Exhibit 99.12
POINTS INTERNATIONAL LTD.
MANAGEMENT INFORMATION CIRCULAR
Solicitation of Proxies
THIS MANAGEMENT INFORMATION CIRCULAR (ALSO REFERRED TO HEREIN AS THIS
"CIRCULAR") IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY OR ON
BEHALF OF THE MANAGEMENT OF POINTS INTERNATIONAL LTD. (THE "CORPORATION") FOR
USE AT THE ANNUAL AND SPECIAL MEETING (THE "MEETING") OF THE SHAREHOLDERS OF THE
CORPORATION TO BE HELD AT STOCK MARKET PLACE, THE EXCHANGE TOWER, 130 KING
STREET WEST, TORONTO, ONTARIO, ON THURSDAY, MAY 11, 2005, AT 12:00 P.M. (EASTERN
STANDARD TIME), OR AT ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF, FOR THE
PURPOSES SET OUT IN THE ACCOMPANYING NOTICE OF MEETING. It is expected that
solicitation will be primarily by mail. Proxies also may be solicited personally
or by telephone by officers and directors of the Corporation. The cost of
solicitation by or on behalf of the management will be borne by the Corporation.
Except as otherwise stated, the information contained herein is given as at
March 8, 2005.
To be effective, properly executed forms of proxy must (i) be delivered to
Computershare Trust Corporation of Canada, the registrar and transfer agent for
the Common Shares, at Suite 600, 530 8th Avenue, S.W., Calgary, Alberta, Canada
T2P 3S8 or to the Secretary of the Corporation at the offices of the
Corporation, Nash Building, 179 John Street, Suite 800, Toronto, Ontario M5T
1X4, in either case, at least one day (excluding Saturdays, Sundays and
holidays) before the date of the Meeting or any adjournment(s) or
postponement(s) thereof, or (ii) be deposited with the Chairman of the Meeting
on the day of the Meeting, or any adjournment(s) or postponement(s) thereof,
prior to the commencement thereof.
Appointment of Proxyholder
The persons named in the enclosed form of proxy are officers and directors of
the Corporation and shall represent management at the Meeting. A SHAREHOLDER
DESIRING TO APPOINT SOME OTHER PERSON (WHO NEED NOT BE A SHAREHOLDER OF THE
CORPORATION) TO REPRESENT HIM OR HER AT THE MEETING MAY DO SO BY INSERTING SUCH
OTHER PERSON'S NAME IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY.
Exercise of Vote by Proxy
The shares of the Corporation represented by properly executed proxies will be
voted or withheld from voting in accordance with the specifications made therein
by the registered shareholder on any ballot that may be called for, and will be
voted for or against any matter to be acted upon where such shareholder
specifies a choice for such matter. For the Meeting, the form of proxy affords a
shareholder an opportunity to specify that the shares registered in his or her
name shall be: (i) voted or withheld from voting in the election of directors;
(ii) voted or withheld from voting on the appointment of auditors and the
authorization of the directors to fix the remuneration of the auditors; and
(iii) voted for or against the resolution approving the extension of the term of
outstanding options in the Corporation's subsidiary Points.com Inc.
("POINTS.COM") and the related rights to put any shares of Points.com issued on
the exercise of such options to the Corporation in consideration of the issuance
by the Corporation of Common Shares (the "PCI OPTION RESOLUTION").
IN RESPECT OF PROXIES IN WHICH REGISTERED SHAREHOLDERS HAVE FAILED TO SPECIFY
THAT THE PROXY NOMINEES ARE REQUIRED TO (I) VOTE OR WITHHOLD FROM VOTING IN THE
ELECTION OF DIRECTORS, (II) VOTE OR WITHHOLD FROM VOTING IN THE APPOINTMENT OF
AUDITORS AND THE AUTHORIZATION OF THE DIRECTORS TO FIX THE REMUNERATION OF THE
AUDITORS, OR (III) VOTE FOR OR AGAINST THE PCI OPTION RESOLUTION, THE SHARES
REPRESENTED BY PROXIES IN FAVOUR OF MANAGEMENT NOMINEES WILL BE VOTED IN FAVOUR
OF SUCH MATTERS.
The form of proxy also confers discretionary authority upon the proxy nominees
in respect of amendments or variations to matters identified in the notice of
Meeting or other matters that may properly
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come before the Meeting or any adjournment(s) or postponement(s) thereof.
Management knows of no amendments, variations or other matters to come before
the Meeting other than the matters referred to in the foregoing Notice of
Meeting. However, if any amendments, variations or other matters which are not
now known to management should properly come before the Meeting or any
adjournment(s) or postponement(s) thereof, the shares represented by proxies in
favour of management nominees will be voted on such amendments, variations or
other matters in accordance with the best judgment of the proxy nominee.
Revocation of Proxies
Proxies given by shareholders for use at the Meeting may be revoked at any time
prior to their use. In addition to revocation in any other manner permitted by
law, a proxy may be revoked by an instrument in writing executed by a
shareholder or by his or her attorney authorized in writing, or, if the
shareholder is a corporation, by an officer or attorney thereof duly authorized,
and deposited either at the offices of Computershare Trust Corporation of
Canada, at any time up to and including the last business day preceding the day
of the Meeting, or any adjournment(s) or postponement(s) thereof, or with the
Chairman of the Meeting on the day of the Meeting, or any adjournment(s) or
postponement(s) thereof.
Quorum and Record Date
The presence of at least five shareholders holding or representing by proxy not
less than 15% of the total number of the issued shares of the Corporation
entitled to vote at the Meeting is required to constitute a quorum at the
Meeting. The board of directors of the Corporation (the "BOARD") has fixed March
23, 2005 as the record date (the "RECORD DATE") for the purpose of determining
shareholders entitled to receive notice of and to vote at the Meeting. The
failure of a shareholder to receive notice of the Meeting does not deprive such
shareholder of the right to vote at the Meeting. A person who has acquired
shares after the Record Date is entitled to vote those shares at the Meeting
upon producing properly endorsed share certificates or otherwise establishing
proper ownership and demanding, not later than 10 days before the Meeting, that
his or her name be included in the list of shareholders eligible to vote at the
Meeting, in which case the transferee is entitled to vote his or her shares at
the Meeting.
Voting Shares and Principal Holders Thereof
As at March 8, 2005, 74,072,456 "COMMON SHARES" and one "SERIES TWO PREFERRED
SHARE" were issued and outstanding, and constituted all of the voting shares in
the capital of the Corporation.
