What is the company’s rationale for the size and allocation of the option grant?

Company Rationale Behind the Size and Allocation of the Option Grant

Why the Company Chose This Size and Allocation

1. Alignment of Management Interests with Shareholders

   • By granting a large block (830,000 options) to its directors and officers, Fredonia Mining ensures that the people who make strategic and operational decisions have a direct, equity‑based stake in the company’s performance.
     
   • When the share price rises above the $0.40 exercise price, the value of those options increases, motivating executives to focus on value‑creation, cost‑control, and successful project execution—all of which benefit existing shareholders.

2. Retention and Incentive for Key Leadership

   • The size of the grant (985,000 options) is substantial enough to serve as a meaningful long‑term compensation component for senior staff, helping to retain critical talent in a capital‑intensive, cyclical mining environment.
     
   • A sizable option pool reduces the risk that senior managers will leave for competing opportunities, especially when the options vest over a multi‑year period (typical for such grants).

3. Competitive Compensation Benchmarking

   • Mining companies operating on the TSX/TSXV often use option grants to match or exceed peer compensation structures. A grant of roughly 1 million options places Fredonia’s senior‑management compensation in line with other mid‑cap mining firms that rely heavily on equity incentives to attract and keep high‑calibre executives.

4. Signal of Confidence in Future Growth

   • Setting the exercise price at $0.40 per share—a level that is generally at or slightly above the current market price—signals that the board believes the stock has up‑side potential. Executives are therefore incentivized to pursue projects (e.g., new mineral discoveries, expansion of existing mines, or strategic partnerships) that can drive that upside.

5. Flexibility for Broader Employee Participation

   • The remaining 155,000 options (≈ 16 % of the total) are likely reserved for non‑executive staff, technical personnel, or future hires. This smaller pool still provides a meaningful equity incentive for employees who are not in senior leadership, fostering a culture of shared ownership across the organization.

6. Capital‑Efficiency and Dilution Management

   • By limiting the bulk of the grant to internal stakeholders (directors/officers) rather than issuing a large public‑market option pool, Fredonia can manage dilution more tightly. The 985,000 options represent a modest percentage of the total outstanding shares, keeping the impact on existing shareholders’ ownership stakes relatively low while still delivering a strong incentive package.

Bottom‑Line Summary

• Size: 985,000 options is large enough to be a significant long‑term incentive for senior leadership while remaining modest in the context of the company’s total share capital, thereby limiting dilution.
• Allocation: Concentrating ~84 % of the grant to directors and officers ensures that those with the greatest decision‑making power are directly motivated to increase shareholder value. The remaining ~16 % provides flexibility to reward other key employees and to keep a reserve for future strategic issuances.
• Strategic Goal: The overall design of the option grant is to align executive and employee interests with the company’s growth objectives, retain critical talent, and signal confidence that the company can create value above the $0.40 exercise price.