UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x Filed by a Party other than the Registrant ¨
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| ¨ | Preliminary Proxy Statement | |||
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
| x | Definitive Proxy Statement | |||
| ¨ | Definitive Additional Materials | |||
| ¨ | Soliciting Material under Rule 14a-12 | |||
| RESOLUTE FOREST PRODUCTS INC. | ||||
| (Name of Registrant as Specified In Its Charter) | ||||
| (Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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Resolute Forest Products Inc.
111 Duke Street, Suite 5000
Montréal, Québec
Canada H3C 2M1
March 22, 2013April 4, 2014
Dear Stockholder:
We cordially invite you to attend the annual meeting of stockholders of Resolute Forest Products Inc., which will be held on Thursday,Friday, May 16, 2013,23, 2014, at 10:00 a.m. (Eastern), at the Valhalla InnCentre for Conservation of Boreal Biodiversity in Thunder Bay, Ontario,Saint-Félicien, Québec, Canada. The accompanying notice of annual meeting and proxy statement contain the details of the business to be conducted at the meeting.
In addition to the formal items of business to be brought before the meeting, we will report on our business and respond to stockholder questions.
Whether or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or by Internet or by completing, signing, dating and returning your proxy form in the enclosed envelope.
Resolute’s annual report for 20122013 is included in this package, and we urge you to read it carefully.
We look forward to seeing you at the annual meeting.
Sincerely,
Richard Garneau
President and chief executive officer
Richard B. Evans
Bradley P. Martin
Chair of the board
Resolute Forest Products Inc.
111 Duke Street, Suite 5000
Montréal, Québec
Canada H3C 2M1
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 201323, 2014
March 22, 2013April 4, 2014
Dear Stockholder:
The 20132014 annual meeting of stockholders of Resolute Forest Products Inc. will be held on Thursday,Friday, May 16, 2013,23, 2014, at 10:00 a.m. (Eastern), at the Valhalla InnCentre for Conservation of Boreal Biodiversity in Thunder Bay, Ontario,Saint-Félicien, Québec, Canada, for the purpose of voting on the following matters:
| 1. | the election of directors for the ensuing year; |
| 2. | the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the |
| 3. | an advisory vote to approve executive compensation, or the |
| 4. | such other business as may properly come before the annual meeting or any adjournment or postponement thereof. |
The record date for the determination of the stockholders entitled to vote at our annual meeting, and any adjournment or postponement thereof, is the close of business on March 20, 2013.April 3, 2014.
Important notice regarding the availability of proxy materials for the annual meeting of
stockholders to be held on May 16, 2013:23, 2014:
The proxy statement and our 20122013 annual report are available at http://www.edocumentview.com/RFP.
By order of the board of directors,
Jacques P. Vachon
Corporate secretary
March 22, 2013April 4, 2014 Montréal, Québec, Canada
Questions and Answers About the Annual General Meeting and Voting | 1 | |||
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Board Leadership Structure; Communication with Independent Directors | ||||
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Item 2. Vote on the Ratification of the Appointment of PricewaterhouseCoopers LLP | ||||
Stockholder | ||||
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of proxies by Resolute Forest Products Inc. on behalf of our board of directors for the 20132014 annual meeting of stockholders. The annual meeting will be held on Thursday,Friday, May 16, 2013,23, 2014, at 10:00 a.m. (Eastern), at the Valhalla InnCentre for Conservation of Boreal Biodiversity in Thunder Bay, Ontario,Saint-Félicien, Québec, Canada. Proxy materials for the annual meeting are being mailed or will be made available on or about April 3, 2013.4, 2014.
When we use the terms “Resolute,” “the Company,” “we,” “us” and “our,” we mean Resolute Forest Products Inc., a Delaware corporation, and its consolidated subsidiaries, unless the context indicates otherwise.
QUESTIONSAND ANSWERS ABOUTTHE ANNUAL GENERAL MEETINGAND VOTING
Who is entitled to vote at the annual meeting?
Owners of Resolute’s common stock at the close of business on March 20, 2013,April 3, 2014, the record date for the annual meeting, are entitled to receive the notice of annual meeting and to vote their shares at the meeting. On that date, there were 94,754,35194,579,231 shares of common stock outstanding and entitled to vote and there were 5,2993,505 holders of record. Each share of common stock is entitled to one vote for each matter to be voted on at the annual meeting.
What is the difference between holding shares as a stockholder of record and through an intermediary?
You are a stockholder of record if you own shares of common stock that are registered in your name with our transfer agent, Computershare Trust Company, N.A. If you are a stockholder of record, the transfer agent is sending these proxy materials to you directly.
If you hold shares of common stock indirectly through a broker, bank or similar institution (which we refer to as an “intermediary institution”“intermediary institution”), you are a “street name”“street name” holder and these materials are being sent to you by the intermediary institution through which you hold your shares. If you provide specific voting instructions by mail, telephone or the Internet, your intermediary institution will vote your shares as you have directed.
What do I need to do to attend the annual meeting?
Attendance at the annual meeting is generally limited to our stockholders and their authorized representatives. All stockholders must bring an acceptable form of identification, like a driver’s license, to attend the meeting in person. If you hold your shares in street name and you plan to attend the annual meeting, you must bring an account statement or other suitable evidence that you held shares of common stock as of the record date to be admitted to the meeting. For directions to the annual meeting you may contact our investor relations department by following the instructions on our website at www.resolutefp.com/investors.
Any representative of a stockholder who wishes to attend must present acceptable documentation evidencing his or her authority, suitable evidence of ownership by the stockholder of common stock as described above and an acceptable form of identification. We reserve the right to limit the number of representatives for any stockholder who may attend the meeting.
What methods can I use to vote?
If you are a registered holder, you may vote:
| • | By mail. Complete, sign and date the proxy card or voting instruction card and return it in the pre-paid envelope enclosed with these materials. |
| • | By telephone or Internet. You can vote over the telephone by calling 1-800-652-VOTE (8683) within Canada, the U.S. and its territories or through the Internet at |
vote their shares and to confirm that their instructions have been recorded properly. Voting will be open 24 hours a day, 7 days a week, but proxies submitted using these methods must be received by 1:00 a.m. (Central) on May |
| • | In person. You can vote in person at the meeting. SeeWhat do I need to do to attend the annual meeting? |
If you are a street name holder, you may vote:
| • | By mail. By returning a properly executed and dated voting instruction form by mail, depending upon the method(s) your intermediary makes available. |
| • | By telephone or Internet. You can vote over the telephone or through the Internet at the number and website address indicated in your intermediary institution’s voting instructions. The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares and to confirm that their instructions have been recorded properly. |
| • | In person. You can vote in person at the meeting if you bring a valid “legal proxy,” which you can obtain from your intermediary institution through which you hold your shares. SeeWhat do I need to do to attend the annual meeting? |
What is a broker non-vote?
If you are a street name holder, you must instruct your intermediary institution how to vote your shares. If you do not, your shares will not be voted on any proposal for which the broker does not have discretionary authority to vote, which is referred to as a “broker non-vote.” In these cases, the broker can register your shares as being “present and entitled to vote” for purposes of determining the quorum but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange, or “NYSE”. Under those rules, your intermediary institution has discretionary voting authority to vote your shares on the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm, even if it does not receive voting instructions from you. But the election of directors and the advisory say-on-pay vote are non-discretionary items, and they may not be voted upon by your broker without specific voting instructions from you. Accordingly, your shares would not be voted on these matters.
Is there a list of stockholders entitled to vote at the annual meeting?
A list of stockholders of record entitled to vote at the meeting will be available for inspection at the meeting and for the ten days before the meeting for any purpose germane to the meeting during ordinary business hours at Resolute Forest Products Inc., 111 Duke Street, Suite 5000, Montréal, Québec, Canada H3C 2M1, from May 2, 2013,13, 2014, through May 15, 2013.22, 2014.
What is the quorum for the annual meeting?
The presence of the holders of shares of common stock representing at least one-third of the voting power of all common stock issued and outstanding and entitled to vote at the meeting, in person or by proxy, is necessary to constitute a quorum for the transaction of business at the annual meeting. Abstentions and broker non-votes are considered present for purposes of determining a quorum.
How will my shares be voted at the annual meeting?
At the meeting, the persons named in the proxy card or, if applicable, their substitute(s) will vote your shares as you instruct. If you sign your proxy card and return it without indicating how you would like to vote your shares, your shares will be voted:
FOR the election of each director nominee;
FOR the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm; and
FOR the advisory resolution approving executive compensation.
Can I revoke my proxy?
If you are a stockholder of record, you can revoke your proxy before it is exercised by:
giving written notice to the Company’s corporate secretary;
delivering a valid, later-dated proxy, or later-dated vote by telephone or on the Internet, before the annual meeting; or
voting in person at the annual meeting.
If you are a street name holder, you maycan submit new voting instructions by contacting your intermediary institution. All shares for which proxies have been properly submitted and not revoked will be voted at the annual meeting.
What are the voting requirements for the approval of each matter presented at the annual meeting?
| • | Election of |
| • | Ratification of PricewaterhouseCoopers LLP. The ratification of the appointment of an independent registered public accounting firm is not required under our by-laws, but we are asking as a matter of good governance. A majority of the votes present and entitled to vote at the meeting must vote to approve the ratification of PricewaterhouseCoppers LLP as our independent registered accounting firm for the |
| • | Advisory vote on executive compensation. Under our by-laws, in order for it to pass, a majority of the votes present and entitled to vote at the meeting must vote to adopt, on an advisory basis, the resolution approving compensation of our named executive officers. Abstentions and broker non-votes will have the same effect as a vote |
Will my vote be confidential?
Yes. We have a policy of confidentiality in the voting of stockholder proxies. Individual stockholder votes are kept confidential, unless disclosure is necessary to meet applicable legal requirements to assert or defend claims for or against the Company or made during a contested proxy solicitation, tender offer or other change of control situation.
Who will pay for the cost of this proxy solicitation?
We will pay the cost of soliciting proxies for the annual meeting. In addition to the solicitation of proxies by mail, solicitation may be made by certain of our directors, officers or employees telephonically, electronically or by other means of communication. Our directors, officers and employees will receive no additional compensation for any such solicitation. We will reimburse brokers and other similar institutions for costs incurred by them in mailing proxy materials to beneficial owners.
What information is available via the Internet?
These documents can be found at www.edocumentview.com/RFP:
notice of annual meeting;
proxy statement;
20122013 annual report; and
form of proxy.
What should I do if I receive more than one set of voting materials?
You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you may receive more than one proxy card. Please complete, sign, date and return by mail, or submit via the Internet or by telephone, each proxy card and voting instruction card you receive. If you would like to consolidate multiple accounts at our transfer agent, please contact Computershare Trust Company, N.A. at (866) 820-6919 (toll free for Canada and the U.S.) or (781) 575-3100.
What is “householding” and how does it affect me?
We have adopted a procedure, approved by the Securities and Exchange Commission, or the “SEC,” called “householding,” pursuant to which stockholders of record who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of the notice of annual meeting, and proxy statement and our 20122013 annual report, unless we are notified that one or more of these stockholders wishes to continue receiving individual copies. This procedure will reduce our printing costs and postage fees.
Stockholders who participate in householding will continue to receive separate proxy cards. Householding would not in any way affect dividend check mailings, if any.
If you participate in householding and wish to receive a separate copy of this notice of annual meeting and proxy statement, or if you do not wish to continue to participate in householding and prefer to receive separate copies of these documents in the future, please contact our transfer agent.
If you are a street name holder, you can request information about householding from your intermediary institution.
CORPORATE GOVERNANCEAND BOARD MATTERS
Corporate Governance Principles
The board has adopted a formal set of corporate governance principles and practices, which we refer to as the “corporate governance principles.” The purpose of the corporate governance principles, which are available on our website (www.resolutefp.com/About_Us/Corporate_Governance), is to provide a structure within which directors and management can pursue the Company’s objectives for the benefit of stockholders and within which directors can supervise Company management. The corporate governance principles are guidelines intended to serve as a flexible framework within which the board may conduct its business, and not as a set of legally binding obligations.
The corporate governance principles outline the board’s responsibilities and the interplay among the board and its committees in furthering the Company’s overall objectives. The corporate governance principles note the
board’s role in advising management on significant issues facing the Company and in reviewing and approving significant actions. In addition, the corporate governance principles highlight the principal roles of certain committees of the board, including:
Thethe board’s selection and evaluation of senior executive officers, including the president and chief executive officer, with assistance from the human resources and compensation/nominating and governance committee, and succession planning.planning;
Thethe administration of executive and director compensation by the human resources and compensation/nominating and governance committee, with final approval of CEO and director compensation by the board.board;
Thethe selection and oversight of our independent registered public accounting firm and oversight of public financial reporting by the audit committee.committee; and
Thethe evaluation of candidates for board membership and the oversight of the structure and practices of the board, the committees and corporate governance matters in general by the human resources and compensation/nominating and governance committee, including annual assessment of board and committee effectiveness.
Our corporate governance principles also include, among other things:
Generalgeneral qualifications for board membership, including independence requirements (with, among other things, the categorical standards for board determinations of independence).;
Directordirector responsibilities, including board and stockholder meeting attendance and advance review of meeting materials.materials;
Provisionsprovisions for director access to management and independent advisors, and for director orientation and continuing education.education; and
Anan outline of management’s responsibilities, including production of financial reports and disclosures, implementation and monitoring of internal controls and disclosure controls and procedures, development, presentation and implementation of strategic plans and setting a strong ethical “tone at the top.”
The Company’s corporate governance principles also include standards concerning the independence of board members. Those standards are designed to comply with those established by the SEC and the NYSE. They include the following:
Each member of the board, except for the president and chief executive officer and, at the discretion of the board, up to two additional directors, must be “independent.”independent. The definition of “independence”independence is based on the NYSE’s corporate governance standards, which also require a majority of directors to be “independent,”independent, and rules established by the SEC.
Each member of the audit committee and the human resources and compensation/nominating and governance committee must be “independent.”independent.
The independent directors must meet in executive session at least annually without any non-independent director or executive officer. The independent directors will also meet in executive session at the end of any board meeting at the request of any independent director. The chair, or lead director if applicable, presides at these meetings.
On the basis of information solicited from each director, and upon the advice and recommendation of our human resources and compensation/nominating and governance committee, the board has determined that 57 out of the Company’s 9 incumbent directors and the two nominees are “independent,”independent, as defined in the NYSE’s corporate governance standards and our by-laws, namely: directorsMichel P. Desbiens, Jennifer C. Dolan, Richard D. Falconer, Jeffrey A. Hearn, Alain Rhéaume, Michael S. Rousseau and David H. Wilkins, and director nominees Michel P. Desbiens and Jennifer C. Dolan.Wilkins.
The board has also determined that each member of the audit committee and the human resources and compensation/nominating and governance committee satisfies the requirements for independence, including the additional independence standards requiredunder NYSE rules for audit committee members under NYSE rules.and compensation committee members. As part of these determinations, which included considering the relationships described below underRelated Party Transactions, as applicable, and the categories of relationships below, the board determined that none of the independent directors has a direct or indirect material relationship with the Company other than his role as a director, or any relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Our corporate governance principles reflect the board’s determination that the following categories of relationships alone are not material and will not impair a director’s independence:
Ownershipownership of less than 5% of the equity of, or being a director of, another company that does business with the Company where the annual sales to, or purchases from, the Company are less than 5% of the annual revenues of either company.company;
Ownershipownership of less than 5% of the equity of, or being an executive officer or director of, an unaffiliated company that is indebted to the Company (or to which the Company is indebted), where the total amount of either company’s indebtedness to the other is less than 5% of the total consolidated assets of either company.company; and
Servingserving as an officer, director or trustee of a charitable organization, where the Company’s charitable contributions to the organization are less than 2% of that organization’s total annual charitable receipts, or $20,000 per year, whichever is less.
The board, acting through the disinterested directors, considered each of the transactions discussedtransaction described underRelated Party Transactionsbelow and determined that they wereit was in compliance with the guidelines. The human resources and compensation/nominating and governance committee, in consultation with the audit committee when appropriate, is responsible for reviewing and overseeing related party transactions and conflicts of interest situations involving the Company, its directors, officers and related parties.
We have adopted a written code of business conduct that applies to all salaried employees, including our president and chief executive officer, chief financial officer and chief accounting officer. Underofficer, and to Company directors. The code of business conduct establishes the fundamental ethical values and standards the Company expects in the work and business activities of its employees, officers and directors. Hourly employees will be covered by the code of business conduct, employees are requiredwhich was recently amended, as of July 1, 2014, and will remain subject to obtain the prior approvalprevious code until then.
Among other things, the code of the chief legalbusiness conduct requires that each employee and officer disclose any actual, potential or in the case of executive officers, from the human resources and compensation/nominating and governance committee, before entering into any transaction that might present aapparent conflict of interest including related party transactions within the Company.manner set out in the code.
The board adopted a separate board of directors’ code of conduct and ethics that applies specifically to directors. The directors’ code of conduct and ethics, among other things, describes ourCompany’s corporate governance principles describe the policy concerning the disclosure, review and approval of conflicts of interest or related party transactions with respect to board members and providesdirectors. The corporate governance guidelines, together with the code of business conduct, provide guidance to directors in handling unforeseen situations as they arise. The guidelinesarise, and they provide that each director (1) director:
must avoid every conflict of interest with the Company and must recuse himself or herself from any board decision where a conflict of interest may exist, (2) exist;
owes a duty to the Company to advance its legitimate interests when the opportunity to do so arises, (3) arises;
must maintain confidentiality of information entrusted to him or her, (4) her;
comply, and oversee the compliance by employees, officers and other directors, with applicable laws, rules and regulations, (5) regulations;
must deal fairly, and must oversee fair dealing by employees and officers, with the Company’s customers, suppliers, competitors and employees, (6) employees;
should promote ethical behaviorbehavior; and (7)
protect the Company’s assets and ensure their efficient use.
The codescode of business conduct areis available on our website atwww.resolutefp.com/(www.resolutefp.com/about_us/corporate_governancecorporate_governance). In addition, should there beThe Company will post on its website any waiver or amendment to the codescode of conduct, those waivers or amendments will also be posted on our website.business conduct.
Board Leadership Structure; Communication with Independent Directors
The Company’s business is managed under the direction of the board, with the board delegating the management of the Company to the president and chief executive officer, working with other executive officers, in a manner consistent with the Company’s objectives and in accordance with its by-laws. This delegation of authority is not intended to minimize the board’s supervisory duties, as more fully set forth in our corporate governance principles.
As board chair, Mr. Evans, the Company’s outgoing chair of theMartin presides over board andmeetings. Because he is not considered an independent director, presides over each board meeting and the separate meetings of independent directors in executive session. Ourpursuant to our by-laws, provide that in the event the chair of the board is not an independent director, an independent director selected by a majority of the independent board willmembers selected Mr. Rhéaume, an independent director, to serve as the board’s lead director, whosedirector. His responsibilities as such include, among other things, chairing any meeting of the independent directors in executive session.
While the Company does not have a written policy on the matter, the board currently separateshas separated the positions of chairman and chief executive officer. By doing so, itThis allows the chief executive officer to focus on managing the Company, and the chairman, together with the lead director, if applicable, to lead the board in providing advice to, and independent oversight of, management. We believe that this structure recognizes the time and effort that our chief executive officer is called to devote to his position, and facilitates the independent functioning of the board, thus enhancing the fulfillment of its oversight responsibilities, and setting the tone for the board in fostering ethical and responsible decision-making and sound corporate governance practices.
Stockholders and other interested persons that would like to communicate with the independent directors may send an e-mail to independentdirectors@resolutefp.com or send a written communication to: Resolute Forest Products Inc. Independent Directors, c/o Resolute Forest Products Corporate Secretary, 111 Duke Street, Suite 5000, Montréal, Québec, Canada, H3C 2M1. The Company’s corporate secretary will forward those communications to the intended recipients and will retain copies for the Company’s records.
Regardless of the method of communication, no message will be screened or edited before it is delivered to the intended recipient(s), who will determine whether to relay the message to other members of the board.
Board’s Role in Risk Oversight
Management is responsible for assessing and managing risk, subject to oversight by our board. The board executes its oversight responsibility for risk assessment and risk management directly through its committees, as follows:
| • | Audit committee. The audit committee periodically reviews management’s plans to manage the Company’s exposure to financial risk, and reports or makes recommendations on significant issues to the board. To the extent deemed appropriate in fulfilling its responsibilities, the audit committee also discusses and considers the Company’s policies with respect to general risk assessment and risk management, and reviews contingent liabilities and risks that |
| • | Environmental, health and safety committee. The environmental, health and safety committee reviews the Company’s outstanding and potential liabilities related to environmental, health and safety matters. |
| • | Finance committee. The finance committee reviews at least annually a report prepared by management on the financial health, from an actuarial perspective, of the benefit plans of the Company’s subsidiaries, and related funded obligations. |
adequacy of management’s plans and processes to manage the Company and its subsidiaries’ exposure to financial risks and the Company and its subsidiaries’ insurance principles and coverage, including those associated with the use of derivatives, currency and interest rates swaps and other risk management techniques. The finance committee also reviews, as needed, the actual and projected financial situation and capital needs of the Company in light of the Company’s business plan and strategy, cash plan, short-term investment policy, balance sheet, dividend policy, issuance or repurchase of Company stock and capital structure (e.g., the respective level of debt and equity, the sources of financing and equity, the Company’s financial ratios and credit rating policy). |
| • | Human resources and compensation/nominating and governance committee. |
The board does not view risk in isolation. Risks are considered in virtually every business decision, including those related to the Company’s strategic plan and capital structure.
Director Qualifications and Nomination Process
We believe that each director should possess high personal and professional ethics, integrity and values, an inquiring and independent mind as well as practical wisdom, vision and mature judgment. He or she should also have substantial training and experience at the policy-making level in business, government, or education and/or expertise that is useful to the Company and complementary to the background and experience of other board members, so that an optimum balance of expertise among members on the board can be achieved and maintained. In light of other business and personal commitments, he or she should also be willing and able to devote the required amount of time to diligently fulfill the duties and responsibilities of board membership, and be committed to serve on the board over a period of years to develop knowledge about the Company’s operations.
With respect to the human resources and compensation/nominating and governance committee’s evaluation of nominee candidates, including those recommended by stockholders, the committee has no formal requirement or minimum standard for the evaluation of nominees. Rather, the committee considers each candidate on his or her own merits. But in evaluating candidates, some of the specific areas of expertise and experience that we believe to be important in light of our business are listed below; ideally, these areas should be represented by at least one board member:
professional services, such as lawyers, investment bankers and university professorsprofessors;
politics/government relationsrelations;
management/operating experience, such as a chief executive office,officer, chief operating officer or senior managermanager; and
financial/accounting experience, such as a chief financial officer, certified financial analyst or chartered public accountingprofessional accountant or analystanalyst.
The applicable aspects of each director’s experience, qualifications and skills that the board considered in their nomination in light of the foregoing are included in their individual biographies.biographies below. It is also desirable that each member of the board has recent experience as a member of the board of at least one other company, preferably a public company.
The board does not have a specific written diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional experiences in evaluating candidates for our board.candidates. Diversity is important because a variety of points of view contribute to a more effective decision-making process.
