Form 20-F o
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Form 40-F þ |
Yes o
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No þ |
1. | Receiving and considering the audited consolidated financial statements of the Corporation for the year ended December 31, 2005 and the auditors report thereon; | |
2. | Electing Directors; | |
3. | Appointing auditors for the ensuing year; and | |
4. | Considering such other business as may properly be brought before the meeting. |
BY ORDER OF THE BOARD OF DIRECTORS, | ||||
/s/ Razvan L. Theodoru | ||||
RAZVAN L. THEODORU | ||||
Corporate Secretary | ||||
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34 |
1
a) | typically, be provided with a computerized form (often called a voting instruction form) which is not signed by the Intermediary and which, when properly completed and signed by the Non-Registered Holder and returned to the Intermediary or its service company, will constitute voting instructions which the Intermediary must follow. The Non-Registered Holder will generally be given a page of instructions which contains a removable label containing a bar-code and other information. In order for the applicable computerized form to validly constitute a voting instruction form, the Non-Registered Holder must remove the label from the instructions and affix it to the computerized form, properly complete and sign the form and submit it to the Intermediary or its service company in accordance with the instructions of the Intermediary or service company. In certain cases, the Non-Registered Holder may provide such voting instructions to the Intermediary or its service company through the Internet or through a toll-free telephone number; or |
b) | less commonly, be given a proxy form which has already been signed by the Intermediary (typically by a facsimile, stamped signature), which is restricted to the number of shares beneficially owned by the Non-Registered Holder but which is otherwise not completed. In this case, the Non-Registered Holder who wishes to submit a proxy should properly complete the proxy form and submit it to Computershare Investor Services Inc. (Attention: Proxy Department), 100 University Avenue, 9th Floor, Toronto, Ontario M5J 2Y1. |
2
3
Jack C. Bingleman Vero Beach, Florida, U.S.A. Director since: 2005 Share ownership: 20,000 DSU ownership: 9,127 Committee memberships: Audit, Environment and Health and Safety Other directorship: Tractor Supply Co. |
Mr. Bingleman is President of Indian River Asset Management Inc. (management company) and he was, prior to 2001, President and Director of Staples International Inc. (Europe). | |
Raymond Chrétien Montreal, Quebec, Canada Director since: 2004 Share ownership: - DSU ownership: 8,974 Committee membership: Nominating and Corporate Governance Other directorship: nil |
Mr. Chrétien is a strategic advisor with Fasken Martineau DuMoulin LLP (lawyers). From 2000 to 2003, he was Ambassador of Canada to France, and previously to the United States, Belgium, Mexico and the Congo. | |
Louis P. Gignac Montreal, Quebec, Canada Director since: 1995 Share ownership: 2,800 DSU ownership: 19,252 Committee memberships: Audit (Chair), Environment and Health and Safety, Pension Other directorship: Gaz Métro Inc. |
Mr. Gignac is President and Chief Executive Officer of Cambior Inc. (mining). | |
Claude R. Lamoureux Toronto, Ontario, Canada Director since: 1992 Share ownership: 7,800 DSU ownership: 40,427 Committee memberships: Human Resources, Nominating and Corporate Governance (Chair) Other directorship: nil |
Mr. Lamoureux is President and Chief Executive Officer of the Ontario Teachers Pension Plan (pension fund management). | |
Jacques Laurent Montreal, Quebec, Canada Director since: 1996 Share ownership: 4,800 DSU ownership: 26,007 Committee memberships: Audit, Pension Other directorships: Groupe Ciment St-Laurent inc., Glentel Inc. |
Mr. Laurent is a partner of Borden Ladner Gervais LLP (lawyers). From 2001 to 2003, he was Chair of the Board of Hydro-Québec. | |
Brian M. Levitt Montreal, Quebec, Canada Director since: 1997 Share ownership: 5,800 DSU ownership: 54,425 Committee membership: Human Resources (Chair) Other directorship: BCE Inc. |
Mr. Levitt has been Chair of the Board of the Corporation since April 29, 2004 and Co-Chair and partner of Osler, Hoskin & Harcourt LLP (lawyers) since 2001. |
(a) | See page 7 for a description of the Deferred Share Unit Plan for Outside Directors. |
4
Gilles Ouimet Ottawa, Ontario, Canada Director since: 2004 Share ownership: 6,000 DSU ownership: 13,283 Committee memberships: Environment and Health and Safety (Chair), Human Resources Other directorship: nil |
Mr. Ouimet is a Corporate Director and was, until May 2004, Chair of the Board of Pratt & Whitney Canada, where he held various senior executive positions. | |
Louise Roy Montreal, Quebec, Canada Director since: 1997 Share ownership: 800 DSU ownership: 30,468 Committee memberships: Environment and Health and Safety, Human Resources Other directorship: ING Canada Inc. |
Ms. Roy is Associate Fellow; Chair, Leadership for Tomorrow Forum CIRANO, since 2002 (liaison and transfer organization). Previously, she was Vice-President, Marketing and Commercial Services of the International Air Transport Association (IATA). | |
Raymond Royer Montreal, Quebec, Canada Director since: 1996 Share ownership: 480,390 DSU ownership: (b) Committee memberships: Environment and Health and Safety, Pension Other directorships: Power Financial Corporation, Shell Canada Limited |
Mr. Royer is President and Chief Executive Officer of the Corporation since 1996. | |
Robert J. Steacy Toronto, Ontario, Canada Director since: 2005 Share ownership: - DSU ownership: 6,844 Committee membership: Audit Other directorships: Alliance Atlantis Communications Inc., Cineplex Galaxy Income Fund and Somerset Entertainment Income Fund |
Mr. Steacy is a Corporate Director and was, until May 2005, Executive Vice-President and Chief Financial Officer of Torstar Corporation (international media conglomerate). | |
Gene R. Tyndall Miami, Florida, U.S.A. Director since: 2005 Share ownership: - DSU ownership: 1,603 Committee membership: Human Resources Other directorship: nil |
Mr. Tyndall is a partner and co-founder of Supply Chain Executive Advisors, LLC (supply chain management) since 2003. Previously, he was Executive Vice-President with Ryder System, Inc. |
(b) | Mr. Royer is a participant in the Executive Deferred Share Unit Plan see Executive Deferred Share Unit Plan on page 12, CEO Compensation on page 13 and Summary Compensation Table on page 14. |
5
Members | Board | Audit | Human | Nominating & | Environment and | Pension | Attendance | |||||||||||||||||||||
Resources | Corporate | Health & Safety | ||||||||||||||||||||||||||
Governance | ||||||||||||||||||||||||||||
# of meetings |
15 | 6 | 7 | 4 | 2 | 4 | % | |||||||||||||||||||||
Jack C. Bingleman(1) |
13 | 2 | | | 1 | | 87 | % | ||||||||||||||||||||
Raymond Chrétien(2) |
15 | | | 1 | | | 100 | % | ||||||||||||||||||||
Paul-Henri Couture |
14 | | 7 | | | | 93 | % | ||||||||||||||||||||
Louis P. Gignac(3) |
13 | 6 | | | 1 | 3 | 87 | % | ||||||||||||||||||||
Claude R. Lamoureux(4) |
13 | 3 | 4 | 4 | | 1 | 87 | % | ||||||||||||||||||||
Jacques Laurent(5) |
15 | 6 | | 3 | 1 | 3 | 100 | % | ||||||||||||||||||||
Brian M. Levitt |
15 | | 7 | | | 1 | 100 | % | ||||||||||||||||||||
Gilles Ouimet(4) |
11 | 3 | 4 | | 2 | | 73 | % | ||||||||||||||||||||
Louise Roy |
13 | | 7 | | 2 | | 87 | % | ||||||||||||||||||||
Raymond Royer |
15 | | | | 2 | 4 | 100 | % | ||||||||||||||||||||
Robert J. Steacy(6) |
11 | 3 | | | | | 100 | % | ||||||||||||||||||||
Gene R. Tyndall(7) |
10 | | 4 | | | | 91 | % | ||||||||||||||||||||
Edward J. Waters(8) |
14 | 2 | | 4 | | 4 | 93 | % |
(1) | Appointed to the Audit Committee and to the Environment and Health and Safety Committee on April 28, 2005. | |
(2) | Appointed to the Nominating and Corporate Governance Committee on April 28, 2005. | |
(3) | Appointed to the Environment and Health and Safety Committee on April 28, 2005. | |
(4) | Appointed to the Human Resources Committee on April 28, 2005. | |
