THE MATRIX TO DEFINING DIRECTOR INDEPENDENCE IN CANADA André Boivin September 2015 pg | i DIRECTOR INDEPENDENCE IN CANADA......................... 1 DIRECTOR INDEPENDENCE MATRIX............................... 3 TSX Listed Companies.................................................................................. 3 General Governance Independence – Board Composition 3 NP 58-201 Part 2 and Part 3, NI 58-101 and NI 52-110 Sections 1.4 and 1.5 and 3 3 ISS Voting Guidelines Section 2 5 Glass Lewis Approach Section I 7 Globe’s Board Games Section 1 8 CCGG Guideline 2 9 CBCA Section 171 9 Independence in the Context of Transactions 10 MI 61-101 Part 7 10 CBCA Section 120 11 TSX Company Manual 12 AUTHOR PROFILE: ANDRÉ BOIVIN ................................ 13 © 2015 Cassels Brock & Blackwell LLP. All rights reserved. Agreement of Confidentiality This document and the information contained in it (including but not limited to information regarding client and/or reference names, representative work samples and/or values, the hourly rates of our lawyers or other professionals, or any fee arrangements) constitute confidential information and may not be disclosed publicly, reproduced, transmitted or published, in any form or by any means without the prior written permission of Cassels Brock & Blackwell LLP, unless such disclosure is required by law. TABLE OF CONTENTS pg | 1 DIRECTOR INDEPENDENC E IN CANADA One of the main pillars of good corporate governance in Canada is the independence of the board. So, it should be fairly straightforward for everyone to identify what exactly is an independent director. But it is not. It depends on whose standards one uses to look at the question. It also depends on the situation in connection with which the question arises. For “general governance,” Canadian securities regulatory authorities have adopted National Policy 58-201 — Corporate Governance Guidelines (“NP 58-201”) to provide public companies with guidance on corporate governance with a view to achieving the right balance between providing protection to investors and maintaining fair and efficient capital markets. NP 58-201, in conjunction with National Instrument 58-101 — Disclosure of Corporate Governance Practices (“NI 58-101”) and National Instrument 52-110 — Audit Committees (“NI 52-110”) set out the regulatory guidance and requirements with respect to the composition and operation of public company boards. NP 58- 201 provides that boards should have a majority of independent directors and that the chair of the board should be independent. If a corporation does not have an independent chair, an independent director should be appointed to act as “lead director.” The audit committee of a non-venture issuer must be composed entirely of independent directors. A director is considered independent if he or she has no direct or indirect “material relationship” with the corporation. A “material relationship” is one which could, in the view of the board, be reasonably expected to interfere with the exercise of the director’s independent judgement. NI 52-110 also sets out some specific instances in which directors would be deemed not to be independent. But in addition to the body of regulatory guidance and requirements with respect to board independence referred to above, public companies are also subject to the expectations of institutional shareholders, most notably as a result of the activities of proxy advisory firms that have their own definitions of independence and associated standards with respect to board composition. Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis & Co., LLC (“Glass Lewis”) are amongst the most influential shareholder advisory organizations. They each set out their own corporate governance guidelines which are often different from, and even more extensive than, mandatory requirements or guidelines from the regulators. These organizations review a corporation’s governance practices and advise Canadian shareholders how to vote their shares based on their standards. These firms have a strong influence on shareholder decision-making. The media also brings its own influence on independence determinations by public company boards. In particular, companies in the S&P/TSX composite index will often seek to rank high on the Globe & Mail’s Board Games Report, which is an annual ranking of the governance practices of companies forming part of such index, and this ranking is based on the Globe’s own governance definitions and benchmarks, which again differ from regulatory standards. In addition to the foregoing general governance standards, there is another different layer of independence requirements that is often confused with the foregoing general governance notion of independence. It is the concept of independence in the context of specific transactions, or in other words, the notion that a director should be free of any conflicts with respect of certain transactions rather than in respect for management. Indeed, corporate law, securities law and stock exchange rules prescribe specific requirements to ensure directors who are independent of conflicts with respect to a transaction play a special role in