Canopy Growth Corp 8-K, filed Jun 17, 2022
Canopy Growth Corp (CGC)
About this 8-K
Canopy Growth Corp filed this 8-K on June 17, 2022, reporting on events of June 14, 2022.
Items reported
- Item 5.02: Director or officer change, or executive pay
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
As of June 14, 2022, the board of directors (the “Board”) of Canopy Growth Corporation (“Canopy” or the “Company”), upon the recommendation of its Corporate Governance, Compensation and Nominating Committee (“CGCN Committee”), took the following actions with regard to certain compensatory arrangements for certain of the Company’s senior management personnel, including the Company’s Chief Executive Officer, Chief Financial Officer and Chief Commercial Officer (the “named executive officers”). All dollar amounts shown are in U.S. dollars, except the exercise price of the stock options granted on June 14, 2022, which is expressed in Canadian dollars.
Short-Term Incentive Program
The Board approved its short-term incentive (“STI”) program for fiscal year 2023, which provides an annual cash incentive to the Company’s executive leadership team, including the named executive officers, based on performance relative to defined financial and individual objectives. The STI program is a leveraged bonus design, where executives may earn between 0% and 200% of the target bonus opportunity, which is defined as a percentage of base salary for each executive. Per the STI program, performance is assessed based on predetermined criteria established and approved by the Board. The STI program measures financial performance based on the following weighted factors for executive officers: 20% free cash flow, 35% revenue and 35% adjusted Earnings before Interest, Tax, Depreciation, and Amortization (“Adjusted EBITDA”), in addition to a 10% weighting of non-financial performance metrics related to the achievement of defined leadership objectives.
Long-Term Incentive Program
With input from the CGCN Committee’s external compensation consultant, Hugessen Consulting Inc., the CGCN Committee recommended and the Board approved the Company’s long-term incentive (“LTI”) program for fiscal year 2023, which provides the Company’s executive leadership team, including the named executive officers, annual long-term share-based equity awards through the Company’s Amended and Restated Omnibus Incentive Plan (the “Omnibus Incentive Plan”). The LTI program includes 50% stock options (“Options”) and 50% performance share units (“PSUs”).
Stock Option Grants
The Board granted Options to purchase Canopy’s common shares (“Common Shares”) on June 14, 2022 under the Omnibus Incentive Plan to certain of the Company’s management personnel, including its executive officers, subject to Canopy’s Option Grant Agreement with respect to the Omnibus Incentive Plan. The form of Option Grant Agreement is filed as Exhibit 10.1 hereto (the “Option Grant Agreement”). The following table sets forth information regarding grants to the named executive officers identified below:
| Name | Number of Stock Options |
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| David Klein Chief Executive Officer |
997,876 | |||
| Judy Hong Chief Financial Officer |
303,201 | |||
| Julious Grant Chief Commercial Officer |
407,594 | |||
Each of the options granted has a six-year term, subject to earlier termination upon the occurrence of certain events related to termination of employment, as specified in the Options Grant Agreement. One-third of the options become exercisable on each of the first, second and third anniversaries of the date of grant, subject to the terms of the Option Grant Agreement. The options will continue to vest upon the Retirement (as that term is defined in the Option Grant Agreement) of the recipient at any time after December 14, 2022 and prior to June 14, 2025, and will vest 30 days after the recipient’s service with Canopy terminates due to the recipient’s death or Disability (as that term is defined in the Option Grant Agreement). The exercise price of each option is CAD$4.84, which is equal to the five-day volume-weighted average price of the Common Shares on the Toronto Stock Exchange for the five trading days prior to the grant date of June 14, 2022.
The foregoing discussion of the Option Grant Agreement is qualified in its entirety by reference to the Option Grant Agreement, which is incorporated herein by reference.
Performance Share Unit Grants
The number of PSUs issued will be based on two metrics: Relative Total Shareholder Return (“RTSR”) against a custom group of cannabis industry peers approved by the Board and Adjusted EBITDA performance against predetermined targets established and recommended by the CGCN Committee and approved by the Board (as set forth below), with each weighted at 50%. The performance periods for each metric will consist of three one-year periods (fiscal year 2023, fiscal year 2024 and fiscal year 2025) and a three-year cumulative period beginning on April 1, 2022 and ending on March 31, 2025, each measured independently of one another. The PSUs will cliff vest after three years from the date of grant and the number of units vesting will vary based on performance over the defined performance periods relative to Board-approved performance targets. The following table sets forth information regarding target awards to the named executive officers identified below:
| Name | Target Number of PSUs |
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| David Klein Chief Executive Officer |
498,938 | |||
| Judy Hong Chief Financial Officer |
151,600 | |||
| Julious Grant Chief Commercial Officer |
203,797 | |||
Pursuant to the terms of the PSUs, for each of the persons in the table above, the minimum PSU award is equal to 50% of the target number of PSUs, and the maximum PSU award is 150% of the target number of PSUs. Unvested PSUs are subject to forfeiture upon the occurrence of certain events related to termination of employment, as specified in the applicable award agreement. A participant may vest in his right to receive the applicable number of PSUs if the participant remains in continuous employment with the Company or any of its subsidiaries until June 14, 2025. In the event a U.S. resident recipient of PSUs retires (as the term “Retirement” is defined in the applicable award agreement) at any time after December 14, 2022 and prior to June 14, 2025, vested awards are payable on a pro rata basis (as set forth in the applicable award agreement). For U.S. residents, PSUs will vest 30 days after the recipient’s service with Canopy terminates due to the recipient’s death or Disability (as that term is defined in the applicable award agreement), subject to the terms of the applicable award agreement.
