SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2004
COMMISSION FILE No. 1-31690
TRANSCANADA CORPORATION
(Translation of Registrant's Name Into English)
450 - 1 STREET S.W., CALGARY, ALBERTA, T2P 5H1, CANADA
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F)
Form 20-F Form 40-F X
----- -----
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
----- -----
I
1. The Management Proxy Circular of the Registrant dated February 24, 2004 and
as filed as Exhibit 1 to this Form 6-K (excluding the Sections entitled
"Composition of the Human Resources Committee", "Report on Executive
Compensation", "Performance Graph" and "Corporate Governance", which shall
be deemed not to be incorporated by reference) is hereby filed with the
Securities and Exchange Commission for the purpose of being and hereby is
incorporated by reference into the following registration statements filed
by TransCanada Corporation under the Securities Act of 1933.
FORM REGISTRATION NO.
---- ----------------
S-8 33-00958
S-8 333-5916
S-8 333-8470
S-8 333-9130
F-3 33-13564
F-3 333-6132
2. The Form of Proxy of the Registrant is hereby furnished as Exhibit 2 to
this Form 6-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRANSCANADA CORPORATION
By: /s/ Russell K. Girling
----------------------------------------------
Russell K. Girling,
Executive Vice-President, Corporate Development
and Chief Financial Officer
By: /s/ Rhondda E.S. Grant
----------------------------------------------
Rhondda E.S. Grant
Vice-President and Corporate Secretary
March 15, 2004
EXHIBIT INDEX
1 Management Proxy Circular of the Registrant
2 Form of Proxy of the Registrant
[LOGO]
NOTICE OF 2004 ANNUAL AND
SPECIAL MEETING OF SHAREHOLDERS
APRIL 23, 2004
MANAGEMENT PROXY CIRCULAR
FEBRUARY 24, 2004
TABLE OF CONTENTS
PAGE
--------
NOTICE OF ANNUAL AND SPECIAL MEETING........................ 2
MANAGEMENT PROXY CIRCULAR................................... 3
General Information....................................... 3
Information on Voting..................................... 3
BUSINESS TO BE TRANSACTED AT THE MEETING.................... 5
1. Financial Statements................................ 5
2. Election of Directors............................... 5
3. Appointment of Auditors............................. 9
4. Amendments to the Stock Option Plan................. 10
5. Approval of the Shareholder Rights Plan............. 11
6. Shareholder Proposals............................... 11
COMPENSATION AND OTHER INFORMATION.......................... 11
Compensation of Directors............................... 11
Compensation of Officers................................ 13
Pension and Retirement Benefits......................... 16
Employment Contracts.................................... 18
Composition of the Human Resources Committee............ 18
Report on Executive Compensation........................ 18
Performance Graph....................................... 23
Corporate Governance.................................... 23
Directors' and Officers' Liability Insurance............ 27
DIRECTORS' APPROVAL......................................... 27
CERTIFICATE................................................. 27
Schedule "A" -- Stock Option Plan Ordinary Resolution....... A-1
Schedule "B" -- Shareholder Rights Plan Ordinary
Resolution................................................ B-1
Schedule "C" -- Statement of Corporate Governance
Practices................................................. C-1
i TRANSCANADA CORPORATION
[LOGO]
March 15, 2004
Dear Shareholder:
You are invited to attend the Annual and Special Meeting of the holders of
common shares of TransCanada Corporation to be held in the Imperial Ballroom at
the Hyatt Regency Calgary Downtown, 700 Centre Street S.E., Calgary, Alberta, on
Friday, April 23, 2004 at 10:30 a.m. (Mountain Daylight Time).
In addition to attending to regular annual meeting business, shareholders will
be requested to approve resolutions to amend the Stock Option Plan and to
continue and ratify, confirm and approve the Shareholder Rights Plan.
The Management Proxy Circular and other enclosed information contain a detailed
description of the matters on which you will be requested to vote. Please give
this material your careful consideration.
Please complete and return the enclosed form of proxy in accordance with the
instructions provided, which will allow for your representation at the meeting.
If you are a registered owner and are able to attend the meeting, you may revoke
your proxy by providing notice at the meeting.
Yours very truly,
/s/ Harold N. Kvisle
Harold N. Kvisle
President and Chief Executive Officer
The Hyatt Regency is conveniently located next to the C-Train platform at Centre
Street N.E. (eastbound trains) and down the street from Olympic Plaza (westbound
trains), which is located between 1st and 2nd Street S.E. Complimentary parking
will be available for TransCanada shareholders at the Telus Convention Centre.
Access to the Telus Convention Centre underground parking garage (clearance
approx. 2 metres) is located at 727 - 1st Street S.E. just as you pass over the
C-Train tracks on the right hand side. Please tell the garage attendant that you
are attending the TransCanada shareholders meeting upon departure.
TRANSCANADA CORPORATION 1
[LOGO]
NOTICE OF ANNUAL AND SPECIAL MEETING
NOTICE IS HEREBY GIVEN that the Annual and Special Meeting (the "Meeting") of
the holders of common shares (the "common shares") of TransCanada Corporation
("TransCanada") will be held in the Imperial Ballroom at the Hyatt Regency
Calgary Downtown, 700 Centre Street S.E., Calgary, Alberta, on Friday,
April 23, 2004 at 10:30 a.m. (Mountain Daylight Time).
HOLDERS OF COMMON SHARES ARE INVITED TO ATTEND THE MEETING FOR THE FOLLOWING
PURPOSES:
(1) to receive the consolidated financial statements for the year ended
December 31, 2003 and the auditors' report thereon;
(2) to elect the directors;
(3) to appoint the auditors and authorize the directors to fix their
remuneration;
(4) to consider and, if deemed appropriate, to pass, with or without
variation, an ordinary resolution to amend the Stock Option Plan, as
described in the enclosed Management Proxy Circular;
(5) to consider and, if deemed appropriate, to pass, with or without
variation, an ordinary resolution to continue and ratify, confirm and
approve the Shareholder Rights Plan, as described in the enclosed
Management Proxy Circular; and
(6) to transact such other business as may properly come before the Meeting
or any adjournment thereof.
Shareholders of record at the close of business on March 5, 2004 will be
entitled to vote at the Meeting. TransCanada will prepare, no later than
10 days following the record date, an alphabetical list of shareholders who are
entitled to vote as of the record date, showing the number of common shares held
by each such shareholder. Each person named on the list of shareholders is
entitled to one vote for each share held.
Shareholders are requested to complete, date, sign and return (in the envelope
provided for that purpose) the accompanying form of proxy for use at the
Meeting. Such proxies must be received before 4:30 p.m. (Eastern Daylight Time)
on Wednesday, April 21, 2004 by TransCanada's transfer agent, Computershare
Trust Company of Canada, Stock Transfer Services, 9th Floor, 100 University
Avenue, Toronto, Ontario, M5J 2Y1. Shareholders may also cast their vote
electronically by following the instructions provided on the form of proxy.
The 2003 Annual Report, the Management Proxy Circular and a form of proxy
accompany this Notice of Meeting.
By Order of the Board of Directors,
/s/ Rhondda E.S. Grant
RHONDDA E.S. GRANT
Vice-President and Corporate Secretary
Calgary, Alberta
March 15, 2004
TRANSCANADA CORPORATION 2
[LOGO]
MANAGEMENT PROXY CIRCULAR
GENERAL INFORMATION
THIS MANAGEMENT PROXY CIRCULAR ("PROXY CIRCULAR") IS FURNISHED IN CONNECTION
WITH THE SOLICITATION OF PROXIES BY MANAGEMENT OF TRANSCANADA CORPORATION
("TRANSCANADA") TO BE USED AT THE ANNUAL AND SPECIAL MEETING (THE "MEETING")
OF HOLDERS OF COMMON SHARES TO BE HELD IN CALGARY, ALBERTA ON FRIDAY,
APRIL 23, 2004 AND AT ANY ADJOURNMENT THEREOF, FOR THE PURPOSES SET OUT IN
THE ACCOMPANYING NOTICE OF ANNUAL AND SPECIAL MEETING (THE "NOTICE OF
MEETING").
The commencement of mailing to shareholders of this Proxy Circular,
TransCanada's 2003 Annual Report and the form of proxy for shareholders will
be March 15, 2004. The cost of soliciting proxies will be borne by
TransCanada. While most proxies will be solicited by mail only, some
shareholders may also be contacted by TransCanada employees personally or by
telephone. In addition, TransCanada has retained Georgeson Shareholder
Communications Canada, 66 Wellington Street West, T-D Tower, Suite 5210,
Toronto Dominion Centre, P.O. Box 240, Toronto, Ontario, M5K 1J3 at a fee of
approximately $40,000 plus out-of-pocket expenses to aid in the solicitation
of proxies from individual and institutional investors in Canada and the
U.S.
TransCanada will provide proxy materials to brokers, custodians, nominees
and fiduciaries and will request that such materials be promptly forwarded
to the beneficial owners of common shares registered in the names of such
brokers, custodians, nominees and fiduciaries.
Unless otherwise stated, the information contained in this Proxy Circular is
given as of the date hereof and all dollar amounts are in Canadian dollars.
For those shareholders who cannot attend the Meeting in person, TransCanada
has made arrangements to provide a live webcast of the Meeting. Details on
how shareholders may listen to and view the proceedings on the webcast will
be found on TransCanada's website at www.transcanada.com and will be
provided in a news release prior to the Meeting.
TransCanada's principal corporate and executive offices are located at
450 - 1st Street S.W., Calgary, Alberta, T2P 5H1.
INFORMATION ON VOTING
RECORD DATE FOR NOTICE OF MEETING AND PROVISIONS RELATING TO VOTING
The Board has fixed March 5, 2004 as the record date for the purpose of
determining shareholders entitled to receive the Notice of Meeting.
TransCanada will prepare, no later than 10 days following the record date,
an alphabetical list of shareholders who are entitled to vote as of the
record date, showing the number of common shares held by each such
shareholder. Each person named on the list of shareholders is entitled to
one vote for each share held. The list is available for inspection during
usual business hours at the office of Computershare Trust Company of Canada
("Computershare"), Suite 600, 530 - 8th Avenue S.W., Calgary, Alberta,
T2P 3S8 and will be available for inspection at the Meeting.
APPOINTMENT OF PROXY HOLDERS
Shareholders wishing to be represented by proxy at the Meeting must deposit
a properly executed proxy with Computershare prior to 4:30 p.m. (Eastern
Daylight Time) on Wednesday, April 21, 2004.
TRANSCANADA CORPORATION 3
All common shares represented by a properly executed and deposited form of
proxy will be voted or withheld from voting on the matters identified in the
Notice of Meeting in accordance with the instructions of the shareholder as
specified on the form of proxy.
IF YOU HAVE APPOINTED A PERSON DESIGNATED BY TRANSCANADA TO ACT AND VOTE ON
YOUR BEHALF AS PROVIDED IN THE ENCLOSED FORM OF PROXY AND YOU DO NOT PROVIDE
ANY INSTRUCTIONS CONCERNING ANY MATTER IDENTIFIED IN THE NOTICE OF MEETING,
THE COMMON SHARES REPRESENTED BY SUCH PROXY WILL BE VOTED:
(i) FOR THE ELECTION OF THE PERSONS NOMINATED FOR ELECTION AS DIRECTORS;
(ii) FOR THE APPOINTMENT OF KPMG LLP, CHARTERED ACCOUNTANTS, AS AUDITORS
AND THE AUTHORIZATION OF THE DIRECTORS TO SET THEIR REMUNERATION;
(iii) FOR THE APPROVAL OF AMENDMENTS TO THE STOCK OPTION PLAN, AS
DESCRIBED IN THIS PROXY CIRCULAR; AND
(iv) FOR THE CONTINUANCE AND RATIFICATION, CONFIRMATION AND APPROVAL OF
THE SHAREHOLDER RIGHTS PLAN, AS DESCRIBED IN THIS PROXY CIRCULAR.
The enclosed form of proxy, when properly signed, confers discretionary
authority on the person or persons named to vote on any amendment to matters
identified in the Notice of Meeting and on any other matter properly coming
before the Meeting. Management is not aware of any such amendment or other
matter. If, however, any such amendment or other matter properly comes
before the Meeting, the proxies will be voted at the discretion of the
person or persons named therein. The persons named in the form of proxy are
either officers or directors of TransCanada.
VOTING ADVICE TO BENEFICIAL HOLDERS
The information set forth in this section is of significant importance to
many shareholders who do not hold their common shares in their own name.
Only proxies deposited by shareholders whose names appear on the records of
TransCanada as the registered holders of common shares can be recognized and
acted upon at the Meeting. If common shares are listed in your account
statement provided by your broker, then, in almost all cases, those common
shares will not be registered in your name on the records of TransCanada.
Such common shares will likely be registered under the name of your broker
or an agent of that broker. In Canada, the vast majority of such shares are
registered under the name of CDS & Co., the registration name for The
Canadian Depository for Securities Limited, which acts as nominee for many
Canadian brokerage firms. Common shares held by your broker or its nominee
can only be voted upon your instructions. Without specific instructions,
your broker, its agent or its nominee is prohibited from voting your common
shares.
THEREFORE, BENEFICIAL SHAREHOLDERS SHOULD ENSURE THAT INSTRUCTIONS
RESPECTING THE VOTING OF THEIR COMMON SHARES ARE COMMUNICATED TO THE
APPROPRIATE PERSON.
Applicable regulatory policy requires your broker to seek voting
instructions from you in advance of a shareholder meeting. Every broker has
its own mailing procedures and provides its own return instructions, which
you should carefully follow in order to ensure that your common shares are
voted at the Meeting. Often, the form of proxy supplied by your broker is
identical to the form of proxy provided to registered shareholders. However,
its purpose is limited to instructing the registered shareholder how to vote
on your behalf. The majority of brokers now delegate responsibility for
obtaining instructions from clients to ADP Investor Communications ("ADP").
ADP mails a voting instruction form in lieu of the form of proxy provided by
TransCanada. The voting instruction form will name the same persons as the
proxy to represent the shareholder at the Meeting. A shareholder has the
right to appoint a person (who need not be a shareholder of TransCanada)
other than the persons designated in the voting instruction form, to
represent the shareholder at the Meeting. To exercise this right, the
shareholder should insert the name of the desired representative in the
blank space provided in the voting instruction form. You are asked to
complete and return the voting instruction form to ADP by mail or facsimile.
Alternately, you can call ADP's toll-free telephone number or access ADP's
internet website to vote your common shares. ADP then tabulates the results
of all instructions received and provides appropriate instructions
respecting the voting of common
4 TRANSCANADA CORPORATION
shares to be represented at the Meeting. IF YOU RECEIVE A VOTING INSTRUCTION
FORM FROM ADP, IT CANNOT BE USED AS A PROXY TO VOTE COMMON SHARES DIRECTLY
AT THE MEETING AS THE VOTING INSTRUCTION FORM MUST BE RETURNED TO ADP WELL
IN ADVANCE OF THE MEETING IN ORDER TO HAVE THE COMMON SHARES VOTED OR TO
APPOINT AN ALTERNATIVE REPRESENTATIVE TO ATTEND AT THE MEETING IN PERSON TO
VOTE SUCH COMMON SHARES.
IF YOU ARE A BENEFICIAL SHAREHOLDER AND WISH TO VOTE IN PERSON AT THE
MEETING, PLEASE CONTACT YOUR BROKER OR AGENT WELL IN ADVANCE OF THE MEETING
TO DETERMINE HOW YOU CAN DO SO.
REVOCABILITY OF PROXIES
A shareholder may revoke a proxy by depositing an instrument in writing
executed by such shareholder or such shareholder's attorney authorized in
writing (or, in the case of a corporation, by a duly authorized officer or
attorney), either at the registered office of TransCanada, 450 - 1st Street
S.W., Calgary, Alberta, T2P 5H1, Attention: Corporate Secretary, at any time
up to and including the last business day preceding the day of the Meeting
or any adjournment thereof, or with the Chair of the Meeting on the day of
the Meeting or an adjournment thereof, or in any other manner permitted by
law.
VOTING SHARES AND PRINCIPAL SHAREHOLDERS
At February 24, 2004, there were 483,330,775 common shares outstanding. Each
common share carries the right to one vote on any matter properly coming
before the Meeting. The common shares are TransCanada's only class of
outstanding shares.
To the knowledge of the directors and officers of TransCanada, based on
information at February 24, 2004, no individual or corporation beneficially
owned, directly or indirectly, or exercised control or direction over, more
than 10% of the outstanding common shares.
BUSINESS TO BE TRANSACTED AT THE MEETING
This Proxy Circular contains information relating to the receipt of
TransCanada's audited consolidated financial statements, the election of
directors, the appointment of auditors, the approval of amendments to the
Stock Option Plan, and the continuation and ratification, confirmation and
approval of the Shareholder Rights Plan.
1. FINANCIAL STATEMENTS
The audited consolidated financial statements of TransCanada for the year
ended December 31, 2003 and the report of the auditors thereon will be
placed before the Meeting. These audited consolidated financial statements
form part of the 2003 Annual Report of TransCanada, which was mailed to
shareholders with the Notice of Meeting and Proxy Circular. Additional
copies of the 2003 Annual Report, in English or French, may be obtained from
the Corporate Secretary of TransCanada upon request and will be available at
the Meeting.
2. ELECTION OF DIRECTORS
TransCanada's articles of incorporation provide for the Board to consist of
a minimum of 10 and a maximum of 20 directors. The number of directors
presently in office is 12. Mr. J.D. Thompson will retire effective
April 23, 2004 and Mr. P.L. Joskow has been named as a new nominee for
election.
The Board has set the number of directors to be elected at the Meeting at
12. The nominees for election as directors of TransCanada are:
D.D. Baldwin P.L. Joskow
W.K. Dobson H.N. Kvisle
P. Gauthier D.P. O'Brien
R.F. Haskayne J.R. Paul
K.L. Hawkins H.G. Schaefer
S.B. Jackson W.T. Stephens
TRANSCANADA CORPORATION 5
The Governance Committee of the Board reviews annually the qualifications of
persons proposed for election to the Board and submits its recommendations
to the Board for consideration. The persons proposed for nomination are, in
the opinion of the Board, well qualified to act as directors for the ensuing
year. Each nominee has established his or her eligibility and willingness to
serve as a director if elected. Each director elected will hold office until
the next annual meeting or until his or her successor is earlier elected or
appointed.
THE PERSONS NAMED IN THE FORM OF PROXY ARE EITHER OFFICERS OR DIRECTORS OF
TRANSCANADA WHO INTEND TO VOTE AT THE MEETING FOR THE ELECTION OF THE
NOMINEES WHOSE NAMES ARE SET FORTH ABOVE UNLESS SPECIFICALLY INSTRUCTED ON
THE FORM OF PROXY TO WITHHOLD SUCH VOTE.
Set forth in tabular form are the names of the 12 proposed nominees; their
municipalities of residence; all positions and offices held by them with
TransCanada; their principal occupations or employment during the past five
years; the year from which each has continually served as a director of
TransCanada, or TransCanada PipeLines Limited ("TCPL") prior to the 2003
arrangement, or NOVA Corporation ("NOVA") prior to the 1998 merger, as
applicable; and the number of each class of securities of TransCanada or any
of its affiliates owned by each of them or over which control or direction
is exercised by each of them:
SECURITIES OWNED,
CONTROLLED OR
PROPOSED NOMINEE(1) PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS DIRECTOR SINCE DIRECTED(2)(3)
------------------------------ ----------------------------------------------- ----------------- --------------------
Chairman, Talisman Energy Inc. (oil and gas) since 1999 225,865(4)(7)(10)
[DOUGLAS D. BALDWIN PHOTO] May 2003. President and Chief Executive Officer,
TCPL, from August 1999 to April 2001. Director,
Douglas D. Baldwin, Calgary Airport Authority, Citadel Group of Funds,
P. Eng. Resolute Energy Inc. and UTS Energy Corporation.
Calgary, Alberta Member, Board of Governors, University of Calgary.
