DEF 14A of Tilray Brands, Inc.
Filed Sep 27, 2023 · FY20230001140361-23-045342
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Summary
Summary Tilray’s Board is divided into three classes. Each class consists of one-third of the total number of directors, and each class has a three-year term. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is duly elected and qualified. The Board presently has seven members and is divided into three classes (I, II, and III) of directors. Each of our directors currently serves until either the 2023 (current), 2024 or 2025 annual meeting of our stockholders and until her or his successor has been duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. It is the Company’s policy to invite directors and nominees for director to attend the Annual Meeting. All of our Board members, who were then-current members of Tilray’s Board, attended our 2022 Annual Meeting of stockholders. Each of the three Class II directors is willing and able to stand for election at the Annual Meeting. Any vacancies not filled at the Annual Meeting may be filled by the Board.
Class II Director Nominees for Election for a Three-Year Term Expiring at the 2026 Annual Meeting
Class II Director Nominees for Election for a Three-Year Term Expiring at the 2026 Annual Meeting The biography of each Class II director nominee is listed below and contains information regarding the person’s service as a director, business experience, public company director positions currently held or held at any time during the last five years, information regarding involvement in certain legal or administrative proceedings (if applicable), and the experiences, qualifications, attributes or skills that caused the Nominating Committee and the Board to determine that the person should serve as a director in light of our business and structure. Each Class II director nominee listed below exemplifies how our Board values professional experience in business, education, policy and governmental fields as well as strong moral character and diversity in terms of viewpoint as well as age, ethnicity and gender. Our Board believes that each Class II director nominee’s strong background and sets of skills provide the Board, as a whole, with a strong foundation of technical expertise and a wealth of diverse experience in a wide variety of areas.
Class II Director Nominees for Election for a Three-Year Term Expiring at the 2026 Annual Meeting
| David Clanachan | | Independent Director | | | Director Since: May 2021 Age: 61 Committees: Audit Committee Member | Other Public Company Boards: Mr. Clanachan is not a director of any other public company board. | | Executive Highlights: | | | | David F. Clanachan is Commissioner of the Canadian Premier League, a post he has held since 2018. Mr. Clanachan was also the Chairman of Restaurant Brands International, Canada until 2018. He was named President and Chief Operating Officer of Tim Hortons in 2014, and had more than 35 years with the brand. Mr. Clanachan holds a Bachelor of Commerce degree from the University of Windsor. Mr. Clanachan brings to the Board significant experience in consumer products and services, as well as financial, international growth, and general management experience. | | | | Select Skills and Qualifications: | | | | Extensive consumer products and services, financial, international growth, and general management experience. | | |
Class II Director Nominees for Election for a Three-Year Term Expiring at the 2026 Annual Meeting
| Renah Persofsky | | Independent Director | | | Director Since: May 2021 Age: 65 Committees: Vice-Chair (Lead Director) and Chair of the Nominating and Governance Committee, Independent Director | Other Public Company Boards: Ms. Persofsky is currently a director of Hydrofarm Holdings Group, Inc. and GreenLane. | | Executive Highlights: | | | | Renah Persofsky has over 40 years of business experience. She presently serves as the executive Chair of Green Gruff, an animal wellness company that produces organic and sustainable animal treats and supplements. Ms. Persofsky also serves on the board of Hydrofarm Holdings Group, Inc., America’s oldest and largest independent wholesaler and manufacturer of hydroponics equipment and grow lights. Ms. Persofsky was appointed to the board of Ocean Six Future Paths Ltd., the world’s first plastic mining company. Recently, Ms. Persofsky was appointed to the board of GreenLane Holdings Inc., a premier global platform for the development an distribution of premium cannabis accessories and packaging. In addition, she served as an executive consultant to many iconic brands including Tim Hortons, Canadian Tire, CIBC, Canada Post and Interac, and was an executive officer of the Bank of Montreal. Ms. Persofsky is a global leader in e-commerce and has co-chaired the Canadian Minister’s Advisory Committee on Electronic Commerce, as well as served as a special advisor to the Minister of Foreign Affairs and Trade. | | | | Select Skills and Qualifications: | | | | Public company board experience, extensive governance and management experience. | | |
Class II Director Nominees for Election for a Three-Year Term Expiring at the 2026 Annual Meeting
| Irwin D. Simon | | Chairman, President, and Chief Executive Officer | | | Director Since: May 2021 Age: 65 Committees: None | Other Public Company Boards: Mr. Simon is currently a director of Stagwell Inc. and Whole Earth Brands, Inc. | | Executive Highlights: | | | | Irwin D. Simon is Chairman, President and Chief Executive officer at Tilray Brands, Inc. Mr. Simon is an executive with over 30 years of experience building industry-leading, disruptive consumer packaged goods companies from organic and natural foods, dietary supplements, personal care, and cannabis. Before Tilray, Mr. Simon transformed Aphria Inc. into a profitable global cannabis company with leading market share brands. In 1993, Mr. Simon founded The Hain Celestial Group, Inc. (NASDAQ: HAIN), a leading organic and natural products company. As Founder, President, Chief Executive Officer, and Chairman, he led Hain Celestial for more than 25 years and grew the business to over $3 billion in net sales with operations in North America, Europe, Asia, and the Middle East, providing consumers with A Healthier Way of Life™. He is also the Executive Chairman of Whole Earth Brands, Inc. (NASDAQ: FREE), a global industry-leading platform focused on the “better for you” consumer packaged goods and ingredients space, and Presiding Director at Stagwell Inc., a provider of marketing, activation and communications solutions and services. | | | | Mr. Simon serves on the board of directors at Tulane University and the Board of Trustees at Poly Prep Country Day School. A true entrepreneur, Mr. Simon is also the majority owner of the Cape Breton Eagles, a Quebec Major Junior Hockey League team. | | | | Select Skills and Qualifications: | | | | Executive and public company board leadership, entrepreneurship, extensive global consumer-packaged goods business and brand development experience, as well as in-depth knowledge of our industry. | | |
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF THE NOMINEES FOR DIRECTOR.
Overview of Board Skills and Qualifications
Overview of Board Skills and Qualifications The following table highlights our current director’s primary qualifications and tenure. This table is intended as a high-level summary and not an exhaustive list of each director’s skills or contributions to the Board.
