Exhibit 99.1

 

NORTH AMERICAN CONSTRUCTION GROUP LTD.

NOTICE OF ANNUAL AND SPECIAL MEETING AND

MANAGEMENT INFORMATION CIRCULAR

 

 

ANNUAL AND SPECIAL MEETING OF

SHAREHOLDERS TO BE HELD ON MAY 5, 2021

 

 

March 23, 2021

NORTH AMERICAN CONSTRUCTION GROUP LTD.

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 5, 2021

NOTICE IS HEREBY GIVEN that the annual and special meeting of holders of voting common shares (the “NACG Shareholders”) of North American Construction Group Ltd. (the “Corporation”) will be held at the head office of the Corporation at 27287 – 100 Avenue, Acheson, Alberta on the 5th day of May, 2021, at 3:00 p.m. (Mountain Time) (the “Meeting”), for the following purposes:

 

•

to receive the audited comparative consolidated financial statements of the Corporation for the year ended December 31, 2020 and the auditor’s report thereon;

 

•

to elect the directors of the Corporation for the ensuing year;

 

•

to consider and, if deemed advisable, approve the advisory resolution to accept the approach to executive compensation disclosed herein;

 

•

to consider, and if appropriate, approve the unallocated options under the Share Option Plan established by the Corporation;

 

•

to reappoint the auditors of the Corporation for the ensuing year and to authorize the directors to fix the remuneration of the auditors; and

 

•

to transact such other business as may properly come before the Meeting or any adjournments thereof.

The specific details of the foregoing matters to be put before the Meeting are set forth in the management information circular (the “Circular”). Capitalized terms used in this notice of annual and special meeting and not otherwise defined herein shall have the meanings ascribed to such terms in the Circular.

The Circular and a form of proxy accompany this notice.

NACG Shareholders who are unable to attend the Meeting are requested to complete, sign, date and return the enclosed form of proxy in accordance with the instructions set out in the form of proxy and in the Circular accompanying this notice. A proxy will not be valid unless it is deposited with our transfer agent Computershare Investor Services Inc., (i) by mail using the enclosed return envelope or one addressed to Computershare Investor Services Inc., Proxy Department, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1, or (ii) by hand delivery to Computershare Investor Services Inc., Proxy Department, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1. Alternatively, you may vote electronically by telephone (1-866-732-8683) or internet (www.investorvote.com) by following the instructions on the enclosed form of proxy. Your proxy or voting instructions must be received in each case no later than 3:00 p.m. (Mountain Time), on May 3, 2021 and if the Meeting is adjourned, no later than 48 hours (excluding Saturdays and holidays) prior to the commencement of any adjournment thereof.

DATED at Acheson, Alberta, this 23rd day of March, 2021.

 

Table of Contents

MANAGEMENT INFORMATION CIRCULAR

 

Solicitation of Proxies			1
Record Date			1
Appointment of Proxyholders			1
Voting of Proxies			2
Revocability of Proxy			2
Advice to Beneficial Holders of Common Shares			2
Notice to United States Shareholders			3
Voting Shares and Principal Holders Thereof			3
Quorum			3
Presentation of Financial Statements			4
Business to be Transacted at the Meeting			4
Compensation Discussion and Analysis			16
2020 Named Executive Officers			16
Executive Compensation Philosophy			16
Components of 2020 Executive Compensation			17
Core Comparator Group			22
2020 Compensation Decisions Regarding NEOs			24
Performance Graph and Table			34
Trends Between NEO Compensation and Total Shareholder Return			35
Human Resources & Compensation Committee Composition			36
Compensation Governance			36
Risk Management			37
Summary of 2020 HRCC Actions			38
Independent Advice			39
Summary Compensation Table			40
Incentive Plan Awards			40
Termination and Change of Control Benefits			43
Board of Directors Compensation			47
Director Compensation Table			47
Incentive Plan Awards - Value Vested or Earned During the Year			49
Corporate Governance			50
Indebtedness of Directors and Officers			56
Interest of Informed Persons in Material Transactions			56
Additional Information			57
General			57
Approval of Proxy Circular			57
Schedule A - Resolution Approving Unallocated Options Under the Share Option Plan			58
Schedule B - Corporate Governance Policy and Board Mandate			59
Appendix A: Responsibilities of Directors			64
Appendix B: Board Chair - Position Description			65
Appendix C: Committee Chair - Position Description			67
Appendix D: Lead Director - Position Description			68

SOLICITATION OF PROXIES

This management information circular (the “Circular”) and accompanying form of proxy (the “Proxy”) are furnished in connection with the solicitation of proxies by or on behalf of management of North American Construction Group Ltd. (the “Corporation”, “NACG”, “our” or “we”) for use at the annual and special meeting (the “Meeting”) of holders of voting common shares of the Corporation (the “NACG Shareholders”) to be held at the head office of the Corporation at 27287 – 100 Avenue, Acheson, Alberta on the 5th day of May, 2021, at 3:00 p.m. (Mountain Time), and at any adjournments thereof, for the purposes set forth in the accompanying notice of meeting dated March 23, 2021 (the “Notice of Meeting”).

It is expected that the solicitation will be primarily by mail. Proxies may also be solicited personally by officers of the Corporation at nominal cost. The cost of this solicitation will be borne by the Corporation. The Corporation may pay the reasonable costs incurred by persons who are the registered but not beneficial owners of voting shares of the Corporation (such as brokers, dealers, other registrants under applicable securities laws, nominees and/or custodians) in sending or delivering copies of this Circular, the Notice of Meeting and Proxy to the beneficial owners of such shares. The Corporation will provide, without cost to such persons, upon request to the Secretary of the Corporation, additional copies of the foregoing documents required for this purpose.

For the purposes of the Meeting, the Corporation is not: (a) relying on the “notice and access” rules to allow it to make certain proxy-related materials available on the internet rather than mailing such materials directly to registered shareholders and indirectly to non-registered shareholders; or (b) mailing proxy-related materials directly to non-registered shareholders who have not waived the right to receive them. The Corporation intends to pay for “proximate intermediaries” (as defined in National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer) to send proxy-related materials and Form 54-101F7 – Request for Voting Instructions Made by Intermediary to non-registered shareholders who have waived the right to receive them.

The Notice of Meeting, Proxy and this Circular will be mailed to NACG Shareholders commencing on or about April 7, 2021. In this Circular, except where otherwise indicated, all dollar amounts are expressed in Canadian currency.

No person has been authorized by the Corporation to give any information or make any representations in connection with the matters contained herein other than those contained in this Circular and, if given or made, any such information or representation must not be relied upon as having been authorized by the Corporation.

This Circular does not constitute an offer or a solicitation to any person in any jurisdiction in which such offer or solicitation is unlawful.

RECORD DATE

The record date (the “Record Date”) for determining which NACG Shareholders shall be entitled to receive notice of and to vote at the Meeting is March 25, 2021. Only NACG Shareholders of record as of the Record Date are entitled to receive notice of and to vote at the Meeting, unless after the Record Date such shareholder of record transfers its shares and the transferee (the “Transferee”), upon establishing that the Transferee owns such shares, requests in writing at least 10 days prior to the Meeting or any adjournments thereof that the Transferee may have his, her or its name included on the list of NACG Shareholders entitled to vote at the Meeting, in which case the Transferee is entitled to vote such shares at the Meeting. Such written request by the Transferee shall be filed with Computershare Investor Services Inc., 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1, together with a copy to the Secretary of the Corporation at 27287 – 100 Avenue, Acheson, Alberta, T7X 6H8.

Under normal conditions, confidentiality of voting is maintained by virtue of the fact that the Corporation’s transfer agent tabulates proxies and votes. However, such confidentiality may be lost as to any proxy or ballot if a question arises as to its validity or revocation or any other like matter. Loss of confidentiality may also occur if the Board of Directors decides that disclosure is in the interest of the Corporation or its shareholders.

APPOINTMENT OF PROXYHOLDERS

The persons named in the accompanying Proxy as proxyholders are representatives of management of NACG. Every NACG Shareholder has the right to appoint a person or company to represent them at the Meeting other than the persons named in the accompanying Proxy. A NACG Shareholder desiring to appoint some other person (who need not be a shareholder of NACG) to represent him, her or it at the Meeting, may do so either by striking out the printed names and inserting the desired person’s name in the blank space

 

Management Information Circular
March 23, 2021		1		North American Construction Group Ltd.

provided in the Proxy or by completing another proper proxy and, in either case, delivering the completed proxy to our transfer agent Computershare Investor Services Inc., (i) by mail using the enclosed return envelope or one addressed to Computershare Investor Services Inc., Proxy Department, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1, or (ii) by hand delivery to Computershare Investor Services Inc., 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1. Alternatively, you may vote electronically by telephone (1-866-732-8683) or internet (www.investorvote.com) by following the instructions on the enclosed form of proxy. Your proxy or voting instructions must be received in each case no later than 3:00 p.m. (Mountain Time), on May 3, 2021 and if the Meeting is adjourned, no later than 48 hours (excluding Saturdays and holidays) prior to the commencement of any adjournment thereof. A Proxy must be signed by a NACG Shareholder or its attorney duly authorized in writing or, if a NACG Shareholder is a corporation, by a duly authorized officer, attorney or other authorized signatory of the NACG Shareholder. If a proxy is given by joint shareholders, it must be executed by all such joint shareholders.

VOTING OF PROXIES

If a Proxy is completed, signed and delivered to the Corporation in the manner specified above, the persons named as proxyholders therein shall vote or withhold from voting the shares in respect of which they are appointed as proxyholders at the Meeting, in accordance with the instructions of the NACG Shareholder appointing them, on any show of hands or any ballot that may be called for and, if the NACG Shareholder specifies a choice with respect to any matter to be acted upon at the Meeting, the persons appointed as proxyholders shall vote in accordance with the specification so made. In the absence of such specification, or if the specification is not certain, the shares represented by such Proxy will be voted in favour of the matters to be acted upon as specified in the Notice of Meeting.

A Proxy confers discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the Notice of Meeting and all other matters which may properly come before the Meeting or any adjournments thereof. As of the date of this Circular, the Board of Directors of the Corporation knows of no such amendments, variations or other matters to come before the Meeting, other than matters referred to in the Notice of Meeting. However, if amendments, variations or other matters should properly arise before the Meeting, the Proxy will be voted on such amendments, variations and other matters in accordance with the best judgment of the person or persons voting such Proxy.

REVOCABILITY OF PROXY

Any NACG Shareholder returning an enclosed Proxy may revoke the same at any time insofar as it has not been exercised. In addition to revocation in any other manner permitted by law, a Proxy may be revoked by instrument in writing executed by the NACG Shareholder or by his, her or its attorney authorized in writing or, if the NACG Shareholder is a corporation, by an officer or attorney thereof duly authorized, and deposited at the registered office of the Corporation to the attention of the Secretary of the Corporation, at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, or with the chairperson of the Meeting, prior to the commencement of the Meeting. A NACG Shareholder attending the Meeting has the right to vote in person and, if he, she or it does so, his, her or its proxy is nullified with respect to the matters such person votes upon and any subsequent matters thereafter to be voted upon at the Meeting or any adjournment thereof.

ADVICE TO BENEFICIAL HOLDERS OF COMMON SHARES

The information set forth in this section is of significant importance to many NACG Shareholders, as a substantial number of NACG Shareholders do not hold voting common shares of the Corporation (“NACG Common Shares”) in their own name, and thus are considered non-registered shareholders. NACG Shareholders who do not hold their NACG Common Shares in their own name (“Beneficial Shareholders”) should note that only Proxies deposited by NACG Shareholders whose names appear on the records of the Corporation as the registered holders of NACG Common Shares can be recognized and acted upon at the Meeting. If NACG Common Shares are listed in an account statement provided to a NACG Shareholder by a broker, then, in almost all cases, those NACG Common Shares will not be registered in the NACG Shareholder’s name on the records of the Corporation. Such NACG Common Shares will more likely be registered under the name of the NACG Shareholder’s broker or an agent of that broker or another similar entity (called an “Intermediary”). NACG Common Shares held by an Intermediary can only be voted by the Intermediary (for, withheld or against resolutions) upon the

 

Management Information Circular
March 23, 2021		2		North American Construction Group Ltd.

instructions of the Beneficial Shareholder. Without specific instructions, Intermediaries are prohibited from voting NACG Common Shares.

Beneficial Shareholders should ensure that instructions respecting the voting of their NACG Common Shares are communicated in a timely manner and in accordance with the instructions provided by their Intermediary. Applicable regulatory rules require Intermediaries to seek voting instructions from Beneficial Shareholders in advance of shareholders’ meetings. Every Intermediary has its own mailing procedures and provides its own return instructions to clients, which should be carefully followed by Beneficial Shareholders in order to ensure that their NACG Common Shares are voted at the Meeting.

Although a Beneficial Shareholder may not be recognized directly at the Meeting for the purposes of voting NACG Common Shares registered in the name of their Intermediary, a Beneficial Shareholder may attend at the Meeting as proxyholder for the Intermediary and vote the NACG Common Shares in that capacity. Beneficial Shareholders who wish to attend the Meeting and indirectly vote their NACG Common Shares as a proxyholder, should enter their own names in the blank space on the form of proxy provided to them by their Intermediary and timely return the same to their Intermediary in accordance with the instructions provided by their Intermediary, well in advance of the Meeting.

NOTICE TO UNITED STATES SHAREHOLDERS

The solicitation of proxies by the Corporation is not subject to the requirements of Section 14(a) of the United States Securities Exchange Act of 1934, as amended (the “US Exchange Act”), by virtue of an exemption applicable to proxy solicitations by “foreign private issuers” as defined in Rule 3b-4 under the US Exchange Act. Accordingly, this Circular has been prepared in accordance with the applicable disclosure requirements in Canada. Residents of the United States should be aware that such requirements may be different than those applicable to proxy statements subject to Section 14(a) of the US Exchange Act.

