CORPORATE GOVERNANCE DISCLOSURE
National Instrument 58-101 entitled "Disclosure of Corporate Governance Practices" ("NI 58-101") requires that if management of an issuer solicits proxies from its security holders for the purpose of electing directors that certain prescribed disclosure respecting corporate governance matters be included in its information circular. The TSXV also requires listed companies to provide, on an annual basis, the corporate governance disclosure which is prescribed by NI 58-101. The prescribed corporate governance disclosure is modeled after that contained in Form 58-101F2 which is attached to NI 58-101 ("FORM 58-101F2 DISCLOSURE").
Set out below is a description of the corporate governance practices, relative to the Form 58-101F2 Disclosure (which is set out below in italics), which was adopted by the directors.
1. Board of Directors
Disclose how the board of directors (the board) will facilitate its exercise of independent supervision over management, including:
(i) the identity of directors that are independent; and
(ii) the identity of directors who are not independent, and the basis for that determination.
The following three (3) directors of Pennine will be independent:
ONE of the members of the Board will not be independent. Mr. Smith will not be independent as Mr. Smith is the Chief Executive Officer of Pennine.
The board will facilitate its exercise of independent supervision over management through in camera sessions and through committees of the Board.
If a proposed director is presently a director of any other issuer that is a reporting issuer (or the equivalent) in a jurisdiction or a foreign jurisdiction, identify both the director and the other issuer.
The following current and proposed directors of Pennine are presently directors of other issuers that are reporting issuers (or the equivalent):
Name of Director
Name of Other Issuer
Sonoro Energy Ltd.
3. Orientation and Continuing Education
Describe what steps, if any, the Board will take to orient new Board members, and describe any measures the Board will take to provide continuing education for directors.
Due to the size of the Board of Pennine, it is not anticipated that any formal program will exist for the orientation of new directors. Upon joining the Board, it is anticipated that new directors would be given access to all of the background documents of Pennine, including all corporate records, by-laws, corporate policies, organization structure and prior board and committee minutes.
It is not anticipated that any formal continuing education program will exist for the directors. As part of continuing education, the Board will receive management presentations with respect to the operations and risks of our business as needed. In addition, the individual directors identify their continuing education needs through a variety of means, including discussions with management and at Board and committee meetings.
4. Ethical Business Conduct
Describe what steps, if any, the Board will take to encourage and promote a culture of ethical business conduct.
The Board will expect directors and employees to act ethically at all times and to acknowledge their adherence to the policies of the Corporation as adopted from time to time. Any material issues regarding compliance with the policies of the Corporation will be brought forward by management at either the Board or appropriate committee meetings, or referred to the senior executive officers of the Corporation, as may be appropriate in the circumstances. The Board and/or appropriate committees or senior executive officers will determine what remedial steps, if any, are required. Any waivers from corporate policy that are granted for the benefit of a director or an employee will be granted only by the Board.
The Board will take all reasonable measures within its control according to domestic and internationally accepted measures to avoid or minimize environmental contamination so that such contamination will cause as little degradation as reasonably possible to the quality of life or health of human beings, animals and vegetative resources
The Board shall not permit or countenance the offering, promising, making or causing to make, either directly or indirectly, of any bribe, gift (other than nominal value), loan, fee, reward, or entertainment of a nature and cost which is neither appropriate nor reasonable, for the benefit of any Party, Public Official, any contractor or any other third party, and shall recognize without prejudice the principles of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed in Paris on 17 December 1997, andentered into force on 15 February 1999, and the Convention’s Commentaries (collectively, the"OECD CONVENTION"), represents and warrants that it and its Affiliate Company and Representatives have not paid, made, offered, given, promised, or authorized and will not pay, make, offer, give, promise or authorize, with respect to this Agreement and the matters which are the subject of any Agreement, whether directly or indirectly, any commissions, money, payment, gift, promise or anything of value , to or for the use or benefit of any Public Official for any purposes. Additionally the Board will endeavour to make every effort to avoid the payment of facilitating payments except where the health, safety or life of an owner, officer, director or employee of a Party is threatened.
Social License to Operate
Heightened public monitoring and regulation of hydrocarbon resource producers, refiners, distributors and commercial/retail sellers, especially where their activities carry the potential for having negative impacts on communities and the environment, involves varying degrees of risk to the Company’s reputation, relations with landowners and regulators, and in extreme cases even the ability to operate. Pennine maintains an active website that complies with Exchange requirements for timely disclosure and is the primary means of communicating to the general public when required. While media attention and public perception remaining largely beyond the control of Pennine’s executive, employees, contractors and directors, the Company makes every effort in its corporate and field operations to engage all stakeholders in a respectful and transparent manner
5. Nomination of Directors
Disclose what steps, if any, will be taken to identify new candidates for board nominations, including:
(i) who will identify new candidates; and
(ii) the process of identifying new candidates.
The responsibility to recommend to the Board suitable candidates as nominees for election or appointment as directors will rest with the Nominating Committee comprising Ray Gertz, Jeff Saxinger and Richard Wadsworth, independent Board members. The Nomination Committee will canvass all of the members of the Board for their input prior to making a recommendation. In identifying new candidates for Board nomination, the Nominating Committee will consider, among other things:
the competencies and skills that the Board considers to be necessary for the Board, as a whole, to possess;
the competencies and skills that the Board considers each existing director to possess;
the competencies and skills each new nominee will bring to the boardroom; and
whether or not each new nominee can devote sufficient time and resources to his duties as a member of the Board.
Disclose what steps, if any, will be taken to determine compensation for the directors and CEO, including:
(i) who determines compensation; and
(ii) the process of determining compensation.
The Compensation Committee was initiated August 24, 2016 and comprise independent Board members Ray Gertz, Jeff Saxinger and Richard Wadsworth who will retain the responsibility for reviewing matters relating to the human resource policies and compensation of the directors and the Named Executive Officers of Pennine in the context of the budget and the business plan of Pennine. It is not anticipated that Pennine will pay any cash compensation to the non-management directors for attendance at board or committee meetings or ordinary Board responsibilities. The Audit Committee reviewed and approved the compensation paid to the Chief Executive Officer as well as the Chief Financial Officer for the fiscal year ended December 31, 2015 set forth under the heading "Executive Compensation". Such base annual compensation was determined upon review of data for a number of comparable companies within the resource industries of competitive salaries paid to executive officers and the time expected to be committed by the respective officer.
7. Other Board Committees
If the board has standing committees other than the audit, compensation corporate governance and nominating committees, identify the committees and describe their function.
It is not anticipated that the Board will create any other standing committees. Such functions will be handled by the full Board.
Disclose what steps, if any, that the board takes to satisfy itself that the Board, its committees, and its individual directors are performing effectively.
To date, the Board of Pennine has satisfied itself that the Board, its committees and individual directors are performing effectively through informal discussions. Going forward, a more formal process may be implemented.