Nominating, Corporate Governance and Compensation Committee Charter
(As Confirmed May 3, 2016)
There shall be a committee of the Board of Directors (the “Board”) of Rare Element Resources Ltd., a British Columbia corporation (“Rare Element” or the “Company”), to be known as the Nominating, Corporate Governance and Compensation Committee (the “Committee”), whose membership, authority and responsibilities shall be as set out in this Charter.
PRIMARY FUNCTION
The primary function of the Committee is to (a) assist the Board in discharging its obligations under corporate governance legislation and best practices for (i) board and committee composition and performance, (ii) President and Chief Executive Officer (“CEO”) recruitment and succession planning, and (iii) compliance generally with corporate governance regulations and guidelines; and (b) assist the Board in establishing, administering and evaluating the compensation principles, criteria, policies and plans for Rare Element’s executive officers (including the President and CEO), and interfacing with senior management regarding the compensation of employees (the Committee’s “Purpose”).
MEMBERSHIP
Following each annual meeting of the shareholders of Rare Element, the Board shall elect no fewer than three directors (the “Members”) to the Committee and shall appoint one of the Members to chair the Committee. Each Member shall meet the independence requirements imposed by applicable law. Each Member must also qualify as a “non-employee director” for the purposes of Rule 16b-3 under the Securities and Exchange Act of 1934, as amended, and satisfy the requirements of an “outside director” for purposes of Section 162(m) of the U.S. Internal Revenue Code.
The Committee may form and delegate authority to subcommittees when and where appropriate.
Any Member may be removed from office or replaced at any time by the Board and shall cease to be a Member upon ceasing to be a director. Each Member shall hold office until the close of the next annual meeting of shareholders of Rare Element or until the Member ceases to be a director, resigns or is removed or replaced, whichever first occurs.
MEETINGS
The Committee shall meet as frequently as is necessary to carry out its responsibilities, but at least twice annually at such times and location determined by the Committee chairman. The Committee is governed by the rules regarding meetings (including meetings by conference telephone or similar communications equipment), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board.
The Committee is authorized and empowered to adopt its own rules of procedure in furtherance of its Purpose that are not inconsistent with (a) any provision of this Charter, (b) any provision of the incorporating organizational documents of Rare Element, or (c) applicable law.
In the absence of the Committee chairman from any meeting, the Members shall elect a chair from those in attendance to act as chair of that meeting.
The Committee chairman shall appoint a secretary for each meeting of the Committee and shall maintain minutes of all meetings and deliberations of the Committee.
REPORTING
Following each meeting of the Committee, the Committee chairman shall report to the Board issues before the Committee and actions taken by the Committee.
RESPONSIBILITIES, DUTIES AND POWERS
The responsibilities, duties and powers of the Committee in furtherance of its Purpose shall include the following:
Nominating and Corporate Governance Related Matters
- Recommend the size, composition and required capabilities of the Board to meet the needs of Rare Element;
- Lead the search for, screen, evaluate and recommend to the Board qualified candidates or nominees for election or appointment as directors, consistent with criteria approved by the Board;
- In addition to independence, the general factors to be considered in evaluating a prospective candidate to the Board should include:
- competencies and skills that the Board considers to be necessary for the Board, as a whole, to possess;
- competencies and skills that the Board considers each existing director to possess;
- business or other relevant experience of the nominee;
- expertise, competencies, skills and knowledge that the nominee will bring to the board;
- contacts in the communities in which the Company does business and in the Company’s industry or other industries relevant to the Company’s business;
- personal qualities and characteristics, accomplishments;
- integrity and reputation in the business community;
- the extent to which the candidate will enhance the objective of having directors with diverse viewpoints;
- backgrounds, experience, expertise, skills and other demographics;
- ability to represent Rare Element’s shareholders and be committed to enhancing long-term shareholder value;
- willingness and ability to commit sufficient time to Board and committee duties and responsibilities; and
- qualifications to serve on specialized Board committees, such as the Audit Committee or the Nominating, Corporate Governance and Compensation Committee.
- Establish and oversee a policy for considering shareholder nominees for directors, and develop the procedures that must be followed by shareholders in submitting recommendations;
- Recommend the slate of nominee directors for presentation to each annual shareholders’ meeting, having first evaluated their performance as directors, where applicable;
- Recommend and secure Board approval for director appointments to fill Board vacancies between annual meetings prior to extending any specific invitations to serve;
- Review periodically the overall succession planning for the chairman of the Board and, when appropriate, recommend to the Board the process for selecting the chairman of the Board;
- Identify and recommend to the Board recruitment, nominations and selection of any new CEO or other senior officer or those to be considered to serve as a director, and ensure that a CEO succession plan is in place, including the establishment of a succession subcommittee if desired;
- Annually evaluate and report to the Board:
- the overall performance of the Board (after obtaining comments from all directors);
- the requisite skills and characteristics of new Board members as well as the composition of the Board as a whole;
- the mandates, performance and composition of the committees of the Board (including the Committee);
- the relationship between the Board and management; and
- the performance of management in terms of corporate governance.
