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NXT Energy Solutions Inc.

 

 

Policies, Mandates and Charters

 

 

 

 

 

Board of Directors Mandate

Corporate Governance Committee Mandate

Compensation Committee Mandate

Insider Trading Policy

Audit Committee Charter

 

 

 

NXT Energy Solutions Inc.

Board of Directors Mandate

 

Purpose

The principal role of the Board of Directors of NXT Energy Solutions Inc. (the “Company”) is stewardship of the Company through the creation of shareholder value, including the protection and enhancement of the value of its assets, as the fundamental objective.  The stewardship responsibility means that the Board oversees the conduct of the business and management, which is responsible for the day‑to‑day conduct of the business.  The Board must assess and ensure systems are in place to manage the risks of the Company’s business with the objective of preserving the Company’s assets.  The Board, through the Chief Executive Officer (“CEO”), sets the attitude and disposition of the Company towards compliance with applicable laws, environmental, safety and health policies, financial practices and reporting.  In addition to its primary accountability to shareholders, the Board is also accountable to employees, government authorities, other stakeholders and the public.

Primary Responsibilities

The principal responsibilities of the Board, which are required to ensure the overall stewardship of the Company are as follows:

1.      The Board must ensure that there are long‑term goals in place and must adopt a strategic planning process.  The CEO, with the approval of the Board, must establish long‑term goals for the Company.  The CEO formulates the Company’s strategy, policies and proposed actions and presents them to the Board for approval.  The Board brings objectivity and judgment to this process.  The Board ultimately approves, on an annual basis, the strategic plan which takes into account, among other things, the opportunities and risks of the Company’s business.

2.      The Board must identify and have an understanding of the principal risks associated with the Company’s businesses, and must ensure that appropriate systems are in place which effectively monitor and manage those risks.

3.      The Board must ensure that processes are in place to enable it to monitor and measure management’s, and in particular the CEO’s, performance in achieving the Company’s stated objectives.  These processes should include appropriate training, development and succession planning of management.

4.      To the extent feasible, the Board shall satisfy itself as to the integrity of the CEO and other executive officers and that the CEO and other executive officers create a culture of integrity throughout the Company.

5.      The Board must ensure that the necessary internal controls and management systems are in place that effectively monitor the Company’s operations and ensure compliance with applicable laws, regulations and policies.

6.      The Board must monitor compliance with the Company’s Code of Business Conduct and Ethics; and

7.      The Board must ensure the Company has adopted a communication policy which effectively communicates with and receives feedback from shareholders. The Board must also ensure that the Company has appropriate processes in place to effectively communicate with employees, government authorities, other stakeholders and the public.

Non‑Delegable Responsibilities

Pursuant to the Canada Business Corporations Act (the “Act”), certain matters are considered to be of such importance, so as to warrant the attention of all Directors and, accordingly, the Act prescribes that the following matters either cannot be delegated or may only be delegated in a qualified or partial manner:

1.                  the submission of items to shareholders for their approval.

2.                  the filling of a vacancy among the directors or in the office of auditor.

3.                  the appointment of additional directors.

4.                  the issue of securities.

5.                  the declaration of dividends.

6.                  the purchase, redemption or other acquisition of the Company’s own shares.

7.                  the payment of certain commissions prescribed by the Act.

8.                  the approval of a management proxy circular.

9.                  the approval of annual financial statements.

10.              the adoption, amendment or repeal of by‑laws.

Customary Board Matters

The following typifies matters customarily considered by the Board in fulfilling its responsibility for stewardship of the Company.  The Board may determine it appropriate to delegate certain of these matters to committees of the Board:

·         the appointment of officers, other than executive officers;

·         adopting a process to consider the competencies and skills the Board, as a whole, should possess and assess the competencies and skills of each Board member and consider the appropriate size of the Board, with a view to facilitating effective decision-making;

·         determining the remuneration of directors and auditors;

·         reviewing and recommending to shareholders, changes to capital structure;

·         approving the Company’s long term strategy and the annual capital expenditure plan of the Company and its subsidiaries and where appropriate any supplementary capital plan;

·         approving banking, borrowing and investment policies;    

·         determining dividend policy;

·         developing the Company’s approach to corporate governance including, without limitation, developing a set of corporate governance principles and guidelines;

·         approving the holding, location and date of meetings of shareholders;

·         appointment of members to committees of the Board of Directors and approving terms of reference for and the matters to be delegated to such committees;

·         granting any waivers from the Company’s Code of Business Conduct and Ethics for the benefit of the Company’s directors or executive officers;

·         granting and delegating authority to designated officers and employees including the authority to commit capital, open bank accounts, sign bank requisitions and sign contracts, documents and instruments in writing;

·         determining the number of directors and recommending nominees for election by the shareholders;

·         approving amendments to the Company’s existing plans: Stock Option Plan, employee benefits plans, or such other plans as the Company approves from time to time;

·         approving the acquisition or disposition or certain corporate assets; and

·         appointing the Company’s transfer agents and registrars.

Board Committees

The Board of Directors has the authority to appoint a committee or committees of the Board and may delegate powers to such committees (with the exceptions prescribed by the Act).  The matters to be delegated to committees of the Board and the constitution of such committees are assessed annually or more frequently as circumstances require.  The following committees have been constituted:

1.    the Audit Committee, to deal with financial reporting and control systems;

2.    the Compensation Committee, to deal with the assessment of management and succession to key positions and compensation within the Company;

3.    the Disclosure Committee, to deal with the Company’s approach to disclosure and the promotion of compliance; and

4.    the Corporate Governance Committee, to deal with the Company’s approach to corporate governance and the promotion of compliance.

Composition and Procedure

The Board of Directors is elected annually by shareholders.  The number of Directors to be elected at shareholders meetings is fixed by the by-laws. While the election of directors is ultimately determined by the shareholders, it is the policy of the Board that a majority of the Directors be independent (as defined under applicable stock exchange rules and securities laws).

