EXHIBIT 99.1
------------
CANADIAN NATURAL RESOURCES LIMITED
NOTICE OF THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY MAY 3, 2007
NOTICE IS HEREBY GIVEN that the Annual and Special Meeting (the
"Meeting") of the Shareholders of Canadian Natural Resources Limited (the
"Corporation") will be held at the Metropolitan Centre, 333 - 4th Avenue S.W.,
in the City of Calgary, in the Province of Alberta, Canada, on Thursday May 3,
2007, at 3:00 o'clock in the afternoon (MDT) for the following purposes:
1. To receive the Annual Report of the Corporation to the
Shareholders, the Consolidated Financial Statements, and the
report of the Auditors, for the fiscal year ending December 31,
2006;
2. To elect Directors for the ensuing year;
3. To appoint Auditors for the ensuing year and to authorize the
Audit Committee of the Corporation's Board of Directors to fix
their remuneration;
4. To consider, and if deemed advisable, to pass a resolution
approving the amendments to the Corporation's Amended Compiled
and Restated Stock Option Plan as more fully outlined in the
Information Circular; and
5. To transact such other business as may properly be brought before
the Meeting or any adjournments thereof.
ANY SHAREHOLDER OF RECORD AT THE CLOSE OF BUSINESS ON MARCH 14, 2007
WILL BE ENTITLED TO RECEIVE NOTICE OF, AND VOTE AT THE MEETING, PROVIDED THAT
TO THE EXTENT SUCH A SHAREHOLDER TRANSFERS THE OWNERSHIP OF ANY OF HIS SHARES
AFTER THE RECORD DATE AND THE TRANSFEREE OF THOSE SHARES ESTABLISHES THAT HE
OWNS SUCH SHARES AND DEMANDS NOT LATER THAN 5 DAYS BEFORE THE MEETING THAT HIS
NAME BE INCLUDED ON THE SHAREHOLDERS' LIST, SUCH TRANSFEREE IS ENTITLED TO VOTE
SUCH SHARES AT THE MEETING. IF YOU CANNOT BE PRESENT IN PERSON, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY FORM IN THE ADDRESSED ENVELOPE PROVIDED. IN ORDER FOR
YOUR PROXY FORM TO BE EFFECTIVE, IT MUST BE DULY COMPLETED AND MUST REACH THE
OFFICE OF COMPUTERSHARE TRUST COMPANY OF CANADA, 9TH FLOOR, 100 UNIVERSITY
AVENUE, TORONTO, ONTARIO, CANADA M5J 2Y1 AT LEAST 24 HOURS BEFORE THE MEETING
TO BE HELD ON THURSDAY MAY 3, 2007.
The specific details of the matters proposed to be put before the
Meeting are set forth in the Information Circular of the Corporation, which
accompanies this Notice. Copies of the Annual Report of the Corporation and
Consolidated Financial Statements referred to herein are also enclosed if you
are a registered holder, or if, as a beneficial shareholder, you returned the
financial statement request card sent with 2006 proxy solicitation material.
DATED at Calgary, Alberta, this 14th day of March 2007.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Bruce E. McGrath
Bruce E. McGrath
Corporate Secretary
CANADIAN NATURAL RESOURCES LIMITED
(THE "CORPORATION")
INFORMATION CIRCULAR
FOR THE ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON THURSDAY MAY 3, 2007 AT 3:00 P.M. (MDT)
AT THE METROPOLITAN CENTRE
333 - 4TH AVENUE S.W. CALGARY, ALBERTA
CONTENTS OF THIS INFORMATION CIRCULAR
PAGE
I. INFORMATION RESPECTING THE CORPORATION
Statement of Corporate Governance Practices of the Corporation.......... 2
Other Corporate Governance Matters...................................... 8
Additional Information.................................................. 12
Statement of Executive Compensation..................................... 12
Executive Compensation.................................................. 15
Options Granted During the Most Recently Completed Financial Year....... 17
Aggregated Options Exercised During the Most Recently Completed
Financial Year and Financial Year-end Option Values ................. 17
Common Shares Held by Named Executive Officers.......................... 18
Directors' Compensation................................................. 18
Equity Compensation Plan Information.................................... 19
Performance Graph....................................................... 20
Indebtedness of Senior Officers and Directors........................... 20
Directors' and Officers' Liability Insurance............................ 21
Interests of informed persons in Material Transactions.................. 21
II. INFORMATION ON ITEMS TO BE ACTED UPON................................... 21
Solicitation of Proxies................................................. 21
Appointment of Proxy and Discretionary Authority........................ 21
Revocation of Proxies................................................... 22
Beneficial Holder of Shares............................................. 22
Voting Shares and Principal Holders Thereof............................. 23
Election of Directors................................................... 23
Appointment of Auditors................................................. 26
Stock Option Plan Amendment............................................. 27
Other Matters........................................................... 29
Schedule "A" Board of Directors Corporate Governance Guidelines......... 30
Unless otherwise indicated, all dollar figures stated in this Circular
represent Canadian dollars. On December 31, 2006, the reported Bank of Canada
noon rate for one Canadian dollar was U.S. $0.8581 and (pound)0.4381. On
December 31, 2006, the reported Bank of Canada noon rate for one U.S. dollar
was $1.1653 and for one pound sterling was $2.2824.
1
I. INFORMATION RESPECTING THE CORPORATION
STATEMENT OF CORPORATE GOVERNANCE PRACTICES OF THE CORPORATION
The Board of Directors (the "Board") continually evaluates the
corporate governance policies and procedures of the Corporation. The Board
annually conducts a self-assessment of its performance, an assessment of its
members and its committees and each committee assesses its members. Since the
date of the last Information Circular, the Board has:
1. reviewed the share ownership requirements of the directors to
ensure director and shareholder interests are aligned. The Board
share ownership requirements of directors was changed to three
times the annual retainer fee from the former requirement of
$300,000;
2. adopted a retirement policy for directors providing for
retirement of directors at age 75; subject to grandfathering
provisions for current Directors who are currently at age 75 or
over;
3. adopted a mandatory share ownership policy for all officers of
the Corporation;
4. adopted majority voting by shareholders for the election of
directors; and
5. reviewed Board standing committee memberships to ensure the
Audit, the Compensation and the Nominating and Corporate
Governance Committees are constituted with all independent
directors and the Health, Safety and Environmental and the
Reserves Committees are constituted with a majority of
independent directors.
Regulatory changes relating to corporate governance are continually
monitored by the Board and the Board will take appropriate action as regulatory
changes occur. In the following table we describe the Corporation's corporate
governance practices in compliance with corporate governance disclosure
requirements mandated under National Instrument 58-101.
CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT COMMENTS
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1. (a) Disclose the identity of directors who are independent. Those directors who are determined to be independent by
the Nominating and Corporate Governance Committee and the
Board and pursuant to the independence standards
established under National Instrument 58-101 and the
New York Stock Exchange ("NYSE") Listing Standards are
disclosed in this Information Circular under "Director
Independence".
(b) Disclose the identity of directors who are not independent Those directors who are determined to be non-independent by
and describe the basis for that determination. the Nominating and Corporate Governance Committee and the
Board and pursuant to the independence standards
established under National Instrument 58-101 and the New
York Stock Exchange Listing Standards are disclosed in this
Information Circular under "Director Independence".
(c) Disclose whether or not a majority of directors are 8 of the 13 director nominees proposed by management for
independent. election are independent as determined by the Nominating
and Corporate Governance Committee and the Board and
pursuant to the independent standards established under
National Instrument 58-101 and the New York Stock Exchange
Listing Standards. Refer to section "Director Independence"
in this Information Circular which describes how directors
are determined independent or non-independent.
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CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT COMMENTS
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(d) Identify those directors who are presently a director of Directorships of other issuers held by the director
any other issuer and identify the issuer. nominees are reported in this Information Circular under
"Election of Directors".
(e) Disclose whether or not the independent directors hold Prior to the termination of each regularly scheduled Board
regularly scheduled meetings at which non-independent meeting, the non-management directors meet in executive
directors and members of management are not in attendance. session without the presence of management to discuss
whatever topics are appropriate. There were 4 executive
sessions held during the most recently completed financial
year. Additional executive sessions may be scheduled from
time to time as determined by a majority of the
non-management directors in consultation with the Chair of
the Board and Chair of the Nominating and Corporate
Governance Committee.
(f) Disclose whether or not the chair of the Board is an The Board of Directors functions independently of
independent director. management and appoints the Chair. The Chair is considered
non-independent. The Board does not have a lead director
but leadership for the non-management directors would,
depending on circumstances, be provided by the Chair of the
Nominating and Corporate Governance Committee or a lead
director appointed by the non-management directors who have
been determined to be independent.
(g) Disclose the attendance record of each director for all The attendance of each director for all board and board
board meetings held since the beginning of the issuer's committee meetings held since the beginning of the most
most recently completed financial year. recently completed financial year is reported in this
Information Circular under "Meetings of the Board of
Directors and Its Committees During 2006". Average
attendance rate in 2006 for all meetings held during the
year is 97%.
2. Disclose the text of the Board's written mandate. The Board's mandate is attached as Schedule "A" to this
Information Circular which outlines the responsibilities of
the Board.
3. (a) Disclose whether or not the board has developed written The role and responsibilities of the Chair and the Chair of
position descriptions for the chair and the chair of each the Board committees is determined through the mandates of
board committee. the Board and the Board committees respectively.
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CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT COMMENTS
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(b) Disclose whether or not the board and CEO have developed a The Corporation does not have a designated CEO position.
written position description for the CEO. This role is delegated by the Board to the Corporate
Management Committee of the Corporation which is comprised
of 13 members of the senior management group including the
Chair, the two Vice-Chairs and the President and Chief
Operating Officer. The Corporate Management Committee
shares the responsibilities normally associated with a CEO
position. The Corporation's corporate governance guidelines
state that the Board is responsible for the stewardship of
the Corporation and overseeing the business and affairs of
the Corporation. Any responsibility that is not delegated
to senior management or a Board committee remains with the
full Board. In addition, the Board in conjunction with
senior management determines the limits of management's
responsibilities and establishes annual corporate
objectives which management is responsible for meeting.
4. (a) Briefly describe what measures the board takes to orient The Corporation has an orientation program whereby new
new directors regarding (i) the role of the board, its members of the Board are provided background information
committees and its directors, and (ii) the nature and about the Corporation's business, current issues, and
operation of the issuer's business. corporate strategies. They also receive a Director's Manual
which contains the Information Circular, annual report,
press releases, and Annual Information Form. They receive a
copy of the Board and Board committee mandates and other
information about the Board, its committees, director's
duties and responsibilities. They meet with key operations
personnel and receive specific information on the business
and ongoing operations of the Corporation, corporate
structure, management structure, financial position,
business risks, employee compensation, business conduct
philosophies, and corporate governance practices. As well,
any director has unrestricted direct access to any member
of senior management and their staff at any time.
(b) Briefly describe what measures, if any, the board takes to The Corporation provides ongoing continuous education
provide continuing education for its directors. programs through key business area presentations, monthly
business updates and site visits. In 2006 presentations
were conducted on the Corporation's enhanced oil recovery
project at its Pelican Lake properties, on site visit to
the Corporation's Horizon Oil Sands Project and detailed
monthly reports on the Horizon Project's progress. Each
director is expected to participate in continuing education
programs to maintain any professional designation that they
may have and which would have been considered in their
nomination as a director. Each director is expected to
participate in programs that would be necessary to maintain
a level of expertise in order to perform his or her
responsibilities as a director and to provide ongoing
guidance and direction to management.
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CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT COMMENTS
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5. (a) Disclose whether or not the board has adopted a written The Board of Directors has adopted a written code for the
code for the directors, officers and employees. If the directors, officers and employees of the Corporation.
Board has adopted a written code: Details regarding the code can be found in this Information
Circular under "Ethics Policy".
(i) disclose how a person or company may obtain a copy A copy of the Code of Integrity, Business Ethics and
of the code; Conduct can be obtained free of charge from SEDAR website
at WWW.SEDAR.COM or by writing to the Corporation to the
attention of the Corporate Secretary.
(ii) describe how the board monitors compliance with Periodic reports are provided to the Board from management
its code, or if the board does not monitor compliance, directly responsible for compliance related matters on
explain whether and how the board satisfies itself compliance with its code and on any existing or potential
regarding compliance with its code; conflicts of interest of directors, officers and employees.
and The Board, through the Audit Committee Chair, also receives
reports of all financial or accounting issues raised
through the Corporation's anonymous toll-free hot-line.
(iii) provide a cross-reference to any material change No material change report pertaining to the conduct of any
report filed since the beginning of the issuer's most director or executive officer has been required or filed
recently completed financial year that pertains to during the most recently completed financial year. To the
any conduct of a director or executive officer that best of the Board's knowledge, there has been no departure
constitutes a departure from the code. from the code in the conduct of any Director or executive
officer.
(b) Describe any steps the board takes to ensure directors To ensure independent judgment is exercised by the
exercise independent judgment in considering transactions directors on any transaction they may be considering where
and agreements in respect of which a director or executive another director or executive officer of the Corporation
officer has a material interest. may have material interest, the director or executive
officer with the material interest must declare such
material interest and would be excused from the meeting
after management's presentation has been made and all
questions have been answered to the fullest; thereby
permitting the disinterested directors to have an open and
unencumbered discussion on the merits of the transaction.
(c) Describe any other steps the board takes to encourage and The Code of Integrity, Business Ethics and Conduct applies
promote a culture of ethical business and conduct. to the directors, officers and employees as well as others
who perform services for or on behalf of the Corporation
and is supported by the Board as a whole. The Nominating
and Corporate Governance Committee reviews the Code of
Integrity and Business Conduct annually to ensure it keeps
pace with evolving business ethics and best practices. The
Board must approve any changes to the Code of Integrity,
Business Ethics and Conduct and only after a recommendation
to the Board is received from the Nominating and Corporate
Governance Committee whose responsibility it is to
recommend to the Board any amendments it determines is
appropriate.
5
CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT COMMENTS
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Material changes to the Code of Integrity and Business
Conduct are communicated to all employees to ensure they
are aware of such changes and that they are in compliance
with the Code of Integrity and Business Conduct. Each new
employee must also sign an acknowledgement form upon their
hire acknowledging that they have received a copy of the
Code of Integrity and Business Conduct, have read it, and
agree to abide by it. Directors, officers and employees
must immediately declare any actual or potential conflicts
of interest that may exist.