The holders of Common Shares and the Series Two Preferred Share are entitled to
vote on all matters brought before a meeting of the shareholders together as a
single class, except in respect of matters where (i) only the holders of shares
of one class or a series of shares are entitled to vote separately pursuant to
applicable law or (ii) the Articles of the Corporation otherwise specify. The
holders of Common Shares are entitled to cast one vote per share and the holder
of the Series Two Preferred Share is entitled to cast that number of votes equal
to the lesser of (i) 19,999,105 and (ii) 19.9% of the total number of votes that
may be cast at the Meeting. As at March 8, 2005, the holder of the Series Two
Preferred Share was entitled to cast up to 18,402,520 votes. Generally, all
matters to be voted on by shareholders must be approved by a simple majority of
the votes cast in respect of Common Shares and the Series Two Preferred Share
held by persons present in person or by proxy, voting together as a single
class.
As at March 8, 2005, the only person who, to the knowledge of the Corporations,
its directors or officers, owns beneficially, directly or indirectly, or
exercises control or direction over, in excess of 10% of any class of the voting
securities of the Corporation, is Points Investments, Inc., an affiliate of
InterActiveCorp ("IAC"), as holder of the Series Two Preferred Share.
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Beneficial Shareholders
Only registered shareholders or the persons they appoint as their proxyholders
are permitted to vote at the Meeting. A person who beneficially owns shares
through an intermediary such as a bank, trust company, securities dealer,
broker, trustee or administrator (an "INTERMEDIARY") is not a registered
shareholder (a "NON-REGISTERED HOLDER"). In accordance with applicable
securities laws, the Corporation distributes copies of its meeting materials to
Intermediaries and clearing agencies for onward distribution to Non-Registered
Holders who have not waived the right to receive meeting materials. Generally,
Non-Registered Holders who have not waived the right to receive meeting
materials will receive a pre-signed form of proxy or a voting instruction form
from their Intermediary along with the meeting materials.
NON-REGISTERED SHAREHOLDERS RECEIVING A PRE-SIGNED PROXY, VOTING INSTRUCTION
FORM OR SIMILAR INSTRUMENT SHOULD CAREFULLY FOLLOW THE MAILING PROCEDURES AND
SIGNING AND RETURNING INSTRUCTIONS OF THEIR INTERMEDIARY TO ENSURE THEIR SHARES
ARE VOTED AT THE MEETING.
Should a Non-Registered Holder receive a form of proxy, voting instruction form
or similar instrument and wish to attend and vote at the Meeting in person (or
have another person attend and vote on behalf of the Non-Registered Holder) such
Non-Registered Holder should contact his or her Intermediary to determine the
steps necessary to accomplish this.
ELECTION OF DIRECTORS
The present term of office of each director will expire immediately prior to the
election of directors at the Meeting. In accordance with its authority, the
Board has determined that the number of directors to be elected at the Meeting,
to serve until the next annual meeting of shareholders or until a successor is
elected or appointed, is 11, two of whom are to be elected by the holder of the
Series Two Preferred Share, voting separately as a series, and nine of whom are
to be elected by the holders of the Common Shares and the holder of the Series
Two Preferred Share, voting together as a single class. Unless authority to do
so is withheld, the shares represented by the proxies in favour of management
nominees will be voted in favour of the election of the persons whose names
appear below as directors of the Corporation. Although the Board is not aware of
any nominee who would be unwilling or unable to serve if elected, should any
nominee be unwilling or unable to serve as a director of the Corporation, the
persons named in the form of proxy reserve the right to nominate and vote for
another nominee at their discretion.
The Board does not have an executive committee, however, the Corporation is
required to have an audit committee under the provisions of the Canadian
Business Corporations Act (CBCA).
The following table provides certain background information with respect to each
nominee for the Board.
COMMON
PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS SHARES
NAME TERM AS (CURRENT AND FOR PAST FIVE YEARS BENEFICIALLY
DIRECTOR CLASSIFICATION DIRECTOR UNLESS OTHERWISE NOTED) OWNED
- ------------------------ ----------- ------------------------------------------------------------------ ------------
Douglas A. Carty(1) Feb. 2002 - Chief Financial Officer, Laidlaw International Ltd., a 5,000
Glen Ellyn, Illinois present transportation company (Jan. 2003 - present); Chief Financial
Independent Officer, Atlas Air Worldwide Holdings Inc., an air cargo company
(Jul. 2001 - Dec. 2002); Chief Financial Officer, Canadian
Airlines, an airline (Jul. 1996 - Jul. 2000)
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COMMON
PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS SHARES
NAME TERM AS (CURRENT AND FOR PAST FIVE YEARS BENEFICIALLY
DIRECTOR CLASSIFICATION DIRECTOR UNLESS OTHERWISE NOTED) OWNED
- ------------------------ ----------- ------------------------------------------------------------------ ------------
Marc B. Lavine (1, 4) Feb. 2000 - Chief Executive Officer, President and Director of Chrysalis 6,717,583
Paris, France present Capital Corporation, a capital pool company (Oct., 2003 -
Independent present); Chief Executive Officer, President and Director of
Chrysalis Capital Corporation 2, a capital pool company (June,
2004 - present); Chief Executive Officer, Exclamation
International Incorporated (Jun. 1999 - Feb. 2002)
T. Robert MacLean(3) Feb. 2002 - Chief Executive Officer, Points International Ltd. (Feb. 2002 - 345,390
Toronto, Ontario present present); Chief Executive Officer, Points.com Inc. (Feb. 2000 -
Insider present); President, Points.com Inc. (Feb. 2000 - Feb. 2002);
Vice-President, other positions, Canadian Airlines, an airline
(1988 - 2000)
Christopher J.D. Barnard Feb. 2000 - President, Points International Ltd. (Feb. 2000 - present); 1,629,800
Toronto, Ontario present President, Points.com Inc. (Feb. 2002 - present); Vice-President,
Insider Exclamation International Incorporated (Jul. 1998 - Feb. 2000)
Rowland W. Fleming(2) Feb. 2002 - Public and private company director (Apr. 1999 - present) 30,000
Mississauga, Ontario present
Independent
John W. Thompson(1) Feb. 2002 - Public company director (Aug. 2000 - present); Managing Director, 1,422,236
Toronto, Ontario present Kensington Capital Partners Limited, an investment and advisory
Independent firm (Sept. 1999 - Oct. 2003)
J. Grant McCutcheon(2) Feb. 2000 - Director, Lawrence & Company Incorporated, an investment firm 156,578
Toronto, Ontario present (Dec. 1995 - present)
Independent
Jim W. Kranias(2) Feb. 2000 - President, International Consulting, a private consulting company 254,078
London, England present (Aug. 1998 - present)
Independent
Eric A. Korman(1, 2, 5) June 2003 - Senior Vice President, Mergers & Acquisitions, InterActiveCorp, an Nil
New York, New York present interactive commerce company (Dec. 2004 - present); other
Nominee of the Series positions at InterActiveCorp (Sept. 2001 - Dec. 2004); Principal
Two Preferred Share and head of business development for ePartners Venture Capital, a
holder $650 million venture fund (Jan. 2000 - Apr. 2001)
Dan Marriott(5) Dec. 2003 - Senior Vice President, Interactive Development, InterActiveCorp, Nil
New York, New York present an interactive commerce company (Dec. 2003 - present); Senior Vice
Nominee of the Series President, Strategic Planning, InterActiveCorp (Feb. 2002 - Dec.