Professor, Rotman School of Management and 1992 21,965(5)(7)
[WENDY DOBSON PHOTO] Director, Institute for International Business,
University of Toronto (education). Director,
Wendy K. Dobson MDS Inc., The Toronto-Dominion Bank and Vice Chair,
Uxbridge, Ontario Canadian Public Accountability Board.
Senior Partner, Desjardins Ducharme Stein Monast 2002 9,052(7)
[PAULE GAUTHIER PHOTO] (law firm). Director, Royal Bank of Canada, The
Royal Trust Corporation of Canada, The Royal Trust
The Hon. Paule Gauthier, Company, Rothmans Inc. and Metro Inc. Chair,
P.C., O.C., O.Q., Q.C. Security Intelligence Review Committee. President,
Quebec, Quebec Fondation de la Maison Michel Sarrazin and
President, Institut Quebecois des Hautes Etudes
Internationales, Laval University.
6 TRANSCANADA CORPORATION
SECURITIES OWNED,
CONTROLLED OR
PROPOSED NOMINEE(1) PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS DIRECTOR SINCE DIRECTED(2)(3)
------------------------------ ----------------------------------------------- ----------------- --------------------
Chairman of the Board, TransCanada. Prior to 1998 198,144(6)
[RICHARD F. HASKAYNE PHOTO] February 19, 2003, Chairman, Fording Inc. (coal (director of NOVA
and wollastonite). Director, EnCana Corporation and since 1991)
Richard F. Haskayne, Weyerhaeuser Company.
O.C., F.C.A.
Calgary, Alberta
President, Cargill Limited (grain handlers, 1996 22,152(7)(8)
[KERRY L. HAWKINS PHOTO] merchants, transporters, processors of agricultural
products and gas marketers). Director, NOVA
Kerry L. Hawkins Chemicals Corporation, Shell Canada Limited and
Winnipeg, Manitoba Hudson's Bay Company.
Chairman, Resolute Energy Inc. (oil and gas) since 2002 32,031(7)(9)
[S. BARRY JACKSON PHOTO] 2002 and Chairman, Deer Creek Energy Limited since
2001 (oil and gas). President and Chief Executive
S. Barry Jackson Officer, Crestar Energy Inc. (oil and gas), from
Calgary, Alberta 1993 to 2000. Director, Nexen Inc.
Professor, Department of Economics, Massachusetts 2004 5,000
[PAUL L. JOSKOW PHOTO] Institute of Technology (education). Director,
National Grid Transco PLC and Whitehead Institute
Paul L. Joskow for Biomedical Research. Trustee of Putnam Mutual
Cambridge, Massachusetts Funds and President, Yale University Council.
TRANSCANADA CORPORATION 7
SECURITIES OWNED,
CONTROLLED OR
PROPOSED NOMINEE(1) PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS DIRECTOR SINCE DIRECTED(2)(3)
------------------------------ ----------------------------------------------- ----------------- --------------------
President and Chief Executive Officer, TCPL, since 2001 555,484(10)(11)
[HAROLD N. KVISLE PHOTO] May 2001 and TransCanada since May 2003. Executive
Vice-President, Trading and Business Development,
Harold N. Kvisle, TCPL, from June 2000 to April 2001. Senior Vice-
P. Eng. President, Trading and Business Development, TCPL,
Calgary, Alberta from April 2000 to June 2000. Senior Vice-President
and President, Energy Operations, TCPL, from
September 1999 to April 2000. Prior to
September 1999, President, Fletcher Challenge
Energy Canada Inc. (oil and gas). Director, Norske
Skog Canada Limited, PrimeWest Energy Inc.,
TransCanada Power, L.P., Chair, Interstate National
Gas Association of America and Chair, Mount
Royal College.
Chairman, EnCana Corporation since April 2002 (oil 2001 18,052(7)
[DAVID P. O'BRIEN PHOTO] and gas). Chairman and Chief Executive Officer,
PanCanadian Energy Corporation (oil and gas), from
David P. O'Brien October 2001 to April 2002. Chairman, President and
Calgary, Alberta Chief Executive Officer, Canadian Pacific Limited,
from May 1996 to October 2001 (energy,
transportation and hotels). Director, Royal Bank of
Canada, Fairmont Hotels & Resorts Inc., Inco
Limited, Molson Inc., Profico Energy Management
Ltd. and The E & P Limited Partnership.
Chairman, James and Associates (private investment 1996 18,610(7)
[JAMES R. PAUL PHOTO] firm). Member of the Advisory Board, AMEC PLC.
James R. Paul
Kingwood, Texas
President, Schaefer & Associates (business advisory 1987 37,826(7)(12)
[HARRY G. SCHAEFER PHOTO] services). Vice-Chairman of the Board, TransCanada,
since 1998. Chairman, Crestar Energy Inc. (oil and
Harry G. Schaefer, gas), from May 1996 to November 2000. Director,
F.C.A. Agrium Inc. and Fording Canadian Coal Trust.
Calgary, Alberta Chairman, Alberta Chapter, Institute of Corporate
Directors and Chair, The Mount Royal College
Foundation.
8 TRANSCANADA CORPORATION
SECURITIES OWNED,
CONTROLLED OR
PROPOSED NOMINEE(1) PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS DIRECTOR SINCE DIRECTED(2)(3)
------------------------------ ----------------------------------------------- ----------------- --------------------
Corporate Director. Chief Executive Officer, 1999 22,800(7)
[W. THOMAS STEPHENS PHOTO] MacMillan Bloedel Limited (forest products), from
October 1997 to October 1999. Director, Xcel
W. Thomas Stephens Energy Inc., Norske Skog Canada Limited, Qwest
Greenwood Village, Colorado Communications International Inc. and The Putnam
Funds.
NOTES:
(1) WITH THE EXCEPTION OF MESSRS. JOSKOW, PAUL, AND STEPHENS, WHO ARE
U.S. RESIDENTS, ALL NOMINEES ARE CANADIAN RESIDENTS.
(2) THE INFORMATION AS TO SHARES BENEFICIALLY OWNED OR OVER WHICH CONTROL
OR DIRECTION IS EXERCISED, NOT BEING WITHIN THE KNOWLEDGE OF
TRANSCANADA, HAS BEEN FURNISHED BY EACH OF THE NOMINEES. EXCEPT AS
INDICATED IN THESE NOTES, THE NOMINEES HAVE SOLE VOTING AND DISPOSITIVE
POWER WITH RESPECT TO THE SECURITIES LISTED ABOVE. AS TO EACH CLASS OF
SHARES OF TRANSCANADA, THE PERCENTAGE OF OUTSTANDING SHARES BENEFICIALLY
OWNED BY ANY ONE DIRECTOR OR NOMINEE OR BY ALL DIRECTORS AND OFFICERS OF
TRANSCANADA AS A GROUP DOES NOT EXCEED 1% OF THE CLASS OUTSTANDING.
(3) VOTING SECURITIES INCLUDE COMMON SHARES THAT CERTAIN OF THE DIRECTORS
HAVE A RIGHT TO ACQUIRE THROUGH THE EXERCISE OF STOCK OPTIONS THAT ARE
VESTED UNDER THE STOCK OPTION PLAN (SEE NOTES 6 AND 10), AND COMMON
SHARES WHICH ELIGIBLE DIRECTORS MAY ACQUIRE UNDER THE SHARE UNIT PLAN
FOR NON-EMPLOYEE DIRECTORS (1998) (SEE NOTE 7), BOTH OF WHICH PLANS ARE
DESCRIBED ELSEWHERE IN THIS PROXY CIRCULAR.
(4) THE SHARES LISTED ALSO INCLUDE 100 CUMULATIVE REDEEMABLE FIRST
PREFERRED SHARES SERIES U AND 500 CUMULATIVE REDEEMABLE FIRST PREFERRED
SHARES, SERIES Y OF TCPL, AND 2,000 UNITS OF TRANSCANADA POWER, L.P.
(5) THE SHARES LISTED INCLUDE 1,000 UNITS OF TRANSCANADA POWER, L.P.
(6) PART OF THE COMPENSATION OF THE DIRECTORS WHO WERE FORMERLY DIRECTORS
OF NOVA WAS THE GRANTING OF OPTIONS UNDER NOVA'S STOCK OPTION PLAN. AS
PART OF THE 1998 MERGER WITH NOVA, ALL NOVA OPTIONS WERE CONVERTED INTO
OPTIONS OF BOTH NOVA CHEMICALS CORPORATION (A SEPARATE PUBLIC COMMODITY
CHEMICALS COMPANY) AND TCPL. AS A RESULT, THE DIRECTORS WHO WERE
FORMERLY DIRECTORS OF NOVA HOLD OPTIONS UNDER THE STOCK OPTION PLAN,
WHICH IS OTHERWISE RESTRICTED TO EMPLOYEES OF TRANSCANADA. UNDER THE
STOCK OPTION PLAN, MR. HASKAYNE HAS THE RIGHT TO ACQUIRE 39,072 SHARES.
(7) UNDER THE SHARE UNIT PLAN FOR NON-EMPLOYEE DIRECTORS (1998), THESE
DIRECTORS MAY ACQUIRE THE FOLLOWING COMMON SHARES: MR. BALDWIN -- 8,052
SHARES, MS. DOBSON -- 17,965 SHARES, MRS. GAUTHIER -- 8,052 SHARES,
MR. HAWKINS -- 18,355 SHARES, MR. JACKSON -- 3,031 SHARES,
MR. O'BRIEN -- 8,052 SHARES AND MR. SCHAEFER -- 9,610 SHARES. MR. PAUL
AND MR. STEPHENS, AS U.S. RESIDENTS, ARE INSTEAD ENTITLED TO RECEIVE THE
CASH EQUIVALENT TO 9,610 AND 20,800 SHARES, RESPECTIVELY. A DIRECTOR
CANNOT REDEEM DEFERRED SHARE UNITS UNTIL THE DIRECTOR CEASES TO BE A
MEMBER OF THE BOARD.
(8) THE SHARES LISTED INCLUDE 2,500 SHARES HELD BY MR. HAWKINS' WIFE.
(9) THE SHARES LISTED INCLUDE 5,000 UNITS OF TRANSCANADA POWER, L.P. AND
8,000 COMMON SHARES HELD BY MR. JACKSON'S WIFE.
(10) MR. KVISLE, AS AN EMPLOYEE OF TRANSCANADA, HAS THE RIGHT TO ACQUIRE
516,667 COMMON SHARES UNDER VESTED STOCK OPTIONS, WHICH AMOUNT IS
INCLUDED IN THIS COLUMN. MR. BALDWIN, AS FORMER PRESIDENT AND CHIEF
EXECUTIVE OFFICER OF TCPL, ALSO HAS THE RIGHT TO ACQUIRE 200,000 COMMON
SHARES UNDER VESTED STOCK OPTIONS, WHICH AMOUNT IS INCLUDED IN THIS
COLUMN.
(11) MR. KVISLE, AS AN EMPLOYEE OF TRANSCANADA, PARTICIPATES IN THE
EMPLOYEE STOCK SAVINGS PLAN WHICH IS DESCRIBED ELSEWHERE IN THIS PROXY
CIRCULAR; HIS HOLDINGS IN THIS PLAN AND 1,000 UNITS OF TRANSCANADA
POWER, L.P. ARE INCLUDED IN THIS COLUMN.
(12) THE SHARES LISTED INCLUDE 700 COMMON SHARES HELD BY MR. SCHAEFER'S
WIFE AND 5,500 COMMON SHARES HELD BY A COMPANY CONTROLLED BY
MR. SCHAEFER'S WIFE. MR. SCHAEFER DISCLAIMS BENEFICIAL OWNERSHIP OF SUCH
SHARES.
Mr. Joseph D. Thompson will retire from the Board effective April 23, 2004.
Management and the Board acknowledge with gratitude the valuable
contributions of Mr. Thompson over the past nine years to the TransCanada
board of directors. Mr. Paul L. Joskow has been named as a new nominee for
election.
3. APPOINTMENT OF AUDITORS
The Board recommends that KPMG LLP, Chartered Accountants, be reappointed as
TransCanada's auditors to hold office until the close of the next annual
meeting and that the directors be authorized to fix their remuneration as
such. KPMG LLP have served as the auditors of TransCanada since 1956. The
TRANSCANADA CORPORATION 9
appointment of auditors will be decided by a simple majority of votes cast
by holders of common shares at the Meeting.
The aggregate fees for professional services rendered by KPMG LLP for the
TransCanada group of companies for the 2003 and 2002 fiscal years are shown
in the table below:
2003 2002
-------- --------
Fees in millions
of dollars
Audit Fees.................................................. $1.80 $1.80
Audit-Related Fees(1)....................................... 0.05 0.02
Tax Fees(2)................................................. 0.06 0.10
All Other Fees(3)........................................... 0.05 --
----- -----
Total....................................................... $1.96 $1.92
===== =====
NOTES:
(1) AUDIT-RELATED FEES PRIMARILY RELATE TO AUDITS OF COMPANY APPROVED
PENSION PLANS.
(2) TAX FEES PRIMARILY RELATE TO TAX ADVICE AND COMPLIANCE.
(3) ALL OTHER FEES PRIMARILY RELATE TO SARBANES-OXLEY ACT OF 2002
COMPLIANCE WORK.
Representatives of KPMG LLP will be present at the Meeting, will be given
the opportunity to make a statement if they so wish and will respond to
appropriate questions.
4. AMENDMENTS TO THE STOCK OPTION PLAN
In 1995 TCPL established the Key Employee Stock Incentive Plan (1995) (the
"1995 Option Plan"). The 1995 Option Plan was subsequently amended, with the
approval of the shareholders of that company, on May 19, 1998. As part of
the Arrangement with TCPL effective May 15, 2003, a stock option plan (the
"Stock Option Plan") was adopted by TransCanada with substantially the same
terms and conditions as the 1995 Option Plan, as amended.
The Toronto Stock Exchange (the "TSX") requires that a share compensation
arrangement be affirmed by the affirmative votes of a simple majority of
votes cast at the Meeting, excluding votes attaching to the common shares
beneficially owned by insiders to whom the common shares may be issued
pursuant to the Stock Option Plan and associates of these insiders. To the
best of TransCanada's knowledge, 713,560 of the common shares are held by
such insiders and their associates and will not be counted for the purpose
of determining whether the required level of shareholder approval has been
obtained.
Shareholders will be asked at the Meeting to consider and, if deemed
advisable, to approve, by a simple majority of votes cast at the Meeting
(other than votes attaching to the common shares beneficially owned by
insiders to whom the common shares may be issued pursuant to the Stock
Option Plan, or associates of such insiders) a resolution, the text of which
is set out in Schedule "A" of this Proxy Circular (the "Option Plan
Resolution") to approve certain amendments to the Stock Option Plan. See
"Report on Executive Compensation -- Long-Term Incentive Plans -- Stock
Option Plan". If the Option Plan Resolution is not passed, the Stock Option
Plan will continue on the same terms as it was the day before the Meeting.
The Board of Directors has approved, subject to shareholder approval,
certain amendments to the Stock Option Plan, the effects of which are as
follows:
i) to confirm the Stock Option Plan in place until the close of business on
the date of TransCanada's 2007 annual meeting of common shareholders.
Currently, the Stock Option Plan has an expiry date of December 31,
2004; and
ii) to increase by 1,000,000 the total number of common shares reserved for
issuance under the Stock Option Plan.
When it was established, 10,000,000 common shares were reserved for issuance
under the 1995 Option Plan. An additional 15,000,000 common shares were
reserved for issuance under the 1995 Option Plan at the time
10 TRANSCANADA CORPORATION
of the merger with NOVA Corporation on July 2, 1998. There are currently
3,675,445 common shares reserved for issuance under future awards of options
under the Stock Option Plan.
Shareholders are being requested to approve an increase in the number of
common shares reserved for issuance under the Stock Option Plan by
1,000,000. This is considered a sufficient number of common shares to
adequately provide for all option awards for the next three years.
Shareholders will be asked to approve the Stock Option Plan in another three
years.
The Board of Directors unanimously recommends that shareholders vote in
favour of the Option Plan Resolution.
5. APPROVAL OF THE SHAREHOLDER RIGHTS PLAN
On December 2, 1994, TCPL implemented its Shareholder Rights Plan (the
"Shareholder Rights Plan"). The Shareholder Rights Plan was subsequently
amended, with the approval of the shareholders of that company, as of
April 7, 1995, May 19, 1998, and April 27, 2001. As part of the Arrangement
with TCPL effective May 15, 2003, the Shareholder Rights Plan was adopted by
TransCanada with substantially the same terms and conditions as the TCPL
Shareholder Rights Plan.
Shareholders will be asked at the Meeting to consider and, if deemed
advisable, to approve, by a simple majority of votes cast at the Meeting, a
resolution, the text of which is set forth in Schedule "B" of this Proxy
Circular (the "Rights Plan Resolution"), to continue and ratify, confirm and
approve the Shareholder Rights Plan. For the Shareholder Rights Plan to
continue in effect after the Meeting, the Rights Plan Resolution must be
passed by a majority vote of common shareholders represented at the Meeting.
If the Rights Plan Resolution is not passed, the Rights Plan will terminate.
The Board of Directors has determined that the Shareholder Rights Plan
continues to be in the best interests of TransCanada and the shareholders.
The Board of Directors unanimously recommends that shareholders vote in
favour of the Rights Plan Resolution. A summary of the Shareholder Rights
Plan is also set out in Schedule "B" to this Proxy Circular.
6. SHAREHOLDER PROPOSALS
Pursuant to Canadian law, shareholder proposals to be considered for
inclusion in the management proxy circular for the 2005 annual meeting of
holders of common shares must be received by the Corporate Secretary of
TransCanada on or before the close of business on December 24, 2004. No
shareholder proposals were received in respect of the Meeting.
COMPENSATION AND OTHER INFORMATION
COMPENSATION OF DIRECTORS
TransCanada's directors also serve as directors of TCPL. An aggregate fee is
paid for serving on the board of TransCanada and for serving on the board of
TCPL. Since TransCanada does not hold any assets directly other than the
common shares of TCPL and does not raise public debt, all directors' costs
are assumed by TCPL according to a management services agreement between the
two companies.
GENERAL
TransCanada's directors' compensation practices are designed to reflect the
size and complexity of TransCanada and to reinforce the emphasis TransCanada
places on shareholder value by linking a portion of directors' compensation
to the value of common shares. TransCanada requires each director to acquire
and hold a minimum number of common shares equal in value to five times the
director's annual cash retainer fee. Directors have a maximum of five years
to reach this level of share ownership. The level of ownership can be
achieved by direct purchase of common shares, by participation in the
TransCanada Dividend Reinvestment Plan or by means of directing cash
retainer fees into, or otherwise acquiring units under, the Share Unit Plan
for Non-Employee Directors (1998) (the "DSU Plan"), described elsewhere in
this Proxy Circular. All directors hold the minimum number of common shares.