VOTING SHARES AND PRINCIPAL HOLDERS THEREOF

The Corporation’s authorized capital consists of an unlimited number of NACG Common Shares and an unlimited number of non-voting common shares. None of the Corporation’s shares have par value. As at March 15, 2021, there were a total of 29,949,528 NACG Common Shares outstanding and no non-voting common shares outstanding. Each NACG Common Share entitles the holder thereof to one vote in respect of each of the matters to be voted upon at the Meeting. To the knowledge of the Corporation’s directors and executive officers, as of March 15, 2021, the following individuals or entities beneficially own, control or direct, directly or indirectly, securities carrying more than 10.0% of the voting rights attached to the NACG Common Shares:

 

Name of Beneficial Owner		Number of NACG Common Shares				Percentage of Outstanding NACG common shares
Mawer Investment Management Ltd.			4,619,851				15.4	%

QUORUM

A quorum for the transaction of business at the Meeting shall consist of at least two persons holding or representing by proxy not less than twenty percent (20%) of the outstanding shares of the Corporation entitled to vote at the meeting.

If a quorum is not present at the opening of the Meeting, the NACG Shareholders present may adjourn the meeting to a fixed time and place but may not transact any other business. If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of less than 30 days it is not necessary to give notice of the adjourned meeting other than by announcement at the time of an adjournment. If a meeting of NACG Shareholders is adjourned by one or more adjournments for an aggregate of more than 29 days and not more than 90 days, notice of the adjourned meeting shall be given as for an original meeting but the management of the Corporation shall not be required to send a form of proxy in the form prescribed by applicable law to each NACG Shareholder who is entitled to receive notice of the meeting. Those shareholders present at any duly adjourned meeting shall constitute a quorum.

 

Management Information Circular
March 23, 2021		3		North American Construction Group Ltd.

The Corporation’s list of NACG Shareholders as of the Record Date has been used to deliver to NACG Shareholders the Notice of Meeting and this Circular as well as to determine the NACG Shareholders who are eligible to vote.

PRESENTATION OF FINANCIAL STATEMENTS

The audited consolidated financial statements of the Corporation for the fiscal year ended December 31, 2020, together with the auditor’s report thereon, copies of which are contained in the Corporation’s annual report, will be presented to the NACG Shareholders at the Meeting. Receipt at the Meeting of the auditor’s report and the Corporation’s financial statements for its last completed fiscal period will not constitute approval or disapproval of any matters referred to therein.

BUSINESS TO BE TRANSACTED AT THE MEETING

1. Election of Directors

The Board of Directors of the Corporation presently consists of eight directors, all of whom have indicated that they wish to stand for re-election. Management proposes to set the total number of directors to be elected at the Meeting at eight.

All of the nominees below are now directors of the Corporation and have been directors since the dates indicated. Management does not contemplate that any of the following nominees will be unable or unwilling to serve as a director but if that should occur for any reason prior to the Meeting, the persons named in the enclosed Proxy will have the right to vote for another nominee at their discretion. Each director elected at the Meeting will hold office until the next annual meeting or until his or her successor is duly elected or appointed.

The Board adopted a “Board Policy on Majority Voting for Director Nominees” (the “Policy”) on August 8, 2013, which Policy was most recently revised on March 5, 2020. The Policy applies to the election of directors at uncontested shareholder meetings and provides that, with respect to any nominee for the Board, where the total number of shares withheld exceeds the total number of shares voted in favour of the nominee, notwithstanding that such nominee is duly elected as a matter of corporate law, he or she shall forthwith submit his or her immediate resignation to the Board. Upon receipt of such resignation, the Board is required to refer it to the Governance and Sustainability Committee and to promptly accept the resignation unless the Governance and Sustainability Committee advises the Board that there are extraordinary circumstances relating to the composition of the Board or the voting results that should delay the acceptance of the resignation or justify rejecting it. Absent such extraordinary circumstances, the Board is expected to confirm its acceptance of the resignation within 90 days of its original receipt. In any case, the Board shall issue a press release which either confirms that they have accepted the resignation or provides an explanation for why they have refused to accept it.

The following table and the notes thereto state, as of March 15, 2021, the: (i) name, municipality, province or state of residence and country of residence of each nominee; (ii) the age of each nominee; (iii) the date each nominee first became a director of the Corporation (with the current term of each incumbent nominee expiring as of the holding of the Meeting); (iv) where applicable, the current position of each nominee with the Corporation (other than that of director); (v) the present status of each nominee as an independent or non-independent director; (vi) the committees upon which each nominee presently serves; (vii) the present principal occupation, business or employment of each nominee; (viii) the number of NACG Common Shares, securities and options beneficially owned, or controlled or directed, directly or indirectly, by each nominee; and (ix) the Board and committee meeting attendance record for each nominee in the fiscal year ended December 31, 2020.

 

Management Information Circular
March 23, 2021		4		North American Construction Group Ltd.

		Martin R. Ferron is presently the Executive Chair of the Board and was, until December 31, 2020, the Chief Executive Officer of the Corporation. He originally joined the Corporation as President and Chief Executive Officer and as a member of the Board on June 7, 2012. He was appointed Chairman of the Board on October 31, 2017. Previously, Mr. Ferron was Director, President and Chief Executive Officer of Helix Energy Solutions Inc. (“Helix”), a NYSE-listed international energy services company, at which he successfully refocused the company on improved project execution, asset utilization and profit performance. He also transformed Helix through a combination of measured organic growth, acquisitions and divestitures, achieving a compound annual EBITDA growth rate of approximately 38% during his tenure with the company. Prior to joining Helix, Mr. Ferron worked in successively more senior management positions with oil services and construction companies including McDermott Marine Construction, Oceaneering International and Comex Group. He holds a B.Sc. in Civil Engineering from City University, London, a M.Sc. in Marine Technology from Strathclyde University, Glasgow and an MBA from Aberdeen University.
Martin R. Ferron
Edmonton, AB, Canada
64 Years Old
Director Since: June 7, 2012		Number of Securities Held*
Executive Chairman		Common Shares		DSUs		Options
Non-Independent Director		2,104,399		211,632		Nil
Meets share ownership guidelines
		Committee Membership and Attendance Record
		Board				8 of 8

 

*	Martin Ferron’s securities holdings listed above do not include restricted stock units (RSUs) and performance share units (PSUs), which are discussed in detail in the Compensation Discussion and Analysis section.

 

Management Information Circular
March 23, 2021		5		North American Construction Group Ltd.

		Joseph C. Lambert became Chief Executive Officer of the Company on January 1, 2021. He had previously been appointed President on October 31, 2017, while also retaining his role as Chief Operating Officer which role he had held since June 1, 2013. Mr. Lambert originally joined us as General Manager of Mining in April 2008 after an extensive career in the mining industry. He was promoted to Vice President, Oil Sands Operations in September of 2010 and accepted the position of Vice President, Operations Support in January 2012. Mr. Lambert has over three decades of North American and Australian experience in mining and heavy civil construction industries as both producer/owner and contract service provider. He holds a B. Sc. In Mining Engineering from the South Dakota School of Mines and Technology, a First Class Mine Manager’s Certificate of Competency from the Department of Minerals and Energy Western Australia and competed the Director Education Program through the University of Toronto - Rotman School of Management.
Joseph C. Lambert
Edmonton, AB, Canada
56 Years Old
Director Since: January 1, 2021		Number of Securities Held*
President & CEO		Common Shares		DSUs		Options
Non-Independent Director		222,356		77,546		31,100
Meets share ownership guidelines
		Committee Membership and Attendance Record
		Not a member of the Board in 2020

 

*

Joseph Lambert’s securities holdings listed above do not include restricted stock units (RSUs) and performance share units (PSUs), which are discussed in detail in the Compensation Discussion and Analysis section. The number of Options held above represents holdings as of March 15, 2021, while the Options disclosed in the Compensation Discussion and Analysis represents the Options held as of December 31, 2020.

 

Management Information Circular
March 23, 2021		6		North American Construction Group Ltd.

		Ronald A. McIntosh served as Chairman of our Board of Directors from May 20, 2004 to October 31, 2017. From January 2004 until August of 2006, Mr. McIntosh was Chairman of NAV Energy Trust, a Calgary-based oil and natural gas investment fund. Between October 2002 and January 2004, he was President and Chief Executive Officer of Navigo Energy Inc. and was instrumental in the conversion of Navigo into NAV Energy Trust. He was Senior Vice President and Chief Operating Officer of Gulf Canada Resources Limited from December 2001 to July 2002 and Vice President, Exploration and International of Petro-Canada from April 1996 through November 2001. Mr. McIntosh’s significant experience in the energy industry includes the former position of Chief Operating Officer of Amerada Hess Canada. Mr. McIntosh currently also serves as the Chair of the Board of Directors of Advantage Oil & Gas Ltd.
Ronald A. McIntosh
Calgary, AB, Canada
79 Years Old
Director Since: May 20, 2004		Number of Securities Held
Independent Director		Common Shares		DSUs		Options
Meets Share ownership guidelines		122,136		263,183		Nil
		Committee Membership and Attendance Record
		Board				8 of 8
		Audit				4 of 4
		Governance and Sustainability				3 of 3
		Operations				6 of 6

 

Management Information Circular
March 23, 2021		7		North American Construction Group Ltd.

Bryan D. Pinney   Calgary, AB, Canada   68 Years Old		Bryan D. Pinney joined the board of directors on May 13, 2015 and became the Corporation’s lead independent director on October 31, 2017. Mr. Pinney has over 30 years of experience serving many of Canada’s largest corporations, primarily in energy and resources and construction. Mr. Pinney served as Calgary Managing Partner of Deloitte LLP from 2002 through 2007, as National Managing Partner of Audit & Assurance from 2007 to 2011, and as Vice Chair until June 2015. Mr. Pinney was a past member of Deloitte’s Board of Directors and chair of the Finance and Audit Committee. Prior to joining Deloitte, Mr. Pinney was a partner with Andersen LLP and served as Calgary Managing Partner from 1991 through May of 2002. Mr. Pinney is the past Chair of the Board of Governors of Mount Royal University and has previously served on a number of non-profit boards. He serves on the board of TransAlta Corporation, where he is a member of the audit committee and Chair of the human resources and compensation committee, and on the board of Sundial Growers, Inc., where he is Chair of the audit committee and a member of the governance and compensation committees. He is also a director of a large private residential construction company. He is a Fellow of the Institute of Chartered Accountants, a Chartered Business Valuator and is a graduate of the Ivey Business School at the University of Western Ontario with an honours degree in Business Administration. He is also a graduate of the Canadian Institute of Corporate Directors.
Director Since: May 13, 2015		Number of Securities Held
Lead Director		Common Shares		DSUs		Options
Independent Director		40,495		148,998		Nil
Meets Share ownership guidelines
		Committee Membership and Attendance Record
		Board				8 of 8
		Audit				4 of 4
		Governance and Sustainability				3 of 3
		Human Resources and Compensation				6 of 6

 

Management Information Circular
March 23, 2021		8		North American Construction Group Ltd.

John J. Pollesel   Edmonton, AB, Canada   57 Years Old		John J. Pollesel joined our board of directors on November 23, 2017. Mr. Pollesel is currently the Chief Executive Officer of Boreal Agrominerals Inc., a private company that explores for, tests, develops and produces organic approved agromineral fertilizers and soil amendment products. Until November of 2017, Mr. Pollesel was Senior Vice President, Mining for Finning (Canada). Prior to Finning, he was CEO for the Morris Group of Companies. Mr. Pollesel has more than 28 years of experience in the mining industry. He has been a member of several executive teams responsible for operations, engineering/projects, finance/administration, strategic planning and leading organizational transformation. In his previous role as Chief Operating Officer for Vale’s North Atlantic Operations, Mr. Pollesel was responsible for one of the largest mining and metallurgical operations in Canada. Prior to Vale, he was the Chief Financial Officer for Compania Minera Antamina in Peru, one of the largest copper/zinc mining and milling operations in the world. He has chaired Finance, Audit, HSE, Compensation and Advisory Committees in addition to holding director positions at Northern Superior Resources, Calico Resources Corporation and numerous not-for- profit organizations. He presently chairs the board of First Cobalt Corporation, which is listed on the TSX-V, OTC exchanges, and serves on the board of Noront Resources Ltd., a TSX-V listed company. He also serves on the audit, governance and EHS committees of Noront and First Cobalt. He holds an Honours BA in Accounting and an MBA from the University of Waterloo and Laurentian University respectively. He is a Chartered Professional Accountant and a Fellow of CPA Ontario.
Director Since: November 23, 2017		Number of Securities Held
Independent Director		Common Shares		DSUs		Options
		Nil		37,639		Nil
On track to meet share ownership guidelines
		Committee Membership and Attendance Record
		Board				8 of 8
		Audit				4 of 4
		Operations				6 of 6

 

Management Information Circular
March 23, 2021		9		North American Construction Group Ltd.

