Electric Royalties Ltd.

(the “Company”)

FORM 51-102F6V

FOR THE YEAR ENDED DECEMBER 31, 2020

STATEMENT OF EXECUTIVE COMPENSATION

The following information, dated as of June 29, 2021, is provided as required under Form 51-102F6V Statement of Executive Compensation (Venture Issuers) and is prepared as at and for the year ended December 31, 2020 (except as otherwise indicated).

This Statement of Executive Compensation should be read in conjunction with the Company’s information circular (the “Information Circular”) dated August 10, 2020 as publicly filed on SEDAR at www.sedar.com on August 19, 2020. All monetary amounts herein are expressed in Canadian Dollars (“$”), unless stated otherwise.

BASIS OF PRESENTATION

The Company was incorporated under the Business Corporations Act (British Columbia) on September 16, 2016. The Company began trading its shares on the TSX Venture Exchange (“TSX-V”) as a capital pool company (“CPC”) (as defined in the TSX-V Policy 2.4 – Capital Pool Companies (the “CPC Policy”)) on November 3, 2017.

On June 24, 2020, the Company announced that, pursuant to a business combination agreement dated January 28, 2020 between the Company, 1238383 B.C. Ltd. (the “Subco”) and a private company then named as Electric Royalties Ltd. (the “Legal Acquiree” or the “Operating Entity”), it had completed its qualifying transaction (the “Qualifying Transaction”), whereby following the consolidation (the “Consolidation”) of the Company’s shares on a 2:1 basis, the Qualifying Transaction was effected by way of a “three-cornered” amalgamation, in which: (a) the Subco was amalgamated with the Legal Acquiree to form an amalgamated company (“Amalco”); (b) all issued and outstanding shares of the Legal Acquiree were exchanged for post-Consolidation shares of the Company on a 1:1 basis; and (c) Amalco became a wholly-owned subsidiary of the Company. The Qualifying Transaction was a reverse-takeover of the Company and upon completion thereof, the Company changed its name to “Electric Royalties Ltd.” and carried on the business previously carried on by the Legal Acquiree.

Prior to the completion of the Qualifying Transaction, the Company did not pay any cash compensation to its officers and directors due to its CPC status. As the Qualifying Transaction was a reverse takeover of the Company, the resulting issuer was a continuation of the business of the Operating Entity, which also did not pay any compensation to its officers and directors since its inception to December 31, 2019. This Statement of Executive Compensation includes the executive compensation discussions relating to the Operating Entity.

NAMED EXECUTIVE OFFICERS

In this section "Named Executive Officer" (or " NEO ") means each of the following individuals:

a) the Chief Executive Officer (" CEO ");
b) the Chief Financial Officer (" CFO ");
c) each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year whose total compensation was, individually, more than $150,000 for that financial year; and
d) each individual who would be an NEO under paragraph (c) but for the fact that the individual was neither an executive officer of the company, nor acting in a similar capacity, at December 31, 2020.

Electric Royalties Ltd./Form 51-102F6V/December 31, 2020

The NEOs of the Operating Entity as at December 31, 2020 are as follows:

Brendan Yurik – CEO of the Company; and
Luqman Khan – CFO of the Company

SUMMARY COMPENSATION TABLE

Compensation paid to the NEOs during the Company's three most recently completed financial years ended December 31, 2020, 2019, and 2018 is set out below and expressed in Canadian dollars unless otherwise noted:

Name and principal position	Fiscal Year	Salary ($)	Share- based awards ($)	Option- based awards(3) ($)	Non-equity incentive plan compensation	Non-equity incentive plan compensation	Pension value ($)	All other compensat ion ($)	Total compensation ($)
					Annual incentiv e plans ($)	Long-term incentive plans ($)
Brendan Yurik (1) CEO	2020 2019 2018	150,000 Nil N/A	Nil Nil N/A	96,000 Nil N/A	Nil Nil N/A	Nil Nil N/A	Nil Nil N/A	Nil Nil N/A	246,000 Nil N/A
Luqman Khan (2) CFO	2020 2019 2018	21,000 Nil N/A	Nil Nil N/A	36,000 Nil N/A	Nil Nil N/A	Nil Nil N/A	Nil Nil N/A	Nil Nil N/A	57,000 Nil N/A

