Spectral Medical Inc.

==> picture [283 x 87] intentionally omitted <==

MANAGEMENT INFORMATION CIRCULAR

SOLICITATION OF PROXIES

April 29, 2021

This Management Information Circular (this “ Circular ”) is furnished in connection with the solicitation of proxies by and on behalf of the management of Spectral Medical Inc. (“ Spectral ” or the “ Company ”) for use at the annual general and special meeting (the “ Meeting ”) of holders (“ Shareholders ”) of common shares in the capital of the Company (“ Shares ”) to be held by way of a live audio webcast at https://web.lumiagm.com/218116379 on June 3, 2021 at 4:00 p.m. (Toronto time) and any adjournments or postponements thereof for the purposes set forth in the accompanying Notice of Annual General and Special Meeting of Shareholders (the “ Notice of Meeting ”). The solicitation will be primarily by mail, but proxies may also be solicited personally or by telephone by directors, officers or employees of the Company. The cost of such solicitation will be borne by the Company.

The Company will not be using the notice-and-access mechanism under National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer for distribution of the Meeting Materials (as defined herein) to Shareholders.

Unless otherwise specified herein, the information contained herein is given as of April 29, 2021.

PARTICIPATING IN THE VIRTUAL MEETING

Attending the Virtual Meeting

The Meeting will be hosted virtually, by way of a live audio webcast. Shareholders will not be able to attend the meeting in person. Shareholders and duly appointed proxyholders can attend the meeting online by going to https://web.lumiagm.com/218116379.

Registered Shareholders (as defined below) and duly appointed proxyholders can participate in the Meeting by clicking “ I have a login ” and entering a Username and Password before the start of the Meeting.

(i) Registered Shareholders – the 15-digit control number located on the form of proxy or in the email notification you received is the Username and the password is “spectral2021”.
(ii) Duly appointed proxyholder – Computershare Investor Services Inc. (“ Computershare ”) will provide the proxyholder with a Username after the voting deadline has passed. The password to the meeting is “spectral2021”. Please see “Appointment and Revocation of Proxies” section below for information on validly appointing proxyholders.

Voting at the Meeting will only be available for Registered Shareholders and duly appointed proxyholders. Non-Registered Shareholders (as defined below) who have not appointed themselves may attend the Meeting by clicking “ I am a guest ” and completing the online form.

Voting at the Virtual Meeting

A Registered Shareholder or a Non-Registered Shareholder who has appointed themselves or a third party proxyholder to represent them at the Meeting, will appear on a list of shareholders prepared by Computershare, the transfer agent and registrar for the Meeting. To have their Shares voted at the Meeting, each Registered Shareholder or proxyholder will be required to enter their control number or Username provided by Computershare at https://web.lumiagm.com/218116379 prior to the start of the Meeting. In order to vote, Non-Registered Shareholders who appoint themselves as a proxyholder MUST register with Computershare at http://www.computershare.com/SpectralMedical after submitting their voting instruction form in order to receive a Username (please see the information under the heading “Appointment and Revocation of Proxies” below for details.

United States Non-Registered Shareholders

To attend and vote at the virtual Meeting, United States’ Non-Registered Shareholders must first obtain a valid legal proxy from the applicable broker, bank or other agent and then register in advance to attend the Meeting. Such Shareholders must follow the instructions from their broker or bank or contact their broker or bank to request a legal proxy form. After first obtaining a valid legal proxy from their broker, bank or other agent, to then register to attend the Meeting, such Shareholders must submit a copy of their legal proxy to Computershare. Requests for registration should be directed to: Computershare Investors Services Inc., 100 University Avenue, 8[th] Floor, Toronto, Ontario M5J 2Y1 or email at [email protected].

Requests for registration must be labeled as “Legal Proxy” and be received no later than 4:00 p.m (Toronto Time) on June 1, 2021. Such Shareholders will receive a confirmation of their registration by email after Computershare receives their registration materials. Following which, such Shareholders may attend the Meeting and vote their Shares at https://web.lumiagm.com/218116379. Please note that such Shareholders are required to register their appointment at http://www.computershare.com/SpectralMedical .

General Virtual Meeting Information

In order to participate in the virtual Meeting, Shareholders must have a valid 15-digit control number and proxyholders must have received an email from Computershare containing a Username.

If you are using a 15-digit control number to login to the online Meeting and you accept the terms and conditions, you will be revoking any and all previously submitted proxies. However, in such a case, you will be provided the opportunity to vote by ballot on the matters put forth at the Meeting. If you DO NOT wish to revoke all previously submitted proxies, do not accept the terms and conditions, in which case you can only enter the Meeting as a guest.

Non-Registered Shareholders who do not have a 15-digit control number or Username will only be able to attend as a guest which allows them to listed to the Meeting but not vote or submit questions.

If you are eligible to vote at the meeting, it is important that you are connected to the internet at all times during the Meeting in order to vote when balloting commences. It is your responsibility to ensure connectivity for the duration of the Meeting.

VOTING PROCEDURES

Who Can Vote

You are entitled to vote if you are a Shareholder of record as of the close of business on April 14, 2021, (the “ Record Date ”). All such Shareholders will be entitled to one vote at the Meeting for each Share held except to the extent that such Shareholder has transferred any of such Shares after the Record Date and the transferee of any of such Shares produces properly endorsed Share certificates or otherwise establishes ownership thereof and makes a written demand not later than seven clear days before the

Meeting to be included in the list of Shareholders entitled to vote at the Meeting, in which case the transferee will be entitled to vote such Shares.

How to Vote

Regardless of how many Shares are owned by any particular Shareholder, the board of directors of the Company (the “ Board ”) encourages all Shareholders to vote. You can vote at the Meeting by following the instructions outlined above under the “Participating in the Virtual Meeting” section or by using the enclosed voting instruction form (a “ VIF ”) or proxy accompanying this Circular to vote using one of the options set out in the chart below prior to the Meeting. Voting is quick and easy.

REGISTERED SHAREHOLDERS (YOU HOLD A PHYSICAL SHARE CERTIFICATE REGISTERED IN YOUR NAME) THERE ARE 4 WAYS TO VOTE USING THE ENCLOSED PROXY	REGISTERED SHAREHOLDERS (YOU HOLD A PHYSICAL SHARE CERTIFICATE REGISTERED IN YOUR NAME) THERE ARE 4 WAYS TO VOTE USING THE ENCLOSED PROXY	REGISTERED SHAREHOLDERS (YOU HOLD A PHYSICAL SHARE CERTIFICATE REGISTERED IN YOUR NAME) THERE ARE 4 WAYS TO VOTE USING THE ENCLOSED PROXY	REGISTERED SHAREHOLDERS (YOU HOLD A PHYSICAL SHARE CERTIFICATE REGISTERED IN YOUR NAME) THERE ARE 4 WAYS TO VOTE USING THE ENCLOSED PROXY
1.VOTE BY INTERNET Go to: www.investorvote.com and vote using your Control # located on the front of your proxy. Follow the voting instructions on screen.	2.VOTE BY TELEPHONE: Call toll-free English 1- 866-732-8683 and vote using your Control # located on your proxy.	3.VOTE BY FAX: Mark, sign and date your proxy form and return it by facsimile to toll free in North America 1-866-249- 7775 or 1-416-263- 9524.	4.VOTE BY MAIL: Mark, sign and date your proxy form and return it in the enclosed postage-paid envelope.
CANADIAN BENEFICIAL SHAREHOLDERS (YOU HOLD SHARES THROUGH A CANADIAN BANK, BROKER OR INTERMEDIARY) THERE ARE 3 WAYS TO VOTE USING YOUR VOTING INFORMATION FORM
1.VOTE BY INTERNET: Go to: WWW.PROXYVOTE.COM and vote using the 16 digit control number located on your VIF.	2.VOTE BY TELEPHONE: Call toll-free English 1- 800-474-7493 or French 1-800-474-7501 and vote using the 16 digit control number located on your VIF.	3.VOTE BY MAIL: Mark, sign and date your VIF and return it in the enclosed postage-paid envelope.
UNITED STATES BENEFICIAL SHAREHOLDERS (YOU HOLD SHARES THROUGH A BANK, BROKER OR INTERMEDIARY)THERE ARE 3 WAYS TO VOTE USING YOUR VOTING INFORMATION FORM

1.VOTE BY INTERNET: Go to: WWW.PROXYVOTE.COM and vote using the 16 digit control number located on your VIF.	2.VOTE BY TELEPHONE: Call the toll-free number listing on your VIF and vote using the 16 digit control number located on your VIF.	3.VOTE BY MAIL: Mark, sign and date your VIF and return it in the enclosed postage-paid envelope.

BOARD RECOMMENDATION

The Board recommends that Shareholders vote “ FOR ”:

(i) Each of the proposed director nominees, whose names are set forth in the Circular;
(ii) The reappointment of PricewaterhouseCoopers LLP, Chartered Professional Accountants, as auditor of the Company, to hold office until the next annual meeting of Shareholders, and for the authorization for the directors to fix the auditor’s remuneration; and
(iii) The approval of the consolidation of all of the Company’s issued and outstanding Shares,

all as described in more detail below.

REGISTERED SHAREHOLDERS

Registered shareholders (“ Registered Shareholders ”) are shareholders whose names appear directly on the share register of the Company maintained by the Company’s transfer agent, Computershare, as the direct holders of Shares. Only Registered Shareholders or the persons they appoint as their proxies are permitted to vote at the Meeting. Registered Shareholders who are unable to attend the Meeting or any adjournment thereof online are encouraged to vote by completing the enclosed form of proxy or, alternatively, by telephone or over the internet, in each case in accordance with the enclosed instructions. A proxy will not be valid for use at the Meeting unless the completed form of proxy is deposited to the Company’s transfer agent, Computershare Investor Services Inc., 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, before 4:00 p.m (Toronto Time) on June 1, 2021 or, if the Meeting is adjourned, 48 hours (excluding Saturdays, Sundays and holidays) preceding the day and time the adjourned Meeting is reconvened. Late proxies may be accepted or rejected by the chairman of the Meeting (the “ Chair ”) in his discretion, and the Chair is under no obligation to accept or reject any particular late proxy.

The form of proxy accompanying this Circular confers discretionary authority upon the proxy nominee with respect to any amendments or variations to matters identified in the Notice of Annual Meeting accompanying this Circular and any other matters that may properly come before the Meeting. As at the date of this Circular, Spectral’s management is not aware of any such amendments or variations, or of other matters to be presented for action at the Meeting.

NON-REGISTERED SHAREHOLDERS (BENEFICIAL SHAREHOLDERS)

The information in this section is of significant importance to Shareholders who do not hold their Shares in their own name . Shares beneficially owned by non-registered Shareholders (“ Non-Registered Shareholders ”) are registered either:

(i) in the name of an intermediary (an “ Intermediary ”) that the Non-Registered Shareholder deals with in respect of the Shares (Intermediaries include, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans); or
(ii) in the name of a depository (a “ Depository ”, such as The Canadian Depository for Securities Limited) of which the Intermediary is a participant.

Non-Registered Shareholders, wishing to vote their Shares, must instruct their Intermediary or Depository to vote their Shares on their behalf. Shares of a Non-Registered Shareholder will not be voted at the Meeting unless the Non-Registered Shareholder instructs its Intermediary or Depository to do so. The Intermediary or Depository must receive a Non-Registered Shareholder’s voting instructions in sufficient time for the Intermediary or Depository to act on them. Non-Registered Shareholders that wish to vote in person at the

Meeting must carefully follow the steps provided by their Intermediary or Depository to appoint themselves or another representative to vote at the Meeting.

In accordance with the requirements of National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer, the Company has distributed copies of the Notice of Meeting, this Circular and the form of proxy (collectively, the “ Meeting Materials ”) to the clearing agencies, Intermediaries and Depository for onward distribution to Non-Registered Shareholders. The Company has elected to pay for the delivery of Meeting Materials to Non-Registered Shareholders. Intermediaries often use service companies to forward the Meeting Materials to Non-Registered Shareholders.

If you are a Non-Registered Shareholder of the Company, your Intermediary will send you a VIF or form of proxy accompanying this Circular. The VIF will instruct the Intermediary how to vote your Shares at the Meeting on your behalf. You must follow the instructions from your Intermediary to vote. The majority of Intermediaries now delegate responsibility for obtaining instructions from clients to Broadridge Investor Communications Solutions, Canada (“ Broadridge ”). Broadridge typically mails a VIF to the Non-Registered Shareholders and asks Non-Registered Shareholders to return the VIF to Broadridge (in some cases the completion of the VIF may be by telephone or the internet). Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of Shares to be represented at the Meeting.

A Non-Registered Shareholder may also receive, on occasion, a form of proxy that has already been signed by the Intermediary (typically by a facsimile, stamped signature) and is restricted as to the number of Shares beneficially owned by that particular Non-Registered Shareholder. This form of proxy is otherwise not completed. Because the Intermediary has already signed the form of proxy, this form of proxy is not required to be signed by the Non-Registered Shareholder when submitting it. In this case, the Non-Registered Shareholder who wishes to submit a proxy should otherwise properly complete the form of proxy and deliver it to the Company c/o Computershare Investor Services Inc. as provided above.

In either case, the purpose of these procedures is to permit Non-Registered Shareholders to direct the voting of the Shares that they beneficially own. Should Non-Registered Shareholders who receive one of the above forms wish to vote at the Meeting in person, such Non-Registered Shareholders should strike out the names of the designated proxyholders and insert the Non-Registered Shareholder’s name in the blank space provided.

