ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
At each annual general meeting, the entire board of directors of Western
retires and directors are elected for the next term. Each director serves until
the close of the next annual general meeting or until his successor is elected
or appointed unless his office is earlier vacated in accordance with our
Articles or with the provisions of the CBCA. Our officers serve at the
discretion of the Board.
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DIRECTORS
The following sets forth the names, provinces of residence and principal
occupations of the directors of Western as of the date hereof (the information
concerning the respective directors has been furnished by each of them).
NAME AND PROVINCE AND
COUNTRY OF RESIDENCE POSITION WITH WESTERN DIRECTOR SINCE
--------------------- --------------------- --------------
JAMES ARTHURS(1)(2)(3) .............. Director July 27, 2004(5)
BC, Canada
LEE DONEY(2)(3) ..................... Director July 27, 2004(5)
BC, Canada
PETER GORDON(1) (4) ................. Director July 27, 2004(5)
ON, Canada
REYNOLD HERT ........................ President, Chief Executive Officer and Director October 4, 2004
BC, Canada
JOHN LACEY(3)(4) .................... Director July 27, 2004(5)
ON, Canada
JOHN MACINTYRE(1)(3) ................ Director and Chairman of the Board July 27, 2004(5)
ON, Canada
JOHN B. NEWMAN(1)(3)(4) ............. Director July 27, 2004(5)
ON, Canada
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(1) Member of the Audit Committee.
(2) Member of the Environmental, Health and Safety Committee.
(3) Member of the Nominating and Corporate Governance Committee.
(4) Member of the Management Resources and Compensation Committee.
(5) Initially appointed in accordance with the Plan.
James Arthurs, Director
Mr. Arthurs is and has been since 2004, the Senior Vice President, Sales &
Marketing for Integrated Paving Concepts Inc., a manufacturer of equipment,
tooling and high technology coatings for the decorative asphalt industry. Prior
to joining Integrated Paving Concepts, Mr. Arthurs was Managing Director,
Operations, for The Jim Pattison Group, one of Canada's largest privately-held
companies, from 2002 through 2004. From January 2002 to May 2002 he was the Sr.
Vice-President and Chief Information Officer for Alderwoods Group, Inc.
(emergent company of the Loewen Group, operating funeral homes and operations
within North America and the U.K.) and from May 2000 to January 2002, he was
with the Loewen Group. The Loewen Group was the subject of CCAA proceedings in
Canada and Chapter 11 proceedings in the U.S. from June 1, 1999 to December 31,
2001. Previous positions included Vice President, Residential and Industrial
Operations for Trus Joist, A Weyerhaeuser Company; and General Manager, Building
Materials Distribution for MacMillan Bloedel Limited. In addition, Mr. Arthurs
spent 16 years with IBM in a wide range of sales and management positions. Mr.
Arthurs holds a Bachelor of Science Degree in Computer Science from the
University of Calgary.
Lee Doney, Director
Mr. Doney is an independent consultant through his company, RLD
Strategies. He is a director on the Community Living Board of the Provincial
Government and the Chair of the Board of Columbia Power Corporation. Mr. Doney
was a Deputy Minister in the British Columbia Government for over 15 years and
served in a number of other posts in the government. Most recently, he was
Deputy Minister of Skills and Development and Labour from June 2001 until his
retirement in April 2004. Mr. Doney's previous responsibilities include Deputy
Minister of Forests; Chief Executive Officer of Forest Renewal BC; Interim
Chair, Industry Training and Apprenticeship Commission; Chief Executive Officer
of the British Columbia Labour Force Development Board; Chairman of the Workers
Compensation Board of Governors; Executive Director to the Provincial Round
Table on the Environment and the Economy; and Executive Director for the BC
Treaty Commission. He has a Masters Degree in Economics from Queens University.
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Peter Gordon, Director
Mr. Gordon is currently Managing Partner, Restructuring of Brascan
Corporation, where he is co-manager of the Tricap Restructuring Fund, a $415
million fund providing investment capital and management assistance to companies
experiencing financial or operational difficulties. He joined Brascan in 1998
where he has been directly involved in its investment banking and merchant
banking activities. Prior to 1998, he spent over fifteen years in the Canadian
mining industry in the marketing, operating and finance areas with Westmin
Resources Limited and Noranda Inc. Mr. Gordon is currently a director of Vicwest
Corporation and Northgate Minerals Corporation. He holds an MBA in addition to
an engineering degree.
Reynold Hert, President, Chief Executive Officer and Director
Mr. Hert was appointed President, CEO and Director of Western on October
4, 2004. Prior to that he had spent 12 years with Weyerhaeuser in various roles,
most recently in Kamloops, B.C., as Vice President, Canadian Forestlands and
previously as Vice President, Canadian SPF Lumber. Mr. Hert joined Weyerhaeuser
as part of the acquisition of Proctor & Gamble Grande Prairie assets. He managed
the Grande Prairie sawmill at the time. He started in the Canadian forest
industry while a forestry student at the University of Toronto, working in
timber cruising in Ontario and Alberta. Mr. Hert has a Bachelor of Science
Degree (Forestry) from the University of Toronto.
John Lacey, Director
Mr. Lacey became the Chairman of the Board of Directors of Alderwoods
Group, Inc. (emergent company of Loewen Group, operating funeral homes and
cemeteries within North America and the U.K.), on January 2, 2002. From January
1999 to January 2002, Mr. Lacey was the Chairman of the Board of Directors of
the Loewen Group Inc., of which he was a director from December 1998 (The Loewen
Group was the subject of proceedings in Canada and Chapter 11 proceedings in the
U.S. from June 1, 1999 to December 31, 2001). From July 1998 to November 1998,
he was President and Chief Executive Officer of The Oshawa Group Ltd. in
Toronto, Ontario. From November 1996 to July 1998, he was President and Chief
Executive Officer of WIC Western International Communications Inc. in Vancouver,
British Columbia. Prior to that, Mr. Lacey served as President and Chief
Executive Officer of Scott's Hospitality Inc. from 1990 to 1996. Mr. Lacey
currently is a director of TELUS, Canadian Tire Corp., CIBC and Cancer Care
Ontario and the Chairman of Doncaster Racing Inc. and Doncaster Consolidated
Ltd. In addition, Mr. Lacey is a member of the advisory board of Tricap.
John MacIntyre, Director and Chairman of the Board
Mr. MacIntyre is, and has been since 2004, a partner in Birch Hill Private
Equity (a successor to TD Capital's Private Equity Fund). From 2002 to 2004, he
was an independent financial advisor. Until February 2002, Mr. MacIntyre was a
Senior Vice-President of The Toronto-Dominion Bank, and Vice Chair, Global Head,
Investment Banking, TD Securities. As Vice Chair, Investment Banking, he was
responsible for global investment banking, corporate credit, trade finance and
correspondent banking. Prior to joining TD Securities in 1987, Mr. MacIntyre was
with Ernst & Young. Mr. MacIntyre has been a director of several public and
private corporations, and is currently a director of Maple Leaf Sports &
Entertainment Ltd., Persona Communications Ltd. and Wellspring. He is on the
advisory boards for TD Capital and Tricap. Mr. MacIntyre is a Chartered
Accountant, a Chartered Business Valuator and a graduate of Queen's University.
John B. Newman, Director
Since his retirement in 1990 as Deputy Chairman of Prudential Securities
(Canada), Mr. Newman has served as Chairman and CEO of Multibanc Financial
Holdings Limited, a private investment vehicle located in Toronto. Mr. Newman
also served as Chairman and CEO of First Place Tower Inc., the owner of a 2.6
million square foot 72 storey office and retail complex located in Toronto, from
its emergence from bankruptcy in 1995 until its sale in 1999. He is currently a
director of a number of public and private Canadian corporations and trusts
engaged in real estate, insurance, investment, manufacturing, distribution and
financing, including Simmons Canada Inc., Multi-Fund Management Inc., Aviva
Group Canada Ltd., Pilot Insurance Company and Utility Corporation. Mr. Newman
was also an independent director of FT Capital Inc. until his resignation on
December 17, 2002. FT Capital Inc. was operating under an agreed moratorium on
its principal and interest payments on its subordinated debentures prior to Mr.
