Exposing Liquor Stores N.A.'s Vote Buying Scheme

• Using shareholders' money to buy shareholders' votes raises serious legal and ethical questions; PointNorth believes it is a breach of the directors' fiduciary duties and oppressive to shareholders
• Last ditch attempt by current Board to stay in place
• Solicitation fees only payable if shareholders vote "FOR" management's full slate and if full current Board is elected
• Third-party governance experts blast the practice as: "inconsistent with the basic tenets of shareholder democracy… Self-preservation is not a reason to spend corporate resources."¹

TORONTO, June 8, 2017 /CNW/ - PointNorth Capital Inc., together with certain affiliates and associates (collectively, "PointNorth"), warn Liquor Stores N.A. Ltd. ("Liquor Stores" or the "Company") shareholders to be aware of calls from their broker asking them to vote the WHITE proxy.  Calls resulting in votes for the current Board are being paid for with shareholders' own money and are designed to entrench the current Board from the overwhelming wave of shareholder demanded change that is coming.

A company on the right track and aligned with shareholders should not need to resort to bribes.  Brokers are being paid with shareholder money to entrench the current Board.

The undisclosed document revealed by PointNorth says: "Liquor Stores will pay a solicitation fee of $0.05 for each Share validly voted FOR each member of the Liquor Stores Slate… No solicitation fees will be payable if each member of the Liquor Stores Slate, as set forth above, is not elected to the Board."  This soliciting dealer arrangement was not disclosed in Liquor Stores' management information circular dated April 28, 2017 and was not fully disclosed in its press release earlier today.

UNETHICAL ACT OF DESPERATION

Liquor Stores' 'Hail Mary' vote buying scheme is an act of desperation to try to keep the old Board in place.  It is certainly a response to the overwhelming support of institutional shareholders of Liquor Stores including LOGiQ Institutional Partners and JC Clark Ltd., who have announced their support for PointNorth, and high turnout and support of retail shareholders on the BLUE proxy for PointNorth.  It is obvious the negative response Liquor Stores' management received over the last week on their roadshow has caused them to resort to this unethical practice of vote buying.

After being ignored for years, shareholders will not be fooled by the current Board's sudden concern with 'shareholder engagement'. Attempting to justify the use of the vote buying scheme under the premise of increasing participation but then only paying those who vote FOR all management nominees is deplorable and misleading to shareholders.  This is not an effort to increase the retail vote in the interests of shareholder democracy – brokers are only paid in the event that all management nominees are elected. Further, because the vote buying scheme favours the WHITE proxy, it undermines the integrity and propriety of the voting process for the Meeting, which is contrary to the Board's fiduciary duties and is oppressive to PointNorth and its fellow shareholders.

LEGAL WARNING TO BANKS AND BROKERS

Participating in the vote buying scheme presents serious legal and ethical challenges and risks to banks and brokers and results in the tainting of the democratic process.  PointNorth recommends that any broker or financial advisor should terminate their agreement with Liquor Stores or seek legal advice regarding proxy solicitation rules.

The legality of vote buying through soliciting dealer fee arrangements is doubtful for three reasons:

• The schemes constitute a breach of directors' fiduciary duties on the basis that corporate resources are used to entrench directors and management;
• The schemes are oppressive to shareholders in that they result in an unfair shareholder vote; and
• The schemes violate securities laws in that brokers engage in proxy solicitation without complying with applicable disclosure rules.

PointNorth will pursue all remedies available to it through the applicable securities commissions and courts.

Leading governance experts have condemned the practice of vote buying:

"CCGG believes that the Proposed Listing Requirements should be amended to include a prohibition on issuers paying intermediaries only if they obtain votes in favour of management's recommended director nominees during a contested director election." (Canadian Coalition for Good Governance, August 26, 2014, OSC Submission)

PointNorth calls on the current Board to fulfil their fiduciary duties.  Do the right thing and cancel this arrangement immediately.

After costing shareholders significant value through the decline in share price and cutting the dividend by 78%, the current Board is now using shareholders' money to entrench themselves.  This makes it crystal clear the current Board is more worried about their paychecks than looking out for shareholders.