In either case, Non-Registered Shareholders should carefully follow the instructions of their Intermediary or Depository including those regarding when and where the proxy or proxy authorization form is to be delivered and may be revoked.

Additionally, the Company may utilize the Broadridge QuickVote™ service to assist eligible Non-Registered Shareholders with voting their Shares. There are two kinds of Non-Registered Shareholders: (i) those who object to their name being made known to the issuers of securities that they own (called “OBOs” or Objecting Beneficial Owners); and (ii) those who do not object (called “NOBOs” or Non-Objecting Beneficial Owners).

APPOINTMENT AND REVOCATION OF PROXIES

The persons named in the accompanying form of proxy are senior officers of the Company. A Shareholder has the right to appoint a person, other than the persons specified in the accompanying form of proxy, who need not be a Shareholder, to attend and act for him or her and on his or her behalf at the Meeting. A Shareholder desiring to appoint some other person as his or her proxy holder may do so by either inserting such person’s name in the blank space provided in the form of proxy or by completing another legal form of proxy and, in either case, delivering the completed proxy to the Corporate Secretary of the Company or to the Company’s transfer agent, Computershare Investor Services Inc., 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, before 4:00 p.m. (Toronto Time) on June 1, 2021 or, if the Meeting is adjourned, 48 hours (excluding Saturdays, Sundays and holidays) preceding the day and time the adjourned Meeting is reconvened. If you are a Shareholder who wishes to appoint

a third party proxyholder, you must also register your proxyholder as an additional step once you have submitted your proxy or voting instruction form. Failure to register the proxyholder will result in the proxyholder not receiving a Username to participate in the Meeting. To register a proxyholder, Shareholders must visit http://www.computershare.com/SpectralMedical by June 1, 2021 at 4:00 p.m. (Toronto Time) and provide Computershare with their proxyholder’s contact information, so that Computershare may provide the proxyholder with a Username via email. Without a Username, proxyholders will not be able to vote at the Meeting. Non-Registered Shareholders should carefully follow the procedures provided by their Intermediary to appoint themselves or someone else to represent their Shares at the Meeting. A Non-Registered Shareholder’s Intermediary requires sufficient time to submit any proxies to Computershare before the voting deadline.

A Shareholder executing the enclosed form of proxy has the right to revoke it under Subsection 110(4) of the Business Corporations Act (Ontario) (the “ OBCA ”). A Shareholder may revoke a proxy as to any matter on which a vote has not already been cast pursuant to the authority conferred by such proxy and may do so: (a) by completing and signing a proxy bearing a later date and depositing it as aforesaid; (b) by depositing an instrument in writing revoking the proxy executed by the Shareholder, or by his or her attorney authorized in writing, before 4:00 p.m (Toronto time) on June 1, 2021 or, if the Meeting is adjourned, 48 hours (excluding Saturdays, Sundays and holidays) preceding the day and time the adjourned Meeting is reconvened; or (c) in any other manner permitted by law. Please note, only a Registered Shareholder can revoke a proxy. Non-Registered Shareholders should follow the instructions provided by their Intermediary or Depository. A Non-Registered Shareholder may revoke a VIF given to an Intermediary by written notice to the Intermediary, except that an Intermediary may not act on a revocation of a VIF which is not received by the Intermediary in sufficient time prior to the Meeting.

EXERCISE OF DISCRETION BY PROXIES

The management representatives named in the accompanying form of proxy will vote the Shares in respect of which they are appointed or will withhold such Shares from voting in accordance with the direction of the Shareholders appointing them.

In the absence of such direction, such Shares will be voted in favour of the matters set out in the Notice of Meeting. The accompanying form of proxy confers discretionary authority upon the persons named therein to vote in accordance with his or her best judgment with respect to amendments or variations to matters identified in the Notice of Meeting and with respect to other matters which may properly come before the Meeting and any reconvened Meeting. At the date of this Circular, management of the Company knows of no such amendment, variation or other matter to come before the Meeting other than the matters referred to in the Notice of Meeting.

INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON

As at the date hereof, other than as disclosed herein, to the knowledge of the directors and senior officers of the Company, none of the directors or officers of the Company who have been a director or executive officer of the Company at any time since the beginning of the Company’s last financial year, nor any proposed nominee for election as a director of the Company, nor any associate or affiliate of any of the foregoing persons, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting, other than the election of directors.

VOTING SHARES AND PRINCIPAL HOLDERS THEREOF

As at April 29, 2021, the Company had 244,163,075 Shares issued and outstanding. All Shareholders of record at the close of business on the Record Date will be entitled to one vote at the Meeting for each Share held except to the extent that such Shareholder has transferred any of such Shares after the Record Date and the transferee of any of such Shares produces properly endorsed Share certificates or otherwise establishes ownership thereof and makes a written demand not later than seven clear days before the Meeting to be included in the list of Shareholders entitled to vote at the Meeting, in which case the transferee will be entitled to vote such Shares.

Two persons present in person or represented by proxy at the Meeting holding not less than 25 per cent of the Shares entitled to vote at the Meeting constitute a quorum for the transaction of business at the Meeting.

Other than as set forth below, as of the date hereof, to the knowledge of the directors and executive officers of the Company, no persons or corporations beneficially own, or exercise control or direction over, directly or indirectly, 10% or more of the issued and outstanding Shares:

(i) Toray Industries, Inc. (“ Toray ”) owns and controls 45,630,105 Shares, or 18.7%, of the currently issued and outstanding Shares, calculated on a non-diluted basis.
(ii) Birch Hill Equity Partners Management Inc. (“ Birch Hill ”) acts as the general partner of each of Birch Hill Equity Partners IV, LP, Birch Hill Equity Partners (US) IV, LP, and Birch Hill Equity Partners (Entrepreneurs) IV, LP (collectively, “ LPs ”). Birch Hill, on behalf of the LPs, owns and controls 36,210,017 Shares representing approximately 14.8% of the issued and outstanding Shares, calculated on a non-diluted basis.

BUSINESS OF THE MEETING

1. CONSOLIDATED FINANCIAL STATEMENTS AND AUDITOR’S REPORT

At the Meeting, the consolidated financial statements for the year ended December 31, 2020 and the auditor’s report thereon will be presented by management of the Company. Such consolidated financial statements are contained in the Annual Report of the Company, copies of which have been mailed, together with the Meeting Materials, to Shareholders.

2. ELECTION OF DIRECTORS

The articles of the Company (the “ Articles ”) provide that the Board shall consist of a minimum of three and a maximum of ten directors. The Board has been empowered to determine from time to time by resolution the number of directors within that provided for in the Articles.

The Board currently consists of six directors. Directors are elected annually at the annual Shareholder meeting and their term of office expires at the next annual Shareholder meeting, unless earlier terminated.

Toray is entitled to nominate one director to the Board for so long as Toray owns in the aggregate not less than 10% of the issued and outstanding Shares (on a non-diluted basis). Mr. Jun Hayakawa is currently the Toray representative.

Birch Hill is entitled to nominate one director to the Board for so long as Birch Hill owns in the aggregate not less than 5% of the issued and outstanding Shares (on a non-diluted basis). Mr. William Stevens is the Birch Hill representative.

Six nominees are proposed for election to hold office until the next annual meeting of Shareholders or until their successors are duly elected or appointed in accordance with the by-laws of the Company. Unless contrary instructions are indicated on the form of proxy or voting instruction form, the persons designated in the accompanying form of proxy or voting instruction form intend to vote FOR the election of the nominees whose names are set forth below. Management of the Company does not contemplate that any of the nominees will be unable to serve as a director but, if that should occur for any reason prior to the Meeting, the persons named in the enclosed form of proxy will exercise discretionary authority to vote for the election of any other person or persons as directors unless they have been otherwise instructed on the form of proxy.

On April 15, 2013, the Board adopted a majority voting policy providing that if any proposed nominee receives a greater number of votes “withheld” from his or her election than votes “for” such election, then

such nominee is expected to offer to resign. The Nomination & Governance Committee will review any such offer of resignation and make a recommendation to the Board. The Board will determine whether to accept the resignation and will announce its decision within 90 days following the shareholders’ meeting. If the Board rejects the offer, it will disclose the reasons why. If the Board accepts the offer, it may appoint a new director to fill the vacancy. The policy would not, however, apply in circumstances involving contested director elections.

The following table and the notes thereto set out the name, province or state and country of residence of each person proposed to be nominated for election as a director of the Company; all of the major positions and offices held in the Company by such person; the principal occupation or employment of such person; the year in which such person became a director of the Company or a predecessor of the Company; and the number of Shares, options to acquire Shares and restricted share units (“ RSUs ”) that each director has advised the Company that such person beneficially owns, or controls or directs, directly or indirectly, as at the date of this Circular. The Company has not independently verified such information.

Name(1) Province/State and Country of Residence and Principal Occupation	Director Since	Number of Shares Beneficially Owned(2) (3)	RSUs Held	Options to Acquire Shares Held(3) (4)
MS. JAN D’ALVISE(5) California, USA President and CEO of Acasti Pharma, Inc.	-	-	-	-
MR. ANTHONY BIHL III(6) (7) (8) Connecticut, USA Board Director	2008	575,000	-	516,250
MR. JUN HAYAKAWA(9) Tokyo, Japan General Manager, Pharmaceuticals & Medical Products Business Planning Division, Toray Industries, Inc.	2018	-	-	-
MR. JOHN NOSENZO(9) (10) New Jersey, USA Chief Commercial Officer of Bioventus Inc.	2020	-	-	200,000
MR. WILLIAM STEVENS(10) (11) Ontario, Canada President of GS Investment Corp.	2014	595,432	-	454,750
DR. PAUL M. WALKER Ontario, Canada Board Director	2001	1,864,096 (12)	273,438	3,283,805

Notes:

(1) Mr. Giese is currently the Chairman of the Nomination & Governance Committee. With Mr. Giese not standing for re-election and with the recent and proposed director appointments and elections, the Company intends to reconstitute the Nomination & Governance Committee in due course following the Meeting.

(2) Information as to Shares beneficially owned is based on information provided by the respective directors and officers and has not been independently verified by the Company.

(3) Information is reported as of the date of this Circular.

(4) Each option is exercisable on its terms for one Share.
(5) It is proposed that Ms. D’Alvise will join the Finance and Audit Committee.
(6) Chairman of the Board.
(7) Chairman of the Human Resources & Compensation Committee.
(8) Member of the Finance and Audit Committee.
(9) Members of the Nomination and Governance Committee.
(10) Members of the Human Resources & Compensation Committee.
(11) Chairman of the Finance and Audit Committee.
(12) These Shares are held directly by Dr. Walker and by entities over which he has control or direction.

A brief biography of each nominee follows:

Jan D’Alvise

Ms. D’Alvise has extensive experience in the pharmaceutical, diagnostic, medical device, and drug discovery research segments of the healthcare industry. From 2016 to present, Ms. D’Alvise continues as the President and CEO of Acasti Pharma, a specialty pharma company, and serves as a member of their board of directors. Prior to Acasti, Ms. D’Alvise was the President and Chairman of Pediatric Bioscience, a private company that was developing a diagnostic test for Autism. Prior to Pediatric Bioscience, she was the CEO of Gish Biomedical, the CEO of the Sidney Kimmel Cancer Center, Chairman, CEO and cofounder of NuGEN Inc., and the EVP and co-founder of Metrika Inc. She also held executive management positions at Syntex and Roche Pharma, and SYVA diagnostics. Ms. D’Alvise has a B.S. in Biochemistry from Michigan Technological University. She has completed post-graduate work at the University of Michigan, Stanford University, and the Wharton Business Schools. Ms. D’Alvise has served on the board of numerous private companies and non-profits, and as an entrepreneur in residence for the Stanford Graduate School of Business and the von Liebig Institute of Entrepreneurship at the University of California at San Diego.

Anthony Bihl III

Mr. Bihl has served on the Board since March 2008. He is an experienced executive with more than 30 years in leadership of global healthcare businesses including a broad base of operational, financial, and senior executive positions. He is currently a board member of Sonendo, Inc., Flowonix Medical Inc. and Meridian Bioscience Inc. where he serves on the Audit and Compensation committees. Mr. Bihl served as the CEO of Bioventus LLC, a global provider of ortho biologic products, from December 2, 2013 until he retired on April 30, 2020, served as a director on the board of Greatbatch Inc. from 2011 to 2016 and served on the board of Nuvectra Inc. until 2020. Mr. Bihl was Group President of American Medical Systems (“ AMS ”), a subsidiary of Endo Pharmaceuticals, in Minneapolis, Minnesota. From 2008 to 2011, Mr. Bihl was the President and Chief Executive Officer of AMS. From 2000 to 2007, Mr. Bihl served in various senior leadership positions at Bayer Healthcare Diagnostics Division including Vice President of Finance, Senior Vice President of Business Planning and Administration, and President, Diagnostics Division. Subsequently, he was Chief Executive Officer of Siemens DX upon the acquisition of Bayer’s Diagnostics Division by Siemens AG.

Jun Hayakawa

Mr. Hayakawa has served on the Board since May 2018. He received a masters degree in Organic Chemistry at Keio University in 1990 and joined Toray Industries the very same year. In his 28 years with the company, he was responsible for medicinal chemistry of opioid compounds and invented Remitch (relief for a complication of kidney and liver failure). He was also responsible for R&D management, licensing and business development for pharmaceutical products. In April 2018 he became currently responsible for all business alliances and licenses in both pharmaceutical and medical device departments.