Amendment to Employment Agreement and Service Delivery Agreement
As of June 14, 2022, the Board amended the employment agreement of Mr. Klein and the service delivery agreement of Mr. Grant (the “Agreement Amendments”) as follows.
David Klein
Mr. Klein’s employment agreement was amended to increase the percentage of his LTI award from 350% of his base salary to 400% of his base salary.
Julious Grant
Mr. Grant’s service delivery agreement was amended to increase his monthly fee to $44,250 per month.
The foregoing discussion of the Agreement Amendments is qualified in its entirety by reference to the Agreement Amendments, which are filed as Exhibits 10.2 and 10.3 hereto and are incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
| Exhibit No. |
Description | |
| 10.1 | Option Grant Agreement (U.S. and Canadian Employees) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 14, 2021). | |
| 10.2 | Amendment to Executive Employment Agreement of David Klein, dated June 14, 2022. | |
| 10.3 | Amendment to Service Delivery Agreement, by and among Canopy Growth USA LLC, Brand House Group, N.A. Corporation and Julious Grant, dated June 14, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CANOPY GROWTH CORPORATION | ||
| By: | /s/ Judy Hong | |
| Judy Hong | ||
| Chief Financial Officer | ||
Date: June 17, 2022
Exhibit 10.2
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1 Hershey Drive Smith Falls, ON K7A 0A8
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(855)558-9333
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invest@canopygrowth.com
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www.canopygrowth.com | |||
June 14, 2022
David Klein
BY EMAIL
Dear David:
The Board of Directors of Canopy Growth Corporation (the “Company”) is pleased to confirm the following increases to your compensation and corresponding changes to the terms of your employment agreement dated December 8, 2019 (the “Agreement”), as amended by an Amending Agreement dated June 8, 2021 (the “Amending Agreement), which compensation increases and Agreement changes are conditional upon you signing and returning this letter to my attention by June 16, 2022:
Long Term Incentive
Paragraph 2 of the Amending Agreement will be replaced with the following:
You will be eligible to participate in Canopy Growth’s Amended and Restated Omnibus Incentive Plan, as approved by the Board and as amended from time to time (the “Incentive Plan”).
Not less than once every fiscal year, you will be eligible to receive a long-term incentive (“LTI”) award of 400% your Base Salary, which utilizes the Fair Market Value share price (as defined in the Incentive Plan) (“FMV price”) on the grant date. The award may be composed of one or more of the following: stock options (“Options”), restricted stock units (“RSUs”), performance share units (“PSUs”), and/or other form of equity authorized by the Incentive Plan to be awarded. The ratio of the various forms of equity (meaning the percentage of the award provided as, for example, Options versus RSUs) shall be in the complete discretion of the Board and may vary from award to award.
All such awards shall vest in accordance with the terms of the Incentive Plan unless modified by either (x) the terms of this Agreement; or (y) the terms of the individual award.
Canopy Growth Corporation would like to take this opportunity to thank-you for your past, present and future contributions!
Regards,
Holly Lukavsky
Chief Human Resources Officer
At the direction of the Board of Directors
I acknowledge that I have read, understand and agree to the amended terms of employment set out above.
Dated this 16th day of June, 2022.
| /s/ David Klein |
| Signature (David Klein) |
1 Hershey Drive • Smiths Falls ON • K7A 0A8 • +1.613.706-2185 • www.tweed.com
Exhibit 10.3
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1 Hershey Drive Smith Falls, ON K7A 0A8
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(855)558-9333
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invest@canopygrowth.com
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www.canopygrowth.com | |||
June 14, 2022
Brand House Group, N.A. Corporation
Attention: Julious Grant
BY EMAIL
Dear Julious:
Canopy Growth USA, LLC (the “Company”) is pleased to confirm the following changes to the Monthly Fee set out in the Service Delivery Agreement dated October 5, 2020 as amended October 28, 2020 (the “Agreement”), as further amended by an Amending Agreement dated June 8, 2021 (the “Amending Agreement), which Monthly Fee change is conditional upon the Principal signing and returning this letter to my attention by June 16, 2022:
Monthly Fee
The Monthly Fee shall be increased to $44,250 USD per month, exclusive of all applicable taxation.
Please note that except as expressly changed within this letter, all other terms of the Agreement, as amended by the Amending Agreement, remain intact.
Regards,
Holly Lukavsky
Chief Human Resources Officer
I acknowledge that I have read, understand and agree to the amended terms of service as set out above.
Dated this 15th day of June, 2022.
| /s/ Julious Grant |
Signature (Julious Grant, on behalf of Brand House Group, N.A. Corporation)
1 Hershey Drive • Smiths Falls ON • K7A 0A8 • +1.613.706-2185 • www.tweed.com