ITEM 3 — ADVISORY VOTE ON THE FREQUENCY OF FUTURE
ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION
As part of the Dodd-Frank Act “Say-on-Pay” rules, Domtar
stockholders may indicate, by a non-binding advisory vote, the desired frequency at which they would like to have an advisory vote on the compensation paid to Domtar Named Executive Officers,
i.e.
how often a proposal similar to this
year’s Item 2 will be included in the matters to be voted on at the Annual Meeting. The choices available under the Say-on-Pay rules are every year, every two years, every three years, or to abstain. The frequency selected by the
stockholders for conducting Say-on-Pay voting at the Annual Meeting of the Stockholders of the Corporation is not a binding determination. However, the frequency selected will be given due consideration by the Board of Directors and the Human
Resources Committee in their discretion.
Our Board of Directors believes that an annual advisory vote on executive compensation provides
our stockholders, in addition to our practice of regular and open dialogue, with a consistent, clear and timely communication channel on the Corporation’s executive compensation programs. The Board of Directors and the Human Resources Committee
make executive compensation decisions every year, and an annual advisory vote would provide our directors with information that can be taken into account when they make decisions with respect to our compensation philosophy, policies and practices.
We recognize that our stockholders’ views may differ in this regard, and we therefore look forward to hearing from our stockholders as to their preferences on the frequency of this advisory vote.
The Board of Directors recommends that you select ONE YEAR as the desired frequency for a stockholders vote on executive compensation under the
Say-on-Pay rules, and unless you instruct us via proxy to vote differently, we will vote valid proxies to select ONE YEAR as the desired frequency for a stockholders vote on executive compensation paid by the Corporation to its Named Executive
Officers
.
Please mark your proxy card to indicate your preference on this Item 3 or your abstention if you wish to
abstain. A plurality of the votes cast on this Item 3 will determine the frequency selected by the stockholders, which means that we will consider stockholders to have expressed a non-binding preference for the option that receives the highest
number of favorable votes.
Please note that if you hold your shares in street name, your broker is not able to vote on your behalf
with respect to the selection of the frequency at which the stockholders of the Corporation will be asked to approve the compensation paid by the Corporation to its Named Executive Officers
.
As a result, it is important if you are a
stockholder in street name that you provide instructions to your broker or vote your shares as provided in this proxy statement.
The Board of Directors unanimously recommends a vote to select ONE YEAR as the desired frequency for a stockholders vote on executive
compensation paid by the Corporation to its Named Executive Officers.
59
2017 PROXY STATEMENT
ITEM 4 — APPROVAL OF THE MATERIAL TERMS OF THE
PERFORMANCE GOALS THAT MAY APPLY TO PERFORMANCE-BASED AWARDS UNDER THE DOMTAR CORPORATION ANNUAL INCENTIVE PLAN FOR MEMBERS OF THE MANAGEMENT COMMITTEE
Our Annual Incentive Plan (the “Annual Incentive Plan”) was adopted by the Human Resources Committee of the Board on May 17, 2007, and the material terms of the performance goals that
may apply to performance-based awards under the Annual Incentive Plan were last approved by our stockholders at our annual meeting of stockholders held on May 2, 2012. We are once again seeking stockholder approval of these material terms in
order to maintain the availability of the deduction under Section 162(m) of the Internal Revenue Code (described below) for performance-based compensation. The Human Resources Committee recommends that you vote FOR the approval of the material
terms of the performance goals that may apply to performance-based awards under the Annual Incentive Plan for Members of the Management Committee, as described in this Item 4.
Unless you instruct us via proxy to vote differently, we will vote valid proxies FOR the approval of this Item 4.
Under Section 162(m) of the Internal Revenue Code, we generally may not, for federal income tax purposes, deduct from our income the compensation paid during a taxable year to a covered
executive, to the extent that their compensation exceeds $1 million. This limitation, however, does not apply to certain performance-based compensation paid to a covered executive if the material terms of the performance goals under which the
compensation is determined and paid are disclosed to and approved by the Corporation’s stockholders.
To maintain the availability
of the deduction under Section 162(m) for performance-based compensation provided to our covered executives under the plan for an additional five years, our stockholders must approve the performance goals under the plan at the annual meeting.
If our stockholders do not approve the performance goals under the Annual Incentive Plan, payments made pursuant to the Annual Incentive Plan may not qualify for the performance-based exemption to the limitation of our ability to deduct for tax
purposes compensation in excess of $1 million paid to covered executives in a taxable year. Stockholders should be aware that we reserve the right to pay bonuses to these covered executives in appropriate circumstances, whether or not such bonuses
would be fully deductible for tax purposes.
The statements made in this Item 4 concerning terms and provisions of the Annual
Incentive Plan are summaries and do not purport to be a complete recitation of the Annual Incentive Plan provisions. These statements are qualified in their entirety by express reference to the full text of the Annual Incentive Plan. A copy of the
Annual Incentive Plan is attached to this proxy statement as Annex A and is incorporated by reference herein.
Summary of the Material
Terms of Performance Awards and Performance Objectives
Annual Incentive Plan
. Our executive officers are eligible to
receive performance awards under the Annual Incentive Plan. The purposes of the Annual Incentive Plan are to enable us to attract, retain, motivate and reward the best qualified executive officers by providing them with the opportunity to earn
competitive compensation directly linked to our performance. The following is a summary of the material terms of the performance goals that may apply to performance-based awards under the Annual Incentive Plan.
Performance Goals that May be Applied under the Annual Incentive Plan
. Bonuses under the Annual Incentive Plan will be subject to the
achievement of performance goals. Performance goals applicable to bonuses intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code will be based on the relative or comparative achievement of one or
more of the following criteria, whether in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies: operating earnings, net earnings, income,
earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, total shareholder return, return on the Corporation’s assets, increase in the Corporation’s earnings or earnings per share, revenue growth,
share price performance, return on invested capital, operating income, pre- or post-tax income, net income, economic value added, cash flow, improvement in or attainment of expense levels, improvement in or attainment of working capital levels,
return on equity, debt reduction, gross profit, market share, cost reductions, workplace safety goals, workforce satisfaction and diversity goals, employee retention, completion of key projects, strategic plan development and implementation and
achievement of synergy targets, and, in the case of persons who are not covered executives, such other criteria as may be determined by our Human Resources Committee. Performance goals may be in respect of the performance of the Corporation or any
of its subsidiaries, divisions or business units.
60
2017 PROXY STATEMENT
The foregoing objectives may exclude any or all “unusual or infrequently occurring items” as
determined under U.S. generally accepted accounting principles and as identified in the financial statements, notes to the financial statements or management’s discussion and analysis in the annual report, including, without limitation, the
charges or costs associated with closures and restructurings of the Corporation or any subsidiary, discontinued operations, unusual or infrequently occurring items, capital gains and losses, dividends, share repurchase, other unusual, infrequently
occurring or non-recurring items, and the cumulative effects of accounting changes.
Maximum Award
. The maximum annual bonus
payable to any participant under the Annual Incentive Plan may not exceed $5,000,000. The Human Resources Committee may, in its sole discretion, reduce or eliminate the amount otherwise payable to a participant under the plan.
Administration
. The performance objectives with respect to the performance period applicable to awards that are intended to qualify as
performance-based compensation under Section 162(m) must be established by the Human Resources Committee within ninety days after the performance period begins (and no later than the date on which a quarter of the performance period has
elapsed). In accordance with Section 162(m) of the Internal Revenue Code, prior to the payment of any performance award that is intended to qualify as performance-based compensation under Section 162(m), the Human Resources Committee must
certify in writing that the applicable performance objectives have been satisfied to the extent necessary for such award to qualify as performance-based compensation under Section 162(m).
New Plan Benefits
. Awards under the Annual Incentive Plan are based on the Corporation’s achievement of performance targets established by the Human Resources Committee, and it is
not currently possible to determine the amounts of future awards. Accordingly, it is not possible to determine the amounts that will be received by the executive officers participating in the Annual Incentive Plan in the future.
Unanimous Recommendation of the Board of Directors; Vote Required
The proposal to approve the performance goals under the plan requires for its approval the affirmative vote of a majority of the shares present in person or represented by proxy at the annual
meeting and entitled to vote on this proposal. Any abstentions will have the effect of a vote against the proposal.
Please note that
if you hold your shares in street name, your broker is not able to vote on your behalf with respect to the approval of the material terms of the performance goals that may apply to performance-based awards under our Annual Incentive Plan without
specific voting instructions from you. As a result, it is important that, if you are a stockholder in street name, you provide instructions to your broker or vote your shares as provided in this proxy statement.
The Board of Directors unanimously recommends a vote FOR the approval of the material terms of the performance goals that may apply to
performance-based awards under our Annual Incentive Plan. For members of the Management Committee
61
2017 PROXY STATEMENT
ITEM 5 — APPROVAL OF THE MATERIAL TERMS OF THE
PERFORMANCE
GOALS THAT MAY APPLY TO PERFORMANCE-BASED AWARDS
UNDER THE AMENDED AND RESTATED DOMTAR CORPORATION
2007 OMNIBUS INCENTIVE
PLAN
Our Board of Directors and our stockholder originally adopted the Domtar Corporation Omnibus Incentive Plan (the “Omnibus
Incentive Plan”) on March 7, 2007, and the amended and restated Omnibus Incentive Plan was approved by the stockholders at the annual meeting of May 2, 2012. We are seeking stockholder approval of these material terms in order to
maintain the availability of the deduction under Section 162(m) of the Internal Revenue Code (described below) for performance-based compensation. The Human Resources Committee recommends that you vote FOR the approval of the material terms of
the performance goals that may apply to performance-based awards under the Domtar Corporation 2007 Omnibus Incentive Plan, as described in this Item 5.
Unless you instruct us via proxy to vote differently, we will vote valid proxies FOR the approval of this Item 5.
Under Section 162(m) of the Internal Revenue Code, we generally may not, for federal income tax purposes, deduct from our income the compensation paid during a taxable year to a covered
executive, to the extent that their compensation exceeds $1 million. This limitation, however, does not apply to certain performance-based compensation paid to a covered executive if the material terms of the performance goals under which the
compensation is determined and paid are disclosed to and approved by the Corporation’s stockholders.
To maintain the availability
of the deduction under Section 162(m) for performance-based compensation provided to our covered executives under the plan for an additional five years, our stockholders must approve the performance goals under the plan at the annual meeting.
If our stockholders do not approve the performance goals under the Omnibus Incentive Plan, payments made pursuant to the Omnibus Incentive Plan may not qualify for the performance-based exemption to the limitation of our ability to deduct for tax
purposes compensation in excess of $1 million paid to covered executives in a taxable year. Stockholders should be aware that we reserve the right to pay bonuses to these covered executives in appropriate circumstances, whether or not such bonuses
would be fully deductible for tax purposes.
The statements made in this Item 5 concerning terms and provisions of the Omnibus
Incentive Plan are summaries and do not purport to be a complete recitation of the Omnibus Incentive Plan provisions. These statements are qualified in their entirety by express reference to the full text of the Omnibus Incentive Plan. A copy of the
Omnibus Incentive Plan is attached to this proxy statement as Annex B and is incorporated by reference herein.
Summary of the
Material Terms of the Omnibus Incentive Plan
Purposes
. The purposes of the Omnibus Incentive Plan are to promote the
interests of the Corporation and our stockholders by (i) attracting and retaining executive personnel and other key employees and directors of outstanding ability; (ii) motivating executive personnel and other key employees and directors
by means of performance-related incentives, to achieve longer-range performance goals; and (iii) enabling such individuals to participate in our long-term growth and financial success. Officers and employees of the Corporation and its
subsidiaries who are selected by the Human Resources Committee are eligible to participate in the Omnibus Incentive Plan. Our non-employee directors are also eligible to participate in the Omnibus Incentive Plan, subject to selection by the Human
Resources Committee.
Awards
. The Human Resources Committee may award non-qualified stock options, incentive stock options,
stock appreciation rights, shares of restricted stock, restricted stock units, performance shares, performance share units, deferred share units and other stock-based awards to plan participants. 4,000,000 shares of the Corporation’s common
stock are reserved for issuance in connection with awards granted under the Omnibus Incentive Plan. Unless otherwise determined by the Human Resources Committee at the time of grant, time-based awards vest in approximately equal installments over
four years beginning on the first anniversary of the grant date and performance-based awards vest based on achievement of pre-determined performance goals over performance periods of three years. Awards may be subject to both performance and
time-based vesting. The Human Resources Committee may accelerate the vesting of an award at any time.
In any one year, no participant
may receive (i) more than 400,000 performance shares, shares of performance-based restricted stock and restricted stock units and performance-based deferred share units, (ii) performance units with a value of more than $10 million or
62
2017 PROXY STATEMENT
(iii) options, stock appreciation rights or any other award based solely on the increase in value of the Corporation’s common stock covering more than 800,000 shares. The exercise price
of options and stock appreciation rights is equal to the closing price per share of the Corporation’s common stock on the New York Stock Exchange on the date of grant.
Dividends
. The Human Resources Committee may provide for the payment of dividends on shares of common stock granted in connection with awards or dividend equivalents with respect to any
shares of common stock subject to an award that have not actually been issued under the award. However, no dividend equivalents may be paid with respect to any unearned performance shares or performance units.
Termination of Employment
. Upon a termination due to death, time-based awards vest in full and performance-based awards vest at target
levels, and options and stock appreciation rights remain exercisable for one year. Upon a termination due to disability (as defined in the Omnibus Incentive Plan), time-based awards vest in full and performance-based awards continue to vest in
accordance with the original vesting schedule, and options and stock appreciation rights remain exercisable for one year. Upon retirement, a pro-rated portion of time-based awards vest and a pro-rated portion of performance-based awards continue to
vest based on actual performance during the applicable performance period, and all awards remain outstanding for 5 years. Upon a termination for cause (as defined in the Omnibus Incentive Plan) or a voluntary termination by a plan participant, all
awards, including vested but unexercised awards, are forfeited without payment. Upon an involuntary termination for any reason other than cause, vested awards remain outstanding for 90 days and unvested awards are forfeited.
Change in Control
. Upon a change in control (as defined in the Omnibus Incentive Plan), unless otherwise determined by the Human Resources
Committee, a participant’s awards will be replaced with awards of the acquiring company having the same or better terms. If there is a change in control and a participant’s employment is terminated for business reasons in the three months
prior to or twenty-four months after the change in control, his or her time-based awards will fully vest and performance-based awards will vest to the extent the applicable performance goals have been achieved as of the date of the change in control
or the end of the fiscal quarter immediately prior to the date of termination, whichever is greater.
If replacement awards are not
available, unless the Human Resources Committee determines otherwise, all time-based awards fully vest and performance-based awards vest to the extent the performance goals related to the award have been achieved as of the date of the change in
control. Alternatively, the Human Resources Committee may determine that vested awards will be canceled in exchange for a cash payment (or other form of change in control consideration) based on the value of the change in control payment and that
unvested awards will be forfeited. The Human Resources Committee may also accelerate the vesting of any or all awards upon a change in control.
Awards subject to Section 409A of the Internal Revenue Code will vest and be settled upon more narrowly defined change in control events, and in all other change in control events will be
replaced by awards of the acquirer (or, where replacement awards are not available, a right to an equivalent cash payment).
Clawbacks
. If a participant in the Omnibus Incentive Plan knowingly or grossly negligently engages in financial reporting misconduct, then
all awards and gains from the exercise of options or stock appreciation rights in the 12 months prior to the date the misleading financial statements were issued as well as any awards that vested based on the misleading financial statements will be
disgorged to the Corporation. In addition, the Corporation may cancel or reduce, or require a participant to forfeit and disgorge to the Corporation or reimburse the Corporation for, any awards granted or vested and any gains earned or accrued, due
to the exercise, vesting or settlement of awards or sale of any common stock pursuant to an award under the Omnibus Incentive Plan, to the extent permitted or required by, or pursuant to any Corporation policy implemented as required by, applicable
law, regulation or stock exchange rule as may from time to time be in effect.