William Stevens

Mr. Stevens has served on the Board since 2014. Mr. Stevens is the President of GS Investment Corp. (GSIC), a private investment management company; he is also CEO of GS Dunn Limited and President of Nutri-Pea LP, both of which are GSIC portfolio companies. Mr. Stevens brings over 25 years of experience

in the capital markets and investment industry to the Company. He has held senior roles in investment banking and private equity and has a successful track record of value creation for shareholders. Mr. Stevens holds a BA in Ecomonomics from Harvard College and an MBA from the Harvard Business School.

Other than as set out in this Circular, to the knowledge of management, no proposed director or a holding company of such proposed director has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable security holder in deciding whether to vote for a proposed director.

Paul Walker

Dr. Walker, M.D., Ph.D., F.R.C.S.C., has served as a director since April 2001. He also served as the Company’s President and Chief Executive Officer from April 2001 until April 2021. Previously, he held the position of Chief Operating Officer of Toronto General Hospital, and was Surgeon in Chief and Vice President of the Surgical Directorate of the University Hospital Network in Toronto, Ontario. Dr. Walker was an active Vascular Surgeon and the Director of the Intensive Care Program, and Professor of Medicine and Laboratory Medicine at the University of Toronto. He received his M.D. from the University of Western Ontario, his Ph.D. from the Salgrenska University of Göteborg, Sweden, and is a graduate of the Advanced Management Program from Harvard School of Business as well as the Advanced Program for Chiefs of Clinical Services from Harvard School of Public Health.

John Nosenzo

Mr. Nosenzo the Chief Commercial Officer of Bioventus Inc., a global leader in Orthobiologic solutions, and he brings to Spectral more than 25 years of extensive experience within multi-billion-dollar organizations in Healthcare Sales, Marketing, Service, Operations and General Management including Laboratory Diagnostic, Imaging Modalities, Brand and Generic Pharmaceuticals. He earned an MBA in marketing and management from Adelphi University and a Bachelor of Science in pharmacy from St. John’s University.

Other than as set out in this Circular, no proposed director of the Company:

(i) is, as at the date of this Circular, or has been, within 10 years before the date of this Circular, a director, chief executive officer or chief financial officer of any company (including the Company) that,
a. was subject to an order that was issued while the proposed director was acting in the capacity as director, chief executive officer or chief financial officer; or
b. was subject to an order that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer;
(ii) is, as at the date of this Circular, or has been within 10 years before the date of this Circular, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
(iii) has, within the 10 years before the date of this Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or become subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.

Anthony BIHL III, a director of the Company, was Chairman of the Board of Directors of Nuvectra Inc. (“ Nuvectra ”), a US based company that operated for over three years before defaulting on a loan covenant. Nuvectra filed for bankruptcy on November 11, 2019, filed a Plan and Disclosure Statement under Chapter 11 of the U.S. Bankruptcy Code in January 2020, and initiated an auction for the sale of the company or its assets in February 2020. The process was completed in 2020.

Ms. D’Alvise, a proposed director of the Company, was CEO of Pediatric Bio, a US based company which filed for bankruptcy after a failed pivotal trial for its only asset.

3. REAPPOINTMENT OF AUDITORS

Unless contrary instructions are indicated on the form of proxy or voting instruction form, the persons designated in the accompanying form of proxy or voting instruction form intend to vote FOR the reappointment of PricewaterhouseCoopers LLP, Chartered Professional Accountants, as auditors of the Company, to hold office until the next annual meeting of Shareholders , and for the authorization of the directors to fix the auditors’ remuneration. PricewaterhouseCoopers LLP, and their predecessor Coopers & Lybrand, have been the auditors of the Company since its incorporation in 1991.

4. APPROVAL OF CONSOLIDATION

Background and Reasons for Share Consideration

At the Meeting, Shareholders will be asked to consider, and if deemed advisable, approve, a special resolution (the “ Share Consolidation Resolution ”) authorizing an amendment to the Corporation’s articles to consolidate the issued and outstanding Shares (the “ Consolidation ”), based on a consolidation ratio in the range of 1 post-Consolidation Share for 10 pre-Consolidation Shares to 1 postConsolidation Share for 20 pre-Consolidation Shares, as determined by the Board in their sole discretion.

The Consolidation may increase the trading price of the Shares, which the Company believes may enhance their marketability and may increase the liquidity of the Shares if implemented at an appropriate time. This may be important to the Company in the future should it wish to explore potential listings on other stock exchanges that require a minimum trading price. The Board also believes that the Consolidation could result in broader interest and demand from those institutional and other investors that have internal guidelines and policies discouraging or prohibiting investments in lower priced shares.

If the Share Consolidation Resolution is approved by the Shareholders, the Consolidation would only be implemented, if at all, upon a determination by the Board, made at anytime within twelve (12) months from the date of approval of the Share Consolidation Resolution by Shareholders, that it is in the best interest of the Company at that time. In setting the actual share ratio in connection with the proposed Consolidation following receipt of shareholder approval, the Board will consider, among other things, factors such as:

The historical trading prices and trading volume of the Shares;
The prevailing trading price and trading volume of the Shares and the anticipated impact of the Consolidation on the trading markets for the Shares;
The outlook for the trading price of the Shares;
Threshold prices of brokerage firms or institutional investors that could impact their ability to invest or recommend investments in the Shares; and
Prevailing general market and economic conditions.

The Board may, however, determine not to implement the Consolidation at any time after the Meeting without further action on the part of or notice to the Shareholders. Further, prior to making any amendment to effect the Consolidation, the Corporation shall first be required to obtain any and all applicable regulatory and relevant stock exchange approvals.

Principal Effects of the Consolidation

The principal effects of the Consolidation include the following:

(a) the fair market value of each Share may increase and will, in part, form the basis upon which further Shares or other securities of the Company will be issued;
(b) the number of issued and outstanding Shares will be significantly reduced from 244,163,075 preConsolidation Shares to approximately 12,208,153 to 24,416,307 post-Consolidation Shares, depending on the consolidation ratio selected by the Board, representing a consolidation ratio in the range of 1 post-Consolidation Share for 20 pre-Consolidation Shares to 1 post-Consolidation Share for 10 pre-Consolidation Shares , respectively;
(c) the exercise prices and the number of Shares issuable upon the exercise or deemed exercise of any warrants of the Company will be automatically adjusted based on the Consolidation ratio selected by the Board;
(d) the exercise prices and the number of Shares issuable upon the exercise of any Options will be automatically adjusted based on the Consolidation ratio selected by the Board in order to preserve proportionately the rights and obligations of the optionees;
(e) as the Company currently has an unlimited number of Shares authorized for issuance, the Consolidation will not have any effect on the number of Shares of the Company available for issuance; and
(f) the Consolidation will not give rise to a capital gain or loss under the Income Tax Act (Canada) for a Shareholder who holds such Shares as capital property. The adjusted cost base to the Shareholder of the new Shares immediately after the Consolidation will be equal to the aggregate adjusted cost base to the Shareholder of the old Shares immediately before the Consolidation.

Risks Associated with the Consolidation

There can be no assurance that the total market capitalization of the Shares of the Company (the aggregate value of all Shares at the then market price) immediately after the Consolidation will be equal to or greater than the total market capitalization immediately before the Consolidation. In addition, there can be no assurance that the per-share market price of the Shares following the Consolidation will remain higher than the per share market price immediately before the Consolidation or equal or exceed the direct arithmetical result of the Consolidation. In addition, a decline in the market price of the Shares after the Consolidation may result in a greater percentage decline than would occur in the absence of a Consolidation, and the liquidity of the Shares could be adversely affected. Further, there can be no assurance that, if the Consolidation is implemented, the margin terms associated with the purchase of Shares will improve or that the Company will be successful in receiving increased attention from institutional investors. The marketability and trading liquidity of the post-Consolidation Shares may not improve. The Consolidation may result in some Shareholders owning “odd lots” of less than 100 Shares which may be more difficult for such Shareholders to sell or which may require greater transaction costs per Share to sell.

Effect on Fractional Share

No fractional Shares will be issued in connection with the Consolidation. All fractions of postConsolidation Shares will be rounded down.

Notice of Consolidation and Letter of Transmittal

If the Consolidation is implemented by the Board, following the announcement by the Company of the effective date of the Consolidation, registered Shareholders will be sent a letter of transmittal by the transfer agent containing instructions on how to exchange their share certificates representing preConsolidation Shares for new share certificates representing post-Consolidation Shares. After the Consolidation, current issued share certificates representing pre-Consolidation Shares will (i) not constitute good delivery for the purposes of trades of post-Consolidation Shares; and (ii) be deemed for all purposes to represent the number of post-Consolidation Shares to which the Shareholder is entitled as a result of the Consolidation. No new Share certificates will be issued until the Shareholder has surrendered the corresponding “old” Share certificate, together with a properly completed and executed letter of transmittal, to the transfer agent. Beneficial Shareholders holding Shares through a bank, broker or other nominee should note that such banks, brokers or other nominees may have different procedures for processing the Consolidation than those that will be put in place by the Company for the registered Shareholders.

Board and Management Reccomendation

The Board and management of the Company recommend the approval of the Consolidation. To be effective, the OBCA requires that the Consolidation be approved by a special resolution of the Shareholders, being a majority of not less than two-thirds (2/3) of the votes cast by Shareholders present in person or by proxy at the Meeting. In addition to the approval of the Shareholders, the Consolidation requires regulatory approvals, including the approval of the Toronto Stock Exchange (“ TSX ”). Unless contrary instructions are indicated on the form of proxy or voting instruction form, the persons designated in the accompanying form of proxy or voting instruction form intend to vote FOR the Share Consolidation Resolution.

The text of the resolution to be passed is set out below:

“ BE IT RESOLVED as a special resolution that:

pursuant to the Business Corporations Act (Ontario) (the “ OBCA ”), the articles of Spectral Medical Inc. (the “ Company ”) be amended to consolidate all of the issued and outstanding common shares (the “ Shares ”), on the basis of a consolidation ratio in the range of 1 postconsolidation Share for 10 pre-consolidation Shares to 1 post-consolidation Share for 20 pre-consolidation Shares to be selected by the board of directors of the Company (the “ Board ”), in its sole discretion, to be effective as at the discretion of the Board at anytime within twelve (12) months from the date of approval of this special resolution by the shareholders of the Company;
the Board be and is hereby authorized to revoke, without further approval of the shareholders, this special resolution at any time prior to the completion thereof, notwithstanding the approval by the shareholders of same, if determined, in the Board’s sole discretion to be in the best interest of the Company; and
any director or officer of the Company is hereby authorized to execute or cause to be executed and to deliver or cause to be delivered, all such certificates, instruments, agreements, notices and other documents and to do or cause to be done all such other acts and things as such director or officer may determine to be necessary or desirable in order to carry out the intent of this resolution, including but not limited to, the filing of articles of amendment under the OBCA, such determination to be conclusively evidenced by the

execution and delivery of such certificates, instruments, agreements, notices and other documents or the doing of any such acts or things.”

STATEMENT OF EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The Company’s executive compensation program is designed to provide short and long-term rewards to executive officers and other employees that are consistent with individual and corporate performance and the employee’s contribution to Spectral’s objectives. The objectives of the Company with respect to compensation of executive officers are to provide compensation levels necessary to attract and retain high quality executives and to motivate key executives to contribute to the success of the Company. These objectives are to be met by the principal components of the Company’s executive compensation program, as set out in greater detail below.

The total compensation plan for senior executives of the Company includes four components: base salary, annual discretionary cash bonus, annual benefits and a long-term component.

The Company does not intend to make any significant changes to its compensation policies and practices in the next financial year.

Base Salary

Base salary is reflective of responsibilities and annual increases should, at a minimum, reflect inflationary pressures and changes in duties. At the date of hire, base salary is determined using a number of factors including industry comparators and relevant experience and is set out in the employment agreement. Annual increases are determined based upon reference to data on compensation levels of executives in comparable companies (i.e. public companies in the drug development/biotech/healthcare sector) as well as annual performance evaluation and underlying economic circumstances. The Human Resources & Compensation Committee recommends the annual base salary increases for the Chief Executive Officer and the direct reports of the Chief Executive Officer to the Board for approval.

Annual Incentive Plans and Benefits

Cash bonuses are awarded to recognize the achievement of annual corporate objectives and to recognize contributions that enhance the intrinsic value of the Company. Benefits commensurate with those paid to senior officers of companies of similar size and scope to the Company are paid to Spectral’s executive officers.

The annual incentive plan is a cash performance plan under which a payment is made to executives following the end of the Company’s fiscal year, based on the achievement of established Company and individual goals. Generally, management of the Company prepares an annual business plan, comprised of a budget and corporate/strategic and financial objectives, which is reviewed and approved by the Board. Bonuses are generally paid to management if the corporate/strategic and financial objectives in such business plan are achieved by the Company, as evaluated at the end of the year by the Human Resources & Compensation Committee. The Human Resources & Compensation Committee may also recommend bonuses based on other criteria where circumstances merit. The Board can exercise discretion, either to award compensation absent attainment of the relevant performance goals or to reduce or increase the size of any award or payout. The Board did not exercise any discretion in this regard during 2020.

The annual objectives of the Company are presented to the Human Resources & Compensation Committee early in the fiscal year and regular updates are provided to the Human Resources & Compensation Committee by the Chief Executive Officer during the year. Following the completion of the fiscal year, the Chief Executive Officer presents an evaluation of corporate performance versus objectives to the Human Resources & Compensation Committee. The Chief Executive Officer also presents the recommended incentive plan payments for each of his direct reports to the Human Resources & Compensation Committee

with reference to the achievement of individual objectives. The Board, on recommendation from the Human Resources & Compensation Committee, has final approval of the amounts paid to the Chief Executive Officer and his direct reports under the annual incentive plan.

