EXHIBIT 99.1
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[LOGO - WESTERN OIL SANDS]
INFORMATION CIRCULAR
THIS INFORMATION CIRCULAR IS FURNISHED IN CONNECTION WITH THE
SOLICITATION OF PROXIES BY THE MANAGEMENT OF WESTERN OIL SANDS INC. (the
"Corporation" or "Western") for use at the Annual General Meeting of the holders
of Class A Shares and Class D Preferred Shares, Series A (collectively, the
"Shareholders") of the Corporation (the "Meeting") to be held on May 12, 2004 at
3:30 p.m. (Calgary time) at the place and for the purposes set out in the
accompanying Notice of Meeting. As a Shareholder you are cordially invited to be
present at the Meeting. To ensure that you will be represented at the Meeting in
the event that you are a REGISTERED SHAREHOLDER and unable to attend personally,
you are requested to date, complete and sign the accompanying instrument of
proxy enclosed herewith and return the same to Valiant Trust Company, 510, 550 -
6th Avenue S.W., Calgary, Alberta, T2P 0S2. If you are an UNREGISTERED
SHAREHOLDER and receive these materials through your broker or through another
intermediary, please complete and return the instrument or proxy in accordance
with the instructions provided therein.
The solicitation of proxies is intended to be primarily by mail but may
also be made by telephone, facsimile transmission or other electronic means of
communication or in person by the directors, officers and employees of the
Corporation. The cost of such solicitation will be borne by the Corporation.
Except where otherwise stated, the information contained herein is given as of
the 16th day of March, 2004.
GENERAL
APPOINTMENT AND REVOCATION OF PROXIES
The individuals named in the accompanying form of proxy are officers
and/or directors of the Corporation. A SHAREHOLDER WISHING TO APPOINT SOME OTHER
PERSON (WHO NEED NOT BE A SHAREHOLDER) TO REPRESENT SUCH SHAREHOLDER AT THE
MEETING HAS THE RIGHT TO DO SO, EITHER BY INSERTING SUCH PERSON'S NAME IN THE
BLANK SPACE PROVIDED IN THE FORM OF PROXY OR BY COMPLETING ANOTHER FORM OF
PROXY. Such a Shareholder should notify the nominee of the appointment, obtain
the nominee's consent to act as proxy and instruct the nominee on how the
Shareholder's shares are to be voted. In any case, the form of proxy should be
dated and executed by the Shareholder or the Shareholder's attorney authorized
in writing, or if the Shareholder is a corporation, under its corporate seal, or
by an officer or attorney thereof duly authorized.
A proxy will not be valid for the Meeting or any adjournment thereof
unless the completed form of proxy is delivered to Valiant Trust Company, 510,
550 - 6th Avenue S.W., Calgary, Alberta, T2P 0S2, not later than forty-eight
(48) hours (excluding Saturdays, Sundays and statutory holidays) prior to the
commencement of the Meeting or any adjournment thereof.
In addition to revocation in any other manner permitted by law, a
Shareholder who has given a proxy may revoke it at any time before it is
exercised, by instrument in writing executed by the Shareholder or by the
Shareholder's attorney authorized in writing and deposited either at the
registered office of the Corporation at any time up to and including the last
business day preceding the day of the Meeting, or any adjournment thereof, at
which the proxy is to be used, or with the Chairman of the Meeting on the day of
the Meeting or any adjournment thereof.
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VOTING OF PROXIES
The persons named in the enclosed form of proxy have indicated their
willingness to represent, as proxyholders, the Shareholders who appoint them.
Each Shareholder may instruct its proxyholder how to vote the Shareholder's
shares by completing the blanks in the form of proxy.
Shares represented by properly executed proxy forms in favour of the
persons designated in the enclosed proxy form will be voted or withheld from
voting on any poll in accordance with the instructions made on the proxy forms
and, if a Shareholder specifies a choice as to any matters to be acted on, such
Shareholder's shares shall be voted accordingly. In the absence of such
instructions, such shares WILL BE VOTED IN FAVOUR OF ALL MATTERS IDENTIFIED IN
THE NOTICE OF MEETING ACCOMPANYING THIS INFORMATION CIRCULAR.
The enclosed form of proxy confers discretionary authority upon the
persons named therein with respect to amendments and variations to matters
identified in the Notice of Meeting and with respect to any other matters which
may properly come before the Meeting. At the time of printing this Information
Circular, the management of the Corporation knows of no such amendments,
variations or other matters to come before the Meeting.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The Corporation's issued and outstanding voting securities as at March
16, 2004 consist of 50,024,021 Class A shares ("Common Shares") and 666,667
Class D Preferred Shares, Series A ("Class D Shares"). Holders of Common Shares
and Class D Shares are entitled to one vote for each share held on all matters
to be considered and acted upon at the Meeting or any adjournment thereof.
The Corporation has set the close of business on April 8, 2004 as the
record date for the Meeting. The Corporation will prepare a list of Shareholders
of record at such time. Holders of Common Shares and Class D Shares of the
Corporation named on that list will be entitled to vote the shares then
registered in their name at the Meeting, except to the extent that (a) the
holder has transferred the ownership of any of the holder's shares after that
date, and (b) the transferee of those shares produces properly endorsed share
certificates, or otherwise establishes that such transferee owns the shares, and
demands at any time before the Meeting that the transferee's name be included in
the list of persons entitled to vote at the Meeting, in which case the
transferee will be entitled to vote such shares at the Meeting or any
adjournment thereof.
