Pacific Northern Gas: Investor Relations: Corporate Governance

STATEMENT OF CORPORATE GOVERNANCE

At Pacific Northern Gas Ltd., corporate governance means ensuring that a comprehensive system of stewardship and accountability is in place and functioning among directors, management and employees of the Company.

The Board of Directors and the members of management are committed to the highest standards of corporate governance. The Company’s corporate governance practices comply with the governance rules of the Canadian Securities Administrators (“CSA”) and are in compliance with the CSA's Multilateral Instrument 52-110, Audit Committees, National Policy 58-201, Corporate Governance Guidelines, and National Instrument 58-101, Disclosure of Corporate Governance Practices.

1. Board of Directors

(a) Disclose the identity of directors who are independent.

Mesdames Fulton and Woodruff and Messrs. Chase, Bingham, Johnston, Unruh and Willms are independent directors.

(b) Disclose the identity of directors who are not independent, and describe the basis for that determination.

Mr. Dyce is the President and Chief Executive Officer (the "CEO") of the Company and is not independent.

(c) Disclose whether or not a majority of directors are independent. If a majority of directors are not independent, describe what the Board of directors (the "Board") does to facilitate its exercise of independent judgment in carrying out its responsibilities.

A majority of the directors are independent.

(d) If a director is presently a director of any other issuer that is a reporting issuer (or the equivalent) in a jurisdiction or a foreign jurisdiction, identify both the director and the other issuer.

The following directors and proposed nominees for directors hold directorship or trustee positions with other reporting issuers:

Mr. Chase is a director of New West Energy Services Inc., Dome Ventures Corporation, Hudson Resources Inc., Western Coal Corp. and Red Back Mining Inc.
Ms. Fulton is a trustee of Swiss Water Decaffeinated Coffee Income Fund.
Mr. Johnston is a director of Span America Medical Systems Inc., Galvanic Applied Sciences Inc. and Circa Enterprises Inc.
Mr. Unruh is a director of Union Gas Limited, Corriente Resources Inc., and Ontario Power Generation Inc.
Mr. Willms is a director of Angiotech Pharmaceuticals Inc. and Pristine Power Inc.

(e) Disclose whether or not the independent directors hold regularly scheduled meetings at which members of management are not in attendance. If the independent directors hold such meetings, disclose the number of meetings held during the preceding 12 months. If the independent directors do not hold such meetings, describe what the Board does to facilitate open and candid discussion among its independent directors.

In-camera sessions of the independent directors are held without members of management present at regularly scheduled meetings of the Board of Directors and otherwise as considered necessary. Four such sessions were held during 2009.

In-camera sessions are also held at all regularly scheduled Audit Committee and Human Resources and Compensation Committee meetings and otherwise as considered necessary. Four such sessions were held for the Audit Committee and one such session was held for the Human Resources and Compensation Committee in 2009.

(f) Disclose whether or not the chair of the Board is an independent director. If the Board has a chair or lead director who is an independent director, disclose the identity of the independent chair or lead director, and describe his or her role and responsibilities. If the Board has neither a chair that is independent nor a lead director that is independent, describe what the Board does to provide leadership for its independent direct.

Mr. Chase is the Chair of the Board and is an independent director. The Chair of the Board is responsible for the management, the development and the effective performance of the Board of Directors and provides leadership to the Board for all aspects of its work. The Chair acts in an advisory capacity to the CEO concerning the interests and management of the Company and, in co-ordination with the CEO, may play a role in the Company's external relationships.

(g) Disclose the attendance record of each director for all Board meetings held since the beginning of the issuer's most recently completed financial year.

Mr. Chase: 5 of 6 Board meetings; 8 of 8 Committee meetings
Mr. Bingham: 5 of 6 Board meetings; 8 of 8 Committee meetings
Mr. Dyce: 6 of 6 Board meetings
Ms. Fulton: 6 of 6 Board meetings; 9 of 9 Committee meetings
Mr. Johnston: 6 of 6 Board meetings; 3 of 3 Committee meetings
Dr. Morris*: 1 of 4 Board meetings; 1 of 1 Committee meetings
Mr. Unruh: 6 of 6 Board meetings; 4 of 4 Committee meetings
Mr. Willms: 5 of 6 Board meetings; 6 of 6 Committee meetings
Ms. Woodruff: 5 of 6 Board meetings; 7 of 7 Committee meetings

* Dr. Morris stepped down from the Board on April 30, 2009

2. Board Mandate

Disclose the text of the Board's written mandate. If the Board does not have a written mandate, describe how the Board delineates its role and responsibilities.

