UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the
Registrant ☒ Filed by a Party other than the
Registrant ☐
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under Rule 14a-12
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RESOLUTE FOREST PRODUCTS INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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Fee paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Date Filed:
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Resolute Forest Products Inc.
111 Duke Street, Suite 5000
Montréal, Québec
H3C 2M1 Canada
April 6, 2017
Dear
Stockholder:
We cordially invite you to attend the annual meeting of stockholders of Resolute Forest Products Inc. on Thursday, May 25,
2017, at 10:00 a.m. (Eastern), in the Museum Center at 5ive Points, 200 Inman Street East, Cleveland, Tennessee, USA. The accompanying notice of annual meeting and proxy statement contain the details of the business to be conducted at the meeting.
In addition to the formal items of business to be brought before the meeting, we will report on our business and respond to stockholder
questions.
Whether or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and
submitting your proxy by telephone or by Internet or by completing, signing, dating and returning your proxy form in the enclosed envelope.
Resolute’s annual report for 2016 is included in this package, and we urge you to read it carefully.
We look forward to seeing you at the annual meeting.
Sincerely,
Richard Garneau
President and chief executive officer
Bradley P. Martin
Chair of the board
Resolute Forest Products Inc.
111 Duke Street, Suite 5000
Montréal, Québec
H3C 2M1 Canada
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 25, 2017
April 6, 2017
Dear
Stockholder:
The 2017 annual meeting of stockholders of Resolute Forest Products Inc. will be held on Thursday, May 25, 2017, at 10:00
a.m. (Eastern), in the Museum Center at 5ive Points, 200 Inman Street East, Cleveland, Tennessee, USA, for the purpose of voting on the following matters:
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the election of directors for the ensuing year;
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the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2017 fiscal year;
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an advisory vote to approve executive compensation, or the “
say-on-pay
”
vote;
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an advisory vote on the frequency of holding the
say-on-pay
vote in the future; and
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such other business as may properly come before the annual meeting or any adjournment or postponement thereof.
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The record date for the determination of the stockholders entitled to vote at our annual meeting, and any adjournment or postponement thereof, is the
close of business on March 30, 2017.
Important notice regarding the availability of proxy materials for the annual
meeting of
stockholders to be held on May 25, 2017:
The proxy statement and our 2016 annual report are available at
http://www.edocumentview.com/RFP.
By order of the board of directors,
Jacques P. Vachon
Corporate secretary
April 6, 2017 Montréal, Québec, Canada
T
ABLE
OF
C
ONTENTS
P
ROXY
S
TATEMENT
This proxy statement is furnished in connection with the solicitation of proxies by Resolute Forest Products Inc. on behalf of our board of directors for
the 2017 annual meeting of stockholders. The annual meeting will be held on Thursday, May 25, 2017, at 10:00 a.m. (Eastern), in the Museum Center at 5ive Points, 200 Inman Street East, Cleveland, Tennessee, USA. Proxy materials for the annual
meeting are being mailed or will be made available on or about April 20, 2017.
When we use the terms “Resolute,” “the
Company,” “we,” “us” and “our,” we mean Resolute Forest Products Inc., a Delaware corporation, and its consolidated subsidiaries, unless the context indicates otherwise.
Q
UESTIONS
AND
A
NSWERS
A
BOUT
THE
A
NNUAL
G
ENERAL
M
EETING
AND
V
OTING
Who is entitled to vote
at the annual meeting?
Owners of Resolute’s common stock at the close of business on March 30, 2017, the record date for the
annual meeting, are entitled to receive the notice of annual meeting and to vote their shares at the meeting. On that date, there were 89,750,964 shares of common stock outstanding and entitled to vote and there were 3,287 holders of record. Each
share of common stock is entitled to one vote for each matter to be voted on at the annual meeting.
What is the difference between
holding shares as a stockholder of record and through an intermediary?
You are a stockholder of record if you own shares of common
stock that are registered in your name with our transfer agent, Computershare Trust Company, N.A. If you are a stockholder of record, the transfer agent is sending these proxy materials to you directly.
If you hold shares of common stock indirectly through a broker, bank or similar institution (which we refer to as an “intermediary
institution”), you are a “street name” holder and these materials are being sent to you by the intermediary institution through which you hold your shares. If you provide specific voting instructions by mail, telephone or the
Internet, your intermediary institution will vote your shares as you have directed.
What do I need to do to attend the annual meeting?
Attendance at the annual meeting is generally limited to our stockholders and their authorized representatives. All stockholders must
bring an acceptable form of identification, like a driver’s license, to attend the meeting in person. If you hold your shares in street name and you plan to attend the annual meeting, you must bring an account statement or other suitable
evidence that you held shares of common stock as of the record date to be admitted to the meeting. For directions to the annual meeting, you may contact our investor relations department by following the instructions on our website at
www.resolutefp.com/investors.
Any representative of a stockholder who wishes to attend must present acceptable documentation evidencing his
or her authority, suitable evidence of ownership by the stockholder of common stock as described above and an acceptable form of identification. We reserve the right to limit the number of representatives for any stockholder who may attend the
meeting.
What methods can I use to vote?
If you are a registered holder, you may vote:
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By mail
. Complete, sign and date the proxy card or voting instruction card and return it in the
pre-paid
envelope enclosed with these materials.
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By telephone or Internet
. You can vote over the telephone by calling
1-800-652-VOTE
(8683) within Canada, the U.S. and its territories,
1-781-575-2300
outside Canada, the U.S. and its territories or through
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the Internet at www.envisionreports.com/RFP. The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares
and to confirm that their instructions have been recorded properly. Voting will be open 24 hours a day, 7 days a week, but proxies submitted using these methods must be received by 1:00 a.m. (Central) on May 25, 2017.
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In person
. You can vote in person at the meeting. See
What do I need to do to attend the annual meeting?
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If you are a street name holder, you may vote:
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By mail
. By returning a properly executed and dated voting instruction form by mail, depending upon the method(s) your intermediary makes
available.
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By telephone or Internet
. You can vote over the telephone or through the Internet at the number and website address indicated in your
intermediary institution’s voting instructions. The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares and to confirm that their instructions have been
recorded properly.
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In person
. You can vote in person at the meeting if you bring a valid “legal proxy,” which you can obtain from your intermediary
institution through which you hold your shares. See
What do I need to do to attend the annual meeting?
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What is
a broker
non-vote?
If you are a street name holder, you must instruct your intermediary
institution how to vote your shares. If you do not, your shares will not be voted on any proposal for which the broker does not have discretionary authority to vote, which is referred to as a “
broker
non-vote
.” In these cases, the broker can register your shares as being “present and entitled to vote” for purposes of determining the quorum but will not be able to vote on those matters
for which specific authorization is required under the rules of the New York Stock Exchange, or “
NYSE
”. Under those rules, your intermediary institution has discretionary voting authority to vote your shares on the ratification of
PricewaterhouseCoopers LLP as our independent registered public accounting firm, even if it does not receive voting instructions from you. But the election of directors, the advisory
say-on-pay
vote and the advisory vote on the frequency of holding the
say-on-pay
vote are
non-discretionary
items, and they may not be voted upon by your broker without specific voting instructions from you. Accordingly, your shares would not be voted on these matters.
Is there a list of stockholders entitled to vote at the annual meeting?
A list of stockholders of record entitled to vote at the meeting will be available for inspection at the meeting and for the ten days before the meeting for any purpose germane to the meeting during
ordinary business hours at Resolute Forest Products Inc., 111 Duke Street, Suite 5000, Montréal, Québec, H3C 2M1, Canada from May 15, 2017, through May 24, 2017.
What is the quorum for the annual meeting?
The presence of the holders of shares of
common stock representing at least
one-third
of the voting power of all common stock issued and outstanding and entitled to vote at the meeting, in person or by proxy, is necessary to constitute a quorum for
the transaction of business at the annual meeting. Abstentions and broker
non-votes
are considered present for purposes of determining a quorum.
How will my shares be voted at the annual meeting?
At the meeting, the persons
named in the proxy card or, if applicable, their substitute(s) will vote your shares as you instruct. If you sign your proxy card and return it without indicating how you would like to vote your shares, your shares will be voted:
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FOR the election of each director nominee;
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FOR the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm;
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FOR the advisory resolution approving executive compensation; and
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For an ANNUAL advisory vote to approve executive compensation.
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Can I revoke my proxy?
If you are a stockholder of record, you can revoke your
proxy before it is exercised by:
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giving written notice to the Company’s corporate secretary;
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delivering a valid, later-dated proxy, or later-dated vote by telephone or on the Internet, before the annual meeting; or
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voting in person at the annual meeting.
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If you are a street name holder, you can submit new voting instructions by contacting your intermediary institution. All shares for which proxies have been properly submitted and not revoked will be voted
at the annual meeting.
What are the voting requirements for the approval of each matter presented at the annual meeting?
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Election of directors
. Since the number of nominees for director is the same as the number of positions on the board to be filled, election of
directors at this annual meeting is deemed
“non-contested.”
As a result, under our
by-laws
as amended in December 2014, directors are elected by a majority
vote. An incumbent director nominee who does not receive a majority of the votes cast in a
non-contested
election shall tender his or her resignation to the board. Under our
by-laws,
abstentions and broker
non-votes
will not be considered “cast” in the election of directors, and, as a result, will not affect the outcome of the
director election.
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Ratification of PricewaterhouseCoopers LLP
. The ratification of the appointment of an independent registered public accounting firm is not
required under our
by-laws,
but we are asking as a matter of good governance. A majority of the votes present and entitled to vote at the meeting must vote to approve the ratification of PricewaterhouseCoopers
LLP as our independent registered accounting firm for the 2017 fiscal year for the ratification to pass. Abstentions will have the same effect as a vote against this proposal.
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Advisory vote on executive compensation
. Under our
by-laws,
in order for it to pass, a majority of the
votes present and entitled to vote at the meeting must vote to adopt, on an advisory basis, the resolution approving compensation of our named executive officers. Abstentions and broker
non-votes
will have the
same effect as a vote against this proposal.
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Advisory vote on frequency of future
say-on-pay
votes.
This
matter is being submitted to enable stockholders to express a preference as to whether future
say-on-pay
votes should be held every year, every two years or every three
years. The provisions of our
by-laws
regarding the vote required to approve a proposal are not applicable to this matter. Abstentions and broker
non-votes
will not
affect the outcome of this proposal.
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Will my vote be confidential?
Yes. We have a policy of confidentiality in the voting of stockholder proxies. Individual stockholder votes are kept confidential, unless disclosure is
necessary to meet applicable legal requirements to assert or defend claims for or against the Company or made during a contested proxy solicitation, tender offer or other change of control situation.
Who will pay for the cost of this proxy solicitation?
We will pay the cost of soliciting proxies for the annual meeting. In addition to the solicitation of proxies by mail, solicitation may be made by certain of our directors, officers or employees
telephonically, electronically or
3
by other means of communication. Our directors, officers and employees will receive no additional compensation for any such solicitation. We will reimburse brokers and other similar institutions
for costs incurred by them in mailing proxy materials to beneficial owners.
What information is available via the Internet?
These documents can be found at www.edocumentview.com/RFP:
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notice of annual meeting;
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2016 annual report; and
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What
should I do if I receive more than one set of voting materials?
You may receive more than one set of voting materials, including
multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in
which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you may receive more than one proxy card. Please complete, sign, date and return by mail, or submit via the Internet or by telephone,
each proxy card and voting instruction card you receive. If you would like to consolidate multiple accounts at our transfer agent, please contact Computershare Trust Company, N.A. at (866)
820-6919
(toll free
for Canada and the U.S.) or (781)
575-3100.
What is “householding” and how does it
affect me?
We have adopted a procedure, approved by the Securities and Exchange Commission, or the “
SEC
,” called
“householding,” pursuant to which stockholders of record who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of the notice of annual meeting, proxy statement
and our 2016 annual report, unless we are notified that one or more of these stockholders wishes to continue receiving individual copies. This procedure will reduce our printing costs and postage fees.
Stockholders who participate in householding will continue to receive separate proxy cards. Householding would not in any way affect dividend check
mailings, if any. If you participate in householding and wish to receive a separate copy of this notice of annual meeting and proxy statement, or if you do not wish to continue to participate in householding and prefer to receive separate copies of
these documents in the future, please contact our transfer agent. If you are a street name holder, you can request information about householding from your intermediary institution.
4
C
ORPORATE
G
OVERNANCE
AND
B
OARD
M
ATTERS
Corporate Governance Principles
The board has adopted a formal set of corporate governance principles and practices, which we refer to as the “corporate governance principles.”
The purpose of the corporate governance principles, which are available on our website (www.resolutefp.com/about_us/corporate_governance), is to provide a structure within which directors can effectively pursue the Company’s objectives for the
benefit of stockholders and supervise the management of the Company. The corporate governance principles are guidelines intended to serve as a flexible framework within which the board may conduct its business, and not as a set of legally binding
obligations.
The corporate governance principles outline the board’s responsibilities and the interplay among the board and its
committees in furthering the Company’s overall objectives. The corporate governance principles note the board’s role in advising management on significant issues facing the Company and in reviewing and approving significant actions. In
addition, the corporate governance principles highlight the principal roles of certain committees of the board, including:
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the board’s selection and evaluation of senior executive officers, including the president and chief executive officer, with assistance from the
human resources and compensation/nominating and governance committee, and succession planning;
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the administration of executive and director compensation by the human resources and compensation/nominating and governance committee, with final
approval of chief executive officer and director compensation by the board;
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the selection and oversight of our independent registered public accounting firm and oversight of public financial reporting by the audit committee;
and
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the evaluation of candidates for board membership and the oversight of the structure and practices of the board, the committees and corporate
governance matters in general by the human resources and compensation/nominating and governance committee, including annual assessment (collectively and on an individual basis) of board and committee effectiveness.
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Our corporate governance principles also include, among other things:
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general qualifications for board membership, including independence requirements (with, among other things, the categorical standards for board
determinations of independence);
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director responsibilities, including board and stockholder meeting attendance and advance review of meeting materials;
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provisions for director access to management and independent advisors, and for director orientation and continuing education; and
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an outline of management’s responsibilities, including production of financial reports and disclosures, implementation and monitoring of internal
controls and disclosure controls and procedures, development, presentation and implementation of strategic plans and setting a strong ethical “tone at the top.”
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Director Independence
The Company’s corporate governance
principles also include standards concerning the independence of board members. Those standards are designed to comply with those established by the SEC and the NYSE. They include the following:
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Each member of the board, except for the president and chief executive officer and, at the discretion of the board, up to two additional directors,
must be independent. The definition of independence is based on the NYSE’s corporate governance standards, which also require a majority of directors to be independent, and rules established by the SEC.
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Each member of the audit committee and the human resources and compensation/nominating and governance committee must be independent.
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The independent directors must meet in executive session at least annually without any
non-independent
director
or executive officer. The independent directors will also meet in executive session at the end of any board meeting at the request of any independent director. The lead director presides at these meetings.
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On the basis of information solicited from each director, and upon the advice and recommendation of our human resources and compensation/nominating and
governance committee, the board has determined that at the date of this proxy statement, seven out of the Company’s nine current directors, and seven of the nine nominees for election as directors to hold office until the 2018 annual meeting of
stockholders, are independent, as defined in the NYSE’s corporate governance standards and our
by-laws,
namely: Michel P. Desbiens, Jennifer C. Dolan, Richard D. Falconer, Jeffrey A. Hearn, Alain
Rhéaume, Michael S. Rousseau, David H. Wilkins, and Randall C. Benson (nominee). One current director, Mr. Desbiens, is not nominated for
re-election.
Mr. Benson is not currently a director,
but is a nominee for election as a director to hold office until the 2018 annual meeting of stockholders.
In determining
Mr. Hearn’s independence, both the human resources and compensation/nominating and governance committee and the full board considered that Mr. Hearn was engaged to provide consulting services on strategic projects being evaluated by
the Company. The human resources and compensation/nominating and governance committee and the full board concluded that the limited nature of the services provided and the amounts paid to Mr. Hearn for such services (which did not exceed
$10,000 in the aggregate in 2016) were not material and did not impair Mr. Hearn’s independence.
The board has also determined that
each member of the audit committee and the human resources and compensation/nominating and governance committee satisfies the requirements for independence, including the additional independence standards under NYSE rules for audit committee members
and compensation committee members. As part of these determinations, which included considering the relationships described below under
Related Party Transactions
, as applicable, and the categories of relationships below, the board determined
that none of the independent directors has a direct or indirect material relationship with the Company other than as a director, or any relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director.
Our corporate governance principles reflect the board’s determination that the following categories of relationships
alone are not material and will not impair a director’s independence:
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ownership of less than 5% of the equity of, or being a director of, another company that does business with the Company where the annual sales to, or
purchases from, the Company are less than 5% of the annual revenues of either company;
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ownership of less than 5% of the equity of, or being an executive officer or director of, an unaffiliated company that is indebted to the Company (or
to which the Company is indebted), where the total amount of either company’s indebtedness to the other is less than 5% of the total consolidated assets of either company; and
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serving as an officer, director or trustee of a charitable organization, where the Company’s charitable contributions to the organization are less
than 2% of that organization’s total annual charitable receipts, or $20,000 per year, whichever is less.
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The human
resources and compensation/nominating and governance committee, in consultation with the audit committee when appropriate, is responsible for reviewing and overseeing related party transactions and conflicts of interest situations involving the
Company, its directors, executive officers, the chief accounting officer, and related parties.
6
Code of Conduct
We have adopted a written code of business conduct that applies to all hourly and salaried employees, including our president and chief executive officer, chief financial officer and chief accounting
officer, and to Company directors. The code of business conduct establishes the fundamental ethical values and standards the Company expects in the work and business activities of its employees, officers and directors.
Among other things, the code of business conduct requires that each employee and officer disclose any actual, potential or apparent conflict of interest
in the manner set out in the code.
The Company’s corporate governance principles describe the policy concerning the disclosure, review
and approval of conflicts of interest or related party transactions with respect to directors. The corporate governance principles, together with the code of business conduct, provide guidance to directors in handling unforeseen situations as they
arise, and they provide that each director:
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must avoid every conflict of interest with the Company and must recuse himself or herself from any board decision where a conflict of interest may
exist;
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owes a duty to the Company to advance its legitimate interests when the opportunity to do so arises;
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must maintain confidentiality of information entrusted to him or her;
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must comply, and oversee the compliance by employees, officers and other directors, with applicable laws, rules and regulations;
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must deal fairly, and must oversee fair dealing by employees and officers, with the Company’s customers, suppliers, competitors and employees;
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should promote ethical behavior; and
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must protect the Company’s assets and ensure their efficient use.
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The code of business conduct is available on our website (www.resolutefp.com/about_us/corporate_governance). The Company will post on its website any waiver or amendment to the code of business conduct.
Board Leadership Structure; Communication with Independent Directors
The Company’s business is managed under the direction of the board, with the board delegating the management of the Company to the president and
chief executive officer, working with other executive officers, in a manner consistent with the Company’s objectives and in accordance with its
by-laws.
This delegation of authority is not intended to
minimize the board’s supervisory duties, as more fully set forth in our corporate governance principles.
As board chair, Mr. Martin
presides over board meetings. Because he is not considered an independent director, pursuant to our
by-laws,
a majority of the independent board members selected Mr. Rhéaume, an independent
director, to serve as the board’s lead director. His responsibilities as such include, among other things, chairing any meeting of the independent directors in executive session.
As indicated in the Company’s corporate governance principles, it is the Company’s current intent that the chair not also concurrently hold the position of chief executive officer and,
accordingly, the positions are separated. This allows the chief executive officer to focus on managing the Company, and the chair, together with the lead director, to lead the board in providing advice to, and independent oversight of, management.
We believe that this structure recognizes the time and effort that our chief executive officer is called to devote to his position, and facilitates the independent functioning of the board, thus enhancing the fulfillment of its oversight
responsibilities, and setting the tone for the board in fostering ethical and responsible decision-making and sound corporate governance practices.
7
Stockholders and other interested persons that would like to communicate with the independent directors may
send an
e-mail
to independentdirectors@resolutefp.com or send a written communication to: Resolute Forest Products Inc. Independent Directors, c/o Resolute Forest Products Corporate Secretary, 111 Duke Street,
Suite 5000, Montréal, Québec, H3C 2M1, Canada. The Company’s corporate secretary will forward those communications to the intended recipients and will retain copies for the Company’s records.
Regardless of the method of communication, no message will be screened or edited before it is delivered to the intended recipient(s), who will determine
whether to relay the message to other members of the board.
Board’s Role in Risk Oversight
Management is responsible for assessing and managing risk, subject to oversight by our board. The board executes its oversight responsibility for risk
assessment and risk management directly through its committees, as follows:
|
•
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|
Audit committee
. The audit committee periodically reviews management’s plans to manage the Company’s exposure to financial risk, and
reports or makes recommendations on significant issues to the board. To the extent deemed appropriate in fulfilling its responsibilities, the audit committee also discusses and considers the Company’s policies with respect to general risk
assessment and risk management, and reviews contingent liabilities and risks that could be material to the Company, including major legislative and regulatory developments that could materially impact the Company’s contingent liabilities.
|
|
•
|
|
Environmental, health and safety committee
. The environmental, health and safety committee reviews the Company’s outstanding and potential
liabilities related to environmental, health and safety matters. It also reviews with management all significant environmental incidents or occupational accidents within the Company and any event of material
non-compliance.
The committee monitors the Company’s relationships with external environmental, health and safety regulatory authorities, which are critical to our business operations.
|
|
•
|
|
Finance committee
. The finance committee reviews at least annually a report prepared by management on the financial health, from an actuarial
perspective, of the benefit plans of the Company’s subsidiaries, and related funding obligations. At least annually, the finance committee reviews the adequacy of management’s plans and processes to manage the Company and its
subsidiaries’ exposure to financial risks and the Company and its subsidiaries’ insurance principles and coverage, including those associated with the use of derivatives, currency and interest rates swaps and other risk management
techniques. The finance committee also reviews, as needed, the actual and projected financial situation and capital needs of the Company, including as a result of the Company’s business plan and strategy, cash plan, short-term investment
policy, balance sheet, dividend policy, issuance or repurchase of Company stock and capital structure (
e.g.
, the respective level of debt and equity, the sources of financing and equity, the Company’s financial ratios and credit rating
policy).
|
|
•
|
|
Human resources and compensation/nominating and governance committee
. The human resources and compensation/nominating and governance committee
assists the board in discharging its responsibilities with respect to human resources strategy, policies and programs and matters relating to the use of human resources and also assists the board in fulfilling its responsibilities to ensure that the
Company is governed in a manner consistent with its
by-laws
and in the best interests of its stockholders. The human resources and compensation/nominating and governance committee also considers the impact of
the Company’s executive compensation program and the incentives created by the compensation awards on the Company’s risk profile, and reviews all of the Company’s compensation policies and procedures, including the incentives that
they create and factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. The board believes that these roles are important in managing the Company’s reputational risk.
|
8
The board does not view risk in isolation. Risks are considered in virtually every business decision,
including those related to the Company’s strategic plan and capital structure.