TRANSCANADA CORPORATION 11
BOARD AND COMMITTEE REMUNERATION
For the financial year ended December 31, 2003, each director who was not an
employee of TransCanada, other than the Chair, was paid in quarterly
instalments in arrears as follows:
Retainer fee................................................ $27,000 per annum
Committee retainer fee...................................... $3,000 per annum
Committee Chair retainer fee................................ $4,000 per annum
Board and Committee attendance fee.......................... $1,500 per meeting
Committee Chair attendance fee.............................. $1,500 per meeting
The Chair, who was paid none of the directors' fees outlined above, was paid
a retainer fee of $300,000 per annum in respect of his duties as Chair,
$3,000 per chaired board meeting, and was reimbursed for certain office and
other expenses. The Vice-Chair was paid a retainer fee of $12,000 per annum
in respect of his duties as Vice-Chair, in addition to his other director's
fees as outlined above. Additionally, directors other than the Chair and any
director who is an employee of TransCanada, receive in respect of their
service as directors, an annual grant of units under the DSU Plan. See
"Deferred Share Unit Plan for Directors". Fees are paid quarterly and are
pro-rated from the date of the director's appointment to the Board and the
relevant committees.
TransCanada pays a travel fee of $1,500 per meeting for which round trip
travel time exceeds three hours, and reimburses the directors for
out-of-pocket expenses incurred in attending such meetings. Directors who
are U.S. residents are paid the same amounts as outlined above in
U.S. dollars.
CASH FEES PAID TO DIRECTORS IN 2003(1)
COMMITTEE COMMITTEE BOARD COMMITTEE
RETAINER RETAINER CHAIR RETAINER ATTENDANCE ATTENDANCE TRAVEL TOTAL FEES
NAME FEE FEE FEE FEE FEE FEE PAID
---- -------- --------- -------------- ---------- ---------- -------- ----------
Douglas Baldwin(2)........... $ 27,000 $6,000 $4,000 $16,500 $16,500 $ 1,500 $ 71,500
Wendy Dobson(2).............. 27,000 6,000 4,000 16,500 12,000 9,000 74,500
Paule Gauthier............... 27,000 6,000 N/A 18,000 13,500 10,500 75,000
Richard Haskayne(3).......... 339,000 N/A N/A N/A N/A 1,500 340,500
Kerry Hawkins(2)............. 27,000 6,000 4,000 18,000 19,500 12,000 86,500
Barry Jackson................ 27,000 6,000 N/A 19,500 13,500 1,500 67,500
David O'Brien................ 27,000 6,000 N/A 13,500 4,500 1,500 52,500
James Paul(4)................ 27,000 6,000 N/A 19,500 12,000 10,500 75,000
Harry Schaefer(2)(5)......... 39,000 6,000 25,647 19,500 21,000 N/A 89,500
W. Thomas Stephens(4)........ 27,000 6,000 N/A 19,500 9,000 12,000 73,500
Joseph Thompson.............. 27,000 6,000 N/A 18,000 10,500 12,000 73,500
NOTES:
(1) FEES ARE AGGREGATE AMOUNTS RESPECTING DUTIES PERFORMED ON BOTH
TRANSCANADA AND TCPL BOARDS.
(2) THE COMMITTEE CHAIR RETAINER FEE AMOUNT INCLUDES FEES PAID IN ADDITION
TO THE COMMITTEE RETAINER FEE IN RESPECT OF DUTIES PERFORMED AND
MEETINGS HELD IN PREPARATION FOR COMMITTEE MEETINGS.
(3) THE RETAINER FEE AMOUNT INCLUDES THE FEE OF $3,000 IN RESPECT OF EACH
BOARD MEETING CHAIRED.
(4) U.S. DIRECTORS ARE PAID THESE DOLLAR AMOUNTS IN U.S. DOLLARS.
(5) THE RETAINER FEE AMOUNT INCLUDES THE FEE OF $12,000 IN RESPECT OF
DUTIES PERFORMED AS VICE-CHAIR.
DEFERRED SHARE UNIT PLAN FOR DIRECTORS
The Share Unit Plan for Non-Employee Directors (1998) was established in
1998 and was amended and restated in October 2000. The DSU Plan allows
eligible Board members, on a quarterly basis, to direct their annual
directors' retainer fee or, at the discretion of the Governance Committee,
other board-related fees, to acquire units representing the right to acquire
common shares. The DSU Plan also allows for grants of units as additional
directors' compensation; these grants are made annually to the directors
other than the
12 TRANSCANADA CORPORATION
Chair and the President and Chief Executive Officer. In September 2003, a
grant of 3,000 DSU units per eligible director was made.
Initially the value of a DSU unit is equal to the market value of a common
share at the time the directors are credited with the units. Thus the grant
of 3,000 DSU units in September 2003 had an initial cash value of
approximately $75,390. The value of a DSU unit, when redeemed, is equivalent
to the market value of a common share at the time the redemption takes
place. In addition, at the time dividends are declared on the common shares
each DSU unit accrues an amount equal to such dividends, which amount is
then reinvested at such time in additional DSU units at a price equal to the
market value of a common share. DSU units do not vest until the director
ceases to be a member of the Board.
COMPENSATION OF OFFICERS
TransCanada's officers also serve as officers of TCPL. An aggregate
remuneration is paid for serving as an officer of TransCanada and for
serving as an officer of TCPL. Since TransCanada does not hold any assets
directly other than the common shares of TCPL and does not raise public
debt, all officers' costs are assumed by TCPL according to a management
services agreement between the two companies.
SUMMARY COMPENSATION TABLE
The following table provides a summary of the remuneration earned by the
President and Chief Executive Officer and the four other most highly
compensated policy-making executive officers of TransCanada serving at
December 31, 2003 (collectively, the "Named Executive Officers"), for
services rendered in all capacities during the financial years ended
December 31, 2003, 2002 and 2001. The summary of the remuneration also
includes stock options awarded under the Stock Option Plan and units awarded
under the Executive Share Unit Plan on February 23, 2004 which awards are
attributable, in part, to 2003 performance. Specific aspects of this
compensation are described in the following tables.
------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------------- ---------------------------
AWARDS
---------------------------
SECURITIES
OTHER UNDER
NAME AND PRINCIPAL POSITION ANNUAL OPTIONS RESTRICTED ALL OTHER
OF THE NAMED EXECUTIVE SALARY BONUS(1) COMPENSATION(2) GRANTED(3) SHARE UNITS(4) COMPENSATION(5)
OFFICERS YEAR ($) ($) ($) (#) ($) ($)
------------------------------------------------------------------------------------------------------------------------------
H.N. Kvisle 2003 772,503 900,000 69,108 165,000 1,961,538 53,915
President and 2002 726,252 1,000,000 93,230 200,000 1,095,000 0
Chief Executive Officer 2001 627,091 959,000 32,999 250,000(6) 0 0
------------------------------------------------------------------------------------------------------------------------------
R.K. Girling 2003 443,751 430,000 39,611 60,000 784,570 21,566
Executive Vice-President, 2002 420,003 480,000 26,904 80,000 438,000 6,575
Corporate Development and 2001 395,001 440,000 26,812 65,000 0 6,561
Chief Financial Officer
------------------------------------------------------------------------------------------------------------------------------
A.J. Pourbaix 2003 382,506 430,000 51,638 60,000 700,552 21,566
Executive Vice-President, 2002 322,500 480,000 14,790 80,000 438,000 6,575
Power 2001 290,001 440,000 13,487 65,000 0 0
------------------------------------------------------------------------------------------------------------------------------
R.J. Turner 2003 447,501 300,000 64,233 40,000 577,272 16,175
Executive Vice-President, 2002 436,254 340,000 41,420 60,000 328,500 0
Gas Transmission 2001 412,503 340,000 45,453 50,000 0 0
------------------------------------------------------------------------------------------------------------------------------
D.J. McConaghy 2003 337,506 400,000 43,595 60,000 616,534 16,175
Executive Vice-President, 2002 322,500 310,000 56,043 60,000 328,500 0
Gas Development 2001 265,000 260,000 34,970 45,000 0 0
------------------------------------------------------------------------------------------------------------------------------
NOTES:
(1) AMOUNTS REFERRED TO IN THIS TABLE AS "BONUS" ARE PAID PURSUANT TO
TRANSCANADA'S INCENTIVE COMPENSATION PROGRAM. SEE "REPORT ON EXECUTIVE
COMPENSATION -- SHORT-TERM INCENTIVE COMPENSATION".
TRANSCANADA CORPORATION 13
(2) THE AMOUNTS IN THIS COLUMN INCLUDE THE VALUE OF SALARY PAID IN LIEU OF
VACATION AND THESE NAMED EXECUTIVES OFFICERS RECEIVED THE FOLLOWING IN
2003: MR. KVISLE -- $28,270, MR. TURNER -- $42,308; AND IN 2002:
MR. KVISLE -- $53,848 AND MR. MCCONAGHY -- $24,231. ALSO, THIS COLUMN
INCLUDES AMOUNTS PAID TO THE NAMED EXECUTIVE OFFICERS BY WAY OF FLEX
BENEFIT CREDITS APPLIED TO THE EMPLOYEE STOCK SAVINGS PLAN,
SPECIFICALLY, IN 2003: MR. KVISLE -- $31,772, MR. POURBAIX -- $14,771
AND MR. TURNER -- $17,388; AND IN 2002: MR. KVISLE -- $32,135 AND
MR. MCCONAGHY -- $14,200. IN ADDITION, THE AMOUNTS INCLUDE PAYMENTS MADE
TO THE NAMED EXECUTIVE OFFICERS BY SUBSIDIARIES AND AFFILIATES OF
TRANSCANADA (INCLUDING DIRECTORS' FEES PAID BY AFFILIATES AND AMOUNTS
PAID FOR SERVING ON MANAGEMENT COMMITTEES OF PARTNERSHIPS IN WHICH
TRANSCANADA HOLDS AN INTEREST), SPECIFICALLY: MR. POURBAIX -- $22,917
(DIRECTORS' FEES PAID BY AN AFFILIATE).
(3) THIS COLUMN SHOWS THE NUMBER OF STOCK OPTIONS AWARDED UNDER THE STOCK
OPTION PLAN TO EACH OF THE NAMED EXECUTIVE OFFICERS FOR EACH OF THE
FINANCIAL YEARS. A SIMILAR NUMBER OF PERFORMANCE UNITS WERE GRANTED IN
2002 AND 2001 UNDER THE PERFORMANCE UNIT PLAN. SEE "REPORT ON EXECUTIVE
COMPENSATION -- PERFORMANCE UNIT PLAN". FOR THE MOST RECENT YEAR, THE
STOCK OPTION AWARD WAS APPROVED IN FEBRUARY 2004 AND IS ATTRIBUTABLE TO
THE NAMED EXECUTIVE OFFICER'S 2003 AND EXPECTED FUTURE CONTRIBUTIONS; NO
CORRESPONDING PERFORMANCE UNITS WERE GRANTED. OPTIONS AWARDED FOR THE
2002 AND 2001 CALENDAR YEARS ARE DESCRIBED IN THE MANAGEMENT PROXY
CIRCULAR DATED FEBRUARY 25, 2003 AND FEBRUARY 26, 2002, RESPECTIVELY.
THE STOCK OPTION PLAN IS DESCRIBED UNDER "REPORT ON EXECUTIVE
COMPENSATION -- STOCK OPTION PLAN".
(4) THE AMOUNTS IN THIS COLUMN WERE REPORTED IN THE COLUMN "ALL OTHER
COMPENSATION" IN PREVIOUS YEARS AND REFLECT THE DOLLAR VALUE OF UNITS
AWARDED UNDER THE EXECUTIVE SHARE UNIT PLAN TO EACH OF THE NAMED
EXECUTIVE OFFICERS FOR EACH OF THE FINANCIAL YEARS. THE DOLLAR VALUE IS
DETERMINED BY MULTIPLYING THE NUMBER OF UNITS AWARDED BY THE CLOSING
MARKET PRICE OF THE COMMON SHARES ON THE DATE OF THE AWARD. IN ADDITION,
AT THE TIME DIVIDENDS ARE DECLARED ON THE COMMON SHARES EACH UNIT
ACCRUES AN AMOUNT EQUAL TO SUCH DIVIDENDS, WHICH AMOUNT IS THEN
REINVESTED AT SUCH TIME IN ADDITIONAL UNITS AT A PRICE EQUAL TO THE
MARKET VALUE OF A COMMON SHARE. FOR THE MOST RECENT YEAR, THE AWARD OF
UNITS WAS APPROVED IN FEBRUARY 2004 AT AN AWARD PRICE OF $26.80. THE
INITIAL AWARD OF UNITS UNDER THE EXECUTIVE SHARE UNIT PLAN APPROVED IN
FEBRUARY 2003 IS DESCRIBED IN THE MANAGEMENT PROXY CIRCULAR DATED
FEBRUARY 25, 2003. VESTING OF ANY OR ALL OF THESE UNITS IS PERFORMANCE
BASED, AND AS SUCH A DISCOUNT FACTOR WAS APPLIED WHEN DETERMINING THE
NUMBER OF UNITS AWARDED FOR EACH OF THE FINANCIAL YEARS. SEE "REPORT ON
EXECUTIVE COMPENSATION -- EXECUTIVE SHARE UNIT PLAN". THE AGGREGATE
NUMBER OF UNITS HELD AT DECEMBER 31, 2003 AND THEIR VALUES AT THEIR
RESPECTIVE AWARD DATES ARE AS FOLLOWS:
---------------------------------------------------------------------------------------------------------
RESTRICTED SHARE UNITS VALUE AT
HELD AT DECEMBER 31, 2003 AWARD DATE
# $
---------------------------------------------------------------------------------------------------------
H.N. Kvisle 52,210 $1,148,915
---------------------------------------------------------------------------------------------------------
R.K. Girling 20,884 459,566
---------------------------------------------------------------------------------------------------------
A.J. Pourbaix 20,884 459,566
---------------------------------------------------------------------------------------------------------
R.J. Turner 15,663 344,675
---------------------------------------------------------------------------------------------------------
D.J. McConaghy 15,663 344,675
---------------------------------------------------------------------------------------------------------
(5) THE AMOUNTS IN THE COLUMN "RESTRICTED SHARE UNITS" WERE REPORTED IN
THIS COLUMN IN THE MANAGEMENT PROXY CIRCULAR DATED FEBRUARY 25, 2003.
FOR 2003, THE AMOUNTS IN THIS COLUMN INCLUDE THE VALUE OF ADDITIONAL
UNITS ACQUIRED THROUGH THE REINVESTMENT OF DIVIDEND EQUIVALENTS ACCRUED
ON OUTSTANDING UNITS UNDER THE EXECUTIVE SHARE UNIT PLAN. FOR 2002 AND
2001, THE AMOUNTS IN THIS COLUMN ALSO INCLUDE AMOUNTS CONTRIBUTED BY
TRANSCANADA TO THE NAMED EXECUTIVE OFFICER UNDER THE DEFINED
CONTRIBUTION PENSION PLAN. SEE "PENSION AND RETIREMENT BENEFITS".
(6) MR. KVISLE WAS APPOINTED PRESIDENT AND CHIEF EXECUTIVE OFFICER OF TCPL
ON MAY 1, 2001 AND RECEIVED AN AWARD OF 100,000 STOCK OPTIONS UPON
APPOINTMENT.
LONG-TERM INCENTIVE PLANS
PERFORMANCE UNIT PLAN ACCRUALS FOR 2003
The following table sets forth information regarding Performance Unit Plan
awards made to the Named Executive Officers. Effective December 31, 2002 no
further awards will be made under the Performance Unit Plan. The estimated
future payouts set out in the table include all accruals up to and including
the
14 TRANSCANADA CORPORATION
accrual approved on February 23, 2004 which accrual is attributable to 2003
performance. See "Report on Executive Compensation -- Performance Unit Plan"
for information with respect to this plan.
-----------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER
NON-SECURITIES PRICE-BASED PLANS(3)
---------------------------------------
UNITS(1) PERIOD UNTIL THRESHOLD TARGET MAXIMUM
NAME (#) MATURATION(2) ($ OR #) ($ OR #) ($)
-----------------------------------------------------------------------------------------------------------------
H.N. Kvisle 150,000 February 25, 2012 N/A N/A 305,250
100,000 March 20, 2011 N/A N/A 293,500
42,500 February 27, 2011 N/A N/A 124,738
55,000 February 28, 2010 N/A N/A 209,825
50,000 February 1, 2010 N/A N/A 190,750
90,000 September 1, 2009 N/A N/A 343,350
-----------------------------------------------------------------------------------------------------------------
R.K. Girling 65,000 February 25, 2012 N/A N/A 132,275
45,000 February 27, 2011 N/A N/A 132,075
45,000 February 28, 2010 N/A N/A 171,675
50,000 February 1, 2010 N/A N/A 190,750
20,000 July 29, 2009 N/A N/A 76,300
25,000 March 1, 2009 N/A N/A 95,375
25,000 December 3, 2008 N/A N/A 95,375
25,162 December 9, 2007 N/A N/A 126,439
-----------------------------------------------------------------------------------------------------------------
A.J. Pourbaix 65,000 February 25, 2012 N/A N/A 132,275
35,000 February 27, 2011 N/A N/A 102,725
20,000 February 28, 2010 N/A N/A 76,300
20,000 February 1, 2010 N/A N/A 76,300
20,000 March 1, 2009 N/A N/A 76,300
17,500 December 3, 2008 N/A N/A 66,763
-----------------------------------------------------------------------------------------------------------------
R.J. Turner 50,000 February 25, 2012 N/A N/A 101,750
42,500 February 27, 2011 N/A N/A 124,738
35,000 February 28, 2010 N/A N/A 133,525
50,000 February 1, 2010 N/A N/A 190,750
20,000 July 29, 2009 N/A N/A 76,300
40,000 March 1, 2009 N/A N/A 152,600
-----------------------------------------------------------------------------------------------------------------
D.J. McConaghy 45,000 February 25, 2012 N/A N/A 91,575
35,000 February 27, 2011 N/A N/A 102,725
20,000 February 28, 2010 N/A N/A 76,300
20,000 February 1, 2010 N/A N/A 76,300
17,500 March 1, 2009 N/A N/A 66,763
-----------------------------------------------------------------------------------------------------------------
NOTES:
(1) AS NO FURTHER AWARDS WILL BE MADE UNDER THIS PLAN, IT WILL BE PHASED
OUT OVER THE 10-YEAR LIFE OF THE OUTSTANDING UNITS.
(2) THE EXERCISE PERIOD FOR ALL UNITS COMMENCES UPON VESTING, WHICH IS THE
THIRD ANNIVERSARY OF THE AWARD DATE AND EXPIRES ON THE TENTH ANNIVERSARY
OF THE AWARD DATE, WITH THE EXCEPTION OF THE PERFORMANCE UNITS MATURING
ON FEBRUARY 1, 2010 GRANTED UNDER A ONE TIME SPECIAL PERFORMANCE
INCENTIVE PROGRAM, WHICH VESTED ON FEBRUARY 22, 2002. SEE "REPORT ON
EXECUTIVE COMPENSATION -- PERFORMANCE UNIT PLAN".