Newman becoming one of its independent directors. Prior to Mr. Newman's
resignation, FT Capital Inc. was subject to a number of cease trade orders
issued in 2001 and 2002 by various securities regulatory authorities in Canada
for failure to file financial statements while its principal shareholder B.C.
Pacific Capital Corporation considered restructuring options with Brascan
Financial Corporation. Those cease trade orders were subsequently terminated
after FT Capital Inc. filed the requisite financial statements.
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SENIOR MANAGEMENT (OTHER THAN CEO)
The following sets forth the names, provinces of residence, offices held within
Western of members of senior management (other than the CEO which is set forth
above) of Western, as of the date hereof (the information concerning the
respective members of senior management has been furnished by each of them).
NAME AND PROVINCE AND
COUNTRY OF RESIDENCE POSITION WITH WESTERN
--------------------- ----------------------
TREVOR BONIFACE............................................. General Manager, Logging
BC, Canada
JOHN DALTON................................................. General Manager, Log Supply
BC, Canada
DAN DYCK.................................................... General Manager, Sawmills
BC, Canada
DAVE INGRAM................................................. General Manager, Pulp Operations
BC, Canada
PAUL IRELAND ............................................... Chief Financial Officer and Corporate Secretary
BC, Canada
MORRIS MANDZIUK ............................................ Treasurer
BC, Canada
DEBBIE NUSSBAUM............................................. Director, Human Resources
BC, Canada
CLEM TROMBLEY............................................... General Manager, Lumber Sales
BC, Canada
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Trevor Boniface, General Manager, Logging
Mr. Boniface was named General Manager of Logging in January 2005 and
prior to that was Regional Manager for the Nootka region since July 27, 2004. He
was the Regional Manager for the Nootka region for Doman since 1998. Mr.
Boniface started with Doman in 1977. As noted above, Doman and its subsidiaries
were subject to CCAA proceedings. Mr. Boniface has a Bachelor of Science Degree
in Forestry (Harvesting Option) and is also a Registered Professional Forester.
John Dalton, General Manager, Log Supply
Mr. Dalton has been our General Manager of Log Supply since July 27, 2004.
Prior to that he was General Manager of Log Supply with Doman since 1983. Mr.
Dalton initially started with Doman in 1965. As noted above, Doman and its
subsidiaries were subject to CCAA proceedings. Mr. Dalton holds a Bachelor of
Science Degree (Forestry) with a Business Administration option.
Dan Dyck, General Manager, Sawmills
Mr. Dyck has been our General Manager of Sawmills since July 27, 2004.
Prior to that he was the General Manager of Sawmills for Doman since 2001 and
prior to that he was the Manager of the Duke Point Sawmill. Mr. Dyck started
with Doman in 1989. As noted above, Doman and its subsidiaries were subject to
CCAA proceedings.
Dave Ingram, General Manager, Pulp Operations
Mr. Ingram has been the General Manager of Pulp Operations since July 27,
2004. Prior to that he was the General Manager of 4018974 Canada Inc. (formerly
Western Pulp Inc.) (a subsidiary of Doman). From June 1991 to September 2004, he
held the positions of Production Manager, Assistant Mill Manager and Mill
Manager at the subsidiary's Squamish Operation. As noted above, Doman and its
subsidiaries were subject to CCAA proceedings. Mr. Ingram held various technical
and production positions with MacMillan Bloedel at their Harmac division from
1972 to 1991. Mr. Ingram is a graduate of Lakehead University with a diploma in
Chemical Engineering Technology.
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Paul Ireland, Chief Financial Officer and Corporate Secretary
Mr. Ireland was appointed as Chief Financial Officer of Western on January
24, 2005. From 2002 to 2004, he was the Vice-President, Finance of Diavik
Diamond Mines Inc., a unit of Rio Tinto plc. From 1994 to 2000, Mr Ireland was
the Vice-President, Finance & Chief Financial Officer of Campbell Resources Inc.
From 1992 to 1994 Mr. Ireland was the Manager of Special Projects and Internal
Audit for Polaris Realty (Canada) Limited. Mr. Ireland started his career with
Ernst & Whinney in London, UK and then moved to KPMG Peat Marwick Thorne in
Toronto. He is a Chartered Accountant (Ontario, England and Wales).
Morris Mandziuk, Treasurer
Mr. Mandziuk has been our Treasurer since July 27, 2004. Prior to that he
held various positions in the accounting, planning and treasury areas at Doman
during his 16 years with the company. As noted above, Doman and its subsidiaries
were subject to CCAA proceedings. Mr. Mandziuk is a Certified Management
Accountant.
Debbie Nussbaum, Director, Human Resources
Ms. Nussbaum was named Director of Human Resources in May 2005 and prior
to that was the Company's Employee Services Manager since July 27, 2004. She was
the Employee Services Manager for the Sawmills Division of Doman since April,
2003. As noted above, Doman and its subsidiaries were subject to CCAA
proceedings. From 1990 to 2003, Ms. Nussbaum held various positions within the
scope of employee services for Repap Manitoba. Prior to that she held various
positions in employee services with Tolko Industries, Manitoba. Ms Nussbaum has
her certification in Payroll Management with a focus on Human Resource
Management.
Clem Trombley, General Manager, Lumber Sales
Mr. Trombley has been our General Manager of Lumber Sales since July 27,
2004. He joined Doman in 1968 as Quality Control Supervisor. In 1972 he
established Doman's sales department and was General Manager of Sales for Doman
since 2001. As noted above, Doman and its subsidiaries were subject to CCAA
proceedings.
B. COMPENSATION
We are required, under applicable securities legislation in Canada, to
disclose to our securityholders details of compensation paid to certain members
of our senior management and directors in our management proxy circular. The
following is derived from the compensation disclosure in Western's recent
management proxy circular required to be filed under applicable securities laws
in Canada.
SUMMARY COMPENSATION TABLE
The following table provides a summary of compensation earned during the
financial year ended December 31, 2004 by our Chief Executive Officer ("CEO"),
Chief Financial Officer ("CFO") (as at December 31, 2004) and three of our most
highly compensated executive officers (as defined under National Instrument
51-102 - Continuous Disclosure Obligations of the Canadian Securities
Administrators), other than the CEO and CFO, whose total annual salary and bonus
was in excess of $150,000, and any of our former executive officers that would
have been one of the three most highly compensated executive officers except
that the individual was not serving as an executive officer for us as of
December 31, 2004 (collectively, the "Named Executive Officers").
Effective on the implementation of the Plan, the employment of the
officers and employees of our Predecessor was continued by us substantially on
the same terms and conditions as their employment with our Predecessor.
Accordingly, for ease of reference the table contains the aggregate compensation
paid to those Named Executive Officers employed by us and by our Predecessor for
the year ended December 31, 2004.
