EX-99.1 2 tsg-ex991_7.htm EX-99.1 tsg-ex991_7.htm

 

Exhibit 99.1

 

 

NOTICE OF ANNUAL and special MEETING OF SHAREHOLDERS

AND

MANAGEMENT INFORMATION CIRCULAR OF

THE STARS GROUP INC.

For the Annual and Special Meeting of Shareholders

to be held on May 10, 2018

at 11:30 a.m.

 

_________________________________

April 10, 2018

_________________________________

 

 

 


 

April 10, 2018

Dear Fellow Shareholders,

 

In my second full year as Chair of the Board of Directors, I am delighted to be part of the excitement our company is building. On the heels of strong performance in the preceding year, our 2017 results were outstanding. Our people are executing well and creating tremendous momentum for the future.

 

Headline results included double-digit revenue and earnings per share growth and nearly $495 million in net cash generated from operating activities. In addition, we continued to reduce our leverage, providing increased flexibility to accelerate growth and the creation of shareholder value. Among other notable achievements, the corporate headquarters were relocated to Toronto, Ontario, and the company name was rebranded to The Stars Group.

 

The solid financial and operational performance in 2017 demonstrates the company’s growth potential as an independent entity. With a commitment to achieving the highest standards of corporate governance, my colleagues and I will continue to do our part to support the company’s success.

 

Board and management renewal

Board composition is at the heart of good governance and I believe our Board is continuing to evolve to include the best mix of relevant skills, experience and backgrounds to support our business and future growth. Earlier this year, Melvin Zhang joined as an observer member of the Board and we welcome the perspective he brings. We’ve also nominated our CEO, Rafi Ashkenazi, to stand for election and join us as we continue our journey to becoming the world’s favorite iGaming destination.

 

One of the Board’s priorities over the past two years has been to build strong executive leadership. Several key appointments were made this year to complete the team, and I am proud to say that The Stars Group has what I believe to be one of the industry’s most experienced management teams. With talented leaders in place, we have now turned our attention to ensuring that the organization is grooming future leaders and are developing our succession plans for all key positions.

 

Growth strategy on course

The Board has been closely monitoring the strategic repositioning of the core poker business and we are very pleased with the progress made in 2017. Poker revenue is growing again under the new business model focused on recreational players. While delivering on the new poker model, management has also achieved rapid growth in casino and sportsbook. These new categories now represent a material revenue stream and a huge opportunity.

 

Subsequent to the end of the year, the Board also supported two transactions in Australia that greatly expand the company’s presence in the sportsbook market. Once completed, these transactions will help transform The Stars Group into a diversified global iGaming company with a commanding leadership in poker, one of the world’s fastest growing casino platforms and the critical mass to be a major player in sports betting, by far the world’s largest iGaming segment.

 

Strong defenses protecting the business

As one of the world’s most licensed iGaming companies, we have a long history of sound risk management when it comes to gaming. We have a deep understanding of gaming regulations and a facility for working constructively with regulators. As a champion of regulated markets, we seek to balance the risk of unregulated markets by being among the first to enter markets where gaming is regulated and licensed. We support the regulation of online gaming, including licensing and taxation regimes and pooled poker liquidity, which we believe will promote sustainable online gaming markets that are beneficial for consumers, governments and the citizens of the regulating jurisdiction, operators and the gaming industry as a whole. Giving effect to the transactions in Australia, we anticipate our percentage of revenues generated from regulated and locally taxed markets to increase in 2018.

 

To protect our ability to benefit from regulated markets, we have a standing compliance committee comprised of an independent member of the Board and external advisors, including formal law enforcement and regulatory professionals. This committee is charged with overseeing all aspects of compliance to ensure we conduct business in an ethical manner and maintain our good reputation.

 

 


 

 

A compelling future

Upon the conclusion of a very successful year, I wish to acknowledge the leadership of Rafi and his management team, and thank all of our people for their contribution. My Board colleagues have been generous with their counsel and insights, and I am grateful for their dedication. As one of the world’s most licensed iGaming companies with licenses or approvals in 18 jurisdictions, I would like to acknowledge the work of our regulators and thank them for their trust in The Stars Group.

 

After eight years on the Board and the last two as Chair, I have no hesitation in telling our shareholders that the company’s future has never been more compelling. Your confidence makes us strong and we work to maintain it every day.

 

Yours sincerely,

 

Divyesh (Dave) Gadhia

 

Divyesh (Dave) Gadhia, CPA, C.A., ICD.D

Chairman of the Board of Directors

 

 


 

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that the annual and special meeting of holders (the “Shareholders”) of common shares (the “Common Shares”) of The Stars Group Inc. (“The Stars Group” or the “Corporation”) will be held at the One King West Hotel, located at 1 King St. W., Toronto, Ontario M5H 1A1, at 11:30 a.m. (Eastern Time), on May 10, 2018 (the “Meeting”), for the purposes of:

(a)

receiving the audited consolidated financial statements of the Corporation for the year ended December 31, 2017 and the report of the auditor thereon;

(b)

electing directors for the ensuing year;

(c)

appointing the auditor of the Corporation and authorizing the directors of the Corporation to fix its remuneration;

(d)

considering and, if deemed advisable, approving an ordinary resolution, the full text of which is reproduced in Schedule “A” to the accompanying management information circular (the “Information Circular”), to (i) amend the equity incentive plan of the Corporation dated June 22, 2015 (the “2015 Equity Incentive Plan” and as amended, the “Equity Incentive Plan”), as more particularly described in the accompanying Information Circular, and (ii) approve the unallocated awards under the Equity Incentive Plan; and

(e)

transacting such other business as may properly be brought before the Meeting.

Further information regarding the matters to be considered at the Meeting is set out in the Information Circular.

The directors of the Corporation have fixed the close of business on March 20, 2018 as the record date for determining Shareholders entitled to receive notice of and to vote at the Meeting.

Toronto, Ontario, April 10, 2018.

 

By order of the Board of Directors

 

(s) Divyesh (Dave) Gadhia

Divyesh (Dave) Gadhia

Chairman of the Board of Directors

 

 

 

 


 

IMPORTANT

Shareholders are encouraged to vote. Please complete, date and sign the enclosed form of proxy or voting instruction form and return it in the envelope provided for that purpose. To be valid, proxies must be deposited at the office of the registrar and transfer agent of the Corporation, Computershare Investor Services Inc., located at 100 University Street, 8th Floor, Toronto, Ontario, M5J 2Y1, no later than 11:30 a.m. (Eastern Time) on May 8, 2018, or, in the event the Meeting is adjourned or postponed, not less than 48 hours (excluding Saturdays, Sundays and holidays) before the adjourned meeting is reconvened or the postponed meeting is convened. If you appoint Divyesh (Dave) Gadhia as your proxyholder, your Common Shares will be voted in accordance with your instructions in the form of proxy or voting instruction form or, if no such instructions are given, such proxyholder will vote IN FAVOUR of the matters indicated in items (b) to (d) hereinabove. Shareholders may also vote by telephone or internet by following the instructions provided in the enclosed form of proxy. If you choose to vote by telephone or internet, your vote must also be cast no later than 11:30 a.m. (Eastern Time) on May 8, 2018, or, in the event the Meeting is adjourned or postponed, not less than 48 hours (excluding Saturdays, Sundays and holidays) before the adjourned meeting is reconvened or the postponed meeting is convened.

