Exhibit 99.2
[LOGO]
ROYAL GROUP TECHNOLOGIES LIMITED
NOTICE AND MANAGEMENT
PROXY CIRCULAR
for the
Annual Meeting of Shareholders
February 20, 2002
------------------------------
January 1, 2002
ROYAL GROUP TECHNOLOGIES LIMITED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Meeting")
of ROYAL GROUP TECHNOLOGIES LIMITED ("Royal Group") will be held at the Hilton
Toronto, 145 Richmond Street West,Toronto, Ontario, Canada, on Wednesday,
February 20, 2002 at 10 a.m., local time, for the purposes of:
(1) receiving Management's report for the financial year ended September
30,2001,and the comparative Consolidated Financial Statements for the
financial year ended September 30,2001,together with the Auditors' Report
thereon;
(2) electing Directors;
(3) appointing auditors and authorizing the Directors to fix their
remuneration; and
(4) transacting such other business as may properly be brought before the
Meeting, or any adjournment thereof.
A COPY OF THE MANAGEMENT PROXY CIRCULAR, ROYAL GROUP'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR ENDED SEPTEMBER 30, 2001 AND A FORM OF PROXY ACCOMPANY
THIS NOTICE. IF YOU DO NOT PLAN TO ATTEND THE MEETING, KINDLY SIGN, DATE, AND
RETURN THE FORM OF PROXY ACCOMPANYING THIS NOTICE. PROXIES MUST BE RECEIVED BY
ROYAL GROUP AT VAUGHAN, ONTARIO, CANADA OR COMPUTERSHARE TRUST COMPANY OF CANADA
AS AGENT FOR ROYAL GROUP AT TORONTO, ONTARIO, CANADA BY 10:00 A.M. ON FEBRUARY
19, 2002.
By Order of the Board,
[Signature]
Vic De Zen Vaughan,Ontario
Chairman of the Board, January 1,2002
President and Chief Executive Officer
TABLE OF CONTENTS
DESCRIPTION PAGE
- ----------- ----
SOLICITATION OF PROXIES ....................................................... 1
AVAILABILITY OF DOCUMENTS ..................................................... 1
APPOINTMENT AND REVOCATION OF PROXIES ......................................... 1
VOTING OF SHARES REPRESENTED BY MANAGEMENT PROXIES ............................ 1
EXERCISE OF DISCRETION BY PROXIES ............................................. 2
RECORD DATE ................................................................... 2
AUTHORIZED CAPITAL ............................................................ 2
OWNERSHIP AND TRANSFER RESTRICTIONS ........................................... 2
PRINCIPAL HOLDERS OF VOTING SECURITIES ........................................ 3
BUSINESS OF THE MEETING ....................................................... 3
Presentation of Management Report, Financial Statement and Auditors' Report.. 3
Election of Directors ....................................................... 3
Appointment and Compensation of Auditors .................................... 5
EXECUTIVE COMPENSATION ........................................................ 5
Summary Compensation ........................................................ 5
Stock Option Plan ........................................................... 6
Options Granted ........................................................... 6
Options Exercised ......................................................... 6
Composition of the Compensation Committee ................................... 7
Report on Executive Compensation ............................................ 7
Compensation of Directors ................................................... 8
Performance Graph ........................................................... 8
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS ............. 9
CORPORATE GOVERNANCE PRACTICES ................................................ 9
Mandate of the Board ........................................................ 9
Board Composition ........................................................... 10
Education and Recruitment ................................................... 10
Independence from Management ................................................ 10
Board Committees ............................................................ 11
Engagement of Outside Advisors .............................................. 11
Board Authority and Delegation .............................................. 11
Investor Relations .......................................................... 12
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE .................................. 12
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS ................................. 12
DIRECTORS' APPROVAL ........................................................... 12
ROYAL GROUP TECHNOLOGIES LIMITED
MANAGEMENT PROXY CIRCULAR
SOLICITATION OF PROXIES
THIS MANAGEMENT PROXY CIRCULAR IS FURNISHED IN CONNECTION WITH THE
SOLICITATION OF PROXIES BY THE MANAGEMENT OF ROYAL GROUP TECHNOLOGIES LIMITED
("Royal Group") to be used at the annual meeting of shareholders (the "Meeting")
of Royal Group to be held at the Hilton Toronto, 145 Richmond Street
West,Toronto, Ontario, Canada, on Wednesday, February 20, 2002 at 10 a.m., local
time, and at any postponement or adjournment thereof, for the purposes set forth
in the accompanying notice of meeting.