To the knowledge of the directors and senior officers of the
Corporation, no person, firm or corporation beneficially owns, directly or
indirectly, or exercises control or direction over, voting securities carrying
more than 10% of the voting rights attached to any class of voting securities of
the Corporation, except as set forth below:
NAME AND MUNICIPALITY OF PERCENTAGE OF VOTING
RESIDENCE VOTING SECURITIES HELD SECURITIES HELD
- --------------------------------- ------------------------------- ----------------------------------
Gardiner Group Capital Limited 800,000 Common Shares and 2.9% (1.6% of Common
Toronto, Ontario 666,667 Class D Shares Shares and 100% of Class D
Shares)
Guardian Capital Inc. 6,240,110 Common Shares 12.5% of Common Shares
Toronto, Ontario
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ADVICE TO BENEFICIAL HOLDERS OF COMMON SHARES AND CLASS D SHARES
THE INFORMATION SET FORTH IN THIS SECTION IS OF SIGNIFICANT IMPORTANCE
TO MANY SHAREHOLDERS OF THE CORPORATION, AS A SUBSTANTIAL NUMBER OF SHAREHOLDERS
DO NOT OWN SHARES IN THEIR OWN NAME. Shareholders who do not hold their shares
in their own name (referred to in this Information Circular as "Beneficial
Shareholders") should note that only proxies deposited by Shareholders whose
names appear on the records of the Corporation as the registered holders of
Common Shares or Class D Shares can be recognized and acted upon at the Meeting.
If Common Shares or Class D Shares are listed in an account statement provided
to a Shareholder by a broker, then in almost all cases those Common Shares or
Class D Shares will not be registered in the Shareholder's name on the records
of the Corporation. Such Common Shares or Class D Shares will more likely be
registered under the names of the Shareholder's broker or an agent of that
broker. In Canada, the vast majority of such shares are registered under the
name of CDS & Co. (the registration name for The Canadian Depositary for
Securities, which acts as nominee for many Canadian brokerage firms). Common
Shares or Class D Shares held by brokers or their agents or nominees can only be
voted (for or against resolutions) upon the instructions of the Beneficial
Shareholder. Without specific instructions, brokers and their agents and
nominees are prohibited from voting shares for the broker's clients. THEREFORE,
BENEFICIAL SHAREHOLDERS SHOULD ENSURE THAT INSTRUCTIONS RESPECTING THE VOTING OF
THEIR COMMON SHARES AND CLASS D SHARES ARE COMMUNICATED TO THE APPROPRIATE
PERSON.
Applicable regulatory policy requires intermediaries/brokers to seek
voting instructions from Beneficial Shareholders in advance of shareholders'
meetings. Every intermediary/broker has its own mailing procedures and provides
its own return instructions to clients, which should be carefully followed by
Beneficial Shareholders in order to ensure that their Common Shares and Class D
Shares are voted at the Meeting. The form of proxy supplied to a Beneficial
Shareholder by its broker (or the agent of that broker) is similar to the form
of proxy provided to registered Shareholders by the Corporation. However, its
purpose is limited to instructing the registered Shareholder (the broker or
agent of the broker) how to vote on behalf of the Beneficial Shareholder. The
majority of brokers now delegate responsibility for obtaining instructions from
clients to Independent Investor Communications Corporation ("IICC"). IICC
typically asks Beneficial Shareholders to return proxy forms to IICC. IICC then
tabulates the results of all instructions received and provides appropriate
instructions respecting voting of shares to be represented at the Meeting. A
BENEFICIAL SHAREHOLDER RECEIVING AN IICC PROXY CANNOT USE THAT PROXY TO VOTE
COMMON SHARES OR CLASS D SHARES DIRECTLY AT THE MEETING - THE IICC PROXY MUST BE
RETURNED TO IICC WELL IN ADVANCE OF THE MEETING IN ORDER TO HAVE THE COMMON
SHARES AND CLASS D SHARES VOTED.
Although a Beneficial Shareholder may not be recognized directly at the
Meeting for the purposes of voting Common Shares or Class D Shares registered in
the name of the Beneficial Shareholder's broker (or agent of the broker), a
Beneficial Shareholder may attend at the Meeting as proxyholder for the
registered Shareholder and vote the Common Shares and Class D Shares in that
capacity. Beneficial Shareholders who wish to attend at the Meeting and
indirectly vote their Common Shares and Class D Shares as proxyholder for the
registered Shareholder should enter their own names in the blank space on the
instrument of proxy provided to them and return the same to their broker (or the
broker's agent) in accordance with the instructions provided by such broker (or
agent), well in advance of the Meeting.
EXECUTIVE COMPENSATION AND REMUNERATION OF DIRECTORS
EXECUTIVE COMPENSATION
The following table discloses, for the periods indicated, total
compensation received by the following executive officers: (i) the Corporation's
Chief Executive Officer; and (ii) the Corporation's Chief Financial Officer; and
(iii) the remaining executive officer (other than the Chief Executive Officer
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and Chief Financial Officer) whose total salary and bonus exceeded $100,000 in
respect of fiscal 2003 (collectively the "Named Executive Officers"). During
fiscal 2003, the Corporation had three executive officers.
SUMMARY COMPENSATION TABLE
====================================================================================================================================
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------ ------------------------------------
AWARDS PAYOUTS
------------------------- -------
RESTRICTED
SHARES OR
SECURITIES RESTRICTED
OTHER ANNUAL UNDER SHARE LTIP ALL OTHER
NAME AND SALARY BONUS(1) COMPENSATION(2) OPTIONS UNITS(1) PAYOUTS COMPENSATION(3)
PRINCIPAL POSITION YEAR ($) ($) ($) GRANTED (#) ($) ($) ($)
- ------------------ ---- ---------- --------- --------------- ----------- ---------- ------- ---------------
Guy J. Turcotte 2003 450,000 Nil N/A Nil Nil Nil 72,000
President and Chief 2002 450,000(4) Nil N/A 300,000 Nil Nil 17,018
Executive Officer 2001 100,000 Nil N/A Nil Nil Nil Nil
David A. Dyck 2003 235,200 63,857 N/A 22,800 4,345 Nil 18,816
Vice President 2002 210,000 158,800(5) N/A 25,000 Nil Nil 16,800
Finance and Chief 2001 173,250 Nil N/A 15,000 Nil Nil 13,736
Financial Officer
John Frangos(6) 2003 315,000 68,513 N/A 16,500 5,431 Nil 25,200
Executive Vice 2002 300,000 66,000 N/A 30,000 Nil Nil 24,000
President and Chief 2001 280,934 Nil N/A Nil Nil Nil 22,017
Operating Officer
====================================================================================================================================
NOTES:
(1) Represents bonuses and performance share units earned during the
respective year pursuant to the short term incentive plan and medium
term incentive plan, respectively, and paid or awarded, as the case may
be, in the year following. Performance share units vest in equal
amounts over a three year term and are subject to the satisfaction of
certain performance criteria as described under "Report on Executive
Compensation - Medium Term Incentive Plan". Performance share units
reflected represent the number of Common Shares that will be issued,
assuming total shareholder return in the middle 50%.