These shareholder materials are being sent to both registered and non-registered owners of Common Shares. If you are a non-registered owner of Common Shares and the Corporation or its agent has sent these materials directly to you, your name and address and information about your holdings of securities have been obtained in accordance with applicable securities regulatory requirements from the intermediary holding your securities on your behalf.

By choosing to send these materials to you directly, the Corporation (and not the intermediary holding on your behalf) has assumed responsibility for (i) delivering these materials to you, and (ii) executing your proper voting instructions. Please return your voting instructions as specified in the request for voting instructions.

 

 

 


 

 

TABLE OF CONTENTS

 

INTRODUCTION

1

Notice to The Stars Group Shareholders in the United States

1

Currency AND OTHER INFORMATION

1

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

1

Voting Information and General Proxy Matters

3

Business of the Meeting

5

Statement of Executive Compensation

13

Director Compensation

37

Securities Authorized for Issuance Under Equity Compensation Plans

41

Directors’ and Officers’ Liability Insurance

42

Indebtedness of Directors and Officers

42

Management Contracts

42

Interest of Informed Persons in Material Transactions

42

Statement of Corporate Governance Practices

42

Audit Committee Information

48

Receipt of Shareholder Proposals for Next Annual Meeting

50

Additional Information

50

APPROVAL OF THE INFORMATION CIRCULAR

51

SCHEDULE “A” EQUITY INCENTIVE PLAN RESOLUTION

A-1

EXHIBIT “A” EQUITY INCENTIVE PLAN

B-1

 

 

 

 

 

 

 

 

 

 


 

MANAGEMENT INFORMATION CIRCULAR

INTRODUCTION

This management information circular (this “Information Circular”) is provided in connection with the solicitation of proxies for use at the annual and special meeting (the “Meeting”) of holders (the “Shareholders”) of common shares (the “Common Shares”) of The Stars Group Inc. (“The Stars Group” or the “Corporation”) to be held on May 10, 2018, at the time and place and for the purposes stated in the accompanying notice of meeting (the “Notice of Meeting”). Unless otherwise indicated, the information contained in this Information Circular is given as of April 10, 2018.

Notice to THE STARS GROUP Shareholders in the United States

The Stars Group is a corporation governed by the laws of Ontario, Canada. The solicitation of proxies and the actions and/or transactions contemplated herein involve securities of a Canadian issuer and are being effected in accordance with provincial and Canadian corporate and securities laws. Shareholders should be aware that requirements under such provincial and Canadian laws differ from requirements under U.S. corporate and securities laws relating to U.S. corporations. The proxy rules under the United States Securities Exchange Act of 1934, as amended, are not applicable to the Corporation or this solicitation and therefore this solicitation is not being effected in accordance with such corporate and securities laws.

Currency AND OTHER INFORMATION

All references in this Information Circular to “dollars”, “US$” and “$” are to U.S. dollars, references to “CDN$” are to Canadian dollars and references to “£” are to Great Britain Pound Sterling. The Corporation’s current presentation currency for its financial statements and management’s discussion and analysis thereon is the U.S. dollar.

 

Adjusted EBITDA as used by the Corporation in the “Statement of Executive Compensation” section of this Information Circular generally means net earnings before financial expenses, income taxes expense (recovery), depreciation and amortization, stock-based compensation, restructuring and certain other items.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Information Circular contains certain information that may constitute forward-looking statements and information (collectively, “forward-looking statements”) within the meaning of the Private Securities Litigation Reform Act of 1995 and applicable securities laws, including, without limitation, statements relating to certain expectations, projections, growth plans, new or improved product introductions, market expansion efforts, and other information related to The Stars Group’s business strategy and future plans. Forward-looking statements can, but may not always, be identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “would”, “should”, “believe”, “objective”, “ongoing”, “imply”, “assumes”, “goal”, “likely” and similar references to future periods or the negatives of these words and expressions and by the fact that these statements do not relate strictly to historical or current matters. These forward-looking statements, other than statements of historical fact, are based on management’s current expectations and are subject to a number of risks, uncertainties, and assumptions, including market and economic conditions, business prospects or opportunities, future plans and strategies, projections, technological developments, anticipated events and trends and regulatory changes that affect the Corporation, its subsidiaries, and its and their customers and industries. Although the Corporation and management believe the expectations reflected in such forward-looking statements are reasonable and are based on reasonable assumptions and estimates as of the date hereof, there can be no assurance that these assumptions or estimates are accurate or that any of these expectations will prove accurate. Forward-looking statements are inherently subject to significant business, regulatory, economic and competitive risks, uncertainties and contingencies that could cause actual events to differ materially from those expressed or implied in such statements.

There can be no assurance that forward-looking statements will prove to be accurate as many factors could cause the Corporation’s actual results, level of activity, performance or achievements or future events or developments to

 

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differ materially from those expressly or impliedly expected or estimated in such statements, including, without limitation, the following factors, which are discussed in greater detail under the “Risk Factors and Uncertainties” section in The Stars Group’s annual information form for the year ended December 31, 2017 (the “2017 AIF”) and under “Caution Regarding Forward‑Looking Statements”, “Risk Factors and Uncertainties”, “Limitations on Key Metrics and Other Data” and “Key Metrics” in The Stars Group’s Management’s Discussion and Analysis for the period ended December 31, 2017 (the “2017 Annual MD&A”): the heavily regulated industry in which the Corporation carries on its business; interactive entertainment and online and mobile gaming generally; current and future laws or regulations and new interpretations of existing laws or regulations, or potential prohibitions, with respect to interactive entertainment or online and mobile gaming or activities related to or necessary for the operation and offering of online and mobile gaming; potential changes to the gaming regulatory framework; legal and regulatory requirements; the ability of the Corporation to obtain, maintain and comply with all applicable and required licenses, permits, approvals, and certifications to offer, operate and market its products and services, including difficulties or delays in the same, in the jurisdictions where the Corporation is currently doing business or intends to do business; significant barriers to entry; competition and the competitive environment within the Corporation’s addressable markets and industries; risks associated with advancements in technology, including artificial intelligence; ability to develop and enhance existing products and services and new commercially viable products and services as a result of its research and development activities; ability to mitigate foreign exchange and currency risks; ability to mitigate tax risks and adverse tax consequences, including, without limitation, the imposition of new or additional taxes, such as value-added and point of consumption taxes, and gaming duties; risks of foreign operations generally; protection of current and future proprietary technology and intellectual property rights; ability to recruit and retain management and other qualified personnel, including key technical, sales and marketing personnel; defects in the Corporation’s products or services; losses due to fraudulent activities; management of growth; contract awards; potential financial opportunities in addressable markets and with respect to individual contracts; ability of technology infrastructure to meet applicable demand; systems, networks, telecommunications or service disruptions or failures or cyber-attacks; regulations and laws that may be adopted with respect to the Internet and electronic commerce or that may otherwise impact the Corporation in jurisdictions where it is currently doing business or intends to do business, particularly those related to online gaming or that could impact the ability to provide online gaming products and services, including without limitation, as it relates to payment processing; ability to obtain additional financing on reasonable terms or at all; refinancing risks; customer and operator preferences and changes in the economy; dependency on customers’ acceptance of its products and services; consolidation within the gaming industry; litigation costs and outcomes; expansion within existing and into new markets; relationships with vendors and distributors; natural events; the overall business and economic conditions; the anticipated outcome of any tax audit involving the Corporation or its subsidiaries; the ability of the Corporation to complete and/or integrate future acquisitions, integrate businesses successfully and generate synergies; and the impact of new laws and regulations in Canada, the United States or any other jurisdiction where the Corporation is currently doing business or intends to do business, particularly those related to online gaming or that could impact the ability to provide online gaming products and services.