the approval process of such transaction. And it is not because a director is independent under the general governance standards of NP 58-201 and ISS guidelines that pg | 2 he or she will be independent of conflicts with respect to a specific transaction. For example a board member of company X who is independent of company X under NP 58-201 will not generally be considered independent (i.e., free of conflicts) in the context of an acquisition of company X by company Y, if the said director is also the CEO and a major shareholder of company Y. So, in short, when a client calls a lawyer to ask if a director is independent, the client often finds the answer much more nuanced than he or she expected. There is a myriad of sources of standards that are to be considered and the context of the question (i.e., is it for governance in general or for a specific transaction) will also have an impact on the parameters that will need to be considered for the analysis. The following is simply a matrix assembling all in one place the key definitions and standards from the various relevant sources as they relate to director independence as they may apply to a company listed on the Toronto Stock Exchange (the “TSX”) in the context of (a) general corporate governance board composition; and (b) a transaction where conflicting interests for a director may arise. pg | 3 DIRECTOR INDEPENDENC E MATRIX TSX LISTED COMPANIES General Governance Independence – Board Composition NP 58-201 Part 2 and Part 3, NI 58-101 and NI 52-110 Sections 1.4 and 1.5 and 3 Independence Criteria Application 1.4 Board member independence (1) A board member is independent if he or she has no direct or indirect material relationship with the issuer. (2) For the purposes of subsection (1), a “material relationship” is a relationship which could, in the view of the issuer's board of directors, be reasonably expected to interfere with the exercise of a member's independent judgement. (3) Despite subsection (2), the following individuals are considered to have a material relationship with an issuer: (a) an individual who is, or has been within the last three years, an employee or executive officer of the issuer; (b) an individual whose immediate family member is, or has been within the last three years, an executive officer of the issuer; (c) an individual who: (i) is a partner of a firm that is the issuer's internal or external auditor, (ii) is an employee of that firm, or (iii) was within the last three years a partner or employee of that firm and personally worked on the issuer's audit within that time; (d) an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual: (i) is a partner of a firm that is the issuer's internal or external auditor, (ii) is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or (iii) was within the last three years a partner or employee of that firm and personally worked on the issuer's audit within that time; (e) an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the issuer's current executive officers serves or served at that same time on the entity's compensation committee; and (f) an individual who received, or whose immediate family member who is employed as an executive officer of the issuer received, more than $75,000 in direct compensation from the issuer during any 12 month period within the last three years. (4) […..] (5) For the purposes of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with The majority of the board should The Chair of the board be independent directors. should The board should appoint a nominating committee and a compensation committee, each of which be an independent director or a lead director who is an independent director should be appointed. should be composed entirely of independent directors. pg | 4 Independence Criteria Application that firm if the compensation is not contingent in any way on continued service. (6) For the purposes of clause (3)(f), direct compensation does not include: (a) remuneration for acting as a member of the board of directors or of any board committee of the issuer, and (b) the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. (7) Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because the individual or his or her immediate family member (a) has previously acted as an interim chief executive officer of the issuer, or (b) acts, or has previously acted, as a chair or vice-chair of the board of directors or of any board committee of the issuer on a part-time basis. (8) For the purposes of section 1.4, an issuer includes a subsidiary entity of the issuer and a parent of the issuer. 