Notes:

(1) Mr. Yurik was appointed as a CEO of the Company in July 2019. Effective January 1, 2020, Mr. Yurik entered into an employment agreement with the Company whereby he is entitled to receive a base salary of $150,000 per year.
(2) Mr. Khan was appointed as CFO of the Company in July 2019. Mr. Khan provides services through a private consulting firm. Services of Mr. Khan are not received on a full-time basis; instead, his services are received on an as-needed basis.
(3) The options were granted in July 2020. For compensation purposes, the Black-Scholes option valuation model has been used to determine the fair value on the date of grant using the following assumptions: grant date share price of $0.29 per share, exercise price of $0.29 per share, expected life of 5 years, expected volatility of 50%, expected dividend yield of 0%, and risk-free interest rate of 0.35%. The Black-Scholes grant date fair value for these awards was $0.12 per option.

INCENTIVE PLAN AWARDS

Outstanding Share-based Awards and Option-based Awards

The Company currently has an option-based awards plan. The following table sets out the option-based awards outstanding as at December 31, 2020, for each NEO:

		Option-based Awards	Option-based Awards
Name	Number of securities underlying unexercised options (#)	Option exercise price ($)	Option expiration date m-d-y	Value of unexercised in-the- money options(1) ($)
Brendan Yurik	800,000	0.29	July 15, 2025	Nil
Luqman Khan	300,000	0.29	July 15, 2025	Nil

Electric Royalties Ltd./Form 51-102F6V/December 31, 2020

Notes:

The value is the difference between the TSXV closing price of $ 0.25 per common share at December 31, 2020 and the exercise price of options.

Incentive Plan Awards – Value Vested or Earned

The following table sets out all incentive plans (value vested or earned) during the year ended December 31, 2020, for each NEO:

Name	Option-based awards – Value vested during the year ($)	Non-equity incentive plan compensation – Value earned during the year ($)
Brendan Yurik	Nil	Nil
Luqman Khan	Nil	Nil

Note:

Represents the aggregate dollar value that would have been realized if options under the option-based award had been exercised on the 2020 vesting date determined by taking the difference between the market price of the shares subject to the option at date of vesting and the exercise price of the option.

PENSION PLAN BENEFITS

The Company has no pension or deferred compensation plans for its directors, officers or employees.

TERMINATION AND CHANGE OF CONTROL BENEFITS

Except as otherwise outlined herein and in accordance with the Employment Standards Act (British Columbia), there are no compensatory plan(s) or arrangement(s), with respect to any NEO resulting from the resignation, retirement or any other termination of employment of the officer’s employment or from a change of the NEO’s responsibilities following a change in control.

DIRECTOR COMPENSATION

Philosophy and Objectives

The main objective of director compensation is to attract and retain directors with the relevant skills, knowledge and abilities to carry out the Board’s mandate.

Director Compensation

The compensation provided to the directors for the financial year of December 31, 2020 is:

Name	Fees earned(1) ($)	Share option- based awards(2) ($)	Non-equity incentive plan compensation ($)	Pension value ($)	All other compen- sation ($)	Total ($)
Marchand Snyman	50,000	60,000	–	–	–	110,000
Craig Lindsay	12,000	36,000	–	–	–	48,000

Electric Royalties Ltd./Form 51-102F6V/December 31, 2020

Name	Fees earned(1) ($)	Share option- based awards(2) ($)	Non-equity incentive plan compensation ($)	Pension value ($)	All other compen- sation ($)	Total ($)
Robert Schafer	12,000	18,000	–	–	–	30,000

Note:

The Company initiated directors’ fees effective July 1, 2020 and the amounts of fees earned in the table above represent fees for only half year. Non-management directors of the Company receive an annual retainer fee of $15,000 in their capacity as directors. The Chair of the Audit and Risk, Compensation, and Nominating and Governance Committee each receives an additional $5,000 annually, and members of the various Board Committees each receives an additional $2,000 annually for each Committee served. Marchand Snyman, as a Chairman of the Board, receives an annual fee of $100,000 and no committee fees.

