Exhibit 5.2
Management Information Circular
IC - 1
MARSULEX
Executive Offices
111 Gordon Baker Road, Suite 300
Toronto, Ontario
M2H 3R1
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that an annual meeting of shareholders (the "Meeting")
of Marsulex Inc. (the "Company") will be held at 3:00 p.m. (Toronto time) on
May 19th, 2005 at St. Andrew's Club and Conference Centre, 27th Floor, 150
King Street West, Toronto, Ontario, Canada M5H 1J9 for the following purposes:
(a) to receive the financial statements of the Company for the fiscal
year ended December 31, 2004 and the report of the auditors
thereon;
(b) to elect directors for the ensuing year;
(c) to appoint auditors for the ensuing year and to authorize the
directors to fix the remuneration to be paid to the auditors; and
(d) to transact such other business as may properly come before the
meeting and any and all adjournments or postponements thereof.
The accompanying Management Information Circular provides additional
information relating to matters to be dealt with at the Meeting and forms part
of this Notice.
DATED at Toronto, Ontario this 21st day of March, 2005
By Order of the Board of Directors
/s/ Laurie Tugman
LAURIE TUGMAN
President and Chief Executive Officer
Note: If you are a holder of common shares of the Company and you are not able
to be present at the Meeting, please exercise your right to vote by signing
and returning the enclosed form of proxy to the Company's transfer agent,
Computershare Trust Company of Canada ("Computershare"), using the enclosed
envelope. Computershare must receive your proxy no later than 5:00 p.m.
(Toronto time) on May 18, 2005 or, if the meeting is adjourned or postponed,
48 hours (excluding Saturdays and statutory holidays) before any reconvened
meeting. Only shareholders of record at the close of business on March 23,
2005 will be entitled to notice of the meeting or any adjournment or
postponement thereof, except that a person who has acquired shares subsequent
to March 23, 2005 will be entitled to vote such shares upon making a written
request to that effect by May 18, 2005 to the Corporate Secretary of the
Company and establishing ownership of such shares.
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MANAGEMENT INFORMATION CIRCULAR MARSULEX
The purpose of the annual meeting of shareholders of Marsulex Inc. (the
"Meeting") is to elect directors, to appoint auditors and to receive the 2004
financial statements of the Company.
THE CORPORATION
Marsulex Inc. ("Marsulex" or the "Company") was amalgamated under the laws of
Canada by a Certificate of Amalgamation dated June 16, 1989. By a Certificate
of Amendment dated June 16, 1989, the Company amended its articles to remove
the private company restrictions. By a Certificate of Amendment dated November
19, 1996, Marsulex amended its articles by, among other things, changing the
minimum and maximum number of directors, amending the authorized capital and
reclassifying certain classes of shares to prepare for a rights offering.
PROXY SOLICITATION AND VOTING AT THE MEETING
Solicitation of Proxies by Management
This Management Information Circular is furnished in connection with the
solicitation by management of Marsulex of proxies to be used at the Company's
Meeting to be held on Thursday, May 19, 2005 at 3:00 p.m. (Toronto time) at
St. Andrew's Club and Conference Centre, 27th Floor, 150 King Street West,
Toronto, Ontario, Canada M5H 1J9. The costs of such solicitation will be borne
by the Company. The solicitation will be primarily by mail. However, the
directors, officers and employees of the Company may also solicit proxies by
telephone, facsimile or in person. The information contained herein, unless
otherwise indicated, is given as at March 1, 2005.
The persons specified in the enclosed form of proxy are representatives of
management and are directors and/or officers of the Company. Each shareholder
has the right to appoint a person (who need not be a shareholder of the
Company) other than the persons designated in the enclosed form of proxy, to
attend and act for the shareholder and on the shareholder's behalf at the
Meeting or any adjournment or postponement thereof. This right may be
exercised by striking out the names of the designated persons on the form of
proxy and inserting the name of the shareholder's nominee in the space
provided, or by completing another appropriate form of proxy. In either case,
the proxy form must be dated and be executed by the shareholder, or his or her
attorney authorized in writing. To be valid, proxies must be returned in the
enclosed envelope or deposited with the Company's transfer agent,
Computershare Trust Company of Canada ("Computershare"), at 100 University
Avenue, 9th Floor, Toronto, Ontario M5J 2Y1 Attention: Proxy Department.
Computershare must receive your proxy no later than 5:00 p.m. (Toronto time)
on May 18, 2005 or, if the Meeting is adjourned, 48 hours (excluding Saturdays
and statutory holidays) before any reconvened Meeting.
Only registered holders of common shares of the Company, or the persons they
appoint as their proxies, are permitted to attend and vote at the Meeting.
However, in many cases, common shares of the Company that are beneficially
owned by a holder (a "Non-Registered Holder") are registered either:
(a) in the name of an intermediary (an "Intermediary") that the
Non-Registered Holder deals with in respect of the shares, such as,
among others, banks, trust companies, securities dealers or brokers and
trustees or administrators of self-administered RRSPs, RRIFs, RESPs and
similar plans; or
(b) in the name of a clearing agency (such as The Canadian Depository for
Securities Limited) of which the Intermediary is a participant.
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In accordance with the requirements of National Instrument 54-101, the Company
will distribute copies of the Notice of Meeting, this Management Information
Circular, the form of proxy and the 2004 annual report (which includes
management's discussion and analysis) (collectively, the "Meeting Materials")
to the clearing agencies and Intermediaries for onward distribution to
Non-Registered Holders. Intermediaries are required to forward Meeting
Materials to Non-Registered Holders unless a Non-Registered Holder has waived
the right to receive them. Very often, Intermediaries will use service
companies to forward the Meeting Materials to Non-Registered Holders.