(5) | Appointed to the Pension Committee on April 28, 2005. | |
(6) | Appointed to the Board and to the Audit Committee on April 28, 2005. | |
(7) | Appointed to the Board and to the Human Resources Committee on April 28, 2005. | |
(8) | Appointed to the Audit Committee on April 28, 2005. |
2006 Fees | ||||
Director annual retainer |
$ | 29,000 | ||
Board meeting attendance fee (per meeting) |
$ | 1,200 | ||
Committee attendance fee (per meeting) |
$ | 1,200 | ||
Chair of the Board annual retainer fee |
$ | 150,000 | ||
Annual fee as member of a committee |
$ | 4,000 | ||
Annual fee as Chair of the Audit Committee |
$ | 10,000 | ||
Annual fee as Chair of any other committee |
$ | 3,000 |
6
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8
9
10
11
12
13
Name and Principal Position | Year | Annual Compensation(1) | Long-Term Compensation | |||||||||||||||||||||||||||||
Bonus | ||||||||||||||||||||||||||||||||
Salary | ($) | |||||||||||||||||||||||||||||||
($) | (2) | Awards | ||||||||||||||||||||||||||||||
Performance Share | Performance Share | Restricted | ||||||||||||||||||||||||||||||
Securities | Deferred Share | Units-1 | Units-2 | Shares | ||||||||||||||||||||||||||||
Under Options/ | Units (#) | (#) | (#) | (#) | ||||||||||||||||||||||||||||
SARs Granted (#) | (3) | (4) | (4) | (5) | ||||||||||||||||||||||||||||
Raymond Royer |
2005 | 975,000 | | 75,000 | 866 | 1,641 | 3,745 | 26,000 | ||||||||||||||||||||||||
President and |
2004 | 975,000 | | 170,000 | 514 | 66,481 | 151,669 | | ||||||||||||||||||||||||
Chief Executive Officer |
2003 | 880,000 | | 115,000 | 1,730 | | | | ||||||||||||||||||||||||
Richard Garneau(6) |
2005 | 358,000 | 88,789 | 24,000 | 8 | 253 | 999 | 30,000 | ||||||||||||||||||||||||
Executive Vice-President - |
2004 | 316,667 | | 47,000 | 4 | 10,228 | 40,445 | | ||||||||||||||||||||||||
Operations |
2003 | 295,833 | | 38,500 | 300 | | | | ||||||||||||||||||||||||
Roger H. Brear |
2005 | US 343,423 | US 89,962 | 24,000 | 63 | 391 | 1,248 | 30,000 | ||||||||||||||||||||||||
Senior Vice-President - |
2004 | US 368,910 | (7) | | 60,000 | 37 | 15,854 | 50,556 | | |||||||||||||||||||||||
Paper Manufacturing |
2003 | US 305,000 | | 52,000 | 488 | | | | ||||||||||||||||||||||||
Steven A. Barker |
2005 | US 320,000 | US 85,247 | 24,000 | | | 999 | 30,000 | ||||||||||||||||||||||||
Senior Vice-President Pulp |
2004 | US 288,692 | | 47,000 | | | 40,445 | | ||||||||||||||||||||||||
& Paper Sales and Marketing |
2003 | US 247,115 | | 16,000 | | | | | ||||||||||||||||||||||||
Daniel Buron |
2005 | 302,673 | 68,640 | 24,000 | | | 746 | 30,000 | ||||||||||||||||||||||||
Senior Vice-President and |
2004 | 216,777 | | 16,000 | | | 30,220 | | ||||||||||||||||||||||||
Chief Financial Officer |
2003 | 189,625 | | 16,000 | | | | |
(1) | Perquisites and personal benefits did not exceed the lesser of $50,000 and 10% of the annual salary and bonus for any of the Named Executive Officers. | |
(2) | Bonuses are generally paid in cash in the year following the financial year in which they were earned (see page 9). For 2005, the Short-Term Incentive Plan payout was based only on the portion related to the individual and group key performance indicators established by the HR Committee and the Board. | |
(3) | See Long-Term Incentive Compensation on page 12 for a description of the Executive Deferred Share Unit Plan. No DSUs have been granted in 2004 and 2005, and the Plan was eliminated in 2005. Figures for 2004 and 2005 indicate only dividends accrued on the previous grants. | |
(4) | See Long-Term Incentive Compensation on page 13 for a description of the Executive Performance Share Unit Plan. These amounts also include reinvested dividends. PSUs-1 vest according to the following schedule: 1/3 on December 31, 2004, 1/3 on December 31, 2005 and 1/3 on December 31, 2006, provided that Domtars return on shareholders equity (ROE) equals or exceeds the average ROE of the competitor companies in the reference group during each year. The 2004 and 2005 increments did not vest as the parameters were not attained. PSUs-2 will vest entirely on December 31, 2006, provided that Domtars ROE equals or exceeds the average ROE of the competitor companies in the reference group during that period. No PSUs were granted in 2005. Figures for 2005 indicate only dividends accrued on the 2004 grant. | |
(5) | See Long-Term Incentive Compensation on page 12 for a description of the Restricted Stock Plan. | |
(6) | Mr. Garneau was appointed Executive Vice-President, Operations, effective October 27, 2005 and his base salary was established at $462,000. Effective January 1, 2006, Mr. Garneaus base salary was established at $492,000. | |
(7) | Mr. Brears salary included a relocation allowance of US$25,833.33. |
14
Market Value | ||||||||||||||||||||
of Securities | ||||||||||||||||||||
Securities | % of Total | Underlying | ||||||||||||||||||
Under | Options | Exercise | Options | |||||||||||||||||
Options | Granted to | or | on the | |||||||||||||||||
Granted | Employees in | Base Price | Date of Grant | Expiration | ||||||||||||||||
Name | (#) | Financial Year | ($ / Security) | ($ / Security) | Date | |||||||||||||||
Raymond Royer |
75,000 | 15.14 | % | 11.44 | 11.44 | February 23, 2011 | ||||||||||||||
Richard Garneau |
24,000 | 4.84 | % | 11.44 | 11.44 | February 23, 2011 | ||||||||||||||
Roger H. Brear |
24,000 | 4.84 | % | 11.44 | 11.44 | February 23, 2011 | ||||||||||||||
Steven A. Barker |
24,000 | 4.84 | % | 11.44 | 11.44 | February 23, 2011 | ||||||||||||||
Daniel Buron |
24,000 | 4.84 | % | 11.44 | 11.44 | February 23, 2011 |
Value of Unexercised | ||||||||||||||||||
Securities | Unexercised | in-the-Money | ||||||||||||||||
Acquired | Options and SARs | Options and SARs | ||||||||||||||||
On | Aggregate | at FY-End | at FY-End | |||||||||||||||
Exercise | Value | (#) | ($) | |||||||||||||||
(#) | Realized | Exercisable/Unexercisable | Exercisable/Unexercisable | |||||||||||||||
Name | (1) | ($) | ||||||||||||||||
670,031 / 283,750 | nil / nil | |||||||||||||||||
Raymond Royer(2) |
nil | nil | (nil / nil)(3) | (nil / nil)(3) | ||||||||||||||
18,750 / 91,250 | nil / nil | |||||||||||||||||
Richard Garneau |
nil | nil | (nil / nil)(3) | (nil / nil)(3) | ||||||||||||||
118,250 / 117,750 | nil / nil | |||||||||||||||||
Roger H. Brear(2) |
nil | nil | (nil / nil)(3) | (nil / nil)(3) | ||||||||||||||
30,750 / 74,000 | nil / nil | |||||||||||||||||
Steven A. Barker(2) |
nil | nil | (nil / nil)(3) | (nil / nil)(3) | ||||||||||||||
15,875 / 51,000 | nil / nil | |||||||||||||||||
Daniel Buron(2) |
nil | nil | (nil / nil)(3) | (nil / nil)(3) |
(1) | Securities acquired during 2005 upon the exercise of Options. | |
(2) | Messrs. Royer, Brear, Barker and Buron received respectively 6,225, 2,925, 1,000 and 1,000 bonus shares on February 7, 2005, pursuant to the Stock Plan. The bonus shares issued on such date had a market value of $11.83. | |
(3) | The amounts shown in parentheses represent SARs granted under the Stock Plan. No SARs have been granted since 1991. See Executive Stock Option and Share Purchase Plan. |
15
(C) | ||||||||||||||
Number of | ||||||||||||||
securities | ||||||||||||||
(A) | remaining available | |||||||||||||
Number of | for future issuance | |||||||||||||
securities to be | (B) | under equity | ||||||||||||
issued upon | Weighted average | (compensation plans | ||||||||||||
exercise of | exercise price of | (excluding securities | ||||||||||||
outstanding options | outstanding options | reflected in column (A) | ||||||||||||
Plan category | (Common Shares) | ($) | (Common Shares) | |||||||||||
Equity compensation plans
approved by security holders |
4,833,126 | 14.38 | 4,887,864 | |||||||||||
Equity compensation plans
not approved by security holders |
n.a. | n.a. | n.a. |
Remuneration | Years of Service(1) | |||||||||||||||||||
($) | 15 | 20 | 25 | 30 | 35 | |||||||||||||||
100,000 |
26,920 | 35,890 | 44,860 | 53,840 | 62,810 | |||||||||||||||
200,000 |
30,000 | 40,000 | 50,000 | 60,000 | 70,000 | |||||||||||||||
300,000 |
30,000 | 40,000 | 50,000 | 60,000 | 70,000 | |||||||||||||||
400,000 |
30,000 | 40,000 | 50,000 | 60,000 | 70,000 | |||||||||||||||