Overview of Board Skills and Qualifications
| | Irwin D. Simon | Renah Persofsky | Jodi Butts | David Clanachan | John M. Herhalt | David Hopkinson | Tom Looney | | Knowledge, Skills & Experience | | | | | | | | | Accounting / Financial Reporting | | | | X | X | | | | Business Operations | X | X | X | X | X | X | X | | Corporate Governance | X | X | X | X | X | X | | | Environmental / Social /Governance | | | X | | X | | | | Financial Literacy / Expertise | X | X | | X | X | | X | | Government / Regulatory | X | | X | | X | | | | Human Capital Management | | | | | X | | | | Independence | | X | X | X | X | X | X | | Consumer Packaged Goods | X | | | | | | | | International Business | X | | | | X | X | | | Investor Relations Management | X | | | | | | | | Mergers & Acquisitions | X | X | | X | X | | X | | Public Company Executive Experience | X | X | X | X | X | X | X | | Recent Public Company Board Experience | X | X | X | X | | X | | | Risk Management | X | | X | X | X | | X | | Technology / Cybersecurity | | X | | X | X | | | | Board Tenure | | | | | | | | | Years | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
Class I and Class III Directors Continuing in Office Until the 2024 and 2025 Annual Meetings, Respectively
Class I and Class III Directors Continuing in Office Until the 2024 and 2025 Annual Meetings, Respectively
Class I and Class III Directors Continuing in Office Until the 2024 and 2025 Annual Meetings, Respectively
| Jodi Butts | | Independent Director | | | Director Since: May 2021 Age: 51 Committees: Nominating & Governance Committee Member | Other Public Company Boards: Ms. Butts is currently a director of Canada Goose Holdings Inc. | | Executive Highlights: | | | | Jodi L.H. Butts is a lawyer, entrepreneur, and seasoned executive with a strong track record in driving positive change and growth within leading organizations. Ms. Butts is a senior governance consultant at Watson Advisors Inc. With more than 20 years of experience in governance and law, boards and leadership teams value the extensive practical know-how she brings to the table. Ms. Butts currently serves as an independent director of Canada Goose Inc. and chairs its Nominations & Governance Committee and is the chair of The Walrus Foundation Board of Directors. She also holds advisory roles including with Bayshore Home Healthcare and the Canadian Centre for the Purpose of the Corporation. Ms. Butts holds a Bachelor of Laws from the University of Toronto where she also received her master’s degree in Canadian history. | | | | Select Skills and Qualifications: | | | | Executive and public company board experience, entrepreneurship, operations and extensive corporate governance experience. | | |
Class I and Class III Directors Continuing in Office Until the 2024 and 2025 Annual Meetings, Respectively
| John M. Herhalt | | Independent Director | | | Director Since: May 2021 Age: 66 Committees: Chair of the Audit Committee | Other Public Company Boards: Mr. Herhalt is not a director of any other public company board. | | Executive Highlights: | | | | John M. Herhalt is a FCPA (FCA) and a retired partner from KPMG and has over 43 years of experience. He has worked across several industry sectors including automotive manufacturing, consumer products, infrastructure, power and utilities, and the public sector. During his time with KPMG, Mr. Herhalt served as Canada’s national advisory services leader, national public sector leader, and KPMG International’s global head of infrastructure, government, and health care sectors providing subject matter advice and support to various KPMG member firms and their clients on a variety of projects in the Americas, Europe, Middle East, and Asia. After retiring from KPMG, Mr. Herhalt has continued to provide management consulting services on a part-time basis and serves as a director on several boards. | | | | Select Skills and Qualifications: | | | | Extensive accounting, financial, governance, risk management and information systems audits, and global business experience. | | |
Class I and Class III Directors Continuing in Office Until the 2024 and 2025 Annual Meetings, Respectively
| David Hopkinson | | Independent Director | | | Director Since: May 2021 Age: 52 Committees: Nominating and Governance Committee & Compensation Committee | Other Public Company Boards: Mr. Hopkinson is not a director of any other public company board. | | Executive Highlights: | | | | An accomplished executive with more than 25 years of diverse sports industry experience, Mr. Hopkinson is currently President and Chief Operating Officer of Madison Square Garden Sports and President of Team Business Operations. As President and Chief Operating Officer, David Hopkinson is responsible for setting the business strategy and overseeing all aspects of business operations across Madison Square Garden Sports Corp. (MSG Sports)’s portfolio of assets, which includes: the New York Knicks (NBA) and New York Rangers (NHL) and two development league teams – the Westchester Knicks (NBAGL) and Hartford Wolf Pack (AHL). In addition, Mr. Hopkinson oversees global marketing partnerships for MSG Sports, as well as the MSG Family of Companies which also includes Madison Square Garden Entertainment Corp. and Sphere Entertainment Co. Prior to being named President and Chief Operating Officer, Mr. Hopkinson served as Executive Vice President, Team Business Operations, where he helped to drive new innovations while optimizing business operations, including marketing, ticketing, and the in-game experience, as well as community and fan development. Prior to joining MSG Sports, David served as Global Head of Partnerships for Real Madrid Club de Futbol in Madrid, Spain from 2018 to 2020. Mr. Hopkinson spent over 20 years with Maple Leaf Sports and Entertainment (MLSE) in Toronto, Canada and in his last role with MLSE, he served as Chief Commercial Officer, responsible for all revenue generation across MLSE’s teams; the Toronto Maple Leafs (NHL), Toronto Raptors (NBA) and Toronto FC (MLS). David has served on the Chancellor’s Advisory Committee at McGill University in Montreal, Canada as well as the Board of Directors of Canada Basketball and Board of Directors of Canada’s Walk of Fame. In 2013, he was awarded the Queen Elizabeth II Diamond Jubilee Medal in recognition of his Service to Canada. | | | | Select Skills and Qualifications: Extensive operational, management and revenue generation experience. | | |
Class I and Class III Directors Continuing in Office Until the 2024 and 2025 Annual Meetings, Respectively
| Thomas Looney | | Independent Director | | | Director Since: May 2021 Age: 60 Committees: Audit Committee & Compensation Committee | Other Public Company Boards: Mr. Looney is not a director of any other public company board. | | Executive Highlights: | | | | Tom Looney is the former President of Diageo US Spirits & Canada. In this position Mr. Looney maintained full responsibility for the growth and development of the company’s spirits business in the United States & Canada including brands such as Smirnoff, Crown Royal, Baileys, Johnnie Walker, Captain Morgan, and Ketel One. Mr. Looney was also a member of Diageo’s North American Executive Team. Previously, Mr. Looney held the position of President, Diageo Beer Company overseeing US sales, finance, marketing, and innovation teams. | | | | Select Skills and Qualifications: Extensive innovation, sales, finance and marketing experience, especially in the beverage alcohol industry, and risk management. | | |
INFORMATION REGARDING THE BOARD AND CORPORATE GOVERNANCE
INFORMATION REGARDING THE BOARD AND CORPORATE GOVERNANCE
Nominating and Corporate Governance Committee
| • | reviewing and recommending to our Board for approval the compensation of our directors; |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY Our non-employee directors are entitled to receive compensation for their service consisting of annual cash retainers and equity awards, as described below. Our Board may revise the policy as it deems necessary or appropriate. Cash Compensation. All non-employee directors are entitled to receive the following annual cash compensation:
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
| Board of Directors | $140,000 | | Chair of committee: | | | Audit | $20,000 | | Compensation | $20,000 | | Nominating and Corporate Governance | $20,000 | | Lead Independent Director: | $90,000 |
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
Equity Compensation. On an annual basis, each director is granted an annual RSU grant for Common Stock with a total value of $250,000, subject to 100% “cliff” vesting on the earlier of the (i) one (1) year anniversary of such grant date or (ii) next annual stockholder meeting, assuming continued Board service for such period. The Fiscal Year 2023 annual award was granted to each non-employee director on July 26, 2022.
DIRECTOR COMPENSATION FOR FISCAL YEAR 2023
DIRECTOR COMPENSATION FOR FISCAL YEAR 2023 The following table sets forth information regarding compensation earned by or paid to our non-employee directors during 2023.
DIRECTOR COMPENSATION FOR FISCAL YEAR 2023
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | | Jodi Butts(2) | 190,000 | 250,000 | 440,000 | | David F. Clanachan | 140,000 | 250,000 | 390,000 | | John M. Herhalt(2) | 210,000 | 250,000 | 460,000 | | David Hopkinson | 140,000 | 250,000 | 390,000 | | Thomas Looney | 149,166 | 250,000 | 399,166 | | Renah Persofsky(2) | 425,000 | 250,000 | 675,000 | | Brendan Kennedy(3) | 75,833 | 250,000 | 325,833 | | Walter Robb(3) | 86,667 | 250,000 | 336,667 |
DIRECTOR COMPENSATION FOR FISCAL YEAR 2023
| (1) This includes annual RSU equity grant. |
DIRECTOR COMPENSATION FOR FISCAL YEAR 2023
| (2) Each of Ms. Butts, Mr. Herhalt and Ms. Persofsky (Chair) received an additional one-time fee for their FY 2023 services on the Company’s Special Litigation Committee (the “SLC”) in connection with the derivative litigation matter captioned in re Tilray Brands, Inc. Reorganization. The SLC findings and efforts resulted in an extremely favorable settlement for the Company in which the defendants and other parties paid $39.9 million to Tilray. |
DIRECTOR COMPENSATION FOR FISCAL YEAR 2023
| (3) Both Mr. Kennedy’s and Mr. Robb’s respective terms on the Board of Directors ended on November 22, 2022. |
DIRECTOR COMPENSATION FOR FISCAL YEAR 2023
| Name | Number of shares Subject to Outstanding Options as of May 31, 2023 | Number of shares Underlying RSUs as of May 31, 2023 | | Jodi Butts | — | 111,613 | | David F. Clanachan | — | 78,337 | | John M. Herhalt | — | 123,526 | | David Hopkinson | — | 121,088 | | Thomas Looney | — | 123,526 | | Renah Persofsky | 30,710 | 137,865 | | Brendan Kennedy | 2,762,954 | 78,337 | | Walter Robb | — | — |
Engagement of Independent Compensation Consultant
Engagement of Independent Compensation Consultant In respect of compensation amounts for Fiscal Year 2023, the Compensation Committee consulted with a new independent compensation consultant, Korn Ferry. Semler Brossy provided advisory services to the Compensation Committee at the beginning of Fiscal Year 2021 through July 2021. Effective April 2023, all analyses and independent recommendations related to executive and director compensation for the Fiscal Year 2023 were conducted by Korn Ferry. During the Fiscal Year 2023 engagement, Korn Ferry conducted a peer group review along with a subsequent analysis of executive base salaries, bonuses, and equity awards. This comprehensive market review also included relevant compensation survey data. Director pay levels were among the items reviewed by Korn Ferry. The Compensation Committee assessed the independence of Korn Ferry prior to its engagement and determined that its work for the Compensation Committee would not raise any conflict of interest. See “Role of Compensation Consultant” for additional detail regarding Korn Ferry’s role.