1.5 Additional Independence Parameters specific to Audit Committee members (1) Despite any determination made under section 1.4, an individual who (a) accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or any subsidiary entity of the issuer, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the board or any board committee; or (b) is an affiliated entity of the issuer or any of its subsidiary entities is considered to have a material relationship with the issuer. (2) For the purposes of subsection (1), the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by (a) an individual's spouse, minor child or stepchild, or a child or stepchild who shares the individual's home; or (b) an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the issuer or any subsidiary entity of the issuer. (3) For the purposes of subsection (1), compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. Every issuer must have an audit committee. Every audit committee member must be independent pg | 5 ISS Voting Guidelines 1 Section 2 Independence Criteria Application 1. Inside Director: 1.1 Employees of the company or its affiliatesi ; 1.2 Non-employee officer of the company if he/she is among the five most highly compensated; 1.3 Current interim CEO or any other current interim executives; 1.4 Beneficial owner of company shares with more than 50 percent of the outstanding voting rights (this may be aggregated if voting power is distributed among more than one member of a group)ii . 2. Affiliated Outside Director: Former/Interim CEOiii 2.1 Former CEO of the company or its affiliates within the past five yearsiv or of an acquired company within the past five years. 2.2 Former interim CEO within the past five yearsiv if the service was longer than 18 months or if the service was between 12 and 18 months and the compensation was high relative to that of the other directors or in line with a CEO’s compensationv at that time. 2.3 CEO of a former parent or predecessor firm at the time the company was sold or split off from the parent/predecessor within the past five yearsiv. Non-CEO Executivesiii 2.4 Former executive of the company, an affiliate, or a firm acquired within the past three years; 2.5 Former interim executive within the past three years if the service was longer than 18 months or if the service was between 12 and 18 months, an assessment of the interim executive's terms of employment including compensation relative to other directors or in line with the top five NEOs at that time. 2.6 Executive of a former parent or predecessor firm at the time the Company was sold or split off from parent/predecessor within the past three years. 2.7 Executive, former executive within the last three years, general or limited partner of a joint venture or partnership with the company; Relatives 2.8 Relativevi of current executive officervii of the company; 2.9 Relative of a person who has served as an executive officer of the company within the last three years; Transactional, Professional, Financial, and Charitable Relationships 2.10 Currently provides (or a relative provides) professional services to the company or to its officers; 2.11 Is (or a relative is) a partner, controlling shareholder or an employee of, an organization that provides professional services to the company, to an affiliate of the company, or to an individual officer of the company or one of its affiliates. 2.12 Currently employed by (or a relative is employed by) a significant customer or supplierviii. 2.13 Is (or a relative is) a trustee, director or employee of a charitable or non-profit organization that receives materialix grants or endowments from the company. 2.14 Has (or a relative has) a transactional relationship with the company excluding investments in the company through a private placement. Other Relationships 2.15 Has a contractual/guaranteed board seat and is party to a voting agreement to vote in line with management on proposals being brought to shareholders. 2.16 Founderx of the company but not currently an employee. Generally ISS will recommend that vote be withheld for any insider or affiliated outside director where: › The board is less than majority independent; or › The board lacks a separate compensation or nominating committee. ISS will recommend to withhold voting for individual directors who are insiders and are members of the audit, compensation or nominating committee. pg | 6 Independence Criteria Application 2.17 Has any material relationship with the corporation or with any one or more members of management of the corporation. Board Attestation 2.18 Board attestation that an outside director is not independent. 3. Independent Directors: 3.1 No material ties to the corporation other than board seat. Footnotes: i "Affiliate" includes a subsidiary, sibling company, or parent company. ISS uses 50 percent control ownership by the parent company as the standard for applying its affiliate designation. ii Under this definition, officers of an entity and/or its affiliates holding more than 50 percent of the outstanding voting rights will be considered insiders. iii When there is a former CEO or other officer of a capital pool company (CPC) or special purpose acquisition company (SPAC) serving on the board of an acquired company, ISS will generally classify such directors as independent unless determined otherwise taking into account the following factors: the applicable listing standards determination of such director’s independence; any operating ties to the firm; and the existence of any other conflicting relationships or related party transactions. iv The determination of a former CEO's classification following the five year cooling-off period will be considered on a case-by-case basis. Factors taken into