This solicitation is being made primarily by mail, but may also be made by
telephone or other means of communication by the Directors, officers or
employees of Royal Group at nominal cost. The cost of solicitation will be borne
by Royal Group.
AVAILABILITY OF DOCUMENTS
COPIES OF THE FOLLOWING DOCUMENTS ARE AVAILABLE ON WRITTEN REQUEST TO ROYAL
GROUP'S VICE PRESIDENT OF CORPORATE COMMUNICATIONS BY MAIL AT 1 ROYAL GATE
BOULEVARD,VAUGHAN, ONTARIO, L4L 8Z7 OR BY FACSIMILE TO (905) 264-0702:THE 2001
ANNUAL INFORMATION FORM (WHICH FORM IS FILED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION AS A FORM 40-F), THE 2001 ANNUAL REPORT TO SHAREHOLDERS
CONTAINING THE COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
SEPTEMBER 30, 2001 TOGETHER WITH THE AUDITORS' REPORT THEREON AND MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS, THE
INTERIM FINANCIAL STATEMENTS FOR PERIODS SUBSEQUENT TO SEPTEMBER 30, 2001, AND
THIS MANAGEMENT PROXY CIRCULAR.
APPOINTMENT AND REVOCATION OF PROXIES
A form of proxy is enclosed and, whether or not you now plan to attend the
Meeting, you are asked to sign, date and return the proxy in the provided
envelope. Proxies to be exercised at the Meeting must be deposited with
Computershare Trust Company of Canada (the "Transfer Agent") at 100 University
Avenue, 11th Floor, Toronto, Ontario M5J 2Y1 in the enclosed envelope or by
facsimile to (416) 981-9800 by 10:00 a.m. on February 19, 2002.
The persons named in the enclosed form of proxy are Directors of Royal
Group. IF YOU WISH TO APPOINT SOME OTHER PERSON OR COMPANY TO REPRESENT YOU AT
THE MEETING,YOU MAY DO SO BY INSERTING THE NAME OF YOUR APPOINTEE, WHO NEED NOT
BE A SHAREHOLDER, IN THE BLANK SPACE PROVIDED.
VOTING OF SHARES REPRESENTED BY MANAGEMENT PROXIES
The enclosed form of proxy, when signed by the shareholder, will constitute
a direction to the nominee. The nominee will, on a show of hands or any ballot
that may be called for, vote or withhold from voting the shares in respect of
which they are appointed in accordance with the direction of the shareholder
appointing them. IF NO CHOICE IS SPECIFIED BY THE SHAREHOLDER,THE SHARES WILL BE
VOTED: (1) FOR THE ELECTION OF THE MANAGEMENT NOMINEES FOR THE POSITION OF
DIRECTOR; AND (2) FOR THE APPOINTMENT OF AUDITORS.
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A shareholder may revoke such shareholder's proxy at any time by instrument
in writing executed by the shareholder or by such shareholder's attorney
authorized in writing, or, if the shareholder is a body corporate, by an officer
or attorney thereof duly authorized and deposited with the Chairman of Royal
Group care of the Transfer Agent or at the registered office of Royal Group, 1
Royal Gate Boulevard, Vaughan, Ontario L4L 8Z7, on or before 10:00 a.m.,
February 19, 2002 or with the Chairman of the Meeting on the day of the Meeting
or any adjournment thereof (but prior to the use of the proxy at the Meeting) or
in any other manner permitted by law.
EXERCISE OF DISCRETION BY PROXIES
THE ENCLOSED FORM OF PROXY CONFERS DISCRETIONARY AUTHORITY UPON THE PERSONS
NAMED IN THE PROXY WITH RESPECT TO AMENDMENTS OR VARIATIONS TO MATTERS
IDENTIFIED IN THE NOTICE OF THE MEETING AND TO OTHER MATTERS WHICH MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. As at the date of this
Management Proxy Circular, Management knows of no such amendment, variation or
other matter to come before the Meeting. If any such matters should properly
come before the Meeting, the persons named in the form of proxy will vote on
those matters in accordance with their best judgement.
RECORD DATE
The date for determining shareholders entitled to receive notice of the
Meeting is January 1, 2002 (the "Record Date").
