It is the policy of Lucero Energy Corp. (the “Corporation“) that the conduct of every director, officer, employee and consultant (herein referred to as “Employee” or “Employees“) while acting on behalf of the Corporation or its subsidiaries be based upon the highest ethical standards. Also, it is essential that the Corporation’s interactions and dealings in carrying out these activities are honest, fair, and courteous with due regard for the protection of our business relationships.
This Code of Business Conduct and Ethics (the “Code“) affirms and expands upon the above principles of the Corporation and is a guideline to:
- Assure compliance with laws and regulations that govern the Corporation’s business activities.
- Maintain a corporate climate in which the integrity and dignity of each individual is valued.
- Foster a standard of conduct that reflects positively on the Corporation.
- Protect the Corporation from unnecessary exposure to financial loss.
This Code does not specifically address every potential form of unacceptable conduct, and it is expected that Employees will exercise good judgment in compliance with the principles set out in this Code. Each Employee has a duty to avoid any circumstance that would violate the letter or spirit of this Code. Unscrupulous dealings, non-compliance with this Code or the law or other dishonest or unethical business practices are forbidden and may result in disciplinary action, including termination of employment.
COMPLIANCE WITH LAWS AND REGULATIONS
Any operating, financial or administrative transaction undertaken in the name of the Corporation that would violate the Federal, Provincial or State laws of Canada or the United States or any associated regulations is prohibited. Particular attention is directed to the laws and regulations relating to discrimination, securities, labor and the environment. If any uncertainty arises as to whether a course of action is within the letter and spirit of the law, advice should be obtained in advance from the Corporation’s counsel directly or with the assistance of the Corporate Secretary.
Discrimination and Sexual Harassment
The Corporation will not tolerate sexual harassment or discrimination based on race, color, religion, age, sex, national origin or disability, or any other basis prohibited by applicable law. Similarly, offensive or hostile working conditions created by such harassment or discrimination will not be tolerated. Each Employee has a duty to avoid conduct that constitutes discrimination or harassment.
Any situation that may reasonably constitute discrimination or sexual harassment must be reported to the Chief Executive Officer or, in the alternative, the Chair of the Audit Committee (see Appendix “A”).
Violence in the Workplace
The Corporation will not tolerate violence in the workplace. Violence means the threatened, attempted or actual conduct of a person that causes or is likely to cause physical injury to person or property. Each Employee has a duty to avoid conduct that constitutes violence in the workplace. Offensive, hostile or unsafe working conditions created by such violence in the workplace, are considered a hazard and will not be tolerated and may result in disciplinary action including termination of employment.
Insider Trading and Tipping
Employees in possession of undisclosed material information about the Corporation must abstain from trading in its securities until such information is generally and publicly available. Such material “inside information” relates to facts or changes in business or operations that might reasonably be expected to have a significant effect on the market price or value of the Corporation’s securities. Such information might include, for example, major contracts, earnings estimates, changes of control or management, pending mergers, dispositions, acquisitions, production histories, well results, the timing of various operations, or other significant business information or developments. Providing such inside information to others (“tipping“) who then trade on it is also strictly prohibited. Trading on inside information is a violation of Canadian securities law. Furthermore, Employees are required to comply with trading restrictions and blackout periods as designated by the Corporation (see the Corporation’s “Information Disclosure Policy”).
Employees may become aware of information regarding actual or potential commercial transactions of the Corporation, information pertaining to the operations or potential operations of the Corporation or of other confidential information obtained in the conduct of the Corporation’s business. Such confidential and proprietary information is the exclusive property of the Corporation and each Employee is bound to keep such information in the strictest confidence both during and subsequent to the term of his or her employment. Furthermore, such information is to be used solely for the Corporation’s purposes and never for the private gain of an Employee, any member of his or her immediate family, or any third party.
Special care is required regarding the public release of information concerning the Corporation’s business, strategies, assets, activities and plans, the disclosure of which could influence investors trading in the Corporation’s securities. All media contact and public statements and discussions regarding the Corporation’s business must only be made by the Chief Executive Officer of the Corporation or the President of Petroshale (U.S.) Inc., or their designees.