Performance Goals that May be Applied under the Omnibus
Incentive Plan
. Performance-based awards under the Omnibus Incentive Plan will be subject to the achievement of performance goals. Performance goals applicable to performance-based awards intended to qualify as performance-based compensation
under Section 162(m) of the Internal Revenue Code will be based on the relative or comparative achievement of performance goals based on the total return to the Corporation’s stockholders or one or more of the following criteria, whether
in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies: operating earnings, net earnings, income, earnings before interest and taxes,
earnings before interest, taxes, depreciation and amortization, return on the Corporation’s assets, increase in the Corporation’s earnings or earnings per share, revenue growth, share price performance, return on invested capital,
operating income, pre- or post-tax, income, net income, economic value added, cash flow, improvement in or attainment of expense levels, improvement in or attainment of working capital
63
2017 PROXY STATEMENT
levels, return on equity, debt reduction, gross profit, market share, cost reductions, workplace safety goals, workforce satisfaction and diversity goals, employee retention, completion of key
projects, strategic plan development and implementation and achievement of synergy targets, and, in the case of persons who are not covered executives, such other criteria as may be determined by the Human Resources Committee. Performance goals may
be in respect of the performance of the Corporation or any of its subsidiaries, divisions or business units.
The foregoing goals may
exclude any or all “unusual or infrequently occurring items” as determined under U.S. generally accepted accounting principles and as identified in the financial statements, notes to the financial statements or management’s discussion
and analysis in the annual report, including, without limitation, the charges or costs associated with closures and restructurings of the Corporation or any participating employer, discontinued operations, unusual or infrequently occurring items,
capital gains and losses, dividends, share repurchase, other unusual, infrequently occurring or non-recurring items, and the cumulative effects of accounting changes. Except in the case of awards to covered executives intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code, the Human Resources Committee may also adjust the performance goals for any performance period as it deems equitable in recognition of unusual, infrequently
occurring or non-recurring events affecting the Corporation, change in applicable tax laws or accounting principles, or such other factors as the Human Resources Committee may determine (including, without limitation, any adjustment that would
result in the Corporation paying non-deductible compensation to a participant).
The performance goals with respect to the performance
period applicable to awards that are intended to qualify as performance-based compensation under Section 162(m) must be established by the Human Resources Committee within ninety days after the performance period begins (and no later than the
date on which a quarter of the performance period has elapsed). In accordance with Section 162(m), prior to the vesting or settlement of any performance award that is intended to qualify as performance-based compensation under
Section 162(m), the Human Resources Committee must certify in writing that the applicable performance goals have been satisfied to the extent necessary for such award to qualify as performance-based compensation under Section 162(m).
New Plan Benefits
. Awards under the Omnibus Incentive Plan are based on the discretion of the Human Resources Committee and/or
the Corporation’s achievement of performance targets established by the Human Resources Committee, and it is not currently possible to determine the amounts of future awards. Accordingly, it is not possible to determine the amounts that will be
received by employees participating in the Omnibus Incentive Plan in the future.
Unanimous Recommendation of the Board of Directors;
Vote Required
The proposal to approve the performance goals under the plan requires for its approval the affirmative vote of a
majority of the shares present in person or represented by proxy at the annual meeting and entitled to vote on this proposal. Any abstentions will have the effect of a vote against the proposal.
Please note that if you hold your shares in street name, your broker is not able to vote on your behalf with respect to the approval of the
material terms of the performance goals that may apply to performance-based awards under our Omnibus Incentive Plan without specific voting instructions from you. As a result, it is important that, if you are a stockholder in street name, you
provide instructions to your broker or vote your shares as provided in this proxy statement.
The Board of Directors unanimously
recommends a vote FOR the approval of the material terms of the performance goals that may apply to performance-based awards under our Omnibus Incentive Plan.
64
2017 PROXY STATEMENT
ITEM 6 — APPROVAL OF EQUITY COMPENSATION LIMIT FOR
DIRECTORS
UNDER THE AMENDED AND RESTATED DOMTAR CORPORATION
2007 OMNIBUS INCENTIVE PLAN
Our Board of Directors and our stockholder
originally adopted the Domtar Corporation 2007 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) on March 7, 2007, and the amended and restated Plan was approved by the stockholders at the annual meeting of May 2, 2012. The
Omnibus Incentive Plan is the only equity incentive compensation plan under which we are granting equity-based incentive awards to directors, officers and employees. During 2016, the NCGC completed a review of directors’ compensation and
recommended that the value of the equity incentive awards made to our Directors pursuant to the Omnibus Incentive Plan be limited to $500,000 for any given year. The previous limit under the Omnibus Incentive Plan referred to a maximum of 400,000
performance shares, shares of performance-based restricted stock and restricted stock units and performance-based deferred share units in any one year. Accordingly, the Board concluded that it was in the best interests of the Corporation and its
stockholders to amend the Omnibus Incentive Plan to limit the value of Deferred Share Unit awards made under the Plan, the only equity incentive awards that are granted to Directors. Our Board approved the following resolution, subject to
stockholder approval at this Annual Meeting:
RESOLVED
, to amend Section 4(c) of the Omnibus Incentive Plan by adding at the
end thereof:
“(v) No Eligible Director may receive Deferred Share Units, other than Elective Deferred Share Units,
under the Plan in any one year with a value of more than $500,000 (based upon the Fair Market Value of the underlying shares of Stock on the date of award).”
Unanimous Recommendation of the Board of Directors; Vote Required
The proposal
to approve this amendment to the Amended and Restated Domtar Corporation 2007 Omnibus Incentive Plan requires for its approval the affirmative vote of a majority of the shares present in person or represented by proxy at the annual meeting and
entitled to vote on this proposal. Any abstentions will have the effect of a vote against the proposal.
A copy of the Omnibus Incentive
Plan is attached to this proxy statement as Annex B and is incorporated by reference herein.
Please note that if you hold your shares
in street name, your broker is not able to vote on your behalf with respect to the approval of this amendment to the Amended and Restated Domtar Corporation 2007 Omnibus Incentive Plan without specific voting instructions from you. As a result, it
is important that, if you are a stockholder in street name, you provide instructions to your broker or vote your shares as provided in this proxy statement.
The Board of Directors unanimously recommends a vote FOR the approval of this amendment to the Amended and Restated Domtar Corporation 2007 Omnibus Incentive Plan
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth the number of shares of our stock reserved for issuance under our equity compensation plans as of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of securities
to
be issued upon exercise
of outstanding options,
warrants and rights (#)
|
|
|
Weighted average exercise price
of
outstanding
options, warrants and rights ($)
|
|
|
Number of securities
remaining
available for future issuance under
equity compensation
plans (excluding securities reflected
in column (a) (#)
|
|
|
|
|
|
(a)
|
|
|
|
(b)
|
|
|
|
(c)
|
|
|
Equity compensation plans
approved by security holders
|
|
|
1,559,801
|
(1)
|
|
|
$44.39
|
(2)
|
|
|
1,793,095
|
(3)
|
|
Equity compensation plans not approved by security holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Total
|
|
|
1,559,801
|
|
|
|
$44.39
|
|
|
|
1,793,095
|
|
|
(1)
|
Represents the total number of shares associated with options, restricted stock units (“RSUs”), performance share units (“PSUs”), deferred
share units (“DSUs”) and dividends equivalent units (“DEUs”) outstanding as of December 31, 2016 that may or will be settled in equity. This number assumes that PSUs will vest at the “maximum” performance level,
and that any performance requirements applicable to options will be satisfied.
|
|
(2)
|
Represents the weighted average exercise price of options disclosed in column (a).
|
|
(3)
|
Represents the number of shares remaining available for issuance in settlement of future awards under the Omnibus Incentive Plan.
|
65
2017 PROXY STATEMENT
ANNUAL REPORT FOR 2016
Copies of the Corporation’s annual report on Form 10-K for the fiscal year ended December 31, 2016 are being furnished concurrently
with this proxy statement to persons who were stockholders of record as of March 10, 2017, the record date for the annual meeting. These materials do not form part of the material for the solicitation of proxies. We hereby incorporate
by reference into this proxy statement “Item 10: Directors and Executive Officers of the Registrant” of our annual report on Form 10-K for the fiscal year ended December 31, 2016.
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|
|
By Order of the Board of Directors,
|
|
Razvan L. Theodoru
|
|
Vice-President, Corporate Law and Secretary
|
Fort Mill, South Carolina
March 31, 2017
69
2017 PROXY STATEMENT
Domtar Corporation
Reconciliation of Non-GAAP Financial Measures
(In
millions of dollars, unless otherwise noted)
The following table sets forth certain non-U.S. generally accepted accounting principles
(“GAAP”) financial metrics identified in bold as “Earnings before items”, “Earnings before items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”, “EBITDA margin
before items”, “Free cash flow”, “Net debt” and “Net debt-to-total capitalization.” Management believes these metrics are also useful to measure the operating performance and benchmark with peers within the
industry. The Company calculates “Earnings before items” and “EBITDA before items” by excluding the after-tax (pre-tax) effect of specified items. These metrics are presented as a complement to enhance the understanding of
operating results but not in substitution for GAAP results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
Reconciliation of “Earnings before items” to Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
($)
|
|
|
|
431
|
|
|
|
142
|
|
|
|
128
|
|
|
(+)
|
|
Impairment of property, plant and equipment
|
|
|
($)
|
|
|
|
2
|
|
|
|
47
|
|
|
|
22
|
|
|
(+)
|
|
Closure and restructuring costs
|
|
|
($)
|
|
|
|
21
|
|
|
|
4
|
|
|
|
25
|
|
|
(+)
|
|
Litigation settlement
|
|
|
($)
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
|
(-)
|
|
Net gains on disposals of property, plant and equipment
|
|
|
($)
|
|
|
|
–
|
|
|
|
(12)
|
|
|
|
–
|
|
|
(+)
|
|
Impact of purchase accounting
|
|
|
($)
|
|
|
|
2
|
|
|
|
–
|
|
|
|
1
|
|
|
(-)
|
|
Alternative fuel tax credits
|
|
|
($)
|
|
|
|
(18)
|
|
|
|
–
|
|
|
|
–
|
|
|
(+)
|
|
Debt refinancing costs
|
|
|
($)
|
|
|
|
–
|
|
|
|
30
|
|
|
|
–
|
|
|
(-)
|
|
Internal Revenue Service audit settlement items
|
|
|
($)
|
|
|
|
(204)
|
|
|
|
–
|
|
|
|
–
|
|
|
(=)
|
|
Earnings before items
|
|
|
($)
|
|
|
|
234
|
|
|
|
211
|
|
|
|
178
|
|
|
(/)
|
|
Weighted avg. number of common and exchangeable shares outstanding
(diluted)
|
|
|
(millions)
|
|
|
|
64.9
|
|
|
|
63.4
|
|
|
|
62.7
|
|
|
(=)
|
|
Earnings before items per diluted share
|
|
|
($)
|
|
|
|
3.61
|
|
|
|
3.33
|
|
|
|
2.84
|
|
|
Reconciliation of “EBITDA” and “EBITDA before items” to Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
($)
|
|
|
|
431
|
|
|
|
142
|
|
|
|
128
|
|
|
(+)
|
|
Income tax (benefit) expense
|
|
|
($)
|
|
|
|
(170)
|
|
|
|
14
|
|
|
|
29
|
|
|
(+)
|
|
Interest expense, net
|
|
|
($)
|
|
|
|
103
|
|
|
|
132
|
|
|
|
66
|
|
|
(=)
|
|
Operating income
|
|
|
($)
|
|
|
|
364
|
|
|
|
288
|
|
|
|
223
|
|
|
(+)
|
|
Depreciation and amortization
|
|
|
($)
|
|
|
|
384
|
|
|
|
359
|
|
|
|
348
|
|
|
(+)
|
|
Impairment of property, plant and equipment
|
|
|
($)
|
|
|
|
4
|
|
|
|
77
|
|
|
|
29
|
|
|
(-)
|
|
Net gains on disposals of property, plant and equipment
|
|
|
($)
|
|
|
|
–
|
|
|
|
(15)
|
|
|
|
–
|
|
|
(=)
|
|
EBITDA
|
|
|
($)
|
|
|
|
752
|
|
|
|
709
|
|
|
|
600
|
|
|
(/)
|
|
Sales
|
|
|
($)
|
|
|
|
5,563
|
|
|
|
5,264
|
|
|
|
5,098
|
|
|
(=)
|
|
EBITDA margin
|
|
|
(%)
|
|
|
|
14%
|
|
|
|
13%
|
|
|
|
12%
|
|
|
|
|
EBITDA
|
|
|
($)
|
|
|
|
752
|
|
|
|
709
|
|
|
|
600
|
|
|
(-)
|
|
Alternative fuel tax credits
|
|
|
($)
|
|
|
|
(18)
|
|
|
|
–
|
|
|
|
–
|
|
|
(+)
|
|
Closure and restructuring costs
|
|
|
($)
|
|
|
|
28
|
|
|
|
4
|
|
|
|
32
|
|
|
(+)
|
|
Impact of purchase accounting
|
|
|
($)
|
|
|
|
3
|
|
|
|
–
|
|
|
|
1
|
|
|
(+)
|
|
Litigation settlement
|
|
|
($)
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
|
(=)
|
|
EBITDA before items
|
|
|
($)
|
|
|
|
765
|
|
|
|
713
|
|
|
|
635
|
|
|
(/)
|
|
Sales
|
|
|
($)
|
|
|
|
5,563
|
|
|
|
5,264
|
|
|
|
5,098
|
|
|
(=)
|
|
EBITDA margin before items
|
|
|
(%)
|
|
|
|
14%
|
|
|
|
14%
|
|
|
|
12%
|
|
70
2017 PROXY STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
Reconciliation of “Free cash flow” to Cash flow from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities
|
|
|
($)
|
|
|
|
634
|
|
|
|
453
|
|
|
|
465
|
|
|
(-)
|
|
Additions to property, plant and equipment
|
|
|
($)
|
|
|
|
(236)
|
|
|
|
(289)
|
|
|
|
(347)
|
|
|
(=)
|
|
Free cash flow
|
|
|
($)
|
|
|
|
398
|
|
|
|
164
|
|
|
|
118
|
|
|
“Net debt-to-total capitalization” computation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
($)
|
|
|
|
10
|
|
|
|
–
|
|
|
|
12
|
|
|
(+)
|
|
Long-term debt due within one year
|
|
|
($)
|
|
|
|
169
|
|
|
|
41
|
|
|
|
63
|
|
|
(+)
|
|
Long-term debt
|
|
|
($)
|
|
|
|
1,171
|
|
|
|
1,210
|
|
|
|
1,218
|
|
|
(=)
|
|
Debt
|
|
|
($)
|
|
|
|
1,350
|
|
|
|
1,251
|
|
|
|
1,293
|
|
|
(-)
|
|
Cash and cash equivalents
|
|
|
($)
|
|
|
|
(174)
|
|
|
|
(126)
|
|
|
|
(125)
|
|
|
(=)
|
|
Net debt
|
|
|
($)
|
|
|
|
1,176
|
|
|
|
1,125
|
|
|
|
1,168
|
|
|
(+)
|
|
Shareholders’ equity
|
|
|
($)
|
|
|
|
2,890
|
|
|
|
2,652
|
|
|
|
2,676
|
|
|
(=)
|
|
Total capitalization
|
|
|
($)
|
|
|
|
4,066
|
|
|
|
3,777
|
|
|
|
3,844
|
|
|
|
|
Net debt
|
|
|
($)
|
|
|
|
1,176
|
|
|
|
1,125
|
|
|
|
1,168
|
|
|
(/)
|
|
Total capitalization
|
|
|
($)
|
|
|
|
4,066
|
|
|
|
3,777
|
|
|
|
3,844
|
|
|
(=)
|
|
Net debt-to-total capitalization
|
|
|
(%)
|
|
|
|
29%
|
|
|
|
30%
|
|
|
|
30%
|
|
“Earnings before items”, “Earnings before items per diluted share”, “EBITDA”,
“EBITDA margin”, “EBITDA before items”, “EBITDA margin before items”, “Free cash flow”, “Net debt” and “Net debt-to-total capitalization” have no standardized meaning prescribed by GAAP and
are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Net earnings, Operating income or any other earnings statement, cash flow statement or balance
sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements thereby leading to different measures
for different companies.