The Chairman of the Board presides as Chair at all meetings of the Board and shareholders of the Company.  The Corporate Secretary or, in the absence of the Corporate Secretary, an Assistant Corporate Secretary attends all meetings of the Board and shareholders and records the proceedings thereof.  The Corporate Secretary prepares and keeps minutes and records of all meetings of the Board.

Meetings of the Board of Directors, including telephone conference meetings, are to be held at such time and place as the Chairman of the Board, or any two Directors, may determine.  Notice of meetings shall be given to each Director in accordance with the by-laws.  Meetings of the Board of Directors may be held without formal notice if all of the Directors are present and do not object to notice not having been given, or if those absent waive notice in any manner before or after the meeting.

Notice of meeting may be delivered personally, given by mail, facsimile or other electronic means of communication.

Any two members of the Board of Directors constitute a quorum at any meeting.

Each Board member is expected to attend Board meetings and meetings of committees of which he or she is a member and to become familiar with deliberations and decisions as soon as possible after any missed meetings. In that regard, members of the Board are expected to prepare for Board (and committee) meetings by reviewing meeting materials distributed to members of the Board, to the extent feasible, in advance of such meetings. Matters of a confidential or sensitive nature may be discussed at Board (or committee) meeting without advance distribution of meeting materials to members of the Board. It is expected that members of the Board will actively participate in determining and setting the long and short term goals and interests of the Company.

In recognition of its independence, the Board shall regularly hold discussions without management present. 

A resolution in writing signed by all the Directors entitled to vote on that resolution at a meeting of the Directors is as valid as if it had been passed at a meeting of the Directors.  A copy of any such resolution in writing is kept with the minutes of the proceedings of the Directors.

At meetings of the Board, any matter requiring a resolution of the Directors is decided by a majority of the votes cast on the question; and in the case of an equality of votes, the Chair of the meeting is entitled to a second or casting vote.

The Board shall ensure that there is a process in place for annually evaluating the effectiveness of the Board, the committees of the Board and individual directors.

Compensation

No Director, unless he or she is an officer of the Company, should receive remuneration from the Company other than compensation received in his or her capacity as a Director.

 


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NXT Energy Solutions Inc.

Corporate Governance Committee Mandate

Purpose

The Corporate Governance Committee (the “Committee”) of NXT Energy Solutions Inc. (the “Company”) is a standing committee appointed by the Board of Directors.  The Committee is responsible for overseeing and assessing the functioning of the Board and the committees of the Board and for the development, recommendation to the Board, implementation and assessment of effective corporate governance principles and guidelines.  The Committee’s responsibilities also include identifying candidates for director and recommending that the Board select qualified director candidates for election at the next annual meeting of shareholders (the “Annual Meeting”).

In discharging its responsibilities, the Committee will report and, where appropriate, make recommendations to the Board in respect of the matters identified in this mandate.

Procedures, Powers and Duties

In addition to any procedures and powers set out in the resolution of the Board establishing this Committee, the Committee shall have, but not be limited to, the following procedures, powers and duties:

General

1.                  Composition ‑ The Committee shall be composed of three members or such greater number as the Board may from time to time determine.  Two members of the Committee shall be “independent” directors, as such term is defined in National Instrument 58-201, the third shall be an officer of the Corporation.

2.                  Appointment and Replacement of Committee Members ‑ Any member of the Committee may be removed or replaced at any time by the Board and shall automatically cease to be a member of the Committee upon ceasing to be a director.  The Board may fill vacancies on the Committee by appointing another director to the Committee.  The Board shall fill any vacancy if the membership of the Committee is less than three directors.  Whenever there is a vacancy on the Committee, the remaining members may exercise all its power as long as a quorum remains in office.  Subject to the foregoing, the members of the Committee shall be appointed by the Board annually and each member of the Committee shall remain on the Committee until the next annual meeting of shareholders after his or her election or until his or her successor shall be duly elected and qualified.

3.                  Committee Chair ‑ The Committee Chair shall be designated by the full Board. The Chair of the Committee shall be responsible for leadership of the Committee, including preparing the agenda, presiding over the meetings, making committee assignments and reporting to the Board.

4.                  Conflicts of Interest ‑ If a Committee member faces a potential or actual conflict of interest relating to a matter before the Committee, that member shall be responsible for alerting the Committee Chair.  If the Committee Chair faces a potential or actual conflict of interest, the Committee Chair shall advise the Chair of the Board.  If the Committee Chair, or the Chair of the Board, as the case may be, concurs that a potential or actual conflict of interest exists, the member faced with such conflict shall disclose to the Committee the member’s interest and shall not participate in consideration of the matter and shall not vote on the matter.

5.                  Compensation of Committee Members ‑ The members of the Committee shall be entitled to receive such remuneration for acting as members of the Committee as the Board may from time to time determine.  No member of the Committee shall receive from the Company any compensation other than the fees to which he or she is entitled as a director or a member of a committee of the Board.

6.                  Separate Executive Meetings ‑ The Committee shall meet at least once every year, and more often as warranted, with the Chief Executive Officer, the Company’s appointed Privacy Officer and the head of the human resources department to discuss any matters that the Committee or either of these individuals believes should be discussed privately.  However, the Committee shall also meet periodically without management present.

Meetings of the Committee

7.                  Procedures for Meetings ‑ Subject to any applicable statutory or regulatory requirements and the articles and by‑laws of the Company, the time at which and place where the meetings of the Committee shall be held and the calling of Committee meetings and the procedure in all things at such meetings shall be determined by the Committee.

8.                  Calling of Meetings ‑ The Committee shall meet as often as it deems appropriate to discharge its responsibilities, but no less than once a year.  Notice of the time and place of every meeting shall be given in writing, by any means of transmitted or recorded communication, including facsimile or other electronic means that produces a written copy, to each member of the Committee at least 24 hours prior to the time fixed for such meeting.  However, a member may in any manner waive a notice of a meeting.  Attendance of a member at a meeting constitutes a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called.  Whenever practicable, the agenda for the meeting and the meeting materials shall be provided to members before each Committee meeting in sufficient time to provide adequate opportunity for their review.