Although the Corporation cautions that the foregoing list of significant risk factors, as well as those risk factors presented under the heading “Risk Factors and Uncertainties” and elsewhere in the 2017 AIF, the 2017 Annual MD&A and in other filings that The Stars Group has made and may make in the future with applicable securities authorities are not exhaustive, Shareholders and investors should carefully consider them and the uncertainties they represent and the risks they entail. Shareholders should not place undue reliance on forward-looking statements as the plans, assumptions, intentions or expectations upon which they are based might not occur. The forward-looking statements contained in this Information Circular are expressly qualified by this cautionary statement. Unless otherwise indicated by the Corporation, forward-looking statements in this Information Circular describe The Stars Group’s expectations as of April 10, 2018 and, accordingly, are subject to change after such date. The Corporation does not undertake to update or revise any forward-looking statements for any reason, except as required by applicable securities laws.

Additional information relating to The Stars Group can be located under the Corporation’s profile on SEDAR at www.sedar.com, on EDGAR at www.sec.gov, and on the Corporation’s website at www.starsgroup.com.

 

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Voting Information and General Proxy Matters

Solicitation of Proxies

The enclosed proxy is being solicited by the management of the Corporation and the expenses of this solicitation will be borne by the Corporation. The solicitation will be conducted primarily by mail but proxies may also be solicited personally by officers, employees or agents of the Corporation, without additional compensation. The Corporation shall directly deliver proxy documents to registered owners and non-registered owners of Common Shares that are non-objecting beneficial owners through the Corporation’s registrar and transfer agent, Computershare Investor Services Inc. (“Computershare”), and the Corporation shall bear the cost of such delivery. The Corporation will also reimburse brokers and other persons holding Common Shares on their behalf or on behalf of nominees for reasonable costs incurred in sending the proxy documents to non-registered owners who are objecting beneficial owners.

Voting Process

The voting process is different depending on whether you are a registered or non-registered owner of Common Shares and, if you are a non-registered owner of Common Shares, whether you are a non-objecting beneficial owner or objecting beneficial owner.

 

If you have Common Shares registered in your own name, you are a registered owner. If you do not hold Common Shares in your own name, you are a non-registered owner. If your Common Shares are listed in an account statement provided to you by a broker, then it is likely that those Common Shares will not be registered in your name, but under the broker’s name or under the name of an agent of the broker such as CDS Clearing and Depository Services Inc., the nominee for many brokerage firms, or its nominee.

There are two kinds of non-registered owners: (i) objecting beneficial owners, i.e., those who object to their name being made known to the issuers of shares which they own; and (ii) non-objecting beneficial owners, i.e., those who do not object to their name being made known to the issuers of the shares which they own. Non-objecting beneficial owners will receive a voting instruction form from the Corporation’s registrar and transfer agent, Computershare. This is to be completed and returned to Computershare in the envelope provided.

Securities regulation requires brokers or agents to seek voting instructions from objecting beneficial owners in advance of the Meeting. Objecting beneficial owners should be aware that brokers or agents can only vote Common Shares if instructed to do so by the objecting beneficial owner. Your broker or agent (or their agent, Broadridge Financial Solutions, Inc.) will have provided you with a voting instruction form or form of proxy for the purpose of obtaining your voting instructions. Every broker has its own mailing procedures and provides instructions for voting. You must follow those instructions carefully to ensure your Common Shares are voted at the Meeting.

If you are an objecting beneficial owner receiving a voting instruction form or proxy from a broker or agent, you cannot use that proxy to vote in person at the Meeting. To vote your Common Shares at the Meeting, the voting instruction form or proxy must be returned to the broker or agent well in advance of the Meeting, as instructed by the broker or agent. If you wish to attend and vote your Common Shares in person at the Meeting, follow the instructions for doing so provided by your broker or agent.

Record Date

The record date for determining those Shareholders entitled to receive notice and to vote at the Meeting is the close of business on March 20, 2018 (the “Record Date”). Only registered and non-registered owners of Common Shares as of the close of business on the Record Date are entitled to receive notice of and to vote at the Meeting. No person becoming a registered or non-registered owner after the Record Date shall be entitled to receive notice of the Meeting, nor can any registered or non-registered owner vote Common Shares they acquire after the Record Date at the Meeting. The failure of any Shareholder to receive notice of the Meeting does not deprive the Shareholder of the right to vote at the Meeting. As of the Record Date, there were 148,481,306 Common Shares issued and outstanding.

 

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Appointment of Proxyholders

The person named as proxyholder in the enclosed form of proxy or voting instruction form, Divyesh (Dave) Gadhia, is the Chairman of the board of directors of the Corporation (the “Board”), and a director of the Corporation. You are entitled to appoint a person, who need not be a Shareholder, other than the person designated in the enclosed form of proxy, to represent you at the Meeting. If you are a registered or non-objecting beneficial owner, such right may be exercised by inserting in the blank space provided in the form of proxy or voting instruction form the name of the person to be designated or by completing another form of proxy or voting instruction form and, in either case, depositing the form of proxy or voting instruction form with the registrar and transfer agent of the Corporation, Computershare, located at 100 University Street, 8th Floor, Toronto, Ontario, M5J 2Y1, at any time before the proxy deadline, being 11:30 a.m. (Eastern Time) on May 8, 2018 or, in the event the Meeting is adjourned or postponed, not less than 48 hours (excluding Saturdays, Sundays and holidays) before the adjourned meeting is reconvened or the postponed meeting is convened. Objecting beneficial owners should follow the instructions provided by their broker or agent and must return the form of proxy or voting instruction form as directed by their broker or agent sufficiently in advance of the proxy deadline to enable their broker or agent to act on it before the proxy deadline. The Corporation reserves the right to accept late proxies and to waive the proxy deadline with or without notice, but is under no obligation to accept or reject any particular late proxy.

Revocation of Proxies

You may revoke your proxy by providing new voting instructions in a new proxy or voting instruction form with a later date. Any new voting instructions, however, will only take effect if received prior to the proxy deadline. Registered and non-objecting beneficial owners may also revoke their proxy without providing new voting instructions by giving a notice in writing signed by such owner, or by his or her attorney authorized in writing to the registrar and transfer agent of the Corporation, Computershare, located at 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1, no later than the close of business on the last business day preceding the day of the Meeting or any adjournment thereof, or to the chairman of the Meeting on the day of the Meeting or any adjournment thereof or in any other manner permitted by law; provided that if the registered or non-objecting beneficial owner is not an individual, the notice in writing must be signed by a duly authorized officer of such owner. Registered owners may attend the Meeting and vote in person and, if they do so, any voting instructions previously given by them for such Common Shares will be revoked. Objecting beneficial owners must contact their broker or agent in order to revoke their voting instructions and/or provide new voting instructions.

Exercise of Voting Rights by Proxies

The person named as proxy will vote or withhold from voting the Common Shares in respect of which he or she is appointed or vote for or against any particular matter, in accordance with the instructions of the Shareholder appointing him or her. In the absence of such instructions, such Common Shares will be voted in favour of all the matters identified in the attached Notice of Meeting, as applicable. The enclosed form of proxy confers discretionary authority upon the person named therein to vote as he or she sees fit with respect to amendments or variations to matters identified in the Notice of Meeting and to other matters which may properly come before the Meeting or any adjournment or postponement thereof, whether or not the amendment or variation or other matter that comes before the Meeting is or is not routine or is contested. As at the date of this Information Circular, the management of the Corporation knows of no such amendment, variation or other matter expected to come before the Meeting other than the matters referred to in the Notice of Meeting.

