Corporate Governance: Mandate of the Board

Introduction to Stewardship Duties

The purposes and responsibilities outlined in this Mandate and accompanying Board materials are meant to serve as guidelines rather than inflexible rules and the Board may adopt such additional procedures and standards as it deems necessary from time to time to fulfill its responsibilities.

The Board is responsible to shareholders and others for the stewardship of the Company. The Board is responsible to oversee management of the business affairs of the Company, as described, and to act with a view to the best interests of the Company, growing value and maximizing return to shareholders.

The Board has plenary power with respect to the Company. Any responsibility not delegated to management or a Committee of the Board remains with the Board.

General Legal Obligations of the Board

1. The Board is responsible for the following legal matters oversight:

  1. overseeing management to ensure legal requirements have been met, and documents and records have been properly prepared, approved and maintained;
  2. approving changes in the By-laws, Articles of Incorporation, matters requiring shareholder approval, and agendas for shareholder meetings; and
  3. approving Madalena's legal structure, names and brands, mission statement and vision statement, and any amendments thereto.

2. The following business matters are the responsibility of the Board generally:

  1. the nomination for election, on recommendation of the Nomination and Corporate Governance Committee, directors who will represent the best interests of Madalena, and also reflect the best interests of shareholders;
  2. the acquisition of subsequent investments by the Company and the negotiation of management agreements respecting subsequent investments; and
  3. any offering of securities of the Company including:
    1. the determination of any distribution record date other than the last date of each calendar year;
    2. the determination of any borrowing, issuing any guarantee, and granting any security and subordination; and
    3. the determination of the manner in which the Company shall exercise voting rights in respect of any securities owned by the Company;
  4. all required administrative services of the Company , including, without limitation:
    1. the retention and monitoring, on behalf of the Company, of the transfer agent and other organizations serving the Company;
    2. the authorization and payment on behalf of the Company of operation expenses incurred on behalf of the Company;
    3. the preparation of accounting, management and other reports (including quarterly and annual reports to shareholders of the Company, financial statements, tax reporting to shareholders of the Company and income tax returns);
    4. keeping and maintaining the books and records of the Company and the supervision of compliance by the Company with record keeping requirements under applicable regulatory regimes;
    5. the calculation of the amount, and the determination of the frequency, of distributions by the Company;
    6. the handling of communications and correspondence with shareholders of the Company and the preparation of notices of distributions to shareholders of the Company;
    7. responding to investors' enquiries and general investor relations in respect of the Company;
    8. dealing with banks and other institutional lenders, including in respect of the maintenance of bank records and the negotiation and securing of bank financing or refinancing of one or more credit or debt facilities, hedging or swap facilities or other ancillary facilities;
    9. the preparation of the Company's reports to relevant securities regulatory authorities and any similar organization of any government or the committee of any stock exchange to which the Company is obligated to report and to otherwise deal with any such regulatory authorities;
    10. the organization of meetings of shareholders of the Company; and
    11. the provision of such other administrative services as may be reasonably required for the ongoing business and administration of the Company;
  5. to oversee the management of the business and affairs of Madalena including the relationships among the Company and their respective affiliates with their executives, affiliates, shareholders, Directors and Officers;
  6. to act honestly and in good faith with a view to the best interests of Madalena;
  7. to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances;
  8. to act in accordance with its obligations contained in the Business Corporations Act (Alberta), the Securities Act of each province and territory of Canada, other relevant legislation, regulations and policies, and the Company's Articles and By-laws;
  9. in particular, it should be noted that the following matters must be considered by the Board as a whole:
    1. submit to the shareholders of the Company any question or matter requiring the approval of the shareholders of the Company;
    2. fill a vacancy among the Directors or in the office of auditor;
    3. issue securities except in the manner and on the terms permitted by law and authorized by the Board;
    4. declare dividends;
    5. purchase, redeem or otherwise acquire shares issued by the Company;
    6. the payment of a commission to any person in consideration of that person purchasing or agreeing to purchase shares of the Company;
    7. approve management proxy circulars;
    8. approve take-over bid circulars or Directors' circulars;
    9. approve any financial statements; or
    10. adopt, amend or repeal By-laws of the Company.

Composition and Board Organization

Nominees for Directors are initially considered and recommended by the Nomination and Corporate Governance Committee of the Board, approved by the entire Board and appointed annually by the Company in accordance with the direction given to the Company by vote of the shareholders of the Company.

The Board will maintain an appropriate number of independent Directors to perform their duties and responsibilities. A majority of Directors comprising the Board must qualify as "independent" Directors in accordance with the definition of "independent" Director from time to time under the requirements or guidelines for Board service under applicable securities laws and the rules of any stock exchange on which the Company's shares are listed for trading. On at least an annual basis, the Board will conduct an analysis and make a determination as to the "independence" of each Board member.

The appropriate number of Directors from time to time will be determined to fairly reflect the investment in Madalena by those shareholders other than a significant shareholder or significant group of shareholders.

Certain of the responsibilities of the Board referred to herein may be delegated to Committees of the Board. The responsibilities of those Committees will be as set forth in their respective mandates, as amended from time to time.

The Board's set of criteria for addressing composition of the Board will include the present and anticipated skill set needed by the Board, experience, ethics, education, time availability, involvement in activities that conflict with Madalena's business, term and the number of other directorships held. Other matters may be included that vary from time to time.

