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Constating Documents

Constating documents of Perpetual Energy Inc.

Amended and Re-stated By-Law No. 1 of Perpetual Energy Inc.

Majority Voting for Directors

The Board of Directors has adopted a policy stipulating that if the number of shares voted in favour of the election of a particular director nominee at a shareholders' meeting is less than the number of shares voted and withheld from voting for that nominee, the nominee will submit his or her resignation to the Board within five days of the meeting, with the resignation to take effect upon acceptance by the Board. The Compensation and Corporate Governance Committee will consider the director nominee's offer to resign and will make a recommendation to the Board as to whether or not to accept the resignation. The Compensation and Corporate Governance Committee will be expected to accept the resignation except in special circumstances requiring the applicable director to continue to serve on the Board. In considering whether or not to accept the resignation, the Compensation and Corporate Governance Committee will consider all factors that it deems relevant including, without limitation, the stated reasons why shareholders "withheld" votes from the election of that nominee, the existing Board composition, the length of service and the qualifications of the director whose resignation has been tendered, the director's contributions to Perpetual and attendance at previous meetings, Perpetual's corporate governance policies and such other skills and qualities as the Compensation and Corporate Governance Committee deems to be relevant.

The Board will consider the Compensation and Corporate Governance Committee's recommendation and make a decision as to whether to accept the director's offer to resign within 90 days of the date of the Meeting, which it will announce by way of a press release and provide a copy to the Toronto Stock Exchange, including, if the Board elects, the reasons for rejecting the resignation offer. In considering whether to accept the director's offer of resignation, the Board will consider the factors considered by the Compensation and Corporate Governance Committee and such additional factors it considers to be relevant. No director who is required to tender his or her resignation shall participate in the deliberations or recommendations of the Compensation and Corporate Governance Committee or the Board.

If a director's offer of resignation is accepted, subject to any corporate law restrictions, the Board may leave the resultant vacancy unfilled until the next annual general meeting. Alternatively, at the Board's discretion, it may fill the vacancy through the appointment of a new director whom the Board considers appropriate or it may call a special meeting of shareholders at which there will be presented nominees supported by the Board to fill the vacant position or positions. The foregoing policy does not apply in circumstances involving contested director elections.

Advance Notice Provisions

Perpetual's by-laws (the "By-Laws") incorporate advance notice provisions with respect to director nominations, which were approved by the shareholders at the Perpetual's 2016 annual and special meeting. The By-Laws set forth a procedure requiring advance notice to Perpetual by any shareholder who intends to nominate any person for election as a director of Perpetual other than pursuant to: (i) a requisition of a meeting made pursuant to the provisions of the Business Corporations Act (Alberta) (the "ABCA"); or (ii) a shareholder proposal made pursuant to the provisions of the ABCA.

Among other things, the advance notice provisions set a deadline by which such shareholders must notify Perpetual in writing of an intention to nominate directors prior to any meeting of shareholders at which directors are to be elected and set forth the information that the shareholder must include in the notice for it to be valid. The advance notice provisions of the By-Laws provide a reasonable time frame for shareholders to notify Perpetual of their intention to nominate directors and require shareholders to disclose information concerning the proposed nominees that is mandated by applicable securities laws. The Board will be able to evaluate the proposed nominees' qualifications and suitability as directors and respond as appropriate in the best interests of Perpetual.

The advance notice provisions also ensure an orderly and efficient meeting process by providing a structured and transparent framework for nominating directors.

No person nominated by a shareholder will be eligible for election as a director of Perpetual unless nominated in accordance with the provisions of the Perpetual's By-laws. A copy of the By-laws are available here and on SEDAR (www.sedar.com).