6. (a) Describe the process by which the board identifies new The Board has constituted the Nominating and Corporate
candidates for the board nomination. Governance Committee to recommend to the Board nominees for
appointment of new directors to fill vacancies or meet
additional needs of the Board. Through the Board evaluation
process and ongoing monitoring of the needs of the
Corporation, desired expertise and skill sets are
determined and individuals that meet the necessary criteria
are identified and interviewed by the Chair of the
Nominating and Corporate Governance Committee, considered
by the entire Nominating and Corporate Governance Committee
for recommendation to the Board as potential nominee
directors.
(b) Disclose whether or not the board has a nominating The Board has constituted the Nominating and Corporate
committee composed entirely of independent directors. Governance Committee comprised entirely of independent
directors, each of whom meets the independent
qualifications under National Instrument 58-101 and the New
York Stock Exchange Listing Standards. Members of the
Nominating and Corporate Governance Committee are
identified in this Information Circular in the table under
"Election of Directors".
(c) If the Board has a nominating committee, describe the The primary duties and responsibilities of the Nominating
responsibilities, powers and operation of the nominating and Corporate Governance Committee are described in this
committee. Information Circular under "Responsibilities of the Board
of Director's Standing Committees".
7. (a) Describe the process by which the board determines the The Nominating and Corporate Governance Committee reviews
compensation for the issuer's directors and officers. periodically the adequacy and structure of directors'
compensation and makes recommendations to the Board
designed to ensure the directors' compensation
realistically reflects the responsibilities, time
commitments and risks of the Directors. The Board has
constituted the Compensation Committee as a standing
committee of the Board of Directors to review and approve
the Corporation's compensation philosophy and programs for
executive officers and employees and to approve and
evaluate all compensation of executive officers including
salaries, bonuses and equity compensation plans.
6
CORPORATE GOVERNANCE DISCLOSURE REQUIREMENT COMMENTS
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(b) Disclose whether or not the Board has a compensation The Board has constituted the Compensation Committee
committee composed entirely of independent directors. comprised entirely of independent directors each of whom
meets the independent qualifications under National
Instrument 58-101 and the New York Stock Exchange Listing
Standards. Members of the Compensation Committee are
identified in this Information Circular in the table under
"Election of Directors".
(c) If the board has a compensation committee, describe the The primary duties and responsibilities of the Compensation
responsibilities, powers and operation of the compensation Committee are outlined below under "Responsibilities of the
committee. Board of Director's Standing Committees".
8. If the Board has standing committees other than the audit, Two other standing committees of the Board are the Health,
compensation and nominating committees, identify the committees Safety and Environmental Committee and the Reserves
and describe their function. Committee. Their primary duties and responsibilities are
described in this Information Circular under
"Responsibilities of the Board of Director's Standing
Committees".
9. Disclose whether or not the board, its committees and individual The Nominating and Corporate Governance Committee is
directors are regularly assessed with respect to their responsible for assessing the effectiveness of the Board as
effectiveness and contribution. a whole, the committees of the Board and the contribution
of individual directors. The assessment includes an annual
survey that each director must complete. The annual survey
covers a range of topics including: individual
self-assessment; assessment of board and committee
performance and effectiveness; and, an assessment of peer
performance at the Board level and at the committee level.
An independent management consulting firm is engaged to
review and analyze the completed surveys and provide to the
Nominating and Corporate Governance Committee a
presentation and written detailed report of the responses
to the survey. The written analysis from the consulting
firm together with any issues or concerns raised by the
survey constitutes part of the report to the full Board.
The Nominating and Corporate Governance Committee present
the detailed report to the Board and make recommendations
to improve the effectiveness of the Board in light of the
results of the performance evaluation.
7
OTHER CORPORATE GOVERNANCE MATTERS
THE NEW YORK STOCK EXCHANGE CORPORATE GOVERNANCE LISTING STANDARDS
The Corporation, as a "foreign private issuer" in the United States,
may rely on home jurisdiction listing standards for compliance with the NYSE
Corporate Governance Listing Standards except for: (i) the rule requiring the
audit committee to meet the requirements of Securities Exchange Commission
("SEC") Rule 10A-3 of the Securities Exchange Act of 1934, as amended; (ii) the
requirement for the Corporation to disclose any significant differences between
its corporate governance practices and the NYSE listing standards; (iii) the
requirement for the Corporation's CEO to notify in writing the NYSE after any
executive officer becomes aware of any non-compliance with the applicable
provisions of NYSE Corporate Governance Listing Standards; and, (iv) the
requirement for the Corporation to submit an executed Annual Written
Affirmation affirming the Corporation's compliance with audit committee
requirements of SEC Rule 10A-3 of the Exchange Act or, as may be required from
time to time, an Interim Written Affirmation to the NYSE in the of event
certain changes to the Audit Committee membership or member's independence and
that the Corporation has provided its statement of significant corporate
governance differences as required to be included in its annual report to
shareholders or on its website.
As required by the NYSE, a statement of the Corporation's significant
differences between its current corporate governance practices and those
currently required for U.S. companies listed on the NYSE is included in the
Corporation's annual report to shareholders.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES DURING 2006
During 2006 the Board of the Corporation held 7 meetings, the Audit
Committee held 5 meetings, the Nominating and Corporate Governance Committee
("N.C.G.") held 2 meetings, the Compensation Committee held 2 meetings, the
Reserves Committee held 3 meetings and the Health, Safety and Environmental
Committee ("H.S.E.") held 4 meetings. The average attendance rate during 2006
at all Board and committee meetings was 97%. The attendance of each individual
director at Board and committee meetings in 2006 adjusted for their respective
term of appointment is reported in the following table.
DIRECTORS C.M. N.M. G.A. G.D. J.G. S.W. K.A.J.
- --------- BEST EDWARDS FILMON GIFFIN LANGILLE LAUT MACPHAIL
---- ------- ------ ------ -------- ---- --------
Board Meetings........ 7/7 7/7 7/7 7/7 7/7 3/3 6/7
100% 100% 100% 100% 100% 100% 86%
Committee Meetings
Audit................. 5/5 N/A 5/5 5/5 N/A N/A N/A
100% 0 100% 100% 0 0 0
N.C.G................. N/A N/A 1/1 2/2 N/A N/A N/A
0 0 100% 100% 0 0 0
Compensation.......... 2/2 N/A N/A N/A N/A N/A N/A
100% 0 0 0 0 0 0
Reserves.............. N/A 3/3 N/A N/A N/A N/A 3/3
0 100% 0 0 0 0 100%
H.S.E................. N/A N/A N/A N/A N/A N/A 3/4
0 0 0 0 0 0 75%
Total Meetings........ 14/14 10/10 13/13 14/14 7/7 3/3 12/14
ATTENDANCE RATE....... 100% 100% 100% 100% 100% 100% 86%
DIRECTORS A.P. N.F. F.J. J.S. E.R. D.A. # OF
- --------- MARKIN MCINTYRE MCKENNA PALMER SMITH TUER MEETINGS
------ -------- ------- ------ ----- ---- --------
Board Meetings........ 7/7 6/7 2/3 7/7 6/7 7/7 7
100% 86% 67% 100% 86% 100% 94%
Committee Meetings
Audit................. N/A N/A N/A N/A N/A 5/5 5
0 0 0 0 0 100% 100%
N.C.G................. N/A N/A 1/1 N/A 1/1 2/2 2
0 0 100% 0 100% 100% 100%
Compensation.......... N/A 2/2 2/2 2/2 2/2 N/A 2
0 100% 100% 100% 100% 0 100%
Reserves.............. N/A 3/3 N/A 3/3 N/A 3/3 3
0 100% 0 100% 0 100% 100%
H.S.E................. 4/4 4/4 N/A 4/4 4/4 N/A 4
100% 100% 0 0 100% 0 95%
Total Meetings........ 11/11 15/16 5/6 16/16 13/14 17/17
ATTENDANCE RATE....... 100% 94% 83% 100% 93% 100% 97%
MANDATORY SHARE OWNERSHIP
The Board believes that in order to better align the interests of the
directors and the executive officers with those of the Corporation's
shareholders, share ownership by the directors and executive officers is
desirable. During 2006, the Nominating and Corporate Governance Committee
reviewed the share ownership requirements of the Directors to ensure their
interests and those of the shareholders are aligned. Non-management directors
are required to acquire and hold common shares of the Corporation ("Common
Shares") equal to a minimum aggregate market value of three times the annual
retainer fee paid to directors within five (5) years from the date of the
director's appointment to the Board. As of the date of this Information
Circular, the number of Common Shares held by each Director and their
respective market value is reported in the table under "Election of Directors"
in this Information Circular.
8
Directors are required to confirm annually for the Corporation's
Information Circular their Common Share ownership position and that such
position is their beneficial and legal ownership position and has not been
hedged or otherwise sold.
In March 2007, the Board adopted Common Share ownership guidelines for
officers including management directors. The guidelines require Common Share
ownership proportionate to the individual's compensation and position which
are:
Chair, Vice-Chair, and, President and Chief
Operating Officer........... ......................... 4 times base salary
Senior Vice-President.................................... 2 times base salary
All other officers....................................... 1 times base salary
Under the guidelines, the individual has 3 years from the effective
date of the adoption of these guidelines (March 15, 2007) or from date of hire
or appointment as an officer, whichever is the later, to acquire and hold the
required level of Common Share ownership. Common Share ownership includes
Common Shares of the Corporation purchased and held within the Corporation's
stock savings plan and any other personal holdings of the individual.
Officers are required to confirm annually their Common Share ownership
position and that such position is their beneficial and legal ownership
position and has not been hedged or otherwise sold.
DIRECTOR INDEPENDENCE
For a director to be independent, the Nominating and Corporate
Governance Committee and the Board must affirmatively determine such
independence, taking into account any applicable regulatory requirements and
such other factors as the Nominating and Corporate Governance Committee and
Board may deem appropriate; provided, however, that there shall be a three (3)
year period during which the following individuals shall not be deemed
independent: (i) former employees of the Corporation, or of its independent
auditor; (ii) former employees of any company whose compensation committee
includes an officer of the Corporation; (iii) an immediate family member of the
individuals specified in (i) and (ii) above; and, (iv) a director whose
immediate family member is an executive of the Corporation. The Nominating and
Corporate Governance Committee and the Board review annually the relationship
that each director has with the Corporation (either directly; or as a partner,
shareholder or officer of an organization that has a relationship with the
Corporation) To assist in this process, all Directors are required to complete
a questionnaire relative to their shareholdings in the Corporation and business
relationships. Following this review, only those Directors whom the Board and
the Nominating and Corporate Governance Committee affirmatively determine have
no direct or indirect material relationship with the Corporation taking into
account the above mentioned factors, any applicable regulatory requirements and
such other factors as the Nominating and Corporate Governance Committee and
Board may deem appropriate will be considered independent directors. Eight of
the 13 director nominees proposed by management for election are independent as
determined by the Nominating and Corporate Governance Committee and the Board
and pursuant to the independent standards established under National Instrument
58-101 and the New York Stock Exchange Listing Standards. Ms. C.M. Best and
Messrs. G.A. Filmon, G.D. Giffin, N.F. McIntyre, F.J. McKenna, J.S. Palmer,
E.R. Smith and D.A. Tuer have all been affirmatively determined to be
independent using the above criteria. Mr. J.S. Palmer is the Chair and a
partner of a law firm that from time to time provides legal services to the
Corporation. Mr. J.S. Palmer does not personally provide these services to the
Corporation nor solicits those services and has confirmed that he does not
receive any portion or percentage of the fees paid by the Corporation to the
law firm, nor participates in the profits of the firm either directly or
indirectly. He has also confirmed that fees paid to the law firm by the
Corporation in 2006 was less than 2% of that firm's gross revenues and the
Nominating and Corporate Governance Committee and the Board has determined that
the fees that have been paid to the law firm in 2006 are not material to either
the Corporation or the law firm and therefore do not impair his ability to act
independent of management. Messrs. A.P. Markin, N.M. Edwards, J.G. Langille,
S.W. Laut who as part of the senior management committee of the Corporation and
Mr. K.A.J. MacPhail through a familial relationship with the Chair of the
Board, have been determined by the Nominating and Corporate Governance
Committee and the Board to be non-independent.
DIRECTOR RETIREMENT POLICY
The Board of Directors established a mandatory retirement policy for
Directors. Under the policy, any Director who has reached the age 75, except
for any current director currently over the age 75, can not stand for election
to the Board. The Board in adopting the retirement policy noted that Mr. J.S.
Palmer had reached the age of 75. The Board
9
also recognized the positive contribution, dedicated service, wise counsel and
leadership provided to the Corporation and its shareholders by Mr. J.S. Palmer
since first becoming a Director in 1997. It is the Board's belief that the
Corporation and its shareholders would continue to benefit from his valued
experience, knowledge, mentoring and input into the stewardship of the
Corporation and consequently grandfathered Mr. J.S. Palmer under the mandatory
retirement policy and asked Mr. J.S. Palmer to remain on the Board and stand
for re-election by the shareholders as a director.
AUDIT COMMITTEE FINANCIAL EXPERT
All of the members of the Corporation's Audit Committee are financially
literate. Ms. C.M. Best who is a member of the Audit Committee qualifies as an
"audit committee financial expert" under the rules issued by the SEC pursuant
to the requirements of the Sarbanes-Oxley Act, of 2002.
ETHICS POLICY
The Corporation has had a long-standing Code of Integrity, Business
Ethics and Conduct, which includes such topics as employment standards,
conflicts of interest, the treatment of confidential information and trading in
the Corporation's shares, to ensure that the Corporation's business is
conducted in a consistently legal and ethical manner. Each Director and all
employees including each member of senior management and more specifically the
principal executive officers, the principal financial officer and the principal
accounting officer are required to abide by the Corporation's Code of
Integrity, Business Ethics and Conduct. The Nominating and Corporate Governance
Committee periodically reviews the Corporation's Code of Integrity, Business
Ethics and Conduct to ensure it addresses appropriate topics and complies with
regulatory requirements and recommends any appropriate changes to the Board for
approval.
Any waivers or changes to the Corporation's Code of Integrity, Business
Ethics and Conduct must be approved by the Board of Directors and appropriately
disclosed. No waivers to the Corporation's Code of Integrity, Business Ethics
and Conduct in whole or in part have been asked for or granted to any Director,
senior officer or employee.
Copies of the Code of Integrity, Business Ethics and Conduct can be
obtained free of charge from SEDAR at WWW.SEDAR.COM or by contacting the office
of the Corporate Secretary at the address indicated under "Additional
Information".