The Board, upon the recommendations of the Human Resources & Compensation Committee, considers the implications of any risks associated with the Company’s compensation policies and practices. On an annual basis, the Compensation Committee reviews the compensation of, among others, the Named Executive Officers (as defined under the heading “Summary Compensation Table” below), including bonuses, and presents their recommendations to the Board for evaluation, review and approval. The Board has not identified any risks arising from the Company’s compensation policies or practices that could encourage a Named Executive Officer to take inappropriate or excessive risks.

Long Term Component

Prior to 2020, the long-term component of compensation for executive officers, including the Chief Executive Officer, was based on stock options. This component of compensation was intended to reinforce management’s commitment to long-term improvements in Spectral’s performance and increased Shareholder value. The Company’s Amended Stock Option Plan V (the “ Legacy Stock Option Plan ”) provided for initial option grants upon hire. Thereafter, options could be granted based upon the recommendations of the Human Resources & Compensation Committee. The Chief Executive Officer recommended the amount of option grants for each of his direct reports to the Human Resources & Compensation Committee. The Human Resources & Compensation Committee, after making any revisions deemed necessary, recommended the option grants to the Board for approval. Previous grants of options were taken into account when considering new grants because the Legacy Stock Option Plan was subject to certain limits. See “Equity Compensation Plans – Legacy Stock Option Plan” below.

A new long term incentive plan (“ LTIP ”) was approved at the 2020 annual and special meeting which became effective May 1, 2020. Options issued and outstanding under the Legacy Stock Option Plan will remain issued and outstanding. No additional options will be granted under the Legacy Stock Option Plan.

The LTIP allows for a variety of equity based awards that provide different types of incentives to be granted to certain executive officers, employees and consultants of the Company (in the case of options (“ Options ”), performance share units (‘‘ PSUs ’’) and restricted share units (‘‘ RSUs ’’)) and directors of the Company (in the case of Options and deferred share units (‘‘ DSUs ’’)). Options, PSUs, RSUs and DSUs are collectively referred to herein as ‘‘ Awards ’’. Each Award will represent the right to receive Shares, or in the case of PSUs, RSUs and DSUs, Shares or cash, in accordance with the terms of the LTIP. The following discussion is qualified in its entirety by the text of the LTIP.

Under the terms of the LTIP, the Board, or if authorized by the Board, the Human Resources and Compensation Committee of the Company, may grant Awards to eligible participants, as applicable. Participation in the LTIP is voluntary and, if an eligible participant agrees to participate, the grant of Awards will be evidenced by a grant agreement with each such participant. The interest of any participant in any Award is not assignable or transferable, whether voluntary, involuntary, by operation of law or otherwise, other than by will or the laws of descent and distribution.

The maximum number of Shares that may be: (i) issued to insiders of the Company within any one-year period; or (ii) issuable to insiders of the Company at any time, in each case, under the LTIP alone, or when combined with all of the Company’s other security-based compensation arrangements, including the Legacy Stock Option Plan, cannot exceed 10% of the aggregate number of Shares issued and outstanding from time to time, as determined on a non-diluted basis.

Directors and officers are not permitted to purchase financial instruments, including, for greater certainty, 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 the Shares granted as compensation or held, directly or indirectly, by the director or officer.

Compensation of the Chief Executive Officer

The total compensation package available for the Chief Executive Officer includes a base salary, a discretionary-bonus component, benefits and a long-term component based on stock options. Compensation is based upon the factors outlined above, including a comparison with compensation of senior officers of companies of similar size and scope to Spectral and the performance of Spectral. The Chief Executive Officer’s compensation is determined in accordance with the procedures outlined above.

Performance Graph

The Shares are listed and posted for trading on the TSX under the symbol “EDT”.

The following line graph compares the Company’s total Shareholder return for $100 invested in Shares on December 31, 2015 with the cumulative total return on the TSX Composite Index for the five most recently completed financial years of the Company.

==> picture [362 x 217] intentionally omitted <==

----- Start of picture text -----

$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
2015 2016 2017 2018 2019 2020
Company Return TSX Composite Index Return
----- End of picture text -----

			Dec-31	Dec-31
	2015	2016	2017	2018	2019	2020
Closing Price of Shares on the TSX	$0.810	$0.275	$0.380	$0.285	$0.720	$0.405
CompanyReturn	$100.00	$33.95	$46.91	$35.19	$88.89	$50.00
TSX Composite Index Return	$100.00	$117.51	$127.59	$110.09	$131.16	$134.00

The performance trend shown by the above graph does not reflect the trend in the Company’s compensation to Named Executive Officers reported over the same period. The market price of the Shares, like the share prices of many publicly traded biotechnology companies, has historically been highly volatile. The Company’s compensation policies and practices are benchmarked to those of other companies in similar industries.

Summary Compensation Table

The following table provides a summary of all compensation paid or payable to the Chief Executive Officer, the, Chief Financial Officer, the Vice President of Sales & Marketing, and the Vice President of Clinical

Development (collectively referred to as the “ Named Executive Officers ”) during the years ended December 31, 2020, 2019 and 2018.

Name and Principal Position	Fiscal Year	Salary ($)	Option-Based Awards(1) ($)	Non-Equity Incentive Plan Compensation(2) ($)	All Other Compensation(3) ($)	Total Compensation ($)
Paul M. Walker President & Chief Executive Officer(4)	2020	453,667	227,791	136,061	28,710	845,229
	2019	449,767	127,736	191,337	21,000	789,840
	2018	438,772	309,975	16,000	21,000	785,747
Chris Seto Chief Financial Officer(5)	2020	337,577	123,129	75,375	54,000	590,081
	2019	139,155	146,290	100,500	5,077	391,022
Gualtiero Guadagni Vice President Sales & Marketing	2020	215,493	55,078	29,939	12,000	312,510
	2019	213,641	31,429	36,354	12,000	293,424
	2018	208,417	66,197	12,000	12,000	298,614
Debra M. Foster Vice President Clinical Development	2020	215,493	55,078	27,800	12,000	310,371
	2019	191,769	31,429	32,077	12,000	267,275
	2018	187,655	66,197	12,000	12,000	277,852

(1) The options granted to Named Executive Officers in 2020 vested at one quarter of the grant amount at the time of the grant. The balance of the options vests equally as to one-twelfth on each successive quarter such that all such options will be fully vested on February 26, 2023. The grants for 2020 were made on February 26, 2020 and the dollar value is based upon the Share price of $0.63 and a Black Scholes’ factor of 115.18%.

The options granted to Named Executive Officers in 2019 vested at one third of the grant amount at the time of the grant, except for 650,000 options granted to the CFO, which 216,645 vested on August 2, 2019, 110,500 vested on September 4, 2019, 9,799 vested on October 4, 2019, and the balance vests equally on the 4[th] day of eah successive month commencing on November 4, 2019. 400,000 options vested 100% at the time of the grant. The balance of the options vests equally as to one-twelfth on each successive quarter such that all such options will be fully vested on June 4, 2022. The grant for 2019 was made on June 4, 2019 and the dollar value is based upon the Share price of $0.36 and a Black Scholes’ factor of 116%.

The options granted to Named Executive Officers in 2018 vested at one quarter of the grant amount at the time of the grant, except for 75,000 options granted to the Interim CFO, which vested 100% at the time of the grant. The balance of the options vests equally as to one-twelfth on each successive quarter such that all such options will be fully vested on February 13, 2021. The grants for 2018 were made on February 13, 2018 and the dollar value is based upon the Share price of $0.33 and a Black Scholes’ factor of 121.95%. An additional 765,000 share options were granted was made to Named Executive Officers on February 13, 2018. 75% of these options will vest upon receiving FDA approval for the Toraymyxin™ cartridge, and 25% will vest upon a value creating business development transaction for the assets or Shares of the company, or similar transaction, the dollar value based upon the Share price of $0.33 and a Black Scholes’ factor of 121.95%.

(2) Non-equity incentive plan compensation consists of annual cash bonuses.
(3) For each Named Executive Officer, the amount includes a car allowance except with respect to Dr. Walker who does not receive a car allowance. For Dr. Walker and Mr. Seto, this amount also includes RRSP contributions of $28,710 and $42,000 respectively. Car allowances are a fixed amount and are calculated based on costs associated with car ownership, such as lease payments, maintenance cost, insurance, license and registration and fuel. The annual RRSP contributions are based on the terms set out in the executive employment agreements.

(4) In 2020, Dr. Walker was a director as well as an executive officer. Dr. Walker did not receive any additional compensation for his role as director. Dr. Walker retired as President and Chief Executive Officer on April 1, 2021.
(5) Mr. Seto was appointed Chief Executive Officer on April 1, 2021.

Executive Employment/Consulting Agreements

In 2020, the Company had entered into employment agreements with each of Dr. Paul M. Walker (President & Chief Executive Officer), Mr. Chris Seto, Ms. Debra Foster (Vice President Clinical Development) and Dr. Gualtiero Guadagni (Vice President Sales & Marketing). In 2021 Dr. Walker retired and Mr. Seto was appointed Chief Executive Officer.

Under the terms of their respective employment agreements with the Company, Dr. Walker, Mr. Seto, Ms. Foster and Dr. Guadagni are each entitled to an annual base salary, bonuses and grants of stock options (if approved by the Board upon the Company meeting certain performance targets), participation in benefit plans, a car allowance and reimbursement of reasonable out-of-pocket expenses incurred in performing their respective duties as officers of the Company. The employment agreements have indefinite terms.

Annual bonuses for the Executives are based on the level of achievement of objectives as established by the Human Resources & Compensation Committee. These objectives typically include targets related to the implementation of the Company’s clinical development and regulatory programs and adherence to the Company’s annual business plan. Approximately fifty per cent of bonuses are based on the achievement of overall corporate objectives, with the remainder based on the individual Executive’s contribution towards those objectives.

Termination without Cause Payments

Mr. Seto is entitled to a payment equal to one and one-half times the sum of his then current annual salary, RRSP contribution and the greater of the annual bonus actually paid in the previous year and the target bonus of 50% of Base Salary. He is also entitled to a continuation of benefits for a one and one-half year period (the “ CEO Notice Period ”) from the effective date of termination. All unvested options will continue to vest in accordance with the original vesting schedule during the CEO Notice Period. Vested, unexpired options can be exercised up until the last day of the CEO Notice Period. Any unexercised options will expire on the last day of the CEO Notice Period.

Ms. Foster and Dr. Guadagni are each entitled to a payment equal to the sum of their respective then current annual salaries, car allowance, and the average of their actual annual bonuses over the preceding two years.

Each of Ms. Foster and Dr. Guadagni will also be entitled to a continuation of benefits for a one-year period (the “ NEO Notice Period ”) from the effective date of termination. All unvested options will continue to vest in accordance with the original vesting schedule during the NEO Notice Period. Vested, unexpired options can be exercised up until the last day of the NEO Notice Period. Any unexercised options will expire on the last day of the NEO Notice Period.

Termination following a Change of Control Event

Mr. Seto is entitled to a payment equal to two times the sum of (i) his then current annual salary, (ii) RRSP contribution, (iii) the greater of the annual bonus actually paid in the previous year and the target bonus of 50% of Base Salary and (iv) the value of benefit plan contributions that would be required to maintain participation in the group health plan for one year. All unvested options will continue to vest in accordance with the original vesting schedule during the 24 month period following the effective date of the termination. Vested, unexpired options can be exercised up until the last day of the notice period. Any unexercised options will expire on the day after the end of the 24 month period following the effective date of th termination.

Ms. Foster is entitled to a payment equal to the sum of (i) her current annual salary, (ii) car allowance, (iii) the average of her actual annual bonus in the preceding two years, and (iv) the value of benefit plan contributions that would be required to maintain participation in the group health plan for one year. All of Ms. Foster’s unvested options will automatically vest and any unexpired options will be exercisable until their expiry date in accordance with the terms and conditions of the Legacy Stock Option Plan.

Executive Compensation Review

The executive employment agreements for Dr. Walker and Ms. Foster, described above became effective January 1, 2011 following the approval of the Board and based on the recommendations of an independent executive compensation review completed by Lane Caputo Compensation Inc. in 2010. The executive employment agreements for Dr. Guadagni and Mr. Seto became effective on May 1, 2013 and August 2, 2019, respectively and Mr. Seto’s agreement was amended effective April 1, 2021 when he was appointed Chief Executive Officer.

In 2020, the Company engaged Lane Caputo Compensation Inc. to conduct an updated executive compensation review which consisted of a comparison of compensation practices benchmarked against a group of relevant peer companies selected from medical device and pharmaceutical companies based on the development stages or the companies, the size and complexity of the organization, and the country in which the company is headquartered. Twelve companies were selected for the peer group.

The peer companies are all publicly traded and proxy circular compensation data is available for their highest paid positions.

The following elements of compensation were compared against Spectral’s peer group:

Salary (either actual or estimated 2020 levels of compensation);
Target Total Cash Compensation (salary and target bonus or 3-year average bonus where targets not specified);
Actual Total Cash Compensation (2020 salary plus most recent cash incentive payment paid for the prior year’s performant);
Equity Awards (three-year average grant of stock options and other full-value, equity-based incentives);
Acutal Total Direct Compensation (Actual Total Cash Compensation plus 3-year average of estimated value of equity-based incentives at time of grant); and
Realizable Total Direct Compensation (Actual Total Cash compensation plus in-the-money value of stop options and current value of RSUs and PSUs grated over the last three years).