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2004 ANNUAL COMPENSATION 2004 LONG TERM COMPENSATION
----------------------------------- -------------------------------------
AWARDS PAYOUTS
-------------------------------------
SECURITIES RESTRICTED
OTHER UNDER SHARES ALL
ANNUAL OPTIONS/ OR OTHER
NAME AND PRINCIPAL COMPENSA- SARS SHARE LTIP COMPENSA-
POSITION WITH THE SALARY BONUS TION(1) GRANTED UNITS PAYOUTS TION(2)
CORPORATION ($) ($) ($) (#) ($) ($) ($)
-------------------- ----------- -------- -------- --------- ---------- ---------- ------- ---------
J.H. (RICK) DOMAN(3) Corporation 93,042 3,000 - - - - 835,058(4)
Former President and Predecessor 224,583 - - - - - 3,258
Chief Executive ------- ------- -------
Officer Total 317,625 3,000 - - - - 838,316
======= ======= =======
DAN DYCK Corporation 67,917 63,550 - - - - 2,191
General Manager, Predecessor 93,583 -- - - - - 3,039
Sawmills ------- ------- -------
Total 161,500 63,550 - - - - 5,230
======= ======= =======
REYNOLD HERT(5) Corporation 92,330 125,000 - 250,000 - - 794
President and Chief Predecessor - - - - - - -
Executive Officer ------- ------- ------- -------
Total 92,330 125,000 - 250,000 - - 794
======= ======= ======= =======
PHILIP HOSIER(6) Corporation 73,042 78,000 - - - - 1,843
Former Corporate Predecessor 102,258 - - - - - 173,097(7)
Secretary and ------- ------- -------
Vice-President, Total 175,300 78,000 - - - - 174,940
Finance ======= ======= =======
DAVE INGRAM Corporation 71,667 37,400 - - - - 2,302
General Manager, Predecessor 100,333 4,000 - - - - 3,217
Pulp Operations ------- ------- -------
Total 172,000 41,400 - - - - 5,519
======= ======= =======
BERNI ZIMMERMANN(8) Corporation 74,400 19,000 - - - - 60,087(9)
Consultant and Predecessor 104,160 - - - - - 2,987
Former General ------- ------- -------
Manager, Logging Total 178,560 19,000 - - - - 63,074
======= ======= =======
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(1) The aggregate amount of perquisites and other personal benefits that is
less than $50,000 and 10% of the total annual salary and bonus for any of
the Named Executives Officers are not reported.
(2) Unless otherwise specified, amounts reported in this column refer to the
dollar values of insurance premiums paid with respect to term life
insurance, medical benefits and amounts contributed in respect of an
employee savings plan.
(3) Mr. Doman was the President and Chief Executive Officer of the Company
from incorporation, April 27, 2004, until September 22, 2004. Mr. Doman's
employment agreement with Doman was transferred to us on the
implementation of the Plan. For a description of the terms of that
agreement see the Annual Filing of Doman, dated April 16, 2004 available
at www.sedar.com under the name Doman Industries Limited. Mr. Doman's
employment was terminated effective September 22, 2004. Pursuant to his
employment agreement, Mr. Doman was paid severance of $833,623 (made up of
severance of $770,000, vacation pay of $44,423, car allowance of $19,200,
and term life insurance, medical benefits and amounts contributed in
respect of an employee savings plan of $1,435).
(4) Mr. Doman's other compensation from the Predecessor and the Company for
the year ended December 31, 2004 was $3,258 and $835,058 respectively, and
includes the $833,623 paid as severance from the Company.
(5) Mr. Hert became the President and Chief Executive Officer of the Company
on October 4, 2004. Under his employment agreement, he is entitled to an
annual base salary of $375,000. Under the terms of such agreement he was
also entitled to a one time hiring bonus of $125,000. See "Item 6.
Directors, Senior Management and Employees - B. Compensation - Employment
Contracts - Executive Compensation Report" below.
(6) Mr. Hosier was the Corporate Secretary of the Company from June 23, 2004
until May 2, 2005. He was Vice President, Finance of the Company from July
27, 2004 to January 24, 2005. (Mr. Paul Ireland was appointed CFO as of
January 24, 2005.) Mr. Hosier retired from the Company in March 2005, but
continues to work for the Company in a consulting role.
(7) Pursuant to a retention agreement dated as of March 1, 2004 with Doman,
Mr. Hosier was paid $65,000 for agreeing to remain in his position as
Vice-President, Finance of Doman until the earlier of the implementation
date of the Plan and June 30, 2004. He was also paid $105,517 vacation pay
plus $2,580 for term life insurance, medical benefits and amounts
contributed in respect of an employee savings plan.
(8) Mr. Zimmermann was the General Manager, Logging of the Company from July
27, 2004 to December 31, 2004. He currently provides consulting services
to the Company.
(9) Mr. Zimmermann was paid $58,049 vacation pay plus $2,580 for term life
insurance, medical benefits and amounts contributed in respect of an
employee savings plan. Mr. Zimmermann is also entitled to severance of
approximately $89,000 and a one time consulting retainer in the amount of
$140,815.
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The aggregate amount of compensation and benefits in kind (excluding
pension benefits as set out below) paid during the financial year ended December
31, 2004 to all our members of senior management as at December 31, 2004 and
former members of senior management as a group for services in all capacities
paid by us and our Predecessor was approximately $3.2 million.
RETIREMENT PLANS
The following tables set forth annual benefits that become payable under
pension plans established by 4018958 Canada Inc. (formerly Western Forest
Products Limited, a subsidiary of Doman), which were transferred to us on the
implementation of the Plan.
As at December 31, 2004, D. Dyck, D. Ingram, R. Hert, P.G. Hosier and B.
Zimmermann were members of the Western Forest Products Limited Salaried
Employees Pension Plan (the "WFP Plan"). Also as at December 31, 2004, R. Hert
and P.G. Hosier were members of the Western Forest Products Limited
Supplementary Plan ("WFP Supplementary Plan"). The Doman Industries Limited
Pension Plan (the "DIL Plan") was also transferred to us on the implementation
of the Plan. However, none of the Named Executive Officers are members of the
DIL Plan. D. Ingram is entitled to a separate supplement pension. See "Item 6.
Directors, Senior Management and Employees - B. Compensation - Employment
Contracts".
TABLE I - THE WFP PLAN
Pensionable Years of Service
Earnings ---------------------------------------------------
($) 15 20 25 30 35 40
----------- ------ ------ ------ ------ ------ ------
100,000 24,855 33,140 41,425 49,710 57,995 66,280
125,000 27,495 36,660 45,825 54,990 64,155 73,320
150,000 27,495 36,660 45,825 54,990 64,155 73,320
175,000 27,495 36,660 45,825 54,990 64,155 73,320
200,000 27,495 36,660 45,825 54,990 64,155 73,320
225,000 27,495 36,660 45,825 54,990 64,155 73,320
250,000 27,495 36,660 45,825 54,990 64,155 73,320
275,000 27,495 36,660 45,825 54,990 64,155 73,320
300,000 27,495 36,660 45,825 54,990 64,155 73,320
325,000 27,495 36,660 45,825 54,990 64,155 73,320
350,000 27,495 36,660 45,825 54,990 64,155 73,320
375,000 27,495 36,660 45,825 54,990 64,155 73,320
400,000 27,495 36,660 45,825 54,990 64,155 73,320
====== ====== ====== ====== ====== ======
Under the WFP Plan, pensionable earnings equal the highest average
earnings of the member of the plan based upon a 60 consecutive month period
while the WFP Plan is in operation. Pension benefits are equal to 1.9% of
pensionable earnings per year of service to a maximum of 40 years minus an
adjustment for Canada Pension Plan Benefits. Although the normal retirement age
is 65, a member may retire up to 10 years prior to the age of 65. If a member
retires before the age of 60 and receives a pension, his pension will be
reduced. If a member retires before the age of 65, he will receive a bridging
benefit which ranges from $3,098 to $9,720 for the range of earnings and years
of service set out in Table II. Apart from the bridging benefit which terminates
at age 65, pensions are paid for life with a guarantee of at least five years
payment should the retired executive die within five years following retirement.
Benefits payable under the WFP Plan are limited to the maximum amounts permitted
under the Income Tax Act (Canada) (the "ITA Limit").