consideration may include but are not limited to: management/board turnover, current or recent involvement in the company, whether the former CEO is or has been Executive Chairman of the board or a company founder, length of service with the company, any related party transactions, consulting arrangements, and any other factors that may reasonably be deemed to affect the independence of the former CEO. v ISS will look at the terms of the interim CEO's compensation or employment contract to determine if it contains severance pay, long-term health and pension benefits or other such standard provisions typically contained in contracts of permanent, non-temporary CEOs. ISS will also consider if a formal search process was underway for a full-time CEO. vi Relative refers to immediate family members including spouse, parents, children, siblings, in-laws and anyone sharing the director's home. vii Executive Officer will include: the CEO or CFO of the entity; the president of the entity; a vice-president of the entity in charge of a principal business unit, division or function; an officer of the entity or any of its subsidiary entities who performs a policy making function in respect of the entity; any other individual who performs a policy-making function in respect of the entity; or any executive named in the Summary Compensation Table. viii If the company makes or receives annual payments exceeding the greater of $200,000 or 5 percent of recipient's gross revenues (the recipient is the party receiving proceeds from the transaction). ix "Material" is defined as a standard of relationship (financial, personal or otherwise) that a reasonable person might conclude could potentially influence one's objectivity in the boardroom in a manner that would have a meaningful impact on an individual's ability to satisfy requisite fiduciary standards on behalf of shareholders. x The operating involvement of the Founder with the company will be considered. Little or no operating involvement may cause ISS to deem the Founder as an independent outsider. pg | 7 Glass Lewis Approach2 Section I Independence Criteria Application Independent Director: A director is independent if s/he has no direct or indirect materiali financial or familialii connections with the company,iii its executives, its independent auditor or other board members, except for service on the board and the standard fees paid for that service. Employee relationships that have existed within the past five years and other relationships that have existed within the three years prior to the inquiry are usually considered to be "current" for purposes of this test. However, Glass Lewis does not apply the five-year look-back period to directors who have previously served as executives of the company on an interim basis for less than one year. Affiliated Director: A director is affiliated if s/he has a material, financial, familial or other relationship with the company, its independent auditor or its executives, but is not an employee of the company. This includes directors whose primary employers have a material financial relationship with the company, as well as those who own or control at least 20% of the company's voting power.iv We note that in every instance in which a company classifies one of its directors as non-independent, that director will be classified as an affiliate by Glass Lewis.v Inside Director: An inside director is one who simultaneously serves as a director and as an employee of the company. This category may include a chairman of the board who acts as an employee of the company or is paid as an employee of the company. Footnotes: i "Material" as used herein means a relationship where the dollar value exceeds: (i) C$50,000 (C$25,000 for venture firms), or where no amount is disclosed, for directors who personally receive compensation for a service they have agreed to perform for the company, outside of their service as a director, including professional or other services; (ii) C$100,000 (C$50,000 for venture firms), or where no amount is disclosed, for those directors employed by a professional services firm such as a law firm, investment bank or consulting firm where the firm is paid for services but not the individual directly (see section on TSX Venture Companies for exceptions). This dollar limit would also apply to charitable contributions to schools where a board member is a professor, or charities where a board member serves on the board or is an executive, or any other commercial dealings between the company and the director or the director's firm; (iii) 1 % of either company's consolidated gross revenue for other business relationships (e.g., where the director is an executive officer of a firm that provides or receives services or products to or from the company). ii "Familial" as used herein includes a person's spouse, parents, children, siblings, grandparents, uncles, aunts, cousins, nieces and nephews, in-laws, and anyone (other than domestic employees) who share such person's home. iii "Company" includes any parent or subsidiary in a consolidated group with the company or any entity that merged with, was acquired by, or acquired the