FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of: March 2002 Commission File Number: 1-12384
SUNCOR ENERGY INC.
(Name of registrant)
112 FOURTH AVENUE S.W.
P.O. BOX 38
CALGARY, ALBERTA
CANADA, T2P 2V5
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
Form 20-F Form 40-F X
--------- ---------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the SEC
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes No X
--------- ---------
If "Yes" is marked, indicate the number assigned to the registrant in connection
with Rule 12g3-2(b):
N/A
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT
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EXHIBIT 1 PRESIDENT'S LETTER TO
SHAREHOLDERS DATED MARCH 25,
2002, NOTICE OF MEETING AND
MANAGEMENT PROXY CIRCULAR, DATED
FEBRUARY 28, 2002
EXHIBIT 2 FORM OF PROXY
EXHIBIT 3 POLICY 41 RETURN CARD
EXHIBIT 4 LETTER TO SHAREHOLDERS WITH
RESPECT TO ELECTRONIC DOCUMENT
DELIVERY AND ELECTRONIC VOTING
EXHIBIT 1
[SUNCOR LOGO]
RICHARD L. GEORGE
President and Chief Executive Officer
March 25, 2002
Dear Suncor Shareholder:
You are invited to attend the annual and special meeting of shareholders of
Suncor Energy Inc. to be held at the Keyano College Theatre, 8115 Franklin
Avenue, Ft. McMurray, Alberta, on Friday, April 26, 2002, at 10:00 a.m.
Enclosed with this letter are Suncor's 2001 annual report, notice of meeting,
management proxy circular and form of proxy or voting instruction form. These
materials describe the business to be dealt with at the meeting, and provide you
with additional information about Suncor and its directors and executive
officers.
This year we are pleased to offer a new service for registered shareholders and
most non-registered shareholders, offering electronic access to our shareholder
communications. If you are interested in this service, information on how to
register is on the proxy form, voting instruction form or information letter
enclosed. If you have internet access, you may wish to consider this service as
it will benefit our environment and reduce costs. Of course, you are free to
continue receiving documents in the mail if this is more suitable to you.
We look forward to and welcome your attendance at the meeting. If you hold your
shares in the name of a nominee, such as your brokerage firm, or if you are a
registered holder but are unable to attend, or are able to attend but wish to
provide your voting instructions in advance, you may complete, sign and return
the enclosed form of proxy by mail. Most shareholders may also vote their shares
by telephone or through the internet, as indicated on the enclosed form of
proxy, voting instruction form or information letter. Shareholders choosing
telephone or internet voting should not return the enclosed form of proxy or
voting instruction form by mail. Arrangements have been made for Computershare
Trust Company of Canada, Suncor's transfer agent, to count and tabulate proxies
in such a manner as to preserve confidentiality of individual shareholder votes.
Under those arrangements, proxies will not be reviewed by Suncor's management,
except where they contain a written comment clearly intended for management, in
the event of a proxy contest or proxy validation issue, or as necessary to meet
legal requirements.
Following the meeting, you will have an opportunity to meet Suncor's directors
and executives. I look forward to seeing you there.
Yours truly,
"RICHARD L. GEORGE"
Richard L. George
President and Chief Executive Officer
[SUNCOR LOGO]
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
The Annual and Special Meeting of Shareholders of Suncor Energy Inc. (the
"Corporation") will be held in the Keyano College Theatre, 8115 Franklin Avenue,
Ft. McMurray, Alberta, on Friday, April 26, 2002, at 10:00 a.m. local time for
the following purposes:
(a) to receive the Annual Report and the financial statements for
the year ended December 31, 2001 and the report of the auditors
thereon;
(b) to elect directors;
(c) to appoint the auditors;
(d) to consider and, if thought fit, to pass an ordinary resolution
approving the amendment of the Company's general operating by-law;
(e) to consider and, if thought fit, to pass an ordinary resolution
approving the Company's Sunshare Performance Stock Option Plan;
(f) to consider and, if thought fit, to pass an ordinary resolution of the
independent shareholders to approve the continuation of the
Corporation's Shareholder Rights Plan and its amendment and
restatement;
(g) to consider and, if thought fit, to pass, with or without amendment,
a special resolution (the "Special Resolution") amending the articles
of the Company to divide the issued and outstanding Common Shares of
Suncor on a two-for-one basis; and
(h) to transact such other business as may properly come before the
meeting or any adjournment thereof.
Further particulars of the above matters are set out in the attached
Management Proxy Circular.
Shareholders who are unable to attend the meeting in person are
requested to sign and date the enclosed form of proxy and return it in the
envelope provided for use at the meeting and any adjournment thereof.
Shareholders may also vote their shares by telephone or through the internet,
using the procedures described on the enclosed form of proxy. Shareholders
choosing telephone or internet voting should not return the enclosed form of
proxy by mail.
By Order of the Board of Directors
"JANICE B. ODEGAARD"
Janice B. Odegaard
Calgary, Alberta Vice President, Associate General Counsel
February 28, 2002 and Corporate Secretary
[SUNCOR LOGO]
MANAGEMENT PROXY CIRCULAR
SOLICITATION OF PROXIES
THIS CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE
MANAGEMENT OF SUNCOR ENERGY INC. ("SUNCOR" OR THE "COMPANY") OF PROXIES (HEREIN
COLLECTIVELY "PROXY" OR "PROXIES") TO BE USED AT THE ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS OF SUNCOR (THE "MEETING") TO BE HELD IN THE KEYANO COLLEGE
THEATRE, 8115 FRANKLIN AVENUE, FORT MCMURRAY, ALBERTA, ON FRIDAY, APRIL 26,
2002, AT 10:00 A.M. LOCAL TIME FOR THE PURPOSES INDICATED IN THE NOTICE OF
MEETING. It is expected that the solicitation will be primarily by mail, but
proxies may also be solicited personally, by telephone or facsimile or other
similar means of communication by regular employees of Suncor. The cost of
solicitation will be borne by Suncor. Custodians and fiduciaries will be
supplied with proxy materials to forward to beneficial owners of Common Shares
of Suncor ("Common Shares") and normal handling charges will be paid for such
forwarding services. The record date to determine the shareholders entitled to
receive notice of and vote at the Meeting is March 7, 2002 (the "Record Date").
APPOINTMENT, VOTING AND REVOCATION OF PROXIES
APPOINTMENT
Shareholders may convey voting instructions through use of the enclosed
paper proxy form to be returned by mail or delivery to the address below, or
through either (i) use of the telephone voting procedure; or (ii) use of the
internet voting procedure. By conveying your voting instructions in one of these
ways, you can participate in the Meeting through the person or persons named on
the form of proxy. Details on using these procedures are described in the
materials accompanying this Circular.
ANY SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
SHAREHOLDER) OTHER THAN THE PERSONS DESIGNATED IN THE ENCLOSED PROXY FORM TO
ATTEND, VOTE AND ACT FOR AND ON BEHALF OF SUCH PERSON AT THE MEETING. IN ORDER
TO DO SO THE SHAREHOLDER MUST INSERT THE NAME OF SUCH OTHER PERSON IN THE BLANK
SPACE PROVIDED IN THE PROXY FORM OR OTHER APPROPRIATE FORM OF PROXY, AND DEPOSIT
IT WITH THE COMPANY OR ITS AGENT IN ACCORDANCE WITH THE INSTRUCTIONS ON THE
ENCLOSED PROXY FORM. MAIL AND INTERNET ARE THE ONLY METHODS BY WHICH A HOLDER
MAY APPOINT SUCH OTHER PERSON AS PROXY. All paper proxies must be deposited with
Suncor's transfer agent, Computershare Trust Company of Canada, at their Toronto
office, 100 University Avenue, Toronto, Ontario, M5J 2Y1, at any time up to 4:30
p.m. local time on Wednesday, April 24, 2002.
1
VOTING
The shares represented by any properly executed proxy in the accompanying
form will be voted or withheld from voting, in accordance with the instructions
of the shareholder, on any ballot that may be called for. If the shareholder has
specified a choice with respect to any matter to be acted upon, the shares will
be voted accordingly. IN THE ABSENCE OF INSTRUCTIONS, SHARES WILL BE VOTED FOR
THE ELECTION OF THE DIRECTORS NAMED HEREIN, FOR THE REAPPOINTMENT OF THE
AUDITORS, FOR THE AMENDMENT OF BY-LAW NO. 1, FOR THE APPROVAL OF THE SUNSHARE
PERFORMANCE STOCK OPTION PLAN, FOR THE APPROVAL AND RECONFIRMATION OF THE
SHAREHOLDER RIGHTS PLAN AND FOR THE APPROVAL OF THE STOCK SPLIT, ALL AS MORE
PARTICULARLY DESCRIBED UNDER THE RELEVANT SECTIONS OF THIS CIRCULAR.
THE ACCOMPANYING FORM OF PROXY CONFERS DISCRETIONARY AUTHORITY ON THE
PERSONS NAMED IN IT WITH RESPECT TO AMENDMENTS OR VARIATIONS TO MATTERS
IDENTIFIED IN THE NOTICE OF MEETING OR OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE MEETING. The management of Suncor is not aware that any such
amendments, variations or other matters are to be presented for action at the
Meeting.
REVOCATION
In addition to revocation in any other manner permitted by law, a
shareholder may revoke a proxy by an instrument in writing executed by the
shareholder or by the shareholder's attorney authorized in writing and deposited
either at the registered office of Suncor, 112 - 4th Avenue S.W., Box 38,
Calgary, Alberta, T2P 2V5, at any time up to and including the last business day
preceding the day of the Meeting, or any adjournment thereof, at which the proxy
is to be used, or with the Chairman of the Meeting prior to the commencement of
the Meeting on the day of the Meeting or any adjournment thereof.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
Holders of record of Common Shares as at the close of business on March
7, 2002 are entitled to one vote for each whole Common Share so held. As of
February 28, 2002 there were 223,153,889 Common Shares issued and outstanding.
Suncor has no other class or series of voting shares outstanding.
As of February 28, 2002, there is no person who, to the knowledge of the
directors and officers of Suncor, beneficially owns, directly or indirectly, or
exercises control or direction over, Common Shares carrying more than 10% of the
voting rights attached to all outstanding Common Shares.
ELECTION OF DIRECTORS
Suncor's Articles of Incorporation stipulate that there shall be not more
than fifteen nor fewer than eight directors. There are currently eleven
directors. In accordance with the Company's By-laws, eleven directors will be
elected at the Meeting. Mr. Bob Wyman, past Chairman of the Board and a director
of Suncor since 1987, will be retiring at the close of the Meeting, as will Mr.
Poul Hansen, a director of Suncor since 1996.
Suncor's management will propose at the Meeting that the eleven nominees
named herein be elected directors. The term of office of each director is from
the date of the meeting at which he or she is elected or appointed until the
next annual meeting of shareholders or until a successor is elected or
appointed.
2
Unless it is specified in a proxy that the Common Shares it represents
shall be withheld from voting in the election of directors, the persons named in
the accompanying form of proxy intend to vote for the election of the nominees
whose names appear in the table below.
The Board of Directors is required to have an Audit Committee. The Board of
Directors also has a Board Policy, Strategy Review and Governance Committee, a
Human Resources and Compensation Committee, and an Environment, Health and
Safety Committee. For details of the membership and mandates of these
committees, see the notes to the table below, "Report on Executive Compensation"
and "Statement of Corporate Governance Practices".
Management does not expect that any of the nominees will be unable to serve
as a director but, if that should occur for any reason prior to the Meeting, the
persons named in the accompanying proxy reserve the right to vote for another
nominee at their discretion unless the proxy specifies that the Common Shares
are to be withheld from voting in the election of directors.
Information for each person proposed to be nominated for election as a
director is as follows:
Voting Securities of
Principal occupation Suncor beneficially
or employment, and owned or over which
major positions and control or direction
Name and Municipality of Periods of Service offices in the last is exercised as at
Residence as a Director five years February 28, 2002(1)
---------------------------- -------------------- ----------------------- -----------------------
Mel Benson(2)(5) April 19, 2000 to Management Services 2,565 Common Shares
Calgary, Alberta Present Consultant
367 Deferred Share
Units(3)
Brian A. Canfield(2)(4) November 10, 1995 Chairman, TELUS 6,000 Common Shares
Point Roberts, Washington to Present Corporation (a
telecommunications 3,770 Deferred Share
company) Units(3)
Bryan P. Davies(2)(5) January 28, 1991 Senior Vice 6,200 Common Shares
Etobicoke, Ontario to April 23, 1996 President, Regulatory
Affairs, Royal Bank 1,644 Deferred Share
April 19, 2000 to of Canada (a Units(3)
Present chartered banking
institution)
Brian Felesky Nominee Partner, Felesky 1,400 Common Shares
Calgary, Alberta Flynn, LLP,
Barristers and
Solicitors, Calgary,
Alberta
John T. Ferguson(5)(6) November 10, 1995 Chairman, Princeton 8,374 Common Shares
Edmonton, Alberta to Present Developments Ltd. (a
real estate 1,955 Deferred Share
development company), Units(3)
Chair of the Board,
TransAlta Corporation
(an electric utility
company)
3
Voting Securities of
Principal occupation Suncor beneficially
or employment, and owned or over which
major positions and control or direction
Name and Municipality of Periods of Service offices in the last is exercised as at
Residence as a Director five years February 28, 2002(1)
---------------------------- -------------------- ----------------------- -----------------------
Richard L. George(6) February 1, 1991 President and Chief 99,277 Common Shares
Calgary, Alberta to Present Executive Officer,
Suncor Energy Inc.(7)
John R. Huff(4)(6) January 30, 1998 Chairman and Chief 10,354 Common Shares
Houston, Texas to Present Executive Officer,
Oceaneering 4,047 Deferred Share
International, Inc. Units(3)
(an oilfield services
company)
Robert W. Korthals(5)(6) April 23, 1996 to Corporate Director 8,000 Common Shares
Toronto, Ontario Present
3,343 Deferred Share
Units(3)
M. Ann McCaig(2)(4) October 1, 1995 to President, VPI 5,144 Common Shares
Calgary, Alberta Present Investments Ltd. (a
private investment 4,227 Deferred Share
holding company) Units(3)
Michael W. O'Brien Nominee Executive Vice 4,829 Common Shares
Canmore, Alberta President, Corporate
Development, and
Chief Financial
Officer, of the
Company
(Retiring June, 2002)
(7)
4
Voting Securities of
Principal occupation Suncor beneficially
or employment, and owned or over which
major positions and control or direction
Name and Municipality of Periods of Service offices in the last is exercised as at
Residence as a Director five years February 28, 2002(1)
---------------------------- -------------------- ----------------------- -----------------------
JR Shaw(4)(6) January 30, 1998 Executive Chair, Shaw 41,600 Common Shares
Calgary, Alberta to Present Communications Inc.
(a diversified 6,234 Deferred Share
communications Units(3)
company); Chairman
of the Board of
Directors of Suncor
Energy Inc.
-------------------------
(1) The information relating to holdings of Common Shares, not being within the
knowledge of Suncor, has been furnished by the respective nominees
individually. Fractional Common Shares have been excluded from the numbers
shown. Certain of the Common Shares held by Mr. George and Mr. Shaw are
held jointly with their respective spouses. The number of Common Shares
held by Mr. George includes 82,486 Common Shares over which he exercises
control or direction but which are beneficially owned by members of his
family. Certain Common Shares held by Mr. Benson (400) and Mr. Shaw (1,000)
are beneficially owned by their respective spouses, but they respectively
exercise control or direction over such shares.
(2) Member of the Environment, Health and Safety Committee. Mr. Hansen, who
will be retiring as a director at the Meeting, is also a member of this
committee.
(3) Deferred Share Units (DSUs) are not voting securities but are included in
this table for informational purposes as they are Common Share equivalents.
See "Compensation of Directors" for a description of DSUs. Fractional DSUs
have been excluded from the numbers shown. Under the Special Performance
Incentive Plan ("SPIP"), Messrs. George and O'Brien are expected to become
entitled to receive DSU's in 2002. See "Report on Executive Compensation:
Compensation Components" for a description of the SPIP.
(4) Member of the Human Resources and Compensation Committee. Mr. Wyman, who
will be retiring as a director at the Meeting, is also a member of this
committee.
(5) Member of the Audit Committee. Mr. Hansen, who will be retiring as a
director at the Meeting, is also a member of this committee.
(6) Member of the Board Policy, Strategy Review and Governance Committee. Mr.
Wyman, who will be retiring as a director at the Meeting, is also a member
of this committee.
(7) Mr. George and Mr. O'Brien also serve as directors and/or officers of
certain subsidiaries of Suncor.
Each of the nominees has been engaged in the principal occupation (or in other
executive capacities for the same, affiliated or predecessor entities) indicated
above for the past five years, except for Mr. Benson, who from 1996 to 2000 was
the Senior Operations Advisor, African Development, Exxon Co. International, and
Mr. Shaw, who became Chairman of the Board of the Company in 2001.