(2) The aggregate amount of such compensation is no greater than the lesser
of $50,000 and 10% of the total of the annual salary and bonus of the
Named Executive Officer for the financial year specified.
(3) Represents contributions by the Corporation to defined contribution
plans. Amounts reflected for Mr. Turcotte in respect of 2003, include
$36,000 representing a top-up contribution in respect of prior years.
(4) Effective January 1, 2002, the compensation of the Chief Executive
Officer was renegotiated and base salary was adjusted to market levels
of comparable Canadian oil and gas corporations.
(5) The bonus granted to Mr. Dyck includes $100,000 which was a special
Board grant which was over and above the established compensation
programs of the Corporation.
(6) Effective January 1, 2002, Mr. Frangos was appointed Executive Vice
President and Chief Operating Officer.
STOCK OPTION PLAN
The Corporation has established a Stock Option Plan (the "Plan") for
the issuance of options to purchase Common Shares to directors, officers and
employees of the Corporation and its subsidiaries and persons providing on-going
services to the Corporation and its subsidiaries. The maximum number of Common
Shares currently reserved for issuance pursuant to the Plan is 3,000,000 (6.0%
of the issued and outstanding Common Shares). At the time a stock option is
granted, the Board of Directors (the "Board") determines the number of Common
Shares to be purchased under the option, the date when the option is to become
effective and, subject to the provisions of the Plan, all other terms and
conditions of the stock option. The exercise price of each stock option is
determined in the discretion of the Board, in accordance with the rules of the
Toronto Stock Exchange (the "TSX"). The options granted under the Plan have a
maximum term of ten years from the date of grant and vest as determined by the
Compensation Committee. Generally, options granted have been determined to
expire five years from the
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date of vesting. Stock options generally vest over four years in equal annual
amounts of 25% of the total stock option grant.
OPTIONS GRANTED DURING THE YEAR ENDED DECEMBER 31, 2003
The following table sets forth the options granted to the Named
Executive Officers of the Corporation in fiscal 2003.
=====================================================================================================================
SECURITIES % OF TOTAL MARKET VALUE OF
UNDER OPTIONS SECURITIES
OPTIONS GRANTED TO EXERCISE OR UNDERLYING OPTIONS
GRANTED(1) EMPLOYEES IN BASE PRICE ON THE DATE OF GRANT EXPIRATION
NAME (#) FINANCIAL YEAR ($/SECURITY) ($/SECURITY) DATE(2)
- ---------------------------------------------------------------------------------------------------------------------
Guy J. Turcotte Nil Nil N/A N/A Not applicable
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David A. Dyck 22,800 9.8 24.40 24.40 Initial Expiry Date:
March 13, 2009
Final Expiry Date:
March 13, 2012
- ---------------------------------------------------------------------------------------------------------------------
John Frangos 16,500 7.1 24.40 24.40 Initial Expiry Date:
March 13, 2009
Final Expiry Date:
March 13, 2012
=====================================================================================================================
NOTES:
(1) Represents stock options to acquire Common Shares.
(2) Stock options generally vest over four years in equal annual amounts of
25% of the total outstanding stock option. The stock options generally
expire five years from the date of vesting.
AGGREGATE OPTION EXERCISES DURING THE YEAR ENDED DECEMBER 31, 2003 AND OPTION
VALUES AS AT DECEMBER 31, 2003
The following table sets forth all options exercised during the
financial year ended December 31, 2003 and the financial year-end values for
options granted to the Named Executive Officers of the Corporation.
=====================================================================================================================
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
SECURITIES FY-END FY-END
ACQUIRED ON AGGREGATE VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE(1)(2)
NAME (#) ($) (#) ($)
- ---------------------------------------------------------------------------------------------------------------------
Guy J. Turcotte Nil Nil 60,000/240,000 330,000/1,320,000
- ---------------------------------------------------------------------------------------------------------------------
David A. Dyck Nil Nil 58,350/64,050 1,094,125/649,155
- ---------------------------------------------------------------------------------------------------------------------
John Frangos Nil Nil 157,500/39,000 3,191,250/207,900
=====================================================================================================================
NOTES:
(1) The closing price of the Corporation's shares on the TSX on December
31, 2003 was $29.50.
(2) Calculated by multiplying the number of Common Shares purchasable on
exercise of the options by the difference between the market price of
the Common Shares at December 31, 2003 and the exercise price of the
options.
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COMPOSITION OF THE COMPENSATION COMMITTEE
During the fiscal year ended December 31, 2003, the Compensation
Committee of the Board of the Corporation was comprised of Mr. Geoffrey A.
Cumming, Chairman, Mr. Glen F. Andrews and Mr. Robert G. Puchniak. None of
Messrs. Cumming, Andrews and Puchniak is or was an officer, employee or former
officer or employee of the Corporation or any of its affiliates or has any
relationship with the Corporation except as a director and shareholder of the
Corporation or was indebted to the Corporation during the fiscal year ended
December 31, 2003.
REPORT ON EXECUTIVE COMPENSATION
The Corporation's executive compensation program is administered by the
Compensation Committee (the "Committee"). As part of its mandate, the Committee
reviews and recommends to the Board the remuneration of the Corporation's
executive officers, including the Named Executive Officers identified in the
Summary Compensation Table. The Committee is also responsible for reviewing the
Corporation's compensation policies and guidelines generally. The Committee met
twice during the fiscal year ended December 31, 2003.
The Corporation's compensation program has four components: (i) base
salary and benefits; (ii) short term incentives; (iii) medium term incentives
through the award of performance share units under the Performance Share Unit
Plan; and (iv) long term incentives through the award of incentive stock options
under the Stock Option Plan of the Corporation. The Corporation's executive
compensation program reflects the Corporation's philosophy that executive
compensation should:
o be reflective of responsibility and contribution to the achievement of
corporate objectives;
o be competitive with comparable corporations and other entities to
attract and retain qualified and experienced executives; and
o encourage the maximization of shareholder value by making long term
equity incentives a component of compensation.