Director Qualifications and
Nomination Process
We believe that each director should possess high personal and professional ethics, integrity and values, an inquiring
and independent mind as well as practical wisdom, vision and mature judgment. He or she should also have substantial training and experience at the policy-making level in business, government, or education and/or expertise that is useful to the
Company and complementary to the background and experience of other board members, so that an optimum balance of expertise among members on the board can be achieved and maintained. In light of other business and personal commitments, he or she
should also be willing and able to devote the required amount of time to diligently fulfill the duties and responsibilities of board membership, and be committed to serve on the board over a period of years to develop knowledge about the
Company’s operations.
With respect to the human resources and compensation/nominating and governance committee’s evaluation of
nominee candidates, including those recommended by stockholders, the committee has no formal requirement or minimum standard for the evaluation of nominees. Rather, the committee considers each candidate on his or her own merits. But in evaluating
candidates, some of the specific areas of expertise and experience that we believe to be important in light of our business are listed below; ideally, these areas should be represented by at least one board member:
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•
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|
professional services, such as lawyers, investment bankers and university professors;
|
|
•
|
|
politics/government relations;
|
|
•
|
|
management/operating experience, such as a chief executive officer, chief operating officer or senior manager; and
|
|
•
|
|
financial/accounting experience, such as a chief financial officer, certified financial analyst or professional accountant or analyst.
|
The applicable aspects of each director’s experience, qualifications and skills that the board considered in their
nomination in light of the foregoing are included in their individual biographies below. It is also desirable that each member of the board has recent experience as a member of the board of at least one other company, preferably a public company.
While the board does not have a formal written diversity policy, the board and the human resources and compensation/nominating and governance
committee advocate diversity in the broadest sense. Diversity is important because we believe a variety of points of view contribute to a more effective decision-making process. Although not specified in the charter, the human resources and
compensation/nominating and governance committee actively seeks out a broad pool of candidates for board positions from diverse ethnic, race, gender and cultural background.
Stockholders who wish to submit director candidates for consideration by our human resources and compensation/nominating and governance committee at the 2018 annual meeting may do so by submitting in
writing such candidates’ names, in compliance with the procedures and along with the other information required by our
by-laws,
to the corporate secretary, Resolute Forest Products, 111 Duke Street, Suite
5000, Montréal, Québec, H3C 2M1, Canada no earlier than February 24, 2018, and no later than March
26, 2018.
Meetings and Committees
The board met eight times in 2016. No incumbent director attended fewer than 75% of the aggregate number of regular and special meetings of the board and of the committees on which the director sits.
9
We expect each director to attend all regular board meetings, all meetings of the committee(s) on which the
director sits and all annual and special meetings of stockholders. All the incumbent directors attended last year’s annual meeting of stockholders.
The board has adopted a written charter for each of its four standing committees: the audit committee, the human resources and compensation/nominating and governance committee, the environmental health
and safety committee and the finance committee. Each committee’s charter is available on our website at www.resolutefp.com/about_us/corporate_governance.
Audit Committee
The members of the audit committee are: Jennifer C. Dolan, Richard
D. Falconer, Alain Rhéaume (chair) and Michael S. Rousseau. The board has determined that each member of the audit committee is “independent” in accordance with the NYSE’s corporate governance standards, our
by-laws
and rule
10A-3
promulgated pursuant to the Securities Exchange Act of 1934, as amended, or the “
Exchange Act
.” The board has determined that each
member qualified as an “audit committee financial expert” in accordance with SEC rules.
The audit committee oversees our financial
reporting, internal controls and audit function process on behalf of the board. Its purposes and responsibilities include:
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Monitoring the integrity of our financial reporting process, systems of internal control and financial statements.
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•
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Monitoring the independence and qualifications of our independent registered public accounting firm.
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•
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Overseeing the audit of the Company’s financial statements.
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•
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Monitoring the performance of our internal audit function and independent registered public accounting firm.
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•
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Monitoring our compliance with legal and regulatory requirements that could have an impact on the Company’s financial statements.
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•
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Fostering open communications among the board, management, the independent registered public accounting firm and internal auditors.
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•
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Reviewing management’s plans to manage the Company’s exposure to financial risk and report or make recommendations on significant issues to
the board.
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•
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Overseeing other matters mandated by applicable rules and regulations as well as listing standards of the NYSE.
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The audit committee met eight times in 2016.
Environmental, Health and Safety Committee
The members of the environmental, health and safety committee are: Michel P. Desbiens, Jeffrey A. Hearn (chair), Richard D. Falconer, Bradley P. Martin and David H. Wilkins. Mr. Desbiens is not
nominated for
re-election,
and will therefore no longer be a member of the board or the environmental, health and safety committee upon the expiration of his current term of office at the annual meeting. The
environmental, health and safety committee monitors the policies, management systems and performance of the Company’s environmental and occupational health and safety matters on behalf of the board.
The primary responsibilities of the environmental, health and safety committee include:
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•
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Reviewing the adequacy of the environmental, health and safety programs and performance of the Company.
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•
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|
Reviewing annually the Company’s environmental, health and safety (i) vision and policies and (ii) strategies and objectives.
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10
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•
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Reviewing outstanding and potential liabilities for environmental, health and safety matters.
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•
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Reviewing with management all significant environmental incidents or occupational accidents within the Company and any event of material
non-compliance.
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•
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Monitoring the Company’s relationships with external environmental, health and safety regulatory authorities and with other stakeholders.
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The environmental, health and safety committee met four times in 2016.
Finance Committee
The members of
the finance committee are: Michel P. Desbiens, Richard D. Falconer (chair), Bradley P. Martin, Alain Rhéaume and Michael Rousseau. Mr. Desbiens is not nominated for
re-election,
and will therefore
no longer be a member of the board or the finance committee upon the expiration of his current term of office at the annual meeting. The primary responsibilities of the finance committee include:
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•
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Reviewing as needed the adequacy of management’s plans to manage the Company’s exposure to financial risk and insurance principles and
coverage, including those associated with the use of derivatives, currency and interest rate swaps and other risk management techniques.
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•
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Reviewing as needed the actual and projected financial situation and capital needs of the Company.
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•
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Reviewing at least annually the Company’s tax situation and tax strategy.
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•
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Reviewing as needed the Company’s investor profile and related investor relations and stockholder services of the Company.
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•
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Reviewing potential merger, acquisition, divestiture, joint venture and other similar transactions and capital expenditure projects to be submitted to
the board.
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•
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Reviewing at least once a year a report prepared by management on the financial health, from an actuarial perspective, of the benefit plans of the
Company’s subsidiaries, and related funding obligations.
|
Our finance committee met four times in 2016.
Human Resources and Compensation/Nominating and Governance Committee
The members of the human resources and compensation/nominating and governance committee are: Jennifer C. Dolan, Jeffrey A. Hearn, Michael S. Rousseau (chair) and David H. Wilkins. The human resources and
compensation/nominating and governance committee’s primary responsibilities include:
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•
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Human resources and compensation
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•
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Reviewing from time to time and approving the structure of the Company’s executive compensation to ensure the structure is appropriate to achieve
the Company’s objectives.
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•
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Evaluating annually the chief executive officer’s performance and compensation, and participating in such evaluation as it relates to other
executive officers of the Company.
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•
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|
At least annually, working with the chair of the board and the chief executive officer to plan for chief executive officer succession and reviewing the
succession planning with the board.
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•
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Recommending to the board the appropriate structure and amount of compensation for
non-employee
directors.
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•
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Periodically evaluating the Company’s executive incentive plans and approving proposed amendments to executive benefit plans.
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11
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•
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Reviewing and approving employment, severance and change in control agreements.
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•
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Considering the impact of the Company’s executive compensation program and the incentives created by compensation awards on the Company’s
risk profile, and reviewing all of the Company’s compensation policies and procedures.
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•
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Recommending to the board nominees to serve as officers of the Company.
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•
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Overseeing and monitoring compliance with the Company’s code of business conduct.
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•
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Reviewing and overseeing related party transactions and conflicts of interest situations involving the Company, its directors, executive officers, the
chief accounting officer, and related persons, in consultation with the audit committee as appropriate.
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•
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Developing and recommending the Company’s corporate governance principles to the board.
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•
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Making recommendations to the board regarding stockholder proposals and any other matters relating to corporate governance.
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•
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Board of directors and board committees
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•
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Annually evaluating the size and composition of the board.
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•
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|
Making recommendations to the board regarding any resignation tendered by a director that fails to receive a majority of the votes cast in an
uncontested election.
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•
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|
Identifying and recommending qualified director candidates to the board and submitting a slate of nominees for election by stockholders at the annual
meeting.
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•
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|
Considering director candidates proposed by stockholders in accordance with the Company’s
by-laws.
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•
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|
Ensuring a process by which the board can assess its performance.
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•
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|
Assessing the performance of each board committee annually, including a review of board committee charters.
|
The human resources and compensation/nominating and governance committee met six times in 2016.
12
D
IRECTOR
C
OMPENSATION
Director Compensation for 2016
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Name
|
|
Fees Earned
or Paid in
Cash
(1)(2)
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|
|
Stock
Awards
(3)
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive Plan
Compensation
|
|
|
Change in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
Michel P. Desbiens
|
|
$
|
75,000
|
|
|
$
|
75,000
|
(6)
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|
$
|
—
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|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
150,000
|
|
|
Jennifer C. Dolan
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|
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75,000
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|
|
|
75,000
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(7)
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|
|
—
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|
|
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—
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|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
|
Richard D. Falconer
|
|
|
90,000
|
(4)
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|
|
75,000
|
(6)
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|
|
—
|
|
|
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—
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|
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—
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|
|
|
—
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|
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|
165,000
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|
Richard Garneau
(5)
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|
|
—
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|
|
|
—
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|
|
|
—
|
|
|
|
—
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|
|
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—
|
|
|
|
—
|
|
|
|
—
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|
Jeffrey A. Hearn
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|
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90,000
|
(4)
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|
|
75,000
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(7)
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|
|
—
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|
|
|
—
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|
|
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—
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|
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4,550
|
(9)
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|
|
169,550
|
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|
Bradley P. Martin
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|
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225,000
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(4)
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|
75,000
|
(6)
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|
|
—
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|
|
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—
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23,588
|
(8)
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—
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|
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323,588
|
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|
Alain Rhéaume
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|
120,000
|
(4)
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|
|
75,000
|
(6)
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|
|
—
|
|
|
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—
|
|
|
|
—
|
|
|
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—
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|
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195,000
|
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|
Michael S. Rousseau
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90,000
|
(4)
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|
75,000
|
(6)
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|
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—
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|
|
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—
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|
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—
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|
|
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—
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|
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165,000
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|
David H. Wilkins
|
|
|
75,000
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|
|
|
75,000
|
(7)
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|
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—
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|
|
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—
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|
|
|
—
|
|
|
|
—
|
|
|
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150,000
|
|
|
1.
|
Retainer fees of all directors were payable in cash, except those of Mr. Martin, who elected to defer all of his cash fees under the Resolute Forest Products
Outside Director Deferred Compensation Plan or “
director deferred compensation plan
”.
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2.
|
The director fees are paid quarterly.
|
|
3.
|
On February 15, 2016, each outside director was granted an equity award with an aggregate grant date fair value of $75,000 each under FASB ASC Topic 718 and
covering 18,029 shares of Company common stock, subject to the Resolute Forest Products Equity Incentive Plan or “
equity incentive plan
.” The Company determined the number of shares by dividing the award value by the volume weighted
average of the highest and lowest prices per share at which the Company’s common stock was traded on the NYSE on each of the five business days immediately before the February 15, 2016 grant date, or $4.16.
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Canadian directors received the award in the form of deferred stock units, or “
DSUs
,” and U.S. directors received the award in the form of restricted
stock units, or “
RSUs”
(collectively, “
2016 equity awards
”). For each director, the 2016 equity awards vested in 25% tranches on the last day of each calendar quarter of 2016. As of December 31, 2016, the 2016
equity awards for all directors were fully vested. Each director’s vested equity award had a fair market value of $96,455 on December 31, 2016 (based on the
per-share
closing trading price on the
NYSE of shares of the Company’s common stock on December 30, 2016, or $5.35).
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4.
|
Mr. Martin serves as chair of the board. However, because Mr. Martin is not an independent director under SEC standards, the board appointed
Mr. Rhéaume as lead director and approved an additional retainer for his service in this capacity. The “Fees Earned or Paid in Cash” column reflect the additional fees Messrs. Martin and Rhéaume received in 2016 for
these roles and additional fees Mr. Rhéaume receives as committee chair. The fees for Messrs. Falconer, Hearn and Rousseau reflect the additional fees for their roles as committee chairs.
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5.
|
As permitted under SEC rules, all of Mr. Garneau’s compensation from the Company for 2016 is set forth in the Summary Compensation Table because he was a
named executive officer in 2016.
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6.
|
The 2016 equity awards to Messrs. Desbiens, Falconer, Martin, Rhéaume and Rousseau were in the form of DSUs.
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7.
|
The 2016 equity awards to Ms. Dolan and Messrs. Hearn and Wilkins were in the form of RSUs.
|
13
|
8.
|
These amounts represent “premium stock units” credited to Mr. Martin’s account under the director deferred compensation plan (as described below
under
Resolute Forest Products Outside Director Deferred Compensation Plan
) as a result of the deferral of his 2016 fees under such plan.
|
|
9.
|
This amount represents fees for consulting services Mr. Hearn performed on strategic projects, as authorized by the board.
|
Cash Component
Compensation payable to the
non-employee
directors is based on an annual retainer fee, payable in cash in equal
quarterly installments. The annual retainer fee has remained unchanged since 2011 at $75,000. In recognition of their added accountabilities, the board chair, lead director and committee chairs receive additional annual fees, payable in cash in
equal quarterly installments. The additional annual fees also remained unchanged since 2011 at $150,000 for the board chair, $25,000 for the audit committee chair and $15,000 for the other committee chairs. The lead director receives an additional
annual fee of $20,000. The Company reimburses all directors for reasonable expenses incurred in connection with attending board and committee meetings.
Resolute Forest Products Outside Director Deferred Compensation Plan
Non-employee
directors had an opportunity to defer all or a portion of their cash fees under the director deferred compensation plan. Fees deferred pursuant to the director deferred compensation plan are credited as
DSUs for Canadian directors and as RSUs for U.S. directors. The number of deferred compensation DSUs and RSUs is determined by dividing 110% of the amount of fees deferred by the volume weighted average of the highest and lowest prices per share at
which the Company’s common stock was traded on the NYSE on each of the five business days immediately before the date the fees would otherwise be paid, resulting in a 10% incentive (referred to in the director deferred compensation plan as the
“
premium stock units
”).
The following table describes how DSUs and RSUs are vested and paid under the director deferred
compensation plan:
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Key Provisions
|
|
DSUs under Director Deferred Compensation Plan
|
|
RSUs under Director Deferred Compensation Plan
|
|
Vesting
|
|
• Non-premium
DSUs and RSUs are always 100% vested
• Premium DSUs and RSUs vest
one-third
on March 31 of the first three calendar years following the year in which they are credited,
but with automatic 100% vesting upon termination of board service for any reason other than cause
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Form of Payment
|
|
Lump sum payment in cash
|
|
Installment payments in cash
|
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|
Timing of Payment
|
|
• All
non-premium
DSUs and
vested premium DSUs are paid as soon as administratively feasible after a termination of board service, unless director is subject to Section 409A of the U.S. Internal Revenue Code, the “
Code
”
• If the
director is subject to Code Section 409A, all
non-premium
DSUs and vested premium DSUs are paid by December 15 of the calendar year following the calendar year of his or her termination of board service,
unless the director provides advance written notice specifying an earlier settlement date
|
|
• Generally,
one-third
of
all
non-premium
RSUs and all vested premium RSUs are paid as soon as administratively feasible after each premium RSU vesting date
• All
non-premium
RSUs and vested premium RSUs are paid as soon as administratively feasible after termination of board service for any reason other than cause before scheduled payment
dates
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14
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|
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|
Key Provisions
|
|
DSUs under Director Deferred Compensation Plan
|
|
RSUs under Director Deferred Compensation Plan
|
|
|
|
|
Definition of “Cause”
|
|
• Commission of a felony or a crime involving moral
turpitude, or other material act or omission involving dishonesty or fraud
• Engaging in conduct that would bring or is reasonably likely to bring the Company or any of its affiliates or subsidiaries into public disgrace or disrepute, or that would
affect the Company’s or any affiliate’s or subsidiary’s business in any material way
• Failure to perform duties as reasonably directed by the Company (which, if
reasonably curable, is not cured within 10 days after notice thereof is provided to the director)
• Gross negligence, willful malfeasance or a material act of disloyalty or other
breach of fiduciary duty with respect to the Company, its affiliates or subsidiaries (which, if reasonably curable, is not cured within 10 days after notice is provided to the director)
|
Equity Component
In addition to the cash component of the directors’ compensation, to ensure the directors’ interests are aligned with those of the stockholders, we grant annual equity-based awards to each
director. The 2016 annual equity award was granted on February 15, 2016. The Human Resources and Compensation/Nominating and Governance Committee (“
compensation committee”
) adheres to a policy that sets the annual grant date
for director equity awards as the eighth trading date after the release of fourth quarter earnings.
The 2016 annual equity award and its
terms are highlighted in the Director Compensation table above and the accompanying footnotes. In addition to the terms noted above, the following table describes how the 2016 annual equity award is vested and settled:
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Key Provisions
|
|
DSU Awards
|
|
RSU Awards
|
|
|
|
|
Vesting upon Termination of Service
|
|
• Upon failure to be
re-elected
or mandatory retirement,
pro rata
vesting of DSUs or RSUs based on months of service in 2016
• Upon death or disability, accelerated vesting of the tranche of DSUs or RSUs
scheduled to vest at the end of the calendar quarter of the director’s termination date
• Upon termination for cause, forfeiture of all vested and unvested DSUs or
RSUs
• Upon any other termination (including resignation), forfeiture of all unvested DSUs
or RSUs
|
|
|
|
|
|
Form of Settlement
|
|
Lump sum payment in Company stock
|
|
Installment payments in Company stock
|
|
|
|
|
|
Timing of Settlement
|
|
Vested DSUs will be settled upon termination of board service
|
|
• Generally, vested RSUs will be settled in
one-third
increments on March 31 of 2017, 2018 and 2019
• Accelerated settlement upon termination of service for any reason other than
cause
|
15
|
|
|
|
|
|
|
Key Provisions
|
|
DSU Awards
|
|
RSU Awards
|
|
|
|
|
Definition of “Cause”
|
|
• Commission of a felony or a crime involving moral
turpitude, or other material act or omission involving dishonesty or fraud
• Engaging in conduct that would bring or is reasonably likely to bring the Company or any of its affiliates or subsidiaries into public disgrace or disrepute, or that would
affect the Company’s or any affiliate’s or subsidiary’s business in any material way
• Failure to perform duties as reasonably directed by the Company (which, if
reasonably curable, is not cured within 10 days after notice thereof is provided to the director)
• Gross negligence, willful malfeasance or a material act of disloyalty or other
breach of fiduciary duty with respect to the Company, its affiliates or subsidiaries (which, if reasonably curable, is not cured within 10 days after notice is provided to the director)
|
|
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|
Definition of “Disability”
|
|
If the director was an employee, he or she would satisfy the criteria for long-term disability benefits under a Company-sponsored plan
|
The following table shows the stock awards granted to the directors since their appointment on the board and the market
value of each award at December 31, 2016. The stock awards were granted in the form of DSUs for Canadian directors and RSUs for U.S. directors. Each award had an initial grant value of $75,000 and covered the number of units of stock shown in
the table. All awards are vested. For compliance with the Company’s stock ownership guidelines, each director continues to hold all shares at December 31, 2016.
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Name
(1)
|
|
Grant
Date
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|
|
Number of
Units of Stock
at Grant Date
(2)
|
|
|
Market Value of
Shares of Stock
at 12/31/16
(3)
|
|
|
Messrs. Falconer, Hearn, Rhéaume, Rousseau
and Wilkins at 12/31/16
|
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04/08/11
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2,711
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|
$
|
14,504
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|
|
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02/27/12
|
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4,889
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|
|
|
26,156
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|
02/18/13
|
|
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5,459
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|
|
|
29,206
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|
|
|
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02/11/14
|
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3,872
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|
|
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20,715
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02/16/15
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4,072
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|
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21,785
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02/15/16
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18,029
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|
96,455
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|
|
Mr. Martin at 12/31/16
|
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08/06/12
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3,290
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17,602
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|
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|
|
|
02/18/13
|
|
|
|
5,459
|
|
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|
29,206
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|
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|
02/11/14
|
|
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3,872
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|
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20,715
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|
|
|
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|
02/16/15
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|
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4,072
|
|
|
|
21,785
|
|
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|
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|
02/15/16
|
|
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18,029
|
|
|
|
96,455
|
|
|
Ms. Dolan and Mr. Desbiens at 12/31/16
|
|
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08/07/13
|
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2,835
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|
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15,167
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|
|
|
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|
02/11/14
|
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3,872
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|
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20,715
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02/16/15
|
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4,072
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|
|
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21,785
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|
|
|
|
|
02/15/16
|
|
|
|
18,029
|
|
|
|
96,455
|
|
|
1.
|
Mr. Garneau’s equity awards are set forth in the Summary Compensation Table as permitted under SEC rules.
|
|
2.
|
Shares under the vested awards for the Canadian directors will be issued upon termination from board service. Shares under the vested awards for the U.S. directors have
been issued pursuant to the award agreements, which provide for
one-third
of each award to be settled each year, beginning with the year after the award is vested.
|
|
3.
|
The fair market value shown is based on the
per-share
closing trading price on the NYSE of shares of the Company’s common
stock on December 30, 2016, or $5.35.
|
16
In addition, on January 9, 2011 and upon the Company’s emergence from creditor protection
proceedings, all directors except Ms. Dolan and Messrs. Desbiens and Martin received a
one-time
option grant. The option award covered 9,302 shares with a $23.05 exercise price. The option award is
fully exercisable with a January 9, 2021 expiration date. Option awards are not a part of the directors’ annual compensation program.
Stock Ownership Guidelines
We
have established stock ownership guidelines for directors to ensure that they are also stockholders, thereby aligning their interests with those of other Company stockholders. Under the guidelines, each director must own shares of Company stock
equal to three times the annual cash retainer fee ($225,000 in total as of December 31, 2016). For purposes of the guidelines, all shares directly owned and deferred stock units (whether DSUs or RSUs and whether vested or unvested) are included
in the calculation. Unexercised stock options are not included in the calculation. Until the stock ownership requirement is met, the guidelines require directors to hold all shares received upon settlement of stock units (excluding shares withheld
for taxes) and a number of shares equal to 50% of any gain realized upon option exercise. To determine whether a director has met the stock ownership requirement, the shares held by each director will be calculated on the basis of fair market value
of the common stock at the time of measurement. As of December 31, 2016, Messrs. Falconer, Martin and Rousseau own sufficient shares to meet the stock ownership requirement, based on the December 30, 2016
per-share
closing price of $5.35. Ms. Dolan and Mr. Desbiens continue to hold their shares pursuant to the guidelines, but did not meet the stock ownership requirement as of December 31, 2016 given
their shorter tenure on the board and the change in stock price. The remaining directors, Messrs. Hearn, Rhéaume and Wilkins, met the stock ownership requirement as of December 31, 2014 but, despite continuing to hold their shares, did
not meet the stock ownership requirements as of December
31, 2016 given the decrease in the price of Company stock.