5
COMPENSATION OF DIRECTORS
Directors, other than Richard L. George, Suncor's President and Chief
Executive Officer, receive compensation from Suncor for services in their
capacity as directors. The Chairman of the Board is paid an annual retainer of
$175,000 and all other directors are paid an annual retainer of $30,000,
prorated in each case for the period served. Directors also receive a fee of
$1,500 per meeting, for attendance at Board or Board committee meetings and are
reimbursed for long distance travel to attend such meetings. Committee chairs
receive an additional $5,000 annually.
The Company's Executive Stock Plan (the "ESP"), described in more detail
under the heading, "Report on Executive Compensation", provides for the
automatic grant of options to purchase Common Shares and awards of Limited
Appreciation Rights ("LARs") to Directors who are not employees of Suncor
("Non-Employee Directors"). Each Non-Employee Director elected or appointed to
the Board of Directors for the first time receives an initial grant of options
to purchase 4,000 Common Shares and 4,000 LARs, and each Non-Employee Director
receives an annual non-discretionary grant of options to purchase 4,000 Common
Shares and 4,000 LARs, on the date of the first Board of Directors meeting
following each annual meeting of the Company's shareholders.
Options granted to Non-Employee Directors are exercisable immediately and
expire ten years from the date of grant. The exercise price of the options is
equal to the market price of the Common Shares at the time of the grant. LARs
granted to Non-Employee Directors are on the terms described under the heading
"Termination Contracts and Change of Control Arrangements".
The ESP includes provisions which allow for the exercise of a Non-Employee
Director's options for a limited period of time after the date the option holder
ceases to be a director of Suncor. However, all LARs held by a Non-Employee
Director immediately terminate upon cessation of such person's directorship.
The ESP also provides for the payment of a fixed percentage of Directors'
annual retainers in Common Shares. These provisions may be activated by the
Board of Directors. As of February 28, 2002, these provisions had not been
activated.
Since January 1, 1999, Non-Employee Directors have been eligible to
participate in a Directors' Deferred Share Unit Plan (the "DSU Plan"), under
which they may elect to receive one-half or all of their cash board compensation
(excluding expense reimbursements) in the form of deferred share units ("DSUs").
The number of DSUs to be credited to a Director's account on each payment date
is equal to the number of Common Shares that could have been purchased on the
payment date with the amount of compensation allocated to the DSU Plan. On each
dividend payment date for Common Shares, an additional number of DSUs is
credited to the directors' DSU accounts, equivalent to the number of Common
Shares that could have been acquired on that date by notional dividend
reinvestment. DSUs will be paid out in cash when the director ceases to hold
office as a director or on a date elected by the director prior to December of
the year following cessation of directorship. The payout will be calculated by
multiplying the number of DSUs by the then market value of a Common Share. In
2001, Directors received a total of 10,468 DSUs. The number of DSUs held
individually by the Directors, other than those Directors retiring at the
Meeting, is set out in the table under the heading, "Election of Directors",
above.
The Board of Directors has established share ownership guidelines for
Non-Employee Directors. The recommended level of share ownership (including
DSUs) is Suncor Common Shares with a market value of $150,000.
6
REPORT ON EXECUTIVE COMPENSATION
COMPOSITION OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE
During 2001, B.A. Canfield, J.R. Huff, M.A. McCaig, JR Shaw and W.R. Wyman
served as members of the Human Resources and Compensation Committee (the
"HR&CC"). Mr. Canfield served as Chairman.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
During 2001, the HR&CC's principal mandate was to evaluate annually the
performance of the Chief Executive Officer and to review his evaluation of the
performance of other executive officers; to recommend to the Board of Directors
the compensation for the Chief Executive Officer; and to review the
recommendations of the Chief Executive Officer for the compensation of other
executive officers. In 2001 the HR&CC reviewed their mandate and amended it to
sharpen the committee's focus on the CEO and his executive group. In addition,
the HR&CC will review all major human resources programs such as succession
planning, performance management and human resource development.
EXECUTIVE COMPENSATION
The Company's executive compensation program is comprised of three
components: base salary, annual incentives and long term incentives. Together,
these components form a comprehensive strategy for achieving the following
objectives:
o to attract and retain highly qualified management;
o to align management compensation with shareholders' interests;
o to motivate performance by linking incentive compensation to the
achievement of business objectives and financial performance; and
o to encourage retention of key people for the succession of Suncor
management.
The total compensation mix is structured to place a significant portion of
the executives' compensation at risk, based on individual, business unit and
corporate performance, as well as market practice. Compensation practices are
also consistent and competitive with the external market.
For Suncor's executive officers, including the executives listed in the
Summary Compensation Table (the "Named Executive Officers"), base salary is
targeted at the 50th percentile, and annual and long term incentives are
targeted at the 65th percentile of remuneration paid by a comparative group of
autonomous Canadian companies (the "Comparator Group") to executives in
comparable positions. The Comparator Group companies compete with Suncor for
executive talent, operate in similar business environments and are of similar
size, scope and complexity. Independent compensation consultants provide the
survey data on which these guidelines are based and applied.
EXECUTIVE COMPENSATION COMPONENTS
BASE SALARY. Salary is recognition for discharging job responsibilities and
reflects the executive's performance over time. Individual salary adjustments
take into account performance contributions for the year and reflect sustained
performance contributions over a number of years.
ANNUAL INCENTIVE PLAN. The Company's Management Incentive Plan ("MIP") provides
executive officers and other senior management of the Company with the
opportunity to earn annual incentive awards based on the achievement of
pre-established annual corporate, business unit and individual performance
objectives. Awards for corporate executives are based on Suncor's
7
overall performance. Awards for the business unit executives are based on a
combination of the performance of Suncor and their respective business unit.
LONG TERM INCENTIVES. Suncor's Named Executive Officers participate in two
long-term incentive programs: (i) the Executive Stock Plan ("ESP") and (ii) the
Special Performance Incentive Plan ("SPIP").
(i) Executive Stock Plan
The ESP was established in 1992 and is designed to reward eligible
executives and senior managers in relation to increases in Common Share
performance. The plan promotes ownership perspectives, encourages the retention
of key employees and provides an incentive to enhance shareholder value by
furthering the growth and profitability of Suncor. ESP awards vary according to
the position and salary level of the plan participant.
Awards under the ESP are administered by the HR&CC. The plan provides for
the grant of options for Common Shares, as well as limited appreciation rights
("LARs") and stock appreciation rights ("SARs"), either with options or standing
alone. The ESP also provides for awards of Common Shares, performance units and
performance or bonus shares, and other share based awards not inconsistent with
the terms of the ESP.
To date, the Board of Directors has followed a practice of awarding only
options for Common Shares and LARs under the ESP. A maximum of 13,800,000 Common
Shares, 800,000 of which are specifically reserved for Directors (See
"Compensation of Directors"), have been authorized for issuance under the ESP
since its inception. Of these, 3,135,049 Common Shares remain available for
future option grants and other ESP awards.
(ii) Special Performance Incentive Plan
The SPIP is a five year performance-based plan for senior executives,
established in 1997 and concluding on April 1, 2002. The SPIP was introduced to
reward Suncor's executive team for making the best long-term decisions to
further Suncor's objective of doubling its size over the five year plan period,
and to align executive compensation with shareholders' interests. The SPIP was
also intended to ensure Suncor retained an exceptional and motivated senior
executive team during a critically important time in the Company's history and
to attract new leaders when needed.
Under the SPIP, a total of 32 executives, including the Named Executive
Officers, were granted Performance Units ("Units") that vest on April 1, 2002
("Vesting Date"), subject to achievement of performance-based vesting criteria
for share value appreciation (the "Vesting Criteria"). Full vesting of Units
requires a 100% increase (including the effect of dividend reinvestment) of an
investment in Common Shares between 1997 when the plan was introduced, and the
Vesting Date.
On the Vesting Date, subject to achievement of the Vesting Criteria,
executives holding Units are entitled to either "Bonus Shares", or "Deferred
Share Units" (DSU's), or some combination thereof, as elected by the executives
individually. "Bonus Shares" are effectively a cash payout, where half the award
is paid in cash to cover individual taxes payable as a result of award payout.
The other half may be used by the executive to purchase Common Shares in the
open market. The cash value is based on the average closing price for Common
Shares for the twelve weeks preceding the Vesting Date. DSUs are Common Share
equivalents that are paid out in cash when the participant ceases to be employed
by the Company, or on a date elected by the participant prior to December of the
year following cessation of employment. The attributes of DSU's are described
under the heading, "Directors' Compensation", above.
8
In January 2002, the Board reviewed the status of the SPIP, and noted that,
based on current trading prices for Common Shares, shareholder value is more
than three times higher than it was in 1997 when the SPIP was initiated. This
increase corresponds to an increase in Suncor's market capitalization from
approximately $3.4 billion at plan inception to approximately $12 billion as of
February 28, 2002. Based on current trading prices, the Vesting Criteria
established for the SPIP in 1997 will be exceeded, and on the Vesting Date, the
value of the executives' investment in the Company through DSU's would be
substantially higher than was originally anticipated -- well in excess of the
share ownership guidelines for their respective positions (See "Executive Share
Ownership Guidelines" below). Following the Board's review of the Plan, in
January 2002, the Board approved an amendment to the plan to allow participants
who had elected to receive more than half of their Units in DSU's, to reduce
their DSU award weighting to a minimum of 50%, and correspondingly increase the
weighting of their Bonus Share award. The amendment recognizes the enormous
creation of shareholder value from the SPIP plan inception to the current date.
The amendment also supports the retention of the key executives who will lead
the Company through its next stage of growth, by permitting them to realize
some, but not all, of the created value today, while keeping a strong leadership
stake in the Company through their DSU's and stock options.
Also in 1997, the Company introduced an Employee Long Term Incentive Plan
("ELTIP") for all employees of Suncor, other than those senior executives who
participate in the SPIP. The key objectives of the ELTIP were to motivate the
employees to meet long-term business unit and company-wide goals and to further
encourage a sense of ownership and teamwork among all employees.
The ELTIP has two components. The first component, called the Employee
Stock Option Program ("ESOP"), is primarily for senior managers and executives
who do not participate in the SPIP. The second component is for all other
employees and is called the Incremental Value Program ("IVP"). Full vesting of
options granted under the ESOP and full payout of the IVP are dependent upon
achievement of business unit performance criteria and, for the IVP, share price
appreciation thresholds. As of the date hereof, all criteria under the ELTIP
have been met, and accordingly, when the program concludes in April 2002, IVP
participants will receive a combination of treasury Common Shares and cash, and
stock options held by the ESOP participants will vest.
Based on current share prices, it is estimated that the total cash cost of
the ELTIP and SPIP programs combined, representing the cash component of ELTIP
and the full value of Bonus Share and DSU components of SPIP, is approximately
$108 million, of which $67 million has been recorded as a cumulative after-tax
charge against earnings up to December 31, 2001. The $108 million estimated cash
cost is less than 1.3% of the $8.5 billion increase in Suncor's market
capitalization since SPIP plan inception. Of the estimated $108 million cash
value of the ELTIP and SPIP programs, an anticipated total cash payout of
approximately $72 million is expected in the second quarter of 2002, allocated
between the SPIP for executives ($41 million) and the ELTIP for other employees
($31 million). The DSU component under SPIP, as noted above, is paid out only
after the executive leaves the Company. Accordingly, the value over time of the
DSU component will vary directly with the value of Common Shares. The foregoing
cash estimates do not include the anticipated issuances of treasury Common
Shares under the ELTIP. Based on current trading prices for Common Shares,
roughly 559,000 Common Shares will be issued in April 2002 under the IVP, and a
further 1,063,000 Common Shares will remain reserved for issuance thereafter on
exercise of ESOP options, which expire in 2007. These Common Share numbers are
before giving effect to the Stock Split, if approved at the Meeting.
The Board of Directors believes the SPIP and ELTIP have been successful
performance-based programs that have positioned the Company to achieve its five
year growth plan initiated in 1997, achieve total shareholder returns well in
excess of the criteria established at plan inception, and significantly
outperform both the TSE 100 and Integrated Oil indices over the plan period.
9
While investors have benefited from a shareholder value that is more than three
times higher than in 1997, Suncor has also:
o retained and attracted highly qualified management, committed to the long
term, profitable growth of Suncor;
o aligned management compensation with shareholders' interests;
o motivated exceptional performance by linking incentive compensation to the
achievement of business objectives and financial performance; and
o encouraged retention of key people for the succession of Suncor management.
The following chart sets out, for each of the Named Executive Officers, the
number of Units under SPIP held as of February 28, 2002, and their allocation
between Bonus Shares (cash) and DSU's.
Number of Performance Award Payout Elected
Name Units Granted in 1997 (%)
-------------- --------------------- --------------------
DSU's Bonus Shares
R. L. GEORGE 200,000 50 50
M.M. ASHAR 100,000 50 50
M.W. O'BRIEN 100,000 50 50
D.W. BYLER 89,000(1) 70 30
T.L. RYLEY 59,286(1) 50 50
-------------------------
Note:
(1) Includes Units granted in April 1, 1997, and Units granted subsequently
when the executive was promoted to his current executive position.
EXECUTIVE SHARE OWNERSHIP GUIDELINES
Suncor's executive share ownership guidelines are for Common Share holdings
with an aggregate value of four times base salary for the CEO, two times base
salary for senior executives, and one times base salary for other vice
presidents. The guideline becomes applicable on the later of April 1, 2002, and
five years after becoming an executive. Common Shares and Deferred Share Units
count toward fulfillment of the guidelines.
COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
The HR&CC assesses the overall performance and compensation of Mr. George,
the President and Chief Executive Officer, on the basis of his sustained
performance over time in meeting the following key accountabilities of his
office:
o positioning Suncor in existing and potential related business areas to
enhance earnings,
o increasing earnings and cash flow through the judicious expansion of Suncor
by development, acquisition or merger,
o optimizing the return on assets employed,
o communicating the goals and key values of Suncor to its stakeholders,
o ensuring that Suncor has a sound financial structure in place to capitalize
on growth and diversification opportunities, and
o continually improving personal and subordinate effectiveness to assure
competent management development and succession.
For 2001, Mr. George's 2001 annual incentive of $720,000 was established to
recognize the effective leadership he provided as demonstrated by the following
Company achievements:
o Under his leadership Suncor averaged 156,600 barrels of oil equivalent per
day during 2001.
10
The Company also increased earnings to $388 million.
o Project Millennium, a four-year, $3.4 billion expansion project was
commissioned on schedule providing Suncor's Oil Sands operation with a
production capacity of 225,000 barrels of oil per day. Despite cost
overruns, this project is expected to be a major contributor to Suncor's
cornerstone business and serve as a foundation for Suncor's plans for
profitable growth.
o During 2001, the Company received regulatory approval for its Firebag
In-situ Oil Sands Project and initiated construction of stage 1 of the
project. Firebag is Suncor's first commercial scale in-situ project, using
technology that has less impact to air, water and land than traditional
mining methods.
o Suncor also took its first steps in seeking regulatory approval for
Voyageur -- an Oil Sands expansion plan to increase production up to
550,000 barrels per day by 2010 to 2012, subject to Board and regulatory
approval and favourable economic and market conditions.
o Acquisitions over the last few years culminated in 2001 with oil sands
leases estimated to contain more than 12 billion barrels of resources in
place, as evaluated by independent petroleum consultants. Suncor's leases
provide the Company with resources for more than 50 years of production
based on currently planned production rates.
o A Company-wide reorganization was completed in November 2001 to position
the Company for continued growth and build a more integrated culture to
leverage business value. Suncor continued to emphasize the importance of
workforce diversity, leadership development, succession planning and a
committed workforce.
o For the third year in a row, Suncor was included in the Dow Jones
Sustainability Group Index, a global stock index that tracks the
performance of leading sustainability companies.
o Electricity was generated from Suncor's first renewable energy project. The
SunBridge Wind Power Project is a joint venture with Enbridge Inc. in Gull
Lake, Saskatchewan and is expected to yield 11 megawatts of power when
completed in 2002. Suncor's renewable energy business is a component of the
Company's action plan to address climate change.
o The Company's role as a founding partner (along with the Pembina Institute
for Appropriate Development) in establishing the Clean Air Renewable Energy
(CARE) Coalition received support by Canada's Finance Minister Paul Martin
when he announced fiscal incentive mechanisms for low-impact renewable
energy.
Mr. George also continued to show strong leadership in communicating
Suncor's achievements and growth plans to the investment community. The market's
confidence in Suncor was reflected in the 12-month increase of 37% in Suncor
stock price, which ended the year at $52.40. During the year, share price
surpassed the $11 billion threshold in market capitalization.