The text of the Board's written mandate is attached as Schedule A to this circular.

3. Position Descriptions

(a) Disclose whether or not the Board has developed written position descriptions for the chair and the chair of each Board committee. If the Board has not developed written position descriptions for the chair and/or the chair of each Board committee, briefly describe how the Board delineates the role and responsibilities of each such position.

The Board has developed written position descriptions for the Chair of the Board and the Chairs of the Board Committees. The Chair of the Board is responsible for the management, the development and the effective performance of the Board of Directors and provides leadership to the Board for all aspects of its work. The Committee Chairs are responsible to lead and oversee the applicable Committee to ensure it fulfills its mandate as set out in its terms of reference.

(b) Disclose whether or not the Board and CEO have developed a written position description for the CEO. If the Board and CEO have not developed such a position description, briefly describe how the Board delineates the role and responsibilities of the CEO.

The Board has approved a written position description for the CEO which states that the CEO is the leader of an effective and cohesive management team for the Company; sets the tone for the Company by exemplifying consistent values of high ethical standards, integrity and fairness; leads the Company in defining its vision; is the main spokesperson for the Company; and bears the chief responsibility to ensure the Company meets its short-term operational and long-term strategic goals and objectives.

4. Orientation and Continuing Education

(a) Briefly describe what measures the Board takes to orient new directors regarding:
(i) the role of the Board, its committees and its directors; and

All new directors receive a Board manual containing the terms of reference and timetables for the Board and the Committees, position descriptions for the Chair, Committee Chairs and individual directors and other relevant corporate and business information. New directors also meet with the President and the Chair of the Board to understand how the Board and its committees operate and fulfill their obligations.

(ii) the nature and operation of the issuer's business.

New directors receive briefing binders from and conduct extensive meetings with each member of the senior management team to understand the Company’s strategic objectives, operations, financial and compliance matters and regulatory environment. The Board manual also contains public information about the Company.

(b) Briefly describe what measures, if any, the Board takes to provide continuing education for its directors. If the Board does not provide continuing education, describe how the Board ensures that its directors maintain the skill and knowledge necessary for them to meet their obligations as directors.

The senior management team makes regular presentations to the Board on matters with significant impact on the Company’s business and on relevant legal developments as they arise. Outside advisors also make presentations on matters relating to the Company’s business and other relevant issues as the need arises. In addition, when matters of relevance to the Company’s operations arise between Board meetings, the President and/or the Chair distributes the relevant information to the directors by email.

5. Ethical Business Conduct

(a) Disclose whether or not the Board has adopted a written code for its directors, officers and employees. If the Board has adopted a written code:

The Board has adopted a written code of business ethics for its directors, officers and employees.

(i) disclose how an interested party may obtain a copy of the written code;

The Company's Code of Business Ethics (the "Code") is available on its website at www.png.ca and at www.sedar.com.

(ii) describe how the Board monitors compliance with its code, or if the Board does not monitor compliance, explain whether and how the Board ensures compliance with its code; and

The Code is reviewed annually by the Corporate Governance Committee. In addition, it is disseminated annually to every director, officer, and employee, each of whom is required to certify that he/she has read the Code and understands it. The Company has also made available an anonymous hotline number that employees can access to report violations of the Code. Any reports to the hotline would be communicated to the Audit Committee.

(iii) provide a cross-reference to any material change report(s) filed within the preceding 12 months that pertains to any conduct of a director or executive officer that constitutes a departure from the code.

There have been no material change reports filed within the preceding 12 months that pertain to any conduct of any director or executive officer that constitutes a departure from the code.

(b) Describe any steps the Board takes to ensure directors exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest.

Directors are required to disclose any actual or potential conflicts of interest. In addition, directors that have an interest in a matter coming before the Board are required to declare that interest and abstain from voting on the matter. Directors are also able to request in-camera sessions to discuss such matters without the presence of the interested director or executive officer and, if necessary, the Board is able to convene a special committee composed of disinterested directors to consider the applicable issue. In addition, materials provided to directors relating to a matter that gives rise to the actual or potential conflict of interest are not provided to the conflicted director. The Board has approved a conflict of interest policy that sets out these requirements. The Board is also able to engage outside advisors at the Company's expense to assist directors in discharging their responsibility to exercise independent judgment.