(3) THE HUMAN RESOURCES COMMITTEE OF THE BOARD DETERMINED IN
FEBRUARY 2004 THAT $1.06 WILL ACCRUE FOR 2003 IN RESPECT OF THE AWARDS
MADE FROM 1995 TO 2002, WHICH AWARDS ARE REFERRED TO BEGINNING AT THE
FIRST LINE FOR EACH NAMED EXECUTIVE OFFICER. THE AMOUNTS REFERRED TO
HEREIN MAY NEVER BE RECEIVED BY THE NAMED EXECUTIVE OFFICERS. SEE
"REPORT ON EXECUTIVE COMPENSATION -- PERFORMANCE UNIT PLAN".
OPTIONS GRANTED FOR 2003
The following table sets forth the stock options under the Stock Option Plan
earned and awarded to each of the Named Executive Officers for 2003 and for
their expected future contributions. See "Report on Executive
Compensation -- Stock Option Plan" for information with respect to this
plan. Options awarded in 2003 and attributable to the executive's
performance for the 2002 calendar year are reported in the
TRANSCANADA CORPORATION 15
Management Proxy Circular dated February 25, 2003 and in this Proxy Circular
under "Compensation of Officers -- Summary Compensation Table".
-----------------------------------------------------------------------------------------------------------------
MARKET VALUE OF
% OF TOTAL COMMON SHARES
NUMBER OF OPTIONS EXERCISE UNDERLYING
COMMON SHARES GRANTED TO PRICE OPTIONS ON THE
UNDER OPTIONS EMPLOYEES FOR ($/COMMON DATE OF GRANT
NAME GRANTED(1) 2003 SHARE)(2) ($/COMMON SHARE) EXPIRATION DATE
-----------------------------------------------------------------------------------------------------------------
H.N. Kvisle 165,000 12.02 26.85 26.80 February 23, 2011
-----------------------------------------------------------------------------------------------------------------
R.K. Girling 60,000 4.37 26.85 26.80 February 23, 2011
-----------------------------------------------------------------------------------------------------------------
A.J. Pourbaix 60,000 4.37 26.85 26.80 February 23, 2011
-----------------------------------------------------------------------------------------------------------------
R.J. Turner 40,000 2.91 26.85 26.80 February 23, 2011
-----------------------------------------------------------------------------------------------------------------
D.J. McConaghy 60,000 4.37 26.85 26.80 February 23, 2011
-----------------------------------------------------------------------------------------------------------------
NOTES:
(1) ANNUAL OPTION AWARDS UNDER THE STOCK OPTION PLAN AWARDED TO THE NAMED
EXECUTIVE OFFICERS IN RELATION TO THE 2003 CALENDAR YEAR AND EXPECTED
FUTURE CONTRIBUTIONS WERE APPROVED BY THE HUMAN RESOURCES COMMITTEE OF
THE BOARD ON FEBRUARY 23, 2004 AND ARE REFLECTED IN THIS PROXY CIRCULAR.
THESE OPTIONS VEST AND ARE EXERCISABLE AS TO 33 1/3% ON EACH ANNIVERSARY
OF THE AWARD DATE FOR A PERIOD OF THREE YEARS.
(2) THE EXERCISE PRICE IS EQUAL TO THE HIGHER OF THE CLOSING PRICE OF
COMMON SHARES ON THE AWARD DATE AND THE WEIGHTED AVERAGE CLOSING PRICE
OF COMMON SHARES ON THE TSX DURING THE FIVE TRADING DAYS IMMEDIATELY
PRIOR TO THE AWARD DATE OF THE OPTIONS.
AGGREGATE OPTION EXERCISES DURING 2003 AND 2003 YEAR-END OPTION VALUES
The following table summarizes, for each of the Named Executive Officers,
the number of stock options, if any, exercised during the financial year
ended December 31, 2003, the aggregate value realized upon exercise, the
total number of unexercised options, if any, and the value of unexercised
"in-the-money" options at December 31, 2003. This table does not include the
stock options awarded on February 23, 2004 which award is included in the
Summary Compensation Table. The value of unexercised "in-the-money" options
at the financial year end is the difference between the exercise price and
the closing price of $27.88 per share of a common share on the TSX on
December 31, 2003. The underlying options have not been and will not
necessarily be exercised and the actual gains, if any, on exercise will
depend on the value of common shares on the date of exercise.
------------------------------------------------------------------------------------------------------------------------
VALUE OF UNEXERCISED
COMMON UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES AGGREGATE DECEMBER 31, 2003 DECEMBER 31, 2003
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------------------------------
H.N. Kvisle 0 0 376,875 310,625 3,791,906 1,913,119
------------------------------------------------------------------------------------------------------------------------
R.K. Girling 0 0 256,412 123,750 2,723,443 764,662
------------------------------------------------------------------------------------------------------------------------
A.J. Pourbaix 20,000 309,030 96,250 121,250 702,737 739,988
------------------------------------------------------------------------------------------------------------------------
R.J. Turner 35,000 454,200 187,225 95,625 1,904,179 599,119
------------------------------------------------------------------------------------------------------------------------
D.J. McConaghy 0 0 153,624 91,250 1,619,927 564,488
------------------------------------------------------------------------------------------------------------------------
PENSION AND RETIREMENT BENEFITS
The Named Executive Officers participate in the Registered Pension Plan and
the Executive Supplemental Pension Plan which are both non-contributory
defined benefit pension plans. The Registered Pension Plan previously
provided three benefit options, a defined benefit, a defined contribution
and a combination option (defined benefit and defined contribution). The
Registered Pension Plan was amended effective October 1, 2001 eliminating
the combination option for new members. The Registered Pension Plan was
amended January 1, 2003 to eliminate the defined contribution option.
Credited service and benefits of all
16 TRANSCANADA CORPORATION
previous defined contribution participants has been recognized in the
defined benefit plan as if such participant had always participated in the
defined benefit plan.
The defined benefit plan is integrated with Canada Pension Plan benefits.
The benefit calculation is based on: 1.25% of a person's highest average
pensionable earnings up to the Final Average Year's Maximum Pensionable
Earnings; plus 1.75% of a person's highest average pensionable earnings in
excess of the Final Average Year's Maximum Pensionable Earnings; multiplied
by the total number of years credited in the Registered Pension Plan
("Credited Pensionable Service"). Pensionable earnings include base salary
and actual incentive compensation payments to a targeted percentage for all
employees. Highest average pensionable earnings are defined as the average
annual pensionable earnings during the 36 consecutive months when earnings
were highest in the last 15 years prior to termination of employment. Final
Average Year's Maximum Pensionable Earnings are defined as the three-year
average of the Year's Maximum Pensionable Earnings as determined in
accordance with the CANADA PENSION PLAN ACT.
Registered defined benefit pension plans are subject to a maximum annual
benefit accrual provided for by the INCOME TAX ACT (Canada), currently
$1,833 for each year of Credited Pensionable Service, with the result that
benefits cannot be earned in the Registered Pension Plan on compensation
above approximately $116,000 per annum.
Under the Executive Supplemental Pension Plan, Named Executive Officers of
TransCanada, among others, are entitled to supplementary pension benefits.
Under this plan, the annual pension benefit is equal to the amount
calculated using a formula of 1.75% multiplied by the officer's Credited
Pensionable Service under the plan multiplied by the amount by which such
officer's highest average annual pensionable earnings exceeds such officer's
highest average annual Registered Pension Plan earnings.
Under the Defined Benefit Plan and the Executive Supplemental Pension Plan,
a Named Executive Officer will receive the following normal form of pension:
(a) in respect of credited service prior to January 1, 1990, upon
retirement, a monthly pension payable for life with 60% continuing
thereafter to the participant's designated joint annuitant; and
(b) in respect of credited service on and after January 1, 1990, upon
retirement, a monthly pension as described in (a) above and for unmarried
participants or married participants who have received spousal consent
and who have so elected, a monthly pension payable for life with payments
to the participant's estate guaranteed for the balance of 10 years if the
participant dies within 10 years of retirement.
In lieu of the normal form of pension, optional forms of pension payment may
be chosen provided that any required waivers are completed.
The following table sets out for the Named Executive Officers, the estimated
annual Defined Benefit Plan benefits (based on the "joint and 60% survivor"
method) payable for credited service under the Registered Pension Plan and
the Executive Supplemental Pension Plan (excluding amounts payable under the
Canada Pension Plan) in specified final average pensionable earnings and
years of Credited Pensionable Service classifications.
TRANSCANADA CORPORATION 17
-------------------------------------------------------------------------------------------------------------------
YEARS OF CREDITED PENSIONABLE SERVICE(1)
FINAL AVERAGE ---------------------------------------------------------------------------------------
PENSIONABLE EARNINGS 10 15 20 25 30 35
-------------------------------------------------------------------------------------------------------------------
$ 400,000 $ 68,000 $102,000 $136,000 $170,000 $ 204,000 $ 238,000
-------------------------------------------------------------------------------------------------------------------
600,000 103,000 155,000 206,000 258,000 309,000 361,000
-------------------------------------------------------------------------------------------------------------------
800,000 138,000 207,000 276,000 345,000 414,000 483,000
-------------------------------------------------------------------------------------------------------------------
1,000,000 173,000 260,000 346,000 433,000 519,000 606,000
-------------------------------------------------------------------------------------------------------------------
1,200,000 208,000 312,000 416,000 520,000 624,000 728,000
-------------------------------------------------------------------------------------------------------------------
1,400,000 243,000 365,000 486,000 608,000 729,000 851,000
-------------------------------------------------------------------------------------------------------------------
1,600,000 278,000 417,000 556,000 695,000 834,000 973,000
-------------------------------------------------------------------------------------------------------------------
1,800,000 313,000 470,000 626,000 783,000 939,000 1,096,000
-------------------------------------------------------------------------------------------------------------------
2,000,000 348,000 522,000 696,000 870,000 1,044,000 1,218,000
-------------------------------------------------------------------------------------------------------------------
NOTE:
(1) ASSUMING THAT THE NAMED EXECUTIVE OFFICERS ABOVE REMAIN EMPLOYED BY
TRANSCANADA UNTIL AGE 60 AND THAT THE REGISTERED PENSION PLAN AND THE
EXECUTIVE SUPPLEMENTAL PENSION PLAN REMAIN IN FORCE SUBSTANTIALLY IN
THEIR PRESENT FORMS, SUCH OFFICERS WILL HAVE APPROXIMATELY THE FOLLOWING
LISTED NUMBER OF YEARS OF CREDITED PENSIONABLE SERVICE: H.N.
KVISLE -- 23 YEARS, R.K. GIRLING -- 24 YEARS; R.J. TURNER -- 31 YEARS,
A.J. POURBAIX -- 26 YEARS AND DENNIS J. MCCONAGHY -- 32 YEARS. SEE
"EMPLOYMENT CONTRACTS". AMOUNTS ARE ROUNDED TO THE NEAREST ONE THOUSAND
DOLLARS.
EMPLOYMENT CONTRACTS
TransCanada has entered into an agreement with Mr. Kvisle to grant
additional credited pensionable service. Upon his completion of five years
of continuous service with TransCanada (the "Vesting Period"), he will be
granted five years of additional credited pensionable service. Effective on
each of the next five anniversaries of the Vesting Period, Mr. Kvisle will
be granted one additional year of credited pensionable service. All such
additional service is not to exceed ten additional years of credited
pensionable service and is only to be recognized on that portion of his
pensionable earnings which exceeds his annual Registered Pension Plan
earnings, to be recognized in the TransCanada Executive Supplemental
Pension Plan.
COMPOSITION OF THE HUMAN RESOURCES COMMITTEE
The Human Resources Committee of the Board (the "Committee") is composed of
five directors, K.L. Hawkins (Chair), W.K. Dobson, D.P. O'Brien,
W.T. Stephens, and J.D. Thompson, who are neither officers nor former
officers of TransCanada or any of its subsidiaries. The Committee is charged
with the mandate described under "Compensation and Other
Information -- Corporate Governance -- Human Resources Committee". The
Committee reports to the Board on all material matters considered or
recommended and approved by it.
REPORT ON EXECUTIVE COMPENSATION
The Committee reviews overall compensation policies and approves the salary
and other remuneration to be awarded to executive officers of TransCanada.
TransCanada has adopted a market based compensation program which is
designed to be competitive in attracting and retaining employees and to
appropriately reward accomplishments and results through pay for
performance. The program is comprised of four components: base salary,
short-term, mid-term and long-term incentive compensation. The program
provides for a combination of competitive base salary and performance-based
incentive programs that focus on business achievements, fulfillment of
individual objectives and overall job performance. There is a particular
focus on reinforcing commitment to maximize shareholder value. Business and
individual performance targets are set annually. If actual performance meets
objectives, an individual's total direct compensation is designed to be
comparable to the median of the market. If actual performance exceeds those
targets, an individual's total direct compensation is designed to be
competitive with compensation levels in other top performing companies
within the comparator group.
18 TRANSCANADA CORPORATION
In addition, effective January 1, 2003, senior officers of TransCanada were
given guidelines to achieve an ownership stake in TransCanada that is
significant in relation to their base salary. Officers have five years to
meet these ownership guidelines, which are:
President and Chief Executive Officer......... 3 times Base Salary
Executive Vice-Presidents..................... 2 times Base Salary
Certain Senior Executives..................... 1 times Base Salary
In calculating their ownership in TransCanada, officers are entitled to
include the value of shares owned, and any units held under the Executive
Share Unit Plan, described elsewhere in this Proxy Circular. Pursuant to
TransCanada's stock ownership guidelines, as at December 31, 2003 the CEO
held a current value of $2,543,073 in eligible shares. This is equivalent to
3.24 times his 2003 base salary.
The pay mix as between base salary and performance based incentive programs
for the Named Executive Officers ranges from 26% to 37% of total direct
compensation in base pay and 63% to 74% of total direct compensation in
performance based incentives.
When determining the level of individual executive compensation, the
Committee considers market compensation data, which is provided by
independent compensation consultants. This compensation data comprises
aggregate compensation market data from other Canadian based companies (head
office or subsidiary offices) of similar size and scope to TransCanada,
determined by revenue, assets, market capitalization, number of employees
and industry. The industry data utilized is derived from and includes oil
and gas (upstream, downstream, heavy oil), pipeline, transportation and, for
the power business, electric utilities. This group of companies is referred
to in this report as the "comparator group".
For 2003, TransCanada's objectives focused on the diligent and disciplined
implementation of TransCanada's key strategies for growth and value
creation. Performance against these strategies delivered strong financial
results with an increase in earnings compared to 2002 and continued strong
cash flows. Specifically:
- Net income from continuing operations per share in 2003 was $1.66 compared
to $1.56 in 2002;
- Funds generated from continuing operations in 2003 were approximately
$1.8 billion; and
- Total shareholder return was 27% in 2003.
BASE SALARIES
Base salaries for the Named Executive Officers are considered against the
market compensation data for similar roles and levels of responsibility
within the comparator group. Individual salaries are based on the Named
Executive Officer's performance contribution to TransCanada, as assessed by
the President and Chief Executive Officer and the Committee, and approved by
the Committee.
SHORT-TERM INCENTIVE COMPENSATION
Annual incentive compensation is designed to link total cash (base salary
and short-term incentive awards combined) compensation levels to the
achievement of business and individual goals. The plan provides for annual
cash awards based on individual contribution to TransCanada's results,
measured against objectives that are determined at the beginning of each
year with an emphasis placed on the individual's performance or contribution
toward financial objectives.
If individual threshold performance levels are not reached, no incentive is
payable; if target performance levels are reached, the notional market
target award is payable. The plan also provides for incentive payments in
excess of the notional market target award, at the discretion of the
President and Chief Executive Officer and in consultation with the
Committee, if performance in a year is superior or exceptional.
TRANSCANADA CORPORATION 19
MID-TERM INCENTIVE PROGRAM
EXECUTIVE SHARE UNIT PLAN
The Named Executive Officers participate in a mid-term incentive program,
the Executive Share Unit Plan (the "ESU Plan") implemented on February 24,
2003. The ESU Plan is an integral part of TransCanada's competitive
compensation program and is performance driven in that it aligns the
individual performance of TransCanada's officers, including the Named
Executive Officers, with the achievement of TransCanada's financial
objectives and shareholder interests. Under the ESU Plan, the Named
Executive Officers are eligible for an annual award of a certain number of
units as determined at the discretion of the Committee. The Committee will
consider an individual's performance, level of responsibility, number of
stock options awarded, the market value of TransCanada's ESU and stock
option awards in comparison to the market data of its competitors, and the
degree to which each executive's potential and contribution will be key to
the success of TransCanada in determining the size of the unit award for
each individual executive officer.
At the time of an award, each ESU unit represents one common share and,
during the three year vesting cycle, at the time dividends are declared on
the common shares each unit accrues an amount equal to such dividends, which
amount is then reinvested at such time in additional units at a price equal
to the market value of a common share. At the end of three years, provided
that the pre-determined corporate performance criteria (as discussed below)
are met, the units will vest. Upon vesting, the units held will be valued
based on the current share price (a weighted average closing price on the
Toronto Stock Exchange ("TSX") during the five trading days immediately
prior to the valuation date) of the common shares.
At the time of an award, the Committee will set predetermined corporate
performance criteria as a target and a threshold. If at the end of the
three year term the target is achieved or exceeded, 100% of the units held
will vest and, if only the threshold is achieved, 50% of the units held will
vest. If the threshold is not achieved, none of the units held will vest. In
the event that the threshold is exceeded but the target is not achieved, the
Committee will have the discretion to determine on a PRO RATA basis the
number of units that vest. Awards are based on the target and threshold and
are measured with respect to the absolute total shareholder return ("TSR"),
the relative TSR as compared to other specified comparison companies
(these include Canadian and U.S. organizations with comparable business
models and a sample of the Standard & Poor's ("S&P")/TSX 60 index companies)
and corporate financial performance (earnings per share (EPS) and funds
generated from continuing operations).
LONG-TERM INCENTIVE PROGRAM
STOCK OPTION PLAN
The Named Executive Officers, as well as other key employees, are eligible
to participate in the Stock Option Plan. See "Business to be Transacted at
the Meeting -- Amendments to the Stock Option Plan.
The Stock Option Plan is a component of the Named Executive Officers' total
compensation program. The Stock Option Plan is intended to reinforce
executive officer commitment to the long-term growth and profitability of
TransCanada and shareholder value. The size of the annual stock option award
to individual executive officers is determined by considering individual
performance, level of responsibility, authority and overall importance to
the current welfare of TransCanada, and the degree to which each executive
officer's long-term potential and contribution will be key to the long-term
success of TransCanada. The Committee has flexibility in the determination
of the size of the award, the vesting date and expiry date for any options
awarded; and, when making its decisions, takes into account all relevant
circumstances (including the value of TransCanada's stock option awards in
comparison with its competitors and the number of units awarded under the
ESU Plan). In the case of stock options, executive officers benefit only if
the market value of the stock subject to the option at the time of exercise
is greater than that at the time of the award.
The Stock Option Plan is administered by the Committee. The exercise price
of options is determined by the Committee at the time options are awarded
and is equal to the higher of the closing price of common shares on the date
of the award and the weighted average closing price of the common shares on
the TSX during the five trading days immediately preceding the date of the
award. Options awarded under the Stock Option Plan up to and including the
2002 award vest as to 25% on the date of award and then 25% on each
20 TRANSCANADA CORPORATION
anniversary thereafter for a period of three years and will be eligible to
be exercised until their expiry date, which is generally ten years from the
date on which they were awarded. Options awarded under the Stock Option Plan
since 2003 will vest as to 33 1/3% on each anniversary of the date of award
for a period of three years. Such options will be eligible to be exercised
until their expiry, which will generally be seven years from the date on
which they were granted.