Stockholders who wish to submit director candidates for consideration by our human resources and compensation/nominating and governance committee at the 20132015 annual meeting may do so by submitting in writing such candidates’ names, in compliance with the procedures and along with the other information required by our by-laws, to the corporate secretary, Resolute Forest Products, 111 Duke Street, Suite 5000, Montréal, Québec, Canada H3C 2M1, no earlier than February 15, 201422, 2015, and no later than March 17, 2014.24, 2015.
The board met 10nine times in 2012.2013. No incumbent director attended fewer than 75% of the regular and special meetings of the board and the standing committees on which the director sits. In fact, withsits, except that Mr. Desbiens, director since the exception2013 annual meeting of onlystockholders, missed one absence atset of meetings following a surgery, and as a result missed one meeting, each incumbent director attended all the regularboard and specialtwo committee meetings of thehis only eight board and the standing committees on which the director sits.committee meetings.
We expect each director to attend all regular board meetings, all meetings of the committee(s) on which the director sits and all annual and special meetings of stockholders. All the incumbent directors attended last year’s annual meeting of stockholders.
The board has adopted a written charter for each of its four standing committees: the audit committee, the human resources and compensation/nominating and governance committee, the environmental health and safety committee and the finance committee. Each committee’s charter is available on our website atwww.resolutefp.com/about_us/corporate_governance.corporate_governance.
Audit Committee
The members of the audit committee are: Jennifer C. Dolan, Richard D. Falconer, Alain Rhéaume (chair) and Michael S. Rousseau. The board has determined that each member of the audit committee is “independent” in accordance with the NYSE’s corporate governance standards, our by-laws and rule 10A-3 promulgated pursuant to the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” The board has determined that each of Messrs. Rhéaume and Rousseau ismember qualified as an “audit committee financial expert” in accordance with SEC rules.
The audit committee oversees our financial reporting, internal controls and audit function process on behalf of the board. Its purposes and responsibilities include:
Monitoring the integrity of our financial reporting process, systems of internal control and financial statements.
Monitoring the independence and qualifications of our independent registered public accounting firm.
Overseeing the audit of the Company’s financial statements.
Monitoring the performance of our internal audit function and independent registered public accounting firm.
Monitoring our compliance with legal and regulatory requirements that could have an impact on the Company’s financial statements.
Foster open communications among the board, management, the independent registered public accounting firm and internal auditors.
Reviewing management’s plans to manage the Company’s exposure to financial risk and report or make recommendations on significant issues to the board.
Overseeing other matters mandated by applicable rules and regulations as well as listing standards of the NYSE.
The audit committee met nine11 times in 2012.2013.
Environmental, Health and Safety Committee
The members of the environmental, health and safety committee are: Michel P. Desbiens, Jeffrey A. Hearn (chair), Richard D. Falconer, Bradley P. Martin and David H. Wilkins. The environmental, health and safety committee monitors the policies, management systems and performance of the Company’s environmental and occupational health and safety matters on behalf of the board.
The primary responsibilities of the environmental, health and safety committee include:
Reviewing the adequacy of the environmental, health and safety programs and performance of the Company.
Reviewing annually the Company’s environmental, health and safety (i) vision and policies and (ii) strategies and objectives.
Reviewing outstanding and potential liabilities for environmental, health and safety matters.
Reviewing with management all significant environmental incidents or occupational accidents within the Company and any eventsevent of material non-compliance.
Monitoring the Company’s relationships with external environmental, health and safety regulatory authorities and with other stakeholders.
The environmental, health and safety committee met threefour times in 2012.2013.
Finance Committee
The members of the finance committee are: Michel P. Desbiens, Richard D. Falconer (chair), Bradley P. Martin and Alain Rhéaume. The primary responsibilities of the finance committee include:
Reviewing as needed the adequacy of management’s plans to manage the Company’s exposure to financial risk and insurance principles and coverage, including those associated with the use of derivatives, currency and interest rate swaps and other risk management techniques.
Reviewing as needed the actual and projected financial situation and capital needs of the Company.
Reviewing at least annually the Company’s tax situation and tax strategy.
Reviewing as needed the Company’s investor profile and related investor relations and stockholder services of the Company.
Reviewing any mergers, acquisitions, divestitures,potential merger, acquisition, divestiture, joint venturesventure and other similar transactions and capital expenditure projects to be submitted to ourthe board.
Reviewing at least once a year a report prepared by management on the financial health, from an actuarial perspective, of the benefit plans of the Company’s subsidiaries, and related funding obligations.
Our finance committee met foursix times in 2012.2013.
Human Resources and Compensation/Nominating and Governance Committee
The members of the human resources and compensation/nominating and governance committee are: Jennifer C. Dolan, Jeffrey A. Hearn, Michael S. Rousseau (chair) and David H. Wilkins. Mr. Martin served on the committee until February, when he voluntarily stepped down as the committee concluded that it would not recommend to the full board that he continue to be considered as independent under the Company’s corporate governance standards and the other applicable standards. The human resources and compensation/nominating and governance committee’s primary responsibilities include:
| • | Human resources and compensation |
Reviewing from time to time and approving the structure of the Company’s executive compensation to ensure the structure is appropriate to achieve the Company’s objectives.
Evaluating annually the chief executive officer’s performance and compensation, and participating in such evaluation as it relates to other executive officers of the Company.
At least annually, working with the chair of the board and the chief executive officer to plan for chief executive officer succession and reviewing the succession planning with the board.
Recommending to the board the appropriate structure and amount of compensation for non-employee directors.
Periodically evaluating the Company’s incentive plans and approve proposed amendments to benefit plans.
Reviewing and approving employment, severance and change in control agreements.
Recommending to the board nominees to serve as officers of the Company.
| • | Corporate governance |
Overseeing and monitoring compliance with the Company’s code of business conductconduct.
Reviewing and overseeing related party transactions and conflicts of interest situations involving the directors’ code of conductCompany, its directors, officers and ethics.related parties, consulting with the audit committee as appropriate.
Developing and recommending the Company’s corporate governance principles to the board.
Making recommendations to the board regarding stockholder proposals and any other matters relating to corporate governance.
Considering the impact of the Company’s executive compensation program and the incentives created by compensation awards on the Company’s risk profile, and reviewing all of the Company’s compensation policies and procedures.
| • | Board of directors and board committees |
Annually evaluating the size and composition of the board.
Identifying and recommending qualified director candidates to the board and submitting a slate of nominees for election by stockholders at the annual meeting.
Considering director candidates proposed by stockholders in accordance with the Company’s by-laws.
Ensuring a process by which the board can assess its performance.
Assessing the performance of each board committee annually, including a review of board committee charters.
The human resources and compensation/nominating and governance committee met fivesix times in 2012.2013.
Director Compensation for 20122013
Name | Fees Earned or Paid in Cash (1)(2) | Stock Awards (3) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | Fees Earned or Paid in Cash(1)(2) | Stock Awards(3) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | ||||||||||||||||||||||||||||||||||||||||
Michel P. Desbiens | 56,250 | 37,500 | (6) | — | — | — | — | 93,750 | ||||||||||||||||||||||||||||||||||||||||||||||
Jennifer C. Dolan | 56,250 | 37,500 | (7) | — | — | — | — | 93,750 | ||||||||||||||||||||||||||||||||||||||||||||||
Richard B. Evans | 225,000 | 75,000 | (8) | — | — | — | 300,000 | 93,750 | 75,000 | (4)(7) | — | — | — | — | 168,750 | |||||||||||||||||||||||||||||||||||||||
Richard Falconer | 97,500 | 75,000 | (7) | — | 10,468 | (9) | — | 182,968 | 90,000 | 75,000 | (6) | — | — | 4,934 | (8) | — | 169,934 | |||||||||||||||||||||||||||||||||||||
Richard Garneau (4) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Jeffrey Hearn | 90,000 | 75,000 | (8) | — | — | — | 165,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Richard Garneau (5) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Jeffrey A. Hearn | 90,000 | 75,000 | (7) | — | — | — | — | 165,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Bradley P. Martin | 56,250 | 37,500 | (7) | — | 3,912 | (9) | — | 97,662 | 175,000 | (4) | 75,000 | (6) | — | — | 19,561 | (8) | — | 269,561 | ||||||||||||||||||||||||||||||||||||
Alain Rhéaume | 100,000 | 75,000 | (7) | — | — | — | 175,000 | 113,334 | (4) | 75,000 | (6) | — | — | — | — | 188,334 | ||||||||||||||||||||||||||||||||||||||
Paul C. Rivett (5) | 45,000 | 75,000 | (7) | — | — | — | 120,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Michael Rousseau(6) | 86,250 | 75,000 | (7) | — | — | — | 161,250 | |||||||||||||||||||||||||||||||||||||||||||||||
Michael Rousseau | 90,000 | 75,000 | (6) | — | — | — | — | 165,000 | ||||||||||||||||||||||||||||||||||||||||||||||
David Wilkins | 75,000 | 75,000 | (8) | — | — | — | 150,000 | 75,000 | 75,000 | (7) | — | — | — | — | 150,000 | |||||||||||||||||||||||||||||||||||||||
| 1. | Retainer fees of all directors were payable in cash, except those of |
| 2. | The director fees are paid quarterly. |
| 3. | On February |
| 4. | Mr. Evans retired from his position as chair and director of the board and did not stand for re-election at the Company’s 2013 annual meeting. His term of office automatically expired as of May 16, 2013. He continued as a special advisor to Mr. Garneau for the remainder of 2013. Mr. Evans continued to vest in his 2013 equity award, but received no further fees after May 31, 2013. Mr. Martin was appointed chair, effective as of May 16, 2013, following Mr. Evans’ retirement. However, because Mr. Martin is not an independent director under SEC standards, the board appointed Mr. Rhéaume as lead director and approved an additional retainer for his service in this capacity. The “Fees Earned or Paid in Cash” column reflect the additional fees Messrs. Martin and Rhéaume received in 2013 for these appointments. |
| 5. | As permitted under SEC rules, all of Mr. Garneau’s compensation from the Company for |
| 6. |
| The |
| The |
| These amounts represent “premium stock units” credited to Messrs. Falconer and |
Standard Compensation Arrangement
Cash Component
Compensation payable to the non-employee directors is based on an annual retainer fee, payable in cash in equal quarterly installments. For 2012, theThe annual retainer fee has remained unchanged fromsince 2011 at $75,000. In recognition of their added responsibilities, the board chair, lead director and committee chairs receive additional annual fees, payable in cash in equal quarterly installments. The additional annual fees also remained unchanged fromsince 2011
at $150,000 for the board chair, $25,000 for the audit committee chair and $15,000 for the other committee chairs. The lead director, a new position in 2013, receives an additional annual fee of $20,000. The Company reimburses all directors for reasonable expenses incurred in connection with attending board and committee meetings.
Resolute Forest Products Outside Director Deferred Compensation Plan
Non-employee directors had an opportunity to defer all or a portion of their cash fees under the director deferred compensation plan. Fees deferred pursuant to the director deferred compensation plan are credited as DSUs for Canadian directors and as RSUs for U.S. directors. DSUs and RSUs have an initial value equal to the fair market value of the Company’s common stock on the trading day immediately before the date they are credited, and their value is always tied to the value of the Company’s common stock. The number of deferred compensation DSUs and RSUs is determined by dividing 110% of the amount of fees deferred by the fair market value of the Company’s common stock on the trading day immediately before the date the fees would otherwise be paid, resulting in a 10% incentive (referred to in the director deferred compensation plan as the “premium stock units,” as applicable)). DSUs and RSUs credited in respect of this incentive vest over three calendar years. Premium stock units also become fully vested upon a termination of board service for any reason other than “cause.” Non-premium DSUs and RSUs are always fully vested. DSUs are payable in cash upon the earlier of termination of board service or death, subject to vesting of the premium DSUs. For a Canadian director who is not subject to Section 409A of the U.S. Internal Revenue Code, the “Code,” vested DSUs are paid on December 15 of the calendar year following the calendar year of a termination of board service, unless the director provides advance written notice specifying an earlier settlement date. Vested DSUs are paid as soon as administratively feasible after a termination of board service by a Canadian director who is subject to Code Section 409A. RSUs are also paid in cash, but generally in three installments over the first three calendar years following the calendar year in which the RSUs were awarded, subject to vesting of the premium RSUs. Payment of the vested RSUs is accelerated in the case of a termination of board service before one or more scheduled payment dates.
Equity Component
In addition to the cash component of the directors’ compensation, to ensure the directors’ interests are aligned with those of the stockholders, we grant annual equity-based awards to each director. The 20122013 annual equity award was granted on February 27, 2012.18, 2013. The compensation committee subsequently adoptedadheres to a policy that sets the annual grant date for director equity awards as the fourth trading date after the release of fourth quarter earnings.
The 20122013 annual equity award and its terms are highlighted in the table above and the accompanying footnotes. In addition to the terms noted above, the terms of the 20122013 equity awards also include conditions for accelerated vesting upon death, disability, or failure to be re-elected as a director or mandatory retirement. Because
Ms. Dolan’s and Mr. Martin’s grant wasDesbiens’s grants were not made until August 20122013 following histheir initial election to the board of directors on May 23, 2012, Mr. Martin’s award does16, 2013, their awards do not contain accelerated vesting in the case of a failure to be re-elected as a director or mandatory retirement. However,While it is the Company’s current practice to provide for acceleratedpro rata vesting of equity in the year a director’s board service terminates (except for cause)., the Company did allow Mr. Evans to continue vesting in his 2013 equity award following his retirement in recognition of his service to the Company since emergence and for his continued service in 2013 as a special advisor to Mr. Garneau. In the event that a director’s service on the board is terminated for “cause,” all of his DSUs or RSUs, as applicable, will be forfeited, including any DSUs or RSUs that were vested but unsettled. Vested DSUs granted to each Canadian director are settled in Company stock upon the earliest of a director’s termination of service, death or disability. Vested RSUs granted to each U.S. director are settled in Company stock in one-third increments on March 31 of 2013, 2014, 2015 and 2015,2016, with accelerated settlement in the event of a director’s termination of service, death or disability.
Under the terms of the 20122013 equity awards, “cause” means a director’s (i) commission of a felony or a crime involving moral turpitude, or other material act or omission involving dishonesty or fraud, (ii) engaging in conduct that would bring or is reasonably likely to bring the Company or any of its affiliates or subsidiaries into
public disgrace or disrepute, or that would affect the Company’s or any affiliate’s or subsidiary’s business in any material way, (iii) failure to perform duties as reasonably directed by the Company (which, if reasonably curable, is not cured within 10 days after notice thereof is provided to the director), or (iv) gross negligence, willful malfeasance or a material act of disloyalty or other breach of fiduciary duty with respect to the Company, its affiliates or subsidiaries (which, if reasonably curable, is not cured within 10 days after notice is provided to the director).
The following table shows the total outstanding awards held by the directors at December 31, 2012.2013. The option award represents the award granted to all directors except Ms. Dolan and Mr. MartinDesbiens upon the Company’s emergence from creditor protection proceedings. It was a one-time option grant and is not a part of the directors’ annual compensation program. The remaining awards were in the form of DSUs for Canadian directors and RSUs for U.S. directors.
| Grant Date | Option Awards | Stock Awards | ||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Vested | Market Value of Shares or Units That Have Vested | ||||||||||||||||||||||||
Name | Exercisable | Unexercisable | ||||||||||||||||||||||||||
Each Director at 12/31/12 (1) | 01/09/11 | 4,651 | 4,651 | $ | 23.05 | 01/08/2021 | — | $ | — | |||||||||||||||||||
Each Director, except | ||||||||||||||||||||||||||||
Mr. Martin, at 12/31/12 (1) | 04/08/11 | — | — | — | — | 2,711 | 37,737 | (2) | ||||||||||||||||||||
| 02/27/12 | — | — | — | — | 4,889 | 68,055 | (2) | |||||||||||||||||||||
Mr. Martin at | 08/06/12 | — | — | — | — | 3,290 | 45,797 | (2) | ||||||||||||||||||||
Name | Grant Date | Option Awards | Stock Awards | |||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Vested | Market Value of Shares or Units That Have Vested | ||||||||||||||||||||||||
| Exercisable | Unexercisable | |||||||||||||||||||||||||||
Each Director at 12/31/13, except Ms. Dolan, Mr. Desbiens and Mr. Martin(1) | 01/09/11 | 6,977 | 2,325 | $ | 23.05 | 01/08/2021 | — | $ | — | |||||||||||||||||||
| 04/08/11 | — | — | — | — | 2,711 | 43,430 | (2) | |||||||||||||||||||||
| 02/27/12 | — | — | — | — | 4,889 | 78,322 | (2) | |||||||||||||||||||||
| 02/18/13 | — | — | — | — | 5,459 | 87,453 | (2) | |||||||||||||||||||||
Mr. Martin at 12/31/13 | 08/06/12 | — | — | — | — | 3,290 | 52,706 | (2) | ||||||||||||||||||||
| 02/18/13 | — | — | — | — | 5,459 | 87,453 | (2) | |||||||||||||||||||||
Ms. Dolan and Mr. Desbiens at 12/31/13 | 08/07/13 | — | — | — | — | 2,835 | 45,417 | (2) | ||||||||||||||||||||
| 1. | Mr. Garneau’s equity awards are set forth in the Summary Compensation Table as permitted under SEC rules. |
| 2. | The fair market value shown is based on the per-share closing trading price on the NYSE of shares of the Company’s common stock on December 31, |
Stock Ownership Guidelines
We have established stock ownership guidelines for directors to ensure that they are also stockholders, thereby aligning their interests with those of other Company stockholders. Under the guidelines, each director must own shares of Company stock equal to three times the annual cash retainer fee ($225,000 in total as of December 31, 2012)2013). For purposes of the guidelines, all shares directly owned and deferred stock units (whether DSUs or RSUs and whether vested or unvested) are included in the calculation. Unexercised stock options are not included in the calculation. Until the stock ownership requirement is met, the guidelines require directors to hold all shares
received upon settlement of stock units (excluding shares withheld for taxes) and a number of shares equal to 50% of any gain realized upon option exercise. To determine whether a director has met the stock ownership requirement, the shares held by each director will be calculated on the basis of fair market value of the common stock at the time of measurement. Under the Company’s insider trading policy, directors are strongly discouraged from entering into hedging or monetization arrangements involving our common stock; all such transactions are subject to a pre-clearance requirement. As of December 31, 2012, Messrs. Evans2013, Mr. Falconer and FalconerMr. Martin own sufficient shares
to meet the stock ownership requirement.requirement, based on the per-share closing price of $16.02. The remaining directors continue to hold their shares pursuant to the guidelines, but havehad not yet met the stock ownership requirement.requirement as of December 31, 2013. The stock ownership requirements for all directors, except Ms. Dolan and Mr. Desbiens, are met upon a stock price of $17.23 or greater.
The Company’s corporate governance principles provide the framework under which we consider “related party transactions,” which are generally relationships and transactions involving more than $120,000 in any fiscal year in which the Company is a participant and in which any director, executive officer, holder of more than 5% of our outstanding common stock or their immediate family members has a direct or indirect material interest. The audit committee, in consultation with the human resources and compensation/nominating and governance committee, in consultation with the audit committee when appropriate, is responsible for implementing and overseeing policies and procedures for related party transactions and conflict of interest situations, and also reviews all related party transactions or potential conflict of interest situations involving the Company, its directors, officers and related parties. The board may also create special independent committees from time to time to review certain transactions, including related party transactions. The corporate governance principles provide that directors may not enter into a transaction with the Company without first disclosing the transaction and obtaining advance approval by the board and the audithuman resources and compensation/nominating and governance committee, and the director must recuse himself or herself from board consideration and decision on any such transaction.
Richard Garneau has been our chief executive officer since January of 2011 and a director since June of 2010. Mr. Garneau’s brother, Julien Garneau, is maintenance superintendant at one of our mills. His total compensation in 2013 was approximately $125,000, including salary, benefits, pension contributions, payment under the 2013 short-term incentive plan and fees earned as a consultant before becoming a full-time employee.
The board, or the audithuman resources and compensation/nominating and governance committee, acting only through disinterested directors, considered the followingthis related party transaction and determined that it was in compliance with our corporate governance principles.
In connection with our announcement on November 28, 2011, that we would commence a formal take-over bid to acquire all of the issued and outstanding common shares of Fibrek Inc., we entered into lock-up agreements with three significant shareholders of Fibrek, including Fairfax Financial Holdings Limited, or “Fairfax.” Fairfax has beneficially owned more than 5% of our common stock since our emergence from the creditor protection proceedings. Bradley P. Martin, a Company director, is vice president for strategic investments, and Paul C. Rivett, formerly a Company director, is a vice president and the chief legal officer of Fairfax. Under the lock-up agreement, Fairfaix agreed to tender all of its common shares of Fibrek to our take-over bid, subject to certain conditions. In consideration for the Fibrek common shares we acquired from Fairfax pursuant to the take-over bid and the lock-up agreement, we distributed to Fairfax 955,038 shares of our common stock on April 19, 2012.
Other than the lock-up agreement described above, there were There was no other transaction during 20122013 in which the Company or any of its subsidiaries was a participant, the amount involved exceeded over $120,000, and any director, director nominee, executive officer or any of their immediate family members had a direct or indirect material interest reportable under applicable SEC rules, nor is there any currently proposed.
Compensation Discussion & Analysis
Executive Summary
This Compensation Discussion and Analysis, or “CD&A,” summarizes our executive compensation philosophy and programs, the decisions made under those programs and changes made to reflect our business objectives. While the executive compensation program is generally applicable to the president and chief executive officer and all senior vice presidents, this CD&A focuses on the compensation of our “named executive officers” for 2012:2013:
Richard Garneau, president and chief executive officer
Jo-Ann Longworth, senior vice president and chief financial officer
| �� | Jo-Ann Longworth, senior vice president and chief financial officer |
Alain Boivin, senior vice president, pulp and paper operations
John Lafave, senior vice president, pulp and paper sales and marketing
Yves Laflamme, senior vice president, wood products, procurement and information technology
Jacques P. Vachon, senior vice president, corporate affairs and chief legal officer
In 2011, much ofThe only change to the Company’s managementexecutive team were new members ofduring 2013 was Mr. Boivin’s resignation from his position as senior vice president, pulp and paper operations, effective November 1, 2013. He served as a special advisor to the team,president and chief executive officer from November 1, 2013 through his retirement on December 31, 2013.
With certain refinements in 2012 and 2013, the human resources and compensation/nominating and governancecompensation committee the “compensationcommittee,” made a number of changes to simplifyhas maintained the executive compensation program reducestructure described in this CD&A since 2011. In 2012, the costcompensation committee adopted a number of certain pay elements,best practices, including a more formal risk assessment process for its compensation program and better align certain pay elements withenhancements to its insider trading policies.
In 2013, the compensation committee continued to refine its best practices. Specifically, it:
Adopted a recoupment policy as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, but in advance of final guidance. As a result, the parameters are based on market best practices, existing standards under the Sarbanes-Oxley Act of 2002 and expected guidance under the Dodd-Frank Act.
Hired a new compensation consultant, Hugessen Consulting, to ensure continued independence of advice to the compensation committee following the retention of Towers Watson as a consultant for the Company’s comparator groups (identified underSetting Compensation Levels — Benchmarking Databelow) to enhance its competitive pay practicesretirement plans’ administration and create symmetry between the Company’s U.S. and Canadian employees. These changes were:related investment matters.