As a result of the review, the Board approved increases to the base salaries of some executives, an increase in the potential cash bonus for some executives, and the awarding of annual equity grants based upon a target dollar award range, with the value split between both Stock Options (value at Black Sholes) and Restricted Share Units effective beginning in 2021. Board compensation remains unchanged.

Incentive Plan Awards

Other than grants of options under the Legacy Stock Option Plan and LTIP, the Company does not compensate its executives with share-based awards.

Outstanding Option-Based Awards

The following table sets forth the details of all option-based awards granted to Named Executive Officers that are outstanding at December 31, 2020:

Name	Number of Shares Underlying Unexercised Options (#)	Option Exercise Price ($)	Option Expiration Date	Value of Unexercised in-the-Money Options ($)
Paul M. Walker President & Chief Executive Officer	400,000	0.73	February 1, 2021	-
	737,500	0.30	February 28, 2022	$77,438
	418,965	0.53	June 1, 2022	-
	955,000	0.395	February 13, 2023	$9,550
	400,000	0.36	June 4, 2024	$18,000
	400,000	0.63	February 26, 2025	-
Chris Seto Chief Financial Officer	650,000	0.36	June 4, 2024	$29,250
	200,000	0.63	February 26, 2025	-
Gualtiero Guadagni Vice President Sales & Marketing	100,000	0.73	February 1, 2021	-
	158,335	0.30	February 28, 2022	$16,625
	79,610	0.53	June 1, 2022	-
	205,000	0.395	February 13, 2023	$2,050
	100,000	0.36	June 4, 2024	$4,500
	100,000	0.63	February 26, 2025	-
Debra M. Foster Vice President Clinical Development	100,000	0.73	February 1, 2021	-
	166,670	0.30	February 28, 2022	$17,500
	79,610	0.53	June 1, 2022	-
	205,000	0.395	February 13, 2023	$2,050
	100,000	0.36	June 4, 2024	$4,500
	100,000	0.63	February 26, 2025	-

Incentive Plan Awards - Value Vested or Earned During the Year

The following table sets forth the value of all option-based awards granted to Named Executive Officers that vested during the financial year ended December 31, 2020 (no non-equity incentive plan compensation was earned by Named Executive Officers during such year):

Name	Option-Based Awards – Value Vested During the Year ($)
Paul M. Walker President & Chief Executive Officer	$95,106
Chris Seto Chief Financial Officer	$26,740

Name	Option-Based Awards – Value Vested During the Year ($)
Gualtiero Guadagni Vice President Sales & Marketing	$20,950
Debra M. Foster Vice President Clinical Development	$20,950

Pension Plan Benefits

The Company does not maintain any defined benefit pension plans or defined contribution pension plans.

Termination and Change of Control Benefits

The termination benefits to which the Named Executive Officers are entitled are set out above under “ Executive Employment Agreements ”. The following are the amounts of the severance payments that would have been made to each of the Named Executive Officers in the event of a termination without cause and termination following a change in control by the Company as at December 31, 2020, together with the value of in-the-money options held by such persons:

Name	Termination without Cause Payments ($)	Termination following a Change of Control Event ($)
Paul M. Walker	1,015,334	1,025,747
Chris Seto	737,037 (1)	744,961(2)
Gualtiero Guadagni	315,931	295,106
Debra M. Foster	300,402	302,752

(1) As CEO, Mr. Seto’s termination without cause payment is $1,043,131.

(2) As CEO, Mr. Seto’s termination following a change of control event payment is $1,377,521.

Human Resources & Compensation Committee

The Human Resources & Compensation Committee is currently comprised of the following directors who are standing for re-election: Anthony P. Bihl III, John Nosenzo and William Stevens, all of whom are independent directors. The Human Resources & Compensation Committee’s responsibilities include: (i) reviewing and making recommendations to the Board with respect to compensation of the Chief Executive Officer, and (ii) making recommendations to the Board with respect to non-Chief Executive Officer compensation, incentive compensation plans and equity-based plans.

In order to ensure that the compensation process remains objective: (i) the Board is required to review and evaluate all recommendations put forward by the Human Resources & Compensation Committee; (ii) both the Board and the Human Resources & Compensation Committee hold “in camera” sessions at which nonindependent directors are not present.

Each of the Human Resources & Compensation Committee members has experience that is relevant to his responsibilities in executive compensation. See the biographies above under “Election of Directors”.

Director Compensation

On an annual basis, the Human Resources & Compensation Committee reviews the adequacy and form of compensation of the directors and the Chairman of the Board, to ensure the compensation realistically reflects the responsibilities and risks involved in being an effective director, and makes appropriate recommendations to the Board for approval.

Director Compensation Table

The following table presents the details of all compensation provided to non-executive directors of the Company for the year ended December 31, 2020:

Name	Fees Earned ($)	Option-Based Awards (1) ($)	All Other Compensation ($)	Total ($)
Anthony Bihl III	103,450	55,453	-	158,903
Kevin Giese	52,000	55,453	-	107,453
Jun Hayakawa	-	-	-	-
John Nosenzo	21,775	41,208	-	62,983
William Stevens	57,167	55,453	-	112,620

(3) The options granted to directors in 2020 vested 100% on the grant date. The grants for 2020 were made on February 26, 2020 and the dollar value is based upon the Share price of $0.63 and a Black Scholes’ factor of 115.18%.

Each director who is not a full-time employee of the Company receives an annual retainer of $22,500 and $1,500 for attendance at each of the meetings of the Board and its committees. In addition, committee members receive a retainer of $5,000 for their membership in the Finance & Audit Committee and $1,250 for each of the Nomination & Governance Committee and the Human Resources & Compensation Committee. In recognition of their additional responsibilities, the Chairman of the Board and the Lead Independent Director each receives double the annual retainer of a director ($45,000) and the Chairman of the Finance & Audit Committee receives double the committee member retainer amount ($10,000) in recognition of the additional responsibilities. The Chairman of the Nomination & Governance Committee and the Human Resources & Compensation Committee each receives an annual retainer of $5,000. Dr. Walker is compensated in his role as Chief Executive Officer; he receives no additional compensation for his role as a director.

All directors are reimbursed for their reasonable out-of-pocket travel and other expenses incurred in attending meetings of the Board or any committee thereof. There were no options granted to directors that expired unexercised during the 2020 fiscal year. There were 150,000 options granted to directors that were exercised in 2020. Directors and officers of the Company are covered by insurance in respect of liability that may be incurred by them for acting in such capacity, unless the liability arises because such director or officer fails to act honestly and in good faith with a view to the best interests of the Company. See below under “ Directors and Officers Insurance ”.

Outstanding Option-Based Awards

The following table sets forth the details of all outstanding option-based awards granted to non-executive directors of the Company who are standing for re-election that are outstanding as at December 31, 2020:

Name	Number of Shares Underlying Unexercised Options	Option Exercise Price ($)	Option Expiration Date	Value of Unexercised in-the-Money Options ($)
Anthony Bihl III	50,000	0.73	February 1, 2021	-
	50,000	0.30	February 28, 2022	5,250
	166,250	0.395	February 13, 2023	1,663
	100,000	0.36	June 4, 2024	4,500
	100,000	0.63	February 26, 2025	-
John Nosenzo	100,000	0.51	August 4, 2025	-
William Stevens	50,000	0.73	February 1, 2021	-
	50,000	0.30	February 28, 2022	5,250
	104,750	0.395	February 13, 2023	1,048
	100,000	0.36	June 4, 2024	4,500
	100,000	0.63	February 26, 2025	-

Incentive Plan Awards – Value Vested or Earned During the Year

The following table sets forth the value of all option-based awards granted to to non-executive directors of the Company who are standing for re-election that vested during the financial year ended December 31, 2020. No non-equity incentive plan compensation earned was earned by any directors during the financial year ended December 31, 2020:

ber 31, 2020:
Name	Option-Based Awards – Value Vested During the Year ($)
Anthony Bihl III	5,000
John Nosenzo	-
William Stevens	5,000

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS AS OF DECEMBER 31, 2020

Equity Compensation Plan Information

Equity Compensation Plan	Information
Plan Category	Number of Shares to be issued upon exercise of outstanding options	Weighted-average exercise price of outstanding options	Number of Shares remaining available for future issuance under equity compensation plans
Equity compensation plans approved by Shareholders	8,518,137	$0.46	15,157,438
Equity compensation plans not approved by Shareholders	N/A	N/A	N/A
Total	8,518,137	$0.46	15,157,438

The Company has two types of stock-based compensation plans. The first is the Legacy Stock Option Plan. Effective May 1, 2020, this was replaced by the LTIP.

Under the LTIP, the Board, or if authorized by the Board, the Human Resources & Compensation Committee of the Company, may grant Awards to certain executive officers, employees and consultants of the Company. Options granted under the LTIP are granted at the market price of the Shares on the business day immediately preceding the day of the grant of such options. The vesting and expiry date of the options vary and are determined by the Board or the Human Resources & Compensation Committee of the Company, as applicable, at the time of the grant.

Number of Options Granted	Exercise Price	Expiry Date
1,121,000	$0.73	February 1, 2021
1,262,505	$0.30	February 28, 2022
628,185	$0.53	June 1, 2022
2,068,500	$0.395	February 13, 2023
100,000	$0.395	March 28, 2023
2,175,000	$0.36	June 4, 2024
1,375,000	$0.63	February 26, 2025

During the 2020 fiscal year, 1,27,062 Options were exercised, 100,000 Options expired and 385,438 Options were forfeited/cancelled.

As at December 31, 2020, Options to purchase an aggregate of 8,518,137 Shares were outstanding and unexercised. 6,209,874. Options to purchase Shares were available for grant under the LTIP on December 31, 2020.

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

No executive officers, directors, employees, former executive officers, directors or employees of the Company nor any of its subsidiaries are indebted to the Company.

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

Except as otherwise disclosed in this Circular, no informed person of the Company, any proposed director of the Company or any associate or affiliate of such persons has had any material interest, direct or indirect, in any transaction of the Company during the last fiscal year or in any proposed transaction which has materially affected or would materially affect the Company or any of its subsidiaries.

CORPORATE GOVERNANCE

Strong, effective corporate governance is a necessary foundation to improved performance and Shareholder confidence and is a key commitment of the Company.

As Shareholders are aware, a series of guidelines, rules, regulations, listing standards and legislation has been passed or adopted over the last several years to assist companies in establishing best practices and to address concerns about governance. These include National Instrument 58-101 – Disclosure of Corporate Governance Practices and National Policy 58-201 – Corporate Governance Guidelines passed by the Canadian Securities Administrators.

The Board believes that its effectiveness is a combination of structure, membership and process; and individual director effectiveness is a combination of competence, behaviour and independence.

In developing Spectral’s policies and practices, the Board and the Nomination & Governance Committee have carefully considered the Board’s structure, membership and its processes.

Set out below are certain key policies and practices that are, in the Company’s view, essential in creating a Board and committees of the Board that can function effectively, add value to the Company and evidence the various roles and shared responsibilities of management of the Company and the Board.

Board Membership and Independence

The Company believes that a strong and independent Board is fundamental to effective corporate governance and accordingly all of the Company’s current and proposed directors, with the exception of Dr. Walker, are independent. Brief biographies of the directors are included earlier in this Circular and indicate the breadth, scope and diversity of their experience, all of which makes a major contribution to the Company, its operations and evolving needs. The independent directors of the Company meet, without the non-independent directors or management of the Company in attendance, after every regularly scheduled Board meeting. Accordingly, the independent directors met 14 times during 2020 without the nonindependent directors or management of the Company.

Mr. Anthony Bihl III is an independent Chairman of the Board and reports to the Board and to the Shareholders. The Chairman of the Board is charged with the responsibility of leading the Board and organizing it to function in partnership with, but independently of, management of the Company in order to facilitate the achievement of the goals of the Company, including sustainable growth and maximizing Shareholder value. The Chairman is also charged with providing appropriate oversight of the management of the ongoing business and affairs of the Company, and fostering and supporting ethical and responsible decision making.

The Nomination & Governance Committee reviews Board composition and meets on a regular basis.

Position Descriptions

The Board has developed written position descriptions for the Chairman of the Board and, the Chair of each of the committees of the Board and the President & Chief Executive Officer. The position descriptions are as follows:

Chairman of the Board of Directors

The prime responsibility of the Chairman of the Board is to provide leadership to the Board to enhance Board effectiveness. The Chairman serves at the pleasure of and reports to the Board. The Board has ultimate accountability for supervision of the management of the Company. Critical to meeting this accountability is the relationship between the Board, management, Shareholders and other stakeholders. The Chairman, as the presiding member, must ensure that these relationships are effective, efficient and further the best interests of the Company.

The Chairman is tasked to:

a. along with the Chief Executive Officer, establish the agenda for meetings of the Board and the annual general meeting and special meetings of Shareholders;
b. chair meetings of the Board and the annual general meeting;
c. oversee the Board’s discharge of its duties assigned to it by law, in the constating documents of the Company and the Company’s Corporate Governance Guidelines;
d. work with the Chief Executive Officer, as appropriate, as a counselor and provide advice on major policy issues;
e. together with the Chief Executive Officer, represent the Company to employees, Shareholders
and other stakeholders;
f. develop a good working relationship between the office of the Chairman, the president and Chief Executive Officer, and the Board to assure open communications, cooperation, interdependence, mutual trust, respect and commonality of purpose;
g. take steps to foster the Board’s understanding of its responsibilities and boundaries with management;
h. ensure that procedures to govern effective and efficient conduct of the Board’s work are in effect; i. ensure that the agenda and materials for annual and special meetings of Shareholders are prepared and distributed;
j. ensure the distribution of information to the Board in a manageable form, with sufficient time for adequate review;
k. in collaboration with the Chief Executive Officer, ensure data requested by directors or Board Committees is provided and meets their needs; and
l. carry out other duties as requested by the Board.