Executive Compensation Program
| • | enable us to attract, motivate and retain the people needed to support our long-term goal of being an industry leader; |
Executive Compensation Program
| • | reward the individual performance that contributes to our short-term and long-term successes. |
Summary of Executive Compensation Philosophy and Objectives
| What We Do | | What We Don’t Do | | | ✔ | Pay for Performance – majority of compensation “at risk” | ✘ | Permit short sales by directors, officers or employees | | ✔ | Reasonable post-employment and change in control provisions | ✘ | Allow hedging or pledging of Company stock | | ✔ | Stock ownership guidelines | ✘ | Offer change in control tax gross-ups | | ✔ | Use of Multiple Performance Metrics | ✘ | Permit repricing of underwater options without stockholder approval | | ✔ | Clawback Policy for equity incentive awards and cash bonuses in the event of restatement of financial results | ✘ | Offer unreasonable perquisites | | | | ✘ | No single trigger cash severance based solely on a change in control of the Company |
Peer Group Composition
Peer Group Composition The Compensation Committee and Semler Brossy’s review and determination at the end of Fiscal Year 2021 of the applicable peer group appropriately balanced the following four relevant spectrums:
Peer Group Composition
| 1. | Industry: Focus was given to companies in the cannabis industry as this best represents the main customer, labor and capital markets in which Tilray competes; however, given Tilray is larger than other cannabis companies, it was important to assess other industries as well. |
Peer Group Composition
| • | Broader biotechnology / pharmaceuticals companies were included because they are similar to Tilray’s medical cannabis business in many respects. |
Peer Group Composition
| • | Companies in the consumer-packaged goods industry were also considered due to Tilray’s consumer-product based business model, and Tilray’s expansion of products and services in the brewery and distillery industry. |
Peer Group Composition
| • | Because the Company’s operations span multiple industries, the Committee also believes that a consistent approach across the breadth of the Company’s operations with respect to features of our overall executive compensation structure is best achieved by reference to a group of general industry peers that is broader than the cannabis, biotechnology, and consumer-packaged goods industry peers. |
Peer Group Composition
| 2. | Size: Company size is a strong indicator of organizational complexity and drives scope of accountability. |
Peer Group Composition
| • | Given the anticipated growth of Tilray following the Business Combination and the cannabis sector overall, a wider financial lens was applied by Semler Brossy as well as Korn Ferry, and revenue was the primary indicator of size. Total assets and market capitalization were used as secondary reference points. |
Peer Group Composition
| 3. | Operations: As Tilray is an established international operator in the cannabis industry, focus was given to companies that are based in North America and have international operations. |
Peer Group Composition
| 4. | Location: The regions or countries where Tilray competes for talent. Our approach proposes to focus the executive compensation analysis primarily to Canadian and U.S.-based companies. |
Peer Group Composition
| • | Since Tilray is U.S.-based with Canadian and U.S.-sourced executives, the Canadian and U.S. markets are both relevant sources of data. Should other markets become relevant in the future, consideration will be given to including companies from those geographies in Tilray’s peer group. |
Peer Group Composition
It was important to the Compensation Committee that the peer group reflect high revenue growth companies. In March 2021, the ultimate outcome of this peer group review was the creation of the following 18-company peer group for Fiscal Year 2021 and 2022, for purposes of determining the compensation arrangements for Tilray’s senior executive officers:
Peer Group Composition
| Cannabis Companies Canopy Growth Corporation Curaleaf Holdings, Inc. | Cresco Labs, Inc. Green Thumb Industries, Inc. | GW Pharmaceuticals plc Trulieve Cannabis Corp. | | Biotechnology/Pharmaceutical/Technology Companies Catalent, Inc. DocuSign, Inc. | Etsy, Inc. Incyte Corporation | Neurocrine Biosciences, Inc. Unity Software Inc. | | Consumer Packaged Goods/Alcohol Companies Beyond Meat Constellation Brands, Inc. | Monster Beverage National Beverage | The Boston Beer Company, Inc. The Simply Good Food Co. |
Peer Group Composition
No changes were made to this peer group for purposes of Fiscal Year 2023 compensation. As the cannabis industry and our business evolves and diversifies, the Compensation Committee will continue to evaluate the appropriateness of each peer annually and make any necessary changes for Fiscal Year 2024 with the input of Korn Ferry, its current independent compensation consultant.
Key Components of Tilray Compensation Plan
| Compensation Element | Primary Purpose | | Performance Period | | Details | | | Cash Compensation | | | | | | | | Base Salary | • | Fixed annual compensation for ongoing services performed, executive tenure, and role | • | Ongoing | • | Provided in cash each pay period. Intended to be competitive in marketplace and to retain key employees | | | • | Continuity | | | | | | Annual Performance-based Bonus | • | Reinforce and drive short-term priorities and business results | • | 1 year | • | Target award based on a percentage of salary; limited to 100% of base salary for senior executives (except for the CEO whose percentages range from 200% to 350% of salary) | | | • | Recognize and reward corporate, and business, and individual performance, including for awards for material transactions | | | • | Incentivizes and rewards the achievement of predetermined corporate and business short-term objectives that are aligned with our strategic plan as well as individual performance | | Equity Award Compensation | | | | | | | | 2022 HEXO PSU Awards (as described below) | • | Reinforce and drive long-term stockholder value | • | Generally, 3 years | • | The Compensation Committee issued grants to the NEOs in July 2022 and July 2023 that included both time and performance-based vesting terms and conditions | | | • | At risk equity awards based on achievement of Company’s financial performance and benefits from HEXO investment | | | | | | Annual Long-term incentives (RSUs) | • | Reinforce and drive long-term stockholder value | • | 2 years | • | Annual grants of LTIP RSUs: The grant value is based on applicable market-driven metrics level and percentage of salary with 50% of the shares vesting one year from the vesting commencement date and the remaining 50% of the shares vesting on the second anniversary of the grant date. | | | • | Retention of key employees during applicable performance periods | | | | |
Shareholder Engagement in Response to Say-on-Pay Vote: Improvements to Compensation Practices and Governance Initiatives
Shareholder Engagement in Response to Say-on-Pay Vote: Improvements to Compensation Practices and Governance Initiatives In the Company’s most recent “say-on-pay” advisory vote under the Company’s 2021 Proxy Statement, approximately 61% of the shareholder votes cast were voted in favor of our executive compensation program. In response to these disappointing voting results, management and the Board engaged in shareholder outreach and solicitation of feedback, including through multiple “Ask Me Anything” (AMA) forums on Reddit. Following these discussions, and to ensure we understood shareholder concerns, management and the Board undertook the following initiatives to improve our compensation practices and corporate governance. First, the Compensation Committee engaged Korn Ferry as an independent consultant to provide an extensive benchmarking analysis and to advise it on new potential compensation arrangements that were implemented in July 2023. Second, the Compensation Committee structured at-risk equity incentive awards based on the achievement of specific financial performance metrics and targets. These equity awards included both time and performance-based vesting conditions to ensure alignment with shareholder interests and the retention of key employees. Third, the Board adopted and implemented a “clawback policy”, pursuant to which the Company will be entitled to recover erroneously awarded incentive-based compensation from its executive officers in the event the Company is required to prepare an accounting restatement to correct previously-issued financial statements. In addition, the Board implemented certain governance initiatives that were designed to simplify the Company’s capital structure and ensure that all stockholders of common shares have equal voting rights, or one vote per share. This governance initiative was achieved through the Company’s Charter Amendment, formally approved in April 2023, that eliminated the Company’s previously authorized class of super majority voting stock and created one class of common stock. Finally, consistent with best governance practices, the Board has again proposed that shareholders approval a proposal to declassify the Board.