The total number of common shares originally reserved for issuance under the
1995 Option Plan was 25,000,000. As at December 31, 2003, approximately
10,355,000 common shares were issuable under outstanding options under the
Stock Option Plan. As at February 24, 2004, approximately 11,555,000 common
shares were issuable under outstanding options under the Stock Option Plan.
Exercise prices for unexercised, issued options range from $10.03 to $26.85,
with expiry periods ranging from March 4, 2004 to February 25, 2012.
PERFORMANCE UNIT PLAN
The Performance Unit Plan was established in 1995, has been amended from
time to time and is administered by the Committee. The Named Executive
Officers, as well as other key employees, participate in the plan. In
July 2002, the Committee amended the plan to provide that no further units
would be granted under the plan. Accruals on outstanding performance units,
however, will continue in accordance with the plan until 2012.
Under the Performance Unit Plan, a unit accrues annually a cash amount which
is no greater than the dividends paid on a common share for the preceding
financial year if TransCanada's total shareholder return is equal to or
greater than that of the peer group index for such financial year. If
TransCanada's total shareholder return is less than that of the peer group
index for such year, the Committee may award a lesser amount.
A performance unit may be redeemed for the dollar value accrued on the unit
beginning on the third anniversary of the award date, the vesting date, and
is deemed to be automatically redeemed on the tenth anniversary of the award
date. However, at the time of exercise the market price of a common share
plus the amount accrued on the unit must be equal to or greater than the
market price of a common share on the award date of the unit, and the Stock
Option awarded on the same date as the unit must have been previously
exercised provided such exercise was not prior to the unit's vesting date.
As at December 31, 2003, approximately 7,550,000 units under the Performance
Unit Plan were outstanding. As at February 24, 2004, approximately 7,519,000
units under the Performance Unit Plan were outstanding.
EMPLOYEE STOCK SAVINGS PLAN
Named Executive Officers participate in the Employee Stock Savings Plan on
the same basis as all other TransCanada employees. Each employee may direct
a payroll deduction toward the purchase of common shares. TransCanada
matches the employee-directed purchase in an amount equal to 25% of the
employee amount to a maximum additional TransCanada contribution of 1% of
the employee's base salary. The shares purchased and the dividends paid on
those shares are allocated to the employee account and vest immediately.
COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. Kvisle's compensation is established with reference to the comparator
group. The Committee makes recommendations to the Board regarding
Mr. Kvisle's compensation on the same performance-related basis as for the
other executive officers including a review of the CEO's success with
respect to all of his personal objectives. There are no established
weightings or formulaic calculations used in assessing Mr. Kvisle's
performance against objectives. The Committee considered weightings but made
a decision to use discretion instead, but place a higher emphasis on
financial results such as EPS, earnings before interest, taxes, depreciation
and amortization (EBITDA) and TEV/EBITDA (total enterprise value divided by
EBITDA). Mr. Kvisle's compensation is comprised of base salary, incentive
compensation and participation
TRANSCANADA CORPORATION 21
in the ESU Plan, Stock Option Plan, Performance Unit Plan, Employee Stock
Savings Plan, and Registered Pension Plan and Executive Supplemental Pension
Plan. See "Compensation and Other Information -- Employment Contracts".
The President and Chief Executive Officer's 2003 personal objectives focused
on maximizing shareholder value by providing strong corporate leadership in
the pursuit of growth and value creation through business development
opportunities in the pipeline and power businesses; optimizing company
assets through active portfolio management and adhering to operationally
excellent business practices; and, building management teams at all levels
of the organization capable of delivering business results in line with
investors expectations. Advancing TransCanada's position in the overall
energy value chain by building long-term winning relationships is an ongoing
priority for Mr. Kvisle. In 2003, his attention was concentrated on eastern
customers, members of the Canadian Association of Petroleum Producers
(CAPP), and northern constituencies, and he was appointed as the first
Canadian chair of the Board of Directors of the Interstate National Gas
Association of America (INGAA).
The level of focused and strategic leadership provided by Mr. Kvisle
resulted in net income, earnings per share, and TSR in excess of objectives,
positioning TransCanada to capture opportunities that create significant
value for shareholders in the short term and over the long term.
The Board is of the view that Mr. Kvisle's contribution to TransCanada's
achievements in 2003 was superior, resulting in his compensation being in
excess of the median of the comparator group. In the determination of
Mr. Kvisle's total direct compensation for 2003, the Board considered the
achievement of the corporate and personal objectives and goals (both
financial and non-financial) as well as any significant economic,
industrial, or market circumstances that influenced the performance of
TransCanada. In this regard, the Board determined that all financial
objectives of TransCanada were met with the majority exceeding target.
Submitted by the Human Resources Committee of the Board:
K.L. Hawkins (Chair) W.T. Stephens
W.K. Dobson J.D. Thompson
D.P. O'Brien
22 TRANSCANADA CORPORATION
PERFORMANCE GRAPH
The following chart compares the five-year cumulative total shareholder
return on the TransCanada (formerly TCPL) common shares to the S&P/TSX composite
index (assuming reinvestment of dividends and considering a $100 investment on
December 31, 1998 in common shares).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
TRANSCANADA TSX
December 31, 1998 $100.00 $100.00
December 31, 1999 $58.90 $131.70
December 31, 2000 $87.20 $141.50
December 31, 2001 $105.60 $123.70
December 31, 2002 $127.30 $108.30
December 31, 2003 $161.70 $137.20
----------------------------------------------------------------------------------------------------------------------
COMPOUND
DEC 31, 1998 DEC 31, 1999 DEC 31, 2000 DEC 31, 2001 DEC 31, 2002 DEC 31, 2003 ANNUAL GROWTH
----------------------------------------------------------------------------------------------------------------------
TransCanada 100 58.9 87.2 105.6 127.3 161.7 10.1%
----------------------------------------------------------------------------------------------------------------------
TSX 100 131.7 141.5 123.7 108.3 137.2 6.5%
----------------------------------------------------------------------------------------------------------------------
CORPORATE GOVERNANCE
The Board and the members of TransCanada's management are committed to the
highest standards of corporate governance. TransCanada is subject to a
variety of corporate governance guidelines and requirements enacted by the
Toronto Stock Exchange ("TSX"), the Canadian Securities Administrators
("CSA"), the New York Stock Exchange ("NYSE"), and by the U.S. Securities
and Exchange Commission ("SEC") under its rules and those mandated by the
United States Sarbanes-Oxley Act of 2002 ("SOX"). TransCanada's corporate
governance practices comply with the TSX Company Manual Corporate Governance
Guidelines (the "TSX Guidelines"), governance rules of the NYSE applicable
to foreign issuers and applicable requirements of the CSA and the SEC. As a
non-U.S. company, TransCanada is not required to comply with most of the
NYSE corporate governance listing standards; however, except as summarized
on its website at www.transcanada.com, TransCanada's governance practices
are in compliance with the NYSE standards. TransCanada is also in
substantial early compliance with the CSA's Multilateral Instrument 52-110
pertaining to audit committees that comes into force on March 30, 2004 and
is applicable in 2005 ("Canadian Audit Committee Rules"), and with proposed
corporate governance guidelines released for comment by the CSA on
January 16, 2004 which are expected to be in force in 2005 ("Proposed
Canadian Governance Guidelines").
TransCanada's principal objective in directing and managing its business and
affairs is to enhance shareholder value. TransCanada believes that effective
corporate governance improves corporate performance and benefits all
shareholders. TransCanada also believes that director, management and
employee honesty and integrity are important factors in ensuring good
corporate governance. To that end, TransCanada has adopted codes of business
ethics for its directors, its employees and its President and
TRANSCANADA CORPORATION 23
Chief Executive Officer, Chief Financial Officer and Controller.
TransCanada's codes of business ethics may be viewed on TransCanada's
website at www.transcanada.com.
The "Statement of Corporate Governance Practices of TransCanada as Compared
to the Current TSX Guidelines for Corporate Governance" is attached to this
Proxy Circular as Schedule "C". It has been approved by the Governance
Committee of the Board and by the Board as a whole. Additional information
on TransCanada's Board of Directors and its committees is set forth below.
The Board has formally adopted and published a set of Corporate Governance
Guidelines, which affirm TransCanada's commitment to maintaining a high
standard of corporate governance. The guidelines address the structure and
composition of the board and its committees and also provide guidance to
both the board and management in clarifying their respective
responsibilities. The Board's strengths include an independent,
non-executive Chair of the Board, well informed, and experienced directors
who ensure that standards exist to promote ethical behaviour throughout
TransCanada, effective board size, director share ownership-requirements and
annual assessment of board, committee and individual director effectiveness.
TransCanada's Corporate Governance Guidelines are available on TransCanada's
website at www.transcanada.com.
The Board discharges its responsibilities directly and through committees.
At regularly scheduled meetings, members of the Board and management discuss
a broad range of issues relevant to TransCanada's strategy and business
interests and the Board is responsible for the approval of TransCanada's
Strategic Plan. In addition, the Board receives reports from management on
TransCanada's operational and financial performance. The Board had eight
scheduled meetings in 2003. Unscheduled meetings are held from time to time
as required; there were twelve meetings of the Board in 2003.
BOARD, COMMITTEE AND INDIVIDUAL DIRECTOR ASSESSMENT
The Governance Committee reports to the Board annually on the evaluation of
the performance of the Board, each of its committees, and that of individual
directors, based on the results of the directors' annual self-assessment
questionnaire. In addition, formal interviews are undertaken annually by the
Chair, based on the results of the questionnaire and TransCanada's
Individual Director Terms of Reference, with each member of the Board and
with each member of the executive leadership of TransCanada. The performance
of the Chair is annually evaluated against his terms of reference by the
Chair of the Governance Committee by means of formal interviews with each of
the directors.
INDEPENDENCE OF DIRECTORS
The Board is comprised of 12 directors, of whom 11 have been determined by
the Board to be outside, unrelated and independent directors. The Board
annually determines the unrelated and independent status of each of its
members based on a written set of criteria developed in accordance with the
definition of "unrelated director" in the TSX Guidelines and the meaning of
"independent" in the Canadian Audit Committee Rules and the Proposed
Canadian Governance Guidelines. The independence criteria also conform with
the applicable rules of the SEC, the NYSE and those set under SOX. The NYSE
extended definitions of independence applicable to directors of U.S.
companies are considered in the case of each director as well. The Board has
determined that none of the directors who serve on its committees have a
material relationship with TransCanada that could interfere with their
ability to act in the best interests of TransCanada.
DESCRIPTION OF BOARD COMMITTEES AND THEIR MANDATES
The Board has four standing committees: the Audit Committee; the Governance
Committee; the Health, Safety and Environment Committee; and the Human
Resources Committee. The Board does not have an Executive Committee.
Committees are composed entirely of unrelated and independent directors.
Charters for each of the committees are in the course of revision to bring
them in full compliance with the new Canadian and U.S. governance
requirements as these requirements are finalized and come into force over
the balance of 2004. The current charters are available on TransCanada's
website
24 TRANSCANADA CORPORATION
at www.transcanada.com and are published in TransCanada's Annual Information
Form for the year ended December 31, 2003 ("AIF").
AUDIT COMMITTEE
This committee is comprised of five unrelated and independent directors and
is mandated to assist the Board in monitoring, among other things, the
integrity of the financial statements of TransCanada, the compliance by
TransCanada with legal and regulatory requirements, and the independence and
performance of TransCanada's internal and external auditors. The committee
is also mandated to review and recommend to the Board approval of
TransCanada's audited annual and unaudited interim consolidated financial
statements and related management discussion and analysis, and selected
corporate disclosure documents including the annual information form, all
prospectuses, other offering memoranda, and any financial statements
required by regulatory authorities, before they are released to the public
or filed with the appropriate regulatory authorities. In addition, the
committee reviews and recommends to the Board the appointment and
compensation of the external auditor, oversees the accounting, financial
reporting, control and audit functions, and recommends funding of the
Canadian pension plans.
The committee reviews the audit plans of the internal and external auditors
and meets with them at the time of each committee meeting, in each case
independently of management. The committee receives and reviews annually the
external auditor's formal written statement of independence delineating all
relationships between itself and TransCanada and its report on
recommendations to management regarding internal controls and procedures,
and ensures the rotation of the lead audit partner having primary
responsibility for the audit as required by law. The committee pre-approves
all audit services and all permitted non-audit services. The committee
oversees the operation of an anonymous and confidential toll free telephone
number for employees, contractors and others to call with respect to
accounting irregularities and ethical violations, and has set up a procedure
for the receipt, retention, treatment and regular review of any such
reported activities. This telephone number is published on TransCanada's
website at www.transcanada.com, on its intranet for employees and in the
company's Annual Report to shareholders. In addition, the committee
discusses with management TransCanada's material financial risk exposures
and the actions management has taken to monitor and control such exposures,
reviews the internal control procedures to determine their effectiveness,
monitors compliance with TransCanada's policies and codes of business
ethics, and reports on these matters to the Board. The committee reviews and
approves the investment objectives and choice of investment managers for the
Canadian pension plans and considers and approves any changes to those plans
relating to financial matters.
The committee has authority in its discretion to retain advisors to assist
it in the discharge of its responsibilities. The committee also reviews its
charter at least annually and, as required, recommends changes to the
Governance Committee and to the Board. The committee's performance is
reviewed annually by the Board. There were six meetings of the committee in
2003.
CHAIR: H.G. Schaefer, F.C.A.
MEMBERS: P. Gauthier, K.L. Hawkins, S.B. Jackson, J.R. Paul
GOVERNANCE COMMITTEE
This committee is comprised of five unrelated and independent directors and
is mandated to enhance TransCanada's governance through a continuing
assessment of TransCanada's approach to corporate governance. The committee
is also mandated to identify qualified individuals to become board members,
to recommend to the Board nominees for election as directors at each annual
meeting of shareholders and to annually recommend to the Board placement of
directors on committees. The committee annually reviews the independence and
unrelated status of each director in accordance with written criteria
described above, in order to provide the Board with guidance for its annual
determination of director independence associated with the placement of
committee members.
The committee reviews the performance of individual directors, the Board as
a whole and each of the committees, in conjunction with the Chair. As noted
elsewhere in this Proxy Circular, the committee also monitors the
relationship between management and the Board, and reviews TransCanada's
structures to
TRANSCANADA CORPORATION 25
ensure that the Board is able to function independently of management. The
committee chair annually reviews the performance of the Chair of the Board.
The committee is also responsible for an annual review of director
compensation and for the administration of the DSU Plan, including the
granting of units under the plan.
The committee has the authority in its discretion to retain advisors to
assist it in the discharge of its responsibilities. The committee reviews
its charter at least annually and, as required, recommends changes to the
Board. The committee's performance is reviewed annually by the Board. There
were two meetings of the committee in 2003.
CHAIR: W.K. Dobson
MEMBERS: D.D. Baldwin, D.P. O'Brien, J.R. Paul, H.G. Schaefer
HUMAN RESOURCES COMMITTEE
This committee is comprised of five unrelated and independent directors and
is mandated to review the company's human resource policies and plans,
monitor succession planning, and to assess the performance of the President
and Chief Executive Officer and other senior officers of TransCanada and its
major subsidiaries against set objectives. The committee approves the salary
and other remuneration to be awarded to senior executive officers of
TransCanada and its major subsidiaries. The committee reports to the Board
with recommendations on the remuneration package for the President and Chief
Executive Officer. The committee approves executive compensation plans and
approves any major changes to TransCanada's compensation and benefit plans.
The committee considers and approves any changes to TransCanada's Canadian
pension plans relating to benefits aspects of these plans. Further, the
committee administers or monitors the ESU Plan, the Restricted Share Unit
Plan, the Stock Option Plan and the Performance Unit Plan.
The committee has the authority to retain advisors in its discretion to
assist it in the discharge of its responsibilities. The committee reviews
its charter at least annually and, as required, recommends changes to the
Governance Committee and the Board. The committee's performance is reviewed
annually by the Board. There were four meetings of the committee in 2003.
CHAIR: K.L. Hawkins
MEMBERS: W.K. Dobson, D.P. O'Brien, W.T. Stephens, J.D. Thompson
HEALTH, SAFETY AND ENVIRONMENT COMMITTEE
This committee is comprised of five unrelated and independent directors and
is mandated to monitor the health, safety and environmental practices and
procedures of TransCanada and its subsidiaries for compliance with
applicable legislation, conformity with industry standards and prevention or
mitigation of losses. The committee also considers whether the
implementation of TransCanada's policies related to health, safety and
environmental matters are effective. The committee reviews reports and, when
appropriate, makes recommendations to the Board on TransCanada's policies
and procedures related to health, safety and the environment. This committee
meets separately with officers of TransCanada and its business units who
have responsibility for these matters and reports to the Board on such
meetings.
The committee has the authority to retain advisors in its discretion to
assist it in the discharge of its responsibilities. The committee reviews
its charter at least annually and, as required, recommends changes to the
Governance Committee and the Board. The committee's performance is reviewed
annually by the Board. There were four meetings of the committee in 2003.
CHAIR: D.D. Baldwin
MEMBERS: P. Gauthier, S.B. Jackson, W.T. Stephens, J.D. Thompson
CHAIR'S PARTICIPATION IN COMMITTEES
Mr. Haskayne, the Chair of the Board, is an unrelated and independent
director and is a non-voting member of all committees of the Board.
26 TRANSCANADA CORPORATION
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
TransCanada has purchased, at its expense, Directors' and Officers'
Liability Insurance with policy limits of U.S. $175 million in the
aggregate, subject to a deductible in respect of corporate reimbursement of
U.S. $2.5 million for each loss. Generally, under this insurance,
TransCanada is reimbursed for payments made under corporate indemnity
provisions on behalf of its directors and officers, and individual directors
and officers (or their heirs and legal representatives) are covered for
losses arising during the performance of their duties for which they are not
indemnified by TransCanada. Major exclusions from coverage include claims
arising from illegal acts, those acts which result in illegal personal
profit, violation of any fiduciary duty under the U.S. EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, pollution damage (except for resultant
shareholder actions) and claims brought by a director or officer against
another director or officer or by TransCanada against a director or officer
except for shareholder derivative actions. For the year ended December 31,
2003, the total annual premium in respect of such insurance was $1,861,692
which was paid entirely by TransCanada.
Additionally, directors and officers of TransCanada are party to indemnity
agreements with TransCanada pursuant to which TransCanada has agreed to
indemnify such directors and officers from liability arising in connection
with the performance of their duties. Such indemnity agreements conform with
the provisions of the CANADIAN BUSINESS CORPORATIONS ACT.
DIRECTORS' APPROVAL
The contents of this Proxy Circular, including the schedules hereto, and the
sending thereof to shareholders entitled to receive notice of the Meeting,
to each director, to the auditors of TransCanada and to the appropriate
governmental agencies, have been approved by the Board of TransCanada.
CERTIFICATE
The foregoing contains no untrue statement of material fact and does not
omit to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in light of the circumstances
in which it was made.