Two Preferred Share 2003); Executive Vice President, Corporate Strategy and
holder Development, Ticketmaster, Inc., an online consumer products
company (Feb. 1999 - Feb. 2002)
Additional Nominee(6)
Notes:
(1) Member of the Audit Committee; Mr. Carty serves as Chairman.
(2) Member of Human Resources and Corporate Governance Committee; Mr. Fleming
serves as Chairman.
(3) Observer of both the Human Resources and Corporate Governance and Audit
Committees.
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(4) Mr. Lavine's holdings include 682,793 Common Shares held directly and
6,034,790 Common Shares held indirectly through The Eyeland Corporation, a
100%-owned personal holding company.
(5) Nominee of Points Investments, Inc., an affiliate of IAC.
(6) Due to the untimely resignation of a director of the Corporation at the
date hereof, the Corporation has not identified an 11th nominee to the
board of directors. When a suitable candidate is identified, appropriate
disclosure will be made.
CORPORATE CEASE TRADE ORDERS OR BANKRUPTCIES
In October 1996, Mr. McCutcheon joined the board of directors of Innovadent
Technologies Ltd. ("INNOVADENT") as the nominee of Innovadent's largest
shareholder and secured lender. Innovadent made a proposal to creditors in May
1998, which was accepted. In April 1999, the Ontario Securities Commission
issued a cease trade order against Innovadent for failure to file financial
statements and in August 1999, Innovadent filed a notice of intent to make a
proposal to creditors. Mr. McCutcheon resigned from the board of Innovadent on
August 31, 1999.
In July of 1996, Mr. Carty was appointed to the position of Chief Financial
Officer of Canadian Airlines Corporation ("CANADIAN"). In March of 2000,
Canadian filed for bankruptcy protection under the Companies Creditors
Arrangement Act.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION AND SUMMARY COMPENSATION TABLE FOR THE FINANCIAL YEAR
ENDED DECEMBER 31, 2004
The following table sets forth all compensation, for the periods indicated, paid
in respect of the Named Executive Officers of the Corporation as of December 31,
2004. A "Named Executive Officer" means the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO") of the Corporation, regardless of the amount of
compensation of those individuals, and each of the Corporation's three most
highly compensated executive officers, other than the CEO and CFO, who are
serving as executive officers at the end of the most recent fiscal year and
whose total salary and bonus for the fiscal year amounted to $150,000 or more,
and any additional individuals for whom disclosure would have been provided
except that the individual was not serving as an officer of the Corporation at
the end of the most recently completed financial year-end.
Annual Compensation Long Term Compensation
------------------------------------ -----------------------------------------
Other Securities Subsidiary
Annual Under Securities All Other
Fiscal Salary Bonus(2) Compensation(3) Option(4) Under Compensation
Name, Principal Position Year ($) ($) ($) (#) Option(5) (#) ($)
- ------------------------------ ------ ------- -------- --------------- ---------- ------------- ------------
Robert MacLean, 2004 250,000 -- 25,825 245,000 975,683 --
Chief Executive 2003 160,000 34,498 26,650 125,000 975,683
Officer 2002 146,917 17,360 33,680 125,000 1,275,375
Christopher Barnard, 2004 189,832 168,000 -- 1,130,000 75,000 --
President 2003 156,800 34,301 -- 1,581,250 75,000
2002 144,667 17,360 -- 1,181,250 75,000
Stephen Yuzpe, 2004 144,692 15,600 -- 233,750 55,000 --
Chief Financial 2003 135,844 27,040 -- 183,750 55,000
Officer 2002 129,167 7,508 -- 183,750 55,000
Bill Thompson(1), 2004 143,000 11,733 -- 96,667 142,100 --
Senior Vice President, Partner 2003 146,493 28,872 -- 50,000 142,100
Relationships 2002 155,065 15,403 -- -- 170,100
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Annual Compensation Long Term Compensation
-------------------------------------------------- -----------------------------------
Other Annual Securities Under Subsidiary All Other
Salary Bonus(2) Compensation(3) Option(4) Securities Under Compensation
Name, Principal Position Fiscal Year ($) ($) ($) (#) Option(5) (#) ($)
- ------------------------ ----------- ------- -------- --------------- ---------------- ---------------- ------------
Darlene Higbee Clarkin, 2004 153,667 14,500 -- 253,333 320,473 --
Vice President and Chief 2003 127,427 27,359 -- 200,000 424,436
Technology Officer 2002 107,083 12,850 -- -- 509,436
Notes:
(1) Salary and bonus amounts for Mr. Thompson were converted from U.S. dollars
using the following foreign exchange rate: (2004 - Cdn$1.30 = US$1.00; 2003
- Cdn$1.40 = US$1.00; 2002 - Cdn$1.5796 = US$1.00).
(2) Bonuses earned in a fiscal (calendar) year are paid within 12 weeks of year
end in the following fiscal year.
(3) Perquisites and other personal benefits for each Named Executive Officer do
not exceed the lesser of Cdn. $50,000 or 10% of total annual salary and
bonus.
(4) Represents options to acquire Common Shares.
(5) Represents options to acquire common shares of Points.com.
OPTIONS GRANTED TO NAMED EXECUTIVE OFFICERS DURING THE FINANCIAL YEAR ENDED
DECEMBER 31, 2004
The following table indicates the options granted during the financial year
ended December 31, 2004 to Named Executive Officers.