PROPRIETARY DATA AND INVENTIONS
Every Employee is expected to improve productivity, modify processes and procedures and to develop new prospects, methods, etc. Since the Employee is provided with the compensation, staff, consulting advice, material and confidential information to fulfill this expectation, the Corporation is the beneficial owner of the results or efforts. Accordingly, any proprietary information which an Employee obtains, prepares or develops, while in the employ of the Corporation is the property of the Corporation.
For greater clarity, proprietary information includes, but is not limited to reports, analyses, patentable ideas, trademarks, copyright material, industrial designs, charts, maps, drawings, computer systems, etc.
CONFLICTS OF INTEREST
No Employee should enter into any transaction or engage in any practice directly or indirectly which would tend to influence him or her to act in any manner other than in the best interests of the Corporation. In particular, it is improper for an Employee to take any action or to make any decision or to influence, or to appear to be capable of influencing, any such action or decision, on behalf of the Corporation if he or she, or any member of his or her immediate family, has any direct or indirect interest which is or may be in actual, potential or apparent conflict with the interests of the Corporation. Even the appearance of a conflict of interest may be as damaging as an actual conflict and should be avoided.
No Employee shall engage in any business or secondary employment which unduly interferes with his or her obligations and responsibilities to the Corporation as assigned by the Chief Executive Officer or the Board of Directors and accepted by the Employee.
The acquisition or retention by an Employee or by a member of his or her immediate family of a financial interest in any Corporation that is selling supplies, furnishing services or otherwise doing business or competing with the Corporation is prohibited without written prior approval of the Corporation’s Chief Executive Officer. This provision does not apply to an officer or Employee owning 5 percent or less of the securities of a publicly traded entity.
Employment of Family Members and Employee Relationships
The Corporation does not prohibit spouses, siblings, children, and other persons related by blood or marriage from working for the Corporation simultaneously. However, all such Employees must be hired by disinterested personnel strictly on the basis of merit and without regard to family relationships. Further, all other personnel decisions, including compensation, promotion and termination must also be made by disinterested personnel in the same manner.
Any Employee who has entered into a sexual relationship with another Employee, no matter what its duration, must ensure that this policy is followed as if the other Employee were a spouse or family member.
In the event an Employee becomes aware of a potential conflict of interest, an actual conflict of interest or even the possible appearance of a conflict of interest, they must disclose such conflict to the Chief Executive Officer, or, in the case of a Director, to the Board of Directors as a whole.
GIFTS AND PAYMENTS
No Employee shall directly or indirectly offer or give any “kickback” or other improper payment or consideration to any customer, business partner, government official or employee, or any other person in consideration for, or influence in, the award of a contract to the Corporation. This prohibition applies to consideration paid to foreign residents as well as residents of Canada and the United States.
No Employee or member of his or her immediate family, shall directly or indirectly solicit, accept or retain any gift, entertainment, trip, discount, compensation, service, loan or other benefit from any organization or person doing business or competing with the Corporation. The only exceptions are: (i) modest gifts or entertainment with nominal value as part of normal business courtesy or hospitality, e.g. meals, occasional tickets, golf green fees and gifts that are not extravagant, expensive or frequent; or (ii) gifts or benefits of significant value where written approval by an officer of the Corporation has been provided prior to the acceptance. A copy of such written approval shall be provided to the Corporate Secretary.
Corporate funds, credit, property or services may not be used directly or indirectly to support any political party or candidate for public office, or to support or oppose any ballot measure, without the approval of the Chief Executive Officer. Employees are permitted to support political parties and candidates with their personal efforts and money.
ACCOUNTING AND FINANCIAL REPORTING
The Corporation is committed to achieving compliance with all applicable securities laws and regulations, accounting standards, accounting controls and audit practices. Every Employee is required to follow prescribed accounting and financial reporting procedures. All accounting records should accurately reflect and describe corporate transactions. The recording of such data must not be falsified or altered in any way to conceal or distort assets, liabilities, revenues, expenses or the nature and results of the Corporation’s activity.