		Maryse C. Saint-Laurent joined our board of directors on August 6, 2019. Ms. Saint-Laurent is an accomplished executive and corporate director with over 25 years’ experience as a business-oriented corporate, transactional and securities lawyer in the energy, electricity and mining sectors. She has led several M&A and financing transactions and has a strong governance background. Ms. Saint-Laurent also possesses several years’ experience in human resources, compensation and benefits/pension management. From 2013 to 2015, she was Vice-President Legal and Corporate Secretary for TransAlta Renewables Inc., and from 2011 to 2015, she was also Vice- President Legal and Corporate Secretary for TransAlta Corporation. Ms. Saint-Laurent is a member of the board of the Alberta Securities Commission, Turquoise Hill Resources Ltd. and the Calgary Prostate Cancer Centre. Ms. Saint-Laurent holds a Master of Laws (securities and finance), from York University, Osgoode Hall Law School, a LL.B., BA and Certification in Human Resources from the University of Alberta as well as her ICD.D designation.
Maryse C. Saint-Laurent
Calgary, AB, Canada
61 Years Old
Director Since: August 6, 2019		Number of Securities Held
Independent Director		Common Shares		DSUs		Options
		Nil		11,342		Nil
On track to meet share ownership guidelines
		Committee Membership and Attendance Record
		Board				8 of 8
		Human Resources and Compensation				6 of 6
		Governance and Sustainability				3 of 3

 

Management Information Circular
March 23, 2021		10		North American Construction Group Ltd.

		Thomas P. Stan joined our board of directors on July 14, 2016. Mr. Stan has served as a board member on a number of public and private Corporations. Until September of 2019 he was the President and CEO of Corval Energy Ltd., a Calgary, Alberta based oil company focused on exploration and production in Manitoba and Saskatchewan. Previously, Mr. Stan has held positions as Managing Director of Investment Banking at Desjardins Capital Markets and Blackmont Capital Markets, President and CEO of Phoenix Energy Ltd. and Sound Energy Trust, and Chairman and CEO of Total Energy Services Ltd. Mr. Stan began his career at Suncor and spent 16 years at Hess Corporation as Vice President Corporate Planning. After Petro Canada acquired Hess Canada he became Vice President of Corporate Development of Petro Canada. Mr. Stan received his Bachelor of Commerce degree in Finance and Economics from the University of Saskatchewan.
Thomas P. Stan
Calgary, AB, Canada
63 Years Old
Director Since: July 14, 2016		Number of Securities Held
Independent Director		Common Shares		DSUs		Options
Meets share ownership guidelines		Nil		44,711		Nil
		Committee Membership and Attendance Record
		Board				8 of 8
		Human Resources and Compensation				6 of 6
		Operations				6 of 6

 

Management Information Circular
March 23, 2021		11		North American Construction Group Ltd.

Kristina E. Williams   Edmonton, AB, Canada   44 Years Old		Kristina E. Williams joined our board of directors on August 6, 2019. Ms. Williams is currently the President and CEO of Alberta Enterprise Corporation, which is responsible for overseeing management of the Alberta Enterprise Fund, a fund established by the government of Alberta in 2009 to attract venture capital to Alberta and to invest in venture capital funds that invest in Alberta technology. The fund currently has twenty investments with an underlying portfolio of more than 200 technology companies. Previously, Ms. Williams held the position of Vice President of Marketing and Sales for Natraceutical Canada Inc. and the position of Administrative Director with Xenerate AB, a Swedish biotechnology company. Ms. Williams was born in Sweden and received a Master of Laws from Uppsala University, where she also served as COO and Vice Chair of the Board of Norrlands Nation, the largest student society at Uppsala. She is currently on the board of governors of the Northern Alberta Institute of Technology (NAIT), serving as chair of the audit and finance committees as well as chair of the NAIT Foundation. She is also on the Alberta Securities Commission New Economy Advisory Committee and serves as Swedish honorary Consul for Edmonton and Northern Alberta. Ms. Williams holds an MBA from the University of Alberta as well as her ICD.D designation.
Director Since: August 6, 2019		Number of Securities Held
Independent Director		Common Shares		DSUs		Options
		Nil		10,824		Nil
On track to meet share ownership guidelines
		Committee Membership and Attendance Record
		Board				8 of 8
		Audit				4 of 4
		Operations				6 of 6

 

Management Information Circular
March 23, 2021		12		North American Construction Group Ltd.

Corporate Cease Trade Orders, Bankruptcies, Penalties or Sanctions

Ronald McIntosh was a director of Forteleza Energy Inc. (“Forteleza”) formerly known as Alvopetro Inc. (“Alvopetro”) from November of 2009 to January of 2016. On March 2, 2011, the Court of Queen’s Bench of Alberta granted an order (the “Order”) under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”) staying all claims and actions against Forteleza and its assets and allowing Forteleza to prepare a plan of arrangement for its creditors if necessary. Forteleza took such steps in order to enable Forteleza to challenge a reassessment issued by the Canada Revenue Agency (“CRA”). As a result of the reassessment, if Forteleza had not taken any action, it would have been compelled to immediately remit one half of the reassessment to the CRA and Forteleza did not have the necessary liquid funds to remit, although Forteleza had assets in excess of its liabilities with sufficient liquid assets to pay all other liabilities and trade payables.

Forteleza believed that the CRA’s position was not sustainable and vigorously disputed the CRA’s claim. Forteleza filed a Notice of Objection to the reassessment and on October 20, 2011 announced that its Notice of Objection was successful, CRA having confirmed there were no taxes payable. As the CRA claim had been vacated and no taxes or penalties were owing Forteleza no longer required the protection of the Order under the CCAA and on October 28, 2011 the Order was removed. On March 3, 2011, the TSX suspended trading in the securities of Forteleza due to Forteleza having been granted a stay under the CCAA. In addition, the securities regulatory authorities in Alberta, Ontario and Quebec issued a cease trade order with respect to Forteleza for failure to file its annual financial statements for the year ended December 31, 2010 by March 31, 2011. The delay in filing was due to Forteleza being granted the CCAA order on March 2, 2011 and the resulting additional time required by its auditors to deliver their audit opinion. The required financial statements and other continuous disclosure documents were filed on April 29, 2011 and the cease trade order was subsequently removed. On September 1, 2010 Forteleza closed the sale of substantially all of its oil and gas assets. As a result of the sale Forteleza was delisted from the TSX on March 30, 2011 as it no longer met minimum listing requirements.

John Pollesel is a director of First Cobalt Corporation (“First Cobalt”). First Cobalt announced on June 21, 2017 that it had proposed a friendly merger with Cobalt One Ltd. (“Cobalt One”) and CobalTech Mining Inc. (“CobalTech”). At that time, First Cobalt signed letters of intent with each of Cobalt One and CobalTech and requested the TSX Venture Exchange to temporarily halt trading of its shares. The TSX Venture Exchange approved the resumption of trading as of August 28, 2017.

Recommendation of the Board of Directors

The Board of Directors recommends a vote “FOR” the election of each of the above nominees to serve as a director of the Corporation.

Unless a NACG Shareholder otherwise directs, or directs that his or her NACG Common Shares are to be withheld from voting in connection with the election of any particular nominee specified above, the persons named in the enclosed form of Proxy intend to vote “FOR” the election of each of the nominees specified above, such directors to hold office until the next annual meeting or until his or her successor is appointed.

2. Advisory Vote on Executive Compensation

The Corporation’s compensation policies and procedures are based on the principle of pay for performance. The Board of Directors believes they align the interests of the Corporation’s executive team with the long-term interests of NACG Shareholders. The Board also believes that NACG Shareholders should have the opportunity to fully understand the objectives, philosophy and principles used in its approach to executive compensation decisions and to have an advisory vote on the Board’s approach to executive compensation. This non-binding advisory vote, commonly known as “Say-on-Pay”, gives each NACG Shareholder an opportunity to either endorse or not endorse the Corporation’s approach to its executive pay program and policies through the following resolution:

“Resolved, on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders of North American Construction Group Ltd. (the “Corporation”) accept the approach to executive compensation disclosed in the management information circular delivered in advance of the 2021 annual and special meeting of shareholders of the Corporation.”

Approval of the above resolution will require an affirmative vote of a majority of the votes cast at the Meeting.

The purpose of the Say-on-Pay advisory vote is to provide appropriate director accountability to the NACG Shareholders for the Board’s compensation decisions by giving NACG Shareholders a formal opportunity to provide

 

Management Information Circular
March 23, 2021		13		North American Construction Group Ltd.

their views on the disclosed objectives of the executive compensation plans, and on the plans themselves, for the past, current and future fiscal years. While NACG Shareholders will provide their collective advisory vote, the directors of the Corporation remain fully responsible for their compensation decisions and are not relieved of these responsibilities by a positive advisory vote by NACG Shareholders.

As this is an advisory vote, the results will not be binding on the Board. However, the Board will take the results of the vote into account, as appropriate, when considering future compensation policies, procedures and decisions and in determining whether there is a need to significantly increase their engagement with NACG Shareholders on compensation and related matters. The Corporation will disclose the results of the Say-on-Pay vote as a part of its report on voting results for the Meeting.

In the event that a significant number of Shareholders oppose the resolution, the Chairman of the Board, Chair of the Human Resources and Compensation Committee and the Lead Director will oversee a consultation process with NACG Shareholders, particularly those who are known to have voted against it, in order to better understand their concerns. The Human Resources and Compensation Committee will review the Corporation’s approach to compensation in the context of those concerns. Shareholders who have voted against the resolution will be encouraged to contact the Lead Director to discuss their specific concerns.

Following the review by the Human Resources and Compensation Committee, the Corporation will disclose to Shareholders a summary of the significant comments relating to compensation received from Shareholders in the process, a description of the process undertaken and a description of any resulting changes to executive compensation or why no changes will be made. The Corporation will provide this disclosure within six months of the Say-on-Pay vote, and no later than in the management information circular for its next annual meeting.

The Board recognizes that Say-on-Pay is an evolving area and will review this policy annually to ensure that it is effective in achieving its objectives.

Recommendation of the Board of Directors

The Board of Directors recommends a vote “FOR” the Corporation’s approach to executive compensation as described in the “Compensation Discussion and Analysis” portion of this Circular.

Unless a NACG Shareholder otherwise directs, or directs that his or her NACG Common Shares are to be withheld from voting in connection with the above resolution with respect to approval of the Corporations’ approach to executive compensation, the persons named in the enclosed form of Proxy intend to vote for the above resolution with respect to approval of the Corporations’ approach to executive compensation.

3. Special Item of Business: Approval of Unallocated Options Under the Share Option Plan

The Corporation’s Share Option Plan is described further below under the heading “Outstanding Option-Based Awards”. The Share Option Plan provides that the maximum number of NACG Common Shares issuable under the Plan is equal to 10% of the Corporation’s issued and outstanding NACG Common Shares. The rules of the Toronto Stock Exchange (the “TSX”) provide that all unallocated options, rights or other entitlements under a security-based compensation arrangement which do not have a fixed number of securities issuable must be re-approved every three (3) years. Accordingly, at the Meeting, NACG Shareholders will be requested to consider, and if deemed appropriate, to approve, with or without amendment, the reservation of the unallocated options under the Share Option Plan, as specified in the Resolution set forth in Schedule “A”.

As of March 15, 2021, the Corporation had 29,949,528 NACG Common Shares outstanding, therefore providing for a current maximum of 2,994,952 NACG Common Shares to be reserved for issuance under the Share Option Plan. As at March 15, 2021, the Corporation had 110,400 options to purchase Common Shares outstanding (or approximately 0.37% of the outstanding NACG Common Shares), leaving unallocated options to purchase an aggregate of 2,884,552 NACG Common Shares (or approximately 9.63% of the outstanding NACG Common Shares) available for future option grants as at that date. Previously allocated options will continue, unaffected, whether or not this resolution is approved by NACG Shareholders. Unallocated options and previously granted options that are cancelled, terminated or exercised subsequent to the Meeting will not, however, be available for grants if this resolution is not approved by shareholders. Approval of the Resolution requires confirmation by a majority of the votes cast at the meeting. The persons named in the accompanying Proxy intend to vote for approval of the Resolution unless instructions to the contrary are given. The adoption of the Resolution requires the favourable vote of a majority of the votes cast thereon at the Meeting.

 

Management Information Circular
March 23, 2021		14		North American Construction Group Ltd.

Recommendation of the Board of Directors

The Board of Directors recommends a vote “FOR” the resolution set out in Schedule “A” of this Information Circular approving the unallocated options under the Corporation’s Share Option Plan.

Unless a NACG Shareholder otherwise directs, or directs that his or her NACG Common Shares are to be withheld from voting in connection with approving the resolution set out in Schedule “A” of this Information Circular, the persons named in the enclosed form of Proxy intend to vote for the approval of the Resolution set out in Schedule “A” of this Information Circular approving the unallocated options under the Corporation’s Share Option Plan.

4. Appointment of Independent Auditors and Authorization of Directors to Fix Remuneration

At the Meeting, NACG Shareholders will be requested to vote on the re-appointment of KPMG LLP (“KPMG”) as the independent auditors of the Corporation to hold office until the next annual meeting of shareholders or until a successor is appointed, and to authorize the Board of Directors to fix the auditor’s remuneration. KPMG have been the auditors of the Corporation, or its predecessor NACG Holdings Inc., since October 31, 2003.

Recommendation of the Board of Directors

The Board of Directors recommends a vote “FOR” the re-appointment of KPMG as independent auditors of the Corporation for the fiscal year ending December 31, 2021 and authorizing the Board of Directors to fix the auditor’s remuneration.

Unless an NACG Shareholder otherwise directs, or directs that his or her NACG Common Shares are to be withheld from voting in connection with the appointment of auditors, the persons named in the enclosed form of Proxy intend to vote for the re-appointment of KPMG as auditors of the Corporation until the next annual meeting of shareholders and to authorize the directors to fix their remuneration.

5. Other Matters

Management of the Corporation know of no matters to come before the Meeting other than as set forth in the Notice of Meeting. However, if other matters which are not currently known to management should properly come before the Meeting, the accompanying proxy will be voted on such matters in accordance with the best judgment of the persons voting the proxy.

 

Management Information Circular
March 23, 2021		15		North American Construction Group Ltd.