71
2017 PROXY STATEMENT
Domtar Corporation
Reconciliation of Non-GAAP Financial Measures by Segment
(In millions of
dollars, unless otherwise noted)
The following table sets forth certain non-U.S. generally accepted accounting principles
(“GAAP”), financial metrics identified in bold as “Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” by reportable segment. Management believes that the financial
metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the segmented “Operating income (loss) before items” by excluding the pre-tax effect of specified items. These
metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulp and Paper
|
|
|
Personal
Care
1
|
|
|
Corporate
|
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Operating income (loss) to “Operating income (loss) before items”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
($)
|
|
|
352
|
|
|
|
270
|
|
|
|
217
|
|
|
|
49
|
|
|
|
61
|
|
|
|
57
|
|
|
|
(37)
|
|
|
|
(43)
|
|
|
|
(51)
|
|
|
(+)
|
|
Impairment of property, plant and
equipment
|
|
($)
|
|
|
4
|
|
|
|
77
|
|
|
|
29
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
(-)
|
|
Net gains on disposal of property, plant and
equipment
|
|
($)
|
|
|
–
|
|
|
|
(14)
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1)
|
|
|
|
–
|
|
|
(-)
|
|
Alternative fuel tax credits
|
|
($)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(18)
|
|
|
|
–
|
|
|
|
–
|
|
|
(+)
|
|
Litigation settlement
|
|
($)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2
|
|
|
(+)
|
|
Closure and restructuring costs
|
|
($)
|
|
|
27
|
|
|
|
3
|
|
|
|
31
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
(+)
|
|
Impact of purchase accounting
|
|
($)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3
|
|
|
|
–
|
|
|
|
1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
(=)
|
|
Operating income (loss) before
items
|
|
($)
|
|
|
383
|
|
|
|
336
|
|
|
|
277
|
|
|
|
53
|
|
|
|
62
|
|
|
|
59
|
|
|
|
(55)
|
|
|
|
(44)
|
|
|
|
(49)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of “Operating income (loss)
before items” to “EBITDA before items”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) before
items
|
|
($)
|
|
|
383
|
|
|
|
336
|
|
|
|
277
|
|
|
|
53
|
|
|
|
62
|
|
|
|
59
|
|
|
|
(55)
|
|
|
|
(44)
|
|
|
|
(49)
|
|
|
(+)
|
|
Depreciation and amortization
|
|
($)
|
|
|
319
|
|
|
|
297
|
|
|
|
284
|
|
|
|
65
|
|
|
|
62
|
|
|
|
64
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
(=)
|
|
EBITDA before items
|
|
($)
|
|
|
702
|
|
|
|
633
|
|
|
|
561
|
|
|
|
118
|
|
|
|
124
|
|
|
|
123
|
|
|
|
(55)
|
|
|
|
(44)
|
|
|
|
(49)
|
|
|
(/)
|
|
Sales
|
|
($)
|
|
|
4,674
|
|
|
|
4,458
|
|
|
|
4,239
|
|
|
|
928
|
|
|
|
869
|
|
|
|
917
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
(=)
|
|
EBITDA margin
before items
|
|
(%)
|
|
|
15%
|
|
|
|
14%
|
|
|
|
13%
|
|
|
|
13%
|
|
|
|
14%
|
|
|
|
13%
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
“Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before
items” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Operating income (loss) or any
other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their
financial statements thereby leading to different measures for different companies.
|
(1)
|
On January 2, 2014, the Company acquired 100% of the shares of Laboratorios Indas, S.A.U. in Spain.
|
|
|
On October 1, 2016, the Company acquired 100% of the shares of Home Delivery Incontinent Supplies Co. in the United States.
|
72
2017 PROXY STATEMENT
ANNEX A
DOMTAR CORPORATION
ANNUAL INCENTIVE PLAN FOR MEMBERS OF THE MANAGEMENT COMMITTEE
SECTION
1. PURPOSE
The purposes of the Plan are to enable the Company and its Subsidiaries to attract, retain, motivate and reward the best
qualified executive officers by providing them with the opportunity to earn competitive compensation directly linked to the Company’s performance.
SECTION 2. DEFINITIONS
Unless the context requires otherwise; the following words as
used in the Plan shall have the meanings ascribed to each below, it being understood that masculine, feminine and neuter pronouns are used interchangeably and that each comprehends the others.
(a) “
Act
” means the Securities and Exchange Act of 1934, as amended.
(b) “
Board
” means the Board of Directors of the Company.
(c)
“
Committee
” means the Human Resources and Compensation Committee of the Board or such other committee of the Board as the Board shall designate from time to time, consisting of two or more members, each of whom is an
“independent” director under New York Stock Exchange Listing requirements, a “Non-Employee Director” within the meaning of Rule 16b-3, as promulgated under the Act, and an “outside director” within the meaning of
Section 162(m) of the
Internal Revenue Code of 1986
, as amended.
|
(d)
|
“
Company
” means Domtar Corporation.
|
|
(e)
|
“
Covered Employee
” shall have the meaning set forth in Section 162(m).
|
(f) “
Executive Officer
” means a member of the Company’s Management Committee, as appointed from time to time by the Board of
Directors upon recommendation of the Committee after consultation with the President and Chief Executive Officer.
|
(g)
|
“
Omnibus Plan
” means the Amended and Restated Domtar Corporation 2007 Omnibus Incentive Plan.
|
(h) “
Participant
” means each Executive Officer of the Company and Covered Employee, as well as any former member of the Management
Committee who retained Management Committee-level benefits and is still employed by the Company.
(i) “
Performance
Period
” means each fiscal year or another period as designated by the Committee, so long as such period does not exceed one year.
(j) “
Plan
” means this Domtar Corporation Annual Incentive Plan, as set forth herein and as may hereafter be amended from time to time.
(k) “
Section 162(m)
” means Section 162(m) of the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
(l) “
Subsidiary
” means any business entity in which the Company owns, directly or indirectly,
fifty percent (50%) or more of the total combined voting power of all classes of stock entitled to vote, and any other business organization, regardless of form, in which the Company possesses, directly or indirectly, 50% or more of the total
combined equity interests.
SECTION 3. ADMINISTRATION
The Committee shall administer and interpret the Plan, provided that, in no event, shall the Plan be interpreted in a manner which would cause any award intended to be qualified as performance based
compensation under Section 162(m) to fail to so qualify. The Committee shall establish the performance objectives for any fiscal year or other Performance Period determined by the Committee in accordance
A-1
2017 PROXY STATEMENT
with Section 4 and certify whether such performance objectives have been obtained. Any determination made by the Committee under the Plan shall be final and conclusive. The Committee may
employ such legal counsel, consultants and agents (including counsel or agents who are employees of the Company or a Subsidiary) as it may deem desirable for the administration of the Plan and may rely upon any opinion received from any such counsel
or consultant or agent and any computation received from such consultant or agent. All expenses incurred in the administration of the Plan, including, without limitation, for the engagement of any counsel, consultant or agent, shall be paid by the
Company. No member or former member of the Board or the Committee shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan other than as a result of such individual’s willful
misconduct.
SECTION 4. BONUSES
(a)
Performance Criteria
. Within 90 days after each Performance Period begins (or such other date as may be required or permitted under Section 162(m)) but not later than the date on
which 25% of the performance period has lapsed, the Committee shall establish the performance objective or objectives that must be satisfied in order for a Participant to receive a bonus award for such Performance Period. Unless the Committee
determines at the time of grant not to qualify the award as performance-based compensation under Section 162(m), any such performance objectives will be based upon the relative or comparative achievement of one or more of the following
criteria, whether in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies, as determined by the Committee for the Performance Period:
operating earnings, net earnings, income, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, total shareholder return, return on the Company’s assets, increase in the Company’s earnings or
earnings per share, revenue growth, share price performance, return on invested capital, operating income, pre- or post-tax, income, net income, economic value added, cash flow, improvement in or attainment of expense levels, improvement in or
attainment of working capital levels, return on equity, debt reduction, gross profit, market share, cost reductions, workplace safety goals, workforce satisfaction and diversity goals, employee retention, completion of key projects, strategic plan
development, and implementation and achievement of synergy targets. Performance Goals may be established on a Company-wide basis or with respect to one or more business units, divisions, Subsidiaries, or products; and in either absolute terms or
relative to the performance of one or more comparable companies or an index covering multiple companies.
When establishing Performance
Goals for a Performance Period, the Committee may exclude any or all “unusual or infrequently occuring items” as determined under U.S. generally accepted accounting principles and as identified in the financial statements, notes to the
financial statements or management’s discussion and analysis in the annual report, including, without limitation, the charges or costs associated with closures and restructurings of the Company or any Subsidiary, discontinued operations,
unusual or infrequently occurring items, capital gains and losses, dividends, share repurchase, other unusual, infrequently occuring or non-recurring items, and the cumulative effects of accounting changes. Except in the case of Awards to Executive
Officers intended to be “other performance-based compensation” under Section 162(m)(4) of the Code, the Committee may also adjust the Performance Goals for any Performance Cycle as it deems equitable in recognition of unusual,
infrequently occuring or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine (including, without limitation, any adjustments that would result in
the Company paying non-deductible compensation to a Participant).
(b)
Maximum Amount Payable
. If the Committee certifies in
writing that any of the performance objectives established for the relevant Performance Period under Section 4(a) has been satisfied, and subject to Section 4(c) or applicable law, each Participant who is employed by the Company or one of
its Subsidiaries on the last day of the Performance Period for which the bonus is payable shall be entitled to receive an annual bonus in an amount not to exceed $5,000,000. If a Participant’s employment terminates for any reason other than
resignation or for Cause (as such term is defined in the Omnibus Plan) (including, without limitation, his or her death, disability or retirement as these terms may be defined in the Omnibus Plan) prior to the last day of the Performance Period for
which the bonus is payable, the maximum bonus payable to such Participant under the preceding sentence shall be multiplied by a fraction, the numerator of which is the number of days that have elapsed during the Performance Period in which the
termination occurs prior to and including the date of the Participant’s termination of employment and the denominator of which is the total number of days in the Performance Period.
(c)
Termination of Employment
. Unless otherwise determined by the Committee in its sole discretion at the time the performance criteria are selected for a particular Performance Period in
accordance with Section 4(a), if a Participant’s employment terminates for any reason prior to the date on which the award is paid hereunder, such Participant shall not earn and shall forfeit all rights to any and all awards
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which have not yet been paid under the Plan;
provided
that if a Participant’s employment terminates as a result of death, disability or retirement (as these terms may be defined in
the Omnibus Plan) the Committee shall give consideration at its sole discretion to the payment of a full or partial bonus with regard to, respectively, the entirety or portion of the Performance Period worked. Notwithstanding the foregoing, if a
Participant’s employment terminates for any reason prior to the date on which the award is paid hereunder, the Committee, in its discretion, may waive any forfeiture pursuant to Section 4 in whole or in part. The Committee has exercised
such discretion in the Severance Program for Management Committee Members.
(d)
Negative Discretion
. Notwithstanding anything
else contained in Section 4(b) to the contrary, the Committee shall have the right, in its absolute discretion, (i) to reduce or eliminate the amount otherwise payable to any Participant under Section 4(b) based on individual
performance or any other factors that the Committee, in its discretion, shall deem appropriate and (ii) to establish rules or procedures that have the effect of limiting the amount payable to each Participant to an amount that is less than the
maximum amount otherwise authorized under Section 4(b).
(e)
Compensation Clawbacks
. The Company may cancel or reduce, or
require a Participant to forfeit and disgorge to the Company or reimburse the Company for, any bonus awards granted or paid under the Plan, to the extent permitted or required by, or pursuant to any Company policy implemented as required by,
applicable law, regulation or stock exchange rule as from time to time may be in effect (including but not limited to The Dodd–Frank Wall Street Reform and Consumer Protection Act and regulations and stock exchange rules promulgated pursuant to
or as a result of such Act).
SECTION 5. PAYMENT
Except as otherwise provided hereunder, payment of any bonus amount determined under Section 4 shall be made to each Participant as soon as practicable after the Committee certifies that one or
more of the applicable performance objectives have been attained (or, in the case of any bonus payable under the provisions of Section 4(d), after the Committee determines the amount of any such bonus) and in any event within two and a half
months of the end of the fiscal year in which the Performance Period ends.
SECTION 6. FORM OF PAYMENT
The Committee shall determine whether any bonus payable under the Plan is payable in cash, in shares of Common Stock or in any combination thereof.
Awards of shares under this Plan may be issued under the Omnibus Plan in forms including, without limitation, Restricted Stock and Restricted Stock Units. The Committee shall have the right to impose whatever conditions it deems appropriate with
respect to the award of shares of Common Stock, including conditioning the vesting of such shares on the performance of additional service.
SECTION 7. GENERAL PROVISIONS
(a)
Effectiveness of the Plan
. The Plan shall
be effective with respect to Performance Periods beginning on or after March 7, 2007 and ending on or before December 31, 2012, unless the term hereof is extended by action of the Board, subject in the case of years after 2012 to approval
by the Company’s shareholders at or before its 2013 annual meeting of shareholders. Upon approval by the Company’s shareholders at or before its 2013 annual meeting of shareholders and at each additional meeting of shareholders at which
this Plan is approved by the Company’s shareholders, the Performance Periods and the term hereof shall be extended for an additional five years.
(b)
Amendment and Termination
. Notwithstanding Section 7(a), the Board or the Committee may at any time amend, suspend, discontinue or terminate the Plan; provided; however, that no such
action shall be effective without approval by the shareholders of the Company to the extent necessary to continue to qualify the amounts payable hereunder to Covered Employees as performance-based compensation under Section 162(m).
(c)
Designation of Beneficiary
. Each Participant may designate a beneficiary or beneficiaries (which beneficiary may be an entity other than
a natural person) to receive any payments which may be made following the Participant’s death. Such designation may be changed or canceled at any time without the consent of any such beneficiary. Any such designation, change or cancellation
must be made in a
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form approved by the Committee and shall not be effective until received by the Committee. If no beneficiary has been named, or the designated beneficiary or beneficiaries shall have predeceased
the Participant, the beneficiary shall be the Participant’s spouse or, if no spouse survives the Participant, the Participant’s estate. If a Participant designates more than one beneficiary, the rights of such beneficiaries shall be
payable in equal shares, unless the Participant has designated otherwise.
(d)
No Right of Continued Employment
. Nothing in this
Plan shall be construed as conferring upon any Participant any right to continue in the employment of the Company or any of its Subsidiaries.
(e)
No Limitation on Corporate Actions
. Nothing contained in the Plan shall be construed to prevent the Company or any Subsidiary from taking any corporate action which is deemed by it to be
appropriate or in its best interest, whether or not such action would have an adverse effect on any awards made under the Plan. No employee, beneficiary or other person shall have any claim against the Company or any Subsidiary as a result of any
such action.