Generally, Non-Registered Holders who have not waived the right to receive
Meeting Materials will either:
(a) be given a proxy which has already been signed by the Intermediary
(typically by a facsimile, stamped signature) which is restricted as to
the number of shares beneficially owned by the Non-Registered Holder but
which is otherwise uncompleted. This form of proxy need not be signed by
the Non-Registered Holder. In this case, the Non-Registered Holder who
wishes to submit a proxy should otherwise complete the form of proxy in
accordance with its directions and deposit it with Computershare at 100
University Avenue, 9th floor, Toronto, Ontario, M5J 2Y1 Attention: Proxy
Department; or
(b) be given a voting instruction form which must be completed and signed by
the Non-Registered Holder in accordance with the directions on the
voting instruction form (which may in some cases permit the completion
of the voting instruction form by telephone).
The purpose of these procedures is to permit Non-Registered Holders to direct
the voting of the shares they beneficially own. Should a Non-Registered Holder
who receives either a proxy or a voting instruction form wish to attend and
vote at the meeting in person (or have another person attend and vote on
behalf of the Non-Registered Holder), the Non-Registered Holder should strike
out the names of the persons named in the proxy and insert the Non-Registered
Holder's (or such other person's) name in the blank space provided or, in the
case of a voting instruction form, follow the corresponding instructions on
that form. In either case, Non-Registered Holders should carefully follow the
instructions of their Intermediaries and their service companies.
VOTING IN PERSON
If you attend the Meeting in person, and are a registered shareholder, you can
cast one vote for each of your registered common shares on any or all
resolutions put before the Meeting. You may dissent from any matter proposed
at the Meeting by withholding from voting your common shares for the
resolutions at the Meeting.
VOTING OF PROXIES AND EXERCISE OF DISCRETION
The common shares of the Company (the "Common Shares") represented by proxies
in favour of the management representatives will be voted (or withheld from
voting) by the persons named in the form of proxy in accordance with the
directions of the shareholder appointing them. In the absence of any direction
to the contrary, it is intended that the Common Shares represented by proxies
in favour of the management representatives will be voted on any ballot for
the election of the directors and for the appointment of auditors, as
described in this Management Information Circular. The enclosed form of proxy
confers discretionary authority upon the persons named therein with respect to
matters not specifically mentioned in the Notice of Meeting but which may
properly come before the Meeting or any adjournment or postponement thereof.
At the date of this Management Information Circular, management knows of no
such amendments, variations or other matter to come before the Meeting other
than the matters referred to in the Notice of Meeting and routine matters
incidental to the conduct of the Meeting. If any further or other matter is
properly brought before the Meeting, the persons designated in the enclosed
form of proxy will vote thereon in accordance with their best judgement
pursuant to the discretionary authority conferred by such proxy with respect
to such matters.
REVOCABILITY OF PROXIES
A proxy given pursuant to this solicitation may be revoked, as to any motion
on which a vote has not already been cast pursuant to the authority conferred
by it, by instrument in writing, including another proxy bearing a later date,
executed by the shareholder or by his or her attorney authorized in writing
or, if the shareholder is a body corporate, by an officer or attorney thereof
duly authorized, and deposited either at the registered office of the Company
at any time up to and including the last business day preceding the day of the
Meeting or any adjournment or postponement thereof, or with the chair of the
Meeting on the day of the Meeting, or any adjournment or postponement thereof,
or in any other manner permitted by law.
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A Non-Registered Holder may revoke a voting instruction form or a waiver of
the right to receive Meeting Materials and to vote given to an Intermediary at
any time by written notice to the Intermediary, except that an Intermediary is
not required to act on a revocation of a voting instruction form or of a
waiver of the right to receive Meeting Materials and to vote that is not
received by the Intermediary at least seven days prior to the meeting.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The holders of record of Common Shares as at the close of business on March
23, 2005 (the "Record Date") are entitled to receive notice of the Meeting and
will be entitled to vote at the Meeting, except that a transferee of such
Common Shares acquired after the Record Date shall be entitled to vote the
transferred Common Shares at the Meeting if he or she produces properly
endorsed certificates for such Common Shares or otherwise establishes that he
or she owns such Common Shares and demands, by written request delivered to
the Corporate Secretary of the Company at its registered office (111 Gordon
Baker Road, Suite 300, Toronto, Ontario, M2H 3R1) no later than May 18, 2005,
that his or her name be included in the list of shareholders entitled to vote
at the Meeting.
As of March 1, 2005, Marsulex had 32,035,231 Common Shares issued and
outstanding. Each Common Share entitles the holder thereof to one vote.
To the knowledge of the directors and officers of the Company, the only person
or corporation which beneficially owned on March 1, 2005, directly or
indirectly, or who on such date exercised control or direction over more than
10% of the voting rights attached to any class of voting securities of the
Company outstanding on the Record Date is TD Capital Canadian Private Equity
Partners ("TD Capital"), a Toronto-Dominion Bank fund, which directly and
indirectly owned 18,364,279 Common Shares representing approximately 57.3% of
the outstanding Common Shares on that date.
PARTICULARS OF MATTERS TO BE ACTED UPON
1. ELECTION OF DIRECTORS
The Articles of the Company provide that the Company shall have a minimum of
three directors and a maximum of fifteen directors. The number of directors to
be elected at the Meeting has been fixed at eight. The term of office for each
of the present directors will expire at the Meeting when a successor is
elected. Each director elected at the Meeting shall hold office until the next
annual meeting of shareholders or, subject to the Company's by-laws and to
applicable laws, until such office is earlier vacated.
The management representatives designated in the enclosed form of proxy intend
to vote for the election, as directors, of the proposed nominees whose names
are set out below. All of the nominees are now directors and have been
directors of the Company since the dates set out opposite their names. Subject
to the proposed nominees' acceptance of a directorship, management does not
expect that any of the proposed nominees will be unable to serve as a
director. However, if any of the proposed nominees are for any reason unable
to serve as a director, the persons named in the enclosed form of proxy will
use their best judgement in voting for an alternative nominee.
