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PRECISION DRILLING TRUST
CORPORATE GOVERNANCE GUIDELINES
1. Trustee Qualification Standards
A majority of the Board of Trustees (the "Board of Trustees") of Precision Drilling Trust (the "Trust") must be Canadian residents and determined to be "independent" as defined in applicable securities laws and the rules or guidelines of any stock exchange upon which the units of the Trust are listed for trading.
A trustee of the Trust ("Trustee") will not be eligible to continue as a Trustee if that person has been a Trustee for more than fourteen years as at the date of an Annual General Meeting or is 69 years or older as at the date of an Annual General Meeting.
In its capacity as administrator of the Trust, Precision Drilling Corporation (the "Corporation") shall, through its Corporate Governance and Nominating Committee, at least annually review the competencies, skills and personal qualities applicable to candidates to be considered for nomination to the Board of Trustees. The objective of this review will be to maintain the composition of the Board of Trustees in a way that provides an effective mix of skills and experience to provide for the duties and responsibilities of the Trustees.
The Corporate Governance and Nominating Committee of the Corporation, acting in its capacity as administrator of the Trust, will report at least annually to the Board of Directors of the Corporation (the "Board of Directors"). Once approved by the Board of Directors, the report of the Corporate Governance and Nominating Committee will be submitted to the Board of Trustees.
2. Trustee Responsibilities
The primary duty of Trustees is to oversee the investment and management of the Trust's property.
Trustees should exercise their business judgment to act in what they reasonably believe to be in the best interests of the Trust in a manner consistent with their fiduciary duties.
Each Trustee is expected to attend in person all regularly-scheduled meetings of the Board of Trustees. It is acceptable for Trustees to participate in such meetings by conference call if attendance in person is not possible. To prepare for meetings, Trustees should review the materials that are sent to Trustees in advance of those meetings. Trustees are to advise the Secretary of the Board of Trustees of matters which they believe should be added to a meeting agenda.
The Board of Trustees expects Trustees as well as directors, officers and employees of the Corporation, as the administrator of the Trust, to act ethically at all times and to acknowledge their adherence to policies comprising the Code of Business Conduct and Ethics of the Corporation (the "Code of Business Conduct"). The Board of Trustees has adopted the principles set out in the Code of Business Conduct of the Corporation and is currently in the process of working with the Board of Directors to adopt a Joint Code of Business Conduct, which would apply to the activities of the Trust, the Precision Drilling Limited Partnership and the Corporation. The Board of Trustees is responsible for monitoring the Trust's compliance with the Code of Business Conduct and will not permit any waiver of the Code of Business Conduct with respect to any Trustee.
Each Trustee at all times when sitting on the Board of Trustees, must represent the interests of holders of units of the Trust ("Unitholders") generally, not just those of a particular group of Unitholders. Any Trustee unable to do this should excuse himself or herself from discussion of the particular issue.
An important task of the Board of Trustees is to review, consider and comment upon reports on the operations of the business of the Corporation and on matters that have been delegated from the Trust to the Corporation under the Administration Agreement. While the Board of Trustees will not make actual business decisions relating to operational matters in relation to the underlying business of the Corporation it will supervise the execution of all such delegated matters.
In addition, the Board of Trustees is responsible for approving the Unitholders' recommendation of directors and causing the General Partner of the Precision Drilling Limited Partnership to elect such nominees to the Board of Directors.
The Board of Trustees must ensure that communications with Unitholders and the investment community are complete and open, particularly as they relate to the Trust's policies and risk profile.
The Board of Trustees shall at all times ensure that the Corporation maintains (a) an Audit Committee, (b) a Corporate Governance and Nominating Committee, and (c) a Compensation Committee, and that the reports of such committees, once approved by the Board of Directors, are promptly submitted to the Board of Trustees. Each such committee must operate in accordance with applicable law, its Charter and Terms of Reference and the applicable rules of each of the Toronto Stock Exchange and the New York Stock Exchange. The Board of Trustees may also establish or cause the Board of Directors to establish such other committees as it deems appropriate and delegate to such committees such authority permitted by applicable law as the Board of Trustees sees fit.
3. Trustee Access to Management
The Corporation shall provide the Board of Trustees with reasonable access to the management of the Corporation for purposes of reporting on any matters that have been delegated by the Trust to the Corporation, subject to reasonable advance notice to the Corporation and reasonable efforts to avoid disruption to the Corporation's management, business and operations.