COMPENSATION DISCUSSION AND ANALYSIS

2020 Named Executive Officers

The below discussion of executive compensation focuses on the compensation of the following executive team members for the year ended December 31, 2020, who are our “named executive officers” or “NEOs” for purposes of this compensation disclosure:

 

Named Executive Officer		Position in 2020
Martin R. Ferron (a)		Chairman of the Board & Chief Executive Officer
Joseph C. Lambert (b)		President and Chief Operating Officer
Jason W. Veenstra		Executive Vice President and Chief Financial Officer
Barry W. Palmer (c)		Senior Vice President, Operations
Jordan A. Slator		Vice President and General Counsel

 

(a)	Effective January 1, 2021, Mr. Ferron assumed the role of Executive Chairman and resigned as Chief Executive Officer.

(b)	Effective January 1, 2021, Mr. Lambert was appointed to the position of President and Chief Executive Officer and to the Board.

(c)	Effective January 1, 2021, Mr. Palmer was appointed to the position of Chief Operating Officer.

Executive Compensation Philosophy

Our executive compensation philosophy is guided by five core principles – alignment with shareholder interests, pay for performance, transparent disclosure, shareholder say on pay and competitive compensation. These fundamental concepts steering our approach to executive compensation were given 94.79% approval by shareholders at the May 2020 AGM:

 

Alignment with Shareholder Interests		It is in the Corporation’s best interest to meet or exceed shareholder expectations and ensure continued access to capital on favorable terms. Accordingly, the pay “at-risk” or variable pay plans (Short-Term Incentive Plan (“STIP”) and Long-Term Incentive Plan (“LTIP”)) were designed to align the interests of the Corporation’s executives with shareholder interests.
Pay for Performance		The Corporation believes that executive compensation should be strongly correlated to the financial and safety performance of the Corporation, and that the executives, as the key decision makers of the Corporation, should be held accountable for that performance. To that end, the Board has adopted the annual STIP, which rewards executives for the achievement of key financial, safety and other individual objectives in the more immediate term, as well as the LTIP, which rewards executives for the overall financial success of the Corporation over the longer term.
Transparent Disclosure		The Corporation is committed to providing transparent disclosure of executive compensation. It is our intent to follow best practices, comply with all regulatory requirements and communicate our executive pay in plain language.
Say on Pay		The Human Resources and Compensation Committee (“HRCC”) and the Board review and consider all shareholder feedback related to compensation matters and will continue existing practices regarding shareholder discussion and engagement. The first shareholder vote on “Say on Pay” was conducted in May 2020 and established the framework for conducting an annual non-binding advisory vote by shareholders on executive compensation.
Competitive Compensation		The Corporation has adopted a market-competitive executive total compensation package. It is the goal of the Corporation to attract and retain talented executives who are capable of and motivated to execute the financial and business objectives of the Corporation. It is important to ensure executive compensation is competitive within the market where the Corporation competes for talent.

 

Management Information Circular
March 23, 2021		16		North American Construction Group Ltd.

Components of 2020 Executive Compensation

The following table sets out the various components of compensation that NEOs were eligible to receive for 2020:

 

Component		Description		Time Frame
Base Salary		Salaries are based on the executive’s level of responsibility, skills and experience, and the current market value of the position. Base salary adjustments are considered annually, taking into account the executive’s overall performance, experience and market conditions.		Annual market reviews and adjustments
Short-Term Incentive Plan (“STIP”)		STIP compensation is linked to the Corporation’s financial and safety performance in the fiscal year as well as each NEO’s achievement against individual objectives. These measures have a pre-determined target set by the Board before the start of the fiscal year and funding of the STIP pool is based on the performance of the Corporation against the financial target during the year. The CEO, the President and COO, and the EVP and CFO, each have target annual bonuses of 100% of their individual annual base salary earnings. The SVP, Operations had a target annual bonus of 75% of his annual base salary earnings and the VP and General Counsel has a target annual bonus of 70% of his annual base salary earnings.		Annual performance
		Payouts range from zero to a maximum of 1.5 times an NEO’s STIP target and 2.0 times the CEO’s STIP target and are subject to the approval of the Board on the recommendation of the HRCC.
		The NEOs are given the opportunity to take up to 50% of their annual STIP in the form of DSUs.
Long-Term Incentive Plan (“LTIP”)		LTIP grants are made through two vehicles: (1) PSUs and (2) RSUs. Refer to the LTIP Eligibility Table in this document. Each NEO is awarded 60% as PSUs and 40% as RSUs.		Three year performance cycle
		All grants are subject to the approval of the HRCC in the case of NEOs, other than the CEO and to approval of the Board of Directors in the case of the CEO.
		Awards are equity-settled by the transfer of shares purchased by an arm’s length trust established for such purpose.
Retirement Arrangements		The Corporation matches contributions of executives to registered retirement savings plans (“RRSPs”) to a maximum of 5% of base salary. If or when the executive reaches his or her annual RRSP contribution limits, the remaining contributions for the calendar year are made to a non-registered savings plan (“Group Investment Account”).		Paid semi-monthly with base salary
Benefit Plans		Executive benefit plans, paid for by the Corporation, provide extended health, dental, disability and insurance coverage.		Monthly premiums
Perquisites		Limited perquisites are provided including a vehicle allowance, and reimbursement of fuel purchases, reimbursement for annual dues to a local sport or health club, an optional annual medical examination and a discretionary health care spending account.		Monthly, as incurred

 

Management Information Circular
March 23, 2021		17		North American Construction Group Ltd.

Base Salary

Base salaries for the NEOs are reviewed and approved each year by the HRCC. The HRCC may make adjustments to an executive’s salary as a result of a change in the executive’s duties and responsibilities and based on the performance and contribution of the executive, both on an individual basis and on the performance of the executive’s department(s) during the previous year. In reviewing the base salaries of the Corporation’s executives, the HRCC also considers comparator group compensation, internal pay relationships, total direct target compensation, total employee cost and the pay position of each executive in the market.

The following table sets out the base salaries of the NEO’s as at December 31, 2020:

 

NEO		December 31, 2020 Base Salary ($)				December 31, 2019 Base Salary ($)				% change
Martin R. Ferron			625,000				625,000				nil
Joseph C. Lambert			410,000				410,000				nil
Jason W. Veenstra (a)			320,000				285,000				12.3	%
Barry W. Palmer			320,000				320,000				nil
Jordan A. Slator			235,000				235,000				nil

 

(a)	Mr. Veenstra’s base salary change was made effective March 1, 2020 as a result of a peer group assessment conducted by Mercer, the Corporation’s compensation consultant, demonstrating the CFO’s total direct compensation to be below target.

Short-Term Incentive Plan (“STIP”)

STIP is the primary performance-based pay vehicle the Corporation uses to reward executives for their contributions to strong financial and operational performance in a financial year. Its purpose is to motivate executives to help the Corporation achieve its financial and safety goals, and to reward them to the extent that goals are achieved. All senior managers, including the NEOs, participate in the STIP.

The graphic below displays the method in which STIP is calculated:

 

 

•	CEO’s STIP is based 100% on Corporate Performance (calculated as 90% Financial Performance + 10% Safety Performance) with no individual performance factor.

 

•

DEFINITIONS: “Adjusted EBIT” is defined as adjusted consolidated net earnings before the effects of interest expense, income taxes and equity earnings in affiliates and joint ventures. “Adjusted EBITDA” is defined as adjusted EBIT before the effects of depreciation, amortization and equity investment depreciation and amortization. Both Adjusted EBIT and Adjusted EBITDA are Non-GAAP financial measures. The terms “Bonus EBIT” and “Bonus EBITDA” refer to Adjusted EBIT and Adjusted EBITDA subject to adjustments approved by the HRCC that remove elements of those metrics that do not relate to management performance. See “Non-GAAP Financial Measures” in our Management Discussion & Analysis for the year ended December 31, 2020.

 

Management Information Circular
March 23, 2021		18		North American Construction Group Ltd.

The following describes the basic terms of the STIP:

 

Participants		Salaried employees active on the payment date.
Vesting		Paid following the end of the fiscal year based on audited financial statements.
Performance Cycle		12 months
Performance Threshold		75% of the financial goals must be achieved to trigger any STIP payment. If this performance threshold is met, it will trigger a payout of 25% or greater.
Performance Measures		CORPORATE PERFORMANCE (50% weight) (100% for CEO)
		Financial (90% weight of Corporate Performance)
		The Corporation’s financial targets for the business are determined by the Board annually. Targets are set based on prior financial performance and forecasted performance based on projected market conditions.
		Safety (10% weight of Corporate Performance)
		The Corporation’s safety targets for the business are approved annually by the Board. Targets are based on industry-standard metrics and prior year performance achievements.
		INDIVIDUAL PERFORMANCE (50% weight) (0% for CEO)
		Individual goals in alignment with the Corporate strategy are cascaded to the Executive team. Corporate strategic goals and objectives are established which drive the business forward. They are set annually and reviewed and approved by the Board.
Payout Timing		Paid in the following year once performance measures have been assessed.
Payout Range		Payment range for the CEO is 0 - 2.0x; and
		Payment range for each of the other NEOs is 0 - 1.50x.
		Maximum Awards may be achieved when the financial performance exceeds the financial targets by the approved inflection point on the STIP payout curve, and that 100% of the safety target is achieved.
Payout		Annual cash bonus established as a percentage of base salary earned in a performance cycle and awarded based on Corporate and Individual Goal achievement.
Change of control		CEO: 2.0 x 90% of STIP target for fiscal year in which the Termination Date occurs. Other NEOs: No payment triggered. See below for details.
Termination		CEO: 1.0 x 90% of STIP target for fiscal year in which the Termination Date occurs. Other NEOs: receive 90% of their pro-rated STIP. See below for details.

 

 

 

Management Information Circular
March 23, 2021		19		North American Construction Group Ltd.

STIP Targets

The Board approves both the financial targets (Bonus EBIT and Bonus EBITDA) and safety target each year. These targets are intended to be challenging. The Board approved the Bonus EBIT and Bonus EBITDA targets for the year ending December 31, 2020 after taking into account the results from 2019, as well as the budget and business plans prepared for 2020. The Board also approved the safety metric and target for the year ending December 31, 2020, considering the results and areas of focus from 2019 and plans for 2020. As discussed in detail below under “STIP Program Objectives and Results”, the financial targets for 2020 were revised in June of 2020 in light of the COVID-19 pandemic.

STIP Awards

The HRCC recommends the STIP award for the CEO on the basis of the Corporation’s Bonus EBIT, Bonus EBITDA and safety performance. The Board approves the CEO’s STIP award. The HRCC approves the STIP awards for the other NEOs, on the recommendation of the CEO, based on the same criteria and each NEO’s individual performance achievements.

The following table sets forth the STIP target, maximum STIP award for the year ended December 31, 2020:

 

NEO		CY2020 STIP Target as Percentage of Base Earnings				STIP Target (a)				Maximum STIP Award(b)				Actual CY2020 STIP Award (c)
Martin R. Ferron			100	%		$	625,000			2.0x $	1,250,000			$	249,267
Joseph C. Lambert			100	%		$	410,000			1.5x $	615,000			$	163,519
Jason W. Veenstra			100	%		$	314,342			1.5x $	471,513			$	125,368
Barry W. Palmer			75	%		$	240,000			1.5x $	360,000			$	95,719
Jordan A. Slator			70	%		$	164,500			1.5x $	246,750			$	65,607

 

(a)	STIP Target is determined as follows: Base earnings from January 1, 2020 to December 31, 2020, multiplied by CY2020 STIP Target Percentage. This calculation takes into consideration base salary changes made part way through the calendar year and the number of eligible calendar days in the period.

(b)	The Maximum STIP Award is based on two times (2.0x) the STIP Target for the period for Mr. Ferron and one and one-half times (1.5x) the STIP Target for the period, for all other NEOs.

(c)	Represents STIP Award, a portion of which, certain NEOs allocated to their CY2020 STIP to DSUs, as follows: Mr. Ferron - 25%; Mr. Lambert - 50%; Mr. Veenstra - 25%; and Mr. Palmer - 50%.

Long-Term Incentive Plan (“LTIP”)

The purpose of the Corporation’s equity-based LTIP is to motivate NEOs to achieve sustained mid and long-term performance, which will increase the value of the Corporation over the long term and generate sustained returns for shareholders. Under the LTIP, incentives are awarded to NEOs in the form of Performance Share Units (“PSUs”), with the pay-out value linked to total shareholder return (“TSR”) in relation to that of the Corporation’s peer group, and Restricted Share Units (“RSUs”), the pay-out value of which is directly linked to share price. Share Options, which were previously awarded under the LTIP, were replaced by PSUs in 2014.

100% of each NEO’s LTIP is tied to Share Value

The performance targets and payouts for TSR in relation to the Corporation’s peer group are indicated below:

 

NACG TSR Percentile Rank relative to the Comparator Group		% of PSU Target Earned
At or above 90th Percentile (Maximum)			200	%
75th Percentile (Stretch)			150	%
50th Percentile (Target)			100	%
25th Percentile (Threshold)			25	%

 

Management Information Circular
March 23, 2021		20		North American Construction Group Ltd.

Annual Target LTIP:

 

NEO		Annual LTIP Value at Target (% of base salary)				% as RSUs				% as PSUs
Martin R. Ferron			150	%			40	%			60	%
Joseph C. Lambert (a)			130	%			40	%			60	%
Jason W. Veenstra			100	%			40	%			60	%
Barry W. Palmer (b)			100	%			40	%			60	%
Jordan A. Slator			45	%			40	%			60	%

 

(a)

Mr. Lambert’s LTIP Target increased October 1, 2019, in support of the Corporation’s 2019 Executive Compensation Review and was effective with the July 2020 regular annual LTIP grant. Mr. Lambert’s LTIP Target has been increased to 175% with his appointment to President and CEO effective January 1, 2021.