500,000 |
30,000 | 40,000 | 50,000 | 60,000 | 70,000 | |||||||||||||||
600,000 |
30,000 | 40,000 | 50,000 | 60,000 | 70,000 | |||||||||||||||
700,000 |
30,000 | 40,000 | 50,000 | 60,000 | 70,000 | |||||||||||||||
800,000 |
30,000 | 40,000 | 50,000 | 60,000 | 70,000 |
(1) | The maximum annual pension allowed was $2,000 for each year of service in 2005. This maximum annuity was increased to $2,111 in 2006. |
Under the defined benefit option, the Domtar Pension Plan is funded by the Corporation and by employee contributions. It provides for normal retirement benefits beginning at age 65, while permitting early retirement with reduced benefits. Since January 1, 2000, the annual benefits payable are equal to 1.5% (1.3% for the contributing years before January 1, 2000) of the average of the Yearly Maximum Pensionable Earnings (YMPE) during the five years preceding the employees termination of employment, plus 2% of the employees best average earnings during any consecutive 60 months in the last 120-month period prior to his termination of employment divided by five, in excess of the average of the YMPE, multiplied by his years of contributory service. Employees with at least 15 years of continuous employment and retiring after attainment of age 55 but prior to age 65 will also be eligible for a bridging supplement based upon the employees number of years of continuous service with the Corporation (maximum of 30 years).
16
Under the defined contribution option, the Domtar Pension Plan is funded by the Corporation and by employee contributions. Since September 1, 2000, the level of contributions varies from 1.5% to 6.5% of the pensionable earnings depending upon the employees age and years of continuous service. The pensionable earnings on which the employee may contribute each year are limited to $100,000. The Corporation matches the employees contributions at 100%.
b) Basic Pension Benefits U.S. plans
The Domtar US Salaried Pension Plan is entirely funded by the Corporation. Participation in the plan is mandatory upon completion of one year of service. Each year, a percentage of the employees pensionable earnings is credited to his account. This percentage is based on the employees age as of January 1st of the calendar year during which the allocation is made to his account. In addition, the employees account is credited with an annual interest equal to the annual rate of interest on 30-year Treasury Constant Maturities published by the Federal Reserve Board. Benefits under the Pension Plan are fully vested in the employee after three years of service.
Salaried employees may also enroll if they wish in the Domtar US Salaried 401(k) Plan after three months of service and if they do so, Company contributions will commence after one year of service. The plan allows employees to contribute from 1% to 60% of their earnings on a pre-tax basis, subject to the limits of the federal legislation. The Company matches 100% of the first 3% of pay and 50% of pay between 3% and 8%. Company contributions are fully vested in the employee after three years of service .
c) Supplemental Pension Benefits
The Corporation also has a supplemental pension benefit program for members of the Management Committee.
Under this program, members in Canada will receive benefits payable out of the general funds of the Corporation. The annual benefits payable are equal to 2% of the best average earnings for each year of contributory service up to ten years plus, if the number of years of contributory service exceeds 10, 10% and, for each year of contributory service in excess of 10 years, 21/2% of the best average earnings, with a maximum of 60%, less any amounts payable under the Domtar Pension Plan.
Under this program, benefits are funded for the members of the Management Committee in the event of a change of control in which case there will be immediate funding, or if they continue to occupy their position until normal retirement age (currently age 65) in which case funding will be made over a period of five years starting at age 60.
Under this program, members in the United States will receive a pension benefit payable from the general funds of the Corporation. Normal annual pension benefits could correspond to 50% of their average annual earnings during the 48 months prior to their retirement, less any benefit payable under the Corporations pension plan and any benefit attributable to the Corporations contributions under the 401(k) plan.
d) Total Estimated Pension Benefits
The Corporation has entered into a retirement agreement with Mr. Royer providing for supplemental pension benefits, which, with those provided by the Domtar Pension Plan, will provide him with an annual pension calculated as provided in the supplemental pension benefit program mentioned above except that each year of credited service will count for two years of credited service. The annual estimated amount payable as at December 31, 2005 to Mr. Royer under the terms of his agreement would be $735,920. This amount is inclusive of the Domtar Pension Plan amount.
The annual estimated amounts at age 65 payable as at December 31, 2005 under the pension benefit programs would be: $126,330 for Mr. Garneau, US$250,130 for Mr. Brear, US$232,000 for Mr. Barker and $259,170 for Mr. Buron. For purposes of determining the benefit payable under the Domtar Pension Plans, base salary and bonuses are used (see Summary Compensation Table on page 14).
17
The years of service determined under the provisions of the Pension Plans as at December 31, 2005 are: for Messrs. Royer, 9 years and 4 months (18 years and 8 months for the purposes of the supplemental pension benefit program); Garneau, 3 years and 3 months, Brear, 4 years and 4 months, Barker, 5 years and 6 months and Buron, 5 years and 7 months.
Employment Agreements
Since September 3, 1996, the Corporation has retained the services of Mr. Royer as President and Chief Executive Officer for an indefinite term. Upon termination at any time of Mr. Royers employment for reasons other than cause, resignation, death, long-term disability, his 65th birthday, or upon a substantial change in his responsibilities or compensation, he will be entitled to receive an amount equal to two times the sum of his annual base salary and target annual bonus plus one month of his base salary and one-twelfth of his target annual bonus for each year of service with the Corporation, up to a maximum of two-and-a-half times the sum of his annual base salary and target annual bonus. In December 2002, the Board of Directors approved an extension of Mr. Royers employment agreement until the end of 2006, i.e. beyond his 65th birthday. At the request of the Board, Mr. Royer has agreed to serve beyond that date. The financial terms of Mr. Royers employment agreement are set out above under CEO Compensation, page 13 and Summary Compensation Table, page 14.
The Corporation has a policy pursuant to which the executive officers of the Corporation (see above under Report on Executive Compensation) will be compensated in the event of termination of their employment for reasons other than cause, resignation, death, or uninterrupted continuous employment with a successor corporation. Pursuant to this policy, each of Messrs. Barker, Brear, Buron and Garneau would be entitled to receive an amount equal to two times the amount of their annual base salary.
INDEBTEDNESS UNDER SECURITIES PURCHASE PROGRAMS
The aggregate outstanding indebtedness to the Corporation or its subsidiaries as at December 31, 2005 of all present and former Directors, officers and employees entered into in connection with purchases of securities of the Corporation, excluding routine indebtedness (as defined under applicable Canadian securities laws), was $11,878,991. As at February 28, 2006, there was no other outstanding indebtedness to the Corporation or its subsidiaries of all present and former Directors, officers and employees. The following table gives the details of the loans granted to the persons who, during the year ended December 31, 2005, were Directors or Executive Officers of the Corporation.