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The compensation committee did not make any additional significant changes in the executive compensation program in 2012, but continued to evaluate the competitiveness of the program against the Company’s comparator groups. Instead, the compensation committee focused on implementing best practices. Specifically, the compensation committee:
Re-evaluated the Company’s comparator groups and reviewed the competitiveness of total direct compensation (base salary, short-term and long-term incentives) for the Company’s president and chief executive officer and all senior vice presidents;
Undertook a more formal risk assessment of its compensation program;
Began to evaluate a recoupment policy and in 2013, adopted a recoupment policy including parameters for recoupment based on best practices, the Sarbanes-Oxley Act and expected guidance under the Dodd-Frank Act; and
Revised the insider trading policy to better specify the transactions that are subject to the insider trading policy, including among others, hedging or monetization transactions and, while strongly discouraging such transactions, to require pre-clearance for any hedging or monetization transactions. In addition, while the insider trading policy allows prearranged, pre-approved trading plans (Section 10b5-1 plans), the policy was further updated to not allow any trades within two weeks after a Section 10b5-1 plan is approved and implemented.
Objectives
Our executive compensation program is designed to meet the following objectives:
Attract and retain team members with superior management ability, insight and judgment who will continue to position the Company for sustained profitability through changing business cycles in the forest products industry;
Motivate and reward the president and chief executive officer and all senior vice presidents for their contributions to the Company’s growth and profitability on a short- and long-term basis by linking a significant portion of the compensation package to the achievement of specific financial measures; and
Ensure a strong alignment between executives and all stockholder interests.
Executive Compensation Process
The compensation committee independently assesses the performance goals and objectives of the president and chief executive officer and makes recommendations to the board as to the amounts and individual elements of his total compensation. The independent directors of the board ultimately approve the final compensation package for the president and chief executive officer. For the senior vice presidents, the compensation committee evaluates and approves all elements of total compensation.
Consistent with its authority under its charter, the compensation committee selects and retains its own independent advisors to provide guidance on the competitiveness and appropriateness of the compensation programs for the president and chief executive officer and all senior vice presidents. For 2012,2013, the compensation committee retained Towers WatsonHugessen Consulting to provide this advice. In 2011, Towers Watson wasManagement recommended by management to the compensation committee to retain a new advisor following Towers Watson’s retention for retention following reviewadministration of the Company’s U.S. retirement plans and investment consulting advice. To maintain the desired level of independence of its predecessor compensation consultant.advisors, the compensation committee hired Hugessen Consulting as it provides no other services to the Company. The compensation committee continues to purchase data on compensation practices from Towers Watson also provided management advice onas Hugessen Consulting does not maintain these matters and is engaged to provide management advice on compensation matters for non-executives. Towers Watson’sdatabases. In 2013, Hugessen Consulting’s aggregate fees for this consulting in 2012 were $53,782. For 2012, Towers Watson received less than $120,000 in fees for other services provided to the Company.$88,408.
As more fully described below, Towers WatsonHugessen Consulting assisted the compensation committee in reviewing and re-evaluating the Company’s comparator groups.groups, benchmarking certain elements of the executive compensation program against this group, and advising on the risk elements of the program. Hugessen also provided management advice on these matters, as directed by the chair of the compensation committee. While internal and external information and advice have been used in the ongoing assessment of the executive compensation programs, the compensation committee and the board retained the full responsibility for all decisions related to the Company’s compensation programs and plans as well as their implementation.
To this end, the compensation committee evaluates total direct compensation (comprising base salary and short-term and long-term incentives) against the median level of the company’s comparator groups. It makes its compensation decisions on various elements at different times in the year. In February 2012,2013, the compensation committee evaluated the management team’s responsibilities and made corresponding adjustments in base salary,performance, determined the 20112012 STIP payout, and evaluated the proposed terms of the 20122013 STIP for the board’s approval. In July 2012,June 2013, the compensation committee evaluatedre-evaluated its industry comparator group and, based on benchmarking data, recommended to the board that certain base salary adjustments for the president and chief executive officer and all senior vice presidents to reassess its level of total direct compensation against its comparators. Following this review,be approved. In October 2013, the compensation committee made additional base salary adjustmentsrecommended for certain officers. In October 2012,approval and the compensation committee awardedindependent members of the board approved the annual equity grant.
20122013 Say-on-Pay Vote
Stockholders approved our executive compensation with over 99% of the votes cast in favor of the non-binding resolution approving executive compensation, or the “say-on-pay” vote, at the 20122013 annual meeting of stockholders. We believe that such a result demonstrates that our stockholders strongly support our compensation policies and programs. Although the compensation committee made certain salary adjustments in 2012, as further described in this CD&A, these changes were not made in response to the advisory vote on say-on-pay but rather were made in the ordinary course by the compensation committee and the board as part of its continuous effort to ensure that the Company’s compensation programs provide appropriate incentives, competitive compensation and align the interests of management with stockholders.
Setting Compensation Levels —- Benchmarking Data
Our executive compensation structure subscribesadheres to a pay-for-performance framework with a mix of cash and non-cash elements. There is no formal policy for allocating a certain percentage of pay between cash and non-cash or short-term or long-term pay. The compensation committee favors a mix that is more weighted to variable pay
through a short-term cash incentive and/orand a long-term, equity incentive, pay (i.e., at-risk).which puts a significant portion of compensation at-risk. The following shows the intended mix for the three main elements of pay, which remained the same as the previous year.two years. To determine the weighted mix, certain assumptions were used: (i) base salary is the salary in effect at December 31, 2012;2013; (ii) the 20122013 STIP at target payout of 100% of base salary, and (iii) the value of the annual equity grants (described below) is based on 125% of base salary (225% for the president and chief executive officer).
| Total Direct Compensation | ||||||||||||
Level | Base Salary | Short-Term Incentive (at Target Payout) | Long-Term Incentive | |||||||||
President and chief executive officer | 23.5 | % | 23.5 | %(1) | 53 | %(2) | ||||||
All other named executive officers | 31 | % | 31 | % | 38 | % | ||||||
| Total Direct Compensation | ||||||||||||
Level | Base Salary | Short-Term Incentive (at Target Payout) | Long- Term Incentive | |||||||||
President and chief executive officer | 23.5 | % | 23.5 | %(1) | 53 | % | ||||||
All other named executive officers | 31 | % | 31 | % | 38 | % | ||||||
The compensation committee annually reviews market data for the president and chief executive officer and all senior vice presidents to assess the competitiveness of their aggregate total direct compensation (base salary, target short-term incentive and long-term incentives) and the individual elements thereof.each element individually. In July 2012,June 2013, the compensation committee conducted this review and re-evaluated itsusing two comparator groups. The primary comparator group consisted of 11 industry peers (“industry comparator group”) and the. The second comparator group consisted of a blend of 1314 Canadian companies and 38 U.S. companies that were part of Towers Watson’s databank and selected based on industry (the forest and paper products industry) and revenues in certain commodity and other industrial industries (“blended comparator group”). Three companies appeared in both the Canadian and U.S. company comparator groups. The 38 U.S. companies in the blended comparator group also included sixfour of the industry comparator group companies.
For 2012,In June 2013, the compensation committee, with assistance from Hugessen Consulting, re-evaluated the industry comparator group and decided to replace International Paper Company with Cascades Inc. This change limited the revenue range of the industry comparator group and maintained a Canadian company presence. As a result, for 2013, the industry comparator group, comprised of tennine U.S. companies and onetwo Canadian companycompanies in the pulp and paper, wood products and packaging sectors, was:
| Bemis Company Inc. | Rock-Tenn Company | |||
| Boise Inc. | Louisiana-Pacific Corporation | Sonoco Products Company | ||
| MeadWestvaco Corp. | Weyerhaeuser Company | |||
| Packaging Corporation of America |
While total direct compensation for each named executive officer was compared against both comparator groups, the compensation committee assessed compensation adjustments against the industry comparator group for the following positions: president and chief executive officer; senior vice president, pulp and paper operations; and senior vice president, wood products, procurement and information technology. The industry comparator group was appropriate for these positions because the positions require specific knowledge of the forest products industry to implement the Company’s strategic plans. When benchmarking to the industry comparator group, the position for the president and chief executive officer was matched with the chief executive officer at the comparator companies. The senior vice president, pulp and paper operations and senior vice president, wood products, procurement and information technology were matched with the next two highest paid named executive officers (after the chief executive officer and chief financial officer) among the comparator companies.
The blended comparator group was used for the following positions: senior vice president and chief financial officer; senior vice president, pulp and paper sales and marketing; and senior vice president, corporate affairs and chief legal officer. These positions perform corporate functions and have a skill set that is transferable across industries; as a result, the blended comparator group was appropriate for these positions. When benchmarking to the blended comparator group, the comparison was made based on job description.
The following chart shows the resulting comparisons against the respective comparator groups,group, using salary levels in effect before the August 2012June 2013 base salary adjustments described further below under “Base Salary.”
Level | Comparator | Base | Short-Term | Target | Equity | Total Direct | ||||||||||
President and chief executive officer | Industry | Below Median | Below Median | Below Median | Below Median | Below Median | ||||||||||
Senior vice president and chief financial officer | Blended | Median | Above Median | Median | Below Median | |||||||||||
| Below Median | ||||||||||||||||
Senior vice president, pulp and paper operations | Industry | Below Median | Above | Median | Below Median | Below Median | Below Median | |||||||||
Senior vice president, pulp and paper sales and marketing | Blended | Below Median | Above Median | Above Median | Below Median | Above Median | ||||||||||
Senior vice president, wood products, procurement and information technology | Industry | Below Median | Above | Median | Below Median | |||||||||||
| Below Median | Below Median | |||||||||||||||
Senior vice president, corporate affairs and chief legal officer | Blended | Below Median | Above Median | Above | Median | Below Median | Below Median | |||||||||
Elements of Our Executive Compensation Program
The following highlights the elements of the Company’s executive compensation program and the basis for the elements.elements:
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Compensation | |||||||||
| Program |
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| Base Salary | Long-term Incentive | DC Make-Up Program | Perquisites and General Benefits | |||||||
| Purpose | • Attracts and retains executives with an assured level of cash
• Reviewed annually and adjusted for increased responsibilities and performance | |||||||||
• Rewards attainment of specific, measurable and bottom-line oriented company performance measures
• Set at a percentage of base salary with threshold, target and maximum payout opportunities | ||||||||||
• Motivates and retains executives to achieve long-range goals
• Aligns executives with shareholder interests
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• Award values based on a target percentage of salary
• Vests ratably over 4 years
• 50%/50% mix between stock options and RSUs | ||||||||||
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• Provides, on a current basis, an amount equal to the company contributions in excess of statutory limits under the tax-qualified defined contribution plans
• For Canadian executives, also provides an amount equal to the employer contribution for the STIP, which is not pensionable pursuant to the Canadian registered tax-qualified defined contribution plans
• Absence of deferral feature and ability to accumulate additional retirement income synchronizes the benefits with those offered to the broader employee group | ||||||||||
| • Allowance caps the cost of perquisites • Tax-equalization program for non-Canadian executives • Offers competitive benefits that include benefits offered to all full-time employees | |||||||||
Performance Period | - | 1 Year | - | - | - | |||||
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| Payout Moderately at Risk | Payout Highly at Risk | |||||||||
Base salary
We provide senior management with a level of assured cash compensation in the form of base salary. The compensation committee considers future adjustments in base salary as a result of changes in responsibilities and performance or if other circumstances warrant a change in base salary. When assessing the adjustments, the compensation committee also considers the base salary ranges for our comparator groups. The benchmarking data showed that the base salary levels continued to be below the median level, based on the respective comparator groups,group, for all named executive officers.
Two sets ofofficers except for Ms. Longworth. As noted above, Ms. Longworth’s base salary adjustments were made in 2012. First, Mr. Vachon assumed responsibilityis above the median level for corporate affairs. In recognition of his increased responsibilities, the compensation committee approved a 2.7% base salary increase. Second, followingblended comparator group.
Following the compensation committee’s review of the benchmarking data and determination thatits performance assessment for all named executive officers’ base salary levels continued to be below the median level for its comparator groups,officers, the compensation committee recommended, and the board approved, the following adjustments in recognition of their individual performance:base salary adjustments: a 3.4%10% base salary increase for Mr. Garneau, and a 15%5% base salary increase for Ms. Longworth and Mr. Boivin.Messrs. Boivin and Lafave, and a 2.5% base salary increase for Messrs. Laflamme and Vachon received a 2% base salary increase that was made consistent with a broad-based employee increase in base salary.Vachon.
Base salaries are established in the currency of each executive officer’s country of residence. Because all named executive officers are residents of Canada, their base salaries were established in Canadian dollars for 2012.2013. However, the numbers shown in the Summary Compensation Table have been converted to U.S. dollars at exchange rates disclosed in the footnotes to the table.
20122013 STIP
The annual short-term incentive plan mirrored the 2011 and 2012 design withand featured multiple performance measures reflecting the diversity of positions and accountabilities within the Company. Certain measures applied to all eligible employees and other measures were targeted to our differentspecific employee groups (corporate, sales and operations). The 20122013 STIP design reflected different employee accountabilities and diversity of positions. The 2012 STIP awardawards for theall named executive officers depended on theirwere tied to the achievement of performance measures tied to increasing income from operations and reducing costs. These performance measures are reflective ofthat reflected the Company’s business strategy and factors driving shareholder value. The remaining portionvalue:
Increasing income from operations;
For all named executive officers other than Mr. Lafave, controlling of the 2012 STIP award depended on improvementsales and general administration costs, or “SG&A costs”;
For Mr. Lafave, meeting budget for profit per metric ton of products sold; and
Improvement of safety performance.
As in 2011 and 2012, the 20122013 STIP did not reward individual performance and instead remained focused on rewarding corporate performance.
A key feature of the 20122013 STIP continued to balancebalances stockholder return with rewarding individuals for achieving our business objectives to improve profits in a challenging and evolving industry. Specifically, the compensation committee setmaintains an overall limit on the total amount that could be paid to all eligible employees as a short-term cash incentive even if performance is met. This limit wasremained set at 7% of free cash flow, which is defined as net cash provided by operating activities, less maintenance capital expenditures, adjusted for cash reorganization and restructuring costs, accelerated and additional voluntary pension contribution toward past service and other special items.
For the president and chief executive officer and his direct reports, including all named executive officers, payout levels were established as a percentage of base salary (as in effect on December 31, 2012)2013). No officer or individual was guaranteed a minimum payout under the 20122013 STIP. The 20122013 STIP also provided authority to the compensation committee to increase, decreaseadjust or cancel awards under the 20122013 STIP at its discretion.
Threshold | Target | Maximum | ||
| 50% | 100% | 150% |
In advance of compensation committee approval of the 2012 STIP awards, Mr. Garneau informed the committee chair of his intention to decline payment of his award. Consequently, the compensation committee did not recommend for board approval a 2012 STIP award for Mr. Garneau. Between Mr. Garneau’s request to not receive a 2012 annual equity award and his declination of payment of his 2012 STIP, Mr. Garneau did not receive 76.5% of the value of his total direct compensation.
In establishing the payout percentages, the compensation committee used benchmarking data from its comparator groups. The payout percentages remained the same as those set for the 2011 and 2012 STIP. In general, the target threshold of 100% is above the median for our comparator groups, but, combined with the lower base salary levels (even with the 2012 base salary increase) in its comparator groups, reflects the compensation committee’s adherence to conditioning a significant portion of pay on Company performance whether short-term or long-term.
The table below sets forth the performance measures approved by the compensation committee for the 20122013 STIP, the associated weight given to each measure and the business objective to which it relates. These performance measures remained the same as in 2011.2011 and 2012.
Performance Measure | Weight | Business Objective/Core Value | ||||
Income from operations | 50 | % | Maximizing profitability | |||
SG&A cost | 30 | % | Maximizing profitability | |||
Safety — Frequency Rate (15%) and Severity Rate (5%) of Incidents | 20 | % | Continuous improvement of safety performance | |||
2012All named executive officers other than Mr. Lafave earned a 2013 STIP award at 48.5% of their annual base salary based on weighted performance measures. The compensation committee determined that Mr. Lafave earned a 2013 STIP award at 40.8% of his annual base salary based on weighted performance measures, after exercising discretion to increase his award (and that of the sales team). For the profits per metric ton performance measure, achievement for Mr. Lafave is determined on a blended basis of paper sales and pulp sales. As noted below, the compensation committee determined a weighted payout percentage of 5.3% for this measure, which it revised to 19.8%. In evaluating the achievement level of the profits per metric ton performance measure, the compensation committee took into consideration a number of unanticipated factors that contributed to increased manufacturing costs and lower transaction prices. The compensation committee also recognized performance of the sales team on commission costs, market share and improvement of the geographic sales mix. Consequently, the compensation committee recommended, and the board approved, a discretionary adjustment to the STIP awards for all named executive officers were approved at 99.94% basedsales team members. The adjustment for Mr. Lafave is reflected below in the payout percentages and the dollar amount is shown on performance measures, reduced to 92.94% as a result of the Summary Compensation Table. The overall limit of 7% of free cash flow. The following table shows the calculation of the 2012flow did not affect 2013 STIP awards for the named executive officers.payouts.
Performance Measure | Target | Actual | Actual Payout | Weight | Weighted Payout Percentage (1) | Average STIP Payout Before Overall Cap of Free Cash Flow | Average STIP Payout After Free Cash Flow Cap Applied | |||||||||||||||
Income from operations | $250 million | $211 million(4) | 61% | 50 | % | 30.5 | % | — | — | |||||||||||||
SG&A cost reductions | $138.5 million | $134.1 million(4) | 150% | 30 | % | 45 | % | — | — | |||||||||||||
Safety—Frequency Rate (2) | 1.2 | 1.05 | 137.5% | 15 | % | 20.63 | % | — | — | |||||||||||||
Safety—Severity Rate (3) | 32 | 33.97 | 76.3% | 5 | % | 3.81 | % | — | — | |||||||||||||
All measures | — | — | — | — | — | 99.94 | % | 92.94 | % | |||||||||||||
Name Executive | Performance | Target | Actual | Actual Payout Percentage by Performance Measure | Adjusted Payout Percentage by Performance Measure | Weight | Weighted Payout Percentage (1) | Average STIP Payout | ||||||||||||||||||
| All NEOs | Income from operations | $265 million | $162 million | 0% | — | 50% | — | — | ||||||||||||||||||
| All NEOs except Mr. Lafave | SG&A cost control | $141 million | $141.5 million | 92% | — | 30% | 27.5% | — | ||||||||||||||||||
| Mr. Lafave | Profit per metric ton(2) | 100% of budgeted margin | 83.6% of budgeted margin | 17.8% | 65.9% | (5) | 30% | 19.8% | — | |||||||||||||||||
| All NEOs | Safety – Frequency Rate(3) | 1.0 | 1.02 | 90% | — | 15% | 13.5% | — | ||||||||||||||||||
| All NEOs | Safety – Severity Rate(4) | 30 | 25.69 | 150% | — | 5% | 7.5% | — | ||||||||||||||||||
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| All NEOs except Mr. Lafave | All measures | — | — | — | — | — | — | 48.5% | ||||||||||||||||||
| Mr. Lafave | All measures | — | — | — | — | — | — | 40.8% | ||||||||||||||||||
| 1. | Expressed as a percentage of annual base salary. |
| 2. | Profit per metric ton is measured separately for paper sales and pulp sales. Mr. Lafave’s payout percentage was based on a weighted average of the Company’s paper and pulp sales performance. |
| 3. | The frequency of safety incidents is the OSHA incident rate measured by the number of days lost due to lost time incidents and recordable incidents, multiplied by 200,000 and divided by the total number of hours worked. |
| The severity of safety incidents is measured by the number of days lost due to lost time incidents and incidents resulting in temporary assignments or restricted work, multiplied by 200,000 and divided by the total number of hours worked. |
As described above,For the first time since Mr. Garneau was appointed president and chief executive officer as of January 1, 2011, Mr. Garneau accepted payment of a short-term incentive plan award. In 2011 and 2012, he declined payment of an aggregate USD $1,202,712 in STIP awards.
Because total cash compensation for Ms. Longworth, Mr. Laflamme and Mr. Vachon remained well below the median amount for their corresponding position in their respective comparator group, the compensation committee did not recommendrecommended, and the board approved, discretionary adjustments to each officer’s 2013 STIP award so that their total cash compensation was increased closer to the board approval of a 2012 STIP award for Mr. Garneau because he informed the committee chair of his intention to decline payment of any award under the 2012 STIP.applicable median.
The compensation committee designed the 20122013 STIP to awardreward corporate performance only and decided not to have any portion of the 20122013 STIP payable on individual performance measures. In March 2013,2014, the board approved the 20132014 STIP design, which generally mirrors the 20122013 STIP, but with respectcertain notable changes to the performance measures weighting and payout levels.their corresponding weighting:
For the SG&A performance measure, a broader range between the threshold and maximum achievement levels, and a 5% decrease in its weight for the corporate team (including Ms. Longworth and Messrs. Garneau, Laflamme and Vachon);
A new performance metric for environmental incidents with a 5% weight for all STIP eligible employees;
| • | For Mr. Lafave and his sales team, a decrease in the weighting of profit per metric ton (from 30% to 12%), the addition of SG&A (5%) and reduction of account receivable collection time, ordays to pay (8%). |
The following compares the 2013 and 2014 STIP performance measures and associated weightings:
| 2013 Weight | 2014 Weight | |||||||||||||||||
2013 Performance Measure | Corporate | Sales | 2014 Performance Measure | Corporate | Sales | |||||||||||||
| Income from operations | 50 | % | 50 | % | Income from operations | 50 | % | 50 | % | |||||||||
| SG&A cost control | 30 | % | — | SG&A cost control | 25 | % | 5 | % | ||||||||||
| Profits per metric ton | — | 30 | % | Profits per metric ton | — | 12 | % | |||||||||||
Safety — Frequency Rate (15%) and Severity Rate (5%) of Incidents | 20 | % | 20 | % | Days to pay | — | 8 | % | ||||||||||
| Safety — Frequency Rate (15%) and Severity Rate (5%) of Incidents | 20 | % | 20 | % | ||||||||||||||
| Environmental incidents | 5 | % | 5 | % | ||||||||||||||
Equity Awards
The compensation committee grants equity awards as a long-term incentive and a significant portion of an executive’s total compensation package. With a significant portion of compensation tied to equity, executives can stay focused on maximizing stockholder value over the long term. The size of the equity awards are based on a
percentage of salary. While the compensation committee has discretion to adjust the size of the equity awards for an executive’s performance, the compensation committee chose not to exercise this discretion in respect of the 20122013 annual equity award. Before the compensation committee approved theIn 2011 and 2012, annual equity awards, Mr. Garneau requested that the compensation committee not recommend to the board an award for him, each of which would have had a value equal to 225% of Mr. Garneau’shis base salary. The compensation committee honored his request.requests in each of those years. In 2013, the compensation committee recommended to the board and the independent members of the board granted Mr. Garneau an annual equity award with a value equal to 225% of his base salary, which he accepted. The independent members of the board granted the other named executive officers were granted equity awards with a value equal to 125% of their base salaries.
