On July 28, 2011, the Maple Leaf Foods’ board entered into a related party “material contract” with the Company’s CEO, Michael McCain, who later in December 2011 acquired personally the family’s 32% share ownership in Maple Leaf Foods. The board did not explain why the McCain family’s private and external reorganization of its share ownership in the Company required or justified the board effecting a “material change” in the public company. Under the McCain Governance Agreement, the board granted Michael McCain a most valuable right to corporate assets while a minority shareholder, namely, the right to board representation and access to the Company’s proxy. The board granted Michael McCain the right to cause the board to nominate for election as directors a number of McCain’s selected nominees proportionate to his share ownership from time to time. Reciprocally, Michael McCain agreed to vote his 32% block “for” the election of the board’s other nominees as Company directors in uncontested elections. While not a complete lockup of circular control, together with the board’s concurrent adoption of a ‘poison pill’, the McCain Governance Agreement created significant hurdles for those who may wish to challenge Michael McCain’s controlling influence over the Company’s strategy and business performance. The McCain Governance Agreement terminates only if the Company becomes bankrupt or if Michael McCain dies or acquires more that 50% of the Company’s shares. If he acquires 50% or more of the shares, he can then select and elect all the directors. While the board granted Michael McCain the privileged right to board representation while a minority shareholder, the board did not provide protection to the minority shareholders of Maple Leaf Foods if Michael McCain becomes a majority shareholder.

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