9.                  Quorum ‑ A majority of members of the Committee shall constitute a quorum for the transaction of Committee business.  No business may be transacted by the Committee except at a meeting of its members at which a quorum of the Committee is present in person or by telephone or other communication device that permits all persons participating in the meeting to speak and hear each other, or by a resolution in writing signed by all the members of the Committee.

10.              Chair of Meetings ‑ If the Chair of the Committee is not present at any meeting of the Committee, one of the other members of the Committee who is present shall be chosen by the Committee to preside at the meeting.

11.              Secretary of Meeting ‑ The Chair of the Committee shall designate a person who need not be a member of the Committee to act as secretary or, if the Chair of the Committee fails to designate such a person, the secretary of the Company shall be secretary of the Committee.  The agenda of the Committee meeting will be prepared by the secretary of the Committee and, whenever reasonably practicable, circulated to each member prior to each meeting.

12.              Minutes ‑ Minutes of the proceedings of the Committee shall be kept in minute books provided for that purpose.  The minutes of Committee meetings shall accurately record the discussions of and decisions made by the Committee, including all recommendations to be made by the Committee to the Board and shall be distributed to all Committee members.

Powers of the Committee

13.              Access ‑ The Committee is entitled to full access to all books, records, facilities, and personnel of the Company.  The Committee may require such officers, directors and employees of the Company and others as it may see fit from time to time to provide any information about the Company it may deem appropriate and to attend and assist at meetings of the Committee.

14.              Delegation ‑ The Committee may delegate from time to time to any person or committee of persons any of the Committee’s responsibilities that lawfully may be delegated.

15.              Adoption of Policies and Procedures ‑ The Committee may adopt policies and procedures for carrying out its responsibilities.

16.              Professional Assistance ‑ The Committee may, subject to a simple majority vote in favour, retain special legal, accounting, financial or other consultants to advise the Committee at the Company’s expense including sole authority to retain and terminate any search firm to be used to identify director candidates and to approve any such firm’s fees and other retention terms.

17.              Reporting to the Board ‑ The Committee will report through the Committee Chair to the Board following meetings of the Committee on matters considered by the Committee, its activities and compliance with this Mandate.

Board Composition and Director Nominations

18.              The Committee shall identify and recommend to the Board qualified director nominees for interim appointments of directors to fill vacancies between annual meetings in accordance with the Articles and By‑Laws of the Company, and for all director nominees for election at the Annual Meeting.

19.              The Committee shall:

(a)                review from time to time the appropriate size of the Board, with a view to facilitating effective decision‑making;

(b)               develop and review periodically standards to be applied in making determinations as to the presence or absence of material relationships between each Director and the Company;

(c)                review annually the competencies, skills and personal qualities required of the Board of Directors in its entirety in order to add value to the Company, in light of:

(i)                 the opportunities and risks facing the Company and the Company’s proposed strategy; 

(ii)               the need to ensure that a majority of the Board is comprised of individuals, each of whom is an “independent” director (as such term is defined from time to time under the requirements or guidelines for board service under applicable securities laws and the rules of any stock exchange on which the Company’s securities are listed for trading); and

(iii)             the Company’s corporate governance guidelines and Board policies with respect to director tenure, retirement and succession and the number of boards on which directors may sit.

(d)               review periodically the competencies, skills and personal qualities of each existing director, and the contributions made by each individual director to the effective operation of the Board as a group and review any significant change in the primary occupation of the director; and

(e)                in light of the above, make recommendations for changes to the composition of the Board.

20.              The Committee shall recruit and consider candidates for director, including any candidates recommended by shareholders, having regard for the background, employment and qualifications of possible candidates.  The Committee shall:

(a)                consider whether the candidate’s competencies, skills and personal qualities are aligned with the Company’s needs and any criteria for selecting new directors established by the Board; and

(b)               ensure the candidate understands the demands and expectations of a director of the Company.

Succession Planning

21.              The Committee shall periodically review with the Chair of the Board and the Chief Executive Officer the succession plans relating to the position of the Chief Executive Officer and other senior positions and make recommendations to the Board with respect to the selection of individuals to occupy these positions.

22.              The Committee shall review plans in respect of an unexpected incapacitation of the Chief Executive Officer.

Corporate Governance

23.              The Committee is responsible for reviewing, at least annually, the Company’s approach to governance issues and revising the Company’s corporate governance guidelines.  The Committee shall make recommendations to the Board with respect to director tenure, retirement and succession.

24.              The Committee is responsible for monitoring the number of boards on which directors sit.

25.              The Committee shall approve all external board appointments that officers of the Company undertake.

26.              The Committee shall establish policies to enable an individual director to engage an outside advisor at the expense of the Company with the approval of the Committee.

Code of Business Conduct and Ethics

27.              The Committee shall:

(a)                periodically review and approve all amendments to the Code of Business Conduct and Ethics;

(b)               be responsible for granting any waivers for the benefit of the Company’s directors or senior officers from the application of the Code of Business Conduct and Ethics and shall review and approve all news releases issued in respect of such waivers prior to their distribution;

(c)                oversee systems for monitoring compliance with the Code of Business Conduct and Ethics;

(d)               encourage and enable employees and others to raise serious concerns with respect to violations or suspected violations of the Code of Business Conduct and Ethics within the Company;

(e)                oversee systems for monitoring, investigating and resolving concerns with respect to violations or suspected violations of the Code of Business Conduct and Ethics.

Insider Trading 

28.              The Committee shall periodically review the Company’s Insider Trading Policy.  Such policy imposes mandatory black‑out periods during which directors and senior management of the Company are prohibited from trading in securities of the Company.

29.              The Committee shall periodically review management’s systems and practices for ensuring that all directors and all officers of the Company who are required to do so file insider reports in connection with any trade of securities of the Company or any derivative transaction which results in the effective disposition of the individual’s economic interest in a security of the Company within the shortest period of time in which such reports are required to be filed.

Privacy Policy

30.              The Committee shall review and approve as necessary the Company’s approach and policy with respect to privacy legislation.  Such policy shall comply with privacy legislation within each jurisdiction in which the Company operates.

31.              The Committee shall oversee systems for monitoring compliance with the privacy policy and maintain a direct line of communication with the Company’s Privacy Officer.