This report is furnished by the members of the Human Resources and
Compensation Committee:
B.A. Canfield, Chairman
J.R. Huff
M.A. McCaig
JR Shaw
W.R. Wyman
11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides a summary of compensation earned by the Chief
Executive Officer and the four other most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------------- -------------
Securities
Under
Name and Other Annual Options/SARs All Other
Principal Salary Bonus(1) Compensation(2) Granted Compensation(3)(4)
Position(5) Year ($) ($) ($) (#) ($)
----------------- ----- ------- -------- ------------- ------------- ------------------
R.L. GEORGE 2001 749,846 720,000 - 105,000 54,270
President and 2000 686,769 610,000 - 80,000 49,320
Chief 1999 608,961 450,000 - 97,800 48,030
Executive
Officer
M.M. ASHAR 2001 374,231 200,000 - 41,500 26,736
Executive Vice 2000 346,231 200,000 - 36,000 24,603
President, 1999 324,231 190,000 - 42,600 23,944
Oil Sands
M.W. O'BRIEN 2001 364,923 225,000 - 36,100 23,003
Executive Vice 2000 339,961 210,000 49,028 32,000 19,860
President, 1999 328,423 150,000 2,700 42,600 22,096
Corporate
Development and
Chief Financial
Officer
D.W. BYLER 2001 313,231 227,000 - 29,000 23,887
Executive Vice 2000 279,892 180,000 - 24,000 21,560
President, 1999 250,108 90,000 - 28,400 19,917
Natural Gas and
Renewable Energy
T.L. RYLEY 2001 313,231 190,000 13,599 29,000 19,874
Executive Vice 2000 279,683 180,000 56,087 20,000 17,705
President, 1999 194,667 65,000 - 17,000 13,405
Energy
Marketing and
Refining
-------------------------
(1) Bonus awards are paid in cash in the year following the year in which they
are earned. Amounts paid under the Management Incentive Plan in 2002 in
respect of services in 2001 are included.
(2) Amounts reported as Other Annual Compensation include incidental
resettlement amounts provided to all employees relocated at Suncor's
request, imputed interest on mortgage loans and reimbursement of taxes on
these amounts.
(3) Represents Suncor contributions to the Suncor Savings Plan and Personal
Retirement Account on behalf of the Named Executive Officer. Suncor
contributes up to 5.5% of employee basic earnings to the Savings Plan on a
matching basis. Suncor also makes contributions to Personal Retirement
Accounts for all employees, including Named Executive Officers, of 1% of
basic earnings, plus up to an additional 1.5% percent of basic earnings on
a 50% matching basis, subject to maximum contribution levels.
(4) Suncor employees, including Named Executive Officers, making current
contributions to the Suncor Savings Plan earn up to 2% of their employee
basic earnings as credits. These credits may be used to purchase additional
group medical, dental, health and insurance benefits on the same terms as
are available to all salaried employees of Suncor, or the credits may be
taken as additional compensation. Credits taken by the Named Executive
Officers as additional compensation have been included in the total.
12
OPTIONS
For details of the 2001 grants of options to the Named Executive Officers
and the fiscal year-end option values, see the following tables. The Company's
Executive Stock Plan also provides for the issuance of SARs. However, no SARs
were issued during the 2001 fiscal year or were outstanding as of December 31,
2001.
OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FISCAL YEAR(1)
Individual Grants
-------------------------------------------------------
Market Value
% of Total of Securities
Securities Options/SARs Underlying
Under Granted to Options/SARs
Options/SARs Employees in Exercise or on Date of
Granted(2) Fiscal Year(3) Base Price Grant
Name (#) (%) ($/Security) ($/Security) Expiration Date
-------------------- ------------ --------------- ------------ -------------- ----------------
R.L. GEORGE 105,000 10.02 34.90 34.90 January 26, 2011
M.M. ASHAR 41,500 3.96 34.90 34.90 January 26, 2011
M.W. O'BRIEN 36,100 3.44 34.90 34.90 January 26, 2011
D.W. BYLER 29,000 2.76 34.90 34.90 January 26, 2011
T.L. RYLEY 29,000 2.76 34.90 34.90 January 26, 2011
-------------------------
(1) Option grants for Common Shares were awarded on January 26, 2001. The first
1/3 of the award is exercisable on and after January 1, 2002, the second
1/3 on and after January 1, 2003, and the final 1/3 on and after January 1,
2004. In the event of a change of control or after the occurrence of
certain specified corporate changes any outstanding options which are not
then exercisable automatically become exercisable.
(2) LARs have been granted to certain executives of Suncor, including all Named
Executive Officers. LARs are attached to each stock option held by the
recipient and become exercisable only in the event of a change of control
transaction. See "Termination Contracts and Change of Control Arrangements"
for further information regarding the LARs.
(3) Options granted to employees include options granted pursuant to the
Executive Stock Plan and options granted pursuant to the Employee Long Term
Incentive Plan for non-executive employees.
13
AGGREGATED OPTION/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Value of Unexercised
Unexercised Options/SARs at In-The-Money Options/SARs at
Fiscal Year-End Fiscal Year-End(2)
(#) ($)
--------------------------------- ----------------------------------
Securities Aggregate
Acquired on Value
Exercise(1) Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
------------------- -------------- ------------- ------------- ---------------- -------------- ----------------
R.L. GEORGE 64,500 2,009,796 357,531 190,933 12,175,858 4,006,650
M.M. ASHAR 16,000 583,058 167,160 79,700 5,922,888 1,687,260
M.W. O'BRIEN 170,000 4,195,036 10,295 71,633 216,401 1,536,700
D.W. BYLER 14,000 400,750 91,098 54,466 3,615,939 1,148,152
T.L. RYLEY 20,000 579,000 50,403 47,999 1,641,942 969,922
-------------------------
(1) The figures shown represent Common Shares.
(2) The unexercised value is the difference between the exercise price of the
option and the closing price for the Common Shares on The Toronto Stock
Exchange on December 31, 2001. The closing price for the Common Shares on
The Toronto Stock Exchange on December 31, 2001 was $52.40. Options are
in-the-money at fiscal year-end if the market value of the underlying
shares at year-end exceeds the exercise price of the options.
RETIREMENT ARRANGEMENTS
The Suncor Energy Pension Plan is a registered pension plan that provides
retirement income to Suncor employees, including the Named Executive Officers.
Retirement income is based on a combination of a defined benefit pension
payment, including an employee paid benefit feature, and a defined contribution
account balance.
In addition to the pension under the Suncor Energy Pension Plan, executive
officers may receive supplemental retirement payments under the terms of the
Supplemental Executive Retirement Plan ("SERP"). The SERP is a non-registered,
non-funded supplemental retirement arrangement.
The following table represents an estimate of the combined retirement
income entitlement of an executive officer from the SERP and the Suncor Energy
Pension Plan at the levels of remuneration and the years of service shown.
14
PENSION PLAN AND SERP TABLE(1)
REMUNERATION YEARS OF SERVICE
-------------- ------------------------------------------------------------------------------
($) 5 7 9 10-25 27
-------------- ---------- ---------- ---------- ---------- ----------
$ $ $ $ $
200,000 50,000 70,000 90,000 100,000 106,000
250,000 62,500 87,500 112,500 125,000 132,500
300,000 75,000 105,000 135,000 150,000 159,000
350,000 87,500 122,500 157,500 175,000 185,500
400,000 100,000 140,000 180,000 200,000 212,000
500,000 125,000 175,000 225,000 250,000 265,000
600,000 150,000 210,000 270,000 300,000 318,000
700,000 175,000 245,000 315,000 350,000 371,000
800,000 200,000 280,000 360,000 400,000 424,000
850,000 212,500 297,500 382,500 425,000 450,500
900,000 225,000 315,000 405,000 450,000 477,000
950,000 237,500 332,500 427,500 475,000 503,500
1,000,000 250,000 350,000 450,000 500,000 530,000
1,050,000 262,500 367,500 472,500 525,000 556,500
1,100,000 275,000 385,000 495,000 550,000 583,000
1,150,000 287,500 402,500 517,500 575,000 609,500
1,200,000 300,000 420,000 540,000 600,000 636,000
1,350,000 337,500 472,500 607,500 675,000 715,500
1,550,000 387,500 524,500 697,500 775,000 821,500
-------------------------
(1) Executive retirement income under the SERP is based on the executive's
remuneration. Remuneration under the SERP is an annualized amount based on
the average salary plus bonus for the best consecutive 36 months of the
last 180 months of continuous service. For 2001 and prior years, the bonus
portion is based on the average of the executive's last three bonuses, and
effective January 1, 2002, the bonus portion is based on the executive's
target bonus. During a three-year transition period, the bonus portion of
the SERP calculation is the greater of the three year average bonus
calculated under the post-2001 provisions, and the three year average bonus
using a combination of actual and target bonuses. Executive retirement
income for Named Executive Officers is 5% of the executive's remuneration,
calculated in the above-described manner, times the number of years of
either credited service or executive pensionable service (depending on the
year in which the executive joined the SERP) ("SERP Credited Service") to a
maximum of 10 years. The retirement benefit will increase by an additional
1.5% of remuneration for each year of executive pensionable service earned
after the later of: July 1, 1997; the date the executive completes 25 years
of credited service; the effective date of the executive's eligibility
under the SERP; and the date on which the executive has earned a retirement
benefit under SERP of at least 50% of remuneration. A portion of retirement
income is payable by the Suncor Energy Pension Plan and a portion is
payable under the SERP. Five years of executive employment are required for
rights under the SERP to vest. Executive officers with less than five years
of executive employment may also become eligible to receive supplemental
retirement payments under the SERP in the event of a change in control, or
a loss of employment upon or after the occurrence of certain specified
events. SERP payments for retirement prior to age 60 will be reduced by an
early retirement reduction factor. The normal form of payment on
retirement, and the basis on which benefits in the above table are computed
is: for married employees, joint and survivor, with 50% to the non-member
surviving spouse; for single employees, for life, with five years
guaranteed.
(2) As of February 28, 2002 remuneration covered by the retirement arrangement
and the years of SERP Credited Service (rounded to the nearest whole year)
for the Named Executive Officers are as follows:
SERP Credited
Remuneration Service
Name ($) (Years)
------------ ---------------- ---------------
R.L. GEORGE 1,286,664 21
M.M. ASHAR 549,996 14
M.W. O'BRIEN 542,220 27
D.W. BYLER 451,224 22
T.L. RYLEY 415,440 18
15
(3) Government of Canada payments received (Old Age Security & Canada Pension
Plan) are in addition to the payments shown in the table.
TERMINATION CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
Suncor has entered into termination contracts with each of the Named
Executive Officers to compensate such individuals, based on their remuneration,
in the event of any of the following: termination of employment other than for
just cause; a significant adverse change in their compensation; a significant
diminution in their duties or responsibilities; certain relocations; or other
material adverse changes to the terms of their employment. The arrangement
provides for a payment of 2.5 times annual remuneration. The arrangement also
provides for cash payments in respect of certain non-vested options and Units,
if any, that are cancelled under the ESP and SPIP plans, respectively, as a
consequence of termination of their employment. In the case of options, the
payment is calculated based on the in-the-money value of a portion of their
non-vested options at the date of termination. The SPIP payment is equal to the
amount payable under the SPIP on a change of control (see below), but pro rated
to exclude service after the date of termination. No payments to the Named
Executive Officers in respect of resignation, retirement or other termination of
employment have been made, accrued or become payable in or in respect of 2001.
Under Suncor's ESP (and, if approved by shareholders at the Meeting, under
the "SunShare" Performance Based Stock Option Plan), the Company may issue LARs.
Certain management and executive employees of the Company, including the Named
Executive Officers, hold LARs. LARs provide the holders thereof with an
opportunity to realize the value, if any, of their options under the ESP, upon
occurrence of a change of control transaction affecting Suncor. In that
circumstance option holders may be unable to exercise their options prior to
completion of a change of control transaction due to securities regulatory
requirements or internal Suncor policies. LARs represent a right attached to
each option held by the LARs holder, exercisable upon completion of a change of
control transaction, to receive a cash payment from Suncor, upon surrender of a
related option. The cash payment is equal to the amount, if any, by which (a)
the greater of (i) the highest price per Common Share paid by a person acquiring
Common Shares in the change of control transaction and (ii) the highest daily
trading price of the Common Shares on The Toronto Stock Exchange during the 60
day period preceding the date of the change of control transaction (daily
trading price for this purpose means the average of the high and low board lot
trading prices of the Common Shares on any particular day) exceeds (b) the
exercise price of the option to which the LAR is related. LARs are generally
issued annually at the discretion of the Company, have an 18 month term (unless
a replacement LAR is issued, in which case the LAR continues in effect under the
terms of the replacement LAR), and attach to all options held by the holder
during the term of the LAR. Upon the exercise or expiry of any option, the
attached LAR is cancelled.
Generally, LARs terminate and are of no further effect upon termination of
employment, retirement, death or entitlement to long-term disability benefits.
However, the Board of Directors has the discretion to permit the exercise of
such LARs in the manner and on such terms as it may authorize.
The following table shows the incremental number of LARs attached to
options granted to each of the Named Executive Officers during 2001 (which is
equivalent to the number of options granted in 2001) and the total number of
LARs which remained outstanding for each Named Executive Officer (which is
equivalent to the number of options then held) as of December 31, 2001.
16
Number of LARs Granted on Number of LARs Outstanding on
Name January 26, 2001 December 31, 2001
------------ ------------------------- -----------------------------
R.L. GEORGE 105,000 548,464
M.M. ASHAR 41,500 246,860
M.W. O'BRIEN 36,100 81,928
D.W. BYLER 29,000 145,564
T.L. RYLEY 29,000 98,402
As disclosed above in the notes to the tables entitled "Option/SAR Grants
During the Most Recently Completed Fiscal Year" and "Pension Plan and SERP
Table", options granted but not yet exercisable may automatically become
exercisable and executive officers with less than five years of executive
service may become eligible to receive supplemental retirement payments under
the SERP in the event of a change in control of Suncor, after the occurrence of
certain specified corporate changes, or for certain executives, after a
substantial decrease in such executive's responsibilities. In addition, Suncor
has entered into certain trust arrangements to secure its obligations under the
SERP, under the termination contracts described above, and under the SPIP, upon
a pending change in control of Suncor.
Under Suncor's SPIP, if a participant retires, dies or becomes eligible to
receive long-term disability benefits before the end of the Performance Period,
a portion of the Participant's Units (pro rated to reflect the length of the
Participant's actual service during the Performance Period) will vest at the end
of the Performance Period, subject to achievement of the performance vesting
criteria. Units held by participants who leave the Company for any other reason
before the end of the Performance Period will be cancelled. In the event of a
change in control of the Company the performance vesting criteria is
extrapolated to the end of the Performance Period and the corresponding number
of a Participant's Units vest immediately as of the effective date of the change
in control and will be paid out within 30 days thereafter in the form of cash.
In addition, the Board of Directors has the discretion to accelerate vesting, or
increase the percentage of Units that would otherwise vest, up to a maximum of
100% of the Units granted.
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
None of the directors, executive officers or senior officers of Suncor,
persons who served as directors, executive officers or senior officers at any
time during 2001, and their respective associates were at any time during the
year indebted to Suncor or its subsidiaries, either in connection with the
purchase of Suncor securities or, excluding routine indebtedness, otherwise.
17
PERFORMANCE GRAPH
The following graph shows, as of December 31 in each of 1996, 1997, 1998,
1999, 2000 and 2001, the total cumulative return, assuming the reinvestment of
all dividends, of $100 invested on December 31, 1996 in each of Suncor Energy
Inc. Common Shares, the TSE 300 (TRIV) Composite Index and the TSE Integrated
Oils (TRIV) Index.
[PERFORMANCE GRAPH]
December 31, December 31, December 31, December 31, December 31, December 31,
1996(1) 1997(1) 1998(1) 1999(1) 2000(1) 2001(1)
-------------- -------------- -------------- -------------- -------------- --------------
Suncor Energy Inc. $100 176 167 222 285 393
TSE 300 Index $100 115 113 149 160 140
TSE Integrated $100 149 119 154 227 272
Oils Index
-------------------------
(1) The year-end values of each investment shown on the graph are based on
share price appreciation plus dividend reinvestment.
18
DIRECTORS' AND OFFICERS' INSURANCE
Under policies purchased by Suncor, insurance of a maximum amount of
approximately $150 million is in effect for the directors and officers of Suncor
against liability for any actual or alleged error or misstatement or misleading
statement or act or omission or neglect or breach of duty in the discharge of
their duties, individually or collectively.
The policies are subject to certain exclusions, and provide for a corporate
deductible of $5 million in circumstances where Suncor is permitted by law to
indemnify individual directors and officers. If Suncor is unable by law to
indemnify individual directors and officers, there is no deductible. In 2001
Suncor paid premiums of approximately $20,500 in respect of directors and
officers as a group. No premiums were paid by any individual director or
officer.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Suncor's Board of Directors is responsible for supervising the management
of the business and affairs of Suncor. The Board of Directors' written mandate
outlines its major goals and duties, which include establishing Suncor's policy
direction and fundamental objectives. The Board of Directors has adopted a
management control process policy which delegates to management the
responsibility and authority to direct Suncor's day-to-day operations, subject
to compliance with Board-approved budgets and strategic plans. Under the policy,
certain matters, including the acquisition of new lines of business and
significant acquisitions, divestments and long-term financings, among other
things, must be approved in advance by the Board of Directors.
The Board of Directors discharges its responsibilities through preparation
for and attendance at regularly scheduled meetings, and through its committees.