(f)
Non-alienation of Benefits
. Except as expressly provided herein, no Participant or beneficiary shall have the
power or right to transfer, anticipate, or otherwise encumber the Participant’s interest under the Plan. The Company’s obligations under this Plan are not assignable or transferable except to (i) a corporation which acquires all or
substantially all of the Company’s assets or (ii) any corporation into which the Company may be merged or consolidated. The provisions of the Plan shall inure to the benefit of each Participant and the Participant’s beneficiaries;
heirs, executors, administrators or successors in interest.
(g)
Withholding
. Any amount payable to a Participant or a
beneficiary under this Plan shall be subject to any applicable Federal, state and local income and employment taxes and any other amounts that the Company or a Subsidiary is required at law to deduct and withhold from such payment.
(h)
Severability
. If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect
without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan.
(i)
Governing Law
. The Plan shall be construed in accordance with and governed by the laws of the State of Delaware, without reference to
the principles of conflict of laws.
(j)
Headings
. Headings are inserted in this Plan for convenience of reference only and are
to be ignored in a construction of the provisions of the Plan.
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ANNEX B
THE AMENDED AND RESTATED DOMTAR CORPORATION 2007 OMNIBUS INCENTIVE PLAN
SECTION 1. PURPOSE
The purposes of The Domtar Corporation 2007 Omnibus Incentive Plan (the “
Plan
”) are to promote the interests of Domtar Corporation
and its shareholders by (
i
) attracting and retaining executive personnel and other key employees and directors of outstanding ability; (
ii
) motivating executive personnel and other key employees and directors by means of
performance-related incentives, to achieve longer-range performance goals; and (
iii
) enabling such individuals to participate in the long-term growth and financial success of Domtar Corporation.
SECTION 2. DEFINITIONS
(a)
Certain Definitions
. Capitalized terms used herein without definition shall have the respective meanings set forth below:
“
Act
” means the Securities Exchange Act of 1934, as amended.
“
Adjustment Event
” has the meaning given in Section 4(d).
“
Affiliate
” means, (
i
) for purposes of Incentive Stock Options, any corporation that is a “parent
corporation” (as defined in Section 424(e) of the Code) or a “subsidiary corporation” (as defined in Section 424(e) of the Code) of the Company, and (
ii
) for all other purposes, with respect to any person, any
other person that (directly or indirectly) is controlled by, controlling or under common control with such person.
“
Award
” means any grant or award made pursuant to Sections 5 through 10 inclusive.
“
Award Agreement
” means an agreement between the Company and a Participant, setting out the terms and conditions
relating to an Award granted under the Plan.
“
Board of Directors
” means the Board of Directors of the
Company.
“
Canadian Taxpayer
” means a Participant liable to pay income taxes in Canada pursuant to the
receipt of an Award under the Plan.
“
Cause
” means (
i
) the willful failure by the
Participant to perform substantially his duties as an Employee of the Company or any Subsidiary (other than due to physical or mental illness), (
ii
) the Participant’s engaging in willful or serious misconduct that has caused or
could reasonably be expected to be injurious to the Company or any Subsidiary in any way, including, but not limited to, by way of damage to their respective reputations or standings in their respective industries, (
iii
) the
Participant’s breach of fiduciary duty or fraud with respect to the Company or any Affiliate of the Company, (
iv
) the Participant’s having been indicted for or convicted of, or entered a plea of guilty or nolo contendere to, a
crime that constitutes a felony or (
v
) the breach by the Participant of any written covenant or agreement with the Company or any Subsidiary not to disclose or misuse any information pertaining to, or misuse any property of, the Company
or any Subsidiary or not to compete or interfere with the company or any Subsidiary; (
vi
) violation of any written policy, program or code of the Company or any Subsidiary or (
vii
) the commission by the Participant of an act
of fraud or embezzlement against the Company or any of its Subsidiaries;
provided
that if a Participant is a party to an employment or individual severance agreement with an Employer that defines the term “Cause” then, with respect
to any Award made to such Participant, “Cause” shall have the meaning set forth in such employment or severance agreement. In addition, a Participant’s service shall be deemed to have terminated for Cause if, after a
Participant’s service has terminated (for a reason other than Cause), facts and circumstances are discovered that would have justified a termination for Cause.
“
Change in Control
” shall be deemed to have occurred if:
(i) any person (within the meaning of Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”)), including any group (within the meaning of
Rule 13d-5(b) under the Exchange Act), but excluding any of the Company, any Subsidiary or any employee benefit plan sponsored or maintained by the Company or any Subsidiary, acquires “beneficial ownership” (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined Voting Power (as defined below) of the Company’s securities;
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(ii) within any 12-month period, the persons who were directors of the Company at the
beginning of such period (the “
Incumbent Directors
”) shall cease to constitute at least a majority of the Board or the board of directors of any successor to the Company; provided, however, that any director elected to the Board, or
nominated for election, by a majority of the Incumbent Directors then still in office shall be deemed to be an Incumbent Director for purposes of this subclause (ii); or
(iii) upon the consummation of a merger, consolidation, share exchange, division, sale or other disposition of all or substantially all of the assets of the Company which has been approved by the
shareholders of the Company (a “
Corporate Event
”), and immediately following the consummation of which the stockholders of the Company immediately prior to such Corporate Event do not hold, directly or indirectly, a majority of the
Voting Power of (
x
) in the case of a merger or consolidation, the surviving or resulting corporation, (
y
) in the case of a share exchange, the acquiring corporation or (
z
) in the case of a division or a sale or
other disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the relevant Corporate Event, holds more than
one-half
of the gross fair market value of the
consolidated assets of the Company immediately prior to such Corporate Event;
provided
, that if a Participant is
a party to an employment or individual severance agreement with an Employer that defines the term “Change in Control” then, with respect to any Award made to such Participant, “Change in Control” shall have the meaning set forth
in such employment or severance agreement.
“
Change in Control Price
” means the highest price per share
of Stock offered in conjunction with any transaction resulting in a Change in Control (as determined in good faith by the Committee if any part of the offered price is payable other than in cash) or, in the case of a Change in Control occurring
solely by reason of a change in the composition of the Board, the highest Fair Market Value of the Stock on any of the 30 trading days immediately preceding the date on which a Change in Control occurs.
“
Code
” means the Internal Revenue Code of 1986, as amended from time to time.
“
Committee
” means the Human Resources Committee of the Board or such other committee of the Board as the Board
shall designate from time to time, consisting of two or more members, each of whom is an “independent” director under New York Stock Exchange Listing requirements, a “Non-Employee Director” within the meaning of Rule 16b-3,
as promulgated under the Act, and an “outside director” within the meaning of section 162(m) of the Code and the Treasury Regulations promulgated thereunder.
“
Company
” means Domtar Corporation, a Delaware corporation, and any successor thereto.
“
Covered Employee
” means any “covered employee” as defined in Section 162(m)(3) of the Code.
“
Deferred Share Unit
” means a unit credited to a participant’s account in the books of the Company under Section 9 that represents the right to receive cash or Stock equal
to the Fair Market Value of one share of Stock on settlement of the account.
“
Designated Beneficiary
”
means the beneficiary designated by the Participant, in a manner determined by the Committee, to receive amounts due the Participant in the event of the Participant’s death. In the absence of an effective designation by the Participant,
Designated Beneficiary shall mean the Participant’s estate.
“
Disability
” means, unless another
definition is incorporated into the applicable Award Agreement, Disability as specified under the Company’s long-term disability insurance policy and any other termination of a Participant’s employment or service under such circumstances
that the Committee determines to qualify as a Disability for purposes of this Plan;
provided
, that if a Participant is a party to an employment or individual severance agreement with an Employer that defines the term “Disability”
then, with respect to any Award made to such Participant, “Disability” shall have the meaning set forth in such agreement;
provided
,
further
, that in the case of any award subject to Section 409A of the Code, Disability
shall have the meaning set forth in Section 409A of the Code.
“
Dividend Equivalent
” means the
right, granted under Section 11 of the Plan, to receive payments in cash or in shares of Stock, based on dividends with respect to shares of Stock.
“
Elective Deferred Share Unit
” shall have the meaning set forth in Section 9(a).
“
Eligible Director
” means a member of the Board who is not an Employee.
“
Effective Date
” means the date, following adoption of this Plan by the Board of Directors, on which this Plan is approved by a majority of the votes cast at a duly constituted
meeting of the shareholders of the Company.
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“
Employee
” means any officer or employee of the Company or any
Subsidiary (as determined by the Committee in its sole discretion).
“
Employer
” means the Company and
any Subsidiary, and, in the discretion of the Committee, may also mean any business organization that is an Affiliate (i.e., an Affiliate corporation at least 20% of whose outstanding voting securities are owned by the Company and its Subsidiaries).
“
Executive Officer
” means any “officer” within the meaning of Rule 16(a)-1(f) promulgated
under the Act or any Covered Employee.
“
Fair Market Value
” means, on any date, the closing price of the
Stock as reported on the consolidated tape of the New York Stock Exchange (or on such other recognized quotation system on which the trading prices of the Stock are quoted at the relevant time) on such date. In the event that there are no Stock
transactions reported on such tape (or such other system) on such date, Fair Market Value shall mean the closing price on the immediately preceding date on which Stock transactions were so reported.
“
Freestanding SAR
” means a stock appreciation right granted independently of any Options.
“
Incentive Stock Option
” means a stock option granted under Section 7 of the Plan that is designated as an
Incentive Stock Option that is intended to meet the requirements of Section 422 of the Code.
“
New
Employer
” means, after a Change in Control, a Participant’s employer, or any direct or indirect parent or any direct or indirect majority-owned subsidiary of such employer.
“
Non-statutory Stock Option
” means a stock option granted under Section 7 of the Plan that is not intended to
be an Incentive Stock Option.
“Non-U.S. Award”
has the meaning given in Section 3(f).
“
Option
” means an Incentive Stock Option or a Non-statutory Stock Option.
“
Participant
” means an Employee or Eligible Director who is selected by the Committee to receive an Award under the
Plan.
“
Performance Award
” means Performance Shares, Performance Units and all other Awards that vest
(in whole or in part) upon the achievement of specified Performance Goals.
“
Performance Cycle
” means
the period of time selected by the Committee during which performance is measured for the purpose of determining the extent to which a Performance Award has been earned or vested.
“
Performance Goals
” means the objectives established by the Committee for a Performance Cycle pursuant to
Section 5(c) for the purpose of determining the extent to which a Performance Award has been earned or vested.
“
Performance Share
” means an Award granted pursuant to Section 5 of the Plan of a contractual right to receive
a share of Stock (or the cash equivalent thereof) upon the achievement, in whole or in part, of the applicable Performance Goals.
“
Performance Unit
” means a dollar denominated unit (or a unit denominated in the Participant’s local currency) granted pursuant to Section 5 of the Plan, payable upon the
achievement, in whole or in part, of the applicable Performance Goals.
“
Restriction Period
” means the
period of time selected by the Committee during which a grant of Restricted Stock, Restricted Stock Units and Deferred Share Units, as the case may be, is subject to forfeiture and/or restrictions on transfer pursuant to the terms of the Plan.
“
Restricted Stock
” means shares of Stock contingently granted to a Participant under Section 6 of
the Plan.
“
Restricted Stock Unit
” means a stock denominated unit contingently awarded under
Section 6 of the Plan.
“
Retirement
” means, unless another definition is incorporated into the
applicable Award Agreement, a termination of the Participant’s employment or service at or after the Participant reaches age 65 or the Participant reaches age 55 with at least 10 years of service; provided that if a Participant is a party to an
employment or individual severance agreement with an Employer that defines the term “Retirement” then, with respect to any Award made to such Participant, “Retirement” shall have the meaning set forth in such employment or
severance agreement.
“
Section 409A of the Code
” Section 409A of the Code and the applicable rules,
regulations and guidance promulgated thereunder.
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“
Service
” means, with respect to Employees, continued employment with
the Company and its Subsidiaries or, with respect to Eligible Directors, service on the Board of Directors.
“
Service Award
” means an Award that vests solely based on the passage of time or continued Service over a fixed
period of time.
“
Specified Award
” means an Award of non-qualified deferred compensation within the
meaning of and that is subject to Section 409A of the Code.
“Specified Change in Control
” means
(
i
) a Corporate Event in which the stockholders of the Company immediately prior to such Corporate Event do not hold, directly or indirectly, at least 25% of the Voting Power of (
x
) in the case of a merger or consolidation,
the surviving or resulting corporation, (
y
) in the case of a share exchange, the acquiring corporation or (
z
) in the case of a division or a sale or other disposition of assets, the surviving, resulting or acquiring
corporations which, immediately following the relevant Corporate Event, hold more than one-half of the gross fair market value of the consolidated assets of the Company immediately prior to such Corporate Event; or (
ii
) the direct or
indirect acquisition by any person (within the meaning of Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”)), including any group (within the meaning of Rule 13d-5(b) under the Exchange
Act), but excluding any of the Company, any Subsidiary or any employee benefit plan sponsored or maintained by the Company or any Subsidiary, of “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities
of the Company representing 75% or more of the combined Voting Power of the Company’s securities; in each case which is (x) a Change in Control and (y) a “change in control” within the meaning of Section 409A of the
Code.
“
Specified Employee
” means (i) if the Company has not adopted a specified employee policy,
any Participant qualifying, on the date of such Participant’s Termination of Service, as a “specified employee” as defined in Section 409A of the Code and (ii) if the Company has in place a specified employee policy, any
Participant qualifying as a “specified employee” under such policy as in effect on the date of such Participant’s Termination of Service.
“
Stock
” means the common stock of the Company, par value $0.01 per share.
“
Stock Appreciation Right
” or “
SAR
” means the right to receive a payment from the Company in cash and/or shares of Stock equal to the product of (
i
) the
excess, if any, of the Fair Market Value of one share of Stock on the exercise date over a specified price fixed by the Committee on the grant date, multiplied by (
ii
) a stated number of shares of Stock.
“
Subplan
” has the meaning given in Section 3(f).
“
Subsidiary
” means any business entity in which the Company owns, directly or indirectly, fifty percent
(50%) or more of the total combined voting power of all classes of stock entitled to vote, and any other business organization, regardless of form, in which the Company possesses, directly or indirectly, 50% or more of the total combined equity
interests in such organization.
“
Termination for Business Reasons
” means (
i
) termination of
a Participant’s employment or service by the Participant’s Employer or New Employer due to the fact that (
x
) the Employer or New Employer has ceased or intends to cease (
A
) to carry on the business or function for
the purpose of which the Participant was employed or otherwise provided services, or (
B
) to carry on that business or function in the place the Participant was employed or otherwise provided services or (
y
) the requirements
of that business (
A
) for employees to carry out work of a particular kind, or (
B
) to carry out the work in the place where the Participant was employed or otherwise provided services, have ceased or diminished or are expected
to cease or diminish, and, in each case, which is beyond the Participant’s control (other than a termination for Cause or by reason of death, Retirement or Disability); (
ii
) termination of employment or service by the Participant as
a result of (
x
) the Employer or New Employer requiring the Participant to work in an office which is more than 75 miles from the location of the Employer’s current principal executive office or the location where the Participant is
employed or otherwise provides services immediately prior to such termination (subject to such reasonable travel as the performance of Participant’s duties and the business of the Employer may require), or (
y
) a material diminution
in Participant’s compensation or duties; or (
iii
) in the case of a Participant who is a non-employee director, a termination of such Participant’s service as a director of the Company or any successor entity thereto by the
Company or any successor entity thereto (other than a termination by reason of death, Retirement or Disability) in connection with a Change in Control.
“
Termination of Service
” means with respect to an Eligible Director, the date upon which such Eligible Director ceases to be a member of the Board and, with respect to an Employee,
the date the Participant ceases to be an Employee, including, with respect to the provisions of Section 9 applicable to a Canadian Taxpayer, due to a Termination for Business Reasons;
provided
, that, with respect to
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any Specified Award, Termination of Service shall mean “separation from service”, as defined in Section 409A of the Code and the rules, regulations and guidance promulgated
thereunder.
