plan (the “Legacy LTIP”). Pursuant to the Arrangement, all of the share options (“Legacy Options”) of Li-Cycle Corp. outstanding under the Legacy Stock Option Plan or the Legacy LTIP fully vested; a total of 28,799 Legacy Options were exercised on a cashless basis in exchange for Shares; and the remaining 106,307 Legacy Options were exchanged for Rollover Options to acquire a total of 4,242,707 Shares. Each Rollover Option, mutatis mutandis, continues to be governed by the terms of the Legacy Stock Option Plan or the Legacy LTIP, as applicable, and the terms of any Share option agreement by which the applicable Legacy Option was evidenced. Any restriction on the exercise of any Legacy Option so replaced continues in full force and effect and the term, exercisability, vesting schedule and other provisions that applied to such Legacy Option otherwise remain unchanged as a result of the replacement of such Legacy Option; provided, however that (x) the Compensation Committee has succeeded to the authority and responsibility of the board of directors of Li-Cycle Corp. with respect to each Rollover Option; and (y) each Rollover Option is subject to administrative procedures consistent with those in effect under the Incentive Award Plan. |
(2) | The issued securities as at October 31, 2021 consist of 1,053,846 options and 716,763 RSUs. |
(3) | Weighted average exercise price does not include RSUs. |
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Incentive Award Plan
The purpose of the Incentive Award Plan is to promote the success and enhance the value of the Company and its subsidiaries by linking the individual interests of the members of the Board, employees, and consultants to those of our Shareholders and other stakeholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to our Shareholders. The Incentive Award Plan also provides flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, employees, and consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operations will be largely dependent. Set forth below is a summary of the material terms of the Incentive Award Plan.
Eligibility and Administration
The employees, consultants and directors of the Company and its subsidiaries are eligible to receive awards under the Incentive Award Plan. The Incentive Award Plan is administered by the Board with respect to awards to non-employee directors and by the Compensation Committee with respect to other participants, each of which may delegate its duties and responsibilities to committees of the Board and/or officers (referred to collectively as the “plan administrator” below), subject to certain limitations that may be imposed under Section 16 of the U.S. Exchange Act, and/or stock exchange rules, as applicable. The plan administrator has the authority to interpret and adopt rules for the administration of the Incentive Award Plan, subject to its express terms and conditions. The plan administrator can also set the terms and conditions of all awards under the Incentive Award Plan, including any vesting and vesting acceleration conditions.
Limitation on Awards and Shares Available
The Incentive Award Plan provides that the maximum number of Shares initially available for issuance under the Incentive Award Plan is 14,799,519. The number of Shares available for issuance under the Incentive Award Plan will be automatically increased on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031, in an amount equal to the lesser of (i) 5% of the outstanding Shares on the last day of the immediately preceding fiscal year, and (ii) such number of Shares determined by the Board. Any Shares distributed pursuant to an award may consist, in whole or in part, of authorized and unissued Shares, treasury Shares or Shares purchased on the open market.
Awards
The Incentive Award Plan provides for the grant of share options, including ISOs and non-qualified share options, SARs, restricted shares, RSUs, dividend equivalents, share payments, other incentive awards, and cash awards. All awards under the Incentive Award Plan will be set forth in award agreements, which will detail all terms and conditions of the awards, including any applicable vesting and payment terms and post-termination exercise limitations. Awards, other than cash awards, generally will be settled in Shares but the plan administrator may provide for cash settlement of any award (other than share options).
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Share Options
Share options will provide for the purchase of Shares in the future at an exercise price set on the grant date. The exercise price per Share subject to each option will be set by the plan administrator, but will, except with respect to certain substitute options granted in connection with a corporate transaction, not be less than 100% of the Fair Market Value (as defined in the Incentive Award Plan) of a Share on the date the option is granted. The term of a share option may not be longer than ten years.
Restricted Shares and RSUs
Restricted shares are an award of non-transferable Shares that remain forfeitable unless and until specified conditions are met, and which may be subject to a purchase price. RSUs are contractual promises to deliver Shares in the future, which may also remain forfeitable unless and until specified conditions are met.
Dividend Equivalents
Dividend equivalents represent the right to receive the equivalent value of dividends paid on Shares and may be granted alone or in tandem with awards other than share options or SARs. Dividend equivalents are credited as of dividend payment dates during the period between the date an award is granted and the date such award vests, is exercised, is distributed or expires, as determined by the plan administrator.
Vesting
Vesting conditions determined by the plan administrator may apply to each award and may include continued service, performance and/or other conditions.
Certain Transactions
In the event of a Change in Control (as defined in the Incentive Award Plan), unless the plan administrator elects to (i) terminate an award in exchange for cash, rights or property, or (ii) cause an award to become fully exercisable and no longer subject to any forfeiture restrictions prior to the consummation of a Change in Control, such award will continue in effect or be assumed or an equivalent award substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event an award continues in effect or is assumed or an equivalent award substituted, and a holder incurs a termination of service without “cause” (as such term is defined in the sole discretion of the plan administrator, or as set forth in the award agreement relating to such award) upon or within 12 months following a Change in Control, then such holder will be fully vested in such continued, assumed or substituted award.
Plan Amendment and Termination
The Incentive Award Plan provides that the Board may amend or terminate the Incentive Award Plan at any time, provided that no amendment, suspension or termination of the Incentive Award Plan will, without the consent of the holder, materially and adversely affect any rights or obligations under any award, unless the award itself otherwise expressly so provides, and provided further that the Board may not take any of the following actions without approval of shareholders given within 12 months before or after such action: (i) increase the limit on the maximum number of Shares which may be issued under the Incentive Award Plan, (ii) reduce the price per Share of any outstanding option or SAR granted under the Incentive Award Plan, or (iii) cancel any option or SAR in exchange for cash or another award when the option or SAR price per share exceeds the fair market value of the underlying Shares.
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Employment Arrangements, Termination and Change in Control Benefits
Effective March 1, 2022, Li-Cycle entered into a new employment agreement with each of Ajay Kochhar, Tim Johnston, Kunal Phalpher and Chris Biederman (the “Employment Agreements”). The Employment Agreements provide for certain payments to the NEO in connection with the termination of the NEO’s employment in various circumstances, as described below.
In the case of Li-Cycle’s termination of the NEO’s employment without cause, or in the case of the NEO’s termination of his employment for good reason (as defined in the Employment Agreements), in either case within twelve months following a change in control (as defined in the Employment Agreements), the NEO is entitled to accrued and unpaid base salary, accrued vacation pay, and reimbursement for business expenses properly incurred; a lump-sum payment in lieu of notice in the amount of eighteen months’ base salary (or twenty-four months’ base salary for the CEO and Executive Chair) plus the amount of the NEO’s annual bonus target in respect of the fiscal year in which the termination occurs, pro-rated to eighteen months (or twenty-four months for the CEO and Executive Chair); matching contributions to the NEO’s registered retirement savings plan up to and including the last day of the statutory notice period required pursuant to applicable employment standards legislation; continued participation in Li-Cycle’s executive benefit plans and perquisites until the end of the statutory notice period pursuant to applicable employment standards legislation, and after, for a period of eighteen months or until the NEO becomes entitled to participate in similar benefit plans with another employer, participation in primary coverages (health care, dental care, and employee assistance program); a lump-sum for the NEO’s annual bonus award in respect of the fiscal year immediately preceding the termination, to the extent earned and unpaid at the date of the termination, calculated at the annual bonus target for such fiscal year, and annual bonus award in respect of the fiscal year of Li-Cycle in which the termination occurs, pro-rated from the start of such fiscal year to the date of the termination, calculated at the annual bonus target for such fiscal year; post-employment treatment of the NEO’s long term incentive plan awards (including without limitation share options and RSUs) determined in accordance with the terms of the Incentive Award Plan and/or any other applicable long term incentive plan(s), the relevant award agreement(s), and the 2021 Executive Severance Policy (as described below); and outplacement career counselling ending on the earliest to occur of twelve months following the termination and the date that the NEO obtains full-time employment.
In the case of Li-Cycle’s termination of the NEO’s employment without cause, or in the case of the NEO’s termination of his employment for good reason (as defined in the Employment Agreements), in either case prior to a change in control or more than twelve months after a change in control (as defined in the Employment Agreements), the NEO is entitled to accrued and unpaid base salary, accrued vacation pay, and reimbursement for business expenses properly incurred; payment in equal monthly instalments representing twelve months’ base salary (or eighteen months’ base salary for the CEO and Executive Chair) plus the amount of the NEO’s annual bonus target in respect of the fiscal year in which the termination occurs, pro-rated to twelve months (or eighteen months for the CEO and Executive Chair); matching contributions to the NEO’s registered retirement savings plan up to and including last day of the statutory notice period
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required pursuant to applicable employment standards legislation; continued participation in Li-Cycle’s executive benefit plans and perquisites until the end of the statutory notice period pursuant to applicable employment standards legislation, and after, for a period of twelve months or until the NEO becomes entitled to participate in similar benefit plans with another employer, participation in primary coverages (health care, dental care, and employee assistance program); post-employment treatment of the NEO’s long term incentive plan awards (including without limitation share options and RSUs) determined in accordance with the terms of the Incentive Award Plan and/or any other applicable long term incentive plan(s), the relevant award agreement(s), and the 2021 Executive Severance Policy (as described below); and outplacement career counselling ending on the earliest to occur of twelve months following the termination and the date that the NEO obtains full-time employment.
If the NEO is terminated for cause, death, mutually agreed retirement or by the executive without good reason, he will be entitled to payment of any unpaid base salary, vacation pay and reimbursement for business expenses properly incurred accrued to the termination date; matching contributions to the NEO’s registered retirement savings plan up to and including last day of the statutory notice period required pursuant to applicable employment standards legislation; and post-employment treatment of the NEO’s long term incentive plan awards (including without limitation share options and RSUs) determined in accordance with the terms of the Incentive Award Plan and/or any other applicable long term incentive plan(s), the relevant award agreement(s), and the 2021 Executive Severance Policy (as described below).