4. Trustee Compensation
The Board of Trustees will determine and review the form and amount of Trustee compensation.
5. Trustee Orientation and Continuing Education
The Board of Trustees will provide access to appropriate orientation programs, sessions or materials for newly elected Trustees for their benefit either prior to or within a reasonable period of time after their nomination or election as a Trustee. The Board of Trustees will encourage, but not require, Trustees to periodically participate in or attend appropriate programs, sessions or receive materials as to the responsibilities of trustees of publicly-traded entities.
6. Annual Performance Evaluation of the Board
The Board of Trustees will annually review its own performance and review and reassess the adequacy of the Mandate of the Board of Trustees. The Board of Trustees shall make a determination annually as to whether it is functioning effectively. The Board of Trustees shall review these Corporate Governance Guidelines on an annual basis to determine whether any changes are appropriate, taking into account any recommendations of the Corporate Governance and Nominating Committee of the Corporation, acting in its capacity as administrator of the Trust, provided that such recommendations have been approved by the Board of Directors.
Approved by the Board of Directors of Precision Drilling Corporation on March 7, 2006.
PRECISION DRILLING CORPORATION
CORPORATE GOVERNANCE GUIDELINES
1. Director Qualification Standards
A majority of the Board of Directors (the "Board of Directors") of Precision Drilling Corporation (the "Corporation") must be Canadian residents and determined to be "independent" as defined in applicable securities laws and the rules of any stock exchange upon which the units of Precision Drilling Trust (the "Trust") are listed for trading.
A director of the Corporation ("Director") will not be eligible to continue as a director if that person has been a director of the Corporation for more than fourteen years as at the date of an Annual General Meeting or is 69 years or older as at the date of an Annual General Meeting. The Board of Directors has waived application of this guideline for 2006 given the need for continuity during the process of converting the business into an income trust structure and to provide continued stewardship to the Corporation's new management team.
The Corporate Governance and Nominating Committee of the Corporation shall annually review the competencies, skills and personal qualities applicable to candidates to be considered for nomination to the Board of Directors. The objective of this review will be to maintain the composition of the Board of Directors in a way that provides an effective mix of skills and experience to provide for the overall stewardship of the Corporation.
The Corporate Governance and Nominating Committee of the Corporation will report at least annually to the Board of Directors. Once approved by the Board of Directors, the portions of any report of the Corporate Governance and Nominating Committee relevant to Trust matters administered by the Corporation will be submitted to the Board of Trustees of the Trust (the "Board of Trustees").
2. Director Responsibilities
The primary duty of the Directors is to help the Corporation realize its full potential. They do this not just by reacting to events or to proposals at meetings, but by bringing to the Corporation's affairs a creative vision, initiative and a sense of how outside events and developments can affect its future. The Directors are encouraged to speak their minds while respecting others, so that different viewpoints can flourish in the process of developing a sensible consensus. Since the Corporation is the administrator of the Trust, the Board of Directors must also ensure that operational matters of the Trust that have been delegated to the Corporation, pursuant to the terms of the Administrative Agreement dated November 7, 2005, are properly administered. As part of its responsibilities for matters so delegated, the Corporation is committed to principles and practices of good corporate governance, including the use of committees.
Directors should exercise their business judgment to act in what they reasonably believe to be in the best interests of the Corporation in a manner consistent with their fiduciary duties.
Each Director is expected to attend in person all regularly-scheduled meetings of the Board of Directors and of all Board of Directors' committees upon which they serve. It is acceptable for Directors to participate in such meetings by conference call if attendance in person is not possible. To prepare for meetings, Directors should review the materials that are sent to Directors in advance of those meetings. Directors are to advise the Chair of the Board of Directors or committee of matters which they believe should be added to a meeting agenda.
The Board of Directors expects Directors as well as officers and employees of the Corporation to act ethically at all times and to acknowledge their adherence to policies comprising the Code of Business Conduct and Ethics for the Corporation (the "Code of Business Conduct"). The Board of Directors is responsible for monitoring the Corporation's compliance with the Code of Business Conduct. The Board of Directors is currently in the process of working with the Board of Trustees to adopt a Joint Code of Business Conduct and Ethics, which would apply to the activities of the Trust, the Precision Drilling Limited Partnership and the Corporation.