The following table sets out various Board Committees and their members:

	Audit and Risk	Compensation	Nominating and Governance
	Committee	Committee	Committee.
Marchand Snyman	Member	Member	Chair
Craig Lindsay	Chair	Member	Member
Robert Schafer	Member	Chair	Member

The options were granted in July 2020. For compensation purposes, the Black-Scholes option valuation model has been used to determine the fair value on the date of grant using the following assumptions: grant date share price of $0.29 per share, exercise price of $0.29 per share, expected life of 5 years, expected volatility of 50%, expected dividend yield of 0%, and riskfree interest rate of 0.35%. The Black-Scholes grant date fair value for these awards was $0.12 per option.

Incentive Plan Awards

Outstanding Share-based Awards and Option-based Awards

The Company currently has an option-based awards plan and a share-based awards plan. However, no sharebased awards have been granted to date. The following table sets out the option-based awards outstanding as at December 31, 2020, for each director:

		Option-based Awards	Option-based Awards
Name	Number of securities underlying unexercised options (#)	Option exercise price ($)	Option expiration date m-d-y	Value of unexercised in-the- money options (1) ($)
Marchand Snyman	500,000	0.29	July 15, 2025	Nil
Craig Lindsay	300,000 25,000(2)	0.29 0.20	July 15, 2025 April 10, 2022	Nil 1,000
Robert Schafer	150,000	0.29	July 15, 2025	Nil

Notes:

The value is the difference between the TSXV closing price of $0.25 per common share at December 31, 2020 and the exercise price of options.
These represent post-Consolidation options that were granted prior to the Qualifying Transaction.

Electric Royalties Ltd./Form 51-102F6V/December 31, 2020

Incentive Plan Awards – Value Vested or Earned

The following table sets out all incentive plans (value vested or earned) during the year ended December 31, 2020, for each director:

2020, for each director:
Name	Option-based awards – Value vested during the year(1) ($)	Non-equity incentive plan compensation – Value earned during the year ($)
Marchand Snyman	–	–
Craig Lindsay	–	–
Robert Schafer	–	–

Note:

Represents the aggregate dollar value that would have been realized if options under the option-based award had been exercised on the 2020 vesting date determined by taking the difference between the market price of the shares subject to the option at date of vesting and the exercise price of the option.

COMPENSATION ACTIONS, DECISIONS OR POLICIES MADE AFTER DECEMBER 31, 2020.

Given the evolving nature of the Corporation’s business, the Board continues to review and redesign the overall compensation plan for senior management so as to continue to address the objectives identified above.

COMPENSATION COMMITTEE AND GOVERNANCE

After the completion of the Qualifying transaction, in July 2020, the Compensation Committee of the Board was constituted to assist the Board in carrying out its responsibilities relating to executive and director compensation, including: reviewing and recommending director compensation, overseeing the Company's base compensation structure and equity-based compensation program, recommending compensation of the Company's officers and employees, evaluating performance of officers generally and in light of annual goals and objectives. The charter for the Compensation Committee is included in the Corporate Governance Policies and Procedures Governance Manual and is available for viewing from the Company’s website under Corporate Governance.

The current members of the Compensation Committee of the Company as stated above are Robert Schafer (Chair), Marchand Snyman and Craig Lindsay, all of whom are independent directors. The Compensation Committee assists the Board in carrying out its responsibilities relating to executive and director compensation.

The members of the Compensation Committee possess the skills and experience that enable the committee to make decisions on the suitability of the Company’s compensation policies and practices.