The WFP Supplementary Plan provides a pension supplement to members of the
WFP Plan designated as participants by the Board in order to provide pension
benefits to the level that members would receive if no ITA Limit was in place.
Pensionable earnings and benefits under the WFP Plan, as supplemented by the WFP
Supplementary Plan, are calculated upon the same basis as benefits and earnings
under the WFP Plan alone, with the exception that the ITA Limit does not apply.
The WFP Supplementary Plan is funded from our general operations.
As at December 31, 2004, D. Dyck had completed and been credited with
approximately 14.3 years of pensionable service, R. Hert had completed and been
credited with approximately 0.3 years of pensionable service, P.G. Hosier had
completed and been credited with approximately 25.3 years of pensionable
service, D. Ingram had completed and been credited with approximately 13.6 years
of pensionable service, and B. Zimmermann had completed and been credited with
approximately 10.8
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years of pensionable service. As of September 22, 2004, the date of termination
of his employment, J.H. Doman had completed and been credited with approximately
22.7 years of pensionable service.
TABLE II -- THE WFP PLAN
(AS SUPPLEMENTED BY THE SUPPLEMENTARY PLAN)
Pensionable Years of Service
Earnings ----------------------------------------------------------------------------------------
($) 15 20 25 30 35 40
----------- ------- ------- ------- ------- ------- -------
100,000 24,855 33,140 41,425 49,710 57,995 66,280
125,000 31,980 42,640 53,300 63,960 74,620 85,280
150,000 39,105 52,140 65,175 78,210 91,245 104,280
175,000 46,230 61,640 77,050 92,460 107,870 123,280
200,000 53,355 71,140 88,925 106,710 124,495 142,280
225,000 60,480 80,640 100,800 120,960 141,120 161,280
250,000 67,605 90,140 112,675 135,210 157,745 180,280
275,000 74,730 99,640 124,550 149,460 174,370 199,280
300,000 81,855 109,140 136,425 163,710 190,995 218,280
325,000 88,980 118,640 148,300 177,960 207,620 237,280
350,000 96,105 128,140 160,175 192,210 224,245 256,280
375,000 103,230 137,640 172,050 206,460 240,870 275,280
400,000 110,355 147,140 183,925 220,710 257,495 294,280
======= ======= ======= ======= ======= =======
For the year ended December 31, 2004, we and our Predecessor have set
aside or accrued $162,000 to provide for pensions, retirement and similar
benefits to our directors and senior officers and former directors and officers
as at December 31, 2004.
EMPLOYMENT CONTRACTS
Mr. D. Ingram entered into an agreement with a subsidiary entity of Doman
dated April 29, 1991, which was assigned to us on the implementation of the
Plan, providing for a supplemental pension in addition to a regular pension from
the WFP Plan. Mr. Ingram is entitled to a supplementary pension from us based on
his pensionable service with us and our Predecessor, his final average earnings
at his former employer and the WFP Plan's pension formula. This supplementary
pension to Mr. Ingram is payable from our general operations.
We have entered into an employment agreement with our current CEO,
effective from October 4, 2005 and an employment agreement with our current CFO,
effective from January 24, 2005 (collectively the "Employment Agreements"). The
Employment Agreements are for an indefinite term and contain provisions for
annual base salaries (subject to annual review), as well as provisions
pertaining to eligibility for annual discretionary bonuses based on personal and
corporate performance, participation in the WFP Plan, the WFP Supplementary Plan
and our incentive stock option plan ("Option Plan"), eligibility for benefits,
vacation, relocation allowances, vehicle allowances and in the case of the CEO
the grant of options as described above. The Employment Agreements also contain
severance provisions contemplating, in the case of termination without cause,
severance payments equal to the sum of 24 months in the case of the CEO, and 12
months in the case of the CFO, of base salary plus the average yearly
performance bonus over the past three years or less (collectively, the
"Termination Payment"). In addition, upon such termination all vested options
may only be exercised within 90 days of termination. The Employment Agreement in
the case of the CEO provides for the entitlement for a period of 90 days to
resign and receive the Termination Payment in the event of the occurrence of
certain change in control events and that upon such change of control, all
unvested options will vest. In the case of the CFO, the Employment Agreement
provides that upon the occurrence of a material change in control of the
Company, and the CFO is not offered employment on substantially the same terms,
the CFO is entitled for a period of 90 days to resign and receive a lump sum
payment equal to 24 months of salary plus bonus amounts due to the CFO.
The foregoing summary of the Employment Agreements is qualified in its
entirety by reference to the provisions of the Employment Agreements set out in
Exhibits 4.6 and 4.7.
Other than as noted above or elsewhere herein, we have no written
employment agreements between us or any of our subsidiaries and a Named
Executive Officer or any compensation arrangement where the Named Executive
Officer entitled to receive more than $100,000 in event of resignation,
retirement or other termination of the Named Executive Officer or on a change of
control where such contract or arrangement is in existence at the end of the
most recent completed financial year.
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See "Item 6. Directors, Senior Management and Employees - B. Compensation
- Summary Compensation Table" for a summary of compensation earned by Named
Executive Officers for the financial year ended December 31, 2004. Also see
"Item 6. Directors, Senior Management and Employees - B. Compensation -
Retirement Plans" for a discussion of retirement benefits available to Named
Executive Officers.
OPTION TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
Incentive Stock Option Plan
Western has an Option Plan which permits the granting of options (the
"Options") in accordance with the terms of the Option Plan to eligible
participants to purchase up to a maximum of 2,500,000 Common Shares
(representing approximately 9.75% of the issued and outstanding Common Shares as
of June 21, 2005), which have been reserved for issuance under the Option Plan.
As of June 21, 2005, 374,590 Options to purchase 374,590 Common Shares or
approximately 1.46% of the issued and outstanding Common Shares have been
granted to eligible participants, no Common Shares have been issued pursuant to
the exercise of Options, and a total of 2,125,410 Options remain available under
the Option Plan. Options which have expired, were cancelled or otherwise
terminated without having been exercised are available for subsequent grants
under the Option Plan.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES FUTURE ISSUANCE UNDER
TO BE ISSUED UPON EQUITY COMPENSATION
EXERCISE OF OUTSTANDING WEIGHTED-AVERAGE PLANS (EXCLUDING
OPTIONS, WARRANTS AND EXERCISE PRICE OF SECURITIES REFLECTED IN
RIGHTS OUTSTANDING OPTIONS, COLUMN (A))
AS AT DECEMBER 31, WARRANTS AND RIGHTS AS AT DECEMBER 31,
2004 AS AT DECEMBER 31, 2004 2004
PLAN CATEGORY (a) (b) (c)
----------------------------- ----------------------- ----------------------- -----------------------
Equity compensation plans
approved by securityholders NIL - NIL
Equity compensation plans not
approved by securityholders 299,590 9.72 2,200,410
Total 299,590 2,200,410
The Option Plan provides that the Board may from time to time grant
Options to acquire Common Shares to any participant who is an employee, officer
or director of us or our affiliates or a consultant to us or our affiliates. The
Options are non-assignable and non-transferable otherwise than by will or by
laws governing the devolution of property in the event of death. Each Option
entitles the holder to acquire one Common Share, subject to certain adjustments.
The exercise price for Options granted pursuant to the Option Plan will be
determined by the Board on the date of the grant, which price may not be less
than the market value. Market value is defined under the Option Plan as the
closing price of the Common Shares on the TSX on the trading day immediately
preceding the grant day and if there is no closing price, the last sale prior
thereto. The term of the Options granted is determined by the Board, which term
may not exceed a maximum of ten years from the date of the grant. Pursuant to
the Option Plan, additional terms and conditions, including vesting
requirements, may be imposed by the Board on Options granted under the Option
Plan. The Option Plan does not contemplate that the Company will provide
financial assistance to any optionee in connection with the exercise of the
Option.