Director Orientation and Continuing Education

32.              The Committee shall oversee an orientation program to familiarise new directors with the Company’s business and operations, including the Company’s reporting structure, strategic plans, significant financial, accounting and risk issues and compliance programs and policies, management and the external auditors.  The Committee shall also oversee ongoing educational opportunities for all directors, so that individuals may maintain or enhance their skills and abilities as directors, as well as to ensure their knowledge and understanding of the Company’s business remains current.

Board Evaluations 

33.              The Committee shall annually review and make recommendations to the Board for changes to the Board of Directors Mandate and the position description for the Chair of the Board as well as a position description for directors and each committee chair.

34.              The Committee shall conduct annual surveys of directors with respect to their views on the effectiveness of the Board, the Chair of the Board, each committee of the Board and its Chair and the contribution of individual directors.

35.              The Committee shall evaluate the performance of the Chair of the Board, the Chair of each Committee and the performance and contribution of individual directors, having regard for the position descriptions for the Board and Board Chair, the mandate for each committee, the results of annual surveys of the directors, attendance at Board and Board committee meetings and the overall contribution, competencies and skills each individual director is expected to bring to the Board.

36.              The Committee shall also annually assess the effectiveness of the Board as a whole and each committee of the Board, including this Committee, having regard for the Board of Directors Mandate and the charter of each Board Committee and make recommendations to the Board.

Operations of the Board

37.              The Committee shall assess the needs of the Board and make recommendations with respect to rules and guidelines governing and regulating the affairs of the Board, including:

(a)                the frequency and location of Board and committee meetings;

(b)               procedures for establishing meeting agendas and the conduct of meetings; and

(c)                the availability, relevance and timeliness of discussion papers, reports and other information required by the Board.

Board Committees 

38.              At the first meeting of the Board following each Annual Meeting, the Chair of the Committee shall recommend to the Board the allocation of directors to each of the Board committees.  Thereafter, when a vacancy occurs at any time in the membership of any Board committee, the Committee shall recommend a particular director to the Board to fill such vacancy.

39.              The Committee shall review from time to time, and at least annually, the charters of the committees of the Board and make recommendations regarding the charters to the Board and recommend timely changes in the role, size, composition and structure of Board committees.

Board Independence

40.              The Committee shall annually review the standards for determining whether a director is independent including a review of the meaning of “independent director” as set out in National Instrument 58-201.

41.              The Committee shall report annually to the Board on the Committee’s review of the independence of each of the Directors.

42.              The Committee shall monitor and assess the relationship between the Board and management, defining the limits to management’s responsibilities and making such recommendations as it may deem necessary with a view to ensuring that the Board is able to function independently of management.

Reporting and Disclosure Requirements

43.              The Committee shall annually review and approve the corporate governance disclosure required to be made in the Company’s Annual Information Form, Notice and Proxy Circular, and on the Company website.

General

44.              The Committee shall undertake on behalf of the Board such other corporate governance initiatives as may be necessary or desirable to enable the Board to provide effective corporate governance for the Company and contribute to the success of the Company and enhance shareholder value.

This Mandate  

The Committee shall review and reassess the adequacy of this Mandate at least annually and otherwise as it deems appropriate and recommend changes to the Board.  The performance of the Committee shall be evaluated with reference to this Mandate annually.

The Committee shall ensure that this Mandate is disclosed on the Company’s website and that this Mandate or a summary of it which has been approved by the Committee is disclosed in accordance with all applicable securities laws or regulatory requirements.


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NXT Energy Solutions Inc.

Compensation Committee Mandate

Purpose

The Compensation Committee (the “Committee”) is a standing committee appointed by the Board of Directors of NXT Energy Solutions Inc. (the “Corporation”).  The Committee shall assist the Board in discharging the Board’s oversight responsibilities relating to the compensation and retention of key senior management employees, and in particular the Chief Executive Officer, with the skills and expertise needed to enable the Company to achieve its goals and strategies at fair and competitive compensation and appropriate performance incentives.  In discharging its responsibilities, the Committee will report and, where appropriate, make recommendations to the Board in respect of the matters identified in this charter.  In addition, the Committee is responsible for producing an annual report on executive compensation for inclusion in the Company's annual proxy circular in accordance with applicable securities laws.

Procedures, Powers and Duties

In addition to any procedures and powers set out in a resolution of the Board from time to time, the Committee shall have, but not be limited to, the following procedures, powers and duties:

1.                  General  

(a)                Composition - The Committee shall be composed of three (3) members or such greater number as the Board may from time to time determine.  Each member of the Committee shall be an “independent” director as such term is defined in National Policy 58-201 – Corporate Governance Guidelines.

(b)               Appointment and Replacement of Committee Members - Any member of a Committee may be removed or replaced at any time by the Board and shall automatically cease to be a member of the Committee upon ceasing to be a director.  The Board may fill vacancies on the Committee by appointing another director to the Committee.  The Board shall fill a vacancy if the membership of the Committee is less than three (3) directors.  Whenever there is a vacancy on the Committee, the remaining members may exercise all its power as long as a quorum remains in office.  Subject to the foregoing, the members of the Committee shall be appointed by the Board annually and each member of the Committee shall remain on the Committee until the next annual meeting of shareholders after his or her election or until his or her successor shall be duly elected and qualified.

(c)                Committee Chair - The Chair of the Committee shall be designated by the full Board.  The Chair of the Committee shall be responsible for leadership of the Committee, including preparing the agenda, presiding over the meetings, making Committee assignments and reporting to the Board.

(d)               Conflicts of Interest - If a Committee member faces a potential or actual conflict of interest relating to a matter before the Committee, other than matters relating to the compensation of directors, that member shall be responsible for alerting the Committee Chair.  If the Committee Chair faces a potential or actual conflict of interest, the Committee Chair shall advise the Chair of the Board.  If the Committee Chair, or the Chair of the Board, as the case may be, concurs that a potential or actual conflict of interest exists, the member faced with such conflict shall disclose to the Committee the member's interest and shall not participate in consideration of the matter and shall not vote on the matter.