The following table sets forth the names of and certain additional information
for the persons proposed to be nominated for election as directors of the
Company. Current members of each of the four standing committees of the Board
of Directors are indicated by footnote. The Company does not have an executive
committee of the Board.
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Board of Directors
- ---------------------------------------------------------------------------------------------------------------------------
Number of Number of Number of
Name and Municipality Director Common Securities Deferred/
of Residence Principal Occupation Since Shares(1) Under Performance
Options Share Units(2)
Granted
- ---------------------------------------------------------------------------------------------------------------------------
Roderick Barrett (3) Managing Partner
Toronto, Ontario Stikeman Elliott LLP, 1993 18,286 40,000 20,764
Barristers & Solicitors
- ---------------------------------------------------------------------------------------------------------------------------
William Lambert (4) Managing Director
Toronto, Ontario TD Capital Group Limited 2002 0 0 0
- ---------------------------------------------------------------------------------------------------------------------------
Ian M. Matheson (5) (6) Chief Consulting Officer
Mississauga, Ontario Risk Management Consultants of 1989 11,068 40,000 21,530
Canada Limited
- ---------------------------------------------------------------------------------------------------------------------------
David McCann (6) Managing Director
Toronto, Ontario TD Capital Group Limited 2002 0 0 0
- ---------------------------------------------------------------------------------------------------------------------------
John A. Rogers (3) (4) President and Chief Executive
Toronto, Ontario Officer 1996 11,068 40,000 20,850
MDS Inc.
- ---------------------------------------------------------------------------------------------------------------------------
William C. Stevens Vice President and Director
Toronto, Ontario TD Capital Group Limited 2005 0 0 0
- ---------------------------------------------------------------------------------------------------------------------------
Lee C. Stewart (4) (6)
Weston, Connecticut Company Director 2000 10,843 16,000 6,908
- ---------------------------------------------------------------------------------------------------------------------------
Robert Yohe (3) (4) (5)
(6) Company Director 1996 47,007 40,000 10,162
Bonita Springs, Florida
- ---------------------------------------------------------------------------------------------------------------------------
(1) Includes Common Shares over which control or direction is exercised. The
information as to Common Shares beneficially owned or controlled, not
being within the knowledge of the Company, has been given by the
directors.
(2) Directors, with the exception of Messrs. Lambert, McCann and Stevens,
have the option of receiving their compensation in the form of Deferred
Share Units under the Marsulex Deferred Share Unit Plan (Directors) and
may be granted Performance Share Units under the Marsulex Performance
Share Unit Plan.
(3) Member of the Corporate Governance Committee.
(4) Member of Audit Committee. Mr. Lambert was a member of the Audit
Committee until March 1, 2005. Mr. Yohe was appointed to the Audit
Committee on March 1, 2005.
(5) Member of the Environmental, Health & Safety Committee.
(6) Member of the Human Resources and Compensation Committee. Mr. Matheson
was a member of the Human Resources and Compensation Committee until
December 2, 2004. Mr. Stewart was appointed to the Human Resources and
Compensation Committee on December 2, 2004.
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EXECUTIVE COMPENSATION
The following table sets forth, for the year ended December 31, 2004, the
compensation of the Chief Executive Officer, the Chief Financial Officer and
the three other most highly compensated executive officers of the Company
whose respective total salary and bonus for the year ended December 31, 2004
(including non-cash compensation) exceeded Cdn. $150,000. The Chief Executive
Officer, the Chief Financial Officer and the three other most highly
compensated executive officers are collectively referred to as the "Named
Executives."
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
- -------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards
- -------------------------------------------------------------------------------------------------------------------------
Other Securities Restricted
Annual Under Share
Compen- Options Units All Other
Name and Principal Salary Bonus sation Granted Granted Compensation
Position Year ($) ($) ($) (#) ($) (1) ($) (2)
- --------------------------------------------------------------------------------------------------------------------------
Laurie Tugman (3) 2004 284,500 105,000 - (4) 0 175,599 15,500
President and Chief
Executive Officer 2003 268,333 127,000 - (4) 0 195,500 13,417
2002 255,000 104,000 - (4) 35,750 91,875 12,750
- --------------------------------------------------------------------------------------------------------------------------
Edward R.(Ted) Irwin (5) 2004 157,917 44,000 28,285 (6) 0 73,838 7,896
Chief Financial Officer
2003 146,250 49,225 28,721 (6) 0 67,490 7,312
2002 139,167 43,000 22,739 (6) 15,000 33,750 5,833
- --------------------------------------------------------------------------------------------------------------------------
Robert Cardell (7) 2004 184,167 55,000 - (4) 0 67,120 20,719
VP and General Manager,
Power Generation Group 2003 179,166 34,800 - (4) 0 60,260 19,792
2002 175,000 43,500 - (4) 19,500 26,814 14,281
- --------------------------------------------------------------------------------------------------------------------------
Doug Osborne 2004 145,833 53,000 21,996 (8) 0 69,810 7,291
Vice President,
Western Business 2003 139,167 50,000 23,584 (8) 0 61,200 6,958
2002 135,000 82,850 21,731 (8) 10,500 23,438 6,750
- --------------------------------------------------------------------------------------------------------------------------
Brian Stasiewicz (9) 2004 204,167 46,000 - (4) 0 74,533 22,969
Vice President,
Refinery Services 2003 200,000 73,000 - (4) 0 72,767 22,083
2002 181,812 75,000 - (4) 18,250 25,648 18,379
- --------------------------------------------------------------------------------------------------------------------------
David Gee (10) 2004 390,000 156,000 - (4) 0 389,862 4,310,340(11)
Former President and
Chief Executive Officer 2003 388,333 220,000 - (4) 0 476,000 149,547
2002 377,500 182,000 - (4) 32,500 364,875 218,471
- --------------------------------------------------------------------------------------------------------------------------
NOTES:
(1) The value of the performance share units is calculated by multiplying
the number of units granted by the closing price of the Company's Common
Shares as at the date of the grant (2004 - $5.37; 2003 - $3.40; 2002 -
$3.75). A total of 230,415 performance share units were granted by the
Board of Directors in 2004 pursuant to the Performance Share Unit Plan
described below, which units were valued on December 31, 2004 at
$1,612,905. Dividends are not paid on performance share units.