(c) Describe any other steps the Board takes to encourage and promote a culture of ethical business conduct.

The Board has approved the Code, a Conflict of Interest Policy, a Whistleblower Policy, a Communications Policy and an Insider Trading Policy. These policies have been disseminated throughout the organization and employees have certified their receipt and understanding of the Code and the Insider Trading Policy. Management applies the highest standard of ethical behaviour and sets the tone from the top for a culture of ethical business conduct.

6. Nomination of Directors

(a) Describe the process by which the Board identifies new candidates for Board nomination.

The Board annually, either on its own or through the Corporate Governance Committee, evaluates the skills and attributes represented by the current directors and considers additional skills and attributes that may be required on the Board and of a new director. Current directors and senior management are requested to advise both the Chair of the Board and of the Corporate Governance Committee of potential candidates. Once candidates are identified, the Chair of the Board, alone or with other directors, interviews the individuals and advises the Chair of the Corporate Governance Committee of the results of the interviews. The Corporate Governance Committee considers the report of the Chair of the Board together with the resumes of the candidates and the requirements of the Board and makes a recommendation on a candidate to the Board for its approval.

(b) Disclose whether or not the Board has a nominating committee composed entirely of independent directors. If the Board does not have a nominating committee composed entirely of independent directors. Describe what steps the Board takes to encourage an objective nomination process.

The Corporate Governance Committee of the Board has the duties and responsibilities of a nominating committee and is composed entirely of independent directors.

(c) If the Board has a nominating committee, describe the responsibilities, powers and operation of the nominating committee.

The Corporate Governance Committee, working with the Chair of the Board, has primary responsibility for the search for and recommendation of candidates for election to the Board and seeks to select well-qualified candidates with a diversity of background, experience and geographic location to maintain a well-balanced and highly competent group of directors with the ability to act together effectively. In particular, the Committee's nominating duties are:

to propose to the Board, annually, the members proposed for re-election to the Board and identify and recommend new nominees for the Board;
to propose to the Board, annually, the assignment of members to the committees of the Board and the Chair for each committee;
in consultation with the Board to consider the competencies and skills the Board should have, the competencies and skills that the existing Directors have and the competencies and skills required for nominees to the Board and to establish criteria for Board membership and recommend Board composition;
to assess on an ongoing basis the performance and contribution of individual Directors; and
to ensure that there is in place an orientation and education program for new members of the Board.

The Board has determined to combine the Corporate Governance Committee and the Human Resources Committee into a single committee, to be called the Compensation and Governance Committee, in order to achieve administrative efficiencies and reduce costs. The Compensation and Governance Committee will have the same governance and nominating responsibilities as the Corporate Governance Committee.

7. Compensation

(a) Describe the process by which the Board determines the compensation for your company's directors and officers.

Directors are compensated through annual retainer fees and a fee per meeting attended, as well as reimbursement for expenses. Under the Company's Deferred Share Unit Plan, directors may designate a percentage (25, 50, 75 or 100 percent) of his or her total compensation to be issued as deferred share units. The Human Resources and Compensation Committee periodically reviews the adequacy and form of compensation of directors to ensure that the compensation realistically reflects the responsibilities and risks involved in being an effective director of the Company and reports and makes recommendations to the Board accordingly.

Compensation for executive positions are based upon the degree of responsibility and accountability borne by the role as well as the overall seasoning and experience of each incumbent relative to the marketplace for comparable talent. An evaluation is done to verify the components of each position and they are then measured against the median for similar positions in small to medium sized publicly traded companies in the energy/pipeline sector. Compensation is benchmarked at the 50th percentile and adjusted to account for the Company's revenues relative to the comparator group. The Human Resources and Compensation Committee reviews recommendations made by the CEO for executive compensation on an annual basis and reports to the Board accordingly.

Periodically outside advisors are engaged to review the adequacy of directors' and officers' compensation. Roger Gurr & Associates was retained during 2009 to assist with the development of the KSL Incentive Plan.

(b) Disclose whether or not the Board has a compensation committee composed entirely of independent directors. If the Board does not have a compensation committee composed entirely of independent directors, describe what steps the Board takes to ensure an objective process for determining such compensation.