company. iv The CBCA stipulates that an associate of a person means (among other things) a corporate body or person that beneficially owns or controls, directly or indirectly, shares or securities currently convertible into shares carrying more than 10% of the voting rights. v If the reason for a director's non-independent status cannot be discerned from the company's documents, we will footnote the director in the board table as "Not considered independent by the board." In all other cases where the director is considered affiliated or is an insider, we will footnote the reasons or circumstances for the director's status. In general, at least a majority of a board should consist of independent directors.i However, Glass Lewis believes boards of companies in the S&P/TSX Composite Index should have at least two thirds of independent. In the event that a board fails to meet these thresholds, Glass Lewis typically recommends shareholders withhold their votes from some of the inside and/or affiliated directors in order to satisfy these independence standards. Only independent directors should serve on a company's audit, compensation and nominating and/or governance committees. As such, Glass Lewis will typically recommend that shareholders withhold their votes from any affiliated or inside director seeking appointment to these committees. Footnotes i NP58-201 pg | 8 Globe’s Board Games3 Section 1 Independence Criteria Application Independent means directors have no links to the company beyond their board role. That means, for example, they are not management, relatives of management, former members of management within the previous five years, or people whose firms do business with the company — including, for example, lawyers, accountants, suppliers, or investment bankers. Directors will be considered related if they are paid extra compensation by the company for providing non-board services, such as consulting work. We also mark as related those directors who are controlling shareholders of the company or who work for a parent company that controls the public subsidiary. 1. What percentage of the company’s directors are fully independent? Four marks for boards with at least two-thirds independents. Two marks if more than 50 per cent of directors are independent. Zero marks if there is a majority of related directors. 2. What percentage of the audit committee is fully independent? Three marks if the committee is fully independent. One mark if there are one or more related directors who are not management. Zero marks if a member of management is on the committee. 3. What percentage of the compensation committee — the committee that determines executive pay — is fully independent? Two marks if the committee is fully independent. One mark if there are one or more related directors who are not management. Zero marks if a member of management is on the committee or if there is no committee. 4. What percentage of the nominating committee — the committee responsible for recommending new directors to join the board — is fully independent? Two marks if the committee is fully independent. One mark if there are one or more related directors who are not management. Zero marks if a member of management is on the committee or if there is no committee. 5. Is the role of chairperson and CEO split? Four marks if the roles are split and there is a fully independent chairperson. Two marks if they are split, but the chairperson is a related director. One mark if they are split, but the chairperson is a member of management. Zero marks if the roles are not split. (Note: There is no longer credit for not splitting the roles but having a lead director.) pg | 9 CCGG Guideline4 2 Independence Criteria Application “Independence” means a director is independent of management, does not have a material relationship with the corporation and, except for director fees and share ownership, does not financially benefit from his or her relationship with the corporation. A material relationship is any relationship that could interfere with a director’s ability to exercise independent judgment or inhibit his or her ability to make difficult decisions about management and the business. Examples of people with material relationships with the corporation include: employees of a corporation; paid advisors or consultants to the corporation such as lawyers, accountants and bankers; employees of a significant customer or supplier; anyone with a personal services contract with the corporation; anyone affiliated with a foundation, university or other non-profit organization that receives significant grants or endowments from the corporation; relatives of the CEO or of other executives of the corporation; and those who are part of an interlocking directorate (where the CEO or other executive serves on the board of the corporation that employs the director). As much as possible, directors also should be independent of each other. For example, boards should have policies to limit interlocking board relationships (i.e., when two directors of Company A sit on the board of Company B) and, in particular, committee interlocks. Too many interlocks suggests a degree