The total number of Common Shares that may be reserved for issuance to any
one participant pursuant to Options granted under the Option Plan may not exceed
5% of the Common Shares outstanding (on a non-diluted basis) on the grant date
of the Options. The maximum number of Common Shares that may be issued to our
insiders and their associates pursuant to Options granted under the Option Plan
within any one-year period, when taken together with the number of Common Shares
issued to such insiders and their associates under our other previously
established or proposed share compensation arrangements, may not exceed 10% of
the issued and outstanding Common Shares on a non-diluted basis at the end of
such period and, in the case of any one insider and his associates, may not
exceed 5% of such issued and outstanding Common Shares. The maximum number of
Common Shares that may be reserved for issuance under Options granted to
insiders and their associates under the Option Plan together with the number of
Common Shares reserved for issuance to such insiders and their associates under
our other
- 53 -
previously established or proposed share compensation arrangements may not
exceed 10% of the issued and outstanding Common Shares on a non-diluted basis at
the grant date of the Options.
Unless otherwise determined by the Board, if the holder of the Option
ceases to be an eligible participant under the Option Plan:
(a) for any reason other than death, retirement, early retirement,
sickness or disability, the Options held by the participant
terminate;
(b) as a result of retirement (other than early retirement), Options
that are held by the participant that have vested continue in force;
(c) by reason only of early retirement as permitted under the provisions
of our pension plan, Options that are held by the participant that
have vested continue in force; and
(d) as a result of death, the legal representatives of the participant
may exercise the Options that are held by the participant within six
months after the date of the participant's death to the extent such
Options were by their terms vested and exercisable as of the date of
the participant's death or within the period of six months following
the participant's death;
In the event that:
(a) we amalgamate, consolidate with or merge with or into another body
corporate, holders of Options will, upon exercise thereafter of such
Option, be entitled to receive and compelled to accept, in lieu of
Common Shares, such other securities, property or cash which the
holder would have received upon such amalgamation, consolidation or
merger if the Option was exercised immediately prior to the
effective date of such amalgamation, consolidation or merger;
(b) the exchange or replacement of Common Shares with those in another
company is imminent because of a proposed merger, amalgamation or
other corporate arrangement or reorganization, the Board may, in its
discretion, determine the manner in which all unexercised Options,
granted under the Option Plan shall be treated including, for
example, requiring the acceleration of the time for the exercise of
outstanding Options and of the time for the fulfillment of any
conditions or restrictions on such exercise; and
(c) an offer to purchase all of the Common Shares is made by a third
party, we may, at our option, require the acceleration of the time
for the exercise of the Options granted under the Option Plan and of
the time for the fulfillment of any conditions or restrictions on
such exercise.
The Board may, subject where required to securities regulators and/or TSX
approval, from time to time amend, suspend or terminate the Plan in whole or in
part. Pursuant to TSX requirements, shareholder approval is required for
amendments that involve:
(a) amendments to the number of securities issuable under the
arrangement, including an increase to a fixed maximum number or a
fixed maximum percentage or a change from a fixed maximum number to
a fixed maximum percentage;
(b) the introduction of a provision permitting reloading upon exercise;
(c) any change to the eligible participants which would have the
potential of broadening or increasing insider participation;
(d) the addition of any form of financial assistance;
(e) any amendment to the financial assistance provision which is more
favourable to participants;
(f) the addition of a cashless exercise feature, payable in cash or
securities, which does not provide for a full deduction of the
number of underlying securities from the reserved shares;
(g) the addition of a deferred or restricted share unit or any other
provision which results in participants receiving securities while
no cash consideration is received by the issuer; and
- 54 -
(h) in circumstances where the amendment could lead to a significant or
unreasonable dilution in the issuer's outstanding securities or may
provide additional benefits to eligible participants, especially
insiders at the expense of the issuer and its existing
securityholders.
The TSX also requires that disinterested shareholder approval be obtained
in accordance with regulatory requirements if the exercise price of any
outstanding option granted to an insider is reduced or the exercise period
extended to the benefit of insiders.
In addition, the Option Plan and any outstanding Options may be amended or
terminated by the Board if the amendment or termination is required by any
securities regulators, a stock exchange or a market as a condition of approval
to a distribution to the public of the Common Shares or to obtain or maintain a
listing or quotation of our Common Shares.
The Board may also amend or terminate any outstanding Option, including,
but not limited to, substituting another award of the same or of a different
type or changing the date of exercise; provided, however that, the holder of the
Option must consent to such action if it would materially and adversely affect
the holder under the Option Plan. Under the Option Plan, the exercise price of
any outstanding Option granted to an insider may not be reduced unless
disinterested shareholder approval is obtained in accordance with TSX and
securities regulatory requirements.
The foregoing summary of the Option Plan is qualified in its entirety by
reference to the provisions of the Option Plan available on EDGAR at www.sec.gov
(under a Form 6-K dated March 28, 2005) and available on SEDAR at www.sedar.com
under the name "Western Forest Products Inc.".
Option Grants During the Financial Period Ended December 31, 2004
We granted the following options to the Named Executive Officers during
the financial year ended December 31, 2004:
OPTION/SARS GRANTS DURING 2004 FINANCIAL YEAR
COMMON SHARES % OF TOTAL MARKET VALUE(1) OF
UNDER OPTIONS/SARS COMMON SHARES
OPTIONS/SARS GRANTED TO EXERCISE OR UNDERLYING
GRANTED EMPLOYEES IN BASE PRICE OPTIONS ON THE
NAME (#) FINANCIAL YEAR ($/SHARE) DATE OF GRANT ($) EXPIRATION DATE
----------------- ------------- -------------- ----------- ------------------ ---------------
J.H. (Rick) Doman - - - - -
Dan Dyck - - - - -
Reynold Hert 250,000(2) 100% 9.25 2,312,500 Oct. 3, 2014
Philip Hosier - - - - -
Dave Ingram - - - - -
Berni Zimmermann - - - - -
|
NOTES:
(1) Market value under the Option Plan is defined as the closing price on the
TSX on the trading day immediately preceding the grant day.
(2) These Options vest in increments of 20% at intervals of one year and
immediately upon a change of control. Options must be exercised within 90
days of termination of employment without cause or resignation upon a
change of control. See "Item 6. Directors, Senior Management and Employees
- B. Compensation - Options to Purchase Securities from Registrant or
Subsidiaries - Incentive Stock Option Plan" for a description of other
terms that apply to the options.
- 55 -
AGGREGATED OPTIONS EXERCISED DURING 2004 FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
SECURITIES UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
ACQUIRED AGGREGATE AT DECEMBER 31, 2004 AT DECEMBER 31, 2004
ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
NAME (#) ($) (#) ($)
----------------- ---------- --------- ------------------------- -------------------------
J.H. (Rick) Doman - - - -
Dan Dyck - - - -
Reynold Hert - - -/250,000 -/0
Philip Hosier - - - -
Dave Ingram - - - -
Berni Zimmermann - - - -
|
NOTES:
(1) Based on a market value of $6.65 per share, being the closing trading
price per Common Share on the TSX as of December 31, 2004.
EXECUTIVE COMPENSATION REPORT
Composition of the Management Resources and Compensation Committee
During the period from the implementation of the Plan until December 31, 2004,
the following individuals served as members of our Management Resources and
Compensation Committee: John Lacey, Peter Gordon and John B. Newman, who were
all directors of the Company during the time they served. None of the members of
our Management Resources and Compensation Committee are officers or employees or
were former officers or employees of the Company or any of our subsidiaries, had
or has any relationship that requires disclosure hereunder in respect of
indebtedness owed to the Company or, except as otherwise set out herein, any
interest in material transactions involving the Company. In addition, none of
our executive officers have served on the compensation committee (or in the
absence of such committee the entire Board of Directors) of another issuer whose
executive officer is a member of our Management Resources and Compensation
Committee or Board.
