Governance Professionals of Canada18th Annual Corporate Governance Conference

Whistler, B.C. | August 2016

The Role of the Boardin Special Situations

Critical Issues in Governance:

Kevin West, Corporate Lawyer & FounderSkyLaw Professional Corporation

SkyLaw is a boutique corporate and securities law firm offering sophisticated legal and strategic advice to public and private companies and shareholders through an innovative law firm structure.

Speakers:

Thierry Keable, General Counsel & Corporate SecretaryWhistler Blackcomb Holdings Inc.

Whistler Blackcomb is a public company with shares traded on the TSX. Whistler Blackcomb owns a 75% interest in each of Whistler Mountain Resort Limited and Blackcomb Skiing Enterprises Limited, which together carry on the company’s premier four-season mountain resort.

Deborah Rosati, Corporate Director & Co-founderWomen Get On Board Inc.

Women Get On Board is a member-based company that connects, promotes and empowers women to corporate boards by hosting routable events, facilitating workshops and showcasing members’ personal brands online.

2

Kevin WestCorporate Lawyer and FounderSkyLaw Professional Corporation

• Kevin is a senior corporate and securities lawyer with more than 16 years of experience.

• After clerking for Justice Binnie at the Supreme Court of Canada, Kevin practiced with Sullivan & Cromwell in New York and Australia and was a partner at Davies in Toronto for over 5 years.

• Kevin founded SkyLaw in 2010, an innovative boutique law firm.

• At SkyLaw, Kevin and his team represent clients ranging from start-up companies to public companies involved in special situations, including M&A transactions and financings.

Speaker Profile:

3

Deborah RosatiCorporate Director and Co-founderWomen Get On Board Inc.

• Deborah Rosati is an accomplished corporate director, entrepreneur, Fellow Chartered Professional Accountant (FCPA) and certified Corporate Director (ICD.D) with experience in technology, consumer and retail, and private equity and venture capital.

• Deborah is on the board of Sears Canada Inc. (TSX: SCC) and NexJ Systems Inc. (TSX:NXJ).

• Deborah co-founded Women Get on Board Inc. in 2015.

Speaker Profile:

4

Thierry KeableGeneral Counsel and Corporate SecretaryWhistler Blackcomb Holdings Inc.

• Thierry became the General Counsel of Whistler Blackcomb (TSX:WB) in 2014.

• Thierry was previously a lawyer with Farris, Vaughn, Wills & Murphy LLP in Vancouver and with Osler, Hoskin & Harcourt LLP in Montreal.

Speaker Profile:

5

Special Situations

6

Special Situations

• A board of directors is responsible for the governance of the corporation.

• Special situations can pose unique challenges for a board and require careful planning in advance.

• Examples of special situations include:– Take-over bids and other change of control transactions;– Financings;– Proxy battles;– Significant acquisitions and divestitures;– Reorganizations; and– Insolvency.

7

Special Situations(Continued)

• Stages of a friendly transaction:– Initial discussions and non-disclosure agreement– Letter of intent– Due diligence– Negotiation of definitive transaction documents (Share purchase

agreement, etc.)– Signing– Closing– Post-closing integration

8

The Role of the Boardin Special Situations

[INSERT IMAGE HERE]

9

1. Understanding Fiduciary Duties

• Directors are subject to two duties:– Directors must act honestly and in good faith with a view to the best

interests of the corporation (the “fiduciary duty”); and

– Directors must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances (the “duty of care”).

• Directors owe their fiduciary duty to the corporation and not to shareholders or any other stakeholder.

• The fiduciary duty is not confined to short-term profit or share value.

10

1. Understanding Fiduciary Duties(Continued)

• The Supreme Court of Canada confirmed in the BCE case that in considering what is in the best interests of the corporation, directors may look to the interests of, among others: – shareholders;

– employees;

– creditors;

– consumers;

– governments; and

– the environment.

11

1. Understanding Fiduciary Duties(Continued)

• Under the business judgment rule, deference is accorded by the courts to the business decisions of directors acting in good faith and so long as it lies within the range of reasonable alternatives.

• Any security holder, creditor, director or officer may bring a claim for “oppression” if the directors have exercised their powers in a manner that is oppressive or unfairly prejudicial to or unfairly disregards their interests.

12

2. When to Have a Special Committee

• An independent committee of directors is mandated in certain specific circumstances under Multilateral Instrument 61-101.

• The Companion Policy for MI 61-101 states that it is good practice for negotiations for a transaction involving an interested party to be reported upon by a special committee of disinterested directors.

• Where a board of directors is considering a matter that may involve an actual or potential conflict, a special committee is highly desirable.

• Other reasons for a special committee might include allegations of wrong-doing, investigation of whistleblower complaints, etc.

13

2. When to Have a Special Committee(Continued)

• A special committee can assist in demonstrating that a board has properly discharged its duties.

• A special committee should have a clear mandate and agreement on the process to be followed to make an informed decision.