AUTHORIZED CAPITAL
The authorized capital of Royal Group consists of an unlimited number of
Multiple Voting Shares, an unlimited number of Subordinate Voting Shares and an
unlimited number of First Preferred Shares and Second Preferred Shares, issuable
in series. As of January 1, 2002, there were issued and outstanding 15,935,444
Multiple Voting Shares and 76,696,696 Subordinate Voting Shares entitled to vote
at the Meeting. No First Preferred Shares or Second Preferred Shares have been
issued. Each holder of Multiple Voting Shares of record on the Record Date will
be entitled to 20 votes for each Multiple Voting Share held and each holder of
Subordinate Voting Shares of record on the Record Date will be entitled to 1
vote for each Subordinate Voting Share held on all matters proposed to come
before the Meeting. There is no other class of outstanding voting securities
entitled to be voted at the Meeting. The holders of Multiple Voting Shares may
be able to approve matters voted at the Meeting without the affirmative vote of
holders of Subordinate Voting Shares.
OWNERSHIP AND TRANSFER RESTRICTIONS
Under applicable law, a take-over bid for the Multiple Voting Shares would
not necessarily result in or require a bid for the Subordinate Voting Shares.
However a take-over bid which is not made for all of the Multiple Voting Shares
and all of the Subordinate Voting Shares on identical terms would, if accepted,
result in a conversion of the Multiple Voting Shares into Subordinate Voting
Shares.
Only holders of record of Multiple Voting Shares or Subordinate Voting
Shares at the close of business on the Record Date are entitled to notice of and
to attend the Meeting, or any adjournment thereof, and to vote thereat, unless,
after the Record Date, a holder of record transfers the Multiple Voting Shares
or Subordinate Voting Shares held and the transferee produces properly endorsed
share certificates or other-
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wise establishes proof of ownership of such Multiple Voting Shares or
Subordinate Voting Shares held and demands, not later than ten days before the
Meeting,that such transferee's name be included in the list of shareholders
entitled to vote. Such list of shareholders will be available for inspection on
and after January 1,2002,during usual business hours at the Transfer Agent's
principal Toronto office and at the Meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
As of the date hereof, to the knowledge of the Directors and officers of
Royal Group, the only parties who beneficially own, directly or indirectly, or
exercise control or direction over shares carrying more than 10% of the voting
rights attached to any class of shares of Royal Group are:
% OF ALL
NAME TYPE OF SHARES NUMBER OF SHARES % OF CLASS VOTING RIGHTS
- ---- -------------- ---------------- ---------- -------------
Vic De Zen Multiple Voting Shares 15,935,444 100% 81%
Subordinate Voting Shares 6,035 0.01% 0.01%
Domenic D'Amico Subordinate Voting Shares 11,511,572 15% 3%
The Directors and senior officers of Royal Group as a group, directly or
indirectly, beneficially own, or exercise control or direction over 1,258,522 of
the Subordinate Voting Shares, being approximately 1.6% of the issued and
outstanding Subordinate Voting Shares, and Mr. Vic De Zen, a Director, the
Chairman of the Board, President and Chief Executive Officer of Royal Group
exercises control or direction over 100% of the Multiple Voting Shares of Royal
Group.
BUSINESS OF THE MEETING
PRESENTATION OF MANAGEMENT REPORT, FINANCIAL STATEMENT AND AUDITORS' REPORT
Management's report for the year ended September 30, 2001 and Royal Group's
comparative Consolidated Financial Statements for the financial year ended
September 30, 2001, together with the Auditors' Report thereon, all of which
will be placed before the shareholders at the Meeting, are contained in Royal
Group's 2001 Annual Report to Shareholders which accompanies this Management
Proxy Circular.
ELECTION OF DIRECTORS
Royal Group's Articles provide that the Board of Directors must consist of
a minimum of three and a maximum of twenty-five Directors. Royal Group's By-Law
No. 1 provides that the number of Directors to be elected at the Meeting shall
be the number then in office unless the directors or the shareholders otherwise
determine. Currently Royal Group has nine Directors. During the 2001 financial
year, nine individuals served as Directors of Royal Group.
Management proposes the nine persons named below as nominees for election
as Directors, each of whom will hold office until the next succeeding annual
meeting of shareholders of Royal Group or until his successor is elected or
appointed, or he resigns, or a vacancy results from his death, dismissal or
otherwise. UNLESS OTHERWISE INSTRUCTED BY A SHAREHOLDER, THE PERSONS NAMED IN
THE ACCOMPANYING PROXY FORM WILL VOTE FOR THE ELECTION OF THESE NOMINEES.