/s/ Harold N. Kvisle /s/ Russell K. Girling
Harold N. Kvisle Russell K. Girling
President and Chief Executive Officer Executive Vice-President, Corporate
Development
and Chief Financial Officer
Dated at Calgary, Alberta
February 24, 2004
TRANSCANADA CORPORATION 27
SCHEDULE "A"
TRANSCANADA CORPORATION
STOCK OPTION PLAN
RESOLUTION
BE IT RESOLVED as an ordinary resolution of TransCanada Corporation (the
"Company") that:
1. The number of common shares of TransCanada Corporation reserved for
issuance pursuant to the exercise of stock options under TransCanada's
Stock Option Plan is increased by an additional 1,000,000 common shares;
2. The Stock Option Plan is confirmed in effect until the close of business
on the date of the Company's 2007 annual meeting of common shareholders;
and
3. Any officer or director of the Company be and is hereby authorized for
and on behalf of the Company, under corporate seal or otherwise, to do
all such things and to execute all such documents or instruments as may
be necessary or desirable to give effect to this resolution.
TRANSCANADA CORPORATION A-1
SCHEDULE "B"
TRANSCANADA CORPORATION
SHAREHOLDER RIGHTS PLAN
RESOLUTION
BE IT RESOLVED as an ordinary resolution of TransCanada Corporation (the
"Company") that:
1. The Shareholder Rights Plan of the Company be continued and the
Shareholder Rights Plan Agreement (the "Rights Agreement") dated as of
April 24, 2003 and amended and restated as of April 23, 2004 between the
Company and Computershare Trust Company of Canada, as Rights Agent, be
and it is hereby ratified, confirmed and approved;
2. The making on or prior to April 23, 2004 of any revisions to the Rights
Agreement as may be required by any stock exchange or by professional
commentators on shareholder rights plans to conform the Rights Agreement
to versions of shareholder rights plans prevalent for public reporting
issuers in Canada, as may be approved by any two of the Chair of the
Board, the Chief Executive Officer, the Chief Financial Officer, any
Vice-President or a director, is hereby approved;
3. The Rights Agreement, as amended in accordance with paragraph 2, is
hereby ratified, confirmed and approved; and
4. Any officer or director of the Company be and is hereby authorized for
and on behalf of the Company, under corporate seal or otherwise, to do
all such things and to execute all such documents or instruments as may
be necessary or desirable to give effect to this resolution.
SUMMARY OF SHAREHOLDER RIGHTS PLAN
The following summarizes the principal terms of the Shareholder Rights Plan.
OBJECTIVES
The primary objective of the Shareholder Rights Plan is to provide the board
of directors with sufficient time to explore and develop alternatives for
maximizing shareholder value if a take-over bid is made for TransCanada and to
provide every shareholder with an equal opportunity to participate in such a
bid. The Shareholder Rights Plan encourages a potential acquiror to proceed
either by way of a Permitted Bid (as defined in the Shareholder Rights Plan),
which requires the take-over bid to satisfy certain minimum standards designed
to promote fairness, or with the concurrence of the board.
EFFECTIVE DATE
The Effective Date of the Shareholder Rights Plan is April 24, 2003.
TERM
To the close of business on the date of the 2007 annual meeting of
shareholders of TransCanada.
ISSUE OF RIGHTS
On May 15, 2003, one right (a "TransCanada Right") was issued and attached
to each common share outstanding and attached to each common share subsequently
issued.
TRANSCANADA RIGHTS EXERCISE PRIVILEGE
The TransCanada Rights will separate from the common shares and will be
exercisable eight trading days (the "Separation Time") after a person has
acquired, or commences a take-over bid to acquire, 20% or more of the shares,
other than by an acquisition pursuant to a take-over bid permitted by the
Shareholder Rights Plan (a "Permitted Bid"). The acquisition by any person (an
"Acquiring Person") of 20% or more of the common shares, other than by way of a
Permitted Bid, is referred to as a "Flip-in Event". Any TransCanada Rights held
TRANSCANADA CORPORATION B-1
by an Acquiring Person will become void upon the occurrence of a Flip-in Event.
Eight trading days after the occurrence of the Flip-in Event, each TransCanada
Right, (other than those held by the Acquiring Person), will permit the purchase
of $200 worth of common shares for $100.
The issue of the TransCanada Rights is not initially dilutive. Upon a
Flip-in Event occurring and the TransCanada Rights separating from the common
shares, reported earnings per share on a fully diluted or non-diluted basis may
be affected. Holders of TransCanada Rights not exercising their TransCanada
Rights upon the occurrence of a Flip-in Event may suffer substantial dilution.
LOCK-UP AGREEMENT
A bidder may enter into lock-up agreements with TransCanada's shareholders
("Locked-up Persons") whereby such shareholders agree to tender their common
shares to the take-over bid (the "Subject Bid") without a Flip-in Event (as
referred to above) occurring. Any such agreement must contain a provision that
either permits the Locked-up Person to withdraw the common shares to tender to
another take-over or to support another transaction that will provide greater
value to the shareholder than the Subject Bid or permits the Locked-up Person to
withdraw the common shares to tender to another take-over bid or to support
another transaction that contains an offering price that exceeds the offering
price contained in the Subject Bid by a specified minimum amount not exceeding
7% of the offering price of the Subject Bid. For greater certainty, a Lock-up
Agreement may contain a right of first refusal or require a period of delay (or
other similar limitation) to give a bidder an opportunity to match a higher
price in another transaction as long as the shareholder can accept another bid
or tender to another transaction.
As restated, the Shareholder Rights Plan requires that any Lock-up Agreement
be made available to TransCanada and the public and amends the definition of
Lock-up Agreement to also provide that under a Lock-up Agreement no "break up"
fees, "top up" fees, penalties, expenses reimbursement or other amounts that
exceed in aggregate the greater of: (i) 2 1/2% of the value payable under the
Subject Bid; and (ii) 50% of the amount by which the value received by a
Locked-up Person under another take-over bid or transaction exceeds what such
Locked-up Person would have received under the Subject Bid; can be payable by
such Locked-up Person if the Locked-up Person fails to deposit or tender common
shares to the Subject Bid or withdraws common shares previously tendered thereto
in order to deposit such common shares to another takeover bid or support
another transaction.
CERTIFICATES AND TRANSFERABILITY
Prior to the Separation Time, the TransCanada Rights are evidenced by a
legend imprinted on certificates for the common shares issued from and after the
Effective Date and are not to be transferable separately from the common shares.
From and after the Separation Time, the TransCanada Rights will be evidenced by
TransCanada Rights certificates which will be transferable and traded separately
from the common shares.
PERMITTED BID REQUIREMENTS
The requirements for a Permitted Bid include the following:
(i) the take-over bid must be made by way of a take-over bid circular;
(ii) the take-over bid must be made to all shareholders;
(iii) the take-over bid must be outstanding for a minimum period of 60 days
and common shares tendered pursuant to the take-over bid may not be
taken up prior to the expiry of the 60 day period and only if at such
time more than 50% of the common shares held by shareholders, other
than the bidder, its affiliates and persons acting jointly or in
concert and certain other persons (collectively, the "Independent
Shareholders"), have been tendered to the take-over bid and not
withdrawn; and
(iv) if more than 50% of the common shares held by Independent Shareholders
are tendered to the take-over bid within the 60 day period, the bidder
must make a public announcement of that fact and the take-over bid must
remain open for deposits of common shares for an additional 10 business
days from the date of such public announcement.
B-2 TRANSCANADA CORPORATION
The Shareholder Rights Plan allows for a competing Permitted Bid (a
"Competing Permitted Bid") to be made while a Permitted Bid is in existence. A
Competing Permitted Bid must satisfy all the requirements of a Permitted Bid
except that it may expire on the same date as the Permitted Bid, subject to the
requirement that it be outstanding for a minimum period of 35 days. Prior to
restating the Shareholder Rights Plan, this time period was 21 days; the change
to 35 days conforms the time period to recent changes in securities legislation.
WAIVER
The board of directors, acting in good faith, may, prior to the occurrence
of a Flip-in Event, waive the application of the Shareholder Rights Plan to a
particular Flip-in Event (an "Exempt Acquisition") where the take-over bid is
made by a take-over bid circular to all holders of common shares. Where the
board exercises the waiver power for one take-over bid, the waiver will also
apply to any other take-over bid for TransCanada made by a take-over bid
circular to all holders of common shares prior to the expiry of any other bid
for which the Shareholder Rights Plan has been waived.
REDEMPTION
The board of directors with the approval of a majority vote of the votes
cast by shareholders (or the holders of TransCanada Rights if the Separation
Time has occurred) voting in person and by proxy, at a meeting duly called for
that purpose, may redeem the TransCanada Rights at $0.001 per TransCanada Right.
TransCanada Rights shall also be redeemed by the board without such approval
following completion of a Permitted Bid, Competing Permitted Bid or Exempt
Acquisition.
AMENDMENT
The board of directors may amend the Shareholder Rights Plan with the
approval of a majority vote of the votes cast by shareholders (or the holders of
TransCanada Rights if the Separation Time has occurred) voting in person and by
proxy at a meeting duly called for that purpose. The directors without such
approval may correct clerical or typographical errors and, subject to approval
as noted above at the next meeting of the shareholders (or holders of
TransCanada Rights, as the case may be), may make amendments to the Shareholder
Rights Plan to maintain its validity due to changes in applicable legislation.
BOARD OF DIRECTORS
The Shareholder Rights Plan will not detract from or lessen the duty of the
board to act honestly and in good faith with a view to the best interests of
TransCanada. The board, when a Permitted Bid is made, will continue to have the
duty and power to take such actions and make such recommendations to
shareholders as are considered appropriate.
EXEMPTIONS FOR INVESTMENT ADVISORS
Investment advisors, trust companies (acting in their capacities as trustees
and administrators), statutory bodies whose business includes the management of
funds and administrators of registered pension plans acquiring greater than 20%
of the common shares are exempted from triggering a Flip-in Event, provided that
they are not making, or are not part of a group making, a takeover bid.
TRANSCANADA CORPORATION B-3
SCHEDULE "C"
STATEMENT OF CORPORATE GOVERNANCE PRACTICES OF TRANSCANADA
AS COMPARED TO THE CURRENT TSX GUIDELINES
FOR CORPORATE GOVERNANCE
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 1 BOARD OF DIRECTORS SHOULD EXPLICITLY ASSUME RESPONSIBILITY FOR STEWARDSHIP OF THE
CORPORATION
Does TransCanada Align? YES
Description of Approach THE BOARD HAS RESPONSIBILITY FOR THE OVERALL STEWARDSHIP OF TRANSCANADA,
ESTABLISHING THE POLICIES AND STANDARDS OF TRANSCANADA IN THE OPERATION OF ITS
BUSINESSES AND REVIEWING AND APPROVING ITS STRATEGIC PLANS. THE BOARD HAS ADOPTED A
PUBLISHED SET OF CORPORATE GOVERNANCE GUIDELINES THAT ADDRESS THE STRUCTURE AND
COMPOSITION OF THE BOARD AND ITS COMMITTEES AND PROVIDES GUIDANCE TO BOTH THE BOARD
AND MANAGEMENT IN CLARIFYING THEIR RESPECTIVE RESPONSIBILITIES AND ENSURING
EFFECTIVE COMMUNICATION BETWEEN THE BOARD AND MANAGEMENT. TRANSCANADA'S CORPORATE
GOVERNANCE GUIDELINES ARE PUBLISHED ON THE COMPANY'S WEBSITE AT www.transcanada.com.
IN ADDITION, THE BOARD HAS COMMITTED ITSELF TO MAINTAINING A HIGH STANDARD OF
CORPORATE GOVERNANCE AND INTEGRITY; IT HAS ADOPTED A CODE OF BUSINESS ETHICS FOR
DIRECTORS WHICH INCORPORATES AS ITS BASIS, PRINCIPLES OF GOOD CONDUCT AND HIGH
ETHICAL BEHAVIOR. TRANSCANADA HAS ALSO ADOPTED CODES OF BUSINESS ETHICS FOR ITS
EMPLOYEES AND ONE APPLICABLE TO ITS PRESIDENT AND CHIEF EXECUTIVE OFFICER, CHIEF
FINANCIAL OFFICER AND CONTROLLER. THE CODES ARE PUBLISHED ON TRANSCANADA'S WEBSITE
AT www.transcanada.com.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 1 a BOARD OF DIRECTORS SHOULD SPECIFICALLY ASSUME RESPONSIBILITY FOR THE ADOPTION OF A
STRATEGIC PLANNING PROCESS
Does TransCanada Align? YES
Description of Approach THE BOARD BELIEVES THAT MANAGEMENT IS PRIMARILY RESPONSIBLE FOR THE DEVELOPMENT OF
TRANSCANADA'S STRATEGIC PLAN. THE BOARD REVIEWS, QUESTIONS, VALIDATES AND APPROVES
TRANSCANADA'S STRATEGIC PLAN ON AN ANNUAL BASIS AND APPROVES ALL MATERIAL CHANGES.
THE BOARD BELIEVES THAT STRATEGY DEVELOPMENT IS AN INTERACTIVE PROCESS BETWEEN
MANAGEMENT AND THE BOARD AND AS SUCH, THE BOARD MEETS ANNUALLY WITH MANAGEMENT FOR A
COMPREHENSIVE STRATEGIC PLANNING SESSION. THE BOARD ALSO RECOGNIZES THAT STRATEGIC
PLANNING IS A CONTINUOUS PROCESS AND CONSEQUENTLY MEETS FROM TIME TO TIME DURING THE
YEAR AS PLANS EVOLVE WHICH REQUIRE ITS CONSIDERATION OR APPROVAL.
IN ADDITION, THE BOARD HOLDS STRATEGIC ISSUES INFORMATION SESSIONS IN CONJUNCTION
WITH SCHEDULED BOARD MEETINGS TO DEVELOP A DEEPER UNDERSTANDING OF MATTERS STRATEGIC
TO TRANSCANADA. FOUR SUCH MEETINGS WERE HELD IN 2003 AND FOUR ARE SCHEDULED FOR
2004.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 1 b BOARD OF DIRECTORS SHOULD SPECIFICALLY ASSUME RESPONSIBILITY FOR THE IDENTIFICATION
OF PRINCIPAL BUSINESS RISKS, AND IMPLEMENTATION OF RISK MANAGEMENT SYSTEMS
Does TransCanada Align? YES
Description of Approach THE BOARD IS RESPONSIBLE FOR UNDERSTANDING AND OVERSEEING COMPLIANCE WITH PROCESSES
THAT ARE IN PLACE TO MITIGATE THE PRINCIPAL RISKS ASSOCIATED WITH TRANSCANADA'S
BUSINESS ON AN ONGOING BASIS, AND IT IS THE RESPONSIBILITY OF MANAGEMENT TO ENSURE
THAT THE BOARD AND ITS COMMITTEES ARE KEPT WELL INFORMED OF THESE CHANGING RISKS ON
A TIMELY BASIS. THE PRINCIPAL RISKS OF TRANSCANADA ARE THOSE RELATED TO GAS
TRANSMISSION AND POWER GENERATION, OVERALL SUPPLY OF AND DEMAND FOR NATURAL GAS,
COMPETITION IN THE INDUSTRY SEGMENTS IN WHICH TRANSCANADA PARTICIPATES AND OTHER
MARKET AND FINANCIAL RISKS.
THE AUDIT COMMITTEE OF THE BOARD REVIEWS TRANSCANADA'S FINANCIAL RISK MANAGEMENT
POLICIES AND PROCEDURES AND REPORTS TO THE BOARD ON THESE MATTERS ON A QUARTERLY
BASIS. THE BOARD ALSO RECEIVES AND REVIEWS REPORTS FROM THE HEALTH, SAFETY AND
ENVIRONMENT COMMITTEE, WHICH INCLUDE RISKS WITHIN THE SCOPE OF ITS MANDATE, ON A
QUARTERLY BASIS.
- ----------------------------------------------------------------------------------------------------------------
TRANSCANADA CORPORATION C-1
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 1 c BOARD OF DIRECTORS SHOULD SPECIFICALLY ASSUME RESPONSIBILITY FOR SUCCESSION
PLANNING, INCLUDING APPOINTING, TRAINING AND MONITORING SENIOR MANAGEMENT
Does TransCanada Align? YES
Description of Approach THE BOARD BELIEVES THAT SUCCESSION PLANNING AND MANAGEMENT DEVELOPMENT ARE KEY TO
THE ONGOING PROCESS THAT CONTRIBUTES SUBSTANTIALLY TO THE SUCCESS OF TRANSCANADA. AN
ANNUAL REPORT ON SENIOR MANAGEMENT DEVELOPMENT AND SUCCESSION IS PREPARED ANNUALLY
FOR PRESENTATION AND DISCUSSION AT THE HUMAN RESOURCES COMMITTEE, WHICH REPORTS ON
THE MATTER TO THE BOARD. THE REPORT OUTLINES THE BACKGROUND AND QUALIFICATIONS
REQUIRED FOR EACH OF THE SENIOR EXECUTIVE OFFICER POSITIONS IN TRANSCANADA
(INCLUDING THAT OF THE CEO) AND FOR KEY OFFICER POSITIONS IN ITS MAJOR SUBSIDIARIES.
SEVERAL POTENTIAL INTERNAL SUCCESSORS FOR EACH POSITION ARE IDENTIFIED IN THE REPORT
AND THEIR QUALIFICATIONS AND DEVELOPMENT PLANS ARE DISCUSSED IN DETAIL WITH THE
COMMITTEE AND THE BOARD. POTENTIAL SUCCESSORS ARE INTRODUCED TO THE BOARD
PERIODICALLY.
THE HUMAN RESOURCES COMMITTEE ALSO CONDUCTS AN ANNUAL REVIEW AND ASSESSMENT OF THE
PERFORMANCE OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER AND THE SENIOR EXECUTIVE
OFFICERS OF TRANSCANADA.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 1 d BOARD OF DIRECTORS SHOULD SPECIFICALLY ASSUME RESPONSIBILITY FOR COMMUNICATIONS
POLICY
Does TransCanada Align? YES
Description of Approach THE BOARD HAS PUT PROCESSES IN PLACE TO MONITOR EFFECTIVE, TIMELY AND NON-SELECTIVE
COMMUNICATIONS BETWEEN TRANSCANADA, ITS STAKEHOLDERS AND THE PUBLIC. THE BOARD, OR
THE APPROPRIATE COMMITTEE, REVIEWS THE CONTENT OF TRANSCANADA'S MAJOR COMMUNICATIONS
TO SHAREHOLDERS AND THE INVESTING PUBLIC, INCLUDING THE QUARTERLY AND ANNUAL
REPORTS, AND APPROVES THE MANAGEMENT PROXY CIRCULAR, THE ANNUAL INFORMATION FORM AND
ANY PROSPECTUSES THAT MAY BE ISSUED. THE INFORMATION IS THEN RELEASED THROUGH
MAILINGS TO SHAREHOLDERS, NEWS WIRE SERVICES, THE GENERAL MEDIA AND PUBLISHED ON
TRANSCANADA'S WEBSITE AT www.transcanada.com ON ITS HOME PAGE.
THE BOARD BELIEVES THAT IT IS THE FUNCTION OF MANAGEMENT TO SPEAK FOR TRANSCANADA IN
ITS COMMUNICATIONS WITH THE INVESTMENT COMMUNITY, THE MEDIA, CUSTOMERS, SUPPLIERS,
EMPLOYEES, GOVERNMENTS AND THE GENERAL PUBLIC. IT IS UNDERSTOOD THAT THE CHAIR OR
OTHER INDIVIDUAL DIRECTORS MAY, FROM TIME TO TIME, BE REQUESTED BY MANAGEMENT TO
ASSIST WITH SUCH COMMUNICATIONS. IF COMMUNICATIONS FROM STAKEHOLDERS ARE MADE TO THE
CHAIR OR TO OTHER INDIVIDUAL DIRECTORS, MANAGEMENT IS INFORMED AND CONSULTED TO
DETERMINE ANY APPROPRIATE RESPONSE.