The Board Policy, Strategy Review and Governance Committee reviews and provides
advice with respect to the preliminary stages of key strategic initiatives and
projects, and reviews and assesses processes relating to long range planning and
budgeting. This committee assists the Board in matters pertaining to corporate
values, beliefs and standards of ethical conduct, as well as corporate
governance issues and Board composition and effectiveness. The Audit Committee
reviews the effectiveness of the Company's financial reporting, management
information and internal control systems, and of its internal and independent
auditors. It also monitors financial reports, the conduct and results of the
annual independent audit, finance and accounting policies and other financial
matters. In addition, the Audit Committee reviews and approves Suncor's interim
consolidated financial statements and interim MD&A (Management's Discussion and
Analysis). The Environment, Health and Safety Committee reviews the
effectiveness with which the Company meets its obligations pertaining to the
environment, health and safety, including the effectiveness with which
management establishes and monitors compliance related policies. This committee
also monitors management's performance and emerging trends and issues in these
areas. The Board of Directors also has a Human Resources and Compensation
Committee. For information regarding the mandate of this committee, see "Report
on Executive Compensation", commencing on page 7 of this Circular. Subject to
limited exceptions, these committees generally do not have decision-making
authority; rather, they convey their findings and recommendations on matters
falling within their respective mandates to the full Board of Directors.
The Board of Directors supports the principle that its membership should
represent a diversity of backgrounds, experience and skills. The Board, through
the Board Policy, Strategy Review and Governance Committee, reviews on an annual
basis the appropriate characteristics of Board members in the context of the
current composition of the Board and the objectives and needs of the Company.
19
Additional information on Suncor's corporate governance practices is set
out in Appendix A to this Circular, which summarizes the corporate governance
guidelines (the "Guidelines") of The Toronto Stock Exchange, and Suncor's
alignment with them.
SPECIAL BUSINESS OF THE MEETING
AMENDMENT OF BY-LAW NO. 1
At the Meeting, shareholders will be asked to consider and, if thought fit,
pass, with or without amendment, an ordinary resolution confirming the amendment
of By-law No. 1, the Company's general operating by-law (the "By-law").
The CANADA BUSINESS CORPORATIONS ACT, the Corporation's governing statute,
and the regulations thereunder (the "Act"), were amended on November 24, 2001
(the "CBCA Amendments"). The CBCA Amendments are extensive and comprehensive,
and include a number of initiatives to modernize the law. Shareholders who are
interested in the full text of the CBCA Amendments and a detailed comparison of
the prior and amended law, should contact Industry Canada Corporations
Directorate or visit its web site at http://strategis.ic.gc.ca.
The Board of Directors reviewed its existing By-law in light of the CBCA
Amendments, and determined that amendment of the By-law was in order to align
the By-law with the amended CBCA. On February 28, 2002, an amended By-law was
approved by the Board.
The amended By-law permits, but does not require, the use of electronic
communication facilities in matters such as delivery of documents to
shareholders, shareholder meetings, proxy appointment and shareholder voting.
The amended By-law now facilitates the use of electronic processes by the
Company, subject to the requirements of the CBCA. These requirements include
processes designed to ensure the integrity of the electronic facilities, and to
ensure that shareholders are not prejudiced by their use. Protections include,
among other things, requirements for recipient consent to electronic delivery of
documents, as well as requirements for the integrity of systems used for
electronic signatures and voting.
Amendments to the By-law were also required to conform the By-law to the
CBCA Amendments on indemnification of directors and officers. Among the changes,
the CBCA now expands the scope of indemnification to include individuals acting,
at the Company's request, as directors and officers, or in a similar capacity,
of entities other than the Company and its direct subsidiaries. This could
include, for example, non profit organizations and industry associations.
Appendix "B" to this Circular sets out the complete text of the amended
By-law, highlighting the changes. In order to continue to be effective, the
amended By-law must be confirmed at the Meeting by a majority of the votes cast
by the shareholders voting in respect of the resolution.
THE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY INTEND TO VOTE IN
FAVOUR OF THE RESOLUTION CONFIRMING THE AMENDMENT OF THE BY-LAW, UNLESS
INSTRUCTED OTHERWISE BY THE SHAREHOLDER SIGNING THE PROXY. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR SUCH CONFIRMATION.
20
TEXT OF RESOLUTION
The text of the resolution to confirm the amended Bylaw is as
follows:
"BE IT RESOLVED as an ordinary resolution of the shareholders of
the Company, that the amendment of By-law No. 1 of the Company,
as approved by the Board of Directors of the Company on
February 28, 2002, and attached to the Management Proxy Circular
dated February 28, 2002, be and it is hereby ratified, confirmed
and approved."
SUNSHARE PERFORMANCE STOCK OPTION PLAN
At the Meeting, shareholders will be asked to consider and, if thought fit,
pass, with or without amendment, an ordinary resolution approving the SunShare
performance based stock option plan (the "SunShare Plan" or the "Plan").
Suncor's existing long-term incentive programs, namely the Special
Performance Incentive Plan ("SPIP") for executives, and the Employee Long-Term
Incentive Plan ("ELTIP") for non-executive employees, are expected to vest on
April 1, 2002. These plans were implemented in 1997 to support the Company's
1997 - 2002 strategic objectives. These performance-based plans served as the
key long term incentives for executives and other employees during the plan
period of 1997 to 2002. Shareholder value today is more than three times higher
than in 1997 when the SPIP was initiated, representing an increase in Suncor's
market capitalization from approximately $3.4 billion in 1997, to approximately
$12 billion as of February 28, 2002. Based on current Common Share prices, these
two programs will fully vest in April 2002. SPIP and ELTIP are described under
the heading "Report on Executive Compensation" in this Circular.
On November 21, 2001, Suncor's Board of Directors, in keeping with the
Company's compensation philosophy, approved the adoption, subject to shareholder
approval, of the SunShare Plan. The purpose of this performance-based stock
option plan is to promote a long-term perspective in decision making and
strategy implementation, to foster corporate integration and teamwork across the
Company and to attract and retain key capabilities required to deliver the
Company's 2002 - 2008 business strategies. The SunShare Plan is intended to
support the next stage of the Company's plans for growth by incorporating
aggressive performance-based vesting acceleration criteria to align and motivate
Suncor employees to superior execution of the business plan. The SunShare
program, if approved, will serve as the cornerstone of the Company's long-term
incentive strategy for eligible employees, including executives, during the
program period.
The Human Resources and Compensation Committee of the Board (the "HR&CC")
has adopted award guidelines under the Plan, which among other things specify
the size of individual option grants for executive employees and a range of
grants for non-executives. Under the terms of the Plan, no single employee will
be eligible to receive options representing more than 5% of the issued and
outstanding common shares of the Company. The HR&CC also has the authority,
which may be delegated to management, to interpret the Plan, to authorize
amendments to the Plan, to adopt, amend and rescind rules, regulations and
administrative guidelines relating to the Plan, and to otherwise administer the
Plan, subject to compliance with regulatory requirements.
Subject to shareholder approval at the Meeting, the SunShare Plan will have
an effective date of April 30, 2002, and options thereunder will be granted on
the effective date to eligible permanent full-time and part-time employees of
the Company and its subsidiaries, in accordance with the HR&CC-approved award
guidelines. Additional options may be granted after the initial grant date,
principally to support recruitment of new employees and employee advancement to
positions of greater accountability within the Company. The HR&CC has delegated
to
21
management the authority to grant options to non-executive employees. No
options have been granted under the SunShare Plan to date.
The Board of Directors has reserved 6,000,000 Common Shares (12,000,000
Common Shares after the Stock Split, if approved - See "Special Business of the
Meeting - Amendment of Articles - Two-for-one Division of Common Shares" below)
for option grants under the SunShare Plan, representing approximately 2.7% of
the issued and outstanding Common Shares of the Company. When combined with
Common Shares that will continue after April 30, 2002, to be reserved for
issuance under Suncor's other share compensation arrangements, approximately 7%
(15,670,000 Common Shares, or 31,340,000 Common Shares, after the Stock Split,
if approved) of Suncor's issued and outstanding Common Shares will be reserved
under Suncor's share compensation arrangements in the aggregate. This aggregate
reserve is comprised of the full 6,000,000 Common Share reserve for the SunShare
plan, the current reserves for granted but as yet unexercised stock options
under Suncor's Executive Stock Plan (ESP) and Employee Long Term Incentive Plan
(ELTIP) (approximately 6,535,000 in total), and shares reserved for future
option grants under the ESP (approximately 3,135,000). No further options will
be granted under the ELTIP, as that plan is now closed to new participants. All
Common Share reserve numbers, unless otherwise indicated, are stated as of
February 28, 2002, and before giving effect to the Stock Split.
The exercise price of each option granted under the SunShare Plan cannot be
less than the fair market value of a Common Share at the time of grant. Fair
market value is generally the simple average of the high and low prices at which
shares were traded in one or more board lots on The Toronto Stock Exchange on
the day prior to the grant date. No option granted under the Plan is exercisable
later than April 29, 2012, which is ten years after the effective date of the
Plan. Options will terminate on their stated termination date or, if earlier,
upon or within varying periods of time following the termination of employment,
depending on the reason for the termination. Awards not exercised prior to their
termination will be available for grants to other participants.
Vesting of options will be accelerated if performance criteria are met
within specified time frames. If performance criteria are not met within the
time frames, options will vest on January 1, 2012, approximately four months
prior to their expiry. The performance criteria include achievement of
company-wide targets for return on capital employed ("ROCE") with maximum
vesting at 15% average annual ROCE over the 2005-2008 period, and achievement of
Common Share price targets requiring a doubling of share price by April 2008 for
maximum vesting. The criteria also permit interim and partial vesting based on
achievement of the ROCE target for the 2003 - 2004 period, and share price
milestones after 2003 concurrently with achievement of total shareholder return
("TSR") superior to the TSR of the S&P 500 index during the comparable period.
Total shareholder return is a measure of return on investment that includes both
capital gain and notional dividend reinvestment over the measurement period.
ROCE will be derived from Suncor's audited financial statements, based on
Suncor's earnings for a year, before long-term interest expense, as a percentage
of average capital employed for the year. Average capital employed for a year is
generally shareholders' equity and debt (short term borrowings and current and
long term portions of long term borrowings), less the costs related to major
growth projects in progress, at the beginning and end of the applicable year,
divided by two. The HR&CC will have the authority to adjust the ROCE criteria as
appropriate for events such as changes in accounting principals and policies
that will effect the comparability of ROCE over the program period, to maintain
the integrity of the original criteria.
The Plan provides for certain adjustments to be made to options in the
event of a subdivision or consolidation of the Common Shares, or in the event of
certain other corporate changes, including an amalgamation, combination, merger
or other reorganization involving the Company. In addition, in the event of a
change of control of the Company prior to April 30, 2008, all options under the
Plan will immediately vest. The Plan also provides for the issuance of LARs to
certain executive and senior management employees. LARs would only become
exercisable
22
after a change of control transaction affecting the Company. See "Termination
Contracts and Change of Control Arrangements" for a description of LARs.
In order to take effect and serve as a key incentive program for Suncor
employees over the 2002 - 2008 program period, the SunShare Plan must approved
by a majority of the votes cast at the Meeting or any adjournment thereof.
THE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY INTEND TO VOTE IN
FAVOUR OF THE RESOLUTION APPROVING THE SUNSHARE PLAN, UNLESS INSTRUCTED
OTHERWISE BY THE SHAREHOLDER SIGNING THE PROXY. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE APPROVAL OF THE SUNSHARE PLAN.
TEXT OF RESOLUTION
The text of the ordinary resolution to approve the SunShare Plan
is as follows:
"BE IT RESOLVED as an ordinary resolution of the shareholders
of the Company that the SunShare Performance Stock Option plan
adopted by the Board of Directors on November 21, 2001 is hereby
approved."
AMENDED AND RESTATED SHAREHOLDER RIGHTS PLAN
BACKGROUND
At the Meeting, shareholders will be asked to approve and reconfirm
Suncor's Shareholder Rights Plan. The Company's original shareholder rights plan
was first implemented under an agreement dated January 25, 1996 between the
Company and Montreal Trust Company of Canada (the "Original Plan"). The Original
Plan was amended and restated, with approval of the shareholders of the Company,
on April 15, 1996 and April 21, 1999. The Original Plan, as so amended and
restated, is referred to as the "1999 Rights Plan". The 1999 Rights Plan is the
Company's current shareholder rights plan. Its continued existence must be
approved and reconfirmed by the Independent Shareholders (as defined therein) on
or before the date of the Company's Meeting.
The Company has reviewed its 1999 Rights Plan for conformity with current
practices of Canadian companies with respect to shareholder rights plan design.
The Company has determined that since April 1999, when the 1999 Rights Plan was
last approved by shareholders, there have been few if any changes in those
practices. As a result, on February 28, 2002, the Board of Directors resolved to
continue the existing 1999 Rights Plan with minimal amendments, by approving an
amended and restated shareholder rights plan (the "2002 Rights Plan" or the
"2002 Plan") proposed to be dated April 26, 2002, subject to approval by the
Independent Shareholders at the Meeting. The 2002 Rights Plan is identical to
the 1999 Rights Plan in all material respects, and names Computershare Trust
Company of Canada, the successor to the corporate trust business of Montreal
Trust Company of Canada, as rights agent under the 2002 Rights Plan.
A summary of the key features of the 2002 Plan is attached as Appendix "C"
to this Circular. All capitalized terms used in this section of the Circular and
in Appendix "C" have the meanings set forth in the 2002 Rights Plan, unless
otherwise indicated. The complete text of the 2002 Rights Plan is available to
any shareholder on request from the Company at 112 - 4th Avenue S.W., Calgary,
Alberta, T2P 2V5, by calling 1-800-558-9071, by e-mail request to
info@suncor.com, or by clicking on "Shareholder Rights Plan" in the Investor
Relations menu on the Company's web site at www.suncor.com.
23
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has determined that it continues to be in the best
interests of Suncor and the holders of its Common Shares that the Company have a
shareholder rights plan, in the form of the 2002 Plan. ACCORDINGLY, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE IN FAVOUR OF THE
RECONFIRMATION AND APPROVAL OF THE 2002 RIGHTS PLAN.
The Company has been advised that the directors and senior officers of the
Company intend to vote all Common Shares held by them in favour of the
confirmation and approval of the 2002 Rights Plan.
THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY, IF NAMED AS PROXY, INTEND
TO VOTE IN FAVOUR OF THE RESOLUTION APPROVING AND RECONFIRMING THE 2002 RIGHTS
PLAN UNLESS A SHAREHOLDER HAS SPECIFIED IN THEIR PROXY THAT THEIR SHARES ARE TO
BE VOTED AGAINST SUCH RESOLUTION.
TEXT OF RESOLUTION
"BE IT RESOLVED, as an ordinary resolution of the Independent
Shareholders of Suncor Energy Inc. (the "Corporation"), that:
1. The Shareholder Rights Plan of the Corporation be continued
and the Amended and Restated Shareholder Rights Plan
Agreement to be made as of April 26, 2002 between the
Corporation and Computershare Trust Company of Canada, be
and it is hereby ratified, confirmed and approved; and
2. Any officer or director of the Corporation be and is hereby
authorized, for and on behalf of the Corporation, to do all
such things and execute all such documents and instruments
as may be necessary or desirable to give effect to this
resolution."
VOTE REQUIRED
Shareholder approval and reconfirmation of the 2002 Rights Plan is not
required by law but is required by the terms of the 1999 Rights Plan and stock
exchange rules. The foregoing resolution must be approved by a simple majority
of 50% plus one vote of the votes cast by Independent Shareholders at the
Meeting.
If the above resolution approving the 2002 Rights Plan is passed at the
Meeting, then the Company and Computershare Trust Company of Canada (the "Rights
Agent") would execute the 2002 Rights Plan effective as of the date the
resolution is passed.
If the resolution is not passed at the Meeting, the 1999 Rights Plan will
become void and of no further force and effect, all outstanding Rights will be
redeemed, the 2002 Plan will not be executed and will never become effective and
the Company will no longer have any form of shareholder rights plan.
The Board of Directors reserves the right to alter any terms of or not to
proceed with the 2002 Rights Plan at any time prior to the Meeting in the event
that the Board of Directors determines that it would be in the best interests of
the Company and its shareholders to do so, in light of subsequent developments.
24
OBJECTIVES OF THE 2002 RIGHTS PLAN
The primary objectives of the 2002 Plan, as with the original Rights Plan,
are to ensure that, in the context of a bid for control of the Company through
an acquisition of the Company's Common Shares, the Board of Directors of the
Company has sufficient time to explore and develop alternatives for maximizing
shareholder value, to provide adequate time for competing bids to emerge, to
ensure that shareholders have an equal opportunity to participate in such a bid
and to give them adequate time to properly assess the bid and lessen the
pressure to tender typically encountered by a shareholder of a corporation that
is subject to a bid.
In approving the 2002 Rights Plan, the Board of Directors considered the
following concerns inherent in the existing legislative framework governing
takeover bids in Canada:
(a) TIME. Current legislation permits a takeover bid to expire in 35 days.