Management has no reason to believe that any of these nominees will be unable to
exercise his function as a Director. As required by law, the Board of Directors
has an Audit Committee, the members of which are indicated below. The Board of
Directors does not have an Executive Committee.
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The following table indicates the names of the proposed nominees,their
positions and offices with Royal Group or its significant affiliates now held by
them, if any, the period during which they have served as Directors, and the
approximate number of shares beneficially owned, directly or indirectly, or over
which control or direction is exercised, by them, as of the date hereof.
NOMINEES FOR ELECTION AS DIRECTOR MUNICIPALITY OF RESIDENCE DIRECTOR SINCE SHARES OWNED
- --------------------------------- ------------------------- --------------- ------------
Vic De Zen Vaughan, Ontario November 25, 1994 15,935,444 Multiple
Director, Chairman of the Board, Voting Shares
President and Chief Executive Officer 6,035 Subordinate
Voting Shares
Douglas Dunsmuir Toronto, Ontario November 25, 1994 1,158,757 Subordinate
Director, Executive Vice President Voting Shares
and General Counsel
Gwain Cornish Campbellville, Ontario November 25, 1994 38,582 Subordinate
Director and Senior Vice President Voting Shares
Ron Goegan Sharon, Ontario December 14, 2001 3,000 Subordinate
Director and Chief Financial Officer Voting Shares
Mario Cadorette Ste-Therese, Quebec November 25, 1994 4,500 Subordinate
Director and President of Voting Shares
Royal Window Coverings (Canada) Inc.
(a subsidiary of Royal Group)
Gregory Sorbara* Richmond Hill, Ontario November 25, 1994 6,121 Subordinate
Director Voting Shares
M.P.P. Vaughan - King - Aurora
(Liberal)
Ronald Slaght* Toronto, Ontario November 25, 1994 26,843 Subordinate
Director Voting Shares
Partner, Lenczner Slaght Royce Smith
Griffin (Barristers)
Ralph Brehn* Ste-Agathe Nord, Quebec May 2, 1995 5,938 Subordinate
Director Voting Shares
Director and retired former President of
Hunter Douglas Canada Ltd.
(Building Products Company)
Irvine Hollis Chatsworth, Ontario May 2, 1995 1,246 Subordinate
Director Voting Shares
Retired former President of Duracell Inc.
(Consumer Products Company)
Presently Management Consultant,
I Hollis Management Consultants Inc.
- -------------------
* member of the Audit Committee
IF ANY OF THE ABOVE NOMINEES IS FOR ANY REASON UNAVAILABLE TO SERVE AS A
DIRECTOR, PROXIES IN FAVOR OF MANAGEMENT WILL BE VOTED FOR ANOTHER NOMINEE IN
THEIR DISCRETION UNLESS THE SHAREHOLDER HAS SPECIFIED ON THE PROXY THAT SUCH
SHAREHOLDER'S SHARES ARE TO BE WITHHELD FROM VOTING ON THE ELECTION OF
DIRECTORS.
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APPOINTMENT AND COMPENSATION OF AUDITORS
UNLESS OTHERWISE INSTRUCTED BY A SHAREHOLDER, THE PERSONS NAMED IN THE
ACCOMPANYING PROXY FORM WILL VOTE FOR THE APPOINTMENT OF KPMG LLP, SUITE 3300,
COMMERCE COURT WEST, TORONTO, ONTARIO, CANADA, M5L 1B2, AS AUDITORS OF ROYAL
GROUP. KPMG LLP and its predecessors have acted as auditors of Royal Group and
its predecessors since 1987 and will continue to hold office until the next
annual meeting of shareholders and will receive such compensation as may be
fixed by the Directors. Representatives of KPMG LLP will be present at the
Meeting with an opportunity to make a statement if they so desire and to respond
to appropriate questions.
EXECUTIVE COMPENSATION
The 2001 compensation of senior executives was determined by the Board of
Directors and followed the procedure that was established at the time of the
Initial Public Offering of Royal Group in November, 1994. Royal Group's policy
is to provide a compensation package that will attract and retain qualified and
experienced executives.