The Human Resources and Compensation Committee of the Board has the duties and responsibilities of a compensation committee and is composed entirely of independent directors.

(c) If the Board has a compensation committee, describe the responsibilities, powers and operation of the compensation committee.

The Human Resources and Compensation Committee is generally responsible for recommending to the Board human resources and compensation policies and guidelines for application to the Company and for implementing and overseeing human resources and compensation policies approved by the Board. In particular, the Committee's compensation duties are:

to recommend to the Board compensation policies and guidelines to the Company;
to ensure that the Company has in place programs to attract and develop management of the highest calibre and a process to provide for the orderly succession of management including the annual receipt of the Chief Executive Officer's current recommendations;
to develop and maintain a position description for the Chief Executive Officer and to assess the performance of the Chief Executive Officer against corporate goals and objectives;
to set the annual salary, bonus and other benefits, direct and indirect, including targets tied to corporate goals and objectives, of the Chief Executive Officer and to approve compensation, incentive plans and equity-based plans for all other designated officers of the Company after considering the recommendations of the Chief Executive Officer, all within the compensation policies and guidelines approved by the Board;
to oversee the implementation and administration of compensation policies approved by the Board concerning the following:

executive compensation, contracts, stock plans or other incentive plans; and
proposed personnel changes involving officers reporting to the Chief Executive Officer;

from time to time, to review the Company's broad policies and programs in relation to pension and benefits;
to annually receive from the Chief Executive Officer recommendations concerning annual compensation policies and budgets for all non-union employees;
from time to time, to review with the Chief Executive Officer the Company's broad policies on compensation for all employees and overall labour relations strategy for organized employees;
to, at least annually and otherwise as considered necessary, review the labour relations environment for the Company and report to the Board with respect to any potential financial implications related thereto.
to periodically review the adequacy and form of the compensation of Directors and to ensure that the compensation realistically reflects the responsibilities and risks involved in being an effective Director, and to report and make recommendations to the Board accordingly;
to report regularly to the Board on all of the Committee's activities and findings during that year;
to review the Compensation Discussion and Analysis to be contained in the Management Proxy Circular for any meeting of the shareholders and recommend its approval by the Board of Directors;
to receive reports from the Pension and Savings Plan Committee and to consider and approve any changes in the Company's pension and savings plans, as such changes relate to compensation and benefits, and report thereon to the Board; and
to review the terms of reference and the calendar of activities to be undertaken by the Committee for each year and to submit any recommended changes thereto for approval by the Board of Directors.

The Board has determined to combine the Corporate Governance Committee and the Human Resources Committee into a single committee, to be called the Compensation and Governance Committee, in order to achieve administrative efficiencies and reduce costs. The Compensation and Governance Committee will have the same compensation responsibilities as the Human Resources and Compensation Committee.

(d) If a compensation consultant or advisor has, at any time since the beginning of the issuer's most recently completed financial year, been retained to assist in determining compensation for any of the issuer's directors and officers, disclose the identity of the consultant or advisor and briefly summarize the mandate for which they have been retained. If the consultant or advisor has been retained to perform any other work for the issuer, state that fact and briefly describe the nature of the work.

Periodically outside advisors are engaged to review the adequacy of compensation for directors, officers and staff. Roger Gurr & Associates was engaged during 2009 to assist with the development of the KSL Incentive Plan which was implemented to attract, retain and incent qualified individuals necessary for the Company to successfully meet its commitments to Pacific Trails Pipeline Limited Partnership, including securing vital approvals, entering into key agreements and securing favourable financing for the development and construction of the Kitimat to Summit Lake Pipeline.

8. Other Board Committees

If the Board has standing committees other than the audit, compensation and nominating committees, identify the committees and describe their function.

The Board has an Environment, Health and Safety Committee that is composed entirely of independent directors and is responsible for reviewing and monitoring the policies and activities of the Company relating to environment, health and safety matters on behalf of the Board.

The Board also has an Executive Committee composed entirely of independent directors that is narrowly mandated to act as the approving body for expenditures which have been broadly approved by the Board and which are beyond the approval levels of the President and to perform such functions and exercise such powers as are specifically delegated to the Committee by the Board.