(b)	Mr. Palmer’s LTIP Target increased as of July 1, 2020 from 70% to 100% of his base salary, effective with the July 1, 2020 grant to align his “at risk” pay with similar positions within the peer group..

The following describes the basic terms of RSUs and PSUs:

 

Participants		Management Employees active on the grant date.
Vesting		“Cliff-vest” three years from the date of grant.
Performance Cycle		Three years from the grant date.
Performance Measure		RSU settlement is based on the market value of a common share as of the maturity date.
		PSU settlement is based on the market value of a common share as of the maturity date and the TSR performance ranking over a three-year period, relative to the Corporation’s comparator group.
		PSU participants may receive 0% to 200% of their target grant, based on TSR Performance Measures.
Settlement Timing		Settled within 90 days following Maturity Date and in any event no later than December 31 of the year in which the Maturity Date occurs.
Equity Settlement		Settled with shares purchased on the open market by an arm’s length trust established for such purpose.
Change of control		Become earned. See below for details.
Termination		Become forfeited. See below for details.

Under the RSU Plan, an RSU and/or a PSU is a right granted to a participant to receive, at the Corporation’s option, either a Common Share of the Corporation or a cash payment equivalent to the fair market value of a Common Share of the Corporation. Certain RSUs granted to Martin Ferron vest over a three-year period, one-third on each anniversary of the grant date. All other RSUs “cliff-vest” on the third anniversary of the grant date. Subject to performance criteria, all PSUs “cliff-vest” on the third anniversary of their grant date. If any dividends are paid on the NACG Common shares, additional RSUs or PSUs will be credited to the participant to reflect such dividends. The RSU plan provides that, in the event of termination of a participant (with or without cause), all RSUs and PSUs that are not earned RSUs are immediately forfeited, unless otherwise permitted under a participant’s employment agreement. In the event of retirement or disability of a participant, all earned RSUs will be redeemed within 30 days of the maturity date. Any RSUs which have not completed their prescribed term (credited RSUs) will continue to be eligible to become earned RSUs as if the participant was still employed by the Corporation. On the death of a participant, all credited RSUs or PSUs will be deemed earned and will be redeemed within 90 days of the date of the participant’s death, or in the case of PSUs, will be settled following receipt of the results required to measure the performance criteria (refer to the PSU Performance Payout Chart contained in this document). Rights respecting RSUs and PSUs are not transferable or assignable other than by will or the laws of descent and distribution.

In June 2010, the Board approved amendments to the RSU plan in the event of a Change of Control to provide a retention vehicle at a time of employment uncertainty. The amendments provide that 100% of the outstanding RSUs that are not earned RSUs held in the participant’s RSU Account on the date the Change of Control transaction is

 

Management Information Circular
March 23, 2021		21		North American Construction Group Ltd.

completed will be deemed to be earned RSUs. The value of the Earned RSUs will be fixed at the date of the Change in Control and final payment deferred until the end of the maximum term (3 years) of the RSU or PSU. Termination provisions in the amendments provide that within 24 months following the Change of Control, if the participant’s employment is terminated by the Participant for any reason other than death, disability, qualified retirement or good reason as defined in the plan, all earned RSUs will be immediately forfeited, unless otherwise permitted under a participant’s employment agreement. In the case of a termination without cause, within 36 months following a Change of Control, all earned RSUs will be paid out.

The Board may amend, suspend or terminate the RSU Plan or any portion thereof at any time. However, no amendment, suspension or termination may materially adversely affect any RSUs or PSUs, or any rights pursuant thereto, granted previously to any participant without the consent of that participant.

The following table outlines the total LTIP awards for the NEOs for the year ended December 31, 2020:

 

NEO		LTIP Target as Percentage of Base Salary				RSUs Granted July 1, 2020				PSUs Granted July 1, 2020
Martin R. Ferron			150	%			44,222				66,333
Joseph C. Lambert(a)			130	%			25,142				37,713
Jason W. Veenstra			100	%			15,095				22,642
Barry W. Palmer(b)			100	%			15,095				22,642
Jordan A. Slator			45	%			4,989				7,483

 

(a)	Mr. Lambert’s LTIP Target increased October 1, 2019 and was in effect with the July 2020 regular annual LTIP grant. Mr. Lambert’s LTIP Target has been increased to 175% with his appointment to President and CEO effective January 1, 2021.

(b)	Mr. Palmer’s LTIP Target increased as of July 1, 2020 to 100%.

Since 2014, the Corporation has elected to settle both RSUs and PSUs in shares. Such shares have been acquired in open-market purchases by an arm’s-length trust established by the Corporation in June of 2014 for such purpose. As at March 15, 2021, the trust held 1,850,826 shares. Shares held by the trust are accounted for as treasury shares in the Corporation’s financial statements.

Retirement Arrangements

The Corporation does not have a pension plan. For the year ended December 31, 2020, the total amount the Corporation set aside for retirement and similar benefits for the NEOs was $94,984, consisting of employer matching contributions to the executive officers’ Registered Retirement Savings Plans and Non-Registered Savings Plans (Group Investment Accounts).

Benefit Plans

The Corporation provides NEOs with health, dental, disability and insurance coverage through benefit plans paid for by the Corporation.

Perquisites

NEOs receive a limited number of perquisites that are consistent with market practice for individuals at this level. These include a vehicle allowance, reimbursement for annual dues at a local health or sports club, an annual medical examination and a discretionary health care spending account.

Core Comparator Group

The HRCC reviews and approves a core comparator group for compensation purposes as well as a reference comparator group used to provide additional context in establishing the NEOs’ target pay. The HRCC has approved a 12-company comparator peer group that includes companies that meet the following criteria:

 

(a)

compete with NACG for customers and revenue;

 

(b)

compete with NACG for executive talent, particularly in the Alberta labour market;

 

(c)

compete with NACG for equity or other capital;

 

(d)

are in the same or similar industry, such as construction and engineering or oil and gas equipment and energy services;

 

Management Information Circular
March 23, 2021		22		North American Construction Group Ltd.

(e)

are of comparable size, in terms of revenue, assets, EBITDA, market capitalization and enterprise value; and

 

(f)

have reliable benchmark compensation information available.

The peer group changed to 12 companies in July 2020, with the removal and addition of certain companies based on the above criteria, as follows:

REMOVAL

 

Company		Rationale
Black Diamond Group		Revenue below size range criteria
Entrec		Revenue below size range criteria
Essential Energy Services		Revenue below size range criteria
Macro Enterprises		Low Enterprise Value
Source Energy Services		Low Market Capitalization
STEP Energy Services		Low Market Capitalization
Stuart Olson		Low Market Capitalization

ADDITION

 

Company		Rationale
Badger Daylighting Ltd.		Services energy & mining; similar size
Calfrac Well Services Ltd.		Services energy; similar size
Pason Systems Inc.		Services energy; similar size
Secure Energy Services Inc.		Services energy; similar size
Tervita Corporation		Services energy; similar size
Trican Well Service Ltd.		Services energy; similar size

Certain competitors are not included in our comparator group because they are private corporations or partnerships (i.e. KMC Mining, Thompson Bros.) or smaller divisions of larger corporations with insufficient compensation information available for them. The use of comparative market data is just one of the factors used in setting compensation for NEOs. NEO compensation could be higher or lower than the comparator data as a result of individual performance, skills or experience.

Relative to the peer group, NACG is positioned between the 33rd and 42nd percentiles on revenue, market capitalization and assets and above the 80th percentile on EBITDA and net income.

 

Management Information Circular
March 23, 2021		23		North American Construction Group Ltd.

Company Name (dollars in millions) (i)		Revenue(ii)				Market Cap.				Total Assets				EBITDA				Net Income				City, Province
AECON GROUP INC.		$	3,644			$	980			$	3,287			$	107			$	88				Toronto, ON
SECURE ENERGY SERVICES INC.		$	1,824			$	390			$	1,425			$	85			$	(85	)			Calgary, AB
BIRD CONSTRUCTION INC.		$	1,504			$	424			$	1,062			$	64			$	36				Mississauga, ON
WAJAX CORPORATION		$	1,423			$	342			$	981			$	96			$	32				Mississauga, ON
TERVITA CORPORATION		$	1,417			$	335			$	1,474			$	184			$	(43	)			Calgary, AB
CES ENERGY SOLUTIONS CORP.		$	888			$	334			$	858			$	53			$	(223	)			Calgary, AB
CALFRAC WELL SERVICES LTD.		$	705			$	147			$	913			$	(18	)		$	(324	)			Calgary, AB
BADGER DAYLIGHTING LTD.		$	559			$	1,326			$	623			$	100			$	25				Calgary, AB
DEXTERRA GROUP INC.		$	471			$	421			$	514			$	65			$	64				Mississauga, ON
TRICAN WELL SERVICE LTD.		$	397			$	431			$	563			$	24			$	(235	)			Calgary, AB
TOTAL ENERGY SERVICES INC.		$	366			$	148			$	850			$	50			$	(31	)			Calgary, AB
PASON SYSTEMS INC.		$	157			$	655			$	361			$	30			$	7				Calgary, AB
North American Construction Group Ltd.		$	500			$	363			$	839			$	159			$	49				Acheson, AB
Percentile Positioning			33	%			42	%			38	%			89	%			81	%

 

(i)	Source: Mercer Canada Ltd.

(ii)	Information is from public filings for the most recently reported four quarters, available as at March 16, 2021.

2020 Compensation Decisions Regarding NEOs

STIP Program Objectives and Results

For the year ended December 31, 2020, the following corporate goals were recommended by the HRCC and approved by the Board under the STIP program:

 

Metric		2020 Target and Achievement		Actual STIP Score
Financial Performance (90% weighting)
Bonus EBIT (50% weighting)		The Corporation achieved $44.6M Bonus EBIT from continuing operations. (See below for financial target information.)
					33.2	%
Bonus EBITDA (50% weighting)		The Corporation achieved $134.2M Bonus EBITDA from continuing operations. (See below for financial target information.)
Safety Performance (10% weighting)
Total Recordable Injury Rate (“TRIR”)		In 2020, there were a total of 8 reportable injury cases, resulting in a TRIR of 0.48. Target was to achieve a TRIR of 0.50 or less.			100	%

For the fiscal year 2020, the financial metrics used in the STIP performance metrics were Bonus EBIT and Bonus EBITDA, equally weighted and comprising 90% of the overall Corporate performance measures. Normally, with respect to each of the Bonus EBITDA and Bonus EBIT targets, the STIP provides for payout of 0% of target payout if less than 75% of target performance is achieved, 25% of target payout if 75% of target performance is achieved, 75% of target payout if 87.5% of target performance is achieved, 100% of target payout if 100% of target performance is achieved and a maximum payout of 150% of target payout if 125% or more of target performance is achieved (with intermediate achievement being interpolated on a linear basis and with maximum payout for the CEO being 200% of target payout, as per the CEO’s written employment agreement).

Given the extraordinary circumstances of the COVID-19 pandemic and its impact on the business, the original 2020 financial performance targets set by the Board were revised in June 2020. The pandemic had effectively put the original targets out of reach early in the year. The adjustment was seen as a way of ensuring that employees were incentivized for the remainder of the year by having a target that was viewed as a stretch, but achievable goal. Both the targets and the potential payouts were lowered. Under the revised targets, with respect to each of the Bonus EBITDA and Bonus EBIT targets, payout was set at 0% of target if actual performance was less than 75% of target,

 

Management Information Circular
March 23, 2021		24		North American Construction Group Ltd.

25% of target if actual performance was 100% of target, 75% of target if actual performance was 138% of target and a maximum 100% of target if actual performance was 156% or more of target (with intermediate achievement being interpolated on a linear basis and with maximum payout for the CEO being 200% of target payout, as per the CEO’s written employment agreement).

With revised targets, it was clear that the Corporation’s pandemic response plan would need to be engaged to reduce the financial impact of the COVID-19 pandemic and with it, the numerous challenges it presented. The pandemic response plan delivered a multi-pronged offensive to ensure all staff were safeguarded and kept informed. Extreme measures were rapidly implemented to safeguard employees, including working from home, physical distancing requirements, making personal protection supplies and equipment (i.e. face masks, gloves, sanitizer) available to all workers and communicating and enforcing safety protocols. Extensive training was immediately delivered to employees, with updates and reminders frequently conveyed to all field and office staff on the necessary health and safety controls in place to stop the spread of the COVID-19 virus. The prompt health and safety response to the pandemic strongly contributed to the Corporation’s ability to sustain a healthy workforce and continue its operations.

For the fiscal year 2020 the Corporation achieved $44.6 million in Bonus EBIT, amounting to 95.2% of the revised target, and $134.2 million in Bonus EBITDA, amounting to 113.9% of the revised target. These achievements resulted in an STIP payout on financial metrics equal to 33.2% of target payout.

NACG continues its journey to zero workplace injuries. For that reason, safety performance continues to be an important factor to achieving our STIP goals. In 2020, the Total Recordable Injury Rate (“TRIR”), which is an industry and nationally-recognized standard safety measure, was used as the safety metric. It is based on the total number of work-related injury and illness cases reported that require more than standard first aid treatment, as it relates to the total number of employee hours worked (refer also to the EXECUTIVE COMPENSATION - Short-Term Incentive Plan in this document for the calculation for TRIR).

For 2020, there were a total of eight reportable injury cases, resulting in a TRIR of 0.48. We recorded 3.35 million exposure hours and the reportable injury cases increased by one over the 2019 cases. With a 0.50 TRIR or less target for 2020, the safety performance measure was deemed achieved and 100% of the safety portion of the STIP will be paid out.

Combined financial and safety performance, once weighted, resulted in an overall STIP score of 39.9%.