% of Total Market Value of
Common Shares Under Options Granted Exercise Price per Common Shares on the
Options Granted to Employees in Common Share Date Preceding Issuance
Name (#) Financial Year ($) ($) Expiration Date
---- ------------------- --------------- ------------------ ----------------------- ---------------
Robert MacLean 120,000(1) 7.3% 1.02 1.02 Aug. 26, 2009
Christopher Barnard 40,000(1) 2.4% 1.02 1.02 Aug. 26, 2009
40,000(2) 2.4% 1.37 1.37 Apr. 21, 2009
Stephen Yuzpe 50,000(2) 3.1% 1.37 1.37 Apr. 21, 2009
Bill Thompson 46,667(2) 2.9% 1.37 1.37 Apr. 21, 2009
Darlene Higbee Clarkin 53,333(2) 3.3% 1.37 1.37 Apr. 21, 2009
Notes:
(1) The options were granted on August 27, 2004 and vest in equal parts on each
of the first, second and third anniversary of the date of grant.
(2) The options were granted on April 22, 2004 and vest in equal parts on each
of the first, second and third anniversary of the date of grant.
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AGGREGATE OPTIONS EXERCISED DURING THE FINANCIAL YEAR ENDED DECEMBER 31, 2004
AND FINANCIAL YEAR END OPTION VALUES
The following table indicates the options exercised during the financial year
ended December 31, 2004 by each of the Named Executive Officers and the value of
options unexercised at year-end.
POINTS INTERNATIONAL LTD. OPTIONS
Common Shares Aggregate Value of Unexercised
Acquired on Value Unexercised Options at In-the-Money Options at
Exercise Realized Financial Year End Financial Year End(1)
Name (#) ($) (#) ($)
---- ------------- --------- ---------------------- -----------------------
Robert MacLean(2) -- -- 125,000 Exercisable 55,000 Exercisable
120,000 Unexercisable Nil Unexercisable
Christopher Barnard(3) 531,250 435,625 783,200 Exercisable 286,000 Exercisable
346,800 Unexercisable Nil Unexercisable
Stephen Yuzpe(4) -- -- 183,750 Exercisable 78,825 Exercisable
50,000 Unexercisable Nil Unexercisable
Bill Thompson -- -- 16,650 Exercisable 11,988 Exercisable
80,017 Unexercisable Nil Unexercisable
Darlene Higbee Clarkin -- -- Nil Exercisable Nil Exercisable
253,333 Unexercisable Nil Unexercisable
Notes:
(1) Based upon the closing price of the Common Shares on the Toronto Stock
Exchange (the "TSX") on December 31, 2004 of $0.94 per Common Share.
(2) Subsequent to year end and up to the date of this Circular, Mr. MacLean
exercised 125,000 stock options that were otherwise set to expire.
(3) Subsequent to year end and up to the date of this Circular, Mr. Barnard
exercised 650,000 stock options that were otherwise set to expire.
(4) Subsequent to year end and up to the date of this Circular, Mr. Yuzpe
exercised 150,000 stock options that were otherwise set to expire and an
additional 13,750 stock options that would have expired in May 2006.
POINTS.COM INC. OPTIONS(1)
Value of Unexercised
Corporation Common Points.com Common Unexercised PCI In-the-Money PCI
Shares Acquired on Aggregate Value Shares Acquired Options at Options at Financial
Exercise Realized on Exercise Financial Year End Year End(2)
Name (#) ($) (#) (#) ($)
---- ------------------ --------------- ----------------- --------------------- -----------------------
Robert MacLean(3) -- -- -- 975,684 Exercisable 2,264,150 Exercisable
Nil Unexercisable Nil Unexercisable
Christopher Barnard(4) -- -- -- 75,000 Exercisable 172,400 Exercisable
Nil Unexercisable Nil Unexercisable
Stephen Yuzpe(5) -- -- -- 55,000 Exercisable 126,427 Exercisable
Nil Unexercisable Nil Unexercisable
Bill Thompson -- -- -- 142,100 Exercisable 326,639 Exercisable
Nil Unexercisable Nil Unexercisable
Darlene Higbee Clarkin 260,313 286,240 103,963 320,473 Exercisable 745,395 Exercisable
Nil Unexercisable Nil Unexercisable
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Notes:
(1) The Corporation has granted to holders of options to acquire common shares
of Points.com the right to put to the Corporation the common shares of
Points.com in exchange for Common Shares having a fair market value equal
to the fair market value of the common shares of Points.com so put. The
Corporation has used a ratio of 2.5039 Common Shares per Points.com common
share for this purpose.
(2) Based upon the closing price of the Common Shares on the TSX on December
31, 2004 of $0.94 per Common Share and assuming that the fair market value
of a Points.com common share is equal to 2.5039 Common Shares, which ratio
is consistent with the historical ratio applied in respect of put rights
granted by the Corporation to holders of certain options exercisable to
acquire common shares of Points.com.
(3) Subsequent to year end and up to the date of this Circular, Mr. MacLean
conditionally exercised 975,684 stock options in the Corporation's
subsidiary Points.com and conditionally put the common shares acquired to
the Corporation for 2,443,015 Common Shares. See the heading "PCI Option
Extension" for additional information.
(4) Subsequent to year end and up to the date of this Circular, Mr. Barnard
conditionally exercised 75,000 stock options in the Corporation's
subsidiary Points.com and conditionally put the common shares acquired to
the Corporation for 187,793 Common Shares. See the heading "PCI Option
Extension" for additional information.
(5) Subsequent to year end and up to the date of this Circular, Mr. Yuzpe
exercised 55,000 Points.com options that were otherwise set to expire and
put the common shares acquired to the Corporation for 137,715 Common
Shares.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Number of securities
to be issued Weighted-average
upon exercise of exercise price of
outstanding options, outstanding options, Number of securities remaining
warrants and rights warrants and rights available for future issuance under
Plan Category (#) ($) equity compensation plans
------------- -------------------- -------------------- -----------------------------------
Employee stock option plan(1, 2) 6,184,558 0.71 1,640,078
Put rights on subsidiary shares(3) 6,486,347 0.02 0
Notes:
(1) Subsequent to year end, 1,823,750 options were exercised and 65,000 were
cancelled.
(2) Subsequent to year end, 150,000 options were granted.
(3) Subsequent to year end, 475,600 stock options in the Corporation's
subsidiary Points.com were exercised and put to the Corporation for
1,190,855 Common Shares. In addition, 1,050,684 stock options in the
Corporation's subsidiary Points.com were conditionally exercised and the
common shares acquired conditionally put to the Corporation for 2,630,808
Common Shares. See the heading "PCI Option Extension" for additional
information.