(e)                Compensation of Committee Members - The members of the Committee shall be entitled to receive such remuneration for acting as members of the Committee as the Board may from time to time determine.  No member of the Committee shall receive from the Company any compensation other than the fees to which he or she is entitled as a director, or a member of a committee of the Board. 

(f)                Separate Executive Meetings - The Committee shall meet at least twice every year, and more often as warranted, with the Chief Executive Officer to discuss any matters that the Committee or either of these individuals believes should be discussed privately.  However, the Committee shall also meet from time to time without Management present.

2.                  Meetings of the Committee

(a)                Procedures for Meetings - Subject to any applicable statutory or regulatory requirements and the articles and by-laws of the Company, the time at which and  place where the meetings of the Committee shall be held, the calling of Committee meetings and the procedure in all things at such meetings shall be determined by the Committee.

(b)               Calling of Meetings - The Committee shall meet at least semi-annually, or more frequently as it deems appropriate to discharge its responsibilities. Notice of the time and place of every meeting shall be given in writing, by any means of transmitted or recorded communication, including facsimile or other electronic means that produces a written copy, to each member of the Committee at least 24 hours prior to the time fixed for such meeting.  However, a member may in any manner waive a notice of a meeting.  Attendance of a member at a meeting constitutes a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.  Whenever practicable, the agenda for the meeting and the meeting materials shall be provided to members before each Committee meeting in sufficient time to provide adequate opportunity for their review.

(c)                Quorum - A majority of members of the Committee shall constitute a quorum for the transaction of Committee business.  No business may be transacted by the Committee except at a meeting of its members at which a quorum of the Committee is present in person or by telephone or other communication device that permits all persons participating in the meeting to speak and hear each other, or by a resolution in writing signed by all the members of the Committee.

(d)               Chair of Meetings - If the Chair of the Committee is not present at any meeting of the Committee, one of the other members of the Committee who is present shall be chosen by the Committee to preside at the meeting.

(e)                Secretary of Meeting - The Chair of the Committee shall designate a person who need not be a member of the Committee to act as secretary or, if the Chair of the Committee fails to designate such a person, the secretary of the Company shall be secretary of the Committee.  The agenda of each Committee meeting will be prepared by the secretary of the Committee and, whenever reasonably practicable, circulated to each member prior to each meeting.

(f)                Minutes - Minutes of the proceedings of the Committee shall be kept in minute books provided for that purpose.  The minutes of Committee meetings shall accurately record the discussions of and decisions made by the Committee, including all recommendations to be made by the Committee to the Board and shall be distributed to all Committee members.

3.                  Powers of the Committee

(a)                Access - The Committee is entitled to full access to all books, records, facilities, and personnel of the Company.  The Committee may require such officers, directors and employees of the Company and others as it may see fit from time to time to provide any information about the Company it may deem appropriate and to attend and assist at meetings of the Committee.

(b)               Delegation - The Committee may delegate from time to time to any person or committee of persons any of the Committee's responsibilities that lawfully may be delegated.

(c)                Adoption of Policies and Procedures - The Committee may adopt policies and procedures for carrying out its responsibilities.

(d)               Professional Assistance - The Committee may, subject to a simple majority vote in favor, retain special legal, accounting, financial or other consultants to advise the Committee at the Company’s expense including sole authority to retain and terminate any executive compensation consulting firm and to approve any such firm's fees and other retention terms.

(e)                Reporting to the Board - The Committee will report through the Committee Chair to the Board following meetings of the Committee on matters considered by the Committee, its activities and compliance with this Charter.

Director Compensation

4.                  The Committee shall recommend to the Board the terms upon which directors shall be compensated.  The Committee shall recommend to the Board the terms for the compensation of directors, the Chair of the Board, and those acting as committee chairs that adequately reflect the responsibilities they are assuming.

Compensation of Senior Officers   

5.                  The Committee shall annually:

(a)                review, revise and approve the position description of the Chief Executive Officer and recommend in conjunction with the participation of the Chief Executive Officer annual performance goals, objectives and criteria for the Chief Executive Officer, evaluate the performance of the Chief Executive Officer against such position description and applicable performance goals, objectives and criteria and make recommendations to the Board with respect to the Chief Executive Officer’s level of compensation based on this evaluation;

(b)               review the Chief Executive Officer’s evaluation of the performance of the other officers of the Company appointed by the Board and such other employees of the Company or any subsidiary of the Company as may be identified to the Committee by the Board (collectively, the “Designated Employees”) and review the Chief Executive Officer’s recommendations with respect to the amount of compensation to be provided to the Designated Employees;

(c)                review and assess the competitiveness and appropriateness of and approve the compensation package of the Chief Executive Officer and each of the Designated Employees.  In conducting such review, the Committee shall consider:

(i)                 the compensation packages of the Chief Executive Officer and the Designated Employees for the prior year;

(ii)               the Committee’s evaluation of the performance of the Chief Executive Officer and the Chief Executive Officer's evaluation of the performance of the respective Designated Employees;

(iii)             the Company’s performance and relative shareholder return;

(iv)             whether the compensation package reflects an appropriate balance between short and longer-term incentives to improve performance of the Company;

(v)               the competitiveness of the compensation package, including the value of similar incentive awards paid to equivalent officers and positions at comparable companies; and

(vi)             the awards given to the Chief Executive Officer and Designated Employees in previous years.

6.                  The Committee shall review and approve any employment contracts or arrangements with the Chief Executive Officer and each of the Designated Employees, including any retiring allowance arrangements, severance payments or any similar arrangements to take effect in the event of a termination of employment and any change of control agreements.

Compensation Policies

7.                  The Committee shall review and recommend to the Board compensation policies and processes and any new incentive compensation and equity compensation plans of the Company or changes to such plans and in particular, the compensation policies, processes and plans respecting the Chief Executive Officer and the Designated Employees.

8.                  The Committee shall review and recommend to the Board the overall parameters of the Company's multi-year incentive plans, if any, including recommending who should be eligible to participate under these plans and changes to such plans

9.                  The Committee shall review and recommend to the Board the Designated Employees to be included as participants in the Company’s Stock Option Plan.