Voting in Person at the Meeting

Registered owners may attend and vote in person at the Meeting. Non-objecting beneficial owners wishing to attend and vote in person at the Meeting should insert their name in the space provided in the voting instruction form and deposit it with Computershare at any time before the proxy deadline. Objecting beneficial owners wishing to attend and vote in person at the Meeting should follow the instructions provided by their broker or agent. If you are a Canadian resident objecting beneficial owner, you need only insert your name in the space provided for the proxyholder appointment in the voting instruction form or proxy form, and return it as instructed by your broker or agent, and you should not complete the voting section of the proxy form or voting information form, as you will vote in person at the Meeting. If you are an objecting beneficial owner resident in the United States, you will likely be instructed to mark the appropriate box on the other side of the voting instruction form to request a legal proxy to be issued and mailed to you by your broker or agent, and you will need to send the voting instruction form to your

 

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broker or agent, receive the legal proxy from your broker or agent and deposit the legal proxy with Computershare prior to the proxy deadline.

Interest of Certain Persons in Matters to Be Acted Upon

No person who has been a director or an executive officer of the Corporation nor any proposed nominee for election as a director of the Corporation at any time since the beginning of its last completed financial year, or any associate or affiliate of any such director, officer or proposed nominee, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting, except as set forth in this Information Circular.

Voting Securities and Principal Holders Thereof

As at April 9, 2018, 148,620,876 Common Shares were issued and outstanding. To the knowledge of the Board and management of the Corporation and based on publicly available information, as at April 9, 2018, no person owned or exercised control or direction over more than 10% of the issued and outstanding Common Shares except for (i) Caledonia (Private) Investments Pty Limited, which held 29,353,133 Common Shares, representing approximately 19.8% of all the issued and outstanding Common Shares as of that date, and (ii) Mr. Hao Tang and Discovery Key Investments Limited, a company wholly owned by Mr. Tang, which collectively held 26,455,200 Common Shares, representing approximately 17.8% of all the issued and outstanding Common Shares as of that date.

Business of the Meeting

The Meeting will be constituted as an annual and special meeting. The audited consolidated financial statements of the Corporation for the year ended December 31, 2017 and the auditor’s report thereon and its attestation report on the Corporation’s internal control over financial reporting will be presented to the Shareholders at the Meeting, but no vote thereon or with respect thereto is required or proposed to be taken. Shareholders will be asked to consider and vote on:

A.

the election of the directors of the Corporation who will serve until the next annual meeting of Shareholders or until their successors are appointed;

B.

the appointment of the auditor of the Corporation who will serve until the end of the next annual meeting of Shareholders or until its successor is appointed, and authorizing the Board to fix its remuneration;

C.

the consideration and, if deemed advisable, approval of an ordinary resolution, the full text of which is reproduced in Schedule “A” (the “Equity Incentive Plan Resolution”), to (i) amend the equity incentive plan of the Corporation dated June 22, 2015 (the “2015 Equity Incentive Plan” and as amended, the “Equity Incentive Plan”), as more particularly described in this Information Circular, and (ii) approve the unallocated awards under the Equity Incentive Plan; and

D.

to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof.

Presentation of the Financial Statements

As indicated above, the audited consolidated financial statements of the Corporation for the year ended December 31, 2017 and the auditor’s report thereon and its attestation report on the Corporation’s internal control over financial reporting will be presented to the Shareholders at the Meeting, but no vote with respect thereto is required or proposed to be taken.

A.

Election of Directors

The Corporation’s articles of incorporation, as amended (the “Articles”), provide that the Board shall consist of not less than three and not more than fifteen directors. The number of directors currently in office is six and there is one Board observer. Each director of the Corporation elected will hold office until the next annual meeting of the Shareholders or until the election of his or her successor, unless he or she resigns, or his or her office otherwise becomes vacant.

 

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Majority Voting

The Corporation has adopted a majority voting policy pursuant to which any nominee for a director position who has more votes cast by ballot at a meeting of Shareholders at which directors are to be elected (or, if no ballot is conducted, votes represented by proxies validly deposited prior to that meeting) “withheld” from his or her election than are cast in favour of his or her election at that meeting must, immediately following that meeting, tender his or her resignation to the Board for consideration. Directors other than those who received more votes withheld than were voted in favour of their election shall consider, and within 90 days determine, whether or not to accept the resignation. The resignation shall be accepted absent exceptional circumstances and is effective when accepted by the Board. A press release disclosing the directors’ determination shall be issued promptly following such determination, and if the resignation is not accepted will include the reasons for doing so. Majority voting would not, however, apply in the event a director’s election is contested.

Advance Notice

The Corporation’s by-laws contain advance notice requirements for director nominations. Shareholders who wish to nominate candidates for election as directors must provide timely notice in writing to the attention of the Secretary of the Corporation, and include the information set forth in the advance notice by-laws of the Corporation. Among other requirements, the notice must be made not less than 30 days and not more than 65 days prior to the date of the relevant shareholder meeting. The Corporation’s by-laws are available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Nominees

Management of the Corporation proposes to nominate the persons whose names are set forth below to act as directors of the Corporation. Except where authority to vote on the election of directors is withheld, the person named in the accompanying form of proxy intend to vote IN FAVOUR of the election of each of the nominees whose names are hereinafter set forth. If prior to the Meeting, any of the nominees shall for any reason become unable or unwilling to serve as a director, it is intended that the discretionary power granted by the form of proxy shall be used to vote for any other person or persons identified by the Board to serve as directors, unless the Shareholder has specified in the form of proxy that his, her or its Common Shares are to be withheld from voting on the election of directors. The Board and management of the Corporation have no reason to believe that any of such nominees will be unable or unwilling to serve, for any reason, if elected to office.

The following table and the notes thereto state the names of all persons proposed to be nominated for election as directors, all other positions and offices with the Corporation now held by them, their principal occupations or employment, their periods of service as directors of the Corporation and the number of Common Shares beneficially owned or over which control or direction is exercised by each of them (including Common Shares underlying certain equity-based compensation), in each case as at April 10, 2018. Each director will hold office until the next annual meeting of Shareholders or until his or her successor is duly elected, unless prior thereto the director resigns or the director’s office becomes vacant.

 

 

 

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Name of Proposed

Directors

Position in the
Corporation

Principal 
Occupation

Director 
Since

Common 
Shares(1)

DSUs(2)

RSUs and PSUs(3)

Aggregate Value of Common Shares, DSUs, RSUs and PSUs(4)

Divyesh (Dave) Gadhia

Burnaby, British Columbia, Canada

Chairman of the Board(5)

President of Atiga Investments Inc. (investment firm)

May 11, 2010

56,500

 

57,785

$3,443,185

Rafael (Rafi) Ashkenazi, Onchan, Isle of Man

Chief Executive Officer of The Stars Group, Chief Executive Officer of Stars Interactive Group, and Director Nominee

Chief Executive Officer of The Stars Group and Chief Executive Officer of Stars Interactive Group

N/A

29,360

29,600 (RSUs) 59,200 (PSUs)

 

$3,559,931

Harlan Goodson

Sacramento,

California,

USA

 

Director(5)(6)

Attorney, The Law Office of Harlan W. Goodson (law firm)

May 11, 2010

7,690

19,554

$820,809

Alfred F. Hurley, Jr.

