CHARTER OF THE HUMAN RESOURCE AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF TIM HORTONS INC.
Adopted September 28, 2009
(Most Recently Amended: May 8, 2013)
This Charter identifies the purpose, composition, meeting requirements, committee responsibilities, annual evaluation procedures and the resources and authority of the Human Resource and Compensation Committee (the "Committee") of the Board of Directors of Tim Hortons Inc., a corporation incorporated under the Canada Business Corporations Act (the "Corporation"), pursuant to the Board's Principles of Governance, its Governance Guidelines ("Governance Guidelines") and other applicable requirements.
The Committee has been established to: (a) examine the levels and methods of compensation employed by the Corporation with respect to the Executive Chairman, Chief Executive Officer ("CEO"), and all other "executive officers" (i.e., those officers either designated by the Board as "executive officers" from time to time or any officer that reports directly to the CEO); (b) make recommendations to the Board with respect to the levels of compensation for the Executive Chairman and CEO, and also determine the levels of compensation for all other executive officers; (c) review and approve corporate goals and objectives relevant to the CEO's compensation, evaluate the CEO in light of those goals and, together with the independent directors of the Board, determine the CEO's compensation package based on this evaluation, including approving any severance arrangements or employment agreements; (d) review and approve the compensation discussion and analysis and related compensation disclosures to be included in the Corporation's proxy circular; (e) oversee all matters relating to shareholders' advisory vote on the Corporation's executive compensation ("say-on-pay votes"); (f) make recommendations to the Board with respect to the implementation and amendment of incentive-compensation plans for the executive officers and all equity-based plans for officers and employees; (g) make award (i.e., type of award or vehicle) and grant determinations under equity compensation plans at previously approved levels of compensation for the executive officers, and further, approve a remaining maximum additional dollar amount for equity awards, as recommended by the CEO, to be granted to other officers and employees in such respective amounts as determined by the CEO; (h) establish performance objectives, corresponding target budget numbers, and payout curves under incentive compensation and equity compensation plans, as the Committee shall determine appropriate; (i) adopt one or more cash bonus plans for the executive officers, subject to Board, and if required, shareholder approval, and, to the extent the Committee determines appropriate, with a view to qualification of the compensation paid thereunder as "performance-based compensation" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, as such Section may be amended or superceded from time to time, and to implement and administer such plans; (j) consider and report, not less frequently than annually, to the Board on non-employee director compensation matters; (k) evaluate, not less frequently than annually, the independence of any compensation advisors; and (l) perform such other duties and functions, including but not limited to those related to employees of the Corporation (or an affiliate) below the executive-officer level, as described in this Charter or as the Board may otherwise assign to the Committee from time to time. In performing its duties, the Committee shall seek to maintain an effective working relationship with the Board and the Corporation's management.
The Committee shall be composed of at least three members (including a Chairperson). The composition of the Committee shall satisfy the independence requirements established for Committee membership in the Governance Guidelines, which requirements are consistent with the applicable listing standards of the New York Stock Exchange ("NYSE"), and the rules of the Canadian securities regulatory authorities, both of the foregoing as may be amended from time to time. In addition, each member of the Committee must be a "non-employee director" as such term is defined in Rule 16b-3 under the Securities Exchange Act of 1934 as well as an "outside director" for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, and may not be part of a compensation committee interlock within the meaning of the U.S. Securities and Exchange Commission ("SEC") Regulation S-K and Canadian securities laws. The Board shall affirmatively determine that the Committee (and any individual member, if applicable) satisfies such requirements whenever any director is appointed to or resigns or is removed from the Committee. The members of the Committee and the Chairperson shall be selected annually by the Board and serve at the pleasure of the Board, upon review and recommendation by the Nominating and Corporate Governance Committee. A Committee member (including the Chairperson) may be removed at any time, with or without cause, by the Board. The Board may designate one or more directors as alternate members of the Committee, who may replace any absent or disqualified member or members at any meetings of the Committee, provided that the independence requirements set forth in the Governance Guidelines are satisfied. No person may be made a member of the Committee if his or her service on the Committee would violate any restriction on service imposed by law, including any rule or regulation of the SEC, the Canadian securities regulatory authorities, or any securities exchange or market on which the Corporation's securities are traded. A Committee member may resign at any time by giving written notice to the Board. A Committee member may resign from the Committee without resigning from the Board, but a Committee member shall be deemed to have resigned from the Committee upon ceasing to be a member of the Board or upon the Nominating and Corporate Governance Committee having determined that the member does not satisfy the applicable independence requirements set forth in the Governance Guidelines, as noted above.
The Committee may delegate responsibilities listed herein to one or more subcommittees of the Committee if the Committee determines such delegation would be in the best interests of the Corporation.