Report On Executive Compensation
The Management Resources and Compensation Committee is responsible for, among
other things, reviewing and approving the compensation of our executive officers
except the CEO and in the case of the CEO, evaluating the CEO's performance in
light of our corporate goals and making recommendations to the Board with
respect to the CEO's compensation level based on this evaluation. The Committee
meets periodically at the request of its Chair to review compensation policies
relating to the Company and its subsidiaries and to approve specific
compensation awards and benefits as well as other matters referred to the
Committee by the Board.
Executive Compensation Policies
The Committee's policy is that executive officers of the Company, including the
CEO and other Named Executive Officers, should be compensated based on the
market value of the jobs they perform, their levels of performance and the
performance of the Company.
The Company's executive compensation policies are designed to recognize and
reward executive officers based upon individual and corporate performance. The
Committee monitors levels of executive remuneration to ensure overall
compensation reflects the Company's objectives and philosophies and meets the
Company's desired relative compensation position. The key components comprising
executive officer compensation are base salary and annual bonus (short-term
incentives) and participation in one or more pension plans and in an incentive
stock option plan (long-term incentives).
- 56 -
The Committee approves salary ranges for executive officers of the Company based
on competitive industry data for the markets in which the Company operates. In
establishing base salaries and salary ranges, the objective of the Committee is
to set target levels which, over time, will be competitive with market salaries.
The Company's compensation policy is to set target levels near or consistent
with the median level in the group of comparable forest product companies, i.e.,
B.C. based, large, publicly held, integrated forest product companies.
Individual levels, which are set annually, may vary from this objective,
depending upon individual performance levels. The CEO does not participate in
discussions or reviews relating to his own compensation.
As noted above, the Company provides annual incentive compensation to executive
officers, including the Named Executive Officers, through the provision of
incentive bonuses. Incentive bonuses are awarded annually, on a discretionary
basis, to executive officers, based upon a review of Company and individual
performance over the prior financial year relative to each executive officer's
area of responsibility. In recognition of performance by the executive team, the
Committee determined that bonuses be awarded to its Named Executive Officers as
set out under the Summary Compensation Table in the Company's management
information circular.
The Company also has in place an incentive stock option plan. The incentive
stock option plan is designed to encourage employees and executive officers to
focus on the long-term interests of the Company and its shareholders. The Board
has the authority to establish terms and conditions of each granted option, in
accordance with the provisions of the incentive stock option plan. Except in the
case of the CEO, as referenced above, the Company has not issued any options to
executive officers under the incentive stock option plan during 2004. The
Committee is in process of developing the eligibility criteria for specific
grants of options under the incentive stock option plan.
CEO Compensation
The Committee's policy is that the salary of the CEO should, be in line with
competitive salaries for positions of similar responsibility at large,
integrated forest products companies in British Columbia that are, like the
Company, publicly held. In assessing compensation paid to the CEO, the Committee
also reviews available industry data relating to such companies. Given that the
CEO was appointed on October 4, 2004, no change has been made to the CEO's
salary. A hiring bonus of $125,000 was paid to the CEO in accordance with his
employment agreement. This total compensation package is at the median of
comparable forest product companies.
COMPENSATION OF DIRECTORS
Directors of Western who are not officers or employees are compensated for
their services as directors through a combination of retainer fees and meeting
attendance fees. Our Board has approved an annual retainer fee to be paid to
such directors (other than the Chair of the Board) of $25,000 and the annual
retainer fee to be paid to our Chair of $50,000. In addition, our Board has
approved the payment of an additional fee of $5,000 per annum to the Chair of
any committee of the Board and the payment to non-management directors of a fee
of $1,000 for each director and committee meeting attended. Such directors are
also to be reimbursed for expenses incurred in connection with their services as
directors.
The directors and former directors (other than inside directors) of
Western were paid the following amounts as directors' fees for the year ended
December 31, 2004:
James Arthurs(1) $22,500
Lee Doney(1) 22,000
Peter Gordon(1) 23,500
John Lacey(1) 22,000
John MacIntyre(1) 35,500
John B. Newman(1) 27,000
(1) Messrs. Arthurs, Doney, Gordon, Lacey, MacIntyre and Newman were first
appointed directors on July 27, 2004 in connection with the implementation of
the Plan.
Our directors are also eligible to participate in the Option Plan. Each
independent director was granted 8,265 Options under the Option Plan, each
Option entitling the holder to acquire one Common Share at the exercise price of
$12.10 per share, until August 19, 2014. The exercise price represented a
premium of 10% on the closing price on the first trading day on the TSX and a
premium over the market price on the date of grant. The Options granted to these
directors vest in increments of 20% at intervals of one year and immediately
upon a change of control. See "Item 6. Directors, Senior Management and
Employees - B. Compensation - Options to Purchase Securities from Registrant or
Subsidiaries - Incentive Stock Option Plan" for a description of the term that
apply to the Options.
- 57 -
In connection with, and subject to, the implementation of the Plan and
appointment as a director of Western, each of the independent directors was paid
a fee of $5,000 (part of the exit costs of our Predecessor) in recognition of
services provided prior to their appointment as directors of the Company in
carrying out due diligence, planning and organizing the future board and
committees of the Company.
DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE
We have entered into indemnification agreements with each of our
directors, directors of our subsidiaries and our CEO and CFO. There was no
indemnification payable during the most recent financial year to our directors
or officers.
We maintain liability insurance for our directors and officers in the
aggregate amount of $25 million, subject to a $350,000 deductible loss payable
by us. The premium, in the amount of $350,000, was paid by us for the period
from July 26, 2004 to July 26, 2005.
C. BOARD PRACTICES
The following describes the Company's corporate governance practices in
accordance with National Instrument 58-101 - Disclosure of Corporate Governance
Practices of the Canadian Securities Administrators and is derived from
Western's recent management proxy circular required to be filed under applicable
securities laws in Canada.
BOARD OF DIRECTORS
Western's Board is currently comprised of seven directors, six of whom are
non-management directors. The independence status of each individual director is
reviewed by the Board annually. In that regard, the Board considers a director
to be independent if he has no direct or indirect material relationship with the
Company, which in the view of the Board could reasonably be perceived to
materially interfere with the exercise of the director's independent judgment.
The Board has determined that six directors, a majority, are independent.
The current position of each director as determined by the Board is as set out
below:
James Arthurs Independent
Lee Doney Independent
Peter Gordon Independent
Reynold Hert Non-independent
John Lacey Independent
John MacIntyre Independent
John B. Newman Independent
|
Mr. Hert is a member of our management and therefore is not an independent
director.
As noted above, Mr. Gordon is an officer of Tricap, a significant
shareholder (see "Item 7. Major Shareholder and Related Party Transactions").
Mr. Lacey and Mr. MacIntyre are on Tricap's independent advisory board.
See "Item 6. Directors, Senior Management and Employees - A. Directors and
Senior Management - E. Share Ownership" above for more information about each
director, including directorships of other reporting issuers in Canada or in a
foreign jurisdiction and share ownership.
The Chair of the Board, John MacIntyre, is an independent member of the
Board. He is responsible for providing leadership to the Board in matters
relating to the execution of Board responsibilities and works with the CEO and
the senior management team to address our responsibilities to our stakeholders.
The Chair's duties are set out in the Board's mandate attached as Exhibit 15.1
hereto.
The Board (through its Nominating and Corporate Governance Committee)
examines its size annually to determine whether the number and composition of
directors is appropriate and is generally satisfied that its current number and
composition of directors is appropriate, providing a diversity of views and
experience while maintaining efficiency. The Board believes that the composition
of the Board fairly represents the interests of Western's shareholders.