TRANSCANADA HAS AN INVESTOR RELATIONS GROUP THAT RESPONDS TO ANALYST, INSTITUTIONAL
AND INDIVIDUAL SHAREHOLDER INQUIRIES AND MAINTAINS A TOLL-FREE TELEPHONE LINE FOR
EASE OF CONTACT. INDIVIDUAL QUERIES, COMMENTS OR SUGGESTIONS CAN BE MADE AT ANY TIME
BY CALLING OR WRITING DIRECTLY TO TRANSCANADA'S HEAD OFFICE IN CALGARY, ALBERTA. IN
ADDITION, TRANSCANADA HAS A COMMUNICATIONS GROUP TO RESPOND TO INQUIRIES FROM MEDIA,
GOVERNMENT AND THE PUBLIC. TOGETHER, THESE GROUPS DEAL WITH STAKEHOLDER CONCERNS AND
ENSURE THAT ALL INQUIRIES RECEIVE A FULL AND TIMELY RESPONSE.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 1 e BOARD OF DIRECTORS SHOULD SPECIFICALLY ASSUME RESPONSIBILITY FOR THE INTEGRITY OF
INTERNAL CONTROL AND MANAGEMENT INFORMATION SYSTEMS
Does TransCanada Align? YES
Description of Approach THE AUDIT COMMITTEE REQUIRES MANAGEMENT TO IMPLEMENT AND MAINTAIN APPROPRIATE
SYSTEMS OF INTERNAL CONTROLS AND MEETS WITH TRANSCANADA'S DIRECTOR OF INTERNAL
AUDIT, IN EXECUTIVE SESSIONS AND WITH MANAGEMENT, ON AT LEAST A QUARTERLY BASIS TO
OVERSEE THE EFFECTIVENESS OF THESE SYSTEMS. IN ADDITION, TRANSCANADA'S PRESIDENT AND
CHIEF EXECUTIVE OFFICER AND EXECUTIVE VICE-PRESIDENT, CORPORATE DEVELOPMENT AND
CHIEF FINANCIAL OFFICER PROVIDE CERTIFICATES RELATING TO THE CONTENTS OF
TRANSCANADA'S QUARTERLY AND ANNUAL REPORTS, WHICH ARE FILED WITH SECURITIES
REGULATORY AUTHORITIES, STATING THAT THEY HAVE EVALUATED AND REPORTED ON THE
EFFECTIVENESS OF TRANSCANADA'S INTERNAL AND DISCLOSURE CONTROL PROCEDURES.
- ----------------------------------------------------------------------------------------------------------------
C-2 TRANSCANADA CORPORATION
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 2 MAJORITY OF DIRECTORS SHOULD BE "UNRELATED" (INDEPENDENT FROM MANAGEMENT AND FREE
FROM CONFLICTS OF INTEREST)
Does TransCanada Align? YES
Description of Approach THE GOVERNANCE COMMITTEE REVIEWS AT LEAST ANNUALLY THE EXISTENCE OF ANY
RELATIONSHIPS BETWEEN EACH DIRECTOR AND TRANSCANADA TO ENSURE THAT THE MAJORITY OF
DIRECTORS ARE UNRELATED TO AND INDEPENDENT OF TRANSCANADA.
THE BOARD BELIEVES THAT, AS A MATTER OF POLICY, THERE SHOULD BE A MAJORITY OF
OUTSIDE, UNRELATED AND INDEPENDENT DIRECTORS ON TRANSCANADA'S BOARD. THE BOARD IS
CHARGED WITH MAKING THIS DETERMINATION. THE DETERMINATION IS MADE ANNUALLY IN
ACCORDANCE WITH THE DEFINITION OF "UNRELATED DIRECTOR" IN THE TSX GUIDELINES AND THE
"MEANING OF INDEPENDENCE" IN THE CANADIAN AUDIT COMMITTEE RULES AND THE PROPOSED
CANADIAN GOVERNANCE GUIDELINES. THE INDEPENDENCE CRITERIA ALSO CONFORM WITH THE
APPLICABLE RULES OF THE SEC, THE NYSE AND THOSE SET OUT IN SOX. THE NYSE'S EXTENDED
DEFINITIONS OF INDEPENDENCE THAT APPLY TO DIRECTORS OF U.S. COMPANIES ARE CONSIDERED
IN THE CASE OF EACH DIRECTOR AS WELL.
IF THE PROPOSED DIRECTORS ARE ELECTED TO THE BOARD, ONLY HAROLD N. KVISLE, THE
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF TRANSCANADA, IS A RELATED, NON-INDEPENDENT
DIRECTOR. THE BOARD HAS DETERMINED THAT THE REMAINING 11 PROPOSED NOMINEES FOR
ELECTION TO THE BOARD AT THE 2004 ANNUAL MEETING HAVE NO MATERIAL RELATIONSHIP WITH
TRANSCANADA AND ARE THEREFORE UNRELATED AND INDEPENDENT.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 3 DISCLOSE FOR EACH DIRECTOR WHETHER HE OR SHE IS UNRELATED, AND HOW THAT CONCLUSION
WAS REACHED
Does TransCanada Align? YES
Description of Approach HAROLD N. KVISLE, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF TRANSCANADA, IS NOT AN
UNRELATED AND INDEPENDENT DIRECTOR.
THE BOARD HAS DETERMINED THAT THE REMAINDER OF THE PROPOSED DIRECTORS ARE
NON-MANAGEMENT, UNRELATED AND INDEPENDENT DIRECTORS. THIS DETERMINATION WAS MADE
BASED ON THE CRITERIA REFERRED TO ABOVE, WITH THE RESULT THAT THE BOARD HAS
DETERMINED THAT THE FOLLOWING DIRECTORS HAVE NO INTEREST, BUSINESS OR OTHER
RELATIONSHIP THAT COULD OR COULD REASONABLY BE PERCEIVED TO MATERIALLY INTERFERE
WITH THEIR ABILITY TO ACT IN THE BEST INTERESTS OF TRANSCANADA. THE BOARD HAS ALSO
DETERMINED THAT, WITH THE EXCEPTION OF MR. KVISLE, ALL DIRECTORS PROPOSED FOR
ELECTION TO THE BOARD AT THE 2004 ANNUAL MEETING HAVE NO DIRECT OR INDIRECT MATERIAL
RELATIONSHIP WITH TRANSCANADA WHICH COULD REASONABLY INTERFERE WITH THEIR EXERCISE
OF INDEPENDENT JUDGMENT. ALTHOUGH SOME OF THE PROPOSED NOMINEES ARE ASSOCIATED WITH
COMPANIES THAT SHIP NATURAL GAS ON THE TRANSCANADA SYSTEM, TRANSCANADA AS A COMMON
CARRIER IN CANADA CANNOT UNDER ITS TARIFF DENY TRANSPORTATION SERVICE TO A
CREDIT-WORTHY SHIPPER. IN ADDITION, DUE TO THE SPECIALIZED NATURE OF THE INDUSTRY,
TRANSCANADA BELIEVES THAT IT IS IMPORTANT FOR ITS BOARD TO BE COMPOSED OF QUALIFIED
AND KNOWLEDGEABLE DIRECTORS. THE BOARD HAS TAKEN THESE FACTORS INTO CONSIDERATION IN
MAKING ITS DETERMINATION OF INDEPENDENCE. FURTHER, THE BOARD CONSIDERED WHETHER
DIRECTORS SERVING ON BOARDS OF NON-PROFIT ORGANIZATIONS WHICH RECEIVE DONATIONS FROM
TRANSCANADA WERE CONFLICTED. THE BOARD DETERMINED THAT SUCH RELATIONSHIPS, WHERE
THEY EXISTED, DID NOT INTERFERE WITH ANY SUCH DIRECTOR'S ABILITY TO ACT IN THE BEST
INTEREST OF TRANSCANADA, AS ALL DECISIONS ON PROVIDING DONATIONS TO NON-PROFIT
ORGANIZATIONS ARE MADE BY A MANAGEMENT COMMITTEE ON WHICH NO DIRECTORS SERVE. THE
BOARD ALSO CONSIDERED VARIOUS OTHER CRITERIA, SUCH AS FAMILY RELATIONSHIPS AND
PAYMENTS MADE TO TRANSCANADA, IN MAKING ITS DETERMINATION.
-- DOUGLAS D. BALDWIN -- UNRELATED AND INDEPENDENT
-- WENDY K. DOBSON -- UNRELATED AND INDEPENDENT
-- PAULE GAUTHIER -- UNRELATED AND INDEPENDENT
-- RICHARD F. HASKAYNE -- UNRELATED AND INDEPENDENT (CHAIR)
-- KERRY L. HAWKINS -- UNRELATED AND INDEPENDENT
-- S. BARRY JACKSON -- UNRELATED AND INDEPENDENT
-- PAUL L. JOSKOW -- UNRELATED AND INDEPENDENT
-- DAVID P. O'BRIEN -- UNRELATED AND INDEPENDENT
-- JAMES R. PAUL -- UNRELATED AND INDEPENDENT
-- HARRY G. SCHAEFER -- UNRELATED AND INDEPENDENT (VICE-CHAIR)
-- W. THOMAS STEPHENS -- UNRELATED AND INDEPENDENT
-- JOSEPH D. THOMPSON -- UNRELATED AND INDEPENDENT (RETIRING APRIL 23, 2004)
- ----------------------------------------------------------------------------------------------------------------
TRANSCANADA CORPORATION C-3
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 4 APPOINT A COMMITTEE OF OUTSIDE DIRECTORS RESPONSIBLE FOR APPOINTMENT OF NEW NOMINEES
AND ONGOING ASSESSMENT OF DIRECTORS
Does TransCanada Align? YES
Description of Approach THE GOVERNANCE COMMITTEE IS RESPONSIBLE FOR PROPOSING NEW NOMINEES TO THE BOARD,
WHICH IN TURN IS RESPONSIBLE FOR IDENTIFYING SUITABLE CANDIDATES FOR ELECTION BY THE
SHAREHOLDERS. THE GOVERNANCE COMMITTEE ANNUALLY REVIEWS THE GENERAL AND SPECIFIC
CRITERIA APPLICABLE TO CANDIDATES TO BE CONSIDERED FOR NOMINATION. THE OBJECTIVE OF
THIS REVIEW IS TO MAINTAIN THE COMPOSITION OF THE BOARD IN A WAY THAT PROVIDES THE
BEST MIX OF SKILLS AND EXPERIENCE TO GUIDE THE LONG-TERM STRATEGY AND ONGOING
BUSINESS OPERATIONS OF TRANSCANADA. NEW NOMINEES MUST HAVE EXPERIENCE IN THE
INDUSTRY OR EXPERIENCE IN GENERAL BUSINESS MANAGEMENT OF SIMILAR SIZE AND SCOPE AS
TRANSCANADA'S, THE ABILITY TO DEVOTE THE TIME REQUIRED, AND A WILLINGNESS TO SERVE.
THE GOVERNANCE COMMITTEE ALSO ADVISES THE BOARD ON THE CRITERIA FOR, AND
DETERMINATION OF, THE INDEPENDENCE OF EACH DIRECTOR.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 5 IMPLEMENT A COMMITTEE PROCESS FOR ASSESSING THE EFFECTIVENESS OF THE BOARD OF
DIRECTORS, ITS COMMITTEES AND THE CONTRIBUTION OF INDIVIDUAL DIRECTORS
Does TransCanada Align? YES
Description of Approach THE GOVERNANCE COMMITTEE IS RESPONSIBLE FOR MAKING AN ANNUAL ASSESSMENT OF THE
OVERALL PERFORMANCE OF THE BOARD, ITS COMMITTEES AND ITS INDIVIDUAL MEMBERS, AND
REPORTS ITS FINDINGS TO THE BOARD. AN ANNUAL QUESTIONNAIRE IS UTILIZED AS PART OF
THIS PROCESS.
THE QUESTIONNAIRE EXAMINES THE EFFECTIVENESS OF THE BOARD AS A WHOLE, AND OF EACH
COMMITTEE, AND SPECIFICALLY REVIEWS AREAS THAT THE BOARD AND/OR MANAGEMENT BELIEVE
COULD BE IMPROVED TO ENSURE THE CONTINUED EFFECTIVENESS OF THE BOARD AND ITS
COMMITTEES IN THE EXECUTION OF THEIR RESPONSIBILITIES.
THE ANNUAL QUESTIONNAIRE AND THE DIRECTORS' TERMS OF REFERENCE ARE THEN USED IN THE
EVALUATION OF THE CONTRIBUTION OF INDIVIDUAL DIRECTORS. FORMAL INTERVIEWS WITH EACH
DIRECTOR AND EACH MEMBER OF TRANSCANADA'S EXECUTIVE LEADERSHIP TEAM ARE ALSO CARRIED
OUT BY THE CHAIR ANNUALLY WITH RESPECT TO THIS MATTER. THE CHAIR OF THE GOVERNANCE
COMMITTEE ALSO INTERVIEWS EACH DIRECTOR ANNUALLY ON HIS OR HER ASSESSMENT OF THE
CHAIR'S PERFORMANCE. ALL OF THESE ASSESSMENTS ARE REPORTED ANNUALLY TO THE FULL
BOARD.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 6 PROVIDE ORIENTATION AND EDUCATION PROGRAMS FOR NEW RECRUITS TO THE BOARD OF
DIRECTORS
Does TransCanada Align? YES
Description of Approach NEW DIRECTORS ARE PROVIDED WITH AN ORIENTATION AND EDUCATION PROGRAM THAT INCLUDES A
DIRECTORS' MANUAL CONTAINING INFORMATION ABOUT THE DUTIES AND OBLIGATIONS OF
DIRECTORS, THE BUSINESS AND OPERATIONS OF TRANSCANADA AND DOCUMENTS FROM RECENT
BOARD MEETINGS. NEW DIRECTORS ARE GIVEN OPPORTUNITIES FOR MEETINGS AND DISCUSSION
WITH SENIOR MANAGEMENT AND OTHER DIRECTORS. THE DIRECTORS' MANUAL IS REVIEWED
ANNUALLY BY THE GOVERNANCE COMMITTEE. DIRECTORS ARE ALSO INVITED TO TOUR CERTAIN OF
TRANSCANADA'S FACILITIES ANNUALLY, AND SENIOR MANAGEMENT PRESENTATIONS ARE MADE TO
THE BOARD PERIODICALLY ON VARIOUS BUSINESS RELATED TOPICS. THE DETAILS OF THE
ORIENTATION OF EACH NEW DIRECTOR ARE TAILORED TO EACH DIRECTOR'S INDIVIDUAL NEEDS
AND AREAS OF INTEREST.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 7 EXAMINE SIZE OF BOARD OF DIRECTORS, WITH A VIEW TO IMPROVING EFFECTIVE
DECISION-MAKING AND, IF APPROPRIATE, UNDERTAKE A PROGRAM TO REDUCE THE NUMBER OF
DIRECTORS
Does TransCanada Align? YES
Description of Approach THE GOVERNANCE COMMITTEE IS MANDATED TO REVIEW THE SIZE, COMPOSITION AND PROFILE OF
THE BOARD FROM TIME TO TIME, AND RECOMMENDS CHANGES TO THE BOARD WHEN APPROPRIATE.
ALTHOUGH THE MAXIMUM NUMBER OF DIRECTORS PERMITTED BY TRANSCANADA'S ARTICLES IS 20,
THE BOARD HAS DETERMINED THAT, AT PRESENT, IT IS IN THE BEST INTERESTS OF
TRANSCANADA TO MAINTAIN A SMALLER BOARD, IN THE RANGE OF 12 TO 14. IT IS THE BOARD'S
BELIEF THAT THIS RANGE IS CURRENTLY SUFFICIENT TO PROVIDE A DIVERSITY OF EXPERTISE
AND OPINIONS AND TO ALLOW EFFECTIVE COMMITTEE ORGANIZATION, YET SMALL ENOUGH FOR
EFFICIENT MEETINGS AND DECISION-MAKING.
- ----------------------------------------------------------------------------------------------------------------
C-4 TRANSCANADA CORPORATION
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 8 REVIEW ADEQUACY AND FORM OF COMPENSATION OF DIRECTORS TO ENSURE COMPENSATION
REFLECTS RISKS AND RESPONSIBILITIES
Does TransCanada Align? YES
Description of Approach THE GOVERNANCE COMMITTEE REVIEWS THE COMPENSATION OF THE DIRECTORS ON AN ANNUAL
BASIS, TAKING INTO ACCOUNT SUCH MATTERS AS TIME COMMITMENT, RESPONSIBILITY AND
COMPENSATION PROVIDED BY COMPARABLE COMPANIES, AND MAKES A RECOMMENDATION TO THE
BOARD FOR APPROVAL ANNUALLY. DIRECTORS MAY RECEIVE THEIR COMPENSATION IN THE FORM OF
CASH, DEFERRED SHARE UNITS OR A COMBINATION OF BOTH. DIRECTORS MUST HOLD A MINIMUM
OF FIVE TIMES THEIR ANNUAL CASH RETAINER FEE IN COMMON SHARES OR RELATED DEFERRED
SHARE UNITS OF TRANSCANADA. DIRECTORS HAVE A MAXIMUM OF FIVE YEARS TO REACH THIS
LEVEL OF SHARE OWNERSHIP. THE GOVERNANCE COMMITTEE'S REVIEW OF DIRECTOR COMPENSATION
IS BASED ON AN OUTSIDE REPORT ON COMPENSATION PAID IN COMPARABLE COMPANIES.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 9 COMMITTEES SHOULD GENERALLY BE COMPOSED OF OUTSIDE DIRECTORS A MAJORITY OF WHOM ARE
UNRELATED
Does TransCanada Align? YES
Description of Approach THE BOARD BELIEVES THAT, AS A MATTER OF POLICY, THERE SHOULD BE A MAJORITY OF
OUTSIDE, UNRELATED AND INDEPENDENT DIRECTORS ON EACH OF THE COMMITTEES. THE AUDIT
COMMITTEE, GOVERNANCE COMMITTEE, HUMAN RESOURCES COMMITTEE AND HEALTH, SAFETY AND
ENVIRONMENT COMMITTEE ARE COMPOSED ENTIRELY OF OUTSIDE, UNRELATED AND INDEPENDENT
DIRECTORS. EACH COMMITTEE IS GOVERNED BY A CHARTER. COPIES OF THESE CHARTERS CAN BE
FOUND ON TRANSCANADA'S WEBSITE AT www.transcanada.com AND ARE PUBLISHED IN
TRANSCANADA'S AIF.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 10 APPOINT A COMMITTEE RESPONSIBLE FOR DEVELOPING AN APPROACH TO CORPORATE GOVERNANCE
ISSUES
Does TransCanada Align? YES
Description of Approach THE MANDATE OF THE GOVERNANCE COMMITTEE INCLUDES RESPONSIBILITY TO UNDERTAKE
INITIATIVES THAT ARE NEEDED TO HELP DELIVER PRE-EMINENT CORPORATE GOVERNANCE. THE
GOVERNANCE COMMITTEE IS RESPONSIBLE FOR REVIEWING THE OVERALL GOVERNANCE PRINCIPLES
OF THE COMPANY AND MONITORING TRANSCANADA'S DISCLOSURE, INCLUDING THIS STATEMENT OF
CORPORATE GOVERNANCE PRACTICES. THE GOVERNANCE COMMITTEE ALSO MONITORS BEST
PRACTICES AMONG MAJOR NORTH AMERICAN COMPANIES TO ENSURE THAT TRANSCANADA CONTINUES
TO CARRY OUT HIGH STANDARDS OF CORPORATE GOVERNANCE.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 11 a DEFINE LIMITS TO MANAGEMENT'S RESPONSIBILITIES BY DEVELOPING POSITION DESCRIPTIONS
FOR:
(i) THE BOARD OF DIRECTORS
Does TransCanada Align? YES
Description of Approach THE BOARD OPERATES UNDER WRITTEN TERMS OF REFERENCE WHILE RETAINING PLENARY POWER.