COMPENSATION OF DIRECTORS DURING THE FINANCIAL YEAR ENDED DECEMBER 31, 2004
Beginning July 1, 2003, the Corporation compensated directors who are not also
executive officers for serving on the Board ("OUTSIDE DIRECTORS") at a rate of
$1,000 per meeting held in person ($500 per meeting held by conference call) and
$900 per committee meeting held in person ($450 per meeting held by conference
call). In addition, Outside Directors are paid an annual retainer of $10,000.
The Chairman of the Board is paid an additional annual retainer of $3,000 and
the Chairman of each committee is paid an additional annual retainer of $2,000.
Outside Directors are reimbursed for reasonable out-of-pocket expenses for
attending Board and committee meetings. Certain directors who are eligible to
receive directors' fees have waived their right to receive compensation. Board
members who have waived their right to compensation can, at any time, elect to
receive fees for meetings held after notice of such election is made.
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Board members are eligible to participate in the Corporation's stock option plan
(the "STOCK OPTION PLAN"). No Outside Director was granted options in 2004. The
total cash compensation paid to the directors for 2004 was $148,250. Directors'
fees are paid quarterly, within 30 days of quarter end.
Six Outside Directors hold, in the aggregate, options to acquire 1,732,500
Common Shares with a weighted average exercise price of $0.45. In addition, two
Outside Directors hold, in the aggregate, 95,000 options to acquire common
shares of the Corporation's subsidiary, Points.com, with an exercise price of
$0.055. The shares issued on the exercise of the Points.com options may be put
to the Corporation for a maximum of 237,871 Common Shares. Subsequent to year
end and up to the date of this Circular, the Outside Directors, in the
aggregate, exercised options to acquire 575,000 Common Shares and Points.com
options for 95,000 Points.com common shares and put those common shares to the
Corporation for 237,871 Common Shares.
EMPLOYMENT AGREEMENTS
Robert MacLean, the CEO of the Corporation and Points.com, is employed under an
employment agreement made as of January 11, 2000, as subsequently amended. Mr.
MacLean currently receives an annual salary of $250,000. The employment
agreement provides for a compensation package that includes base salary, bonus,
benefits and the right to participate in any incentive stock option plan of the
Corporation. The agreement automatically renews from year to year, and may be
terminated by the Corporation by giving notice at least 60 days prior to the
expiry of the annual term. If the agreement is terminated on such other notice,
and for reasons other than just cause, Mr. MacLean is entitled to one year of
severance pay. The agreement also contains provisions related to
confidentiality, intellectual property rights, non-solicitation and
non-competition.
Christopher Barnard, the Corporation's President, is employed under an
employment agreement made as of April 1, 1999, as subsequently amended. Mr.
Barnard currently receives an annual salary of $189,832. The employment
agreement provides for a compensation package that includes base salary, bonus,
benefits and the right to participate in any incentive stock option plan of the
Corporation. In addition to a general bonus entitlement, Mr. Barnard was paid a
bonus of $150,000 in 2004 as certain share ownership criteria were met and is
also entitled to a bonus of up to $800,000 payable over a minimum of three years
commencing December 31, 2004 provided certain share ownership requirements are
met during such period. If the agreement is terminated by the Corporation for
reasons other than just cause, Mr. Barnard is entitled to the greater of one
year of salary and an amount which would be awarded under applicable common law
principles. In addition, upon termination for other than just cause, all
unvested options held by Mr. Barnard will immediately vest. The agreement also
contains provisions related to confidentiality, intellectual property rights,
non-solicitation and non-competition.
Stephen Yuzpe, the Corporation's CFO, is employed under an employment agreement
made as of May 1, 2000, as subsequently amended. Mr. Yuzpe currently receives an
annual salary of $144,692. The employment agreement provides for a compensation
package that includes base salary, bonus, benefits and the right to participate
in any incentive stock option plan of the Corporation. In addition to a general
bonus entitlement, Mr. Yuzpe is entitled to a bonus of up to $130,000, which is
payable after December 31, 2004 provided certain share ownership requirements
are met. If the agreement is terminated by the Corporation for reasons other
than just cause, Mr. Yuzpe is entitled to the greater of six months of salary
and an amount which would be awarded under applicable common law principles. The
agreement also contains provisions related to confidentiality, intellectual
property rights, non-solicitation and non-competition.
Bill Thompson, the Corporation's Senior Vice President, Partners, is employed
under an employment agreement made as of August 1, 2000. Mr. Thompson currently
receives an annual salary of US$110,000. The employment agreement provides for a
compensation package that includes base salary, bonus, benefits and the right to
participate in any incentive stock option plan of the Corporation. The agreement
automatically renews from year to year, and may be terminated by the Corporation
by giving
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60 days' notice. The agreement also contains provisions related to
confidentiality, intellectual property rights, non-solicitation and
non-competition.
Darlene Higbee Clarkin, the Corporation's Vice President, Technology and Chief
Technology Officer, is employed under an employment agreement made as of July
10, 2000. Ms. Higbee-Clarkin currently receives an annual salary of $153,667.
The employment agreement provides for a compensation package that includes base
salary, bonus, benefits and the right to participate in any incentive stock
option plan of the Corporation. The agreement automatically renews from year to
year, and may be terminated by the Corporation by giving 30 days' notice. The
agreement also contains provisions related to confidentiality, intellectual
property rights, non-solicitation and non-competition.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Corporation and its subsidiary, Points.com, currently maintain Directors'
and Officers' Liability Insurance in the amount of US$5,000,000 in the aggregate
(US$5,000,000 per occurrence) for the term ending September 15, 2005. All
directors are entitled to full reimbursement for directors' liability without
deduction. There is a deductible of US$50,000 for each claim where the
Corporation provides indemnification to a director or officer. In addition,
there is a US$100,000 deductible for any security related claims arising against
the Corporation. The aggregate annual premium for the policy is US$75,000. All
costs associated with the premiums shall be borne by the Corporation.
COMPOSITION OF THE HUMAN RESOURCES
AND CORPORATE GOVERNANCE COMMITTEE
Executive compensation is determined on an annual basis by the Board upon the
recommendation of the human resources and corporate governance committee of the
Board (the "HUMAN RESOURCES AND CORPORATE GOVERNANCE COMMITTEE"). This committee
is comprised of four Outside Directors of the Corporation: Messrs. Fleming
(Chairman), Korman, Kranias and McCutcheon. The Human Resources and Corporate
Governance Committee reviews the performance of the executive officers, the
performance of the Corporation (including its separate divisions and
subsidiaries) and determines recommended compensation packages for executive
officers and the compensation ranges for all employees.