RESPONSIBILITIES OF THE BOARD OF DIRECTOR'S STANDING COMMITTEES
The Audit Committee's primary duties and responsibilities as stated in
its charter are to:
a) ensure that the Corporation's management has designed and
implemented an effective system of internal financial controls;
b) monitor and report on the integrity of the Corporation's
financial statements, financial reporting processes and systems
of internal controls regarding financial, accounting and
compliance with regulatory and statutory requirements as they
relate to financial statements, taxation matters and disclosure
of material facts;
c) review the Corporation's financial statements, management
discussion and analysis and annual and interim earnings before
the release of this information by press release or distribution
to the shareholders;
d) select and recommend for appointment by the shareholders, the
Corporation's independent auditors, pre-approve all audit and
non-audit services to be provided to the Corporation or its
subsidiary entities by the Corporation's independent auditors
consistent with all applicable laws, and establish the fees and
other compensation to be paid to the independent auditors and
oversee the work of the independent auditor, including resolution
of disagreements with management;
e) monitor the independence and performance of the Corporation's
independent auditors;
f) monitor the performance of the internal auditing function;
g) establish procedures for the receipt, retention, response to and
treatment of complaints, including confidential, anonymous
submissions by the Corporation's employees, regarding accounting,
internal controls or auditing matters; and,
10
h) provide an avenue of communication among the independent
auditors, management, the internal auditing function and the
Board.
The Corporation's Annual Information Form contains additional
information on the Audit Committee and its members under the section entitled
"Audit Committee Information".
The Compensation Committee's primary duties and responsibilities as
stated in its charter are to:
a) review and approve periodically the Corporation's compensation
philosophy and programs for executive officers and employees of
the Corporation that (i) supports the Corporation's overall
business strategy and objectives; (ii) attracts and retains key
executives and employees; (iii) links compensation with business
objectives and organizational performance; and (iv) provides
competitive compensation opportunities;
b) approve and evaluate all compensation of executive officers
including salaries, bonuses, and equity compensation plans;
c) review the Corporation's senior management and the steps being
taken to assure the succession of qualified senior management at
the Corporation;
d) review the Corporation's Amended, Compiled and Restated Employee
Stock Option Plan and the Employee Stock Purchase Plan under
which common shares may be acquired by directors, executive
officers and employees of the Corporation. The Compensation
Committee will also review the administration of all equity plans
the Corporation may establish; and,
e) produce a report annually on executive officer compensation for
inclusion in the proxy statement of the Corporation.
The Health, Safety and Environmental Committee's primary duties and
responsibilities as stated in its charter are to:
a) generally ensure that the management of the Corporation has
designed and implemented effective health, safety and
environmental risk programs, controls and reporting systems and
reporting to the Board in respect thereof; and,
b) review management's commitment, overall plans and strategies in
the areas of corporate citizenship, ethics, social responsibility
and community affairs to ensure they are in line with the
Corporation's goals and image.
The Nominating and Corporate Governance Committee's primary duties and
responsibilities as stated in its charter are to:
a) provide assistance to the Board, the Chair of the Board and the
Vice-Chair of the Board in the area of review and consideration
of developments in corporate governance practices;
b) recommend to the Board a set of corporate governance principles
and procedures applicable to and employed by the Corporation;
c) provide assistance to the Board, the Chair of the Board and the
Vice-Chair of the Board in the area of Nominating and Corporate
Governance Committee selection and rotation practices;
d) provide assistance to the Board, the Chair of the Board and the
Vice-Chair of the Board in the area of evaluation of the overall
effectiveness of the Board and management;
e) identify individuals qualified to become Board members with the
Chair of the Board and the Vice-Chair of the Board and recommend
to the Board director nominees for the next annual meeting of
shareholders; and,
f) review and recommend periodically to the Board the Corporation's
compensation for directors of the Corporation.
The Reserves Committee's primary duties and responsibilities as stated
in its charter are to:
a) generally assume responsibility for assisting the Board in
respect of annual independent and/or internal review of the
Corporation's petroleum and natural gas reserves;
b) appoint the independent evaluating engineers and approve their
remuneration; and,
11
c) report to the Board on the Corporation's petroleum and natural
gas reserves and recommend to the Board for acceptance and
inclusion of the contents of the annual independent report on the
Corporation's petroleum and natural gas reserves for filing with
the regulatory authorities.
ADDITIONAL INFORMATION
Financial information is provided in the Corporation's annual and
quarterly financial statements and annual and quarterly management's discussion
and analysis ("MD&A"). The Corporation is a reporting issuer under the
securities acts of all provinces of Canada and a reporting "foreign private
issuer" under the Securities Act of 1933 in the US and complies with the
requirement to file annual and quarterly financial statements, annual and
quarterly management's discussion and analysis, as well as its management
information circular and annual information form ("AIF") with the various
securities commissions in such provinces and with the Securities Exchange
Commission in the US. The Corporation's most recent AIF, audited financial
statements, MD&A, quarterly financial statements and quarterly MD&A subsequent
to the audited financial statements and management information circular may be
viewed on the Corporation's website at WWW.CNRL.COM and on SEDAR at
WWW.SEDAR.COM under the name Canadian Natural Resources Limited. The
Corporation's annual financial statements, annual MD&A and AIF on Form 40-F can
also be accessed on EDGAR at WWW.SEC.GOV.
Paper copies of the Corporation's financial statements and management
discussion and analysis, AIF, Form 40-F, management information circular,
corporate governance guidelines, committee charters or ethics policy can also
be obtained from the Corporation free of charge by contacting:
Corporate Secretary of the Corporation at:
2500, 855 - 2nd Street S.W.
Calgary, Alberta T2P 4J8
STATEMENT OF EXECUTIVE COMPENSATION
COMPOSITION OF THE COMPENSATION COMMITTEE
During the year ending December 31, 2006, the members of the Board of
Directors who served on the Compensation Committee (the "Committee") were:
James S. Palmer, Catherine M. Best, Norman F. McIntyre, Frank J. McKenna and
Eldon R. Smith. All members of the Committee are independent members of the
Board and are knowledgeable with respect to compensation programs and
compensation levels. There were no interlocking relationships as described in
National Instrument 51-102 paragraph 8.1(d) under Form 51-102F6.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Committee reviews and approves the Corporation's compensation
philosophy and programs for executive officers which include the Corporation's
Chairman and Vice-Chairmen and for employees of the Corporation to ensure that
the Corporation's compensation philosophy and programs (a) support the
Corporation's overall business strategy and objectives; (b) attracts and
retains key executive officers and employees; (c) links compensation with
business objectives and organizational performance; and, (d) provides
competitive compensation opportunities. The Committee approves the compensation
paid to each of the Corporation's executive officers, the overall compensation
paid by the Corporation to its employees and the granting of stock options to
executive officers and employees. The Committee holds in-camera sessions
without management present at each of its regularly scheduled meetings.
The compensation paid is structured to comprise both short-term cash
payments and longer term incentive payments. The short-term cash payments are
structured to be competitive with the market place in which the Corporation
operates while performance based equity compensation is a significant component
of overall executive officer compensation. The Committee has chosen to
implement equity based compensation plans in place of defined benefit plans or
supplemental compensation or retirement plans that are not necessarily aligned
with creation of shareholder value.
The Corporation does not have a named Chief Executive Officer and the
review of factors that would be used to determine compensation of a Chief
Executive Officer are used in determining compensation to members of the
Corporation's Corporate Management Committee. The Corporation does not have
employment agreements with any of its executive officers.
12
The Committee has had numerous discussions of the relative merits of
its compensation practice which embraces both its non-formulaic approach to
executive officer compensation and a formula based approach for a portion of
their bonus payments and has concluded that the current approach is successful
and has resulted in an effective focused management team. The approach provides
the necessary flexibility to appropriately incenticize the management team in
changing market and industry conditions yet also base a part of their (as for
all employees) bonus payments based on meeting specified established targets
relating to operations (production volumes, safety and environmental risk
management targets, cost of production and capital efficiency). This
methodology is continuously evaluated to ensure executive compensation is
linked with the performance of the Corporation.
The compensation paid includes base salary, a discretionary year-end
cash bonus based on individual's and the Corporation's performance,
contributions to the Corporation's Savings Plan, a corporate performance cash
bonus paid twice per year to employees and executive officers in the
conventional operations if specified established targets relating to operations
are met, a year-end share bonus based on the individual's and the Corporation's
performance and awards of options to acquire the Corporation's common shares
pursuant to a stock option plan. These forms of compensation are considered
both individually and collectively to determine the compensation levels paid to
each of the Corporation's employees and executive officers. Compensation levels
of the Corporation's employees and executive officers are reviewed annually
following completed performance reviews.
In arriving at the compensation levels paid by the Corporation to its
executive officers the Committee takes into account a number of factors,
including the expertise and experience of the individual, the length of time
the individual has been in the position, the personal performance of the
individual, the overall performance of the Corporation, and, a subjective
evaluation considering peer-company market data. The overall performance of the
Corporation is determined by reviewing the success the Corporation achieved on
an annual basis in meeting its four defined value creation
measurements/financial goals, which are its production, reserves, cash flow and
net asset value and the corporate goals and objectives established by the
Board.
CASH PAYMENTS
1. BASE SALARY
One of the Committee's objectives is to position executive base
salaries to be competitive with other companies in the energy sector or the
market place in which the Corporation operates. The Committee uses and consults
available third party compensation surveys conducted on the industry for
companies of comparable size. Base salaries for executive officers were
previously set at the median level for similar positions in oil and natural gas
companies of comparable size. In addition, compensation in the form of
discretionary yearly cash bonuses was provided to recognize performance. These
cash payments were supplemented with the awarding of additional common stock
options. As the Corporation reached the upper limits of acceptable levels of
outstanding stock options, and was restricted in the amount awarded for any
further performance options, some base salaries have been increased beyond the
median level and the level of cash bonuses has been increased. The Committee
believes this is appropriate to ensure that overall compensation levels remain
competitive to attract and retain quality employees while also ensuring that
overall compensation levels do not become excessive.
2. CASH BONUSES
The Committee believes that incentive or "at risk" compensation
motivates individual performance to maximize shareholder value and aligns
executive officer performance with the Corporation's objectives and shareholder
interests. The discretionary cash bonus awarded is based on the individual's
performance over the year in contributing to the Corporation meeting its four
defined value creation measurements/financial goals. In 2006, cash bonuses
awarded to executive officers were generally set at 80% of the normalized
targeted levels to reflect the Corporation's not reaching all of its internal
production targets.
The corporate performance cash bonuses paid twice yearly to employees
and executive officers in the conventional operations are based on the
Corporation's performance using key performance measurements approved by the
Committee to determine the Corporation's performance and which include
production volumes, safety and environmental risk management targets, cost of
production and capital efficiency. The Corporation failed to meet all of the
targets established and accordingly the corporate performance cash bonus was
not paid out at its maximum amount in 2006.
13
LONG TERM INCENTIVE PLANS
1. STOCK OPTION PLAN
The Committee believes that, to the extent possible, granting of stock
options should be used to augment the overall compensation package and the
Corporation has a long-standing policy of awarding stock options to all of its
executive officers and employees. To remain competitive with its industry peer
group the Committee believes it is important that the Corporation has an option
plan available to provide parity with compensation levels within the industry.
The Corporation's option plan is structured so that the exercise price can not
be lower than market value at the time of granting options, the options are
vested over five years commencing one year after granting and no re-pricing of
options is allowed. These options provide an incentive for all employees and
officers to ensure they are striving to maximize shareholder value. Directors
are not eligible to receive options under the option plan unless they provide
ongoing day-to-day management services to the Corporation. The Board believes
this established policy of awarding stock options meets the Corporation's
business objectives provided the total number of options outstanding at any
time is limited to a maximum of 10% of the Corporation's outstanding common
shares. No one person can hold options pursuant to the option plan of more than
5% of the outstanding Common Shares nor is it possible for Insiders, as a
group, to hold options amounting to 10% of the outstanding Common Shares and
the aggregate number of Common Shares issuable to Insiders under all share
based compensation plans of the Corporation including Options at any time and
in any one year period can not exceed 10% of the outstanding Common Shares of
the Corporation.
During 2003 the Corporation amended its option plan to facilitate
holders of options to receive a cash payment of the difference between the
market price of the Common Shares on the Toronto Stock Exchange ("TSX") and the
exercise price of the options in lieu of Common Shares. This amendment ratified
by the shareholders in 2004 reduces the amount of dilution in the Corporation
as no additional Common Shares are issued if the cash election is made by the
option holder. Concurrently with this amendment the Corporation adopted the
accounting practice of reporting as an expense the intrinsic cost associated
with granting stock options.
In 2006, stock options other than to new employees hired during the
year were granted twice to the executive officers and employees. The first
grant was made in early 2006 to reflect results of annual compensation reviews
undertaken in late 2005 and completed in early 2006 while the second grant was
made in late 2006 to reflect results of the annual compensation reviews
completed in late 2006.
2. STOCK SAVINGS PLAN
The Corporation has established a Stock Savings Plan for all of its
full-time employees. Under this plan, employees may elect to contribute up to
10% of their gross salary and the Corporation contributes one and one-half
times the contributions of the employees. The funds are deposited with a
trustee to purchase Common Shares of the Corporation through TSX. The
Corporation's portion of the contributions vests to the employee who has less
than five years of continuous participation in the plan over a two-year period
provided the employee does not leave the employment of the Corporation for any
reason prior to the vesting dates. The Corporation's portion of the
contributions vests on January 1 of each year to the employee who has five
years of continuous participation in the plan provided the employee does not
leave the employment of the Corporation for any reason prior to the vesting
date. As at December 31, 2006 the trustee was holding a total of 4,540,067
Common Shares of the Corporation pursuant to the terms of the Stock Savings
Plan.
A similar plan to the Stock Savings Plan was also adopted for all
permanent U.K. employees, entitled CNR International (U.K.) Limited Profit
Sharing Scheme (the "Scheme"). Effective December 31, 2002, due to changes in
U.K. tax legislation, the Scheme was discontinued and a share incentive plan
was adopted for all permanent U.K. employees entitled "CNR International (U.K.)
Limited Share Incentive Plan (the "SIP"). Under the terms of the SIP, each
employee can participate by contributing from (pound)10 to a maximum of
(pound)125 per month not to exceed 10% of the employee's monthly salary. A
matching contribution not to exceed two times the contribution of the employee
is made by CNR International (U.K.) Limited. The funds are deposited with a
trustee to purchase Common Shares of the Corporation through TSX. To benefit
fully from U. K. tax legislation governing SIPs, the purchased shares must be
held for a period of 5 years to be eligible for tax relief. As at December 31,
2006 the trustee was holding a total of 124,414 Common Shares of the
Corporation pursuant to the terms of the Scheme and 179,783 Common Share of the
Corporation pursuant to the terms of the SIP.