(2) Amounts reported include contributions to a group registered retirement
savings plan available to all employees of the Company.
(3) Mr. Tugman held the position of Executive Vice President and Chief
Financial Officer until March 10, 2004, at which date he became Chief
Operating Officer. Mr. Tugman held this position until he was appointed
to his current position of President and Chief Executive Officer on
November 19, 2004.
(4) The value of perquisites and benefits paid to the Named Executive is
less than the lesser of $50,000 and 10% of the Named Executive's total
annual salary and bonus.
(5) Mr. Irwin was appointed to the position of Chief Financial Officer on
March 10, 2004.
(6) The amounts reported include amounts paid to Mr. Irwin in respect of his
automobile allowance and related expenses (2004 - $18,638; 2003 -
$19,708; 2002 - $18,352) and the approximate cost of other benefits
provided to all employees, including health and dental insurance,
long-term disability insurance and group life insurance.
(7) All amounts reported for Mr. Cardell are expressed in US dollars.
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(8) The amounts reported include amounts paid to Mr. Osborne in respect of
his automobile allowance and related expenses (2004 - $13,770; 2003 -
$16,180; 2002 - $13,827) and the approximate cost of other benefits
provided to all employees, including health and dental insurance,
long-term disability insurance and group life insurance.
(9) All amounts reported for Mr. Stasiewicz are expressed in US dollars.
(10) Mr. Gee ceased to hold the position of President and Chief Executive
Officer effective November 19, 2004.
(11) The amount reported includes a settlement payment of $4,287,886 described
below.
OPTION GRANTS
No options were granted in 2004.
2004 YEAR-END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------------------
Securities Unexercised Options Value of Unexercised
Acquired on Aggregate Value at December 31, 2004 in-the-Money Options at
Exercise Realized (#) Exercisable / December 31, 2004
Name (#) ($) Unexercisable (1) ($) Exercisable / Unexercisable (1)
- ---------------------------------------------------------------------------------------------------------------------------
Laurie Tugman nil nil 291,500 / 11,917 1,042,383 / 36,942
- ---------------------------------------------------------------------------------------------------------------------------
Edward R. (Ted) nil nil 10,000 / 5,000 31,000 / 15,000
Irwin
- ---------------------------------------------------------------------------------------------------------------------------
Robert Cardell nil nil 13,000 / 6,500 40,300 / 20,150
- ---------------------------------------------------------------------------------------------------------------------------
Doug Osborne nil nil 8,250 / 3,500 27,078 / 10,850
- ---------------------------------------------------------------------------------------------------------------------------
Brian Stasiewicz nil nil 223,667 / 6,083 702,667 / 18,858
- ---------------------------------------------------------------------------------------------------------------------------
David Gee nil nil 953,500 / nil 3,186,833 / nil
- ---------------------------------------------------------------------------------------------------------------------------
NOTE:
(1) Representing options on Common Shares of the Company. The closing price
of Marsulex's stock on December 31, 2004 was $7.00.
OPTION REPRICINGS
The Company has not repriced downward any options since inception of the Stock
Option Plan (described below).
SETTLEMENT AGREEMENT WITH FORMER CEO
In November 2004, the Company entered into a settlement agreement with David
Gee, the former President and CEO of the Company. The total cost of payments
to Mr. Gee in connection with his departure from the Company pursuant to the
settlement agreement amounted to $4,287,886. This amount represents the
payment of (i) a settlement award calculated using years of service with the
Company and the years of service with the prior employer, (ii) the bonus in
respect of service for the 2004 year, (iii) a lump sum retiring allowance, and
(iv) a lump-sum contribution made in respect of a supplemental pension plan
(described below). Also pursuant to the settlement agreement, the Company
agreed to continue to make its premium contributions so as to provide for
certain benefits (including life and health care insurance) until the earlier
of (a) June 30, 2007 and (b) the date Mr. Gee secures comparable benefit
coverage. Under the terms of the settlement agreement, all performance share
units and stock options held by Mr. Gee (under the plans described below), to
the extent then not vested, vested immediately.
SUPPLEMENTAL PENSION PLAN FOR FORMER CEO
In 1999, the Company established a Supplemental Pension Plan (the "Plan") for
David Gee. The Plan was structured to provide Mr. Gee with an annual target
pension income upon retirement at age 65 of $291,903. This target pension
income was based on (1) Mr. Gee's approximately 9.5 years of service at a
previous employer, as well as his projected 17 years of service at the Company
to age 65, and (2) a projected average salary based on a 4% annual increase to
base salary together with bonuses over the 17 years of service. Pursuant to
the Plan, after taking into consideration the income generated from the
existing group registered retirement savings plan and Mr. Gee's pension from
the previous employer, the Company determined that an annual payment of
approximately $130,000 (including $10,000 estimated expenses) into the Plan
would achieve the desired target pension income. In 2002, a review of
contributions determined that funding in 2000 and 2001 was insufficient to
meet the pension objectives for those years due to overstated interest
IC - 8
components used in the funding estimate software. An additional contribution
of $53,430 was made by the Company to bring the Plan to appropriate 2002
objective levels. Pursuant to the settlement agreement entered into with Mr.
Gee (as described above), the Company has satisfied its obligations with
respect to the Plan.