A board that works for itself cannot be expected to work for shareholders.  The current Board cannot make the changes needed.  The new nominees can and will.

WARNING: Shareholders who receive a call from their broker to vote the WHITE proxy for management should be aware their broker is being paid by Liquor Stores' current Board to get their vote.

We encourage all shareholders who have a financial advisor or broker to call them and ask if they have agreed to Liquor Stores' vote buying scheme and, if so, how they reconcile that with the trust that has been place in them.

It is time for a change. Shareholders can do better. Every vote will count no matter how many shares you own. 

Vote the BLUE proxy form or BLUE voting instruction form for the six new director nominees before 5:00 p.m. (Toronto time) on June 15, 2017. Even if you have voted the WHITE proxy, it is not too late. A later-dated BLUE proxy will replace any previously voted WHITE proxy.

If you have questions or need help voting, contact Kingsdale Advisors at 1-877-657-5857 or at [email protected].  

About PointNorth Capital

PointNorth, together with its affiliates and associates, is a private equity investment firm formed in Ontario. PointNorth invests, as did its predecessor, in equity and debt situations where it is able to influence operational, financial and strategic direction.

PointNorth invests in companies that are experiencing financial or operational challenges, are in out-of-favour sectors or are otherwise in need of change to drive significant long-term value for stakeholders. PointNorth does not seek to appoint its founders and principals to the boards of directors of companies it invests in, but rather operates by identifying best-in-class independent candidates to nominate for board positions. This commitment to improvements benefits all shareholders, not just PointNorth.

PointNorth has developed the New Strategy for Liquor Stores with the input of third party alcohol retail industry experts. As at April 21, 2017, PointNorth beneficially owned or controlled or directed, directly or indirectly, an aggregate of 2,750,000 common shares, representing approximately 9.91% of the common shares in the capital of Liquor Stores.

About Institutional Shareholder Services

Institutional Shareholder Services Inc. (ISS) is the world's leading provider of corporate governance and responsible investment (RI) solutions for asset owners, asset managers, hedge funds, and asset service providers. ISS' solutions include: objective governance research and recommendations; RI data, analytics, and research; end-to-end proxy voting and distribution solutions; turnkey securities class-action claims management; and reliable global governance data and modeling tools. Institutional clients turn to ISS to apply their corporate governance views, identify environmental, social and governance risk, and manage their complete proxy voting needs on a global basis. ISS analysts have unique expertise and insight on the governance and RI landscape, local market voting practices and regulatory requirements, along with expertise in varied fields such as law, M&A, compensation, and analytics.

Forward-Looking Statements and Information

Certain statements contained in this press release, constitute forward-looking statements. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions as they relate to Liquor Stores or PointNorth are intended to identify forward-looking statements. Such statements reflect PointNorth's current views and intentions with respect to future events as well as assumptions made by and information currently available to PointNorth, and are subject to certain risks and uncertainties. Although PointNorth considers these assumptions to be reasonable based on the information currently available to it, many factors could cause the actual results, performance, actions or achievements of Liquor Stores or others that may be expressed or implied by such forward-looking statements to materially differ from those described herein should one or more of these risks or uncertainties materialize. Such factors include, but are not limited to, economic, business, competitive and regulatory factors. Readers are cautioned not to place undue reliance on forward-looking statements.

The forward-looking statements contained herein are expressly qualified by this cautionary statement and are made as of the date of this press release. Except as expressly required by law, PointNorth does not intend, and disclaims any intention or obligation to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Liquor Stores' registered office address is Suite 101, 17220 Stony Plain Road, Edmonton, AB Canada T5S 1K6. A copy of this press release may be obtained on Liquor Stores' SEDAR profile at www.sedar.com.

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¹ Canadian Coalition for Good Governance, Stephen Erlichman, The Globe and Mail, Thursday, Jul. 04, 2013

SOURCE PointNorth Capital Inc.

Ian Robertson, Executive Vice President, Communication Strategy, Kingsdale Advisors, Direct: 416-867-2333, Cell: 647-621-2646, Email: [email protected]