9. Assessments

Disclose whether or not the Board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution. If assessments are regularly conducted, describe the process used for the assessments. If assessments are not regularly conducted, describe how the Board satisfies itself that it, its committees, and individual directors are performing effectively.

The overall effectiveness of the Board, its Committees and the Chair is assessed through the auspices of the Corporate Governance Committee. The Chair reviews the activities of the Board and the Committees over the prior year, including the attendance record of each Board member, and discusses pertinent issues with each Board member as deemed appropriate. In addition, a formal assessment of the Board, the Chair and the Committees is undertaken periodically by means of a questionnaire circulated to the directors. The results are reviewed by the Corporate Governance Committee and reported to the Board.

SCHEDULE A - TERMS OF REFERENCE

A. PURPOSE

The Board of Directors (the "Board") has the responsibility for the stewardship of the Company and to oversee the conduct of the business of the Company. The Board's fundamental objectives are to enhance and preserve long-term shareholder value, to ensure the Company meets its obligations on an ongoing basis and that the Company operates in a reliable and safe manner. In performing its functions, the Board should also consider the legitimate interests its other stakeholders such as employees, customers and communities may have in the Company. In overseeing the conduct of the business, the Board, through the Chief Executive Officer, shall set the standards of conduct for the enterprise.

B. PROCEDURES AND ORGANIZATION

The Board operates by delegating certain of its authorities to management and by reserving certain powers to itself. The Board retains the responsibility for managing its own affairs including selecting its Chair, nominating candidates for election to the Board, constituting committees of the full Board and determining Director compensation. Subject to the Company's constating documents and the British Columbia Business Corporations Act, the Board may constitute, seek the advice of and delegate powers, duties and responsibilities to committees of the Board.

The Board has developed a calendar of the activities to be undertaken by the Board for each meeting, attached as Appendix A. The calendar of activities will be reviewed annually.

C. DUTIES AND RESPONSIBILITIES

The Board's principal duties and responsibilities fall into a number of categories which are outlined below.

Legal Requirements
1. The Board has the responsibility to ensure that legal requirements have been met and documents and records have been properly prepared, approved and maintained;
2. The Board has the statutory responsibility to:
  1. supervise the management of the business and affairs of the Company;
  2. act honestly and in good faith with a view to the best interests of the Company;
  3. exercise the care, diligence and skill that reasonable, prudent people would exercise in comparable circumstances; and
  4. act in accordance with its obligations contained in the British Columbia Business Corporations Act and the regulations thereto, the Company's constating documents, the Securities Act of each province and territory of Canada, and other relevant legislation and regulations;
3. The Board has the statutory responsibility for considering the following matters as a full Board which in law may not be delegated to management or to a committee of the Board:
  1. any submission to the shareholders of a question or matter requiring the approval of the shareholders;
  2. the filling of a vacancy among the Directors or in the office of auditor;
  3. the issuance of securities;
  4. the declaration of dividends;
  5. the purchase, redemption or any other form of acquisition of shares issued by the Company;
  6. the payment of a commission to any person in consideration of his/her purchasing or agreeing to purchase shares of the Company from the Company or from any other person, or procuring or agreeing to procure purchasers for any such shares;
  7. the approval of management information circulars;
  8. the approval of any take-over bid circular or directors' circular;
  9. the approval of financial statements of the Company; and
  10. the adoption, amendment or repeal of the constating documents of the Company.

Independence
The Board has the responsibility to ensure that appropriate structures and procedures are in place to permit the Board to function independently of management.

Strategy Determination
The Board has the responsibility to:
1. at least annually, participate with management, in the development of, and ultimately approve, the Company's strategic plan, taking into account, among other things, the opportunities and risks of the Company's business;
2. approve the annual business plans that implement the strategic plan;
3. approve annual capital and operating budgets that support the Company's ability to meet its strategic objectives;
4. approve the Company's political donations policy;
5. approve the entering into, or withdrawing from, lines of business that are, or are likely to be, material to the Company;
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. monitor the Company's progress towards its strategic objectives, and revise and alter its direction through management in light of changing circumstances;
9. conduct periodic reviews of human, technological and capital resources required to implement the Company's strategy and the regulatory, cultural or governmental constraints on the business; and
10. review, at every regularly scheduled Board meeting if feasible, recent developments that may affect the Company's strategy, and advise management on emerging trends and issues.