Risk Management Considerations
| • | Financial Performance Measures. The financial metrics used to determine the amount of an executive’s bonus are measures the Committee believes drive long-term stockholder value. The ranges set for these measures are intended to reward success without encouraging excessive risk-taking. |
Total Cash Compensation of NEOs
Total Cash Compensation of NEOs Overview The total cash compensation of our executive compensation program has served a two-fold purpose. Base salaries are intended to provide financial stability, and predictability and security of compensation for our NEOs for fulfilling their core job responsibilities, while the annual cash performance bonus is intended to incentivize and reward the achievement of predetermined corporate objectives that are aligned with our strategic plan as well as individual performance. Adjustments in total cash compensation targets may then be made based on factors such as an executive’s duties and responsibilities and his or her position in the Company, an executive’s individual contributions, as well as management’s financial forecasts for the upcoming year. Fiscal Year 2023 Base Salary and Total Cash Compensation Determinations The Compensation Committee generally establishes annual base salaries for our NEOs commensurate with the level of experience that the executive brings to the position, the nature of the responsibilities required of the executive, such as whether the executive is performing in multiple roles, how successful the executive is in achieving goals established by the Compensation Committee and the executive’s contributions to the Company and internal pay equity considerations, but does not assign any specific weights to these factors. As discussed in other parts of this CD&A, the Compensation Committee also gives significant consideration to the size of the Company and our budgeted operating expenses in setting annual base salaries and has not historically targeted base salaries for our NEOs to any specific level within the range of base salaries paid by our peer group. Base salaries are reviewed annually and may be adjusted to better match competitive market levels or to recognize an executive’s professional growth and development, increased responsibility or other discretionary factors. In determining the base salary levels for each of Mr. Simon, Mr. Merton and Ms. Faltischek in connection with their continued employment, the Compensation Committee considered the significant increase in responsibility of these executives post-business combination with Aphria Inc., their respective relevant experience and achievements and the level of compensation of our peer group companies and other survey data and individual negotiations with each executive. For each of Mr. Gendel and Mr. Savell, as a new NEO upon joining the Company, their respective base salaries were determined primarily based on market and competitive conditions applicable to their specific position. The following table sets forth, for each NEO, the annualized base salary for the 2023 Fiscal Year:
Annual Performance Bonus Plan
Annual Performance Bonus Plan We offer our NEOs the opportunity to earn annual cash bonuses that are intended to compensate them for achieving short-term company and individual performance goals. Our Compensation Committee establishes the target bonuses of our NEOs, which are evaluated from time to time. The Company’s compensation program is designed to reward performance relative to corporate financial performance criteria and individual performance. Specifically, the Company’s senior executives are eligible to receive an annual bonus each year in a target amount equal to a percentage of their base salary if the Company fully achieves the financial performance targets established by the Compensation Committee and the CEO and each NEO is determined to have satisfied his or her individual performance criteria. The Company does not apply a formula or use a pre-determined weighting when comparing overall performance against the various individual objectives, and no single objective is material in determining individual awards. The Company’s financial performance for Fiscal Year 2023 partially achieved the financial targets established by the Compensation Committee, including consolidated net revenue and Adjusted EBITDA targets established by the Board. For Fiscal Year 2023, the applicable consolidated net revenue target was $695 million and the Adjusted EBITDA target was $75 million for full bonus payments. In addition, the Committee considered other impactful initiatives implemented by management, including revenue diversification through accretive acquisitions and product innovations; improved operational performance and production efficiencies; and strengthening of the Company’s balance sheet. As a result of the Company’s partial achievement of the Company’s financial targets, together with these other significant accomplishments, the Compensation Committee determined to pay annual cash bonus awards in an amount equal to 30% of the applicable bonus targets to the NEOs in respect of the Fiscal Year 2023.
Annual Performance Bonus Plan
| Name | Target Bonus Percentage of Base salary | Bonus Amount ($) for Fiscal Year 2023 (30% of Target Amount) | | Irwin Simon | 200% (up to a maximum of 350%) | $1,909,950 | | Carl Merton | 100% | $112,026 | | Denise Faltischek | 100% | $165,000 | | Mitchell Gendel | 100% | $153,000 | | Roger Savell | 100% | $150,000 |
Annual Performance Bonus Plan
Equity Incentive Compensation The Company grants long-term incentive awards to our NEOs in the form of restricted share units that may be subject to time-based and performance-based vesting requirements. We use long-term equity-based compensation to incentivize and retain our executive officers by linking their awards to our long-term financial performance. We believe that these long-term incentives motivate our executive officers to grow revenues and earnings, enhance stockholder value and align their interests with those of our stockholders. We typically award long-term equity-based compensation with restricted stock units that vest over time so long as the executive remains employed with the Company. Thus, the units are designed both to link executives’ interests with those of our stockholders (as the units’ value is based on the value of Tilray Brands, Inc. Common Stock) and to provide a long-term retention incentive for the vesting period, as they generally have value regardless of share price volatility. Awards of performance-based restricted share units also cover multiple years, with a percentage of the units subject to the award becoming eligible to vest each year based on the Company’s and the individual’s performance during that year relative to performance goals reviewed by the Compensation Committee. Before any performance-based restricted share unit is paid, the Compensation Committee must certify that the performance target(s) have been satisfied. The Compensation Committee has discretion to determine the performance target(s) and any other restrictions or other limitations of performance-based restricted share units and may reserve discretion to reduce payments below maximum award limits. Thus, the performance units are designed both to motivate executives to maximize the Company’s performance each year and to provide a long-term retention incentive for the entire period covered by the award. The Compensation Committee determines the size of equity award grants after considering the following factors:
Annual Performance Bonus Plan
| • | the competitive equity compensation practices for comparable positions identified in the applicable market analysis; |
Annual Performance Bonus Plan
| • | the executive’s level of responsibility and duties; |
Annual Performance Bonus Plan
| • | a comparison to grant levels of other executive officers; |
Annual Performance Bonus Plan
| • | individual NEOs’ performance; |
Annual Performance Bonus Plan
| • | our corporate performance; |
Annual Performance Bonus Plan
| • | our total equity compensation costs relative to total expenses; |
Annual Performance Bonus Plan
| • | the executive’s prior experience, experience within his or her specific job and breadth of knowledge; and |
Annual Performance Bonus Plan
| • | our corporate objectives for share-based compensation charges and earnings dilution. |
Annual Performance Bonus Plan
The Compensation Committee does not take into consideration an executive’s aggregate equity holdings or equity carrying value in determining annual long-term equity incentive awards. July 2022 HEXO PSU Awards In July 2022, shortly following Tilray’s investment in HEXO Corp., the Compensation Committee granted PSU awards to the NEOs, with vesting targets based upon generating EBITDA from cost savings and production efficiencies from the HEXO strategic investment (the “2022 HEXO PSU Awards”). The Compensation Committee approved these awards in order to retain and motivate our NEOs during the critical investment stage of generating cost savings and production efficiencies with HEXO. Each HEXO PSU Award represents a contingent right to receive one (1) share of Tilray Common Stock. The 2022 HEXO PSU Awards would be earned only upon achievement of specified EBITDA targets of at least $30 million in Fiscal Year 2023. Specifically, subject to the reporting person’s continuous employment through the vesting date, the resulting number of shares of Common Stock acquired upon vesting of the 2022 HEXO PSU Awards is contingent upon the achievement of EBITDA performance targets of $30 million to $40 million. Mr. Simon was granted 1,412,429 of the 2022 HEXO PSU Awards, and each of Mr. Merton, Ms. Faltischek, Mr. Gendel and Mr. Savell were granted 187,853 of the 2022 HEXO PSU Awards. All of the 2022 HEXO PSU Awards are intended to be long-term incentive awards tied to challenging financial performance targets, stock price appreciation goals, and continued employment of the Tilray leadership team.