ANY RESPONSIBILITY NOT DELEGATED TO MANAGEMENT OR A COMMITTEE OF THE BOARD REMAINS
WITH THE BOARD. CHARTERS HAVE BEEN ADOPTED FOR EACH OF THE COMMITTEES OUTLINING
THEIR PRINCIPAL RESPONSIBILITIES. EACH COMMITTEE REVIEWS ITS CHARTER ANNUALLY TO
ENSURE IT IS IN LINE WITH THE CURRENT DEVELOPMENTS IN CORPORATE GOVERNANCE. THE
CURRENT CHARTERS ARE AVAILABLE ON TRANSCANADA'S WEBSITE AT www.transcanada.com AND
ARE PUBLISHED IN THE AIF.
- ----------------------------------------------------------------------------------------------------------------
TRANSCANADA CORPORATION C-5
- ----------------------------------------------------------------------------------------------------------------
(ii) THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
Does TransCanada Align? YES
Description of Approach THE BOARD HAS APPROVED TERMS OF REFERENCE FOR THE POSITION OF THE PRESIDENT AND
CHIEF EXECUTIVE OFFICER, WHICH DEFINES THE PRESIDENT AND CHIEF EXECUTIVE OFFICER'S
DUTIES AND RESPONSIBILITIES. THESE DUTIES INCLUDE:
-- THE DEVELOPMENT AND RECOMMENDATION OF STRATEGIC PLANS TO THE BOARD THAT PROVIDE
FOR TRANSCANADA'S PROFITABLE GROWTH AND OVERALL SUCCESS, INCLUDING INVOLVING THE
BOARD IN THE EARLY STAGES OF STRATEGY DEVELOPMENT;
-- THE IMPLEMENTATION OF BUSINESS AND OPERATIONAL PLANS;
-- REPORTING REGULARLY TO THE BOARD ON THE OVERALL PROGRESS AND RESULTS AGAINST
OPERATING AND FINANCIAL OBJECTIVES;
-- THE AUTHORIZATION OF THE COMMITMENT OF FUNDS TO CAPITAL PROJECTS NOT INCLUDED IN
A PREVIOUSLY APPROVED BUDGET OR OTHERWISE BY THE BOARD, TO A MAXIMUM OF
$25 MILLION; AND
-- THE COMMITMENT OF CORPORATE RESOURCES AND ENTRANCE INTO AGREEMENTS IN THE
ORDINARY COURSE OF BUSINESS IN ORDER TO PURSUE THE APPROVED STRATEGIES OF
TRANSCANADA, WITH THE PROVISO THAT MAJOR COMMITMENTS, EXPOSURES AND RISKS ARE
REPORTED TO THE BOARD ON A REGULAR AND TIMELY BASIS.
THE HUMAN RESOURCES COMMITTEE AND THE BOARD ANNUALLY REVIEW AND APPROVE THE
PRESIDENT AND CHIEF EXECUTIVE OFFICER'S PERSONAL PERFORMANCE OBJECTIVES AND REVIEW
WITH HIM HIS PERFORMANCE AGAINST THE PREVIOUS YEAR'S OBJECTIVES.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 11 b BOARD OF DIRECTORS SHOULD APPROVE OR DEVELOP CORPORATE OBJECTIVES WHICH THE
PRESIDENT AND CHIEF EXECUTIVE OFFICER IS RESPONSIBLE FOR MEETING
Does TransCanada Align? YES
Description of Approach THE HUMAN RESOURCES COMMITTEE CONDUCTS AN ANNUAL REVIEW OF THE PERFORMANCE OF
TRANSCANADA AND THE PRESIDENT AND CHIEF EXECUTIVE OFFICER AS MEASURED AGAINST
OBJECTIVES ESTABLISHED IN THE PRIOR YEAR BY THE BOARD, THE HUMAN RESOURCES COMMITTEE
AND THE PRESIDENT AND CHIEF EXECUTIVE OFFICER. THE RESULTS OF THIS ANNUAL REVIEW ARE
COMMUNICATED TO THE BOARD, WHICH THEN MAKES AN EVALUATION OF THE OVERALL PERFORMANCE
OF TRANSCANADA AND THE PRESIDENT AND CHIEF EXECUTIVE OFFICER. THE CHAIR AND THE
CHAIR OF THE HUMAN RESOURCES COMMITTEE COMMUNICATE THIS PERFORMANCE EVALUATION TO
THE PRESIDENT AND CHIEF EXECUTIVE OFFICER. THE EVALUATION IS USED BY THE HUMAN
RESOURCES COMMITTEE IN ITS DELIBERATIONS CONCERNING THE PRESIDENT AND CHIEF
EXECUTIVE OFFICER'S ANNUAL COMPENSATION. THE EVALUATION OF TRANSCANADA'S PERFORMANCE
AGAINST CORPORATE OBJECTIVES ALSO FORMS PART OF THE DETERMINATION OF THE ENTIRE
COMPENSATION OF ALL EMPLOYEES.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 12 ESTABLISH PROCEDURES TO ENABLE THE BOARD OF DIRECTORS TO FUNCTION INDEPENDENTLY OF
MANAGEMENT
Does TransCanada Align? YES
Description of Approach THE GOVERNANCE COMMITTEE HAS THE RESPONSIBILITY TO ENSURE THAT THE BOARD FUNCTIONS
INDEPENDENTLY OF MANAGEMENT. THE GOVERNANCE COMMITTEE'S RESPONSIBILITIES INCLUDE THE
REVIEW OF TRANSCANADA'S STRUCTURES AND PROCEDURES TO ENSURE THE BOARD IS ABLE TO
FUNCTION INDEPENDENTLY OF MANAGEMENT AND THAT IT DOES SO FUNCTION. IN ADDITION, THE
GOVERNANCE COMMITTEE MONITORS THE QUALITY OF THE RELATIONSHIP BETWEEN MANAGEMENT AND
THE BOARD AND RECOMMENDS IMPROVEMENTS AS DEEMED NECESSARY OR DESIRABLE.
AT THE CONCLUSION OF EACH BOARD MEETING, NON-MANAGEMENT DIRECTORS MEET WITHOUT THE
PRESENCE OF MANAGEMENT TO DISCUSS THE ISSUES THAT HAVE ARISEN AT THE MEETING AND
OTHER MATTERS OF INTEREST.
THE BOARD, AS A MATTER OF POLICY, APPOINTS THE CHAIR AND VICE-CHAIR IN A
NON-EXECUTIVE CAPACITY.
- ----------------------------------------------------------------------------------------------------------------
C-6 TRANSCANADA CORPORATION
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 13 ESTABLISH AN AUDIT COMMITTEE COMPOSED ONLY OF OUTSIDE DIRECTORS WITH SPECIFICALLY
DEFINED ROLES AND RESPONSIBILITIES
Does TransCanada Align? YES
Description of Approach ALL FIVE MEMBERS OF THE AUDIT COMMITTEE ARE OUTSIDE, UNRELATED AND INDEPENDENT
DIRECTORS. ALL MEMBERS OF THE AUDIT COMMITTEE ARE FINANCIALLY LITERATE AS DEFINED
UNDER THE CANADIAN AUDIT COMMITTEE RULES AND THE PROPOSED CANADIAN GOVERNANCE
GUIDELINES. IN ADDITION, IN ACCORDANCE WITH THE SEC RULES, THE BOARD HAS
SPECIFICALLY DETERMINED THAT IT HAS AT LEAST ONE AUDIT COMMITTEE FINANCIAL EXPERT
SERVING ON ITS AUDIT COMMITTEE. MR. HARRY G. SCHAEFER HAS BEEN DETERMINED TO BE SUCH
AUDIT COMMITTEE FINANCIAL EXPERT AND IS INDEPENDENT, AS THAT TERM IS DEFINED BY THE
NYSE'S LISTING STANDARDS APPLICABLE TO TRANSCANADA. THE SEC RULES PROVIDE THAT THE
DETERMINATION BY THE BOARD THAT MR. SCHAEFER IS AN "AUDIT COMMITTEE FINANCIAL
EXPERT" AS DEFINED UNDER THOSE RULES DOES NOT MAKE MR. SCHAEFER AN "EXPERT" FOR ANY
OTHER PURPOSE, NOR DOES IT IMPOSE A HIGHER DEGREE OF INDIVIDUAL RESPONSIBILITY OR
OBLIGATION ON MR. SCHAEFER THAN THAT IMPOSED ON ANY OTHER DIRECTOR. RATHER, THE ROLE
OF MR. SCHAEFER, LIKE THE ROLE OF ALL AUDIT COMMITTEE MEMBERS, IS TO OVERSEE THE
AUDIT PROCESS AND NOT TO CERTIFY OR GUARANTEE THE ACCURACY OR COMPLETENESS OF THE
INTERNAL OR EXTERNAL AUDIT OF TRANSCANADA'S FINANCIAL INFORMATION OR PUBLIC
DISCLOSURE.
THE CHARTER OF THE AUDIT COMMITTEE SPECIFICALLY DEFINES THE COMMITTEE'S ROLES AND
RESPONSIBILITIES AND IS SUMMARIZED ELSEWHERE IN THIS PROXY CIRCULAR. THE CURRENT
CHARTER IS PUBLISHED ON TRANSCANADA'S WEBSITE AT www.transcanada.com AND IN THE AIF.
- ----------------------------------------------------------------------------------------------------------------
GUIDELINE 14 IMPLEMENT A SYSTEM TO ENABLE INDIVIDUAL DIRECTORS TO ENGAGE OUTSIDE ADVISORS AT THE
CORPORATION'S EXPENSE
Does TransCanada Align? YES
Description of Approach TRANSCANADA RECOGNIZES THAT INDIVIDUAL DIRECTORS MAY DESIRE THE SERVICES OF AN
INDEPENDENT ADVISOR OR EXPERT TO ASSIST IN MATTERS INVOLVING THEIR RESPONSIBILITIES
AS BOARD OR COMMITTEE MEMBERS. THE BOARD HAS DETERMINED THAT ANY DIRECTOR WHO WISHES
TO ENGAGE AN OUTSIDE ADVISOR AT THE EXPENSE OF TRANSCANADA MAY DO SO IF HE OR SHE
FIRST ADVISES THE GOVERNANCE COMMITTEE. AS WELL, EACH COMMITTEE CHARTER SPECIFICALLY
AUTHORIZES SUCH COMMITTEE TO ENGAGE OUTSIDE EXPERTS AS IT DEEMS NECESSARY TO CARRY
OUT THEIR DUTIES.
- ----------------------------------------------------------------------------------------------------------------
TRANSCANADA CORPORATION C-7
ADDITIONAL INFORMATION
Additional information relating to the company is on SEDAR at www.sedar.com.
Anyone wishing to receive a paper copy of this Proxy Circular or any document
referenced herein, may obtain one free of charge by contacting TransCanada's
Corporate Secretary at 450 - 1st Street S.W., Calgary, Alberta, Canada T2P 5H1,
telephone (403) 920-2000.
Financial information is provided in the company's comparative financial
statements and MD&A for its most recently completed financial year. Shareholders
may access the company website to obtain copies of the company's financial
statements and MD&A at www.transcanada.com.
EXHIBIT 2
[TRANSCANADA LOGO] [COMPUTERSHARE LOGO]
Computershare Trust Company of Canada
9th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
www.computershare.com
SECURITY CLASS
HOLDER ACCOUNT NUMBER
Please print in ink. Print in CAPITAL
letters inside the grey areas as shown in
this example.
/ A / B / C / / 1 / 2 / 3 / / X /
- --------------------------------------------------------------------------------
FORM OF PROXY - ANNUAL AND SPECIAL MEETING TO BE HELD ON APRIL 23, 2004
- --------------------------------------------------------------------------------
NOTES TO PROXY
1. EVERY HOLDER HAS THE RIGHT TO APPOINT SOME OTHER PERSON OF THEIR CHOICE,
WHO NEED NOT BE A HOLDER, TO ATTEND AND ACT ON THEIR BEHALF AT THE MEETING.
IF YOU WISH TO APPOINT A PERSON OTHER THAN THE PERSONS WHOSE NAMES ARE
PRINTED HEREIN, PLEASE INSERT THE NAME OF YOUR CHOSEN PROXYHOLDER IN THE
SPACE PROVIDED (SEE REVERSE).
2. If the securities are registered in the name of more than one owner (for
example, joint ownership, trustees, executors, etc.), then all those
registered should sign this proxy. If you are voting on behalf of a
corporation or another individual you may be required to provide
documentation evidencing your power to sign this proxy with signing
capacity stated.
3. This proxy should be signed in the exact manner as the name appears on the
proxy.
4. If this proxy is not dated, it will be deemed to bear the date on which it
is mailed by Management to the holder.
5. THE SECURITIES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
HOLDER, HOWEVER, IF SUCH A DIRECTION IS NOT MADE IN RESPECT OF ANY MATTER,
THIS PROXY WILL BE VOTED AS RECOMMENDED BY MANAGEMENT.
VOTE USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEK!
VOTING BY MAIL may be the only method for holdings held in the name
of a corporation or holdings being voted on behalf of an individual.
VOTING BY MAIL OR BY INTERNET are the only methods by which a
holder may appoint a person as proxyholder other than the
Management nominees named on the reverse of this proxy.
Instead of mailing this proxy, you may choose one of the two voting
methods outlined below to vote this proxy. Have this proxy in hand
when you call.
RECEIVE DOCUMENTS ELECTRONICALLY - You can enrol to receive future
securityholder communication electronically, after you vote using the
Internet. If you don't vote online, you can still enrol for this service.
Follow the instructions below.
- ------------------------------------- ------------------------------------------ ---------------------------------------------
[GRAPHIC] TO VOTE USING THE TELEPHONE
(WITHIN CANADA AND U.S.) [GRAPHIC] TO VOTE USING THE INTERNET [GRAPHIC] TO RECEIVE DOCUMENTS ELECTRONICALLY
- ------------------------------------- ------------------------------------------ ---------------------------------------------
- Call the toll free number - Go to the following web site: - You can enrol to receive future
listed BELOW from a touch www.computershare.com/ca/proxy securityholder communications
tone telephone. There is electronically, after you vote
NO CHARGE for this call. using the Internet. If you DON'T
vote online, you can still enrol
1 (877) 236-4857 by visiting www.computershare.com
- click "Investors" and then
"Electronic Shareholder
Communications".
YOU WILL NEED TO PROVIDE YOUR HOLDER ACCOUNT NUMBER AND PROXY ACCESS NUMBER
LISTED BELOW.
HOLDER ACCOUNT NUMBER PROXY ACCESS NUMBER
IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT MAIL BACK THIS PROXY.
Proxies submitted must be received by 4:30 pm (EDT) on April 21, 2004.
THANK YOU
+
[BAR CODE GRAPHIC]
- --------------------------------------------------------------------------------
THIS FORM OF PROXY IS SOLICITED BY AND ON BEHALF OF MANAGEMENT.
- --------------------------------------------------------------------------------
APPOINTMENT OF PROXYHOLDER
I/WE BEING SHAREHOLDER(S) OF TRANSCANADA CORPORATION OR Print the name of the --------------------
HEREBY APPOINT: Richard F. Haskayne, Chair, or person you are appointing
failing him Harold N. Kvisle, President and CEO, if this person is someone
or failing him Rhondda E.S. Grant, Vice-President other than the Chairman
and Corporate Secretary of the Meeting. --------------------
as my/our proxyholder with full power of substitution and to vote in
accordance with the following directions (or if no directions have been
given, as the proxyholder sees fit) and all other matters that may properly
come before the ANNUAL AND SPECIAL MEETING OF TRANSCANADA CORPORATION TO BE
HELD IN THE IMPERIAL BALLROOM AT THE HYATT REGENCY CALGARY DOWNTOWN,
700 CENTRE STREET S.E., CALGARY, ALBERTA, ON FRIDAY, APRIL 23, 2004 AT
10:30 AM (MOUNTAIN DAYLIGHT TIME), and at any adjournment thereof.
1. ELECTION OF DIRECTORS
FOR WITHHOLD FOR WITHHOLD FOR WITHHOLD
01. D. D. Baldwin / / / / 05. K. L. Hawkins / / / / 09. D. P. O'Brien / / / /
02. W. K. Dobson / / / / 06. S. B. Jackson / / / / 10. J. R. Paul / / / /
03. P. Gauthier / / / / 07. P. L. Joskow / / / / 11. H. G. Schaefer / / / /
04. R. F. Haskayne / / / / 08. H. N. Kvisle / / / / 12. W. T. Stephens / / / /
2. APPOINTMENT OF AUDITORS
FOR WITHHOLD
Appointment of KPMG LLP, Chartered Accountants, / / / /
as Auditors and authorize the directors to fix
their remuneration.
3. AMENDMENTS TO THE STOCK OPTION PLAN FOR AGAINST
Resolution amending the Stock Option Plan, as
described in the accompanying Management Proxy / / / /
Circular.
4. APPROVAL OF THE SHAREHOLDER RIGHTS PLAN FOR AGAINST
Resolution continuing and ratifying, confirming
and approving the Shareholder Rights Plan, as / / / /
described in the accompanying Management Proxy
Circular.
THE PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE COMPANY. This form
of the proxy, when properly executed, confers discretionary authority with
respect to amendments to the matters identified in the Notice of Annual
Meeting or other matters which properly come before the Meeting and the
replacement of any nominee identified above if such nominee becomes unable or
unwilling to serve. Management knows of no such amendments replacements or
other matters. The shares represented by this proxy will be voted or withheld
from voting on any ballot that may be called for. Where the person whose
proxy is solicited specifies a choice with respect to any matter to be voted
upon, the shares shall be voted in accordance with the choice so made. IF NO
CHOICE IS SPECIFIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
FAVOUR OF THE MATTER.
AUTHORIZED SIGNATURE(S) - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
I/We hereby revoke any proxy previously given with respect to the Meeting. IF NO
VOTING INSTRUCTIONS ARE INDICATED ABOVE, THIS PROXY WILL BE VOTED AS RECOMMENDED
BY MANAGEMENT. I/We authorize you to act in accordance with my/our instructions
set out herein.
Signature(s) Date - Day Month Year
- --------------------------- ------------------------------------
/ / / / / / / / / / /
- --------------------------- ------------------------------------
INTERIM FINANCIAL DISCLOSURE
In accordance with securities regulations, Mark this box if you
shareholders may elect annually to receive would like to receive
interim financial statements, if they so / / interim financial
request. If you wish to receive interim statements.
financial statements, please mark this box:
As always, you can access TransCanada reports online at www.transcanada.com
/ / T R P Q +