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
UNDER SECURITIES PURCHASE PROGRAMS
Financially | ||||||||||||||||
Amount | Assisted | |||||||||||||||
Largest Amount | Outstanding | Securities | ||||||||||||||
Involvement | Outstanding | as at | Purchases | Security for | ||||||||||||
of Issuer | During Year Ended | December 31, | During Year Ended | Indebtedness | ||||||||||||
or | December 31, 2005 | 2005 | December 31, 2005 | (#) | ||||||||||||
Name and Principal Position |
Subsidiary |
($) |
($) |
(#) (1) |
(2) |
|||||||||||
Roger H. Brear Senior Vice-President - Paper Manufacturing |
Lender | 173,979 | 173,979 | nil | 11,700 | |||||||||||
Steven A. Barker Senior Vice-President - Pulp and Paper Sales and Marketing |
Lender | 116,920 | 116,920 | nil | 8,000 | |||||||||||
Daniel Buron Senior Vice-President and Chief Financial Officer |
Lender | 172,828 | 172,828 | nil | 12,000 |
(1) | Effective in 2003, no financial assistance is available to the Executive Officers for the purchase of the Corporations securities. | |
(2) | Common Shares of the Corporation pledged as security. |
18
PERFORMANCE GRAPH
The following Performance Graph shows the yearly percentage change in the cumulative total shareholder return on the Corporations Common Shares compared with the cumulative total return of the S&P/TSX Composite, the TSX Paper and Forest and the S&P/TSX Materials Indices.
The year-end values of each investment are based on share appreciation plus dividends paid in cash, with the dividends reinvested on the date they were paid. The calculations exclude trading commissions and taxes. Total shareholder returns from each investment, whether measured in dollars or percent, can be calculated from the year-end investment values shown in the graph below.
FIVE-YEAR CUMULATIVE TOTAL RETURNS
Value of $100 invested on December 31, 2000
APPOINTMENT OF AUDITORS
Pursuant to the recommendation of the Directors of the Corporation, except where authorization to vote with respect to the appointment of auditors is withheld, the persons named in the enclosed form of proxy intend to vote for the re-appointment of PricewaterhouseCoopers LLP, who have served as auditors of the Corporation since 1952, and became the Corporations sole auditors on May 1, 2003, as auditors of the Corporation until the next annual meeting of shareholders.
AUDIT AND NON-AUDIT SERVICES FEES
The Audit Committee of the Board of Directors of the Corporation adopted in April 2003 the Audit and Non-Audit Services Pre-Approval Policy that may be found on our web site at www.domtar.com.
Fees paid to PricewaterhouseCoopers LLP for the years ended December 31, 2005 and 2004 are detailed below:
(in thousands of Canadian dollars) |
Years ended December 31, |
|||||||
2005 |
2004 |
|||||||
Audit Fees |
1,640 | 1,178 | ||||||
Audit Related Fees |
177 | 341 | ||||||
Income Tax Return Services Fees |
0 | 32 | ||||||
All Other Fees |
84 | 56 | ||||||
Total |
1,901 | 1,607 | ||||||
19
AUDIT COMMITTEE INFORMATION
Pursuant to Multilateral Instrument 52-110, and Form 52-110F1, disclosure on the Audit Committee Information may be found in the Corporations Annual Information Form dated March 27, 2006.
SHAREHOLDER PROPOSALS
The outside date for submission of proposals by shareholders to the Corporation for inclusion in next years Management Proxy Circular in connection with next years Annual Meeting of the Holders of Common Shares will be January 4, 2007.
ADDITIONAL INFORMATION
Additional information relating to the Corporation may be found on SEDAR at www.sedar.com. Financial information is provided in the Corporations comparative financial statements and Managements Discussion and Analysis for its most recently completed financial year.
APPROVAL BY DIRECTORS
The Directors of the Corporation have approved the contents and the sending of this Management Proxy Circular.
DATED at Montreal, Quebec March 27, 2006 |
/ s / Razvan L. Theodoru RAZVAN L. THEODORU Corporate Secretary |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
1. | Board of Directors | |||||||
(a) | Disclose the identity of directors who are independent. | The Corporation complies. Of the current thirteen (13) members of the board of directors of the Corporation (the Board or the Board of Directors), twelve (12) directors are independent within the meaning of the CSA Disclosure Instrument. They are Brian M. Levitt, Jack C. Bingleman, Raymond Chrétien, Paul-Henri Couture, Louis P. Gignac, Claude R. Lamoureux, Jacques Laurent, Gilles Ouimet, Louise Roy, Robert J. Steacy, Gene R. Tyndall, and Edward J. Waters. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
(b) | Disclose the identity of directors who are not independent, and describe the basis for that determination. | The Corporation complies. One (1) of the directors, Mr. Raymond Royer, is an officer (President and Chief Executive Officer) of the Corporation and therefore does not qualify as independent within the meaning of the CSA Disclosure Instrument. | ||||||
(c) | Disclose whether or not a majority of directors are independent. If a majority of directors are not independent, describe what the board does to facilitate its exercise of independent judgement in carrying out its responsibilities. | The Corporation complies. Twelve (12) of our thirteen (13) current directors are independent and 12 of the 13 director nominees are independent. | ||||||
(d) | If a director is presently a director of any other issuer that is a reporting issuer (or the equivalent) in a jurisdiction or a foreign jurisdiction, identify both the director and the other issuer. | The Corporation complies. The directorships of all current directors and director nominees are described on pages 4 and 5 of this Circular. | ||||||
(e) | Disclose whether or not the independent directors hold regularly scheduled meetings at which non-independent directors and members of management are not in attendance. If the independent directors hold such meetings, disclose the number of meetings held since the beginning of the issuers most recently completed financial year. If the independent directors do not hold such meetings, describe what the board does to facilitate open and candid discussion among its independent directors. | The Corporation complies. At all meetings of
the Board and committees of the Board, the
independent directors have the opportunity
to meet without any representatives of
management being present. During 2005, the
Board and Board committees held, in the
aggregate, thirty-two (32) such in camera
sessions without any representatives of
management being present. The members of the Audit Committee, who are also independent, also meet without management being present. Six (6) such meetings were held during the Corporations most recently completed financial year. |
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(f) | Disclose whether or not the chair of the board is an independent director. If the board has a chair or lead director who is an independent director, disclose the identity of the independent chair or lead director, and describe his or her role and responsibilities. If the board has neither a chair that is independent nor a lead director that is independent, describe what the board does to provide leadership for its independent directors. | The Corporation complies. Brian M. Levitt is the Chair of the Board of the Corporation and has held the position of Chair of the Board since April 2004. Mr. Levitt is independent within the meaning of the CSA Disclosure Instrument. The Chair of the Board is responsible for presiding over the meetings of the Board, overseeing the Board in carrying out its responsibilities, ensuring that management protects and upholds the rights and interests of the shareholders of the Corporation and studying, with the Board, all matters that influence the manner in which the Corporation exercises its activities and makes its decisions. | ||||||
(g) | Disclose the attendance record of each director for all board meetings held since the beginning of the issuers most recently completed financial year. | The Corporation complies. The record of attendance of directors at Board and committee meetings is set forth in the Section entitled Board of Directors Meetings Held and Attendance of Directors of this Circular. | ||||||
2. | Board Mandate Disclose the text of the boards written mandate. If the board does not have a written mandate, describe how the board delineates its role and responsibilities. | The Corporation complies. The Board has adopted a formal Board mandate, which is attached hereto as Schedule B. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
3. | Position Descriptions | |||||||
(a) | Disclose whether or not the board has developed written position descriptions for the chair and the chair of each board committee. If the board has not developed written position descriptions for the chair and/or the chair of each board committee, briefly describe how the board delineates the role and responsibilities of each such position. | The Corporation complies. The Board has
adopted a formal position description for
the Chair of the Board. The position
description states that the Chair of the
Board is responsible for managing the Board,
ensuring that the Board carries out its
mandate effectively and works as a cohesive
group. The position description also
provides that the Chair of the Board acts as
a liaison between the members of the Board
and between the Board and management, which
involves working with the President and
Chief Executive Officer to ensure that
management complies with the financial and
operational objectives approved by the
Board. While there is no formal position description for Board committee chairs, the Board ensures that each committee chair manages his respective committee and ensures that the committee carries out its mandate effectively and works as a cohesive group. Like the Chair of the Board, each committee chair must oversee the committees discharge of its duties and responsibilities. Committee chairs must report regularly to the Board on the business of their committee. The Board intends to adopt formal chair position descriptions in 2006. |
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(b) | Disclose whether or not the board and CEO have developed a written position description for the CEO. If the board and CEO have not developed such a position description, briefly describe how the board delineates the role and responsibilities of the CEO. | The Corporation complies. The Board has
adopted a formal position description for
the President and Chief Executive Officer.