The compensation committee favors an equity mix of 50% in stock options and 50% in RSUs. Stock options allow executives to share in the appreciation of the stock price and align their interests with shareholders. RSUs provide a greater value to executives and with a 50%/50% mix, reduces the dilutive effect of options.
InSince 2011, the compensation committee shifted the time for grantinghas made an annual equity awards to theaward grant at its October meeting and continued this practice in 2012. Themeeting. This year’s annual equity award was approved with a November 8, 20126, 2013 grant date. The compensation committee favors granting the award later in the year to allow the management team to demonstrate performance before receiving an equity grant. In addition, in 2012, the compensation committee adopted a policy that sets the annual grant date for management awards as the fourth trading date after the release of the third quarter earnings. This policy allows the date to be selected in advance, without regard to anticipated earnings or other major announcements and as a precaution against potential claims that equity awards are made at a time when the Company and named executive officers are in possession of material non-public information.
| 2012 Annual Equity Awards | 2013 Annual Equity Awards | |||||||||||||||
Named Executive Officer | Stock Options | Restricted Stock Units | Stock Options | Restricted Stock Units | ||||||||||||
Mr. Garneau | n/a | n/a | 132,061 | 64,512 | ||||||||||||
Ms. Longworth | 48,377 | 23,701 | 35,635 | 17,408 | ||||||||||||
Mr. Boivin | 51,833 | 25,394 | 38,181 | 18,652 | ||||||||||||
Mr. Lafave | 27,092 | 13,234 | ||||||||||||||
Mr. Laflamme | 42,458 | 20,801 | 30,531 | 14,914 | ||||||||||||
Mr. Vachon | 37,064 | 18,158 | 26,652 | 13,020 | ||||||||||||
| 1. |
The number of stock options awarded in each named executive officer’s annual equity grant was determined by dividing 50% of the dollar value of the equity award by the Black-Scholes value of an option, reflecting an exercise price equal to the simple arithmetic mean between the highest and lowest prices per share at which our common stock was traded on the New York Stock Exchange on November 7, 2012,5, 2013, the trading day immediately preceding the grant date. The number of RSUs awarded in each annual equity grant was determined by dividing 50% of the dollar value of the equity award by the simple arithmetic mean between the highest and lowest prices per share at which our common stock was traded on the New York Stock Exchange on November 7, 2012.5, 2013.
The equity awards vest 25% on each of the four anniversaries of the grant date, even though a three year vesting approach is more common. The longer vesting period is intended to emphasize the retention element of the awards.
The equity awards contain customary provisions for accelerating vesting upon certain terminations and post-termination exercise periods, as further described in the narratives to the Summary Compensation Table. However, if a named executive officer retires, the equity awards continue to vest. This feature is intended to attract and retain management with significant experience and encourage executives to postpone retirement. As a result, if a named executive officer retires at least six months after the grant date, he will be permitted to continue
vesting in the award. For this purpose, “retirement” means the named executive officer is at least age 58 with at least two years of service, and the sum of his age and years of service equals or exceeds 62.5. In addition, the employee must not be entitled to receive a severance package.
Retirement Plans and DC Make-Up Program
For 2012,2013, the president and chief executive officer and all senior vice presidents earned retirement benefits only under a tax-qualified retirement plan, subject to either Canadian or U.S. law. The tax-qualified retirement plans are offered to all eligible employees (not just executives), but limit the pay or contributions that may be considered pursuant to the applicable tax law. For a brief period, the executives earned benefits under a supplemental defined contribution plan that allowed the executives to accumulate, on a tax-deferred basis, additional retirement income, but the Company terminated this plan in 2011 and made distributions to executives in 2012. Beginning inSince 2012, the Company doeshas not offeroffered any supplemental retirement plan that allows executives to currently accumulate, on a tax-deferred basis, additional retirement income.
However, because Company contributions are limited in amount and type under the tax-qualified plans, the Company believes executives should receive the benefit of the plans without regard to the limits. For simplified administration, beginning insince 2012, under a program referred to as theDC Make-Up Program, the Company pays executives a cash payment equal to the Company contributions prescribed under the applicable tax-qualified plan formulas that exceed statutory limits. In addition, Canadian executives receive a cash payment equal to the employer contribution they would have received on their annual incentive awards as if the broad-based plan had provided an employer contribution on these awards. The named executive officers other than Ms. Longworth each received payments under the DC Make-Up Program totaling 10% of their compensation, and Ms. Longworth received payments totaling 9% of her compensation. These payments are less generous than the contributions previously offered under the terminated supplemental defined contribution plan and doesdo not allow executives to accumulate earnings on a deferred basis. The payments made pursuant to the DC Make-Up Program are reflected in the Summary Compensation Table under All Other Compensation because the contributions are not deferred compensation. The executives pay tax on the cash payment and no gross-up or other earnings are provided on these payments.
Even though the Company does not offer any supplemental retirement benefits that accumulate on a tax-deferred basis currently to executives, Mr. Laflamme and Mr. Vachon previously earned supplemental defined benefits under Company plans that were terminated effective upon the Company’s 2010 emergence from creditor protection proceedings. The supplemental defined benefits were reinstated under new arrangements pursuant to the plans of reorganization for Mr. Laflamme, Mr. Vachon and other employees who waived and forfeited all claims they had or may have had in the creditor protection proceedings in respect of any terminated supplemental retirement plan. The reinstated benefits are provided solely to honor prior contractual obligations, but with all supplemental defined benefits frozen as of December 31, 2010 based on service and earnings up to that date. None of the other named executive officers have any reinstated supplemental retirement benefits.
The frozen supplemental retirement benefits are paid using our general assets. For the Canadian executives, payments under a supplemental defined benefit plan are normally scheduled to be paid in monthly payments, which can generally be secured by a letter of credit pursuant to a retirement compensation arrangement without adverse tax consequences to the executive. The Company has established security protocols to secure a letter of credit for eligible executives at age 55 that guarantees their frozen supplemental retirement benefits.
Benefits provided through defined benefit plans are described more fully underPension Benefits. The defined contribution plan benefits are described underNonqualified Deferred Compensation for 2012 and DC Make-Up Program.
Severance and Change in Control Arrangements
We believe that the Company should provide reasonable severance benefits to its employees in the event of an involuntary termination without cause. With respect to the president and chief executive officer and all senior vice presidents, these severance benefits should reflect the fact that it may be difficult for employeesthem to find
comparable employment within a short period of time. Severance benefits should help provide an opportunity for the Company and former employees to part ways in an efficient and effective manner.
In the event of a change in control, we believe that the interests of stockholders will be best served if the interests of the president and chief executive officer and all senior vice presidents are aligned with them, and providing change in control benefits should eliminate, or at least reduce, the reluctance of senior executives to pursue potential change in control transactions that may be in the best interests of stockholders.
For each named executive officer except Mr. Garneau, severance protection is provided pursuant to the Company’s executive severance policy. The executive severance policy provides for a severance amount determined using a formula that provides six weeks of eligible pay per each year of service. Pay takes into account base salary plus the average of the last two paid regular annual incentive awards, annualized, with a cap
of 125% of the executive’s target incentive for the year of termination. The executive severance policy provides forprovidesfor a minimum of one year of severance and a maximum of two years of severance. Change in control protection under the executive severance policy does not provide greater severance amounts, but provides severance benefits if, within 12 months following a change in control, a senior executive resigns for good reason (i.e., due to conditions tantamount to a constructive dismissal).
The executive severance policy, in both a change in control or non-change in control context, does not provide any enhanced benefits in the form of, for example, subsidized continued health coverage or tax-gross ups. The impact of a termination on the current year incentive award and outstanding equity awards are determined pursuant to the incentive award and equity award plans.
Effective upon Mr. Garneau’s commencement of employment as president and chief executive officer on January 1, 2011, the Company entered into employment and change in control agreements with Mr. Garneau, which agreements provide severance protection in lieu of coverage under the executive severance policy. Mr. Garneau’s employment agreement provides the samesimilar severance pay asto the executive severance policy in the event he is terminated without cause absent a change in control. Mr. Garneau’s change in control agreement provides an enhanced severance amount in the event of a termination without cause or good reason within 24 months after a change in control. The severance amount is equal to three times the sum of (i) his base salary in the year of termination, (ii) the average of the last two earned regular annual incentive awards, earned, annualized, with a cap of 125% of his target incentive for the year of termination and (iii) the maximum amount of contributions the Company could have made on his behalf under the defined contribution plan program for the year of termination, plus $20,000 in lieu of outplacement services. The change in control agreement also provides subsidized continued health and life insurance coverage for up to three years following his termination date.
Perquisites
The named executive officers are entitled to receive an annual allowance intended to cover expenses for fiscal and financial advice, and such other perquisites as chosen by the executive. If an executive is not covered by the Company’s Tax Equalization Policy, then the annual allowance may also be used for tax preparation fees. Mr. Garneau has a $50,000 annual allowance and the other named executive officers have a $12,000 annual allowance (each in Canadian dollars). A fixed allowance balances the market practice of providing a certain level of perquisites with controlling costs to ensure the perquisites are not excessive. An annual allowance also provides the executives flexibility in selecting the perquisites that are suitable to their needs for a given year.
In addition, the Company also provides named executive officers with a comprehensive annual medical examination. In 2012, the compensation committee approved an enhancement to the medical benefits for the president and chief executive officer and all senior vice presidents. This enhancement providesexamination as well as a medical concierge service to allow for coordination of health needs in the event of medical issues, including while traveling abroad. In addition, any of these executives who is subject to taxation in both Canada and the U.S. as a result of their business travel is provided a payment under the Company’s Tax Equalization Policy generally equal to the difference between his or her respective home tax liability and actual taxes paid as well as a gross-up on that difference, all of which is intended to limit the executive’s tax liability to the liability in the executive’s home country.
The compensation committee has discretion to approve additional perquisites from time to time. The named executive officers are responsible for any tax consequences related to their use and receipt of the perquisites.
Stock Ownership Guidelines
The compensation committee adopted stock ownership guidelines for certain of its vice presidents and each of its named executive officers. The ownership guideline is a multiple of the executive’s base salary. Under the guidelines, Mr. Garneau must own shares of Company stock equal to 4.5 times base salary while the other named executive officers and other senior vice presidents must own shares of Company stock equal to 2.5 times base
salary. For purposes of the guidelines, all shares directly owned and unvested restricted stock units are included in the calculation. Unexercised stock options are not included in the calculation. Until the stock ownership requirement is met, executives must hold all shares (excluding shares withheld for taxes) received upon settlement of restricted stock units and a number of shares equal to 50% of theany gain realized upon option exercise. To determine whether a named executive officer has met the stock ownership requirement, each named executive officer’s base salary is met,converted to U.S. dollars using the exchange rate at the time of measurement, and the shares held by eachthe named executive officer will beare calculated on the basis of fair market value of the common stock at the time of measurement. The compensation committee will annually review the extent to which the named executive officers have met the stock ownership requirement. At this time, given the short tenure of the management team, theThe named executive officers continue to hold their shares pursuant toin accordance with the guidelines, but havehad not yet met the stock ownership requirement as of December 31, 2013. Based on the December 31, 2013 exchange rate of $0.9414, the stock ownership requirements for all named executive officers, except for Mr. Garneau, would have been met upon a stock price of $22.10 or greater. Mr. Garneau is not as close to meeting the stock ownership requirement because, per his request, the compensation committee did not recommend and, therefore, the board did not approve the grant of an annual equity award to him in either 2011 or 2012.
Deductibility of Compensation — Compensation—Section 162(m) of the U.S. Internal Revenue Code
In order to maintain flexibility to attract and retain qualified executives, the Company considers the deductibility rules of Section 162(m) of the U.S. Internal Revenue Code, or the “Code”, to the extent applicable, but retains the discretion to make compensation awards whether or not the compensation is deductible.
The following report does not constitute soliciting material and is not considered filed or incorporated by reference into any other filing by Resolute Forest Products Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The independent members of the compensation committee have reviewed and discussed the Compensation Discussion and Analysis above with management and, based on such review and discussion, the independent members of the compensation committee recommended to the board that the Compensation Discussion and Analysis be included in this proxy statement and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.2013.
Michael S. Rousseau (Chair)
JeffJennifer C. Dolan
Jeffrey A. Hearn
David H. Wilkins
Tabular Disclosure of Executive Compensation
The following table sets forth information concerning all compensation earned by the Company’s named executive officers for 2010, 2011, 2012 and 2012:2013:
Summary Compensation Table
Name and Principal Position | Year | Salary (1) | Bonus | Stock Awards (2) | Option Awards | Non-Equity Incentive Plan Compen- sation (3) | Declined Non-Equity Incentive Plan Compen- sation (3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (4) | All Other Compen- sation (5) | Total | Total, Less Declined Non-Equity Incentive Plan Compen- sation (6) | |||||||||||||||||||||||||||||||||
Richard Garneau, | 2012 | $ | 834,610 | $ | — | $ | — | $ | — | $ | — | $ | 796,661 | $ | — | $ | 155,939 | $ | 1,787,210 | $ | 990,549 | |||||||||||||||||||||||
President and chief executive officer (7) | 2011 | 761,763 | 100,000 | — | 406,051 | — | 198,007 | 1,465,821 | 1,059,770 | |||||||||||||||||||||||||||||||||||
Jo-Ann Longworth | 2012 | 400,046 | — | 270,428 | 270,428 | 405,375 | — | — | 72,544 | 1,418,821 | 1,418,821 | |||||||||||||||||||||||||||||||||
Senior vice president and chief financial officer (8) | 2011 | 173,459 | — | 218,750 | 218,750 | 92,124 | — | — | 32,275 | 735,358 | 735,358 | |||||||||||||||||||||||||||||||||
Alain Boivin, | 2012 | 428,621 | — | 289,746 | 289,746 | 434,331 | — | — | 82,303 | 1,524,747 | 1,524,747 | |||||||||||||||||||||||||||||||||
Senior vice president, pulp and paper operations (9) | ||||||||||||||||||||||||||||||||||||||||||||
Yves Laflamme, | 2012 | 375,666 | — | 237,339 | 237,339 | 355,776 | — | 426,316 | 75,922 | 1,708,358 | 1,708,358 | |||||||||||||||||||||||||||||||||
Senior vice president, wood products, procurement and information technology (10) | 2011 | 335,915 | — | 298,828 | 471,484 | 180,467 | — | 358,928 | 118,166 | 1,763,788 | 1,763,788 | |||||||||||||||||||||||||||||||||
Jacques P. Vachon, | 2012 | 327,164 | — | 207,188 | 207,188 | 310,575 | — | 463,244 | 67,616 | 1,582,975 | 1,582,975 | |||||||||||||||||||||||||||||||||
Senior vice president and chief legal officer | 2011 | 287,777 | 3,674 | 270,938 | 451,563 | 153,397 | — | 381,317 | 108,013 | 1,656,679 | 1,656,679 | |||||||||||||||||||||||||||||||||
| 2010 | 335,750 | 289,000 | — | — | 158,950 | — | 727,907 | 18,192 | 1,529,799 | 1,529,799 | ||||||||||||||||||||||||||||||||||
Name and | Year | Salary (1) | Bonus | Stock Awards (2) | Option Awards (2) | Non-Equity Incentive Plan Compensation (3) | Declined Non-Equity Incentive Plan Compensation (3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (4) | All Other Compen- sation (5)(6) | Total | Total, Less Declined Non-Equity Incentive Plan Compen- sation (7) | |||||||||||||||||||||||||||||||||
Richard Garneau, | 2013 | $ | 873,931 | $ | — | $ | 1,010,264 | $ | 1,010,264 | $ | 427,070 | $ | — | $ | — | $ | 157,925 | $ | 3,479,454 | $ | 3,479,454 | |||||||||||||||||||||||
| President and chief executive officer | 2012 | 834,610 | — | — | — | — | 796,661 | — | 155,939 | 1,787,210 | 990,549 | |||||||||||||||||||||||||||||||||
| 2011 | 761,763 | — | — | 100,000 | — | 406,051 | — | 198,007 | 1,465,821 | 1,059,770 | ||||||||||||||||||||||||||||||||||
Jo-Ann Longworth | 2013 | 432,439 | 12,532 | (10) | 272,611 | 272,611 | 207,434 | — | — | 97,681 | 1,295,308 | 1,295,308 | ||||||||||||||||||||||||||||||||
| Senior vice president and chief financial officer | 2012 | 400,046 | — | 270,428 | 270,428 | 405,375 | — | — | 72,544 | 1,418,821 | 1,418,821 | |||||||||||||||||||||||||||||||||
| 2011 | 173,459 | — | 218,750 | 218,750 | 92,124 | — | — | 32,275 | 735,358 | 735,358 | ||||||||||||||||||||||||||||||||||
Alain Boivin, | 2013 | 463,326 | — | 292,083 | 292,083 | 222,250 | — | — | 106,775 | 1,376,517 | 1,376,517 | |||||||||||||||||||||||||||||||||
| Senior vice president, pulp and paper operations(8) | 2012 | 428,621 | — | 289,746 | 289,746 | 434,331 | — | — | 82,303 | 1,524,747 | 1,524,747 | |||||||||||||||||||||||||||||||||
John Lafave, | 2013 | 328,760 | 47,002 | (10) | 207,252 | 207,252 | 85,608 | — | — | 78,179 | 954,053 | 954,053 | ||||||||||||||||||||||||||||||||
| Senior vice president, pulp and paper sales and marketing(9) | ||||||||||||||||||||||||||||||||||||||||||||
Yves Laflamme, | 2013 | 374,149 | 47,163 | (10) | 233,559 | 233,559 | 177,718 | — | 44,464 | 91,633 | 1,202,245 | 1,202,245 | ||||||||||||||||||||||||||||||||
| Senior vice president, wood products, procurement and information technology | 2012 | 375,666 | — | 237,339 | 237,339 | 355,776 | — | 426,316 | 75,922 | 1,708,358 | 1,708,358 | |||||||||||||||||||||||||||||||||
| 2011 | 335,915 | — | 298,828 | 471,484 | 180,467 | — | 358,928 | 118,166 | 1,763,788 | 1,763,788 | ||||||||||||||||||||||||||||||||||
Jacques P. Vachon, | 2013 | 326,614 | 17,488 | (10) | 203,886 | 203,886 | 155,139 | — | — | 80,658 | 987,671 | 987,671 | ||||||||||||||||||||||||||||||||
| Senior vice president, corporate affairs and chief legal officer | 2012 | 327,164 | — | 207,188 | 207,188 | 310,575 | — | 463,244 | 67,616 | 1,582,975 | 1,582,975 | |||||||||||||||||||||||||||||||||
| 2011 | 287,777 | 3,674 | 270,938 | 451,563 | 153,397 | — | 381,317 | 108,013 | 1,656,679 | 1,656,679 | ||||||||||||||||||||||||||||||||||
| 1. | Base salaries for all named executive officers were established in Canadian dollars and have been converted to U.S. dollars using the average exchange rate for Canadian to U.S. dollars for |
| 2. | Amounts in |
Name | 2012 Annual RSU Award | 2012 Annual Option Award | Total 2012 Equity Awards | 2013 Annual RSU Award | 2013 Annual Option Award | Total 2013 Equity Awards | ||||||||||||||||||
Richard Garneau | $ | 1,010,264 | $ | 1,010,264 | $ | 2,020,528 | ||||||||||||||||||
Jo-Ann Longworth | $ | 270,428 | $ | 270,428 | $ | 540,856 | 272,611 | 272,611 | 545,222 | |||||||||||||||
Alain Boivin | 289,746 | 289,746 | 579,492 | 292,083 | 292,083 | 584,166 | ||||||||||||||||||
John Lafave | 207,252 | 207,252 | 414,504 | |||||||||||||||||||||
Yves Laflamme | 237,339 | 237,339 | 474,678 | 233,559 | 233,559 | 467,118 | ||||||||||||||||||
Jacques P. Vachon | 207,188 | 207,188 | 414,376 | 203,886 | 203,886 | 407,772 | ||||||||||||||||||
The compensation committee approved the 2012 annual equity award on October 24, 2012 with a November 8, 2012 grant date and, per Mr. Garneau’s request, did not recommend to the board an award for Mr. Garneau. The 2012 annual equity award will vest 25% on each of the first four anniversaries of the grant date, subject to a named executive officer’s continued employment with the Company and customary conditions for accelerated vesting or forfeiture upon the occurrence of certain employment-related events, as further described below in the narrative disclosure to this table.
The independent members of the board approved the 2013 annual equity award on October 9, 2013 with a November 6, 2013 grant date. The 2013 annual equity award will vest 25% on each of the first four anniversaries of the grant date. For |
| all named executive officers other than Mr. Boivin, the award is subject to a named executive officer’s continued employment with the Company and customary conditions for accelerated vesting or forfeiture upon the occurrence of certain employment-related events, as further described below in the narrative disclosure to this table. In recognition of Mr. Boivin’s service to the Company before his retirement effective December 31, 2013, his award will vest 25% on each of the first four anniversaries of the grant date as if he had retired six months after the grant date, and his vested options will be exercisable until the fifth anniversary of the grant date. |
| 3. | Amounts shown for |
| 4. | Amounts in this column reflect an increase in the actuarial present value of |
| 5. | Amounts in this column include the following basic company contributions allocated on behalf of the named executive officers pursuant to the Defined Contribution Retirement Plan for Non-Unionized Employees of Resolute Forest Products (the registered defined contribution plan) and additional cash payments to the named executive officers under the DC Make-Up Program equal to (i) company contributions under the registered plan formulas in excess of statutory limits, and (ii) the employer contribution they would have received on their annual incentive awards as if the registered plan had provided an employer contribution on these awards: |
Name | Basic Company Contribution | Additional Cash Payment | Basic Company Contribution | Additional Cash Payment | ||||||||||||
Richard Garneau | $ | 13,218 | $ | 70,171 | $ | 13,161 | $ | 74,232 | ||||||||
Jo-Ann Longworth | 13,487 | 30,723 | 13,360 | 60,708 | ||||||||||||
Alain Boivin | 13,263 | 51,802 | 13,097 | 75,078 | ||||||||||||
John Lafave | 13,115 | 44,068 | ||||||||||||||
Yves Laflamme | 13,315 | 42,114 | 13,167 | 58,523 | ||||||||||||
Jacques P. Vachon | 13,266 | 34,634 | 13,126 | 49,456 | ||||||||||||
The cash payments shown above and the perquisite allowances next described were established in Canadian dollars and have been converted to U.S. dollars using the average exchange rate for Canadian to U.S. dollars for 2012,2013, or $1.0007.$0.9711.
Additional perquisites for all named executive officers include (i) a perquisite accountamount of $50,248$49,215 for Mr. Garneau and $12,024$11,812 for all other named executive officers covering personal transportation, fiscal/financial advice, etc., (ii) a comprehensive annual medical examination with a value up to $3,002$2,913 for Mr. Garneau and his spouse and up to $1,501$1,457 for all other named executive officers and their spouses (if any), (iii) an annual medical referral with a value up to $1,001$971 for all named executive officers and their spouses and dependents (if any), (iv) a medical concierge service with a value of $1,501,$1,457, (v) parking, and (vi) for Mr. Garneau, Ms. Longworth and Mr. Vachon, annual membership dues for a private club.