While this represents more time than the 21 day period in effect prior
to recent amendments to securities laws, the Board of Directors is of
the view that even 35 days may not be sufficient time to permit
shareholders to consider a takeover bid and to make a reasoned and
unhurried decision. The 2002 Rights Plan provides a mechanism whereby
the minimum expiry period for a Takeover Bid must be 60 days after the
date of the bid and the bid must remain open for a further period of
10 Business Days after the Offeror publicly announces that the shares
deposited or tendered and not withdrawn constitute more than 50% of
the Voting Shares outstanding held by Independent Shareholders
(generally, shareholders other than the Offeror or Acquiring Person,
their Associates and Affiliates, and Persons acting jointly or in
concert with the Offeror or Acquiring Person). The 2002 Rights Plan is
intended to provide shareholders with adequate time to properly
evaluate the offer and to provide the Board of Directors with
sufficient time to explore and develop alternatives for maximizing
shareholder value. Those alternatives could include, if deemed
appropriate by the Board of Directors, the identification of other
potential bidders, the conducting of an orderly auction or the
development of a corporate restructuring alternative which could
enhance shareholder value.
(b) PRESSURE TO TENDER. A shareholder may feel compelled to tender to a
bid which the shareholder considers to be inadequate out of a concern
that failing to tender may result in the shareholder being left with
illiquid or minority discounted shares in the target company. This is
particularly so in the case of a partial bid for less than all shares
of a class, where the bidder wishes to obtain a control position but
does not wish to acquire all of the Voting Shares. The 2002 Rights
Plan provides a shareholder approval mechanism in the Permitted Bid
provision which is intended to ensure that a shareholder can separate
the tender decision from the approval or disapproval of a particular
takeover bid. By requiring that a bid remain open for acceptance for a
further 10 Business Days following public announcement that more than
50% of the Voting Shares held by Independent Shareholders have been
deposited, a shareholder's decision to accept a bid is separated from
the decision to tender, lessening the undue pressure to tender
typically encountered by a shareholder of a company that is the
subject of a takeover bid.
(c) UNEQUAL TREATMENT. While existing securities legislation has
substantially addressed many concerns of unequal treatment, there
remains the possibility that control of a company may be acquired
pursuant to a private agreement in which a small group of shareholders
dispose of shares at a premium to market price which premium is not
shared with other shareholders. In addition, a person may slowly
accumulate shares through stock exchange acquisitions which may
result, over time, in an acquisition of control without payment of
fair value for control or a fair sharing of a control premium among
all shareholders. The 2002 Rights Plan
25
addresses these concerns by applying to essentially all acquisitions
of greater than 20% of the Voting Shares, to better ensure that
shareholders receive equal treatment.
GENERAL IMPACT OF THE 2002 RIGHTS PLAN
It is not the intention of the Board of Directors in maintaining a
shareholder rights plan for Suncor to secure the continuance of existing
directors or management in office, nor to avoid a bid for control of the Company
in a transaction that is fair and in the best interest of shareholders. For
example, through the Permitted Bid mechanism, described in more detail in
Appendix "B" to this Circular, shareholders may tender to a bid which meets the
Permitted Bid criteria without triggering the 2002 Rights Plan, regardless of
the acceptability of the bid to the Board of Directors. Furthermore, even in the
context of a bid that does not meet the Permitted Bid criteria, the Board of
Directors will continue to be bound to consider fully and fairly any bid for the
Company's Common Shares in any exercise of its discretion to waive application
of the 2002 Rights Plan or redeem the Rights. In all such circumstances, the
Board of Directors must act honestly and in good faith with a view to the best
interests of the Company and its shareholders.
Neither the Original Rights Plan nor the 2002 Rights Plan was adopted or
approved in response to or in anticipation of any pending or threatened takeover
bid, nor to deter takeover bids generally. As of the date of this Circular, the
Board of Directors was not aware of any third party considering or preparing any
proposal to acquire control of the Company. Rather, the objectives of the 2002
Rights Plan remain the same as they were for the Original Plan, as summarized
above.
The 2002 Rights Plan does not interfere with the day-to-day operations of
the Company. The issuance of the Rights does not in any way alter the financial
condition of the Company, impede its business plans or alter its financial
statements. In addition, the 2002 Rights Plan is not initially dilutive and is
not expected to have any effect on the trading of Common Shares. However, if a
Flip-In Event occurs and the Rights separate from the Common Shares, as
described in Appendix "B", reported earnings per share and reported cash flow
per share on a fully-diluted or non-diluted basis may be affected. In addition,
holders of Rights not exercising their Rights after a Flip-In Event may suffer
substantial dilution.
The 2002 Rights Plan does not preclude any shareholder from utilizing the
proxy mechanism of the CANADA BUSINESS CORPORATIONS ACT to promote a change in
the management or direction of the Company, and has no effect on the rights of
holders of outstanding voting shares of the Company to requisition a meeting of
shareholders, in accordance with the provisions of applicable corporate and
securities legislation, or to enter into agreements with respect to voting their
Common Shares. The definitions of "Acquiring Person" and "Beneficial Ownership"
have been developed to minimize concerns that the 2002 Rights Plan may be
inadvertently triggered or triggered as a result of an overly-broad aggregating
of holdings of institutional shareholders and their clients.
In summary, the Board of Directors believes that the dominant effect of the
2002 Rights Plan will be to enhance shareholder value, and ensure equal
treatment of all shareholders in the context of an acquisition of control.
TAX CONSEQUENCES OF 2002 RIGHTS PLAN
The following discussion is of a general nature only and is not intended to
constitute nor should it be construed to constitute legal or tax advice to any
particular shareholder. Shareholders are advised to consult their own tax
advisers regarding the consequences of acquiring, holding, exercising or
otherwise disposing of their Rights, taking into account their own particular
circumstances and applicable foreign, provincial, state and local tax laws.
26
CANADIAN FEDERAL INCOME TAX CONSEQUENCES
While the matter is not free from doubt, the issue of the Rights may be a
taxable benefit which must be included in the income of shareholders. However,
no amount must be included in income if the Rights do not have a monetary value
at the date of issue. The Company considers that the Rights, when issued, will
have negligible monetary value, there being only a remote possibility that the
Rights will ever be exercised.
Assuming that the Rights have no value, Canadian shareholders will not be
required to include any amount in income or be subject to withholding tax under
the INCOME TAX ACT (Canada) (the "Tax Act") as a result of the issuance of the
Rights. The Rights will be considered to have been acquired at no cost.
The holders of Rights may have income or be subject to withholding tax
under the Tax Act if the Rights are exercised or otherwise disposed of.
ELIGIBILITY FOR INVESTMENT FOR CANADIAN TAX-DEFERRED PLANS
The Rights are qualified investments under the Tax Act for registered
retirement savings plans ("RRSP's"), registered retirement income funds
("RRIF's"), and deferred profit sharing plans ("DPSP's"), and will not
constitute foreign property of any such plan or any other taxpayer subject to
Part XI of the Act, provided that the Common Shares continue to be qualified
investments that are not foreign property for such plans.
The issuance of the Rights will not affect the eligibility of the Common
Shares on the Effective Date as investments for investors governed by certain
Canadian federal and provincial legislation governing insurance companies, trust
companies, loan companies and pension plans.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
As the possibility of the Rights becoming exercisable is both remote and
speculative, the adoption of the 2002 Rights Plan will not constitute the
distribution of stock or property by the Company to its shareholders, an
exchange of property or stock (either taxable or non-taxable), or any other
event giving rise to the realization of gross income by any shareholder. The
holder of Rights may have taxable income if the Rights become exercisable or are
exercised or sold. In the event the Rights should become exercisable, as
described above, shareholders should consult their own tax advisor concerning
the consequences of acquiring, holding, exercising or disposing of their Rights.
AMENDMENT OF ARTICLES - TWO FOR ONE DIVISION OF COMMON SHARES
At the Meeting, shareholders will be asked to consider and, if thought fit,
pass, with or without amendment, a special resolution (the "Special
Resolution"), amending Suncor's Articles to divide the issued and outstanding
Common Shares on a two-for-one basis (the "Stock Split").
Since May 8, 2000, the record date for the previous two-for-one division of
Suncor's Common Shares, the trading price of the Common Shares has increased
from $32 to highs of over $55 in the first quarter of 2002. The average trading
price for the first two months of 2002 has been in the range of $49.
Based on available information, Suncor's management believes Suncor's
Common Shares are owned primarily by institutions such as mutual funds, pension
funds and life insurance companies. It is estimated that less than 10% of
Suncor's Common Shares are held by retail investors. The Board of Directors
believes that the Stock Split will encourage greater market liquidity and wider
distribution among individual investors, as a lower share price makes a board
27
lot more affordable.
The Stock Split will not change the rights of holders of Common Shares.
Each Common Share outstanding after the Stock Split will be entitled to one vote
and will be fully paid and non-assessable. As a result of the Stock Split, there
will be certain consequential amendments to outstanding rights and options to
acquire Common Shares. Assuming ratification of the renewal of Suncor's
shareholder rights plan (the "SRP"), the number of Common Share purchase rights
("Rights") outstanding will double. (See "Special Business of the Meeting -
Renewal of Shareholder Rights Plan", below). Until the Separation Time (as
defined in the SRP), Rights will continue to be represented by the certificates
representing the Common Shares. In addition, the Board of Directors has approved
certain consequential amendments to its share and share-based incentive
compensation plans to preserve proportionately the rights of plan participants.
The number of DSUs and options will double and option exercise prices will be
halved. The number of Common Shares reserved for future option grants and other
share awards under the Company's employee stock option plans (including the new
SunShare Plan, if approved by shareholders at the meeting - see "Special
Business of the Meeting - SunShare Performance Stock Option Plan", above) will
double to approximately 31,340,000 shares, based on the number of shares
reserved as of February 28, 2002. The number of Common Shares reserved for
issuance under the Company's Dividend Reinvestment and Common Share Purchase
Plan will double to approximately 3,500,000, also based on the number of shares
reserved as of February 28, 2002. These amendments will not take effect until
the Stock Split has been approved by shareholders and implemented by the Company
by filing Articles of Amendment with Industry Canada.
In order to give effect to the Stock Split, the Articles must be amended by
special resolution of shareholders. The text of the Special Resolution is set
out below. To be effective, the Special Resolution must be passed by the
affirmative vote of a majority of not less than two-thirds of the votes cast by
the shareholders voting in respect of the Special Resolution.
THE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY INTEND TO VOTE IN
FAVOUR OF THE SPECIAL RESOLUTION, UNLESS INSTRUCTED OTHERWISE BY THE SHAREHOLDER
SIGNING THE PROXY. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF
THE COMPANY'S ARTICLES TO DIVIDE THE ISSUED AND OUTSTANDING COMMON SHARES ON A
TWO-FOR-ONE BASIS.
If the Special Resolution is passed at the Meeting and the Stock Split is
implemented, shareholders of record as of the close of business on May 15, 2002,
being the record date in respect of the Stock Split, will keep their current
share certificates and will be provided with additional share certificates
representing the Common Shares to which they are entitled as a result of the
Stock Split. It is currently expected that the Company will mail such
certificates on or about May 22, 2002. Currently outstanding share certificates
representing Common Shares should be retained by the holders thereof and should
not be forwarded to the Company or its transfer agents.
TEXT OF SPECIAL RESOLUTION
The text of the special resolution to approve the Stock Split is as
follows:
"BE IT RESOLVED as a special resolution that:
1. Pursuant to section 173 of the CANADA BUSINESS CORPORATIONS
ACT (the "Act"), the Articles of the Company be amended to
divide the issued and outstanding Common Shares on a
two-for-one basis;
2. Any one of the directors or officers of the Company is hereby
authorized to sign all such documents, including, without
limitation, Articles of Amendment, and to do all such acts
and things, including, without
28
limitation, delivering such Articles of Amendment to the
Director under the Act, as they, in their discretion,
determine to be necessary or advisable in order to properly
implement and give effect to the foregoing; and
3. The directors of the Company may, in their discretion,
without further approval of the shareholders, revoke this
special resolution at any time before the issuance of a
Certificate of Amendment in respect of the foregoing.
APPOINTMENT OF AUDITORS
The persons named in the accompanying form of proxy intend to vote in
favour of the reappointment of PricewaterhouseCoopers LLP as auditors of Suncor,
to hold office until the close of the next annual meeting.
PricewaterhouseCoopers LLP have been auditors of Suncor for more than five
years.
The aggregate fees billed by PricewaterhouseCoopers LLP for audit and
audit-related services to the Company for the 2001 year were approximately
$905,000. For consulting, tax and other services, fees billed in 2001 were
approximately $2,044,000.
GENERAL
The information contained herein is given as of February 28, 2002, except
as otherwise indicated. A copy of the documents set out below may be obtained
without charge by any person upon request from the Company at 112 - 4th Avenue
S.W., Calgary, Alberta, T2P 2V5, by calling 1-800-558-9071, or by email request
to info@suncor.com:
1. Suncor's current annual report containing financial statements for the most
recently completed financial year and the report of the auditors relating
thereto together with any subsequent interim financial statements; and
2. This Circular.
In addition, persons resident in the United States may obtain a copy of
Suncor's current Form 40-F and persons resident elsewhere may obtain a copy of
Suncor's current Annual Information Form, together with a copy of any pertinent
information incorporated by reference therein, without charge upon request to
the Company at the address noted above.
29
DIRECTORS' APPROVAL
The contents and the sending of this Circular have been approved by the
Directors of Suncor.
February 28, 2002
"JANICE B. ODEGAARD"
Janice B. Odegaard
Vice President, Associate General Counsel and
Corporate Secretary
30
APPENDIX A
CORPORATE GOVERNANCE SUNCOR
GUIDELINE ALIGNMENT COMMENTARY
------------------------- --------- ------------------------------------------------------------
1. The Board of
Directors should
explicitly assume
responsibility for
stewardship of the
Company, and
specifically for:
a. adoption of a Yes The Board Policy, Strategy Review and Governance
strategic planning ("Board Policy") Committee is responsible for
process assisting the Board of Directors and management by
reviewing and providing advice with respect to
the preliminary stages of key strategic initiatives
and projects, and by reviewing and assessing
processes relating to long range planning and
budgeting. Suncor's long range plan is reviewed
and approved annually by the Board of Directors.
A Board meeting principally devoted to strategic
planning is held annually.
b. identification of Yes The Board of Directors' participation in Suncor's
principal risks, strategic planning process involves consideration
and implementing of the principal risks inherent in Suncor's
risk management businesses. Risk identification and risk monitoring
systems and management system implementation are included
in the Board's major goals.
Specific risks and risk management are also addressed
by committees of the Board. For example, the Board
Policy Committee's mandate includes providing advice
with respect to the early stages of key strategic
initiatives and projects and assessing the planning
and budgeting processes, all of which involve
consideration of risks and related management systems.
The Environment, Health and Safety ("EH & S") Committee
plays a role in reviewing environmental, health and
safety issues and reporting to the Board of Directors
on these matters. The Audit Committee reviews
financial risk management issues and programs,
including cash management, insurance and the use of
financial derivatives.
1
CORPORATE GOVERNANCE SUNCOR
GUIDELINE ALIGNMENT COMMENTARY
------------------------- --------- ------------------------------------------------------------
c. succession planning Yes The Board of Directors is responsible for monitoring and
and monitoring reviewing the performance of the Chief Executive Officer
senior management ("CEO") and senior officers and for ensuring adequate
succession for their positions. The Human Resources and
Compensation ("HRC") Committee is specifically mandated to
ensure that appropriate executive succession planning and
performance evaluation programs are in place and that they
are operating effectively. The committee conducts an
annual review of the performance of the CEO against
predetermined goals and criteria. Senior management
performance evaluations are undertaken annually, under the
aegis of the CEO, and the results are reviewed by the
committee. The committee also reviews and reports to the
Board of Directors on the succession plan for senior
management positions, including the position of the CEO.
In addition, succession planning is included in the job
descriptions for senior management.
d. communications policy Yes The Board of Directors is specifically mandated to ensure
systems are in place for communications with Suncor's
shareholders and other stakeholders. Through Company
policies, procedures and processes, Suncor seeks to
interpret its operations for its shareholders and other
stakeholders, through a variety of channels, including its
annual reports, quarterly reports, news releases
(including regular outlook and guidance releases),
environmental reports, website materials, briefing
sessions and group meetings. The Company encourages and
provides for stakeholder feedback, through corporate
communications and investor relations programs.
e. integrity of Yes The Board of Directors is specifically mandated to ensure
internal control processes are in place to monitor and maintain the integrity
and management of Suncor's internal control and management information
information systems systems. The Audit Committee is specifically mandated to
assist the Board of Directors by reviewing the
effectiveness of financial reporting, management
information and internal control systems. This function
includes a review of the evaluation of these systems by
internal and external auditors, as well as the activities,
organizational structure and qualifications of internal
auditors, and the independence of external auditors.
2
CORPORATE GOVERNANCE SUNCOR
GUIDELINE ALIGNMENT COMMENTARY
------------------------- --------- ------------------------------------------------------------
2. Majority of directors Yes Suncor currently has eleven directors, and the Board of
should be Directors has determined that eleven directors will be
"unrelated", and how elected at the Meeting. Richard L. George (President and
these conclusions CEO) is the only director who is related. This conclusion
were reached was reached by a review and analysis of the financial,
contractual and other relationships of each director and
their associates and affiliates, with Suncor and its
affiliates, and an assessment of the materiality of any
such relationships and the effect, if any, on the
independence of each individual director. Mr. O'Brien, a
Board nominee, if elected, will initially and for a period
of time thereafter be considered a "related" director as
he is an executive officer of the Company. Mr. O'Brien has
announced his retirement from the Company in June 2002.