of inter-related interests that might be detrimental to director independence. Boards also should assess the “independent mindedness” of prospective and current directors. Every member of a well-governed board should be willing to challenge management and, if necessary, other members of the board. At least two thirds of every board should be independent of management. CBCA5 Section 171 Independence Criteria and Application Audit Committee 171. (1) Subject to subsection (2), a corporation described in subsection 102(2) shall, and any other corporation may, have an audit committee composed of not less than three directors of the corporation, a majority of whom are not officers or employees of the corporation or any of its affiliates. (2) The Director may, on the application of a corporation, authorize the corporation to dispense with an audit committee, and the Director may, if satisfied that the shareholders will not be prejudiced, permit the corporation to dispense with an audit committee on any reasonable conditions that the Director thinks fit. (3) An audit committee shall review the financial statements of the corporation before such financial statements are approved under section 158. pg | 10 Independence in the Context of Transactions MI 61-1016 Part 7 Independence Criteria Application 7.1 Independent Directors: (1) For the purposes of the Instrument, it is a question of fact as to whether a director of an issuer is independent. (2) A director of an issuer is not independent in connection with a transaction if the director (a) is an interested party in the transaction, (b) is currently, or has been at any time during the 12 months before the date the transaction is agreed to, an employee, associated entity or issuer insider of an interested party, or of an affiliated entity of an interested party, other than solely in his or her capacity as a director of the issuer, (c) is currently, or has been at any time during the 12 months before the date the transaction is agreed to, an adviser to an interested party in connection with the transaction, or an employee, associated entity or issuer insider of an adviser to an interested party in connection with the transaction, or of an affiliated entity of such an adviser, other than solely in his or her capacity as a director of the issuer, (d) has a material financial interest in an interested party or an affiliated entity of an interested party, or (e) would reasonably be expected to receive a benefit as a consequence of the transaction that is not also available on a pro rata basis to the general body of holders in Canada of offeree securities or affected securities, including, without limitation, the opportunity to obtain a financial interest in an interested party, an affiliated entity of an interested party, the issuer or a successor to the business of the issuer. (3) A member of an independent committee for a transaction to which the Instrument applies shall not receive any payment or other benefit from an issuer, an interested party or a successor to any of them that is contingent upon the completion of the transaction. (4) For the purposes of this section, in the case of an issuer bid, a director of the issuer is not, by that fact alone, not independent of the issuer. The Instrument requires that a committee comprised exclusively of independent directors (an “independent committee”) play a role in certain circumstances: Under the definition of “collateral benefit”, a benefit received solely in connection with a related party’s services as an employee, director or consultant of the issuer, of an affiliated entity of the issuer or of a successor to the business of the issuer, shall not be considered to be a collateral benefit if: (I) the related party discloses to an independent committee of the issuer the amount of consideration that the related party expects it will be beneficially entitled to receive, under the terms of the transaction or bid, in exchange for the equity securities beneficially owned by the related party, (II) the independent committee, acting in good faith, determines that the value of the benefit, net of any offsetting costs to the related party, is less than five per cent of the value referred to in subclause (I), and (III) the independent committee’s determination is disclosed in the disclosure document for the transaction, or in the directors’ circular in the case of a take-over bid; Under Section 2.3 of the Instrument, in the context of an insider bid, the insider offeror must obtain a formal valuation, and an independent committee of the offeree issuer shall, and the offeror shall enable the independent committee to: (a) determine who the valuator will be, (b) supervise the preparation of the formal valuation, and (c) use its best efforts to ensure that the formal valuation is completed and provided to the offeror in a timely manner. An independent committee may play a similar role in an issuer bid, a business combination or a related party transaction (Sections 3.3, 4.3 and 5.4) The Instrument also requires that the issuer have one or more independent directors in respect of the transaction and that certain determinations by and