DIRTT Environmental Solutions Ltd. Compensation ......2019/10/07 · DIRTT ENIRNENTAL LTIN...

DIRTT Environmental Solutions Ltd.

Compensation Committee Charter

http://www.dirtt.com



2DIRTT ENVIRONMENTAL SOLUTIONS | Compensation Committee Charter

A. RESPONSIBILITYThe Compensation Committee (the “CC”) is responsible for assisting the Board of Directors (the “Board”) of DIRTT Environmental Solutions Ltd. (the “Company”) in fulfilling its oversight responsibilities in relation to:

a. the selection and retention of executive officers (as defined below);

b. the compensation of executive officers;

c. the management of benefit plans for executive officers;

d. the selection, retention and compensation of other members of senior management as the CC may identify from time to time; and

e. any additional matters the Board delegates to the CC.

For purposes of this Charter, “executive officers” refer to: (a) the Company’s principal executive officer, president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice president in charge of a principal business unit, division or function, any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company; and (b) officers of subsidiaries if they perform policy-making functions for the Company.

B. COMPOSITIONThe Board will appoint a minimum of three directors to be members of the CC. The members of the CC will be selected by the Board on the recommendation of the Nominating & Governance Committee (the “NGC”).

All of the members of the CC will be “independent directors” (“Independent Directors”) as defined under applicable securities laws and exchange rules. For the purposes of this Charter, “applicable securities laws and exchange rules” refer to: (a) the Securities Act (Alberta) and the equivalent thereof in each province and territory of Canada in which the Company is a “reporting issuer” or equivalent thereof, together with the regulations, rules and blanket orders of the securities commission or similar regulatory authority in each of those jurisdictions; (b) the United States Securities Act of 1933, the United States Securities Exchange Act of 1934 (the “U.S. Exchange Act”) and any rules or regulations thereunder; and (c) the rules of each of the Toronto Stock Exchange and The Nasdaq Stock Market LLC (“Nasdaq”), to the extent that any securities of the Company are listed on those exchanges.

Under exceptional and limited circumstances, one non-independent director may be appointed to the CC if permissible under applicable securities laws and exchange rules, and subject to all limitations therein. In addition, at least two members of the CC must be “Non-Employee Directors” for the purposes of Rule 16b-3 (“Rule 16b-3”) under the U.S. Exchange Act. Notwithstanding the foregoing membership requirements and subject to applicable law, no action of the CC will be invalid by reason of any such requirement not being met at the time the action is taken.

C. DUTIESThe CC is responsible for performing the duties set out below as well as any other duties that are otherwise required by applicable securities laws and exchange rules or delegated to the CC by the Board. The CC will have the authority to delegate any of its responsibilities, along with the authority to take action in relation to those responsibilities, to one or more subcommittees of the CC as the CC may deem appropriate in its sole discretion.

1. Senior Management Selection, Retention and Succession Planning

The CC will:

a. review the Company’s organizational structure;

b. review, from time to time, the Company’s human resources strategies for consistency with the Company’s vision, mission and core values;



c. consider policies and principles for the selection and retention of senior management, including executive officers;

d. in consultation with the chief executive officer, develop and review emergency and long-term succession plans for the chief executive officer for Board approval; and

e. review the succession plans for the executive officer team.

2. ExecutiveOfficerDevelopment

The CC will:

a. review executive development, including training and retention of executive officers;

b. recommend policies and principles for performance reviews of the executive officers, and review the practices used to evaluate the executive officers; and

c. review the chief executive officer’s recommendations with respect to the recruitment, promotion, transfer and termination of other executive officers.

3. IncentiveCompensationPlansandEquity-BasedCompensationPlans

Subject to shareholder approval as required, the CC will:

a. make recommendations to the Board with respect to the adoption or amendment of incentive- and equity-based compensation plans, annual incentive pay plans, and long-term incentive pay plans, if any, for executive officers and employees;

b. make recommendations to the Board with respect to the adoption or amendment of incentive- and equity-based compensation plans, annual incentive pay plans, and long-term incentive pay plans, if any, for directors, taking into consideration the input of the NGC;

c. make recommendations to the Board regarding targets by which to measure the performance of executive officers as those targets relate to all performance-based compensation plans; and

d. provide that shareholders are given the opportunity to vote on equity-based compensation plans, when appropriate or as may be required by applicable securities laws and exchange rules, the Company’s articles of incorporation or bylaws (as they may be amended from time to time), or the Company’s board mandate.

The CC will recommend or, if this power has been delegated to the CC by the Board, make decisions with respect to the granting of share options and other awards under the Company’s share-based compensation plans, including the entitlement, vesting, exercise price and all other matters relating to those plans. Additionally, to the extent required to afford them the exemptions provided in Rule 16b-3 under the U.S. Exchange Act, the CC will review and approve (or recommend to Board for approval) the specific sales, purchases, and other transactions in equity securities of the Company, or derivatives of those equity securities, between the Company and executive officers or directors of the Company.