Duties and Responsibilities

1. Managing the Affairs of the Board and Governance

The Board operates by delegating certain of its authorities, including spending authorizations, to management and by reserving certain powers to itself. The legal obligations of the Board are described under the heading "General Legal Obligations of the Board". Subject to these legal obligations and to the Articles and By-laws of the Company, the Board retains the responsibility for managing its own affairs, including:

  1. developing the Board's approach to governance, including the development and maintenance of the Board Manual and the Governance Guidelines, which may be delegated to the Nomination and Corporate Governance Committee;
  2. planning its composition and size;
  3. selecting the Board Chair or "Lead Director";
  4. nominating candidates for election to the Board;
  5. appointing Committees;
  6. determining Director compensation;
  7. developing position descriptions or terms of reference for the Board Chair and the Chair of each Committee of the Board, as well as for the President, Chief Executive Officer and for individual Directors; and
  8. assessing the effectiveness of the Board itself, Committees and individual Directors in fulfilling their responsibilities at least annually.

2. Management and Human Resources

The Board has oversight responsibility for:

  1. the appointment and succession of the CEO and evaluating the CEO's performance, approving CEO compensation and providing advice and counsel to the CEO in the execution of the CEO's duties;
  2. satisfying itself as to the integrity of the CEO and that the CEO and other Executive Officers create a culture of integrity throughout the organization;
  3. approving a position description or terms of reference for the CEO;
  4. reviewing CEO performance at least annually against agreed upon written goals and objectives that the CEO is responsible for meeting and that have been approved by the Board;
  5. approving decisions relating to senior management, including appointment and discharge of Officers, compensation and benefits for Executive Officers, acceptance of outside directorships on public companies by Executive Officers (other than not-for-profit organizations), and special arrangements with Executive Officers, or other employee groups;
  6. ensuring succession planning programs are in place, including programs to train and develop management; and
  7. approving certain matters relating to all employees, including:
    1. the annual salary policy/program for employees;
    2. new benefit programs or material changes to existing programs; and
    3. material benefits granted to retiring employees outside of benefits received under any approved pension and other benefit programs.

3. Strategy and Plans

The Board has oversight responsibility to:

  1. participate with management in the development of, and ultimately approve, Madalena's strategic plan, which strategic plan will take into account, among other things, the opportunities and risks of the business;
  2. approve the annual business plans that enable Madalena to realize its objectives;
  3. approve annual capital and operating budgets that support Madalena's ability to meet its strategic objectives;
  4. approve any political or charitable donations policy or budget;
  5. approve the entering into, or withdrawing from, lines of business or geographic markets that are, or are likely to be, material to Madalena;
  6. approve financial and operating objectives used in determining compensation if they are different from the strategic, capital or operating plans referred to above;
  7. approve material divestitures and acquisitions;
  8. approve major leases; and
  9. monitor Madalena's progress towards its goals, and to revise and alter its direction through management in light of changing circumstances.

4. Financial and Corporate Issues

The Board has oversight responsibility to:

  1. take reasonable steps to ensure the implementation and integrity of Madalena's internal control and management information systems;
  2. monitor operational and financial results;
  3. approve the Audit Committee recommendation to appoint external auditors and approve auditors' fees;
  4. approve annual and quarterly financial results as approved by the Audit Committee and to approve release thereof by management;
  5. approve any management proxy circular, annual information form and any documents incorporated by reference therein;
  6. approve distributions on or in respect of the Company's shares;
  7. approve financings, changes in authorized capital, issue and repurchase of shares, issue of debt securities, listing of shares and other securities, issue of commercial paper, and related prospectuses;
  8. approve banking resolutions and significant changes in banking relationships;
  9. approve appointments, or material changes in relationships with corporate trustees;
  10. review coverage, deductibles and key issues regarding corporate insurance policies;
  11. approve contracts, arrangements or commitments that may have a material impact on Madalena; and
  12. approve the commencement or settlement of litigation that may have a material impact on Madalena.

5. Business and Risk Management

The Board has oversight responsibility for the following functions, which may be delegated to one or more Committees of the Board:

  1. ensure management identifies the principal business and financial risks and implements appropriate systems to manage these risks;
  2. review operating and financial performance relative to budgets or objectives;
  3. receive reports from management on matters relating to, among others, ethical conduct, environmental management, employee health and safety, human rights, and related party transactions;
  4. to the extent the same have not been delegated to the Audit Committee, to assess and monitor management control systems:
    1. assess information provided by management and others (e.g., internal and external auditors) about the effectiveness of management control systems; and
    2. understand principal risks and review whether Madalena achieves a proper balance between risk and returns, and that management ensures that systems are in place to address the risks identified.

6. Policies and Procedures

The Board has oversight responsibility to:

  1. approve and monitor compliance with all significant policies and procedures by which Madalena is operated;
  2. direct management to ensure Madalena operates at all times within applicable laws and regulations and according to the Code of Conduct adopted by Madalena; and
  3. review significant new corporate policies or material amendments to existing policies.

7. Compliance Reporting and Communications

The Board has oversight responsibility to:

  1. ensure Madalena has in place effective communication processes with shareholders of the Company and other stakeholders and financial, regulatory and other recipients;
  2. approve interaction with shareholders of the Company on all items requiring shareholder response or approval;
  3. ensure that the financial performance of the Company is reported to shareholders, other securityholders and regulators in compliance with applicable law and regulations on a timely and regular basis, fairly and in accordance with generally accepted accounting principles;
  4. ensure the timely reporting of any other developments that have a significant and material impact on the value of the Company; and
  5. report annually to shareholders of the Company on the Board governance for the preceding year.

8. Standards of Liability

Nothing contained in this Mandate is intended to expand applicable standards of liability under statutory, regulatory, common law or any other legal requirements for the Board or members of its Committees. The purposes and responsibilities outlined in this Mandate and accompanying Board materials are meant to serve as guidelines rather than inflexible rules and the Board may adopt such additional procedures and standards as it deems necessary from time to time to fulfill its responsibilities.