As a result of their education and experience, each member of the Compensation Committee has familiarity with, an

understanding of, or experience in:

(a) reviewing compensation philosophy including base compensation structures & incentive programs;
(b) reviewing specific executive and director compensation;
(c) administering of share options and other equity based compensation plans and the determination of share option grants; and
(d) reviewing performance goals and the assessments of corporate officers.

All members of the Compensation Committee serve on other boards of publicly traded companies and have experience in the area of compensation and related issues. For relevant education and experience of the members of the

Electric Royalties Ltd./Form 51-102F6V/December 31, 2020

Compensation Committee, see disclosure under " Election of Directors " in the Company’s Information Circular filed on SEDAR on August 19, 2020.

The Compensation Committee has, among other things, the following duties, responsibilities and authority:

(a) to recommend to the Board the form and amount of compensation to be paid by the Company to directors for service on the Board and on its committees. The Compensation Committee shall review director compensation at least annually.
(b) to annually review the Company’s base compensation structure and the Company's incentive compensation, share option and other equity-based compensation programs and recommend changes in or additions to such structure and plans to the Board as needed.
(c) to recommend to the Board the annual base compensation of the Company's executive officers and senior managers (collectively the "Officers").
(d) to recommend to the Board annual corporate goals and objectives under any incentive compensation plan adopted by the Company for Officers, and recommend incentive compensation participation levels for Officers under any such incentive compensation plan. In determining the incentive component of compensation, the Compensation Committee will consider the Company’s performance and relative shareholder return, the values of similar incentives at comparable companies and the awards given in past years.
(e) to evaluate the performance of Officers generally and in light of annual corporate goals and objectives under any incentive compensation plan.
(f) to periodically review with the Chairman and CEO their assessments of corporate officers and senior managers and succession plans and make recommendations to the Board regarding appointment of officers and senior managers.
(g) to administer the Company's share option and other equity based compensation plans and determine the annual grants of share options and other equity based compensation.
(h) to recommend to the Nominating and Governance Committee the qualifications and criteria for membership on the Compensation Committee.

Due to the small size of the Company and the current level of the Company's activities, the Compensation Committee is able to closely monitor and consider any risks which may be associated with the Company's compensation policies and practices. Risks, if any, may be identified and mitigated through regular meetings of the Board during which financial and other information of the Company are reviewed. No risks have been identified arising from the Company's compensation policies and practices that are reasonably likely to have a material adverse effect on the Company.

Executive compensation is comprised of short-term compensation in the form of a base salary and long-term ownership through the Company's share option plan. This structure ensures that a significant portion of executive compensation (stock options) is both long-term and "at risk" and, accordingly, is directly linked to the achievement of business results and the creation of long-term shareholder value. As the benefits of such compensation, if any, are not realized by officers until a significant period of time has passed, the ability of officers to take inappropriate or excessive risks that are beneficial to their compensation at the expense of the Company and the shareholders is extremely limited. Furthermore, the short-term component of the executive compensation (base salary) represents a relatively small part of the total compensation. As a result, it is unlikely that an officer would take inappropriate or excessive risks at the expense of the Company or the shareholders that would be beneficial to their short-term compensation when their long-term compensation might be put at risk from their actions.

Report on Executive Compensation

This report on executive compensation has been authorized by the Compensation Committee. The Board assumes responsibility for reviewing and monitoring the long-range compensation strategy for the Company’s senior management, although the Compensation Committee guides it in this role. As part of its mandate, the Board determines the type and amount of compensation for the Company’s executive officers. In addition, the Board reviews the methodology utilized by the Company for setting salaries of employees throughout the organization.

Electric Royalties Ltd./Form 51-102F6V/December 31, 2020

The Company’s compensation policies and programs are designed to be competitive with similar companies and to recognize and reward executive performance consistent with the success of the Company’s business.

Philosophy and Objectives

The Company’s senior management compensation program is designed to ensure that the level and form of compensation achieves certain objectives, including:

(a) attracting and retaining talented, qualified and effective executives;
(b) motivating the short and long-term performance of these executives; and
(c) better aligning their interests with those of the Company’s Shareholders.