REPORT ON EXECUTIVE COMPENSATION BY THE HUMAN RESOURCES AND COMPENSATION
COMMITTEE
The Human Resource and Compensation Committee (the "HRCC") assists the Board
of Directors in establishing the compensation philosophy for the Company and
reviewing the design, competitiveness and implementation of the Company's
compensation and benefit plans. The HRCC annually reviews the performance of
the President and Chief Executive Officer and, together with the President and
Chief Executive Officer, the performance of senior management.
The HRCC regularly retains independent compensation consultants (for example,
Aon was retained in 2004) to assist with reviews of the Company's compensation
programs. This review compares the Company's program with those of selected
comparable companies in the industrial services industries and other small to
mid-sized Canadian and U.S. companies. The HRCC believes that this review
process provides an effective, ongoing evaluation of the program relative to
current industry practice.
The HRCC also reviews and monitors management succession processes and
provides assistance to the President and Chief Executive Officer on senior
management appointments.
Four Board members, all outside directors, served on the HRCC in 2004: Robert
Yohe (Chair), Ian Matheson, Lee Stewart and David McCann. Ian Matheson served
until December 2, 2004 when he was replaced by Mr. Stewart.
The objectives of the Company's compensation program are to attract and retain
highly qualified senior management, motivate superior performance and align
the interests of senior management with the interests of the Company's
shareholders. The compensation program is linked to achieving both short-term
and longer-term goals of the Company. Accordingly, a significant portion of
senior management's compensation is based upon the Company's success in
meeting specified performance goals, including strategic plan objectives and
appreciation in the Company's share price.
The Company's compensation program for senior management is composed of 3
components: (1) base salary, (2) annual incentive awards for the
accomplishment of specific goals and objectives, and (3) long-term rewards for
increasing shareholder value.
(1) Base Salary
The Company maintains base salary guidelines derived from an assessment
of relative duties and responsibilities with corresponding salary ranges
for each position targeted to deliver compensation at or about the
market median. The HRCC reviews the base salary structure on an annual
basis for equity, consistency with performance, and competitiveness.
(2) Annual Short-Term Incentive Awards
Under the short-term incentive compensation plan, senior management
members are eligible for annual bonuses based on (a) the Company's
success in achieving defined performance targets based on earnings
before interest, taxes, depreciation and amortization (EBITDA) and
return on capital (ROC), and (b) their individual success in
accomplishing the personal goals and expectations as determined and set
out in their objectives each year. The plan participants, their rates of
participation, the minimum standards required to qualify for awards and
the criteria used to determine awards under the plan are established
annually by the HRCC and recommended to the Board of Directors. The HRCC
sets the annual objectives and reviews the performance of the President
and Chief Executive Officer, with confirmation by the Board, while the
President and Chief Executive Officer sets the annual objectives and
reviews the performance of the other Named Executives, with confirmation
by the HRCC.
The President and Chief Executive Officer, and Chief Financial Officer
are eligible to earn target bonuses of 50% and 35%, respectively, of
their base salaries, with both awards based 60% on the achievement of
targeted consolidated results and 40% on the achievement of individual
performance objectives. The other Named Executives are eligible to earn
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target bonuses of 35% of their base salaries, based 20% on the
achievement of targeted consolidated results, 40% on the achievement of
targeted results of their respective business segments, and 40% on the
achievement of individual performance objectives. Under this plan, the
participants can earn bonuses in excess of their targets in the event
that targeted consolidated results, targeted business segment results,
and/or individual performance objectives are exceeded.
(3) Long-term Rewards
All Named Executives participate in an incentive compensation plan under
which they are entitled to long-term awards based on the Company's
success in achieving return on capital objectives. The HRCC determines
the annual plan targets each year, subject to the approval of the Board.
Performance Share Unit Plan and Deferred Share Unit Plan (Executives)
In 2002, the Company established a Performance Share Unit Plan (the "PSU
Plan") to provide long-term incentive compensation for management employees
and key persons that emphasizes pay for performance. Grants under the PSU Plan
are made at the discretion of the Board, which also prescribes the performance
factors (measured by the Company's return on capital) used to determine the
number of performance share units (PSU's), which will vest at the expiry of
the grant period. Plan participants who elect not to participate in the
Deferred Share Unit Plan (described below) and who continue to be employed by
the Company at the expiry of the grant period, will be entitled to that number
of Marsulex common shares that can be purchased on the open market with an
amount equal to the number of vested PSU's multiplied by the then market value
of the common shares less all applicable source deductions.
The Company also established a Deferred Share Unit Plan (Executives) (the "DSU
Plan") for management employees and key persons to defer until retirement,
termination, resignation or death, delivery to the participant of the
underlying common shares of Marsulex and the concomitant requirement for the
payment of taxes associated therewith. Unless a participant elects otherwise,
vested PSU's automatically convert on a one-for-one basis to deferred share
units (DSU's) at the expiry of the grant period. On the settlement date (a
date between the date of retirement, termination, resignation or death and the
end of the following calendar year), a participant is entitled to receive a
number of common shares of the Company purchased on the open market, or cash,
or a combination of such shares and cash at his/her discretion. The
entitlement amount is the amount of DSU's multiplied by then market value of
the shares less all applicable source deductions.
Stock Option Plan
The Company has a stock option plan for management employees and key persons
(the "Stock Option Plan"). Persons generally employed by the Company in
management functions, senior officers and directors of the Company, or an
affiliate of the Company, are eligible to participate in the Stock Option
Plan. Participants are determined by the HRCC and confirmed by the Board. The
number of Common Shares issuable under the Plan cannot, at present, exceed
3,120,227. Options are to be issued with an exercise price of not less than
the closing price of the Common Shares on the Toronto Stock Exchange on the
day prior to the issuance and are to be exercisable for up to a maximum of ten
years. The Board may, in granting options, provide that the right to exercise
the options vests over a specified period. In such a case, the options
nevertheless become automatically exercisable in full if control over the
Company changes. If a participant's employment is terminated due to death or
voluntary resignation, or if a director participant leaves the Board, the
vesting of options held by such participant automatically ceases and vested
options may not be exercised by the participant after the earlier of the first
anniversary of such termination and the expiry of the options. If a
participant's employment is terminated otherwise than for cause, the vesting
of options held by the participant continues during the notice period
established by the participant's employment contract or otherwise and vested
options held by the participant may be exercised until the option's expiry
period. No financial assistance is provided by the Company to assist grantees
of options to purchase Common Shares.