“
Voting Power
” when used in the definition of Change in Control shall mean such specified
number of the Voting Securities as shall enable the holders thereof to cast such percentage of all the votes which could be cast in an annual election of directors and “Voting Securities” shall mean all securities of a company entitling
the holders thereof to vote in an annual election of directors.
(b)
Gender and Number
. Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.
SECTION 3. POWERS OF THE COMMITTEE
(a)
Eligibility
. Each Employee (including
any officer of the Company) and Eligible Director who, in the opinion of the Committee, has the capacity to contribute to the successful performance of the Company, is eligible to be a Participant in the Plan.
(b)
Power to Grant and Establish Terms of Awards
. The Committee shall have the discretionary authority, subject to the terms of the Plan, to
determine the Employees and Eligible Directors, if any, to whom Awards shall be granted, the type or types of Awards to be granted, and the terms and conditions of any and all Awards including, without limitation, the number of shares of Stock
subject to an Award, the time or times at which Awards shall be granted, and the terms and conditions of applicable Award Agreements. The Committee may establish different terms and conditions for different types of Awards, for different
Participants receiving the same type of Award, and for the same Participant for each type of Award such Participant may receive, whether or not granted at the same or different times.
(c)
Administration
. The Plan shall be administered by the Committee. The Committee shall have sole and complete authority and discretion to adopt, alter and repeal such administrative rules,
guidelines and practices governing the operation of the Plan as it shall from time to time deem advisable, and to interpret the terms and provisions of the Plan. The Committee’s decisions (including any failure to make decisions) shall be
binding upon all persons, including the Company, shareholders, Employers and each Employee, Director, Participant or Designated Beneficiary, and shall be given deference in any proceeding with respect thereto.
(d)
Delegation by the Committee
. The Committee may delegate to the Chief Executive Officer of the Company the power and authority to make
Awards to Participants who are not “insiders” subject to Section 16(b) of the Act, pursuant to such conditions and limitations as the Committee may establish. The Committee may also appoint agents (who may be officers or employees of
the Company) to assist in the administration of the Plan and may grant authority to such persons to execute agreements, including Award Agreements, or other documents on its behalf. All expenses incurred in the administration of the Plan, including,
without limitation, for the engagement of any counsel, consultant or agent, shall be paid by the Company.
(e)
Restrictive Covenants
and Other Conditions
. Without limiting the generality of the foregoing, the Committee may condition the grant of any Award under the Plan upon the Participant to whom such Award would be granted agreeing in writing to certain conditions (such as
restrictions on the ability to transfer the underlying shares of Stock) or covenants in favor of the Company and/or one or more Affiliates thereof (including, without limitation, covenants not to compete, not to solicit employees and customers and
not to disclose confidential information, that may have effect following the Termination of Service and after the Stock subject to the Award has been transferred to the Participant), including, without limitation, the requirement that the
Participant disgorge any profit, gain or other benefit received in respect of the Award prior to any breach of any such covenant.
(f)
Participants Based Outside the United States
. To conform with the provisions of local laws and regulations, or with local compensation practices and policies, in foreign countries in which the Company or any of its Subsidiaries or Affiliates
operate, but subject to the limitations set forth herein regarding the maximum number of shares issuable hereunder and the maximum award to any single Participant, the Committee may (
i
) modify the terms and conditions of Awards granted
to Participants employed outside the United States (“
Non-US Awards
”), (
ii
) establish subplans with modified exercise procedures and such other modifications as may be necessary or advisable under the circumstances
(“
Subplans
”), and (
iii
) take any action which it deems advisable to obtain, comply with or otherwise reflect any necessary governmental regulatory procedures, exemptions or approvals with respect to the Plan. The
Committee’s decision to grant Non-US Awards or to establish Subplans is entirely voluntary, and at the complete discretion of the Committee. The Committee may
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2017 PROXY STATEMENT
amend, modify or terminate any Subplans at any time, and such amendment, modification or termination may be made without prior notice to the Participants. The Company, Subsidiaries, Affiliates
and members of the Committee shall not incur any liability of any kind to any Participant as a result of any change, amendment or termination of any Subplan at any time. The benefits and rights provided under any Subplan or by any Non-US Award
(
i
) are wholly discretionary and, although provided by either the Company, a Subsidiary or Affiliate, do not constitute regular or periodic payments and (
ii
) are not to be considered part of the Participant’s salary or
compensation under the Participant’s employment with the Participant’s local employer for purposes of calculating any severance, resignation, redundancy or other end of service payments, vacation, bonuses, long-term service awards,
indemnification, pension or retirement benefits, or any other payments, benefits or rights of any kind. If a Subplan is terminated, the Committee may direct the payment of Non-US Awards (or direct the deferral of payments whose amount shall be
determined) prior to the dates on which payments would otherwise have been made, and, in the Committee’s discretion, such payments may be made in a lump sum or in installments.
SECTION 4. MAXIMUM AMOUNT AVAILABLE FOR AWARDS
(a)
Number
. Subject in all cases to the provisions of this Section 4, the maximum number of shares of Stock that are available for Awards shall be 4,000,000 shares of Stock.
Notwithstanding the provisions of Section 4(b), the maximum number of shares of Stock that may be issued in respect of Incentive Stock Options shall not exceed 4,000,000 shares. Shares of Stock may be made available from Stock held in treasury
or authorized but unissued shares of the Company not reserved for any other purpose.
(b)
Canceled, Terminated, or Forfeited Awards,
etc
. Any shares of Stock subject to an Award which for any reason expires without having been exercised, is canceled or terminated or otherwise is settled without the issuance of any Stock shall again be available for grant under the Plan. If a
Stock Appreciation Right is granted in tandem with an Option so that only one may be exercised with the other being surrendered in such exercise in accordance with Section 8(b), the number of shares subject to the tandem Option and Stock
Appreciation Right shall only be taken into account once (and not as to both awards). Shares of Stock subject to Awards that are assumed, converted or substituted pursuant to an Adjustment Event will not further reduce the maximum limitation set
forth in Section 4(a).
(c)
Individual Award Limitations
. Subject to Sections 4(b) and 4(d), the following individual Award
limits shall apply:
(i) No Participant may receive the right to more than 400,000 Performance Shares, shares of
performance-based Restricted Stock and Restricted Stock Units and performance-based Deferred Share Units under the Plan in any one year.
(ii) No Participant may receive the right to Performance Units under the Plan in any one year with a value of more than $10 million (or the equivalent of such amount denominated in the
Participant’s local currency).
(iii) No Participant may receive Options, SARs or any other Award based solely on
the increase in value of Stock on more than 800,000 shares of Stock under the Plan in any one year.
(iv) The aggregate
Fair Market Value of the shares with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year shall not exceed $100,000.
(v) No Eligible Director many receive Deferred Share Units, other than Elective Deferred Share Units, under the Plan in any one year
with a value of more than $500,000 (based upon the Fair Market Value of the underlying shares of Stock on the date of award).
(d)
Adjustment in Capitalization
. The number and kind of shares of Stock available for issuance under the Plan and the number, class, exercise price, Performance Goals or other terms of any outstanding Award shall be adjusted by the Board to
reflect any extraordinary dividend, stock dividend, stock split or share combination or any recapitalization, business combination, merger, consolidation, spin-off, exchange of shares, liquidation or dissolution of the Company or other similar
transaction affecting the Stock (any such transaction or event, an “
Adjustment Event
”) in such manner as it determines in its sole discretion.
(e)
Prohibition Against Repricing
. Except to the extent (
i
) approved in advance by holders of a majority of the shares of the Company entitled to vote generally in the election of
directors or (
ii
) as a result of any Adjustment Event, the Committee shall not have the power or authority to reduce, whether through amendment or otherwise, the exercise price of any outstanding Option or base price of any outstanding
Stock Appreciation Right or to grant any new Award, or make any cash payment, in substitution for or upon the cancellation of Options or Stock Appreciation Rights previously granted.
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2017 PROXY STATEMENT
SECTION 5. PERFORMANCE SHARES AND PERFORMANCE UNITS
(a)
Generally
. The Committee shall have the authority to determine the Participants who shall receive Performance Shares and Performance
Units, the number of Performance Shares and the number and value of Performance Units each Participant receives for each or any Performance Cycle, and the Performance Goals applicable in respect of such Performance Shares and Performance Units for
each Performance Cycle. Any adjustments to such Performance Goals shall be approved by the Committee. The Committee shall determine the duration of each Performance Cycle (the duration of Performance Cycles may differ from each other), and there may
be more than one Performance Cycle in existence at any one time. Unless otherwise determined by the Committee, the Performance Cycle for Performance Shares and Performance Units shall be three years. Performance Shares and Performance Units shall be
evidenced by an Award Agreement that shall specify the number of Performance Shares and the number and value of Performance Units awarded to the Participant, the Performance Goals applicable thereto, and such other terms and conditions not
inconsistent with the Plan as the Committee shall determine. No shares of Stock will be issued at the time an Award of Performance Shares is made, and the Company shall not be required to set aside a fund for the payment of Performance Shares or
Performance Units. No dividends shall be paid on unearned Performance Shares.
(b)
Earned Performance Shares and Performance
Units
. Performance Shares and Performance Units shall become earned, in whole or in part, based upon the attainment of specified Performance Goals or the occurrence of any event or events, including a Change in Control, as the Committee shall
determine, either at or after the grant date. In addition to the achievement of the specified Performance Goals, the Committee may, at the grant date, condition payment of Performance Shares and Performance Units on such conditions as the Committee
shall specify. The Committee may also require the completion of a minimum period of service (in addition to the achievement of any applicable Performance Goals) as a condition to the vesting of any Performance Share or Performance Unit Award.
(c)
Performance Goals
. At the discretion of the Committee, Performance Goals may be based on the total return to the
Company’s shareholders, inclusive of dividends paid, during the applicable Performance Cycle (determined either in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the
performance of a number of companies), or upon the relative or comparative attainment of one or more of the following criteria, whether in absolute terms or relative to the performance of one or more similarly situated companies or a published index
covering the performance of a number of companies: operating earnings, net earnings, income, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, return on the Company’s assets, increase in the
Company’s earnings or earnings per share, revenue growth, share price performance, return on invested capital, operating income, pre- or post-tax, income, net income, economic value added, cash flow, improvement in or attainment of expense
levels, improvement in or attainment of working capital levels, return on equity, debt reduction, gross profit, market share, cost reductions, workplace safety goals, workforce satisfaction and diversity goals, employee retention, completion of key
projects, strategic plan development and implementation and achievement of synergy targets, and, in the case of persons who are not Executive Officers, such other criteria as may be determined by the Committee. Performance Goals may be established
on a Company-wide basis or with respect to one or more business units, divisions, Subsidiaries, or products. When establishing Performance Goals for a Performance Cycle, the Committee may exclude any or all “unusual or infrequently occurring
items” as determined under U.S. generally accepted accounting principles and as identified in the financial statements, notes to the financial statements or management’s discussion and analysis in the annual report, including, without
limitation, the charges or costs associated with closures and restructurings of the Company or any Employer, discontinued operations, unusual or infrequently occurring items, capital gains and losses, dividends, share repurchase, other unusual,
infrequently occurring or
non-recurring
items, and the cumulative effects of accounting changes. Except in the case of Awards to Executive Officers intended to be “other performance-based
compensation” under Section 162(m)(4) of the Code, the Committee may also adjust the Performance Goals for any Performance Cycle as it deems equitable in recognition of unusual, infrequently occurring or non-recurring events affecting the
Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine (including, without limitation, any adjustments that would result in the Company paying non-deductible compensation to a
Participant).
(d)
Special Rule for Performance Goals
. If, at the time of grant, the Committee intends a
Performance Share Award, Performance Unit or other Performance Award to qualify as “other performance based compensation” within the meaning of Section 162(m)(4) of the Code, the Committee must establish Performance Goals for the
applicable Performance Cycle no later than the 90
th
day after the Performance
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2017 PROXY STATEMENT
Cycle begins (or by such other date as may be required under Section 162(m) of the Code) but not later than the date on which 25% of the performance period has lapsed.
(e)
Negative Discretion
. Notwithstanding anything in this Section 5 to the contrary, the Committee shall have the right, in its
absolute discretion, (i) to reduce or eliminate the amount otherwise payable to any Participant under Section 5(h) based on individual performance or any other factors that the Committee, in its discretion, shall deem appropriate and
(ii) to establish rules or procedures that have the effect of limiting the amount payable to each Participant to an amount that is less than the maximum amount otherwise authorized.
(f)
Affirmative Discretion
. Notwithstanding any other provision in the Plan to the contrary, (including, without limitation, the maximum amounts payable under Section 4(c)), but subject to
the maximum number of shares available for issuance under Section 4(a) of the Plan, the Committee shall have the right, in its discretion, to grant a bonus or Award in cash, in shares of Stock or in any combination thereof, to any Participant who is
not a Covered Employee for the year in which the amount paid would ordinarily be deductible by the Company for federal income tax purposes in an amount up to the maximum bonus payable, based on individual performance or any other criteria that the
Committee deems appropriate.
(g)
Certification of Attainment of Performance Goals
. As soon as practicable after the end of a
Performance Cycle and prior to any payment or vesting in respect of such Performance Cycle, the Committee shall certify in writing the number of Performance Shares or other Performance Awards and the number and value of Performance Units which have
been earned or vested on the basis of performance in relation to the established Performance Goals.
(h)
Payment of Awards
.
Payment or delivery of Stock with respect to earned Performance Shares and earned Performance Units shall be distributed to the Participant or, if the Participant has died, to the Participant’s Designated Beneficiary, as soon as practicable
after the expiration of the Performance Cycle and the Committee’s certification under paragraph 5(g) above, provided that payment or delivery of Stock with respect to earned Performance Shares and earned Performance Units shall not be
distributed to a Participant until any other conditions on payment of such Awards established by the Committee have been satisfied. The Committee shall determine whether earned Performance Shares and the value of earned Performance Units are to be
distributed in the form of cash, shares of Stock or in a combination thereof, with the value or number of shares payable to be determined based on the Fair Market Value of the Stock on the date of the Committee’s certification under paragraph
5(g) above. The Committee shall have the right to impose whatever conditions it deems appropriate with respect to the award or delivery of shares of Stock, including conditioning the vesting of such shares on the performance of additional service.
(i)
Newly Eligible Participants
. Notwithstanding anything in this Section 5 to the contrary, the Committee shall be
entitled to make such rules, determinations and adjustments as it deems appropriate with respect to any Participant who becomes eligible to receive Performance Shares, Performance Units or other Performance Awards after the commencement of a
Performance Cycle.
SECTION 6. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
(a)
Grant
. Restricted Stock and Restricted Stock Units may be granted to Participants at such time or times as shall be determined by the
Committee. The grant date of any Restricted Stock or Restricted Stock Units under the Plan will be the date on which such Restricted Stock or Restricted Stock Units are awarded by the Committee, or on such other date as the Committee shall
determine. Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement that shall specify (
i
) the number of shares of Restricted Stock and the number of Restricted Stock Units to be granted to each Participant,
(
ii
) the Restriction Period(s) and (
iii
) such other terms and conditions, including rights to dividends or Dividend Equivalents, not inconsistent with the Plan as the Committee shall determine, including customary
representations, warranties and covenants with respect to securities law matters. Grants of Restricted Stock shall be evidenced by a bookkeeping entry in the Company’s records (or by such other reasonable method as the Company shall determine
from time to time). No shares of Stock will be issued at the time an Award of Restricted Stock Units is made and the Company shall not be required to set aside a fund for the payment of any such Awards.