14
3. SHARE BONUS PLAN
The Share Bonus Plan provides a form of compensation which combines
share ownership in the Corporation by its employees without dilution or the
granting of stock options. This plan awards a cash bonus based on performance
of the employee and overall performance of the Corporation which is used by a
trustee to acquire Common Shares of the Corporation through TSX. The Common
Shares acquired are held by the trustee pursuant to the terms of the Stock
Savings Plan and, provided the employee does not leave the employment of the
Corporation for any reason, the Common Shares vest to that employee equally
over a three-year period. If the employee leaves the employment of the
Corporation for any reason, the unvested Common Shares purchased pursuant to
the Share Bonus Plan are forfeited by the Employee under the terms of the plan.
This plan provides additional share ownership in the Corporation by its
executive officers and employees.
4. HORIZON OIL SANDS LONG TERM INCENTIVE PLAN
The Corporation has adopted the Horizon Oil Sands Long Term Incentive
Plan under which executive officers and employees can benefit upon the
successful completion of Phase 1 of the Horizon Oil Sands Project, subject to
the Corporation, the executive officers and the individual employee meeting
established performance elements. The Committee reviewed and recommended the
approval of the performance elements by the Board who subsequently approved the
performance elements at the time of Project sanction on February 9, 2005. The
individual bonuses paid are on a prorated basis depending on (i) position and
level of responsibility of the individual to the successful completion of Phase
1 of the Horizon Oil Sands Project, (ii) meeting the established performance
elements comprised of capital expenditure targets, rate of production,
operating costs per barrel of synthetic crude, and, onsite safety targets, and,
(iii) the individual employee meeting personal performance objectives. Personal
performance objectives are set for the period the Horizon Long Term Incentive
Plan is in effect.
The Compensation Committee believes the Corporation's methods of
compensation detailed above provide a balanced program of immediate and
longer-term incentive compensation that is reasonable while at the same time
provide the Corporation's executive officers and employees with a competitive
total compensation package.
Submitted by the Compensation Committee
James S. Palmer, Chair
Catherine M. Best
Norman F. McIntyre
Frank J. McKenna
Eldon R. Smith
EXECUTIVE COMPENSATION
The Corporation, which does not have a Chief Executive Officer
position, has 4 executive officers in addition to the Chief Financial Officer
position who meet the requirements to be classified as Named Executive Officers
pursuant to National Instrument 51-102. The following table sets forth all
annual remuneration for services in all capacities to the Corporation and its
subsidiaries for the fiscal year ended December 31, 2006, 2005 and 2004 in
respect of each Named Executive Officer. There were no Restricted Shares or
Restricted Share Units issued or long term incentive payment pay-outs made to
any of the Named Executive Officers in the last three fiscal year-ends.
15
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-----------------------------------
SECURITIES
SHARE BONUS OTHER ANNUAL UNDER OPTIONS/ ALL OTHER
NAME AND PRINCIPAL SALARY BONUS PLAN COMPENSATION SARS GRANTED COMPENSATION
POSITION YEAR ($) ($) ($)(4) ($)(1) (#)(3) ($)(2)
- ------------------- ---- ------- ------- ----------- ------------ -------------- ------------
Steve W. Laut 2006 500,000 266,875 650,000 NIL 175,000/NIL 58,673
President and Chief 2005 408,173 306,411 750,000 NIL 150,000/NIL 50,625
Operating Officer 2004 337,500 200,000 450,000 NIL 200,000/NIL 43,500
John G. Langille 2006 325,000 104,875 250,000 NIL 50,000/NIL 48,750
Vice-Chairman 2005 325,000 130,688 312,500 NIL 35,000/NIL 50,625
2004 337,500 135,000 303,750 NIL 60,000/NIL 45,000
Tim S. McKay 2006 330,000 104,575 250,000 NIL 60,000/NIL 45,000
Senior Vice-President, 2005 300,000 130,250 312,500 NIL 35,000/NIL 44,394
North American 2004 295,962 110,000 247,500 NIL 50,000/NIL 40,500
Operations
Real J. H. Doucet 2006 330,000 125,000 312,500 NIL 60,000/NIL 66,808
Senior 2005 300,000 125,000 312,500 NIL 35,000/NIL 40,558
Vice-President, 2004 290,769 100,000 247,500 NIL 50,000/NIL 28,000
Oilsands
Douglas A. Proll 2006 330,000 129,575 312,500 NIL 60,000/NIL 42,404
Chief Financial 2005 293,308 135,016 325,000 NIL 35,000/NIL 37,500
Officer and Senior 2004 270,000 125,000 281,250 NIL 50,000/NIL 26,000
Vice-President,
Finance
- -----------
Notes:
(1) The value of perquisites and benefits for each Named Executive Officer is
less than the lesser of $50,000 and 10% of total annual salary and bonus.
(2) All Other Compensation comprises the vested portion in each year of the
Corporation's contribution to the Corporation's Stock Savings Plan for
each Named Executive Officer. The Corporation's contribution to the
Corporation's Stock Savings Plan for each Named Executive Officer vests on
January 1 each year. The unvested portion of the Corporation's
contribution in 2006 as at December 31, 2006 for each Named Executive
Officer and which vested January 1, 2007 is as follows: S.W. Laut,
$75,000; J.G. Langille, $48,750; T.S. McKay, $49,500; R.J.H. Doucet
$49,500 and, D.A. Proll, $49,500.
(3) The options awarded for 2004 and 2005 were awarded for performance in the
year and were granted in the subsequent year. The number of options
reported as granted for the year 2004 have been adjusted for the 2005
two-for-one subdivision of Common Shares. The options awarded for 2006
performance were awarded in December 2006.
(4) Share Bonus Plan awards are in the form of a cash payment deposited to the
Employee Stock Savings Plan for the purpose of purchasing Common Shares of
the Corporation on TSX, on behalf of the Named Executive Officer. The
Common Shares vest equally over three years each July 1 for Common Shares
purchased for 2004 performance, each September 1 for Common Shares
purchased for 2005 performance and each May 1 for Common Shares purchased
for 2006 performance. Any dividends declared payable on the Common Shares
by the Corporation are also paid on the unvested shares and dividends paid
are used to purchase additional Common Shares which vest immediately. The
number of Common Shares purchased on TSX for each Named Executive Officer
for (i) 2006 performance at an average purchase price of $54.69 is as
follows: S.W. Laut, 11,886; J.G. Langille, 4,571; T.S. McKay, 4,571;
R.J.H. Doucet 5,714 and, D.A. Proll, 5,714; (ii) 2005 performance at an
average purchase price of $61.1396 is as follows: S.W. Laut, 12,267; J.G.
Langille, 5,111; T.S. McKay, 5,111; R.J.H. Doucet 5,111 and, D.A. Proll,
5,316; and (iii) 2004 performance at an average purchase price of $25.1223
(adjusted for the 2005 two-for-one stock split) is as follows: S.W. Laut,
17,912; J.G. Langille, 12,090; T.S. McKay, 9,852; R.J.H. Doucet, 9,852
and, D.A. Proll, 11,194 (adjusted for the 2005 two-for-one stock split).
If the Named Executive Officer leaves the employment of the Corporation
for any reason, the unvested Common Shares purchased pursuant to the Share
Bonus Plan are forfeited by the Named Executive Officer under the terms of
the plan.
The Compensation Committee also reviews the compensation paid to
Messrs. A.P. Markin, Chairman, and N.M. Edwards Vice-Chairman. After taking
into account all the factors to determine the compensation levels to be paid
for 2006 performance, on December 12, 2006, Messrs A.P. Markin and N.M. Edwards
were each awarded $200,000 as a cash bonus and $1,000,000 pursuant to the
Corporation's Share Bonus Plan. Share Bonus Plan awards are used to purchase on
TSX, Common Shares of the Corporation through the Employee Stock Savings Plan.
The shares vest equally over three years. If Mr. A.P. Markin or Mr. N.M.
Edwards no longer provides management services
16
to the Corporation for any reason, is not a director or does not become an
officer or employee, any portion of the shares purchased for the share bonus
award on his behalf and not yet vested is forfeited under the plan. Performance
options are typically granted annually for past fiscal year performance. For
fiscal years 2004 and 2005 the performance options were awarded after calendar
year-end. For fiscal year 2006 performance, options were granted in December
2006. Therefore, each of Messrs. A.P. Markin and N.M. Edwards were granted
options in January 2006 on account of fiscal year 2005 activities on 150,000
Common Shares at a price of $59.85 per share and 175,000 options were granted
in December 2006 at a price of $61.18 on account of fiscal year 2006
activities. During the most recently completed financial year Mr. A.P. Markin
exercised an aggregated 144,000 stock options for Common Shares realizing an
aggregated value of $4,586,720. During the most recently completed financial
year Mr. N.M. Edwards exercised an aggregated 300,000 stock options for Common
Shares realizing an aggregated value of $15,768,750.
OPTIONS GRANTED DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
Options granted at $59.85 per share to the Named Executive Officers
during the most recently completed financial year were in respect of the 2005
annual performance review and are reported in the Annual Compensation table for
2005 for each Named Executive Officer. Options granted at $61.18 per share to
the Named Executive Officers during the most recently completed financial year
were in respect of the 2006 annual performance review and are reported in the
Annual Compensation table for 2006 for each Named Executive Officer.
MARKET VALUE OF
PER CENT OF SECURITIES
SECURITIES TOTAL UNDERLYING
UNDER OPTIONS/SARS OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR ON THE
GRANTED EMPLOYEES IN BASE PRICE DATE OF GRANT
NAME (#) FINANCIAL YEAR ($/SECURITY) ($/SECURITY) EXPIRATION DATE
- ---- ------------ -------------- ------------- ------------- ----------------
Steve W. Laut....... 175,000 2.48 $61.18 $61.18 January 11, 2012
150,000 $59.85 $59.85 February 6, 2011
John G. Langille.... 50,000 0.65 $61.18 $61.18 January 11, 2012
35,000 $59.85 $59.85 February 6, 2011
Tim S. McKay........ 60,000 0.73 $61.18 $61.18 January 11, 2012
35,000 $59.85 $59.85 February 6, 2011
Real J.H. Doucet.... 60,000 0.73 $61.18 $61.18 January 11, 2012
35,000 $59.85 $59.85 February 6, 2011
Douglas A. Proll.... 60,000 0.73 $61.18 $61.18 January 11, 2012
35,000 $59.85 $59.85 February 6, 2011
AGGREGATED OPTIONS EXERCISED DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR AND FINANCIAL YEAR-END OPTION VALUES
VALUE OF
SECURITIES UNEXERCISED
ACQUIRED AGGREGATE VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON EXERCISE REALIZED AT FY-END (#) AT FY-END(1) ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ---------- --------------- ------------------------- -------------------------
Steve W. Laut......... 200,000 10,072,500 336,000/559,000 16,419,800/8,656,200
John G. Langille...... 44,000(2) 2,387,550(2) 148,000/207,000 7,227,040/5,004,410
Tim S. McKay.......... 80,000(2) 4,048,050(2) 222,000/193,000 11,291,150/4,359,300
Real J.H. Doucet...... 152,000(2) 7,816,670(2) 94,000/191,000 4,596,700/4,254,250
Douglas A. Proll...... 20,000(2) 1,051,950(2) 294,000/191,000 14,884,950/4,254,250
- -----------
Notes:
(1) The closing price of the Corporation's Common Shares on TSX on December
31, 2006 was $62.15.
(2) Includes those options surrendered for cash by Messrs. J.G. Langille, T.S.
McKay, R.J.H. Doucet and D.A. Proll in the amounts of 44,000, 30,000,
128,000 and 20,000 options respectively for which the Corporation paid to
the Named Executive Officer the difference between the exercise price of
the option and the closing price of the Common Shares on TSX on the day
prior to the exercise of the option and for which no Common Shares of the
Corporation were issued.
17
COMMON SHARES HELD BY NAMED EXECUTIVE OFFICERS
The following table sets forth, as of March 14, 2007, the beneficial
ownership and market value of the Common Shares of the Corporation held by the
Named Executive Officers:
MEETS REQUIRED
COMMON SHARES MARKET VALUE SHARE OWNERSHIP
NAME (#) ($) LEVELS
- ---- ------------- ------------ ---------------
Steve W. Laut................ 363,533 22,041,006 Yes
John G. Langille............. 842,388 51,073,984 Yes
Tim S. McKay................. 369,364 22,394,539 Yes
Real J.H. Doucet............. 67,000 4,062,210 Yes
Douglas A. Proll............. 108,921 6,603,880 Yes
DIRECTORS' COMPENSATION
The Corporation pays compensation comprised of cash and Common Shares
to its non-management directors in their capacity as directors. The
compensation for 2006 was a cash annual retainer of $20,000 plus 2,000 Common
Shares purchased on Toronto Stock Exchange ("TSX") and $1,500 for each regular
and special Board of Director's meeting attended in person or by telephone and
each meeting of a committee of the Board attended in person or by telephone.
Chairs of a committee of the Board receive an annual retainer of $7,500.
Non-Chair members of a committee receive an annual retainer fee of $4,500.
Directors who reside out of province and attend board or committee meetings in
person receive a time and travel fee of $4,000 per round trip. No fees are paid
for the time required preparing for board or committee meetings. The Nominating
and Corporate Governance Committee reviews the fees paid to the directors to
ensure the Corporation's fees are reasonable and competitive.
The review undertaken by the Nominating and Corporate Governance
Committee resulted in a change to the mandatory share ownership requirement of
directors and the Directors are now required to acquire and hold a minimum
aggregate market value of 3 times the annual retainer paid to directors
ensuring the share ownership requirements of the directors are aligned with the
interests of shareholders.
The Compensation Committee as one of its primary responsibilities
reviews and approves compensation to directors who provide ongoing day-to-day
management services to the Corporation. No annual retainer or meeting fees are
paid to such directors. The compensation paid to Messrs. A.P. Markin, N.M.
Edwards, J.G. Langille and S.W. Laut for 2006 is reported in this Information
Circular under "Executive Compensation". Fees paid to non-management directors
for 2006 are reported in the following table.