REPORT BY HUMAN RESOURCES AND CORPORATE GOVERNANCE COMMITTEE
ON EXECUTIVE COMPENSATION
The Human Resources and Corporate Governance Committee is responsible for
reviewing and making recommendations to the Board on compensation paid to
executive officers of the Corporation and on the compensation practices of the
Corporation.
The Corporation's compensation packages are designed to encourage, compensate
and reward the employees of the Corporation on the basis of individual and
corporate performance.
The executive compensation system consists of three primary components: salary,
short-term incentives and long-term incentives. It is the intention of the Human
Resources and Corporate Governance Committee to design the executive
compensation system such that the sum of the three components for an individual
will be competitive with median compensation levels for similar positions at
comparable companies. The competitiveness of the compensation structure has been
previously determined through a compensation survey at the direction of the
Human Resources and Corporate Governance Committee. In arriving at what
constitutes average or above average total compensation, the Human Resources and
Corporate Governance Committee exercises its discretion and good judgment and
considers, as a reference point, competitive data for issuers in a similar
position. The source data for the comparator are the survey results of an
independent survey conducted by a human resources consulting group in a prior
year. Achieving the appropriate level of total compensation for an executive
year over year is
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accomplished primarily by adjusting the amounts of short-term and long-term
compensation granted to such executive.
BASE SALARY
Executives' salaries were benchmarked to comparable public technology companies
based in Toronto. The survey completed indicated that the Corporation
compensates its employees at approximately the 50th percentile of the comparable
set of companies. The Human Resources and Corporate Governance Committee will
periodically engage an independent consultant to determine whether the
Corporation's salary, bonus and stock option compensation are appropriate.
To determine a particular executive officer's compensation, the Human Resources
and Corporate Governance Committee will give consideration to the Corporation's
performance, personal performance, leadership and achievement of specific annual
objectives. Such specific annual objectives are based on the achievement of
financial and non-financial metrics.
SHORT-TERM COMPENSATION INCENTIVES
Executive officers receive a portion of their annual compensation in the form of
bonuses. Each executive officer is eligible to be paid a bonus of up to 40% (and
in the case of the CEO, up to 80%) of his or her salary based on the executive's
overall contribution and performance and on the Corporation's achievement of
certain financial, strategic and operating targets. With respect to an executive
officer's potential bonus, 30% is based on personal objectives and 70% is based
on corporate objectives.
LONG-TERM COMPENSATION INCENTIVES
The Corporation's long-term incentive compensation for executive officers is
provided through grants of stock options under the Stock Option Plan.
Participation in the Stock Option Plan is considered to be an important
component of compensation, in order to focus the interests of executives on the
long-term interests of the shareholders. The Board administers the Stock Option
Plan subject to option guidelines and recommendations developed by the Human
Resources and Corporate Governance Committee. The number of stock options
granted is based on each executive's responsibility and personal performance,
and takes into consideration the number and terms of stock options that have
been previously granted to that executive.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER (T. ROBERT MACLEAN)
Mr. MacLean's compensation is determined in the same fashion as all other
executive officers of the Corporation and consists of base salary, bonus and
stock options as determined by the Human Resources and Corporate Governance
Committee. In 2004, he was paid a base salary of $250,000 and is expected to
receive a bonus attributed to employment performance in 2004. Bonuses in respect
of 2004 had not been determined as at the date of this Circular. Mr. MacLean's
maximum target bonus was $200,000 or 80% of his base salary. The determination
of the bonus was based on corporate and individual performance. Mr. MacLean was
granted 120,000 employee stock options with an exercise price of $1.02 per
Common Share acquired during the year. In 2004, the Human Resources and
Corporate Governance Committee made use of a benchmark study performed in a
prior year to determine the Chief Executive Officer's salary and bonus.
The report was presented by Messrs Fleming, Korman, Kranias and McCutcheon.
PERFORMANCE GRAPH
The following graph compares the total cumulative shareholder return for the
Common Shares with the cumulative returns of two TSX indices for the same
period, assuming an initial investment in common shares of $100 on the
Corporation's first day of trading on the TSX Venture Exchange, August 9, 1999.
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(PERFORMANCE GRAPH)
Aug-99 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
------ ------ ------ ------ ------ ------ ------
Points International Ltd. Share Price(1) $0.50 $ 2.40 $ 0.60 $ 0.24 $ 0.35 $ 1.00 $ 0.94
Points International Ltd. Common Shares 100 480.0 120.0 48.0 70.0 200.0 188.0
S&P/TSX Small Cap Index 100 106.7 110.8 114.4 109.5 145.6 154.1
S&P/TSX Composite Index 100 122.6 130.2 112.0 96.4 119.8 134.7
Note:
(1) Indexed return to calculate the relative performance.
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS
AND SENIOR OFFICERS
None of the directors, executive officers or senior officers of the Corporation
was indebted to the Corporation or its subsidiaries in the most recently
completed fiscal year, other than Mr. Robert MacLean, the Corporation's CEO. The
following table sets forth certain details of Mr. MacLean's indebtedness. Mr.
MacLean's loan had an initial 18-month term that commenced on February 24, 2000.
The initial term to maturity expired on August 24, 2001 but was extended to
December 31, 2004. Interest accrued on the principal outstanding at the Canada
Revenue Agency prescribed interest rate with accrued interest payable together
with principal on the loan maturity date. The purpose of the loan was to induce
Mr. MacLean to relocate from Calgary to Toronto to assume a leadership position
with Points.com and to assist him with the move.
Involvement Largest amount
of outstanding Amount Amount forgiven during
Name, principal Exclamation during last outstanding as Security for last completed fiscal
position Inc. completed fiscal year at Dec. 31, 2004 indebtedness year
- ----------------------- ----------- ---------------------- ---------------- --------------------- ----------------------
Mr. Robert MacLean, Lender $25,000 principal plus nil Options in Points.com $25,000 principal plus
Chief Executive Officer $825 accrued interest Inc. $825 accrued interest
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The TSX requires that each listed company disclose on an annual basis its
approach to corporate governance. A description of the Corporation's approach to
corporate governance is set forth in Schedule
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A, which is cross-referenced to the guidelines of the TSX (the "TSX
GUIDELINES"), which are set forth in Section 474 of the TSX Company Manual.