As part of our corporate governance regime, our independent directors hold
regularly scheduled meetings, at which members of management are not in
attendance. The meetings are held on the same day as Board meetings. Since we
commenced business
- 58 -
on July 28, 2004 until December 31, 2004, we have held four Board meetings at
which members of management were not present.
The Board believes that all directors should attend all meetings of the
Board and all meetings of each committee on which a director is a member. The
following table summarizes the attendance of Board and committee members from
July 28, 2004 to December 31, 2004:
Nominating and Management
Environmental, Corporate Resources and
Health and Governance Compensation
Board Meetings Audit Committee Safety Committee Committee Meetings Committee Meetings
NAME Attended Meetings Attended Meetings Attended Attended Attended
-------------------- -------------- ----------------- ----------------- ------------------ ------------------
James Arthurs 4 of 4 3 of 3 2 of 2 1 of 1 N/A
J.H. (Rick) Doman(1) 1 of 1 N/A N/A N/A N/A
Lee Doney 4 of 4 N/A 2 of 2 1 of 1 N/A
Peter Gordon 4 of 4 3 of 3 N/A N/A 4 of 4
Reynold Hert(2) 2 of 2 N/A N/A N/A N/A
John Lacey 3 of 4 N/A N/A 1 of 1 3 of 4
John MacIntyre 4 of 4 3 of 3 N/A 1 of 1 N/A
John B. Newman 4 of 4 3 of 3 N/A 1 of 1 4 of 4
(1) Mr. Doman's directorship ended on September 22, 2004.
(2) Mr. Hert was appointed director on October 4, 2004.
BOARD MANDATE
The Board has adopted a written mandate in which it has assumed
responsibility for our stewardship and for overseeing the management of our
business. In that regard, the Board carries out its mandate directly or
indirectly through its committees described below. The responsibilities of the
Board are included in the Board's mandate, a copy of which is attached as
Exhibit 15.1 hereto.
Our senior management is responsible for our day-to-day operations and
management. Prior Board approval is required in connection with matters that the
Board deems significant such as major acquisitions or divestitures, significant
amendments to our credit facilities, significant financings or changes to our
strategic objectives.
POSITION DESCRIPTIONS
The Board has developed written position descriptions for the Chair of the
Board and the Chair of each Board committee. In addition, the Board and the CEO
have developed a written position description for the CEO. The duties and
responsibilities of the Chair and CEO are set out in the Board's mandate
attached as Exhibit 15.1 hereto. The Board has also developed and approved the
corporate goals and objectives that our CEO is responsible for meeting.
ORIENTATION AND CONTINUING EDUCATION
The Board has a process for the orientation of new Board members regarding
the role of the Board, its committees and its directors and the nature of
operation of our business. New members are given a tour of our operations, meet
with members of management, the Chair of the Board and the Chairs of the Board
committees and a copy of recent disclosure documents and the minutes of Board
and committee meetings are provided to new members.
In addition, the Board provides continuing education for its members to
maintain or enhance their skills and abilities as directors and to keep their
knowledge of the Company current.
The Board also has in place a policy whereby directors may, subject to
approval of the Chair or a majority of the independent Board members, engage
outside advisers at the Company's expense. Each of the Board committees are also
authorized to engage outside advisers at the Company's expense.
ETHICAL BUSINESS CONDUCT
The Board has adopted two written codes of conduct, an Employee Code of
Conduct for employees and a Code of Business Conduct and Ethics for directors
and officers, to promote integrity and good governance.
- 59 -
Our codes address the following matters:
(a) conflicts of interest, including transactions and agreements in
respect of which a director or executive officer has a material
interest;
(b) protection and proper use of corporate assets and opportunities;
(c) confidentiality of corporate information;
(d) fair dealing with our security holders, customers, suppliers,
competitors and employees;
(e) compliance with laws, rules and regulations; and
(f) reporting of any illegal or unethical behavior.
The Board has also adopted a Communication Policy and an Insider Trading
Policy. A copy of the written codes and policies can be viewed on our website at
www.westernforest.com. A copy of our codes and policies are also available from
our Corporate Secretary.
The Nominating and Corporate Governance Committee oversees compliance with
each of the codes and policies, authorizes any waivers and confirms with
management the appropriate disclosure of any waiver. Where appropriate, the
Committee will also cause an investigation of any reported violation of the Code
of Business Conduct and Ethics and oversees an appropriate response is taken to
any violation. The CEO promotes compliance with the Employee Code of Conduct,
causes an investigation of any reported violations to be undertaken and
determines an appropriate response is taken to any violation.
Certain of our directors are directors or officers of other issuers and,
to the extent that such other issuers may participate in transactions or other
ventures in which we may participate, the directors may have a conflict of
interest in negotiating and concluding terms respecting the extent of such
participation. The Board requires that directors provide disclosure to it of all
boards and committees that they are members of, and all offices held at, other
issuers. We also require conflicts of interest to be disclosed to our Code of
Ethics Contact Person and reported to the Nominating and Corporate Governance
Committee. In the event that conflicts of interest arises, a director who has
such a conflict is required under the CBCA to disclose the conflict and (except
in limited circumstances permitted by the CBCA) to abstain from voting for or
against the approval of the matter. (See "Item 10. Additional Information - B.
Articles and Bylaws".) In addition, in considering transactions and agreements
in respect of which a director has a material interest our Board will require
that the interested person absent themselves from portions of Board or committee
meetings so as to allow independent discussion of points in issue and the
exercise of independent judgment. In appropriate cases, we may also establish a
special committee of independent directors to review a matter in which directors
or management, may have a conflict.
NOMINATION OF DIRECTORS
The Nominating and Corporate Governance Committee will review the
composition of the Board annually, assess the board annually, identify new
candidates for nomination as directors to the Board and make recommendations to
the Board for nominees for election as directors. In that regard, the committee
considers:
- the competencies and skills that are considered to be necessary for
the Board, as a whole, to possess;
- the competencies and skills that each existing director possesses;
- the competencies and skills each new nominee will bring to the
boardroom and whether the nominees can devote sufficient time to the
Company and the Board; and
- performance of existing directors.
See "Item 6. Directors, Senior Management and Employees - C. Board
Practices - Board Committees - Nominating and Corporate Governance Committee"
below for a description of the committee's composition and responsibilities.
- 60 -
COMPENSATION AND BOARD ASSESSMENTS
Compensation for directors is determined by the Nominating and Corporate
Governance Committee. The Committee reviews industry standards for directors
compensation in setting compensation levels for directors and may use
consultants for guidance.
Compensation levels for officers is determined by the Management Resources
and Compensation Committee. See "Item 6. Directors, Senior Management and
Employees - B. Compensation - Executive Compensation Report" above for a
description of our executive compensation policies. We have retained Mercer
Human Resource Consulting Limited, a compensation consultant, to provide
competitive industry data on compensation for officers.
The Board, its committees and individual directors will be regularly
assessed with respect to their effectiveness and contribution. The assessment
considers (a) compliance with the Board's mandate, (b) the charter of each
committee of the Board and (c) the competencies and skills that the individual
director brings to the Board.
See "Item 6. Directors, Senior Management and Employees - C. Board
Practices - Board Committees - Nominating and Corporate Governance Committee -
Management Resources and Compensation Committee" below for a description of each
committee's composition and responsibilities.
BOARD COMMITTEES
The Board has established four committees of directors, being the
Environmental, Health and Safety Committee, Nominating and Corporate Governance
Committee, the Management Resources and Compensation Committee and the Audit
Committee. Each of the committees are composed of entirely independent members.
Environmental, Health and Safety Committee
The Environmental Health and Safety Committee is currently composed of
James Arthurs and Lee Doney. Mr. Doney is the Chair of the committee. All of the
members of the committee are independent.