If the NEO is terminated for permanent disability, he will be entitled to a lump-sum payment of any unpaid base salary, vacation pay and reimbursement for business expenses properly incurred accrued during the applicable elimination period for long-term disability benefits stipulated in Li-Cycle’s long-term disability insurance plan, less any short-term disability benefit payments provided by Li-Cycle; matching contributions to the NEO’s registered retirement savings plan up to and including the end of the applicable elimination period; continued participation in Li-Cycle’s executive benefit plans and perquisites up to and including the end of the applicable elimination period; post-employment treatment of the NEO’s long term incentive plan awards (including without limitation share options and RSUs) determined in accordance with the terms of the Incentive Award Plan and/or any other applicable long term incentive plan(s), the relevant award agreement(s), and the 2021 Executive Severance Policy (as described below); and if any, minimum statutory entitlements under applicable employment standards legislation.
The 2021 Executive Severance Policy provides that all unvested options and RSUs will be accelerated and exercisable for the remainder of the term in the case of an executive officer’s termination (i) without cause or resignation for good reason within 12 months following a change in control, (ii) in the case of death, and (iii) in the case of disability. An executive officer’s unvested options and RSUs will continue to vest in the case of mutually agreed retirement. In all other cases of termination, unvested options and RSUs shall be forfeited.
Bruce MacInnis retired on January 31, 2022. In connection with his retirement, pursuant to his employment agreement, as amended by a retirement agreement entered into on July 7, 2021 and a letter agreement dated August 18, 2021, Mr. MacInnis was entitled to (i) a lump sum amount equal to twelve months of his base salary at the retirement date (being $325,000), (ii) a lump sum amount equal to his bonus for the fiscal year ended October 31, 2021 calculated and payable at target, and pro rated for his increase in base salary and target bonus upon the completion of the
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Business Combination, and (iii) continued participation in the Company’s group health and dental plans until the earlier of the date which is 12 months following the retirement date and the date on which he secures alternate coverage through any source other than existing spousal coverage.
The table below sets out (i) for the NEOs other than Mr. MacInnis, the incremental payments that would have been made to them under the terms of their Employment Agreements upon the occurrence of certain events, had they occurred on October 31, 2021, and (ii) for Mr. MacInnis, the amounts that were paid pursuant to his retirement agreement in connection with his retirement on January 31, 2022.
Name and Principal | Event | Salary and annual incentives ($) | Equity- Based Awards(1) ($) | Total ($) | ||||||||||
Ajay Kochhar | Termination without cause/termination by Mr. Kochhar for good reason within 12 months following a change in control | 2,520,000 | 355,511 | 2,875,511 | ||||||||||
Termination without cause/termination by Mr. Kochhar for good reason prior to a change of control or more than 12 months following a change in control | 1,485,000 | — | 1,485,000 | |||||||||||
Termination for cause, mutually agreed retirement or by Mr. Kochhar without good reason | — | — | — | |||||||||||
Death | — | 355,511 | 355,511 | |||||||||||
Permanent disability | — | 355,511 | 355,511 | |||||||||||
Tim Johnston | Termination without cause/termination by Mr. Johnston for good reason within 12 months following a change in control | 2,520,000 | 355,511 | 2,875,511 | ||||||||||
Termination without cause/termination by Mr. Johnston for good reason prior to or more than 12 months following a change in control | 1,485,000 | — | 1,485,000 | |||||||||||
Termination for cause, mutually agreed retirement or by Mr. Johnston without good reason | — | — | — | |||||||||||
Death | — | 355,511 | 355,511 | |||||||||||
Per manent disability | — | 355,511 | 355,511 |
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Name and Principal | Event | Salary and annual incentives ($) | Equity-Based Awards(1) ($) | Total ($) | ||||||||||
Bruce MacInnis(2) | Retirement | 444,647 | — | 444,647 | ||||||||||
Kunal Phalpher | Termination without cause/termination by Mr. Phalpher for good reason within 12 months following a change in control | 975,000 | 135,404 | 1,110,404 | ||||||||||
Termination without cause/termination by Mr. Phalpher for good reason prior to or more than 12 months following a change in control | 510,000 | — | 510,000 | |||||||||||
Termination for cause, mutually agreed retirement or by Mr. Phalpher without good reason | — | — | — | |||||||||||
Death | — | 135,404 | 135,404 | |||||||||||
Permanent disability | — | 135,404 | 135,404 | |||||||||||
Chris Biederman | Termination without cause/termination by Mr. Biederman for good reason within 12 months following a change in control | 975,000 | 135,404 | 1,110,404 | ||||||||||
Termination without cause/termination by Mr. Biederman for good reason prior to or more than 12 months following a change in control | 510,000 | — | 510,000 | |||||||||||
Termination for cause, mutually agreed retirement or by Mr. Biederman without good reason | — | — | — | |||||||||||
Death | — | 135,404 | 135,404 | |||||||||||
Permanent disability | — | 135,404 | 135,404 |
(1) | The 2021 Executive Severance Policy provides that all unvested options and RSUs will be accelerated and exercisable for the remainder of the term in the case of an executive officer’s termination (i) without cause or resignation for good reason within 12 months following a change in control, (ii) in the case of death, and (iii) in the case of disability. An executive officer’s unvested options and RSUs will continue to vest in the case of mutually agreed retirement. In all other cases of termination, unvested options and RSUs shall be forfeited. The value of unvested options is calculated as the difference based on the closing price of the Shares on the NYSE of $12.94 on October 31, 2021. Although no RSUs were outstanding as of October 31, 2021, in connection with the closing of the Business Combination, the NEOs were granted RSUs under the Incentive Award Plan as follows: 108,096 to Mr. Kochhar; 108,096 to Mr. Johnston; 41,171 to Mr. Phalpher; and 41,171 to Mr. Biederman. The RSUs were granted with effect on December 10, 2021, being the date following the effectiveness of a registration statement on Form S-8 filed by the Company with the SEC to register the Shares issuable thereunder: See “Incentive Plans –Incentive Award Plan”, below. |
(2) | Mr. MacInnis retired on January 31, 2022 and received the incremental payments set forth above as a result of such retirement. |
Compensation of Directors
The Charter of the Compensation Committee provides that the Compensation Committee will periodically evaluate and make recommendations to the Board with respect to appropriate forms and amounts of compensation for directors of the Company. In doing so, the Compensation Committee will consider: (i) the time commitment associated with being a director of the Company, including, as applicable, committee (and committee chair) work and Board chair (or lead director) work; (ii) the responsibilities and risks associated with being such a director, (iii) compensation paid to directors of companies and their subsidiaries similar to the Company, and (iv) any other factors the Compensation Committee deems relevant.
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In Fiscal 2021, the Board approved the following amounts for director compensation:
Compensation Element | RSU Award Value | Cash Value | ||||||
Standard Retainer | ||||||||
Director | $ | 100,000 | $ | 50,000 | ||||
Additional Retainers | ||||||||
Lead Director | — | $ | 25,000 | |||||
Audit Committee Chair | — | $ | 15,000 | |||||
Other Committee Chair | — | $ | 10,000 |
In addition, upon the closing of the Business Combination, the non-employee directors received an “on-boarding” equity award valued at two times the annual equity award value (i.e., $200,000).
Each member of our Board is entitled to reimbursement for reasonable travel and other expenses incurred when attending Board or Committee meetings or otherwise in connection with their director position. Directors do not receive any payment for attending meetings.
Director Share Ownership Guidelines
The Company’s non-employee directors are required to maintain an equity interest in the Company, through the ownership of Shares (or similar instruments such as RSUs) equal to at least four times their annual cash retainer within five years of joining the Board. Accordingly, the minimum equity ownership requirement is currently $200,000. Each of the Company’s non-employee directors was in compliance with the minimum equity ownership requirements as at October 31, 2021.
To calculate equity ownership for the purpose of the Company’s minimum equity ownership requirements for non-employee directors, as approved by the Board, the Company will include: (i) Shares; (ii) vested options, and (iii) vested RSUs. Vested options and vested RSUs are valued using the higher of (A) “Fair Market Value” (as defined in the Incentive Award Plan, “FMV”) on the date of the issuance of the equity award and (ii) FMV on the applicable measurement date. Further, the number of shares underlying vested options or vested RSUs are determined based on the number of shares that would be deliverable upon exercise or settlement in full of the respective awards, less (A) for the options, a number of shares with a FMV equal to the exercise price thereof, and a number of shares with a FMV equal to applicable taxes using an assumed tax rate of 25%, and (B) for RSUs, a number of shares with a FMV equal to applicable taxes using an assumed tax rate of 50%.
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Director Compensation Table
The following table shows the compensation earned by each non-employee director of the Company during Fiscal 2021. Neither Mr. Kochhar, the Chief Executive Officer of the Company, nor Mr. Johnston, the Executive Chair of the Company, is included in the table as neither receives any additional compensation for his service as a director of the Company.
Director | Fees Earned or Paid in Cash(1) | Stock Awards(2) ($) | Option Awards | Non-Equity Incentive Plan Compensation | Pension Value | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Rick Findlay | 37,215 | 311,124 | — | — | — | — | 348,339 | |||||||||||||||||||||
Alan Levande | 11,277 | 280,822 | — | — | — | — | 292,099 | |||||||||||||||||||||
Scott Prochazka | 14,660 | 280,822 | — | — | — | — | 295,482 | |||||||||||||||||||||
Anthony Tse | 35,077 | 311,124 | — | — | — | 56,400 | (3) | 402,601 | ||||||||||||||||||||
Mark Wellings | 42,853 | 311,124 | — | — | — | — | 353,977 |
(1) | A portion of the Fees Earned or Paid in Cash for Rick Findlay, Anthony Tse and Mark Wellings represents fees paid to each of them for services as directors of Li-Cycle Corp. prior to the Business Combination, which fees were paid in Canadian dollars prior to January 1, 2021 and paid in U.S. dollars thereafter. Those Canadian dollar amounts have been converted to U.S. dollars using the Bank of Canada’s average exchange rate on between November 1, 2020 and December 31, 2020 (being the period when fees were paid in Canadian dollars) of CA$1.00=U.S.$0.7732. Following the Business Combination, the Fees Earned or Paid in Cash were as follows: Rick Findlay $13,533, Alan Levande $11,277, Scott Prochazka $14,660, Anthony Tse $11,277, and Mark Wellings $19,171. |
(2) | In connection with the closing of the Business Combination, each non-employee director received an RSU grant with a value of $280,822 (consisting of an annual award (pro rated) of $80,822 and a one-time “on-boarding” award of $200,000). The RSUs were granted with effect on December 10, 2021, being the date following the effectiveness of a registration statement on Form S-8 filed by the Company with the SEC to register the Shares issuable thereunder. The annual RSU award vests ratably over a three-year period, with the first tranche vesting on August 10, 2022, and the one-time “on-boarding” RSU award vests ratably over a two-year period, with the first tranche vesting on August 10, 2022, subject to the participant’s continued service on the Board. Prior to the Business Combination, Rick Findlay, Anthony Tse and Mark Wellings served as directors of Li-Cycle Corp. In this regard, they each received an RSU grant with a value of CA$39,246 on December 1, 2020. These Canadian dollar amounts have been converted to U.S. dollars using the Bank of Canada’s exchange rate on December 1, 2020 (being the date of grant) of CA$1.00=U.S.$0.7721. |
(3) | This amount represents aggregate fees paid to Anthony Tse in Fiscal 2021 under the terms of a consulting agreement dated July 19, 2019 between Li-Cycle Corp. and Mr. Tse pursuant to which Mr. Tse provided consulting services to Li-Cycle Corp. in relation to the proposed expansion of its operations in Asia. The agreement has since been terminated. See the section entitled “Item 7. B. Related Party Transactions.” |
Outstanding Option-Based and Share-based Awards
The following table indicates, for each of the directors other than Mr. Kochhar and Mr. Johnston, all option-based and share-based awards outstanding as of October 31, 2021.