(b)
Vesting
. Restricted Stock and Restricted Stock Units granted to Participants under the Plan shall be subject to a Restriction Period.
Except as otherwise determined by the Committee at or after grant, and subject to the Participant’s continued employment or service with his or
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2017 PROXY STATEMENT
her Employer on such date, the Restriction Period with respect to Restricted Stock and Restricted Stock Units that vest solely based on the passage of time shall lapse in four approximately equal
installments on the first through fourth anniversaries of the grant date and the Restriction Period with respect to performance-based Restricted Stock and Restricted Stock Units shall lapse, to the extent performance goals have been achieved, three
years after the grant date, in each case in accordance with the schedule provided in Participant’s restricted stock agreement. The Restriction Period may lapse with respect to portions of Restricted Stock and Restricted Stock Units on a pro
rata basis, or it may lapse at one time with respect to all Restricted Stock and Restricted Stock Units in an Award. The Restriction Period shall also lapse, in whole or in part, upon the occurrence of any event or events, including a Change in
Control, specified in the Plan, or specified by the Committee, in its discretion, either at or after the grant date of the applicable Award. In its discretion, the Committee may also establish performance-based vesting conditions with respect to
Awards of Restricted Stock and Restricted Stock Units (in lieu of, or in addition to, time-based vesting) based on one or more of the Performance Goals listed in Section 5(c); provided that any Award of Restricted Stock or Restricted Stock
Units made to any Executive Officer that is intended to qualify as “other performance based compensation” under Section 162(m) of the Code shall be subject to the same restrictions and limitations applicable to Awards of Performance
Shares and Performance Units under Sections 5(d) and 5(g), during a Performance Cycle selected by the Committee. In no case shall the vesting periods applicable to a Participant who is a Canadian Taxpayer exceed the restricted period under the
Income Tax Act (Canada).
(c)
Settlement of Restricted Stock and Restricted Stock Units
. At the expiration of the Restriction
Period for any Restricted Stock Awards, the Company shall remove the restrictions applicable to the bookkeeping entry evidencing the Restricted Stock Awards, and shall, upon request, deliver the stock certificates evidencing such Restricted Stock
Awards to the Participant or the Participant’s legal representative (or otherwise evidence the issuance of such shares free of any restrictions imposed under the Plan). At the expiration of the Restriction Period for any Restricted Stock Units,
for each such Restricted Stock Unit, the Participant shall receive, in the Committee’s discretion, (
i
) a cash payment equal to the Fair Market Value of one share of Stock as of such payment date, (
ii
) one share of Stock
or (
iii
) any combination of cash and shares of Stock.
SECTION 7. STOCK OPTIONS
(a)
Grant
. Options may be granted to Participants at such time or times as shall be determined by the Committee. Except as otherwise
provided herein, the Committee shall have complete discretion in determining the number of Options, if any, to be granted to a Participant. The grant date of an Option under the Plan will be the date on which the Option is awarded by the Committee,
or such other date as the Committee shall determine in its sole discretion. Each Option shall be evidenced by an Award Agreement that shall specify the exercise price, the duration of the Option, the number of shares of Stock to which the Option
pertains, the conditions upon which the Option or any portion thereof shall become vested or exercisable and such other terms and conditions not inconsistent with the Plan as the Committee shall determine, including customary representations,
warranties and covenants with respect to securities law matters.
(b)
Exercise Price
. The Committee shall establish the exercise
price at the time each Option is granted, which price shall not be less than 100% of the Fair Market Value of the Stock on the date of grant. Notwithstanding the foregoing, if an Incentive Stock Option is granted to an Employee who, at the time of
grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate thereof, the exercise price shall be at least 110% of the Fair Market Value of the Stock on the grant date.
(c)
Vesting and Exercisability
. Except as otherwise determined by the Committee at or after grant, and subject to the
Participant’s continued employment or service with his or her Employer on such date, each Option awarded to a Participant under the Plan shall become vested and exercisable in accordance with the vesting schedule provided in the
Participant’s option agreement, but in no event later than ten years from the date of grant. Options awarded under the Plan may vest either on a cliff-vesting or a pro rata basis. Unless otherwise determined by the Committee and specified in
the Award Agreement evidencing the grant of Options, each Option shall become vested and exercisable in four approximately equal installments on the first four anniversaries of the date of grant. Options may also become exercisable, in whole or in
part, upon the occurrence of any event or events, including a Change in Control, specified in the Plan, or specified by the Committee, in its discretion, either at or after the grant date of the applicable Option. In its discretion, the Committee
may also establish performance conditions (in lieu of, or in addition to, time-based vesting) with respect to the exercisability of any Option. No Option shall be exercisable on or after the tenth anniversary of its grant date. The Committee may
impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal or state securities laws, as it may deem necessary or advisable.
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2017 PROXY STATEMENT
(d)
Payment
. No Stock shall be delivered pursuant to any exercise of an Option until payment in
full of the exercise price therefor is received by the Company. Such payment may be made (
i
) in cash or its equivalent, (
ii
) by exchanging shares of Stock owned by the optionee which are not the subject of any pledge or other
security interest, (
iii
) by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Stock so tendered to the Company, valued as of the date of such tender,
is at least equal to such exercise price, (
iv
) to the extent permitted by the Committee, through an arrangement with a broker approved by the Company (or through an arrangement directly with the Company) whereby payment of the exercise
price is accomplished with the proceeds of the sale of Stock or (
v
) to the extent permitted by the Committee, through net settlement in Stock. The Company may not make a loan to a Participant to facilitate such Participant’s
exercise of any of his or her Options or payment of taxes.
(e)
Incentive Stock Option Status.
Notwithstanding anything in this
Plan to the contrary, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code.
SECTION 8. STOCK APPRECIATION RIGHTS
(a)
Grant
. Stock Appreciation Rights may be granted to Participants at such time or times as shall be determined by the Committee. Stock
Appreciation Rights may be granted in tandem with Options which, unless otherwise determined by the Committee at or after the grant date, shall have substantially similar terms and conditions to such Options to the extent applicable, or may be
granted on a freestanding basis, not related to any Option. The grant date of any Stock Appreciation Right under the Plan will be the date on which the Stock Appreciation Right is awarded by the Committee or such other future date as the Committee
shall determine in its sole discretion. No Stock Appreciation Right shall be exercisable on or after the tenth anniversary of its grant date. Stock Appreciation Rights shall be evidenced by an Award Agreement, whether as part of the Award Agreement
governing the terms of the Options, if any, to which such Stock Appreciation Right relates or pursuant to a separate Award Agreement with respect to freestanding Stock Appreciation Rights, in each case containing such provisions not inconsistent
with the Plan as the Committee shall determine, including customary representations, warranties and covenants with respect to securities law matters.
(b)
Vesting and Exercisability
. Except as otherwise determined by the Committee at or after grant, and subject to the Participant’s continued employment or service with his or her
Employer on such date, each Stock Appreciation Right awarded to a Participant under the Plan shall become vested and exercisable in accordance with the vesting schedule provided in the Participant’s Award Agreement, but in no event later than
ten years from the date of grant. Stock Appreciation Rights awarded under the Plan may vest either on a cliff-vesting or a pro rata basis. Unless otherwise determined by the Committee and specified in the Award Agreement evidencing the grant of
Freestanding SARs, each Freestanding SAR shall become vested and exercisable in four approximately equal installments on the first four anniversaries of the date of grant. Stock Appreciation Rights granted in tandem with an Option shall become
vested and exercisable on the same date or dates as the Options with which such Stock Appreciation Rights are associated vest and become exercisable. Stock Appreciation Rights may also become exercisable, in whole or in part, upon the occurrence of
any event or events, including a Change in Control, as specified in the Plan, or specified by the Committee, in its discretion, either at or after the grant date of the applicable Stock Appreciation Right. In its discretion, the Committee may also
establish performance conditions (in lieu of, or in addition to, time-based vesting) with respect to the exercisability of any Stock Appreciation Rights. No Stock Appreciation Rights shall be exercisable on or after the tenth anniversary of their
grant date. The Committee may impose such conditions with respect to the exercise of Stock Appreciation Rights, including without limitation, any relating to the application of federal or state securities laws, as it may deem necessary or advisable.
Stock Appreciation Rights that are granted in tandem with an Option may only be exercised upon the surrender of the right to exercise such Option for an equivalent number of shares of Stock, and may be exercised only with respect to the shares of
Stock for which the related Option is then exercisable.
(c)
Settlement
. Subject to Section 13(a), upon exercise of a Stock
Appreciation Right, the Participant shall be entitled to receive payment in the form, determined by the Committee, of cash or shares of Stock having a Fair Market Value equal to such cash amount, or a combination of shares of Stock and cash having
an aggregate value equal to such amount, determined by multiplying:
(i) any increase in the Fair Market Value of one
share of Stock on the exercise date over the price fixed by the Committee on the grant date of such Stock Appreciation Right, which may not be less than the Fair Market Value of a share of Stock on the grant date of such Stock Appreciation Right, by
(ii) the number of shares of Stock with respect to which the Stock Appreciation Right is exercised;
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2017 PROXY STATEMENT
provided, however, that on the grant date, the Committee may establish, in its sole discretion, a
maximum amount per share which will be payable upon exercise of a Stock Appreciation Right.
SECTION 9. DEFERRED SHARE
UNITS
(a)
Grant
. Freestanding Deferred Share Units may be granted to Participants at such time or times as shall be determined
by the Committee without regard to any election by the Participant to defer receipt of any compensation or bonus amount payable to him. The grant date of any freestanding Deferred Share Unit under the Plan will be the date on which such freestanding
Deferred Share Unit is awarded by the Committee or on such other future date as the Committee shall determine in its sole discretion. In addition, on fixed dates established by the Committee and subject to such terms and conditions as the Committee
shall determine, the Committee may permit a Participant to elect to defer receipt of all or a portion of his annual compensation and/or annual incentive bonus (“
Deferred Annual Amount
”) payable by the Company or a Subsidiary and
receive in lieu thereof an Award of elective Deferred Share Units (“
Elective Deferred Share Units
”) equal to the greatest whole number which may be obtained by dividing (
i
) the amount of the Deferred Annual Amount, by
(
ii
) the Fair Market Value of one share of Stock on the date of payment of such compensation and/or annual bonus. Each Award of Deferred Share Units shall be evidenced by an Award Agreement that shall specify (x) the number of
shares of Stock to which the Deferred Share Units pertain, (y) the time and form of payment of the Deferred Share Units and (z) such terms and conditions not inconsistent with the Plan as the Committee shall determine, including customary
representations, warranties and covenants with respect to securities law matters. Upon the grant of Deferred Share Units pursuant to the Plan, the Company shall establish a notional account for the Participant and will record in such account the
number of Deferred Share Units awarded to the Participant. No shares of Stock will be issued to the Participant at the time an award of Deferred Share Units is granted. Deferred Share Units may become payable on a Change in Control, Termination of
Service or on a specified date or dates set forth in the Award Agreement evidencing such Deferred Share Units. Notwithstanding anything in this Plan to the contrary, Deferred Share Units granted to a Participant who is a Canadian Taxpayer shall only
be redeemable and the value thereof payable to such Participant (or, in the event of such Participant’s death, such Participant’s beneficiary) upon a Termination of Service of such Participant (including due to death).
(b)
Rights as a Stockholder
. The Committee shall determine whether and to what extent Dividend Equivalents will be credited to the account
of, or paid currently to, a Participant receiving an Award of Deferred Share Units. Unless otherwise provided by the Committee at or after the grant date, (
i
) any cash dividends or distributions credited to the Participant’s account
shall be deemed to have been invested in additional Deferred Share Units on the record date established for the related dividend or distribution in an amount equal to the greatest whole number which may be obtained by dividing (
A
) the
value of such dividend or distribution on the record date by (
B
) the Fair Market Value of one share of Stock on such date, and such additional Deferred Share Unit shall be subject to the same terms and conditions as are applicable in
respect of the Deferred Share Unit with respect to which such dividends or distributions were payable, and (
ii
) if any such dividends or distributions are paid in shares of Stock or other securities, such shares and other securities
shall be subject to the same vesting, performance and other restrictions as apply to the Deferred Share Unit with respect to which they were paid. A Participant shall not have any rights as a stockholder in respect of Deferred Share Units awarded
pursuant to the Plan (including, without limitation, the right to vote on any matter submitted to the Company’s stockholders) until such time as the shares of Stock attributable to such Deferred Share Units have been issued to such Participant
or his beneficiary. A Participant who is a Canadian Taxpayer shall not be considered the owner of the Common Stock underlying Deferred Share Units granted to such Participant.
(c)
Vesting
. Unless the Committee provides otherwise at or after the grant date, the portion of each Award of Deferred Share Units that consists of freestanding Deferred Share Units, together
with any Dividend Equivalents credited with respect thereto, will be subject to a Restriction Period. Except as otherwise determined by the Committee at the time of grant, and subject to the Participant’s continued Service with his or her
Employer on such date, the Restriction Period with respect to Deferred Share Units that vest solely based on the passage of time shall lapse in four approximately equal installments on the first through fourth anniversaries of the grant date and the
Restriction Period with respect to performance-based Deferred Share Units shall lapse, to the extent Performance Goals have been achieved, three years after the grant date, in each case in accordance with the schedule provided in Participant’s
Award Agreement. The Restriction Period may lapse with respect to portions of Deferred Share Units on a pro rata basis, or it may lapse at one time with respect to all Deferred Share Units in an Award. The Restriction Period shall also lapse, in
whole or in part, upon the occurrence of any event or events, including a Change in Control, specified in the Plan, or specified by the Committee, in its discretion, on the grant date of the
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2017 PROXY STATEMENT
applicable Award. In its discretion, the Committee may also establish performance-based vesting conditions with respect to Awards of Deferred Share Units (in lieu of, or in addition to,
time-based vesting) based on one or more of the Performance Goals listed in Section 5(c); provided that any Award of Deferred Share Units made to any Executive Officer that is intended to qualify as “other performance based
compensation” under Section 162(m) of the Code shall be subject to the same restrictions and limitations applicable to Awards of Performance Shares and Performance Units under Sections 5(d) and 5(g), during a Performance Cycle selected by
the Committee. The portion of each Award of Deferred Share Units that consists of Elective Deferred Share Units, together with any Dividend Equivalents credited with respect thereto, shall not be subject to any Restriction Period and shall be
non-forfeitable
at all times. Notwithstanding anything in this Plan to the contrary, Deferred Share Units granted to a Participant who is a Canadian Taxpayer shall only be redeemable and the value thereof payable to
such Participant (or in the event of death, such Participant’s beneficiary) upon a Termination of Service of such Participant (including due to death).
(d)
Further Deferral Elections
. A Participant may elect to further defer receipt of shares of Stock issuable in respect of Deferred Share Units (or an installment of an Award) for a specified
period or until a specified event, subject in each case to the Committee’s approval and to such terms as are determined by the Committee, all in its sole discretion. Subject to any exceptions adopted by the Committee, such election must
generally be made at least 12 months prior to the prior settlement date of such Deferred Share Units (or any such installment thereof) whether pursuant to this Section 9 or Section 13 and must defer settlement for at least five years. A
further deferral opportunity does not have to be made available to all Participants, and different terms and conditions may apply with respect to the further deferral opportunities made available to different Participants. This Section 9(d)
shall not apply to Deferred Share Units granted to a Participant who is a Canadian Taxpayer.