- Oversee issues of corporate governance as they apply to Rare Element and review annually Rare Element’s compliance with applicable corporate governance regulations and guidelines and consider whether any changes to the systems, policies and procedures in place to achieve compliance should be recommended to the Board for adoption;
- Annually review and report to the Board on business activities of each Board member including their employment or service to any other companies to assure that potential conflicts are clearly understood or avoided. These include:
- the relationships, if any, between each of the directors and Rare Element and its management; and
- any involvements of any of the directors (including membership on other boards of directors) which constitute, or may result in, a conflict of interest;
- Review, at least annually, the Committee’s duties, responsibilities and performance and determine if any changes in practices of the Committee or amendments to this Charter are necessary.
- The Committee shall have the sole authority to retain any search firm to be used to identify director candidates and shall have sole authority to approve the search firm’s fees and other retention terms. The Committee shall also have authority to obtain advice and assistance from internal or external legal, accounting or other advisors that it determines to be necessary to carry out its duties.
- Undertake such additional responsibilities as from time to time may be delegated to the Committee by the Board, required by Rare Element’s organizational documents, or required by applicable law.
Compensation Related Matters
- The Committee shall review and approve the overall compensation philosophy of the Company.
- The Committee shall review and approve annually, or more frequently as required, the corporate goals and objectives relevant to CEO and other executive officers in establishing performance based compensation.
- Based upon an annual evaluation of the CEO’s performance, the Committee shall evaluate the performance of the CEO and, based upon such evaluation, the Committee shall approve, together with the other independent directors of the Board, the compensation of the CEO (including base salary, incentive compensation and equity-based awards). In making its determination as to CEO compensation, the Committee shall consider, among other factors it deems appropriate, Rare Element’s performance and relative shareholder return, the compensation of chief executive officers at comparable or peer companies, the awards given to the CEO in past years, the nature, extent and acceptability of risks that the CEO may be encouraged to take by any incentive compensation, and such other factors as the Committee deems relevant. The CEO shall not be present during voting or deliberations about the CEO’s compensation.
- The Committee shall approve the compensation (including base salary, incentive compensation, bonuses and equity-based awards) of all executive officers of Rare Element. The Committee shall take into account the recommendations of the CEO as to executive compensation, the nature, extent and acceptability of risks that the officer may be encouraged to take by any incentive compensation, each individual’s performance and achievement of predetermined goals, any outstanding and special achievements, Rare Element’s overall performance and comparable compensation paid to similarly-situated officers in comparable or peer companies.
- The Committee shall review and approve all employment agreements, severance arrangements, retirement arrangements, change in control agreements and provisions, and any special or supplemental benefits for each executive officer of Rare Element, subject to approval by the Board.
- The Committee shall review and make recommendations to the Board with respect to the compensation to be paid to non-executive Board members, committee members and committee chairpersons.
- The Committee shall administer and make recommendations to the Board as required concerning Rare Element’s incentive-compensation plans and equity-based plans.
- The Committee shall oversee the risk profile of the Company’s compensation programs and periodically review the incentives and material risks arising from or related to the Company’s compensation programs.
- The Committee shall assess the results of the Company’s most recent advisory vote on executive compensation.
- The Committee shall review and discuss the Compensation Discussion and Analysis (CD&A) section proposed for inclusion in the Company’s annual proxy circular with management and recommend to the Board whether such section should be so included in accordance with all applicable rules and regulations. The Committee will prepare or approve an annual report on executive compensation for inclusion in Rare Element’s proxy circular as required by applicable rules and regulations.
- The Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser (collectively, “Compensation Consultant”) to advise the Committee. If the Committee does retain or obtain the advice of a Compensation Consultant, the Committee shall be directly responsible for the appointment, termination, compensation and oversight of the work of any such Compensation Consultant. The Company must provide for appropriate funding, as determined by the Committee, for payment of reasonable compensation to a Compensation Consultant.
- The Committee may select a Compensation Consultant only after taking into consideration all relevant factors with respect to such Compensation Consultant’s independence, including the following:
- The provision of other services to the Company by the person that employs the Compensation Consultant;
- The amount of fees received from the Company by the person that employs the Compensation Consultant, as a percentage of the total revenue of the person that employs the Compensation Consultant;
- The policies and procedures of the person that employs the Compensation Consultant that are designed to prevent conflicts of interest;
- Any business or personal relationship of the Compensation Consultant with a member of the Committee;
- Any shares of the Company owned by the Compensation Consultant; and
- Any business or personal relationship of the Compensation Consultant or the person employing the Compensation Consultant with an executive officer of the Company.
- The Committee shall review and make recommendations to the Board with respect to directors’ and officers’ indemnification and insurance matters.
Reporting and Review Procedures:
- In the performance of any of its duties and responsibilities, the Committee shall have access to any and all books and records of Rare Element necessary for the execution of the Committee’s obligations and may request from the officers of Rare Element such records and other matters considered appropriate.
- The Committee shall have the power and authority to conduct or authorize studies and investigations into any matter of interest or concern within the scope of its responsibilities that the Committee deems appropriate and have the sole authority to retain independent counsel, consultants or other experts to assist in the conduct of any such study or investigation, including the authority to approve fees payable to such experts and any other terms of retention.
- Review, at least annually, the Committee’s duties, responsibilities and performance and determine if any changes in practices of the Committee or amendments to this Charter are desired or necessary.
- Undertake such additional responsibilities as from time to time may be delegated to the Committee by the Board, required by Rare Element’s incorporation documents or bylaws, or required by applicable law.