SUMMARY COMPENSATION
The following table,presented in accordance with the Securities Act
(Ontario),sets forth all compensation paid, for the years ended September 30,
2001, 2000 and 1999, in respect of the individuals who were at each of such
dates the Chief Executive Officer and the four most highly compensated executive
officers of Royal Group (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- SECURITIES UNDER
NAME AND FISCAL OTHER ANNUAL OPTIONS GRANTED ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (NUMBER) COMPENSATION
- ------------------ ------ -------- ---------- ------------ ---------------- ------------
Vic De Zen 2001 $500,000 $2,225,000 $12,000 300,000 $0
Chairman of the Board, 2000 $500,000 $2,501,000 $12,000 320,000 $0
President and Chief 1999 $500,000 $4,134,000 $12,000 320,000 $0
Executive Officer
Gary Brown 2001 $300,000 $1,330,000 $12,000 0 $0
Director, Executive Vice 2000 $300,000 $1,663,500 $12,000 0 $0
President and Chief 1999 $300,000 $1,842,500 $12,000 0 $0
Financial Officer
Douglas Dunsmuir 2001 $300,000 $1,340,000 $12,000 0 $0
Director,Executive Vice 2000 $300,000 $1,663,500 $12,000 0 $0
President and 1999 $300,000 $1,842,500 $12,000 0 $0
General Counsel
Gwain Cornish 2001 $280,000 $ 720,000 $12,000 50,000 $0
Director and Senior 2000 $280,000 $ 710,000 $12,000 0 $0
Vice President 1999 $280,000 $ 380,000 $12,000 0 $0
Mario Cadorette 2001 $210,000 $ 49,650 $ 5,970 0 $0
Director and President of 2000 $210,000 $ 113,812 $ 5,909 0 $0
Royal Window 1999 $160,000 $ 116,280 $ 5,166 0 $0
Coverings (Canada) Inc.
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STOCK OPTION PLAN
The Board of Directors adopted Royal Group's 1994 Stock Option Plan (the
"Plan") to motivate Royal Group's Management, officers and employees and to
further align their interests with those of its public shareholders. Currently
under the Plan: (i) the maximum number of Subordinate Voting Shares which may be
authorized for issuance is limited to 8,583,385 (ii) the aggregate number of
Subordinate Voting Shares authorized for issuance to any one person within a
one-year period is limited to 5% of the outstanding Subordinate Voting Shares,
(iii) the number of Subordinate Voting Shares reserved for issuance or issued
within one year to an insider shall not exceed 10% of the outstanding
Subordinate Voting Shares, and (iv) each option must have a term not exceeding
nine years. The exercise price of options granted under the Plan is the closing
market price the day prior to the date the option is granted on (i) The Toronto
Stock Exchange generally, or (ii) The New York Stock Exchange in the case of
certain U.S. resident optionholders. Generally, 50% of the options awarded
pursuant to a specific grant become exercisable at any time after the third
anniversary of the date of grant and the remaining 50% of such options become
exercisable at any time after the sixth anniversary of the date of grant. The
Board of Directors may provide financial assistance to an optionholder to enable
such holder to exercise some or all of such holder's options. In 2001, no such
assistance was provided. If the optionholder has resigned or has been terminated
for just cause, all unexercised options previously granted to such optionholder
are cancelled. In any other circumstance,the optionholder retains the right to
exercise all options granted to such holder in accordance with their terms.
(A) OPTIONS GRANTED
The following table shows the options granted under the Plan to the Named
Executive Officers of Royal Group for the financial year ended September 30,
2001.
OPTION GRANTS DURING THE FINANCIAL YEAR ENDED SEPTEMBER 30, 2001
MARKET VALUE
% OF ALL OF SECURITIES
SECURITIES OPTIONS UNDERLYING
UNDER GRANTED TO OPTIONS
OPTIONS EMPLOYEES EXERCISE ON THE
GRANTED IN FINANCIAL PRICE DATE OF GRANT DATE OF GRANT/
NAME (NUMBER) YEAR ($/SECURITY) ($/SECURITY) EXPIRATION DATE
- ---- ---------- ------------ ------------ ------------- ---------------
Vic De Zen 320,000 55% 20.00 20.00 December 1,2000/
November 30,2009
(B) OPTIONS EXERCISED
The following table sets forth each exercise of options during the
financial year ended September 30, 2001 and the value of the unexercised options
to purchase Subordinate Voting Shares of Royal Group held by the Named Executive
Officers.
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AGGREGATED OPTION EXERCISES DURING THE FINANCIAL YEAR ENDED
SEPTEMBER 30, 2001 AND FINANCIAL YEAR END OPTION VALUES
VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SEPTEMBER 30, 2001 AT SEPTEMBER 30, 2001
SECURITIES AGGREGATE (NUMBER) ($)
ACQUIRED VALUE --------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------- ----------- ------------- ----------- -------------
Vic De Zen nil nil 1,360,000 nil 1,264,000 nil
Gary Brown nil nil 168,554 nil 2,319,207 nil
Douglas Dunsmuir nil nil 168,554 100,000 2,319,207 nil
Gwain Cornish nil nil 76,777 95,000 1,000,854 nil
Mario Cadorette nil nil 76,000 30,000 670,300 nil
- ---------------
* The closing price of Royal Group's Subordinate Voting Shares on The Toronto
Stock Exchange on September 30, 2001 was 23.95.