BASE SALARIES
The Committee considers the Corporation's long-term interests and
financial objectives as well as qualitative aspects such as leadership, level of
responsibility, individual performance, overall corporate performance, years of
relevant experience and salaries paid by comparable corporations and entities in
the determination of base salaries for executive officers. Salaries for the
Named Executive Officers (including the Chief Executive Officer) are reviewed
annually based on corporate and personal performance and on individual levels of
responsibility.
SHORT TERM INCENTIVE PLAN
The Committee established an individual performance bonus to be paid
annually to all employees (including executive officers of the Corporation)
based on a combination of excellent or superior individual performances and
various corporate performance targets being achieved which commenced in 2002 and
continued in 2003. This short term incentive plan was developed to complement
the long-term incentive plan described below. Individual objectives (targets)
are established for each position to provide a measure against actual
performance. In addition, various corporate performance objectives (targets) are
also established and measured against actual performance. These targets include
the relative increase in the share price of the Corporation, production cost
goals, and other measures materially important to the Corporation. Entitlement
under the short-term incentive plan is based on a weighting of both individual
and corporate performance against the stated objectives. Such weightings vary
depending
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on the position of the employee and relative to each employee's ability to
influence corporate results. For executive officers, short term incentive
payments are based equally upon individual objectives and corporate performance
objectives.
MEDIUM TERM INCENTIVE PLAN
Western has adopted a Performance Share Unit Plan. The principal
purposes of the Performance Share Unit Plan are to encourage directors,
officers, employees and consultants of the Corporation to acquire a proprietary
interest in the Corporation, thereby aligning their interests with the interests
of the shareholders; to focus management of the Corporation on operating and
financial performance and long-term shareholder return by providing an increased
incentive to contribute to the Corporation's future growth and profitability;
and to strengthen the ability of the Corporation to attract and retain
exceptionally qualified directors, officers, employees and consultants. The
Performance Share Unit Plan is administered by the Committee in accordance with
its provisions.
Awards under the Performance Share Unit Plan ("Unit Awards") will be in
the form of units, with each unit entitling the holder to receive one Common
Share of the Corporation for no additional consideration in the manner and
subject to the restrictions set forth in the Performance Share Unit Plan. Unit
Awards will be made in such frequency and on such dates as the Committee
determines to be appropriate. The number of units awarded to any individual
pursuant to a Unit Award will be determined by the Committee taking into account
such factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan, including corporate performance
measures, the duties and seniority of the individual, and contributions and
potential contributions of the individual to the success of the Corporation.
Each Unit Award will vest at a rate of 1/3 of the units awarded thereunder
annually over a three year period, conditional on the Corporation achieving an
acceptable total shareholder return against a peer group. If total shareholder
return at a particular vesting date is in the bottom 25% of the peer group, none
of the units otherwise eligible to vest with respect to such Unit Award will
vest. If total shareholder return at a particular vesting date is in the top 25%
of the peer group, 150% of the units eligible to vest on such date will vest. If
total shareholder return at a particular vesting date is in the middle 50% of
the peer group, all of the units eligible to vest on such date will vest.
LONG TERM INCENTIVE PLAN (STOCK OPTIONS)
Under the Stock Option Plan, options to purchase Common Shares are
granted to executives and other selected employees to link a part of their
compensation to the interests of the shareholders of the Corporation. The
Corporation believes that the Plan encourages the achievement of long-term goals
of the Corporation thus maximizing shareholder value. Options are granted based
on corporate performance as well as achieving important operational targets.
Recommendations are made to the Board with respect to the granting of stock
options. The Committee considers the number of options previously granted to
executive officers in its determination to recommend further grants of options.
Options are granted based on the terms established under the Plan.
During fiscal 2003, stock options to acquire 233,000 Common Shares at
prices ranging from $24.40 to $28.22 per share were awarded to 23 eligible
optionees, including two of the Named Executive Officers.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of the Chief Executive Officer is determined by the
Compensation Committee on the same basis as the other Named Executive Officers
and consists of base salary and benefits, short term incentives, medium term
incentives and long term incentives. During fiscal 2003, no options or
performance share units were granted to the Chief Executive Officer.
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Submitted by the Compensation Committee:
Geoffrey A. Cumming, Chairman
Glen F. Andrews
Robert G. Puchniak
PERFORMANCE GRAPH
The following graph compares the yearly change in the cumulative total
shareholder return of a $100 investment made on December 31, 2000 in the
Corporation's Common Shares with the cumulative total return of the S&P/TSX
Composite Total Return Index and the S&P Energy Total Return Index assuming the
reinvestment of dividends, where applicable, for the comparable period.
[GRAPHIC OMITTED]
[LINE GRAPH]
================================================================================
S&P/TSX COMPOSITE
WESTERN INDEX(1) S&P ENERGY INDEX(2)
- --------------------------------------------------------------------------------
December 31, 2000 $100 $100 $100
December 31, 2001 $133.96 $87.43 $106.91
December 31, 2002 $170.18 $76.55 $121.60
December 31, 2003 $207.02 $97.02 $151.96
================================================================================
NOTES:
(1) Formerly the TSE 300 Composite Total Return Index.
(2) Formerly the TSE Oil and Gas Producers Total Return Index.
COMPENSATION OF DIRECTORS
During fiscal 2003, directors of the Corporation were paid an annual
retainer of $8,000, together with Board meeting fees of $1,000 for each meeting
attended in person and $350 for each meeting attended by conference call.
Committee meeting fees of $600 were paid for each meeting attended in person and
$250 for each meeting attended by conference call. The Corporation believes that
its current fee levels reflect the expertise and time commitment of its
directors. Total compensation paid to directors during fiscal 2003 was $259,300.
In addition, directors of the Corporation have been entitled to participate in
Western's stock option incentive plan. During the fiscal year ended December 31,
2003, 25,000 options to purchase Common Shares were granted to each of the two
newly appointed directors, Oyvind Hushovd and John Lill. These options were
granted at a market price of $28.22 pursuant to the Plan. No other options were
granted to directors of the Corporation during fiscal 2003. Directors are also
eligible to participate in the Performance Share Unit Plan referred to above.