In compensating its senior management, the Company employs a combination of base salary, bonus compensation and equity participation through its share option plan and other equity participation plans.

Base Salary

In the Board’s view, paying base salaries that are competitive in the markets in which the Company operates is a first step to attracting and retaining talented, qualified and effective executives. The NEOs are paid a salary in order to ensure that the compensation package offered by the Company is in line with that offered by other companies in our industry, and as an immediate means of rewarding the NEO for efforts expended on behalf of the company.

The salary to be paid to a particular NEO is determined by gathering competitive salary information from a variety of sources, including surveys conducted by independent consultants and national and international publications, such as the Mercer Benchmark Database. Payment of a cash salary fits within the objective of the compensation program since it rewards each NEO for performance of his duties and responsibilities.

Bonus Compensation

The Board considers performance, shareholder benefits achieved, competitive factors and other matters in awarding bonuses, including if sufficient cash resources are available for the granting of bonuses.

All Other Fees

There were no other fees paid to any consultants or advisors relating to executive compensation.

Executive Compensation-Related Fees

No compensation was paid to any compensation consultants in respect of executive compensation studies for the Company’s two most recently completed financial years.

Equity Participation – Option Based Awards

The Company has a share option plan (the "Option Plan"). The Option Plan was established to provide incentive to qualified parties to increase their proprietary interest in the Company, encourage the alignment of interests with its shareholders, and foster their continued association with the Company.

Long term incentives are comprised of share options. The Compensation Committee is delegated the authority to grant share options. The Compensation Committee reviews the grants of share options to directors, management, employees and consultants. Share options are generally granted annually, and at other times of the year to individuals commencing employment with the Company. Share option exercise prices are set in accordance with policies of the TSX Venture Exchange and are based on the closing trading price prior to the date of grant.

The Company believes that encouraging its executives, employees and directors to become shareholders is the best way of aligning their interests with those of its Shareholders. Equity participation is accomplished through the Option Plan. Share options are granted taking into account a number of factors, including the amount and term of options previously granted, base salary and bonuses, and competitive factors. Share options vest on terms established by the Compensation Committee.

Electric Royalties Ltd./Form 51-102F6V/December 31, 2020

The Company’s long term incentives are designed to foster and promote the long-term financial success of the Company by strengthening the ability of the Company to attract and retain highly competent employees, motivating performance through incentive compensation, promoting greater alignment of interests between employees and shareholders in creating long-term shareholder value, and enabling employees to participate in the long-term growth and financial success of the Company. Share options provide employees with the opportunity to participate in the growth of the Company’s share price as well as benefit from the favourable tax treatment applicable to this form of compensation.

For material terms of the Option Plan, see disclosure under " Particular of Matters to be Acted Upon " in the Company’s Information Circular filed at SEDAR on August 19, 2020.

General

The Compensation Committee considered the implications of the risks associated with the Company’s compensation policies and practices and concluded that, given the nature of the Company’s business and the role of the Compensation Committee in overseeing the Company’s executive compensation practices, the compensation policies and practices do not serve to encourage any non executive officer NEO or individual at a principal business unit or division to take inappropriate or excessive risks, and no risks were identified arising from the Company’s compensation policies and practices that are reasonably likely to have a material adverse effect on the Company.

The Company has adopted a policy restricting its NEOs and directors from purchasing financial instruments including prepaid variable forward contracts, equity swaps, collars, or units of exchange funds that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the NEO or director. For the years ended December 31, 2020 and 2019, no NEO or director, directly or indirectly, employed a strategy to hedge or offset a decrease in market value of equity securities granted as compensation or held.

Given the evolving nature of the Company’s business, the Board continues to review and redesign the overall compensation plan for senior management so as to continue to address the objectives identified above.

Electric Royalties Ltd./Form 51-102F6V/December 31, 2020

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Electric Royalties Ltd. Remuneration Information 2021

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