The President and Chief Executive Officers
responsibilities include preparing and
recommending to the Board a vision for
Domtar and the long-term strategies that
will add value for the shareholders. The
President and Chief Executive Officer is
also responsible for developing a corporate
culture that promotes integrity and ethical
behavior, recommending to the Board the
annual budgets that support the
Corporations long-term strategies and
reporting to the Board on matters that
relate to the execution of the financial and
operational objectives approved by the
Board. The Human Resources Committee is responsible for reviewing and approving corporate goals and objectives relevant to the compensation of the President and Chief Executive Officer, evaluating the performance of the President and Chief Executive Officer in light of those goals and objectives, reporting the results of such evaluation to the Board and recommending the President and Chief Executive Officers compensation level to the Board based on this evaluation. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
4. | Orientation and Continuing Education | |||||||
(a) | Briefly describe
what measures the board takes
to orient new directors
regarding (i) the role of the board, its committees and its directors, and (ii) the nature and operation of the issuers business. |
The Corporation complies. The Nominating and
Corporate Governance Committee is
responsible for monitoring the Corporations
orientation program for new directors. The Corporation provides new directors with an orientation and education program that focuses on its main strategic thrusts, operating strengths and challenges, financial information, human resources, environmental matters, sustainable growth and the corporate governance system, including the roles, responsibilities and and operation of the liabilities of directors. Mill visits are also organized for new directors. The Corporation provides new directors with an orientation and education program that focuses on its main strategic thrusts, operating strengths and challenges, financial information, human resources, environmental matters, sustainable growth and the corporate governance system, including the roles, responsibilities and and operation of the liabilities of directors. Mill visits are also organized for new directors. |
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(b) | Briefly describe what measures, if any, the board takes to provide continuing education for its directors. If the board does not provide continuing education, describe how the board ensures that its directors maintain the skill and knowledge necessary to meet their obligations as directors. | The Corporation complies. The Nominating and
Corporate Governance Committee is
responsible for monitoring the Corporations
continuing education program for directors. The Corporation provides directors with a continuing education program that focuses on its main strategic thrusts, operating strengths and challenges, financial information, human resources, environmental matters, sustainable growth and the corporate governance system, including the roles, responsibilities and liabilities of directors. Presentations on the Corporations operations are made by management at each Board meeting. Board meetings are held at mill sites and visits are organized for directors. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
5. | Ethical Business Conduct | |||||||
(a) | Disclose whether or not the board has adopted a written code for the directors, officers and employees. If the board has adopted a written code: | The Corporation complies. | ||||||
(i) | disclose how a person or company may obtain a copy of the code; | The Corporation adopted a Code of Ethics in 2000 which is available on the Corporations Internet site at www.domtar.com/en/governance/ethics/477.asp. | ||||||
(ii) | describe how the board monitors to compliance with its code, or if the board does not monitor compliance, explain whether and how the board satisfies itself regarding compliance with its code; and | The Board, through its Audit Committee, has the responsibility periodically review the Code of Ethics and monitors adherence thereto by Management. | ||||||
(iii) | provide a cross-reference to any material change report filed since the beginning of the issuers most recently completed financial year that pertains to any conduct of a director or executive officer that constitutes a departure from the code. | No material change report has been filed or required to be filed pertaining to any conduct of a director or executive officer constituting a departure from the code during the Corporations most recently completed financial year. | ||||||
(b) | Describe any steps the board takes to ensure directors exercise independent judgement in considering transactions and agreements in respect of which a director or executive officer has a material interest. | The Corporation complies. In accordance with
applicable law, when a conflict of interest
arises, a director is required to disclose
his or her interest and abstain from voting
on the matter. In practice, the board
requests every director to disclose any
direct or indirect interest he or she has in
any organization, business or association,
which could place the director in a conflict
of interest. Every year, a questionnaire is
sent to each director to make sure that the
director is in no such conflict that has not
been disclosed. Should there be a discussion
or decision relating to an organization,
business or association in which a director
has an interest, the board would request
such director not to participate in any such
discussion or decision. The Board has adopted a Conflict of Interest Policy that has been integrated in the Code of Ethics which defines conflict of interest situations and establishes the procedure that must be followed by a director, an executive officer or an employee that finds himself in a conflict of interest situation. The Code of Ethics is available on the Corporations Internet site at www.domtar.com/en/governance/ethics/477.asp. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
(c) | Describe any other steps the board takes to encourage and promote a culture of ethical business conduct. | The Corporation complies. The Board has adopted various corporate policies, including a Conflict of Interest Policy as well as a Whistleblower Protection Policy, each integrated in the Code of Ethics, whereby employees, customers, suppliers, shareholders and other stakeholders, may, anonymously and confidentially, report wrongdoings in connection with accounting, internal accounting controls, auditing matters, potential or actual violations of the law, and generally matters related to the Corporations Code of Ethics. The Corporation also organizes ethics training sessions on an ongoing basis. | ||||||
6. | Nomination of Directors | |||||||
(a) | Describe the process by which the board identifies new candidates for board nomination. | The Corporation complies. The Nominating and
Corporate Governance Committee is
responsible for recommending to the Board
appropriate criteria for the selection of
new directors and for periodically reviewing
the criteria adopted by the Board. It is
also responsible for recommending to the
Board candidates the committee believes are
qualified and suitable to become members of
the Board consistent with criteria for
selection of new directors adopted from time
to time by the Board and established by the
Board Charter. The Nominating and Corporate Governance Committees complete mandate can be found on the Corporations Internet site at www.domtar.com/en/governance/. |
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(b) | Disclose whether or not the board has a nominating committee composed entirely of independent directors. If the board does not have a nominating committee composed entirely of independent directors, describe what steps the board takes to encourage an objective nomination process. | The Corporation complies. The Nominating and Corporate Governance Committee is currently composed of three (3) directors, all of whom are independent within the meaning of the CSA Disclosure Instrument. | ||||||
(c) | If the board has a nominating committee, describe the responsibilities, powers and operation of the nominating committee. | The Corporation complies. The Nominating and Corporate Governance Committee has the responsibility to recommend to the Board appropriate criteria for the selection of new directors, to periodically review the criteria adopted by the Board, to recommend candidates for the Board and its committees and to review and evaluate the performance and contribution of all directors. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
7. | Compensation | |||||||
(a) | Describe the process by which the board determines the compensation for the issuers directors and officers. | The Corporation complies. The Nominating and
Corporate Governance Committee has the
responsibility to periodically review the
compensation of directors. In making
recommendations to the Board for appropriate
adjustments, the Committee considers the
time commitment, risks and responsibilities
of directors, as well as comparative data
derived from surveys of board compensation
at other companies prepared by an
independent outside consultant, who reports
to the Nominating and Corporate Governance
Committee. The Corporations executive compensation program is the responsibility of the Human Resources Committee. As part of its mandate, the Human Resources Committee recommends the Corporations compensation policy to the Board for approval. The Committee also approves the hiring and the compensation levels for all members of the Management Committee and reports its decisions to the Board. Additional information on the process for the determination of executive compensation is included in the Report on Executive Compensation at pages 8 to 14 of this Circular. |
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(b) | Disclose whether or not the board has a compensation committee composed entirely of independent directors. If the board does not have a compensation committee composed entirely of independent directors, describe what steps the board takes to ensure an objective process for determining such compensation. | The Corporation complies. All members of the Nominating and Corporate Governance Committee are independent within the meaning of the CSA Disclosure Instrument. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
(c) | If the board has a compensation committee, describe the responsibilities, powers and operation of the compensation committee. | The Corporation complies. The Nominating and
Corporate Governance Committee is
responsible for periodically reviewing and
evaluating the performance and contribution