Allowing directors to
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participate in the Plan will enable their compensation to be tied, in part, to
the performance and contribution of directors as measured against criteria set
forth in the mandates of the Board and its various committees. Where their
employment so permits, directors are required to hold a number of Common Shares
in the Corporation which is equivalent to five times their annual retainer. This
position can be accumulated over a period of five years.
EQUITY PLAN COMPENSATION
The Stock Option Plan constitutes the sole equity compensation plan
adopted by the Corporation. The following table details the securities
authorized for issuance under such Plan as at December 31, 2003. For a
description of Stock Option Plan, see "Executive Compensation and Remuneration
of Directors - Stock Option Plan".
======================================================================================================================
NUMBER OF SECURITIES TO WEIGHT OR AVERAGE EXERCISE NUMBER OF SECURITIES
BE ISSUED UPON EXERCISE PRICE OF OUTSTANDING REMAINING AVAILABLE FOR
OF OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND FUTURE ISSUANCE UNDER EQUITY
PLAN CATEGORY WARRANTS, RIGHTS RIGHTS COMPENSATION PLANS
- -----------------------------------------------------------------------------------------------------------------------
Equity compensation plans 1,344,700 $17.25 1,263,000
approved by security holders
- -----------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders Nil N/A Nil
- -----------------------------------------------------------------------------------------------------------------------
Total: 1,344,700 $17.25 1,263,000
======================================================================================================================
While the Performance Share Unit Plan contemplates the delivery of
Common Shares to the participants upon the satisfaction of certain performance
criteria, these Common Shares will be purchased in the market to satisfy this
obligation.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
Management of the Corporation is not aware of any material interest,
direct or indirect, of any director or executive officer of the Corporation, any
person beneficially owning, directly or indirectly, more than 10% of the
Corporation's voting securities, or any associate or affiliate of such person in
any transaction within the last fiscal year or in any proposed transaction which
in either case has materially affected or will materially affect the Corporation
or its subsidiaries.
CORPORATE GOVERNANCE
Western's Board is committed to a high standard of corporate governance
practices. The Board believes that this commitment is not only in the best
interest of its shareholders but that it also promotes effective decision making
at the Board level. The Board is of the view that its approach to corporate
governance is appropriate and complies with the objectives and guidelines
relating to corporate governance adopted by the TSX. These guidelines, together
with a brief discussion of the Corporation's compliance therewith, are set forth
in Schedule "A" to this Information Circular. In addition, the Board monitors
and considers for implementation by Western the corporate governance standards
which are proposed by various Canadian regulatory authorities or which are
published by various non-regulatory organizations in Canada.
MANDATE OF THE BOARD
The Board has responsibility for the stewardship of the Corporation. In
carrying out this mandate, the Board meets regularly and a broad range of
matters are discussed and reviewed for approval. These matters include overall
corporate plans and strategies, budgets, internal controls and management
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information systems, risk management as well as interim and annual financial and
operating results. The Board is also responsible for the approval of all major
transactions, including equity issuances as well as for the Corporation's debt
and borrowing policies. The Board strives to ensure that actions taken by the
Corporation correspond closely with the objectives of its shareholders. The
Board meets at least once annually to review in depth the Corporation's
strategic plan and it reviews the Corporation's resources which are required to
carry out the Corporation's growth strategy and to achieve its objectives. The
Board met eight times in 2003, with an average attendance record for the
independent directors of 90%. All directors had an attendance record at Board
meetings of 75% or more.
The Chairman of the Board is an unrelated director. The Chairman of the
Board is charged with ensuring that the Board carries out its responsibilities
and that these responsibilities are clearly understood by all of its members.
The Chairman also ensures that the Board can function independently of
management, that the necessary resources and procedures are available or in
place to support its responsibilities and that the appropriate functions are
delegated to the relevant committees. The Chairman is responsible for overseeing
and setting the Board agendas, for the quality of information sent to directors
and for the in camera sessions held among the independent directors at each
Board meeting. The Chairman is also responsible for assuring a process is in
place for an annual performance review of the Chief Executive Officer which is
conducted by the Board and senior management succession planning matters.
COMPOSITION OF THE BOARD
The Board currently consists of ten directors who provide a wide
diversity of business experience. Two of the ten directors were added to the
Board in December 2003. Nine of the board members are independent of management
and are unrelated directors, as such terms are defined by the guidelines of the
Toronto Stock Exchange. Each of the unrelated directors is free from any
business or other interest or relationship which could reasonably be perceived
to materially interfere with the director's ability to act with a view to the
best interest of the Corporation, other than interests and relationships which
arise solely as a result of shareholdings. The members of the Board have diverse
backgrounds and expertise, and were selected in the belief that the Corporation
benefits materially from such a broad range of experience and talent.
BOARD COMMITTEES AND THEIR MANDATES
The Board has four committees. The committees are: Audit Committee,
Compensation Committee, Corporate Governance Committee and the Health, Safety
and Environment Committee. Each committee (other than the Health, Safety and
Environment Committee) has three members who are unrelated directors. The
Health, Safety and Environmental Committee has four members that are unrelated
directors.
AUDIT COMMITTEE
CHAIR: Robert G. Puchniak
MEMBERS: Brian F. MacNeill, Mac H. Van Wielingen
The Audit Committee reviews Western's interim unaudited consolidated
financial statements and annual audited consolidated financial statements and
certain corporate disclosure documents including the annual information form,
management's discussion and analysis, annual and interim earnings press
releases, offering documents including all prospectuses and other offering
memoranda before they are approved by the Board. The Committee reviews and makes
a recommendation to the Board in respect of the appointment and compensation of
the external auditor and it monitors accounting, financial reporting, control
and audit functions. The Audit Committee meets to discuss and review the audit
plans of external auditors and it is directly responsible for overseeing the
work of the external auditor with respect to the preparing or issuing of the
auditor's report or the performance of other audit, review or attest services,
-11-
including the resolution of disagreements between management and the external
auditor regarding financial reporting. The Committee questions the external
auditor independently of management and reviews a written statement of its
independence based on the criteria found in the recommendations of the Canadian
Institute of Chartered Accountants. The Committee must be satisfied that
adequate procedures are in place for the review of the Corporation's public
disclosure of financial information extracted or derived from its financial
statements and it periodically assesses the adequacy of those procedures. The
Audit Committee must approve or pre-approve, as applicable, any non-audit
services to be provided to the Corporation by the external auditor. In addition,
it reviews and reports to the Board on Western's risk management policies and
procedures and reviews the internal control procedures to determine their
effectiveness and to ensure compliance with Western's policies and avoidance of
conflicts of interest. The Committee has established procedures for dealing with
complaints or confidential submissions which come to its attention with respect
to accounting, internal accounting controls or auditing matters.