Annual Performance Bonus Plan
| Name | Total PSUs assuming Target Achievement (100%) | Total Units assuming Maximum Achievement (200%) | | Irwin D. Simon | 1,412,429 | 2,824,858 | | Carl Merton | 187,853 | 375,706 | | Denise Faltischek | 187,853 | 375,706 | | Roger Savell | 187,853 | 375,706 | | Mitchell Gendel | 187,853 | 375,706 |
Annual Performance Bonus Plan
Annual LTIP RSU Grants In addition to the 2022 HEXO PSU Awards, the Compensation Committee awarded annual LTIP RSU grants to most of the Tilray senior executive officers in July 2022. These LTIP RSU awards, as well as new hire and annual RSU awards, vest in tranches over two years with 50% of the shares subject to the awards generally vesting one year from the vesting commencement date and the remaining 50% of shares vesting on the second anniversary of the grant date. Restricted stock units provide long-term incentive compensation that has greater retention value as compared to stock options in a flat or down market while minimizing earnings dilution.
Annual Performance Bonus Plan
| Name | Annual LTIP RSU Target | | Irwin Simon | 250% | | Carl Merton | 175% | | Denise Faltischek | 175% | | Mitchell Gendel | 175% | | Roger Savell | 175% |
Annual Performance Bonus Plan
Fiscal Year 2023 Compensation Awards Following Successful Investment in HEXO Corp. For Fiscal Year 2023, our NEOs received transaction bonus payments and PSU equity awards in recognition of their efforts in structuring and completing the successful acquisition of the convertible debt of HEXO Corp. in a transaction that closed in July 2022. The financial benefits to Tilray were achieved through a substantial annual advisory fee payable by HEXO to the Company; the restructuring of HEXO’s existing indebtedness to benefit Tilray debt position; and the discounted purchase price for the HEXO convertible debt acquired in Fiscal Year 2023. Specifically, cash bonus payments were made to Mr. Simon, Mr. Merton, Ms. Faltischek, Mr. Gendel and Mr. Savell in recognition of each of their exceptional efforts and in consideration of their unique and significant contributions to the successful HEXO debt acquisition and substantial financial benefits derived from that investment. These bonus amounts and PSU awards are disclosed in the Summary Compensation Table in respect of Fiscal Year 2023.
Other Compensation and Benefits
Other Compensation and Benefits Severance and Change of Control Benefits. Our NEOs are entitled to certain severance and change of control payments and benefits pursuant to our executive agreements with our NEOs. The terms of executive agreements are described in more detail below in the sections entitled “Employment, Severance and Change of Control Benefits.” The Compensation Committee believes these agreements are an essential element of our executive compensation program and assist the Compensation Committee in recruiting and retaining talented executives. The Compensation Committee also believes these benefits serve to minimize the distractions to the executive, reduce the risk that the executive will depart the Company before an acquisition is consummated, and allow the executive to focus on continuing normal business operations and the success of a potential transaction, rather than worrying about how business decisions that may be in our best interest and the interests of our stockholders will impact his or her own financial security. Further, these agreements are in line with customary practices at an executive level at our peer companies. Other Benefits. We believe that establishing a competitive benefit package consistent with companies with which we compete for employees is an important factor in attracting and retaining talented employees. Thus, we provide our NEOs with employee benefits on the same basis as offered to our full time non-executive employees, including health and dental insurance, supplemental life insurance, short-term and long-term disability, and a 401(k) plan.
Summary Compensation Table
Summary Compensation Table The following table presents all of the compensation paid or awarded to or earned by our NEOs during Fiscal Years 2021 (January 1, 2021 to May 31, 2021), 2022 (June 1, 2021 to May 31, 2022), and 2023 (June 1, 2022 to May 31, 2023). Calendar year 2020 is omitted from the table below because none of our current NEOs were a named executive officer during that year. Fiscal year 2021 was a five-month transition period due to a change in the Company’s fiscal year-end. In accordance with the rules promulgated by the SEC, certain columns relating to information that is not applicable have been omitted from this table.
Summary Compensation Table
| Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation(3) | Option Awards | All Other Compensation ($)(4) | Total ($) | | Irwin Simon President, Chief Executive Officer and Chairman of the Board | 2023 | 1,819,000 | 2,500,000(5) | 9,249,999 | 1,909,950 | — | 177,635 | 15,656,584 | | | 2022 | 1,714,165 | — | 17,599,962 | — | — | 142,639 | 19,456,767 | | | 2021 | 141,667* | 13,185,000(6) | — | — | — | 357,332 | 13,683,998 | | Carl Merton Chief Financial Officer | 2023 | 373,358(7) | 348,932(5) | 1,321,687 | 112,026 | — | 11,049 | 2,167,052 | | | 2022 | 375,086(7) | — | 2,447,902 | — | — | 13,412 | 2,836,400 | | | 2021 | 32,787* | 1,058,645(6) | — | — | — | 34,436 | 1,125,868 | | Denise Faltischek Chief Strategy Officer and Head of International | 2023 | 550,000 | 600,000(5) | 1,539,999 | 165,000 | — | 107,681 | 2,962,680 | | | 2022 | 509,615 | — | 2,365,606 | — | — | 15,125 | 2,890,346 | | | 2021 | 41,667* | 1,093,750(6) | — | — | — | 54,059 | 1,189,476 | | Roger Savell(8) Chief Administrative Officer | 2023 | 500,000 | 75,000(5) | 810,833 | 150,000 | — | 97,465 | 1,633,298 | | Mitchell Gendel(9) Global General Counsel and Corporate Secretary | 2023 | 510,000 | 500,000(5) | 1,408,750 | 153,000 | — | 26,870 | 2,598,620 | | | 2022 | 370,512 | — | 1,999,995 | — | — | 16,297 | 2,386,804 | | | 2021 | — | — | — | — | — | — | — |
Summary Compensation Table
| * Salary amounts reflect base salary that was paid to the NEOs following the completion of the business combination with Aphria Inc. |
Summary Compensation Table
| (1) In connection with new employment agreements executed on July 26, 2021, each of the named executive officers (other than Mr. Gendel and Mr. Savell) received a base salary increase that included adjustments effective as of May 1, 2021. In addition, the Company transitioned its U.S. employees from bi-weekly to bi-monthly payroll disbursements, and each executive received a pro rata payroll disbursement at the end of calendar year 2021 covering the period from December 26, 2021 to December 31, 2021. These payroll adjustments resulted in these executives receiving total base salary for Fiscal Year 2022 in excess of their contractual base salary. |
Summary Compensation Table
| (2) These amounts reported do not reflect the amounts actually received by our NEOs. Instead, these amounts reflect the aggregate grant date fair value of each stock option or restricted stock unit award granted to our NEOs on each of July 26, 2021 (during Fiscal Year 2022) and July 26, 2022 (during Fiscal Year 2023), as computed in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC 718. Assumptions used in the calculation of the grant date fair value of each equity award are included in Note 19 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended May 31, 2023. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. PSU values in the Stock Awards column are based on performance achieved at 100% for the included PSUs, which was the probable outcome of performance conditions as of the grant date for the included PSUs. For the 2022 HEXO PSU Awards, the grant date fair value of each NEO’s included PSUs if earned at maximum levels was $3.54 per PSU. |
Summary Compensation Table
| (3) Represents the cash performance bonus earned under our Annual Performance Bonus Plan described above. |
Summary Compensation Table
