April 18, 2007

1. Draft - for discussion purposes only CVCA – Top Tips for Underperforming Companies • Exit Strategies – Restructuring, Sale or Wind-down April 18, 2007 • Jamey Gage, McCarthy Tétrault LLP • John McKenna, PricewaterhouseCoopers LLP

2. 1 Introduction 1 2 Restructuring 6 3 Going Concern Sale 12 4 Wind-down and Liquidation 15 5 Summary 19 Agenda Page

3. Section 1 Introduction 1

4. Section 1 - Introduction Introduction 2 • Premise: Company in financial difficulty and cannot continue to operate under status quo • Focus: Practical observations about the basic alternatives available and related decision-making process for the Company

5. Section 1 - Introduction A very frequent problem 3 • Lack of recognition of severity of issue until its too late, due to: • denial/not accepting failure: • trade way out • “tomorrow will be a better day” • last man standing strategy • management agenda conflicts with what’s right for company

6. Section 1 - Introduction Threshold Question: Can business be made viable if restructured? 4 • Operational restructuring: • headcount reduction • closure/sale of one or more business lines • renegotiation of key contracts • new money for capital investment • Balance sheet restructuring: • re-align stakeholders with their financial reality • “shore-up” balance sheet • Basic alternatives if it cannot be restructured: • going concern sale • wind-down and liquidation

7. Section 1 - Introduction Operating in the Zone of Insolvency – Factors to Consider 5 • Director and Officer duties and liabilities: • fiduciary duty to company not creditors or shareholders • nevertheless must take into account interests of other stakeholders • statutory personal liabilities • Liquidity Management: • plan ahead; do not wait for the crisis • cost reduction opportunities • managing suppliers and “trading while insolvent” concerns

8. Section 2 Restructuring 6

9. Section 2 - Restructuring Practical Considerations in Planning a Restructuring 7 • Does management have experience and credibility with stakeholders to lead restructuring? • Chief Restructuring Officer • Professional advisers • Investigate all realistic restructuring alternatives • Flesh out cost cutting measures • Develop sustainable business plan and strategy to get there • Analyse available liquidity and liquidity management strategies and line-up additional funding • Develop stakeholders’ communication plan • Minimize D&O exposure

10. Section 2 - Restructuring Informal vs Formal Restructuring - factors to consider 8 • Number of stakeholders and willingness to compromise: • senior and subordinated lenders • trade creditors • employee groups • Time available: • existing liquidity • creditor and other pressures (defaults, maturities, litigation, etc.) • Need for additional liquidity • Cross-border issues

11. Section 2 - Restructuring Advantages of Formal Restructuring - CCAA 9 • Stays creditors, litigation and other proceedings • Company can reject contracts or try to renegotiate them • Limitations on termination of contracts by counterparties • Facilitates restructuring on large groups of creditors • Brings parties to negotiating table • Directors and officers better protected • Financing can be more easily obtained during restructuring In other words, it maximizes the chance the company has to restructure

12. Section 2 - Restructuring Advantages of Informal Restructuring 10 • CCAA filing publicity can have negative impact on customers, suppliers and employees • Can be quicker and less expensive • Less impact on value of assets to be disposed • Avoid cross defaults of non-filing entities triggered by a filing • Company’s activities and business plan not subject to same level of challenge or opposition

13. Section 2 - Restructuring Overview of CCAA 11 • CCAA has eligibility requirements • Main steps in the CCAA process: • Pre-filing preparation • Court application for initial CCAA order • Filing of a CCAA restructuring plan • Creditor meetings to vote on CCAA plan • Court hearing to sanction CCAA plan • Implementation of CCAA plan

14. Section 3 Going Concern Sale 12

15. Section 3 - Going Concern Sale Issues to consider re going concern sale 13 • Structure of transaction • Marketing approach • Net realizations • Timing • Holding it all together: • liquidity • employees • customers • suppliers • lenders

16. Section 3 - Going Concern Sale Is court “assistance” required to facilitate the sale? 14 • Factors to consider: • obtain “DIP” financing • stay enforcement proceedings by creditors • avoid termination of contracts • provide D&O protection • repudiate contracts/leases • buyer protections (vesting order, avoidance of subsequent claims) • formal process to distribute proceeds of sale • Often a “dual” track approach is pursued in CCAA – going concern sale as alternative to restructuring

17. Section 4 Wind-down and Liquidation 15

18. Section 4 - Wind-down and Liquidation Direction? 16 • Company vs. creditor controlled process: • Company controlled: • “informal” wind-down • liquidating CCAA • Creditor controlled – receivership: • privately appointed receiver • court appointed receiver • Impact of TCT decision • Receivership may also require bankruptcy: • assists secured lenders • but can cause D&O problems & additional scrutiny of prior activities

19. Section 4 - Wind-down and Liquidation Practical issues that effect the wind-down/liquidation direction 17 • Holding it all together: • management • employees • customers • suppliers • lenders • liquidity

20. Section 4 - Wind-down and Liquidation Is court “assistance” required? 18 • Advantages of court proceedings: • facilitates additional financing • stay enforcement proceedings by creditors • counter the actions of employees • can provide buyer protections (vesting order, avoidance of subsequent claims) • provides formal process to distribute proceeds of sale and deal with competing claims • provides D&O protection and can be used to create D&O claims process

21. Section 5 Summary 19

22. Section 5 - Summary Summary 20 • There are likely going to be a greater number of distressed companies • There are many ways to deal with distressed companies to maximize value/recovery • Critical to identify the issue early and select the right option • And, of course, retain the right professionals!

23. Section 5 - Summary Contact details 21 John McKenna, PricewaterhouseCoopers LLP • Tel: (416) 941-8314 • E-mail: john.p.mckenna@ca.pwc.com Jamey Gage, McCarthy Tétrault LLP • Tel: (416) 601-7539 • E-mail: jgage@mccarthy.ca