The Audit Committee is also charged with reviewing the report of the
independent qualified reserves evaluator relating to the Corporation's reserves
and resources. The Committee meets independently of management with the
independent qualified reserves evaluator to review the evaluation report, the
corporate summary of the reserves and future net revenues of the oil sands
properties and other related matters. In addition, it reviews the Corporation's
relationship with the independent consulting firm and makes a recommendation to
the Board in respect of the appointment of the qualified reserves evaluator.
The Committee met four times in 2003.
COMPENSATION COMMITTEE
CHAIR: John W. Lill
MEMBERS: Geoffrey A. Cumming, Glen F. Andrews
The Compensation Committee reviews succession plans for key management
positions within the Corporation, human resource policies and plans, the
performance and development of the Chief Executive Officer and other senior
officers of the Corporation. The Committee makes recommendations to the Board
with respect to the salary and other remuneration to be awarded to senior
executive officers of Western. It also makes recommendations to the Board in
respect of all other compensation matters including long, medium and short term
incentives such as bonuses, stock option and performance share unit plans and
other benefits and is responsible for developing these programs. The Committee
is responsible for ensuring that the Corporation's compensation is linked to
meaningful and measurable performance targets. See "Report on Executive
Compensation".
The committee met twice in 2003.
CORPORATE GOVERNANCE COMMITTEE
CHAIR: Mac H. Van Wielingen
MEMBERS: Geoffrey A. Cumming, Brian F. MacNeill
The Corporate Governance Committee's mandate is to annually assess the
effectiveness of the Board as a whole, the various other committees as well as
individual directors, with particular focus on the Chairman of the Board and the
Chairs of the various committees, all in accordance with the standards
established by the Board. Such assessments consist of a confidential peer-review
survey and performance evaluations. The Governance Committee also assesses the
Corporation's approach to corporate governance and monitors the relationship
between management and the Board. It is also mandated to undertake those
initiatives as are necessary to maintain a high standard of corporate governance
practices and ensuring ongoing compliance with the rules and policies of
applicable regulatory authorities with respect to corporate governance. This
Committee is responsible for recommending candidates to the Board for nomination
as directors and for the composition of various Board committees and for
-12-
recommendations regarding Chairmanship of the Board. Directors are encouraged to
update their knowledge of the Corporation by meeting with management and also by
familiarizing themselves with its operations.
Directors are selected through a rigorous process where numerous
requirements must be satisfied in order to ensure an appropriate balance of
skills and experience. The directors of the Board are required to maintain a
minimum 75% attendance record.
The Committee, together with the Compensation Committee, also reviews
and recommends compensation for Board and committee service.
The Committee met three times in 2003.
HEALTH, SAFETY AND ENVIRONMENT COMMITTEE
CHAIR: Glen F. Andrews
MEMBERS: Tullio Cedraschi, Walter W. Grist, Ovyind Hushovd
The Health, Safety and Environment Committee's mandate is to monitor
the health, safety and environmental practices and procedures of Western and its
subsidiaries for compliance with applicable legislation, conformity with
industry standards and prevention or mitigation of losses. It reviews, reports
and, when appropriate, makes recommendations to the Board on the Corporation's
policies and procedures related to health, safety and the environment.
The Committee met once in 2003.
BUSINESS OF THE ANNUAL MEETING
RECEIPT OF THE FINANCIAL STATEMENTS AND AUDITORS' REPORT
The Financial Statements of the Corporation for the year ended December
31, 2003 and the auditors' report thereon will be placed before the Shareholders
at the Meeting.
Under National Policy 54-102 - INTERIM FINANCIAL STATEMENT AND REPORT
EXEMPTION, a person or corporation who in the future wishes to receive interim
financial statements from the Corporation must deliver a written request for
such material to the Corporation, together with a signed statement that the
person or corporation is the owner of securities (other than debt instruments)
of the Corporation. Shareholders who wish to receive interim financial
statements are encouraged to send the enclosed return card, together with the
completed form of proxy to Valiant Trust Company, 510, 550 -6th Avenue S.W.,
Calgary, Alberta, T2P 0S2.
ELECTION OF DIRECTORS
At present, the Board of Directors may consist of a minimum of one and
a maximum of twelve directors. It is proposed that ten persons be elected as
directors at the Meeting. Each of the proposed nominees is currently serving as
a director of the Corporation, with Messrs. Hushovd and Lill being appointed to
the Board during 2003.
Management does not contemplate that any of the nominees will be unable
to serve as a director but, if that should occur for any reason prior to the
Meeting, the persons designated in the enclosed form of proxy reserve the right
to vote for other nominees in their discretion.
-13-
The following table sets forth, for all persons proposed to be
nominated for election as directors, all positions and offices with the
Corporation now held by them, their current principal occupations, the periods
during which they have served as directors of the Corporation, and the number of
voting shares of the Corporation beneficially owned, directly or indirectly, by
each of them, or over which they exercise control or direction, as of March 16,
2004. In the case of Messrs. Hushovd and Lill, information is also given in
connection with their principal occupations during the past five years.
NUMBER OF
NAME AND MUNICIPALITY OF VOTING
RESIDENCE PRINCIPAL OCCUPATION DIRECTOR SINCE SHARES(6)
- ------------------------- ------------------------------------------------- -------------- ---------
Glen F. Andrews(2)(4) Retired businessman. Previously President BHP October 1999 115,000
Bainbridge Island, Copper North America until June 1999.
Washington
Tullio Cedraschi(4) President and Chief Executive Officer of October 2000 Nil
Montreal, Quebec CN Investment Division, the entity responsible
for investing the assets of the Canadian
National Railways Pension Trust Funds.