CASH COMMITTEE PURCHASE OF
ANNUAL CHAIR COMMITTEE MEETING OUT OF COMMON TOTAL 2006 COMMON
RETAINER RETAINER RETAINER FEES PROVINCE FEES SHARES FEES SHARES
NAME $ $ $ $ $ $ $ PURCHASED
-------- --------- --------- ------- ------------- ----------- ---------- ---------
C.M. Best.......... 20,000 7,500 4,500 21,000 -- 115,745 168,745 2,000
N.M. Edwards....... -- -- -- -- -- -- -- --
G.A. Filmon........ 20,000 -- 9,000 19,500 16,000 88,400 152,900 2,000
G. D. Giffin....... 20,000 7,500 4,500 21,000 12,000 115,745 180,745 2,000
J.G. Langille...... -- -- -- -- -- -- -- --
S.W. Laut.......... -- -- -- -- -- -- -- --
K.A.J. MacPhail.... 20,000 -- 9,000 18,000 -- 115,745 162,745 2,000
A.P. Markin........ -- -- -- -- -- -- -- --
N.F. McIntyre...... 20,000 -- 13,500 22,500 -- 115,745 171,745 2,000
F.J. McKenna....... 10,000 -- 4,500 7,500 4,000 50,855 76,855 1,000
J.S. Palmer........ 20,000 7,500 9,000 24,000 -- 115,745 176,245 2,000
E.R. Smith......... 20,000 7,500 4,500 19,500 -- 115,475 167,245 2,000
D.A. Tuer.......... 20,000 7,500 9,000 25,500 -- 115,745 177,745 2,000
TOTAL 2006 FEES:................................................................................. $ 1,434,970
18
EQUITY COMPENSATON PLAN INFORMATION
NUMBER OF SECURITIES SECURITIES REMAINING
TO BE ISSUED AVAILABLE TOTAL NUMBER
UPON EXERCISE OF FOR FUTURE ISSUANCE OF SECURITIES
OUTSTANDING UNDER EQUITY ISSUABLE UPON
OPTIONS AT WEIGHTED-AVERAGE COMPENSATION PLANS EXERCISE OF
DECEMBER 31, EXERCISE PRICE AT DECEMBER 31, OPTIONS AT
2006 OF OUTSTANDING 2006 DECEMBER 31,
PLAN CATEGORY (#) OPTIONS (#) 2006
- ------------- -------------------- ---------------- -------------------- --------------
Equity compensation plans
approved by security
holders.................... 34,431,067 $33.77 5,237,145 39,668,212
Equity compensation plans
not approved by security
holders.................... NIL NIL NIL NIL
Total........................ 34,431,067 $33.77 5,237,145 39,668,212
Percent of Outstanding
Shares..................... 6.4% 1.0% 7.4%
The Corporation has a long-standing policy of awarding stock options to
its officers and employees under the Amended Compiled and Restated Stock Option
Plan (the "SOP"). The options are considered a part of the employee's
compensation package to provide parity with compensation levels within the
industry. Directors are not eligible to receive options under the SOP unless
they provide ongoing day-to-day management services to the Corporation. The
Board believes this established policy of awarding stock options meets the
Corporation's business objectives provided the total number of options
outstanding at any time is limited to a maximum of 10% of the Corporation's
outstanding common shares. The Corporation believes it is in its best interests
to continue to award stock options to new employees as part of their
compensation package to remain competitive with the Corporation's peer group.
The aggregate number of Shares that may be available for issuance, from time to
time, under the Plan as approved by shareholders shall not exceed 25,850,000
Shares prior to adjustment for the May 2004 two-for-one stock split and the May
2005 two-for-one stock split.
The options issued pursuant to the SOP are non-assignable, have an
expiry term not to exceed six years and are exercisable at 20% per year
commencing one year after the date of grant. The exercise price of the options
is determined as the closing market price on TSX the day prior to the granting
of the options. The Corporation does not provide any form of financial
assistance to facilitate the purchase of securities pursuant to the SOP.
Options are exercisable only during the term of employment with the Corporation
and the option holder is not subject to a collective agreement as defined in
the SOP text. No one person can hold options pursuant to the SOP of more than
5% of the outstanding Common Shares nor is it possible for directors and
officers, as a group, to hold options amounting to 10% of the outstanding
Common Shares and the aggregate number of Common Shares issuable to Insiders
under all share based compensation plans of the Corporation including Options
at any time and in any one year period can not exceed 10% of the outstanding
Common Shares of the Corporation.
If an Optionee ceases to be a Service Provider to the Corporation for
any reason other than death or by retirement all unvested options granted to
such Optionee shall immediately terminate and be of no further force and effect
and all vested options granted to such Optionee and not exercised within 30
days of the Optionee ceasing to be a Service Provider for any reason other than
death or retirement, shall terminate. If an Optionee shall die while being a
Service Provider to the Corporation, any Option which has vested at the date of
death shall be exercisable for three months after the date of death and if not
exercised, shall terminate at the end of three months from date of death. If an
Optionee ceases to be a Service Provider to the Corporation by reason of
retirement, any vested Option held by such Optionee at the effective date of
retirement shall be exercisable for a period of 30 days from the effective date
of retirement and if not exercised, shall terminate at the end of 30 days from
the effective date of retirememt.
Pursuant to terms of the SOP, the Board may amend, modify or terminate
the SOP if and when it is advisable at the discretion of the Board without
disinterested shareholder approval except for those amendments specifically
requiring disinterested shareholder approval as mandated by TSX. No amendment
as it may relate to UK Approved Options under the terms of the SOP shall take
effect unless and until the approval of the Board of Inland Revenue has been
obtained for such amendment. The SOP was amended in 2003 to facilitate holders
of options to receive a cash payment in lieu of a share certificate and this
amendment was ratified by the shareholders in 2004. Further amendments were
approved by the Board of Directors in January 2006 clarifying who, under the
definition of "Service Provider" as defined in the SOP, is eligible to receive
options under the terms of the SOP and entitlement of an optionee to continue
as an option holder under the terms of the SOP. A further amendment of a
housekeeping nature
19
was approved by the Board of Directors of the Corporation on March 15, 2007
clarifying that the aggregate number of shares issuable to Insiders under all
share based compensation plans of the Corporation including Options at any time
and in any one year period can not exceed 10% of the outstanding Common Shares
of the Corporation.
As at March 14, 2007, the number of common shares issuable pursuant to
equity compensation plans approved by the shareholders is:
PER CENT OF
NUMBER OF OUTSTANDING
SECURITIES COMMON SHARES
To be issued upon exercise of outstanding
options..................................... 31,027,872 5.8%
Available for Future Issuance................. 7,523,681 1.4%
--------- ----
Total number of securities issuable........... 38,551,553 7.2%
========== ====
PERFORMANCE GRAPH
The following performance graph illustrates, over the five year period
ended December 31, 2006, the cumulative return to shareholders of an investment
in the common shares of the Corporation compared to the cumulative total
shareholder return on the S&P/TSX Composite Index and the S&P/TSX Oil & Gas
Exploration and Production Index, assuming the reinvestment of dividends, where
applicable.
CUMULATIVE VALUE OF A $100 INVESTMENT
[LINE CHART OMITTED]
AT DECEMBER 31 2001 2002 2003 2004 2005 2006
- -------------- ---- ---- ---- ---- ---- ----
CANADIAN NATURAL RESOURCES LIMITED........................... $100 123 173 274 617 668
S&P/TSX COMPOSITE INDEX...................................... $100 88 111 127 158 185
S&P/TSX OIL & GAS EXPLORATION & PRODUCTION INDEX............. $100 116 140 196 341 345
INDEBTEDNESS OF SENIOR OFFICERS AND DIRECTORS
The Corporation does not as a general practice extend loans to its
directors, senior officers or any of their associates or affiliates. No
directors and senior officers or any of their associates or affiliates have
been indebted to the Corporation at any time during the last completed
financial year ending December 31, 2006.
20
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
Effective February 17, 2006 the Corporation entered into a contract of
liability insurance in the amount of U.S. $50,000,000 per policy year for the
benefit of the directors and officers of the Corporation against liability
incurred by them in their capacity as a director or officer of the Corporation
or of a subsidiary in the event the Corporation can not or is unable to
indemnify them. A one year policy for a premium of U.S. $492,500 was purchased
that expired February 17, 2007. The liability insurance was renewed for a one
year term expiring February 17, 2008 for a premium of U.S. $492,500. There is
no deductible for this coverage.
INTERESTS OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
The management of the Corporation is not aware of any material
interest, direct or indirect, of any director, any proposed nominee for
director or 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 any such person in any transaction which was
commenced in the last completed financial year of the Corporation or in any
proposed transaction which in either case has materially affected or will
materially affect the Corporation or its subsidiaries.
II. INFORMATION ON ITEMS TO BE ACTED UPON
SOLICITATION OF PROXIES
This Information Circular (the "Circular") is furnished in connection
with THE SOLICITATION OF PROXIES BY THE MANAGEMENT OF CANADIAN NATURAL
RESOURCES LIMITED (the "Corporation") for use at the Annual And Special Meeting
of the Shareholders of the Corporation to be held at the Metropolitan Centre,
333 - 4th Avenue S.W. in the City of Calgary, in the Province of Alberta,
Canada, on Thursday May 3, 2007 at 3:00 o'clock in the afternoon (MDT) (the
"Meeting") and at any adjournments thereof, for the purposes set forth in the
accompanying Notice of Meeting. The solicitation of proxies will be primarily
by mail, but may also be by telephone, telegraph or oral communications by the
directors, officers and regular employees of the Corporation, at no additional
compensation. The costs of preparation and mailing of the Notice of Meeting,
Instrument of Proxy and this Information Circular as well as any such
solicitation referred to above will be paid by the Corporation. Except as
otherwise stated, the information contained herein is given as of March 14,
2007.
APPOINTMENT OF PROXY AND DISCRETIONARY AUTHORITY
A SHAREHOLDER HAS THE RIGHT TO DESIGNATE A PERSON OR COMPANY (WHO NEED
NOT BE A SHAREHOLDER OF THE CORPORATION) OTHER THAN ALLAN P. MARKIN AND JOHN G.
LANGILLE, THE MANAGEMENT DESIGNEES, TO ATTEND AND ACT FOR HIM AT THE MEETING.
SUCH RIGHT MAY BE EXERCISED BY INSERTING IN THE BLANK SPACE PROVIDED THE NAME
OF THE PERSON OR COMPANY TO BE DESIGNATED AND DELETING THEREFROM THE NAMES OF
THE MANAGEMENT DESIGNEES OR BY COMPLETING ANOTHER PROPER INSTRUMENT OF PROXY
and, in either case, depositing the resulting instrument of proxy at
Computershare Trust Company of Canada, 9th Floor, 100 University Avenue,
Toronto, Ontario, Canada M5J 2Y1 at least 24 hours before the Meeting for which
it is to be used. The instrument appointing a proxy shall be in writing and
shall be executed by the shareholder or his attorney authorized in writing or,
if the shareholder is a corporation, under its corporate seal or by an officer
or attorney thereof duly authorized.
ALL SHARES REPRESENTED AT THE MEETING BY PROPERLY EXECUTED PROXIES WILL
BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS OF THE SHAREHOLDERS ON ANY BALLOT
THAT MAY BE CALLED FOR AND WHERE A CHOICE WITH RESPECT TO ANY MATTER TO BE
ACTED UPON HAS BEEN SPECIFIED IN THE INSTRUMENT OF PROXY, THE SHARES
REPRESENTED BY THE PROXY WILL BE VOTED IN ACCORDANCE WITH SUCH SPECIFICATION.
IN THE ABSENCE OF ANY SUCH SPECIFICATIONS, THE MANAGEMENT DESIGNEES, IF NAMED
AS PROXY, WILL VOTE IN FAVOUR OF ALL THE MATTERS SET OUT THEREIN. IF A
SHAREHOLDER APPOINTS A PERSON DESIGNATED IN THE FORM OF PROXY OR NOMINEE AND
WHERE A CHOICE WITH RESPECT TO ANY MATTERS TO BE ACTED UPON HAS NOT BEEN
SPECIFIED, THE PROXY WILL BE VOTED IN FAVOUR OF ALL THE MATTERS SET OUT
THEREIN.
THE ENCLOSED FORM OF PROXY, WHEN PROPERLY SIGNED, ALSO CONFERS
DISCRETIONARY AUTHORITY UPON THE PERSONS NAMED THEREIN WITH RESPECT TO
AMENDMENTS OR VARIATIONS TO MATTERS IDENTIFIED IN THE NOTICE OF MEETING AND
WITH RESPECT TO OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING, OR AT
ANY ADJOURNMENT THEREOF. THE
21
MANAGEMENT OF THE CORPORATION DOES NOT KNOW OF ANY MATTERS WHICH MAY BE
PRESENTED AT THE MEETING, OTHER THAN THE MATTERS SET FORTH IN THE NOTICE BUT IF
THE OTHER MATTERS OR AMENDMENTS OR VARIATIONS DO PROPERLY COME BEFORE THE
MEETING, IT IS THE INTENTION OF THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY
TO VOTE SUCH PROXY ACCORDING TO THEIR BEST JUDGEMENT.
REVOCATION OF PROXIES
A SHAREHOLDER OR INTERMEDIARY WHO HAS GIVEN A PROXY, OR HIS ATTORNEY
AUTHORIZED IN WRITING, MAY REVOKE IT AS TO ANY MATTER UPON WHICH A VOTE HAS NOT
ALREADY BEEN CAST PURSUANT TO THE AUTHORITY CONFERRED BY THE PROXY, by
instrument in writing executed by the shareholder or his attorney authorized in
writing, or, if the shareholder is a corporation, under its corporate seal or
by an officer or attorney thereof duly authorized in writing, and deposited
either at the registered office of the Corporation or the office of
Computershare Trust Company of Canada, 9th Floor, 100 University Avenue,
Toronto, Ontario, Canada M5J 2Y1 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 deposited with the Chair of such Meeting on
the day of the Meeting or adjournment thereof, or by executing a proxy bearing
a later date and depositing the new proxy at the office of Computershare Trust
Company of Canada, 9th Floor, 100 University Avenue, Toronto, Ontario, Canada
M5J 2Y1 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 Chair of such Meeting on the day of the Meeting or any adjournment
thereof. In addition, a proxy may be revoked by the shareholder personally
attending at the Meeting and voting his shares.