Nomination & Governance Committee Chair

The prime responsibility of the Chairman of the Nomination & Governance Committee is to provide leadership to the Nomination & Governance Committee to ensure that the Nomination & Governance Committee is organized properly, functions effectively and meets its obligations and responsibilities in accordance with its mandate. The Nomination & Governance Committee is required to meet as many times as required to carry out its responsibilities effectively. Critical to meeting this accountability is ensuring that the Company has in place an appropriate and effective system of corporate governance.

The Chairman of the Nomination & Governance Committee is tasked to :

a. set the tone for the Nomination & Governance Committee work;
b. in consultation with the Chief Executive Officer and other members of senior management, develop the agendas and ensure all required business is brought before the Nomination & Governance Committee to enable the Nomination & Governance Committee to carry out its responsibilities;
c. chair Nomination & Governance Committee meetings;

d. ensure meeting information is distributed to committee members with sufficient time for adequate review;
e. oversee the logistics of the Nomination & Governance Committee’s operations and ensure compliance with the Nomination & Governance Committee terms of reference; and
f. report to the full Board on the Nomination & Governance Committee’s decisions and recommendations.

Human Resources & Compensation Committee Chair

The prime responsibility of the Chairman of the Human Resources & Compensation Committee is to provide leadership to the Compensation Committee and to ensure that the Human Resources & Compensation Committee is organized properly, functions effectively and meets its obligations and responsibilities in accordance with its mandate. The Human Resources & Compensation Committee is required to meet as many times as required to carry out its responsibilities effectively. Critical to meeting this accountability is ensuring that the Company has in place an appropriate system of compensation.

The Chairman of the Human Resources & Compensation Committee is tasked to:

a. set the tone for the Human Resources & Compensation Committee work;
b. in consultation with Chief Executive Officer and other members of senior management, develop the agendas and ensure all required business is brought before the Human Resources & Compensation Committee to enable it to carry out its responsibilities;
c. chair the Human Resources & Compensation Committee meetings;
d. ensure meeting information is distributed to Human Resources & Compensation Committee members with sufficient time for adequate review;
e. oversee the logistics of Human Resources & Compensation Committee’s operations and ensure compliance with the Human Resources & Compensation Committee terms of reference; and
f. report to the full Board on the Human Resources & Compensation Committee’s decisions and recommendations.

Finance & Audit Committee Chair

The prime responsibility of the Chairman of the Finance & Audit Committee is to provide leadership to the Finance & Audit Committee to ensure that it is organized properly, functions effectively and meets its obligations and responsibilities in accordance with its mandate.

The Finance & Audit Committee is required to meet as many times as required to carry out its responsibilities effectively. Critical to meeting this accountability is the relationship between the Finance & Audit Committee, management and the external auditor. The Chairman of the Finance & Audit Committee must ensure that these relationships are effective, efficient and further the best interests of the Company.

The Chairman of the Finance & Audit Committee shall:

a. set the tone for the Finance & Audit Committee work;
b. in consultation with the Chief Executive Officer and other members of senior management, develop the agendas and ensure all required business is brought before the Finance & Audit Committee to enable the committee to carry out its responsibilities;
c. chair Finance & Audit Committee meetings;
d. ensure meeting information is distributed to Finance & Audit Committee members with sufficient
time for adequate review;
e. oversee the logistics of the Finance & Audit Committee’s operations and ensure compliance with the Finance & Audit Committee terms of reference; and
f. report to the full Board on the Finance & Audit Committee’s decisions and recommendations.

President & Chief Executive Officer

The prime responsibility of the President & Chief Executive Officer is to develop and implement a corporate strategy which is expected to make Spectral a leader in the management of endotoxemia related diseases, focusing initially on the treatment of septic shock. The President & Chief Executive Officer is tasked to:

a. prepare and submit an annual business plan to the Board for approval;
b. make regular enhancements and modifications to the corporate strategy as market conditions change, as the Company grows and as other factors become significant;
c. pursue new business developments in core product areas, as well as related areas;
d. ensure that an implementation plan is in place achieve the corporate strategy and that the plan is carried through;
e. effectively manage the growth of the Company during normal periods and during periods of
significant change;
f. manage all staff and ensure that the staff is highly productive through personal growth programs and by fostering excellent morale and a progressive corporate culture;
g. ensure that an effective corporate top management team exists with provision for succession;
h. maintain a climate which attracts, retains and motivates top quality managers;
i. develop a finance strategy for raising capital and managing cash flows;
j. be accountable for the Company’s consistent achievement of its financial objectives and goals;
k. be accountable for meeting all legal and regulated obligations as required, and ensure all actions on behalf of the Company comply with applicable laws;
l. ensure the Company has an appropriate internal control environment for financial reporting, achievement of corporate objectives and compliance with applicable laws;
m. report activities to the Board and present new business opportunities with cost and benefit justifications for the purposes of planning capital investment (where required);
n. manage relationships with major suppliers with the objectives of optimizing costs and ensure a mutually beneficial arrangement, continuity and, where required, mutual growth;
o. develop and manage alliances and partnerships with complimentary organizations to further market penetration in areas which cannot be dealt with solely by the Company;
p. ensure that regulatory environments are addressed within the Company’s corporate strategy and implementation plans;
q. serve as the chief spokesperson for the Company and ensure that the Company is properly
marketed to its various publics; and
r. perform such additional duties and functions as may be reasonably requested from time to time by the Chairman of the Board or the Board itself.

Board Orientation and Continuing Education

New directors are introduced to the business of the Company through an initial orientation program, including meetings with the senior executives and tours of the business operations, so that they have a clear understanding of such business operations, and the Company can more effectively leverage their capability in the context of such business. New directors receive a Board orientation binder containing relevant historical material to assist them in learning about the Company, the role of the Board, its committees and its directors. The Board holds meetings each year at which management of the Company reviews with the Board its strategies, business plans, opportunities and risks. In addition, the Board periodically receives relevant articles and reports regarding the diagnostics and health markets and the Company’s particular business, strategy and governance.

Board and Director Assessments

Like any process, corporate governance practices must be reviewed on a regular basis to ensure that the practices remain relevant and effective for the Company. In that regard, each of the directors completes a confidential questionnaire evaluating the Board and its committees annually. The questionnaires are reviewed by the Chair of the Nomination & Governance Committee. In addition, the Nomination & Governance Committee reviews the performance of the Board members annually. These assessments

consider, in the case of the Board or a committee thereof, its mandate and/or key responsibilities and, in the case of individual directors, any applicable position description and the competencies and skills such director is expected to bring to the Board. The results of these reviews are reported to and discussed with the Board. The Nomination & Governance Committee also regularly reviews and evaluates its practices against various governance guidelines and best practices.

Term Limits

The Nomination & Governance Committee has established guidelines on the term of directors. Board members should anticipate serving for an initial period of three years. However, the Company has not adopted formal term limits for directors on the Board or other mechanisms of Board renewal. Overall tenure is based upon a member’s continuing contribution, the ongoing needs of the Company and annual election by the Shareholders. The Nomination & Governance Committee reviews on a regular basis the makeup of the Board and particular skill sets which would be beneficial to the overall strategy and evolving business requirements of the Company. These skill sets include medicine, science, information technology, marketing and sales, general management, business, finance, government relations, academia, human resources and governance. In addition, the Nomination & Governance Committee assesses each director in order to ensure that the Board is balanced between highly experienced directors with long-term institutional knowledge and those with a fresh perspective. The Board is of the view that such a review process is more effective than implementing terms limits or other mechanisms of Board renewal (such as a mandatory retirement age).

Women on the Board and in Executive Offices

The Company has not adopted a written policy specifically relating to the identification and nomination of women directors nor does the Board or the Nomination & Governance Committee consider the level of representation of women on the Board or in executive positions when nominating candidates for election to the Board or when making executive officer appointments. Instead, the Board and the Nomination & Governance Committee evaluates potential nominees to the Board by reviewing the qualifications of the nominee, irrespective of gender, and determines their relevance by taking into consideration the then current Board composition and the anticipated skills required to round out the capabilities of the Board. Similarly, the Board assesses candidates for executive positions with the Company based on experience, skill and merit. However, the Company values diversity, including, without limitation, diversity of experience, perspective, education, race, gender and national origin as part of its overall business strategy.

The Board has not set specific targets as to the number of women board members it will maintain or the number of women executive positions it will maintain given the relatively small number of directors it currently has and the infrequent turnover of directors and executive officers.

As at the date of this Circular, no women are members of the Board, one woman is being put forward as a director nominee proposed for election, and one woman holds an executive position, representing approximately 20% of such positions.

Meetings and Strategic Planning

The Board is actively involved on an ongoing basis in reviewing, providing input on and approving the Company’s overall strategic plan, business plan and any strategic investments. The frequency of Board meetings depends upon the state of Spectral’s operations and the opportunities and challenges that the Company faces. In addition to the formal meetings, there are informal consultations between senior management and directors. There were 14 formal meetings of the Board during the year ended December 31, 2020.

Summary of Board and Committee Meetings Held During 2020

Board	14
Finance & Audit Committee	5
Human Resources & Compensation Committee	3
Nomination & Governance Committee	1

Summary of Director Attendance During 2020

Director	Board Meetings Attended	Finance & Audit Committee Meetings Attended	Human Resources & Compensation Committee Meetings Attended	Nomination & Governance Committee Meetings Attended
Mr. A. Bihl III	14 of 14	3 of 5	3 of 3	N/A
Mr. K. Giese	12 of 14	5 of 5	N/A	1 of 1
Mr. J. Hayakawa	14 of 14	N/A	N/A	1 of 1
Mr. W. Stevens	14 of 14	5 of 5	3 of 3	N/A
Dr. P. Walker	14 of 14	N/A	N/A	N/A

Risk Management

The Board plays a significant oversight role in risk management, principally through the Finance & Audit Committee and the Human Resources & Compensation Committee. Risk is identified and managed at the corporate level and is reviewed with such committees on a regular basis and reported to the Board.

Shareholder Communications

Spectral has a Disclosure Committee consisting of the Chief Executive Officer, the Chief Financial Officer and the Chairman of the Board with the objective of having a clear and effective process to provide timely, accurate, consistent and non-selective disclosure of all material information to all of the Company’s stakeholders. This Committee reviews and, where appropriate, approves all material external communications.

In addition, the Board and/or the Finance & Audit Committee reviews and approves material Company filings including this Circular, the annual information form, interim and annual consolidated financial statements and management’s discussion and analysis thereon and financial press releases.

Further information on the Company can be found at www.sedar.com. In addition, Shareholders can contact the Company’s transfer agent, Computershare Investor Services Inc., at 1-800-564-6253. Current Share prices, financial reports, recent press releases and annual reports are accessible on the Company’s website at www.spectraldx.com or by contacting Mr. Ali Mahdavi, Spinnaker Capital Markets Inc. at 416-962-3300 or [email protected].

The Board

The Board has the statutory duty to manage or supervise the management of the business and affairs of the Company. In carrying out such duties and exercising their powers, each director is required to act

honestly and in good faith with a view to the best interests of the Company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The directors are also given the right to delegate certain of their duties and responsibilities to committees of the Board. A description of the committees to which the Board has delegated certain duties and responsibilities as well as a description of those duties and responsibilities follows. The principal duties and responsibilities which have been retained by the Board include contributing to the formulation of and approving strategic plans; monitoring Company performance and the execution of its business plans; reviewing the Company’s financial performance; reporting and disclosure; approving the annual consolidated financial statements of the Company; obtaining reasonable assurance as to the adequacy of the internal controls; approving all significant Company transactions; appointing the Chairman, Chief Executive Officer and senior executives of the Company and planning their succession on the recommendation of the Human Resources & Compensation Committee; overseeing the identification of the principal risks to the Company and the implementation of appropriate processes and systems to manage such risks; and reviewing and approving key policies developed by management around ethical conduct, compliance and practices. The text of the Board’s written mandate, entitled “Corporate Governance Guidelines and Practices”, is set out in Schedule “A” to this Circular .

The Committees

The Board does not have an executive committee, but has created and delegated some of its duties to three standing committees of the Board: the Finance & Audit Committee; the Human Resources & Compensation Committee; and the Nomination & Governance Committee. Each of the committees has a written mandate which sets out its principal duties and responsibilities, all of which are reviewed annually. The Finance & Audit Committee and the Nomination & Governance Committees are comprised entirely of independent directors. The Human Resources & Compensation Committee is comprised of two independent directors and one non-independent director.

A summary of the key responsibilities of each of the standing committees is set out in Schedule “B” to this Circular .

Trading in Company Securities

The Company has established blackout periods during which securities of the Company cannot be traded by insiders of the Company, including directors and senior officers. In addition, to the extent that the Company is engaged in material undisclosed activities, additional blackout periods are formally imposed. These blackout periods apply to all securities whether held directly or in any equity compensation plan. There are no separate blackout periods related to non-insider equity compensation plan participants. Directors and senior officers are required to report any trading in securities of the Company within the requisite period required under the Securities Act (Ontario).

Equity Ownership Guidelines for Directors and Officers

In November 2013, the Company adopted share ownership guidelines (the “ Guidelines ”) for directors and officers, to be effected at the discretion of the Board, the details of which are described below.