of all directors and the effectiveness of
the Board as a whole; and, annually
reviewing the compensation of the directors
in their capacity as directors and make
recommendations to the Board of Directors. The Corporations executive compensation program is the responsibility of the Human Resources Committee. The Human Resources Committee is responsible for reviewing the human resources policies of the Corporation, reviewing and approving corporate goals and objectives relevant to the compensation of the Corporations President and Chief Executive Officer, overseeing the Corporations regulatory compliance with respect to compensation matters, and approving the engagement, termination, promotion and compensation of the members of the Management Committee. |
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(d) | If a compensation consultant or advisor has, at any time since the beginning of the issuers most recently completed financial year, been retained to assist in determining compensation for any of the issuers directors and officers, disclose the identity of the consultant or advisor and briefly summarize the mandate for which they have been retained. If the consultant or advisor has been retained to perform any other work for the issuer, state that fact and briefly describe the nature of the work. | During fiscal year 2005, the Human Resources Committee retained the services of Towers Perrin to provide advice on the competitiveness and appropriateness of compensation programs for the President and Chief Executive Officer and senior executive officers. Towers Perrin did not provide any other services to the Corporation during that period. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
8. | Other Board Committees If the board has standing committees other than the audit, compensation and nominating committees, identify the committees and describe their function. | The Corporation complies. In addition to the
Audit Committee, the Nominating and
Corporate Governance Committee and the Human
Resources Committee, the Board has also
established an Environment and Health &
Safety Committee and a Pension Committee. The mandate of the Environment and Health and Safety Committee includes the review of policy, management plans, programs, practices and performance of the Corporation in light of applicable environment and health and safety legislative requirements, the assessment of the performance of the Corporation in these areas, and making recommendations to the Board with respect to the foregoing. The mandate of the Pension Committee includes the approval of the investment policy of the Corporations pension funds and the benchmarks used to measure the performance of the pension funds, the recommendation annually to the Board, for its approval, of the funding policy for the pension funds and the approval of the hiring of the external portfolio managers and their objectives, and the evaluation of the performance of the external and internal portfolio managers. The mandates of each of these committees can found on the Corporations Internet site at www.domtar.com/en/governance/. The record of attendance of directors at committee meetings is set forth in the Section entitled Board of Directors Meetings and Attendance of Directors of this Circular. |
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9. | Assessments Disclose whether or not the board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution. If assessments are regularly conducted, describe the process used for the assessments. If assessments are not regularly conducted, describe how the board satisfies itself that the board, its committees, and its individual directors are performing effectively. | The Corporation complies. The Board has an
informal process for assessing its
effectiveness, and that of its committees. The Chair of the Board bears this
responsibility along with the Nominating and
Corporate Governance Committee. The Nominating and Corporate Governance Committee has the responsibility to undertake and review with the Board an annual performance evaluation of the Board and of the committees, which compares the performance of each committee with the requirements of its respective duties and responsibilities, and establishes the goals and objectives of each committee for the upcoming year. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
The CSA Audit Committee Rules state that the audit committee must be composed of a minimum of three (3) members, who must be independent directors (as defined in those rules). | The Corporation complies. The Audit
Committee is composed of five (5) directors, namely Louis P. Gignac (Chair), Jack C.
Bingleman, Jacques Laurent, Robert J. Steacy
and Edward J. Waters. The Board has determined that all members of the Audit Committee are independent within the meaning of the term in the CSA Audit Committee Rules. |
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The CSA Audit Committee Rules state that each audit committee member must be financially literate. | The Corporation complies. All five (5)
members of the Audit Committee are
financially literate within the meaning of
such definition and two (2) members of the
committee (Louis P. Gignac and Robert J.
Steacy) meet all the criteria to be
designated as audit committee financial
experts as that term is used in Item 401(h)
of Regulation S-K of the SEC. In determining whether or not a director is financially literate, the board considers if the director has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Corporations financial statements. In determining if a director is an audit committee financial expert, the board considers if the director is a person who has: (a) an understanding of generally accepted accounting principles and financial statements; (b) the ability to assess the general application of such accounting principles in connection with the accounting for estimates, accruals and reserves; (c) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Corporations financial statements, or experience actively supervising one or more persons engaged in such activities; (d) an understanding of internal controls and procedures for financial reporting; and (e) an understanding of audit committee functions. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
The CSA Audit Committee Rules state that the audit committee must have a written charter that sets out its mandate and responsibilities. | The Corporation complies. The charter of the Audit Committee explicitly describes the role and oversight responsibilities of the Audit Committee and can be found on the Corporations Internet site at www.domtar.com/en/governance/. | |||||||
The CSA Audit Committee Rules state that the audit committee must recommend to the Board of Directors: (a) the external auditor to be nominated for the purposes of preparing or issuing an auditors report or performing other audit, review or attest services for the issuer; and (b) the compensation of the external auditor. | The Corporation complies. The charter of the Audit Committee states that the Audit Committee is responsible for (a) appointing, terminating and compensating, subject to the Boards ratification and shareholders approval, the external auditor, and (b) approving any compensation payable by the Corporation for any approved audit or non-audit services to the external auditor, including the fees, and the terms and conditions for the performance of such services. The Audit Committee also evaluates the external auditors qualifications, performance and independence. | |||||||
The CSA Audit Committee Rules state that the audit committee must be directly responsible for overseeing the work of the external auditor engaged for the purpose of preparing or issuing an auditors report or performing other audit, review or attest services for the issuer, including the resolution of disagreements between management and the external auditor regarding financial reporting. | The Corporation complies. The charter of the
Audit Committee states that the Audit
Committee is responsible for (a) evaluating,
and overseeing the work of the external
auditor of the Corporation for the purpose of preparing or issuing an audit report or
related work, and the external auditor must
report directly to the Audit Committee; and
(b) resolving disagreements between
Management and the external auditor
regarding financial reporting. At least once annually, the Audit Committee obtains a written report by the external auditor describing, to the extent permitted under applicable auditing standards (a) the external auditors internal quality-control procedures; and (b) all relationships between the external auditor and the Corporation. |
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The CSA Audit Committee Rules state that the audit committee must pre-approve all non-audit services to be provided to the issuer or its subsidiary entities by the issuers external auditor. | The Corporation complies. The charter of the Audit Committee states that the Audit Committee is responsible for approving, in advance of the provision thereof, all audit services and, subject to Section 10A(1) of the Exchange Act (U.S.) and rules promulgated thereunder, all non-audit services to be provided to the Corporation by the external auditor. The Committee may delegate such authority to one or more members of the Committee. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
The CSA Audit Committee Rules state that the audit committee must review the issuers financial statements, MD&A and annual and interim earnings press releases before the issuer publicly discloses this information. These rules also mention that the audit committee must be satisfied that adequate procedures are in place for the review of the issuers public disclosure of financial information extracted or derived from the issuers financial statements, other than the public disclosure referred to in the preceding sentence, and must periodically assess the adequacy of those procedures. | The Corporation complies. The charter of the Audit Committee provides that the Audit Committee is responsible for reviewing the annual and quarterly financial statements of the Corporation and accompanying information including the Corporations MD&A disclosure and earnings press releases, prior to their release, filing and distribution as well as the results of the external auditors reviews of the quarterly financial statements. The Audit Committee must also review with management and the external auditors the financial information contained in documents required to be disclosed or filed by the Corporation before their disclosure or filing with regulatory authorities in Canada or the United States of America. | |||||||