An important task of the Board of Directors is to encourage, challenge, counsel and monitor management of the Corporation, while leaving management free to direct the Corporation's day to day operations. Relations with the Chief Executive Officer of the Corporation should be open and constructive; all aspects of an issue should be discussed in a constructive atmosphere and there should be a shared interest in finding the best way to proceed, with the Board of Directors' response to each challenge ideally emerging from effective discussion and analysis by the Board of Directors and management.
The Board of Directors must ensure that the Corporation has a sound but innovative strategic plan that will enable it to flourish in the future. The Board of Directors is expected to contribute creative judgment and a fresh perspective to this task and to review the plan at least annually, and more frequently if the Board of Directors deems it necessary, to ensure that it remains current and applicable.
The Board of Directors should approve budgets and monitor operating performance and ensure that it has the necessary information, including key business and competitive indictors, to enable it to discharge this duty and take any remedial action necessary.
The Board of Directors should review at least annually, and more frequently if the Board of Directors deems it necessary, the performance of each business segment of the Corporation and the strength of the Corporation's competitive position and the relative returns it is delivering to its shareholders.
The Board of Directors must ensure that communications with the holders of units of the Trust and the investment community are complete and open, particularly as they relate to the Corporation's strategies, policies and risk profile.
The Board of Directors will schedule executive sessions where independent Directors meet with or without management participation at each regularly-scheduled meeting of the Board of Directors. The Board of Directors will establish methods by which interested parties may communicate directly with the Lead Director or with the independent Directors of the Board of Directors as a group and cause such methods to be disclosed.
The Board of Directors shall at all times maintain (a) an Audit Committee, (b) a Corporate Governance and Nominating Committee and (c) a Compensation Committee, each of which must report to the Board of Directors. Each such committee must operate in accordance with applicable laws, its Charter and Terms of Reference and the applicable rules of each of the Toronto Stock Exchange and the New York Stock Exchange. The Board of Directors may also establish such other committees as it deems appropriate and delegate to such committees such authority permitted by applicable law and as the Board of Directors sees fit. The purpose of the Board of Directors' committees is to assist the Board of Directors in discharging its responsibilities. Notwithstanding the delegation of responsibilities to a Board of Directors' committee, the Board of Directors is ultimately responsible for matters assigned to the committees for determination. Except as may be explicitly provided in the Charter and Terms of Reference of the committee or a resolution of the Board of Directors, the role of the Board of Directors' committee is to review and make recommendations to the Board of Directors with respect to the approval of matters considered by the committee.
3. Director Access to Management
The Corporation shall provide each Director with complete access to the management of the Corporation, subject to reasonable advance notice to the Corporation and reasonable efforts to avoid disruption to the Corporation's management, business and operations.
4. Director Compensation
The Board of Directors, upon recommendation of the Compensation Committee, will determine and review the form and amount of Director compensation.
5. Director Orientation and Continuing Education
The Board of Directors, upon recommendation of the Corporate Governance and Nominating Committee, will establish or identify and provide access to appropriate orientation programs, sessions or materials for newly elected Directors of the Corporation for their benefit either prior to or within a reasonable period of time after their nomination or election as a Director. The Board of Directors will encourage, but not require, Directors to periodically participate in or attend appropriate programs, sessions or receive materials as to the responsibilities of directors of publicly-traded companies.
6. Management Evaluation and Succession
The Board of Directors (not including any members of management of the Corporation) will conduct an annual review of the performance and compensation of the Chief Executive Officer, taking into account the views and recommendations of the Compensation Committee and the Corporate Governance and Nominating Committee, as applicable, and as set forth in their respective Charter and Terms of Reference.
The Board of Directors will establish and review such formal or informal policies and procedures, consulting with the Corporate Governance and Nominating Committee, the Chief Executive Officer and others, as it considers appropriate, regarding executive succession planning.
7. Annual Performance Evaluation of the Board of Directors
The Board of Directors will annually review its own performance and review and reassess the adequacy of the Mandate of the Board of Directors. The Board of Directors shall make a determination annually as to whether it and its committees are functioning effectively. The full Board of Directors will discuss its evaluation to determine what, if any, action could improve Board of Directors and Board of Directors committee performance. The Board of Directors, with the assistance of the Corporate Governance and Nominating Committee, as appropriate, shall review these Corporate Governance Guidelines on an annual basis to determine whether any changes are appropriate.
Approved by the Board of Directors of Precision Drilling Corporation on March 7, 2006.
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