R
ELATED
P
ARTY
T
RANSACTIONS
The Company’s corporate governance principles provide the framework under which we consider “related
party transactions,” which are generally relationships and transactions involving more than $120,000 in any fiscal year in which the Company is a participant and in which any director, executive officer, holder of more than 5% of our
outstanding common stock or any of their immediate family members has a direct or indirect material interest. The human resources and compensation/nominating and governance committee, in consultation with the audit committee when appropriate, is
responsible for implementing and overseeing policies and procedures for related party transactions and conflict of interest situations, and also reviews all related party transactions or potential conflict of interest situations involving the
Company, its directors, executive officers, the chief accounting officer and related persons. The board may also create special independent committees from time to time to review certain transactions, including related party transactions. The
corporate governance principles provide that directors may not enter into a transaction with the Company without first disclosing the transaction and obtaining advance approval by the board and the human resources and compensation/nominating and
governance committee, and the director must recuse himself or herself from board consideration and decision on any such transaction.
17
E
XECUTIVE
C
OMPENSATION
Compensation Discussion & Analysis
Executive Summary
This Compensation Discussion and Analysis, or
“
CD&A
,” summarizes our executive compensation philosophy and programs, the decisions made under those programs and any changes made to reflect our business objectives. While the executive compensation program is generally
applicable to the president and chief executive officer and all senior vice presidents, this CD&A focuses on the compensation of our “named executive officers” for 2016:
|
•
|
|
Richard Garneau, president and chief executive officer
|
|
•
|
|
Jo-Ann
Longworth, senior vice president and chief financial officer
|
|
•
|
|
Yves Laflamme, senior vice president, wood products, procurement and information technology
|
|
•
|
|
André Piché, senior vice president, tissue group and Calhoun, Catawba and Mokpo operations
|
|
•
|
|
Richard Tremblay, senior vice president, pulp and paper group
|
The human resources and compensation/nominating and governance committee (referred to as the
compensation committee
in this Executive Compensation section) maintained the executive compensation
program for 2016 as highlighted in the following table and discussed in greater detail in this CD&A.
18
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Total Direct Compensation
|
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|
Indirect
Compensation
|
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Program
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Base
Salary
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Annual Incentive
Compensation
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Long-term
Incentive
|
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DC Make-Up
Program
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Perquisites and
General
Benefits
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Purpose
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|
• Attracts and retains executives with an assured level of cash
• Reviewed annually and
adjusted for increased accountabilities and performance
|
|
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|
• Rewards attainment of specific, measurable and bottom-line oriented company performance
measures
• Set at
a percentage of base salary with threshold, target and maximum payout opportunities
• Rewards demonstrated individual effectiveness and remarkable initiatives, namely behaviors that enhance overall corporate performance
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|
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|
• Motivates and retains executives to achieve long-range goals
• Aligns executives with
shareholder interests
• Award values based on a target percentage of salary
• 50%/50% mix between RSUs
and PSUs
• RSUs
vest ratably over 4 years
• PSUs payable upon attainment of performance measures and employment on vesting
date
|
|
|
|
• Provides, on a current basis, an amount in cash, equal to the company contributions in excess
of statutory limits under the tax-qualified defined contribution plans
• For Canadian executives, also provides an amount equal to the employer contribution for the STIP, which is not pensionable pursuant to the Canadian registered
tax-qualified defined contribution plans
• Absence of deferral feature and ability to accumulate retirement income
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|
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|
• Fixed perquisite allowance to give executives flexibility in selecting perquisites that suit
their individual situations
• Allowance caps the cost of perquisites
• Tax-equalization program
for executives
• Offers competitive benefits that include benefits offered to all full-time
employees
|
|
Performance Period
|
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–
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1
Year
|
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|
3 Years
(PSUs)
|
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–
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–
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Payout Moderately
at Risk
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Payout Highly
at Risk
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19
Objectives
Our executive compensation program is designed to meet the following objectives:
|
•
|
|
Attract and retain team members with superior management ability, insight and judgment who will pursue the
re-positioning
of the Company for long-term growth, with a focus on operational excellence and the creation of a sustainable and diversified portfolio of products;
|
|
•
|
|
Motivate and reward the president and chief executive officer and all senior vice presidents for their contributions to the Company’s growth and
profitability on a short- and long-term basis by linking a significant portion of the compensation package to the achievement of specific financial measures and other Company goals and objectives;
|
|
•
|
|
Encourage superior individual performance by rewarding, through limited discretionary cash awards, demonstrated effectiveness and remarkable
initiatives, namely behaviors that enhance overall corporate performance; and
|
|
•
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Ensure a strong alignment between executives and all stockholder interests.
|
Executive Compensation Process
The compensation committee independently assesses
the performance goals and objectives of the president and chief executive officer and makes recommendations to the board as to the amounts and individual elements of his total compensation. The independent directors of the board ultimately approve
the final compensation package for the president and chief executive officer. For the senior vice presidents, the compensation committee evaluates and approves all elements of total compensation.
Consistent with its authority under its charter, the compensation committee selects and retains its own independent advisors to provide guidance on the
competitiveness and appropriateness of the compensation programs for the president and chief executive officer and all senior vice presidents. For 2016, the compensation committee retained Hugessen Consulting to provide this advice. In 2016,
Hugessen Consulting’s aggregate fees were $39,511 (converted from Canadian dollars to U.S. dollars based on the average exchange rate for 2016, or $0.7549).
As more fully described below, Hugessen Consulting assists the compensation committee in benchmarking certain elements of the executive compensation program against the Company’s comparator groups
(described below) and advises on the risk elements of the program. Hugessen also provides management advice on these matters, as directed by the chair of the compensation committee. While internal and external information and advice have been used
in the ongoing assessment of the executive compensation programs, the compensation committee and the independent members of the board retained the full responsibility for all decisions related to the Company’s compensation programs and plans as
well as their implementation.
20
To this end, the compensation committee evaluates total direct compensation (comprising of base salary and
short-term and long-term incentives) against the median level of the Company’s comparator groups. It makes its compensation decisions on various elements at different times in the year:
|
|
|
|
|
|
|
February 2016
|
|
•
|
|
Recommended for approval, and the independent members of the board of directors approved, the 2015 STIP payout, and the terms of the
2016 STIP
|
|
|
|
•
|
|
Reviewed the main elements of the executive compensation program, including perquisites, to assess any changes to the program
|
|
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|
July 2016
|
|
•
|
|
Recommended for approval, and the independent members of the board of directors approved, certain base salary adjustments for the president and chief executive officer and all
senior vice presidents
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|
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|
|
|
October 2016
|
|
•
|
|
Recommended for approval, and the independent members of the board approved, the annual equity grant for management
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|
|
|
•
|
|
Assessed all senior vice presidents’ performance
|
|
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|
•
|
|
Reviewed and discussed succession planning for Mr. Garneau and all senior vice presidents
|
|
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|
•
|
|
Reviewed the compensation risk assessment
|
|
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|
December 2016
|
|
•
|
|
Assessed Mr. Garneau’s performance for 2016
|
|
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|
•
|
|
Discussed succession planning for Mr. Garneau
|
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|
February 2017
|
|
•
|
|
Recommended for approval, and the independent members of the board of directors approved, the 2016 STIP payout and the terms of the
2017 STIP
|
|
|
|
•
|
|
At management’s recommendation, discussed and decided not to approve discretionary awards to the executive team
|
2016
Say-on-Pay
Vote
Stockholders approved our executive compensation with over 99% of the votes cast in favor of the
non-binding
resolution approving executive compensation, or the
“say-on-pay”
vote, at the 2016 annual meeting of
stockholders.
Setting Compensation Levels—Benchmarking Data
Our executive compensation structure adheres to a
pay-for-performance
framework with a mix of cash and
non-cash
elements. There is no formal policy for allocating a certain percentage of pay between cash and
non-cash
or short-term or long-term pay. The compensation committee
favors a mix that is more weighted to variable pay through a short-term cash incentive and a long-term equity incentive, which puts a significant portion of compensation
at-risk.
The following shows the
intended mix for the three main elements of pay. The weighted mix, as shown below, is based on the following assumptions: (i) base salary is the salary in effect at December 31, 2016; (ii) the 2016 STIP at target payout of 100% of
base salary; (iii) the value of the annual equity grants (described below) is based on 125% of base salary (225% for the president and chief executive officer); and (iv) parity between the Canadian and U.S. dollars.
|
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Total Direct Compensation
|
|
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Level
|
|
Base Salary
|
|
|
Short-Term
Incentive
(at Target Payout)
|
|
|
Long-
Term
Incentive
|
|
|
President and chief executive officer
|
|
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23.5%
|
|
|
|
23.5%
|
|
|
|
53.0%
|
|
|
All other named executive officers
|
|
|
30.8%
|
|
|
|
30.8%
|
|
|
|
38.4%
|
|
21
The compensation committee annually assesses the competitiveness of aggregate total direct compensation
(base salary, target short-term incentive and long-term incentives) and each element individually for the president and chief executive officer and all senior vice presidents. To make this assessment, the compensation committee uses market data
based on two comparator groups. Before 2015, the compensation committee historically updated the market data every year. Beginning in 2015, the compensation committee updates the information every two years. As a result, for 2015, in consultation
with Hugessen, the compensation committee used the 2014 market data, adjusted by 3%. In 2016, the compensation committee reassessed the comparator groups and obtained updated market data.
The compensation committee identified a primary comparator group, which consisted of 10 industry peers (“
industry comparator group”
).
The second comparator group consisted of a blend of 15 Canadian companies and 33 U.S. companies that were part of Willis Towers Watson’s databank and selected based on industry (the forest and paper products industry) and revenues in certain
commodity and other industrial industries (“
blended comparator group
”). Four companies appeared in both the Canadian and U.S. company comparator groups. The 33 U.S. companies in the blended comparator group also included four of the
industry comparator group companies.
The industry comparator group for 2016 changed from the industry comparator group for 2014 by replacing
three of the companies with three new companies as noted below. In reassessing the industry comparator group, the group was initially developed by focusing on publicly traded companies with headquarters, operations and sales in Canada and the U.S.
that are in the paper packaging, paper or forest products industry. To further narrow the industry comparator group, the company identified the companies with revenue and a total enterprise value between 1/3 to three times that of Resolute’s
revenue and total enterprise value. Finally, the group was refined to its final 10 companies based on peer size with a focus on paper products and packaging companies that have a majority of U.S.-based sales and substantial sales of coated papers,
wood products and pulp products. As a result, the final industry comparator group comprised of the following eight U.S. companies and two Canadian companies in the forest products and paper products industries:
|
|
|
|
|
|
|
Bemis Company Inc.
|
|
Domtar Corporation
|
|
Louisiana-Pacific Corporation
|
|
Canfor Corp.*
|
|
Graphic Packaging Holding Company
|
|
Packaging Corporation of America
|
|
Cascades Inc.
|
|
KapStone Paper and Packaging Corporation*
|
|
Sonoco Products Company
|
|
Clearwater Paper Corporation*
|
|
|
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*
|
New for 2016, replacing MeadWestvaco Corp., Rock-Tenn Company and Weyerhaeuser Company.
|
While total direct compensation for each named executive officer was compared against both comparator groups each time a comparable position existed in both groups, the compensation committee assessed
compensation adjustments against the industry comparator group for the following positions: president and chief executive officer; senior vice president, pulp and paper group; senior vice president, tissue group and Calhoun, Catawba and Mokpo
operations; and senior vice president, wood products, procurement and information technology. The industry comparator group was appropriate for these positions because the positions require specific knowledge of the forest products industry to
implement the Company’s strategic plans. When benchmarking to the industry comparator group, the position for the president and chief executive officer was matched with the chief executive officer at the comparator companies. The senior vice
president, pulp and paper group; senior vice president, tissue group and Calhoun, Catawba and Mokpo operations and senior vice president, wood products, procurement and information technology were matched with the business unit group heads among the
comparator companies.
The blended comparator group was used for the senior vice president and chief financial officer because this position
performs corporate functions and has a skill set that is transferable across industries. As a result, the blended comparator group was appropriate for this position.
When benchmarking to either comparator group, the comparison was made based on position and on a currency neutral basis assuming parity between Canadian and U.S. dollars.
22
The following chart shows the resulting comparisons against the respective comparator group, using salary
levels in effect before the June 2016 base salary adjustments described further below under
Base Salary
.
|
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Level
|
|
Comparator
Group
|
|
Base
Salary
|
|
Short-Term
Incentive
(at Target
Payout)
|
|
Target
Total Cash
|
|
Equity
Award
Value
|
|
Total Direct
Compensation
|
|
President and chief executive officer
|
|
Industry
|
|
Above
Median
|
|
Above
Median
|
|
Above
Median
|
|
Below
Median
|
|
Below
Median
|
|
|
|
|
|
|
|
|
|
Senior vice president and chief financial officer
|
|
Blended
|
|
Below
Median
|
|
Above
Median
|
|
Above
Median
|
|
Below
Median
|
|
Below
Median
|
|
|
|
|
|
|
|
|
|
Senior vice president, wood products, procurement and information technology
|
|
Industry
|
|
Below
Median
|
|
Above
Median
|
|
Above
Median
|
|
Below
Median
|
|
Below
Median
|
|
|
|
|
|
|
|
|
|
Senior vice president, tissue group and Calhoun, Catawba and Mokpo operations
|
|
Industry
|
|
Below
Median
|
|
Above
Median
|
|
Below
Median
|
|
Below
Median
|
|
Below
Median
|
|
|
|
|
|
|
|
|
|
Senior vice president, pulp and paper group
|
|
Industry
|
|
Below
Median
|
|
Above
Median
|
|
Above
Median
|
|
Below
Median
|
|
Below
Median
|
Elements of Our Executive Compensation Program
The following highlights the elements of the Company’s executive compensation program and the basis for the elements:
Base salary
We provide senior management with a level of assured cash compensation in the
form of base salary. The compensation committee considers future adjustments in base salary as a result of changes in accountabilities and performance or if other circumstances warrant a change in base salary. When considering base salary
adjustments, the compensation committee takes into account each named executive officer’s demonstrated effectiveness appraisal rating for performing the expected duties of their defined roles. Among other things, the appraisal reviews and
assesses each named executive officer’s mastery of his or her roles and identifies areas for improvement.
When assessing the
adjustments, the compensation committee also considers the base salary ranges for the comparator groups to assess each officer’s proximity to the median for the comparator groups. The updated benchmarking data showed that the base salary levels
continued to be below the median level, based on the respective comparator group, for all named executive officers except for the president and chief executive officer whose adjusted base salary was approximately 20% above the median level on a
dollar basis.
Following the compensation committee’s review of the benchmarking data and its performance assessment for all named
executive officers, the compensation committee recommended, and the independent members of the board approved, effective June 1, 2016, base salary adjustments for the executive team as follows: a 2% base salary increase for Ms. Longworth
and Messrs. Garneau and Tremblay and a 3% base salary increase for Messrs. Laflamme and Piché.
Because the executive team resides in
Canada and the U.S., in 2014, the independent members of the board of directors approved a new currency policy to address currency fluctuations that can impact parity among its executive team. It also allows for smoother benchmarking to comparator
companies that are paid in U.S. dollars. Specifically, base salary is established assuming parity in the Canadian and U.S. dollars, with a portion paid in Canadian dollars and a portion paid in U.S. dollars based on the geographic location of the
Company’s pulp and paper production capacity as of the prior December 31. As a result, for 2016, 53% of an executive’s salary was
23
paid in U.S. dollars and 47% in Canadian dollars. The numbers shown in the Summary Compensation Table have been converted to U.S. dollars at exchange rates disclosed in the footnotes to the
table. For 2017, the portion of base salary paid in U.S. dollars versus Canadian dollars changed slightly to 52% and 48%, respectively, based on the geographic mix of the Company’s pulp and paper production capacity as of December 31,
2016.
2016 STIP
The annual
short-term incentive plan awards all named executive officers for the achievement of the following performance measures that reflect the Company’s business strategy and factors driving shareholder value:
|
|
•
|
|
Generating targeted income from operations;
|
|
|
•
|
|
Controlling selling, general and administration costs, or “
SG&A costs
”;
|
|
|
•
|
|
Improving safety performance; and
|
|
|
•
|
|
Improving environmental performance.
|
As in past years, the 2016 STIP did not reward individual performance and instead remained focused on rewarding corporate performance. The 2016 STIP mirrored the 2015 STIP in design. A key feature of the
2016 STIP balanced stockholder return with rewarding individuals for achieving our business objectives. Specifically, the 2016 STIP contained an overall limit on the total amount that could be paid to all eligible employees as a short-term cash
incentive under the plan even if performance was met. This limit remained set at 7% of free cash flow, which is defined as net cash provided by operating activities, less maintenance, safety and environmental capital expenditures, adjusted for cash
reorganization and restructuring costs, additional pension contributions toward past service and other special items.
For the president and
chief executive officer and all senior vice presidents, including all named executive officers, payout levels were established as a percentage of base salary (as in effect on December 31, 2016). No officer or individual was guaranteed a minimum
payout under the 2016 STIP. The 2016 STIP also provided authority to the compensation committee to adjust or cancel awards under the 2016 STIP at its discretion.
|
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|
|
2016 STIP Payout Levels
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
50% of base salary at 12/31/16
|
|
100% of base salary at 12/31/16
|
|
150% of base salary at 12/31/16
|
In establishing the payout percentages, the compensation committee used benchmarking data from its comparator groups. The
payout percentages have remained the same since the 2011 STIP. In general, the target threshold of 100% is above the median for our comparator groups, but, combined with the lower base salary levels in its comparator groups, reflects the
compensation committee’s adherence to conditioning a significant portion of pay on Company performance.
The table below sets forth the
performance measures approved by the compensation committee for the 2016 STIP that apply to the named executive officers, the associated weight given to each measure and the business objective to which it relates.
|
|
|
|
|
|
|
|
|
Performance Measure
|
|
Weight
|
|
|
Business Objective/Core Value
|
|
Income from operations
|
|
|
50%
|
|
|
Maximizing profitability
|
|
SG&A cost control
|
|
|
25%
|
|
|
Maximizing profitability
|
|
Safety – Frequency Rate (15%) and
Severity Rate (5%) of Incidents
|
|
|
20%
|
|
|
Continuous improvement of safety performance
|
|
Environmental Incidents
|
|
|
5%
|
|
|
Continuous improvement of environmental performance
|
24
All named executive officers earned a 2016 award at 71.6% of their annual base salary based on weighted
performance measures. As a result of the overall limit of 7% of free cash flow, the 2016 STIP payouts were reduced to 30.1% of each named executive officer’s annual base salary.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Measure
|
|
Target
Performance
|
|
Actual
Performance
|
|
Actual Payout
Percentage by
Performance
Measure
|
|
|
Weight
|
|
|
Weighted Payout
Percentage
Before Overall
Cap of Free
Cash Flow
(1)
|
|
|
Weighted Payout
Percentage After
Overall Cap
of Free
Cash Flow
(1)
|
|
|
Income from operations
|
|
$152 million
|
|
$84 million
|
|
|
0%
|
|
|
|
50%
|
|
|
|
0%
|
|
|
|
0%
|
|
|
SG&A cost control
|
|
$140 million
|
|
$135.4 million
|
|
|
146%
|
|
|
|
25%
|
|
|
|
36.5%
|
|
|
|
15.3%
|
|
|
Safety – Frequency Rate
(2)
|
|
.92
|
|
.70
|
|
|
150%
|
|
|
|
15%
|
|
|
|
22.5%
|
|
|
|
9.5%
|
|
|
Safety – Severity Rate
(3)
|
|
25
|
|
24.9
|
|
|
102%
|
|
|
|
5%
|
|
|
|
5.1%
|
|
|
|
2.1%
|
|
|
Environmental Incidents
(4)
|
|
£
41
|
|
27
|
|
|
150%
|
|
|
|
5%
|
|
|
|
7.5%
|
|
|
|
3.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All measures
|
|
—
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
71.6%
|
|
|
|
30.1%
|
|
|
1.
|
Expressed as a percentage of annual base salary.
|
|
2.
|
The frequency of safety incidents is the OSHA incident rate measured by the number of recordable incidents, multiplied by 200,000 and divided by the total number of
hours worked.
|
|
3.
|
The severity of safety incidents is measured by the number of days lost due to lost time incidents and incidents resulting in temporary assignments or restricted work,
multiplied by 200,000 and divided by the total number of hours worked.
|
|
4.
|
Environmental incidents is measured by the number of Class 1 & 2 environmental incidents. Class 1 environmental incidents are high severity incidents with
risk of significant adverse environmental impact, contamination, liability, damage to the company’s reputation and/or legal action and fines. Class 2 environmental incidents are reportable incidents,
non-administrative
infractions, regulatory audit findings and conditions that have a moderate risk of potential adverse impact, contamination, liability or damage to the company’s reputation.
|
Since 2013, Mr. Garneau has accepted payment of his STIP awards. However, in his initial years of serving as president and
chief executive officer, he declined payment of an aggregate $1,202,712, which represented the amount he earned for his 2011 and 2012 STIPs.
The compensation committee designed the 2016 STIP to reward corporate performance only and decided not to have any portion of the 2016 STIP payable on
individual performance measures. On February 1, 2017, the compensation committee approved the 2017 STIP with the same performance measures for corporate performance as the 2016 STIP but with a slight change in the associated weightings for
income from operations and SG&A costs. The weightings for these measures will change from 50% to 55% for income from operations and from 25% to 20% for SG&A costs. The associated weightings for the remaining measures will stay the same. In
addition, beginning with the 2017 STIP, an individual discretionary payout factor of plus or minus 15% may be applied to an executive’s STIP payout to either reward high effectiveness in a role and/or remarkable initiatives or address
performance and/or failure to meet annual objectives. Any individual adjustments for the executive team will be subject to board approval. In addition, the introduction of an individual discretionary adjustment will not impact the total amount
budgeted for a STIP payout as capped by the overall limit of 7% of free cash flow.
Integrated Leadership System
In 2014, the Company launched a strategic organization initiative focused on implementing an integrated leadership system designed to increase
organizational capabilities.
25
The new leadership system is designed to:
|
|
•
|
|
Optimize the organization’s structure;
|
|
|
•
|
|
Clarify each employee’s role and accountabilities;
|
|
|
•
|
|
Provide a robust approach to evaluating employees’ demonstrated effectiveness and long-term potential;
|
|
|
•
|
|
Improve leadership practices to enhance each employee’s opportunity to drive success individually and, ultimately, for the Company;
|
|
|
•
|
|
Better link compensation to individual performance; and
|
|
|
•
|
|
Improve the succession-planning process.
|
By focusing on providing the right tools for individual success, the Company strives to provide its employees with the means to reach their full potential and, therefore, enhance shareholder value,
product quality for our consumers, and the health and safety of our employees.
As part of this system, each year, the named executive
officers are appraised on three elements: mastery of their basic roles, remarkable initiatives and behaviors that can have an adverse effect on their own effectiveness or that of the team (known as “disruptive
behaviors”).
Individual Discretionary Awards
The independent members of the board of directors have historically focused on rewarding achievement of certain levels of performance based on corporate measures under the short-term incentive plan. With
the implementation of an integrated leadership system, they have decided to exercise their discretion in granting cash awards for individual performance on a limited basis. When granted, the awards are discretionary and intended to reward high
effectiveness in an individual’s role and/or remarkable initiatives. Remarkable initiatives are measured based on three criteria: intensity, integration and innovation. However, at management’s recommendation, the committee did not approve
any awards be granted to the executive team members for 2016.