Loans to Directors and Senior Officers  

10.              The Committee shall review Management’s policies and practices respecting the Company's compliance with applicable legal prohibitions, disclosure requirements or other requirements on making or arranging for personal loans to directors and senior officers or amending or extending any such existing personal loans or arrangements.

Reporting Requirements

11.              The Committee shall annually review in accordance with all applicable rules and regulations a report on executive compensation that shall be disclosed in the proxy circular prepared in connection with the Company’s annual meeting of shareholders.

General

12.              Charitable donations in excess of $25,000 by the Company to organizations in which a director is affiliated shall require prior approval by the Committee after consideration of any impact that such donation may have on director independence.

13.              The Committee may undertake on behalf of the Board such other compensation initiatives as may be necessary or desirable to contribute to the success of the Company and enhance shareholder value.

This Charter

The Committee shall review and reassess the adequacy of this Charter at least annually and otherwise as it deems appropriate and recommend changes to the Board.  The performance of the Committee shall be evaluated with reference to this Charter annually.

The Committee shall ensure that this Charter is disclosed on the Company’s website and that this Charter or a summary of it which has been approved by the Committee is disclosed in accordance with all applicable securities laws or regulatory requirements in the annual proxy circular or annual report of the Company. 


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 NXT Energy Solutions Inc.

Insider Trading Policy

 

The Policy

 

NXT Energy Solutions Inc. (the “Corporation”) is committed to ensuring compliance with all applicable securities laws governing trading in securities of the Corporation while in possession of material non-public information concerning the Corporation and tipping or disclosing material non-public information to outsiders.

 

In conjunction with regulatory requirements, it is the policy of the Corporation that, once a person becomes an insider (as described below), his or her security holdings in the Corporation, and any change therein, must be reported to the appropriate securities commissions.  The responsibility for compliance with insider reporting obligations rests with the insiders and not with the Corporation.  However, the Corporation has an interest in monitoring the holdings of its insiders and ensuring that insider holdings are accurately reported, as the identity of insiders and the size of their holdings may be relevant in determining whether the Corporation is permitted, under applicable securities laws and stock exchange rules, to undertake certain types of transactions.

 

Scope 

 

This policy covers all officers and directors of the Corporation and all employees and consultants of the Corporation.  Directors, officers, employees and consultants are responsible for ensuring compliance by their families and other members of their households.

 

This policy applies to any transactions in any securities of the Corporation, including shares, debentures, options or other securities exchangeable or exercisable into shares, as well as exchange-traded options or other derivative securities that are not issued by the Corporation but are based on securities of the Corporation. 

 

This policy applies not only to the securities of the Corporation which a director, officer, employee or consultant owns, but also those over which control or direction is exercised (for example as a trustee or executor of an estate) and also to the securities of the Corporation that are indirectly owned (for example by a corporation controlled by a director, officer, employee or consultant or by an immediate family member of a director, officer, employee or consultant). 

 

This policy applies not only during the course of a director's, officer's, employee's or consultant's service to the Corporation, but also after the completion of such service to the extent the relevant person possesses material non-public information at the time such service is completed. 

 

Insiders

 

The directors and officers of the Corporation are considered to be insiders of the Corporation pursuant to applicable securities laws and as such are subject to a higher standard of scrutiny and disclosure requirements than other people who may trade in securities of the Corporation.  The following rules apply to insiders: 

 

Initial Reports -- An initial report must be filed within ten (10) days of the date on which a person or corporation becomes an insider.  An initial report is not required, however, when a person becomes an insider if he or she has no direct or indirect beneficial ownership, control or direction over securities of the Corporation.

 

Changes in Beneficial Ownership -- A person or corporation who is an insider must report any changes in his or her direct or indirect beneficial ownership of, or control over, securities of the Corporation within ten (10) days of the date such change takes place. 

 

Stock Options -- A person or corporation who is an insider is reminded that the grant of an option, or the exercise of an option, gives rise to reporting obligations and an insider report must be filed with respect to these matters within ten (10) days of the date such transaction takes place. 

 

Filing -- A person or corporation who is an insider is required to use the System for Electronic Disclosure by Insiders (“SEDI”) for reporting insider trades.  Reporting through SEDI can be completed by insiders themselves through the internet or through an agent, such as the Corporation's external legal counsel. Insiders are referred to the internet website for SEDI at www.sedi.ca.  As well, insiders are encouraged to contact the Corporate Secretary with respect to any questions about filing through the SEDI system.

 

Definitions

 

The following definitions apply to this Policy:

 

Material Information  -- Securities legislation and this policy make frequent reference to material information.  In this policy, material information is any information relating to the business and affairs of the Corporation that results in, or would reasonably be expected to affect the investment decisions of a reasonable holder of securities of the Corporation or an investor or if the information would reasonably be expected to affect the market price or value of any of the securities of the Corporation.

 

Non-public Information -- Material information is “non-public” if it has not been generally disclosed.  Information is considered to have been generally disclosed if: (i) the information has been disseminated in a manner calculated to effectively reach the marketplace, and (ii) public investors have been given a reasonable amount of time to analyze the information.  For the purposes of this policy, information will be considered public; i.e., no longer non-public, after information has been generally disclosed by means of a broadly disseminated press release.

 

If you are unsure whether the information that you possess is material or non-public, legal counsel to the Corporation should be consulted before trading in any securities of the Corporation.

 

 

Statement of Policy and Procedures

 

Prohibited Activities

 

1.                  No insider, employee or consultant may trade in securities of the Corporation while in possession of material non-public information concerning the Corporation.

2.                  No insider, employee or consultant may trade in securities of the Corporation outside of the “trading windows” described below, or during any designated special trading blackout periods.

3.                  No insider, employee or consultant may trade in securities of the Corporation during any trading blackout period imposed on employees and consultants of the Corporation generally.

4.                  No insider, employee or consultant may disclose material non-public information concerning the Corporation to any outside person (including family members, analysts, individual investors and members of the investment community and news media) unless such disclosure is necessary in the course of business and in accordance with the Corporation's Disclosure Policy.  In any instance where such information is disclosed to outsiders, the outsider must be advised that they must not disclose the information to anyone else, other than in the necessary course of business, and they may not trade in securities of the Corporation until the information has been generally disclosed.