APPOINTMENT OF AUDITORS
Management proposes to nominate Mintz & Partners LLP as the auditors of the
Corporation to hold office until the close of the next annual meeting of
shareholders, and proposes that the shareholders authorize the directors to fix
the remuneration of the auditors. The Common Shares represented by proxies in
favour of management nominees will be voted in favour of the appointment of
Mintz & Partners LLP as auditors of the Corporation, to hold office until the
next annual meeting of shareholders and the authorization of the directors to
fix the remuneration of the auditors, unless authority to do so is withheld.
Mintz & Partners LLP have been the auditors of the Corporation since February
2000.
A copy of the financial statements of the Corporation for the fiscal year ended
December 31, 2004 has been provided to the shareholders of the Corporation.
PCI OPTION EXTENSION
The Corporation's subsidiary, Points.com, has outstanding options to acquire up
to 2,114,899 common shares of Points.com (the "PCI OPTIONS"). The PCI Options
represent approximately 6.3% of the common shares of Points.com on a fully
diluted basis and, accordingly, represent potential dilution to the
Corporation's ownership interest (and indirectly, the interests of the
Corporation's shareholders) in Points.com. The PCI Options have been issued with
an initial term of five years. The purpose of the Points.com stock option plan
was to provide certain directors, officers and key employees with an opportunity
to acquire common shares of Points.com and to benefit from the appreciation
thereof. The PCI Options are accompanied by put rights entitling the holders to
put common shares of Points.com issued on the exercise of the PCI Options to the
Corporation for Common Shares. A significant portion of the PCI Options expire
in the first three quarters of 2005. The maximum number of Common Shares
issuable on the exercise of the PCI Options and associated put rights is
5,295,492.
The tax treatment for holders of PCI Options is different than that for holders
of options in the Corporation. This tax treatment applicable to PCI Options
requires holders to remit tax in the year of exercise of the PCI Option rather
than in the year of disposal of the Common Shares acquired on the exercise,
which is normally the case for options in a public company. As a result, if the
holders of PCI Options exercise their options and associated put rights, it is
expected that approximately 25% of the Common Shares so acquired would be
required to be sold over the next several months to cover the tax liabilities.
Both the Board and Management believe that this anticipated selling to cover tax
liabilities would both significantly reduce senior Management's holding in the
Common Shares and put undue pressure on the current share price. It is
Management's view that both circumstances would not be beneficial to
shareholders.
Management of the Corporation believes that extending the expiry date on the PCI
Options by two years would allow for the orderly exercise of the PCI Options and
associated put rights and could avoid a downward pressure on the market price of
the Common Shares if option holders were forced to sell a portion of the Common
Shares acquired to fund associated costs, including any applicable taxes. The
extension for the additional two years will result in a total seven-year term
for the PCI Options, which is less than the maximum ten-year term permitted by
the TSX.
This Meeting has been called to consider and, if thought fit, to approve with or
without variations as an ordinary resolution the PCI Option Resolution (the text
of which is set out in Schedule B hereto) authorizing the extension of the term
for the PCI Options from five years up to a maximum of seven years.
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To be approved in accordance with the rules of the TSX, this ordinary resolution
must be passed by a simple majority of the votes cast in person or by proxy at
the Meeting, other than votes attaching to shares beneficially owned by the
directors and senior officers of the Corporation holding PCI Options and their
associates. MANAGEMENT RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PCI OPTION
RESOLUTION. Unless instructed in the form of proxy to the contrary, the Common
Shares represented by proxies in favour of management nominees will be voted in
favour of the PCI Option Resolution.
PCI Options that would otherwise have expired prior to the date of the Meeting
have been conditionally exercised to acquire 1,970,283 common shares of
Points.com and associated put rights have been conditionally exercised to put
those common shares to the Corporation in consideration for the issuance by the
Corporation of 4,933,398 Common Shares. These conditional exercises will be
deemed to have not occurred if the PCI Option Resolution is approved.
ADDITIONAL INFORMATION
The Corporation's financial information is contained in its comparative
financial statements and Management's Discussion and Analysis for the fiscal
year ended December 31, 2004. Information concerning the Corporation's Audit
Committee may be found on page 18 of the Corporation's Annual Information Form
"BOARD COMMITTEES - Audit Committee". Additional information about the
Corporation is available on SEDAR at www.sedar.com.
Upon request made to the Corporate Secretary of the Corporation at 179 John
Street, Suite 800, Toronto, Ontario M5T 1X4, the Corporation will provide to any
person, and in the case of a security holder of the Corporation without charge,
one copy of:
(a) the Corporation's most recent annual information form filed with
securities commissions or similar regulatory authorities in Canada,
together with the pertinent Page of any document incorporated by
reference therein;
(b) the Corporation's most recently filed comparative annual financial
statements, together with the report of the Corporation's auditors
thereon, and any interim financial statements filed for any period
after the end of its most recently completed financial year; and
(c) the Corporation's management information circular for its most recent
annual meeting of shareholders at which directors were elected.
BOARD APPROVAL
The undersigned hereby certifies that the contents and the sending of this
Circular have been approved by the Board for mailing to the shareholders
entitled to receive notice of the Meeting, to each director of the Corporation
and to the auditors of the Corporation.
DATED as at March 8, 2005
(signed) Robert MacLean
----------------------------------------
Robert MacLean
Chief Executive Officer
SCHEDULE A
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Corporation's statement of corporate governance practices is set out below:
REQUIREMENT COMMENTS
----------- --------
1. Mandate of the Board
The Board should explicitly assume The Board has adopted a formal mandate pursuant to
responsibility for stewardship of the which it has assumed responsibility for the
Corporation. stewardship of the Corporation.
As part of the overall stewardship Under its mandate, the Board has assumed
responsibility, the Board should assume responsibility specifically for the matters set
responsibility specifically for: out below:
(i) adoption of a strategic planning (i) the adoption of a strategic planning process,
process; including approving the Corporation's
strategic plan, approving its annual capital
and operating plans, and monitoring corporate
performance;
(ii) identification of principal risks and (ii) assisting management in identifying risks and
implementation of risk-managing monitoring the implementation of systems to
systems; manage the risks;
(iii) succession planning, including (iii) succession planning as it relates to the CEO
appointing, training and monitoring and President only;
management;
(iv) communications policy; and (iv) reviewing all material corporate
communications before they are released to
the public; and
(v) the integrity of internal control and (v) through the Audit Committee, reviewing the
management information systems. Corporation's internal control systems
policy.
2. Composition of the Board
Majority of directors should be At the date of this Circular, eight of the ten
"unrelated" (free from conflicting members of the Board are "unrelated" within the
interest). meaning of the TSX Guidelines.