3. Appoint a
Committee:
a. responsible for the Yes The Chairman of the Board works with the CEO to plan Board
appointment and composition and succession, and these plans are reviewed by
assessment of by the Board Policy Committee. The Board Policy Committee,
directors meeting in the absence of any inside (management) directors
who are members of that committee, has the mandate to
consider nominations for directors, maintain a list of
potential candidates, recommend Board nominations to the
full Board of Directors and evaluate the performance and
contribution of directors. Mr. George is the only inside
director currently serving on the Board Policy Committee.
b. composed Yes As noted above, Mr. George has input into Board composition
exclusively of through his role as CEO. However, as an inside director he
outside (i.e., does not participate in the Board Policy Committee's
non-management) assessment and nomination processes.
directors
c. the majority of Yes Of the six members of the Committee, only one member
whom are unrelated (Mr. George) is a related director. He does not participate
in the Committee's Board assessment and Board nomination
processes.
4. Implement a process Yes The Board Policy Committee annually assesses and evaluates
for assessing the the performance and contribution of individual members of
effectiveness of the Board of Directors and the effectiveness of the Board
the Board of of Directors and its committees.
Directors, its
committees and
individual directors
3
CORPORATE GOVERNANCE SUNCOR
GUIDELINE ALIGNMENT COMMENTARY
------------------------- --------- ------------------------------------------------------------
5. Provide orientation Yes Suncor provides orientation and education materials to new
and education members of the Board of Directors, and conduct a formal
programs for new orientation program involving meetings with senior management
directors on key legal, environmental, business, financial and
operational issues. Suncor's Corporate Secretary maintains
and updates a "Director's Book", a copy of which is given
to each director, containing pertinent information relating
to the Board and the Company.
Presentations and tours at the sites of Suncor's principal
operations are provided to directors on a periodic basis,
often in conjunction with Board meetings, for the purpose
of acquainting them with Suncor's operations and the
communities in which they are carried on.
6. Consider size of Yes The Board of Directors is specifically mandated to fix its
Board of Directors, size, subject to shareholder approval, where required. The
and impact of the Board Policy Committee is charged with the duty of assisting
number on Board the Board of Directors in matters pertaining to, among
effectiveness other things, the organization and composition of the Board
of Directors.
There are currently eleven members of Suncor's Board of
Directors, and it is proposed that eleven directors be
elected at the Meeting. The Board of Directors has
determined an appropriate size for Suncor's Board of
Directors is in the range of ten to fourteen directors.
7. Review compensation Yes The HRC Committee reviews and reports to the Board of
of directors in Directors on directors' compensation issues. The committee
light of risks and has developed, in consultation with outside advisors,
responsibilities guidelines for director compensation based on, among
other factors, directors' roles and responsibilities and an
analysis of the competitive position of Suncor's director
compensation program. The Board has set director
compensation based upon recommendations from this
committee.
4
CORPORATE GOVERNANCE SUNCOR
GUIDELINE ALIGNMENT COMMENTARY
------------------------- --------- ------------------------------------------------------------
8. Committees should Yes Richard L. George (President and CEO) is a member of the
generally be Board Policy Committee (See above). As noted above,
composed of outside Mr. O'Brien, a Board nominee, if elected, will be also
directors, a initially and for a period of time thereafter a related
majority of whom director.
are unrelated
Subject to the above exception, all Board committees are
currently comprised solely of outside and unrelated
directors.
Mr. Shaw (Chairman of the Board of Directors) is a member
of the Board Policy Committee and the HRC Committee. While
Mr. Shaw may be considered an "officer" of the Company by
virtue of his position as Chairman, he serves as such in a
non-executive capacity. Accordingly, he is considered an
"outside" director of Suncor for the purposes of the
Guidelines.
9. Appoint a committee Yes The Board Policy Committee assists the Board of Directors
responsible for in matters pertaining to the Company's approach to
Suncor's approach governance issues, the organization and composition of the
to corporate Board of Directors, the organization and conduct of Board
governance issues meetings, and the effectiveness of the Board of Directors
in performing and fulfilling its responsibilities.
10a. Define limits to
management's
responsibilities by
developing mandates
for:
i. the Board of Yes The Board of Directors has developed and approved its
Directors mandate, which includes a description of its major goals
and duties. The Board of Directors has also developed and
approved a management control process policy which sets out
the specific authority that has been delegated to
management by the Board of Directors. The Board of
Directors has plenary power and has reserved to itself all
authority not specifically delegated.
ii. the Chief Yes There is an accountability statement for the office of CEO
Executive which defines the main role of the position and identifies
Officer its key accountabilities, described in more detail in the
"Report on Executive Compensation".
b. Board of Directors Yes The corporate objectives for which the CEO is responsible
should approve the are set annually by the Board of Directors in consultation
Chief Executive with the Board Policy Committee. In addition, the HRC
Officer's corporate Committee annually reviews the CEO's performance goals
objectives and criteria, and his performance is measured against
these criteria in conjunction with compensation reviews.
5
CORPORATE GOVERNANCE SUNCOR
GUIDELINE ALIGNMENT COMMENTARY
------------------------- --------- ------------------------------------------------------------
11. Establish Yes The Chairman of the Board is independent of Suncor's
structures and management.
procedures to
enable the Board of The Board of Directors and its committees meet independently
Directors to of management when warranted. In addition, in camera
function sessions are held at Board meetings in the absence of both
independently of management and inside directors.
management
12a. Ensure an Audit Yes The mandate of Suncor's Audit Committee, described in
Committee has a general terms under "Statement of Corporate Governance
specifically Practices" of the Circular, includes the following specific
defined mandate and duties:
direct
communication o Enquire as to the adequacy of Suncor's system of internal
channels with controls
internal and o Review the evaluation of internal and financial controls
external auditors by internal and external auditors, respectively
o Review management's monitoring of compliance with the
Company's business conduct code
o Oversee the financial aspects of Suncor's pension plan
o Review financial statements and related disclosure
documents, including related accounting and legal
developments
o Review and monitor audit functions and findings
o Review corporate policies and practices relating to cash
management, financial risk management, financing, credit
and taxation related matters
o Conduct independent investigations into any matters which
come under its scope of responsibilities
The Audit Committee has direct communication channels with
Suncor's internal and external auditors and meets regularly
with the external auditors without presence of management.
Suncor's Director of Internal Audit reports directly to the
Audit Committee on a regular basis.
b. all members should Yes
be non-management
directors
13. Implement a system Yes Individual directors may engage outside advisors at Suncor's
to enable expense with the approval of the Chairman of the Board of
individual Directors, Chairman of the Board Policy Committee or the
directors to engage Board Policy Committee.
outside advisors at
the Company's
expense
6
APPENDIX B
SUNCOR ENERGY INC.
BY-LAW NO. 1
By-laws regulating the business and affairs
of the Corporation
(Amended and Restated as of FEBRUARY 28, 2002)
----------------------------------------------------------
1. BOARD OF DIRECTORS AND BOARD COMMITTEES
(a) NUMBER OF DIRECTORS - Subject to any minimum and maximum number of
directors specified in the Articles, the number of directors to be elected at
any meeting of shareholders shall be the number of directors then in office, or
such other number as has been determined from time to time by resolution of the
board of directors.
(b) COMMITTEES - The board of directors may appoint from among their
numbers one or more committees of directors, however designated, and subject to
the CANADA BUSINESS CORPORATIONS ACT AND THE REGULATIONS PROMULGATED THEREUNDER,
ALL AS AMENDED FROM TIME TO TIME (the "Act"), may delegate to such committee or
committees any of the powers of the directors. The board of directors shall
appoint a chairman of each such committee to serve at the pleasure of the board.
Subject to the Act and By-laws, and unless otherwise determined by resolution of
the board of directors, a majority of the members of a committee shall
constitute a quorum for meetings of committees, and in all other respects, each
such committee shall have the power to determine its own rules of procedure.
2. MEETINGS OF SHAREHOLDERS
(a) PLACE AND TIME - Meetings of shareholders of the Corporation shall be
held at the registered office of the Corporation or at such other place within
Canada on such date and at such time as may be determined from time to time by
the board of directors. TO THE EXTENT PERMITTED BY THE ACT, MEETINGS OF
SHAREHOLDERS MAY BE HELD ENTIRELY BY MEANS OF A TELEPHONIC, ELECTRONIC OR OTHER
COMMUNICATION FACILITY, INCLUDING TELECONFERENCING, VIDEO CONFERENCING, COMPUTER
LINK, WEBCASTING AND OTHER SIMILAR MEANS.
(b) CHAIRMAN - The Chairman of the Board, if any, or, in his absence or in
case of his inability or refusal or failure to act, such other person (other
than a person who is an executive officer or employee of the Corporation) as may
have been designated by the Chairman of the Board to exercise such function in
his absence, shall preside at meetings of shareholders. In the absence of all
such persons or, in case of their inability or refusal or failure to act, the
persons present entitled to vote shall choose another director as chairman and
if no director is present, or if all the directors present refuse to act, then
the persons entitled to vote shall choose one of their number to be chairman of
the meeting.
(c) QUORUM - At all meetings of shareholders, except meetings at which only
holders of one or more classes or one or more series of preferred shares are
entitled to vote, it shall be necessary in order to constitute a quorum for two
persons entitled to vote at the meeting to be present and for not less than 10
per cent of the outstanding shares of the Corporation which may be voted at the
meeting to be represented in person or by proxy or by a duly authorized
representative of a shareholder. At all meetings at which only holders of a
particular class or series of preferred shares are entitled to vote, it shall be
necessary in order to constitute a quorum
1
for two persons entitled to vote at the meeting to be present. If a quorum is
present at the opening of any meeting of shareholders, the shareholders
present or represented may proceed with the business of the meeting
notwithstanding that a quorum is not present throughout the meeting. If a
quorum is not present at the opening of any meeting of shareholders, the
holders present or represented of a majority of the shares represented at the
meeting may adjourn the meeting to a fixed time (at least 24 hours after the
time fixed for the meeting) and place, but no other business may be
transacted. Notwithstanding the foregoing, at such adjourned meeting the
shareholder or shareholders entitled to vote then present or represented
shall constitute a quorum.
(d) PROXIES - A shareholder is entitled to vote in person or by proxy or,
if a body corporate or an association, by any individual duly authorized by a
resolution of the directors or governing body of the body corporate or
association. TO THE EXTENT PERMITTED BY THE ACT, THE DIRECTORS MAY PROVIDE FOR
THE DEPOSITING AND TABULATION OF PROXIES BY TELEPHONIC, ELECTRONIC OR OTHER
COMMUNICATION MEANS.
(e) PROCEDURE AND VOTING AT MEETINGS - The chairman of a meeting of
shareholders shall conduct the meeting and shall determine the procedure thereof
in all respects. His decision on all matters or things shall be conclusive and
binding upon the meeting. Except as may be otherwise prescribed by law, a
majority of the votes cast shall be sufficient for all purposes and shall be the
decision of the meeting. In case of an equality of votes, the chairman of the
meeting shall have a casting vote in addition to the vote or votes to which he
is entitled as a shareholder, a proxyholder or a duly authorized representative
of a shareholder. Every matter submitted to a meeting of shareholders for
decision shall be decided on a show of hands unless a ballot is required or
demanded. The chairman of the meeting may require, or any shareholder or
proxyholder may demand, a ballot on any matter either before or after any vote
by a show of hands. A demand for a ballot may be withdrawn at any time prior to
the taking of the ballot. A ballot so required or demanded shall be taken in
such manner and either at once or after adjournment, as the chairman of the
meeting shall direct. The result of the ballot shall be the decision of the
meeting, whether or not a vote by a show of hands shall have been taken
previously on the same matter. Every person entitled to vote at a meeting of
shareholders shall have one vote on a show of hands and, subject to the articles
of the Corporation, upon a ballot shall be entitled to one vote for each share
of the Corporation having such voting right which he holds or represents.
NOTWITHSTANDING THE FOREGOING, TO THE EXTENT PERMITTED BY THE ACT, A PERSON
ENTITLED TO VOTE AT A MEETING OF SHAREHOLDERS MAY VOTE BY MEANS OF A TELEPHONIC,
ELECTRONIC OR OTHER COMMUNICATION FACILITY THAT THE CORPORATION HAS MADE
AVAILABLE FOR THAT PURPOSE.
(f) SCRUTINEERS - The chairman of a meeting of shareholders may, or if a
ballot is to be taken shall, appoint one or more persons who need not be
shareholders to act as scrutineers of the meeting or any adjournment thereof.
(g) ADDRESSES OF SHAREHOLDERS - Every shareholder shall furnish to the
Corporation an address to or at which all notices and documents intended for the
shareholder shall be sent. If no address appears in the records of the
Corporation, such notice or document may be sent to such address as may be
considered to be the most likely to result in the notice or document reaching
the shareholder. The accidental omission to give any notice or document to any
shareholder shall not invalidate any action taken at any meeting held pursuant
to such notice or otherwise based thereon.
3. MEETINGS OF DIRECTORS
(a) PLACE, TIME AND NOTICE - Subject to the provisions of any resolution
of the board of directors, meetings of the board of directors may be called
at any time by the Chairman of the Board, or any two directors, or the
President, or in the absence or disability of the President, any two
Vice-Presidents, or by order of the board of directors, and meetings of any
committee of the board of directors may be called at any time by the
aforesaid persons, or by the chairman of the
2
applicable committee, or by order of the applicable committee. Notice of
the time and place for holding any meeting of the board of directors or any
committee shall be given at least 48 hours prior to the time fixed for the
meeting. Any meeting so called may be held at the registered office of the
Corporation or any other place which shall have been fixed by the board of
directors or committee, as applicable.
(b) CHAIRMAN - Subject to the provisions of any resolution of the board of
directors, the Chairman of the Board, if any, or, in his absence or in case of
his inability or refusal or failure to act, such other director (other than a
director who is an executive officer or employee of the Corporation), if any,
designated from time to time by the Chairman of the Board to exercise such
function in his absence, shall preside at meetings of the board of directors,
and the chairman of a committee, if any, or, in case of his absence or inability
or refusal or failure to act, that one member of the applicable committee (who
is a director other than a director who is an executive officer or employee of
the Corporation), if any, designated by the chairman of the committee to
exercise such function in his absence, shall preside at meetings of the
committee. If the Chairman of the Board or committee chairman, as applicable,
and such designated director, if any, be absent or unable or refuse or fail to
act, the directors present may choose a chairman from among their number. The
chairman at any meeting of directors or a committee may vote as a director.
(c) QUORUM - A majority of the directors in office shall constitute a
quorum for a meeting of the board of directors.
(d) VOTING - Questions arising at a meeting of the directors or any
committee shall be decided by a majority of the votes cast. In case of an
equality of votes, the chairman of the meeting shall have casting vote in
addition to the vote to which he is entitled as a director.
4. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) INDEMNITY - Subject to the limitations contained in the Act, the
Corporation shall indemnify a director or officer of the Corporation, a former
director or officer of the Corporation, or a person who acts or acted at the
Corporation's request as a director or officer, OR IN A SIMILAR CAPACITY, OF
ANOTHER ENTITY, and his heirs and representatives, against all costs, charges
and expenses, including an amount paid to settle an action or satisfy a
judgement, reasonably incurred by him in respect of any civil, criminal,
administrative, INVESTIGATIVE OR OTHER PROCEEDING TO WHICH HE IS INVOLVED BY
REASON OF THAT ASSOCIATION WITH THE CORPORATION OR SUCH OTHER ENTITY, if
(i) he acted honestly and in good faith with a view to the best interests
of the Corporation OR, AS THE CASE MAY BE, TO THE BEST INTERESTS OF
THE OTHER ENTITY FOR WHICH HE ACTED AS A DIRECTOR OR OFFICER OR IN A
SIMILAR CAPACITY AT THE CORPORATION'S REQUEST; and
(ii) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, he had reasonable grounds for
believing that his conduct was lawful.
[DELETED TEXT]
(b) INSURANCE - The Corporation may purchase and maintain insurance for the
benefit of any person referred to in clause 4(a) hereof against such liability
as the board of directors may from time to time determine and as permitted by
the Act.
5. DELEGATION
Without limit to the powers of the board of directors as provided in the
Act, but subject to any limitations as provided in the Act, the board of
directors may from time to time on behalf of
3
the Corporation delegate to one or more persons whether or not directors or
officers of the Corporation all or any of their powers to such extent and in
such manner as the board of directors shall determine at the time of each
such delegation.
6. EXECUTION OF DOCUMENTS
The board of directors may from time to time determine the officers or
other persons by whom any particular document or instrument or class of
documents or instructions of the Corporation shall be executed and the manner of
execution thereof, including the use of facsimile reproduction of any or all
signatures and the use of the corporate seal or a facsimile reproduction
thereof.