COMPOSITION OF THE COMPENSATION COMMITTEE
In 2001 compensation for senior executives and Directors was monitored
directly by the Board as a whole.
REPORT ON EXECUTIVE COMPENSATION
The compensation of Royal Group's senior executives, including that of its
Chief Executive Officer, continues to follow the pattern which was set at the
time Royal Group went public in November, 1994. The compensation consists of a
base salary, an annual bonus and stock options, all of which are approved
annually by the Board. The base salaries of Royal Group's senior executives was
established by the Board at the time Royal Group went public in November,1994
and,other than Mario Cadorette's, these base salaries have not changed since
that time. Growth in executive compensation since that time has been linked to
Royal Group's corporate performance through the use of an annual bonus and stock
option grants. With the emphasis of the compensation policy being on the bonus
and the stock options,executive compensation is linked closely with the
performance of Royal Group.
The Board of Directors has adopted an employee bonus plan for certain of
Royal Group's employees whereby 4% of the EBITDA (earnings before interest,
taxes, depreciation and amortization) of each of Royal Group's operating units
are distributed annually as to 2% to senior managers and key operating personnel
of such operating unit and as to 2% to executive management of Royal Group. The
particulars of Royal Group's 1994 Stock Option Plan are discussed in more detail
above, however the Board would like to reiterate that it adopted the Plan to
motivate Royal Group's management, officers and employees and to further align
their interests with those of its public shareholders. The Board feels that the
Plan has been successful in accomplishing these objectives and that the Plan is
a key component of Royal Group's executive compensation package.
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COMPENSATION OF DIRECTORS
Each "outside" Director receives an annual fee of $10,000 and a fee of
$1,000 for each meeting of the Board that they attend. For the financial year
ended September 30, 2001, Royal Group paid the "outside" Directors an aggregate
amount of $59,000 in annual and attendance fees.
The foregoing Report on Executive Compensation has been made by all of the
members of the Board of Directors:
Vic De Zen (Chairman) Douglas Dunsmuir
Gwain Cornish Ron Goegan
Mario Cadorette Irvine Hollis
Gregory Sorbara Ronald Slaght
Ralph Brehn
PERFORMANCE GRAPH
The following graph compares the total cumulative shareholder return for
Cdn. $100 invested in Royal Group's Subordinate Voting Shares with the
cumulative total return of each of the TSE 300 Index and the TSE Building
Materials Index since Royal Group went public in November, 1994.
[SHARE PERFORMANCE GRAPH]
ROYAL GROUP TECHNOLOGIES LIMITED (RYG)
SHARE PERFORMANCE GRAPH
CUMULATIVE TOTAL RETURN ON INVESTMENT OF $C100
NOVEMBER 30, 1994 THROUGH SEPTEMBER 30, 2001
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INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
As at the date hereof, no officer or Director or any of their associates is
indebted to Royal Group or its subsidiaries.
CORPORATE GOVERNANCE PRACTICES
Royal Group's current corporate governance practices are based on the
principles of fairness, accountability,transparency and responsible corporate
behavior and reflect fairly the interests of public shareholders, the
substantial management and employee investment in Royal Group and Royal Group's
historic and current entrepreneurial and growth-oriented nature. Royal Group's
corporate governance practices are described below with reference to the
corporate governance guidelines of The Toronto Stock Exchange which were
published to help corporations assess their corporate governance practices
(collectively, the "Guidelines").
MANDATE OF THE BOARD
The Board of Directors' mandate is to supervise the management of the
business and affairs of Royal Group and to act with a view to the best interests
of Royal Group. The Board fulfills its mandate directly and through its Audit
Committee. At regularly scheduled meetings the Directors receive and discuss
reports on Royal Group's financial position and operating performance. The Board
of Directors also discharges its responsibilities as follows:
i) it reviews the strategic planning and business objectives which are
submitted by Management and discusses with the Chief Executive Officer
and senior management the strategic plan and objectives that should be
pursued by Royal Group;
ii) it is informed on a periodic basis of the principal risks faced by
Royal Group and the steps implemented to manage these risks by
periodic management reports. The Audit Committee monitors these risks
and Royal Group's internal controls and management information systems
and reports directly to the Board on a regular basis;
iii) it is responsible for assessing the performance of Royal Group's
executive officers based on the recommendations of the Chief Executive
Officer and for succession planning in respect of senior management.