BENEFICIAL HOLDER OF SHARES
THE INFORMATION SET FORTH IN THIS SECTION IS OF SIGNIFICANT IMPORTANCE
TO MANY SHAREHOLDERS OF THE CORPORATION, AS A SUBSTANTIAL NUMBER OF THE
SHAREHOLDERS DO NOT HOLD COMMON SHARES IN THEIR OWN NAME. SHAREHOLDERS WHO DO
NOT HOLD THEIR COMMON 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 CAN BE RECOGNIZED AND ACTED UPON AT THE
MEETING. IF COMMON SHARES ARE LISTED IN AN ACCOUNT STATEMENT PROVIDED TO A
SHAREHOLDER BY A BROKER, THEN IN ALMOST ALL CASES THOSE COMMON SHARES WILL MORE
LIKELY BE REGISTERED UNDER THE NAME OF THE BROKER OR AN AGENT OF A 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 HELD BY
BROKERS OR THEIR NOMINEES CAN ONLY BE VOTED UPON THE INSTRUCTIONS OF THE
BENEFICIAL SHAREHOLDERS. WITHOUT SPECIFIC INSTRUCTIONS, BROKERS/NOMINEES ARE
PROHIBITED FROM VOTING COMMON SHARES FOR THEIR CLIENTS. THE CORPORATION DOES
NOT KNOW FOR WHOSE BENEFIT THE COMMON SHARES REGISTERED IN THE NAME OF CDS &
CO. ARE HELD. THEREFORE, BENEFICIAL SHAREHOLDERS CANNOT BE RECOGNIZED AT THE
MEETING FOR PURPOSES OF VOTING THE COMMON SHARES IN PERSON OR BY WAY OF PROXY,
EXCEPT AS SET OUT BELOW.
APPLICABLE REGULATORY POLICY REQUIRES INTERMEDIARIES/BROKERS TO SEEK
VOTING INSTRUCTIONS FROM BENEFICIAL SHAREHOLDERS IN ADVANCE OF MEETINGS. EVERY
INTERMEDIARY/BROKER HAS ITS OWN MAILING PROCEDURES AND PROVIDES ITS OWN RETURN
INSTRUCTIONS, WHICH SHOULD BE CAREFULLY FOLLOWED BY BENEFICIAL SHAREHOLDERS IN
ORDER TO ENSURE THAT THE COMMON SHARES ARE VOTED AT THE MEETING. OFTEN, THE
FORM OF PROXY SUPPLIED TO A BENEFICIAL SHAREHOLDER BY ITS BROKER IS IDENTICAL
TO THAT PROVIDED TO REGISTERED SHAREHOLDERS. HOWEVER, ITS PURPOSE IS LIMITED TO
INSTRUCTING THE REGISTERED SHAREHOLDER HOW TO VOTE ON BEHALF OF THE BENEFICIAL
SHAREHOLDER. THE MAJORITY OF BROKERS NOW DELEGATE RESPONSIBILITY FOR OBTAINING
INSTRUCTIONS FROM CLIENTS TO ADP INVESTOR COMMUNICATIONS ("ADP"). ADP TYPICALLY
MAILS A SCANNABLE VOTING INSTRUCTION FORM IN LIEU OF THE FORM OF PROXY. THE
BENEFICIAL SHAREHOLDER IS ASKED TO COMPLETE AND RETURN THE VOTING INSTRUCTION
FORM TO THEM BY MAIL OR FACSIMILE. ALTERNATIVELY, THE BENEFICIAL SHAREHOLDER
CAN CALL A TOLL-FREE NUMBER TO VOTE THE SHARES HELD BY THE BENEFICIAL
SHAREHOLDER. ADP THEN TABULATES THE RESULTS OF ALL INSTRUCTIONS RECEIVED AND
PROVIDES APPROPRIATE INSTRUCTIONS RESPECTING THE VOTING OF COMMON SHARES TO BE
REPRESENTED AT THE MEETING. A BENEFICIAL SHAREHOLDER RECEIVING A VOTING
INSTRUCTION FORM CANNOT USE THAT VOTING INSTRUCTION FORM TO VOTE COMMON SHARES
DIRECTLY AT THE MEETING AS THE VOTING INSTRUCTION FORM MUST BE RETURNED AS
DIRECTED BY ADP WELL IN ADVANCE OF THE MEETING IN ORDER TO HAVE THE COMMON
SHARES VOTED.
IF YOU ARE A BENEFICIAL SHAREHOLDER AND WISH TO VOTE IN PERSON AT THE
MEETING, PLEASE CONTACT YOUR BROKER OR AGENT WELL IN ADVANCE OF THE MEETING TO
DETERMINE HOW YOU CAN DO SO.
22
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
March 14, 2007 is the record date for determination of Common Shares of
the Corporation entitled to notice of and to vote at the Meeting, provided that
to the extent a shareholder transfers the ownership of any of his shares after
the record date and the transferee of those shares establishes that he owns
such shares and requests not later than 5 days before the Meeting that his name
be included on the shareholders' list, such transferee is entitled to vote such
shares at the Meeting.
As at March 14, 2007 the Corporation has 539,019,919 voting securities
outstanding as fully paid and non-assessable Common Shares without par value,
each share carrying the right to one vote.
To the knowledge of the directors and officers of the Corporation no
person or company beneficially owns, directly or indirectly, or exercises
control or direction over voting securities carrying more than 10% of the
voting rights attached to all voting securities of the Corporation.
ELECTION OF DIRECTORS
The affairs of the Corporation are managed by a Board of Directors who
are elected annually at each Annual General Meeting of Shareholders and hold
office until the next Annual General Meeting, or until their successors are
duly elected or appointed or until a director vacates the office or is replaced
in accordance with the Articles and By-laws of the Corporation. The Corporation
has an Audit Committee, which is comprised of Ms. C.M. Best as Chair, Messrs.
G.D. Giffin, G.A. Filmon and D.A. Tuer. The Corporation does not have an
Executive Committee.
The following table sets forth the name of each of the persons proposed
to be nominated for election as a director (the "Nominee"); the Nominee's
principal occupation at present and within the preceding 5 years, except with
respect to those directors elected at the last annual meeting of shareholders;
all positions and offices in the Corporation held by the Nominee; other
directorships held by the Nominee; the date the Nominee was first elected, or
appointed a director; and the number and market value of shares of the
Corporation that the Nominee has advised are beneficially owned, directly or
indirectly, and controlled or directed by the Nominee as of March 14, 2007. In
accordance with the resolution of the Board of Directors adopted at their
meeting held on March 2, 2007, any Nominee in an uncontested election who
receives a greater number of shares withheld than shares voted in favour of
their appointment must tender their resignation to the Board for Board
consideration and to take effect upon acceptance of the resignation by the
Board.
====================================================================================================================================
MARKET
NUMBER OF VALUE OF
COMMON SHARES COMMON SHARES BEGAN
POSITION BENEFICIALLY BENEFICALLY PERIOD OF
PRESENTLY OWNED/CONTROLLED OWNED/CONTROLLED SERVICE AS
NAME HELD PRINCPAL OCCUPATION OR DIRECTED(6) OR DIRECTED ($) DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
Catherine M. Best, FCA Director(2)(4) Executive Vice-President Risk 5,240 317,701 November,
Calgary, Alberta (age 53) Management and Chief Financial 2003
Canada Officer Calgary Health Region.
Currently serving on the board
of directors of Enbridge Income
Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
N. Murray Edwards Vice-Chairman President, Edco Financial 11,039,605 669,331,251 September,
Calgary/Banff, Alberta and Director(3) Holdings Ltd. (Private 1988
Canada (age 47) Management and Consulting
Company). Currently serving
on the board of directors of
Ensign Energy Services Inc.
and Magellan Aerospace
Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
23
====================================================================================================================================
MARKET
NUMBER OF VALUE OF
COMMON SHARES COMMON SHARES BEGAN
POSITION BENEFICIALLY BENEFICALLY PERIOD OF
PRESENTLY OWNED/CONTROLLED OWNED/CONTROLLED SERVICE AS
NAME HELD PRINCPAL OCCUPATION OR DIRECTED(6) OR DIRECTED ($) DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
Honourable Gary A. Filmon Director(1)(2) Consultant, Exchange Group 3,000 181,890 February,
Winnipeg, Manitoba (age 64) (business consulting firm 2006
Canada based in Winnipeg, Manitoba).
Prior thereto, served as
Premier of Manitoba from
1988 to 1999. Currently
serving on the board of
directors of MTS Allstream
Inc., Pollard Banknote
Income Fund, Arctic Glacier
Income Trust, Exchange
Industrial Income Fund,
Wellington West Capital Inc.
and FWS Construction Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Ambassador Gordon D. Director(1)(2) Senior Partner, McKenna Long 13,428 814,140 May,
Giffin (age 57) & Aldridge LLP (law firm). 2002
Atlanta, Georgia Currently serving on the
U. S. A. board of directors of Bowater
Inc.; Canadian National
Railway; Canadian Imperial
Bank of Commerce; Ontario
Energy Savings Corp. and
Transalta Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
John G. Langille Vice-Chairman Vice-Chairman of the 842,388 51,073,984 June,
Calgary, Alberta and Director Corporation. 1982
Canada (age 61)
- ------------------------------------------------------------------------------------------------------------------------------------
Steve W. Laut President and President and Chief Operating 363,533 22,394,539 August,
Calgary, Alberta Chief Officer. Prior thereto 2006
Canada Operating Executive Vie-President,
Officer and Operations of the Corporation
Director 2001 to 2003 and most recently
(age 49) Chief Operating Officer of the
Corporation 2003 to 2005.
- ------------------------------------------------------------------------------------------------------------------------------------
Keith A.J. MacPhail Director(3)(5) Chairman, President and Chief 157,794 9,567,050 October,
Calgary, Alberta (age 50) Executive Officer, Bonavista 1993
Canada Energy Trust and Chairman of
Nu Vista Energy Ltd. Currently
serving on the board of
directors of Bonavista Energy
Trust and Nu Vista Energy Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Allan P. Markin Chairman and Chairman of the Corporation. 7,928,288 480,692,101 January, 1989
Calgary, Alberta Director(5)
Canada (age 61)
- ------------------------------------------------------------------------------------------------------------------------------------
24
====================================================================================================================================
MARKET
NUMBER OF VALUE OF
COMMON SHARES COMMON SHARES BEGAN
POSITION BENEFICIALLY BENEFICALLY PERIOD OF
PRESENTLY OWNED/CONTROLLED OWNED/CONTROLLED SERVICE AS
NAME HELD PRINCPAL OCCUPATION OR DIRECTED(6) OR DIRECTED ($) DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
Norman F. McIntyre Director(3)(4)(5) An independent businessman. 5,000 303,150 July,
Calgary, Alberta (age 61) Prior thereto Executive Vice- 2005
Canada President, Petro-Canada from
1995 to 2002 and most recently
President, Petro-Canada 2002
to 2004. Currently serving on
the board of directors of Signal
Energy Inc. and Petro Andina
Resources, a private company.
- ------------------------------------------------------------------------------------------------------------------------------------
Frank J. McKenna Director(1)(4) Deputy Chair, TD Bank Financial 4,000 242,520 August,
Cap Pele, New Brunswick (age 59) Group. Prior thereto Premier 2006
Canada of New Brunswick from 1987 to
1997; Counsel to Atlantic
Canada law firm McInnes Cooper
from 1998 to 2005, and mostly
recently Canadian Ambassador to
the United States from 2005 to
2006. Currently serving on the
board of directors of Brookfield
Asset Management Inc. and,
Perseus Private Equity a
private equity fund management
company.
- ------------------------------------------------------------------------------------------------------------------------------------
James S. Palmer, C.M., Director(3)(4)(5) Chairman and a Partner of 164,678 9,984,427 May,
A.O.E., Q.C (age 78) Burnet, Duckworth & Palmer LLP 1997
Calgary, Alberta (law firm). Currently serving
Canada serving on the board of
directors of Magellan Aerospace
Corporation; Rally Energy Corp.
and Energy Resource Alberta. He
has held a number of other
directorships in the past and
is past Chairman of Telus
Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Eldon R. Smith,OC, M.D. Director(4)(5) Emeritus Professor and Former 34,952 2,119,140 May,
Calgary, Alberta (age 67) Dean, Faculty of Medicine, 1997
Canada University of Calgary. Currently
serving on the board of directors
of Vasogen Inc.; Sernova Corp.;
and Overlord Financial Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
25
====================================================================================================================================
MARKET
NUMBER OF VALUE OF
COMMON SHARES COMMON SHARES BEGAN
POSITION BENEFICIALLY BENEFICALLY PERIOD OF
PRESENTLY OWNED/CONTROLLED OWNED/CONTROLLED SERVICE AS
NAME HELD PRINCPAL OCCUPATION OR DIRECTED(6) OR DIRECTED ($) DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
David A. Tuer Director(1)(2)(3) Executive Vice-Chairman, BA 19,254 1,167,370 May,
Calgary, Alberta (age 57) Energy Inc. Currently serving 2002
Canada on the board of directors of
BA Energy Inc., Rockwater
Capital Corporation; Daylight
Resources Trust; Xtreme Coil
Drilling Corp. and, Altalink
Management Ltd., a private
company.
====================================================================================================================================
- -----------
Notes:
(1) Member of the Nominating and Corporate Governance Committee
(2) Member of the Audit Committee
(3) Member of the Reserves Committee
(4) Member of the Compensation Committee
(5) Member of the Health, Safety and Environmental Committee
(6) Does not include Common Shares issuable upon exercise of stock options
held as at March 14, 2007 as follows: N.M. Edwards, 805,000; J.G.
Langille, 295,000, A.P. Markin, 573,000 and S.W. Laut 735,000.
Mr. N.M. Edwards previously was a director of Imperial Metals Limited,
a corporation engaged in both oil and gas and mining operations, in the year
prior to that corporation implementing a plan of arrangement under the COMPANY
ACT (British Columbia) and under the COMPANIES' CREDITORS ARRANGEMENT ACT
(Canada) which resulted in the separation of its two businesses. The
reorganization resulted in the creation of two public corporations, Imperial
Metals Corporation and IEI Energy Inc. (now Rider Resources Ltd.) both of which
trade on TSX. Mr. F.J. McKenna was a director of Alphanet Telecom Inc. which
was assigned into bankruptcy February 8, 1999.
APPOINTMENT OF AUDITORS
The Board of Directors of the Corporation upon the recommendation of
the Audit Committee of the Board of Directors has selected the firm of
PricewaterhouseCoopers LLP ("PwC") to be nominated at the Meeting for
re-appointment as the Corporation's independent auditors for the ensuing year
at remuneration to be fixed by the Audit Committee of the Board of Directors.
Before PwC was recommended for appointment the Audit Committee met with
management and PwC to review and discuss the proposed fiscal year 2007 audit
and non-audit services to be rendered, the relationship of PwC with the Audit
Committee, and, the independence of PwC. The Corporation's independent auditor
since its inception has been PwC. The Corporation has been advised by PwC that
it is the policy of PwC to rotate the senior audit partner for the Corporation
at least once every five years.