Option-Based Awards | Share-Based Awards(2) | |||||||||||||||||||||||||||
Director | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | Value of Unexercised In-The- Money Options(1) ($) | Number of Shares or Units of Shares That Have Not Vested (#) | Market or Payout Value of Share-Based Awards That Have Not Vested ($) | Market or Payout Value of Value of Vested Share- Based Awards Not Paid Out or Distributed ($) | |||||||||||||||||||||
Rick Findlay | 159,640 | 0.02 | April 11, 2023 | 2,062,549 | — | — | — | |||||||||||||||||||||
139,685 | 0.37 | July 19, 2024 | 1,755,840 | |||||||||||||||||||||||||
Alan Levande | — | — | — | — | — | — | — | |||||||||||||||||||||
Scott Prochazka | — | — | — | — | — | — | — | |||||||||||||||||||||
Anthony Tse | — | — | — | — | — | — | — | |||||||||||||||||||||
Mark Wellings | 87,003 | 0.37 | July 19, 2024 | 1,093,628 | — | — | — |
(1) | Options are “in-the-money” if the market price of the shares covered by the options is greater than the option exercise price. Values for Share options are calculated based on the difference between the closing market price of the Shares on the NYSE on October 29, 2021, which was $12.94, and the exercise price. Actual value realized will be the difference between the market price and the option exercise price upon exercise of the options. |
(2) | Although not outstanding as of October 31, 2021, in connection with the closing of the Business Combination, each of the non-employee directors was granted 25,692 RSUs under the Incentive Award Plan. The RSUs were granted with effect on December 10, 2021, being the date following the effectiveness of a registration statement on Form S-8 filed by the Company with the SEC to register the Shares issuable thereunder. |
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SECTION 5: CORPORATE GOVERNANCE POLICIES AND PRACTICES
Introduction
We are a “foreign private issuer” under applicable U.S. federal securities laws. As a result, we are permitted to follow certain corporate governance rules that conform to Canadian requirements in lieu of certain NYSE corporate governance rules.
The Canadian Securities Administrators have issued corporate governance guidelines pursuant to National Policy 58-201 - Corporate Governance Guidelines (the “Corporate Governance Guidelines”), together with certain related disclosure requirements pursuant to NI 58-101. The Corporate Governance Guidelines are recommended as “best practices” for issuers to follow. We recognize that good corporate governance plays an important role in our overall success and in enhancing shareholder value and, accordingly, we have adopted certain corporate governance policies and practices which the Board and management believe comply in all material respects with the Corporate Governance Guidelines.
The disclosure below, setting forth our key governance practices, includes disclosure required by NI 58-101 describing our approach to corporate governance in relation to the Corporate Governance Guidelines.
Election of Directors
At any general meeting of our shareholders at which directors are to be elected, a separate vote of shareholders entitled to vote will be taken with respect to each candidate nominated for director. Pursuant to the OBCA, any casual vacancy occurring on our Board may be filled by a quorum of the remaining directors, subject to certain exceptions.
Director Independence
Under NI 58-101, a director is considered to be independent if he or she is independent within the meaning of Section 1.4 of NI 52-110. It is the Board’s policy to have a majority of directors who satisfy the criteria for “independent directors,” as defined by the applicable rules of the NYSE and Section 1.4 of NI 52-110. The Nominating and Governance Committee annually reviews each director’s independence and any material relationships a director may have with the Company. Following such review, only those directors who the Board affirmatively determines have no material relationship with the Company, and otherwise satisfy the independence requirements of the NYSE and Section 1.4 of NI 52-110, will be considered “independent directors.”
The Board has determined that each of the directors other than Mr. Kochhar, Mr. Johnston and Mr. Levande qualify as “independent directors”, as defined under the rules of the NYSE and NI 58-101, and therefore the Board consists of a majority of “independent directors”. Mr. Kochhar is not independent by reason of the fact that he is our President and Chief Executive Officer, Mr. Johnston is not independent by reason of the fact that he is our Executive Chairman and Mr. Levande is not independent by reason of his previous employment with Peridot.
The Board of Directors Charter provides that if at any point the Chair is not independent, then the Board will also appoint one member to act as the independent “Lead Director”, and will set out his or her duties and responsibilities in a position description. The Board Chair is not independent and
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consequently an independent director, Mark Wellings, has been appointed as Lead Director by the Board and is responsible for ensuring that the Board operates independently of management and that the directors have an independent leadership contact. For more information, see the disclosure relating to the position description of the Lead Director below under “Position Descriptions”.
Meetings of Directors
The Board will meet at least once each quarter, with additional meetings held as deemed advisable, at such times and locations (if any) as the Chair deems necessary to fulfill the Board’s responsibilities. From the closing of the Business Combination to October 31, 2021, there were five Board meetings, one Audit Committee meeting, three Compensation Committee meetings, one Nominating and Governance Committee meeting and one HSEQ Committee meeting.
The independent directors meet, without non-independent directors and members of management, at each meeting. From the closing of the Business Combination to October 31, 2021, there were five meetings of independent directors. Meetings of independent directors and the agendas for those meetings are set by our Lead Director.
Each director is expected to attend all meetings of the Board and any committee of which he or she is a member and is expected to review and be familiar with Board and committee materials which have been provided in sufficient time for review prior to the meeting.
A director who has a material interest in a matter before our Board or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our Board or any committee on which he or she serves, such director may be required to absent himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Directors will also be required to comply with the relevant provisions of the OBCA regarding conflicts of interest.
Board of Directors Charter
The Board is responsible for supervising the management of our business and affairs, including providing guidance and strategic oversight to management. The Board has adopted a formal Board of Directors Charter that includes the following as its responsibilities:
• | ensuring a strategic planning process is in place and approving business plans, operating and capital budgets and material transactions and capital investments not in the ordinary course of business; |
• | appointing our Chief Executive Officer and developing a written position description for the role of the Chief Executive Officer; |
• | developing the corporate goals and objectives that our Chief Executive Officer is responsible for meeting and reviewing the performance of Chief Executive Officer against such corporate goals and objectives; |
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• | satisfying itself as to the integrity of our Chief Executive Officer and other executive officers and that our Chief Executive Officer and other executive officers create a culture of integrity throughout the organization; |
• | overseeing and approving our Code of Conduct and our Code of Ethics for Principal Executive and Senior Financial Employees and reviewing, approving and overseeing the implementation of our material policies, including the Insider Trading Policy, the Pre-Approval of Audit and Non-Audit Services Policy, the Related Party Transaction Policy and the Anti-Corruption, Sanctions Compliance and Anti-Money Laundering Policy; |
• | identifying and assessing the principal risks of our business, and ensuring the implementation of appropriate systems to manage and mitigate these risks; and |
• | ensuring the integrity of our internal control system and management information systems and safeguarding our assets. |
The full text of the Board of Directors Charter is set out in Schedule B hereto.
Position Descriptions
The Board has adopted a written position description for the Executive Chairman which sets out his key responsibilities, including duties relating to ensuring the proper functioning and effectiveness of the Board and its committees; in consultation with the Lead Director, the Chief Executive Officer and the Corporate Secretary, determining the frequency, dates and locations of meetings of the Board and setting the agendas for meetings of the Board; chairing Board and Shareholder meetings and carrying out such other duties and responsibilities as the Board may request from time to time.
The Board has adopted a written position description for the Lead Director which sets out his key responsibilities, including working with the Executive Chair to facilitate the proper functioning and effectiveness of the Board and its committees; consulting with the Executive Chair regarding the frequency, dates and locations of the meetings of the Board and the agendas for those meetings; ensuring that the Board operates independently of management and that the directors have an independent leadership contact; chairing and setting the agenda for in-camera meetings of the independent directors; and performing such other functions as may be reasonably requested by the Board or the Executive Chair.
The Board has also adopted a written position description for each of the committee chairs which set out each of the committee chair’s key responsibilities, including duties relating to determining the frequency, dates and locations of meetings and setting committee meeting agendas, chairing committee meetings, reporting to the Board and carrying out any other special assignments or any functions as may be requested by the Board.
The Board has adopted a written position description for the President and Chief Executive Officer which sets out the key responsibilities of the President and Chief Executive Officer, including to supervise day-to-day management of the business and affairs of the Company; formulate the Company’s short and long term strategic and business plans and present such plans to the Board; implement capital and operating plans to support the Company’s strategic and business plans;
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identify the risks associated with the Company’s strategic and business plans and suggest systems to manage such risks; develop and maintain an effective organizational structure; recruit and manage an appropriate senior leadership team; serve as the Company’s role model for responsible, ethical and effective decision-making; act as the principal spokesperson for the Company and oversee the interactions between the Company, the public, investors, regulators, analysts, the media and other stakeholders; and perform such other duties and responsibilities as may be delegated by the Board from time to time.
Orientation and Continuing Education
All new directors will be offered the opportunity to participate in an orientation program of the Company (the “Orientation Program”) upon being elected or appointed to the Board. Together with the President and Chief Executive Officer, the Executive Chair and other management of the Company, the Nominating and Governance Committee will develop, implement, and regularly review and update the Orientation Program. The Orientation Program will include presentations by senior management to familiarize new directors with the role of the Board, its committees and directors, the nature and operation of the Company’s business, the Company’s strategic plans, its significant financial, accounting and risk management issues, its compliance programs, its Code of Business Conduct and Ethics, its Code of Ethics for Principal and Senior Financial Officers, its principal officers, and its external independent auditor. In addition, the Orientation Program will include visits to Company facilities.