The Board as a whole also assesses its own effectiveness and that of
its Audit Committee and the contribution of individual Directors on an
ongoing basis;
iv) it approves the annual financial statements, the annual report,
quarterly results, all other significant financial communications to
shareholders, management proxy circulars and press releases on major
developments. The Chief Executive Officer also approves all press
releases;
v) it reviews and is responsible for Royal Group's approach to corporate
governance including Royal Group's response to the Guidelines; and
vi) it reviews major investment proposals and monitors progress of these
investments.
The Board meets a minimum of four times a year and more frequently if
required. During the 2001 financial year, the Board met 5 times.
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BOARD COMPOSITION
The Board is composed of nine Directors, five of whom are "inside"
management Directors, including Vic De Zen, Royal Group's controlling
shareholder, and four of whom are "outside" Directors who are "unrelated" to
Royal Group and to its significant shareholder within the meaning of the
Guidelines. An "unrelated" director under the Guidelines is a Director who is
free from any interest and any business or other relationship which could, or
could reasonably be perceived to materially interfere with the Director's
ability to act in the best interests of the Corporation, other than interests
and relationships arising from the Director's shareholdings. The Board considers
that the five "inside" Directors are able to, and do act, with a view to the
best interests of Royal Group, with their compensation as officers of Royal
Group being tied to a consistent measurement of corporate performance, and are
sensitive to avoidance and disclosure of conflicts of interest. The Board
believes that the presence of its senior executives on the Board is a key factor
in Royal Group's success. These Directors bring to the Board the knowledge and
experience that they have acquired during their long length of service with
Royal Group. The insight that each offers in his particular area of
responsibility has been instrumental in creating an effective Board and in
achieving Royal Group's successful results.
Royal Group is controlled by Vic De Zen who, directly or indirectly, owns
or controls 100% of the outstanding Multiple Voting Shares of Royal Group and a
nominal amount of the outstanding Subordinate Voting Shares of Royal Group and
is a "significant shareholder" and "inside" Director within the meaning of the
Guidelines. The "inside" Directors and other management shareholders of Royal
Group own a significant number of the total outstanding Subordinate Voting
Shares of Royal Group. The Directors believe that the membership on the Board of
Directors of four "outside" Directors fairly reflects the investment in Royal
Group by outside shareholders.
The Board feels that the entrepreneurial and growth-oriented nature of
Royal Group and its need to respond quickly and effectively in an ever-changing
business environment makes it appropriate for the Board to be composed of its
current number of directors to allow for open, efficient and effective
deliberation and does not believe that it would add to the quality or efficiency
of its decision-making to alter the Board's size.
EDUCATION AND RECRUITMENT
Management and the "inside" Directors are responsible for the orientation
of "outside" Directors. All Directors receive reports relating to Royal Group's
business, are privy to presentations on legal matters relating to Royal Group
and its Directors and may participate in a Directors' information programme. The
"outside" Directors also participate in the Board's ongoing information
programme in order to enhance their understanding of Royal Group's operations.
The Board has not adopted a formal policy for the recruitment of Directors
and there are no plans to increase the number of Directors on the Board. Other
than Ron Goegan, who was just recently appointed to the Board, all the Directors
presently in office and proposed to be elected at the Meeting have served as
Directors in good standing of Royal Group for several years.
INDEPENDENCE FROM MANAGEMENT
The Board does not function with a non-Management Chairman or with a "Lead
Director". All Directors are expected to exercise critical judgement at all
times and the unrelated Directors have unrestricted, direct access to Royal
Group's executives and to its external auditors. The Board believes that its
independence is protected by the Directors' undertaking to contribute to the
evaluation of their individual
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and collective performances and effectiveness. The Board does not believe that
it is necessary to implement the Guidelines' recommendations regarding
additional structures and procedures to ensure the Board's independence from
Management. The Board further believes that the granting to the Directors of
stock options and the shareholdings and stock options of the "inside" Directors
ensures that the Directors' interests are congruent with the interests of Royal
Group and its shareholders.