Finally, this column also reflects shares of Company common stock paid to Messrs. Laflamme and Vachon in settlement of their claims against the Company for amounts compromised in conjunction with the creditor protection proceedings.
| 6. | This column also reflects shares of Company common stock paid to Messrs. Lafave, Laflamme and Vachon in settlement of their claims against the Company for amounts compromised in conjunction with the creditor protection proceedings. Mr. Lafave monetized his shares on August 8, 2013, and the amount of the resulting cash payment has been converted to U.S. dollars using the average exchange rate for Canadian to U.S. dollars on August 8, 2013, or $0.9646. Messrs. Laflamme and Vachon retained their shares as of December 31, 2013 and, for purposes of the Summary Compensation Table, the fair market value of the shares was determined based on the per-share closing trading price on the NYSE of shares of the Company’s common stock on December 31, 2013, or $16.02. |
| In light of Mr. Garneau’s declination of the 2011 and 2012 STIP |
| 8. |
| Mr. Boivin |
| Mr. |
| 10. | Amounts shown for Ms. Longworth and Messrs. Lafave, Laflamme, and Vachon represent discretionary adjustments approved by the compensation committee following determination of the 2013 STIP. As more fully discussed in the CD&A, amounts for Ms. Longworth and Messrs. Laflamme and Vachon are intended to bring their total cash compensation closer to the median for their respective comparator group. Amounts for Mr. Lafave represent a discretionary adjustment to his 2013 STIP award, as more fully discussed in the CD&A. These adjustments were converted to U.S. dollars using the exchange rate described in footnote (3). |
Grants of Plan-Based Awards
Estimated Possible Payouts
Name | Equity Award Grant Date | Date of Board Approval of Equity Award | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards (2) ($ Per Share) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||||
Richard Garneau (3) | n/a | n/a | 425,168 | 850,336 | 1,275,504 | |||||||||||||||||||||||||||
Jo-Ann Longworth | 11/08/2012 | 10/24/2012 | 23,701 | 270,428 | ||||||||||||||||||||||||||||
| 11/08/2012 | 10/24/2012 | 48,377 | 11.41 | 270,428 | ||||||||||||||||||||||||||||
| n/a | n/a | 216,344 | 432,688 | 649,032 | ||||||||||||||||||||||||||||
Alain Boivin | 11/08/2012 | 10/24/2012 | 25,394 | 289,746 | ||||||||||||||||||||||||||||
| 11/08/2012 | 10/24/2012 | 51,833 | 11.41 | 289,746 | ||||||||||||||||||||||||||||
| n/a | n/a | 231,797 | 463,594 | 695,391 | ||||||||||||||||||||||||||||
Yves Laflamme | 11/08/2012 | 10/24/2012 | 20,801 | 237,339 | ||||||||||||||||||||||||||||
| 11/08/2012 | 10/24/2012 | 42,458 | 11.41 | 237,339 | ||||||||||||||||||||||||||||
| n/a | n/a | 189,873 | 379,746 | 569,619 | ||||||||||||||||||||||||||||
Jacques P. Vachon | 11/08/2012 | 10/24/2012 | 18,158 | 207,188 | ||||||||||||||||||||||||||||
| 11/08/2012 | 10/24/2012 | 37,064 | 11.41 | 207,188 | ||||||||||||||||||||||||||||
| n/a | n/a | 165,750 | 331,500 | 497,250 | ||||||||||||||||||||||||||||
Under Non-Equity Incentive
Plan Awards(1)
Name | Equity Award Grant Date | Date of Board Approval of Equity Award | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards (23) ($ Per Share) | Grant Date Fair Value of Stock and Option Awards ($) | ||||||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||||
Richard Garneau | 11/06/2013 | 10/09/2013 | 64,512 | 1,010,264 | ||||||||||||||||||||||||||||
| 11/06/2013 | 10/09/2013 | 132,061 | 15.66 | 1,010,264 | ||||||||||||||||||||||||||||
| n/a | n/a | 440,279 | 880,557 | 1,320,836 | ||||||||||||||||||||||||||||
Jo-Ann Longworth | 11/06/2013 | 10/09/2013 | 17,408 | 272,611 | ||||||||||||||||||||||||||||
| 11/06/2013 | 10/09/2013 | 35,635 | 15.66 | 272,611 | ||||||||||||||||||||||||||||
| n/a | n/a | 213,849 | 427,699 | 641,548 | ||||||||||||||||||||||||||||
Alain Boivin | 11/06/2013 | 10/09/2013 | 18,652 | 292,083 | ||||||||||||||||||||||||||||
| 11/06/2013 | 10/09/2013 | 38,181 | 15.66 | 292,083 | ||||||||||||||||||||||||||||
| n/a | n/a | 229,125 | 458,249 | 687,374 | ||||||||||||||||||||||||||||
John Lafave | 11/06/2013 | 10/09/2013 | 13,234 | 207,252 | ||||||||||||||||||||||||||||
| 11/06/2013 | 10/09/2013 | 27,092 | 15.66 | 207,252 | ||||||||||||||||||||||||||||
| n/a | n/a | 162,578 | 325,157 | 487,735 | ||||||||||||||||||||||||||||
Yves Laflamme | 11/06/2013 | 10/09/2013 | 14,914 | 233,559 | ||||||||||||||||||||||||||||
| 11/06/2013 | 10/09/2013 | 30,531 | 15.66 | 233,559 | ||||||||||||||||||||||||||||
| n/a | n/a | 183,215 | 366,431 | 549,646 | ||||||||||||||||||||||||||||
Jacques P. Vachon | 11/06/2013 | 10/09/2013 | 13,020 | 203,886 | ||||||||||||||||||||||||||||
| 11/06/2013 | 10/09/2013 | 26,652 | 15.66 | 203,886 | ||||||||||||||||||||||||||||
| n/a | n/a | 159,938 | 319,875 | 479,813 | ||||||||||||||||||||||||||||
| 1. | Amounts shown in the “Threshold,” “Target” and “Maximum” columns represent payout potential under the |
| 2. | The exercise price of the |
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
The following is a discussion of the plans, policies and arrangements governing the compensation awarded to our named executive officers, as set forth in the Summary Compensation Table and Grants of Plan-Based Awards table above. Compensation to which a named executive officer may be entitled upon a severance from employment, whether or not in connection with a change in control, is addressed below inSeverance and Change in Control Arrangements.
For 2012,2013, the primary elements of each named executive officer’s total compensation were base salary, cash awards pursuant to the Company’s short-term incentive plan, and long-term equity awards consisting of nonqualified stock options and RSUs granted on November 8, 2012. In addition, a new program, the6, 2013. The DC Make-Up Program was implemented to provideprovides contributions limited under registered tax-qualified defined contribution plans in lieu of tax-deferred benefits that were previouslywould otherwise be available under a now-terminated supplemental defined contribution plan.
Base Salary
Base salary for all named executive officers was based on adjustments to their 2011 levels set by the compensation committee and reflected in the terms of their employment agreements and offer letters, as applicable. The annual base salaries set forth in Mr. Garneau’s employment agreement and in offer letters to Ms. Longworth and Messrs. Boivin, Laflamme and Vachon were $765,000, $350,000, $375,000, $340,000 and $289,000, respectively (each in U.S. dollars). Base salaries for all named executive officers were established in Canadian dollars and have been converted to U.S. dollars.dollars in the Summary Compensation Table. For reasons described in theCD&A,, the Summary Compensation Table reflects an increase in base salary from the 20112012 levels and shows amounts actually paid in 2011. However, the2013. The increases described in the CD&A resulted in annual base salaries of $850,931, $432,991, $463,919, $380,012$880,557, $427,699, $458,249, $325,157, $366,431 and $331,732$319,875 for Mr. Garneau, Ms. Longworth and Messrs. Boivin, Lafave, Laflamme and Vachon, respectively, as of December 31, 2012.2013.
Short-Term Cash Incentive Compensation — 20122013 STIP Awards
The named executive officers participated in the 20122013 STIP, the material terms of which are described above in theCD&A.&A. The threshold, target and maximum awards were 50%, 100% and 150% of base salary, respectively, and the applicable performance metrics were (i) were:
income from operations, (ii) reduction in
for all eligible named executive officers except Mr. Lafave, control of selling, general and administrative expenses, or“SG “SG&A cost,,” (iii) frequency of safety incidents (i.e., the OSHA incident rate — measured by the number of days lost due to lost-time incidents and, recordable incidents, multiplied by 200,000 and divided by the total number of hours worked), and (iv) for Mr. Lafave, profit per metric ton,
| • | frequency of safety incidents (i.e., the OSHA incident rate — measured by the number of days lost due to lost time incidents and recordable incidents, multiplied by 200,000 and divided by the total number of hours worked), and |
severity of safety incidents (measured by the number of days lost due to lost-timelost time incidents and incidents resulting in temporary assignments or restricted work, multiplied by 200,000 and divided by the total number of hours worked).
The following tables show the threshold, target and maximum levels for each performance metric, as well as the applicable weighting assigned to each performance metric for purposes of determining awards to the named executive officers:
Performance Level | Performance Metric | Weighting (% of STIP award) | ||||||||||||||||||||||
Performance Metric | Threshold | Target | Maximum | Performance Level | Performance Metric | Weighting (% of STIP award) | ||||||||||||||||||
Performance Metric | Threshold | Target | Maximum | |||||||||||||||||||||
| td00 million | td50 million | $300 million | Income from operations | 50 | % | td12 million | td65 million | $318 million | Income from operations | 50% | ||||||||||||||
SG&A cost | $141.5 million | $138.5 million | $135.5 million | SG&A cost or profit per metric ton | 30 | % | $144 million | $141 million | $138 million | SG&A cost or profit per metric ton | 30% | |||||||||||||
Profit per metric ton | 80% of budgeted margin | 100% of budgeted margin | 120% of budgeted margin | |||||||||||||||||||||
Safety – Frequency (OSHA incident rate) | 1.4 | 1.2 | £1.0 | Safety – Frequency (OSHA incident rate) | 15 | % | 1.1 | 1.0 | £0.9 point | Safety – Frequency (OSHA incident rate) | 15% | |||||||||||||
Safety – Severity rate | 36 | 32 | £28 | Safety – Severity rate | 5 | % | 33 | 30 | £27 points | Safety – Severity rate | 5% | |||||||||||||
As described in the CD&A above, the Company generated income from operations below the threshold level, had SG&A cost between the threshold and target levels, exceeded the maximum performance level for SG&A,levels, and achieved an OSHA rate between the target and maximum performance levels and a severity rate between the threshold and target levels. However, based on these results, total payouts to all Resolute employees eligible toProfit per metric ton was between the 2012threshold and target levels for pulp sales and below the threshold level for paper sales. For purposes of Mr. Lafave’s 2013 STIP would have exceeded 7% ofaward, this resulted in a blended performance between the free cash flow generated bythreshold and target levels. After taking into account the Companyadjustments described in 2012. As a result, all payouts under the 2012 STIP were reduced to meet the cap. In light of the foregoing,CD&A, the compensation committee recommended, and the board approved, 20122013 STIP awards to Ms. Longworth and Messrs. Garneau, Boivin, Laflamme, Lafave and Vachon at a level equal to 92.94%51.4%, 48.5%, 48.5%, 61.4%, 40.8% and 54.0% of their respective base salaries. In advance of compensation committee approval, Mr. Garneau informed the committee chair of his intention to decline payment of his 2012 STIP award. Consequently, the compensation committee did not recommend for board approval a 2012 STIP award for Mr. Garneau. Mr. Garneau’s decision resulted in him foregoing 23.5% of this total direct compensation (76.5% when combined with the 2012 annual equity award he declined, as described below).
Long-Term Incentive Compensation — Equity Awards
As described in theCD&A,on October 24, 2012,9, 2013, the compensation committeeindependent members of the board approved equity awards of nonqualified stock options and RSUs to Ms. Longworth and Messrs. Boivin, Laflamme and Vachoneach of the named executive officers under the equity incentive plan in respect of their 20122013 service with the Company. It did not recommend a 2012
The 2013 annual equity award forgranted to Mr. Garneau pursuant to his request in advancehad a value of board approval, which resulted in Mr. Garneau foregoing 53%$2,020,528, representing 225% of his total direct compensation (76.5% when combined with the 2012 STIP he declined, as described above).
base salary. The 20122013 annual equity awards granted to Ms. Longworth and Messrs. Boivin, Lafave, Laflamme and Vachon had values of $540,856, $579,492, $474,678$545,222, $584,166, $414,504, $467,118 and $414,376,$407,772, respectively, representing 125% of their base salaries. The 20122013 annual equity award is the largest portion of an executive’s total direct compensation, representing 38% of total direct compensation for the named executive officers (except for Mr. Garneau, where the percentage is 53%). To determine the shares under the option and RSU portions of the 20122013 annual equity award, the compensation committee used the following approach:
An award of options to purchase a number of shares of the Company’s common stock determined by dividing (i) 50% of his award value by (ii) the Black-Scholes value of an option, or $5.59.$7.65. The exercise price of an option is equal to the arithmetic mean of the highest and lowest prices per share at which the Company’s common stock was traded on the NYSE on November 7, 2012,5, 2013, or $11.41.$15.66.
An award of RSUs with respect to a number of shares of the Company’s common stock determined by dividing (i) 50% of his award value by (ii) the arithmetic mean of the highest and lowest prices per share at which the Company’s common stock was traded on the NYSE on November 7, 2012,5, 2013, or $11.41.$15.66.
The 2012For all named executive officers other than Mr. Boivin, the 2013 annual equity awards vest 25% on each of the first four anniversaries of the grant date as long as the executive remains employed through the applicable vesting dates. In recognition of Mr. Boivin’s contributions to the Company before his retirement on December 31, 2013, his 2013 annual equity award will vest on 25% on each of the first four anniversaries of the grant date as if he had retired six months after the grant date. For the RSUs, additional RSUs will be credited on unvested RSUs representing a number that is equivalent to any dividends that the Company may declare on its stock. RSUs are ordinarily settled upon vesting. Options are ordinarily exercisable for ten years following the grant date, as long as the executive remains employed during that period. In the event that a named executive officer is terminated for “cause,” all unexercised options and unsettled RSUs will be cancelled, including anythe portion already vested and not settled.exercised (in the case of options). The awards also have conditions for accelerated or continued vesting upon death, disability, termination of employment by the Company without “cause,” or “retirement.” For this purpose, retirement means the employee is at least age 58 with at least two years of service and the sum of his age and years of service equals or exceeds 62.5. In addition, the employee must not be entitled to receive a severance package.
If an executive “retires” on or after May 8, 20136, 2014 (the six month anniversary of the grant date), his unvested options and RSUs awarded under the 20122013 annual equity award will continue to vest as if he remained employed through all applicable vesting dates. The executive will have through November 7, 20175, 2018 (i.e.one year after the last vesting date of November 8, 2016)6, 2017) to exercise his vested options. But, if the executive dies during that one year period, then the vested options will remain exercisable for two years following his death.
If an executive either retires before May 8, 20136, 2014, voluntarily terminates employment at any time on or after age 55 and his termination does not constitute a “retirement,” or his employment is terminated at any time without “cause,” the executive would become vested in apro rata portion of the options and RSUs equal to (i) the total number shares of Company common stock covered by the options or units under the RSUs, as applicable, multiplied by (ii) a fraction, the numerator of which is the number of months elapsed since the grant date and the denominator of which is 48, including the portion that has already vested. In this case, the executive has one year after his terminationhistermination to exercise the vested portion of the options unless he dies during the one-year period, in which case the vested options would remain exercisable for two years following his death.
If the executive dies while employed, or he becomes eligible for long-term disability benefits under a Company-sponsored plan, then, in addition to any portion of the options and RSUs in which he is already vested, the
portion of the options and RSUs scheduled to vest on the next anniversary of the grant date would vest on his date of death or the first day of the long-term disability period, as applicable. The vested portion of the options would be exercisable for two years following such date.
Employment Agreements and Offer Letters
The material terms of each officer’s employment arrangement are identified below, but any severance arrangement to which a named executive officer may be subject upon certain termination events, whether or not in connection with a change in control, is described below underSeverance and Change in Control Arrangements.
Mr. Garneau
In connection with his commencement of employment as president and chief executive officer, theThe Company entered into an amended and restated employment agreement with Mr. Garneau, dated January 1, 2011.February 26, 2014. The employment agreement continues in effect until death, disability, retirement or written notice of termination by Mr. Garneau or the Company, with certain ongoing restrictive covenants as described below. Under the terms of his employment agreement, Mr. Garneau is entitled to an annual base salary of $765,000$935,370 (in Canadian dollars) ($880,557 in U.S. dollars), subject to periodic adjustments, and is eligible to receive an annual incentive, as approved by the independent members of the board, under the Company’s 2011 annual short-term incentive plan with a target payout of 100% of his base salary and a maximum of 150%, subject to modifications by the board in its discretion. Pursuant to the compensation committee’s decision in July 2011 to pay all executive compensation in the currency of an executive’s country of residence, Mr. Garneau’s base salary was established in Canadian dollars for 2012. As described above, his base salary was increased by 3.4% effective August 1, 2012.plan. Under his employment agreement, Mr. Garneau is also eligible to receive awards under the equity incentive plan (including an initial award equivalent to 225% of his annual base salary) and other benefits and perquisites. As described above, Mr. Garneau declined any 2012 STIP award and was not awarded a 2012 annual equity award, giving up 76.5% of his total direct compensation.
Mr. Garneau is subject to a covenant not to disclose confidential information during the term of the agreement and for five years thereafter. In addition, Mr. Garneau is subject to covenants not to compete with the Company, solicit customers of the Company or interfere with suppliers of the Company during the term of the agreement and, except as provided in his change in control agreement, for nine months thereafter (12 months in the case of a termination for “cause” (as defined under the employment agreement)).
Ms. Longworth and Messrs. Boivin, Lafave, Laflamme and Vachon
In 2012, Ms. Longworth and Messrs. Boivin, Laflamme and Vachon were employed pursuant to the following offer letters entered into with the Company in 2011:Company:
Name | Effective | Position | ||
Jo-Ann Longworth | August 31, 2011 | Senior vice president and chief financial officer | ||
Alain Boivin | March 4, 2011 | Senior vice president, pulp and paper operations (through October 31, 2012) | ||
John Lafave | February 7, 2011 | Senior vice president, pulp and paper sales and marketing | ||
Yves Laflamme | January 17, 2011 | Senior vice president, wood products, | ||
Jacques P. Vachon | Senior vice president, corporate affairs and chief legal officer |
The offer letters entered into with Ms. Longworth and Messrs. Boivin, Lafave, Laflamme and Vachon providedprovide for an annual base salary. Base salaries are evaluated annually by the compensation committee. The 2013 annual base salaries of $350,000, $375,000, $340,000for Ms. Longworth and $289,000,Messrs. Boivin, Lafave, Laflamme and Vachon were $454,322, $486,774, $345,397, $389,240 and $339,787, respectively, (eachin Canadian dollars ($427,699, $458,249, $325,157, $366,431 and $319,875, respectively, in U.S. dollars)dollars based on a December 31, 2013 exchange rate of $0.9414). Pursuant
to the compensation committee’s decision in July 2011 to pay all executive compensation in the currency of an executive’s country of residence, their base salaries werehave been established in Canadian dollars forsince 2012. Under their offer letters, Ms. Longworth and Messrs. Boivin, Lafave, Laflamme and Vachon were eligible to receive an annual incentive under the Company’s 2011 annual short-term incentive plan with a target payout of 100% of base salary. In 2012,2013, they participated in the 20122013 STIP with the same payout potential. They were also eligible to receive awards under the equity incentive plan, as determined by the board. Additionally, throughout their
periods of employment in 2012,2013, Ms. Longworth and Messrs. Boivin, Lafave, Laflamme and Vachon were eligible for other benefits and perquisites.
Outstanding Equity Awards at Fiscal Year-End 20122013
The equity awards made to the named executive officers that were outstanding as of December 31, 20122013 were the stock options and RSUs granted in 2011, 2012 and 20122013 under the equity incentive plan. The terms of the 20122013 annual equity award are described in the narrative disclosure to the Summary Compensation Table and Grants of Plan-Based Awards table. The 2011 and 2012 annual equity awards have the same terms asterms. The 2013 annual equity award generally mirrors the 2011 and 2012 annual equity awards.award.