| (4) Further details for Fiscal Year 2023 are included in the “All Other Compensation” table below. |
Summary Compensation Table
| (5) These amounts include transaction bonuses paid to our NEOs in August 2022 (Fiscal Year 2023) in recognition of the successful closing of the HEXO investment. |
Summary Compensation Table
| (6) These amounts include transformation bonuses and annual performance bonuses paid to Mr. Simon, Mr. Merton, and Ms. Faltischek by the Company in July 2021 in recognition for their Aphria Inc. performance and efforts prior to the business combination with Aphria Inc. |
Summary Compensation Table
| (7) The 2023 compensation of Mr. Merton is converted into USD with the exchange rate of May 31, 2023 of $0.7346 (USD) to $1.0000 (CAD). The 2022 compensation of Mr. Merton is converted into USD with an exchange rate on May 31, 2022 of $0.7899 (USD) to $1.0000 (CAD). |
Summary Compensation Table
| (8) Mr. Savell was hired as Chief Administrative Officer on March 31, 2022. No information is reported for Mr. Savell for 2022 because he was not an NEO for that fiscal year. |
Summary Compensation Table
| (9) Mr. Gendel was hired as Global General Counsel and Corporate Secretary on July 17, 2021. |
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table shows for Fiscal Year 2023, certain information regarding grants of plan-based awards, to the following named executive officers:
Grants of Plan-Based Awards
| Name | Estimated Possible Payouts Under Non-Equity Incentive Plan | | | Estimated Possible Payouts Under Equity Incentive Plan(2) | | Grant Date fair value of Equity Awards(1) | | | | | Grant date | Target | Maximum | Target | Maximum | Target | Maximum | Type | | Irwin Simon | 26-Jul-22 | | | 1,200,565 | 1,200,565 | $4,250,000 | $4,250,000 | Annual | | | 26-Jul-22 | | | 1,412,429 | 2,824,858 | $4,999,999 | $9,999,997 | HEXO Grants Annual Incentive | | | | $3,638,000 | $6,366,500 | | | | | | | Carl Merton | 26-Jul-22 | | | 185,505 | 185,505 | $656,688 | $656,688 | Annual | | | 26-Jul-22 | | | 187,853 | 375,706 | $665,000 | $1,329,999 | HEXO Grants Annual Incentive | | | | $373,358 | $373,858 | | | | | | | Denise Faltischek | 26-Jul-22 | | | 247,175 | 247,175 | $875,000 | $875,000 | Annual | | | 26-Jul-22 | | | 187,853 | 375,706 | $665,000 | $1,329,999 | HEXO Grants Annual Incentive | | | | $550,000 | $550,000 | | | | | | | Roger Savell | 26-Jul-22 | | | 41,196 | 41,196 | $145,834 | $145,834 | Annual | | | 26-Jul-22 | | | 187,853 | 375,706 | $665,000 | $1,329,999 | HEXO Grants Annual Incentive | | | | $500,000 | $500,000 | | | | | | | Mitchell Gendel | 26-Jul-22 | | | 210,099 | 210,099 | $743,750 | $743,750 | Annual | | | 26-Jul-22 | | | 187,853 | 375,706 | $665,000 | $1,329,999 | HEXO Grants Annual Incentive | | | | $510,000 | $510,000 | | | | | |
Grants of Plan-Based Awards
| (1) The dollar amounts in this column represent that grant date fair value of the product of the number of shares granted and the closing market price of our common stock on the grant date for time-based restricted stock units. |
Grants of Plan-Based Awards
| (2) The annual grants vest at the rate of 50% of the RSUs on the twelve (12) month anniversary of the grant date (the “Vesting Date”), and the remaining 50% RSUs on the 24 months anniversary of the Vesting Date. Whereas the staking grants vesting schedules are thoroughly described in the document. |
Narrative Disclosure To Grants Of Plan-Based Awards Table
Narrative Disclosure To Grants Of Plan-Based Awards Table Annual Performance Bonus Cash Awards The Company provides eligibility for annual cash bonus awards to reward named executive officers for performance in the fiscal year. For more information regarding our annual performance bonus cash awards, please see the section of the CD&A titled “Annual Performance Bonus Plan.” Equity Compensation Awards Consistent with its practices for awarding restricted stock units described in the CD&A above, the Compensation Committee approved equity compensation awards in the form restricted stock units to each of the named executive officers listed in the table above. For more information regarding our equity compensation awards, please refer the section of the CD&A titled “Equity Incentive Compensation.” In addition, the named executive officers’ equity compensation awards may, under certain circumstances, be subject to accelerated vesting in the event of a change of control and termination. For more information regarding the accelerated vesting provisions and treatment of the equity compensation awards in the event of a change of control, refer to the sections titled “Severance and Change of Control Benefits” and “Potential Payments Upon Termination or Change of Control.”
Outstanding Equity Awards At Fiscal Year 2023 End
Outstanding Equity Awards At Fiscal Year 2023 End
Outstanding Equity Awards At Fiscal Year 2023 End
| | | | | Option Awards | | | | Stock Awards | | | Name | Grant Date | Type of Award | Vesting Commencement date | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Operation exercise price ($) | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares of units of stock that have not vested ($) | | Irwin Simon | 2/24/2019 | APH Ex | 2/24/2019 | 830,000 | — | 13.06 | 2/24/2024 | — | — | | | 8/7/2019 | APH Ex | 8/7/2019 | 31,887 | — | 8.95 | 8/7/2024 | — | — | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 94,891 | 158,468 | | | 7/27/2021 | EIP 2018 | 7/27/2021 | — | — | — | — | 261,862 | 437,310 | | | 7/27/2021 | EIP 2018 | 7/27/2021 | — | — | — | — | 98,193 | 163,982 | | | 7/27/2021 | EIP 2018 | 7/27/2021 | — | — | — | — | 98,193 | 163,982 | | | 7/27/2021 | EIP 2018 | 7/27/2021 | — | — | — | — | 392,772 | 655,929 | | | 7/26/2022 | EIP 2018 | 6/1/2022 | — | — | — | — | 1,200,565 | 2,004,944 | | | 7/26/2022 | EIP 2018 | 7/31/2022 | — | — | — | — | 2,824,858 | 4,717,513 | | Carl Merton | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 16,347 | 27,299 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 32,443 | 54,180 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 12,166 | 20,317 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 12,166 | 20,317 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 48,662 | 81,266 | | | 7/26/2022 | EIP 2018 | 6/1/2022 | — | — | — | — | 185,505 | 309,793 | | | 7/26/2022 | EIP 2018 | 7/31/2022 | — | — | — | — | 375,706 | 627,429 | | Denise Faltischek | 10/17/2019 | APH Ex | 10/17/2019 | 249,000 | — | 6.50 | 10/17/2024 | — | — | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 13,344 | 22,284 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 32,443 | 54,180 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 12,166 | 20,317 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 12,166 | 20,317 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 48,662 | 81,266 | | | 7/26/2022 | EIP 2018 | 6/1/2022 | — | — | — | — | 247,175 | 412,782 | | | 7/26/2022 | EIP 2018 | 7/31/2022 | — | — | — | — | 375,706 | 627,429 | | Roger Savell | 4/5/2022 | EIP 2018 | 4/5/2022 | | — | — | — | 59,660 | 99,632 | | | 4/5/2022 | EIP 2018 | 4/5/2022 | — | — | — | — | 22,372 | 37,361 | | | 4/5/2022 | EIP 2018 | 4/5/2022 | — | — | — | — | 22,372 | 37,361 | | | 4/5/2022 | EIP 2018 | 4/5/2022 | — | — | — | — | 223,712 | 373,599 | | | 7/26/2022 | EIP 2018 | 6/1/2022 | — | — | — | — | 41,196 | 68,797 | | | 7/26/2022 | EIP 2018 | 7/31/2022 | — | — | — | — | 375,706 | 627,429 | | Mitchell Gendel | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 32,443 | 54,180 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 12,166 | 20,317 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 12,166 | 20,317 | | | 7/26/2021 | EIP 2018 | 7/26/2021 | — | — | — | — | 48,662 | 81,266 | | | 7/26/2022 | EIP 2018 | 6/1/2022 | — | — | — | — | 210,099 | 350,865 | | | 7/26/2022 | EIP 2018 | 7/31/2022 | — | — | — | — | 375,706 | 627,429 |
Outstanding Equity Awards At Fiscal Year 2023 End
The market value for each NEOs was based on the closing price $1.67 per share on May 31, 2023.
