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Calvalley Petroleum Inc.

Compensation Committee

Members:

  • Mr. Tom Valentine (Chair)
  • Mr. David Wiliams
  • Mr. Gary Robertson
  • Mr. Ken Stephenson

Mandate

Purpose

The Compensation Committee (the "Committee") is a standing committee appointed by the Board of Directors of Calvalley Petroleum 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
    1. 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.
    2. 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.
    3. 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.
    4. 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.
    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 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
    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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
    1. 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.
    2. 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.
    3. Adoption of Policies and Procedures - The Committee may adopt policies and procedures for carrying out its responsibilities.
    4. 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.
    5. 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.
    4. 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.
    5. Compensation of Senior Officers
  5. The Committee shall annually:
    1. 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;
    2. 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;
    3. 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:
      1. the compensation packages of the Chief Executive Officer and the Designated Employees for the prior year;
      2. 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;
      3. the Company's performance and relative shareholder return;
      4. whether the compensation package reflects an appropriate balance between short and longer-term incentives to improve performance of the Company;
      5. the competitiveness of the compensation package, including the value of similar incentive awards paid to equivalent officers and positions at comparable companies; and
      6. 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.
    7. 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.
    10. 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.
    11. 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.
    12. 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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