Executive Team Achievement Highlights and Awards – 2020

The Executive team continued its focus on the Corporation’s’ strategies throughout 2020. The achievements of each NEO affect major areas of the business and align with the elements of the Corporation’s strategies, as summarized below:

 

 

 

 

Management Information Circular
March 23, 2021		25		North American Construction Group Ltd.

 

 

Each member of the executive team is accountable for achieving certain results based on the Corporation’s strategic objectives. The degree to which the Corporation achieves these goals is the degree to which the NEOs will see their compensation in the form of “at-risk” pay increase. Because much of the “at-risk” pay is directly aligned with the Corporation’s share price, the variable pay is strongly aligned with shareholders’ interests. The following are the major achievements of each NEO in 2020 and their respective awards:

 

Martin R. Ferron

In his position as CEO, Mr. Ferron provided overall leadership and direction to the business to achieve the Corporation’s strategic goals and objectives. Since joining the Corporation in June 2012, Mr. Ferron has been key to providing a clear vision for the Corporation and inspiring the entire organization and particularly the executive team to remain committed to fulfilling its objectives. Mr. Ferron has transitioned to Chairman of the Board effective January 1, 2021, where he will provide support to his successor, Mr. Lambert, and other members of the executive team in sustaining the performance of the Corporation.

Mr. Ferron’s base salary has been held at $625,000 per annum since July 2013. Mr. Ferron’s total direct compensation at target is comprised of 71% of pay “at-risk” through short and long-term incentive plans, with 42% of Mr. Ferron’s long-term incentive plan awards tied to the Corporation’s share price performance. Also, 60% of his variable long-term compensation is in the form of PSUs, and has a TSR performance metric measured against the peer group.

 

Management Information Circular
March 23, 2021		26		North American Construction Group Ltd.

 

Under the STIP, Mr. Ferron’s annual incentive award is targeted at 100% of annual base salary and is linked to achievement of Corporate results.

Mr. Ferron’s Corporate goal achievements, can be attributed, both directly and indirectly, to the financial and safety STIP accomplishments in 2020, as they drove Corporate strategies and included the following:

 

Growth and Diversification:		Increased available revenue streams with diversification into US and management of coal mine; and
		Harnessing the synergies that have come with the ownership interest of Nuna, with the award of a major earthworks construction contract at a gold mining project in Northern Ontario.
Execution Excellence:		With onset of COVID-19, demonstrated ability to consistently execute job requirements to the client’s satisfaction, and to respond with agility by assessing risks and managing change;   A focus on managing indirect project costs and a reduction in general and administrative spending attributed to the continued financial health of the Corporation:
		•  Adjusted EBIT margin of 16.3%; and
		•  Adjusted Return on Invested Capital (ROIC) of 9.7%, as a measure of Adjusted EBIT less current income tax expense and deferred income tax expense for the trailing 12 months divided by the average invested capital over the same period to calculate how efficiently we use our capital to generate profits.
Corporate Excellence:		Continued development of long-term relationships with investors, clients and suppliers;   Integration of systems and processes to provide efficient management support to the business, including joint ventures.

 

Management Information Circular
March 23, 2021		27		North American Construction Group Ltd.

Talent Management:		Leading the transition of the Chief Executive Officer position to the successor;   Mentoring members of the executive team by articulating the vision of the Corporation and inspiring them to achieve common goals that move the Corporation in the direction of that vision; and   Oversight of short, mid and long-term succession planning of the senior leadership of the Corporation.

These achievements attributed to an STIP payout at 39.9% of target for Mr. Ferron, which resulted in an STIP award of $249,267 for the year ended December 31, 2020.

Joseph C. Lambert

In his role as President and COO, Mr. Lambert was responsible for driving operational and corporate excellence for NACG’s heavy construction and mining business activities, projects and assets as well as maintenance services. Mr. Lambert had direct oversight over operations activities, asset management, maintenance, and support services including: estimating, business development, health, safety and environment, training and human resources.

Mr. Lambert’s base salary remained unchanged at $410,000 in 2020, with his last increase being effective October

1, 2019. Mr. Lambert’s total direct compensation at target was comprised of 70% of pay “at-risk” through short- and long-term incentive plans, with 40% of Mr. Lambert’s long-term incentive awards tied to the Corporation’s share price performance. Also, 60% of his variable long-term compensation is in the form of PSUs, and has a TSR performance metric measured against the peer group.

 

 

Under the STIP, Mr. Lambert’s annual incentive award is targeted at 100% of annual base salary and is linked to achievement of corporate results and individual achievements.

 

Management Information Circular
March 23, 2021		28		North American Construction Group Ltd.

Mr. Lambert’s individual goal achievements included the following:
Growth and Diversification:		The award of a gold mining project in Northern Ontario which demonstrates the revenue synergies and opportunities for growth and diversification that are possible through the Corporation’s ownership interest in Nuna;
		Increased available revenue streams with diversification into US and management of coal mine; and
		Continued expansion of revenue from equipment maintenance services offerings.
Execution Excellence:		Supporting the Corporation’s ‘Everyone Gets Home Safe’ safety culture, with industry-recognized outstanding safety performance achievements:
		•  A Total Recordable Injury Rate (“TRIR”) of 0.48, beating target of 0.50. See further explanation of the TRIR within this discussion and analysis;
		•  A Disabling Injury Rate (“DIR”) of 0.30, remarkably exceeding the mining industry average of 1.75 by 483%. The Disabling Injury rate measures the number of times per 100 person years worked that a work-related injury caused a loss time claim or resulted in modified duties; and
		Execution of job specifications to the clients’ satisfaction, despite the challenges faced with COVID-19, through safety protocol adherence and rigid cost management.
Corporate Excellence:		Development of relationships with investors, clients and suppliers; and
		Equipment repair cost savings through procurement of components from suppliers affiliated through joint ventures.
Integration of Acquisitions | New Contracts:		Following the management award of a lignite mine in Christine, Texas:       •  the Operations team transitioned the project sites and met or exceeded the client’s production requirements;
		•  the Asset Management and Equipment Maintenance division assessed equipment repair needs and implemented a maintenance schedule to support Operations and meet client expectations;
		•  the Safety and Training departments successfully undertook the training of employees to meet the Corporation’s safety and standard operating procedures and meet or surpass government regulations; and
		•  the Human Resources department on boarded nearly 300 employees.
Talent Management:		On-going talent management program which includes a succession planning model focused on promoting employee growth and development for key positions and high performing employees;
		Investing in our workforce through education and training programs for all new and current employees;
		Provide mentorship to Operations and Maintenance senior leadership team for readiness with CEO transition;
		Continuous review of the succession planning program and support for the development of leaders at all levels of the Corporation by providing development opportunities through education and experience; and
		Identify leadership competency gaps throughout the organization and mitigate the risk by supporting training and development in those areas.

As indicated in this discussion and analysis, some of these goals were also cascaded to Mr. Lambert’s executive operations and support team to assist in their planning and execution throughout the year.

These accomplishments resulted in an STIP payout at 39.9% of target for Mr. Lambert, which resulted in an STIP award of $163,519 for the year ended December 31, 2020.

Jason W. Veenstra

As Executive Vice-President and Chief Financial Officer, Mr. Veenstra is responsible for the strategic leadership, direction and guidance for all financial activities of the Corporation.

 

Management Information Circular
March 23, 2021		29		North American Construction Group Ltd.

Mr. Veenstra joined the Corporation on September 10, 2018, at a base annual salary of $285,000. The peer group review provided by Mercer in July 2019, highlighted Mr. Veenstra’s total direct compensation being 14% below the P50 market value. Demonstrating a consistently high performance, Mr. Veenstra’s was awarded with a 12% increase effective March 1, 2020. Mr. Veenstra’s total direct compensation at target is comprised of 67% of pay “at-risk” through short- and long-term incentive plans, with 34% of Mr. Veenstra’s regular annual long-term incentive plan awards tied to the Corporation’s share price performance. Also, 60% of his variable long-term compensation is in the form of PSUs, and has a TSR performance metric measured against the peer group.

 

Under the STIP, Mr. Veenstra’s annual incentive award is targeted at 100% of annual base salary and is linked to achievement of corporate results and individual achievements.

Mr. Veenstra’s individual goal achievements included the following:

 

Execution Excellence:		Assisted with finalizing an expanded and extended senior secured credit facility agreement through October 2023 to mitigate risks which may be associated with the financial fall-out of COVID-19.
Corporate Excellence:		Drive Corporate financial strategy and support operational decision-makers through the use of refined reporting systems, while maintaining regulatory filing requirements;
		Oversee inter-department process improvements to deliver stream-lined services to the business; and
		On-going financial analysis of corporate balance sheet to allow the Corporation accurate financial data and forecasting to steer Corporate short-term and long-term business strategy;
Talent Management:		Provide development opportunities through education and experience to all members of the Finance, Information Technology, Procurement and Business Shared Service teams with a view for leadership and engagement among employees.

These goal achievements resulted in an STIP payout at 39.9% of target for Mr. Veenstra, which resulted in an STIP award of $125,368 for the year ended December 31, 2020.

 

Management Information Circular
March 23, 2021		30		North American Construction Group Ltd.

Barry W. Palmer

In his role as Senior Vice President, Operations, Mr. Palmer was responsible for the oversight and planning, developing and executing of a strategy for operations in the Oil Sands region through leading project development, execution and management, leadership, both in inspiring a progressive employee relations culture and strong safety culture, and in representing the Corporation in industry and in client relations.

For 2020, Mr. Palmer’s base salary remained at $320,000, with his last increase being October 1, 2019. Mr. Palmer’s long-term incentive plan eligibility increased from 70% to 100% of his base salary effective with the July 1, 2020 regular annual LTIP grant. This adjustment brought his “at risk” pay in alignment with similar positions within the peer group data. Mr. Palmer’s total direct compensation at target was comprised of 63% of pay “at-risk” through short and long-term incentive plans, with 36% of Mr. Palmer’s long-term incentive plan awards tied to the Corporation’s share price performance. Also, 60% of his variable long-term compensation is in the form of PSUs, and has a TSR performance metric measured against the peer group.

 

 

Under the STIP, Mr. Palmer’s annual incentive award is targeted at 75% of annual base salary and is linked to achievement of corporate results and individual achievements.

Mr. Palmer’s individual goal achievements included the following:

 

Growth and Diversification:		On-going review and evaluation of potential projects that meet the Corporation’s business strategy.

 

Management Information Circular
March 23, 2021		31		North American Construction Group Ltd.

Execution Excellence:		Actively supporting the Corporation’s journey to zero workplace incidents, proven with the following 2020 safety performance metrics:
		•  A Total Recordable Injury Rate (“TRIR”) of 0.48, beating target of 0.50. See further explanation of the TRIR within this discussion and analysis;
		•  A Disabling Injury Rate (“DIR”) of 0.30, remarkably exceeding the mining industry average of 1.75 by 483%. The Disabling Injury rate measures the number of times per 100 person years worked that a work-related injury caused a loss time claim or resulted in modified duties; and
		Despite the safety and workforce challenges presented by COVID-19, work on three major project sites continued to operate in a safe manner, without shut-downs.
Integration of Acquisitions | New Contracts:		Following the management award of a lignite mine in Christine, Texas, the Operations team transitioned the project sites and met or exceeded the client’s production requirements.
Talent Management:		Informal mentorship of Operations leadership team, including operations managers, project managers and superintendents. With 40 years of industry experience and years of service with the Corporation, Mr. Palmer provides the Corporation and its employees with an advantage in understanding the Mining industry and in particular, the Fort McMurray Oil Sands region.

These goal achievements resulted in an STIP payout at 39.9% of target for Mr. Palmer, which resulted in an STIP award of $95,719 for the year ended December 31, 2020.

Jordan A. Slator

As General Counsel and Vice President, Mr. Slator leads all aspects of the legal issues affecting the business of our publicly-traded company, including securities and corporate governance compliance, ensuring maximum protection of the Corporation’s legal rights and that the Corporation is optimizing its level of risk.

Mr. Slator’s base salary has remained at $235,000 since October 1, 2019. Mr. Slator’s total direct compensation at target is comprised of 53% of pay “at-risk” through short and long-term incentive plans, with 20% of Mr. Slator’s long-term incentive plan awards tied to the Corporation’s share price performance. Also, 60% of his variable long-term compensation is in the form of PSUs, and has a TSR performance metric measured against the peer group.

 

Management Information Circular
March 23, 2021		32		North American Construction Group Ltd.

 

Under the STIP, Mr. Slator’s annual incentive award is targeted at 70% of annual base salary and is linked to achievement of corporate results and individual achievements.
Mr. Slator’s individual goal achievements included the following:
Growth and Diversification:		Establishment of legal structures and risk mitigation measures in relation to expansion of the business outside of Canada; and
		Establishment of joint ventures in relation to building new lines of business and geographic diversification;.
Execution Excellence:		Lead the Corporation’s redemption of $55 million of 5.5% convertible unsecured subordinated debentures.
		Establishment of legal structures and risk mitigation measures in relation to the Corporation’s multi-company structure.

These goal achievements resulted in an STIP payout at 39.9% of target for Mr. Slator, which resulted in an STIP award of $65,607 for the year ended December 31, 2020.

Share Ownership Guidelines

As part of the Corporation’s effort to align executive interests with shareholder interests, it has adopted share ownership guidelines for senior executive officers. The guidelines must be achieved within five years from the date the senior executive officer is appointed a member of executive management. All share ownership is to be in the form of equity in the Corporation, in each case represented by NACG Common Shares, DSUs or RSUs. Once the share ownership threshold is achieved, the number of NACG Common Shares, DSUs, and RSUs representing the compliance level must be held for at least 30 days to qualify. Thereafter, the aggregate number of NACG Common Shares, DSUs or RSUs that was required to achieve compliance must be maintained to remain compliant, regardless of a subsequent decrease in NACG Common Share price.