Option Exercises And Stock Vested
Option Exercises And Stock Vested The following table shows for the Fiscal Year 2023, certain information regarding option exercises and stock vested during the last fiscal year with respect to the NEOs..
Option Exercises And Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | Irwin Simon | — | — | 422,186 | $1,508,150 | | Carl Merton | — | — | 100,734 | $379,006 | | Denise Faltischek | — | — | 53,891 | $195,126 | | Roger Savell | — | — | 74,567 | $181,943 | | Mitchell Gendel | — | — | 40,548 | $150,027 |
Pension Benefits
Pension Benefits Our NEOs did not participate in, or otherwise receive any benefits under, any pension or defined benefit retirement plan sponsored by us in 2023.
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation Our NEOs did not participate in, or earn any benefits under, a nonqualified deferred compensation plan sponsored by us during Fiscal Year 2023.
CEO Pay Ratio
CEO Pay Ratio Under SEC regulations, we are required to calculate and disclose the total annual compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO (the “CEO Pay Ratio”). Set forth below is a description of the methodology, including material assumptions, adjustments and estimates we used to identify the median employee for purposes of calculating the CEO Pay Ratio:
CEO Pay Ratio
| • | We identified our median employee from all employees, including full-time and part-time employees who were on our payroll records as of a determination date of May 31, 2023. |
CEO Pay Ratio
| • | Compensation for international employees was converted to U.S. dollar equivalents based on the applicable exchange rate. |
CEO Pay Ratio
| • | In determining compensation for purposes of the median calculation, we used each employee’s annual base pay and cash equivalent of benefits. |
CEO Pay Ratio
| • | We annualized the base salary earned during the fiscal year ending May 31, 2023 by all employees. |
CEO Pay Ratio
| • | We then calculated the annual total base compensation of the identified median employee in accordance with the requirements of the Summary Compensation Table. |
CEO Pay Ratio
We determined our median employee’s total compensation based upon the foregoing methodology for Fiscal Year 2023, including any perquisites and other benefits, in the same manner that we determine the total compensation of our named executive officers for purposes of the Summary Compensation Table disclosed above. For the fiscal year ending May 31, 2023, the median employee’s total compensation was $35,426. As disclosed in the Summary Compensation Table, the total compensation of our CEO was $15,656,584, which includes equity awards valued on the date of grant (July 2022) equal to $9,249,999. This equity award amount was based on the grant date value of the Company’s stock equal to $3.54 per share, and is subject to retention and financial-performance based vesting conditions. Inclusive of the equity-incentive awards granted in July 2022, the resulting ratio of the annual total compensation of our CEO to the annual total compensation of the median employee was 442 to 1. The foregoing pay ratio represents the Company’s estimate calculated in a manner the Company believe to be consistent with the SEC rules and applicable guidance. In calculating the pay ratio, SEC rules allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions reflecting their unique employee populations. Therefore, our reported pay ratio may not be comparable to that reported by other companies due to differences in industries, scope of international operations, business models and scale, as well as the different estimates, assumptions, and methodologies applied by other companies in calculating their respective pay ratios. Neither the Compensation Committee nor management of the Company uses the pay ratio measure in making compensation decisions.
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control The following table provides information concerning the estimated payments and benefits to which each current NEO would be entitled under the applicable agreement assuming that the triggering event took place on May 31, 2023. There can be no assurance that a triggering event would produce the same or similar results as those estimated below if such event occurs on any other date or at any other price, of if any other assumption used to estimate potential payments and benefits is not correct. Due to the number of factors that affect the nature and amount of any potential payments or benefits, any actual payments and benefits may be different.
Potential Payments Upon Termination or Change of Control
| | Base salary | | Bonus | Equity Awards | Benefits | Total | | | Severance Period (months) | Amount of base pay | Value | Value Unvested Estimates (Max)(1) | COBRA/ Equivalent months | Total | | Irwin Simon | | | | | | | | Termination Without Cause | 18 | $2,728,500 | $5,457,000 | 8,302,128 | 21,136 | $16,508,764 | | Change of Control | 30 | $4,547,500 | $9,095,000 | 8,302,128 | 21,136 | $21,965,764 | | Carl Merton(2) | | | | | | | | Termination Without Cause | 12 | $375,358 | $375,358 | 1,140,602 | — | $1,887,317 | | Change of Control | 24 | $746,715 | $746,715 | 1,140,602 | — | $2,634,033 | | Denise Faltischek | | | | | | | | Termination Without Cause | 12 | $550,000 | $550,000 | 1,238,576 | 14,091 | $2,352,666 | | Change of Control | 24 | $1,100,000 | $1,100,000 | 1,238,576 | 14,091 | $3,452,666 | | Roger Savell | | | | | | | | Termination Without Cause | 12 | $500,000 | $500,000 | $1,244,180 | 8,940 | $2,253,120 | | Change of Control | 24 | $1,000,000 | $1,000,000 | $1,244,180 | 8,940 | $3,253,120 | | Mitchell Gendel | | | | | | | | Termination Without Cause | 12 | $510,000 | $510,000 | 1,154,374 | 11,338 | $2,185,712 | | Change of Control | 24 | $1,020,000 | $1,020,000 | 1,154,374 | 11,338 | $3,205,712 |
Potential Payments Upon Termination or Change of Control
| (1) For all NEOs, the value of equity award acceleration of vesting is based on the closing stock price of $1.67 per share of our common stock as reported on the Nasdaq Global Select Market on May 31, 2023, and based on a 100% target vesting. |
Potential Payments Upon Termination or Change of Control
| (2) The amounts shown for Mr. Merton are converted into USD with an exchange rate of $0.7346 (USD) to $1.0000 (CAD). |
Potential Payments Upon Termination or Change of Control
| (3) COBRA calculations are based on current employer paid benefits as of May 31, 2023, for medical and dental coverage and based on family status. |
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between “compensation actually paid” to our PEO and to our other non-PEOs and certain financial performance of the Company. Compensation actually paid, as determined under SEC requirements, does not reflect the actual amount of compensation earned by or paid to our executive officers during a covered year. For further information concerning the Company’s pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to the Compensation Discussion and Analysis. Fair value amounts below are computed in a manner consistent with the fair value methodology used to account for share-based payments in our financial statements under generally accepted accounting principles. For time-based RSU awards, fair value is calculated using the closing price on applicable year-end dates or, in the case of vesting dates, the actual vesting price. For PSU awards, the same valuation methodology as RSU awards is used to calculate fair value except year-end and vesting date values are multiplied by the probability of achievement as of each such date. The estimated probability of achievement of the PSUs was 100% for the Synergy PSUs and HEXO PSUs and 0% for the stock price appreciation PSUs at applicable year-end. Total shareholder return has been calculated in a manner consistent with Item 402(v) of Regulation S-K.