III. MEETING REQUIREMENTS
The Committee shall meet as necessary, but at least four times each year, to enable it to fulfill its responsibilities, and shall hold executive sessions, with only the members of the Committee present, attendant to each Committee meeting, or otherwise as needed or desired. The Committee shall meet at the call of the Chairman of the Board, the Chairperson, or by any two Committee members, preferably in conjunction with regular Board meetings. The Committee may meet by telephone conference call or by any other means permitted by law or the Corporation's By-laws. A majority of the members of the Committee shall constitute a quorum. The Committee shall act on the affirmative vote of a majority of members present at a meeting at which a quorum is present. Without a meeting, the Committee may act by unanimous written consent of all members. The Committee shall determine its own rules and procedures, including designation of a chairperson pro tempore, in the absence of the Chairperson, and designation of a secretary. The Committee may also adopt rules of governance, not inconsistent with this Charter, to assist the Committee in the discharge of its responsibilities. The secretary need not be a member of the Committee and shall attend Committee meetings and prepare minutes thereof, which shall be recorded or filed with the books and records of the Corporation. Any member of the Board shall be provided with copies of such Committee minutes upon request.
The Committee may ask members of management, or others whose advice and counsel it considers relevant to the issues then being considered by the Committee, to attend meetings of the Committee, to provide information to the Committee, and to assist in the discussion and examination of the matters under consideration by the Committee.
The Chairperson of the Committee shall be responsible for leadership of the Committee, presiding over Committee meetings, making Committee assignments and reporting the Committee's actions to the Board from time to time (but at least quarterly) as requested by the Board. The Chairperson, with the assistance of management, shall also set the agenda for Committee meetings.
IV. COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Committee members, as directors and as articulated in the Governance Guidelines, will exercise their business judgment in a manner they reasonably believe to be in the best interests of the Corporation. Committee members are entitled to rely on the honesty and integrity of the Corporation's executives and its outside advisors and auditors to the fullest extent permitted by law. In carrying out its oversight responsibilities, the Committee's policies and procedures should remain flexible to enable the Committee to promote compliance by the Corporation with changes in applicable legal and regulatory requirements.
The Committee shall have the authority, duties and responsibilities for those compensation matters listed above under its statement of purpose. Such authority, duties and responsibilities include the following:
In discharging the responsibilities set forth under this Section IV.A, the Committee may consider (as appropriate and as contemplated by Corporation policies, plans and programs) individual, team, business unit, regional and Corporation-wide performance and results against applicable pre-established annual and long-term performance goals, taking into account such factors as shareholder return, economic and business conditions, and remuneration provided to the Executive Chairman and CEO in the past. The Committee may also consider comparative and competitive compensation and benefit performance levels of companies included in specified comparator groups determined by the Committee, as well as any other factors and considerations as it shall determine are appropriate. The Committee shall not be precluded from approving compensation awards under approved plans, subject to the Board's approval rights with respect to amount of compensation, as may be required to comply with applicable tax laws (e.g., Section 162(m) of the Internal Revenue Code of 1986, as amended).
All decisions of the Committee regarding recommendations of the Committee to the Board regarding the compensation of the CEO and/or Executive Chairman shall be made by the Committee in executive session.
Prior to the retention of a compensation consultant or any other external advisor, and not less frequently than annually, the Committee shall assess the independence of such advisor from management, taking into consideration all factors relevant to such advisor's independence, as the Committee considers appropriate or as may be required by applicable law or listing standards, including factors specified in the New York Stock Exchange listing standards; and
V. ANNUAL EVALUATION PROCEDURES
The Committee shall annually assess its performance and effectiveness to confirm that it is meeting its responsibilities under this Charter. In this review, the Committee shall consider, among other things, (a) the appropriateness of the scope and content of this Charter, (b) the appropriateness of matters presented for information and approval, (c) the sufficiency of time for consideration of agenda items, (d) the frequency and length of meetings, and (e) the quality of written materials and presentations. The Committee may recommend to the Board such changes to this Charter as the Committee deems appropriate.
The Committee may conduct or authorize studies of matters within the Committee's scope of responsibilities, as described above, and may, in its sole discretion, retain or obtain the advice of, at the expense of the Corporation, independent counsel and, if applicable, other consultants or advisors that it deems appropriate or advisable to assist the Committee in fulfilling its responsibilities under this Charter. As set forth above, the Committee shall have sole authority and direct responsibility to appoint, retain and terminate any compensation advisor engaged to assist in the evaluation of director, Executive Chairman, CEO or other executive officer compensation, including the sole authority and responsibility to negotiate and approve the fees and retention terms of any compensation advisor retained for such purposes, and shall be directly responsible for oversight of the work of any such advisors. In this regard, see above under paragraph 10 of Section IV. F.
Nothing contained in this Charter is intended to expand applicable standards of liability under statutory or regulatory requirements for the directors of the Corporation or members of the Committee. The purposes and responsibilities outlined in this Charter are meant to serve as guidelines rather than as inflexible rules, and the Committee is encouraged to adopt such additional procedures and standards as it deems necessary from time to time to fulfill its responsibilities. This Charter is intended to be consistent with the Board's Principles of Governance and Governance Guidelines. This Charter is, and any amendments thereto will be, displayed on the Corporation's website, and a printed copy will be made available without charge to any shareholder of the Corporation who requests such.
Certain of the matters referred to in this Charter and approved by the Committee and/or Board may also require shareholder and/or regulatory approvals, in which case, the approval of such matters by the Committee and/or Board shall be subject to such required approvals having been obtained.