The committee's responsibilities, powers and operation are set out in its
charter, a copy of which is attached as Exhibit 15.2 hereto.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is currently composed of
James Arthurs, Lee Doney, John Lacey, John MacIntyre and John B. Newman. Mr.
Newman is the Chair of the Committee. All of the members of this committee are
independent.
The committee's responsibilities, powers and operation are in its charter,
a copy of which is attached as Exhibit 15.3 hereto.
The committee has recommended the adoption of an Employee Code of Conduct
and a Code of Business Conduct and Ethics. See "Item 6. Directors, Senior
Management and Employees - C. Board Practices - Ethical Business Conduct" above.
Management Resources and Compensation Committee
As noted above, the Management Resources and Compensation Committee is
currently composed of Peter Gordon, John Lacey and John B. Newman. All of the
members of the committee are independent. Mr. Lacey is the Chair of the
committee.
The committee's responsibilities, powers and operation are set out in its
charter, a copy of which is attached as Exhibit 15.4 hereto.
Audit Committee
The Audit Committee is currently composed of James Arthurs, Peter Gordon,
John MacIntyre and John B. Newman. Mr. MacIntyre is the Chair of the committee.
Each of the members of the committee is independent and financially literate as
defined in Multilateral Instrument 52-110 - Audit Committees of the Canadian
Securities Administrators. See "Item 6. Directors, Senior Management and
Employees - A. Directors and Senior Management" for each member's education
and/or experience.
- 61 -
The committee's responsibilities, powers and operation are set out in its
charter, a copy of which is attached as Exhibit 15.5 hereto.
See also "Item 16A Audit Committee Financial Expert" and "Item 16C
Principal Accountant Fees and Services," for further particulars regarding our
Audit Committee, including the Audit Committee's pre-approval policies and
procedures for non-audit services and the service fees paid to our auditors.
D. EMPLOYEES
The following table sets out the number of employees employed by the
Company as at December 31, 2004, and by our Predecessor as at December 31, 2003
and 2002, and the number of employees employed in the pulp segment and in the
solid wood segment for the same date.
NO. OF EMPLOYEES 2004 2003 2002
COMPANY PREDECESSOR PREDECESSOR
Total .......................... 2,027 2,442 2,412
Pulp Segment(1) ................ 321 669 773
Solid Wood...................... 1,706 1,773 1,639
(1) Number of employees include 356 and 432 employees employed at Port Alice
by our Predecessor as at December 31, 2003 and 2002 respectively.
In addition, we use contractors in our harvesting operations. As of
December 31, 2004, we had approximately 400 contractors.
See also "Item 4. Information on the Company - B. Business Overview -
Human Resources".
E. SHARE OWNERSHIP
DIRECTORS
The following table sets forth information, as of June 21, 2005,
concerning the beneficial ownership of the Common Shares by each of the
directors (the information concerning the respective directors has been
furnished by each of them).
PERCENTAGE OF
ISSUED CLASS
OF SHARES
NUMBER OF REPRESENTED BY
SHARES SHARES
BENEFICIALLY BENEFICIALLY NUMBER OF
NAME OF DIRECTOR AND POSITION WITH THE COMPANY OWNED OWNED(1) OPTIONS
----------------------------------------------- ------------ -------------- ---------
JAMES ARTHURS NIL NIL 8,265(2)
Director
LEE DONEY NIL NIL 8,265(2)
Director
PETER GORDON See Note 4 See Note 4 8,265(2)
Director
REYNOLD HERT NIL NIL 300,000(3)
President, Chief Executive Officer and Director
JOHN LACEY 6,177(4) .024% 8,265(2)
Director
JOHN MACINTYRE 414(4) .002% 8,265(2)
Director and Chairman of the Board
JOHN B. NEWMAN NIL NIL 8,265(2)
Director
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(1) Rounded up to the nearest third decimal place.
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(2) See "Item 6. Directors, Senior Management and Employees - B. Compensation
- Compensation of Directors" for the terms of the Options granted.
(3) See "Item 6. Directors, Senior Management and Employees - B. Compensation"
for the terms of the 250,000 Options granted to Mr. Hert. On June 15,
2005, 50,000 Options were granted to Mr. Hert, each Option entitling him
to acquire one Common Share at the exercise price of $3.50 until June 14,
2015. The Options granted vest in increments of 20% at intervals of one
year and immediately upon a change of control. Vested Options must be
exercised within 90 days of termination of employment without cause or
resignation upon change of control. See "Item 6. Directors, Senior
Management and Employees - B. Compensation - Options and Purchase
Securities from Registrant or Subsidiaries - Incentive Stock Options Plan"
for a description of other terms that apply to the Options.
(4) Mr. Gordon, as described above under "Item 6. Directors, Senior Management
and Employees - A. Directors and Senior Management", is an officer of
Tricap. As of June 21, 2005 Tricap holds 5,138,228 Common Shares or 20.5%
of our issued and outstanding Common Shares. (See "Item 7. Major
Shareholders and Related Party Transactions - A. Major Shareholders" for a
list of our other principal shareholders.) Also, as described above, each
of Messrs. Lacey and MacIntyre are members of the independent advisory
board of Tricap. Of the 5,138,228 Common Shares, 6,177 Common Shares are
beneficially owned by Mr. Lacey and 441 Common Shares are beneficially
owned by Mr. MacIntyre. However, Tricap has the right to control and
direct those Common Shares, including the right to vote or dispose of the
shares.
SENIOR MANAGEMENT (OTHER THAN CEO)
The following table sets forth information, as of June 21, 2005,
concerning the beneficial ownership of the Common Shares by each member of
senior management (other than the CEO which is set forth above) (the information
concerning the respective members of senior management has been furnished by
each of them).
PERCENTAGE OF
ISSUED CLASS
OF SHARES
NUMBER OF REPRESENTED BY
SHARES SHARES
BENEFICIALLY BENEFICIALLY NUMBER OF
NAME AND POSITION WITH THE COMPANY OWNED OWNED OPTIONS
----------------------------------------------- ------------ -------------- ---------
TREVOR BONIFACE NIL NIL NIL
General Manager, Logging
JOHN DALTON NIL NIL NIL
General Manager, Log Supply
DAN DYCK NIL NIL NIL
General Manager, Sawmills
DAVE INGRAM NIL NIL NIL
General Manager and Director of WPL
PAUL IRELAND NIL NIL 25,000(1)
Chief Financial Officer and Corporate Secretary
MORRIS MANDZIUK NIL NIL NIL
Treasurer
DEBBIE NUSSBAUM NIL NIL NIL
Director, Human Resources
CLEM TROMBLEY NIL NIL NIL
General Manager, Lumber Sales
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(1) On June 15, 2005, 25,000 Options were granted to Mr. Ireland, each Option
entitling him to acquire one Common Share at the exercise price of $3.50
until June 14, 2015. The Options granted vest in increments of 20% at
intervals of one year and immediately upon a change of control. Vested
Options must be exercised within 90 days of termination of employment
without cause or resignation upon change of control. See "Item 6.
Directors, Senior Management and Employees - B. Compensation - Options and
Purchase Securities from Registrant or Subsidiaries - Incentive Stock
Options Plan" for a description of other terms that apply to the Options.
As at June 21, 2005, 6,591 Common Shares or less than .026% of the Common
Shares outstanding were beneficially owned, directly or indirectly, or control
or direction was exercised over those shares, by the directors and members of
senior management set out above of the Company as a group. (See footnote 4 to
the directors table of share ownership above.)
See "Item 6. Directors, Senior Management and Employees - B. Compensation
- Options to Purchase Securities from Registrant and Subsidiaries" for a
discussion of the Option Plan.
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