The CSA Audit Committee Rules state that the audit committee must establish procedures for: (a) the receipt, retention and treatment of complaints received by the issuer regarding accounting, internal accounting controls, or auditing matters; and (b) the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters. | The Corporation complies. The charter of the Audit Committee provides that the Committee must establish and maintain procedures for (a) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters; and (b) the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters. As part of these procedures, the Corporation has a Whistleblower Protection Policy, integrated in the Code of Ethics, whereby employees, customers, suppliers, shareholders and other stakeholders, may, anonymously and confidentially, report wrongdoings in connection with accounting, internal accounting controls, auditing matters, potential or actual violations of the law, and generally matters related to the Corporations Code of Ethics. | |||||||
The CSA Audit Committee Rules state that the audit committee must review and approve the issuers hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the issuer. | The Corporation complies. The charter of the Audit Committee provides that the Audit Committee is responsible for establishing policies for the Corporations hiring of employees or former employees of the Corporations external auditor. |
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Corporate Governance Practices | ||||||||
CSA Guidelines | at the Corporation | |||||||
The CSA Audit Committee Rules state that the audit committee must have the authority: (a) to engage independent counsel and other advisors as it determines necessary to carry out its duties; (b) to set and pay the compensation for any advisors employed by the audit committee; and (c) to communicate directly with the internal and external auditors. | The Corporation complies. The charter of the Audit Committee states that the Audit Committee may, without further approval of the Board, obtain such advice and assistance, including without limitation, the performance of special audits, reviews and other procedures, from outside accounting, legal or other advisors as the Audit Committee determines to be necessary or advisable in connection with the discharge of its duties and responsibilities. The Corporation shall pay to the external counsel or other advisors usual and customary expenses and charges, as shall be determined by the Audit Committee. According to the Audit Committees charter, it must meet separately, at least once every fiscal quarter, with Management, with the Corporations internal auditor and with the external auditor. |
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I. | STEWARDSHIP MISSION OF THE BOARD | |
The Board of Directors of Domtar Inc. (the Corporation) is elected by the Corporations shareholders to supervise the management of the business and affairs of the Corporation. | ||
The primary stewardship responsibility of the Board is to ensure that Management conducts the business and affairs of the Corporation with the main objectives to increase shareholder value, while taking into account the interests of customers, employees and other stakeholders, to continuously improve Domtars performance, quality and diversity of its products and services, and to ensure its continuous growth and development. |
II. | DUTIES AND RESPONSIBILITIES OF THE BOARD | |
According to the Canada Business Corporations Act, the Corporations governing statute, the Board of Directors has plenary power. The Board is governed by the By-laws of the Corporation approved by the shareholders and by the Administrative Resolutions adopted by the Board. | ||
In addition to its statutory responsibilities, the Board has the following duties and responsibilities: |
1. | Satisfy itself as to the integrity of the CEO and senior management, and that such senior officers create a culture of integrity throughout the organization. | |
2. | Adopt a strategic planning process, and review and approve the Corporations strategic plan that takes into account, among other things, the opportunities and risks of the business, market and product global trends, and growth potential. | |
3. | Identify the principal risks of the Corporations businesses, including fraud risks and ensure the implementation of appropriate systems to manage these risks, including the Corporations anti-fraud program. | |
4. | Ensure that the Corporation is managed so as to preserve the integrity and accuracy of its financial reporting, internal controls and disclosure controls, and management information systems. | |
5. | Ensure that its expectations of Management are understood, that the appropriate matters come before the Board and that the Board is kept informed of shareholder feedback. | |
6. | Review and approve, upon the recommendation of the Human Resources Committee, the appointment, compensation, and performance of the President and Chief Executive Officer and the succession plan for him and senior managers. | |
7. | Select, upon the recommendation of the Nominating and Corporate Governance Committee, nominees for election as directors. | |
8. | Conduct, through the Nominating and Corporate Governance Committee and the Chairman of the Board, an annual review of Board and committee practices and mandates. | |
9. | Review and approve, upon the recommendation of the Nominating and Corporate Governance Committee, the compensation of non-executive directors, and ensure that their compensation adequately reflects the risks and responsibilities, and time commitment involved in being an effective director. | |
10. | Ensure that appropriate structures and procedures are in place so that the Board and its committees can function independently of Management. |
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11. | Review and approve key policy statements developed by Management on issues such as ethics, compliance, communications, environment, health and safety, and public disclosures. | |
12. | Review and approve the contents of major disclosure documents, including the annual information form, annual and quarterly managements discussion and analysis, press releases in connection with quarterly and annual financial results and the corresponding financial statements, and the management proxy circular. | |
13. | Review and approve significant capital expenditures, raising of capital, significant loans and other major financial activities. | |
14. | Review and approve significant reorganizations, restructuring, acquisitions, and divestitures. | |
15. | Monitor, through its Nominating and Corporate Governance Committee, the system of corporate governance of the Corporation. |
III. | COMPOSITION AND ORGANIZATION OF THE BOARD |
1. | Selection of Members | |
The Nominating and Corporate Governance Committee of the Board maintains an overview of the desired size and profile of the Board, the need for recruitment and the expected experience of new candidates. The Committee reviews and recommends to the Board the candidates for nomination as directors. The Board approves the final choice of candidates for nomination and election by the shareholders. | ||
2. | Membership Criteria | |
The Board shall be, and be perceived as, a group of strong and independent directors possessing vast business experience that is relevant to a multi-divisional international corporation. | ||
The Corporation seeks numerous qualities in its directors, in particular, independence, solid business experience, good judgment, integrity, financial literacy, knowledge of other relevant areas, regional representativeness, knowledge of various cultural communities, a desirable knowledge of the French language, the ability to gain trust, leadership and strategic vision, the ability to perform in times of crisis, and the ability to allocate the necessary time and effort to perform Board and committee duties. | ||
3. | Independent Directors | |
A majority of the Board shall be composed of independent directors under the laws, regulations and stock exchange listing requirements to which the Corporation is subject. | ||
Independence of directors will be determined on the basis of the criteria set out in Annex 1 hereto. | ||
4. | Chairman of the Board | |
The Board shall appoint a Chairman and, if one has to be appointed, a Vice-Chairman from among the Corporations directors. At all times, the same person may not occupy the positions of Chairman or Vice-Chairman of the Board and of President and Chief Executive Officer. |
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5. | Size | |
The size of the Board must be sufficient in number to ensure a diversity of skills and perspectives and to provide useful experience to the Board supervising the management of the Corporation as well as to staff on the various Board committees, while allowing the Board to function efficiently and effectively. Participation of all the directors in committees is not an absolute rule, and in order to allocate the necessary time, no director shall be a member of more than three (3) committees, other than the Executive Committee. | ||
6. | Retirement Age | |
A director who has attained the age of 70 prior to the Annual Shareholders Meeting in any year shall retire from office at such annual meeting. | ||
7. | Term of Office | |
The directors are elected by the shareholders at every annual meeting. The term of office of each director shall expire at the close of the annual shareholders meeting following that at which the director was elected. | ||
A director ceases to hold office when the director dies, resigns, becomes disqualified under the Canada Business Corporations Act or is removed from office according to law. A resignation becomes effective at the time a director sends it to the Corporation or at the time specified in the resignation, but it cannot take effect before the time it is rendered. Directors are urged to inform the Corporation in writing of the reasons for their resignation. |
IV. | MEETINGS OF THE BOARD |
1. | Board Agendas | |
The annual composite schedule of meetings for the Board and its committees is prepared by the Chairman of the Board, after consultation with the committee chairs, the President and Chief Executive Officer, and other directors. This schedule takes into consideration the annual work plans of the committees that are designed to ensure the discharge of their regular responsibilities. | ||
The Chairman develops the agendas for Board meetings after consultation with the President and Chief Executive Officer. As a general rule, all agendas are distributed to directors in advance of meetings with relevant background information and reports except where the confidential nature of certain matters renders such prior distribution inappropriate. | ||
2. | Board Meeting Frequency | |
A minimum of four regularly scheduled Board meetings shall be held each year. Additional meetings may be held when required. | ||