PAY VERSUS PERFORMANCE
| | Current PEO(2) | | Prior PEO(2) | | Average of Non-PEO NEOs(3) | | Value of $100 Initial Investment Based On: | | Net Income (Loss)(10) ($000) | Adjusted EBITDA(11) ($000) | | Fiscal Year(1) | SCT Total Compensation(4) | Compensation Actually Paid(5) | SCT Total Compensation(4) | Compensation Actually Paid(6) | SCT Total Compensation(4) | Compensation Actually Paid(7) | Cumulative TSR(8) | Peer Group TSR(9) | | | | 2023 | $15,656,584 | $6,053,926 | $0 | $0 | $2,340,413 | $963,478 | $10.68 | $25.91 | -$1,443,000 | $61,479 | | 2022 | $19,456,767 | $5,599,894 | $0 | $0 | $2,755,870 | $957,950 | $26.56 | $47.89 | -$434,132 | $48,047 | | 2021 | $13,683,998 | $16,536,484 | $6,458,729 | $7,535,144 | $2,208,882 | $3,475,621 | $97.31 | $120.91 | -$336,014 | $40,771 | | 2020 | $0 | $0 | $1,907,812 | $7,205,882 | $1,394,132 | $431,435 | $48.22 | $90.06 | -$271,073 | -$30,283 |
PAY VERSUS PERFORMANCE
| (1) In accordance with the transitional relief under the SEC rules, only three fiscal years of information is required as this is the Company’s first fiscal year of disclosure under Item 402(v) of Regulation S-K. Fiscal year 2021 was a five-month transition period (January 1, 2021 to May 31, 2021) due to the change in the Company’s fiscal year-end. For 2020, the reportable year was January 1, 2020 to December 31, 2020. |
PAY VERSUS PERFORMANCE
| (2) In fiscal year 2021, the PEOs included Irwin Simon (Current PEO) and Brendan Kennedy (Prior PEO). Mr. Simon served as the Company’s PEO for fiscal year 2022 and 2023. Mr. Kennedy served as the Company’s PEO in fiscal year 2020. |
PAY VERSUS PERFORMANCE
| (3) The non-PEO NEOs for the applicable fiscal years were as follows: |
PAY VERSUS PERFORMANCE
2023: Carl Merton (CFO), Denise Faltischek (Head of International and Chief Strategy Officer), Roger Savell (Chief Administrative Officer), and Mitchell Gendel (Global General Counsel and Corporate Secretary 2022: Carl Merton (CFO), Denise Faltischek (Head of International and Chief Strategy Officer), James Meiers (Head of Canada), and Mitchell Gendel (Global General Counsel and Corporate Secretary 2021: Carl Merton (CFO), Denise Faltischek (Head of International and Chief Strategy Officer), James Meiers (Head of Canada), Michael Krutech (Former CFO), Jon Levin (Former COO), and Andrew Pucher (Former Chief Corporate Development Officer) 2020: Michael Kruteck (Former CFO), Jon Levin (Former COO), Mark Castaneda (Former CFO & Treasurer), Edward Wood Pastorius, Jr. (Former Chief Revenue Officer), Andrew Pucher (Former Chief Corporate Development Officer), and Kathryn Dickson (President, Manitoba Harvest USA, LLC).
PAY VERSUS PERFORMANCE
| (4) The values in this column reflect the “Total” compensation set forth in the Summary Compensation Table (“SCT”) as stated in the Company’s past proxy filings for the corresponding fiscal year. See the footnotes to the applicable SCT for further detail regarding the amounts in this column. |
PAY VERSUS PERFORMANCE
| (5) The following table sets forth the adjustments made during each fiscal year presented in the Pay Versus Performance Table to arrive at compensation “actually paid” to our Current PEO during 2021, 2022, and 2023: |
PAY VERSUS PERFORMANCE
| Adjustments to Determine Compensation “Actually Paid” for Current PEO | Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Column in the SCT | Increase for Fair Value of Awards Granted during the year that Remain Unvested as of Year End | Increase for Fair Value of Awards Granted during the year that Vest during year | Increase/deduction for Change in Fair Value from prior Year-end to current Year-end of Awards Granted Prior to year that were Outstanding and Unvested as of Year-end | Increase/deduction for Change in Fair Value from Prior Year-end to Vesting Date of Awards Granted Prior to year that Vested during year | Deduction of Fair Value of Awards Granted Prior to year that were Forfeited or Modified during year | Dollar Value of Dividends or other Earnings Paid on Stock Awards prior to Vesting Date not otherwise included in Total Compensation | Total Adjustments | | 2023 | $9,249,999 | $4,363,700 | $0 | ($4,328,895) | ($387,465) | $0 | $0 | ($9,602,659) | | 2022 | $17,599,962 | $6,142,756 | $0 | $0 | ($2,399,666) | $0 | $0 | ($13,856,872) | | 2021 | $0 | $0 | $0 | $0 | $2,852,486 | $0 | $0 | $2,852,486 |
PAY VERSUS PERFORMANCE
| (6) The following table sets forth the adjustments made during each fiscal year presented in the Pay Versus Performance Table to arrive at compensation “actually paid” to our Prior PEO during fiscal years 2020 and 2021: |
PAY VERSUS PERFORMANCE
| Adjustments to Determine Compensation “Actually Paid” for Current PEO | Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Column in the SCT | Increase for Fair Value of Awards Granted during the year that Remain Unvested as of Year End | Increase for Fair Value of Awards Granted during the year that Vest during year | Increase/deduction for Change in Fair Value from prior Year-end to current Year-end of Awards Granted Prior to year that were Outstanding and Unvested as of Year-end | Increase/deduction for Change in Fair Value from Prior Year-end to Vesting Date of Awards Granted Prior to year that Vested during year | Deduction of Fair Value of Awards Granted Prior to year that were Forfeited or Modified during year | Dollar Value of Dividends or other Earnings Paid on Stock Awards prior to Vesting Date not otherwise included in Total Compensation | Total Adjustments | | 2021 | $0 | $0 | $0 | $0 | 1,076,415 | $0 | $0 | $1,076,415 | | 2020 | ($934,401) | $916,645 | $0 | ($4,086,941) | ($5,008,998) | $0 | $0 | ($9,113,695) |
PAY VERSUS PERFORMANCE
| (7) The following table sets forth the adjustments made during each fiscal year presented in the Pay Versus Performance Table to arrive at the average compensation “actually paid” to our Non-PEO NEOs during each of the reportable years: |
PAY VERSUS PERFORMANCE
| Adjustments to Determine Compensation “Actually Paid” for Current PEO | Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Column in the SCT | Increase for Fair Value of Awards Granted during the year that Remain Unvested as of Year End | Increase for Fair Value of Awards Granted during the year that Vest during year | Increase/deduction for Change in Fair Value from prior Year-end to current Year-end of Awards Granted Prior to year that were Outstanding and Unvested as of Year-end | Increase/deduction for Change in Fair Value from Prior Year-end to Vesting Date of Awards Granted Prior to year that Vested during year | Deduction of Fair Value of Awards Granted Prior to year that were Forfeited or Modified during year | Dollar Value of Dividends or other Earnings Paid on Stock Awards prior to Vesting Date not otherwise included in Total Compensation | Total Adjustments | | 2023 | ($1,270,317) | $599,274 | $0 | ($629,633) | ($76,258) | $0 | $0 | ($1,376,934) | | 2022 | ($2,294,777) | $752,084 | $0 | $0 | ($255,227) | $0 | $0 | ($1,797,920) | | 2021 | $0 | $0 | $0 | $0 | $1,266,739 | $0 | $0 | $1,266,739 | | 2020 | ($950,676) | $878,066 | $0 | ($204,937) | ($685,150) | $0 | $0 | ($962,697) |
PAY VERSUS PERFORMANCE
| (8) Total shareholder return is calculated for each fiscal year based on a fixed investment of $100 from the day before the beginning of the earliest period reported in the table (December 31, 2019) through the end of each applicable year, assuming reinvestment of dividends. |
PAY VERSUS PERFORMANCE
| (9) Horizons Marijuana Life Sciences Index is the peer group index selected by the Company for this purpose and for purposes of the Stock Performance Graph in our Annual Report. |
PAY VERSUS PERFORMANCE
| (10) The dollar amounts reported represents the amount of net income (loss) reflected in the Company's audited financial statements for the applicable year or period. |
PAY VERSUS PERFORMANCE
| (11) The Company has identified Adjusted EBITDA as the Company-selected measure for this pay versus performance disclosure, as it represents the most significant financial performance measure used to link compensation actually paid to the PEOs and Non-PEO NEOs to the Company's performance in fiscal year 2023. |