4. BenefitPlansandPerquisites

The CC will review and recommend to the Board for approval all benefit plans designed primarily for executive officers and any other material perquisites granted to executive officers.

5. EmploymentAgreementsandSeveranceArrangements

The CC will review employment agreements, severance arrangements, change-in-control provisions or agreements, and any changes to contractual agreements and provisions, including pension arrangements, for all of the executive officers and make recommendations to the Board for approval.



6. EvaluationandCompensationoftheExecutiveOfficers

The CC will recommend the following to the Board for approval:

a. the position description of the chief executive officer developed in consultation with the chief executive officer;

b. the corporate goals and objectives that are relevant to the chief executive officer’s compensation;

c. an evaluation of the performance of the chief executive officer in meeting his or her goals and objectives;

d. the chief executive officer’s compensation (including the annual base salary levels; annual cash incentive awards; long-term incentive awards; and any special or supplemental benefits) based on the evaluation referred to above, compensation paid to chief executive officers or other individuals with comparable corporate responsibilities in comparable peer organizations, and the Company’s performance and relative shareholder return;

e. the portion of executive compensation to be linked to the Company’s performance; and

f. remedial action where necessary.

The chief executive officer must not be present during voting or deliberation on his or her compensation.

Additionally, the CC will review the recommendations of the chief executive officer with respect to the compensation of the other executive officers, considering, among other things, the incentive- and equity-based compensation plans in place, the evaluation of the executive officers in light of the Company’s performance, and compensation paid to executive officers of comparable peer organizations. The CC will recommend to the Board the compensation of the other executive officers (including the annual base salary levels; annual cash incentive awards; long-term incentive awards; and any special or supplemental benefits).

7. DirectorCompensation

The CC will periodically review the adequacy and form of directors’ compensation, consider input from the NGC, and recommend to the Board a compensation model that appropriately compensates directors for the responsibilities and risks involved in being a director or a member of one or more Board committees, as applicable.

Directors who are employees of the Company will not receive any additional compensation for service on the Board.

8. Say-on-Pay

If and when applicable, the CC will review and recommend to the Board how frequently the Company should permit shareholders to have an advisory vote on executive compensation (“say-on-pay”), taking into account any previous results of shareholder advisory votes on the frequency of say-on-pay resolutions at the Company. Following each say-on-pay shareholder advisory vote, the CC will review the results and consider whether to make any changes to the Company’s executive compensation policies and practices.

9. OtherPowersandResponsibilities

The Company will review, as it deems necessary or appropriate, matters related to the Company’s compliance with applicable securities laws and exchange rules and other applicable laws and regulations affecting employee and director compensation and benefits, including, but not limited to, Rule 16b-3 and Section 13(k) of the U.S. Exchange Act.

The CC will consider whether to establish, and if established, annually review executive officer compliance with, equity ownership guidelines of the Company.

Periodically, the CC will review reports on the Company’s compensation programs that affect all employees.

D. REPORTINGThe CC will review and discuss with the Company’s management the Compensation Discussion and Analysis (“CD&A”), if required, to be included in the Company’s filings (the “Securities Filings”) with the applicable securities commissions or similar regulatory authorities in Canada and the U.S. Securities and Exchange Commission, and determine whether to recommend to the Board that



the CD&A be included in the Securities Filings. Additionally, the CC will produce the Compensation Committee Report as required by applicable securities laws and exchange rules, if required, for inclusion in the Company’s Securities Filings.

The CC will review the report on executive compensation required to be disclosed in the Company’s Securities Filings or any other human resource or compensation matter required to be publicly disclosed by the Company.

The CC will also regularly report to the Board on all significant matters it has addressed and with respect to such other matters that are within its responsibilities and assist the Board in reviewing and approving any other public disclosure as may be required by applicable securities laws and exchange rules.

E. MEETINGSSubject to the Company’s bylaws and articles and the requirements under applicable securities laws and exchange rules (and in particular, the Business Companys Act (Alberta)):

1. Scheduling

The CC will meet at least twice annually, or more frequently as it determines is necessary or appropriate to fulfill its responsibilities. A meeting of the CC may be called by the Chair of the CC (the “CC Chair”), the Chair of the Board, the Lead Director (if any), the chief executive officer, or any CC member. Meetings will be held at a location determined by the CC Chair.

2. Notice

Notice of the time and place of each meeting will be given to each member either by telephone or other electronic means not less than 48 hours before the time of the meeting. Meetings may be held at any time without notice if all of the members have waived or are deemed to have waived notice of the meeting. A member participating in a meeting will be deemed to have waived notice of the meeting.

