Nuvo Pharmaceuticals Inc NRIFF

Our Longterm Incentive Plan is...

[need2stockup]

....not known, but Nuvo's LTIP is well known. Need2.

The Committee retained the services of Radford, a member of the AON Consulting Group (Radford), the

leading executive compensation consultant to the life sciences industry in North America. As a first step in

the process, the Committee requested that Radford identify a peer group of Canadian and U.S. based life

sciences companies with similar characteristics to Nuvo, (including market capitalization, stage of

development and number of employees) (the Comparator Group) that might compete for executive talent in

the marketplace. Nuvo’s executive positions were matched and then compared with comparable executive

positions at the Comparator Group companies.

This comparative analysis was used by Radford and the Committee to establish an executive

compensation philosophy and executive compensation recommendations to the Nuvo Board of Directors.

The Radford study indicated that the overall compensation of Nuvo’s executive officers averaged below the

25th percentile when compared to compensation paid to comparable the executives of Comparator Group

companies.

The Compensation Committee, based on the Radford report and Radford’s recommendations, designed

and implemented an executive compensation program to achieve the following objectives:

• Advance the business of the Company and shareholder value by tying significant portions of

executive compensation to measurable objective Company performance;

• Attract and retain the key talent necessary to achieve the business objectives of the Company; and,

• Align executive interests with shareholders through stock ownership.

Base salary, short-term incentives and performance stock units and stock options granted under a longterm

incentive plan (LTIP) are the key elements of the executive compensation plan. To emphasize

performance-based compensation, the Company benchmarked base salaries to the 25th percentile of the

Comparator Group, but provided the opportunity for executives to earn total compensation at or above the

market median through performance based cash bonuses and the LTIP.

PSUs issued under the LTIP provides employees with the opportunity to earn common shares of the

Company if certain PSU Objectives are achieved. The Board of Directors approved the issuance of

1,312,600 PSUs to members of the executive team in May 2010. As at December 31, 2010, the Board of

Directors assessed the Predefined Objectives and determined that 918,820 PSUs were earned PSUs

(Earned PSUs). The total value of these PSUs was determined to be $207 of which $89 was recognized as

compensation expense in 2010. These PSUs will vest in three equal tranches of 306,273 over the next two

years.

In the year, 5.2 million stock options were granted, including 4.7 million issued to members of the executive

team under the LTIP and $188,000 of compensation expense was recognized, compared to $478,000 of

compensation expense recorded in the prior year.