COMPLIANCE AND ENFORCEMENT
The Corporation is committed to providing a work environment based on trust and respect and enabling all Employees to work without fear of intimidation or discrimination. As part of this commitment, the Corporation encourages an open and frank atmosphere in which problems, concerns or complaints can be raised without fear of retaliation.
Each Employee is responsible for adherence to, and bound as a condition of employment, by this Code. Any suspected violation of this Code should be reported promptly in accordance with this Code and Appendix “A” hereto without regard to the usual lines of reporting.
Raising a Complaint or Concern
Any Employee may report a violation or suspected violation of any aspect of this Code in accordance with the procedure set out in Appendix “A” attached to this Code. The person reporting a violation or suspected violation of this Code should use their judgment as to the most appropriate method of raising their complaint or concern.
Activities that must be Reported
The following activities (each a “Reportable Activity“) must be reported by Employees of the Corporation promptly (see Appendix “A”):
1. Any concerns or complaints with respect to the Corporation’s accounting, internal accounting controls, financial reporting or auditing matters including:
- Fraud or deliberate error in the preparation, evaluation, review or audit of any financial statement of the Corporation;
- Fraud or deliberate error in the recording and maintaining of financial records of the Corporation;
- Deficiencies in or non-compliance with the Corporation’s internal accounting controls;
- Tampering with, or the deliberate destruction or removal of financial records during the Corporation’s normal retention period of such financial records;
- Misrepresentation or false statement to or by an officer, Employee, consultant or external accountant regarding a matter contained in the financial records, financial reports or audit reports of the Corporation; or
- Any effort to mislead, deceive, manipulate, coerce or fraudulently influence any internal or external accountant or auditor in connection with the preparation, examination, audit or review of any financial statement or records of the Corporation.
2. Any evidence of an activity by an Employee of the Corporation or by any department within the Corporation that may constitute corporate fraud, a violation of federal, state or provincial laws, including the misappropriation of any Corporation property or use of Corporation funds for any illegal, improper or unethical purpose.
3. Any threatened, attempted or actual conduct that causes or is likely to cause physical injury.
4. Any violation or suspected violation of the matters covered by this Code.
Questions of interpretation or application of this Code with respect to a particular situation should be raised in a timely manner using the same procedure as the raising of a complaint or concern (see Appendix “A”) as circumstances dictate. Such requests may be made in writing or orally and will be treated confidentially.
The Corporation is fully committed to maintain adequate procedures for the confidential, anonymous reporting by an Employee of a Reportable Activity.
Any submission made by an Employee regarding a Reportable Activity shall be treated on a confidential and, if desired by the Employee on an anonymous basis. A submission shall only be disclosed to those persons who have a need to know in order to properly carry out an investigation of the Reportable Activity, in accordance with the procedures set out in Appendix “A” for handling such Reportable Activity.
Any Employee, who in good faith reports what they believe to be a Reportable Activity, will be protected from threats of retaliation, discharge, or other types of adverse action or discrimination including but not limited to, lower compensation or inferior terms and conditions of employment that are directly related to the disclosure of such Reportable Activity.
Any Employee who retaliates against another Employee who reports a Reportable Activity in good faith may face disciplinary action, including termination of his or her employment, without notice.
EXCEPTIONS, CHANGES and disclaimers
Any exception or waiver in favor of a director or officer of the Corporation must be approved in writing by the Board of Directors. Exceptions or waivers for other Employees must be approved in writing by the Chief Executive Officer with a copy provided to the Corporate Secretary. Any change to this policy must be in writing approved by the Board of Directors and signed by the Chief Executive Officer.
The Corporation reserves the right to amend this Code, in whole or in part, at any time and solely at its discretion.
Where applicable, this Code is not an employment contract between the Corporation and any of its employees.
Any Employee of Lucero Energy Corp. or its subsidiaries (collectively, the “Corporation“) may submit a question, concern or complaint regarding any matter covered by this Code to the management of the Corporation without fear of dismissal or retaliation of any kind. The Corporation is committed to providing a work environment based on trust, respect and ethical compliance with all applicable laws and regulations, accounting and reporting standards, accounting controls and audit practices. The Corporation’s Audit Committee (the “Committee“) will oversee the receipt, review and follow-up of Employee concerns in this area.