at least two-thirds of the issuer’s independent directors be made in respect of certain matters for an issuer to rely on the “financial hardship exemption” from valuation requirements in the context of a related party transaction. (Section 5.5(g) of the Instrument). pg | 11 CBCA Section 120 Independence Criteria and Application 120. (1) A director or an officer of a corporation shall disclose to the corporation, in writing or by requesting to have it entered in the minutes of meetings of directors or of meetings of committees of directors, the nature and extent of any interest that he or she has in a material contract or material transaction, whether made or proposed, with the corporation, if the director or officer: (a) is a party to the contract or transaction; (b) is a director or an officer, or an individual acting in a similar capacity, of a party to the contract or transaction; or (c) has a material interest in a party to the contract or transaction. Time of disclosure for director (2) The disclosure required by subsection (1) shall be made, in the case of a director, (a) at the meeting at which a proposed contract or transaction is first considered; (b) if the director was not, at the time of the meeting referred to in paragraph (a), interested in a proposed contract or transaction, at the first meeting after he or she becomes so interested; (c) if the director becomes interested after a contract or transaction is made, at the first meeting after he or she becomes so interested; or (d) if an individual who is interested in a contract or transaction later becomes a director, at the first meeting after he or she becomes a director. Time of disclosure for officer (3) The disclosure required by subsection (1) shall be made, in the case of an officer who is not a director, (a) immediately after he or she becomes aware that the contract, transaction, proposed contract or proposed transaction is to be considered or has been considered at a meeting; (b) if the officer becomes interested after a contract or transaction is made, immediately after he or she becomes so interested; or (c) if an individual who is interested in a contract later becomes an officer, immediately after he or she becomes an officer. Time of disclosure for director or officer (4) If a material contract or material transaction, whether entered into or proposed, is one that, in the ordinary course of the corporation’s business, would not require approval by the directors or shareholders, a director or officer shall disclose, in writing to the corporation or request to have it entered in the minutes of meetings of directors or of meetings of committees of directors, the nature and extent of his or her interest immediately after he or she becomes aware of the contract or transaction. Voting (5) A director required to make a disclosure under subsection (1) shall not vote on any resolution to approve the contract or transaction unless the contract or transaction unless the contract or transaction (a) relates primarily to his or her remuneration as a director, officer, employee, agent or mandatory of the corporation or an affiliate; (b) is for indemnity or insurance under section 124; or (c) is with an affiliate. Continuing disclosure (6) For the purposes of this section, a general notice to the directors declaring that a director or an officer is to be regarded as interested, for any of the following reasons, in a contract or transaction made with a party, is a sufficient declaration of interest in relation to the contract or transaction: (a) the director or officer is a director or officer, or acting in a similar capacity, of a party referred to in paragraph (1)(b) or (c); (b) the director or officer has a material interest in the party; or (c) there has been a material change in the nature of the director’s or the officer’s interest in the party. Access to disclosures (6.1) The shareholders of the corporation may examine the portions of any minutes of meetings of directors or of committees of directors that contain disclosures under this section, and any other documents that contain those pg | 12 Independence Criteria and Application disclosures, during the usual business hours of the corporation. Avoidance standards (7) A contract or transaction for which disclosure is required under subsection (1) is not invalid, and the director or officer is not accountable to the corporation or its shareholders for any profit realized from the contract or transaction, because of the director’s or officer’s interest in the contract or transaction or because the director was present or was counted to determine whether a quorum existed at the meeting of directors or committee of directors that considered the contract or transaction, if (a) disclosure of the interest was made in accordance with subsections (1) to (6); (b) the directors approved the contract or transaction; and (c) the contract or transaction was reasonable and fair to the corporation when it was approved. Confirmation by shareholders (7.1) Even if the conditions of subsection (7) are not met, a director or officer, acting honestly and in good faith, is not accountable to the corporation