The Audit Committee of the Board of Directors in 2006 approved
specified audit and non-audit services to be performed by PwC. The services
provided include: (i) the annual audit of the Corporation's internal controls
and December 31, 2006 consolidated financial statements included in the Annual
Information Form and Form 40-F, reviews of the Corporation's unaudited first,
second, and third quarter interim Consolidated Financial Statements, audits of
certain of the Corporation's subsidiary companies' annual financial statements
as well as other audit services provided in connection with statutory and
regulatory filings; (ii) audit related services related to debt covenant
compliance and Crown Royalty Statements; (iii) tax related services related to
expatriate personal tax and compliance as well as other corporate tax return
matters; and (iv) non-audit services related to accessing resource materials
through PwC's accounting literature library.
26
Fiscal 2006 fees accrued to PwC will not exceed those amounts shown in
the table below.
FEES ACCRUED TO AUDITORS PRICEWATERHOUSECOOPERS LLP
SERVICES FISCAL 2006 FISCAL 2005
- -------- ----------- -----------
Audit..................................... $3,126,287 $1,227,835
Audit Related............................. $121,353 $266,923
Tax Related............................... $134,025 $39,331
Other..................................... $9,516 $7,290
------ ------
$3,391,181 $1,541,379
STOCK OPTION PLAN AMENDMENT
The Corporation has a long-standing policy of awarding stock options to
its officers and employees under the Amended Compiled and Restated Stock Option
Plan (the "SOP"). The options are considered a part of the employee's
compensation package to provide parity with compensation levels within the
industry. Directors are not eligible to receive options under the SOP unless
they provide ongoing day to day management activities to the Corporation. The
Board of Directors believes this established policy of awarding stock options
meets the Corporation's business objectives provided the total number of
options outstanding at any time is limited to a maximum of 10% of the
Corporation's outstanding common shares.
The options issued pursuant to the SOP have an expiry term of six years
and are exercisable at 20% per year commencing one year after the date of grant
or at the discretion of the Board but in no event no longer than six years. No
one person can hold options pursuant to the SOP of more than 5% of the
outstanding Common Shares nor is it possible for Insiders, as a group, to hold
options amounting to 10% of the outstanding Common Shares and the aggregate
number of Common Shares issuable to Insiders under all share based compensation
plans of the Corporation including Options at any time and in any one year
period can not exceed 10% of the outstanding Common Shares of the Corporation.
Under subsection 613(d) of the TSX Company Manual, an amendment
procedure for amending a security based compensation arrangement such as the
SOP must be approved by shareholders. At the time of implementation of
subsection 613(d) the SOP contained a general amendment provision which
permitted an amendment to the SOP subject to Board and TSX approval. At the
time of implementation of subsection 613(d), TSX issued a Staff Notice to
clarify situations in which this "general amendment" provision would be
sufficient for amendments to a security based compensation arrangement without
shareholder approval. This clarification was intended to be temporary and
effective June 30, 2007, unless shareholder approval has been received for a
detailed amending provision of a security based compensation arrangement, all
amendments to a security based compensation arrangement will require
shareholder approval. At the Meeting, shareholders will be asked to vote on an
ordinary resolution approving an amendment to the SOP as described below
including a detailed amendment provision. These proposed amendments if approved
will leave unchanged the material terms of the SOP.
SUMMARY OF PROPOSED AMENDMENTS
The Board has approved amendments to the SOP designed to: (i) extend
the expiry date of Options which would otherwise expire during a "blackout
period"; and (ii) set forth the types of amendments to the SOP and Options
previously granted which would require Shareholder approval, (collectively, the
"Amendments").
The first Amendment is designed to address the circumstance in which an
Option expires during a time when the Corporation is under a self-imposed
blackout period which prevents an Optionee from exercising Options. The
Corporation has, and intends to have in the future, policies which mandate
trading blackouts in certain circumstances, such as preceding the release of
financial results. TSX considers self-imposed blackout periods to be an example
of good corporate governance and trading policies, and the general prohibition
in TSX rules against extending the expiry date of an Option without shareholder
approval was not intended to penalize listed issuers, and their insiders and
employees, for this type of positive corporate behaviour. The proposed
amendment will provide that the expiration date for an Option shall be extended
to the seventh business day following the later of: (a) the last day of a
blackout period; and (b) the date the Option would otherwise expire, if the
expiration date would otherwise occur in the time period commencing at the
commencement of the blackout period to which the Optionee is subject and ending
on the
27
second business day subsequent to the blackout period. It is intended that this
proposed amendment will pertain to Options previously granted, as well as
Options granted in the future. The blackout expiration term will only be
available when there is a blackout period self-imposed by the Corporation
(i.e., it will not apply to the Corporation or its insiders being the subject
of a cease trade order) and the blackout expiration term will be available to
all eligible participants under the SOP, under the same terms and conditions.
The second Amendment clarifies the provisions of the SOP and terms of
Options granted which may not be amended without the consent of the
Shareholders. The SOP will be amended to provide that without Shareholder
approval the Board may amend, suspend or discontinue the SOP or amend Options
granted under the SOP at any time; provided, however, that approval by
Shareholders shall be obtained for any amendment which: (a) increases the
number of Common Shares issuable pursuant to the SOP; (b) would reduce the
exercise price of an outstanding Option, including a cancellation of an Option
and re-grant of an Option in conjunction therewith, constituting a reduction of
the exercise price of the Option; (c) would extend the term of any Option
granted under the SOP beyond the expiration date of the Option except as
provided in the above paragraph respecting black out periods; (d) amends the
SOP to allow for a maximum term of an Option to be greater than six years; (e)
expands the authority of the Corporation to permit assignability of Options
beyond that contemplated by the SOP; (f) adds to the categories of participants
who may be designated for participation in the SOP; and (g) amends the SOP to
provide for other types of compensation through equity issuance.
Without limiting the foregoing, the Board may make the following types
of amendments to the Plan without seeking shareholder approval: (a) amendments
of a "housekeeping" nature including any amendment for the purpose of curing
any ambiguity, error or omission in the Plan or to correct or supplement any
provision of the Plan that is inconsistent with any other provision of the SOP;
(b) amendments necessary to comply with the provisions of applicable law; (c)
amendments respecting administration of the Plan; (d) any amendments to the
vesting provisions of the Plan or any Option; (e) any amendment to the early
termination provisions of the SOP or any Option, whether or not such Option is
held by an Insider, provided such amendment does not entail an extension beyond
the original expiry date; (f) the addition or modification of a cashless
exercise feature, payable in cash or shares, which provide for a full deduction
of the number of underlying shares from the SOP reserve, (g) amendments
necessary to suspend or terminate the SOP, and (h) any other amendment, whether
fundamental or otherwise, not requiring shareholder approval under applicable
law (including rules, regulations and policies of TSX).
Approval by the shareholders of the amendments to the SOP is required
by the policies of TSX and, therefore, must be approved in accordance with
Section 140 of the BUSINESS CORPORATIONS ACT (Alberta), in the form of an
ordinary resolution. An affirmative vote of more than 50% of the Common Shares
represented and voted at the meeting is necessary to approve the following
resolution.
AS THE PROPOSED AMENDMENTS TO THE SOP WILL NOT RESULT IN AN INCREASE IN
THE NUMBER OF COMMON SHARES THAT MAY BE ISSUED PURSUANT TO THE SOP AND ARE
ADMINISTRATIVE IN NATURE ONLY AND THE AMENDMENTS WHICH CAN NOT BE MADE WITHOUT
SHAREHOLDER APPROVAL ARE CLEARLY SET OUT, THE BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE IN FAVOUR OF THE PROPOSED RESOLUTION RELATING TO
AMENDMENTS TO THE SOP.
WHEREAS the Corporation, pursuant to the policies of TSX, wishes to
obtain the requisite shareholder approval of certain amendments to its
Amended Compiled and Restated Stock Option Plan (the "SOP") as more
particularly described in the Information Circular of the Corporation
dated March 14, 2007:
BE IT RESOLVED as an ordinary resolution of the shareholders of the
Corporation that:
1. The amendments to the SOP, substantially as set forth in the
Information Circular of the Corporation dated March 14, 2007 be
and they are hereby ratified, confirmed and approved; and
2. Any director or officer of the Corporation be and is hereby
authorized to do all such things and execute all such documents
and instruments as may be necessary or desirable to give effect
to the foregoing resolutions.
28
OTHER MATTERS
Management is not aware of any matters to come before the Meeting other
than those set forth in the Notice of Meeting. If other matters properly come
before the Meeting, it is the intention of the persons named in the form of
proxy to vote the same in accordance with their best judgement in such matters.
APPROVAL OF CIRCULAR
The contents and sending of this Information Circular has been approved
in substance by the Board of Directors of the Corporation.
DATED at Calgary, Alberta, this 14th day of March 2007.
29
SCHEDULE "A" TO INFORMATION CIRCULAR DATED MARCH 14, 2007
CANADIAN NATURAL RESOURCES LIMITED
(THE "CORPORATION")
BOARD OF DIRECTORS CORPORATE GOVERNANCE GUIDELINES
The Board of Directors (the "Board") of the Corporation has adopted the
following Corporate Governance Guidelines (the "Guidelines") to assist the
Board in meeting its responsibilities. These Guidelines reflect the Board's
commitment to monitor the effectiveness of policy and decision making both at
the Board and management level, with a view to enhancing long-term shareholder
value. The Board requires the directors, officers and employees of the
Corporation to comply with all legal and regulatory requirements and encourages
them to adhere to the highest ethical standards in the performance of their
duties.
Directors must perform their duties, keeping in mind their fiduciary
duty to the shareholders and the Corporation. That duty includes the obligation
to ensure that the Corporation's disclosures contain accurate information that
fairly presents the Corporation and its operations to shareholders and the
public in conformity with applicable laws, rules and regulations.
BOARD RESPONSIBILITIES
The Board is responsible for the stewardship of the Corporation and
overseeing the business and affairs of the Corporation. In executing this role,
the Board shall oversee the conduct, direction and results of the business. In
turn, management is mandated to conduct the day-to-day business and affairs of
the Corporation and is responsible for implementing the Board's strategies,
goals and directions. The Board and its members shall at all times act in the
best interest of the Corporation and its actions shall reflect its
responsibility of establishing proper business practices and high ethical
standards expected of the Corporation.
In discharging the Board's stewardship obligations, the Board assumes
responsibility for the following matters:
1. adoption of a strategic planning process and approval of a
strategic plan which takes into account, among other things, the
opportunities and risks of the business;
2. the identification of the principal risks of the Corporation's
business and ensuring the implementation of appropriate systems
to manage these risks;
3. succession planning; including appointing, training and
monitoring senior management;
4. a communication and disclosure policy for the Corporation; and,
5. the integrity of the Corporation's internal control and
management information systems.
COMPOSITION OF THE BOARD
CRITERIA FOR BOARD OF DIRECTORS
The Nominating and Corporate Governance Committee, comprised entirely
of Directors who qualify as independent directors under the requirements of the
regulatory bodies to which the Corporation is subject to ("Independent
Directors"), is responsible for identifying, screening and recommending
director nominations for appointment as members of the Board. The Board,
however, will ultimately be responsible for nominating for appointment new
directors and for the selection of its Chair.
The Board requires that a majority of the Board qualify as Independent
Directors. Nominees for director are selected on the basis of, among other
things, broad perspective, integrity, independence of judgment, experience,
expertise, diversity, ability to make independent analytical inquiries,
understanding of the Corporation's business environment and willingness to
devote adequate time and effort to Board responsibilities.
ELECTION OF DIRECTORS BY SHAREHOLDERS
Election of director nominees by shareholders in an uncontested
election shall be by majority vote. A director nominee who receives less than
50% of the votes cast in favour of the election of the director nominee shall
forthwith submit to the Board, his or her resignation, to take effect upon
acceptance by the Board. The Board shall exercise
30
discretion in considering the resignation of the director nominee and if it is
deemed to be in the best interests of the Corporation and the shareholders and,
absent any extenuating circumstances deemed by the Board to exist, the Board
shall accept such resignation within 90 days of having received the resignation
of the director nominee.
INDEPENDENCE
As stated previously, the Board shall be comprised of a majority of
Independent Directors. For a director to be independent, the Nominating and
Corporate Governance Committee and the Board must affirmatively determine that
an individual is independent, taking into account any applicable regulatory
requirements and such other factors as the Nominating and Corporate Governance
Committee and Board may deem appropriate; provided, however, that there shall
be a three (3) year period during which they shall not be deemed independent,
for the following individuals; (i) former employees of the Corporation, or of
its independent auditor; (ii) former employees of any company whose
compensation committee includes an officer of the Corporation; and (iii)
immediate family members of the individuals specified in (i) and (ii) above.
The Nominating and Corporate Governance Committee and the Board will review
annually the relationship that each director has with the Corporation (either
directly; or as a partner, shareholder or officer of an organization that has a
relationship with the Corporation). Following this review, only those Directors
who the Board and the Nominating and Corporate Governance Committee
affirmatively determine meet any applicable regulatory independence
requirements and have no material relationship with the Corporation will be
considered Independent Directors. The basis for any determination that a
relationship is not material will be published in the Corporation's annual
proxy information circular.
Directors have an obligation to inform the Board of any material
changes in their circumstances or relationships that may impact their
designation by the Board as "independent".
SIZE OF THE BOARD
The Articles of the Corporation provide that the Board will have not
less than three (3) or more than fifteen (15) members. The Board will fix the
exact number of directors at any time after considering the recommendation of
the Nominating and Corporate Governance Committee. The size of the Board should
enable its members to effectively and responsibly discharge their
responsibilities to the Corporation.
OTHER COMPANY DIRECTORSHIPS
The Corporation does not have a policy limiting the number of other
company boards of directors upon which a Director may sit. The Nominating and
Corporate Governance Committee shall consider the number of other company
boards or comparable governing bodies on which a prospective nominee is a
member.
Directors are expected to advise the Chair of the Board and the Chair
of the Nominating and Corporate Governance Committee in advance of accepting
any other company directorships or any assignment to the audit committee or
compensation committee of the Board of Directors of any other company.
TERM LIMITS
The Board does not favour the concept of mandatory term limits. The
Board believes term limits have the disadvantage of losing the contribution of
Directors who have been able to develop, over a period of time, increasing
insight into the Corporation and its operations and therefore provide an
increasing contribution to the Board as a whole.
RETIREMENT POLICY
Under the Board's retirement policy Directors will not stand for
re-election after reaching the age of 75, subject to grandfathering any current
directors, currently over the age 75. The Nominating and Corporate Governance
Committee has the responsibility to evaluate annually the qualifications of
each Director.