New York, New York,
USA

Director and Chairman of the CGNC Committee(5)(6)

Corporate director and consultant

June 28, 2016

2,182

19,554

$654,863

David Lazzarato

Toronto, Ontario,

Canada

Director and Chairman of the Audit Committee(7)

Media and broadcast industry consultant

June 28, 2016

4,000

19,554

$709,636

Mary Turner
Beamsville, Ontario, Canada

Director(7)

Corporate director

June 21, 2017

19,554

$589,124

 

Notes:

(1)

The information as to the number of Common Shares beneficially owned or over which control is exercised is provided to the best of the knowledge of the Corporation based on publicly available information and includes restricted Common Shares held, if any.

(2)

The number of deferred share units (“DSUs”) includes DSUs granted to such directors pursuant to the 2015 Equity Incentive Plan and held as of the date of this Information Circular. For additional information on these DSU grants, see “Director Compensation – Narrative Discussion” below.

(3)

The number of time-based restricted shares units (“RSUs”) and performance-based share units (“PSUs”) includes RSUs and PSUs granted to such directors and director nominees pursuant to the 2015 Equity Incentive Plan and held as of the date of this Information Circular. The number of PSUs is calculated based on the target performance level for each metric being met, which would result in 100% of the granted PSUs vesting during the relevant periods. For additional information, see “Basis and Structure of Executive CompensationEquity-Based Long-Term Incentive Awards” below.

(4)

The aggregate value of the Common Shares, DSUs, RSUs and PSUs for each director nominee was calculated by converting the closing price of the Common Shares on the TSX on April 9, 2018 from Canadian dollars to U.S. dollars using an exchange rate as of such date of 0.7856.

(5)

Member of the corporate governance, nominating and compensation committee (the “CGNC Committee”).

(6)

Messrs. Goodson and Hurley each served as a member of the audit committee (the “Audit Committee”) until June 21, 2017 and December 31, 2017, respectively.  

(7)

Member of the Audit Committee.

The proposed directors, as a group, beneficially own, directly or indirectly, or exercise direction or control over, 99,732 Common Shares, representing approximately 0.07% of the issued and outstanding Common Shares as at April 9, 2018.

Biographies

Divyesh (Dave) Gadhia, CPA, C.A., ICD.D

Mr. Divyesh (Dave) Gadhia, 56, is the Chairman of The Stars Group’s Board and is a member of the CGNC Committee. Mr. Gadhia is and has been the President of Atiga Investments Inc., an investment firm focused on consumer products, since 2010. He served as the Chief Executive Officer and Executive Vice Chairman of Gateway

 

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Casinos & Entertainment Limited from 1992 until 2010, where he was responsible for strategic initiatives, regulatory matters and governmental relations. He has served as a director of a number of other private and public companies, as well as charities, including a director of the Canadian Gaming Association from 2005 to 2010, a director of Gateway Casinos & Entertainment Limited from 1999 to 2007, and a director of Trian Equities from 1994 to 1999. In 2009, Mr. Gadhia was awarded the Canadian Gaming News Outstanding Achievement Award and was previously awarded the Business in Vancouver’s Top 40 Under 40 Award. Mr. Gadhia is a Chartered Public Accountant, a member of the Institute of Corporate Directors and holds a business degree from Simon Fraser University.

Rafael (Rafi) Ashkenazi

Mr. Rafael (Rafi) Ashkenazi, 43, currently serves as the Chief Executive Officer of The Stars Group and is responsible for devising and implementing its business plan and strategies. Mr. Ashkenazi is also the Chief Executive Officer for The Stars Group’s primary operating business, Stars Interactive Group, and is responsible for the performance and strategy of its offerings, including PokerStars and related brands.  Mr. Ashkenazi, who initially joined Stars Interactive Group in January 2013 as Chief Operating Officer, is an experienced gaming industry executive who previously served as Chief Operating Officer of Playtech plc (LSE: PTEC), a global gaming software development company (“Playtech”), from January 2006 to January 2010 and then from September 2011 to January 2013, and as a member of the board of directors of Playtech from March 2006 to January 2010. From January 2010 to September 2011, Mr. Ashkenazi served as Vice President of Business Operations of Playtech. He was appointed Senior Vice President of Strategy for The Stars Group in April 2015, Chief Executive Officer of Stars Interactive Group in November 2015, Interim Chief Executive Officer of The Stars Group in March 2016 and then permanent Chief Executive Officer of The Stars Group in November 2016. Mr. Ashkenazi graduated with honors from Shenkar College in Israel where he earned a B.A. in Industrial Engineering.

Harlan Goodson

Mr. Harlan Goodson, 71, is a current director and member of the CGNC Committee, and served as a member of the Audit Committee until June 2017, and served as the Director of California’s Division of Gambling Control from 1999 to 2003, during which he led the implementation of California’s Tribal-State Class III gaming compacts. Prior to forming his own law practice, The Law Office of Harlan W. Goodson, in Sacramento, California, Mr. Goodson was with the national law firm of Holland and Knight, LLP for four years where his practice concentrated on Gaming Law and Gaming Regulation and Governmental Affairs. Mr. Goodson’s biography was published in the 2000 edition of Who’s Who in American Law and in 2002, his work gained him international distinction when he was the recipient of the International Masters of Gaming Law inaugural Regulator of the Year award in 2001. Prior to being appointed to the position of Director of California’s Division of Gambling Control, Mr. Goodson worked in the California State Senate as a legislative consultant for Senator Bill Lockyer from 1994 to 1999. While serving as a consultant in the state legislature, Mr. Goodson drafted legislation in the areas of criminal law, correctional law, juvenile law and insurance law. Since 1996, Mr. Goodson has been an adjunct law professor teaching classes on the legislative process and statutory interpretation at John F. Kennedy University, School of Law. He has been a national speaker at conferences, symposia, law schools and before governmental bodies on the subjects of gaming regulation, Tribal government gaming and Tribal-State relations. Mr. Goodson is a member of the California State Bar, the International Masters of Gaming Law and the International Association of Gaming Advisors. In 2007, Mr. Goodson also served as a Judge Pro Tempore for the Superior Court in Sacramento, California. Mr. Goodson has also been listed in America’s Best Lawyers annually since 2005 and was selected by his peers as the Northern California 2012 Attorney of the Year for Gaming Law. Mr. Goodson graduated with a Bachelor of Arts from Golden Gate University and a Juris Doctor from the John F. Kennedy School of Law.

Alfred F. Hurley, Jr.