 

Management Information Circular
March 23, 2021		33		North American Construction Group Ltd.

The following table summarizes compliance with the share ownership guidelines for each NEO as at December 31, 2020:

 

Named Executive Officers		Stock Ownership Target as a Multiple of Salary				In Compliance Yes/No
Martin R. Ferron			4.0x				Yes
Joseph C. Lambert			2.5x				Yes
Jason W. Veenstra			1.5x				Yes
Barry W. Palmer			1.5x				Yes
Jordan A. Slator			1.0x				Yes

Executive Compensation Alignment with Shareholder Interests

Performance Graph and Table

The following graph compares the percentage change in the cumulative NACG Shareholder return for $100 invested in NACG Common Shares at the closing price of $2.47 on the last trading day of December 2015, with the total cumulative return of the S&P/TSX Composite Index (“S&P/TSX Index”) and the S&P/TSX Small Cap Index for the period from December 31, 2015 to December 31, 2020. On the last trading day of December 2020, NACG Common Shares closed at $12.44 per NACG Common Share on the TSX.

The chart below displays that the NACG share price significantly out-performed the indices in 2020.

 

 

December 31,		2016($)				2017($)				2018($)				2019($)				2020($)
NACG (TSX)			209.72				254.25				491.90				637.25				503.64
S&P/TSX Index(i)			117.51				124.59				110.09				131.16				134.00
S&P/TSX Small Cap Index(i)			135.15				135.53				108.29				122.19				134.42
NEO Total Direct Compensation ($ M)(ii)			4.27				4.72				5.98				4.97				4.95

 

(i)	Source: S&P Dow Jones Indices LLC.

(ii)	The December 31, 2018 NEO Total Direct Compensation rose as a result of the addition of the CFO in September 2018.

 

Management Information Circular
March 23, 2021		34		North American Construction Group Ltd.

The graph shows the total direct compensation of the Corporation’s NEOs over the same five-year reporting period (see also the Summary Compensation Table within this discussion and analysis). The total direct compensation of our NEOs follows a similar trend to the NACG share value on the TSX, where in a reporting year, NACG share value was lower, the NEO total direct compensation was lower; conversely when the NACG share value increased, the NEO total direct compensation also increased. NEOs individual compensation is directly linked to share value, particularly with long-term awards tied to the financial performance of the Corporation, and in particular to TSR.

Trends Between NEO Compensation and Shareholder Value

To best demonstrate the link between NACG’s NEO compensation and shareholder return on investment, the following graph is included, which displays the CEO’s total direct compensation target, summary compensation reported and realized (actual) pay for each of the five years 2016 - 2020, ending December 31, 2020. The graph also indicates the cumulative return for $100 invested in NACG Common Shares over the same period.

As described in our “Executive Compensation Philosophy”, aligning executive compensation with shareholder interests is a key concern of the HRCC and Corporation. While target compensation for the CEO remained static, when NACG’s share price rose significantly in 2018 and remained at similar levels throughout 2020, the realized pay for the CEO increased as his long-term incentive awards (RSUs, PSUs and vested share options) began to vest and provide gains from the original grant award values. The “at-risk” pay is designed such that when long-term financial and strategic objectives are achieved, the share price rises and the realized pay component increases.

 

 

•

The CEO’s base salary and LTIP grant compensation remained unchanged over this five-year period.

 

•

As share price has risen, Realized Pay has increased, with the vesting of prior grants of share units and share options.

 

•

For years 2018, 2019 and 2020, Realized Pay includes settlements from past awards of equity shares and cash settlements of vested and exercised share options.

Definitions:

 

•

Target Compensation – Base pay, annual incentive at target performance, grant value of long-term incentive awards.

 

Management Information Circular
March 23, 2021		35		North American Construction Group Ltd.

•

SCT Pay – Compensation as reported in the Summary Compensation Table (SCT) includes base pay, annual incentive paid, grant value of long-term incentive awards

 

•

Realized Pay – Base pay, annual incentive paid, payouts of long-term incentive awards and exercised share options.

 

•

NACG (TSX) Indexed Value – Value of $100 invested in NACG shares on December 31, 2015.

Human Resources & Compensation Committee

The Human Resources and Compensation Committee (the “HRCC”) is comprised entirely of independent Board members. This approach ensures that no conflict of interest exists between Committee members accountable for making executive compensation decisions. Each HRCC committee member brings human resources and executive compensation oversight, as well as financial knowledge and industry experience.

The members of the HRCC, as of the fiscal year end, December 31, 2020, are:

 

Name of Committee Member		Role on Committee		Direct Executive Compensation Experience
Thomas P. Stan		Chair		Direct experience managing compensation and human resources matters as Chairman and CEO of Total Energy Services Ltd., President & CEO of Sound Energy Trust and Corval Energy Ltd, over previous 20 years.
Bryan D. Pinney		Member		Has served on the Corporation’s Human Resources & Compensation Committee since 2015.
				Direct experience overseeing compensation programs as part of managing partner roles.
				Chair of the Human Resources & Compensation Committee of TransAlta Corporation, member of the Human Resources & Compensation Committee of Sundial Growers Inc. Involved in oversight of the compensation programs of a private residential construction company.
				Served as Chair of the Board and as Chair of the Human Resources & Compensation Committee at Mount Royal University and responsible for oversight of the CEO’s compensation.
Maryse C. Saint-Laurent		Member		Over 30 years of direct and indirect experience in human resources management, compensation analysis, pension administration and the development of comprehensive compensation programs for senior executives.
				Served on the pension administration committees of large public companies which provided oversight to the management of large investment portfolios.
				Serves or has served as Chair of compensation committees of public corporations and a public service entity.

 

Compensation Governance

Under this mandate, the Board has approved a Committee Charter which outlines the responsibilities of the HRCC, which include:

 

(a)

review and recommend to the Board for approval the Corporation’s general compensation philosophy, policies and guidelines;

 

Management Information Circular
March 23, 2021		36		North American Construction Group Ltd.

(b)

review and recommend to the independent members of the Board for approval annually the corporate goals and objectives relevant to the compensation of the CEO;

 

(c)

review and recommend to the independent members of the Board for approval the compensation package for the CEO, including without limitation, base salary, annual incentive compensation, retirement, health and welfare benefits and perquisites;

 

(d)

review and approve the compensation package for the Executive Management of the Corporation, other than the CEO, including without limitation, base salaries, annual incentive compensation, retirement, health and welfare benefits and perquisites. In the Charter, “Executive Management” includes the CEO, President and COO, COO, EVP and CFO, Senior Vice President(s) and Vice-President(s);

 

(e)

review and recommend to the Board for approval the structure, implementation, participation, amendments or termination of all long-term incentive compensation programs, including but not limited to: the Share Option Plan, Deferred Share Unit (DSU) Plan, and the Performance Share Unit (PSU) Plan and Restricted Share Unit (RSU) Plan;

 

(f)

review and recommend to the Board for approval the compensation package for the Committee Chairs and other directors;

 

(g)

review and recommend to the Board for approval the recruitment, evaluation and succession plans for the CEO;

 

(h)

review and approve the recruitment, appointment, evaluation and succession plans for the Executive Management of the Corporation, other than the CEO;

 

(i)

retain, compensate, and terminate, as applicable, any independent compensation consultants or other consultants to advise and assist the Committee with respect to its responsibilities. The Committee will have sole authority to approve the consultant’s fees and the other terms and conditions of the consultant’s retention; and

 

(j)

undertake any other activity that may be reasonably necessary for the Committee to carry out its responsibilities as set out in the Charter.

Risk Management

As a key part of its oversight of board and executive compensation, the HRCC considers the implications of the risks associated with the Corporation’s compensation policies, including obtaining advice of external compensation experts and both internal and external legal counsel to identify and mitigate such risks. The key risks identified by the HRCC in relation to compensation are: (a) ensuring alignment of executive behavior with shareholder interests; (b) ensuring executives are not rewarded for taking undue risks outside the established risk tolerances for the Corporation; (c) ensuring compensation is at market levels to be able to attract and maintain talented executives while not over-paying for their services; (d) ensuring the Corporation’s compensation plans encourage a balance between short-term and long-term results. The HRCC believes that it has implemented policies, procedures and compensation plans and mechanisms that mitigate all of these risks, including taking the following actions:

 

•

Made a majority of the targeted annual compensation of each NEO “at-risk” and contingent on achieving pre-determined objectives or based on the appreciation of the Corporation’s share price over the mid to long term;

 

•

Regularly benchmarked base, variable and total compensation against a peer group of organizations selected by the HRCC as relevant for compensation benchmarking purposes;

 

•

Structured the Short-term Incentive Plan (STIP) with a balanced, diversified mix of financial and non-financial performance measures, each intended to improve different elements of the Corporation’s business;

 

•

Changed the STIP targets to 45% Adjusted EBITDA, 45% Adjusted EBIT and 10% safety, starting in 2018, thereby placing an emphasis on the Corporation’s income and cash flow within the incentive plan;

 

•

Set a threshold for STIP payout, established to compensate strong Corporation performance against stretch targets (while also capping the STIP payout for the CEO and other NEOs);

 

Management Information Circular
March 23, 2021		37		North American Construction Group Ltd.

•

Provided the executive team members with the option of converting up to 50% of their STIP payout to DSUs, where more of their pay is invested in the Corporation and tied to share price;

 

•

Adopted formal share ownership guidelines for NEOs, which require them to hold a target dollar value of equity in the Corporation while employed in an executive position and sought independent compensation consultant advice to ensure these guidelines are in-line with market best practices;

 

•

Implemented a vesting period of up to three years for RSUs and PSUs to align executives’ interests and efforts with those of shareholders over the long term;

 

•

Granted RSUs and PSUs annually, to provide overlapping performance cycles that require sustained levels of performance to achieve a consistent payout;

 

•

Provided strong oversight of the executive compensation program by using discretion to adjust metrics or payouts based on results, events and/or individual circumstances;

 

•

Implemented a formal anti-hedging policy which prohibits directors and employees, including executive officers, from short-selling or hedging securities of the Corporation, including a prohibition on purchasing financial instruments that are designed to hedge or offset a decrease in market value of securities granted as compensation or otherwise held directly or indirectly by the director or employee; and

 

•

Implemented a formal executive compensation claw-back policy which ensures executive officers are not able to benefit through an overpayment of performance-based compensation that is based on an error or omission in determining the compensation, the misconduct of the executive officer or a restatement of financial results (other than a restatement caused by a change in applicable accounting rules or interpretations).

Summary of 2020 HRCC Actions:

The HRCC held six meetings during calendar year 2020, each of which included an in-camera session without management present. In-camera sessions were also held with an external independent compensation advisor where executive compensation was discussed.

The following is a summary of the HRCC actions in 2020:

 

Responsibility		2020 Highlights
Executive Compensation		Reviewed the 2019 Corporate performance and made recommendations to the Board on the CEO and other NEO’s annual STIP payments;
		Reviewed and made recommendations for approval to the Board for the 2020 STIP performance criteria and targets;
		Reviewed and set goals for the CEO which align with the Corporation’s business strategy and financial outlook;
		Engaged the services of an independent consultant to review and provide advice on its executive compensation best practices;
		Reviewed the Corporation’s long-term incentive plan (LTIP) progress with quarterly reports on total shareholder return in relation to its peer group;
		Reviewed executive pay, including base salary and total direct compensation in relation to comparable positions within the Corporation’s peer group; and
		Reviewed and approved the annual LTIP grants and settlement awards.
Compensation Oversight and Disclosure		Employed the services of an independent consultant to review and provide advice on the Compensation Discussion and Analysis portion of the 2020 Management Information Circular for advice on best practices;
Oversight of Compensation Programs, Policies and Practices		Reviewed and approved corporate human resources policies and guidelines.

 

Management Information Circular
March 23, 2021		38		North American Construction Group Ltd.

Responsibility		2020 Highlights
Talent Management and Succession		Conducted quarterly reviews and consequential discussions regarding the Corporation’s leadership strategy, including any perceived short-term, mid-term or long-term leadership gaps against business requirements and depth of succession.
		Sought independent consultant advice on executive compensation for leadership transition effective January 2021.
Employee Engagement, Diversification and Inclusion		Reviewed and discussed employee demographic information as it relates to compensation and made recommendations for future action.

Independent Advice

The HRCC and management use the services of specialized and independent compensation consultants to assist in carrying out their mandate with respect to executive appointments and compensation governance.

The consultants may be engaged to:

 

•

provide information and independent advice to assist in developing the appropriate total compensation philosophy and structure for the current NEOs and potential executive positions;

 

•

assist management in the development of the various programs within our compensation framework;

 

•

perform studies of the market comparator group to evaluate the Corporation’s total compensation programs;

 

•

provide recommendations to the HRCC such as appropriate compensation structure and composition of an appropriate peer group; and

 

•

provide custom reporting data based on peer group financial results.

It is not a requirement of the HRCC to obtain prior approval from the Board of Directors to retain the services of specialized or independent compensation consultants. The HRCC may engage the services of a consultant to analyze and mitigate compensation risk to the Corporation. Mercer (Canada) Limited (“Mercer”), an independent compensation consultant, has been retained by the Corporation to assist in determining compensation for executive management and directors and was first retained in 2012 on executive compensation matters.

The HR Committee Chair may meet privately with the independent consultant before meetings where compensation is discussed to ensure that important issues receive appropriate attention. In addition, the HR Committee meets with the independent advisor in camera without management present when compensation is reviewed.