7. NOTICES
(a) METHOD OF GIVING NOTICES - Subject to the Act, any notice (which term
includes any communication or other document) to be given (which term includes
sent, delivered or served) pursuant to the Act the Articles, the by-laws or
otherwise to a shareholder, director, officer or auditor may be given and, if so
given, shall be sufficiently given if delivered personally to the person to whom
it is to be given or if delivered to his recorded address or if mailed to him at
his recorded address by prepaid ordinary mail (except in the event of an actual
or threatened stoppage or slow-down in mail delivery, in which case an alternate
method of giving notice shall be used) or if sent to him at his recorded address
(which term shall include his recorded facsimile number or electronic mail
address) by means of any prepaid transmitted or recorded communication,
INCLUDING BY MEANS OF TELECOPY, FACSIMILE OR OTHERWISE BY ELECTRONIC MEANS. A
notice so delivered shall be deemed to have been given and received when it is
delivered personally or to the recorded address as aforesaid; a notice so mailed
shall be deemed to have been given when deposited in a post office or public
letter box and shall be deemed to have been received at the time it would be
delivered in the ordinary course of mail, unless there are reasonable grounds
for believing that the person to whom it is delivered or mailed did not receive
the document within that time or at all. A notice so sent by any means of
transmitted or recorded communication shall be deemed to have been given when
dispatched or transmitted by or on behalf of the Corporation, and shall be
deemed to have been received at the same time, unless there are reasonable
grounds for believing that the person to whom it is sent did not receive the
notice within that time or at all. Notwithstanding the foregoing, any notice so
delivered (other than by prepaid ordinary mail), dispatched or transmitted to
the recorded address after 5:00 p.m. local time at the place of delivery or on a
Saturday, Sunday or banking holiday (a "non-business day") at the place of
delivery, shall be deemed to have been received at 8:00 a.m. local time on the
first day thereafter that is not a non-business day. The secretary may change or
cause to be changed the recorded address of any shareholder, director, officer
or auditor in accordance with any information believed by him to be reliable.
Nothing in this section shall be construed as precluding the giving of notice by
the Corporation in any other manner.
(b) NOTICE TO JOINT SHAREHOLDERS - If two or more persons are registered as
joint holders of any share, any notice shall be addressed to all of such joint
holders, but notice to one of such persons shall be sufficient notice to all of
them.
(c) OMISSIONS AND ERRORS - The accidental omission to give any notice to
any shareholder, director, officer or auditor or the non-receipt of any notice
by any such person or any error in any notice not affecting the substance
thereof shall not invalidate any action taken at any meeting held pursuant to
such notice or otherwise founded thereon.
(d) PERSONS ENTITLED BY DEATH OR OPERATION OF LAW - Every person who, by
operation of law, transfer, death of a shareholder or any other means
whatsoever, shall become entitled to any share shall be bound by every notice in
respect of such share which shall have been duly given to the shareholder from
whom he derives his title to such share prior to his name and address being
entered on the securities register (whether such notice was given before or
4
after the happening of the event upon which he became so entitled) and prior to
his furnishing to the Corporation the proof of authority or evidence of his
entitlement prescribed by the Act.
8. INTERPRETATION
In this by-law, words importing the singular number include the plural and
vice versa; words importing the masculine gender include the feminine gender;
and words importing persons include individuals, corporations, partnerships,
trusts and unincorporated organizations.
-----------------------------------------------
5
APPENDIX C
2002 SHAREHOLDER RIGHTS PLAN
SUMMARY OF KEY FEATURES
The following is a summary of the features of the 2002 Rights Plan. The
summary is qualified in its entirety by the full text of the 2002 Rights Plan, a
copy of which is available from the Company as described in the Circular. All
defined terms, where used in this summary without definition, have the meanings
attributed to them in the 2002 Rights Plan. There are no substantive differences
between the 2002 Rights Plan and the 1999 Rights Plan.
(a) Issuance of Rights
One Right was issued by the Company in respect of each Common Share
outstanding at the close of business on January 25, 1996, the date of
implementation of the Original Plan, and one Right was issued and will
continue to be issued in respect of each Common Share of the Company issued
thereafter, prior to the earlier of the Separation Time and the Expiration
Time. Under the 2002 Rights Plan, the Rights are simply reconfirmed and the
Company reconfirms its authorization to continue the issuance of new Rights
for each Common Share issued. Each Right entitles the registered holder
thereof to purchase from the Company one Common Share. The exercise price
under the 1999 Rights Plan was $75, reflecting an adjustment for the
two-for-one stock split of Company's Common Shares in 2000. In the 2002
Plan, after giving effect to the proposed Stock Split, the exercise price
is re-established at $150 per Common Share to reflect what the Company
believes is a more appropriate exercise price. The Rights are not
exercisable until the Separation Time. If a Flip-In Event occurs, each
Right will entitle the registered holder to receive, upon payment of the
Exercise Price, Common Shares of the Company having an aggregate market
price equal to twice the Exercise Price.
The 2002 Rights Plan includes a new provision that the Company is not
required to issue or deliver Rights, or securities upon the exercise of
Rights, outside Canada or the United States, where such issuance or
delivery would be unlawful without registration of the relevant Persons or
securities. If the 2002 Rights Plan would require compliance with
securities laws or comparable legislation of a jurisdiction outside Canada
and the United States, the Board of Directors may establish procedures for
the issuance to a Canadian resident fiduciary of such securities, to hold
such Rights or other securities in trust for the Persons beneficially
entitled to them, to sell such securities, and to remit the proceeds to
such Persons.
(b) Trading of Rights
Until the Separation Time (or the earlier termination or expiration of the
Rights), the Rights will be evidenced by the certificates representing the
Common Shares of the Company and will be transferable only together with
the associated Common Shares. From and after the Separation Time, separate
certificates evidencing the Rights ("Rights Certificates"), together with a
disclosure statement prepared by the Company describing the Rights, will be
mailed to holders of record of Common Shares (other than an Acquiring
Person) as of the Separation Time. Rights Certificates will also be issued
in respect of Common Shares issued prior to the Expiration Time, to each
holder (other than an Acquiring Person) converting, after the Separation
Time, securities ("Convertible Securities") convertible into or
exchangeable for Common Shares. The Rights will trade separately from the
Common Shares after the Separation Time.
1
(c) Separation Time
The Separation Time is the Close of Business on the tenth Business Day
after the earlier of (i) the "Stock Acquisition Date", which is generally
the first date of public announcement of facts indicating that a Person has
become an Acquiring Person; and (ii) the date of the commencement of, or
first public announcement of the intent of any Person (other than the
Company or any Subsidiary of the Company) to commence a Take-over Bid
(other than a Permitted Bid or a Competing Permitted Bid, so long as such
bid continues to satisfy the requirements of a Permitted Bid or Competing
Permitted Bid). In either case, the Separation Time can be such later date
as may from time to time be determined by the Board of Directors. If a
Take-over Bid expires, is cancelled, terminated or otherwise withdrawn
prior to the Separation Time, it shall be deemed never to have been made.
(d) Acquiring Person
In general, an Acquiring Person is a Person who is the Beneficial Owner of
20% or more of the Company's outstanding Voting Shares. Excluded from the
definition of "Acquiring Person" are the Company and its Subsidiaries, and
any Person who becomes the Beneficial Owner of 20% or more of the
outstanding Voting Shares as a result of one or more or any combination of
an acquisition or redemption by the Company of Voting Shares, a Permitted
Bid Acquisition, an Exempt Acquisition, a Convertible Security Acquisition
and a Pro Rata Acquisition. The definitions of "Permitted Bid Acquisition",
"Exempt Acquisition", "Convertible Security Acquisition" and "Pro Rata
Acquisition" are set out in the 2002 Rights Plan Agreement. However, in
general:
(i) a "Permitted Bid Acquisition" means an acquisition of Voting Shares
made pursuant to a Permitted Bid or a Competing Permitted Bid;
(ii) an "Exempt Acquisition" means a share acquisition in respect of which
the Board of Directors has waived the application of the 2002 Rights
Plan, which was made prior to the date of the Original Plan, which was
made pursuant to a dividend reinvestment plan of the Company, or which
was made pursuant to a distribution by the Company of Voting Shares or
Convertible Securities by way of a private placement by the Company or
upon the exercise by an individual employee of stock options granted
under a stock option plan of the Company or rights to purchase
securities granted under a share purchase plan of the Company. It also
means a share acquisition which was made pursuant to the receipt or
exercise of rights issued by the Company to all the holders of Voting
Shares (other than holders resident in a jurisdiction where such
distribution is restricted or impracticable as a result of applicable
law) to subscribe for or purchase Voting Shares or Convertible
Securities, or which was made pursuant to a distribution to the public
by the Company of Voting Shares or Convertible Securities made
pursuant to a prospectus, as long as the Person acquiring same does
not thereby acquire a great percentage of Voting Shares or Convertible
Securities than the percentage held by such Person immediately prior
to the acquisition;
(iii) a "Convertible Security Acquisition" means an acquisition of Voting
Shares upon the exercise of Convertible Securities received by such
Person pursuant to a Permitted Bid Acquisition, Exempt Acquisition or
a Pro Rata Acquisition; and
(iv) a "Pro Rata Acquisition" means an acquisition of Voting Shares or
Convertible Securities as a result of a stock dividend, a stock split
or other similar event, acquired on the same pro rata basis as all
other holders of Voting Shares.
Also excluded from the definition of "Acquiring Person" are underwriters or
members of a banking or selling group acting in connection with a
distribution of securities by way of
2
prospectus or private placement, and a Person in its capacity as an
Investment Manager, Trust Company, Plan Trustee, Statutory Body or Crown
agent or agency (provided that such person is not making or proposing to
make a Take-over Bid).
To the best of the knowledge of the directors and senior officers of the
Company, as of the date hereof, no person is the Beneficial Owner of 20% or
more of the outstanding Voting Shares.
(e) Beneficial Ownership
In general, a Person is deemed to Beneficially Own Common Shares actually
held by others in circumstances where those holdings are or should be
grouped together for purposes of the 2002 Rights Plan. Included are
holdings by the Person's Affiliates (generally, a person that controls, is
controlled by, or under common control with another person) and Associates
(generally, relatives sharing the same residence). Also included are
securities which the Person or any of the Person's Affiliates or Associates
has the right to acquire within 60 days (other than (1) customary
agreements with and between underwriters and/or banking group and/or
selling group members with respect to a public offering of securities; or
(2) pursuant to a pledge of securities).
A Person is also deemed to "Beneficially Own" any securities that are
Beneficially Owned (as described above) by any other Person with which the
Person is acting jointly or in concert (a "Joint Actor"). A Person is a
Joint Actor with any Person who is a party to an agreement, arrangement or
understanding with the first Person or an Associate or Affiliate thereof
for the purpose of acquiring or offering to acquire Common Shares.
(i) Institutional Shareholder Exemptions from Beneficial Ownership
The definition of "Beneficial Ownership" contains several exclusions
whereby a Person is not considered to "Beneficially Own" a security.
There are exemptions from the deemed "Beneficial Ownership" provisions
for institutional shareholders acting in the ordinary course of
business. These exemptions apply to (i) an investment manager
("Investment Manager") which holds securities in the ordinary course
of business in the performance of its duties for the account of any
other Person (a "Client"), including the acquisition or holding of
securities for non-discretionary accounts held on behalf of a Client
by a broker or dealer registered under applicable securities law; (ii)
a licensed trust company ("Trust Company") acting as trustee or
administrator or in a similar capacity in relation to the estates of
deceased or incompetent persons (each an "Estate Account") or in
relation to other accounts (each an "Other Account") and which holds
such security in the ordinary course of its duties for such accounts;
(iii) the administrator or the trustee (a "Plan Trustee") of one or
more pension funds or plans (a "Plan") registered under applicable
law; (iv) a Person who is a Plan or is a Person established by statute
(the "Statutory Body"), and its ordinary business or activity includes
the management of investment funds for employee benefit plans, pension
plans, insurance plans, or various public bodies, or (v) a Crown agent
or agency. The foregoing exemptions only apply so long as the
Investment Manager, Trust Company, Plan Trustee, Plan, Statutory Body
or Crown agent or agency is not then making or has not then announced
an intention to make a Take-over Bid, other than an Offer to Acquire
Voting Shares or other securities pursuant to a distribution by the
Company or by means of ordinary market transactions.
A Person will not be deemed to "Beneficially Own" a security because
(i) the Person is a Client of the same Investment Manager, an Estate
Account or an Other Account of the same Trust Company, or Plan with
the same Plan Trustee as another Person or Plan on whose account the
Investment Manager, Trust
3
Company or Plan Trustee, as the case may be, holds such security;
or (ii) the Person is a Client of an Investment Manager, Estate
Account, Other Account or Plan, and the security is owned at law or
in equity by the Investment Manager, Trust Company or Plan Trustee,
as the case may be.
(ii) Exemption for Permitted Lock-up Agreement
A Person will not be deemed to "Beneficially Own" any security where
the holder of such security has agreed to deposit or tender such
security pursuant to a Permitted Lock-up Agreement to a Take-over Bid
made by such Person or such Person's Affiliates or Associates or a
Joint Actor, or such security has been deposited or tendered pursuant
to a Take-over Bid made by such Person or such Person's Affiliates,
Associates or Joint Actors until the earliest time at which any such
tendered security is accepted unconditionally for payment or is taken
up or paid for.
A Permitted Lock-up Agreement is essentially an agreement between a
Person and one or more holders of Voting Shares (the terms of which
are publicly disclosed and made available to the public within the
time frames set forth in the definition of Permitted Lock-up
Agreement) pursuant to which each Locked-up Person agrees to deposit
or tender Voting Shares to the Lock-up Bid and which further provides
that such agreement permits the Locked-up Person to withdraw its
Voting Shares in order to deposit or tender the Voting Shares to
another Take-Over Bid or support another transaction: (i) at a price
or value that exceeds the price under the Lock-Up Bid; or (ii) is for
a number of Voting Shares at least 7% greater than the number of
Voting Shares under the Lock-Up Bid at a price or value that is not
less than the price or value offered in the Lock-up Bid; or (iii) that
contains an offering price that exceeds the offering price in the
Lock-up Bid by as much as or more than a Specified Amount and does not
provide for a Specified Amount greater than 7% of the offering price
in the Lock-up Bid.
A Permitted Lock-up Agreement may contain a right of first refusal or
require a period of delay to give the Person who made the Lock-up Bid
an opportunity to match a higher price in another Take-Over Bid or
transaction or other similar limitation on a Locked-up Person's right
to withdraw Voting Shares so long as the limitation does not preclude
the exercise by the Locked-up Person of the right to withdraw Voting
Shares during the period of the other Take-Over Bid or transaction.
Finally, under a Permitted Lock-up Agreement no "break up" fees, "top
up" fees, penalties, expenses or other amounts that exceed in
aggregate the greater of (i) 2-1/2% of the price or value of the
consideration payable under the Lock-up Bid; and (ii) 50% of the
amount by which the price or value of the consideration received by a
Locked-up Person under another Take-Over Bid or transaction exceeds
what such Locked-up Person would have received under the Lock-up Bid;
can be payable by such Locked-up Person if the Locked-up Person fails
to deposit or tender Voting Shares to the Lock-up Bid or withdraws
Voting Shares previously tendered thereto in order to deposit such
Voting Shares to another Take-Over Bid or support another transaction.
(f) Flip-In Event
A Flip-In Event occurs when any Person becomes an Acquiring Person. In the
event that, prior to the Expiration Time, a Flip-In Event which has not
been waived by the Board of Directors occurs (see "Redemption, Waiver and
Termination"), each Right (except for Rights Beneficially Owned or which
may thereafter be Beneficially Owned by an Acquiring Person or a transferee
of such a Person, which Rights will become null and void) shall constitute
the right to purchase from the Company, upon exercise thereof in accordance
4
with the terms of the 2002 Rights Plan, that number of Common Shares having
an aggregate Market Price on the date of the Flip-In Event equal to twice
the Exercise Price, for the Exercise Price (such Right being subject to
anti-dilution adjustments). For example, if at the time of the Flip-In
Event the Exercise Price is $150 and the Market Price of the Common Shares
is $50, the holder of each Right would be entitled to purchase Common
Shares having an aggregate Market Price of $300 (that is, 6 Common Shares)
for $150 (that is, a 50% discount from the Market Price).
(g) Permitted Bid and Competing Permitted Bid
A Permitted Bid is a Take-over Bid made by way of a Take-over Bid circular
and which complies with the following additional provisions:
(i) the Take-over Bid is made to all holders of record of Voting Shares,
other than the Offeror;
(ii) the Take-over Bid contains irrevocable and unqualified conditions
that:
(I) no Voting Share shall be taken up or paid for pursuant to the
Take-over Bid prior to the close of business on a date which is
not less than 60 days following the date of the Take-over Bid and
the provisions for the take-up and payment for Voting Shares
tendered or deposited thereunder shall be subject to such
irrevocable and unqualified condition;
(II) unless the Take-over Bid is withdrawn, Voting Shares may be
deposited pursuant to the Take-over Bid at any time prior to the
close of business on the date of first take-up or payment for
Voting Shares and all Voting Shares deposited pursuant to the
Take-over Bid may be withdrawn at any time prior to the close of
business on such dates;
(III) more than 50% of the outstanding Voting Shares held by
Independent Shareholders must be deposited to the Take-over Bid
and not withdrawn at the close of business on the date of first
take-up or payment for Voting Shares; and
(IV) in the event that more than 50% of the then outstanding Voting
Shares held by Independent Shareholders have been deposited to
the Take-over Bid and not withdrawn as at the date of first
take-up or payment for Voting Shares under the Take-over Bid, the
Offeror will make a public announcement of that fact and the
Take-over Bid will remain open for deposits and tenders of Voting
Shares for not less than 10 Business Days from the date of such
public announcement.