3. | Management at Meetings | |
Management participates in meetings and makes presentations to allow directors to gain additional understanding and insight into the Corporations businesses. | ||
4. | In camera Sessions | |
At all meetings of the Board and committees of the Board, the independent directors shall have the opportunity to meet alone to discuss such matters as they see fit. |
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V. | BOARD COMMITTEES |
1. | Number, Structure and Jurisdiction of Committees | |
The Board has constituted six committees: the Executive Committee, the Nominating and Corporate Governance Committee, the Audit Committee, the Human Resources Committee, the Environment and Health and Safety Committee, and the Pension Committee. Other committees or sub-committees may be established from time to time by Board resolution. The roles and responsibilities of each committee are described in the respective committee mandates (charters). As a general rule, the Board committees do not formally approve the matters that are submitted to them, but return them to the Board with their recommendations. Where committees have the mandate to approve certain matters, these committees must nevertheless report to the Board at set intervals and times. | ||
2. | Independent Committee Members | |
Members of the Audit Committee, the Human Resources Committee and the Nominating and Corporate Governance Committee shall be independent under the laws, regulations and stock exchange listing requirements to which the Corporation is subject. | ||
3. | Committee Agendas | |
The chairman of each committee, in consultation with the Chairman of the Board and the appropriate senior executives, develops the agenda for committee meetings. | ||
4. | Committee Report to the Board | |
At the Board meeting next following each meeting of a committee, the committee chairman reports to the Board on the committees activities. |
VI. | ADMINISTRATIVE MATTERS |
1. | Assessment of the Boards Performance | |
The Nominating and Corporate Governance Committee, along with the Chairman of the Board, bear the responsibility to assess the Boards performance as a whole as well as that of individual directors. The Nominating and Corporate Governance Committee shall be chaired by a person other than the Chairman of the Board and shall be responsible for assessing the performance of the Chairman of the Board. | ||
2. | Share Ownership by Directors | |
The Board believes that ownership of Domtar common shares by directors is desirable in order to align their economic interest with those of the shareholders. Since the introduction of a Directors Stock Plan in 1997, outside directors have received a portion of their annual compensation in common shares. A Deferred Share Unit Plan for Outside Directors (DSUs) was introduced in 1999, replacing the previous stock plan. In 2001, the Board of Directors adopted a policy stating that the directors will hold a personal investment in common shares and DSUs of the Corporation, of at least six (6) times the amount of their annual base compensation over a period of three (3) years. This policy does not apply to directors who, by reason of policies of their own employers, may not benefit personally from the director compensation paid by the Corporation. |
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3. | Confidentiality | |
Directors shall maintain the absolute confidentiality of the deliberations and decisions of the Board of Directors and information received at meetings, except as may be specified by the Chairman or if the information is publicly disclosed by the Corporation. | ||
4. | Interaction with Third Parties | |
If a third party approaches a director on a matter of interest to the Corporation, the director should bring the matter to the attention of the Chairman of the Board, who shall determine, together with the director, whether this matter should be reviewed with Management or should more appropriately be dealt with by the Board. | ||
Board members, individually or as a part of a group, are not mandated to engage in lobbying activities on behalf of the Corporation without the express authorization of the Chairman of the Board (and after notifying the Corporation). In the event that such a mandate is given to them, the directors shall ensure that they are in compliance with the applicable legislation governing lobbyist activities. | ||
5. | Orientation and Education Program | |
The Corporation provides directors with an orientation program that includes information about its businesses, operations, and current issues and strategies. Directors receive written documentation and have opportunities to meet with senior management and to visit facilities. |
VII. | RESOURCES AND AUTHORITY OF THE BOARD | |
Committees and directors may consult external advisors in appropriate cases, especially if they deem it necessary when the Corporation plans a major transaction such as a reorganization or financing. Except for the Audit Committee, the retention and the terms and conditions of the retention of external advisors shall receive prior approval by the Nominating and Corporate Governance Committee. |
* * * * * * * |
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1. | A director will qualify as independent if the Board of Directors of the Corporation determines that the director has no material relationship with Domtar. | |
2. | Material relationship means a relationship that could, in the view of the Board of Directors of the Corporation, reasonably interfere with the exercise of a directors independent judgment. | |
3. | A director is not independent if currently, or in the last three years, (the same principle applies to a member of the directors immediate family1), the director: |
i) | is or has been employed by Domtar; | |
ii) | receives or has received more than $75,000 (US $100,000 under NYSE rules) per year in direct compensation from Domtar, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); | |
iii) | is or has been affiliated with or employed by a present or former internal or external auditor of Domtar; | |
iv) | is or has been employed as an executive officer of another company where any of Domtars present executive officers serve on that companys compensation committee; | |
v) | is or has been an executive officer or an employee of a company who makes payments to, or receives payment from, Domtar which in any single fiscal year exceed the greater of US $1 million or 2% of such companys consolidated gross revenues in the most recent completed fiscal year; | |
vi) | is or has been an executive officer or an employee of a Domtar customer who is a competitor of other Domtar customers in a similar business; | |
vii) | is or has been employed as an executive officer of an entity that directly or indirectly, by itself or otherwise, has the means to direct or cause the direction of the strategies and management of Domtar, whether through ownership of voting securities or otherwise; | |
viii) | is or has been a senior officer, a partner or a significant shareholder (10% of more) of a professional organization, a service provider or a consulting firm (i.e. legal, investment banking, management, IT, accounting/tax services), and the annual fees that such organization receives from Domtar for such services exceed the greater of US $1 million or 2% of such organizations annual gross revenues, in the most recent completed fiscal year. |
1 | Member of the directors immediate family means spouse, parents, children, brothers, sisters, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law. |
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9th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1 www.computershare.com |
Security Class | ||
Holder Account Number |
1. | Every holder has the right to appoint some other person of his/her choice, who needs not be a holder, to attend and act on his/her behalf at the meeting. If you wish to appoint a person other than the persons whose names are printed herein, please insert the name of your chosen proxyholder in the space provided (see reverse) and strike out the other names. | |
2. | If the securities are registered in the name of more than one owner (for example, joint ownership, trustees, executors, etc.), then all those registered should sign this form. If you are voting on behalf of a corporation or another individual you must require documentation evidencing your power to sign the proxy with signing capacity stated. | |
3. | The form of proxy should be signed in the exact manner as the name appears on the proxy. | |
4. | If the form of proxy is not dated, it will be deemed to bear the date on which it was mailed to the holder. | |
5. | The securities represented by this proxy will be voted as directed by the holder, however, if such a specification is not made in respect of any matter, this proxy will be voted as recommended by Management. |
| Go to the following web site: www.computershare.com/proxy |
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| Proxy Instructions must be received by 5:00 pm, Eastern Time, April 26, 2006. |
| Complete, sign and date the reverse hereof. | ||
| Return this Proxy in the envelope provided. |
Appointment of Proxy | ||||||
The undersigned holder of Common Shares of Domtar Inc. (the Corporation) hereby appoints: Brian M. Levitt, the Chair of the Board, or failing him, Raymond Royer, the President and Chief Executive Officer, or failing him, Razvan L. Theodoru, the Corporate Secretary | OR | Print the name of the person you are appointing if this person is someone other than those designated | |
For | Withhold | ||||||
01. Jack C. Bingleman | o | o | |||||
02. Raymond Chrétien | o | o | |||||
03. Louis P. Gignac | o | o | |||||
04. Claude R. Lamoureux | o | o |
For | Withhold | ||||||
05. Jacques Laurent | o | o | |||||
06. Brian M. Levitt | o | o | |||||
07. Gilles Ouimet | o | o | |||||
08. Louise Roy | o | o |
For | Withhold | ||||||
09. Raymond Royer | o | o | |||||
10. Robert J. Steacy | o | o | |||||
11. Gene R. Tyndall | o | o |
All the proposed nominees |
For | o | Withhold | o | |||||
2. Appointment of Auditors | |||||||||
to vote FOR or WITHHOLD from voting with respect to the appointment of the auditors | For | o | Withhold | o |
Date |
Financial Statements Request | Interim Financial Reports | Annual Reports | ||||
In accordance with securities regulations, shareholders may elect annually to receive financial statements, if they so request. If you wish to receive such mailings, please mark your selection. | o | Mark this box if you would like to receive interim financial reports by mail. | o | Mark this box if you DO NOT want to receive the Annual Report by mail. |
DOMTAR INC. | ||||
(Registrant) | ||||
Date: March 27, 2006. | By: | /s/ Razvan L. Theodoru | ||
Razvan L. Theodoru | ||||
Corporate Secretary | ||||