In 2002, the Company discontinued the use of stock options for long-term
incentive compensation and replaced them with grants under the PSU Plan.
IC - 10
Review of President and Chief Executive Officer Compensation
In determining the 2004 long-term incentive award for Laurie Tugman, President
and Chief Executive Officer of the Company, the HRCC took into consideration
Mr. Tugman's performance against his 2004 goals and objectives as Chief
Operating Officer established by the Board of Directors. These included the
Company's actual 2004 performance against specific metrics reviewed and
approved by the Board of Directors, as well as the accomplishment of specific
operational and organizational objectives, including the agreements for the
expansion of the Montreal Facility, the recertification under the Responsible
Care initiative and the continued improvement of responsible management
processes in this area. Mr. Tugman was awarded incentive compensation of
$105,000 in consideration of his successful accomplishment of the above
objectives. A total of 62,435 performance share units were granted to Mr.
Tugman in March of 2005 under the Company's PSU Plan.
STOCK OWNERSHIP GUIDELINES
In order to better align senior management's interests with those of the
Company's shareholders, the Company has adopted minimum stock ownership
guidelines. Under these guidelines, executives (including the Named
Executives) are expected to accumulate and hold common stock, performance
share units and vested "in-the-money" stock options (as described above) in
accordance with the following table:
- -------------------------------------------------------------------------------------------------------------------------
Value of units
Guideline held under this
Multiple of Base Value of Guideline at
Name Salary Base Salary December 31, 2004 (1)
- -------------------------------------------------------------------------------------------------------------------------
Laurie Tugman 2 times $650,000 $1,691,813
- -------------------------------------------------------------------------------------------------------------------------
Edward R. (Ted) Irwin 1 times $160,000 $233,528
- -------------------------------------------------------------------------------------------------------------------------
Robert Cardell (2) 1 times $185,000 $252,460
- -------------------------------------------------------------------------------------------------------------------------
Doug Osborne 1 times $147,000 $228,246
- -------------------------------------------------------------------------------------------------------------------------
Brian Stasiewicz (2) 1 times $205,000 $827,365
- -------------------------------------------------------------------------------------------------------------------------
NOTES:
(1) Units were valued at the closing price of Marsulex's stock on December
31, 2004 of $7.00.
(2) All amounts reported are expressed in US dollars.
BENEFITS
Executive Officers of the Company are entitled to receive other benefits on
substantially the same basis as employees of the Company generally. Other
benefits specific to the former CEO are described in the previous section.
Summary
The HRCC is satisfied that the Company's compensation program is competitive,
reflects market practices, is appropriate to attract and retain a skilled team
of senior management and motivate superior performance to achieve the
Company's strategic objectives and optimize shareholder value.
The foregoing report was submitted to the Board of Directors for approval by
the Human Resources and Compensation Committee:
Robert Yohe (Chair)
Ian Matheson (HRCC member until December 2, 2004)
David McCann
Lee Stewart (HRCC member appointed December 2, 2004)
IC - 11
PERFORMANCE GRAPH
The following graph compares the total cumulative shareholder return for $100
invested in common shares of the Company with the total cumulative return of
the S&P/TSX Composite Index over the last five years. On December 31, 2004,
the Company's Common Shares closed at $7.00.
The omitted graph indicates that a $100 investment in common shares of the
Company on January 1, 1999 would have had a value of approximately $219 on
December 31, 2004. The omitted graph also indicates that the same $100
investment in the S&P/TSX Composite Index on January 1, 1999 would have had a
value of approximately $119 on December 31, 2004.
EMPLOYMENT CONTRACTS
All of the Named Executives are parties to offer letters with the Company,
which outline the terms and conditions pertaining to their employment. In
addition to the compensation under the heading "Executive Compensation" above,
these contracts provide as follows:
In the case of Laurie Tugman, if Mr. Tugman's employment is terminated for any
reason other than for cause, the Company is obligated to continue to pay Mr.
Tugman's total compensation, including benefits and car allowance, for a
period of 24 months. In the case of Ted Irwin, if Mr. Irwin's employment is
terminated as a result of a sale of the Company, the Company is obligated to
pay Mr. Irwin severance of 12 months salary and benefits. If Mr. Irwin's
employment is terminated for any other reason other than for cause, the
Company is obligated to pay him severance of 9 months (12 months on or after
March 2007) salary and benefits. In the case of Robert Cardell, if Mr.
Cardell's employment is terminated by the Company for any reason other than
for cause, the Company is obligated to provide at least 12 months notice or
payment in lieu thereof. In the case of Doug Osborne, if Mr. Osborne's
employment is terminated as a result of a sale of the Company, or the sale of
the Company's western business, the Company is obligated to pay Mr. Osborne
severance of 12 months salary and benefits. If Mr. Osborne's employment is
terminated for any other reason other than for cause, the Company is obligated
to pay him severance of 9 months salary and benefits. In the case of Brian
Stasiewicz, if Mr. Stasiewicz's employment is terminated for any reason other
than for cause, the Company is obligated to provide him with approximately 15
months notice or a payment equivalent to such period in lieu of notice.
The annual salaries of officers of the Company (including the Named
Executives) were recently reviewed. Effective March 1, 2005, the base salaries
of the Named Executives are: Laurie Tugman - $325,000; Ted Irwin - $170,000;
Robert Cardell - US$190,000; Doug Osborne - $170,000; and Brian Stasiewicz -
US$205,000.