Mr. Alfred F. Hurley, Jr., 63, is a current director and Chairman of the Corporate Governance, Nominating and Compensation Committee, and has been a director of New Mountain Finance Corporation, a NYSE-listed business development company (“NMFC”), since 2010. He is the Chairman of NMFC’s Nomination and Governance and Compensation Committees and a member of its Audit and Valuation Committees. Mr. Hurley has also been a director of Merrill Corporation, which is a privately held company that provides outsourced solutions for complex, regulated and confidential business information since 2013. He serves as Chairman of Merrill’s Compensation and Governance and Human Resources Committee and as a member of the Audit Committee. He has also been the

 

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Fortress Voting Proxy to, a member of the Board of Managers, and a member of the Audit Committee of Ligado Networks Corporation, a privately held company (“Ligado”), since December 2017. Ligado is a satellite communications company that is developing a satellite-terrestrial network. Mr. Hurley is also the sole member of a consulting business, Alfred F. Hurley, Jr. & Company, LLC, which he started in 2014. He previously was Vice Chairman of Emigrant Bank and Emigrant Bancorp (collectively, the “Bank”) from 2007 and 2009, respectively, to December 2012, and was a consultant at the Bank during 2013. His responsibilities at the Bank included advising the Bank’s Chief Executive Officer on strategic planning, acquisitions and divestitures, asset/liability management, on-line banking and new products. In addition, he was Chairman of the Bank’s Credit and Risk Management Committee from November 2008 to January 2012 and the Bank’s acting Chief Risk Officer from January 2009 until January 2012. Before joining the Bank, Mr. Hurley was the Chief Executive Officer of M. Safra & Co., a private money management firm, from 2004 to 2007. Prior to joining M. Safra & Co., Mr. Hurley worked at Merrill Lynch (“ML”) from 1976 to 2004. His latest management positions prior to his departure included serving as Senior Vice President of ML & Co. and Head of Global Private Equity Investing, Managing Director and Head of Japan Investment Banking and Capital Markets, Managing Director and Co-Head of the Global Manufacturing and Services Group, and Managing Director and Head of the Global Automotive, Aerospace, and Transportation Group. As part of his management duties, he was a member of the Corporate and Institutional Client Group (“CICG”) Executive Committee which had global responsibility for ML’s equity, debt, investment banking and private equity businesses, a member of the Japan CICG Executive Committee, and a member of the Global Investment Banking Management and Operating Group Committees. Mr. Hurley graduated from Princeton University with an A.B. in History, cum laude.

David Lazzarato, FCA, C.A., ICD.D

Mr. David Lazzarato, 62, is a current director and Chairman of the Audit Committee, and is a media and broadcast industry consultant who assists companies in the areas of strategy development, mergers and acquisitions and financing. He has served as a member of the board of directors and chair of the audit committee of Yellow Pages Limited (TSX: Y) since December 2012 and was Senior Vice President, Finance at Bell Canada in 2010 and 2011. From 2009 until 2013, Mr. Lazzarato served on the board of directors and was the chair of the audit committee of LED Roadway Lighting and from 2004 to 2013, he was vice chair of the Trillium Health Centre Foundation. In 2008, Mr. Lazzarato was Chief Executive Officer of Craig Wireless Systems. Prior to joining Craig Wireless Systems, Mr. Lazzarato served as Executive Vice President and Chief Financial Officer of Alliance Atlantis Communications Inc. and Chairman of Motion Picture Distribution from 2005 to 2007. From 1999 to 2004, Mr. Lazzarato served as Executive Vice President and Chief Financial Officer of Allstream Inc. (formerly, AT&T Canada Inc.) and was Chief Corporate Officer of MTS Allstream Inc. in 2004. Mr. Lazzarato is past Chair of the McMaster University Board of Governors and of the Council of Chairs of Ontario Universities. Mr. Lazzarato earned a Bachelor of Commerce degree from McMaster University and is a Chartered Accountant, having received the FCA designation from the Ontario Institute of Chartered Accountants in 2006. Mr. Lazzarato received the ICD.D certification from the Institute of Corporate Directors in 2008 and has also completed the Senior Executive Program at the Massachusetts Institute of Technology.

Mary Turner, FCPA, FCA, C. Dir

Ms. Mary Turner, 65, is a current director and member of the Audit Committee. Ms. Turner served as President and Chief Executive Officer and board member of Canadian Tire Bank, a subsidiary of Canadian Tire Corporation (TSX: CTC), from 2012 until her retirement in 2016. She has over 25 years of experience in financial services, payments, customer service, credit risk management, enterprise risk management, operations, finance and information technology at Canadian Tire. Prior to joining Canadian Tire, Ms. Turner was a partner at Deloitte & Touche (now Deloitte LLP) in Toronto from 1985 to 1992. Throughout her career, Ms. Turner has been a member of several boards of directors, including Mackenzie Financial Corporation, a subsidiary of IGM Financial Inc. (TSX: IGM), where she is a member of the Fund Oversight Committee. She also currently serves on the boards of directors of YMCA Canada, where she is a member of its Governance Committee, Niagara College, where she chairs its New Member Search Committee and is a member of its Audit Committee, Canadian Tire Jumpstart Charities, where she chairs its Audit Committee, and the 2021 Canada Games Host Society. Ms. Turner has an honours B.Sc and is a graduate of the Chartered Director Program at McMaster University. She is a Chartered Accountant and received the FCA designation from the Ontario Institute of Chartered Accountants in 2003.

 

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Record of Attendance of Directors at Board Meetings

The following table sets forth the record of attendance of directors at meetings of the Board, the Audit Committee and the CGNC Committee during the year ended December 31, 2017.

 

 

 

 

 

Director

Meetings of Directors

Audit Committee

Corporate Governance,

Nominating and
Compensation Committee

Divyesh (Dave) Gadhia(1)

13/13

N/A

5/5

Harlan Goodson(1)(2)

13/13

2/2

5/5

Alfred F. Hurley, Jr.(1)(3)

13/13

4/4

5/5

David Lazzarato(1)

13/13

4/4

N/A

Peter E. Murphy(4)(5)

8/8

2/2

N/A

Mary Turner(5)

7/8

2/2

N/A

Aubrey Zidenberg(6)

5/5

N/A

N/A

Wesley K. Clark(6)

5/5

N/A

N/A

 

Notes:

(1)

Messrs. Gadhia, Goodson, Hurley and Lazzarato are members of the previously disclosed special committee of independent directors in 2016 (the “Special Committee”), which was formed by the Board in 2016 to consider a proposed acquisition of the Corporation and to conduct certain internal reviews.  The Special Committee has not been disbanded but did not meet in 2017 as all applicable matters were dealt with by the full Board, which was comprised entirely of independent directors.

(2)

Following the Corporation’s 2017 annual general meeting of Shareholders held on June 21, 2017 Meeting (the “2017 Annual Meeting”), Mr. Goodson was replaced as a member of the Audit Committee.

(3)

Mr. Hurley served as a member of the Audit Committee through December 31, 2017.

(4)

Mr. Murphy will not be standing for re-election as a director at the Meeting.

(5)

Mr. Murphy and Ms. Turner were each elected as a director and appointed as a member of the Audit Committee at the 2017 Annual Meeting.

(6)

Mr. Zidenberg and General Clark did not stand for re-election as directors at the 2017 Annual Meeting.

Appointment of Observer to the Board

In January 2018, the Corporation entered into an agreement (the “Nominee Agreement”) with Mr. Tang Hao and his affiliated entity Discovery Key Investments Limited, which based on publicly available information collectively hold approximately 17.8% of the outstanding Common Shares of the Corporation as of the date hereof, pursuant to which Mr. Tang appointed Mr. Melvin Zhang as his nominee to be an observer to the Board. Mr. Zhang will serve as an observer to the Board until such time as he and Mr. Tang have received certain licenses and approvals from certain of the Corporation’s gaming regulatory authorities, at which point Mr. Zhang will serve on the Board as a director.