Geoffrey A. Cumming(2)(3) Vice-Chairman of Gardiner Group Capital October 1999 1,350,000
Auckland, New Zealand Limited, a private Canadian investment
corporation, and Managing Director of Zeus
Capital Limited, a private New Zealand
investment corporation.
Walter W. Grist(4) Managing Director, Brown Brothers Harriman & December 1999 Nil
New York, New York Co., a private investment management and
banking partnership which is general partner of The
1818 Fund III, L.P.
John W. Lill(2) Executive Vice President and Chief Operating December 2003 Nil
Toronto, Ontario Officer of Dynatec Corporation, a mining
corporation, since November 2003. President and
Chief Operating Officer (Base Metals) with BHP
Billiton, a mining corporation, from 2001 to 2003
and Chief Operating Officer (Copper) with BHP
Billiton from 2000 to 2001. From 1998 to 2001, Vice
President of Mining Operations for Rio Algom Ltd., a
mining corporation.
Brian F. MacNeill(1)(3) Chairman of Petro Canada, an integrated energy October 1999 100,000
Calgary, Alberta company.
Oyvind Hushovd(4) Chairman and Chief Executive Officer of December 2003 Nil
Gabriel Resources Ltd., a mining corporation,
since March 2003. President and Chief
Executive Officer of Falconbridge Ltd., a
mining corporation, from 1996 to February 2002.
Robert G. Puchniak(1) Executive Vice President and Chief Financial October 1999 28,000
Winnipeg, Manitoba Officer of James Richardson & Sons, Limited,
an investment and holding corporation.
Guy J. Turcotte President and Chief Executive Officer of July 1999 1,619,153
Calgary, Alberta Western and Chairman of Fort Chicago Energy
Partners, L.P.
-14-
NUMBER OF
NAME AND MUNICIPALITY OF VOTING
RESIDENCE PRINCIPAL OCCUPATION DIRECTOR SINCE SHARES(6)
- ------------------------- ------------------------------------------------- -------------- ---------
Mac H. Van Co-Chairman of ARC Financial Corporation, a December 1999 200,619
Wielingen(1)(3) (8) private investment management company focused
Calgary, Alberta on the energy sector, and Chairman of ARC
Energy Trust.
NOTES:
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
(3) Member of the Corporate Governance Committee of the Board of Directors.
(4) Member of the Health, Safety and Environment Committee of the Board of
Directors.
(5) The Corporation does not have an Executive Committee of its Board
of Directors.
(6) Includes all Common Shares held by the spouse and children of such
individuals or corporations controlled by them.
(7) Includes Common Shares held indirectly through a family trust of which
Mr. Turcotte is one of three trustees and a discretionary beneficiary.
(8) Mr. Van Wieligen was a director of Guantlet Energy Corporation
("Guantlet") from September 1999 to December 2003. On June 17, 2003, an
order was granted under the Companies Creditors Arrangement Act which
provided creditor protection to Guantlet to develop a financial
restructuring plan that was approved by its creditors.
It is the intention of the management designees in the accompanying
form of proxy, if named as proxy, to vote for the election of said persons to
the Board of Directors, unless otherwise directed. Each director elected will
hold office until the close of the next annual meeting, or until his successor
is duly elected or appointed, unless his office is earlier vacated.
APPOINTMENT OF AUDITORS
The Shareholders will be asked to vote for the appointment of
PricewaterhouseCoopers LLP, Chartered Accountants, of Calgary, Alberta, as
auditors of the Corporation until the next annual general meeting of
Shareholders, at such remuneration as may be approved by the Board of Directors
of the Corporation. PricewaterhouseCoopers LLP, Chartered Accountants, have been
the auditors of the Corporation since its incorporation.
OTHER BUSINESS
Management is not aware of any matter to come before the Meeting other
than the matters referred to in the Notice of the Meeting. However, if any other
matter properly comes before the Meeting, the accompanying form of proxy confers
discretionary authority to vote with respect to amendments or variations to
matters identified in the Notice of the Meeting and with respect to other
matters that properly may come before the Meeting.
ADDITIONAL INFORMATION
Additional information relating to the Corporation is available on
SEDAR at www.sedar.com. Financial information is contained in Western's
consolidated financial statements and Management's Discussion and Analysis for
the year ended December 31, 2003. If you wish to request copies of the
Corporation's financial statements and Management's Discussion and Analysis,
please contact David A. Dyck at Western Oil Sands Inc., Suite 2400, Ernst &
Young Tower, 440 Second Avenue S.W., Calgary, Alberta T2P 5E9, Tel: (403)
233-1700.
CERTIFICATE
The foregoing contains no untrue statement of a material fact and does
not omit to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in the light of the circumstances
in which it was made.
Dated this 16th day of March, 2004.
(Signed) "GUY J. TURCOTTE" (Signed) "DAVID A. DYCK"
Guy J. Turcotte David A. Dyck
President and Chief Executive Officer Vice President Finance and
Chief Financial Officer
SCHEDULE "A"
WESTERN
CORPORATE GOVERNANCE GUIDELINE ALIGNMENT COMMENTS
- ------------------------------------------------ -------------- --------------------------------------------------
1. The Board should explicitly
assume responsibility for
stewardship of the Corporation,
and specifically for:
(a) Adoption of a strategic planning Yes The Board approves, as appropriate, all long-term
process strategies, business plans, corporate policies,
financings and capital budgets. At regularly
scheduled meetings, members of the Board and
management discuss a broad range of issues
relevant to the Corporation's overall strategy.
(b) Identification of principal risks, Yes The Board's participation in the strategic
and implementing risk management planning process involves consideration of the
systems principal risks inherent in the Corporation's
business. The Audit Committee of the Board of
Directors also addresses specific risks and risk
management in its review of the Corporation's
financial statements.
(c) Succession, planning and Yes The Board of Directors and the Corporate
monitoring senior management Governance Committee are responsible for
succession planning at the Board and senior
management levels. The Compensation Committee
reviews compensation policies and plans, assesses
the performance of senior management of the
Corporation against the Corporation's goals and
recommends the salary and other remuneration of
the senior executive officers of the Corporation
for approval by the Board of Directors.