Equity Awards
The compensation committee grants equity awards as a long-term incentive and a significant portion of an executive’s total compensation package. With a significant portion of compensation tied to
equity, executives can stay focused on maximizing stockholder value over the long term. Until 2014, the compensation committee favored an equity mix of 50% in stock options and 50% in RSUs. Stock options allowed executives to share in the
appreciation of the stock price and align their interests with shareholders. In 2014, to further align the compensation program with best practices and enhance its pay for performance philosophy, the compensation committee replaced stock options
with PSUs and retained the grant of RSUs. As a result, the 2016 annual equity award consists of an equity mix of 50% in RSUs and 50% in PSUs. This combination emphasizes the retention element of RSUs and PSUs and, in addition, for PSUs, the “at
risk” nature of a portion of a named executive officer’s compensation.
The size of the equity awards is based on a percentage of
salary taking into account market data. While the compensation committee has discretion to adjust the size of the equity awards for an executive’s performance, the compensation committee chose not to exercise this discretion in respect of the
2016 annual equity award. Since 2013, based on the compensation committee’s recommendation to the board and the independent members of the board approval, Mr. Garneau has accepted an annual equity award with a value equal to 225% of his
base salary. However, similar to the 2011 and 2012 STIP awards, Mr. Garneau requested that the compensation committee not recommend an equity award for him in either 2011 or 2012. The compensation committee honored those requests. The
independent members of the board granted the other named executive officers equity awards with a value equal to 125% of their base salaries.
26
Since 2011, the compensation committee has made an annual equity award grant at its October meeting. The
compensation committee has a policy to set the annual grant date in advance without regard to anticipated earnings or other major announcements and as a precaution against potential claims that equity awards are made at a time when the Company and
named executive officers are in possession of material
non-public
information. The compensation committee policy sets the annual grant date for management awards as the eighth trading date after the release of
the third quarter earnings.
This year’s annual equity award was approved with a November 14, 2016 grant date. The number of RSUs
and PSUs awarded under the 2016 annual equity grant was determined by dividing 50% of the dollar value of the equity award by the volume weighted average of the highest and lowest prices per share at which our common stock was traded on the New York
Stock Exchange on each of the five business days immediately before the November 14, 2016 grant date, or $3.95.
The compensation
committee favors granting the award later in the year to allow the management team to demonstrate effectiveness before receiving an equity grant and has a policy to set the annual grant date in advance without regard to anticipated earnings or other
major announcements and as a precaution against potential claims that equity awards are made at a time when the Company and named executive officers are in possession of material
non-public
information. The
compensation committee policy sets the annual grant date for management awards as the eighth trading date after the release of the third quarter earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Annual Equity Awards
|
|
|
Named Executive Officer
|
|
Performance
Share
Units
|
|
|
Restricted Stock
Units
|
|
|
Mr. Garneau
|
|
|
289,548
|
|
|
|
289,548
|
|
|
Ms. Longworth
|
|
|
68,505
|
|
|
|
68,505
|
|
|
Mr. Laflamme
|
|
|
59,848
|
|
|
|
59,848
|
|
|
Mr. Piché
|
|
|
55,973
|
|
|
|
55,973
|
|
|
Mr. Tremblay
|
|
|
59,694
|
|
|
|
59,694
|
|
On February 28, 2017, the independent members of the board modified the payout form of Mr. Garneau’s 2016
annual equity awards. Typically, the annual equity award is settled in shares of Company stock.
However, in alignment with the annual limits
set forth in the equity incentive plan on the number of shares that may be issued with respect to grants awarded in a given year to an individual, Mr. Garneau’s PSU award and 89,548 units of his RSU award will settle in cash.
The RSU award vests 25% on each of the four anniversaries of the grant date, even though a three year vesting approach is more common. The longer vesting
period is intended to emphasize the retention element of the awards.
27
In contrast, the 2016 PSU award will vest on February 29, 2020 and will be earned and payable as
follows:
The equity awards contain customary provisions for accelerating vesting upon certain terminations and events, such as
death and disability, all as further described in the narratives to the Summary Compensation Table. In all cases, the number of PSUs payable will be determined by actual performance results. The PSU award covers a target number of units and the
number of PSUs payable will range from 0 to 150% of the target number of PSUs.
In addition, if a named executive officer retires, the equity
awards—both RSUs and PSUs—may continue to vest. This feature is intended to attract and retain management with significant experience and encourage executives to postpone retirement. As a result, if a named executive officer retires at
least six months after the grant date, he will be permitted to continue vesting in the award. For this purpose, “retirement” means the named executive officer is at least age 58 with at least two years of service, and the sum of his age
and years of service equals or exceeds 62.5. In addition, the employee must not be entitled to receive a severance package.
Retirement
Plans and DC
Make-Up
Program
For 2016, the president and chief executive officer and all senior
vice presidents earned retirement benefits only under a
tax-qualified
retirement plan, subject to either Canadian or U.S. law. The
tax-qualified
retirement plans are
offered to all eligible employees (not just executives), but limit the pay or contributions that may be considered pursuant to the applicable tax law. Since 2012, the Company has not offered any supplemental retirement plan that allows executives to
currently accumulate, on a
tax-deferred
basis, additional retirement income.
However, because Company
contributions are limited in amount and type under the
tax-qualified
plans, the Company believes executives should receive the benefit of the plans without regard to the limits. For simplified administration,
since 2012, under a program referred to as the
DC
Make-Up
Program
, the Company pays executives a cash payment equal to the Company contributions prescribed under the applicable
tax-qualified
plan formulas that exceed statutory limits. In addition, Canadian executives receive a cash payment equal to the employer contribution they would have received on their annual incentive awards as if
the broad-based plan had provided an employer contribution on these awards. The DC
Make-Up
Program does not allow executives to accumulate earnings on a deferred basis. The payments made pursuant to the DC
Make-Up
Program are reflected
28
in the Summary Compensation Table under All Other Compensation because the contributions are not deferred compensation. The executives pay tax on the cash payment and no
gross-up
or other earnings are provided on these payments. When combined with the Company contributions received under the
tax-qualified
plans, the named executive officers
other than Mr. Tremblay each received an aggregate 2016 defined contribution program benefit totaling 10% of their compensation. Mr. Tremblay received aggregate 2016 defined contribution program benefit totaling 8.5% of his
compensation.
Even though the Company does not offer any supplemental retirement benefits that accumulate on a
tax-deferred
basis currently to executives, Messrs. Laflamme and Piché previously earned supplemental defined benefits under Company plans that were terminated effective upon the Company’s 2010
emergence from creditor protection proceedings. The supplemental defined benefits were reinstated under new arrangements pursuant to the plans of reorganization for Messrs. Laflamme and Piché, and other employees who waived and forfeited
all claims they had or may have had in the creditor protection proceedings in respect of any terminated supplemental retirement plan. The reinstated benefits are provided solely to honor prior contractual obligations, but with all supplemental
defined benefits frozen as of December 31, 2010 based on service and earnings up to that date. None of the other named executive officers have any reinstated supplemental retirement benefits.
The frozen supplemental retirement benefits are paid using our general assets. For the Canadian executives, payments under a supplemental defined benefit
plan are normally scheduled to be paid in monthly payments, which can generally be secured by a letter of credit pursuant to a retirement compensation arrangement without adverse tax consequences to the executive. The Company has established
protocols to secure a letter of credit for eligible executives at age 55 that guarantees their frozen supplemental retirement benefits. The Company has secured a letter of credit per its protocols for Messrs. Laflamme and Piché.
Benefits provided through defined benefit plans are described more fully under
Pension Benefits
. The defined contribution plan
benefits are described under
DC
Make-Up
Program
.
Severance and Change in Control
Arrangements
We believe that the Company should provide reasonable severance benefits to its employees in the event of an involuntary
termination without cause. With respect to the president and chief executive officer and all senior vice presidents, these severance benefits should reflect the fact that it may be difficult for them to find comparable employment within a short
period of time. Severance benefits should help provide an opportunity for the Company and former employees to part ways in an efficient and effective manner.
In the event of a change in control, we believe that the interests of stockholders will be best served if the interests of the president and chief executive officer and all senior vice presidents are
aligned with them, and providing change in control benefits should eliminate, or at least reduce, the reluctance of senior executives to pursue potential change in control transactions that may be in the best interests of stockholders.
For each named executive officer except Mr. Garneau, severance protection is provided pursuant to the Company’s executive severance policy. The
executive severance policy provides for a severance amount determined using a formula that provides six weeks of eligible pay per each year of service. Eligible pay takes into account base salary plus the average of the last two paid regular annual
incentive awards, annualized, with a cap of 125% of the executive’s target incentive for the year of termination. The executive severance policy provides for a minimum of one year of severance and a maximum of two years of severance. Change in
control protection under the executive severance policy does not provide greater severance amounts, but provides severance benefits if, within 12 months following a change in control, a senior executive resigns for good reason (
i.e.,
due to
conditions tantamount to a constructive dismissal).
The executive severance policy, in both a change in control or
non-change
in control context, does not provide any enhanced benefits in the form of, for example, subsidized continued health coverage or
tax-gross
ups. The
29
impact of a termination on the current year incentive award and outstanding equity awards is determined pursuant to the incentive award and equity award plans.
Effective upon Mr. Garneau’s commencement of employment as president and chief executive officer on January 1, 2011, the Company entered
into employment and change in control agreements with Mr. Garneau, which agreements provide severance protection in lieu of coverage under the executive severance policy. Mr. Garneau’s employment agreement provides similar severance
pay to the executive severance policy in the event he is terminated without cause absent a change in control. Mr. Garneau’s change in control agreement provides an enhanced severance amount in the event of a termination without cause or
good reason within 24 months after a change in control. The severance amount is equal to three times the sum of (i) his base salary in the year of termination, (ii) the average of the last two earned regular annual incentive awards,
annualized, with a cap of 125% of his target incentive for the year of termination and (iii) the maximum amount of contributions the Company could have made on his behalf under the defined contribution program (
i.e.,
the registered
tax-qualified
defined contribution plan and the DC
Make-Up
Program) for the
one-year
period following his termination date, plus
$14,880 in lieu of outplacement services. In addition, Mr. Garneau’s outstanding equity awards would fully vest as of his termination date. The change in control agreement also provides subsidized continued health and life insurance
coverage for up to three years following his termination date.
Perquisites
The named executive officers are entitled to receive an annual allowance intended to cover expenses for fiscal and financial advice, and such other perquisites as chosen by the executive. If an executive
is not covered by the Company’s Frequent Business Travelers Policy, then the annual allowance may also be used for tax preparation fees. Mr. Garneau has a $38,455 annual allowance, Ms. Longworth and Messrs. Laflamme and Piché
have a $9,229 annual allowance and Mr. Tremblay has a $12,000 annual allowance. (Allowances for the Canadian executive officers have been converted from Canadian dollars using the exchange rate for the date on which they were paid, May 27,
2016, or 0.7691.) A fixed allowance balances the market practice of providing a certain level of perquisites with controlling costs to ensure the perquisites are not excessive. An annual allowance also provides the executives flexibility in
selecting the perquisites that are suitable to their needs for a given year.
In addition, the Company also provides named executive
officers with a comprehensive annual medical examination as well as a medical concierge service to allow for coordination of health needs in the event of medical issues, including while traveling abroad. In addition, if any of these executives are
subject to taxation in both Canada and the U.S. as a result of their business travel, he or she is provided a payment under the Company’s Tax Equalization Policy generally equal to the difference between his or her respective home tax liability
and actual taxes paid, as well as a
gross-up
on that difference. This payment is intended to limit the executive’s tax liability to the liability in the executive’s home country.
The compensation committee has discretion to approve additional perquisites from time to time. The named executive officers are responsible for any tax
consequences related to their use and receipt of the perquisites.
Stock Ownership Guidelines
The compensation committee adopted stock ownership guidelines for all its senior vice presidents, including each of the named executive officers, and
certain of its vice presidents. The ownership guideline is a multiple of the executive’s base salary. Under the guidelines, Mr. Garneau must own shares of Company stock equal to 4.5 times base salary while the other named executive
officers and other senior vice presidents must own shares of Company stock equal to 2.5 times base salary. For purposes of the guidelines, all shares directly owned and unvested RSUs are included in the calculation. PSUs and unexercised stock
options are not included in the calculation. Until the stock ownership requirement is met, executives must hold all shares (excluding shares withheld for taxes) received upon settlement of RSUs and PSUs and a number of shares equal to 50% of any
gain realized upon option exercise. To determine whether a named executive officer has met the stock ownership
30
requirement, each named executive officer’s base salary is converted to U.S. dollars using the exchange rate at the time of measurement, and the shares held by the named executive officer
are calculated on the basis of fair market value of the common stock at the time of measurement. The compensation committee annually reviews the extent to which the named executive officers have met the stock ownership requirement. In 2016, the
named executive officers held their shares in compliance with the guidelines, but did not meet the stock ownership requirement as of December 31, 2016 given the decrease in the price of Company stock. Mr. Garneau declined his 2011 and 2012
annual equity awards, which also contributed to him not meeting the stock ownership requirement as of December 31, 2016.
Deductibility of Compensation — Section 162(m) of the U.S. Internal Revenue Code
In order to maintain flexibility to attract and retain qualified executives, the Company considers the deductibility rules of Section 162(m) of the
U.S. Internal Revenue Code, or the “
Code
,” to the extent applicable, but retains the discretion to make compensation awards whether or not the compensation is deductible.
Compensation Committee Report
The following report does not
constitute soliciting material and is not considered filed or incorporated by reference into any other filing by Resolute Forest Products Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The independent members of the compensation committee have reviewed and discussed the Compensation Discussion and Analysis above with
management and, based on such review and discussion, the independent members of the compensation committee recommended to the board that the Compensation Discussion and Analysis be included in this proxy statement and in the Company’s Annual
Report on
Form 10-K
for the year ended December 31, 2016.
Michael S. Rousseau (Chair)
Jennifer C. Dolan
Jeffrey A. Hearn
David H. Wilkins
31
Tabular Disclosure of Executive Compensation
The following table sets forth information concerning all compensation earned by the Company’s named executive officers for 2014, 2015 and 2016:
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position
|
|
Year
|
|
|
Salary
(1)
|
|
|
Bonus
|
|
|
Stock
Awards
(2)
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive
Plan
Compen-
sation
(3)
|
|
|
Change in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
(4)
|
|
|
All Other
Compen-
sation
(5)
|
|
|
Total
|
|
|
Richard Garneau
|
|
|
2016
|
|
|
$
|
1,017,686
|
|
|
$
|
—
|
|
|
$
|
790,000
|
|
|
$
|
—
|
|
|
$
|
1,804,600
|
|
|
$
|
—
|
|
|
$
|
201,146
|
|
|
$
|
3,813,432
|
|
|
President and chief executive officer
|
|
|
2015
|
|
|
|
980,905
|
|
|
|
—
|
|
|
|
1,508,000
|
|
|
|
—
|
|
|
|
1,221,527
|
|
|
|
—
|
|
|
|
210,876
|
|
|
|
3,921,308
|
|
|
|
|
|
2014
|
|
|
|
925,820
|
|
|
|
219,924
|
|
|
|
2,165,350
|
|
|
|
—
|
|
|
|
447,178
|
|
|
|
—
|
|
|
|
199,747
|
|
|
|
3,958,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jo-Ann
Longworth
|
|
|
2016
|
|
|
|
431,263
|
|
|
|
—
|
|
|
|
541,190
|
|
|
|
—
|
|
|
|
130,815
|
|
|
|
—
|
|
|
|
80,709
|
|
|
|
1,183,977
|
|
|
Senior vice president and
|
|
|
2015
|
|
|
|
427,400
|
|
|
|
—
|
|
|
|
531,148
|
|
|
|
—
|
|
|
|
206,344
|
|
|
|
—
|
|
|
|
85,921
|
|
|
|
1,250,813
|
|
|
chief financial officer
|
|
|
2014
|
|
|
|
429,502
|
|
|
|
66,034
|
|
|
|
541,806
|
|
|
|
—
|
|
|
|
201,405
|
|
|
|
—
|
|
|
|
89,236
|
|
|
|
1,327,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yves Laflamme
|
|
|
2016
|
|
|
|
375,262
|
|
|
|
—
|
|
|
|
472,800
|
|
|
|
—
|
|
|
|
114,283
|
|
|
|
98,377
|
|
|
|
72,556
|
|
|
|
1,133,278
|
|
|
Senior vice president, wood products, procurement and information technology
|
|
|
2015
|
|
|
|
368,278
|
|
|
|
—
|
|
|
|
459,532
|
|
|
|
—
|
|
|
|
178,517
|
|
|
|
—
|
|
|
|
78,429
|
|
|
|
1,084,756
|
|
|
|
|
|
2014
|
|
|
|
367,975
|
|
|
|
84,862
|
|
|
|
464,192
|
|
|
|
—
|
|
|
|
172,553
|
|
|
|
300,127
|
|
|
|
79,862
|
|
|
|
1,469,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
André Piché
|
|
|
2016
|
|
|
|
350,965
|
|
|
|
—
|
|
|
|
442,186
|
|
|
|
—
|
|
|
|
106,884
|
|
|
|
152,928
|
|
|
|
69,064
|
|
|
|
1,122,027
|
|
|
Senior vice president, tissue group and Calhoun, Catawba and Mokpo operations
|
|
|
2015
|
|
|
|
338,950
|
|
|
|
—
|
|
|
|
429,764
|
|
|
|
—
|
|
|
|
166,958
|
|
|
|
46,598
|
|
|
|
70,808
|
|
|
|
1,053,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Tremblay
|
|
|
2016
|
|
|
|
376,820
|
|
|
|
—
|
|
|
|
471,582
|
|
|
|
—
|
|
|
|
113,988
|
|
|
|
—
|
|
|
|
317,113
|
|
|
|
1,279,503
|
|
|
Senior vice president,
|
|
|
2015
|
|
|
|
351,464
|
|
|
|
—
|
|
|
|
462,836
|
|
|
|
—
|
|
|
|
179,801
|
|
|
|
—
|
|
|
|
415,737
|
|
|
|
1,409,838
|
|
|
pulp and paper group
|
|
|
2014
|
|
|
|
338,100
|
|
|
|
48,920
|
|
|
|
417,396
|
|
|
|
—
|
|
|
|
149,206
|
|
|
|
—
|
|
|
|
61,685
|
|
|
|
1,015,307
|
|
|
1.
|
As described in the CD&A, in 2016, 53% of each named executive officer’s base salary was paid in U.S. dollars and 47% was paid in Canadian dollars.
Amounts paid in Canadian dollars have been converted to U.S. dollars using the exchange rate on the applicable payroll date.
|
|
2.
|
Amounts in these columns reflect the aggregate grant date fair value under FASB ASC Topic 718 of RSUs and the target level of PSUs, respectively, awarded to the named
executive officers under the 2016 annual equity award that are settled in stock. The following shows the grant date values for RSU awards and target PSU awards, as well as the grant date value for the 2016 PSU awards based on the maximum level of
payout, regardless of whether the award is settled in cash or stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2016 Annual
RSU Award
|
|
|
2016 Annual
Target
PSU Award
|
|
|
Total 2016
Equity Awards
|
|
|
2016 Annual
Maximum
PSU Award
|
|
|
Richard Garneau
|
|
$
|
1,143,715
|
|
|
$
|
1,143,715
|
|
|
$
|
2,287,430
|
|
|
$
|
1,715,573
|
|
|
Jo-Ann
Longworth
|
|
|
270,595
|
|
|
|
270,595
|
|
|
|
541,190
|
|
|
|
405,893
|
|
|
Yves Laflamme
|
|
|
236,400
|
|
|
|
236,400
|
|
|
|
472,800
|
|
|
|
354,600
|
|
|
André Piché
|
|
|
221,093
|
|
|
|
221,093
|
|
|
|
442,186
|
|
|
|
331,640
|
|
|
Richard Tremblay
|
|
|
235,791
|
|
|
|
235,791
|
|
|
|
471,582
|
|
|
|
353,687
|
|
The independent members of the board approved the 2016 annual equity award on October 31, 2016 with
a November 14, 2016 grant date. The RSU award will vest 25% on each of the first four anniversaries of the grant date. The PSU award will vest on February 29, 2020. For all named executive officers, both awards are subject to a named
executive officer’s continued employment with the Company and customary conditions for accelerated vesting or forfeiture upon the occurrence of certain employment-related events, as further described below in the narrative disclosure to this
table.
32
For Mr. Garneau, his entire 2016 PSU award and 89,548 units of his 2016 RSU award will
be settled exclusively in cash. As a result, this column only shows the grant date value of 200,000 units under his 2016 RSU award. In addition, Mr. Garneau was granted a target award of 148,873 units under his 2015 PSU award, which was
modified, on February 28, 2017, to settle up to a maximum of 51,127 PSUs in stock. The remaining units that vest will settle exclusively in cash. As a result, this column includes the grant date value of his 2015 RSU award and 51,127 units of
his 2015 PSU award.
|
|
|
|
|
2015 RSU
|
|
2015 PSU
|
|
$1,122,502
|
|
$385,498
|
|
3.
|
Amounts shown for 2016 reflect annual cash incentive awards earned under the 2016 STIP. For all named executive officers, amounts earned reflect a percentage of the
named executive officer’s base salary as of December 31, 2016, applying the Company’s currency policy with allocations between Canadian and U.S. dollars established as of January 1, 2016. The portion of base salary payable in
Canadian dollars was converted to U.S. dollars using the average exchange rate for Canadian to U.S. dollars for 2016, or $0.7549.
|
In addition, as described in footnote 2, for Mr. Garneau, this column includes the grant date value of his entire 2016 PSU award and 97,746 units of his 2015 PSU award that would be settled
exclusively in cash if target level performance is met. It also includes the grant date value of 89,548 units of his 2016 RSU award that will be settled exclusively in cash. The amounts shown for Mr. Garneau for 2016 and 2015 include the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STIP
|
|
|
RSU
|
|
|
PSU
|
|
|
2016
|
|
$
|
307,170
|
|
|
$
|
353,715
|
|
|
$
|
1,143,715
|
|
|
2015
|
|
$
|
484,522
|
|
|
|
—
|
|
|
$
|
737,005
|
|
|
4.
|
Amounts in this column reflect increases in the actuarial present value of benefits for Messrs. Laflamme and Piché under applicable Canadian registered
(
i.e.