The positions of Chairman and Chief Executive Officer are combined at Royal
Group. This is similar to many other leading corporations and has the advantage
of the Chairman of the Board of Directors having a more detailed knowledge of
the business and activities of Royal Group than would be possible in the case of
a non-executive Chairman. The Board believes that the combination of the two
offices does not impair Royal Group's corporate governance system. The Board
also believes that specific position descriptions for the Board and the Chief
Executive Officer, while recommended by the Guidelines, are not required as such
individuals understand the responsibilities and limits of their offices.
BOARD COMMITTEES
The Audit Committee is the Board's only committee and is currently composed
of three "outside" Directors. The composition of the Audit Committee is in
accordance with the recommendations in the Guidelines. The Audit Committee met 5
times in fiscal 2001 and it intends to meet at least quarterly in fiscal 2002.
Its responsibilities include reviewing and approving: the external audit plan by
meeting with outside auditors who are independent of Management; the internal
auditing process, accounting standards, practices and systems; the management
information systems, financial risk management and internal controls including
foreign currency risk strategies; the annual and interim financial statements
and all other legally required public disclosure materials and other significant
public communications that contain financial information before they are
presented to the Board for approval.
The Board believes that its small size and its open and effective dialogue
obviates the need to follow the Guidelines' recommendations and create
additional committees. For example, instead of establishing a compensation
committee, in 2001 compensation for senior executives and Directors was
monitored directly by the Board as a whole. The Board feels that the
compensation of the Directors realistically reflects the responsibilities and
risks involved in being effective directors. Similarly, the Board has not
created a committee of "outside" Directors to nominate new Directors and to
assess the current Directors as recommended in the Guidelines as these functions
are carried out by the Board as a whole.
ENGAGEMENT OF OUTSIDE ADVISORS
An individual Director may engage outside advisors (including financial
advisors, accountants and lawyers) at the expense of Royal Group subject to the
approval of the Audit Committee.
BOARD AUTHORITY AND DELEGATION
In addition to those matters which must by law be approved by the Board,
Management is also required to seek Board approval for any disposition or
expenditure in excess of $60,000,000. Management must also consult with the
Board before engaging in any venture that is outside of Royal Group's existing
businesses. Changes in senior management are also to be approved by the Board.
The Board expects Royal Group's Management to take the initiative in identifying
opportunities and risks affecting Royal Group's business and in finding means to
respond to these opportunities and risks for
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the benefit of Royal Group. The Board also expects Royal Group's Management to
keep it informed in a timely and candid manner of the progress of Royal Group
towards the achievement of its established goals, and of any material deviations
from such goals and from the strategies and policies approved by the Board. The
Board is satisfied that Royal Group's Management is responding to these
expectations.
INVESTOR RELATIONS
Royal Group maintains an investor relations team which communicates with
potential and current investors and responds to investor inquiries. Most
inquiries from shareholders and the investment community are referred to Royal
Group's Vice President of Corporate Communications who has the responsibility to
ensure that the inquiry is considered by the appropriate members of Management
and, if necessary, by the Board and that a reply is provided in a timely manner.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
Royal Group on its own behalf, and on behalf of its subsidiaries, maintains
directors' and officers' liability insurance which, subject to the provisions
contained in the policy, protects the directors and officers, as such, against
all claims during the term of their office provided they acted honestly and in
good faith with a view to the best interests of the applicable corporation. Such
insurance provides for an aggregate $25,000,000 annual protection against
liability for and reimbursement of amounts paid. The policy carries a $75,000
deductible for each claim made against Royal Group under this indemnification
liability coverage. There is no deductible for claims made against directors and
officers. The premium paid by Royal Group in connection with this insurance for
the financial year ended September 30, 2001 was $95,279.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
During the year ended September 30, 2001, no Director, senior officer,
principal shareholder or other insider of Royal Group, nor any associate or
affiliate thereof, has or has had any material interest, direct or indirect, in
any transaction or in any proposed transaction which has materially affected or
would materially affect Royal Group, its affiliates or any of their collective
subsidiaries.
DIRECTORS' APPROVAL
The contents and the sending of this Management Proxy Circular to each
shareholder entitled to receive notice of the Meeting, to each Director and to
the Auditors of the Corporation have been approved by the Board of Directors of
Royal Group and the contents of this Management Proxy Circular are accurate as
of January 1, 2002.
On Behalf of the Board of Directors
[Signature]
Vic De Zen Vaughan, Ontario
Chairman of the Board, January 1, 2002
President and Chief Executive Officer
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ROYAL GROUP TECHNOLOGIES LIMITED