(e)
Settlement
. Subject to this
Section 9 and Section 13, upon the date specified in the Award Agreement evidencing the Deferred Share Units (or, in the case of a Participant who is a Canadian Taxpayer, in accordance with the procedures set out in the Award Agreement
evidencing the Deferred Share Units) for each such Deferred Share Unit the Participant shall receive, in the Committee’s discretion, (
i
) a cash payment equal to the Fair Market Value of one share of Stock as of such payment date,
(
ii
) one share of Stock or (
iii
) any combination of cash and shares of Stock. In no event shall any payment or settlement of Deferred Share Units granted to a Participant who is a Canadian Taxpayer take place later than
December 31 of the first calendar year commencing after the year in which the Termination of Service of such Participant takes place.
SECTION 10. OTHER STOCK-BASED AWARDS
(a)
Generally
. The Committee may grant
other stock-based Awards, including, but not limited to, the outright grant of Stock in satisfaction of obligations of the Company or any Affiliate thereof under another compensatory plan, program or arrangement, modified Awards intended to comply
with or structured in accordance with the provisions of applicable non-U.S. law or practice, or the sale of Stock, in such amounts and subject to such terms and conditions as the Committee shall determine, including, but not limited to, the
satisfaction of Performance Goals. Each other-stock based Award shall be evidenced by an Award Agreement that shall specify the terms and conditions applicable thereto. Any other stock-based Award may entail the transfer of actual shares of Stock or
the payment of the value of such Award in cash based upon the value of a specified number of shares of Stock, or any combination of the foregoing, as determined by the Committee. The terms of any other stock-based Award need not be uniform in
application to all (or any class of) Participants, and each other stock-based award granted to any Participant (whether or not at the same time) may have different terms.
(b)
Termination of Service
. In addition to any other terms and conditions that may be specified by the Committee, each other stock-based award shall specify the impact of a Termination of
Service upon the rights of a Participant in respect of such Award. At the discretion of the Committee, such conditions may be the same as apply with respect to Restricted Stock or Restricted Stock Units, or may contain terms that are more or less
favorable to the Participant.
SECTION 11. DIVIDEND EQUIVALENTS
(a)
Generally
. Dividend Equivalents may be granted to Participants at such time or times as shall be determined by the Committee; provided that no Dividend Equivalents shall be paid with
respect to any unearned Performance Shares or Performance Units. Dividend Equivalents may be granted in tandem with other Awards, in addition to other Awards, or freestanding and unrelated to other Awards.
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The grant date of any Dividend Equivalents under the Plan will be the date on which the Dividend Equivalent is awarded by the Committee, or such other date as the Committee shall determine in its
sole discretion. Dividend Equivalents shall be evidenced in writing, whether as part of the Award Agreement governing the terms of the Award, if any, to which such Dividend Equivalent relates, or pursuant to a separate Award Agreement with respect
to freestanding Dividend Equivalents, in each case, containing such provisions not inconsistent with the Plan as the Committee shall determine, including customary representations, warranties and covenants with respect to securities law matters.
SECTION 12. TERMINATION OF EMPLOYMENT OR SERVICE.
(a)
Termination Due to Death
. Unless otherwise determined by the Committee at or after the time the Award is granted and set forth in the Award Agreement covering such Award, if a
Participant’s employment or service terminates due to the Participant’s death:
(i) With respect to Performance
Awards, the Participant’s Designated Beneficiary shall be entitled to a distribution of, and such Performance Awards shall be deemed immediately vested to the extent of, the same number or value of Performance Awards (without pro-ration) that
would have been payable for the Performance Cycle had his or her Service continued until the end of the applicable Performance Cycle as if target performance levels had been achieved. Any Stock issuable in respect of such Performance Awards or value
of Performance Awards payable in cash that become payable in accordance with the preceding sentence shall be paid on the earlier of (x) the date the Performance Award would have been paid had the Participant remained in Service through the
original payment date and (y) January 31 of the year following the Participant’s death.
(ii) All Service
Awards shall immediately vest.
(iii) All Service Awards (other than Options and SARs) shall be paid on the earlier of
(x) the date the Award would have been paid had the Participant remained in Service through the original payment date and (y) January 31 of the year following the Participant’s death.
(iv) All Options and SARs shall remain outstanding until the first anniversary of the date of death or the Award’s normal
expiration date, whichever is earlier, after which any unexercised Options and SARs shall immediately terminate.
(b)
Termination Due
to Disability
. Unless otherwise determined by the Committee at or after the time the Award is granted and set forth in the Award Agreement covering such Award, if a Participant’s employment or service terminates due to the
Participant’s Disability:
(i) With respect to Performance Awards, the Participant shall be entitled to a
distribution of, and such Performance Awards shall be deemed vested to the extent of, the same number or value of Performance Awards (without pro-ration) that would have been payable for the Performance Cycle had his or her Service continued until
the end of the applicable Performance Cycle, subject to satisfaction of the applicable Performance Goals. Any Stock issuable in respect of Performance Awards or value of Performance Awards payable in cash that become payable in accordance with the
preceding sentence shall be paid at the same time as the Awards are paid to other Participants (or at such earlier time as the Committee may permit).
(ii) All Service Awards shall immediately vest.
(iii) All Service
Awards (other than Options and SARs) shall be paid on the earlier of (x) the date the Award would have been paid had the Participant remained in Service through the original payment date and (y) January 31 of the year following the
Participant’s date of termination due to Disability.
(iv) All Options and SARs shall remain outstanding until the
first anniversary of the date of termination or the Award’s normal expiration date, whichever is earlier, after which any unexercised Options and SARs shall immediately terminate.
(c)
Retirement
. Unless otherwise determined by the Committee at or after the grant date and set forth in the Award Agreement covering such Award, if a Participant’s Service terminates
due to the Participant’s Retirement,
(i) With respect to Performance Awards, the Participant shall be entitled to a
distribution of, and such Performance Awards shall be deemed vested to the extent of, the number or value of Performance Awards that would have been payable for the Performance Cycle had his or her Service continued until the end of the applicable
Performance Cycle, subject to satisfaction of the applicable Performance Goals, multiplied by a fraction, the numerator of which is the number of days elapsed from the commencement of the Performance
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Cycle through the date of his or her Retirement and the denominator of which is the number of days in the Performance Cycle, and the remainder of each such Performance Award shall be forfeited
and canceled as of the date of such Retirement. Any Stock issuable in respect of Performance Awards or value of Performance Awards payable in cash that become payable in accordance with the preceding sentence shall be paid at the same time as the
Performance Awards are paid to other Participants (or at such earlier time as the Committee may permit).
(ii) With
respect to Service Awards, such Service Awards shall be deemed vested to the extent of, or the Restricted Period shall lapse with respect to, as applicable, the number of shares of Stock subject to such Service Award multiplied by a fraction, the
numerator of which is the number of days elapsed from the date of grant of the Service Award through the date of his or her Retirement and the denominator of which is the number of days from the grant date of the Service Award to the date such
Service Award would have vested had the Participant’s Service continued through the original service period, and the remainder of each such Award shall be forfeited and canceled as of the date of such Retirement.
(iii) Vested Service Awards (other than Options and SARs) shall be paid on the earlier of (x) the date the Service Award would
have been paid (or the Restricted Period would have lapsed) had the Participant remained in Service through the original payment date and (y) January 31 of the year following the Participant’s Termination of Service.
Notwithstanding anything to the contrary contained in this Plan, if the Award is a Specified Award and the Participant is a
Specified Employee, and a Vested Award would otherwise be paid to the Participant pursuant to and on the date specified in clause (iii)(y) above, any such payment required to be made to such Participant under this Plan upon or following the
Participant’s Termination of Service shall be delayed until six months after the Participant’s Termination of Service (or, if earlier, upon the Participant’s death) to the extent necessary to comply with, and avoid imposition on the
Participant of any tax penalty imposed under, Section 409A of the Code. Should payments be delayed in accordance with the preceding sentence, the accumulated payment that would have been made but for the period of the delay shall be paid in a
single lump sum as soon as administratively practicable following the six month anniversary of the Participant’s Termination of Service, and not later than 90 days after such six month anniversary.
(iv) All vested Options and SARs shall remain outstanding until the fifth anniversary of the date of termination or the Award’s
normal expiration date, whichever is earlier, after which any unexercised Options and SARs shall immediately terminate.
(v) The Committee may condition the vesting, distribution, exercise or continuation of such Awards following Retirement on the
Participant’s refraining from engaging in conduct that is detrimental to the Company (such as competing with the Company or soliciting employees or customers of the Company) following Retirement.
(d)
Termination for Cause
. Unless otherwise determined by the Committee at or after the grant date and set forth in the Award Agreement
covering such Award, if a Participant’s employment or service terminates for Cause, all Options and SARs, whether vested or unvested, and all other Awards that are unvested, unexercisable or with respect to which the Restricted Period has not
lapsed shall be immediately forfeited and canceled, effective as of the date of the Participant’s Termination of Service.
(e)
Involuntary Termination for any Other Reason
. Unless otherwise determined by the Committee at or after the time the Award is granted and set forth in the Award Agreement covering such Award, if a Participant’s employment or service is
terminated by the Company for any reason other than death, Disability, Retirement or Cause,
(i) all Performance Awards
for which the Performance Cycle has been completed and which are earned but unpaid as of the date of Termination of Service shall be paid at the same times as the Performance Award is paid to other Participants, and all other Awards that are
unvested, unexercisable or with respect to which the Restricted Period has not lapsed shall be immediately forfeited and canceled as of the date of Termination of Service.
(ii) All vested Options and SARs shall remain outstanding until the 90
th
day after of the date of Termination of Service or the Award’s normal expiration date, whichever is earlier, after which any unexercised Options and SARs shall immediately
terminate.
(f)
Voluntary Termination by the Participant
. Unless otherwise determined by the Committee at or after the time the
Award is granted and set forth in the Award Agreement covering such Performance Shares or Performance Units, if a Participant terminates his or her Service with the Company (other than by reason of death, Disability or Retirement), all Options and
SARs, whether vested or unvested, and all
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other Awards that are unvested, unexercisable or with respect to which the Restricted Period has not lapsed shall be immediately forfeited and canceled, effective as of the date of the
Participant’s Termination of Service.
(g)
Termination in Connection with a Change in Control
. Notwithstanding anything to
the contrary in this Section 12, Section 13 shall determine the treatment of Awards upon a Change in Control.
SECTION 13. CHANGE IN CONTROL
(a)
Change in Control
. Unless otherwise determined by the Committee, as otherwise provided in an Award Agreement, or as provided in Section 13(b) or 13(d), in the event of a Change in
Control,
(i) no cancellation, termination, acceleration of exercisability or vesting, lapse of any Restriction Period or
settlement or other payment shall occur with respect to any such outstanding Awards, provided that such outstanding Awards shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted Award, an
“
Alternative Award
”) by the New Employer, provided that any Alternative Award must:
(A) be based on
shares of Stock that are traded on an established U.S. securities market;
(B) provide the Participant (or each
Participant in a class of Participants) with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award, including, but not limited to, an identical or better exercise or vesting
schedule and identical or better timing and methods of payment;
(C) have substantially equivalent economic value to such
Award (determined at the time of the Change in Control); and
(D) have terms and conditions which provide that in the
event that the Participant suffers a Termination for Business Reasons within 24 months after the occurrence of a Change in Control:
(I) all outstanding Service Awards held by a terminated Participant shall become vested and exercisable and the Restriction Period on all such outstanding Service Awards shall lapse; and
(II) each outstanding Performance Award held by a terminated Participant with a Performance Cycle in progress at the time of both
the Change in Control and the Termination for Business Reasons, shall be deemed to be earned and become vested and/or paid out in an amount equal to the product of (
x
) such Participant’s target award opportunity with respect to such
Award for the Performance Cycle in question and (
y
) the greater of the percentage of Performance Goals (which Performance Goals shall be pro-rated, if necessary or appropriate, to reflect the portion of the Performance Cycle that has
been completed) achieved as of the date of the Change in Control and as of the last day of the fiscal quarter ended on or immediately prior to the date of Termination of Service. The portion of any Performance Award that does not vest in accordance
with the preceding sentence shall immediately be forfeited and canceled without any payment therefor.
(III)
Payments
. To the extent permitted under Section 15(l), all amounts payable hereunder shall be payable in full, as soon as reasonably practicable, but in no event later than 10 business days, following termination.
(ii) with respect to Awards other than Specified Awards, if no Alternative Awards are available, then immediately prior to the
consummation of the transaction constituting the Change in Control, (
A
) all unvested Service Awards shall vest and the Restriction Period on all such outstanding Service Awards shall lapse; (
B
) each outstanding Performance
Award with a Performance Cycle in progress at the time of the Change in Control shall be deemed to be earned and become vested and/or paid out in an amount equal to the product of (
x
) such Participant’s target award opportunity with
respect to such Award for the Performance Cycle in question and (
y
) the percentage of Performance Goals achieved as of the date of the Change in Control (which Performance Goals shall be pro-rated, if necessary or appropriate, to reflect
the portion of the Performance Cycle that has been completed), and all other Performance Awards shall lapse and be canceled and forfeited upon consummation of the Change in Control; and (C) shares of Stock underlying all Restricted Stock,
Restricted Stock Units, Performance Shares, Performance Units, Deferred Share Units and other stock-based Awards that are vested or for which the Restricted Period has lapsed (as provided in this Section 13(a) or otherwise) shall be issued or
released to the Participant holding such Award.
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(iii) with respect to Specified Awards, in the event of a Change in Control that is
not a Specified Change in Control, if no Alternative Awards are available, or Alternative Awards may not be issued in a manner that complies with Section 409A of the Code or without the imposition of any additional taxes or interest under
Section 409A of the Code, the Committee, as constituted immediately prior to the Change in Control, may determine that Awards may be settled through a cash payment equal to the Change in Control Price multiplied by the number of vested Awards
(reduced by any required exercise price) plus interest from the later of the vesting date and the Change in Control through the date of payment at a rate determined by the Committee as constituted immediately prior to the Change in Control to the
extent to that such settlement shall not subject the Participant holding such Award to any additional taxes or interest under Section 409A of the Code or in such other manner that shall comply with Section 409A of the Code.
(b)
Specified Change in Control
. Unless otherwise determined by the Committee at or prior to the time of grant or as otherwise provided in
an Award Agreement entered into after November 3, 2008, notwithstanding anything in this Plan with respect to any Specified Awards, in the event of a Specified Change in Control then all of the Specified Awards shall be subject to the treatment
provided in Section 13(a)(ii) as if they were Awards other than Specified Awards (it being understood for this purpose that Alternative Awards shall be deemed unavailable for such Specified Awards). Unless otherwise determined by the Committee
at or prior to the time of grant or as otherwise provided in an Award Agreement entered into after November 3, 2008, in each case in compliance with Section 409A of the Code, no other Change in Control shall trigger any payment, issuance,
release or settlement of a Specified Award.
(c)
Termination for Business Reasons Prior to a Change in Control
. Unless otherwise
determined by the Committee at or after the time of grant, any Participant whose employment or service is terminated due to a Termination for Business Reasons within 3 months prior to the occurrence of a Change in Control shall be treated, solely
for the purposes of this Plan (including, without limitation, this Section 13) as continuing in the Company’s employment or service until the occurrence of such Change in Control, and to have been terminated immediately thereafter.
(d)
Committee Discretion
. Notwithstanding anything in this Section 13 to the contrary, except as otherwise provided in an
Award Agreement, if the Committee as constituted immediately prior to the Change in Control determines in its sole discretion, then all Awards shall be canceled in exchange for a cash payment equal to (
x
)(
A
) in the case of Option and
SAR Awards that are vested (as provided in Section 13(a) or otherwise), the excess, if any, of the Change in Control Price over the exercise price for such Option or SAR and (
B
) in the case of all other Awards that are vested or for
which the Restricted Period has lapsed (as provided in Section 13(a) or otherwise), the Change in Control Price, multiplied by (
y
) the aggregate number of shares of Common Stock covered by such Award, provided, however, that no
Specified Award shall be cancelled in exchange for a cash payment unless the Change in Control is a Specified Change in Control or such payment may be made without the imposition of any additional taxes or interest under Section 409A of the
Code. The Committee may, in its sole discretion, accelerate the exercisability or vesting or lapse of any Restriction Period with respect to all or any portion of any outstanding Award immediately prior to the consummation of the transaction
constituting the Change in Control, provided, however, that no such acceleration or vesting or lapse may be exercised with respect to any Specified Award to the extent that such exercise would result in the imposition of any additional tax, interest
or penalty under Section 409A of the Code.