,
tax-qualified)
and Canadian supplemental pension plans established by Resolute FP Canada Inc. or Resolute, the “
pension plans
”, using interest rate and life expectancy
assumptions consistent with those used in the Company’s financial statements. Changes in the actuarial present value of pension plan benefits were determined using discount rate and life expectancy assumptions consistent with those used in the
Company’s financial statements. The values of Canadian pension plan benefits for both Messrs. Laflamme and Piché were converted to U.S. dollars as of December 31, 2016, the date of the balance sheet included in the Company’s
annual report on Form
10-K
for the year ended the same date, or $0.7440. The changes in the actuarial present value of the benefits for 2016 for Messrs. Laflamme and Piché are attributable to the change
in the discount rate for 2016, a change in post-retirement life expectancy assumptions and the interest growth under the pension plans. For Mr. Laflamme, the change in actuarial present value of the benefits for 2016 is also attributable to his
attainment of age 58, as he is now eligible to receive an unreduced pension upon terminating employment. All benefits under the pension plans were frozen on or before December 31, 2010. Pursuant to the plans of reorganization, as of the
Company’s December 9, 2010 emergence from creditor protection proceedings, all supplemental retirement plans were terminated, and the Company established new supplemental retirement plans to reinstate the benefits for participants who
waived and forfeited any and all claims they had or may have had in the creditor protection proceedings in respect of any terminated supplemental retirement plan. Additional discussion of pension benefits is provided after the “Pension Benefits
for 2016” table below.
|
33
|
5.
|
Amounts in this column include the following basic company contributions allocated on behalf of the named executive officers pursuant to the Defined Contribution
Retirement Plan for
Non-Unionized
Employees of Resolute Forest Products (the registered defined contribution plan) and additional cash payments to the named executive officers under the DC
Make-Up
Program equal to (i) company contributions under the registered plan formulas in excess of statutory limits, and (ii) the employer contribution they would have received on their annual incentive
awards as if the registered plan had provided an employer contribution on these awards:
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Basic
Company
Contribution
|
|
|
Additional
Cash
Payment
|
|
|
Richard Garneau
|
|
$
|
11,117
|
|
|
$
|
137,147
|
|
|
Jo-Ann
Longworth
|
|
|
10,913
|
|
|
|
52,228
|
|
|
Yves Laflamme
|
|
|
10,917
|
|
|
|
43,924
|
|
|
André Piché
|
|
|
10,988
|
|
|
|
40,302
|
|
|
Richard Tremblay
|
|
|
22,525
|
|
|
|
24,788
|
|
For all named executive officers other than Mr. Tremblay, the cash payments shown above and the
perquisite allowances next described were established in Canadian dollars and have been converted to U.S. dollars using the average exchange rate for Canadian to U.S. dollars for 2016, or $0.7549. The cash payment and the perquisite allowance
were paid in U.S. dollars to Mr. Tremblay.
Additional perquisites include (i) a perquisite amount of $38,455 for
Mr. Garneau, $12,000 for Mr. Tremblay, and $9,229 for all other named executive officers covering personal transportation, fiscal/financial advice, etc., (ii) a comprehensive annual medical examination with a value up to $4,529 for
Mr. Garneau and his spouse and up to $2,265 for Ms. Longworth and Messrs. Laflamme, Piché and Tremblay and their spouses (if any), (iii) an annual medical referral with a value up to $755 for all named executive officers other
than Mr. Tremblay and their spouses and dependents (if any), (iv) a medical concierge service with a value of $1,145 for all named executive officers, (v) coverage under the Company’s broad-based welfare benefit programs for
salaried employees, (vi) parking for all named executive officers, and (vii) annual membership dues for two private clubs for Mr. Garneau and one private club for Ms. Longworth and Messrs. Laflamme, Piché and Tremblay,
which memberships are used for business purposes only.
In addition, in 2016, the compensation committee approved
Mr. Tremblay’s relocation of his residence to a U.S. location closer to the Company’s corporate headquarters. As a result of his relocation, Mr. Tremblay received a payment of $163,326 pursuant to the Company’s standard
relocation policy.
Finally, for Mr. Tremblay, the amount in this column includes a $74,737 payment under the
Company’s Tax Equalization Policy, as described in the CD&A, in respect of his total compensation, which was subject to taxation in the U.S. and Canada.
34
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Equity
Award
Grant
Date
|
|
Date of
Board
Approval
of Equity
Award
|
|
Estimated Possible Payouts
Under
Non-Equity
Incentive
Plan
Awards
(1)
|
|
|
Estimated Possible Payouts
Under Equity Incentive
Plan Awards
(2)
|
|
|
All Other
Stock
Awards:
Number
of
Shares of
Stock
or Units
(3)
|
|
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($)
|
|
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
Richard Garneau
|
|
11/14/2016
|
|
10/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289,548
|
|
|
|
1,143,715
|
|
|
|
|
11/14/2016
|
|
10/31/2016
|
|
|
144,774
|
|
|
|
289,548
|
|
|
|
434,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,143,715
|
|
|
|
|
n/a
|
|
n/a
|
|
|
507,767
|
|
|
|
1,015,534
|
|
|
|
1,523,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jo-Ann
Longworth
|
|
11/14/2016
|
|
10/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,505
|
|
|
|
270,595
|
|
|
|
|
11/14/2016
|
|
10/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,253
|
|
|
|
68,505
|
|
|
|
102,758
|
|
|
|
|
|
|
|
270,595
|
|
|
|
|
n/a
|
|
n/a
|
|
|
216,243
|
|
|
|
432,486
|
|
|
|
648,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yves Laflamme
|
|
11/14/2016
|
|
10/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,848
|
|
|
|
236,400
|
|
|
|
|
11/14/2016
|
|
10/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,924
|
|
|
|
59,848
|
|
|
|
89,772
|
|
|
|
|
|
|
|
236,400
|
|
|
|
|
n/a
|
|
n/a
|
|
|
188,916
|
|
|
|
377,831
|
|
|
|
566,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
André Piché
|
|
11/14/2016
|
|
10/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,973
|
|
|
|
221,093
|
|
|
|
|
11/14/2016
|
|
10/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,987
|
|
|
|
55,973
|
|
|
|
83,960
|
|
|
|
|
|
|
|
221,093
|
|
|
|
|
n/a
|
|
n/a
|
|
|
176,684
|
|
|
|
353,367
|
|
|
|
530,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Tremblay
|
|
11/14/2016
|
|
10/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,694
|
|
|
|
235,791
|
|
|
|
|
11/14/2016
|
|
10/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,847
|
|
|
|
59,694
|
|
|
|
89,541
|
|
|
|
|
|
|
|
235,791
|
|
|
|
|
n/a
|
|
n/a
|
|
|
188,428
|
|
|
|
376,855
|
|
|
|
565,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
The amounts shown in these columns for the equity award grant represent the “Threshold,” “Target” and “Maximum” payout potential under
Mr. Garneau’s 2016 PSU award, which was modified to settle exclusively in cash.
|
In addition, amounts
shown in these columns represent the “Threshold,” “Target” and “Maximum” payout potential under the 2016 STIP before application of the aggregate payout limit of 7% of free cash flow, which could reduce the payout on
STIP awards despite achievement of the applicable performance measures. Amounts actually earned by the named executive officers under the 2016 STIP are shown in the
“Non-Equity
Incentive Plan
Compensation” column of the Summary Compensation Table. The payout potential is based on the named executive officers’ base salaries as of December 31, 2016 (expressed in U.S. dollars based on the exchange rate for Canadian to U.S.
dollars as of that date, or $0.7440).
|
2.
|
Amounts shown in these columns represent the potential number of shares of Company stock that could vest pursuant to the 2016 PSU award if the average STIP payment
percentage for corporate measures for 2017, 2018 and 2019 (disregarding application of the aggregate payout limit of 7% of free cash flow) meets the annual “Threshold,” “Target” or “Maximum” performance levels
established for the 2017, 2018 and 2019 STIP, as further described in the Compensation Discussion & Analysis.
|
|
3.
|
Amounts shown in this column show the number of RSUs awarded in 2016.
|
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
The following is a discussion of the plans, policies and arrangements governing the compensation awarded to our named executive officers, as set forth in the Summary Compensation Table and Grants of
Plan-Based Awards table above. Compensation to which a named executive officer may be entitled upon a severance from employment, whether or not in connection with a change in control, is addressed below in
Severance and Change in Control
Arrangements.
For 2016, the primary elements of each named executive officer’s total compensation were base salary, cash awards
pursuant to the Company’s short-term incentive plan, and long-term equity awards consisting of RSUs and PSUs granted on November 14, 2016. The DC
Make-Up
Program provides contributions limited
under
35
registered
tax-qualified
defined contribution plans in lieu of
tax-deferred
benefits that would otherwise be
available under a supplemental defined contribution plan.
Base Salary
In 2016, 53% of each named executive officer’s base salary was paid in U.S. dollars and 47% was paid in Canadian dollars, based on the geographic location of the Company’s pulp and paper
production capacity as of December 31, 2015. For reasons described in the CD&A, the Summary Compensation Table reflects an increase in base salary from the 2015 levels and shows amounts actually paid in 2016. The increases described in the
CD&A resulted in annual base salaries of $1,015,534, $432,486, $377,831, $353,367 and $376,855 for Mr. Garneau, Ms. Longworth and Messrs. Laflamme, Piché and Tremblay, respectively, as of December 31, 2016.
Short-Term Incentive Compensation — 2016 STIP Awards
The named executive officers participated in the 2016 STIP, the material terms of which are described above in the CD&A. The threshold, target and maximum awards were 50%, 100% and 150% of base
salary, respectively, and the applicable performance metrics were:
|
|
•
|
|
generating targeted income from operations;
|
|
|
•
|
|
control of selling, general and administrative expenses, or “SG&A cost;”
|
|
|
•
|
|
frequency of safety incidents (
i.e.
, the OSHA incident rate — measured by the number of recordable incidents, multiplied by 200,000 and
divided by the total number of hours worked);
|
|
|
•
|
|
severity of safety incidents (measured by the number of days lost due to lost time incidents and incidents resulting in temporary assignments or
restricted work, multiplied by 200,000 and divided by the total number of hours worked); and
|
|
|
•
|
|
the number of Class 1 and 2 environmental incidents. Class 1 environment incidents are high severity incidents with risk of significant
adverse environmental impact, contamination, liability, damage to the company’s reputation and/or legal action and fines. Class 2 environment incidents are reportable incidents,
non-administrative
infractions, regulatory audit findings and conditions that have a moderate risk of potential adverse impact, contamination, liability or damage to the company’s reputation.
|
The following table shows the threshold, target and maximum levels for each performance metric, as well as the applicable weighting assigned to each
performance metric for purposes of determining awards to the named executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Level
|
|
|
Performance Metric
|
|
Weighting (%
of STIP award)
|
|
|
Performance
Metric
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
|
|
Income from operations
|
|
$
|
122 million
|
|
|
$
|
152 million
|
|
|
$
|
182 million
|
|
|
Income from operations
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
SG&A cost
|
|
$
|
145 million
|
|
|
$
|
140 million
|
|
|
$
|
135 million
|
|
|
SG&A cost
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
Safety – Frequency (OSHA incident rate)
|
|
|
1.02
|
|
|
|
0.92
|
|
|
|
£
0.82 point
|
|
|
Safety – Frequency
(OSHA incident rate)
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
Safety – Severity rate
|
|
|
28
|
|
|
|
25
|
|
|
|
£
22 points
|
|
|
Safety – Severity rate
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
Environmental
Incidents
|
|
|
No payout if
>41
|
|
|
|
£
41
|
|
|
|
33
|
|
|
Environmental
Incidents
|
|
|
5
|
%
|
As described in the CD&A above, the Company generated income from operations below the threshold level; had SG&A
cost and a severity rate between the target and maximum performance levels; and achieved an OSHA
36
rate and a number of environmental incidents at the maximum performance level. However, based on these results, total payouts to all Resolute employees eligible to the 2016 STIP would have
exceeded 7% of the free cash flow generated by the Company in 2016. As a result, all payouts under the 2016 STIP were reduced to meet the cap. In light of the foregoing, the compensation committee recommended, and the board approved, 2016 STIP
awards to Ms. Longworth and Messrs. Garneau, Laflamme, Piché and Tremblay at a level equal to 30.1% of their respective base salaries, as of December 31, 2016, with allocations between Canadian and U.S. dollars as established for
2016.
Long-Term Incentive Compensation — Equity Awards
As described in the CD&A
,
on October 31, 2016, the independent members of the board approved equity awards of RSUs and PSUs to each of the named executive officers under the equity
incentive plan in respect of their 2016 service with the Company.
The 2016 annual equity award granted to Mr. Garneau had a value of
$2,287,430, representing 225% of his base salary. The 2016 annual equity awards granted to Ms. Longworth and Messrs. Laflamme, Piché and Tremblay had values of $541,190, $472,800, $442,186 and $471,582, respectively, representing 125% of
their base salaries as of the grant date. The 2016 annual equity award is a long-term incentive and the largest portion of an executive’s total direct compensation.
To determine the units under both the RSU and PSU portions of the 2016 annual equity award, the compensation committee divided (i) 50% of the total award value by (ii) the volume weighted
average of the highest and lowest prices per share at which the Company’s common stock was traded on the NYSE on each of the five business days immediately before the November 14, 2016 grant date, or $3.95.
For all named executive officers, the 2016 RSU awards vest 25% on each of the first four anniversaries of the grant date as long as the executive remains
employed through the applicable vesting dates. The 2016 PSU awards vest 100% on February 29, 2020 as long as the executive remains employed through that date. Additional RSUs and PSUs will be credited on unvested RSUs and PSUs, respectively,
representing a number that is equivalent to any dividends that the Company may declare on its stock. In the case of PSUs, the number of shares of Company stock earned and vested will equal (i) the average of the actual payout percentage
determined for achievement of the corporate measures under the STIPs for 2017, 2018 and 2019, multiplied by (ii) the number of PSUs granted in the 2016 annual equity award. The aggregate payout limit of 7% of free cash flow is disregarded when
determining the actual payout percentage. RSUs and PSUs are settled in Company common stock upon vesting with an exception for Mr. Garneau. As described in the
CD&A
, the
non-employee
members of
the board of directors modified the payout form of Mr. Garneau’s 2016 annual equity award in alignment with the annual limits set forth in the equity incentive plan on the number of shares that may be issued with respect to grants to an
individual in a given year. Mr. Garneau’s PSU award will be settled exclusively in cash and 89,548 units of his RSU award will be settled in cash. The RSUs that vest on the first anniversary of the grant date and a portion of the RSUs that
vest on the second anniversary of the grant date will be settled in cash. The remaining RSUs that vest will be settled in shares of Company stock.
37
The following table describes the effect of a named executive officer’s termination before the
applicable vesting dates:
|
|
|
|
|
|
|
Key Provisions
|
|
RSU Awards
|
|
PSU Awards
|
|
|
|
Termination for Cause / Resignation Before Age 55
|
|
|
|
|
|
Vesting and Settlement
|
|
All unsettled RSUs will be cancelled
|
|
All unsettled PSUs will be cancelled
|
|
|
|
Retirement On or After May 14, 2017 (Six Month Anniversary of Grant Date)
|
|
|
|
|
|
Vesting
|
|
RSUs continue to vest on each anniversary of grant date through November 14, 2020
|
|
PSUs become 100% vested on retirement date
|
|
|
|
|
|
Settlement
|
|
RSUs are settled following each vesting date
|
|
PSUs are settled on February 29, 2020 based on average actual payout percentage for corporate measures under STIP for 2017, 2018 and 2019
|
|
|
|
Retirement Before May 14, 2017 / Resignation On or After Age 55 / Involuntary Termination Without
Cause
|
|
|
|
|
|
Vesting
|
|
Pro rata
vesting of RSUs equal to (i) the total number of RSUs awarded plus any dividend equivalents, multiplied by (ii) a fraction, the numerator of which is the
number of months elapsed since the grant date and the denominator of which is 48, including the portion that has already vested
|
|
Pro rata
vesting of PSUs equal to (i) the total number of PSUs awarded plus any dividend equivalents, multiplied by (ii) a fraction, the numerator of which is the
number of months elapsed since the grant date and the denominator of which is 40
|
|
|
|
|
|
Settlement
|
|
RSUs are settled following the retirement or termination date
|
|
PSUs are settled on February 29, 2020
pro rata
based on average actual payout percentage for corporate measures under STIP for 2017, 2018 and 2019
|
|
|
|
Death or Disability
|
|
|
|
|
|
Vesting and Settlement upon Death or Disability from Grant Date through December 31, 2016
|
|
RSUs scheduled to vest on the next anniversary of the grant date (
i.e.,
November 14) automatically vest on the death or disability date, and are settled by
March 15 of the following year
|
|
•
Pro rata
vesting of PSUs equal to (i) the total
number of PSUs awarded plus any dividend equivalents, multiplied by (ii) a fraction, the numerator of which is the number of months elapsed from the grant date through December 31, 2017 and the denominator of which is 40
• PSUs are
settled by March 15, 2018,
pro rata
based on average actual payout percentage for corporate measures under STIP for 2017
|
|
|
|
|
|
Vesting and Settlement upon Death or Disability On and After January 1, 2017
|
|
Same as above
|
|
•
Pro rata
vesting of PSUs equal to (i) the total number of PSUs awarded plus any
dividend equivalents, multiplied by (ii) a fraction, the numerator of which is the number of months elapsed from the grant date through December 31 of the year of death or disability and the denominator of which is
40
|
38
|
|
|
|
|
|
|
Key Provisions
|
|
RSU Awards
|
|
PSU Awards
|
|
|
|
|
|
• PSUs are settled by the immediately following March 15,
pro rata
based
on average actual payout percentage for corporate measures under STIP for the completed STIP years before payout
|
|
|
|
Key Definitions
|
|
|
|
|
“Disability”
|
|
The named executive officer’s eligibility for long-term disability benefits under a Company-sponsored plan
|
|
|
|
|
“Retirement”
|
|
• Attainment of age 58; and
• Completion of
at least two years of service; and
• Having a combined age and years of service (counting partial years) equal to at
least 62.5; and
• Not being entitled to receive a severance package.
|
Employment Agreements and Offer Letters
The material terms of each officer’s employment arrangement are identified below, but any severance arrangement to which a named executive officer may be subject upon certain termination events,
whether or not in connection with a change in control, is described below under
Severance and Change in Control Arrangements
.
Mr. Garneau
The Company entered
into an amended and restated employment agreement with Mr. Garneau, dated February 26, 2014. The employment agreement continues in effect until death, disability, retirement or written notice of termination by Mr. Garneau or the
Company, with certain ongoing restrictive covenants as described below. Mr. Garneau’s employment agreement provides for an annual base salary, subject to periodic adjustments. His base salary is evaluated annually by the compensation
committee. The
Base Salary
section of this narrative disclosure provides more detail regarding his 2016 base salary. Under the terms of his employment agreement, Mr. Garneau is also eligible to receive an annual incentive, as approved by
the independent members of the board, under the Company’s annual short-term incentive plans adopted from time to time. In addition, under his employment agreement, Mr. Garneau is eligible to receive awards under the equity incentive
plan and other benefits and perquisites.
Mr. Garneau is subject to a covenant not to disclose confidential information during the term
of the agreement and for five years thereafter. In addition, Mr. Garneau is subject to covenants not to compete with the Company, solicit customers of the Company or interfere with suppliers of the Company during the term of the agreement and,
except as provided in his change in control agreement, for nine months thereafter (12 months in the case of a termination for “cause” (as defined under the employment agreement)).
39
Ms. Longworth and Messrs. Laflamme, Piché and Tremblay
Ms. Longworth and Messrs. Laflamme, Piché and Tremblay were employed pursuant to the following offer letters entered into with the Company:
|
|
|
|
|
|
|
Name
|
|
Effective Date
|
|
Position on Effective Date
|
|
|
|
|
|
Jo-Ann
Longworth
|
|
August 31, 2011
|
|
Senior vice president and chief financial officer
|
|
|
|
|
|
Yves Laflamme
|
|
January 17, 2011
|
|
Senior vice president, wood products, global supply chain, procurement and information technology
|
|
|
|
|
|
André Piché
|
|
February 4, 2014
|
|
Senior vice president, pulp and paper operations
|
|
|
|
|
|
Richard Tremblay
|
|
February 4, 2014
|
|
Senior vice president, pulp and paper operations
|
The offer letters entered into with Ms. Longworth and Messrs. Laflamme, Piché and Tremblay provide for an
annual base salary. Base salaries are evaluated annually by the compensation committee. The
Base Salary
section of this narrative disclosure provides more detail regarding the 2016 base salaries for Ms. Longworth and Messrs. Laflamme,
Piché and Tremblay.
Under their offer letters, Ms. Longworth and Messrs. Laflamme, Piché and Tremblay were eligible to
receive annual incentives under the annual short-term incentive plans adopted by the Company from time to time, with a target payout of 100% of base salary. In 2016, they participated in the 2016 STIP with the same payout potential. They were also
eligible to receive awards under the equity incentive plan, as determined by the board. Additionally, throughout their periods of employment in 2016, Ms. Longworth and Messrs. Laflamme, Piché and Tremblay were eligible for other benefits
and perquisites.
Equity Awards
Outstanding Equity Awards at Fiscal
Year-End
2016
The equity awards made to the named executive officers that were outstanding as of December 31, 2016 were the stock options granted in 2011 through 2013, the RSUs granted in 2013 through 2016, and
PSUs granted in 2014 through 2016 under the equity incentive plan. The terms of the 2016 annual equity award are described in the narrative disclosure to the Summary Compensation Table and Grants of Plan-Based Awards table. The 2011 and 2012 annual
equity awards have the same terms. The 2013 annual equity award generally mirrors the 2011 and 2012 annual equity award. As described in the CD&A, in 2014, the compensation committee retained the grant of RSUs on generally the same terms as the
2011 through 2013 awards, but replaced stock options with PSUs. RSUs and PSUs were again granted in 2016 on generally the same terms as the 2014 and 2015 awards.