5.                  No insider, employee or consultant may give trading advice of any kind relating to securities of the Corporation to anyone while possessing material non-public information about the Corporation, except that insiders, employees and consultants should advise others not to trade securities of the Corporation if such trade might violate the law or this policy.

6.                  No insider, employee or consultant may: (a) trade in securities of any other public company, trust, partnership or other entity (a “company”) while possessing material non-public information concerning that company; (b) “tip” or disclose material non-public information concerning any company to anyone; or (c) give trading advice of any kind to anyone concerning any other company while possessing material non-public information about that company that such insider, employee or consultant learned in the course of service to the Corporation.

7.                  No insider, employee or consultant may: (a) engage in “short sales” of securities of the Corporation, or (b) buy or sell puts, calls or other derivatives in respect of securities of the Corporation.

Trading Windows and Blackout Periods

Blackout Periods and Trading Windows  -  A “blackout period” is any time where an insider, employee or consultant is restricted by the terms of this policy or applicable securities law from trading in securities of the Corporation.  Alternatively, a “trading window” is the period of time between blackout periods where an insider, employee or consultant is not restricted by the terms of this policy or applicable securities law from trading in securities of the Corporation.

Designation of Blackout Periods -- The Corporation will notify insiders, employees and consultants by e-mail when a general blackout period is in effect, and will provide a brief explanation of the reason for the blackout period.  The Corporation will similarly advise the insiders, employees and consultants by e-mail when the general blackout period has ceased.  It is the obligation of every insider, employee and consultant to ensure, prior to effecting a trade, that a blackout period is not in effect or such person is not otherwise restricted from trading in securities of the Corporation.  In the event that an insider, employee or consultant is unsure whether they may trade in securities of the Corporation, they should contact the Chief Executive Officer, Chief Financial Officer or Corporate Secretary of the Corporation to determine if a general blackout period is in effect or if the insider, employee or consultant is in possession of material undisclosed information.

Advance Notification Requirements -- Insiders, employees and consultants wishing to sell securities in the Corporation shall provide the Chief Executive Officer, or in his absence the Chief Financial Officer, or in his absence, the Corporate Secretary (the “Approving Party”), with advance written notice of such sale.  Notice is to be delivered no less than 72 hours in advance of such sale, unless the Insider, employee or consultant receives written confirmation from the Approving Party that such sale may proceed sooner.  Any approval granted by the Approving Party shall be valid for a period of 30 days. 

Standing Orders -- In the event that an insider, employee or consultant wishes to place a “standing order” for the sale of securities, it shall be the responsibility of the insider, employee or consultant to ensure (either personally or through the use of an agent), that prior to the execution of such trade, no blackout period has arisen subsequent to the issuance of the approval.   

Trading Windows for Insiders --  Insiders may trade in securities of the Corporation only during the period beginning after the close of business one (1) day following widespread public release of quarterly or year-end operating results and ending at the close of trading on the earlier to occur of the fifth day preceding a meeting of the board of directors of the Corporation or the Audit Committee to approve any distribution or earnings press release or any financial statements reflecting the Corporation's operating results.

Trading Windows for Employees and Consultants  --  All other employees and consultants who are not insiders may trade in securities of the Corporation at any time, provided they are not in possession of material non-public information and no blackout period applicable to such employee or consultant is in place.

No Trading While in Possession of Material Non-public Information or During Blackout Periods --  No insider, employee or consultant possessing material non-public information concerning the Corporation may trade in securities of the Corporation even during applicable trading windows.  Persons possessing such information may trade during a trading window only after the close of trading on the next full trading day following the widespread public release of the information.  No insider, employee or consultant may trade in securities of the Corporation outside of applicable trading windows or during any designated blackout periods.  No insider, employee or consultant may disclose to any outside third party that a special blackout period has been designated.

Priority of Statutory or Regulatory Trading Restrictions -- The trading prohibitions and restrictions set forth in this policy will be superseded by any greater prohibition or restrictions prescribed by securities laws and regulations.

Enforcement

 

The consequences of prohibited insider trading or tipping can be severe.  Under securities laws, persons violating insider trading or tipping rules may be required to disgorge the profit made or the loss avoided by trading, pay the loss suffered by the persons who purchased securities from or sold securities to the insider tippee, pay fines up to the greater of $1,000,000 and three times the profit made or loss avoided, pay administrative penalties of up to $500,000 and serve a jail term of up to five years less a day. The Corporation may also be required to pay penalties and could, under certain circumstances, be subject to private lawsuits by traders for damages suffered as a result of illegal insider trading or tipping by persons under the Corporation’s control.

 

Violation of this policy or applicable tipping laws by any insider, employee or consultant may subject such person to disciplinary action up to and including termination for cause in the case of an insider or employee or termination of the consulting contract in the case of a consultant. 

 

If it is discovered that anyone subject to these policies has violated applicable securities laws, the matter may be referred to the appropriate regulatory authorities.

 

 


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NXT Energy Solutions Inc.

Audit Committee Charter

 

Introduction

 

This charter (the “Charter”) has been adopted to govern the composition, mandate, responsibilities and authority of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of NXT Energy Solutions Inc.  (the “Company”).

 

Composition and Procedures

 

1.                  The Committee shall be appointed by the Board and shall be composed of three directors, with at least two of whom being “independent” as required by the Business Corporations Act (Alberta) (the “Act”).

2.                  The Board will appoint the chair of the Committee.

3.                  The quorum for meetings shall be a majority of the members of the Committee, present in person or by telephone or other telecommunication device that permits all persons participating in the meeting to speak and to hear each other.

4.                  Meetings of the Committee shall be conducted as follows:

(a)                the Committee shall meet, in person or by teleconference, at least four times annually at such times and locations as may be requested by the chair of the Committee. Notice of meetings to the members shall be the same as set out in the by-laws of the Company for meetings of the Board. The Auditors or any member of the Committee may request a meeting of the Committee; and

(b)               management representatives may be invited to attend meetings (except private sessions with the Auditors as defined below).