COMPENSATION OF DIRECTORS
No fees are paid to Messrs. Lambert, McCann or Stevens for acting as directors
of the Company. Every other director of the Company is entitled to receive an
annual retainer of $15,000, meeting fees in the amount of $1,500 per meeting
and committee meeting fees of $500 per meeting. A director who is the chair of
IC - 12
a committee of the Board receives an additional annual retainer of $3,000
which retainer was increased to $4,500 effective March 1, 2005.
In 2002, the Company established a Deferred Share Unit Plan (Directors) (the
"DSU Directors' Plan") pursuant to which a director can elect to receive no
less than 25% and up to 100% of his annual retainer in deferred share units
(DSU's) in lieu of cash or shares. If a director elects to so receive 100% of
his annual retainer in the form of DSU's, he may also elect to receive 100% of
his meeting fees and committee chair fees in the form of DSU's in lieu of a
cash payment. On the settlement date (based on the date of resignation or
death), a director will be entitled to receive, at his option, common shares
of the Company, cash, or a combination of cash and shares in satisfaction of
the DSU's. A cash payment or an amount to be used to purchase shares on the
open market is the number of DSU's credited to a director's account multiplied
by the then market price of the shares less all applicable source deductions.
In 2004, a total of 14,410 DSU's were credited to the accounts of directors
who elected to participate in the DSU Plan.
Directors (other than Messrs. Lambert, McCann and Stevens) are also eligible
to participate in the Company's Stock Option Plan and PSU Plan. No options
were granted to directors in 2004. A total of 12,865 PSU's were granted to
eligible directors in 2004.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table (presented in accordance with Form 51-102F5 of NI 51-102)
sets out, as at December 31, 2004, the number of securities to be issued upon
the exercise of outstanding options, the weighted average exercise price of
outstanding options and the number of securities remaining available for
future issuance under the Company's Stock Option Plan. (The Stock Option Plan
was approved by the shareholders of the Company; there are no equity
compensation plans that have not been approved by the Company's shareholders.)
===========================================================================================================================
Number of shares to be Weighted-average exercise Number of shares remaining
issued upon exercise of price of outstanding available for future
outstanding options and options and rights issuance under the Plan
rights (excluding shares reflected
Plan Category in column (a))
(a) (b) (c)
==========================================================================================================================
Equity compensation plans
approved by shareholders
==========================================================================================================================
Stock Option Plan 2,051,765 $3.84 1,407,295
==========================================================================================================================
Total 2,051,765 $3.84 1,407,295
==========================================================================================================================
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS
No director, officer nor the associate of any such person is indebted to the
Company.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
No informed person (as defined in Material Instrument 54-102) of the Company,
which includes its directors and officers, has any interest in any material
transaction involving the Company.
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION
The Company has a policy of insurance for its directors and officers and those
of its subsidiaries, Marsulex Montreal, MET, and IT. The limit of liability
applicable to all insured directors and officers under the current policy,
which expires on May 1, 2005, is $55 million in the aggregate inclusive of
defence costs. Under the policy, the Company has reimbursement coverage to the
extent that it has indemnified the directors and officers in excess of a
deductible of $100,000 for each loss. The policy includes securities claims
coverage for the Company, insuring it against any legal obligation to pay on
account of any securities claims brought against it. The total premium paid by
the Company in respect of coverage during 2004 was $245,870, no part of which
is payable by the directors or officers of the Company.
IC - 13
The by-laws of the Company also provide for the indemnification of the
Company's directors and officers from and against any liability and cost in
respect of any action or suit brought against them in connection with the
execution of their duties of office, subject to the limitations contained in
the Canada Business Corporations Act.
2. APPOINTMENT OF AUDITORS
The management representatives designated in the enclosed form of proxy intend
to vote in favour of the reappointment of KPMG LLP, as auditors of the
Company, to hold office until the next annual meeting of shareholders at a
remuneration to be fixed by the directors. KPMG LLP has served as auditors of
the Company since 1989.
3. GENERAL MATTERS
Management is not aware of any matter intended to come before the Meeting,
other than the matters described in the accompanying Notice of Meeting. If any
other matters properly come before the Meeting, it is the intention of the
persons named by management in the form of proxy to vote in respect of those
matters in accordance with their judgement.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Board of Directors and management of Marsulex believe that sound corporate
governance practices are an important part of the Company's business
operations. They therefore support the guidelines of the Toronto Stock
Exchange's Corporate Governance Committee (the "Guidelines") and believe that
the Company's governance procedures conform to those Guidelines. (The
paragraph numbers below correspond to the subsection numbers of the Guidelines
as set out in the Toronto Stock Exchange Company Manual, section 474.)
2. The Mandate of the Marsulex Board is consistent with the TSX's
requirement that a board assume responsibility for the stewardship of a
corporation. The Company's Mandate is reviewed annually and includes the
following responsibilities:
(a) adoption and reassessment of the strategic plan for the Company;
(b) identification of principal risks associated with the Company's
business and review of systems to manage these risks;
(c) assessment of senior management and consideration of succession
planning;
(d) adoption of communications policy for the Company; and
(e) review of internal control and management information systems.
The Board has established four standing committees to assist in this
stewardship function. Each committee is composed of outside directors,
the majority of which (except in the case of the Environmental, Health &
Safety Committee) are unrelated to the Company.
Human Resources and Compensation Committee - This Committee is
responsible for assisting the Board in determining compensation of
senior management as well as reviewing the adequacy and form of
directors' compensation. The Committee annually reviews the goals and
objectives of the Chief Executive Officer and the Chief Financial
Officer for the upcoming year and each year conducts an appraisal of the
performance of the Chief Executive Officer and the Chief Financial
Officer.
Audit Committee - The Committee is responsible for assisting the Board
in fulfilling its oversight responsibility of the Company's financial
reporting, public disclosure policy, accounting systems, internal
controls and financial risk management and liaising with the external
auditors.