Mercer was engaged throughout 2020 by the HRCC as its independent compensation consultant to provide advice to the HRCC about executive compensation, share ownership guidelines and the composition of the Corporation’s comparator group. The following table sets out the fees paid to Mercer during the years ending December 31, 2020 and December 31, 2019:

 

Mercer (Canada) Limited		2020 Fees				2019 Fees
Executive Compensation-related Fees		$	120,600			$	133,844
All Other Fees			—				—
Total Fees Paid		$	120,600			$	133,844

In 2020, Mercer completed a compensation review of the NEO’s total compensation. Mercer benchmarked pay levels on a holistic basis, capturing base salary and short-term incentives to review against total cash compensation, and long-term incentives to analyze and compare total direct compensation to assess NACG’s competitiveness against the market. Based on market information provided for each executive position, Mercer recommended certain changes to NEO compensation (see Base Salary Changes in 2020).

 

Management Information Circular
March 23, 2021		39		North American Construction Group Ltd.

Summary Compensation Table

The following table sets forth the annual compensation for the year ended December 31, 2020, paid or granted to, the NEOs:

 

																		Non-Equity Incentive
																		Plan Compensation
										Share-				Option-				Annual
						Salary				based				based				Incentive				Long-term								All other
						Earned				Awards				Awards				Plan (STIP)				Incentive				Pension				Compensation				Total
Name and Principal Position		Year				($)(a)				($)(b)				($)(c)				($)(d)				Plans				value ($)				($)(e)				Compensation
Martin R. Ferron			2020				625,000				937,507				nil				249,267				N/A				—				31,250				1,843,024
Chief Executive Officer and Chairman of the Board			2019				625,000				937,505				nil				472,362				N/A				—				31,250				2,066,117
(Appointed June 7, 2012)			2018				625,000				937,510				nil				1,195,106				N/A				—				31,250				2,788,866
Joseph C. Lambert			2020				410,000				533,010				nil				163,519				N/A				—				63,773				1,170,302
President and Chief Operating Officer			2019				383,750				375,016				nil				290,085				N/A				—				19,187				1,068,038
(Executive Appointment September 27, 2010)			2018				375,000				375,012				nil				562,500				N/A				—				18,750				1,331,262
Jason W. Veenstra			2020				314,166				320,010				nil				125,368				N/A				—				15,709				775,253
Executive Vice President and Chief Financial Officer			2019				285,000				285,023				nil				215,397				N/A				—				14,250				799,670
(Appointed September 10, 2018)			2018				88,606				250,008				nil				132,909				N/A				—				4,430				475,953
Barry W. Palmer			2020				320,000				320,010				nil				95,719				N/A				—				16,001				751,730
Senior Vice President, Operations (Executive Appointment			2019				304,250				194,362				nil				172,484				N/A				—				15,212				686,308
December 15, 2011)			2018				299,000				194,362				nil				336,375				N/A				—				14,548				844,285
Jordan A. Slator			2020				230,483				105,763				nil				65,607				N/A				—				11,524				413,377
Vice President and General Counsel			2019				220,000				96,771				nil				116,412				N/A				—				11,000				444,183
(Executive Appointment December 1, 2018)			2018				215,000				96,757				nil				225,750				N/A				—				10,750				548,257

 

(a)	Salary earned reflects base salary for the period January to December for the applicable reporting year.

(b)

2020 and 2019 reflect the July 1st regular annual RSU and PSU grant value for each NEO. 2018 includes the September 10, 2018 LTIP Grant awarded to Mr.Veenstra, upon appointment. Refer to the Executive Team Achievement Highlights and Awards – 2020 LTIP Component section for the calculation of each NEO’s award.

(c)	No Option-based Awards were granted in 2020, 2019 or 2018.

(d)

Reflects the compensation value of the STIP award made to each Executive for the applicable reporting period. Mr. Ferron allocated 25% of his 2020 STIP, 20% of his 2019 STIP and 25% of his 2018 STIP to DSUs. Mr. Lambert allocated 50% of his 2020 STIP and 20% of his 2019 STIP to DSUs. Mr. Palmer allocated 50% of his 2020 STIP and 20% of his 2019 STIP to DSUs. Mr. Veenstra allocated 25% of his 2020 STIP and 50% of his 2019 STIP to DSUs.

(e)	Represents RRSP matching contributions received by the NEOs. Mr. Lambert’s amount also includes a vacation payout for FY2020 in the amount of $43,273. A portion of Mr. Palmer’s 2018 earnings did not earn Retirement Savings contributions.

Incentive Plan Awards

Outstanding Share-Based Awards

The following table summarizes the number and value of outstanding share-based awards for each of the NEOs for the year ended 2020:

 

														Market or Payout
						Market or Payout								Value of vested
		Number of shares				Value of Securities				Number of				share-based
		or units that have				that have Not				Securities that				awards not paid
NEO		not vested (a)				Vested(b)				have Vested(c)				out or distributed(d)
Martin R. Ferron			258,335				3,213,690				206,386				2,567,445
Joseph C. Lambert			138,472				1,722,594				70,664				879,059
Jason W. Veenstra			85,046				1,057,970				7,582				94,315
Barry W. Palmer			76,965				957,447				65,047				809,191
Jordan A. Slator			31,956				397,531				nil				nil

 

(a)	Represents RSUs, PSUs and reinvested dividends (rounded to the nearest whole number) for all NEOs granted but unearned as at December 31, 2020.

 

Management Information Circular
March 23, 2021		40		North American Construction Group Ltd.

(b)

RSU value is the NOA Closing Price as of December 31, 2020 on the TSX, which was $12.44 (Canadian dollars), for all awarded RSUs, as though the earned units were settled on that date. PSU value is the NOA Closing Price as of December 31, 2020 on the TSX, which was $12.44 (Canadian dollars), for all awarded PSUs, as though the earned units were settled on that date, multiplied by the TSR performance factor at target (100%).

(c)	Represents DSUs and reinvested dividends (rounded to the nearest whole number) for all NEOs granted to December 31, 2020.

(d)	DSU value is the NOA Closing Price as of December 31, 2020 on the TSX, which was $12.44 (Canadian dollars), as though the earned units were redeemed on that date..

Outstanding Option-Based Awards

The Share Option Plan was approved by the Corporation’s shareholders on November 3, 2006 and became effective on November 28, 2006. The Share Option Plan is administered by the HRCC. Option grants under the Share Option Plan may be made to employees and officers of the Corporation who are determined to be eligible by the HRCC. Directors are not eligible to receive options except, if applicable, in his or her capacity as employee or officer of the Corporation. The Share Option Plan provides for the discretionary grant of options to purchase NACG Common Shares. Options granted under the Share Option Plan are evidenced by an agreement, specifying the vesting, exercise price and expiration of such options, which terms are determined for each optionee by the HRCC. Options to be granted under the Share Option Plan will have an exercise price of not less than the previous five-day volume weighted average trading price of NACG Common Shares on the Toronto Stock Exchange or the New York Stock Exchange, converted to Canadian dollars. The Share Option Plan provides that up to 10% of the issued and outstanding NACG Common Shares from time to time may be reserved for issuance or issued from treasury and also provides that the maximum number of NACG Common Shares issuable to insiders under the Share Option Plan (and any other security-based compensation arrangements of the Corporation) is 10% of the issued and outstanding NACG Common Shares on a non-diluted basis immediately prior to the proposed option to purchase. The maximum number of NACG Common Shares issuable to insiders within any one-year period pursuant to the Share Option Plan (and any other security-based compensation arrangements of the Corporation) is 10% of the outstanding NACG Common Shares on a non-diluted basis immediately prior to the proposed option to purchase. Options may not be exercised prior to the first anniversary of the date of the grant. The vesting of options is otherwise determined on the grant of the option. Generally, options vest over a five-year period at a rate of 20% per year and expire at the end of 10 years. Each option has a term of no less than 5 and not more than 10 years. The Share Option Plan provides that, in the event of the termination (with or without cause) of an optionee, the options held by an optionee cease to be exercisable 30 days after the termination, subject to adjustment by the HRCC. For qualified retirees (age 55 or over and as approved by the HRCC), vested options continue to be exercisable for the balance of the exercise period applicable to the option. The Corporation does not provide financial assistance to participants under the Share Option Plan to facilitate the purchase of securities under the Share Option Plan. Options granted under the Share Option Plan are not transferable by an optionee, except by an optionee’s will or by the laws of descent and distribution. During the lifetime of an optionee, the options are exercisable by only him or her (or, in the case of the optionee’s disability, by his or her legal representative(s), if applicable). If an optionee dies, the options held by such optionee may be exercised by the legal representative of the deceased optionee. Such options cease to be exercisable on such date that is the earlier of: (a) 365 days after the optionee’s death, and (b) the expiry date set out in the deceased optionee’s option agreement. Notwithstanding the foregoing, the Share Option Plan allows the expiry date to be extended by determination of the HRCC or as permitted under the option agreement. If the expiry date falls within or immediately after a blackout period or a lock-up period, the expiry date would be automatically extended for five business days after the blackout period or lock-up period. Option repricing is prohibited by the Share Option Plan.

The Share Option Plan provides that the Board of Directors may make certain amendments to the Share Option Plan only upon receipt of shareholder and regulatory approval, including (i) any amendment to the number of securities issuable under the Share Option Plan, (ii) any changes in the participants in the plan that have the potential of broadening or increasing insider participation, (iii) the introduction of, or amendments to, any form of financial assistance; (iv) any amendments to the amendment provisions of the Share Option Plan, and (v) any other amendments that may lead to significant or unreasonable dilution in the Corporation’s outstanding securities or may provide additional benefits to eligible participants, especially to participants who are insiders. The Share Option Plan authorizes the Board of Directors to make other amendments to the plan, subject only to regulatory approval (i.e. without shareholder approval, unless specifically required by applicable law or regulatory authority), including (i) amendments of a “housekeeping” nature (i.e. amendments for the purpose of curing any ambiguity, error or omission in the Share Option Plan, or to comply with applicable law or the requirements of any stock exchange on which the NACG Common Shares are listed), (ii) any changes in the termination provisions of an option or of the

 

Management Information Circular
March 23, 2021		41		North American Construction Group Ltd.

Share Option Plan which does not entail an extension beyond the original expiry date and (iii) a discontinuance of the Share Option Plan.

The Corporation has not issued options under its Share Option Plan since 2014, at which time Share Options under the LTIP were replaced by PSUs. The following table summarizes the number and value of outstanding option-based awards for each of the NEOs for the year ended December 31, 2020. Each unexercised option represents one underlying common voting share in the capital of the Corporation.

 

																		Value of
														Value of				Unexercised In-
														Unexercised In-				the-Money
		Unexercised												the-Money				Options Which
		Options (including				Option Exercise								Options Which				Have Not Yet
NEO		those unvested)				Price				Option Expiry Date				Have Vested(a)				Vested(b)
Martin R. Ferron			nil				nil				N/A				nil				nil
Joseph C. Lambert			14,600			$	6.56				November 30, 2021				85,848				nil
			14,000			$	2.75				September 19, 2022				135,660				nil
			17,100			$	5.91				December 18, 2023				111,663				nil
			45,700											$	333,171
Barry W. Palmer			40,000				2.75				September 19, 2022				387,600				nil
			40,000											$	387,600
Jason W. Veenstra(c)			nil				nil				nil				nil				nil
Jordan A. Slator			5,000			$	2.75				September 19, 2022				48,450				nil
			7,500			$	5.91				December 18, 2023				48,975				nil
			12,500											$	97,425

 

(a)	Value is the December 31, 2020 Closing Price of one NACG Common Share on the Toronto Stock Exchange, which was $12.44, less the option exercise price multiplied by the number of outstanding option-based awards as of December 31, 2020, as though the options were exercised on that date.

(b)	All Stock Option grants have vested.

(c)	No Stock Options have been granted to Mr. Veenstra.

Incentive Plan Awards Vested or Earned During the Year

No option-based awards vested during the year ended December 31, 2020. The following table sets forth the value of share-based awards and non-equity incentive plan compensation that vested or was earned by the NEOs during the year ended December 31, 2020:

 

		Share-Based Awards –				Non-Equity Incentive Plan
		Value Vested During the				Compensation – Value
NEO		Year ($)(a)(b)				Earned During the Year ($)
Martin R. Ferron(c)			2,102,819				186,945
Joseph C. Lambert			568,905				81,761
Jason W. Veenstra			107,698				94,029
Barry W. Palmer			504,990				47,854
Jordan A. Slator			178,099				65,607

 

(a)	Includes the value of reinvested dividends earned on DSUs during the calendar year ended December 31, 2020, multiplied by their fair market value on the record date (“FMV”), for all NEOs, with the exception of Mr. Slator, who does not hold any DSUs.

(b)

Share-Based Awards - Represents the equity settlement of the RSUs and PSUs granted July 1, 2017, plus reinvested dividends, and in the case of PSUs, multiplied by the percentage of PSU Target Earned. The settlement is calculated as the number of RSUs and PSUs that matured during the calendar year ending December 31, 2020, multiplied by the Closing Price on the TSX on June 30, 2020, which was $8.51. The Corporation ranked in the 100th percentile for TSR performance against the 2017 peer group, resulting in a 200% PSU Performance Payout. See also (c) regarding Mr. Ferron’s vested Share-Based Awards.

(c)

Share-Based Awards - Represents the equity settlement of the PSUs granted to Mr. Ferron on July 1, 2017, plus reinvested dividends, multiplied by the percentage of PSU Target Earned, and the equity settlements of the 3rd tranche of the RSUs granted to Mr. Ferron on July 1, 2017, the 2nd tranche of RSUs granted to Mr. Ferron on July 1, 2018 and the 1st tranche of RSUs granted to Mr. Ferron on July 1, 2019, plus reinvested dividends. Calculated as the number of RSUs and PSUs that matured during the calendar year ending December 31, 2020, multiplied by the Closing Price on the TSX on June 30, 2020, which was $8.51.

 

Management Information Circular
March 23, 2021		42		North American Construction Group Ltd.