• A chair should be appointed.• Assess independence throughout the process.• Consider compensation for the directors on a special committee.• Consider having a perpetual stand-by special committee formed. • The special committee should document its process and report to

the full board.14

3. Identifying Potential Conflicts

• Corporate statutes generally require that conflicted directors abstain from participating in meetings or voting on resolutions in which they have a material interest.

15

3. Identifying Potential Conflicts(Continued)

• Related party transactions under MI 61-101 may require a formal valuation or approval of a majority of the minority shareholders.

• A “related party” is a broad definition that includes directors, senior officers, 10% shareholders and control persons.

• Related party transactions include:– A related party participating in a private placement of shares;

– A purchase or sale of an asset from a related party; and

– A loan to or from a related party.

• Consider executive compensation arrangements and the motivations of management and other key stakeholders. Are there any collateral benefits?

16

3. Identifying Potential Conflicts(Continued)

• Issuers should have conflict of interest guidelines or a code of business conduct and ethics.– National Policy 58-201 states that the board should be responsible for monitoring

compliance with the code and that a material departure from the code will likely constitute a “material change” requiring a material change report to be filed.

– Any waiver of the code should be granted by the board.

• Director and officer questionnaires should be regularly distributed to obtain information about activities and interests that could cause a conflict of interest; e.g. in connection with annual proxy circulars and any prospectus offering.

• Conflict disclosure should be included in board resolutions.

17

4. How to Prepare for Board MeetingsInvolving Special Situations

• Assess whether the directors have experience with a special situation, such as an M&A transaction or a potential insolvency.

• Permit directors to obtain the advice of outside advisors, including financial and legal advisors, well in advance of any board meeting.

18

4. How to Prepare for Board MeetingsInvolving Special Situations (Continued)

• Consider if independent advisors should be engaged by the board or a special committee (at the expense of the company).

• Repeat orientation sessions for directors on fiduciary duties.• Confirm directors and officers liability insurance is sufficient.• Provide board materials sufficiently in advance of the board meeting so

that directors can study them.• Know who your shareholders are and the key players in the transaction.• Obtain advice on how to document the board deliberations.• Challenge biases.• Encourage unfashionable thinking.

19

4. How to Prepare for Board MeetingsInvolving Special Situations (Continued)

• Consider MI 61-101 issues early on:– Will a special meeting of shareholders be required?– Will a formal valuation be required?

• Determine the approval process and ensure signing officers are available.

• Allow for contingencies – something always comes up at the last minute.

20

5. How to Manage Disclosure Issuesin Special Situations

• Prepare guidelines for handling material non-public information before a special situation arises.

• Keep the dissemination of information on a “need-to-know” basis and use code words, or cones of silence.

21

5. How to Manage Disclosure Issuesin Special Situations (Continued)

• The decision of the Ontario Securities Commission in AiT Advanced Information Technologies Corporation addresses the timing of disclosure of merger negotiations.

• There is no bright-line test, but the OSC supported the established practice of disclosing a transaction only once the parties are clearly committed to the transaction. In the decision, the OSC determined that there was no material change until the definitive agreement was signed.

22

5. How to Manage Disclosure Issuesin Special Situations (Continued)

• Shareholders with an early warning report or alternative monthly report must consider when to update their filings if there is a change of intent.

• Recent amendments to the EWR require more detailed information regarding intentions of the acquiror and the purpose of the transaction.

• The AMR is no longer available if the eligible institutional investor solicits proxies in certain circumstances.

23

5. How to Manage Disclosure Issuesin Special Situations (Continued)

• Designate an internal team with members from the corporate secretary's office, investor relations and legal.

• Prepare draft press releases and disclosure documents in advance.• Set a timetable with input from legal counsel to ensure timely

disclosure.• Use an online data room to manage information flow and consider

keeping sensitive data out of the data room until later in the process.• Require in-person review of sensitive documents, minute books, etc.• Avoid disclosing personal information.• Consider confidentiality obligations to third parties.

24

5. How to Manage Disclosure Issuesin Special Situations (Continued)

• Identify key stakeholders (internal and external) to contact upon disclosure: shareholders, creditors, customers, suppliers, etc.

• Keep the TSX informed of progress.• Engage HR consultants to manage employment issues and

retention.• Consider a trading blackout and delay of option grants.• Work quickly to get to an announcement prior to any leaks. • Remind directors that they can be personally liable for misleading

disclosure and will be judged in hindsight.

25

Questions For Discussion

26

Kevin West, Corporate Lawyer & FounderSkyLaw Professional CorporationE-mail: kevin.west@skylaw.caTel.: 416-759-5299www.skylaw.ca

Questions? Please contact us:

Thierry Keable, General Counsel & Corporate SecretaryWhistler Blackcomb Holdings Inc.E-mail: TKeable@Whistlerblackcomb.comTel.: 604-938-7005www.whistlerblackcomb.com

Deborah Rosati, Corporate Director & Co-founderWomen Get On Board Inc.E-mail: deborah@deborahrosati.caTel.: 647-479-9762www.womengetonboard.ca

27

The Role of the Board in Special SituationsThank you for attending!

Governance Professionals of Canada18th Annual Corporate Governance Conference

Whistler, B.C. | August 2016

28