SECTION 14. EFFECTIVE DATE, AMENDMENT, MODIFICATION, AND TERMINATION OF
THE PLAN
The Plan shall be effective on the Effective Date, and shall continue in effect, unless sooner terminated pursuant to this
Section 14, until the tenth anniversary of the Effective Date. The Board of Directors or the Committee may at any time in its sole discretion, for any reason whatsoever, terminate or suspend the Plan, and from time to time, subject to obtaining
any regulatory approval, including that of the New York Stock Exchange and the Toronto Stock Exchange, if applicable, may amend or modify the Plan; provided that without the approval by a majority of the votes cast at a duly constituted meeting
of shareholders of the Company, no amendment or modification to the Plan may (
i
) materially increase the benefits accruing to Participants under the Plan, (
ii
) except as otherwise expressly provided in Section 4(d),
increase the number of shares of Stock subject to the Plan or the individual Award limitations specified in Section 4(c), (
iii
) modify the class of persons eligible for participation in the Plan (
iv
) allow Options to be
issued with an exercise price below Fair Market Value on the date of grant (
v
) extend the term of any Award granted under the Plan beyond its original expiry date or (
vi
) materially modify the Plan in any other way that would
require shareholder approval under any regulatory requirement that the Committee determines to be applicable, including, without limitation, the rules of the New York Stock Exchange and the Toronto Stock Exchange.
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Notwithstanding any provisions of the Plan to the contrary, neither the Board of Directors nor the Committee may, without the consent of the affected Participant, amend, modify or terminate the
Plan in any manner that would adversely affect any Award theretofore granted under the Plan or result in the imposition of an additional tax, interest or penalty under Section 409A of the Code.
SECTION 15. GENERAL PROVISIONS
(a)
Withholding
. The Employer shall have the right to deduct from all amounts paid to a Participant in cash (whether under this Plan or otherwise) any amount of taxes required by law to be
withheld in respect of Awards under this Plan as may be necessary in the opinion of the Employer to satisfy tax withholding required under the laws of any country, state, province, city or other jurisdiction, including but not limited to income
taxes, capital gains taxes, transfer taxes, and social security contributions that are required by law to be withheld. In the case of payments of Awards in the form of Stock, at the Committee’s discretion, the Participant shall be required to
either pay to the Employer the amount of any taxes required to be withheld with respect to such Stock or, in lieu thereof, the Employer shall have the right to retain (or the Participant may be offered the opportunity to elect to tender) the number
of shares of Stock whose Fair Market Value equals such amount required to be withheld.
(b)
Nontransferability of Awards
. Except
as provided herein or in an Award Agreement, no Award may be sold, assigned, transferred, pledged or otherwise encumbered except by will or the laws of descent and distribution; provided that the Committee may permit (on such terms and conditions as
it shall establish) a Participant to transfer an Award for no consideration to the Participant’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of
the beneficial interest and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests (“
Permitted Transferees
”). No amendment to the Plan or to any Award shall permit transfers
other than in accordance with the preceding sentence. Any attempt by a Participant to sell, assign, transfer, pledge or encumber an Award without complying with the provisions of the Plan shall be void and of no effect. Except to the extent required
by law, no right or interest of any Participant shall be subject to any lien, obligation or liability of the Participant. All rights with respect to Awards granted to a Participant under the Plan shall be exercisable during the Participant’s
lifetime only by such Participant or, if applicable, his or her Permitted Transferee(s). The rights of a Permitted Transferee shall be limited to the rights conveyed to such Permitted Transferee, who shall be subject to and bound by the terms of the
agreement or agreements between the Participant and the Company.
(c)
No Limitation on Compensation
. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to pay compensation to its Employees, in cash or property, in a manner which is not expressly authorized under the Plan.
(d)
No Right to Employment
. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Employer. The grant of an Award hereunder, and any future grant of Awards under the Plan is entirely voluntary, and at the complete discretion of the Company. Neither the grant of
an Award nor any future grant of Awards by the Company shall be deemed to create any obligation to grant any further Awards, whether or not such a reservation is explicitly stated at the time of such a grant. The Plan shall not be deemed to
constitute, and shall not be construed by the Participant to constitute, part of the terms and conditions of employment and participation in the Plan shall not be deemed to constitute, and shall not be deemed by the Participant to constitute, an
employment or labor relationship of any kind with the Company. The Employer expressly reserves the right at any time to dismiss a Participant free from any liability, or any claim under the Plan, except as provided herein and in any agreement
entered into with respect to an Award. The Company expressly reserves the right to require, as a condition of participation in the Plan, that Award recipients agree and acknowledge the above in writing. Further, the Company expressly reserves the
right to require Award recipients, as a condition of participation, to consent in writing to the collection, transfer from the Employer to the Company and third parties, storage and use of personal data for purposes of administering the Plan.
(e)
No Rights as Shareholder
. Subject to the provisions of the applicable Award contained in the Plan and in the Award
Agreement, no Participant, Permitted Transferee or Designated Beneficiary shall have any rights as a shareholder with respect to any shares of Stock to be distributed under the Plan until he or she has become the holder thereof.
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(f)
Forfeiture for Financial Reporting Misconduct; Other Compensation Clawbacks
. If the Company
is required to prepare an accounting restatement due to material noncompliance by the Company with any financial reporting requirement under the securities laws, and if a Participant knowingly or grossly negligently engaged in the misconduct or
knowingly or grossly negligently failed to prevent the misconduct as determined by the Committee, or if the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, then the
Participant shall forfeit and disgorge to the Company (
i
) any Awards granted or vested and all gains earned or accrued due to the exercise of Options or SARS or sale of any Stock during the 12-month period following the filing of the
financial document embodying such financial reporting requirement and (
ii
) any other Awards that vested based on the materially non- complying financial reporting. The Company may also cancel or reduce, or require a Participant to
forfeit and disgorge to the Company or reimburse the Company for, any Awards granted or vested and any gains earned or accrued, due to the exercise, vesting or settlement of Awards or sale of any Stock pursuant to an Award under the Plan, to the
extent permitted or required by , or pursuant to any Company policy implemented as required by, applicable law, regulation or stock exchange rule as from time to time may be in effect (including but not limited to The Dodd–Frank Wall Street
Reform and Consumer Protection Act and regulations and stock exchange rules promulgated pursuant to or as a result of such Act).
(g)
Construction of the Plan
. The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be determined solely in accordance with the laws of the State
of Delaware (without reference to the principles of conflicts of law).
(h)
Compliance with Legal and Exchange Requirements
. The
Plan, the granting and exercising of Awards thereunder, and any obligations of the Company under the Plan, shall be subject to all applicable federal, state, and foreign country laws, rules, and regulations, and to such approvals by any regulatory
or governmental agency as may be required, and to any rules or regulations of any exchange on which the Stock is listed. The Company, in its discretion, may postpone the granting and exercising of Awards, the issuance or delivery of Stock under any
Award or any other action permitted under the Plan to permit the Company, with reasonable diligence, to complete such stock exchange listing or registration or qualification of such Stock or other required action under any federal, state or foreign
country law, rule, or regulation and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Stock in compliance with applicable laws, rules,
and regulations. The Company shall not be obligated by virtue of any provision of the Plan to recognize the exercise of any Award or to otherwise sell or issue Stock in violation of any such laws, rules, or regulations, and any postponement of the
exercise or settlement of any Award under this provision shall not extend the term of such Awards. Neither the Company nor its directors or officers shall have any obligation or liability to a Participant with respect to any Award (or Stock issuable
thereunder) that shall lapse because of such postponement.
(i)
Deferrals
. Subject to the requirements of Section 409A of
the Code, the Committee may postpone the exercising of Awards, the issuance or delivery of Stock under, or the payment of cash in respect of, any Award or any action permitted under the Plan, upon such terms and conditions as the Committee may
establish from time to time. Subject to the requirements of Section 409A of the Code, a Participant may electively defer receipt of the shares of Stock or cash otherwise payable in respect of any Award (including, without limitation, any shares
of Stock issuable upon the exercise of an Option other than an Incentive Stock Option) upon such terms and conditions as the Committee may establish from time to time.
(j)
Indemnification
. Each person who is or shall have been a member of the Committee and each delegate of such Committee shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be made a party or in which he or she may be
involved in by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in
any such action, suit, or proceeding against him or her, provided that the Company is given an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it personally. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-laws, by contract, as a matter of law, or
otherwise.
(k)
Amendment of Award
. In the event that the Committee shall determine that such action would, taking into account
such factors as it deems relevant, be beneficial to the Company, the Committee may affirmatively act to amend, modify or terminate any outstanding
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Award at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including without limitation, change the date or dates as of which (
A
) an
Option or SAR becomes exercisable, (
B
) a Performance Share or Performance Unit is deemed earned, or (
C
) Restricted Stock, Restricted Stock Units, Deferred Share Units and other Stock-based Awards becomes nonforfeitable,
except that no outstanding Option may be amended or otherwise modified or exchanged (other than in connection with a transaction described in Section 4(d)) in a manner that would have the effect of reducing its original exercise price or
otherwise constitute repricing. Any such action by the Committee shall be subject to the Participant’s consent if the Committee determines that such action would adversely affect the Participant’s rights under such Award, whether in whole
or in part. The Committee may, in its sole discretion, accelerate the exercisability or vesting or lapse of any Restriction Period with respect to all or any portion of any outstanding Award at any time. Notwithstanding any provisions of the Plan to
the contrary, the Committee may not, without the consent of the affected Participant, amend, modify or terminate an outstanding Award or exercise any discretion in any manner that would result in the imposition of an additional tax, interest or
penalty under Section 409A of the Code.
(l)
409A Compliance
. The Plan is intended to be administered in a manner consistent
with the requirements, where applicable, of Section 409A of the Code. Where reasonably possible and practicable, the Plan shall be administered in a manner to avoid the imposition on Participants of immediate tax recognition and additional
taxes pursuant to such Section 409A. Notwithstanding the foregoing, neither the Company nor the Committee, nor any of the Company’s directors, officers or employees shall have any liability to any person in the event such Section 409A
applies to any such Award in a manner that results in adverse tax consequences for the Participant or any of his beneficiaries or transferees. Notwithstanding any provision of this Plan or any Award Agreement to the contrary, the Board of the
Directors or the Committee may unilaterally amend, modify or terminate the Plan or any outstanding Award, including but not limited to changing the form of Award, if the Board or Committee determines, in its sole discretion, that such amendment,
modification or termination is necessary or advisable to comply with applicable U.S. law as a result of changes in law or regulation or to avoid the imposition of an additional tax, interest or penalty under Section 409A of the Code.
(m)
No Impact on Benefits
. Except as may otherwise be specifically stated under any employee benefit plan, policy or program, no
amount payable in respect of any Award shall be treated as compensation for purposes of calculating a Participant’s right under any such plan, policy or program.
(n)
No Constraint on Corporate Action
. Nothing in this Plan shall be construed (
a
) to limit, impair or otherwise affect the Company’s right or power to make adjustments,
reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets or (
b
) to limit the right or power of the
Company, or any Subsidiary, to take any action which such entity deems to be necessary or appropriate.
(o)
Headings and
Captions
. The headings and captions herein are provided for reference and convenience only, shall not be considered part of this Plan, and shall not be employed in the construction of this Plan.
B-19
2017 PROXY STATEMENT
IMPORTANT ANNUAL MEETING INFORMATION Admission Ticket MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 000004
000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT LINE SACKPACK
Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies
submitted by the Internet or telephone must be received by 12:00 a.m., Eastern Daylight Time, on May 3, 2017. Vote by Internet Go to www.envisionreports.com/ufs Or scan the QR code with your smartphone Follow the steps outlined on the secure
website Vote by telephone Call toll free
1-800-652-VOTE
(8683) within the USA, US territories & Canada on a touch
tone telephone Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in X this example. Please do not write outside the designated areas. Annual Meeting Proxy Card 1234 5678 9012 345 IF
YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. A Proposals — The Board of Directors recommends a vote FOR all of the director nominees, FOR proposals
2, 4, 5, 6 and 7 and ONE YEAR for Proposal 3. Election of nine Directors: For Against Abstain For Against AbstainFor Against Abstain —Giannella Alvarez—Brian M. Levitt—Denis Turcotte 03—David J.
Illingworth 06—Pamela B. Strobel 09—Mary A. Winston
Say-on-Pay
– An advisory vote to approve named executive officer compensation. The approval of the
material terms of the performance goals under the Domtar Corporation Annual Incentive Plan for Members of the Management Committee. The approval of equity compensation limit for Directors under the Amended and Restated Domtar Corporation 2007
Omnibus Incentive
Plan. Say-When-on-Pay—An
advisory vote on the approval of the frequency of
stockholder vote on executive compensation. The approval of the material terms of the performance goals under the Amended and Restated Domtar Corporation 2007 Omnibus Incentive Plan. The ratification of the appointment of PricewaterhouseCoopers LLP
as the Corporation’s independent public accounting firm for the 2017 fiscal year. 1 Year 2Years 3 Years Abstain For Against Abstain The transaction of any other business that may properly be brought before the annual
meeting. B Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep
signature within the box. IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A—C ON BOTH SIDES OF THIS CARD. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR
A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND 1UP X 3152891 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
Domtar Corporation 2017 Annual Meeting of Stockholders Domtar 234 Kingsley Park Drive Fort Mill, South Carolina Wednesday, May 3,
2017 7:45 a.m. EDT If you plan to attend the annual meeting please note that registration and seating will begin at 7:00 a.m. Each stockholder will be asked to sign an admittance card and may be asked to present a valid picture identification.
Stockholders holding stock in brokerage accounts will need to bring a copy of a brokerage statement reflecting stock ownership as of the March 10, 2017 record date. Cameras and recording devices will not be permitted at the meeting. qIF YOU
HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — Domtar Corporation This proxy is solicited on
behalf of the Board of Directors for the Annual Meeting on May 3, 2017. The undersigned hereby appoints Robert J. Steacy, John D. Williams and Razvan L. Theodoru and each of them, proxies, with full power of substitution, to vote all shares of
common stock of the undersigned in Domtar Corporation at the annual meeting of stockholders to be held on Wednesday, May 3, 2017, beginning at 7:45 a.m. (EDT) at Domtar, 234 Kingsley Park Drive, Fort Mill, South Carolina, and any adjournment
thereof, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement furnished herewith, in accordance with the directions indicated on the reverse side of this card or provided through the
telephone or internet proxy procedures, and at the discretion of the proxies on any other matters that may properly come before the meeting. If specific voting directions are not given with respect to the matters to be acted upon and the signed card
is returned, the proxies will vote such shares in accordance with the Directors’ recommendations on the matters listed on the reverse side of this card and at the discretion of the proxies on any other matters that may properly come before the
meeting. The Board of Directors recommends a vote FOR all of the director nominees, a vote FOR proposals 2, 4, 5, 6 and 7 and ONE YEAR for Proposal 3, as listed on the reverse side of this card. The Board of Directors knows of no other matters that
are to be presented at the meeting. Please sign and return promptly in the enclosed envelope or, if you choose, you can submit your proxy by telephone or through the internet. C
Non-Voting
Items Change of Address — Please print new address below. IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A—C ON BOTH SIDES OF THIS CARD.