Primary responsibilities of the Committee

 

The primary responsibilities of the Committee are:

 

1.                  To recommend to the Board:

(a)                the external auditor (the “Auditors”) to be nominated for appointment by the shareholders of the Company for the purpose of preparing or issuing the Auditor’s report or performing other audit, review or attest services for the Company; and

(b)               the compensation of the Auditors.

2.                  To oversee the work of the Auditors in preparing or issuing the Auditor’s report on the Company’s annual consolidated financial statements or performing other audit, review or attest services for the Company including the resolution of disagreements between management of the Company and the Auditors regarding financial reporting.

3.                  To pre-approve, as required by the Act and subject to the exemptions in the Act, all non-audit services to be provided to the Company by the Auditors. The Committee may, in accordance with the requirements of the Act, delegate to one or more members of the Committee the authority to pre-approve non-audit services to be provided by the Auditors, provided that all such pre-approvals of non-audit services shall be presented to the Committee at its first scheduled meeting following such pre-approval.

4.                  To review:

(a)                the Company’s unaudited quarterly consolidated financial statements for the first, second and third quarters of the Company’s fiscal year (“quarterly statements”) and the Company’s audited annual consolidated financial statements (“annual statements”);

(b)               the Management’s Discussion and Analysis (“MD&A”) prepared in conjunction with the quarterly and annual statements; and

(c)                all press releases to be issued by the Company with respect to its annual and quarterly earnings and press releases on other material financial reporting matters.

5.                  To satisfy itself that adequate procedures are adopted by the Company for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements other than the public disclosure referred to in section 4 above and to regularly assess the adequacy of such procedures.

6.                  To satisfy itself that adequate procedures are adopted and oversee the maintenance of procedures for:

(a)                the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and

(b)               the confidential anonymous submission by employees of the Company and its subsidiaries of concerns regarding questionable accounting or auditing matters.

7.                  To review and approve the Company’s and its subsidiaries’ hiring policies regarding partners, employees and former partners and employees of the current and former Auditors of the Company and its subsidiaries.

Authority of the Committee

 

Subject to prior consultation with the Chief Executive Officer or the Chief Financial Officer (except in unusual circumstances), the Committee is authorized to:

1.                  engage independent counsel and other advisors it determines necessary to carry out the Committee’s duties and responsibilities;

2.                  set and require the Company to pay the compensation and charged expenses for any advisors engaged by the Committee; and

3.                  communicate directly with the internal audit staff of the Company and its subsidiaries (if any) and the Auditors.

Additional Responsibilities and Duties of the Committee

 

Auditors

 

1.                  The Committee shall ensure that the Company requires and instructs the Auditors to report directly to the Committee.

2.                  The Committee is responsible for ensuring the independence of the Auditors. On an annual basis, the Committee shall obtain a formal written statement from the Auditors delineating all relationships between the Auditors and the Company and confirming the independence of the Auditors. This written statement shall be obtained in conjunction with the audit of the annual financial statements after each fiscal year end.

Review of Annual Financial Statements

The Committee shall review the annual financial statements and related MD&A of the Company prior to their public release and shall report the results of its review to the Board and make recommendations to the Board with respect to Board approval of the financial statements and related MD&A. At the Committee meeting at which the Company’s annual financial statements are to be reviewed, the Committee shall meet, in person or by teleconference, with representatives of the Auditors and with the Company’s management to assess and understand the annual financial statements and the results of the audit including, but not limited to:

1.         that the Company’s system of internal controls and financial reporting systems are adequate to produce fair and complete disclosure of its financial results;

2.         that the Company’s reporting is complete and fairly presents its financial condition in accordance with generally accepted accounting principles;

3.         that accounting judgments and estimates used by management are reasonable and do not constitute earnings management;

4.         that risk management policies are in place to identify and reduce significant financial and business risks; and

5.         that the Company has in place a system to ensure compliance with applicable laws, regulations and policies.

Review of Quarterly Financial Statements

The Committee shall review the interim quarterly financial statements and related MD&A of the Company prior to their public release and shall report the results of its review to the Board and make recommendations to the Board with respect to Board approval of the quarterly statements and related MD&A unless the Board has delegated to the Committee the authority to approve the quarterly statements and related MD&A, in which case the Committee shall also approve the quarterly statements and related MD&A. The review by the Company shall be substantially completed prior to the issuance of a press release respecting the quarterly financial results. The Committee shall meet with the Company’s management to assess and understand the interim quarterly financial statements and to discuss the results of their preparation and review.

Other Responsibilities and Duties

3.                  As part of the quarterly and annual reviews described above, the Committee will:

(a)        meet with management in the absence of the Auditors for the annual review;

(b)        meet with the Auditors in the absence of management for the annual review;

(c)        review with management and the Auditors any proposed changes in major accounting policies, the presentation and impact of significant risks and uncertainties, and key estimates and judgments of management that may be material to financial reporting;

(d)       review with management and the Auditors any significant financial reporting issues discussed during the fiscal period and the method of resolution;

(e)        review any problems experienced by the Auditors in performing the annual audit, including any restrictions imposed by management or significant accounting issues on which there was a disagreement with management;

(f)        obtain an explanation from management of all significant variances between comparative reporting periods;

(g)        review the post-audit or management letter, containing the recommendations of the Auditors, and management’s response and subsequent follow up to matters raised by the Auditors;

(h)        review any evaluation of internal controls by the Auditors, together with management’s response; and

(i)         review and reassess the Charter for adequacy at least annually and make changes as it deems necessary.

2.         In addition to the quarterly and annual reviews, the Committee will:

(a)        prior to the commencement of each annual audit, meet with the Auditors to review the Auditors’ audit plan for the ensuing audit;

(b)        review with management and the Auditors all material accounting and financial issues affecting the Company not dealt with in annual and quarterly reviews; and

(c)        review annually and recommend changes to the Company’s code of conduct.

3.                  The Committee shall perform such other duties as may be required by the Board or as may be delegated to the Committee by the Board.

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