or to its shareholders for any profit realized from a contract or transaction for which disclosure is required under subsection (1), and the contract or transaction is not invalid by reason only of the interest of the director or officer in the contract or transaction, if (a) the contract or transaction is approved or confirmed by special resolution at a meeting of the shareholders; (b) disclosure of the interest was made to the shareholders in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed; and (c) the contract or transaction was reasonable and fair to the corporation when it was approved or confirmed. Application to court (8) If a director or an officer of a corporation fails to comply with this section, a court may, on application of the corporation or any of its shareholders, set aside the contract or transaction on any terms that it thinks fit, or require the director or officer to account to the corporation for any profit or gain realized on it, or do both those things. TSX Company Manual7 Independence Criteria and Application Under Section 501(C) certain transactions involving insiders or other related parties of a non-exempt issuer must be approved by the board on the recommendation of directors who are unrelated to the transaction. 1 “ISS Voting Guidelines” means the Canadian “Proxy Voting Guidelines for TSX Listed Companies, 2015 Benchmark Policy Recommendations”, published December 22, 2015, by ISS. 2 “Glass Lewis Approach” means “Guidelines 2015 Proxy Season – An overview of the Glass Lewis Approach to Proxy Advice, Canada” updated 12/30/2014 by Glass Lewis. 3 “Globe’s Board Games” means the “Board Games 2014: The best and the worst governed companies in Canada”, published in the Report of Business by the Globe & Mail, November 2014. 4 “CCGG Guideline” means the publication entitled “Building High Performance Boards” of the Canadian Coalition for Good Governance, August 2013. 5 “CBCA” means the Canada Business Corporations Act. 6 “MI 61-101” or the “Instrument” means Multilateral Instrument 61-101 – Protection of Minority Shareholders in Special Transactions. See MI 61-101 for defined terms such as “related party”, “interested party”, “affiliated entity”, “associated entity” and others. 7 “TSX Company Manual” means “The Toronto Stock Exchange Company Manual” of the Toronto Stock Exchange. See TSX Company Manual for defined terms “insider” and “non-exempt issuer”. pg | 13 A U T H O R P R O F I L E : ANDR É BOIVIN 416 860 6580 firstname.lastname@example.org Education: LL.B. (Common Law), Dalhousie University, 1996; LL.B. (Civil Law), University of Sherbrooke, 1994 Call to the Bar: Ontario, 1999; Québec, 1997 Associations: Barreau du Québec; Canadian Bar Association; Ontario Bar Association Achievements: Canadian Legal Lexpert Directory 2015 (Mining); Awarded the 2011 Zenith Award by Lexpert in the area of Corporate Social Responsibility for his work with, and donations to, the Omatjete Primary School Project in Namibia As a member of Cassels Brock’s Securities Group and Mining Group, André Boivin’s practice focuses on corporate and securities law, mostly for public mining companies. André is one of our top experts on National Instrument 43-101 Standards of Disclosure for Mineral Projects. He is continuously involved in numerous equity financing transactions and advises many public companies on a daily basis with respect to regulatory compliance and governance matters. André has also been involved in various mergers and acquisitions and other significant strategic transactions, including, for example, acting as our team leader in the acquisition by New Gold Inc. of the Blackwater Gold Project located in British Columbia, through New Gold’s acquisition of Richfield Ventures Corp., Silver Quest Resources Ltd. and Geo Minerals Ltd. André's transactional experience includes playing a key role in representing: • Allana Potash Corp. in its $20 million public offering • Luna Gold Corp. in the sale of its Cachoeira Project to Brazil Resources • New Gold Inc. in its acquisition of Silver Quest Resources Ltd. • New Gold Inc. in its acquisition of Geo Minerals Ltd. • New Gold Inc. in its $550 million acquisition of Richfield Ventures Corp. • Consolidated Thomson Iron Mines in its US$230 million financing of convertible unsecured subordinated debentures • Sulliden Gold Corporation in public offerings aggregating $55 million • Dundee Precious Metals in connection with the sale of its Timok and Potoj Cuka Gold Projects in Serbia • Avion Gold Corporation in public offerings aggregating approximately $150 million • Dundee Precious Metals in various significant public offerings • Luna Gold in its $39.35 million prospectus offering and South American private placement • Crocodile Gold in a $29 million bought deal • Crocodile Gold in its RTO $136 million business combination with Franc-Or Resources • Western Goldfields in a $1.2 billion business combination with New Gold • Central Sun in a business combination with B2Gold Corp. • Franco-Nevada in its $370 million unit financing • Kinross Gold Corporation in its three-way cross-border $3.5 billion business combination with TVX Gold Inc. and Echo Bay Mines Ltd.