In addition to the Orientation Program, the Company will, from time to time, offer director education presentations and will also provide, at Company expense, the opportunity for directors to attend director orientation programs sponsored by leading universities and corporate governance organizations and other programs relating or of interest to directors.
In the past year, directors attended presentations and were provided with materials related to, among other things: director’s liabilities and the Company’s disclosure obligations under applicable securities laws. The directors were also provided with a tour of the Company’s Spoke operations and the site of the Company’s future North America Hub, near Rochester, New York. Directors have also been provided with presentations from senior management to familiarize them with the Company’s strategic plans, risk management issues and significant issues facing the Company.
Code of Business Conduct and Ethics
The Board has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) applicable to all of our directors, officers and employees, including our President and Chief Executive Officer, Executive Chairman, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions, which is a “code of ethics” as defined in Item 16B of Form 20-F promulgated by the SEC and which is a “code” under NI 58-101. The Code of Conduct sets out the Company’s guidelines for appropriate interactions and communications with our customers, fellow employees and other stakeholders, as well as our fundamental rules for doing business. The objective of the Code of Conduct is to provide guidelines for maintaining the Company’s integrity, reputation and honesty with a goal of honoring others’ trust in us at all times.
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The full text of the Code of Conduct is posted on our website and under our profile on SEDAR at www.sedar.com. If we make any amendment to the Code of Conduct or grant any waivers, including any implicit waiver, from a provision of the Code of Conduct, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC and the Canadian Securities Administrators. Under Item 16B of the SEC’s Form 20-F, if a waiver or amendment of the Code of Conduct applies to our principal executive officer, principal financial officer, principal accounting officer or controller and relates to standards promoting any of the values described in Item 16B(b) of Form 20-F, we will disclose such waiver or amendment on our website in accordance with the requirements of Instruction 4 to such Item 16B.
The Nominating and Governance Committee is responsible for overseeing compliance with the Code of Conduct, and will annually review the adequacy of the Code of Conduct and recommend any changes the committee considers appropriate.
The Company encourages all employees, officers and directors to report any suspected violations of the Code of Conduct promptly and intends to thoroughly investigate any good faith reports of violations. In order to ensure that violations or suspected violations can be reported without fear of retaliation, harassment or an adverse employment consequence, the Code of Conduct contains procedures that are aimed to facilitate confidential, anonymous submissions by our employees.
Whistleblower Protection and Investigation Policy
The Audit Committee has adopted a whistleblower policy (the “Whistleblower Policy”) that describes the procedures by which any employee may submit a good faith complaint without fear of dismissal or retaliation, of any actual or potential or suspected violation of the Company’s Code of Conduct; any applicable laws, rules or regulations; any applicable accounting, auditing or securities regulatory requirements; employment related matters; or other matters of ethical concern.
The Whistleblower Policy permits employees to make complaints to their manager, HR representative, the General Counsel, or to a confidential incident reporting helpline. The helpline is administered by an independent third-party service, called Ethical Advocate, to ensure that questions and reports may be made both anonymously and confidentially. The Company’s General Counsel is responsible for assessing reports and overseeing investigations. All reports are treated as confidential to fullest extent permitted by law and consistent with the need to conduct an appropriate review.
Nomination of Directors
Each year, the Nominating and Governance Committee will review the composition of the Board in order to ensure that it has the best mix of skills and experience to guide the long-term strategy and the ongoing business operations of the Company.
While the Board has two diverse members, none of the current Board members or nominees for election at the Meeting are women. The Board intends to increase its size from seven to nine members in the near term, which will provide an opportunity to enhance the balance of diversity, skills and experiences of its members. The Nominating and Governance Committee has engaged an external director search firm and is currently in the process of recruiting additional independent
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directors from a pool of candidates, all of whom are women. Recruiting additional independent directors will also facilitate the Company’s compliance with NYSE independence requirements for Board committees, following the expiry of the one-year phase-in period for newly public companies.
Director candidates are selected based upon their character, track record of accomplishment in their respective fields, demonstrated leadership characteristics and diversity, as well as their other professional and corporate expertise, skills and experience. Criteria that are considered by the Board in the selection of directors include:
(a) | the independence, judgment, strength of character, reputation in the business community, ethics and integrity of the individual; |
(b) | the business or other relevant experience, skills and knowledge that the individual may have that will enable the individual to provide effective oversight of the Company’s business, including anticipated regulatory and market developments; |
(c) | the fit of the individual’s skill set, strength of character and judgment; and |
(d) | the individual’s ability to devote sufficient time to carry out their responsibilities as a director in light of their occupation and the number of boards of directors of other public companies or significant organizations on which they serve. |
In addition, the Company recognizes the importance and benefit of having a board of directors and senior management comprised of highly talented and experienced individuals having regard to the need to foster and promote diversity among Board members and executive officers. Diversity refers to a broad range of factors that are used to distinguish groups and individuals such as age, education, experience, gender and gender expression/identity, sexual orientation, religion, disability, national origin and ethnicity, including Indigenous people and members of visible minorities. In support of this goal, the Nominating and Governance Committee will, in addition to the qualifications discussed above, when identifying candidates to nominate for election to the Board or in its review of executive officer succession planning and talent management:
(a) | consider criteria that promote gender balance and diversity, including with regard to women, national origin and ethnicity, including Indigenous peoples and members of visible minorities, persons with disabilities and other factors; |
(b) | consider the level of representation of women on the Board and in executive officer positions along with other markers of diversity when making recommendations for nominees to the Board or for appointment as executive officers and when succession planning for the Board and executive officers; and |
(c) | engage qualified independent external advisors, as appropriate, to assist the Board in conducting its search for candidates that meet the Board’s criteria regarding skills, gender balance, experience and diversity. |
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To assist in this process, the Nominating and Governance Committee will be mandated to consider as part of its policies and procedures:
(a) | the periodic evaluation and assessment of individual directors as well as Board committees and the Board as a whole to identify strengths and areas for improvement; |
(b) | in consultation with the Board, the development and maintenance of a director skills matrix that identifies the skills and expertise required for the Board along with potential areas for growth and improvement; and |
(c) | measures designed to ensure that the nominee recruitment and identification processes are appropriate in terms of depth and scope to foster identification and progression of diverse candidates. |
Two out of nine, or 22%, of our executive officers are women. Specific targets or quotas for diversity appointments to the Board and to executive officer positions have not been adopted by the Board due to the need to consider a balance of criteria in each individual appointment. The Nominating and Governance Committee will, in its periodic review of the composition of the Board and executive officer appointments, assess the effectiveness of the Board nomination process and senior management appointment process at achieving the Company’s diversity objectives and monitor the implementation of its Board membership criteria guidelines.
Board Size
The Board believes that the size of the Board should enable its members to effectively and responsibly discharge their responsibilities to the Company. The Board must recognize that the Company’s demands on its directors may evolve with the development of the Company and that the size of the Board should be considered over time and within the context of the development of the Company and the directors’ responsibilities. The Board has the ability to increase or decrease its size within the limits defined by the Articles of the Company and in accordance with applicable laws.
The Board continues to work towards enhancing the balance of diversity, skills and experiences of its members. The Board therefore intends to increase its size from seven to nine members in the near term. The Nominating and Governance Committee is in the process of recruiting additional Board members from a pool of candidates, all of whom are women.
Skills Matrix
The Board brings together a range of diversity and a mix of competencies to promote the achievement of the Company’s strategic objectives and effective corporate governance and oversight. Information regarding the Company’s director nominees is set forth in the skills matrix below:
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AGE | REGION | COMPETENCIES(1) | ||||||||||||||||||||||||||||||||||||
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Ajay Kochhar | X | X | X | X | X | X | X | X | X | X | X | X | X | |||||||||||||||||||||||||
Tim Johnston | X | X | X | X | X | X | X | X | X | X | X | X | ||||||||||||||||||||||||||
Mark Wellings | X | X | X | X | X | X | X | X | X | X | ||||||||||||||||||||||||||||
Rick Findlay | X | X | X | X | X | X | X | X | X | X | X | X | X | |||||||||||||||||||||||||
Anthony Tse | X | X | X | X | X | X | X | X | X | X | X | X | X | X | ||||||||||||||||||||||||
Alan Levande | X | X | X | X | X | X | X | X | X | X | X | |||||||||||||||||||||||||||
Scott Prochazka | X | X | X | X | X | X | X | X | X | X |
(1) Definition of core competencies
• | Executive Leadership: Business and strategic management experience from service in a significant leadership positions, such as a chief executive officer, chief financial officer or other senior leadership role. |
• | Board Experience: Experience as a corporate director, particularly at a public company. |
• | Finance: Background and experience in finance, accounting, banking, capital markets, financial reporting or economics. |
• | Industry Knowledge: Experience in the company’s businesses and industries, including battery manufacturing, lithium-ion production and cleantech. |
• | Operational Experience: Experience defining and driving strategic direction and growth and managing the operations of a business or large organization. |
• | International: International background or global experience, including in growth markets. |
• | Information Technology: Experience or expertise in technology sector, information security, data privacy, or use of technology to facilitate business operations and customer service. |
• | Safety, Health, Environment & CSR: Experience in ESG and community affairs maters, including as part of a business and managing corporate social responsibility issues as business imperatives. |
• | Strategic Planning & M&A: Experience in corporate/strategic planning and evaluating, structuring and executing M&A and joint venture transactions. |
• | HR / Executive Compensation: Experience in establishing compensation programs, recruitment and succession planning. |
• | Capital Projects: Experience in providing leadership or oversight of large capital projects, including on cost and schedule. |
• | High-Growth Enterprises: Experience in assisting rapidly scaling businesses advance through various stages of development. |
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Director Term Limits and Other Mechanisms of Board Renewal
The Board seeks to maintain a balance between ensuring that there are fresh ideas and viewpoints available to the Board while not losing the insight, experience and other benefits of continuity contributed by longer serving Directors. Rather than adopting formal term limits, mandatory age- related retirement policies and other mechanisms of board renewal, the Nominating and Governance Committee has developed a skills and competencies matrix for the Board as a whole and for individual directors. See “Skills Matrix”, above. The Nominating and Governance Committee conducts a process for the assessment of the performance and effectiveness of the Board, each committee and each director, and reports the evaluation results to the Board on an annual basis. See “Board Evaluation”, below.