Financial and Corporate Issues
The Board has the responsibility:
1. to take reasonable steps to ensure the integrity and effectiveness of the Company's internal control and management information systems, including the evaluation and assessment of information provided by management and others (e.g., internal and external auditors) about the integrity and effectiveness of the Company's internal control and management information systems;
2. to review operating and financial performance relative to budgets and objectives;
3. to approve the annual financial statements and notes thereto, management's discussion & analysis of financial condition and results of operations contained in the annual report, the annual information form and the management information circular;
4. to subject to confirmation by the shareholders of the Company at each annual meeting, to appoint the external auditors for the Company and approve the auditor's fees for audit services;
5. to approve significant contracts, transactions, and other arrangements or commitments that may be expected to have a material impact on the Company; and
6. to monitor the pension and savings plans of the Company, including receiving reports from the Audit Committee and the Human Resources and Compensation Committee on such matters and on the activity of the Pension and Savings Plan Committee.

Managing Risk
The Board has the responsibility to understand the principal risks of the business in which the Company is engaged, to achieve a proper balance between risks incurred and the potential return to shareholders, and to ensure that there are systems in place which effectively monitor and manage those risks with a view to the long-term viability of the Company.

Appointment, Training and Monitoring Senior Management
The Board has the responsibility:
1. to appoint the Chief Executive Officer (the "CEO"), to monitor and assess CEO performance against corporate goals and objectives, to determine CEO compensation, considering the recommendations of the Human Resources and Compensation Committee, and to provide advice and counsel in the execution of the CEO's duties;
2. to approve the appointment and remuneration of all senior officers, acting upon the advice of the CEO;
3. to the extent possible, to satisfy itself as to the integrity of the CEO and other senior officers and satisfy itself that the CEO and other senior officers are creating a culture of integrity throughout the Company;
4. to approve certain decisions relating to senior management, including the:
  1. appointment and discharge of senior officers;
  2. compensation and benefits for senior officers;
  3. acceptance by the CEO of any outside directorships on public companies or any significant public service commitments; and
  4. employment, consulting, retirement and severance agreements, and other special arrangements proposed for senior officers; and
5. to ensure that adequate provision has been made to train and develop management and for the orderly succession of the CEO and the other senior officers.

Policies, Procedures and Compliance
The Board has the responsibility:
1. to ensure that the Company operates at all times within applicable laws and regulations and to the highest ethical and moral standards;
2. to approve and monitor compliance with significant policies and procedures by which the Company is operated;
3. to ensure the Company sets high environmental standards in its operations and is in compliance with environmental laws and legislation;
4. to ensure the Company has in place appropriate programs and policies for the health and safety of its employees in the workplace;
5. to develop the Company's approach to corporate governance; and
6. to review significant new corporate policies or material amendments to existing policies (including, for example, policies regarding business conduct, conflict of interest and the environment).

Reporting and Communication
The Board has the responsibility:
1. to adopt a communication or disclosure policy for the Company and ensure that the Company has in place effective communication processes with shareholders and other stakeholders (including measures to enable stakeholders to communicate with the independent directors of the Board) and with financial, regulatory and other institutions and agencies;
2. to ensure that the financial performance of the Company is accurately reported to shareholders, other security holders and regulators on a timely and regular basis in accordance with all applicable securities laws, rules and regulations;
3. to ensure that the financial results are reported fairly and in accordance with generally accepted accounting principles and all applicable securities laws, rules and regulations;
4. to ensure the timely reporting of any other developments that have a significant and material impact on the value of the Company;
5. to approve the content of the Company's major communications to shareholders and the investing public, including the Interim/Annual Reports (including the financial statements and Management, Discussion and Analysis), the Management Information Circular (including the Compensation, Discussion and Analysis and disclosure of corporate governance practices), the Annual Information Form, any prospectuses that may be issued, and any significant information respecting the Company contained in any documents incorporated by reference in any such prospectuses; and
6. to report annually to shareholders on its stewardship of the affairs of the Company for the preceding year.

Outside Consultants or Advisors
At the Company's expense, the Board may retain, when it considers it necessary or desirable, outside consultants or advisors to advise the Board independently on any matter. The Board shall have the sole authority to retain and terminate any such consultants or advisors, including sole authority to review a consultant's or advisor's fees and other retention terms.