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
Number of Securities
Underlying
Unexercised Options
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units
of Stock
That
Have Not
Vested
|
|
|
Market
Value of
Shares or
Units
That Have
Not
Vested
(9)
|
|
|
Name
|
|
Grant
Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
|
|
|
Richard Garneau
|
|
|
01/09/2011
|
|
|
|
9,302
|
|
|
|
—
|
(1)
|
|
$
|
23.05
|
|
|
|
01/09/2021
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
99,046
|
|
|
|
33,015
|
(2)
|
|
|
15.66
|
|
|
|
11/06/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,128
|
(2)
|
|
|
86,285
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,088
|
(3)
|
|
|
155,621
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
58,177
|
(4)
|
|
|
311,247
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
111,654
|
(5)
|
|
|
597,349
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
148,873
|
(6)
|
|
|
796,471
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
289,548
|
(7)
|
|
|
1,549,082
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
289,548
|
(8)
|
|
|
1,549,082
|
|
|
|
|
|
|
|
|
|
|
|
Jo-Ann
Longworth
|
|
|
11/03/2011
|
|
|
|
26,166
|
|
|
|
—
|
(1)
|
|
|
16.45
|
|
|
|
11/03/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/08/2012
|
|
|
|
48,377
|
|
|
|
—
|
(1)
|
|
|
11.41
|
|
|
|
11/08/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
26,727
|
|
|
|
8,908
|
(2)
|
|
|
15.66
|
|
|
|
11/06/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,352
|
(2)
|
|
|
23,283
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,278
|
(3)
|
|
|
38,937
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,557
|
(4)
|
|
|
77,880
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,416
|
(5)
|
|
|
141,326
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,222
|
(6)
|
|
|
188,438
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,505
|
(7)
|
|
|
366,502
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,505
|
(8)
|
|
|
366,502
|
|
|
|
|
|
|
|
|
|
|
|
Yves Laflamme
|
|
|
01/09/2011
|
|
|
|
24,092
|
|
|
|
—
|
(1)
|
|
|
23.05
|
|
|
|
01/09/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/03/2011
|
|
|
|
6,354
|
|
|
|
—
|
(1)
|
|
|
16.45
|
|
|
|
11/03/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/08/2012
|
|
|
|
21,228
|
|
|
|
—
|
(1)
|
|
|
11.41
|
|
|
|
11/08/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
15,266
|
|
|
|
7,632
|
(2)
|
|
|
15.66
|
|
|
|
11/06/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,728
|
(2)
|
|
|
19,945
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,236
|
(3)
|
|
|
33,363
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,472
|
(4)
|
|
|
66,725
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,854
|
(5)
|
|
|
122,269
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,473
|
(6)
|
|
|
163,031
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
59,848
|
(7)
|
|
|
320,187
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
59,848
|
(8)
|
|
|
320,187
|
|
|
|
|
|
|
|
|
|
|
|
André Piché
|
|
|
01/09/2011
|
|
|
|
9,868
|
|
|
|
—
|
(1)
|
|
|
23.05
|
|
|
|
01/09/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/03/2011
|
|
|
|
9,569
|
|
|
|
—
|
(1)
|
|
|
16.45
|
|
|
|
11/03/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/08/2012
|
|
|
|
17,531
|
|
|
|
—
|
(1)
|
|
|
11.41
|
|
|
|
11/08/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
9,455
|
|
|
|
3,151
|
(2)
|
|
|
15.66
|
|
|
|
11/06/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,539
|
(2)
|
|
|
8,234
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,606
|
(3)
|
|
|
29,992
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,214
|
(4)
|
|
|
59,995
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,374
|
(5)
|
|
|
114,351
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
28,499
|
(6)
|
|
|
152,470
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,973
|
(7)
|
|
|
299,456
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,973
|
(8)
|
|
|
299,456
|
|
|
|
|
|
|
|
|
|
|
|
Richard Tremblay
|
|
|
11/03/2011
|
|
|
|
11,483
|
|
|
|
—
|
(1)
|
|
|
16.45
|
|
|
|
11/03/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/08/2012
|
|
|
|
17,937
|
|
|
|
—
|
(1)
|
|
|
11.41
|
|
|
|
11/08/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
10,077
|
|
|
|
3,358
|
(2)
|
|
|
15.66
|
|
|
|
11/06/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
11/06/2013
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,640
|
(2)
|
|
|
8,774
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,606
|
(3)
|
|
|
29,992
|
|
|
|
|
|
11/06/2014
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,214
|
(4)
|
|
|
59,995
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,019
|
(5)
|
|
|
123,152
|
|
|
|
|
|
11/09/2015
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,692
|
(6)
|
|
|
164,202
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
59,694
|
(7)
|
|
|
319,363
|
|
|
|
|
|
11/14/2016
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
59,694
|
(8)
|
|
|
319,363
|
|
|
1.
|
These awards are fully vested and exercisable.
|
41
|
2.
|
Vests on the anniversary of the grant date: November 6, 2017. The first tranche vested November 6, 2014, the second tranche vested November 6, 2015 and
the third tranche vested November 6, 2016.
|
|
3.
|
Vests ratably in
one-fourth
tranches on each anniversary of the grant date: November 6, 2017 and November 6, 2018. The
first tranche vested November 6, 2015 and the second tranche vested November 6, 2016.
|
|
4.
|
Unvested until February 28, 2018. The award will become 100% vested on February 28, 2018, with the number of shares paid out dependent on performance
conditions as described in the narrative disclosure to the Summary Compensation Table.
|
|
5.
|
Vests ratably in
one-fourth
tranches on each anniversary of the grant date: November 9, 2017, November 9, 2018 and
November 9, 2019. The first tranche vested November 9, 2016.
|
|
6.
|
Unvested until February 28, 2019. The award will become 100% vested on February 28, 2019, with the number of shares paid out dependent on performance
conditions as described in the narrative disclosure to the Summary Compensation Table. As noted in the
CD&A,
Mr. Garneau will receive a payout of a maximum of 51,127 shares with any remaining payout to be made in cash.
|
|
7.
|
Vests ratably in
one-fourth
tranches on each anniversary of the grant date: November 14, 2017, November 14, 2018,
November 14, 2019 and November 14, 2020.
|
|
8.
|
Unvested until February 29, 2020. The award will become 100% vested on February 29, 2020, with the number of shares paid out dependent on performance
conditions as described in the narrative disclosure to the Summary Compensation Table. As noted in the
CD&A
, Mr. Garneau will receive any payout in cash and no shares will be issued.
|
|
9.
|
The fair market value shown is based on the
per-share
closing trading price on the NYSE of shares of the Company’s common
stock on December 30, 2016, or $5.35.
|
Option Exercises and Stock Vested for 2016
The options that were exercisable in 2016 were those awarded under the emergence equity award, approved upon emergence with a January 9, 2011 grant
date, and under the 2011 through 2013 annual equity awards. None of the named executive officers exercised options in 2016.
The number
of shares acquired on the vesting of outstanding RSUs granted under the 2011 through 2014 annual equity awards, and the value realized on the applicable vesting dates, are set forth in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
2012 Annual
Equity Award
|
|
|
2013 Annual
Equity Award
|
|
|
2014 Annual
Equity Award
|
|
|
2015 Annual
Equity Award
|
|
|
Aggregate
number
of
shares
acquired
on
vesting in
2016
|
|
|
Aggregate
value
realized
on vesting
in 2016
|
|
|
Name
|
|
Number
of
shares
acquired
on
vesting
|
|
|
Value
realized
on
vesting
|
|
|
Number
of
shares
acquired
on
vesting
|
|
|
Value
realized
on
vesting
|
|
|
Number
of
shares
acquired
on
vesting
|
|
|
Value
realized
on
vesting
|
|
|
Number
of
shares
acquired
on
vesting
|
|
|
Value
realized
on
vesting
|
|
|
|
|
Richard Garneau
(1)
|
|
|
—
|
|
|
$
|
—
|
|
|
|
16,128
|
|
|
$
|
63,706
|
|
|
|
14,544
|
|
|
$
|
57,449
|
|
|
|
37,219
|
|
|
$
|
143,293
|
|
|
|
67,891
|
|
|
$
|
264,448
|
|
|
Jo-Ann
Longworth
|
|
|
5,925
|
|
|
|
23,404
|
|
|
|
4,352
|
|
|
|
17,190
|
|
|
|
3,639
|
|
|
|
14,374
|
|
|
|
8,806
|
|
|
|
33,903
|
|
|
|
22,722
|
|
|
|
88,871
|
|
|
Yves Laflamme
|
|
|
5,200
|
|
|
|
20,540
|
|
|
|
3,728
|
|
|
|
14,726
|
|
|
|
3,118
|
|
|
|
12,316
|
|
|
|
7,619
|
|
|
|
29,333
|
|
|
|
19,665
|
|
|
|
76,915
|
|
|
André Piché
|
|
|
2,147
|
|
|
|
8,481
|
|
|
|
1,539
|
|
|
|
6,079
|
|
|
|
2,804
|
|
|
|
11,076
|
|
|
|
7,125
|
|
|
|
27,431
|
|
|
|
13,615
|
|
|
|
53,067
|
|
|
Richard Tremblay
|
|
|
2,197
|
|
|
|
8,678
|
|
|
|
1,641
|
|
|
|
6,482
|
|
|
|
2,804
|
|
|
|
11,076
|
|
|
|
7,673
|
|
|
|
29,541
|
|
|
|
14,315
|
|
|
|
55,777
|
|
|
1.
|
Per Mr. Garneau’s request, he did not receive a 2012 annual equity award.
|
Compensation Risk Assessment
Annually, the Company, through an
internal committee, assesses whether any elements of the Company’s compensation policies and practices encourage excessive and unnecessary risk-taking, and, if so, whether the
42
level of risk encouraged is reasonably likely to have a material adverse effect on the Company. The internal committee is composed of the senior vice president and chief financial officer; the
senior vice president, corporate affairs and chief legal officer; the senior vice president, human resources; and members of the human resources staff. At inception, Hugessen Consulting provided input into the process and elements to review and
provided information on market best practices. The process identified the compensation plans and practices and related key features, assessed the risk related to each of them (taking into account enterprise risk) and compared the plan and practices
with market best practices. In 2016, Hugessen Consulting provided updated information on market best practices and the internal committee concluded that no changes to the Company’s compensation policies and practices were advisable. The
compensation committee and Hugessen Consulting reviewed and commented on the internal committee’s findings.
Following this review, we
believe that the design of our compensation policies and practices encourages employees to remain focused on both our short-term and long-term goals, and the compensation programs are not reasonably likely to have a material adverse effect on the
Company. For example, the issuance of PSUs in the annual equity grant aligns the executive team with the STIP metrics over a multi-year period, including overlapping performance periods.
Pension Benefits
This section describes the accumulated
benefits, if any, of each of the named executive officers under Company-sponsored defined benefit pension plans. The table below shows the present value of accumulated benefits, if any, payable to each of the named executive officers, including the
number of years of service credited to them under each applicable plan. The benefits were determined using the interest rates and life expectancy assumptions consistent with those used in the Company’s financial statements.
Pension Benefits for 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Number
of Years
Credited
Service
|
|
|
Present
Value of
Accumulated
Benefit
(1)
|
|
|
Payments
During Last
Fiscal Year
|
|
|
Richard Garneau
(2)
|
|
n/a
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Jo-Ann
Longworth
(2)
|
|
n/a
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Yves Laflamme
|
|
Registered Plan (Canada)
|
|
|
28.51
|
|
|
|
1,277,455
|
|
|
|
—
|
|
|
|
|
Supplemental Plan (Canada)
|
|
|
28.51
|
|
|
|
1,812,146
|
|
|
|
—
|
|
|
André Piché
|
|
Registered Plan (Canada)
|
|
|
24.00
|
|
|
|
1,164,404
|
|
|
|
|
|
|
|
|
Supplemental Plan (Canada)
|
|
|
24.00
|
|
|
|
605,391
|
|
|
|
|
|
|
Richard Tremblay
(2)
|
|
n/a
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
1.
|
The present value of accumulated benefits under the Canadian registered and supplemental pension plans sponsored by Resolute FP Canada Inc. or Resolute is determined
based on the assumptions used in the Company’s financial statements, as described in Note 13 of the Consolidated Financial Statements, except that each named executive officer’s retirement age was assumed to be the earliest age upon which
an unreduced pension is payable under the plan(s) in which he was a participant as of December 31, 2016, the benefits are based on service and earnings before 2011 and the values of Canadian pension plan benefits for Messrs. Laflamme and
Piché were converted to U.S. dollars using the exchange rate for Canadian to U.S. dollars as of December 31, 2016, the date of the balance sheet included in the Company’s annual report on Form
10-K
for the year ended the same date, or $0.7440. These assumptions are further described in the narratives below.
|
|
2.
|
Ms. Longworth and Messrs. Garneau and Tremblay do not have accrued benefits in any Company-sponsored defined benefit pension plans. Instead, their retirement
benefits are provided exclusively through the Company’s registered plan and the DC
Make-Up
Program. Retirement benefits for Messrs. Laflamme and Piché for current service are similarly provided
exclusively through these arrangements after 2010. The DC
Make-Up
Program is further described below.
|
43
The named executive officers did not earn pension benefits in 2016, other than due to changes in their final
average earnings under the Resolute FP Canada registered pension plan (as described below).
The following discussion describes the terms of
the pension plans applicable to Messrs. Laflamme and Piché for service and earnings before January 1, 2011. No other named executive officer has pension benefits accrued under defined benefit pension plans (either registered or the
reinstated supplemental plans, both as described below).
Before their pension benefits were frozen as described below, Messrs. Laflamme and
Piché earned benefits under Canadian pension plans that were either registered or
non-registered.
A “
registered plan”
means the plan is intended to be qualified for favorable tax
treatment under the Canadian Income Tax Act, or the
“Income Tax Act
.” In contrast, a “
non-registered
plan
” is not qualified for this favorable tax treatment and provides to a
select group of management and highly compensated employees additional pension benefits that cannot be provided under the registered plans because of statutory limitations or an overall benefit that is offset by the benefit provided under the
registered plan.
Pursuant to the plans of reorganization, the
non-registered
plans were terminated
and those accumulated benefits were reinstated under new
non-registered
plans,
“the 2010 Canadian DB SERPs,”
for certain participants, including Messrs. Laflamme and Piché. The
reinstated benefits were frozen as to benefit service and earnings (but not vesting service) as of December 31, 2010.
Messrs. Laflamme and Piché have pension benefits payable under legacy Abitibi Canadian pension plans (now sponsored by Resolute FP
Canada Inc.). Pension benefits under the 2010 Canadian DB SERPs were frozen for Messrs. Laflamme and Piché effective December 31, 2010. However, pensionable earnings continue to grow under the registered plan and may impact what is
payable between the 2010 Canadian DB SERPs and the registered plan. The following describes the pension benefits payable under these plans.
The reinstated accrued benefits provided to Messrs. Laflamme and Piché under the 2010 Canadian DB SERPs are determined pursuant to a
traditional pension plan formula based on years of credited service and a percentage of final average compensation. The 2010 Canadian DB SERPs provide an overall pension benefit that is offset by the benefit payable under the registered plans,
including any registered plan benefits that have been commuted. The registered plans limit the amount of the pension benefit payable due to statutory constraints.
Pension Formula
These Canadian pension plans generally provide total pension
benefits equal to 2% of final average compensation multiplied by years of credited service with the Company and its related entities, up to 35 years of service. As a result of the benefit service freeze described above, the pension benefits for
Messrs. Laflamme and Piché under the 2010 Canadian DB SERPs take into account their years of credited service through December 31, 2010.
Compensation used under the formulas depends on the period for which years of service are credited. For years of credited service through December 31, 2008, final average compensation is the sum of
(i) average monthly base salary based on the best 60 consecutive months of base salary within the last 120 months and (ii) the best five annual incentive awards in the last ten years. For years of credited service after
December 31, 2008, final average compensation is the average of the five highest consecutive calendar years of eligible earnings in the last 10 years. Eligible earnings in a given calendar year is the sum of the base salary and the
incentive award paid under an annual incentive plan (excluding any special incentive awards unless authorized by the Company). The paid incentive award component is capped at 125% of the target incentive award of each year.
Beginning January 1, 2009 through December 31, 2010, Messrs. Laflamme and Piché were required to contribute to the Abitibi
registered plan. Their contributions were equal to 5% of their pensionable earnings up to the U.S. compensation limit ($245,000 in 2009 and 2010). Contributions were credited with interest at the average net rate of return of the pension fund of the
Abitibi registered plan over the preceding two calendar years.
44
Once participants attain age 55, they can retire early. The total pension payable is unreduced if the
participant retires at age 58 and the sum of his age and years of service is at least 80. If a participant is not eligible for an unreduced benefit and has completed 20 years of service, the total pension payable is reduced by 6% for each year
(or 0.5% for each month) between his retirement date and the date he would have attained age 58 and the sum of his age and years of service would have equaled at least 80 had he continued employment. Messrs. Laflamme and Piché are both
eligible to retire early with unreduced pension benefits.
Time and Form of Payment
The legacy Abitibi Canadian pension plans provide for payment in an annuity with a participant option to select payment among different types of
annuities, any of which will provide monthly payments for the life of the participant and his spouse, if any. For the Canadian executives who are not subject to U.S. tax law, the annuities can generally be secured by a letter of credit pursuant to a
retirement compensation arrangement without adverse tax consequences to the executive and the Company has established security protocols. At the executive’s age 55, the Company will undertake to secure the executives’ supplemental
retirement benefits by a letter of credit. The Company has secured the Canadian DB SERP benefits of Messrs. Laflamme and Piché.
Assumptions for Pension Benefits Table Value
The accrued benefit amounts identified in the Pension Benefits table above show the present value of the future monthly payments if calculated as a lump sum. An interest rate and mortality table providing
for current life expectancies are used to calculate the present value amount as of December 31, 2016. The interest rate and mortality table used are the same as those used for our financial statements, which are a 3.7% interest rate and the
2014 Private Sector Canadian Pensioner’s Mortality Table including a decrease of the rates of 5.7%, projected generationally using Scale B, and no assumption for
pre-retirement
mortality. Benefits were
calculated assuming retirement on the date an executive attains age 58 with the sum of his age and years of service equaling at least 80. In addition, the final average earnings used for the calculation of the accumulated benefit as of
December 31, 2016, as shown in the Pension Benefits table, are: for years of service credited through December 31, 2008, Mr. Laflamme, $303,493 and Mr. Piché, $191,973; and for years of service credited after
December 31, 2008, Mr. Laflamme, $271,643 and Mr. Piché, $174,915.
DC
Make-Up
Program
Following its 2011 termination of its nonqualified,
non-registered
deferred compensation plan, the Company implemented, in 2012, the DC
Make-Up
Program to provide Company contributions to eligible employees who are
limited by the statutory rules on the amount of compensation that can be taken into account under the registered
tax-qualified
defined contribution plans. In addition, because the registered
tax-qualified
plans do not provide contributions on awards payable pursuant to STIPs for Canadian employees, the DC
Make-Up
Program also provides these contributions. The
Company chose to provide these contributions on a current taxable basis instead of a
tax-deferred
basis. These contributions are reflected in the Summary Compensation Table under All Other Compensation
because the contributions are not deferred compensation.
Severance and Change in Control Arrangements
The following is a discussion of the policies and arrangements to which a named executive officer becomes subject upon certain termination
events, with or without a change in control of the Company. During 2016, all named executive officers except Mr. Garneau were covered by the Company’s executive severance policy. Severance protection for Mr. Garneau was provided under
his employment agreement and, in the case of a termination with a change in control, a separate change in control agreement.
45
The material terms of the executive severance policy, the severance provisions of Mr. Garneau’s
employment agreement and Mr. Garneau’s change in control agreement are described below. In all cases, to be eligible for severance benefits, the named executive officers must agree to certain restrictive covenants intended to mitigate the
competitive disadvantage that would result from losing executive talent to competitors of the Company:
|
|
•
|
|
The executive severance policy requires eligible executives to protect confidential information. In addition, to receive benefits under the executive
severance policy, an eligible executive must sign a release containing
non-compete,
non-solicitation
and confidentiality covenants.
|
|
|
•
|
|
Mr. Garneau’s employment agreement includes covenants not to compete with the Company, solicit customers of the Company or interfere with
suppliers of the Company for a
12-month
period following a termination for “cause” (as defined in the employment agreement) or a nine-month period following a termination for any other reason, except
that these covenants do not apply in the case of a termination without “cause” by the Company or for “good reason” by Mr. Garneau pursuant to the change in control agreement (as defined thereunder). In addition, a
confidentiality covenant is effective for a five-year period following a termination for any reason.
|
The following table
describes the material terms of the executive severance policy and the severance provisions of Mr. Garneau’s employment and change in control agreements (with all descriptions qualified by the actual terms of the policy and agreements):
|
|
|
|
|
|
|
Key Provisions
|
|
Executive Severance Policy
|
|
Mr. Garneau’s Employment and Change
in Control Agreements
|
|
|
|
Termination Without Cause (No Change in Control)
|
|
|
|
|
|
Severance pay
(1)
|
|
• Lump sum payment equal to 6 weeks of eligible pay per
year of continuous service, with a minimum of 52 weeks and a maximum of 104 weeks
• “Eligible pay” is base pay, plus the lesser of (i) average of last 2 incentive awards paid or (ii) 125% of target incentive award for year of
termination
•
Pro rata
vesting of equity awards pursuant to the terms of the award
agreements
|
|
• Same severance pay as under executive severance
policy
• “Eligible pay” is base pay, plus the lesser of (i) average of
last 2 incentive awards earned or (ii) 125% of target incentive award for year of termination
•
Pro rata
vesting of equity awards pursuant to the terms of the award
agreements
|
|
|
|
Termination Without Cause or for Good Reason On or After Change in Control
|
|
|
|
|
|
Time period during which change in control benefits are payable
|
|
Eligible termination within 12 months after change in control
|
|
Eligible termination within 24 months after change in control
|
|
|
|
|
|
Severance pay
(1)
|
|
Same severance pay as when there is no change in control
|
|
The following amounts, reduced to minimize excise tax liability under Code Section 4999:
(2)
• Lump sum
payment equal to:
• 3 times base salary as in effect on his termination date, plus
• 3 times
the lesser of (i) average of his last 2 incentive awards
|
46
|
|
|
|
|
|
|
Key Provisions
|
|
Executive Severance Policy
|
|
Mr. Garneau’s Employment and Change
in Control Agreements
|
|
|
|
|
|
earned or (ii) 125% of target incentive award for year of termination,
plus
• 3 times maximum Company contributions he could have received under
Company’s defined contribution program (if any) for year of termination, plus
• $14,880 in lieu of individual outplacement services
• Immediate vesting of outstanding equity awards
• Eligibility for Company-provided health care and life insurance coverage,
with premiums payable at the rates then in effect for executives, until the earlier of 36 months after his termination date or the date he becomes covered under another employer’s health care and life insurance programs
|
|
Key Definitions
|
|
|
|
|
|
“Cause”
|
|
Just cause, determined by the Company in its sole discretion
|
|
• Willful failure to carry out duties under employment
agreement, to materially comply with Company’s rules and policies, or to follow board’s reasonable instructions or directives consistent with duties and responsibilities under employment agreement
• Acting
dishonestly or fraudulently in connection with the Company’s business, or willful gross misconduct in the course of employment, in each case resulting in adverse consequences to the Company or its affiliates
• Personal
profiting from a transaction involving the Company or its affiliates without prior written consent of board, or other material breach of fiduciary duties
• Criminal offense punishable by imprisonment likely to
adversely
|
47
|
|
|
|
|
|
|
Key Provisions
|
|
Executive Severance Policy
|
|
Mr. Garneau’s Employment and Change in
Control Agreements
|
|
|
|
|
|
affect the Company or its affiliates or the suitability of Mr. Garneau to perform duties under employment
agreement
• Material breach of employment agreement
• Material
misconduct detrimental to business or financial position of the Company or its affiliates
• Serious personal misconduct detrimental injurious to reputation of the Company or
its affiliates
• Habitual inability to carry out functions of employment due to alcohol or drug
related causes (with 30 day notice and cure period)
• Any serious reason pursuant to Article 2094 of the Civil Code of Québec
|
|
|
|
|
|
“Good reason”
|
|
• Material adverse change in status, title, position, duties or
responsibilities (including reporting line relationships), or any removal from, or failure to reappoint to, any material office or position
• Material reduction in aggregate compensation and benefits
• Material
reduction in salary
• Material change in geographic location at which services are to be
performed
|
|
• Material change in status, title, position, duties or
responsibilities (including reporting line relationships) that represents substantial adverse change, or any removal from, or failure to reappoint to, any material office or position
• Material
reduction in aggregate compensation and benefits
• Material reduction in base salary
• The Company’s failure to obtain from any successor its assent to assume the
change in control agreement
• Material change in geographic location at which services are to be
performed
|
|
|
|
|
Good reason “notice and cure period”
|
|
• Executive must provide notice within 90 days after
initial existence of “good reason” condition
• Company has 30 days to remedy condition after receiving notice
|
|
|
|
|
“Change in control”
|
|
• Acquisition of at least 50% of Company’s
voting shares
• Election or appointment of at least 50% new directors
• Transaction(s)
resulting in a transfer of assets with fair market value (net of existing liabilities transferred) of at least 50% of Company’s market capitalization immediately before the transaction(s)
• Completion of
any transaction or the first of a series of transactions that would have the same or similar effect as any transaction(s) described in the prior three bullets
|
48
|
1.
|
For the named executive officers other than Mr. Garneau, vesting of outstanding equity awards is not automatically accelerated. However, the equity incentive plan
provides the compensation committee discretion to accelerate the exercisability of outstanding stock options upon a termination with or without a change in control.
|
|
2.
|
If the aggregate amount of pay and benefits payable to Mr. Garneau under the change in control agreement would constitute a “parachute payment” subject
to excise tax under Section 4999 of the U.S. Internal Revenue Code, his aggregate pay and benefits would be reduced to the greater of (i) the
after-tax
amount which he would retain after all federal,
state and local income taxes and all excise taxes under Section 4999, or (ii) the
after-tax
amount which he would retain after all federal, state and local income taxes if his aggregate pay and
benefits were reduced to the maximum amount payable without triggering the excise tax liability under Section 4999.
|
Severance Projection in the Case of
Non-Change
in Control,
Non-Cause
Termination
If Ms. Longworth or Messrs. Laflamme, Piché, or Tremblay had
been terminated without cause on December 31, 2016, absent a change in control, they would have received the following benefits under the Company’s executive severance policy described above. Amounts shown for Mr. Garneau are pursuant
to his employment agreement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Garneau
|
|
|
Jo-Ann
Longworth
|
|
|
Yves
Laflamme
|
|
|
André
Piché
|
|
|
Richard
Tremblay
|
|
|
Base Salary (1—2X)
(1)
|
|
$
|
1,015,534
|
|
|
$
|
432,486
|
|
|
$
|
755,662
|
|
|
$
|
706,734
|
|
|
$
|
376,855
|
|
|
Avg. of Last Two Annualized Regular Cash Incentive Awards Paid (1—2X)
|
|
|
395,846
|
(2)
|
|
|
203,874
|
(3)
|
|
|
351,070
|
(3)
|
|
|
316,164
|
(3)
|
|
|
164,504
|
(3)
|
|
All Other Severance Compensation
|
|
|
753,437
|
(4)
|
|
|
249,875
|
(5)
|
|
|
219,155
|
(5)
|
|
|
203,994
|
(5)
|
|
|
206,121
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,164,817
|
|
|
|
886,235
|
|
|
|
1,325,887
|
|
|
|
1,226,892
|
|
|
|
747,480
|
|
|
1.
|
Assumes annual base salaries for Mr. Garneau, Ms. Longworth and Messrs. Laflamme, Piché and Tremblay of $1,015,534, $432,486, $377,831, $353,367 and
$376,855, respectively (expressed in U.S. dollars based on a ratio of 53% payable in U.S. dollars and 47% payable in Canadian dollars, as described in footnote 1 to the Summary Compensation Table, with the portion payable in Canadian dollars
converted to U.S. dollars using the exchange rate as of December 31, 2016, or $0.7440).
|
|
2.
|
Pursuant to his employment agreement, Mr. Garneau’s severance pay is based on the average of his last two short term incentive awards earned, rather than
paid. He earned awards under the 2015 and 2016 STIPs.
|
|
3.
|
For disclosure purposes, cash incentive award calculations for Ms. Longworth and Messrs. Laflamme, Piché and Tremblay are based on the average of their 2014
and 2015 regular incentive awards paid.
|
|
4.
|
Assumes (i) payment of a 2016 STIP award of $307,170, (ii) outplacement counseling services with a value of $14,880, (iii) one month of additional
pro rata
vesting of the 33,015 outstanding options under Mr. Garneau’s 2013 annual equity award, with no value realized on the spread between the
per-share
closing trading price on the NYSE of shares of the
Company’s common stock on December 30, 2016, or $5.35, and the applicable exercise price for the 2013 annual option award (
i.e.