A Competing Permitted Bid is a Take-over Bid that is made after a
Permitted Bid has been made but prior to its expiry, satisfies all the
requirements of a Permitted Bid as described above, except that a
Competing Permitted Bid is not required to remain open for 60 days so
long as it is open until the later of (i) the earliest date on which
Common Shares may be taken-up or paid for under any earlier Permitted
Bid or Competing Permitted Bid that is in existence and (ii) 35 days
(or such other minimum period of days as may be prescribed by
applicable law in Alberta) after the date of the Take-over Bid
constituting the Competing Permitted Bid.
(h) Redemption, Waiver and Termination:
(i) REDEMPTION OF RIGHTS ON APPROVAL OF HOLDERS OF VOTING SHARES AND
RIGHTS. The Board of Directors acting in good faith may, after having
obtained the prior
5
approval of the holders of Voting Shares or Rights, at any time prior
to the occurrence of a Flip-In Event, elect to redeem all but not less
than all of the then outstanding Rights at a redemption price of
$0.00001 per Right, appropriately adjusted for anti-dilution as
provided in the 2002 Rights Plan (the "Redemption Price").
(ii) WAIVER OF INADVERTENT ACQUISITION. The Board of Directors acting in
good faith may waive the application of the 2002 Rights Plan in
respect of the occurrence of any Flip-In Event if (i) the Board of
Directors has determined that a Person became an Acquiring Person
under the 2002 Rights Plan by inadvertence and without any intent or
knowledge that it would become an Acquiring Person; and (ii) the
Acquiring Person has reduced its Beneficial Ownership of Voting Shares
such that at the time of waiver the Person is no longer an Acquiring
Person.
(iii) DEEMED REDEMPTION. In the event that a Person who has made a
Permitted Bid or a Take-over Bid in respect of which the Board of
Directors has waived or has deemed to have waived the application of
the 2002 Rights Plan consummates the acquisition of the Voting Shares,
the Board of Directors shall be deemed to have elected to redeem the
Rights for the Redemption Price.
(iv) DISCRETIONARY WAIVER WITH MANDATORY WAIVER OF CONCURRENT BIDS. The
Board of Directors acting in good faith may, prior to the occurrence
of the relevant Flip-In Event as to which the 2002 Rights Plan has not
been waived under this clause, upon prior written notice to the Rights
Agent, waive the application of the 2002 Rights Plan to a Flip-In
Event that may occur by reason of a Take-over Bid made by means of a
Take-over Bid circular to all holders of record of Voting Shares.
However, if the Board of Directors waives the application of the 2002
Rights Plan, the Board of Directors shall be deemed to have waived the
application of the 2002 Rights Plan in respect of any other Flip-In
Event occurring by reason of such a Take-over Bid made prior to the
expiry of a bid for which a waiver is, or is deemed to have been,
granted.
(v) DISCRETIONARY WAIVER RESPECTING ACQUISITION NOT BY TAKE-OVER BID
CIRCULAR. The Board of Directors acting in good faith may, with the
prior consent of the holders of Voting Shares, determine, at any time
prior to the occurrence of a Flip-In Event as to which the application
of the 2002 Rights Plan has not been waived, if such Flip-In Event
would occur by reason of an acquisition of Voting Shares otherwise
than pursuant to a Take-over Bid made by means of a Take-over Bid
circular to holders of Voting Shares and otherwise than by
inadvertence in the circumstances described in (h)(ii) above, to waive
the application of the 2002 Rights Plan to such Flip-In Event.
However, if the Board of Directors waives the application of the 2002
Rights Plan, the Board of Directors shall extend the Separation Time
to a date subsequent to and not more than 10 Business Days following
the meeting of Shareholders called to approve such a waiver.
(vi) REDEMPTION OF RIGHTS ON WITHDRAWAL OR TERMINATION OF BID. Where a
Take-over Bid that is not a Permitted Bid is withdrawn or otherwise
terminated after the Separation Time and prior to the occurrence of a
Flip-In Event, the Board of Directors may elect to redeem all the
outstanding Rights at the Redemption Price. In such event, the 2002
Rights Plan will continue to apply as if the Separation Time had not
occurred and one Right will remain attached to each Common Share as
provided for in the 2002 Rights Plan.
If the Board of Directors is deemed to have elected or elects to redeem
the Rights as described above, the right to exercise the Rights will
thereupon, without further action and without notice, terminate and the
only right thereafter of the holders of Rights is to receive
6
the Redemption Price. Within 10 Business Days of any such election or
deemed election to redeem the Rights, the Company will notify the
holders of the Voting Shares or, after the Separation Time, the holders
of the Rights.
(i) Anti Dilution Adjustments
The Exercise Price of a Right, the number and kind of shares subject to
purchase upon exercise of a Right, and the number of Rights outstanding,
will be adjusted in certain events, including:
(i) if there is a dividend payable in Voting Shares or Convertible
Securities (other than pursuant to any optional stock dividend program
or dividend reinvestment plan or a dividend payable in Voting Shares
in lieu of a regular periodic cash dividend) on the Common Shares, or
a subdivision or consolidation of the Common Shares, or an issuance of
Common Shares or Convertible Securities in respect of, in lieu of or
in exchange for Common Shares; or
(ii) if the Company fixes a record date for the distribution to all holders
of Common Shares of certain rights or warrants to acquire Common
Shares or Convertible Securities, or for the making of a distribution
to all holders of Common Shares of evidences of indebtedness or assets
(other than regular periodic cash dividends or stock dividends payable
in Common Shares) or rights or warrants.
No adjustment to the Exercise Price of a Right will occur as a result of
the Stock Split, if approved by shareholders at the meeting.
(j) Supplements and Amendments
Changes that the Board of Directors, acting in good faith, determines are
necessary to maintain the validity of the Rights Plan as a result of any
change in any applicable legislation, rules or regulation may be made
subject to subsequent confirmation by the holders of the Common Shares or,
after the Separation Time, Rights.
The Company may make amendments to correct any clerical or typographical
error.
Subject to the above exceptions, after the Meeting, any amendment,
variation or deletion of or from the Rights Plan and the Rights, is subject
to the prior approval of the holders of Common Shares, or, after the
Separation Time, the holders of the Rights.
(k) Expiration
If the 2002 Rights Plan is ratified, confirmed and approved at the Meeting,
it will become effective immediately following such approval and remain in
force until the earlier of the Termination Time (the time at which the
right to exercise Rights shall terminate pursuant to the 2002 Rights Plan)
and the termination of the annual meeting of the shareholders in the year
2005 unless at or prior to such meeting the Independent Shareholders ratify
the continued existence of the 2002 Plan.
7
EXHIBIT 2
[SUNCOR ENERGY LOGO] [COMPUTERSHARE LOGO]
Computershare Trust Company of Canada
100 University Avenue
Toronto Ontario M5J 2Y1
Telephone 416-981-9500
1-888-267-6555
Facsimile 416-981-9803
1-888-665-5666
Jack Sample www.computershare.com
123 Main Street
Anytown PROXY NUMBER XXXXXXXX
Province ISSUE ID XXXXX
A1A3B4 HOLDER ACCOUNT NUMBER
SAMPLEABCD0.000 00
Use a black pen. Print in
CAPITAL letters inside the grey
areas as shown in this example. / A / B / C / / 1 / 2 / 3 / / X /
PROXY FORM - ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 26,
2002
NOTES TO PROXY
1. THE SHAREHOLDER SUBMITTING THIS PROXY HAS THE RIGHT TO APPOINT A PERSON TO
REPRESENT SUCH SHAREHOLDER AT THE MEETING OTHER THAN JR SHAW, RICHARD L.
GEORGE AND ROBERT W. KORTHALS. TO EXERCISE THIS RIGHT, THE SHAREHOLDER MAY
EITHER INSERT THE NAME OF THE DESIRED REPRESENTATIVE IN THE BLANK SPACE
PROVIDED OR SUBMIT ANOTHER PROPER FORM OF PROXY. (SEE REVERSE.) VOTING BY
MAIL OR BY INTERNET ARE THE ONLY METHODS BY WHICH A HOLDER MAY APPOINT A
PERSON AS PROXY OTHER THAN THE MANAGEMENT NOMINEES NAMED ON THE REVERSE OF
THIS FORM.
2. THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED BY
THE SHAREHOLDER BUT IF NO SPECIFICATION IS MADE, THEY WILL BE VOTED "FOR"
ITEMS 1, 2, 3, 4, 5 AND 6.
3. If amendments or variations to matters identified in the Notice of Meeting
or any other matters properly come before the Meeting or any adjournment
thereof, this proxy confers discretionary authority upon the shareholder's
nominee to vote on such amendments, variations or other matters as such
nominee sees fit. At the date of the Notice of Meeting, management knows of
no such amendments, variations or other matters to come before the Meeting.
4. This proxy must be signed by the shareholder or such shareholder's attorney
in writing or, if the shareholder is a corporation, by an officer or
attorney thereof duly authorized. Any proxy which is undated will be deemed
to bear the date on which it was mailed to the shareholder.
VOTE USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEK!
VOTING BY MAIL is the only method for holdings held in the name of a corporation
or holdings being voted on behalf of another individual.
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy. Have this proxy form in hand when you call.
RECEIVE DOCUMENTS ELECTRONICALLY - You can enrol to receive future
securityholder communication electronically after you vote using the Internet.
Even if you don't vote online, you can still enrol for this service. Follow the
instructions below.
----------------------------------------- ---------------------------------- --------------------------------------------------
TO VOTE USING THE TELEPHONE
(WITHIN U.S. AND CANADA) TO VOTE USING THE INTERNET TO RECEIVE DOCUMENTS ELECTRONICALLY
----------------------------------------- ---------------------------------- --------------------------------------------------
o Call toll free 1-800-816-9061 from a o Go to the following web site: o You can enrol to receive future securityholder
touch tone telephone. There is NO www.computershare.com/ca/proxy communication electronically after you vote
CHARGE for this call. using the Internet. If you don't vote online,
you can still enrol at:
o Enter your CONTROL NUMBER and PIN o Enter your CONTROL NUMBER and PIN www.computershare.com/ca/consent
NUMBER, which are located in the bottom NUMBER, which are located in the
left hand corner of this form, and then bottom left hand corner of this o Enter your CONTROL NUMBER and PIN NUMBER, which
listen for voting instructions form, and then follow the voting are located in the bottom left hand corner of
instructions on the screen. this form, and then follow the instructions on
the screen.
IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT MAIL BACK THIS PROXY FORM.
CONTROL NUMBER 12345678901234 PIN NUMBER 12345
Proxies submitted by mail, telephone or Internet must be received by 4:30 p.m.
(local time) on April 24, 2002.
THANK YOU
Mr A Sample
12345678 12345 SAMPLEABCD0.000 [BARCODE GRAPHIC OMITTED]
THIS FORM OF PROXY IS SOLICITED BY AND ON BEHALF OF MANAGEMENT.
APPOINTMENT OF PROXY
I/WE BEING HOLDER(S) OF SUNCOR ENERGY INC. HEREBY PRINT THE NAME OF THE PERSON
APPOINT(S) JR Shaw; or failing him, Richard OR YOU ARE APPOINTING IF THIS PERSON
L. George; or failing him, Robert W. Korthals IS SOMEONE OTHER THAN THE FOREGOING ______________________________
as my/our proxy to attend, act and vote on behalf of the undersigned at the
Annual and Special Meeting of Suncor Energy Inc. to be held at Keyano College
Theatre, 8115 Franklin Avenue, Fort McMurray, AB on Friday, April 26, 2002, at
10:00 a.m. (local time), or at any adjournment thereof, provided that without
otherwise limiting the generality of the authority hereby conferred, the Common
Shares registered in the name of the undersigned should be voted as specified
below.
1. ELECTION OF DIRECTORS FOR WITHHOLD
Election of Directors Nominated by / / / /
Management of the Company
2. APPOINTMENT OF AUDITOR FOR WITHHOLD
Reappointment of PricewaterhouseCoopers / / / /
LLP as Auditor
RESOLUTIONS
The Board of Directors recommends a vote FOR the following resolutions. Please
read the resolutions in full in the accompanying Management Proxy Circular, or
at www.suncor.com
3. BY-LAW NO. 1 FOR AGAINST
Resolution approving the amendment to the / / / /
Company's By-Law No. 1
4. STOCK OPTION PLAN FOR AGAINST
Resolution approving the Sunshare Performance Based / / / /
Stock Option Plan
5. SHAREHOLDER RIGHTS PLAN FOR AGAINST
Resolution approving the continuation, / / / /
amendment and restatement of the Company's
Shareholder Rights Plan.
6. DIVISION OF COMMON SHARES FOR AGAINST
Resolution approving the amendment of articles to / / / /
effect a Two-For-One Division of Common shares
If any amendment or variation to the matters identified in the Notice of Meeting
which accompanies this proxy is proposed at the Meeting or any adjournment
thereof, or if any other matter properly comes before such Meeting or any
adjournment thereof, this proxy confers discretionary authority to vote on any
such amendment or variation or such other matters according to the best judgment
of the person voting the proxy. The undersigned hereby revokes any instrument of
proxy previously given to vote at the Meeting or any adjournments thereof.
AUTHORIZED SIGNATURE(S) -- SIGN HERE -- THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
I/We authorize you to act in accordance with my/our instructions set out above.
I/We hereby revoke any Proxy previously given with respect to the Meeting. If no
voting preferences are indicated above, this Proxy will be voted as recommended
by Management.
Signature(s) Date - Day Month Year
_______________________________ / / / / / / / / / / /
EXHIBIT 3
[SUNCOR LOGO]
TO THE REGISTERED AND NON-REGISTERED SHAREHOLDERS OF SUNCOR ENERGY INC.
("SUNCOR").
Pursuant to National Policy 41, holders of Suncor common shares may
elect annually to have their names added to Suncor's interim financial statement
supplemental mailing list by completing and returning this card. Alternatively,
these reports can be accessed at www.suncor.com no later than sixty days after
the end of each quarter.
PLEASE PLACE MY NAME ON SUNCOR'S INTERIM FINANCIAL STATEMENT SUPPLEMENTAL
MAILING LIST.
Name
_______________________________________________________________________________
Apt. Street Number Street Name
_____________ ______________ ________________________________________________
City Province/State Postal Code/Zip Code
____________________________________ ___________________ ____________________
/ / SUNQ 2ENRG 06824 17N
---------------------
Place Stamp Here
---------------------
Computershare Trust Company of Canada
100 University Ave. 9th Floor
Toronto ON M5J 2Y1
EXHIBIT 4
[SUNCOR ENERGY LOGO]
Dear Shareholder:
Suncor Energy Inc.'s goal is to provide investors with access to shareholder
communications as efficiently and effectively as possible. A number of our
shareholders have expressed that electronic access provides the greatest
convenience; as such, we are pleased to announce the launch of this new document
delivery approach.
INTRODUCING ELECTRONIC ACCESS TO SHAREHOLDER COMMUNICATIONS
This initiative will give shareholders the ability to electronically access the
following important company documents easily and quickly:
o Suncor Energy Inc. Annual Report, including financial statements
o Notice of shareholder meetings
o Information Circular and proxy related materials
This initiative is meant to increase convenience for you, provide benefits to
our environment, and reduce costs. However, this new approach may not be
accessible or suitable for everyone. In this case, paper copies of company
documents will continue to be provided.
HOW TO ENROLL FOR ELECTRONIC DELIVERY OF DOCUMENTS
If you prefer the electronic option, you must have an electronic mail (e-mail)
account and access to the Internet. To take advantage of electronic delivery,
please go to www.investordeliverycanada.com and follow the instructions for
enrollment. Please use the 12 character Control Number displayed on the enclosed
Voting Instruction Form. If you hold Suncor Energy Inc. shares in multiple
accounts, you will receive meeting packages and a corresponding Control Number
for each account. You must register for each account. Each account will be coded
for electronic delivery of documents and you will be notified when companies
held in your accounts make them available on-line. An e-mail confirmation of
your election(s) for this option will be sent to your e-mail address.
ELECTRONIC VOTING
You may also vote your shares through the Internet. You will receive an e-mail
notification on how to access Suncor Energy Inc. documents when they become
available, as well as a Control Number to enable you to vote your shares through
the www.proxyvotecanada.com internet website. The control number is also
displayed on the Voting Instruction Form if you received paper copies of
documents.
Your enrollment for this option will remain in effect until you cancel it. You
may cancel your enrollment at any time by accessing the
www.investordeliverycanada.com website. Please record your Enrollment Number and
PIN (personal identification number) in a secure place for future reference.
We hope that you will take advantage of this new on-line service.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SUNCOR ENERGY INC.
Date: March 25, 2002 By: "JANICE B. ODEGAARD"
------------------------------------
JANICE B. ODEGAARD
Vice President, Associate General
Counsel and Corporate Secretary