Board Commitments and Interlocks
The Board does not believe that its members should be prohibited from serving on the boards of other companies so long as those commitments do not create material actual or potential conflicts and do not interfere with the director’s ability to fulfill his or her duties as a member of the Board. An individual member of the Board should not sit on more than four public company boards (including that of the Company). The Company’s Corporate Governance Guidelines provide that if a member of the Board serves as an executive officer of a publicly traded company, that member should not serve on the boards of more than two public companies (including that of the Company or any other company on which such board member is an executive officer).
In selecting nominees for membership, the Board takes into account the other demands on the time of a candidate, and with respect to current members of the Board, their past attendance at, preparedness for and participation in Board and committee meetings. The Company’s Corporate Governance Guidelines provide that directors should advise the chair of the Nominating and Governance Committee and each of the committees in which they serve in advance of accepting an invitation to serve on another public company board.
The Company will seek to have no more than two board and committee interlocks at any given time. A board interlock occurs when two of the Company’s directors also serve together on the board of another public company or investment company.
Board Evaluation
The Nominating and Governance Committee is responsible for developing a process to assess the effectiveness of the Board, its committees, each chair and the directors. The Lead Director, in collaboration with the chair of the Nominating and Governance Committee, will provide an annual assessment of the overall performance and effectiveness of the Board and each committee, the Chair, each committee chair and each director and report annually on such assessments to the Board. The objective of the assessments is to ensure the continued effectiveness of the Board in the execution of its responsibilities and to contribute to a process of continuing improvement. This assessment is discussed with the full Board following the end of each fiscal year and specifically reviews areas in which the Board and/or management believes that a better contribution could be made. Its purpose is to increase the effectiveness of the Board as a whole, as well as the effectiveness of individual Board members.
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In the event that a material change occurs with respect to the principal employment or affiliation of an independent director, such independent director is required to notify the Board Chair and Corporate Secretary of such change. The Board will then consider, with the assistance of the Nominating and Governance Committee, whether, given such material change in such independent director’s principal employment or affiliation, it is appropriate for such director to continue to be nominated as a member of the Board.
Committees of the Board of Directors
The Company has established an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”), a nominating and corporate governance committee (the “Nominating and Governance Committee”) and a health, safety, environmental, quality and technical committee (the “HSEQ Committee”). Each committee has a written charter that is posted on our website.
Audit Committee
The Audit Committee is comprised of Scott Prochazka (Chair), Rick Findlay and Mark Wellings. The Audit Committee met once from the closing of the Business Combination to October 31,
2021. Our Board has determined that each of the audit committee members is an independent director, as required by applicable SEC, NYSE rules and NI 52-110. Our Board has also determined that at least one member of the audit committee, namely Scott Prochazka, qualifies as the “audit committee financial expert,” as such term is defined in Item 407 of Regulation S-K and that all members of the audit committee are “financially literate,” as such term is defined in NI 52-110.
The members of the Audit Committee have direct experience that is relevant to their responsibilities:
• | Mr. Prochazka served as a President and CEO of a NYSE-listed, Fortune 500 energy delivery company, where he supervised the company’s CFO and participated in preparation of SEC financial filings. He currently served on the audit committee of Peridot Acquisition Corp. II, a NYSE-listed special purpose acquisition company; |
• | Mr. Wellings is a seasoned financial professional and corporate director, with over 18 years experience in the corporate finance practice of a Canadian investment bank. He currently serves on the audit committee of two other public companies (Superior Gold Inc. and Adventus Mining Corporation); and |
• | Mr. Findlay is a management consultant, company founder and corporate director, with extensive experience in the environmental and recycling sectors. As CEO and consultant, he has been involved in financial management and oversight of several companies through various stages of growth and development. |
For more information on the skills and experience of our Audit Committee members, please see their biographies in Section 3 of this Circular – About the Nominee Directors.
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The Board has established a written charter setting forth the purpose, composition, authority and responsibility of the Audit Committee consistent with the rules of the NYSE, the SEC and the applicable Canadian securities laws. The Audit Committee is, among other things, directly responsible for monitoring the integrity of the Company’s financial statements, financial reporting process and systems of internal controls and procedures; ensuring compliance by the Company with applicable legal and regulatory requirements, reviewing areas of potential significant financial risk to the Company; evaluating the independent auditor’s independence and qualifications; and appointing, determining the compensation of and monitoring the performance of the independent auditors. The Audit Committee oversees risks and exposures to the Company related to, amongst other things, (i) threatened and pending litigation; (ii) claims against the Company or any of its subsidiaries; (iii) tax matters, regulatory compliance and correspondence from regulatory authorities; and (iv) environmental exposure. The text of the Charter of the Audit Committee is set out in Schedule C hereto.
Pre-Approval of Audit and Non-Audit Services Policy
As part of its responsibilities, the Audit Committee is required to pre-approve audit and non-audit services provided by the independent auditor in order to ensure that the provision of such services do not impair the auditor’s independence from the Company. Accordingly, the Committee has adopted a Pre-Approval of Audit and Non-Audit Services Policy (the “Pre-Approval Policy”) that sets forth the procedures and conditions whereby audit and permitted non-audit services to be performed by the independent auditor will be pre-approved. Under the Pre-Approval Policy, the Committee may delegate pre-approval authority to one or more of its independent members. All applications or requests for services to be provided by the independent auditor will be submitted to the Company’s Chief Financial Officer, who will determine whether such proposed services are included within the list of services that have received the general pre-approval of the Committee. Requests or applications to provide services that require the specific approval of the Committee will be submitted to the Committee by both the independent auditor and the CFO.
Compensation Committee
The Compensation Committee is comprised of Rick Findlay (Chair), Alan Levande and Mark Wellings. The Compensation Committee met three times from the closing of the Business Combination to October 31, 2021. The Board has determined that each of the members of the Compensation Committee is an independent director, other than Alan Levande (by reason of his previous employment with Peridot). Given that Mr. Levande was not an employee or executive officer of Li-Cycle or its predecessors prior or subsequent to the Business Combination and the limited operations of Peridot prior to the Business Combination (none of which form part of the continuing operations of the Company), the Board has determined that Mr. Levande’s participation on the Compensation Committee is not reasonably expected to impede the Compensation’s Committee’s objective determination of the performance of the Company’s directors and officers and the identification of new directors. Further, the Board’s determination regarding Mr. Levande’s non-independence does not affect his ability to serve on the Compensation Committee, under the NYSE’s phase-in rules for newly public companies. For more information, see Section 4: Compensation Discussion and Analysis – Compensation of Executives – Compensation Governance.
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The Board has established a written charter setting forth the purpose, composition, authority and responsibility of the Compensation Committee consistent with the rules of the NYSE, the SEC and the guidance of the Canadian Securities Administrators. The Compensation Committee, among other things, oversees the compensation strategy and policies of the Company’s employees and directors; establishes, reviews and reports on compensation of the Company’s executive officers; administers equity-based and certain other compensation plans; and reviews the “Compensation Discussion and Analysis” and related executive compensation disclosure for inclusion in the Company’s public disclosure documents.
Nominating and Governance Committee
The Nominating and Governance Committee is comprised of Mark Wellings (Chair), Alan Levande and Anthony Tse. The Nominating and Governance Committee met once from the closing of the Business Combination to October 31, 2021. The Board has determined that each of the members of the Compensation Committee is an independent director, other than Alan Levande (by reason of his previous employment with Peridot). Given that Mr. Levande was not an employee or executive officer of Li-Cycle or its predecessors prior or subsequent to the Business Combination and the limited operations of Peridot prior to the Business Combination (none of which form part of the continuing operations of the Company), the Board has determined that Mr. Levande’s participation on the Nominating and Governance Committee is not reasonably expected to impede the Nominating and Governance Committee’s objective determination of the performance of the Company’s directors and officers and the identification of new directors. Further, the Board’s determination regarding Mr. Levande’s non-independence does not affect his ability to serve on the Nominating and Governance Committee, under the NYSE’s phase-in rules for newly public companies.
The Board has established a written charter setting forth the purpose, composition, authority and responsibility of the Nominating and Governance Committee. The Nominating and Governance Committee is, among other things, responsible for identifying and evaluating individuals qualified to become Board members, consistent with criteria approved by the Board, and recommending such individuals to the Board for approval as nominee; leading the performance review of the Board and its committees; and overseeing the establishment of the Company’s corporate governance practices and policies.
Health, Safety, Environmental, Quality and Technical Committee
The HSEQ Committee is comprised of Tim Johnston (Chair), Anthony Tse, Rick Findlay and Scott Prochazka. The HSEQ Committee met once from the closing of the Business Combination to October 31, 2021. The Board has established a written charter setting forth the purpose, composition, authority and responsibility of the HSEQ Committee. The function and purpose of the HSEQ Committee is to assist the Board in fulfilling its responsibilities with respect to: (i) developing and implementing the health, safety, environmental and quality policies, procedures and programs of the Company and its subsidiaries, and monitoring compliance with such policies; and (ii) developing and implementing quality assurance and technical policies, procedures and programs of the Company and its subsidiaries, and monitoring compliance with such policies.
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Disclosure Policy
We have adopted a written disclosure policy (the “Disclosure Policy”), which outlines the procedures and practical guidelines for timely disclosure of information about the Company to the investing public, in accordance with applicable legal and regulatory requirements, and is intended to protect and prevent the improper use or disclosure of undisclosed material information or otherwise confidential information about the Company.
The Disclosure Policy applies to all directors, officers, employees and consultants of the Company and covers all disclosure contained in all documents filed with or furnished to the Company’s securities regulators or stock exchanges. The Disclosure Policy also applies to any and all other statements communicated orally, verbally, in writing or electronically to any person, including, but not limited to, analysts, investors and the public that would reasonably be expected to affect the market price or value of the Company’s securities.