In order to facilitate responses to questions and the reporting of concerns or complaints, the Corporation has established the following procedures.
Depending on the circumstances, the nature of the Reportable Activity (as defined in The Code of Business Conduct and Ethics) and the desire for confidentiality or anonymity, any Employee of the Corporation may submit a question, concern or complaint through one or more of the following channels:
1. Their immediate supervisor;
2. The Chief Executive Officer; and/or
3. The Chairman of the Audit Committee.
If bringing a Reportable Activity to the attention of their immediate supervisor is considered inappropriate or does not provide the desired level of confidentiality, the Employee should report the Reportable Activity directly to the Chief Executive Officer who will treat all disclosures in confidence and will involve only those individuals who need to be involved in order to conduct an investigation. If the Employee wishes to remain anonymous, or if they consider it inappropriate to submit the Reportable Activity to a senior officer of the Corporation, the question, concern or complaint may be submitted to the Chairman of the Audit Committee on an anonymous and confidential basis using the contact information set out below. Anonymous written or telephone communications will be accepted.
A. Any Employee of the Corporation including the Chief Executive Officer who receives a submission from any person regarding a Reportable Activity shall treat such submission in a confidential manner and shall immediately report such submission to the Chair of the Audit Committee, regardless of the materiality of the allegation. All submissions received by the Chair of the Audit Committee will be investigated.
B. Submissions not related to a Reportable Activity will be directed to the Chief Executive Officer who shall deal with such submission in a confidential manner in the normal course of business.
C. The Chair of the Audit Committee, upon receipt of any submission regarding a Reportable Activity, shall:
(i) review and assess the seriousness of the Reportable Activity with the members of the Audit Committee and together, determine the manner in which and by whom the Reportable Activity will be investigated, including the use of internal and external resources as the Audit Committee determines, in its sole discretion to be appropriate. Confidentiality will be maintained to the fullest extent possible, consistent with the need to conduct an adequate review;
(ii) depending on the nature of a Reportable Activity and its materiality as determined by the Audit Committee, and in particular with respect to submissions that could materially affect the financial statements of the Corporation or the integrity of the Corporation’s system of internal controls, the person(s) designated to investigate the alleged Reportable Activity will be instructed to keep the Chief Executive Officer and Chief Financial Officer (except to the extent any such persons are allegedly implicated in the Reportable Activity) apprised of the status of the investigation for purposes of ensuring compliance with regulatory requirements, including timely and continuous disclosure obligations of the Corporation and certification obligations by the Chief Executive Officer and Chief Financial Officer;
(iii) in the event the Reportable Activity is determined to be material, the Chair of the Audit Committee shall immediately inform the full Board for further handling;
(iv) track all Reportable Activities subject to investigation on an ongoing basis; and
(v) report directly back to the Employee who reported the Reportable Activity (if such Employee has expressly waived anonymity, has provided contact information and wishes an update on the status of the investigation).
D. Investigations of all submissions relating to Reportable Activities will be made in a timely manner. Executive officers, members of the Audit Committee, external legal counsel and other advisors shall be consulted if necessary.
E. Prompt and appropriate corrective action will be taken when and as warranted in the judgment of the Audit Committee and with the approval of the Board of Directors.
F. On a quarterly basis or upon request, the Chair of the Audit Committee shall report to the Board of Directors on all submissions on Reportable Activities received during the previous quarter through all channels of communications, how such submissions related to a Reportable Activity were handled, the results of any investigations and any corrective action taken.
All complaints/concerns and investigations with respect to a Reportable Activity shall be fully documented in writing by the person(s) designated to investigate the matter and such documentation will be maintained for six (6) years in the files of Burnet, Duckworth & Palmer, LLP, counsel to the Corporation. Each Reportable Activity file will be marked as confidential and will be available for inspection by Audit Committee members and, with written authorization from the Chairman of the Audit Committee, the external auditors and any outside counsel or other advisors hired in connection with such matters.