Name | Grant Date | Option Awards | Stock Awards | Grant Date | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units That Have Not Vested | Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units That Have Not Vested | |||||||||||||||||||||||||||||||||||||||||||||||
| Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Richard Garneau | 01/09/2011 | 4,651 | 4,651 | (1) | $ | 23.05 | 01/08/2021 | — | $ | — | 01/09/2011 | 6,977 | 2,325 | (1) | $ | 23.05 | 01/08/2021 | — | $ | — | ||||||||||||||||||||||||||||||||||||
| 11/06/2013 | — | 132,061 | (4) | 15.66 | 11/06/2023 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/06/2013 | — | — | — | — | 64,512 | (4) | 1,033,482 | |||||||||||||||||||||||||||||||||||||||||||||||||
Jo-Ann Longworth | 11/03/2011 | 6,542 | 19,624 | (2) | 16.45 | 11/02/2021 | — | — | 11/03/2011 | 13,084 | 13,082 | (2) | 16.45 | 11/02/2021 | — | — | ||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | — | — | — | — | 6,648 | (2) | 106,501 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | 12,095 | 36,282 | (3) | 11.41 | 11/07/2022 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | — | — | — | — | 9,973 | (2) | 138,824 | 11/08/2012 | — | — | — | — | 17,775 | (3) | 284,756 | |||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | — | 48,377 | (3) | 11.41 | 11/07/2022 | — | — | 11/06/2013 | — | 35,635 | (4) | 15.66 | 11/06/2023 | — | — | |||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | — | — | — | — | 23,701 | (3) | 329,918 | 11/06/2013 | — | — | — | — | 17,408 | (4) | 278,876 | |||||||||||||||||||||||||||||||||||||||||
Alain Boivin | 11/03/2011 | 7,009 | 21,026 | (2) | 16.45 | 11/02/2021 | — | — | 11/03/2011 | 14,018 | 14,017 | (2) | 16.45 | 11/02/2021 | — | — | ||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | — | — | — | — | 10,686 | (2) | 148,749 | 11/03/2011 | — | — | — | — | 7,124 | (2) | 114,126 | |||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | — | 51,833 | (3) | 11.41 | 11/07/2022 | — | — | 11/08/2012 | 12,959 | 38,874 | (3) | 11.41 | 11/07/2022 | — | — | |||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | — | — | — | — | 25,394 | (3) | 353,484 | 11/08/2012 | — | — | — | — | 19,045 | (3) | 305,101 | |||||||||||||||||||||||||||||||||||||||||
| 11/06/2013 | — | 38,181 | (4) | 15.66 | 11/06/2023 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/06/2013 | — | — | — | — | 18,652 | (4) | 298,805 | |||||||||||||||||||||||||||||||||||||||||||||||||
John Lafave | 01/09/2011 | 8,895 | �� | 2,965 | (1) | 23.05 | 01/08/2021 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 01/09/2011 | — | — | — | — | 461 | (1) | 7,385 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | 11,214 | 11,214 | (2) | 16.45 | 11/02/2021 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | — | — | — | — | 5,698 | (2) | 91,282 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | 9,195 | 27,584 | (3) | 11.41 | 11/07/2022 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | — | — | — | — | 13,514 | (3) | 216,494 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/06/2013 | — | 27,092 | (4) | 15.66 | 11/06/2023 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/06/2012 | — | — | — | — | 13,234 | (4) | 212,009 | |||||||||||||||||||||||||||||||||||||||||||||||||
Yves Laflamme | 01/09/2011 | 12,046 | 12,046 | (1) | 23.05 | 01/08/2021 | — | — | 01/09/2011 | 18,069 | 6,023 | (1) | 23.05 | 01/08/2021 | — | — | ||||||||||||||||||||||||||||||||||||||||
| 01/09/2011 | — | — | — | — | 936 | (1) | 14,995 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | 12,710 | 12,709 | (2) | 16.45 | 11/02/2021 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| 01/09/2011 | — | — | — | — | 1,872 | (1) | 26,058 | 11/03/2011 | — | — | — | — | 6,458 | (2) | 103,457 | |||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | 6,355 | 19,064 | (2) | 16.45 | 11/02/2021 | — | — | 11/08/2012 | 10,615 | 31,843 | (3) | 11.41 | 11/07/2022 | — | — | |||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | — | — | — | — | 9,688 | (2) | 134,857 | 11/08/2012 | — | — | — | — | 15,600 | (3) | 249,912 | |||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | — | 42,458 | (3) | 11.41 | 11/07/2022 | — | — | 11/06/2013 | — | 30,531 | (4) | 15.66 | 11/06/2023 | — | — | |||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | — | — | — | — | 20,801 | (3) | 289,550 | 11/06/2013 | — | — | — | — | 14,914 | (4) | 238,922 | |||||||||||||||||||||||||||||||||||||||||
Jacques P. Vachon | 01/09/2011 | 12,602 | 12,601 | (1) | 23.05 | 01/08/2021 | — | — | 01/09/2011 | 18,902 | 6,301 | (1) | 23.05 | 01/08/2021 | — | — | ||||||||||||||||||||||||||||||||||||||||
| 01/09/2011 | — | — | — | — | 1,959 | (1) | 27,269 | 01/09/2011 | — | — | — | — | 979 | (1) | 15,684 | |||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | 5,402 | 16,204 | (2) | 16.45 | 11/02/2021 | — | — | 11/03/2011 | 10,804 | 10,802 | (2) | 16.45 | 11/02/2021 | — | — | |||||||||||||||||||||||||||||||||||||||||
| 11/03/2011 | — | — | — | — | 8,235 | (2) | 114,631 | 11/03/2011 | — | — | — | — | 5,490 | (2) | 87,950 | |||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | — | 37,064 | (3) | 11.41 | 11/07/2022 | — | — | 11/08/2012 | 9,266 | 27,798 | (3) | 11.41 | 11/07/2022 | — | — | |||||||||||||||||||||||||||||||||||||||||
| 11/08/2012 | — | — | — | — | 18,158 | (3) | 252,759 | 11/08/2012 | — | — | — | — | 13,618 | (3) | 218,160 | |||||||||||||||||||||||||||||||||||||||||
| 11/06/2013 | — | 26,652 | (4) | 15.66 | 11/06/2023 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| 11/06/2013 | — | — | — | — | 13,020 | (4) | 208,580 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 1. | Vests ratably in one-fourth tranches on each anniversary of the Company’s December 9, 2010 emergence: December 9, |
| 2. | Vests ratably in one-fourth tranches on each anniversary of the grant date: November 3, |
| 3. | Vests ratably in one-fourth tranches on each anniversary of the grant date: November 8, |
| 4. | Vests ratably in one-fourth tranches on each anniversary of the grant date: November 6, 2014, November 6, 2015, November 6, 2016 and November 6, 2017. |
Option Exercises and Stock Vested for 20122013
The options that were exercisable in 20122013 were those awarded (i) under the emergence equity award, approved upon emergence with a January 9, 2011 grant date, and (ii) under the 2011 annual equity award and (iii) under the 2012 annual equity award. All exercisable options remained outstanding as of December 31, 2012.2013. Twenty-five percent of the RSUs granted under the emergence equity award vested on the secondthird anniversary of the emergence date (i.e., December 9, 2012)2013), twenty-five percent of the RSUs granted under the 2011 annual equity award vested on the second anniversary of the grant date (i.e., November 3, 2013), and twenty-five percent of the RSUs granted under the 20112012 annual equity award vested on the first anniversary of the grant date (i.e., November 3, 2012)8, 2013). The number of shares that vested in 2012,under the outstanding RSUs in2013, and the value realized on such date, are set forth in the following table. No named executive officer exercised any vested stock option in 2013.
| Stock Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
| Emergence Equity Award | 2011 Annual Equity Award | Emergence Equity Award | 2011 Annual Equity Award | 2012 Annual Equity Award | ||||||||||||||||||||||||||||||||||||
Name | Number of shares acquired on vesting | Value realized on vesting | Number of shares acquired on vesting | Value realized on vesting | Number of shares acquired on vesting | Value realized on vesting | Number of shares acquired on vesting | Value realized on vesting | Number of shares acquired on vesting | Value realized on vesting | ||||||||||||||||||||||||||||||
Richard Garneau (1) | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||||||||||||
Jo-Ann Longworth (1) | — | — | 3,325 | 39,933 | — | — | 3,325 | 53,857 | 5,926 | 87,412 | ||||||||||||||||||||||||||||||
Alain Boivin (1) | — | — | 3,562 | 42,780 | — | — | 3,562 | 57,704 | 6,349 | 93,640 | ||||||||||||||||||||||||||||||
John Lafave | 461 | �� | 6,403 | 2,850 | 43,162 | 4,505 | 66,445 | |||||||||||||||||||||||||||||||||
Yves Laflamme | 937 | 11,310 | 3,230 | 38,792 | 936 | 13,005 | 3,230 | 52,318 | 5,201 | 76,719 | ||||||||||||||||||||||||||||||
Jacques P. Vachon | 979 | 11,817 | 2,745 | 32,967 | 980 | 13,605 | 2,745 | 44,469 | 4,540 | 66,958 | ||||||||||||||||||||||||||||||
| 1. | No emergence equity award covering RSUs was granted to Mr. Garneau, and Ms. Longworth and Mr. Boivin were not employees at the time this award was made. In addition, per Mr. Garneau’s request, he did not receive |
In 2012,2013, the Company, through an internal committee, developed a more formal process to assessassessed whether any elements of the Company’s compensation policies and practices encourage excessive and unnecessary risk-taking, and, if so, whether the level of risk encouraged is reasonably likely to have a material adverse effect on the Company. The internal committee was composed of the senior vice president and chief financial officer; the senior vice president, corporate affairs and chief legal officer; the senior vice president, human resources; and members of the human resources staff. Towers WatsonHugessen Consulting provided input into the process and elements to review and provided information on market best practices. The process identified the compensation plans and practices and related key features, assessed the risk related to each of them (taking into account enterprise risk) and compared the plan and practices with market best practices. The compensation committee and Towers WatsonHugessen Consulting reviewed and commented on the internal committee’s findings. Following this review, we believe that the design of our compensation policies and practices encourages employees to remain focused on both our short-and long-term goals.
goals and the compensation programs are not reasonably likely to have a material adverse effect on the Company. However, the review identified certain best practices thatwhich the Company decided to implement. For example, to maintain independence of its compensation advisors, the Company did not have a clawback policy on incentive and equityreplaced Towers Watson with Hugessen Consulting as compensation andconsultant following an expansion of Towers Watson’s services. In addition, the Company has adopted a policy consistent with best practices, existing guidancewritten code of business conduct as discussed under the Sarbanes-Oxley ActCorporate Governance and expected guidance under the Dodd-Frank Act.Board Matters — Code of Conduct.
This section describes the accumulated benefits, if any, of each of the named executive officers under Company-sponsored defined benefit pension plans. Any benefits accumulated under Company-sponsored deferred defined contribution plans, and distributed in 2012 as a result of the termination of the 2010 deferred compensation SERP, are described underNonqualified Deferred Compensation for 2012 and DC Make-Up Program below.
The table below shows the present value of accumulated benefits, if any, payable to each of the named executive officers, including the number of years of service credited to them under each applicable plan. The benefits were determined using the interest rates and mortality rate assumptions consistent with those used in the Company’s financial statements.
Pension Benefits for 20122013
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit(1) | Payments During Last Fiscal Year | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit(1) | Payments During Last Fiscal Year | ||||||||||||||||||||
Richard Garneau (2) | n/a | — | $ | — | $ | — | n/a | — | $ | — | $ | — | ||||||||||||||||
Jo-Ann Longworth (2) | n/a | — | — | — | n/a | — | — | — | ||||||||||||||||||||
Alain Boivin (2) | n/a | — | — | — | n/a | — | — | — | ||||||||||||||||||||
| John Lafave | n/a | — | — | — | ||||||||||||||||||||||||
Yves Laflamme | Registered Plan (Canada) | 28.51 | 1,495,614 | — | Registered Plan (Canada) | 28.51 | 1,410,676 | — | ||||||||||||||||||||
| Supplemental Plan (Canada) | 28.51 | 2,255,982 | — | Supplemental Plan (Canada) | 28.51 | 2,137,511 | — | |||||||||||||||||||||
Jacques P. Vachon | Registered Plan (Canada) | 11.58 | 651,680 | — | Registered Plan (Canada) | 11.58 | 598,809 | — | ||||||||||||||||||||
| Supplemental Plan (Canada) | 25.50 | 2,617,554 | — | Supplemental Plan (Canada) | 25.50 | 2,399,799 | — | |||||||||||||||||||||
| 1. | The present value of accumulated benefits under the Canadian registered and supplemental pension plans sponsored by Resolute FP Canada Inc. or Resolute is determined based on the assumptions used in the Company’s financial statements, as described in Note |
| 2. | Ms. Longworth and Messrs. Garneau, Boivin and |
The named executive officers did not earn pension benefits in 2013.
The following discussion describes the terms of the pension plans applicable to Messrs. Laflamme and Vachon.Vachon for service before January 1, 2011. No other named executive officer has pension benefits accrued under the Company’s defined benefit pension plans (either registered or the reinstated supplemental plans, both as described below).
Before their pension benefits were frozen as described below, Messrs. Laflamme and Vachon earned benefits under Canadian pension plans that were either registered or non-registered. A “registered plan” means the plan is intended to be qualified for favorable tax treatment under the Canadian Income Tax Act, or the “Income Tax Act.” In contrast, a “non-registered plan” is not qualified for this favorable tax treatment and provides to a select group of management and highly compensated employees additional pension benefits that cannot be provided under the registered plans because of statutory limitations or an overall benefit that is offset by the benefit provided under the registered plan. The Abitibi registered plan is the Pension Plan for Executive Employees of Abitibi-Consolidated Inc., or the “Abitibi registered plan.”
Before the Company’s December 9, 2010 emergence from creditor protection proceedings, Messrs. Laflamme and Vachon participated in the prior Canadian Supplemental Executive Retirement Plan (SERP) for Executive Employees of Abitibi-Consolidated Inc., or “prior Abitibi DB SERP,” and Mr. Laflamme also participated in the Régime supplémentaire de retraite des cadres supérieurs désignés de Donohue Inc., collectively the “prior DB SERPs,” each a non-registered supplemental defined benefit plan. Pursuant to the plans of reorganization, the prior DB SERPsnon-registered plans were terminated effective as of December 9, 2010, and all benefit obligationsthose accumulated benefits were deemed repudiated. Also, pursuant to the plans of reorganization, the Company establishedreinstated under new non-registered supplemental defined benefit plans, including the AbitibiBowater 2010 Canadian DB Supplemental Executive Retirement Plan and the AbiBow Canada Inc. DB Supplemental Retirement Plan, collectively the “2010 Canadian DB SERPs,” solely for the purpose of reinstating benefits accumulated under the prior Abitibi DB SERP for participants who waived and forfeited any and all claims they may have had in the creditor protection proceedings in respect of the prior Abitibi DB SERP or any other supplemental retirement benefit plan. Pursuant to the plans of reorganization, benefits under the 2010 Canadian DB SERPs,” for certain participants, including Messrs. Laflamme and Vachon. The reinstated benefits were frozen as to benefit service and
earnings (but not vesting service). Consequently, active employees, including Messrs. Laflamme and Vachon, did not earn benefits under the 2010 Canadian DB SERPs or any other supplemental pension plan in 2012. as of December 31, 2010.
Messrs. Laflamme and Vachon also have pension benefits payable under legacy Abitibi Canadian pension plans. Pension benefits were frozen for Messrs. Laflamme and Vachon effective December 31, 2010. The following describes the pension benefits payable under these plans.
Following the prior DB SERPs’ termination, theThe reinstated accrued benefits thatprovided to Messrs. Laflamme and Vachon accrued under the prior DB SERPs were reinstated under the 2010 Canadian DB SERPs. In general, the plans’ formulas provideSERPs are determined pursuant to a traditional pension plan formula based on years of credited service and a percentage of final average compensation. The 2010 Canadian DB SERPs provide an overall pension benefit that is offset by the benefit payable under the registered plans, including any registered plan benefits that have been commuted. The registered plans limit the amount of the pension benefit payable due to statutory constraints.
In 2009, we changed our retirement program for Canadian employees by shifting to predominantly defined contribution plans from traditional defined benefit pension plans. Current employees were migrated to defined contribution plans over a two-year period. As a result, effective December 31, 2010, benefits for Messrs. Laflamme and Vachon under the Abitibi registered plan and prior Abitibi DB SERP were frozen, as described below.
Pension Formula
These Canadian pension plans generally provide total pension benefits equal to 2% of final average compensation multiplied by years of credited service with the Company and its related entities, up to 35 years of service. As a result of the benefit service freeze described above, the pension benefits for Messrs. Laflamme and Vachon under the 2010 Abitibi DB SERP take into account their years of credited service through December 31, 2010.
Compensation used under the formulas depends on the period for which years of service are credited. For years of credited service through December 31, 2008, final average compensation is the sum of (i) average monthly base salary based on the best 60 consecutive months of base salary within the last 120 months and (ii) the best five annual incentive awards in the last ten years. For years of credited service after December 31, 2008, final average compensation is the average of the five highest consecutive calendar years of eligible earnings in the last 10 years. Eligible earnings in a given calendar year is the sum of the base salary and the incentive award paid under the annual incentive plan (excluding any special incentive awards unless authorized by the Company). The paid incentive award component is capped at 125% of the target incentive award of each year.
Beginning January 1, 2009 through December 31, 2010, Messrs. Laflamme and Vachon were required to contribute to the Abitibi registered plan. Their contributions were equal to 5% of their pensionable earnings up to the U.S. compensation limit ($245,000 in 2009 and 2010). Contributions were credited with interest at the average net rate of return of the pension fund of the Abitibi registered plan over the preceding two calendar years.
Once participants attain age 55, they can retire early. The total pension payable is unreduced if the participant retires at age 58 and the sum of his age and years of service is at least 80. If a participant is not eligible for an unreduced benefit and has completed 20 years of service, the total pension payable is reduced by 6% for each year (or 0.5% for each month) between his retirement date and the date he would have attained age 58 and the sum of his age and years of service would equal at least 80. If the participant has less than 20 years of service, the 6% per year (or 0.5% for each month) reduction is calculated for each year before age 65 that the retirement occurs. A participant who terminates employment with the Company and its related entities for any reason before attaining age 55 is eligible for an unreduced pension payable at age 65, but may elect to receive a reduced pension at any time before age 65. If his employment was terminated involuntarily, his pension payable is reduced by 6% for each year (or 0.5% for each month) between the date payments commence and the date on or
after attainment of age 58 that the sum of his age and years of service would equal at least 80. If his employment was terminated voluntarily, the 6% per year (or 0.5% for each month) reduction is calculated for each year before age 65 that payments commence.
Time and Form of Payment
The legacy Abitibi Canadian pension plans provide for payment in an annuity with a participant option to select payment among different types of annuities, any of which will provide monthly payments for the life of the participant and his spouse, if any. For the Canadian executives who are not subject to U.S. tax law, the annuities can generally be secured by a letter of credit pursuant to a retirement compensation arrangement without adverse tax consequences to the executive and the Company has established security protocols. At the executive’s age 55, the Company will undertake to secure the executives’ supplemental retirement benefits by a letter of credit. As of the time this proxy was filed, the Company has secured the Canadian DB SERP benefits of Mr. Laflamme but not Mr. Vachon.
Assumptions for Pension Benefits Table Value
The accrued benefit amounts identified in the Pension Benefits table above show the present value of the future monthly payments if calculated as a lump sum. An interest rate and mortality table providing for current life expectancies are used to calculate the present value amount as of December 31, 2012.2013. The interest rate and mortality table used are the same as those used for our financial statements, which are a 4.3%4.8% interest rate and the RP2000 generational mortality table with white collar adjustments, with a 3% increase to liabilities to account for mortality improvements, and no presumption for pre-retirement mortality. Benefits were calculated assuming retirement on the date an executive attains age 58 with the sum of his age and years of service equaling at least 80. In addition, the final average earnings used for the calculation of the accumulated benefit as of December 31, 2012,2013, as shown in the Pension Benefits table, are: for years of service credited through December 31, 2008, Mr. Laflamme, $411,188$384,021 and Mr. Vachon $504,200;$470,886; and for years of service credited after December 31, 2008, Mr. Laflamme, $368,037,$343,720, and Mr. Vachon, $469,784.$438,745.
Nonqualified Deferred Compensation for 2012 and DC Make-Up Program
The named executive officers began participating in the AbitibiBowater 2010 DC Supplemental Executive Retirement Plan, or “2010 deferred compensation SERP,” a nonqualified, non-registered defined contribution plan, effective as of the following dates: January 1, 2011 in the case of Messrs. Garneau, Laflamme and Vachon; March 4, 2011 in the case of Mr. Boivin; and July 4, 2011 in the case of Ms. Longworth. On October 25, 2011, the board terminated the 2010 deferred compensation SERP, effective as of December 31, 2011. As a result, the Company did not make any additional contributions to the 2010 deferred compensation SERP after 2011, except to credit earnings to participants’ notional accounts pending liquidation of the accounts in 2012. The 2010 deferred compensation SERP was liquidated and the value of the notional accounts was paid to the named executive officers on either March 31, 2012 (for Canadian taxpayers) or November 30, 2012 (for U.S. taxpayers). The table below reflects these distributions.
Name | Executive Contributions in Last FY | Registrant Contributions in Last FY (1) | Aggregate Earnings in Last FY (1) | Aggregate Withdrawals/ Distributions (1) | Aggregate Balance at Last FY End (1) | |||||||||||||||
Richard Garneau | $ | — | $ | — | $ | 643 | $ | 158,737 | $ | — | ||||||||||
Jo-Ann Longworth | — | — | 63 | 15,619 | — | |||||||||||||||
Alain Boivin | — | — | 208 | 51,436 | — | |||||||||||||||
Yves Laflamme | — | — | 356 | 87,897 | — | |||||||||||||||
Jacques P. Vachon | — | — | 1,092 | 80,301 | — | |||||||||||||||
Because of theFollowing its 2011 termination of the 2010its nonqualified, non-registered deferred compensation SERP,plan, the Company implemented, in 2012, the DC Make-Up Program to provide senior management with Company contributions to employees limited by the statutory rules on the amount of compensation that can be taken into account under the registered tax-qualified defined contribution plans. In addition, because the registered tax-qualified plans do not provide contributions on the STIP for Canadian employees, the DC Make-Up Program also provides these contributions. As a result, theThe Company chose to provide contributions that are otherwise limited by statute and contributions on the STIP for Canadian employees, but opted to pay the additionalthese contributions on a current taxable basis instead of a tax-deferred basis. The contributions are less generous than those offered under the terminated 2010 deferred compensation SERP, and the program does not allow executives to accumulate earnings on a tax-deferred basis. These contributions are reflected in the Summary Compensation Table under All Other Compensation because the contributions are not deferred compensation.
Severance and Change in Control Arrangements
The following is a discussion of the policies and arrangements to which a named executive officer becomes subject upon certain termination events, with or without a change in control of the Company. During 2012,2013, all named executive officers except Mr. Garneau were covered by the Company’s executive severance policy. Severance protection for Mr. Garneau was provided under his employment agreement and, in the case of a termination with a change in control, a separate change in control agreement.
The material terms of the executive severance policy, the severance provisions of Mr. Garneau’s employment agreement and Mr. Garneau’s change in control agreement are described below. In all cases, to be eligible for severance benefits, the named executive officers must agree to certain restrictive covenants intended to mitigate the competitive disadvantage that would result from losing executive talent to competitors of the Company:
The executive severance policy requires eligible executives to protect confidential information. In addition, to receive benefits under the executive severance policy, an eligible executive must sign a release containing non-compete, non-solicitation and confidentiality covenants.
Mr. Garneau’s employment agreement includes covenants not to compete with the Company, solicit customers of the Company or interfere with suppliers of the Company for a 12-month period following a termination for “cause” (as defined in the employment agreement) or a nine-month period following a termination for any other reason, except that these covenants do not apply in the case of a termination without “cause” or for “good reason” pursuant to the change in control agreement (as defined thereunder). In addition, a confidentiality covenant is effective for a five-year period following a termination for any reason.
Executive Severance Policy
Under
The following table describes the material terms of the executive severance policy and the severance is triggered in two situations:
A named executive officer is terminated involuntarily by the Company without just cause (as determined by the Company in its sole discretion), whether or not the involuntary termination occurs after a “change in control,” or
Within 12 months after aprovisions of Mr. Garneau’s employment and change in control agreements (with all descriptions qualified by the actual terms of the Company, a named executive officer voluntarily terminates his employment for “good reason.”
If severance is triggered, the executive receives pay equal to six weeks of eligible pay per year of continuous service, with a minimum of 52 weekspolicy and a maximum of 104 weeks, and with proportional allowance for completed months. Eligible pay is base pay, plus the lesser of (i) the average of the last two incentive awards paid under regular Company-sponsored short-term incentive plans or (ii) 125% of the current target incentive award for the year of termination. (To calculate the average of the last two incentive awards paid, the incentive award for 2010 would be annualized because that award was paid on apro ratabasis for performance during the
last six months of 2010.) Severance pay is generally paid as a lump sum upon termination. For the named executive officers, coverage under all Company-sponsored benefit plans ends pursuant to the plans’ terms. The policy also provides outplacement counseling following a covered termination. Except as required by law, as a condition to receiving severance pay and benefits under the executive severance policy, the executive must execute, and not revoke, a valid waiver and release agreement.
The executive severance policy contains the following general definitions of “change in control” and “good reason,” qualified in their entirety by the policy’s actual terms:
In general, a “change in control” means (i) the acquisition of a number of voting shares equal to or greater than 50% of the total number of voting shares immediately after such acquisition; (ii) the election or appointment of a number of members of the board of directors equal to or greater than 50% of the board of directors; (iii) any transaction or series of transactions whereby assets of the Company become the property of any other person (other than a subsidiary of the Company) if such assets have a fair market value (net of any existing liabilities assumed by such other person as part of the same transaction) equal to 50% or more of the Company’s market capitalization (as defined in the executive severance policy) immediately before such transaction; or (iv) the completion of any transaction or the first of a series of transactions that would have the same or similar effect as any transaction or series of transactions referred to in clauses (i), (ii) and (iii).