3. ChairandDistributionofMaterials

The CC Chair will preside as chair of each meeting and will establish, when practicable, the agenda for each meeting and lead discussion on meeting agenda items. In the absence of the CC Chair at a meeting of the CC, the members in attendance will select one of them to act as chair of that meeting.

Any member may propose the inclusion of items on the agenda, request the presence of or a report by any member of senior management, or at any meeting raise subjects that are not on the agenda for the meeting.

The CC Chair should distribute meeting materials, if any, to the CC members with sufficient time to review prior to scheduled meetings when practicable.

4. AttendanceandParticipation

Each member is expected to attend and participate in all meetings.

Meetings may, at the discretion of the CC, include other directors, members of the Company’s management, independent advisers and consultants or any other persons whose presence the CC believes to be necessary or appropriate. Those in attendance may observe the meeting of the CC, but may not participate in any discussion or deliberation unless invited to do so by the CC, and in any event are not entitled to vote. Notwithstanding the foregoing, the CC may also exclude from its meetings any persons it deems appropriate, including, but not limited to, any director who is not a member of the CC and any member who has a conflict of interest with respect to the matter being considered.

5. Quorum

A majority of members will constitute a quorum for any meeting of the CC.



6. VotingandApproval

At meetings of the CC, each member will be entitled to one vote. Matters will be decided by an affirmative vote of a majority of members present at a meeting at which a quorum is present. In case of an equality of votes, the CC Chair will not have a second or casting vote in addition to his or her original vote. The CC may also act by unanimous written consent by all members entitled to vote on that resolution in lieu of a meeting.

7. Procedures

Procedures for CC meetings will be determined by the CC Chair unless otherwise determined by the bylaws of the Company or a resolution of the CC or the Board.

8. Minutes of Meetings

The CC may appoint one of its members or any other person to act as secretary at any meeting thereof, who will, among other things, keep minutes of the proceedings of the CC and will timely circulate copies of the minutes to each member.

F. CC CHAIREach year, the Board will appoint one member to be CC Chair. If, in any year, the Board does not appoint a CC Chair, the incumbent CC Chair will continue in office until a successor is appointed.

G. REMOVAL AND VACANCIESAny member of the CC may be removed and replaced at any time by an affirmative majority vote of the Board. The Board will fill vacancies on the CC by appointment from among qualified members of the Board on the recommendation of the NGC. If a vacancy exists on the CC, the remaining members will exercise all of their powers so long as a quorum remains in office.

H. ASSESSMENTThe CC’s performance will be evaluated by the NGC in accordance with the Board-approved process in order to determine its effectiveness in fulfilling its responsibilities and duties as set out in this Charter and in a manner consistent with the Board Mandate adopted by the Board.

I. REVIEW AND DISCLOSUREThe CC will review this Charter annually and submit it to the NGC together with any proposed amendments. The NGC will review this Charter and submit it to the Board for approval with any further amendments that it deems necessary and appropriate.

The Company will post and disclose this Charter as required by applicable securities laws and exchange rules.

J. ACCESS TO OUTSIDE ADVISERSThe CC may, in its sole discretion, retain and determine funding for legal counsel, compensation consultants, as well as other experts and advisers (collectively, “Compensation Advisers”), including the authority to retain, approve the fees payable to, amend the engagement with, and terminate any Compensation Adviser, as it deems necessary or appropriate to fulfill its responsibilities. The Company must provide for appropriate funding, as determined by the CC, for payment of (a) compensation to any Compensation Adviser engaged by the CC and (b) ordinary administrative expenses of the CC that are necessary or appropriate in carrying out its duties.

If the CC engages a Compensation Adviser, then the CC is directly responsible for the appointment, compensation and oversight of the Compensation Adviser. Prior to any such engagement, the CC will analyze the relationships the Compensation Advisers have with members of the CC, as well as management and the Company as a whole, to evaluate whether the Compensation Advisers


have any conflict of interests in accordance under applicable securities laws and exchange rules, including Item 407 of Regulation S-K. This analysis will include the specific factors identified by the U.S. Securities and Exchange Commission and Nasdaq as well as any other factors that affect the independence of compensation advisers.

The CC, and any outside advisers retained by it, will have access to all records and information relating to the Company which it deems relevant to the performance of its duties.

Although the CC members have the duties and responsibilities set forth in this Charter, nothing in this Charter is intended to create, or should be construed as creating, any responsibility or liability of the CC members, except to the extent otherwise provided under applicable law. In addition, nothing in this Charter is intended to preclude or impair the protection provided in law for good faith reliance by CC members on reports or other information provided by others.


DIRTT Environmental Solutions Ltd. Compensation ......2019/10/07 · DIRTT ENIRNENTAL LTIN...

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