(d) Communications policy Yes The Corporation's communication policy provides
for open and timely disclosure of relevant
information relating to the Corporation and its
business and affairs. The Board reviews the
Corporation's audited consolidated financial
statements and selected corporate disclosure
documents including the annual information form,
management's discussion and analysis, information
circulars, all prospectuses and other offering
memoranda before they are publicly released.
-2-
WESTERN
CORPORATE GOVERNANCE GUIDELINE ALIGNMENT COMMENTS
- ------------------------------------------------ -------------- --------------------------------------------------
(e) Integrity of internal control and Yes The Audit Committee is specifically mandated to
management information systems assist the Board by reviewing the effectiveness of
financial reporting, management information and
internal control systems. The Audit Committee
meets quarterly with the auditors, independently
of management and also reviews the independent
reserve report with the independent qualified
reserves evaluator.
2. Majority of directors should be Yes During 2003, one member of the Board was "related"
"unrelated", (free from conflicting and the remaining nine directors were "unrelated"
interests) to the Corporation as that term is used in the TSX
guidelines and the proposed TSX corporate
governance standards.
3. Disclose for each director whether he Yes Glen F. Andrews, Tullio Cedraschi, Geoffrey A.
or she is related, and how that Cumming, Walter W. Grist, Oyvind Hushovd, John W.
conclusion was reached Lill, Brian F. MacNeill, Robert G. Puchniak and
Mac H. Van Wielingen are unrelated to the
Corporation as that term is used in the TSX
guidelines and the proposed corporate governance
standards. Each of these directors is independent
of management, none has any interest, business or
other relationship that could, or could reasonably
be perceived to, materially interfere with his
ability to act in the best interests of the
Corporation. None of the directors have received
compensation from the Corporation other than
director's fees and stock options granted from
time to time pursuant to the Corporation's
long-term incentive plan.
Guy J. Turcotte, President and Chief Executive
Officer was, during 2003, a member of management
and thus related to the Corporation.
4. Appoint a Committee:
(a) Responsible for the appointment and Yes The Board has constituted a Corporate Governance
assessment of directors Committee which is responsible for nominating new
directors and assessing the Board overall as well
as individual directors.
(b) Composed exclusively of outside Yes All of the members of the Governance Committee and
directors (i.e., non-management all other committees are unrelated directors.
directors the majority of whom are
unrelated)
-3-
WESTERN
CORPORATE GOVERNANCE GUIDELINE ALIGNMENT COMMENTS
- ------------------------------------------------ -------------- --------------------------------------------------
5. Implement a process for assessing Yes The Corporate Governance Committee has been
effectiveness of the Board, its mandated to perform assessments of the Board as a
committees and individual directors whole, the committees and individual directors,
and for the self assessments performed by the
Board members.
6. Provide orientation and education Yes The Corporation conducts an informal orientation
programs for new directors involving meetings with senior management on key
business, financial and operational issues.
7. Examine size of Board and consider Yes The Board of Directors presently consists of ten
reducing with a view to improving members and the Board believes that a ten member
effectiveness Board is an effective size to provide a diversity
of business experience to the Corporation.
8. Review compensation of directors in Yes The Compensation Committee and the Governance
light of risks and responsibilities Committee review and report to the Board on
directors' compensation issues.
9. Committees should generally be Yes All Board committees are made up of outside,
composed of non-management directors, a unrelated directors.
majority of whom are unrelated
10. Appoint a committee responsible for Yes The Corporate Governance Committee has been formed
approach to corporate governance issues and is made up solely of unrelated directors.
11. (a) Define limits to management's
responsibilities by developing
mandates for:
(i) the Board Yes Under its mandate, the Board has ultimate
responsibility for the overall stewardship of the
Corporation. Day-to-day management is the
responsibility of the Chief Executive Officer, and
the senior executive officers of the Corporation.
(ii) the Chief Executive Officer Yes The Board believes management is responsible for
the effective, efficient and prudent management of
the Corporation's day-to-day operation subject to
the Board's stewardship. Management's
responsibility is mandated and includes the
implementation of the approved strategic plan
within authorized budgets and in compliance with
the Corporation's policies and procedures.
Additionally, management is expected to fully
inform the Board on the business and affairs of
the Corporation, to develop and maintain a sound,
effective organizational structure and to ensure
capable management.
-4-
WESTERN
CORPORATE GOVERNANCE GUIDELINE ALIGNMENT COMMENTS
- ------------------------------------------------ -------------- --------------------------------------------------
(b) Board should approve the Chief Yes The corporate objectives for which the Chief
Executive Officer's corporate Executive Officer is responsible are set by the
objectives Board of Directors.
12. Establish structures and procedures Yes In order to enable the Board to function
to enable the Board to function independently of management, a director who is an
independently of management unrelated director has been appointed as the
Chairman of the Board and has been given this
mandate.
13. (a) Ensure an Audit Committee has a Yes The Audit Committee has a specifically defined
specifically defined mandate and mandate. The Audit Committee reviews the direct
communication channels with Corporation's audited consolidated financial
internal and external auditors statements and interim financial statements and
selected corporate disclosure documents before
they are approved by the Board of Directors. It
approves the public release of quarterly financial
results, monitors accounting, financial reporting,
control and audit functions, reviews risk
management policies and reviews issues relating to
legal and regulatory responsibilities. The Audit
Committee reviews the audit plans for the external
auditors and meets with them, in each case
independently of management. During fiscal 2003,
the Board as a whole reviewed the annual audited
financial statements, with the interim financial
statements being approved by the Audit Committee.
Reference is made to the section entitled "Audit
Committee in the Corporation's Annual Information
Form in respect of the year ended December 31,
2003", for further information with respect to the
Audit Committee.
(b) All members of the Audit Committee Yes All committees of the Board are comprised solely
should be non-management directors of outside, unrelated directors.
14. Implement a system to enable Yes In addition to the authority of committees to
individual directors to engage retain external advisors in connection with their
outside advisors at the Corporation's responsibilities, individual directors may engage
expense outside advisors at any time (at the expense of
the Corporation) to provide advice with respect to
a corporate decision or action.