In general, “good reason” means (i) a material adverse change in the executive’s status, title, position, duties or responsibilities (including reporting line relationships), or any removal of the executive from, or failure to reappoint the executive to, any material office or position; (ii) a material reduction of the executive’s compensation and benefits, in the aggregate, to those provided for under the employee compensation and benefit plans, programs and practices in which he was participating; (iii) a material reduction in the executive’s salary; or (iv) a material change in the geographic location at which the executive is to perform services on behalf of the Company from the location immediately before the change in control.
Mr. Garneau’s Employment and Change in Control Agreements
Under his employment agreement, if Mr. Garneau is terminated involuntarily by the Company without cause, except within two years after a change in control of the Company, he would be eligible for the same level of severance pay offered to other executives covered under the executive severance policy using the same parameters for determining eligible pay. Severance pay would be paid as a lump sum upon termination. Mr. Garneau would also be eligible for outstanding equity awards.
However, Mr. Garneau’s change in control agreement provides enhanced severance pay, if, within two years after a change in control, the Company terminates his employment without cause or he resigns for good reason (subject to a 30-day notice and cure period for a good reason termination). In these circumstances, he would be eligible for severance pay in a lump sum equal to:
three times his base salary as in effect on his termination date, plus
three times the lesser of (i) the average of his last two incentive awards earned under Company-sponsored short-term incentive plans or (ii) 125% of his current target incentive award, plus
three times the maximum Company contributions he could have received under the Company’s defined contribution program (if any) for his year of termination, plus
$20,000 in lieu of individual outplacement services.
Mr. Garneau would also be eligible for Company-provided health care and life insurance coverage, with premiums payable at the rates then in effect for executives, until the earlier of 36 months after his termination date or the date he becomes covered under another employer’s health care and life insurance programs. In addition, upon the change in control, all outstanding stock options would vest immediately and be exercisable, and all outstanding RSUs would vest immediately and be settled.
If the aggregate amount of pay and benefits payable to Mr. Garneau under the change in control agreement would constitute a “parachute payment” subject to excise tax under Section 4999 of the U.S. Internal Revenue Code, his aggregate pay and benefits would be reduced to the greater of (i) the after-tax amount that he would retain after all federal, state and local income taxes and all excise taxes under Section 4999, or (ii) the after-tax amount that he would retain after all federal, state and local income taxes if his aggregate pay and benefits were reduced to the maximum amount payable without triggering the excise tax liability under Section 4999.
Mr. Garneau’s agreements have the same definition of “change in control” as the executive severance policy, but the following definitions of “cause” and “good reason”agreements):
Key Provisions | Executive Severance Policy | Mr. Garneau’s Employment and Change in Control | ||
| Termination Without Cause (No Change in Control) | ||||
| Severance pay (1) | • Lump sum payment equal to 6 weeks of eligible pay per year of continuous service, with a minimum of 52 weeks and a maximum of 104 weeks • “Eligible pay” is base pay, plus the lesser of (i) average of last 2 incentive awards paid or (ii) 125% of target incentive award for year of termination | • Same severance pay as under executive severance policy, plus immediate vesting of outstanding equity awards • “Eligible pay” is base pay, plus the lesser of (i) average of last 2 incentive awards earned or (ii) 125% of target incentive award for year of termination | ||
| Termination Without Cause or for Good Reason On or After Change in Control | ||||
| Time period during which change in control benefits are payable | Eligible termination within 12 months after change in control | Eligible termination within 24 months after change in control | ||
| Severance pay(1) | Same severance pay as when there is no change in control | The following amounts, reduced to minimize excise tax liability under Code Section 4999:(2) • Lump sum payment equal to: • 3 times base salary as in effect on his termination date, plus • 3 times the lesser of (i) average of his last 2 incentive awards earned or (ii) 125% of target incentive award for year of termination, plus • 3 times maximum Company contributions he could have received under Company’s defined contribution program (if any) for year of termination, plus • $20,000 in lieu of individual outplacement services • Immediate vesting of outstanding equity awards • Eligibility for Company-provided health care and life insurance coverage, with premiums payable at the rates then in effect for executives, until the earlier of 36 months after his termination date or the date he becomes covered under another employer’s health care and life insurance programs | ||
In general, “cause” means (i) the willful failure of Mr. Garneau to carry out his duties under the employment agreement, to comply in all material respects with the rules and policies of the Company or to follow any reasonable instruction or directive of the board that is consistent with his duties and responsibilities under the employment agreement; (ii) Mr. Garneau acting dishonestly or fraudulently in connection with the Company’s business, or Mr. Garneau’s willful gross misconduct in the course of his employment, in each case resulting in adverse consequences to the Company or its affiliates; (iii) if Mr. Garneau or his spouse or child under the age of majority makes any personal profit arising out of or in connection with any transaction involving the Company or its affiliates without making disclosure to and obtaining the prior written consent of the board, or other material breach of Mr. Garneau’s fiduciary duties to the Company; (iv) the conviction of Mr. Garneau for, or his guilty plea to, any criminal offense punishable by imprisonment that may reasonably be considered to be likely to adversely affect the Company or its affiliates or the suitability of Mr. Garneau to perform his duties under the employment agreement, including without limitation any offense involving fraud, theft, embezzlement, forgery, willful misappropriation of funds or property, or other fraudulent or dishonest acts; (v) any material breach of the employment agreement; (vi) misconduct by Mr. Garneau that is materially detrimental to the business or financial position of the Company or its affiliates; (vii) personal misconduct by Mr. Garneau of such a serious and substantial nature that it has or would injure the reputation of the Company or its affiliates; (viii) the habitual inability by Mr. Garneau to carry out functions of his employment due to alcohol or drug related causes, provided that he must be provided with written notice of at least 30 days in advance of such a termination, during which period he must have failed to remedy such alcohol or drug related causes; or (ix) any serious reason pursuant to Article 2094 of the Civil Code of Québec.
Key | Executive Severance Policy | Mr. Garneau’s Employment and Change in Control | ||
| Key Definitions | ||||
| “Cause” | Just cause, determined by the Company in its sole discretion | • Willful failure to carry out duties under employment agreement, to materially comply with Company’s rules and policies, or to follow board’s reasonable instructions or directives consistent with duties and responsibilities under employment agreement • Acting dishonestly or fraudulently in connection with the Company’s business, or willful gross misconduct in the course of employment, in each case resulting in adverse consequences to the Company or its affiliates • Personal profiting from a transaction involving the Company or its affiliates without prior written consent of board, or other material breach of fiduciary duties • Criminal offense punishable by imprisonment likely to adversely affect the Company or its affiliates or the suitability of Mr. Garneau to perform duties under employment agreement • Material breach of employment agreement • Material misconduct detrimental to business or financial position of the Company or its affiliates • Serious personal misconduct detrimental injurious to reputation of the Company or its affiliates • Habitual inability to carry out functions of employment due to alcohol or drug related causes (with 30 day notice and cure period) • Any serious reason pursuant to Article 2094 of the Civil Code of Québec | ||
Key Provisions | Executive Severance Policy | Mr. Garneau’s Employment and Change in Control | ||
“Good reason” | • Material adverse change in status, title, position, duties or responsibilities (including reporting line relationships), or any removal from, or failure to reappoint to, any material office or position • Material reduction in aggregate compensation and benefits • Material reduction in salary • Material change in geographic location at which services are to be performed | • Material change in status, title, position, duties or responsibilities (including reporting line relationships) that represents substantial adverse change, or any removal from, or failure to reappoint to, any material office or position • Material reduction in aggregate compensation and benefits • Material reduction in base salary • The Company’s failure to obtain from any successor its assent to assume the change in control agreement • Material change in geographic location at which services are to be performed | ||
| Good reason “notice and cure period” | • Executive must provide notice within 90 days after initial existence of “good reason” condition • Company has 30 days to remedy condition after receiving notice | |||
| “Change in control” | • Acquisition of at least 50% of Company’s voting shares • Election or appointment of at least 50% new directors • Transaction(s) resulting in a transfer of assets with fair market value (net of existing liabilities transferred) of at least 50% of Company’s market capitalization immediately before the transaction(s) • Completion of any transaction or the first of a series of transactions that would have the same or similar effect as any transaction(s) described in the prior three bullets | |||
| 1. | For the named executive officers other than Mr. Garneau, vesting of outstanding equity awards is not automatically accelerated. However, the equity incentive plan provides the compensation committee discretion to accelerate the exercisability of outstanding stock options upon a termination with or without a change in control. |
In general, “good reason” means (i) a material change in Mr. Garneau’s status, title, position, duties or responsibilities (including reporting line relationships) that represents a substantial adverse change from his status, title, position, duties or responsibilities as in effect immediately before a change in control or at any time within 24 months thereafter; the assignment to Mr. Garneau of any duties or responsibilities that are materially inconsistent with his status, title, position, duties or responsibilities as in effect immediately before a change in control or at any time within 24 months thereafter; or any removal of Mr. Garneau from, or failure to reappoint or reelect him to, any material office or position held immediately before a change in control or at any time within 24 months thereafter; (ii) a material reduction of Mr. Garneau’s compensation and benefits, in the aggregate, as compared to those provided for under the employee compensation and benefit plans, programs and practices in which he was participating immediately before a change in control or at any time within 24 months thereafter; (iii) a material reduction in Mr. Garneau’s base salary immediately before a change in control or at any time within 24 months thereafter; (iv) the Company’s failure to obtain from any successor its assent to assume the change in control agreement; or (v) a material change in the geographic location at which Mr. Garneau is to perform services on behalf of the Company from the location immediately before the change in control.
| 2. | If the aggregate amount of pay and benefits payable to Mr. Garneau under the change in control agreement would constitute a “parachute payment” subject to excise tax under Section 4999 of the U.S. Internal Revenue Code, his aggregate pay and benefits would be reduced to the greater of (i) the after-tax amount which he would retain after all federal, state and local income taxes and all excise taxes under Section 4999, or (ii) the after-tax amount which he would retain after all federal, state and local income taxes if his aggregate pay and benefits were reduced to the maximum amount payable without triggering the excise tax liability under Section 4999. |
Severance Projection in the Case of Non-Change in Control, Non-Cause Termination
If Ms. Longworth or Messrs. Bovin,Lafave, Laflamme or Vachon had been terminated without cause on December 31, 2012,2013, absent a change in control, they would have received the following benefits under the Company’s executive severance policy described above. Amounts shown for Mr. Garneau are pursuant to his employment agreement. Amounts shown for Mr. Boivin reflect the terms of his retirement effective December 31, 2013.
| Richard Garneau | Jo-Ann Longworth | Alain Boivin | Yves Laflamme | Jacques P. Vachon | Richard Garneau | Jo-Ann Longworth | Alain Boivin (1) | John Lafave | Yves Laflamme | Jacques P. Vachon | ||||||||||||||||||||||||||||||||||
Base Salary (1—2X) | $ | 857,139 | $ | 436,150 | $ | 467,303 | $ | 765,568 | $ | 668,304 | $ | 880,557 | $ | 427,699 | $ | — | $ | 384,560 | $ | 732,861 | $ | 639,751 | ||||||||||||||||||||||
Avg. of Last Two Annualized Regular Cash Incentive Awards Paid (1—2X) | 601,356 | (2) | 46,062 | (3) | 112,160 | (3) | 368,570 | (4) | 351,581 | (4) | 611,866 | (3) | 248,750 | (4) | — | 210,202 | 536,243 | (4) | 399,844 | (4) | ||||||||||||||||||||||||
All Other Severance Compensation | 866,819 | (5) | 446,459 | (6) | 476,908 | (6) | 395,080 | (6) | 347,262 | (6) | 2,514,641 | (5) | 272,823 | (6) | 1,128,668 | 178,176 | 274,170 | (6) | 217,848 | (6) | ||||||||||||||||||||||||
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Total | 2,325,314 | 928,671 | 1,056,371 | 1,529,218 | 1,367,147 | 4,007,063 | 949,272 | 1,128,668 | 772,938 | 1,543,274 | 1,257,443 | |||||||||||||||||||||||||||||||||
| 1. | For disclosure purposes, the calculations for Mr. Boivin are based on the terms of his retirement effective December 31, 2013. Mr. Boivin is entitled to (i) payment of his 2013 STIP award (ii) continued vesting of his 2011 and 2012 annual equity awards pursuant to their terms, and continued vesting of his 2013 annual equity awards as if he had retired six months after the grant date, and (iii) continued use of the Company-provided annual medical referral service through December 31, 2014. Pursuant to SEC guidance, the table reflects: |
a 2013 STIP award of $222,250;
the fair market value of his unvested RSUs, or $718,032, determined based on the per-share closing trading price on the NYSE of shares of the Company’s common stock on December 31, 2013, or $16.02;
| • | the aggregate spread on his unvested options, or $186,927, determined based on the per-share closing trading price on the NYSE of shares of the Company’s common stock on December 31, 2013, or $16.02, and the respective option exercise prices (i.e., $16.45 for options granted pursuant to the 2011 annual equity award, $11.41 for options granted pursuant to the 2012 annual equity award, and $15.66 for options granted pursuant to the 2013 annual equity award); and |
continued use of the Company-provided annual medical referral service through December 31, 2014, determined as the average annual value of this service for 2012 and 2013.
| 2. | Assumes annual base salaries for Mr. Garneau, Ms. Longworth and Messrs. |
| 3. |
| 4. | For disclosure purposes, cash incentive award calculations for Ms. Longworth and Messrs. Lafave, Laflamme and Vachon are based on the average of their |
| 5. | Assumes (i) payment of a |
| 6. | Assumes (i) payment of a |
Ms. Longworth: a 20122013 STIP award of $405,375; 1,553$219,966; 2,295 options, with a fair value of $10,191$15,867 under FASB ASC 718; 7711,133 RSUs, with a fair market value of $10,732.$18,158.
Mr. Boivin:Lafave: a 20122013 STIP award of $434,331; 1,664$132,610; 1,798 options, with a fair value of $10,919$12,501 under FASB ASC 718; 826889 RSUs, with a fair market value of $11,498.$14,235.
Mr. Laflamme: a 20122013 STIP award of $355,776; 1,414$224,881; 2,050 options, with a fair value of $9,372$14,238 under FASB ASC 718; 7021,013 RSUs, with a fair market value of $9,772.$16,231.
Mr. Vachon: a 20122013 STIP award of $310,575; 1,222$172,627; 1,778 options, with a fair value of $8,077$12,323 under FASB ASC 718; 607878 RSUs, with a fair market value of $8,449.$14,070.
The number of options and RSUs for which vesting would have been accelerated represents one month ofpro rata vesting of the 2011, 2012 and 20122013 annual equity awards. Because the secondthird tranche of the emergence equity award vested on December 9, 20122013 pursuant to its regular vesting schedule, and no additional full months elapsed before December 31, 2012,2013, no portion of the emergence equity award would have vested on apro rata basis with respect to Messrs. Lafave, Laflamme and Vachon.
The value of options and RSUs is based on the per-share closing trading price on the NYSE of shares of the Company’s common stock on December 31, 2012,2013, or $13.92,$16.02, and for options, the Black Scholes value used to determine grant size (i.e., $8.36, $5.39 and $5.39$7.65 for the 2011, 2012 and 20122013 annual option awards, respectively).
Severance Projection in the Case of Non-Cause or Good Reason Termination Following a Change in Control
If Ms. Longworth or Messrs. Boivin,Lafave, Laflamme or Vachon had terminated employment for good reason on December 31, 2012,2013, within 12 months following a change in control, they would have received the following amounts under the Company’s executive severance policy described above. Notably, for everyone except Mr. Garneau, the amounts payable upon an eligible termination following a change in control is the same as the amount payable upon an involuntary termination absent a change in control. If Mr. Garneau’s employment had terminated without cause or for good reason on December 31, 2012,2013, within 24 months following a change in control, he would have received the amounts shown pursuant to his change in control agreement.
| Richard Garneau | Jo-Ann Longworth | Alain Boivin | Yves Laflamme | Jacques P. Vachon | Richard Garneau | Jo-Ann Longworth | Alain Boivin (1) | John Lafave | Yves Laflamme | Jacques P. Vachon | ||||||||||||||||||||||||||||||||||
Base Salary | $ | 2,571,416 | $ | 436,150 | $ | 467,303 | $ | 765,568 | $ | 668,304 | $ | 2,641,672 | $ | 427,699 | $ | — | $ | 384,560 | $ | 732,861 | $ | 639,751 | ||||||||||||||||||||||
Avg. of Last Two Annualized Regular Cash Incentive Awards Paid | 1,804,068 | (2) | 46,062 | (3) | 112,160 | (3) | 368,570 | (4) | 351,581 | (4) | 1,835,597 | (3) | 248,750 | — | 210,202 | 536,243 | 399,844 | |||||||||||||||||||||||||||
Welfare Payment | 19,902 | — | — | — | — | 18,202 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
2012 STIP Award | 796,661 | (5) | 405,375 | 434,331 | 355,776 | 310,575 | ||||||||||||||||||||||||||||||||||||||
2013 STIP Award | 427,070 | 219,966 | — | 132,610 | 224,881 | 172,627 | ||||||||||||||||||||||||||||||||||||||
3X Company Contributions under Defined Contribution Program for 2012 | 250,167 | — | — | — | — | 269,982 | — | — | — | |||||||||||||||||||||||||||||||||||
Outplacement | 20,160 | 20,160 | 20,160 | 20,160 | 20,160 | 18,828 | 18,828 | — | 18,828 | 18,828 | 18,828 | |||||||||||||||||||||||||||||||||
Value of Equity Awards | 49,998 | (6) | 20,923 | (7) | 22,417 | (7) | 19,144 | (7) | 16,527 | (7) | 2,068,742 | (4) | 34,029 | (5) | — | 26,738 | (5) | 30,461 | (5) | 26,393 | (5) | |||||||||||||||||||||||
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Total Pre-Tax Value | 5,512,372 | 928,670 | 1,056,371 | 1,529,218 | 1,367,147 | 7,280,093 | 949,272 | — | 772,938 | 1,543,274 | 1,257,443 | |||||||||||||||||||||||||||||||||
Excise Tax | — | (8) | — | (9) | — | (9) | — | (9) | — | (9) | — | (6) | — | (7) | — | — | (7) | — | (7) | — | (7) | |||||||||||||||||||||||
Total Funding | $ | 5,512,372 | 928,670 | 1,056,371 | 1,529,218 | 1,367,147 | $ | 7,280,093 | 949,272 | — | 772,938 | 1,543,274 | 1,257,443 | |||||||||||||||||||||||||||||||
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| 1. | Mr. Boivin retired from employment on December 31, 2013. For disclosure purposes, his calculations are described in the Severance Projection in the Case of Non-Change in Control, Non-Cause Termination table above and footnote (1) thereto. |
| Assumes annual base salaries for Mr. Garneau, Ms. Longworth and Messrs. |
| Mr. Garneau |
| 4. |
| Assumes immediate vesting of |
| Assumes immediate vesting of a pro rata portion of stock options and RSUs. The number and value of options and RSUs that would vest upon termination is as follows: |
Ms. Longworth: a 2012 STIP award of $405,375; 1,5532,295 options, with a fair value of $10,191$15,867 under FASB ASC 718; 7711,134 RSUs, with a fair market value of $10,732.$18,161.
Mr. Boivin: a 2012 STIP award of $434,331; 1,664Lafave: 1,798 options, with a fair value of $10,919$12,501 under FASB ASC 718; 826889 RSUs, with a fair market value of $11,498.$14,237.
Mr. Laflamme: a 2012 STIP award of $355,776; 1,4142,050 options, with a fair value of $9,372$14,238 under FASB ASC 718; 7021,013 RSUs, with a fair market value of $9,772.$16,224.
Mr. Vachon: a 2012 STIP award of $310,575; 1,2221,778 options, with a fair value of $8,077$12,323 under FASB ASC 718; 607878 RSUs, with a fair market value of $8,449.$14,070.
The number of options and RSUs for which vesting would have been accelerated represents one month ofpro rata vesting of the 2011 and 2012 annual equity awards. Because the secondthird tranche of the emergence equity award vested on December 9, 20122013 pursuant to its regular vesting schedule, and no additional full months elapsed before December 31, 2012,2013, no portion of the emergence equity award would have vested on apro rata basis with respect to Messrs. Lafave, Laflamme and Vachon.
The value of options and RSUs is based on the per-share closing trading price on the NYSE of shares of the Company’s common stock on December 31, 2012,2013, or $13.92,$16.02 and for options, the Black Scholes value used to determine grant size (i.e., $8.36 and $5.39 for the 2011 and 2012 annual option awards, respectively).
| In |
| To the extent Ms. Longworth or Messrs. Boivin, Lafave, Laflamme or Vachon were subject to U.S. taxation in |
The Company may not take a tax deduction for amounts subject to the change in control excise tax under Section 4999 of the Code. However, in the event of a non-cause or good reason termination on December 31, 20122013 following a change in control, no amounts payable to the named executive officers would have been subject to taxation under Section 4999.
The following table includes all our stock-based holdings, as of March 20, 2013,April 3, 2014, of: each of our directors director nominees and named executive officers,officers; our directors director nominees and executive officers as a group,group; and all those known by us to be beneficial owners of more than five percent of our common stock.
Name and Address of Beneficial Holder | Number of Shares of Common Stock Beneficially Owned | Percent of Class (1) | ||||||
Fairfax Financial Holdings Limited | 24,776,520 | (2) | 26.2 | % | ||||
95 Wellington Street West, Suite 800 Toronto, Ontario M5J 2N7 Canada | ||||||||
Steelhead Partners, LLC | 13,082,608 | (3) | 13.8 | % | ||||
333 108th Avenue NE, Suite 2010 Bellevue, Washington 98004 | ||||||||
Donald Smith & Co., Inc. | 9,732,528 | (5) | 10.3 | % | ||||
152 West 57th Street New York, New York 10019 | ||||||||
The Vanguard Group | 5,275,667 | 5.6 | % | |||||
100 Vanguard Blvd. Malvern, Pennsylvania 19355 | ||||||||
Alain Boivin | 8,853 | (6) | * | |||||
Michel P. Desbiens | — | — | ||||||
Jennifer C. Dolan | — | — | ||||||
Richard B. Evans | 22,251 | (7) | * | |||||
Richard D. Falconer | 12,251 | (7) | * | |||||
Richard Garneau | 4,651 | (8) | * | |||||
Jeffrey A. Hearn | 12,251 | (7) | * | |||||
Pierre Laberge | 9,057 | (9) | * | |||||
John Lafave | 13,488 | (10) | * | |||||
Yves Laflamme | 21,092 | (11) | * | |||||
Jo-Ann Longworth | 8,263 | (12) | * | |||||
Bradley P. Martin | 3,290 | (13) | * | |||||
Alain Rhéaume | 12,251 | (7) | * | |||||
Michael S. Rousseau | 12,251 | (7) | * | |||||
Jacques P. Vachon | 20,482 | (14) | * | |||||
David H. Wilkins | 12,251 | (7) | * | |||||
Directors (including nominees) and executive officers as a group (16 persons) | 172,682 | * | * | |||||
Name and Address of Beneficial Holder | Number of Shares of Common Stock Beneficially Owned | Percent of Class(1) | ||||||
Fairfax Financial Holdings Limited 95 Wellington Street West, Suite 800 Toronto, Ontario M5J 2N7 Canada | 29,044,011 | (2) | 30.7 | % | ||||
Steelhead Partners, LLC 333 108th Avenue NE, Suite 2010 Bellevue, Washington 98004 | 12,831,041 | (3) | 13.6 | % | ||||
Donald Smith & Co., Inc. 152 West 57th Street New York, New York 10019 | 9,084,165 | (4) | 9.6 | % | ||||
| Alain Boivin | 33,952 | (5) | * | |||||
| Michel P. Desbiens | 3,803 | (6) | * | |||||
| Jennifer C. Dolan | 3,803 | (6) | * | |||||
| Richard D. Falconer | 21,004 | (7) | * | |||||
| Richard Garneau | 6,977 | (8) | * | |||||
| Jeffrey A. Hearn | 21,004 | (7) | * | |||||
| John Lafave | 14,891 | (9) | * | |||||
| Yves Laflamme | 25,618 | (10) | * | |||||
| Jo-Ann Longworth | 31,689 | (11) | * | |||||
| Bradley P. Martin | 9,717 | (12) | * | |||||
| Alain Rhéaume | 21,004 | (7) | * | |||||
| Michael S. Rousseau | 21,004 | (7) | * | |||||
| Jacques P. Vachon | 45,736 | (13) | * | |||||
| David H. Wilkins | 21,004 | (7) | * | |||||
| Directors (including nominees) and executive officers as a group (16 persons) | 325,514 | * | ||||||
| * | Less than 1% |
| 1. | Based on |
| 2. | Based on a statement of changes in beneficial ownership filed on Form 4 on |
| 3. | Based on an amended Schedule 13G |
| 4. | Based on a Schedule 13G |
| 5. |
| Includes |
| 6. | Includes 3,803 vested RSUs or |
| 7. | Includes |
| 8. | Includes |
| 9. | Includes |
| 10. | Includes |
| 11. | Includes |
| 12. | Represents vested DSUs. |
| 13. | Includes |
Item 1. Vote on the Election of Directors
Composition of the Board
The board fixed the board size at nine members; seveneach of the nine current members areof the board is standing for reelection and two nominees are standing for election, in each case to hold office until the 20142015 annual meeting of stockholders. Richard B. Evans, our current chairman, has determined not to stand for re-election at this year’s annual meeting. Mr. Evans has served on the board of the Company and its predecessors since 2003, and as chair since 2009. The Company extends its deepest gratitude to Mr. Evans for his unwavering support, and his steady and determined guidance.