Environmental, Health and Safety Committee - This Committee is
responsible for assisting the Board in monitoring environmental, health
and safety issues. Responsibilities include policies on employee health
and safety, the environment, product responsibility, and the
transportation of hazardous materials. On a regular basis, the Committee
commissions and reviews external audits related to Marsulex's compliance
and reviews management's activities with respect to correcting any
deficiencies.
IC - 14
Corporate Governance Committee - This Committee is responsible for
developing the Company's approach to corporate governance issues,
advising the Board in filling vacancies on the Board and periodically
reviewing the composition and effectiveness of the Board and the
contribution of individual directors.
3. The Board is currently composed of eight members. Three of the current
directors are considered to be related to the Company. TD Capital
controls a majority of the votes for the election of directors and as
such is considered to be the Company's "significant shareholder" under
the Guidelines.
4. Each year the Board, assisted by the Corporate Governance Committee,
undertakes an analysis of each director's relationship with the Company
to determine if any are "related" as contemplated by the Guidelines. In
December 2004, consideration was given, once again, to past and present
engagement of the director's professional services or the services of a
company in which the director has an interest, the significance of any
remuneration for that engagement, and other business or interests which
could reasonably be perceived to materially interfere with that
director's ability to act in the best interests of the Company. The
"related" directors are: Roderick Barrett, a partner in Stikeman Elliott
LLP, solicitors to the Company and Ian Matheson, employed by Risk
Management Consultants of Canada Limited, a risk management company
providing consulting services to the Company.
The Board has considered the relationship of each of the directors to TD
Capital, the Company's significant shareholder, and determined Messrs.
David McCann and William Lambert (Managing Directors of TD Capital) and
William Stevens (Vice President and Director of TD Capital) to be
related to the significant shareholder. The Board believes that the
composition of the Board, being comprised of a majority of persons who
do not have a relationship with the significant shareholder, fairly
reflects the interests of minority shareholders in the Company.
5. The mandate of the Corporate Governance Committee includes the
responsibility for assisting the Board in filling vacancies on the
Board.
6. The mandate of the Corporate Governance Committee also includes an
annual review of the performance of the Board, committees of the Board,
and if deemed appropriate, individual directors.
7. The Board does not have a formal orientation program for new directors.
However, new directors meet with management to review the business of
the Company and are provided with certain historical documentation and
materials from recent previous Board and committee meetings.
8. The mandate of the Corporate Governance Committee includes the periodic
review of the composition of the Board. While the Board feels that its
current size is conducive to the supervision of the business of the
Company and the efficient evaluation of business opportunities, the
Board views the addition of outside and unrelated directors as desirable
and will expand the Board to accommodate candidates with exceptional
qualifications.
9. The Compensation Committee reviews the adequacy and form of directors'
compensation on an annual basis. Each director is paid an annual
retainer, attendance fees, committee chair fees (if appropriate) and
they are also eligible to participate in the Company's Stock Option
Plan, Performance Share Unit Plan, and Deferred Share Unit Plan
(Directors). The Board believes that the directors' compensation package
realistically reflects the responsibilities and risk involved in being
an effective director.
10. The Compensation and Corporate Governance Committees are comprised of
three directors, all of whom are outside directors and the majority of
whom are unrelated to the Company. The Audit Committee is comprised of
three directors, all of whom are outside directors and are unrelated to
the Company. The Environmental, Health & Safety Committee is comprised
of 2 directors both of whom are outside directors and one of whom is
unrelated to the Company.
11. The Corporate Governance Committee is responsible for developing the
Company's approach to corporate governance, including this Statement.
12. In connection with the appointment of the President and Chief Executive
Officer in November 2004, the position description of this office was
reviewed and updated. The compensation of the President and Chief
Executive Officer is directly tied to the successful completion of
objectives determined and evaluated by the Board, assisted by the
Compensation Committee. In addition, the Company has an Authorizations
Policy, approved by the Board, which sets out the limits of each
officer's authorization by financial and other parameters.
IC - 15
13. The Board of Directors has appointed a Chair, Mr. David McCann, who is
not a member of management and is not related to the Company, but is
related to the Company's significant shareholder. The Company has a
policy formalizing the opportunity afforded to the Board to meet without
the presence of management and without the presence of members of the
Board who are related to the Company's significant shareholder at the
conclusion of each Board meeting.
14. The Audit Committee is composed entirely of outside directors. The terms
of reference for the Committee specifically define its responsibilities
and include the oversight of management reporting on internal controls.
The external auditors of the Company are invited to attend all meetings
of the Committee, and Committee members are afforded the opportunity to
communicate with the external auditors without the presence of
management.
15. The Company has a policy enabling an individual director, upon notice to
the President and Chief Executive Officer and with the approval of the
Corporate Governance Committee, to engage, at the Company's expense, an
outside advisor.
OTHER INFORMATION CONCERNING MARSULEX
The Common Shares are listed on the TSX with the trading symbol: MLX.
Copies of the Company's latest Annual Information Form (or Form 20-F, as the
case may be) (together with the documents incorporated therein by
reference), the comparative financial statements of the Company for 2004
together with the report of the auditors thereon, management's
discussion and analysis of the Company's financial condition and results
of operations for 2004, the interim financial statements of the Company
for periods subsequent to the end of the Company's last fiscal year and
this Management Information Circular are available upon request from the
Company at 416-496-9655. Additional information relating to the Company
is on SEDAR at www.sedar.com at the Company's profile.
APPROVAL BY BOARD OF DIRECTORS
The Board of Directors of Marsulex has approved the contents and the sending
of this Management Information Circular to the shareholders of the Company.
By Order of the Board of Directors
/s/ Laurie Tugman
Toronto, Ontario LAURIE TUGMAN
March 21, 2005 President and Chief Executive Officer
IC - 16