, $15.66), (iv) one month of additional
pro rata
vesting of the aggregate 561,110 RSUs granted to
him pursuant his 2013, 2014, 2015 and 2016 annual equity awards, resulting in the vesting of 11,690 RSUs with a combined fair market value of $62,542 and (v)
pro rata
vesting of the 496,598 PSUs granted pursuant his 2014, 2015 and 2016
annual equity awards, resulting in the vesting of 68,943 PSUs with a combined fair market value of $368,845 based on the actual payout percentage for corporate measures under the 2015 and 2016 STIP before application of the aggregate 7% limit of
free cash flow, or 64.93%, projected through 2019.
|
49
|
5.
|
Assumes (i) payment of a 2016 STIP award, (ii) outplacement counseling services with a value of $14,880 for Ms. Longworth and Messrs. Laflamme and
Piché and $5,800 for Mr. Tremblay, and (iii) immediate vesting of a
pro rata
portion of stock options, RSUs and PSUs. The number and value of 2016 STIP awards and options, RSUs and PSUs that would vest upon termination is as
follows:
|
|
|
•
|
|
Ms. Longworth: a 2016 STIP award of $130,815; 742 options, with no value realized; 2,827 RSUs, with a fair market value of $15,124; 16,646 PSUs,
with a fair market value of $89,056.
|
|
|
•
|
|
Mr. Laflamme: a 2016 STIP award of $114,283; 636 options, with no value realized; 2,452 RSUs, with a fair market value of $13,118; 14,369
PSUs, with a fair market value of $76,874.
|
|
|
•
|
|
Mr. Piché: a 2016 STIP award of $106,884; 263 options, with no value realized; 2,122 RSUs, with a fair market value of $11,353; 13,248
PSUs, with a fair market value of $70,877.
|
|
|
•
|
|
Mr. Tremblay: a 2016 STIP award of $113,988; 280 options, with no value realized; 2,253 RSUs, with a fair market value of $12,054; 13,884
PSUs, with a fair market value of $74,279.
|
The table reflects one month of additional
pro rata
vesting of options and RSUs under the 2013, 2014, 2015 and 2016 annual equity awards, as applicable, and
pro rata
vesting of PSUs under the 2014, 2015 and 2016 annual equity awards. The value of options, RSUs and PSUs is based on the
per-share
closing trading price on the NYSE of shares of the Company’s common stock on December 30, 2016, or $5.35. There is no value realized on any of the options under the 2013 annual option award
because the December 30, 2016 closing price is less than the applicable exercise price (
i.e.,
$15.66). For PSUs, the value is also based on the actual payout percentage for corporate measures under the 2015 and 2016 STIP before
application of the aggregate 7% limit of free cash flow, or 64.93%, projected through 2019.
Severance Projection in the Case of
Non-Cause
or Good Reason Termination Following a Change in Control
If Ms. Longworth or Messrs.
Laflamme, Piché or Tremblay had terminated employment for good reason on December 31, 2016, within 12 months following a change in control, they would have received the following amounts under the Company’s executive severance
policy described above. Notably, for everyone except Mr. Garneau, the amounts payable upon an eligible termination following a change in control are the same as the amounts payable upon an involuntary termination without cause absent a change
in control. If Mr. Garneau’s employment had terminated without cause or for good reason on December 31, 2016, within 24 months following a change in control, he would have received the amounts shown pursuant to his change in control
agreement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Garneau
|
|
|
Jo-Ann
Longworth
|
|
|
Yves
Laflamme
|
|
|
André
Piché
|
|
|
Richard
Tremblay
|
|
|
Base Salary
(1)
|
|
$
|
3,046,602
|
|
|
$
|
432,486
|
|
|
$
|
755,662
|
|
|
$
|
706,734
|
|
|
$
|
376,855
|
|
|
Avg. of Last Two Annualized Regular Cash Incentive Awards Paid
|
|
|
1,187,538
|
(2)
|
|
|
203,874
|
|
|
|
351,070
|
|
|
|
316,164
|
|
|
|
164,504
|
|
|
Welfare Payment
|
|
|
16,004
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
2016 STIP Award
|
|
|
307,170
|
|
|
|
130,815
|
|
|
|
114,283
|
|
|
|
106,884
|
|
|
|
113,988
|
|
|
3X Company Contributions under Defined Contribution Program for 2016
|
|
|
399,910
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Outplacement
|
|
|
14,880
|
|
|
|
14,880
|
|
|
|
14,880
|
|
|
|
14,880
|
|
|
|
5,800
|
|
|
Value of Equity Awards
|
|
|
4,131,093
|
(3)
|
|
|
104,180
|
(4)
|
|
|
89,992
|
(4)
|
|
|
82,230
|
(4)
|
|
|
86,333
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,103,197
|
(5)
|
|
|
886,235
|
(6)
|
|
|
1,325,887
|
(6)
|
|
|
1,226,892
|
(6)
|
|
|
747,480
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
Assumes annual base salaries for Mr. Garneau, Ms. Longworth and Messrs. Laflamme, Piché and Tremblay of $1,015,534, $432,486, $377,831, $353,367 and
$376,855, respectively (expressed in U.S. dollars based on a ratio of 53% payable in U.S. dollars and 47% payable in Canadian dollars, as described in footnote 1 to the Summary Compensation Table, with the portion payable in Canadian dollars
converted to U.S. dollars using the exchange rate as of December 31, 2016, or $0.7440).
|
50
|
2.
|
Pursuant to his change in control agreement, Mr. Garneau’s severance pay is based on the average of his last two short term incentive awards earned, rather
than paid. He earned awards under the 2015 and 2016 STIPs.
|
|
3.
|
Assumes (i) immediate vesting of the 33,015 outstanding options under Mr. Garneau’s 2013 annual equity award, with no value realized on the spread
between the
per-share
closing trading price on the NYSE of shares of the Company’s common stock on December 30, 2016, or $5.35, and the applicable exercise price for the 2013 annual option award
(
i.e.
, $15.66), (ii) immediate vesting of the 446,418 outstanding RSUs granted to him pursuant his 2013, 2014, 2015 and 2016 annual equity awards, with a combined fair market value of $2,388,336 and (iii) immediate vesting of 325,749 of
the outstanding PSUs granted pursuant his 2014, 2015 and 2016 annual equity awards, with a fair market value of $1,742,757 based on the actual payout percentage for corporate measures under the 2015 and 2016 STIP before application of the aggregate
7% limit of free cash flow, or 64.93%, projected through 2019.
|
|
4.
|
Assumes immediate vesting of a
pro rata
portion of stock options, RSUs and PSUs. The number and value of options, RSUs and PSUs that would vest upon termination
is as follows:
|
|
|
•
|
|
Ms. Longworth: 742 options, with no value realized; 2,827 RSUs, with a fair market value of $15,124; 16,646 PSUs, with a fair market value of
$89,056.
|
|
|
•
|
|
Mr. Laflamme: 636 options, with no value realized; 2,452 RSUs, with a fair market value of $13,118; 14,369 PSUs, with a fair market value of
$76,874.
|
|
|
•
|
|
Mr. Piché: 263 options, with no value realized; 2,122 RSUs, with a fair market value of $11,353; 13,248 PSUs, with a fair market value
of $70,877.
|
|
|
•
|
|
Mr. Tremblay: 280 options, with no value realized; 2,253 RSUs, with a fair market value of $12,054; 13,884 PSUs, with a fair market value of
$74,279.
|
The table reflects one month of additional
pro rata
vesting of options and RSUs under the
2013, 2014, 2015 and 2016 annual equity awards, as applicable, and
pro rata
vesting of PSUs under the 2014, 2015 and 2016 annual equity awards. The value of options, RSUs and PSUs is based on the
per-share
closing trading price on the NYSE of shares of the Company’s common stock on December 30, 2016, or $5.35. There is no value realized on any of the options under the 2013 annual option award
because the December 30, 2016 closing price is less than the applicable exercise price (
i.e.,
$15.66). For PSUs, the value is also based on the actual payout percentage for corporate measures under the 2015 and 2016 STIP before
application of the aggregate 7% limit of free cash flow, or 64.93%, projected through 2019.
|
5.
|
Pursuant to his change in control agreement, Mr. Garneau’s severance payment would have been subject to excise tax under Section 4999. Mr. Garneau
would have been responsible for payment of the excise tax (and all federal, state and local taxes) on his severance payment and would not have been entitled to a
gross-up
payment. Consequently, the total
number shown does not reflect the estimated amount of the excise tax.
|
|
6.
|
To the extent Ms. Longworth or Messrs. Laflamme or Piché were subject to U.S. taxation in 2016, they could have been subject to the change in control excise
tax under Section 4999 of the Code. In no event would they have been entitled to
gross-up
payments in respect of such tax pursuant to the executive severance policy or their individual award agreements.
|
|
7.
|
Mr. Tremblay was subject to U.S. taxation in 2016 and, consequently, could have been subject to the change in control excise tax under Section 4999 of the
Code. In no event would he have been entitled to
gross-up
payments in respect of such tax pursuant to the executive severance policy or his individual award agreements.
|
51
I
NFORMATION
ON
S
TOCK
O
WNERSHIP
The following table includes all stock-based holdings, as of March 30, 2017, of: each of our directors and
named executive officers; our directors and executive officers as a group; and all those known by us to be beneficial owners of more than five percent of our common stock.
|
|
|
|
|
|
|
|
|
|
|
Name and Address of Beneficial
Holder
|
|
Number of Shares
of Common Stock
Beneficially
Owned
|
|
|
Percent
of
Class
(1)
|
|
|
Fairfax Financial Holdings Limited
95 Wellington Street West, Suite 800
Toronto, Ontario M5J 2N7
Canada
|
|
|
30,548,190
|
(2)
|
|
|
34.0
|
%
|
|
Donald Smith & Co., Inc.
152 West 57th Street
New York, New York 10019
|
|
|
7,554,027
|
(3)
|
|
|
8.4
|
%
|
|
Chou Associates Management Inc.
110 Sheppard Avenue, Suite 301, Box 18
Toronto, Ontario M2N 6Y8
Canada
|
|
|
7,190,395
|
(4)
|
|
|
8.0
|
%
|
|
The Vanguard Group
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
|
|
|
4,956,652
|
(5)
|
|
|
5.5
|
%
|
|
Alpine Investment Management, LLC
8000 Maryland Avenue, Suite 700
Saint Louis, Missouri 63105
|
|
|
4,670,865
|
(6)
|
|
|
5.2
|
%
|
|
Randall C. Benson
|
|
|
5,000
|
(7)
|
|
|
*
|
|
|
Michel P. Desbiens
|
|
|
28,808
|
(8)
|
|
|
*
|
|
|
Jennifer C. Dolan
|
|
|
28,808
|
(8)
|
|
|
*
|
|
|
Richard D. Falconer
|
|
|
48,334
|
(9)
|
|
|
*
|
|
|
Richard Garneau
|
|
|
163,740
|
(10)
|
|
|
*
|
|
|
Jeffrey A. Hearn
|
|
|
48,334
|
(9)
|
|
|
*
|
|
|
Yves Laflamme
|
|
|
76,119
|
(11)
|
|
|
*
|
|
|
Jo-Ann
Longworth
|
|
|
134,052
|
(12)
|
|
|
*
|
|
|
Bradley P. Martin
|
|
|
34,722
|
(13)
|
|
|
*
|
|
|
André Piché
|
|
|
61,316
|
(14)
|
|
|
*
|
|
|
Alain Rhéaume
|
|
|
48,334
|
(9)
|
|
|
*
|
|
|
Michael S. Rousseau
|
|
|
68,334
|
(15)
|
|
|
*
|
|
|
Richard Tremblay
|
|
|
60,725
|
(16)
|
|
|
*
|
|
|
David H. Wilkins
|
|
|
48,334
|
(9)
|
|
|
*
|
|
Directors (including nominees) and executive
officers as a group (15 persons)
|
|
|
988,530
|
|
|
|
1.1
|
%
|
|
1.
|
Based on 89,750,964 shares of outstanding common stock as of March 30, 2017. For purposes of this table, “beneficial ownership” is determined in
accordance with Rule
13d-3
under the Exchange Act, pursuant to which a person or group of persons is deemed to have beneficial ownership of the shares of common stock that the person has the right to acquire
within 60 days of the date of determination, as well as the shares of common stock underlying vested stock-settled RSUs or DSUs and vested options. For purposes of computing the percentage of outstanding shares of common stock held by each person or
group of persons named above, all the shares the person or persons has (have) the right to acquire within 60 days, as well as the shares of common stock underlying vested stock-settled RSUs or DSUs and vested options, are deemed to be outstanding
but are deemed not to be outstanding for the purpose of computing the percentage ownership of any other person. All numbers listed represent sole investment and voting power unless otherwise indicated.
|
|
2.
|
Based on an amended Schedule 13D filed on December 22, 2016, by V. Prem Watsa, 1109519 Ontario Limited, The Sixty Two Investment Company Limited,
810679 Ontario Limited, Fairfax Financial
|
52
|
|
Holdings Limited, FFHL Group Ltd., Fairfax (Barbados) International Corp., Wentworth Insurance Company Ltd., TIG Insurance (Barbados) Limited, Fairfax (US) Inc., Clearwater Insurance Company,
Zenith National Insurance Corp., Zenith Insurance Company, TIG Holdings, Inc., TIG Insurance Company, Odyssey US Holdings Inc., Odyssey Re Holdings Corp., Odyssey Reinsurance Company, Hudson Insurance Company, Hudson Specialty Insurance Company,
Newline Holdings UK Limited, Newline Corporate Name Limited, Crum & Forster Holdings Corp., The North River Insurance Company, United States Fire Insurance Company, RiverStone Holdings Limited, RiverStone Insurance Limited, RiverStone
Insurance (UK) Limited, CRC Reinsurance Limited, Northbridge Financial Corporation, Northbridge Commercial Insurance Corporation, Northbridge General Insurance Corporation, Northbridge Personal Insurance Corporation, Federated Insurance Company of
Canada, Brit Limited, Brit Insurance Holdings Limited, Brit Insurance (Gibraltar) PCC Limited, and Brit Syndicates Limited.
|
|
3.
|
Based on a Schedule 13G filed on February 9, 2017, by Donald Smith & Co., Inc. and Donald Smith Long/Short Equities Fund, L.P. Donald
Smith & Co., Inc. reports having sole voting power over 6,986,096 shares and Donald Smith Long/Short Equities Fund, L.P. reports having sole voting power over 31,931 shares, and both report having sole dispositive power over 7,554,027
shares.
|
|
4.
|
Based on a Schedule 13G filed on February 13, 2017, by Chou Associates Fund, Chou Associates Management Inc., Chou Asia Fund, Chou Bond Fund, Chou RRSP Fund, Chou
Opportunity Fund, Chou Income Fund, Chou America Management, Inc., and Francis S. M. Chou.
|
|
5.
|
Based on a Schedule 13G filed on February 10, 2017, by The Vanguard Group.
|
|
6.
|
Based on a Schedule 13G filed on February 14, 2017, by ACR Alpine Capital Research, LLC, Alpine Investment Management, LLC, Alpine Partners Management, LLC,
MQR, L.P., ACR Multi-Strategy Quality Return (MQR) Fund, and Nicholas V. Tompras. ACR Alpine Capital Research, LLC, Alpine Investment Management, LLC, and Nicholas V. Tompras each report having shared voting and shared dispositive power over
4,670,865 shares. Alpine Partners Management, LLC and MQR, L.P. each report having shared voting and shared dispositive power over 84,000 shares, and ACR Multi-Strategy Quality Return (MQR) Fund reports having shared voting and shared
dispositive power over 107,100 shares.
|
|
7.
|
Includes 5,000 shares of common stock acquired in open market purchases.
|
|
8.
|
Includes 28,808 vested RSUs or DSUs, as the case may be.
|
|
9.
|
Includes 9,302 shares of common stock that can be acquired by exercising vested stock options and 39,302 vested RSUs or DSUs, as the case may be.
|
|
10.
|
Includes 108,348 shares of common stock that can be acquired by exercising vested stock options and 55,392 vested RSUs.
|
|
11.
|
Includes 66,940 shares of common stock that can be acquired by exercising vested stock options and 9,179 vested RSUs.
|
|
12.
|
Includes 101,270 shares of common stock that can be acquired by exercising vested stock options and 32,782 vested RSUs.
|
|
13.
|
Represents vested DSUs.
|
|
14.
|
Includes 46,423 shares of common stock that can be acquired by exercising vested stock options and 14,893 vested RSUs.
|
|
15.
|
Includes 9,302 shares of common stock that can be acquired by exercising vested stock options, 39,302 vested DSUs, and 20,000 shares of common stock acquired in open
market purchases.
|
|
16.
|
Includes 39,497 shares of common stock that can be acquired by exercising vested stock options and 21,228 vested RSUs.
|
53
M
ANAGEMENT
P
ROPOSALS
Item 1 — Vote on the Election of Directors
Composition of the Board
The board fixed the board size at nine members. Eight of
the nine current members of the board, and one
non-incumbent,
Randall C. Benson, are standing for election as directors to hold office until the 2018 annual meeting of stockholders. Michel P. Desbiens is not
nominated for
re-election
and will therefore no longer be a member of the board or its committees upon the expiration of his current term of office at the annual meeting. Each director nominee has been
recommended for election by the human resources and compensation/nominating and governance committee and approved and nominated for election by the board. Each director will hold office until his or her successor has been elected and qualified or
until the director’s earlier resignation or removal. Each director nominee has consented to serve if elected. Should any director nominee be unable to stand for election at the annual meeting, proxies will be voted in favor of such other
person, if any, recommended by the human resources and compensation/nominating and governance committee and designated by the board.
Pursuant
to our
by-laws,
as amended in December 2014, if any director nominee fails to receive a majority of the votes cast in an uncontested election of directors, such as the 2017 annual meeting, that director must
promptly tender his or her resignation to the board. The human resources and compensation/nominating and governance committee will make a recommendation to the full board whether or not to accept the resignation. The board will publicly announce its
decision regarding a tendered resignation within 90 days from the date the results of the election are certified.
Board Recommendation
The board unanimously recommends a vote FOR the election to the board of each of Randall C. Benson, Jennifer C. Dolan, Richard D.
Falconer, Richard Garneau, Jeffrey A. Hearn, Bradley P. Martin, Alain Rhéaume, Michael S. Rousseau and David H. Wilkins. What follows is biographical information for each nominee and the qualifications considered in nominating each of them to
the board.
Nominees
|
|
|
|
|
Jennifer C. Dolan
Age:
70
Director since: 2013
|
|
Ms. Dolan has served on the Company’s board since the 2013 annual meeting of stockholders.
She retired from The New York Times Company in 2012 after a
33-year
career, the last ten of which she spent as vice president of forest products, where she managed paper procurement and oversaw its equity investments in two paper mills, including as a member of the board of
Donohue Malbaie Inc., a joint venture with the Company. Before then, she held a number of executive and senior finance roles. Ms. Dolan is a certified public accountant, and a member of the American Institute of Certified Public Accountants.
She serves on no other public company board.
Director
qualifications:
• Management/operating experience — experienced executive, representing
one of the largest consumers of newsprint in North America
• Professional services & financial/accounting experience — certified public accountant
|
54
|
|
|
|
|
Richard D. Falconer
Age: 72
Director since: 2010
|
|
Mr. Falconer has served on the Company’s board since we emerged from creditor protection on December 9, 2010, which we
refer to as the “
emergence date
.”
He was vice chairman
and managing director of CIBC World Markets Inc. until he retired in 2011. He joined Wood Gundy (now a division of CIBC World Markets Inc.) in 1970; his previous roles include financial analyst, director of research and
co-head
of investment banking. He has experience advising companies in the forest products industry.
Mr. Falconer serves as a board member of Chorus Aviation Inc. (TSX) and is chairman of Jaguar Mining Inc. (TSX). Jaguar Mining filed for creditor
protection under the
Companies’ Creditors Arrangement Act
(Canada) in December of 2013 and emerged from creditor protection on April 22, 2014. Mr. Falconer is a board member for a number of
not-for-profit
organizations. Mr. Falconer has been Managing Director at Lazard Canada Inc. since September 2016, and before that was a Senior Partner at Verus Partners & Co. from April 2014 to
September 2016.