Advance Notice Provisions
We have adopted an advance notice by-law which provides that shareholders seeking to nominate candidates for election as directors must provide timely written notice to our Corporate Secretary at our principal executive offices. To be timely, a shareholder’s notice must be received: (1) in the case of an annual meeting of shareholders, not less than 30 days no more than 65 days prior to the date of the annual meeting; provided, however, that in the event that the annual meeting of shareholders 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 by the shareholder may be received not later than the close of business on the 10th day following the date of such public announcement; and (2) in the case of a special meeting (which is not also an annual meeting) of shareholders called for the purpose of electing directors, not later than the close of business on the 15th day following the day that is the earlier of the date that a notice of meeting is filed for such meeting and the date on which the first public announcement of the date of the special meeting was made. Our advance notice by-law also prescribes the proper written form for a shareholder’s notice. Our Board may, at its sole discretion, waive any requirement under these provisions.
Choice of Forum
We have adopted a forum selection by-law which provides that, unless we consent in writing to the selection of an alternative forum, the Superior Court of Justice of the Province of Ontario, Canada and appellate courts therefrom, will, to the fullest extent permitted by law, be the sole and exclusive forum for: (1) any derivative action or proceeding brought on our behalf; (2) any action or proceeding asserting a breach of fiduciary duty owed by any of our directors, officers or other employees to us; (3) any action or proceeding asserting a claim arising pursuant to any provision of the OBCA or our articles or by-laws, or (4) any action or proceeding asserting a claim otherwise related to our “affairs” (as defined in the OBCA). Our forum selection by-law also provides that our securityholders are deemed to have consented to personal jurisdiction in the Province of Ontario and to service of process on their counsel in any foreign action initiated in violation of our by-law.
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SECTION 6: GENERAL AND ADDITIONAL INFORMATION
Interests of Certain Persons or Companies on Matters to be Acted Upon
Other than as described herein, no person who has been a director or executive officer of the Company at any time since the beginning of the last financial year of the Company, no proposed nominee for election as director of the Company and no associate or affiliate of any of the foregoing persons has or had any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon other than as disclosed herein.
Interest of Informed Persons in Material Transactions
No informed persons of the Company, proposed director, or any associate or affiliate of any informed person or proposed director has any material interest, direct or indirect, in any transaction in the last fiscal year or in any proposed transaction which has materially affected or would materially affect the Company or any of its subsidiaries.
Indebtedness of Directors, Officers and Employees
Since November 1, 2020, no current or proposed director, executive officer or employee of the Company, or any former director, executive officer or employee of the Company, or any associate of any of the foregoing, is, or has been, excluding routine indebtedness, indebted to the Company or its subsidiaries, either in connection with the purchase of the Company securities or otherwise.
Shareholder Proposals
Shareholder proposals to be considered for inclusion in next year’s management information circular for the Company’s 2023 annual general meeting of shareholders must be submitted no later than February 27, 2023.
Other Matters
As of the date of this Circular, management is not aware that any other matter is to be presented for action at the Meeting. If, however, other matters properly come before the Meeting, the persons named on the enclosed form of proxy will vote on them in accordance with their judgment, pursuant to the discretionary authority conferred by the form of proxy with respect to such matters.
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Additional Information
Additional financial information about Li-Cycle, including Li-Cycle’s 2021 Annual Report on Form 20-F, including its audited consolidated financial statements and notes and related Management’s Discussion and Analysis for the year ended October 31, 2021, are accessible on SEDAR at sedar.com, on EDGAR at sec.gov, on our website at https://investors.li- cycle.com/financials/sec-filings/, or by contacting Li-Cycle by phone at 1-877-542-9253 or by email at investors@li-cycle.com.
Approval by Directors
The Board of Directors of the Company approved the contents of this Circular and authorized it to be sent to each shareholder who is eligible to receive notice of, and vote his, her or its shares at, our Annual General and Special Meeting of Shareholders, as well as to the Company’s auditors.
/s/ Carl DeLuca |
Carl DeLuca |
General Counsel and Corporate Secretary |
March 8, 2022 |
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SCHEDULE A
Deloitte LLP | ||
Bay Adelaide East 8 Adelaide Street West | ||
Suite 200 | ||
Toronto, ON M5H 0A9 | ||
Canada
| ||
Tel: 416-601-6150 | ||
Fax: 416-601-6151 www.deloitte.ca |
January 31, 2022
Securities and Exchange Commission
100 F Street N.E.
Washington, D.C. 20549
We have read Item 16F in this Form 20F of Li-Cycle Holdings Corp. dated January 31, 2022 and have the following comments:
1. | We agree with the statements made in “Resignation/dismissal of independent registered public accounting firm” as it relates to us. |
2. | We have no basis on which to agree or disagree with the statements in “Engagement of new independent public accounting firm”. |
Yours truly,
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
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SCHEDULE B
Li-Cycle Holdings Corp.
CHARTER OF THE BOARD OF DIRECTORS
FUNCTION AND PURPOSE
The Board of Directors (the “Board”) of Li-Cycle Holdings Corp. (the “Company”) is responsible for the supervision of the management of the business and affairs of the Company. The Board, directly and through its committees, will provide direction to senior management, generally through the President and Chief Executive Officer (the “CEO”), to pursue the best interests of the Company. The Board’s fundamental objective is to enhance and preserve long-term shareholder value while at the same time considering the legitimate interests of its other stakeholders, including the Company’s employees, customers and communities.
COMPOSITION AND ORGANIZATION
Membership and Qualifications
Composition: The Board will be comprised of at least three directors and not more than ten directors with such number to be fixed by the Board in accordance with applicable legislation, regulations and listing requirements upon the recommendation of the Nominating and Corporate Governance Committee. Directors are elected annually at the Company’s annual meeting of shareholders and must meet the requirements of applicable corporate laws and securities laws, rules, regulations and guidelines.
Independence: A majority of the Board must qualify as “independent”, as defined in accordance with the requirements of applicable stock exchange and securities regulatory authorities, and meet the experience and expertise requirements of the applicable stock exchange and securities regulatory authorities.
The Board has the responsibility to ensure that appropriate structures and procedures are in place to permit the Board to function independently of management.
Chair and Lead Director: The Board will appoint one member to act as the Chair and will set out his or her duties and responsibilities in a position description. If at any point the Chair is not independent, the Board will also appoint one member to act as the Lead Director, and will set out his or her duties and responsibilities in a position description.
The Chair may be removed from the position at any time at the discretion of the Board. The incumbent Chair will continue in office until a successor is appointed or he or she is removed by the Board or ceases to be a director of the Company. If the Chair is absent from a meeting, the Lead Director, if any, will preside at the meeting, and if there is no Lead Director, the Board will, by majority vote, select another director to preside at the meeting.
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Board Committees
The Board has established the following committees: the Audit Committee; the Nominating and Corporate Governance Committee; the Compensation Committee; and the Health, Safety, Environmental, Quality & Technical Committee. Subject to applicable law or regulatory requirements, the Board may establish other committees, including ad hoc committees, or merge or dispose of any committee not otherwise required by applicable rules or regulations. In consultation with the Nominating and Corporate Governance Committee, the Board will review the appropriate structure, size, composition, mandate and members of each Board committee, and approve and modifications to such items as considered advisable.
Meetings
Frequency: The Board will meet at least once each quarter, with additional meetings held as deemed advisable, at such times and locations (if any) as the Chair deems necessary to fulfill the Board’s responsibilities. The Board will conduct meetings of the Board in accordance with the Company’s articles and by-laws. The independent directors shall meet, without members of management, at each regularly scheduled meeting.
Agendas and Notice: The Chair, in consultation with the Lead Director and the Corporate Secretary, will establish the meeting dates and the meeting agenda. The Corporate Secretary will send notice of each Board meeting and information concerning the business to be conducted at such meeting, to each director not less than 48 hours prior to each meeting, provided that, except where the Business Corporations Act (Ontario) requires the notice to specify the purpose of, or the business to be transacted at, the meeting, notice need not be sent for any regularly scheduled meeting. The Chair, or a majority of the directors, may call a special meeting of the Board at any time. Attendance at a meeting shall constitute a waiver of notice of such meeting, except attendance for the express purpose of objecting to the notice.
Holding and Recording Meetings: Board meetings may be held in person, telephonically or by other electronic means, or action may be taken by written consent in accordance with the applicable corporate law. The Board may act by a majority vote or unanimous written resolution. The Board will keep written minutes of its meetings.
Each director is expected to attend all meetings of the Board and any committee of which he or she is a member and is expected to review and be familiar with Board and committee materials which have been provided in sufficient time for review prior to the meeting.
The Board and the Chair may invite any officer or employee of the Company or any advisors as it deems appropriate from time to time to attend Board meetings (or any part thereof) and assist in the discussion and consideration of matters relating to the Board.
The Board will meet in camera, without any non-independent directors or management present, as a feature at each meeting.
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Quorum: A majority of the directors of the Board, present in person or by telephone or other electronic means, will constitute a quorum for Board meetings.
AUTHORITY AND RESPONSIBILITIES
The Board, in exercising its powers and discharging its duties, will act honestly and in good faith with a view to the best interests of the Company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The Board operates by delegating certain of its authorities to management and by reserving certain powers for itself. The Board retains the responsibility for managing its own affairs, including selecting its Chair, nominating candidates for election to the Board, constituting committees of the Board and determining director compensation.