Under the Guidelines, non-officer directors of the Company should, upon the later of: (a) five years after November 1, 2013, or (b) within five years of joining the Board, own, and continue to own while a director, a combination of the number of Shares and notional units under a deferred share unit or similar plan of the Company, with a market value equal to two times the annual director retainer (“ Board Target Ownership ”). Directors should own 20% of the Board Target Ownership by June 30, 2014, or within one year of joining the Board. As of the date of this Circular, the Board Target Ownership has been met. The Guidelines do not apply to any Board member holding a Board seat as designate of a significant shareholder of the Company, who is authorized to vote that shareholder’s Shares on all Board matters, as appropriate.

Under the Guidelines, officers of the Company should, upon the later of: (a) five years after November 1, 2013, or (b) within five years of initially becoming an officer of the Company own, and continue to own while

an officer of the Company, a combination of the number of Shares and notional units under a restricted share unit or similar plan of the Company, with a market value equal to the Officer Target Ownership outlined below. The Officer should own 20% of the Officer Target Ownership by June 30, 2014 or within one year of initially becoming an officer of the Company. As of the date of this Circular, all of the individual equity ownership guideline targets for Officers employed on a full-time basis with the Company have been met.

Officer	Officer Target Ownership (Base Salary Multiple)
CEO	2.0 X
CFO	1.0 X
OtherOfficers	0.5X

“Market value” is determined at any time or from time to time for purposes of the Guidelines based on the number of the Shares and/or notional units, as applicable, owned or to be owned and using the highest price of the Shares on the TSX during the previous twelve-month period.

Equity Compensation Plans

The equity compensation plans that the Company has in place reflect the recommendations of the independent compensation review completed by Lane Caputo Compensation Inc. in 2020. All equity compensation plans of the Company that provide for the issuance of Shares from treasury to participants have been approved by the Board and the TSX. Pursuant to the TSX rules, any changes to such plans may require Shareholder approval.

Business Conduct and Ethics

The Company’s business conduct and ethics are embodied in certain core values, including mutual trust, respect for people, integrity and commitment to excellence. At Spectral, ethical behaviour is the responsibility of all employees, not simply that of senior officers. A copy of the Company’s code of ethics and business conduct (the “ Code ”) can be obtained by contacting the Company at 1-888-426-4264.

Directors are required to notify management of the Company in writing of the existence of any personal or professional relationships which may create a conflict of interest with the Company or with a customer, supplier or other outside party. In addition, directors are required to disclose to the Board any material interest in any proposed transaction/agreement to be entered into by the Company which is subject to Board approval.

The Company’s directors, officers, employees and consultants have a responsibility to report any conduct or proposed conduct reasonably believed to be in violation of the Code promptly to the Corporate Secretary of the Company. The Corporate Secretary is required to report any suspected violation of the Code to the Human Resources & Compensation Committee for investigation. The Human Resources & Compensation Committee in turn reports to the Board. On an annual basis, the Board undertakes a self-assessment of its governance practices including compliance with the Code. Management of the Company is also interviewed in connection with such assessment. The Corporate Secretary of the Company is the contact person for employees, officers, and directors who may wish to report any suspected violations of the Code. Employees are asked if they are aware of any violations during annual performance reviews and senior management make enquiries at each of its regularly scheduled meetings. To date there have been no reports of any suspected violations of the Code.

Nomination Committee Process

The Company’s current governance practices address a number of the disclosure rules including the requirement for a nomination committee, a nomination committee charter and confirmation as to independence of the committee’s members under applicable listing standards.

In addition, Spectral’s Nomination & Governance Committee reviews the composition of the Board on a regular basis, taking into account a number of factors, including the evolving needs of the Company, and the breadth and depth of experience of the Board members. Potential nominees for the Board currently come from a number of sources including recommendations of existing independent Board members, senior management and outside search firms.

All proposed candidates are reviewed by members of the Nomination & Governance Committee, the Chairman of the Board and certain members of senior management. Such review takes into consideration the competencies and skills of any proposed candidate as well as the ability to devote the necessary amount of time to Board member duties. The final decision as to whether such candidates are proposed to the Shareholders as nominees is made by the Board.

Director Independence

It is the objective of the Board that all non-employee directors meet the criteria for independence as set out in applicable securities laws. In addition, the Company’s Corporate Governance Guidelines and Practices require that members of the Finance & Audit Committee satisfy the independence requirements under applicable securities laws for members of audit committees.

Based upon the information provided by the directors, the Board has determined that all of the directors are independent other than Dr. Walker, who was also the Chief Executive Officer until April 2021.

Shareholder Communications with the Board

Shareholders and other interested parties may communicate directly with the Board or the independent directors. All communications should be in writing and should be directed to the Chairman of the Board c/o Spectral Medical Inc., 135 The West Mall, Unit 2, Toronto, Ontario, M9C 1C2 or to the President and CEO at Spectral Medical Inc., 135 The West Mall, Unit 2, Toronto, Ontario, M9C 1C2 or by e-mail to: [email protected].

The sender should indicate in the address whether it is intended for the entire Board, the independent directors as a group, or an individual director. Each communication intended for the Board or independent directors received by the Chairman or Corporate Secretary will be forwarded to the intended recipients subject to compliance with instructions from the Board in effect from time to time concerning the treatment of inappropriate communications.

Overall Approach

The Board and senior management believe that the Company’s current governance practices are appropriate and comply in all material respects with applicable statutory, regulatory and exchange requirements.

DIRECTORS AND OFFICERS INSURANCE

Spectral’s directors’ and officers’ insurance was renewed in December 2020. The amount of the annual premium paid by Spectral was $389,078; no amount was payable by the directors or officers in respect of such insurance. The insurance policy is subject to a $30 million limit, both per claim and in the aggregate. A $100,000 deductible applies to each claim up to $10 million made by the Company on its own behalf and on behalf of each director and officer insured for corporate indemnity. There is no deductible for all other claims.

ADDITIONAL INFORMATION

Shareholders who wish additional information should contact Computershare Investor Services Inc. tollfree at 1-800-564-6253, locally at 514-982-7555 or by email at [email protected] with any questions regarding the deposit of proxies.

Financial information is provided in the Company’s comparative annual consolidated financial statements and MD&A for the fiscal year ended December 31, 2020. The Company has complied with Section 5.1 of National Instrument 52-110 – Audit Committees , and the disclosure required by Form 52-110F1 is included in the Company’s Annual Information Form commencing on page 30 under the heading, “Finance and Audit Committee”.

Additional information relating to the Company is available on SEDAR at www.sedar.com. Shareholders may also contact the Company at 1-888-426-4264 to request copies of the Company’s current annual report, annual information form, consolidated financial statements, MD&A and other continuous disclosure documents filed by the Company.

APPROVAL

The content and the sending of this Circular have been approved by the Board and a copy of the Circular has been sent to each director of the Company, the auditors of the Company and each Shareholder entitled to notice of the Meeting.

DATED at Toronto, Ontario, the 29[th] day of April 2021.

“Christopher Seto” (signed) Christopher Seto Chief Executive Officer

A-1

Schedule “A”: Corporate Governance Guidelines

The Board of Directors of Spectral Medical Inc. (“ Spectral ”) is responsible for overseeing the effective management of the Company’s business. In carrying out those responsibilities, the Board has the authority and duty to protect and enhance the Company’s assets in the interests of all stakeholders.

The Board recognizes that Board effectiveness is an interplay of structure, membership and process and individual Director effectiveness is an interplay of independence, competence and behaviour. The Board’s responsibility is an active one and the involvement and commitment of each Director, as evidenced by attendance, preparation and participation at meetings are essential ingredients in the overall success of the Company.

This document summarizes certain guidelines and practices of Spectral’s Board of Directors relating to matters of corporate governance. These guidelines are not meant to be static and will be reviewed and evaluated on a regular basis and modified as determined by the Nomination & Governance Committee to meet the changing needs of the Company and regulatory requirements.

1. Chair of the Board and CEO

The Board has separated the roles of Chair and CEO. Currently, the Company has an independent, Non-Executive Chair of the Board (“ Chair ”). The Chair is appointed by the independent Board on the recommendation of the Nomination & Governance Committee.

2. Lead Independent Director

The Board has determined that at such time as the Chair is not an independent Director that a Director who is independent should serve as “Lead Independent Director”. The Lead Independent Director would chair regular meetings of the independent Directors and would assume other responsibilities, which the independent Directors may from time to time designate. The Lead Independent Director would be appointed by the independent Board on the recommendation of the Nomination & Governance Committee.

3. Director Responsibilities

In discharging his or her duties, each Director shall act honestly and in good faith with a view to the best interests of the Company; and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

4. Board Composition

The Board believes and the Company’s by-laws provide that a majority of the Directors should be independent of the Company. Independent means free from any relationship which could materially interfere with his or her ability to act in the best interests of the Company as determined by the Board or a Committee thereof, in accordance with applicable regulatory Governance Guidelines and Standards (currently OSC and TSX). In addition, the Board believes that there should generally be no more than one or two non-independent Directors.

5. Board Size

The Articles of the Company provide for a minimum of three and a maximum of ten Directors. The Board believes at this time, given the size and scope of the Company’s Business, that seven Directors is the right number to provide the depth, breadth and diversity of expertise and experience required, while allowing for efficient operation and decision-making. The Board has the ability to increase or decrease its size, within the limits set out in its Articles. The Nomination & Governance Committee reviews the size and composition of the Board annually and makes recommendations to the Board when it believes a change would be in the best interests of the Company.

6. Board Meeting Agendas

The Chair and the CEO, in consultation with the Corporate Secretary, develop the agenda for each Board meeting. Notice of the principal matters to be addressed at all Board meetings are distributed

A-2

to Directors in advance of each meeting, and all Board members are free to suggest additions to meeting topics. The Chair will establish the agenda items for meetings of the independent Directors.

7. Board Meetings

Information and reports pertaining to Board meeting agenda items are generally circulated to the Directors a week in advance of the meeting. Materials are prepared in a way to focus attention on critical issues to be considered by the Board. Reports may be presented during Board meetings by members of the Board, senior management and/or staff, or by invited outside advisors.

Directors are expected to attend all meetings of the Board and the Committees upon which they serve, to come to such meetings fully prepared, and to remain in attendance for the duration of the meeting. Where a Director’s absence from a meeting is unavoidable, the Director should, as soon as practicable after the meeting, contact the Board Chair, the Committee Chair, the CEO, or the Corporate Secretary for a briefing on the substantive elements of the meeting.

8. Regular Attendance of Non-Directors at Board Meetings

The Board appreciates the value of having certain members of senior management attend each Board meeting to provide information and opinion to assist the Directors in their deliberations and to allow Directors to evaluate the caliber of the senior management team. The CEO will seek the Board’s concurrence in the event of any proposed change to the management attendees at Board meetings. Management attendees will not attend the portion of each meeting, which is reserved for discussion among the independent Directors only.

9. Executive Sessions of Independent Directors

The independent Directors of the Board will meet separately, as determined by the Chair or, if there is a Lead Independent Director, by the Lead Independent Director.

10. Board Contacts with Senior Management

All of the Directors have open access to the Company’s senior management. It is expected that Directors will exercise judgment to ensure that their contacts with senior management are carried out in such a manner as to limit such management’s distraction from the Company’s business operations. Written communications from Directors to members of senior management will be copied to the Chair and to the CEO. The Board also encourages individual Directors to make themselves available for consultations with senior management outside Board meetings in order to provide specific advice and counsel on subjects where such Directors have special knowledge and experience.

11. Board Compensation

The compensation program for Directors is reviewed and agreed to on an annual basis by the Nomination & Governance Committee, with the opportunity to obtain assistance from outside consultants. Overall compensation is established based on a comparator peer group of companies as determined from time to time by the Committee.

12. Delegation and Committees of the Board

In carrying out its duties, the Board has established and delegated certain responsibilities to separate Committees of the Board. The current Committees of the Board are Finance & Audit; Human Resources & Compensation; and Nomination & Governance. Each of the Committees operates under a separate and distinct mandate approved by the Board, which describes both the structure of the Committee and its duties and responsibilities and each is comprised entirely of independent Board members.

13. Committee Members

Committee membership is approved by the Board in consultation with the Chair and the CEO and upon recommendation of the Nomination & Governance Committee.

A-3

14. Committee Composition

Members of the Committees of the Board shall be appointed from among the members of the Board.

15. Committee Meetings

The schedule of meetings of each Committee will be determined by its Chair and its members, based upon an annual work plan designed to discharge the responsibilities of the Committee as set out in its mandate. The Chair of the Committee will develop the agenda for each Committee meeting through consultation as appropriate with members of management, staff and the Committee. Each Committee will report to the Board on the results of each Committee meeting. Minutes will be prepared for all Committee meetings and copies provided to all Board members.

16. Board Review of “Independence” of Directors

Directors will notify the Chair of the Nomination & Governance Committee of their employment affiliations, including both director and committee memberships, in other organizations, in order to enable the Committee to assess their independence and/or the continued appropriateness of their membership under the circumstances.

The Committee will review on an annual basis any relationships between Directors and the Company, which might be construed in any way to compromise the designation of any Director as being independent of the Company. The objective of such review will be to determine the existence of any material relationships, to ensure that the composition of the Board remains such that the majority of the Directors are independent and that where any such relationships exist, the Director is acting appropriately.

17. Criteria for Board Membership

The Nomination & Governance Committee will review each year the composition and general and specific criteria applicable to candidates to be considered for nomination to the Board. The objective of this review will be to maintain the composition of the Board in a way, which provides the best mix of skills and experience to guide the long term strategy and ongoing business operations of the Company. This review will take into account such common characteristics such as personal integrity, good judgment, high ethics and standards, outstanding ability in their individual fields of expertise and a willingness to devote necessary time to Board matters.