Director
qualifications:
• Professional services & financial experience — senior position in
Canadian investment banking industry
• Management/operating experience — former vice chairman and managing director of a large Canadian investment banking firm
|
|
|
|
|
Richard Garneau
Age:
69
Director since: 2010
|
|
Mr. Garneau has served on the board since June 2010 and has been our president and chief executive officer since January 1,
2011.
He served as president and chief executive officer of Catalyst Paper
Corporation from 2007 through 2010 and as vice president of pulp and paper operations with Domtar Inc. from 2005 through 2007. Catalyst Paper filed for creditor protection under the
Companies’ Creditors Arrangement Act
(Canada) and
Chapter 15 of the U.S. Bankruptcy Code in January of 2012. He also held a variety of roles at Norampac, Copernic.com, Future Electronics, St. Laurent Paperboard, Finlay Forest Industries and Donohue Inc.
He serves on no other public company board of directors.
Director qualifications:
• Management/operating experience — experienced chief executive officer and
senior executive officer with large publicly-held forest products industry companies
• Professional services & financial/accounting experience — chartered
professional accountant
|
55
|
|
|
|
|
Jeffrey A. Hearn
Age: 65
Director since: 2010
|
|
Mr. Hearn has served on the Company’s board since the emergence date.
He retired from International Paper in April 2009, where he served as project
executive with responsibility for implementing the company’s expanded manufacturing and market presence in Brazil. Before this assignment, Mr. Hearn held various other general business management, operations management and technology
management positions in the U.S. and Canada, including as head of International Paper’s coated paperboard business. He was president and chief executive officer of Weldwood of Canada from 2000 to 2002, and has also served as chair of the
Paperboard Mfg. and Converting Section of the American Forest Products Association and former vice-chair of the Forest Products Association of Canada. He was also Industry CEO representative for the B.C. Forest Products Forest Practices Reform
Initiative.
He serves on no other public company board of
directors.
Director qualifications:
• Management/operating experience — experienced executive officer with large
publicly-held forest products industry companies
• Politics/government relations — experienced executive officer with trade associations in the forest products industry
|
|
|
|
|
Bradley P. Martin
Age: 57
Director since: 2012
|
|
Mr. Martin has served on the board since the 2012 annual meeting of stockholders.
Since March 9, 2012, he has served as vice president for strategic investments
with Fairfax Financial Holdings Limited. He had been its vice president and chief operating officer since January 2007, and its corporate secretary since 2002. Before joining Fairfax in 1998, he was a partner with Torys LLP, a leading Canadian
business law firm, specializing in mergers and acquisitions and securities law.
Mr. Martin currently serves as a member of the boards of Bank of Ireland (London Stock Exchange), Eurobank Ergasias S.A. (Athens Stock Exchange) and a private company. He has served in the last five
years on the boards of Ridley Inc. (TSX), Imvescor Restaurant Group Inc. (TSX) and The Brick Ltd. (TSX).
Director qualifications:
• Professional services & financial experience — former chief operating officer of a Canadian financial services company; former partner with a Toronto-based law
firm
• Management/operating experience — experienced executive officer with large
publicly-traded company
|
56
|
|
|
|
|
Alain Rhéaume
Age: 65
Director since: 2010
|
|
Mr. Rhéaume has served on the Company’s board since the emergence date.
He is founder and a managing partner at Trio Capital Inc. Before then he was
executive vice president and president of Fido, a subsidiary of Rogers Wireless Communications Inc., a role he assumed when Microcell Telecommunications Inc. was acquired by Rogers. Mr. Rhéaume was president and chief operating officer
and previously served as chief financial officer of Microcell. Previously, Mr. Rhéaume was associate deputy minister of finance from 1987 to 1992 and deputy minister of finance from 1992 to 1996 in the provincial government of
Québec.
He currently serves as a director of
SNC-Lavalin
Group Inc. (TSX), the Canadian Investors Protection Fund and Boralex Inc. (TSX). He has served in the last five years on the boards of the Canadian Public Accountability Board, Redline Communications
Group Inc. (TSX), Diagnocure Inc. (TSX), Kangaroo Media Inc. (TSX Venture Exchange; no longer a public company), Boralex Power Income Fund (TSX) and other private companies.
Director qualifications:
• Politics/government relations and financial/accounting experience — various
senior finance positions with the government of the province of Québec and chief financial officer of a publicly traded company
• Management/operating experience — several senior executive positions in the
hi-tech
industry
|
|
|
|
|
Michael S. Rousseau
Age: 59
Director since: 2010
|
|
Mr. Rousseau has served on the Company’s board since the emergence date.
He has been executive vice president and chief financial officer of Air Canada since
October 2007. He served as president of Hudson’s Bay Company from 2006 to 2007, and as executive vice president and chief financial officer from 2001 to 2006. Prior to joining Hudson’s Bay Company in 2001, he held senior executive
financial positions at other large international corporations, including Moore Corporation in Chicago, Silcorp Limited and the UCS Group (a division of Imasco Limited).
Mr. Rousseau currently serves on the board of EnerCare Inc. (TSX).
Director qualifications:
• Management/operating experience — experienced executive with large
publicly-traded companies
• Professional services & financial/accounting experience — currently
chief financial officer with Canada’s largest airline; chartered professional accountant
|
|
|
|
|
David H. Wilkins
Age: 70
Director since: 2010
|
|
Ambassador Wilkins has served on the Company’s board since the emergence date.
He was nominated by President George W. Bush as United States ambassador to Canada in
2005, a position he held until January 20, 2009. Before this appointment, he practiced law for 34 years in Greenville, South Carolina, and has extensive experience in civil litigation and appellate practice. He was elected to the South Carolina
House of Representatives in 1980 and served 25 years, culminating in his service as speaker of the House. He is currently a partner at Nelson Mullins Riley & Scarborough LLP and chairs the Public Policy and International Law practice
group.
Mr. Wilkins currently serves on the board of United Community
Banks, Inc. (NASDAQ), as well as on other private company boards.
Director
qualifications:
• Professional services — experienced lawyer in public policy and international
law
• Politics/government relations — former U.S. ambassador to Canada and elected
representative
|
57
|
|
|
|
|
Randall C. Benson
Age:
57
Nominee
|
|
Mr. Benson has not previously served as a director or officer of the Company.
He has been the principal of R.C. Benson Consulting Inc. since October 1999,
providing strategic analysis, management, financial and operational restructuring and recapitalization expertise to companies, including those considered distressed or underperforming. From May 2012 to August 2016, Mr. Benson was also
Co-Lead
of the National Restructuring practice (Canada) at KPMG LLP. Through R.C. Benson Consulting and as part of his practice at KPMG, Mr. Benson has served as a chief restructuring officer or special advisor
to boards, management or shareholders of both public and private companies, including various engagements in connection with solvent and insolvent restructurings. In addition, Mr. Benson has experience in finance, distribution and logistics,
sales, and general management gained through various roles he has held in operating companies, including as the chief financial officer of public and private companies
Call-Net
Enterprises Inc. (which owned
Sprint Canada Inc.) and Beatrice Foods Inc., and as divisional president of Parmalat Canada’s Dairy Group.
Mr. Benson has also previously served as a director of Cinram International Income Fund, Hollinger Inc. (“Hollinger”),
Sun-Times
Media Group Inc.,
Terra Nova Acquisition Corp., Beatrice Foods Inc., and Cybersurf Corporation. Mr. Benson does not currently serve on any other public company board.
Director qualifications:
• Management/operating experience — experienced director and executive for
various public and private companies
• Professional services & financial/accounting experience — experienced executive and special advisor in connection with mergers and acquisitions, financings, and
operational and financial restructurings
From July 2005 through March
2007, Mr. Benson was the chief restructuring officer and a director of Hollinger, positions to which he was appointed pursuant to a July 2005 order of the Ontario Superior Court of Justice. On August 1, 2007, Hollinger and certain of its
subsidiaries initiated a court supervised restructuring under Canada’s Companies’ Creditors Arrangement Act and Chapter 15 of the U.S. Bankruptcy Code. In addition, prior to Mr. Benson becoming an officer and director of Hollinger,
Ontario and other Canadian provincial securities regulators issued a management cease trade order that prohibited certain then current and former directors, officers and insiders of Hollinger from trading in Hollinger securities, as a result of
Hollinger not having filed certain financial statements and related disclosure documents when required. Although Mr. Benson was not an officer or director of Hollinger at the time of the original order nor was he involved with events that led
to the order, in April 2006, Mr. Benson became subject to the order when it was amended to reflect changes in Hollinger’s officers and directors. The order was lifted on April 10, 2007, after Hollinger filed financial statements and
disclosure documents then required by the Canadian securities regulators.
|
Item 2 — Vote on the Ratification of the Appointment of PricewaterhouseCoopers
LLP
The audit committee appointed PricewaterhouseCoopers LLP (“
PwC
”) as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2017. Our organizational documents do not require that our stockholders ratify the appointment of the independent registered public accounting firm, but we do so because we believe it is a
matter of good corporate practice. If the stockholders do not ratify the appointment, the audit committee will reconsider whether to retain PwC, but still may retain them. Even if the appointment is ratified, the audit committee may change, in its
discretion, the appointment at any time if it determines that it would be in the best interests of our Company and our stockholders to do so.
58
Audit Committee
Pre-Approval
of Audit and Permissible
Non-Audit
Services
The audit committee’s policy is to
pre-approve
all audit and
non-audit
services performed by the Company’s independent registered public accounting firm, including audit-related, tax and other
services. The audit committee
pre-approved
all audit and permissible
non-audit
services provided by PwC in 2016.
The Company’s chief financial officer, chief accounting officer (or another officer designated by the board) and the independent registered public
accounting firm must submit to the audit committee a request to provide any service that requires
pre-approval.
Each request must include a statement as to whether the independent registered public accounting
firm and the submitting officer view the provision of the requested services as consistent with the SEC’s rules on auditor independence. The request must be sufficiently detailed to enable the audit committee to precisely identify the services
requested. The audit committee may delegate
pre-approval
authority to its chair or one or more other committee members, but not to management. Any committee member with delegated authority must report all
pre-approval
decisions to the audit committee at its next scheduled meeting.
Other Information
A representative of PricewaterhouseCoopers LLP is expected to be present at the annual meeting, will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to appropriate questions from stockholders.
Audit Fees and All
Other Fees
Fees paid
. The following table contains certain information on the fees paid to PwC for professional services
rendered in the years ended December 31, 2016, and 2015, converted from Canadian to U.S. dollars at the average exchange rate in the applicable year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee category
|
|
|
|
|
2016
fees
|
|
|
2015
fees
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
Audit fees
|
|
|
|
|
|
$
|
2,375
|
|
|
$
|
2,474
|
|
|
Audit-related fees
|
|
|
|
|
|
|
63
|
|
|
|
41
|
|
|
Tax fees
|
|
|
|
|
|
|
16
|
|
|
|
16
|
|
|
All other fees
|
|
|
|
|
|
|
69
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fees
|
|
|
|
|
|
$
|
2,523
|
|
|
$
|
2,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
|
Audit fees
. Audit fees consist of fees billed for professional services rendered in respect of the audits of annual consolidated financial
statements and internal control over financial reporting for the years indicated, review of interim consolidated financial statements included in quarterly reports on Form
10-Q
and other services provided in
connection with statutory and regulatory filings or engagements.
|
|
|
•
|
|
Audit-related fees
. Audit-related fees consist primarily of fees for other attestation engagements in respect of the fiscal years indicated.
|
|
|
•
|
|
Tax fees
. Tax fees in each of 2016 and 2015 consisted primarily of tax compliance services for certain of our subsidiaries.
|
|
|
•
|
|
All other fees
. All other fees in each of 2016 and 2015 consist mainly of translation services for the Company’s periodic reports.
|
Board Recommendation
The board unanimously recommends a vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2017 fiscal year. Unless a contrary
choice is specified, proxies solicited by the board will be voted FOR ratification of the appointment.
59
Item 3 — Advisory vote to approve executive compensation
Rule
14a-21
under the Exchange Act requires that we give our stockholders the ability to cast a
non-binding
advisory vote on the compensation of our named executive officers. This vote is commonly referred to as the
“say-on-pay”
vote. At our 2011 annual meeting, a majority of stockholders voted, consistent with the recommendation of the Company’s board of directors,
to hold a stockholder advisory vote on a resolution to approve the compensation of the Company’s named executive officers annually. Accordingly, we intend to continue to provide annual
say-on-pay
votes.
The compensation of our executive officers is based on a design that ties a
substantial percentage of an executive’s compensation to the attainment of financial and other performance measures that, the board believes, serve to promote the creation of long-term stockholder value and to position the Company for long-term
success. As described more fully in the
Compensation Discussion and Analysis
section of this proxy statement, the mix of fixed and performance-based compensation and short-term and long-term incentive awards is designed to enable the Company
to attract and retain top quality executive talent while, at the same time, creating a close relationship between performance and compensation. Our human resources and compensation/nominating and governance committee and the board believe that the
design of the program and the compensation awarded to our named executive officers thereunder fulfill this objective.
We are asking for
stockholder approval of the compensation of our named executive officers, as we have disclosed in this proxy statement in accordance with SEC rules. The compensation disclosures are contained under the heading
Compensation Discussion and
Analysis
, the compensation tables and the narrative discussion accompanying the compensation tables. This vote is not intended to address any specific item of compensation but rather the overall compensation of our named executive officers and
the policies and practices described in this proxy statement.
Accordingly, the board is requesting your approval of the following
non-binding
resolution:
RESOLVED, that the Company’s stockholders approve, on a
non-binding
advisory basis, the compensation of the Company’s named executive officers, as disclosed in the proxy statement for this annual meeting pursuant to the compensation disclosure rules of the
Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2016 Summary Compensation Table, the other related tables and the accompanying narrative.
This vote is advisory and therefore not binding on the Company, our human resources and compensation/nominating and governance committee, or the board. Nevertheless, the board and human resources and
compensation/nominating and governance committee value the opinions of our stockholders and will review the voting results in connection with their ongoing evaluation of the Company’s compensation programs.
Board Recommendation
The board
unanimously recommends a vote FOR the approval of the Company’s executive compensation. Unless a contrary choice is specified, proxies solicited by the board will be voted FOR this proposal.
Item 4. — Advisory vote on the frequency of holding future advisory votes on executive compensation
Rule
14a-21
under the Exchange Act also requires that, not more than six years after the last such
vote, we give our stockholders the ability to cast a
non-binding
advisory vote as to how frequently they would like to cast an advisory vote on the compensation of our named executive officers like Item 3
above. The last such vote was held in 2011. By voting on this Item 4 proposal, stockholders may indicate whether in future years they would prefer an advisory
say-on-pay
vote either annually, every two years or every three years.
The board recognizes the importance of receiving regular input from stockholders
on important issues like executive compensation. The board also believes that a well-structured compensation program should include
60
plans that drive creation of stockholder value over the long-term and do not simply focus on short-term gains. While there are differing views as to whether the effectiveness of these plans can
be adequately evaluated on an annual basis, especially in a cyclical industry such as ours, the board believes that at present it should continue to receive advisory input from our stockholders each year. Accordingly, as indicated below, the board
recommends that you vote in favor of an annual advisory vote on our executive compensation.
The enclosed proxy card gives you four choices
for voting on this item. You can choose whether the
say-on-pay
vote should be conducted every year, every two years or every three years. You may also abstain from
voting on this item. This vote is advisory and therefore not binding on the Company or the board. Nevertheless, the board values the opinions of our stockholders.
Board Recommendation
The board recommends a vote for an ANNUAL advisory vote on
executive compensation matters. Unless a contrary choice is specified, proxies solicited by the board will be voted for an ANNUAL advisory vote on executive compensation matters.
A
UDIT
C
OMMITTEE
R
EPORT
The audit committee of the board of directors oversees our financial reporting, internal controls and audit function process on behalf of the board. The Company’s management is responsible for the
financial statements and for maintaining effective internal control over financial reporting.
In carrying out its oversight responsibilities,
the audit committee has reviewed and discussed with management and PricewaterhouseCoopers LLP the audited financial statements for the year ended December 31, 2016. The audit committee has discussed with PricewaterhouseCoopers LLP the matters
required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board, or the “
PCAOB
.” The audit committee has received from PricewaterhouseCoopers LLP the written disclosures and the letter
required by applicable requirements of the PCAOB regarding the independent auditors’ communications with the audit committee concerning independence, and the audit committee has discussed with PricewaterhouseCoopers LLP the firm’s
independence.
Based on the review and discussions referred to above, the audit committee recommended to the board that the audited financial
statements for the year ended December 31, 2016, be included in the Company’s 2016 annual report on Form
10-K
for filing with the SEC.
Jennifer C. Dolan
Richard D. Falconer
Alain Rhéaume (chair)
Michael S. Rousseau
S
ECTION
16 B
ENEFICIAL
O
WNERSHIP
R
EPORTING
C
OMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and 10% stockholders
to file reports of holdings and transactions in common stock with the SEC. Those persons are also required to furnish the Company with copies of all section 16(a) reports they file, which we post on our website at
www.resolutefp.com/investors/sec_filings.
As a practical matter, the Company assists its directors and officers by monitoring transactions
and completing and filing section 16 reports on their behalf. Based on a review of the copies of such reports and on written representations from the Company’s directors and executive officers, the Company believes that all section 16(a) filing
requirements applicable to the Company’s directors, executive officers and stockholders were complied
61
with during the most recent fiscal year, except that a Form 3 filing inadvertently was not timely filed to report the opening balance for Mr. Boniferro upon being appointed as an executive
officer of the Company; and a Form 4 filing inadvertently was not timely filed for Mr. Boniferro for units withheld in respect of taxes on the settlement of restricted stock units.
C
OMPENSATION
C
OMMITTEE
I
NTERLOCKS
AND
I
NSIDER
P
ARTICIPATION
None of the individuals who served as members of the human resources and compensation/nominating and governance committee during 2016 was an officer or
employee of the Company during 2016 or at any time in the past nor had reportable transactions with the Company. During 2016, none of the Company’s executive officers served on the board of directors or compensation committee of any other
entity that had an executive officer serving as a member of the Company’s board of directors or compensation/nominating and governance committee.
O
THER
B
USINESS
There is no other
matter that the board currently intends to present, or has reason to believe others will present, at the annual meeting. If other matters come before the meeting, the persons named in the accompanying form of proxy will vote on them in accordance
with their best judgment.
S
TOCKHOLDER
P
ROPOSALS
FOR
I
NCLUSION
IN
N
EXT
Y
EAR
’
S
P
ROXY
To be
considered for inclusion in next year’s proxy statement, stockholder proposals submitted in accordance with the SEC’s Rule
14a-8
must be received at our principal executive offices no later than the
close of business on December 21, 2017. Proposals should be addressed to the corporate secretary, Resolute Forest Products Inc., 111 Duke Street, Suite 5000, Montréal, Québec, H3C 2M1, Canada.
S
TOCKHOLDER
P
ROPOSALS
FOR
2018 A
NNUAL
M
EETING
Our
by-laws
require that any stockholder proposal that is not submitted for inclusion in next
year’s proxy statement under SEC Rule
14a-8
but instead is sought to be presented directly at the 2018 annual meeting be made by way of a “notice of business,” as further described in the
by-laws.
To be timely, the notice of business must be delivered personally or mailed to, and received at, our principal executive offices, addressed to the corporate secretary, by no earlier than 90 days and no
later than 60 days before the first anniversary of the date of the prior year’s annual meeting of stockholders. Accordingly, a notice of business must be received no earlier than February 24, 2018 and no later than March 26, 2018. The
notice of business should be addressed to the corporate secretary, Resolute Forest Products, 111 Duke Street, Suite 5000, Montréal, Québec, H3C 2M1, Canada.
A
DDITIONAL
I
NFORMATION
We will
furnish, without charge to a stockholder, a copy of the annual report on Form
10-K
(including the financial statements and financial schedules incorporated by reference therein but not including the exhibits,
which are available upon payment of a reasonable fee) for the year ended December 31, 2016, filed with the SEC. A copy of the report can be obtained upon written request to the Company at Corporate Secretary, Resolute Forest Products Inc., 111
Duke Street, Suite 5000, Montréal, Québec, H3C 2M1, Canada. The annual report on Form
10-K
and all of the Company’s filings with the SEC can be accessed through our website at
www.resolutefp.com/investors/sec_filings.
62
Resolute
Forest products
IMPORTANT ANNUAL MEETING INFORMATION
000004
ENDORSEMENT_LINE SACKPACK
MR A SAMPLE
DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6
Using a black ink pen, mark your
votes with an X as shown in X this example. Please do not write outside the designated areas.
Annual Meeting Proxy Card
C123456789
000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext
000000000.000000 ext 000000000.000000 ext
Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you
may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on May 25, 2017.
Vote by Internet
Go to www.envisionreports.com/RFP
Or scan the QR code with your smartphone
Follow the steps outlined on the secure website
Vote by telephone
Call toll free
1-800-652-VOTE
(8683) within the USA, US territories & Canada on a touch tone telephone
Call
1-781-575-2300
outside of the USA, US
territories & Canada on a touch tone telephone. Standard rates will apply.
Follow the instructions provided by the recorded message
1234 5678 9012 345
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A Proposals — The board recommends a vote FOR all nominees and FOR Proposals 2 and
3 and every 1 Year for Proposal 4.
1. Election of directors:
For Against
Abstain For Against Abstain For Against Abstain +
01—Randall C. Benson 02—Jennifer C. Dolan 03—Richard D. Falconer
04—Richard Garneau 05—Jeffrey A. Hearn 06—Bradley P. Martin
07—Alain
Rhéaume 08—Michael S. Rousseau 09—David H. Wilkins
For Against Abstain For Against Abstain
2. Ratification of PricewaterhouseCoopers LLP appointment 3. Advisory vote to approve executive compensation
(“say-on-pay”)
1 Yr 2 Yrs 3 Yrs Abstain
4. Advisory vote on the frequency of
say-on-pay
B
Non-Voting
Items
Change of Address — Please
print your new address below. Comments — Please print your comments below. Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting.
C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian,
please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.
C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MMMMMMM1UP X 3254371 MR A SAMPLE AND MR A
SAMPLE AND MR A SAMPLE AND +
02KP5C
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.
Proxy — RESOLUTE FOREST PRODUCTS INC.
Resolute Forest Products
Inc. 111 Duke Street, Suite 5000 Montréal, Québec H3C 2M1, Canada
Proxy solicited by Resolute Forest Products Inc. on behalf of the board of
directors for the 2017 annual meeting of stockholders to be held on May 25, 2017.
Richard Garneau and Jacques P. Vachon (the “proxies”), or either
of them, each with the full power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers that the undersigned would possess if personally present at the 2017 annual meeting of stockholders of
Resolute Forest Products Inc. to be held on May 25, 2017 and at any adjournment or postponement thereof.
The proxies shall vote subject to the direction
indicated on the reverse side of this proxy card. If no such direction is indicated, the proxies will vote as the board of directors recommends. The proxies are authorized to vote in their discretion upon other business as may properly come before
the meeting and any adjournment or postponement thereof.
The board of directors recommends a vote FOR all the nominees listed, FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the 2017 fiscal year, FOR approval of the Company’s executive compensation and for conducting future advisory
votes on executive compensation every 1 YEAR.
(Items to be voted appear on reverse side.)
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