The board has recommended incumbent director Bradley P. Martin to serve as our new chairman, and Alain Rheaume, also incumbent, as lead director.
Each director nominee has been recommended for election by the human resources and compensation/nominating and governance committee and approved and nominated for election by the board. Each director will hold office until his or her successor has been elected and qualified or until the director’s earlier resignation or removal. Each director nominee has
consented to serve if elected. Should any director nominee be unable to stand for election at the annual meeting, proxies will be voted in favor of such other person, if any, recommended by the human resources and compensation/nominating and governance committee and designated by the board.
Board Recommendation
The board unanimously recommends a vote FOR the election to the board of each of Michel P. Desbiens, Jennifer C. Dolan, Richard D. Falconer, Richard Garneau, Jeffrey A. Hearn, Bradley P. Martin, Alain Rhéaume, Michael S. Rousseau and David H. Wilkins. What follows is biographical information for each nominee and the qualifications considered in nominating each of them to the board.
Nominees
Michel P. Desbiens Age: Director | Mr. Desbiens has
He has been an independent consultant since 2000, advising a number of clients in the forest products industry, during which time he served briefly as Quebecor World Inc.’s chief executive officer (international) and chief executive officer for part of 2002 and 2003. He had been president and chief executive officer of Donohue Inc. since 1994 when it was acquired by Abitibi-Consolidated Inc. (a predecessor entity of ours) in 2000, after which he served briefly as its chairman and a special advisor. Before then, he held a number of executive positions with Donohue Inc., Domtar Inc., Chapelle d’Arblay paper mill and Abitibi-Price Inc. (a predecessor entity of ours). Mr. Desbiens is a mechanical engineer.
Mr. Desbiens presently serves on the board of Rogers Sugar Inc. (Toronto Stock Exchange), and in the last five years has served on the boards of Cascades Inc. (Toronto Stock Exchange), Catalyst Paper Corp. (Toronto Stock Exchange) and Fibrek Inc., a subsidiary (previously on the Toronto Stock Exchange).
Director qualifications:
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• | Management/operating experience — experienced executive officer with, and advisor to, a number of large publicly-held forest products industry companies | |||
Jennifer C. Dolan Age: Director | Ms. Dolan has
She retired from The New York Times Company in 2012 after a 33-year career, the last ten of which she spent as vice president of forest products, where she managed paper procurement and oversaw its equity investments in two paper mills, including as a member of the board of Donohue Malbaie Inc., a joint venture with the Company. Before then, she held a number of executive and senior finance roles. Ms. Dolan is a certified public accountant, and a member of the American Institute of Certified Public Accountants. She serves on no other public company board.
Director qualifications:
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• | Management/operating experience — experienced executive, representing one of the largest consumer of newsprint in North America
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• | Professional services & financial/accounting experience — certified public accountant | |||
Richard D. Falconer Age: Director since: 2010 | Mr. Falconer has served on the Company’s board since we emerged from creditor protection in December of 2010, which we refer to as the “emergence
He was vice chairman and managing director of CIBC World Markets Inc. until he retired in 2010. He joined Wood Gundy (now a division of CIBC World Markets Inc.) in 1970; his previous roles include financial analyst, director of research and co-head of investment banking. He has experience advising companies in the forest products industry.
Mr. Falconer
Director qualifications:
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• | Professional services & financial experience — senior position in Canadian investment banking industry | |||
• | Management/operating experience — former vice chairman and managing director of a large Canadian investment banking firm | |||
Richard Garneau Age: Director since: 2010 | Mr. Garneau has served on the board since June 2010 and has been our president and chief executive officer since January 1, 2011.
He served as president and chief executive officer of Catalyst Paper Corporation from 2007 through 2010 and as vice president of pulp and paper operations with Domtar Inc. from 2005 through 2007. Catalyst Paper filed for creditor protection under theCompanies’ Creditors Arrangement Act (Canada) and Chapter 15 of the U.S. Bankruptcy Code in January of 2012. He also held a variety of roles at Norampac, Copernic.com, Future Electronics, St. Laurent Paperboard, Finlay Forest Industries and Donohue Inc.
He serves on no other public company board of directors.
Director qualifications:
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• | Management/operating experience — experienced chief executive officer and senior executive officer with large publicly-held forest products industry companies | |||
• | Professional services & financial/accounting experience — chartered professional accountant | |||
Jeffrey A. Hearn Age: Director since: 2010 | Mr. Hearn has served on the Company’s board since the emergence date.
He retired from International Paper in April 2009, where he served as project executive with responsibility for implementing the company’s expanded manufacturing and market presence in Brazil. Before this assignment, Mr. Hearn held various other general business management, operations management and technology management positions in the U.S. and Canada, including as head of International Paper’s coated paperboard business. He was president and chief executive officer of Weldwood of Canada from 2000 to 2002, and has also served as chair of the Paperboard Mfg. and Converting Section of the American Forest Products Association and former vice-chair of the Forest Products Association of Canada. He was also Industry CEO representative for the B.C. Forest Products Forest Practices Reform Initiative.
He serves on no other public company board of directors.
Director qualifications:
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• | Management/operating experience — experienced executive officer with large publicly-held forest products industry companies
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• | Politics/government relations — experienced executive officer with trade associations in the forest productions industry | |||
Alain Rhéaume Age: Director since: 2010 | Mr. Rhéaume has served on the Company’s board since the emergence date.
He is founder and a managing partner at Trio Capital Inc. Before then he was executive vice president and president of Fido, a subsidiary of Rogers Wireless Communications Inc., a role he assumed when Microcell Telecommunications Inc. was acquired by Rogers. Mr. Rhéaume was president and chief operating officer and previously served as chief financial officer of Microcell. Previously, Mr. Rhéaume was associate deputy minister of finance from 1987 to 1992 and deputy minister of finance from 1992 to 1996 in the provincial government of Québec.
He currently serves as a director of SNC-Lavalin Group Inc. (Toronto Stock Exchange), the Canadian Public Accountability Board, the Canadian Investors Protection Fund, Boralex Inc. (Toronto Stock Exchange) and Redline Communications Group Inc. (Toronto Stock Exchange). He has served in the last five years on the boards of
Director qualifications:
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• | Politics/government relations and financial/accounting experience — various senior finance positions with the government of the province of Quebec
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• | Management/operating experience — several senior executive positions in the hi-tech industry | |||
Bradley P. Martin Age: Director since: 2012 | Mr. Martin has served on the board since the 2012 annual meeting of
Since March 9, 2012, he has served as vice president for strategic investments with Fairfax Financial Holdings Limited. He had been its vice president and chief operating officer since January 2007, and its corporate secretary since 2002. Before joining Fairfax in 1998, he was a partner with Torys LLP, a leading Canadian business law firm, specializing in mergers and acquisitions and securities
Mr. Martin currently serves as chairman of Ridley Inc. (Toronto Stock Exchange) and
Director qualifications: | |||
• | Professional services & financial experience — former chief operating officer of a Canadian financial services company; former partner with a Toronto-based law firm | |||
• | Management/operating experience — experienced executive officer with large publicly-traded company | |||
Michael S. Rousseau Age: Director since: 2010 | Mr. Rousseau has served on the Company’s board since the emergence date.
He has been executive vice president and chief financial officer of Air Canada since October 2007. He served as president of Hudson’s Bay Company from 2006 to 2007, and as executive vice president and chief financial officer from 2001 to 2006. Prior to Joining Hudson’s Bay Company in 2001, he held senior executive financial positions at other large international corporations, including Moore Corporation in Chicago, Silcorp Limited and the UCS Group (a division of Imasco Limited). | |
Mr. Rousseau currently serves on the board of EnerCare Inc. (Toronto Stock Exchange)
Director qualifications: | ||||
• | Management/operating experience — experienced executive with large publicly-traded companies | |||
• | Professional services & financial/accounting experience — currently chief financial officer with Canada’s largest airline; chartered professional accountant | |||
David H. Wilkins Age: Director since: 2010 | Ambassador Wilkins has served on the Company’s board since the emergence date.
He was nominated by President George W. Bush as United States ambassador to Canada in 2005, a position he held until January 20, 2009. Before this appointment, he practiced law for 34 years in Greenville, South Carolina, and has extensive experience in civil litigation and appellate practice. He was elected to the South Carolina House of Representatives in 1980 and served 25 years, culminating in his service as speaker of the House. He is currently a partner at Nelson Mullins Riley & Scarborough LLP and chairs the Public Policy and International Law practice group.
He serves on no other public company board of directors, but serves on other private company boards.
Director qualifications: | |||
• | Professional services — experienced lawyer in public policy and international law | |||
• | Politics/government relations — former U.S. ambassador to Canada and elected representative | |||
Item 2. Vote on the Ratification of the Appointment of PricewaterhouseCoopers LLP
The audit committee appointed PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2013.2014. Our organizational documents do not require that our stockholders ratify the appointment of the independent registered public accounting firm, but we do so because we believe it is a matter of good corporate practice. If the stockholders do not ratify the appointment, the audit committee will reconsider whether to retain PwC, but still may retain them. Even if the appointment is ratified, the audit committee may change, in its discretion, the appointment at any time if it determines that it would be in the best interests of our Company and our stockholders to do so.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
The audit committee’s policy is to pre-approve all audit and non-audit services performed by the Company’s independent registered public accounting firm, including audit-related, tax and other services. The audit committee pre-approved all audit and permissible non-audit services provided by PwC in 2012.2013.
The Company’s chief financial officer, chief accounting officer (or another officer designated by the board) and the independent registered public accounting firm must submit to the audit committee a request to provide any service that requires pre-approval. Each request must include a statement as to whether the independent registered public accounting firm and the submitting officer view the provision of the requested services as consistent with the SEC’s rules on auditor independence. The request must be sufficiently detailed to enable the audit committee to precisely
identify the services requested. The audit committee may delegate pre-approval authority to its chair or one or more other committee members, but not to management. Any committee member with delegated authority must report all pre-approval decisions to the audit committee at its next scheduled meeting.
Other Information
A representative of PricewaterhouseCoopers LLP is expected to be present at the annual meeting, will have the opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions from stockholders.
Audit Fees and All Other Fees
Fees paid. The following table contains certain information on the fees paid to PwC for professional services rendered in the years ended December 31, 2013, and 2012, and 2011.converted from Canadian to U.S. dollars at the average exchange rate in the applicable year.
Fee category | 2012 fees | 2011 fees | 2013 fees | 2012 fees | ||||||||||
| (in thousands) | (in thousands) | |||||||||||||
Audit fees | $3,292 | $ | 3,909 | $ | 3,286 | $ | 3,439 | |||||||
Audit-related fees | 163 | 69 | 66 | 277 | ||||||||||
Tax fees | 20 | 18 | 25 | 24 | ||||||||||
All other fees | 80 | 81 | 50 | 90 | ||||||||||
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Total fees | $3,555 | $ | 4,077 | $ | 3,427 | $ | 3,830 | |||||||
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| • | Audit fees. Audit fees consist of fees billed for professional services rendered |
| • | Audit-related fees. Audit-related fees consist primarily of fees for other attestation |
| • | Tax fees. Tax fees in each of |
| • | All other fees. All other fees in each of |
Board Recommendation
The board unanimously recommends a vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 20132014 fiscal year. Unless a contrary choice is specified, proxies solicited by the board will be voted FOR ratification of the appointment.
Item 3. Advisory vote to approve executive compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the “Dodd-Frank Act,” requires that we give our stockholders the ability to cast a non-binding advisory vote on the compensation of our named executive officers. This vote is commonly referred to as the “say-on-pay”“say-on-pay” vote. At our 2011 annual meeting, a
majority of stockholders voted, consistent with the recommendation of the Company’s board of directors, to hold a stockholder advisory vote on a resolution to approve the compensation of the Company’s named executive officers annually. Accordingly, we intend to continue to provide annual say-on-pay votes.
The compensation of our executive officers is based on a design that ties a substantial percentage of an executive’s compensation to the attainment of financial and other performance measures that, the board believes, serves to promote the creation of long-term stockholder value and to position the Company for long-term
success. As described more fully in theCompensation Discussion and Analysis section of this proxy statement, the mix of fixed and performance-based compensation and short-term and long-term incentive awards is designed to enable the Company to attract and retain top quality executive talent while, at the same time, creating a close relationship between performance and compensation. Our human resources and compensation/nominating and governance committee and the board believe that the design of the program and the compensation awarded to our named executive officers thereunder fulfill this objective.
We are asking for stockholder approval of the compensation of our named executive officers, as we’ve disclosed in this proxy statement in accordance with SEC rules. The compensation disclosures are contained under the headingCompensation Discussion and Analysis, the compensation tables and the narrative discussion accompanying the compensation tables. This vote is not intended to address any specific item of compensation but rather the overall compensation of our named executive officers and the policies and practices described in this proxy statement.
Accordingly, the board is requesting your approval of the following non-binding resolution:
RESOLVED, that the Company’s stockholders approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers, as disclosed in the proxy statement for this annual meeting pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 20122013 Summary Compensation Table, the other related tables and the accompanying narrative.
This vote is advisory and therefore not binding on the Company, our human resources and compensation/nominating and governance committee, or the board. Nevertheless, the board and human resources and compensation/nominating and governance committee value the opinions of our stockholders and will review the voting results in connection with their ongoing evaluation of the Company’s compensation programs.
Board Recommendation
The board unanimously recommends a vote FOR the approval of the Company’s executive compensation. Unless a contrary choice is specified, proxies solicited by the board will be voted FOR this proposal.
The audit committee of the board of directors oversees our financial reporting, internal controls and audit function process on behalf of the board. The Company’s management is responsible for the financial statements and for maintaining effective internal control over financial reporting.
In carrying out its oversight responsibilities, the audit committee has reviewed and discussed with management and PricewaterhouseCoopers LLP the audited financial statements for the year ended December 31, 2012.2013. The audit committee has discussed with PricewaterhouseCoopers LLP the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted byapplicable requirements of the Public Company Accounting Oversight Board, in Rule 3200T.or the “PCAOB.” The audit committee has received from PricewaterhouseCoopers LLP the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent accountant’sauditors’ communications with the audit committee concerning independence, and the audit committee has discussed with PricewaterhouseCoopers LLP the firm’s independence.
Based on the review and discussions referred to above, the audit committee recommended to the board that the audited financial statements for the year ended December 31, 2012,2013, be included in the Company’s 20122013 annual report on Form 10-K for filing with the SEC.
Jennifer C. Dolan
Richard D. Falconer
Alain Rhéaume (chair)
Michael S. Rousseau
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and 10% stockholders to file reports of holdings and transactions in common stock with the SEC. Those persons are also required to furnish the Company with copies of all section 16(a) reports they file, which we post on our website at www.resolutefp.com/investors/sec_filings.
As a practical matter, the Company assists its directors and officers by monitoring transactions and completing and filing section 16 reports on their behalf. BasedSubject to exceptions described below, based on a review of the copies of such reports and on written representations from the Company’s directors and executive officers, the Company believes that all section 16(a) filing requirements applicable to the Company’s directors, executive officers and stockholders were complied with during the most recent fiscal year.
Exceptions:
Form 4 filings were not timely filed for units withheld in respect of taxes on the settlement of restricted stock units for: Mr. Boivin (one form and transaction in 2012; two forms and transactions in 2013); Mr. Laberge (one form and transaction in 2011; two forms and transactions in 2012; three forms and transactions in 2013); Mr. Lafave (one form and transaction in 2011; two forms and transactions in 2012; three forms and transactions in 2013); Mr. Laflamme (one form and transaction in 2011; two forms and transactions in 2012; three forms and transactions in 2013); Ms. Longworth (one form and transaction in 2012; two forms and transactions in 2013); Ms. Travaglini, our chief accounting officer (one form and transaction in 2012; two forms and transactions in 2013); and Mr. Vachon (one form and transaction in 2011; two forms and transactions in 2012; three forms and transactions in 2013).
Based on a Form 4 filed on March 11, 2014, by Steelhead Partners, LLC, jointly with James Michael Johnston and Brian Katz Klein, as well as a separate Form 4 filed by Steelhead Navigator Master, L.P., the reporting persons failed to timely file reports in connection with one transaction in 2013 and three transactions in 2014.
COMPENSATION COMMITTEE INTERLOCKSAND INSIDER PARTICIPATION
Except as described in the following paragraph, none of the individuals who served as members of the human resources and compensation/nominating and governance committee during 20122013 was an officer or employee of the Company during 20122013 or at any time in the past nor had reportable transactions with the Company.
Bradley P. Martin, a member of the member of the human resources and compensation/nominating and governance committee during 2012,for a part of 2013, is an executive officer of Fairfax. See “Related Party Transactions” above for a description of certain transactions involving Fairfax during 2012.
There is no other matter that the board currently intends to present, or has reason to believe others will present, at the annual meeting. If other matters come before the meeting, the persons named in the accompanying form of proxy will vote on them in accordance with their best judgment.
STOCKHOLDER PPROPOSALSROPOSALSFOR INCLUSIONIN NEXT YEAR’S PROXY
To be considered for inclusion in next year’s proxy statement, stockholder proposals submitted in accordance with the SEC’s Rule 14a-8 must be received at our principal executive offices no later than the close of business on November 22, 2013.December 5, 2014. Proposals should be addressed to the corporate secretary, Resolute Forest Products Inc., 111 Duke Street, Suite 5000, Montréal, Québec, Canada H3C 2M1.
STOCKHOLDER PROPOSALSFOR 20142015 ANNUAL MEETING
Our by-laws require that any stockholder proposal that is not submitted for inclusion in next year’s proxy statement under SEC Rule 14a-8 but instead is sought to be presented directly at the 20142015 annual meeting be made by way of a “notice of business,” as further described in the by-laws. To be timely, the notice of business must be delivered personally or mailed to, and received at, our principal executive offices, addressed to the corporate secretary, by no earlier than 90 days and no later than 60 days before the first anniversary of the date of the prior year’s annual meeting of stockholders. Accordingly, a notice of business must be received no earlier than February 15, 201422, 2015 and no later than March 17, 2014.24, 2015. The notice of business should be addressed to the corporate secretary, Resolute Forest Products, 111 Duke Street, Suite 5000, Montréal, Québec, Canada H3C 2M1.
We will furnish, without charge to a stockholder, a copy of the annual report on Form 10-K (including the financial statements and financial schedules incorporated by reference therein but not including the exhibits, which are available upon payment of a reasonable fee) for the year ended December 31, 2012,2013, filed with the SEC. A copy of suchthe report maycan be obtained upon written request to the Company at Corporate Secretary, Resolute Forest Products Inc., 111 Duke Street, Suite 5000, Montréal, Québec, Canada H3C 2M1. The annual report on Form 10-K and all of the Company’s filings with the SEC can be accessed through our website atwww.resolutefp.com/investors/sec_filings.
IMPORTANT ANNUAL MEETING INFORMATION 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 1:00 a.m., Central Time, on May 16, 2013.23, 2014. Vote by Internet Go to www.envisionreports.com/RFP 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 this example. Please do not write outside the designated areas. Annual Meeting Proxy Card 1234 5678 9012 345q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals — The board recommends a vote FOR all nominees and FOR Proposals 2 and 3. 01 - Michel P. Desbiens 02 - Jennifer C. Dolan 03 - Richard D. Falconer + 1. Election of directors: For Withhold 01 - Michel P. DesbiensFor Withhold For Withhold 04 - Richard Garneau 07 - Alain Rhéaume For Withhold 02 - Jennifer C. Dolan 05 - Jeffrey A. Hearn 08 - Michael Rousseau For Withhold 03 - Richard D. Falconer 06 - Bradley P. Martin 07 - Alain Rhéaume 08 - Michael Rousseau 09 - David H. Wilkins 2. Ratification of PricewaterhouseCoopers LLP appointment For Against Abstain 3. Advisory vote to approve executive compensation (“say-on-pay”) For Against Abstain B Non-Voting Items Change of Address — Please print your new address below. Comments — Please print your comments below. Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. C 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. 1UP X C 1234567890 J N T 1612761 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 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND 01MAVA
q IF 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 — RESOLUTE FOREST PRODUCTS INC. Resolute Forest Products Inc. 111 Duke Street, Suite 5000 Montréal, Québec Canada H3C 2M1 Proxy solicited by Resolute Forest Products Inc. on behalf of the board of directors for the 20132014 annual meeting of stockholders to be held on May 16, 2013.23, 2014. Richard Garneau and Jacques P. Vachon (the “proxies”), or either of them, each with the full power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers that the undersigned would possess if personally present at the 20132014 annual meeting of stockholders of Resolute Forest Products Inc. to be held on May 16, 201323, 2014 and at any postponement or adjournment thereof. The proxies shall vote subject to the direction indicated on the reverse side of this proxy card. If no such direction is indicated, the proxies will vote as the board of directors recommends. The proxies are authorized to vote in their discretion upon other business as may properly come before the meeting and any adjournment or postponement thereof. The board of directors recommends a vote FOR all the nominees listed, FOR the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the 20132014 fiscal year and FOR approval of the Company’s executive compensation. (Items to be voted appear on reverse side.)