The Company does not have a policy limiting the number of other public company boards of directors upon which a director may sit, in general. However, the Nomination & Governance Committee shall consider the number of other public company board and other boards (or comparable governing bodies) on which a prospective nominee is a member.

Although the Company does not impose a limit on outside directorships, it does recognize the substantial time commitments attendant to Board membership and expects that the members of its Board be fully committed to devoting all such time as is necessary to fulfill their Board responsibilities, both in terms of preparation for, and attendance and participation at meetings.

18. Selection of New Director Candidates

The Board is responsible for identifying suitable candidates to be recommended for election to the Board by the shareholders. The Nomination & Governance Committee has been given the responsibility in consultation with the Chair and CEO of gathering the names of potential nominees, screening their qualifications against the current skill and experience needs of the Board and making recommendations in this regard to the full Board. All Directors are encouraged to identify potential candidates and to provide their names to the Chair of the Committee. In addition, independent search firms shall be engaged as appropriate to assist in identifying potential candidates.

An invitation to stand as a nominee for election to the Board will normally be made to a candidate by the Board through the Chair or the Chair of the Nomination & Governance Committee.

A-4

19. New Director Orientation and Continuing Education

New Directors will be provided with an orientation and education program which will include written information about the duties and obligations of Directors, the business of the Company, material policies, meetings and discussion with senior management and other Directors, and tours of the Company’s operations. When first appointed to a Board Committee, Directors will be offered appropriate information and orientation to prepare them to participate effectively in the work of the Board or any Committee to which they are appointed. Continuing education will include meeting with local management, regular receipt of articles, reports and other papers regarding the diagnostics market, presentations related to industry trends, markets, opportunities in such markets and governmental and regulatory changes impacting the Company.

20. Assessing Corporate Governance Practices and the Board’s Performance

The Nomination & Governance Committee, with the assistance of the Chair and Corporate Secretary, is responsible for conducting annual assessments of the effectiveness of the Company’s governance practices and conducting a self-assessment of the overall performance of the Board and its Committees and reporting on the same to the Board. In addition, the Chair of the Board and the Chair of the Nomination & Governance Committee shall review on an annual basis the performance of individual members of the Board and the Chair of the Board, in consultation with the Chairs of the Committees, the performance of Members of each Committee. It is expected that the result of such reviews will be to identify any areas where the Directors believe the governance practices can be improved or where the Directors and/or management believe that the Board could make a better collective contribution to overseeing the affairs of the Company. Items identified through this process as requiring improvement will become an accountability of senior management and/or the Chair or Committee and regular monitoring and progress reports provided to the Nomination & Governance Committee.

21. Withhold Votes for Directors at Shareholder Meetings

The Nomination & Governance Committee will take into account the number of withheld votes by shareholders with respect to a Director in determining his or her candidacy for re-election at the next annual meeting.

22. Term Limits for Directors

Directors should anticipate serving on the Board for an initial period of three years. Overall, tenure will be based upon a Directors’ continuing contribution, the overall requirements of the Company and annual election by the shareholders.

23. Evaluation of the CEO

The Human Resource & Compensation Committee conducts an annual review of the performance of the CEO as measured against objectives established mutually in advance by the Committee and the CEO. The evaluation will also be used by the Committee in its deliberations concerning the CEO’s annual compensation, which shall be reviewed and approved by the Board.

24. Management Development and Succession Planning

The Board expects that management development should be an ongoing process and that a report be prepared on such activity annually and provided to the Human Resource & Compensation Committee.

The Committee shall review on an annual basis the succession plans of the Company at the senior management level, including the CEO, and shall report thereon to the Board.

The Board shall review such plans annually and provide input thereon to the Committee.

25. Board Communication with Stakeholders

The Board believes that it is the function of management to speak for the Company in its communications with the investment community, the media, customers, suppliers, employees, governments and the general public. It is understood that the Chair or other individual Directors

A-5

may from time to time be requested by management to assist with such communications. If communications from stakeholders are made to the Chair or to other individual independent Directors, management will be informed. The Board, either directly or through the Finance & Audit Committee, approves the content of the Company’s major communications to shareholders and the investing public, including the annual and interim Consolidated financial statements and corresponding Press Releases, the annual and interim Management’s Discussion and Analysis, the Proxy Circular, the Annual Information Form and any prospectuses which may be issued.

26. Corporate Strategy

The Board believes that management is responsible for the development of long-term corporate strategy, while the role of the Board is to review, question and validate, and ultimately to approve the strategies proposed by management and to monitor progress against such strategies. A dedicated meeting of the Board will be held annually to address long-term corporate strategy and management shall report to the Board on a regular basis any events both internal or external which might impact such strategy.

27. Shareholder Communication with the Board

Shareholders and other interested parties may communicate directly with the Board or the independent Directors. All communications should be in writing and should be directed to either the Company’s Chair at Spectral Medical Inc., 135 The West Mall, Unit 2, Toronto, Ontario, M9C 1C2 or to the Chief Executive Officer at Spectral Medical Inc., 135 The West Mall, Unit 2, Toronto, Ontario, M9C 1C2 or by e-mail to [email protected].

Matters relating to the Company’s accounting, internal accounting controls or auditing matters will be referred to the Chair of the Finance and Audit Committee.

Matters relating to Board or executive compensation will be referred to the Chair of the Human Resources & Compensation Committee.

Other matters will be referred to the Board Chair.

To further facilitate communication between the Company’s shareholders and the Board, all Directors standing for re-election and all new Director nominees are encouraged to attend the annual meeting of shareholders.

28. Individual Directors Engaging Outside Advisors

The Charters for the Board and each of the Committees provide the Board or a Committee with the right to engage outside advisors at the expense of the Company. Any Board or Committee member wishing to engage an outside advisor should discuss such engagement with the Chair, the CEO and, if applicable, the Chair of the relevant Committee.

B-1

Schedule “B”: Key Board and Committee Responsibilities

BOARD OF DIRECTORS

contribute to the formulation of and approve strategic plans;
monitor Company performance and the execution of its business plans;
oversee the identification by management of the principal risks of the Company’s businesses as well as the implementation, by management, of appropriate processes and systems to manage such risks;
appoint the CEO and approve the appointment of the Senior Executives of the Company and review their performance and compensation and plan for their succession upon recommendation of the Human Resources & Compensation Committee;
review and approve management’s recommendations regarding major decisions and actions, including acquisitions, divestitures, financings and capital expenditures;
review and approve key policies developed by management on various issues such as ethics, compliance, communications and public disclosures and review, approve and monitor compliance with policies adopted by the Board;
oversee the Company’s public communication policies and their implementation, including disclosure of material information, investor relations and shareholder communications;
oversee, with the Finance & Audit Committee, financial reporting and disclosure of the Company to obtain reasonable assurance that:
the Company complies with all applicable laws and regulations of governments, regulatory agencies and stock exchanges relating to financial reporting and disclosure; and
the accounting policies and practices, significant judgments and disclosures which underlie or are incorporated in the Company’s consolidated financial statements are appropriate having regard to the Company’s businesses; and
review and approve the annual consolidated financial statements, financial reporting and disclosure and obtain reasonable assurance as to the integrity of the Company’s internal control and management system.

FINANCE & AUDIT

Independent Auditor
recommend to the Board the appointment or replacement of the independent auditor;
establish the compensation of the independent auditor;
have the independent auditor report directly to the Finance & Audit Committee;
determine the extent of involvement of the independent auditor in reviewing unaudited quarterly financial results;
meet with the independent auditor prior to the annual audit to discuss the planning, scope and staffing of the audit;
approve the selection of the senior audit partners having primary responsibility for the audit;
provide for the periodic rotation of the senior audit partners having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
at least on an annual basis, evaluate the qualifications, performance and independence of the independent auditor and the senior audit partners having primary responsibility for the audit; and
pre-approve all auditing services and permitted non-audit services performed by the independent auditor.

B-2

Financial Reporting
prior to their public release and filing with securities regulatory agencies, review and discuss with management and the independent auditor the:
- press release;
- consolidated financial statements and notes thereto;
- management’s discussion and analysis; and
- results of any independent auditor’s review requested/approved by the Committee.
review the Company’s unaudited quarterly financial results including:
- any significant judgments made in the preparation of consolidated financial statements;
- any significant disagreements among management and the independent auditor in connection with the preparation of consolidated financial statements;
- significant financial reporting issues and judgments made in connection with the preparation of the Company’s consolidated financial statements;
- critical accounting policies and practices;
- integrity of the Company’s financial reporting processes; and
- any correspondence with regulators or governmental agencies and any published reports, which raise material issues regarding the Company’s consolidated financial statements or accounting policies.
Year-end Audit
review of the Company’s audited financial results, including:
- all matters described above with respect to unaudited quarterly financial results;
- results of the independent audit; and
- all matters required to be discussed by Statement of Auditing Standards No. 61.
Annual Proxy Statement and Regulatory Filings
issue any reports required of the Audit Committee to be included in the Company’s annual proxy statement; review and recommend to the Board the approval of all material documents filed with securities regulatory agencies including:
- Consolidated Year-end Consolidated financial statements;
- Annual Information Form; and
- Prospectuses.
Related Party Transactions and Off-Balance Sheet Structure
review all related-party transactions and, if deemed appropriate, recommend approval of any particular transaction to the Board; and
review all material off-balance sheet structures, which the Company is a party to.
Internal Controls, Risk Management and Legal Matters
consider the effectiveness of the Company’s internal controls over financial reporting and related information technology security and control;
discuss with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures; and
review with management, and if necessary, the Company’s counsel, any legal matter which could reasonably be expected to have a material impact on the Company’s consolidated financial statements or accounting policies.
Capital Structure, Investment and Cash Management Policies, Disclosure Policy
review and approve any changes to the Company’s capital structure;
review and approve the Company’s investment and cash management policy; and
o review and approve the Company’s disclosure policy.

B-3

“ Whistle Blower ” and Related Procedures
establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters.

• Review of Charter and Self-Assessment

review and reassess annually the adequacy of the Committee’s Charter; and
o review annually the Committee’s own performance.
Reporting to the Board
make regular reports to the Board, but not less frequently than quarterly.

HUMAN RESOURCES & COMPENSATION COMMITTEE

Human Resources
review of human resources development and organization structure and approve any significant programs or changes to structure.
Succession Planning
review and report to the Board on the Company’s succession planning process for the CEO and senior officers reporting to the CEO.
Compensation
review compensation principles and practices and approve any significant changes to such principles and practices;
review and make recommendations to the Board on the compensation of the CEO;
o review and report to the Board on annual objectives against which to assess the CEO and on its assessment of the CEO’s performance against those objectives;
review and approve the compensation of senior officers reporting to the CEO;
evaluate periodically the competitiveness of the cash and equity compensation programs for senior management and initiate action or make recommendations to the Board as appropriate;
review all employee compensation and stock equity plans including Short-Term Incentive Plan, Mid-Term Incentive Plan, Stock Option Plan, Stock Purchase Plans and approve changes to such plans, provided that any plan amendments which will have a material cost increase or material effect on the Company or the participants requires Board approval;
administer the Company’s Employee Stock Option Plan, Stock Purchase Plan, MidTerm Incentive Plan and such other equity based plans as may be delegated to it from time to time by the Board; and
report on an annual basis to the Board and Shareholders, the policies of the Committee for determining executive compensation.
Director Compensation
review and recommend to the Board, the form and adequacy of compensation for independent Directors.
Review of Charter and Self-Assessment
review and reassess annually the adequacy of the Committee’s Charter; and
review annually the Committee’s own performance.

• Report to the Board

the Chair of the Committee or designate shall report to the Board after each meeting the significant matters addressed by the Committee at such meeting.

B-4

NOMINATION & GOVERNANCE COMMITTEE

Corporate Governance
develop and recommend to the Board, corporate governance guidelines applicable to the Company;
annually review the corporate governance guidelines and practices of the Company and, if appropriate, recommend changes to such guidelines and practices to the Board or management;
monitor the appropriateness of the Company’s governance systems with regard to external governance standards and with emphasis on “continuous improvement”;
review regularly the effectiveness of the Board and its committees in meeting its governance objectives and in its relationship with management; and
review any shareholder proposal received by the Company and recommend to the Board the Company’s response.

• Nominating

review the makeup and needs of the Board, identify and recommend candidates for Board membership;
establish the criteria for membership; such criteria should cover, among other things, diversity, experience, skill set and the ability to act on behalf of shareholders;
in consultation with the Board and CEO and, on an ongoing basis, maintain a database of potential candidates;
utilize such outside agencies or third parties at the cost of the Company, as the Committee deems necessary to assist in identifying potential candidates; and
recommend to the Board the annual nominees to the Board for presentation to the Shareholders.
Director Indemnification and D&O Insurance
review and recommend to the Board the appropriateness and adequacy of the policy of indemnification of directors. In that regard, the Chair of the Committee and the Chair of the Audit Committee shall consult in connection with any renewal or change to the Directors’ and Officers’ liability insurance coverage.
Review of Charter and Self-Assessment
review and reassess annually the adequacy of the Committee’s Charter; and
o review annually the Committee’s own performance.
Report to the Board
the Chair of the Committee or designate shall report to the Board after each meeting the significant matters addressed by the Committee at such meeting.

Date: April 29, 2021

“Christopher Seto” (signed) Christopher Seto Chief Executive Officer Spectral Medical Inc.

AI assistant

Spectral Medical Inc. — Proxy Solicitation & Information Statement 2021

42747_rns_2021-05-10_a179b7e3-8f52-4bd1-b44d-2925b490f012.pdf