In furtherance of its purpose, the Board assumes the following duties and responsibilities, some of which are initially reviewed and recommended by the applicable committee of the Board for full Board approval:
Strategy and Budget
(a) | ensuring a strategic planning process is in place and approving, on at least an annual basis, a business plan which takes into account, among other things, the longer-term opportunities and risks of the business; |
(b) | approving the Company’s annual operating and capital budgets; |
(c) | reviewing operating and financial performance results in relation to the Company’s business plan and budgets; |
(d) | reviewing and approving material transactions and capital investments not in the ordinary course of business; |
Board Composition and Administration
(a) | approving individuals identified and presented by the Nominating and Corporate Governance Committee as nominees for election at the next annual meeting of shareholders; |
(b) | approving the nomination of directors to the Board, as well as: |
i. | ensuring that a majority of the Company’s directors are independent pursuant to applicable legislation, regulations and listing requirements; |
ii. | developing appropriate qualifications and criteria for the selection of Board members; |
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iii. | appointing the chair of the Board (the “Chair”), the lead independent director (the “Lead Director”), if necessary, and the chair and members of each Committee of the Board; |
(c) | identifying individuals qualified to become members of the Audit Committee in light of the independence, financial literacy, experience, diversity and other membership requirements set forth under applicable legislation, regulations and listing requirements; |
(d) | providing an orientation program for new directors to the Board and continuing education opportunities for all directors to ensure that directors can maintain and enhance their abilities and ensure that their knowledge of the Company’s business remains current; |
(e) | determining director compensation and any equity ownership requirements for directors with recommendations of the Compensation Committee; |
(f) | assessing annually the effectiveness and contribution of the Board and the Board Chair and Lead Director (if applicable); of each Committee of the Board and their respective chairs; and of individual directors; |
(g) | developing written position descriptions for the Board Chair, the Lead Director and the chair of each Committee of the Board; |
Human Resource Management and Compensation
(a) | appointing the CEO and developing a written position description for the role of the CEO; |
(b) | developing the corporate goals and objectives that the CEO is responsible for meeting and reviewing the performance of the CEO against such corporate goals and objectives; |
(c) | approving the Company’s compensation and benefits policies and any changes thereto for executive officers; |
(d) | ensuring that the Company’s compensation and benefits policies create and reinforce good conduct, ethical behaviour and promote reasonable risk taking; |
(e) | satisfying itself as to the integrity of the CEO and other executive officers and that the CEO and other executive officers promote a culture of integrity throughout the organization; |
(f) | overseeing the Company’s succession planning and talent development; |
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Governance
(a) | developing the Company’s approach to, and disclosure of, corporate governance practices and developing a set of corporate governance guidelines that are specifically applicable to the Company; |
(b) | ensuring that there are appropriate procedures in place for the identification and resolution of conflicts of interest; |
(c) | overseeing an approving the Company’s code of conduct and code of ethics for senior financial employees with the purpose of promoting integrity and deterring wrongdoing, and encouraging and promoting a culture of ethical business conduct; |
(d) | establishing appropriate limits on the authority delegated to management to manage the business and affairs of the Company; |
(e) | reviewing, approving and overseeing the implementation of the Company’s material policies, including the insider trading policy, the pre-approval policy for audit and non-audit services, the related party transaction policy, the anti- corruption policy and health and safety policies and practices; |
Risk Management, Internal Controls and Compliance
(a) | identifying and assessing the principal risks of the Company’s business, and ensuring the implementation of appropriate systems to manage and mitigate these risks; |
(b) | ensuring full and complete disclosure of how the Board oversees risk; |
(c) | ensuring the integrity of the Company’s internal control system and management information systems and the safeguarding of the Company’s assets; |
(d) | reviewing, approving and overseeing compliance with the Company’s disclosure policy and whistleblower procedure; |
(e) | overseeing the adequacy of the Company’s processes to ensure compliance by the Company with applicable legal and regulatory requirements; |
Financial Reporting and Auditors
(a) | reviewing and approving, as required, the Company’s financial statements, related management’s discussion and analysis and other related financial information, and their filing and disclosure, as required; |
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(b) | appointing, subject to approval of shareholders, and removing of the external auditor; |
Communications
(c) | together with management, meeting with the Company’s shareholders at the annual meeting of shareholders and being available to respond to questions at that time; |
(d) | adopting a communication policy for the Company; |
(e) | establishing measures for receiving feedback from stakeholders; |
(f) | monitoring investor relations programs and communications with analysts, the media and the public and reviewing and approving the disclosure of material information in accordance with the Company’s disclosure policy; |
Other
(a) | performing any other activities consistent with this Charter, the Company’s by- laws and governing laws that the Board determines are necessary or appropriate. |
OTHER AUTHORITY AND RESPONSIBILITIES
Access to Records and Personnel: The Board will have full access to any relevant records of the Company and its subsidiaries that it deems necessary to carry out its responsibilities. The Board may request that any officer or other employee of the Company or any advisor to the Company meet with members of the Board or its advisors, as it deems necessary to carry out its responsibilities.
Independent Advisors: The Board will have the authority to engage, terminate and determine funding for independent legal counsel, accounting advisors, compensation consultants and other advisors (the “Advisors”) as it deems necessary to carry out its responsibilities. Such Advisors may be the regular advisors to the Company. The Board is empowered to cause the Company or any of its subsidiaries, as applicable, to pay the compensation of the Advisors as established by the Board.
Funding: The Board shall have the authority to determine and approve funding (which will be supplied by the Company) for: (i) payment of compensation to any Advisors engaged by the Board; and (ii) ordinary administrative expenses of the Board or any other expenses that are necessary or appropriate in carrying out its duties.
Delegation: The Board may form and delegate authority to subcommittees and may delegate authority to the Chair or one or more designated directors.
B-6
Board Performance and Charter Review: The Board will annually review and assess its performance, effectiveness and contribution, including an evaluation of whether this Charter appropriately addresses the matters that are and should be within its scope. The Board will conduct such review and assessment in such manner as it deems appropriate with the assistance of the Nominating and Governance Committee.
Other: The Board will perform any other activities consistent with this Charter, the Company’s by-laws and governing laws that the Board determines are necessary or appropriate.
Nothing contained in this Charter is intended to expand applicable standards of conduct under statutory or regulatory requirements for the directors of the Company.
Approved by the Board of Directors on August 10, 2021 and effective as of August 10, 2021.
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SCHEDULE C
Li-Cycle Holdings Corp.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
FUNCTION AND PURPOSE
The Audit Committee (the “Committee”) will assist the Board of Directors (the “Board”) of Li- Cycle Holdings Corp. (the “Company”) in fulfilling its oversight responsibilities by:
a) | monitoring the integrity of the Company’s financial statements, financial reporting process and systems of internal controls and procedures; |
b) | ensuring compliance by the Company with applicable legal and regulatory requirements; |
c) | reviewing areas of potential significant financial risk to the Company; |
d) | evaluating the independent auditor’s independence and qualifications; and |
e) | monitoring the performance of the independent auditors, as well as any other public accounting firm engaged to perform other audit, review, or attestation services. |
While the Committee has the duties and responsibilities set forth in this Charter, the role of the Committee is that of oversight. The Committee is not responsible for planning or conducting the audit or determining whether the financial statements of the Company are complete and accurate and in accordance with applicable accounting rules. Such activities are the responsibility of management and the independent auditors. The Committee and its members are not preparers, auditors, or certifiers of the financial statements or guarantors of the independent auditors’ reports. It is not the duty or responsibility of the Committee to ensure that the Company complies with all laws and regulations. The Committee and each of its members will be entitled to rely on:
a) | the integrity of those persons and organizations within and outside of the Company from which it receives information; |
b) | the accuracy of the financial and other information provided to the Committee by such persons or organizations absent actual knowledge to the contrary (which will be promptly reported to the Board); and |
c) | representations made by management as to any audit and non-audit services provided by the independent auditors. |
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COMPOSITION AND ORGANIZATION
Membership and Qualifications
Composition: The Committee will be composed of at least three directors, including a chair of the Committee (the “Chair”), all appointed by the Board after considering any recommendation of the Nominating and Corporate Governance Committee. Each member of the Committee will serve until his or her successor is duly appointed, or upon resignation or removal by the Board.
Independence: Each member of the Committee must qualify as “independent” and meet the experience and expertise requirements of the applicable stock exchange and securities regulatory authorities. At least one member of the Committee must qualify as an “audit committee financial expert” as defined in accordance with the applicable securities regulatory authorities and stock exchanges on which the Company’s securities are listed.
Financial Literacy: All members of the Committee must be financially literate, as defined by the applicable securities regulatory authorities and stock exchanges on which the Company’s securities are listed. A director who is not financially literate may be appointed to the Committee, provided that such director becomes financially literate within a reasonable period of time following such appointment.
Meetings
Frequency: The Committee will meet at least four times a year at such times and locations (if any) as the Chair deems necessary to fulfill the Committee’s responsibilities. The Committee may meet with the independent auditors, members of the internal audit function and management jointly or separately, to the extent the Committee deems necessary and appropriate.
Agendas and Notice: In consultation with the Corporate Secretary, the Chair will establish the meeting dates and the meeting agenda. The Corporate Secretary will send notice of each Committee meeting and information concerning the business to be conducted at such meeting, to each member of the Committee not less than 48 hours prior to each meeting, provided that notice need not be sent for any regularly scheduled meeting. The Chair, or a majority of the members of the Committee, may call a special meeting of the Committee at any time. Attendance at a meeting shall constitute a waiver of notice of such meeting, except attendance for the express purpose of objecting to the notice. While the Committee is expected to communicate regularly with management of the Company, the Committee will exercise a high degree of independence in establishing its meeting agenda and in carrying out its responsibilities.
Holding and Recording Meetings: Committee meetings may be held in person, telephonically or by other electronic means, or action may be taken by written consent in accordance with the applicable corporate law. The Committee may act by a majority vote at a meeting of the Committee or unanimous written resolution. The Committee will keep written minutes of its meetings and submit such minutes to the Board. The Committee shall report regularly to the Board on its discussions and actions, including any significant issues or concerns that arise at its meetings, and shall make recommendations to the Board as appropriate. The independent auditor or any two directors of the Board may request the Chair call a meeting of the Committee and may attend and participate in such meeting or inform the Committee of a specific matter of concern to the independent auditor or directors.
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Quorum: A majority of the members of the Committee, present in person or by telephone or other electronic means, will constitute a quorum for meetings of the Committee.
AUTHORITY AND RESPONSIBILITIES
Independent Auditors
Hiring and Selection of Independent Auditors: The Committee will have the sole authority and the direct responsibility for the appointment, compensation, retention, termination and oversight of the independent auditors for the Company (including the resolution of disagreements between management and the independent auditors regarding financial controls or financial reporting) and the independent auditors will report directly to the Committee.
Performance and Independence of Independent Auditors: The Committee will evaluate the qualifications and performance and confirm the independence of the independent auditors on an ongoing basis, but not less frequently than annually. The Committee will confirm receipt from the independent auditors of a formal written statement delineating all relationships between the Company and its subsidiaries and the independent auditors, consistent with applicable accounting rules and standards. The Committee will discuss with the auditors any disclosed relationships or services that may impact the objectivity and independence of the auditors and will take, or recommend that the Board take, appropriate action to oversee the independence of the auditors. The Committee shall review a written report from the independent auditors explaining the auditors’ internal quality-control procedures and any issues raised by the most recent internal quality-control review (or any peer review or inquiry or investigation by governmental or professional authorities).