31
DIRECTOR RESPONSIBILITIES
Each Director shall have the responsibility to exercise his or her
business judgment in good faith and in a manner that he or she reasonably
believes to be in the best interests of the Corporation. A Director is expected
to spend the time and effort necessary to properly discharge such Director's
responsibilities. Accordingly, a Director is expected to regularly attend
meetings of the Board and committees on which such Director sits (with the
understanding that on occasion a Director may be unable to attend a meeting)
and to review in advance the meeting materials.
DIRECTOR ORIENTATION
New members of the Board shall be provided an orientation, which
includes background information about the Corporation's business, current
issues, corporate strategies, general information about the Board and
Committees and Director's duties and responsibilities and meetings with key
operations personnel. Each Director is expected to participate in continuing
educational programs in order to maintain the necessary level of expertise to
perform his or her responsibilities as a Director.
BOARD MEETINGS
The Board has four (4) regularly scheduled meetings each year
appropriately scheduled for the Board to meet its responsibilities. In
addition, unscheduled Board meetings may be called upon proper notice being
given at any time to address specific needs of the Corporation. One half (or
where one half of the Directors is not a whole number, the whole number which
is closest to and less than one half) of the Directors then in office
constitutes a quorum for Board of Directors meetings.
The Chair of the Board and the Vice-Chair will establish the agenda for
each Board meeting. Any member of the Board may request that an item be
included on the agenda and at any Board meeting raise subjects that are not on
the agenda for that meeting.
At the invitation of the Board, members of senior management and
independent advisors recommended by the Chair, a Vice-Chair or the President
and Chief Operating Officer attend Board meetings or portions thereof for the
purpose of participating in discussions thereby providing certain expertise
and/or insight into items that may be open for discussion. The Corporate
Secretary attends all Board meetings except where there is a specific reason
for the Corporate Secretary to be excluded.
Materials for the review, discussion, and/or action of the Board are,
to the extent practicable, to be distributed sufficiently in advance of
meetings, thereby allowing time for review prior to the meeting. It is
recognized that in certain circumstances written materials may not be available
in advance of the meeting.
Immediately following the termination of each regularly scheduled Board
meeting, the Independent Directors shall meet in executive session without the
presence of management to discuss whatever topics it believes are appropriate.
These meetings will be chaired by the Chair of the Nominating and Corporate
Governance Committee. Additional executive sessions may be scheduled from time
to time as determined by a majority of the Independent Directors in
consultation with the Chair of the Board and Chair of the Nominating and
Corporate Governance Committee.
BOARD COMMITTEES
The Board has five (5) standing committees:
1. Audit Committee;
2. Compensation Committee;
3. Nominating and Corporate Governance Committee;
4. Reserves Committee; and
5. Health, Safety and Environmental Committee.
The purpose and responsibilities for each of these committees are
outlined in committee charters adopted by the Board.
32
The Audit Committee, the Compensation Committee and the Nominating and
Corporate Governance Committee shall each be comprised entirely of Independent
Directors. The Reserves Committee and the Health, Safety and Environmental
Committee shall be comprised of a majority of Independent Directors. The Chair
of each of the Reserves Committee and the Health, Safety and Environmental
Committee shall be an Independent Director.
Appointment of directors to standing committees shall be the
responsibility of the Board, having received the recommendation of the
Nominating and Corporate Governance Committee, based upon consultations with
the members of the Board and the Chair.
The Board may constitute additional standing committees or special
committees with special mandates as may be required or appropriate from time to
time.
The Chair of each committee will determine the agenda, frequency and
length of the committee meetings consistent with any requirements set forth in
the committee's charter.
BOARD EVALUATION
The Nominating and Corporate Governance Committee will sponsor an
annual self-assessment of the Board's performance as well as the performance of
each committee of the Board, the results of which will be discussed with the
full Board and each committee. In preparing these assessments, the Nominating
and Corporate Governance Committee, circulates to each Director a questionnaire
through which each Director can provide input. The Nominating and Corporate
Governance Committee will also utilize the results of this self-evaluation
process in assessing and determining the characteristics and critical skills
required of prospective candidates for appointment to the Board and making
recommendations to the Board with respect to assignments of Board members to
various committees.
DIRECTOR COMPENSATION
Senior management of the Corporation shall report periodically to the
Nominating and Corporate Governance Committee on the status of the
Corporation's Director compensation practices in relation to the other
companies of comparable size and within the industry. The Corporation believes
in a mix of both cash and stock based compensation. The Nominating and
Corporate Governance Committee will recommend any changes in Director
compensation to the Board for approval.
Director's fees are the only compensation an Audit Committee member may
receive from the Corporation.
SHARE OWNERSHIP
Directors are required to acquire and hold Common Shares of the
Corporation with a minimum aggregate market value of three times the annual
retainer fee paid to directors within five (5) years from the date of their
appointment as a director of the Corporation.
Directors are required to confirm annually for the Corporation's
Information Circular their share ownership position and that such position is
their beneficial and legal ownership position and has not been hedged or
otherwise sold.
EVALUATION OF SENIOR MANAGEMENT
Senior management is responsible for the day to day operation of the
Corporation. Operations are to be conducted in a manner, which reflects the
standards established by the Board, and with the goal of implementing and
fulfilling the policies, strategies and goals established by the Board. The
Board shall determine the specific or general terms and levels of authority for
senior management as it may consider advisable from time to time.
The Corporation does not have a CEO designation. This role is delegated
by the Board to the senior management of the Corporation including the Chair of
the Board, the Vice-Chairs of the Board, the President and Chief Operating
Officer. The Board establishes annual corporate objectives which senior
management is responsible for meeting and assesses senior management's
performance annually. This evaluation is based upon objective criteria
previously authorized by the Board including consideration of the performance
of the business of the Corporation, accomplishment of short and long term
strategic objectives, material business accomplishments and development of
management. The evaluation is used by the Compensation Committee, as part of a
formal process of considering compensation of senior management with reference
to the performance in meeting the corporate objectives.
33
The President and Chief Operating Officer reports to the Compensation
Committee annually with respect to senior management succession issues and the
status of the Corporation's on-going program for management development.
DIRECTOR ACCESS TO MANAGEMENT, EMPLOYEES AND ADVISORS
Each Director may consult with any manager or employee of the
Corporation or with any independent advisor to the Corporation at any time.
In appropriate circumstances, the committees of the Board are
authorized to engage independent advisors as may be necessary in the
circumstances.
In discharging his or her obligations, an individual director may
engage outside advisors, at the expense of the Corporation, in appropriate
circumstances.
CODE OF INTEGRITY, BUSINESS ETHICS AND CONDUCT
The Nominating and Corporate Governance Committee periodically assesses
the Corporation's Code of Integrity, Business Ethics and Conduct policies to
ensure it addresses appropriate topics and complies with the appropriate
regulatory bodies regulations and recommend any appropriate changes to the
Board for approval. The Board must approve any waiver of the code for any
member of senior management or Directors. Any waiver must be disclosed in
accordance with relevant regulatory requirements.
MODIFICATIONS TO CORPORATE GOVERNANCE GUIDELINES
The Nominating and Corporate Governance Committee will annually review
these Corporate Governance Guidelines and recommend any appropriate changes to
the Board for approval.
34
CANADIAN NATURAL RESOURCES LIMITED
INSTRUMENT OF PROXY
SOLICITED BY THE MANAGEMENT OF CANADIAN NATURAL RESOURCES LIMITED
FOR THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY MAY 3, 2007
The undersigned shareholder of Canadian Natural Resources Limited (the
"Corporation") hereby appoints Allan P. Markin, Chairman of the Board, or
failing him, John G. Langille, Vice-Chairman of the Corporation, or instead of
either of the foregoing, as nominee and proxy (the "Proxy") of the undersigned
with full power of substitution to attend and act on behalf of the undersigned
in respect of all Common Shares registered in the name of the undersigned at
THE ANNUAL AND SPECIAL MEETING OF HOLDERS OF COMMON SHARES OF THE CORPORATION
TO BE HELD AT 3:00 O'CLOCK IN THE AFTERNOON (MDT) ON THURSDAY THE 3RD DAY OF
MAY, 2007 (THE "MEETING"), AND AT ANY ADJOURNMENT OR ADJOURNMENTS THEREOF IN
THE SAME MANNER, TO THE SAME EXTENT AND WITH THE SAME POWERS AS IF THE
UNDERSIGNED WERE PRESENT AT THE MEETING OR ANY ADJOURNMENT OR ADJOURNMENTS
THEREOF; provided that the undersigned shareholder specifies and directs the
persons above named that the Common Shares registered in the name of the
undersigned shall be voted:
1. To vote on the election of directors of the Corporation for the ensuing
year, the nominees proposed by management described in the Information
Circular accompanying the Notice of Meeting and this Instrument of Proxy.
FOR WITHHOLD
--- --------
A) ALL nominees [_] [_]
OR individually as follows:
FOR WITHHOLD FOR WITHHOLD
--- -------- --- --------
B) Catherine M. Best [_] [_] Keith A.J. MacPhail [_] [_]
N. Murray Edwards [_] [_] Allan P. Markin [_] [_]
Honourable Gary A. Filmon [_] [_] Norman F. McIntyre [_] [_]
Ambassador Gordon D. Giffin [_] [_] Frank J. McKenna [_] [_]
John G. Langille [_] [_] James S. Palmer [_] [_]
Steve W. Laut [_] [_] Eldon R. Smith [_] [_]
David A. Tuer [_] [_]
2. TO VOTE FOR OR WITHHOLD FROM VOTING ON the appointment of
PricewaterhouseCoopers LLP, Chartered Accountants, Calgary, Alberta, as
auditors of the Corporation for the ensuing year and the authorization of
the Audit Committee of the Board of Directors of the Corporation to fix
their remuneration.
3. TO VOTE FOR OR AGAINST the ordinary resolution approving the amendments
to the Corporation's Amended Compiled and Restated Stock Option Plan as
outlined in the Information Circular.
4. At the discretion of the said Proxy, to vote on any permitted amendments
to or variations of any matters identified in the Notice of Meeting
enclosed herewith or other matters that may properly be brought before
the Meeting or any adjournments thereof.
UNLESS OTHERWISE INDICATED ABOVE, ON ANY BALLOT THAT
MAY BE CALLED FOR, THE COMMON SHARES REPRESENTED BY
THIS INSTRUMENT OF PROXY WILL BE VOTED FOR THE APPROVAL
OF ALL MATTERS SET OUT HEREIN. IF ANY AMENDMENTS TO THE
MATTERS IDENTIFIED IN THE NOTICE OF MEETING ARE
PROPOSED AT THE MEETING OR ANY ADJOURNMENT OR
ADJOURNMENTS THEREOF, OR IF ANY OTHER MATTERS PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT OR
ADJOURNMENTS THEREOF, DISCRETIONARY AUTHORITY IS HEREBY
CONFERRED WITH RESPECT THERETO.
THE UNDERSIGNED SHAREHOLDER OF THE CORPORATION HEREBY
RATIFIES AND CONFIRMS ALL THAT THE PROXY MAY DO BY
VIRTUE HEREOF. ANY INSTRUMENT OF PROXY PREVIOUSLY GIVEN
WITH RESPECT TO THE UNDERSIGNED SHARES IS HEREBY
REVOKED AND THIS INSTRUMENT OF PROXY MAY BE REVOKED AT
ANY TIME PRIOR TO THE EXERCISE THEREOF.
_______________________________________________________
Name of Shareholder
_______________________________________________________
Signature of Shareholder
_______________________________________________________
Number of Shares
DATED this _______ day of ______________________, 2007.
1. A SHAREHOLDER HAS THE RIGHT TO APPOINT A PROXY
HOLDER (WHO NEED NOT BE A SHAREHOLDER) OTHER THAN
THE PERSONS DESIGNATED ABOVE, TO ATTEND AND ACT FOR
SUCH SHAREHOLDER AT THE MEETING. TO EXERCISE THIS
RIGHT, THE SHAREHOLDER MUST INSERT THE NAME OF THE
DESIRED PERSON IN THE BLANK SPACE PROVIDED ABOVE
AND STRIKE OUT THE OTHER NAMES, OR MAY COMPLETE
ANOTHER APPROPRIATE INSTRUMENT OF PROXY.
2. THE INSTRUMENT OF PROXY MUST BE DATED AND MUST BE
EXECUTED BY THE SHAREHOLDER OR SUCH 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. IF THIS INSTRUMENT OF PROXY IS NOT
DATED IT SHALL BE DEEMED TO BEAR THE DATE ON WHICH
IT WAS MAILED TO THE SHAREHOLDER BY THE MANAGEMENT
OF THE CORPORATION.
3. THE INSTRUMENT OF PROXY WILL NOT BE VALID AND WILL
NOT BE ACTED ON OR VOTED UNLESS IT IS SIGNED AND
DELIVERED TO COMPUTERSHARE TRUST COMPANY OF CANADA,
9TH FLOOR, 100 UNIVERSITY AVENUE, TORONTO, ONTARIO
M5J 2Y1 NOT LATER THAN 24 HOURS BEFORE THE TIME OF
THE MEETING OR ANY ADJOURNMENT THEREOF.
CANADIAN NATURAL RESOURCES LIMITED
TO BENEFICIAL SHAREHOLDERS:
Securities laws provide shareholders with the opportunity to elect annually to
have their name added to an issuer's supplemental mailing list in order to
receive the Corporation's annual and interim reports containing the financial
statements and related Management Discussion and Analysis ("MD&A") by mail. A
request card similar to this one was sent to all beneficial holders with the
proxy solicitation material for the last shareholder meeting held on May 4,
2006. If you have returned the card with the appropriate box checked you will
receive under separate cover the 2006 Annual Report containing the financial
statements and related MD&A.
You may choose to access for the Corporation's 2007 reporting year, the
Corporation's 2007 annual and interim reports containing the financial
statements and related MD&A at the Corporation's website www.cnrl.com or
through the System for Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com once they become available rather than receiving them by mail.
To receive the Corporation's 2007 annual and interim reports containing the
financial statements and related MD&A by mail, you must register online at
www.computershare.com/ca/mailinglist OR return this card with the appropriate
box or boxes checked.
[_] To receive the interim report containing the 2007 Interim Financial
Statements and MD&A
[_] To receive the annual report containing the 2007 Annual Financial
Statements and MD&A
Name: (Please Print) __________________________________________________________
Address: ______________________________________________________________________
___________________________________________________ Postal Code:______________
Signature: ________________________________________ Date: ____________________
I certify that I am a shareholder.
___________
AFFIX
STAMP
HERE
___________
COMPUTERSHARE TRUST COMPANY OF CANADA
9TH FLOOR, 100 UNIVERSITY AVENUE
TORONTO, ONTARIO M5J 2Y1