Board should include a number of directors The Board has two nominees appointed by the holder
unrelated to the Corporation or the of the Series Two Preferred Share in the capital
significant shareholder that fairly of the Corporation, which is convertible, on a
reflects the investment in the Corporation fully diluted basis, into approximately 19.1% of
by shareholders other than the significant the Common Shares of the Corporation. However, at
shareholder. the date of
this Circular, the holder of the Series Two
Preferred Share is not a "significant shareholder"
as that term is defined in the TSX Guidelines.
3. Determination of Status of Directors
Disclose for each director whether he or The Board has adopted the definitions of "related
she is related, and how that conclusion director" and "unrelated director" used in the TSX
was reached. Guidelines and considered the relationship of each
of its directors to the Corporation on the basis
of these definitions as follows:
Unrelated Directors:
Messrs. Carty, Fleming, Kranias, McCutcheon and
Thompson are not members of management and do not
have a relationship with the Corporation that
could be seen to interfere with their ability to
act in the best interests of the Corporation,
other than interests or relationships resulting
from their holding shares in the Corporation.
Mr. Lavine was the former Chief Executive Officer
of the Corporation from June 1999 to February
2002. As at the date of this Circular, he has not
been an officer of the Corporation in the past
three years. The Board has determined that he is
now an unrelated director.
Messrs. Marriott and Korman are not members of
management, but are nominees of the holder of the
Series Two Preferred Share. However, the Board has
determined that they do not have a relationship
with the Corporation that could be seen to
interfere with their ability to act in the best
interests of the Corporation, other than interests
or relationships resulting from their holding
shares in the Corporation.
Related Directors:
Messrs. MacLean and Barnard are the Chief
Executive Officer and President of the
Corporation, respectively.
4. Nominating/Corporate Governance Committee
Appoint a committee composed of The Corporation does not currently have a
non-management directors, a majority of nominating committee. In accordance with the
whom are unrelated directors, responsible mandate of the Board, a nominating committee will
for the appointment/assessment of be established as and when required.
directors.
5. Board Assessment
Implement a process for assessing the The Corporation does not currently review
effectiveness of the Board, its committees individual or committee contributions to the
and individual directors. Board.
6. Orientation and Education
Provide orientation and education programs In 2004, the Corporation delivered a draft board
for new directors. manual to the Chairman and the Chair of the Human
Resources and Corporate Governance Committee. The
Corporation expects to introduce the final board
manual as part of its director education and
orientation plan to be implemented in 2005.
7. Size and Composition of the Board
Examine the size of the Board with a view The Corporation has not currently initiated a
to determining the impact of the number on process to determine the optimal size of the
effectiveness of decision-making. Board.
8. Compensation
Review the adequacy and form of The Human Resources and Corporate Governance
compensation of directors in light of Committee reviews the adequacy and form of Board
risks and responsibilities. compensation in light of the time commitment,
risks and responsibilities involved. The Human
Resources and Corporate Governance Committee then
establishes the compensation of the directors.
9. Composition of Committees
Committees should generally be composed of The Board has established two standing committees
non-management directors, the majority of of directors (the Audit Committee and the Human
whom are unrelated. Resources and Corporate Governance Committee),
each with a specific mandate and each comprised of
a majority of unrelated directors.
10. Governance Committee
The Board should assume responsibility The Human Resources and Corporate Governance
for, or appoint a committee responsible Committee is responsible for the Corporation's
for, the approach to corporate governance approach to corporate governance issues, including
issues. This committee would, among other the Corporation's response to the TSX Guidelines.
things, be responsible for the
Corporation's response to the TSX
Guidelines.
11. Position Descriptions
Develop position descriptions for the The Human Resources and Corporate Governance
Board and for the CEO, including the Committee develops position descriptions and
definition of limits for management's objectives for the CEO and President and measures
responsibilities. The Board should develop their performance in meeting those objectives. The
the corporate objectives which the CEO is Corporation has not currently developed position
responsible for meeting. descriptions for members of the Board.
12. Procedures to Ensure Independence
Establish appropriate procedures to enable The Corporation has a non-management chairman of
the Board to function independently of the Board and has regular non-management sessions
management. An appropriate structure would as part of each meeting of the Board and each
be to (i) appoint a chairman of the Board meeting of the Audit Committee and Human Resources
who is not a member of management with and Corporate Governance Committee.
responsibility to ensure that the Board
discharges its responsibilities or (ii)
adopt alternate means such as assigning
this responsibility to a committee of the
Board or to a director, sometimes referred
to as the "lead director". Appropriate
procedures may involve the Board meeting
on a regular basis without management
present or may involve expressly assigning
responsibility for administering the
Board's relationship to management to a
committee of the Board.
13. Composition of the Audit Committee
The Audit Committee should be composed The members of the Audit Committee are all outside
only of outside directors. and unrelated directors.
INTERNAL CONTROLS
Audit Committee duties should include The Audit Committee oversees management reporting
oversight responsibility for management on the Corporation's internal controls in
reporting on internal control. While it is accordance with its current mandate contained in
management's responsibility to design and the draft board manual.
implement an effective system of internal
control, it is the responsibility of the
Audit Committee to ensure that management
has done so.
COMMUNICATIONS WITH EXTERNAL AUDITOR
The Audit Committee should have direct The Audit Committee has direct communication
communication channels with the internal channels with the external auditors to discuss and
and external auditors to discuss and review specific issues as appropriate.
review specific issues as appropriate.
14. External Advisors
Implement a system to enable individual Each committee is empowered to engage external
directors to engage outside advisors, at advisors as it sees fit. Any individual director
the Corporation's expense. The engagement is entitled to engage an outside advisor at the
of the outside advisor should be subject Corporation's cost and expense provided that such
to the approval of an appropriate director has obtained the approval of the Chairman
committee of the Board. of the Board.
SCHEDULE B
RESOLUTION APPROVING EXTENSION TO POINTS.COM OPTIONS
IT IS RESOLVED AS AN ORDINARY RESOLUTION THAT:
1. the extension of the term of Points.com Inc. options from five years to up
to seven years, as determined by the Board, and the extension of the
associated put rights for the same period of time, is hereby approved; and
2. any two officers or directors of the Corporation be, and are hereby
authorized for and on behalf of the Corporation, to execute, deliver, and
file all such documents, whether under the corporate seal of the
Corporation or otherwise, and to do all such acts or things as may be
necessary or desirable to give effect to the foregoing resolution.