Approval of Independent Auditor Services: The Committee will review and approve the independent auditors’ annual engagement letter and all audit, audit-related, tax and other non-audit permissible services proposed to be provided by the independent auditors, and the fees for such services. The Committee is responsible for establishing policies and procedures for the Committee’s pre-approval of permitted services by the independent auditors or other registered public accounting firms on an on-going basis. So long as any pre-approval of any transaction or service is presented to the full Committee at its next regularly scheduled meeting, the Committee can delegate to the Chair or one or more members of the Committee the authority to pre-approve audit and permissible non-audit services.
Oversight of Auditors; Audit Plan. The Committee will review and discuss with the independent auditors the overall scope and results of the annual audit and other financial reviews, including the adequacy of staffing and rotation of audit partners as required by applicable law or regulatory authority.
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Review of Independent Auditor Report: The Committee will review: (i) any reports required to be prepared by the independent auditors on all critical accounting policies and practices to be used; (ii) all alternative treatments within applicable accounting rules for policies and practices related to material items that have been discussed with management, including the ramifications of such alternative disclosures and treatments and the treatment preferred by the independent auditors; (iii) other significant reporting issues and judgments, significant regulatory, legal and accounting initiatives, rules and developments that may have a material impact on the Company’s financial statements and their anticipated impact, compliance programs and policies; and (iv) any other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences. The Committee will also discuss with the independent auditors and then disclose those matters whose disclosure is required by applicable accounting or auditing standards.
Financial Reporting Process
Accounting Procedures: The Committee will assist the Board in discharging its responsibility in relation to the quality, acceptability, and integrity of the Company’s accounting policies and principles, reporting practices and internal controls.
Open Communication: The Committee will provide and facilitate an open avenue of communication between the independent auditors, the Board, management and the accounting and finance department of the Company. The independent auditor shall have a direct line of communication to the Committee and may bypass management if deemed necessary. The independent auditor shall report to the Committee and is ultimately accountable to the Committee and the Board.
System of Financial Controls: The Committee will discuss with management, and provide oversight over, the design, implementation, adequacy and effectiveness of the Company’s internal controls and disclosure controls and procedures, and material changes in such controls (including all internal and external people, resources, policies, processes and enforcement) aimed at ensuring the integrity and compliance of the books and records of the Company with International Financial Reporting Standards (“IFRS”) and other applicable laws and regulations and sound business practices, as well as protecting the value of the assets of the Company and safeguarding the credibility of its brand, employees, management team, the Board and shareholders.
The Committee will review any significant deficiencies in the design or operation of internal control over financial reporting or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company’s internal control over financial reporting, and any required disclosures regarding the Company’s internal controls. The Committee will also review with management and the independent auditors processes to ensure (i) that the necessary books, records and accounts have sufficient detail to accurately and
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fairly reflect the Company’s transactions; (ii) that adequate procedures are in place for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements, and for the review of the Company’s disclosure controls and procedures and to periodically assess the adequacy of those procedures and recommend any proposed changes to the Board for consideration; and (iii) that adequate processes are in place for assessing the risk of material misstatements in the financial statements and for detecting control weaknesses or fraud.
Annual Audit Review: The Committee will review with management and the independent auditors the results of the annual audit of the Company for each fiscal year together with the independent auditors’ audit report thereon, including the Company’s accounting principles and practices, significant judgments, estimates, known and likely misstatements identified during the audit (other than those the independent auditors believe to be trivial). In performing such review, the Committee will review the scope of the audit, the audit procedures utilized, any difficulties or disputes encountered during the audit, any changes in accounting practices or principles, and any other matters related to the conduct of the audit brought to the Committee’s attention by management or the independent auditors, or which are raised by members of the Committee. In connection with the annual reviews, the Committee will inquire about and review with management and the independent auditors any significant risks or exposures faced by the Company and discuss with management the steps taken to minimize such risk or exposure. Such risks and exposures may include but are not limited to: (i) threatened and pending litigation; (ii) claims against the Company or any of its subsidiaries; (iii) tax matters, regulatory compliance and correspondence from regulatory authorities; and (iv) environmental exposure.
Quarterly Reviews: The Committee will review with management and the independent auditors the financial statements of the Company each quarter and related notes, including the quarterly financial statements, management discussion and analysis, financial reports, financial projections and other applicable financial disclosure, prior to the public disclosure of such information and together with the independent auditors’ review thereof pursuant to professional standards and procedures for conducting such reviews, as established by generally accepted auditing standards. In connection with the quarterly reviews, the Committee shall inquire about and review with management and the independent auditors any significant risks or exposures faced by the Company and discuss with management the steps taken to minimize such risks or exposures.
Financial Reporting Disclosure: The Committee will review with management and the independent auditors the audited annual financial statements and related notes, including the auditors’ report thereon, management discussion and analysis, financial reports, financial projections and other applicable financial disclosure, prior to the public disclosure of such information, and the Committee will be responsible for making a recommendation to the Board as to whether the Company’s financial statements be included in any report filed, as applicable, with any securities regulatory authority. Further, the Committee will review with management
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and the independent auditors where appropriate financial information contained in any prospectuses, annual information forms, annual reports to shareholders, management information circulars, material change disclosures of a financial nature and any similar disclosure documents prior to the public disclosure of such documents or information. In connection with the annual reviews, the Committee shall inquire about and review with management and the independent auditors any significant risks or exposures faced by the Company and discuss with management the steps taken to minimize such risks or exposures.
Internal Audit Processes. The Committee will review any appointment of individuals to, and any changes in, the senior internal audit position. The Committee will review and discuss regularly with the senior internal audit executive, the results of internal audit activities, including any significant issues raised in reports to management and management’s responses. The Committee will also provide oversight of the internal audit department objectives, responsibilities, independence, performance, resources and annual plan and budget, including the scope of the plan and any significant modifications.
CEO and CFO Certifications. The Committee will review the Chief Executive Officer’s and Chief Financial Officer’s annual certification plan, receive the CEO and CFO certifications of interim and annual filings made in accordance with applicable Canadian and United States securities laws and review the interim and annual CEO and CFO certifications.
Earnings Announcements. The Committee will review and discuss with management and the independent auditors any earnings press releases, earnings guidance provided to analysts and rating agencies, and other public announcements regarding the Company’s results of operations.
Finance and Investment Oversight
Financial Resources: The Committee will periodically review and make recommendations to the Board with respect to the Company’s financial resources, financing requirements, currency hedging, investment strategies (if any) and related matters.
Incurrence of Debt or Equivalents: Irrespective of the dollar amount involved, issuance of debt securities or off-balance sheet financing will require Committee recommendation and Board approval.
Other Financial Matters: The Committee will receive and review reports from management with respect to significant financial matters, including, without limitation, any significant transactions outside the ordinary course of business of the Company as requested by the Board or as deemed appropriate by the Committee from time to time.
Risk Management
The Committee will be responsible for the oversight of risks and exposures associated with financial matters, particularly financial reporting, tax, accounting, disclosure, internal control over financial reporting, investment guidelines and credit and liquidity matters, programs and
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policies relating to legal and regulatory compliance and strategy, and operational infrastructure, particularly reliability, business continuity, capacity, information security, data protection and privacy. The Committee shall provide regular reports to the Board on such matters. The Committee will review and assess the Company’s processes to manage and control risk, except for risks retained by the Board or its other committees.
With the Committee’s oversight, management will establish guidelines, policies and practices regarding risk management, including, but not limited to, derivative policies, insurance programs and necessary practices and procedures to monitor and control major business, operational and financial risks.
Related Party Transactions
The Committee will review and approve or ratify, in accordance with the Company’s policies as approved by the Committee, all related party transactions as defined by applicable rules and regulations.
Review of Hiring Policy
The Committee will oversee the policies and procedures as required by applicable rules and regulations governing how the Company may employ or receive services from individuals who are or once were partners of or employed by the present and former independent auditors of the Company.
Legal Compliance; Investigations
The Committee will be responsible for overseeing legal and regulatory matters that may have a material impact on financial statements and the Company’s business. The Committee shall have access to management, the General Counsel, and internal and independent auditors in connection with such review. The General Counsel has express authority to communicate at any time with the Committee about compliance matters.
Complaint Handling Process (i.e., “Whistleblower Reporting”)
Submission of Complaints: The Committee will establish, maintain and oversee the procedures for: (i) the receipt, retention, and treatment of complaints regarding accounting, internal controls, or audit matters; and (ii) the confidential, anonymous submission by the Company’s employees of concerns regarding questionable accounting, audit or internal control matters.
OTHER AUTHORITY AND RESPONSIBILITIES
Access to Records and Personnel: The Committee will have full access to any relevant records of the Company and its subsidiaries that it deems necessary to carry out its responsibilities. The Committee may request that any officer or other employee of the Company or any of its subsidiaries or any advisor to the Company meet with members of the Committee or its advisors, as it deems necessary to carry out its responsibilities.
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Independent Advisors: The Committee will have the authority to engage, terminate and determine funding for such independent legal counsel, accounting advisors and other advisors (the “Advisors”) as it deems necessary to carry out its responsibilities. Such Advisors may be the regular advisors to the Company. The Committee is empowered to cause the Company or any of its subsidiaries, as applicable, to pay the compensation of the Advisors as established by the Committee.
Funding: The Committee shall have the authority to determine and approve funding (which will be supplied by the Company) for: (i) payment of compensation to the independent external auditors or any other registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company; (ii) any other Advisors engaged by the Committee; and (iii) ordinary administrative expenses of the Committee or any other expenses that are necessary or appropriate in carrying out its duties.
Reports to Board of Directors: The Committee will report regularly to the Board regarding the meetings of the Committee with such recommendations to the Board as the Committee deems appropriate.
Review of this Charter: At least once a year, the Committee will review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for consideration and approval.
Annual Committee Evaluation: The Committee will annually evaluate its performance and report to the Board on the results of the review, including any recommended changes contained therein for approval by the Board.
Delegation: The Committee may form and delegate authority to subcommittees and may delegate authority to the Chair or one or more designated members of the Committee. The Committee cannot delegate its responsibilities to non-committee members.
Other Responsibilities: The Committee will take such other action with respect to the matters set out herein as may be delegated from time to time by the Board, and shall perform such other duties as may be required by applicable law or requested by the Board or deemed appropriate by the Committee. The Committee will discharge its responsibilities, and will assess the information provided to the Committee, in accordance with its business judgment. The Committee will have the authority to conduct or authorize investigations into any matters within the scope of its responsibilities as it deems appropriate.
Approved by the Board of Directors on August 10, 2021 and effective as of August 10, 2021.
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