Pursuant to the Nominee Agreement, Mr. Tang will continue to hold the right to nominate a director to the Board, subject to certain conditions, until the earlier of the day following the 2020 annual general meeting of the Corporation’s shareholders and the date on which his direct and indirect ownership of the Corporation’s issued and outstanding Common Shares falls below 10 percent (on a non-diluted basis). The Nominee Agreement also provides for certain standstill restrictions that will remain in effect until January 1, 2019, and provides as well that Mr. Tang will not acquire greater than 20% of the outstanding Common Shares prior to the 2020 annual general meeting of shareholders other than by way of a negotiated transaction approved by Board or by way of formal takeover bid for all of the outstanding Common Shares.

Mr. Yan Min “Melvin” Zhang, 62, is a current observer to the Board. Mr. Zhang has over 30 years of management experience across a range of industries, including commercial development and investment, and is currently an Executive Director of International Entertainment Corp. (HKG: 1009), a Hong Kong-based real estate developer with interests in hotel and entertainment properties across Asia, since May 2017.  Mr. Zhang also served as the Chief Operations Officer of Goldenway Capital Management Hong Kong Ltd., a Hong Kong-based capital management firm and a member of Goldenway Investments Holdings Limited, from June 2016 to May 2017.  Prior to that, Mr. Zhang served as the General Manager of Lloyd’s Register Industrial Technical Services Shanghai Co., an engineering and technology professional services company, from 2011 to 2016. From 2002 to 2010, Mr. Zhang was the Country Manager and Investment Director of China at Saudi Basic Industries Corporation, a global

 

10


 

petrochemical company.  Mr. Zhang served as the General Manager of Amylum Asia Ltd. from 1995 to 2002, and oversaw business development and operations in the United States and China at Safer Industrial Group from 1989 to 1995.  Mr. Zhang has a bachelor degree in Foreign Language & International Trade from Zhongshan University in Guangzhou, China, and a masters degree in Marketing & Business Administration from Oklahoma State University.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

To the knowledge of the Corporation, none of the proposed directors of the Corporation is, or within 10 years before the date hereof, has been:

(a)

a director, chief executive officer or chief financial officer of any company (including the Corporation) that

 

(i)

was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days issued while the proposed director was acting in the capacity as director, chief executive officer or chief financial officer, or

 

(ii)

was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than 30 consecutive days issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer;

(b)

a director or executive officer of any company (including the Corporation) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

(c)

has become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangements or compromises with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.

To the knowledge of the Corporation, none of the proposed directors of the Corporation have been subject to:

(a)

any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or

(b)

any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

B.

Appointment of Auditor

At the Meeting, the Shareholders will be asked to approve a resolution to reappoint Deloitte LLP, London, England, United Kingdom (“Deloitte”) as the independent external auditor of the Corporation until the close of the next annual meeting of the Shareholders or until its successor is appointed, and to authorize the directors of the Corporation to fix its remuneration. Deloitte was initially appointed as independent external auditor on September 15, 2015.

The Board, upon advice of the Audit Committee, unanimously recommends that holders of Common Shares vote IN FAVOUR of the reappointment of Deloitte as independent external auditor of the Corporation, to hold office until the close of the next annual meeting of the Shareholders or until its successor is appointed, and authorizing the directors of the Corporation to fix its remuneration. The reappointment of Deloitte must be approved by a majority of the votes cast on the matter at the Meeting.

If you appoint Divyesh (Dave) Gadhia as your proxyholder, your Common Shares will be voted in accordance with your instructions in the form of proxy or voting instruction form or, if no such instructions are given, such proxyholder will vote IN FAVOUR of the reappointment of Deloitte as auditor of the Corporation, to hold office until the close of the next annual meeting of the Shareholders or until its successor is appointed, and authorizing the directors of the Corporation to fix its remuneration.

 

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C.

Equity Incentive Plan Resolution

At the Meeting, Shareholders will be asked to consider, and if deemed advisable, pass the Equity Incentive Plan Resolution, the full text of which is attached as Schedule “A” to this Information Circular, to approve (i) an amendment to the limit on the participation of directors under the 2015 Equity Incentive Plan approved by the Board on April 4, 2018 (the “Proposed Amendment”), and (ii) the unallocated awards under the Equity Incentive Plan.

 

Summary of the Proposed Amendment

 

The Proposed Amendment would amend section 3.6(a) of the 2015 Equity Incentive Plan to increase the limit on the granting of awards to a director in any year from CDN$100,000 to CDN$150,000, of which no more than CDN$100,000 may be granted in the form of Options (defined below). The increase in the limit on the granting of awards to a director in any year reflects the limits permitted under proxy voting guidelines issued by Institutional Shareholder Services (“ISS Guidelines”), which permit a $150,000 per annum overall limit on the value of awards granted, provided that no more than $100,000 can be granted in the form of stock options. Under the 2015 Equity Incentive Plan and ISS Guidelines, such limits do not apply to director share units granted to a director in lieu of any cash retainer or meeting fees. Shareholder approval of the Proposed Amendment is required under section 14.2(f) of the 2015 Equity Incentive Plan.

 

On April 4, 2018, the Board also approved amendments to the 2015 Equity Incentive Plan to (i) change the name of the Corporation to its current legal name (i.e., The Stars Group Inc.) throughout, (ii) update the notice address to the new head-office of the Corporation located in Toronto, Ontario and (iii) change the choice of law and submission to jurisdiction from Québec to Ontario in respect of any awards granted after April 4, 2018. These amendments reflect the change in the Corporation’s name and its continuance into the Province of Ontario as approved by shareholders in 2017.  Under the amendment provisions of the 2015 Equity Incentive Plan, these additional amendments do not require shareholder approval.

 

The above summary of the amendments to the 2015 Equity Incentive Plan is qualified in its entirety by reference to the full text of the plan, a blacklined copy of which is appended as Exhibit “A” to this Information Circular.

 

Approval of Unallocated Options

Pursuant to the rules of the Toronto Stock Exchange (the “TSX”), every three (3) years all unallocated awards, rights or other entitlements available under the Corporation’s equity-based compensation arrangements must be approved by Shareholders.

Under the Corporation’s current compensation arrangements, namely the 2015 Equity Incentive Plan and the 2010 Stock Option Plan, the total number of Common Shares reserved for issuance cannot exceed 10% of the issued and outstanding Common Shares from time to time. Since the 2015 annual Shareholder meeting (the “2015 Annual Meeting”), the Corporation no longer grants Options under the 2010 Stock Option Plan, such that following that date, all awards are granted only pursuant to the terms of the Equity Incentive Plan. As the limit on the number of Common Shares issuable under the Equity Incentive Plan is a percentage of the outstanding Common Shares, should the Company issue additional Common Shares in the future, the number of Common Shares issuable under the Equity Incentive Plan will increase accordingly.

As of December 31, 2017 and April 10, 2018, 7,615,159 and 6,845,019 awards, respectively, were granted pursuant to the equity-based compensation arrangements of the Corporation then in effect. Assuming that the Equity Incentive Plan Resolution is passed at the Meeting, 8,019,569 unallocated awards would remain available under the Equity Incentive Plan on the date of this Information Circular.    

The Board considers the approval of the Equity Incentive Plan Resolution to be in the best interests of the Corporation and accordingly, the Board unanimously recommends that holders of Common Shares vote IN FAVOUR of the Equity Incentive Plan Resolution. The Equity Incentive Plan Resolution must be approved by a majority of the votes cast on the matter at the Meeting.

If you appoint Divyesh (Dave) Gadhia as your proxyholder, your Common Shares will be voted in accordance with your instructions in the form of proxy or voting instruction form or, if no such instructions are given, such proxyholder will vote IN FAVOUR of the Equity Plan Resolution.

 

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Statement of Executive Compensation

Compensation Discussion and Analysis

The responsibility for determining the principles for compensation of executives and other key employees of the Corporation rests with the Board. The Board has established the CGNC Committee, which serves the principal role of establishing the Corporation’s executive compensation plans and policies.

Duties and Responsibilities of the Corporate Governance, Nominating and Compensation Committee

In addition to its corporate governance and nominations duties, the CGNC Committee is responsible for, among other things, assisting the Board in discharging its oversight responsibilities relating to the compensation and retention of key senior management employees with the skills and expertise needed to enable the Corporation to achieve its goals and strategies at a fair and competitive compensation, including appropriate performance incentives. These responsibilities include, without limitation, (i) reviewing, assessing and recommending to the Board compensation payable to the Chief Executive Officer and other members of senior management, (ii) reviewing and overseeing the administration of compensation and incentives policies, plans and programs, and (iii) reviewing executive and director compensation disclosure to be made in the Corporation’s management information circulars.

 

The CGNC Committee reviews and recommends to the Board compensation policies and processes and any new incentive compensation and equity compensation plans of the Corporation or changes to any such policies, processes or plans, and is responsible for the administration of all the Corporation’s incentive and equity compensation plans, subject to applicable policies adopted by the Board. The CGNC Committee also reviews and approves any performance measures respecting incentive compensation payable to executives and key employees, and makes recommendations to the Board on any performance measures regarding incentive compensation payable to the Chief Executive Officer. Previous grants of equity-based awards may be taken into account by the CGNC Committee when considering new grants.

 

Finally, the CGNC Committee reviews and recommends to the Board for approval compensation awarded to the Corporation’s non-employee directors and the compensation awarded to the Chief Executive Officer, Chief Financial Officer, and generally that of the three most highly compensated executive officers of the Corporation, including any of its subsidiaries, or those individuals acting in a similar capacity (collectively, the “NEOs”).

 

Composition of the Corporate Governance, Nominating and Compensation Committee

The CGNC Committee currently consists of Messrs. Hurley, Gadhia and Goodson, all of whom are independent directors (as determined based on the standards set forth under “Statement of Corporate Governance Practices – Board”). Each of the members of the CGNC Committee is experienced in dealing with compensation matters. Mr. Hurley, the Chair of the CGNC Committee, has for several years served as the chair of committees responsible for compensation or compensation-related matters, as applicable, at Merrill Corporation and NMFC; Mr. Gadhia had direct involvement in establishing compensation philosophies and policies in his role as Chief Executive Officer and Executive Vice Chairman of Gateway Casinos & Entertainment Limited; and Mr. Goodson is a lawyer and has served on the CGNC Committee of the Corporation since 2010.

 

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Independent Compensation Consultant

In August 2016, the CGNC Committee formally engaged Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent compensation advisor. FW Cook does not perform any work for management of the Corporation. FW Cook assists the CGNC Committee by, among other things:

 

 

conducting a benchmarking market analysis for executive compensation, including the NEO roles;

 

providing updates on emerging executive compensation and global regulatory trends and best practices;

 

conducting an independent review of the Corporation’s policies related to executive and non-employee director compensation;

 

reviewing the Information Circular as it relates to certain compensation matters;

 

participating in CGNC Committee meetings from time to time; and

 

making recommendations with respect to compensation of the Corporation’s directors.

Aggregate fees payable to FW Cook in 2017 were approximately $193,000, all of which were for executive and director compensation related advice to the CGNC Committee. No other fees were paid by the Corporation to FW Cook.

Prior to engaging FW Cook in 2016, the CGNC Committee confirmed FW Cook’s independence after taking into consideration the six factors for compensation advisor independence under the applicable NASDAQ Rules (as defined below). In addition, the CGNC Committee or the Chairman of the CGNC Committee, to the extent delegated by the full CGNC Committee, (i) annually reviews the independence of its compensation consultant, (ii) approves the engagement and fees payable to FW Cook, and (iii) reviews for pre-approval any other work by the compensation consultant for the Corporation and does not approve any such work if, in its opinion, it would compromise the independence of the compensation advisor.

Use of Market Data

The Corporation uses market data to assess its compensation practices and help guide the range of total target compensation payable to the Corporation’s senior executive team. For 2017 executive compensation, including NEO compensation, the CGNC Committee used General Industry Compensation Surveys conducted by Willis Towers Watson, which provided compensation data specific to relevant employing locations and included companies in the global online gaming, interactive entertainment and consumer technology industries.

Based on a compensation review and advice provided by FW Cook, for 2017 the CGNC Committee approved as its primary peer group for its NEO compensation the following companies: Electronic Arts Inc., Scientific Games Corporation, Caesars Acquisition Company, Akamai Technologies, Inc., Nuance Communications, Take-Two Interactive Software, Inc., Match Group, Inc., VeriSign, Inc., ACI Worldwide, Inc., ANSYS, Inc., Fair Isaac Corporation, j2 Global, Inc., Zynga Inc., Zillow Group, Inc., Synchronoss Technologies, Inc. and TiVo Corporation. The peer group consists of North American listed companies in the gaming, interactive entertainment and software industries with revenues generally between 0.33 to 3 times that of The Stars Group’s revenue and enterprise value generally between 0.2 to 5 times that of The Stars Group. Other key factors considered in determining the peer group include the scope of international operations, business-to-consumer products or services, and EBITDA margin. For 2018, the executive compensation peer group is expected to consist of the same or substantially similar peer group as used in 2017.

In addition to this primary peer group, executive compensation benchmarking data was collected from (i) eight publicly traded gaming companies, consisting of 888 Holdings plc, GVC Holdings PLC, Kindred Group plc, NYX Gaming Group Limited (which was acquired by Scientific Games Corporation in early 2018), Paddy Power Betfair plc, Playtech plc, The Intertain Group Limited and William Hill plc; (ii) third-party data from a technology survey of companies with revenues in the United Kingdom between $1 billion and $3 billion; (iii) third-party data from a technology survey of companies with revenues in the United States between $1 billion and $3 billion; and (iv) third-party survey data from a Willis Towers Watson compensation survey.

The CGNC Committee considers market pay practices when setting executive compensation, but does not target

 

14


 

total compensation or specific compensation elements against the market data. Instead, the CGNC Committee uses market data to assess the overall reasonableness of the Corporation’s executive compensation program. The CGNC Committee believes that compensation decisions require a thoughtful review of multiple factors. In addition to peer and general market data, as part of its compensation analysis the CGNC Committee takes various items into consideration, including: performance of the Corporation; market competition for a particular position; an individual’s experience, performance, responsibilities with the Corporation and long-term potential; historical compensation; tenure with the Corporation; long-term potential with the Corporation; internal equity holdings; and advice from FW Cook.

Basis and Structure of Executive Compensation

Currently, executive compensation is comprised primarily of three components: (i) base salary; (ii) short-term compensation in the form of annual incentive cash bonuses; and (iii) equity-based long-term incentive awards. The base salary is a fixed portion of the compensation while the other components are variable, payable based on a combination of performance of the relevant executive and the Corporation as well as the passage of time. In 2017, the short-term and long-term variable portions of executive compensation constituted, on average, at least a majority of each NEO’s total target compensation.

The Board annually reviews executive compensation. The CGNC Committee assesses and makes recommendations to the Board with regard to the competitiveness and appropriateness of the compensation packages of the Chief Executive Officer and other executives of the Corporation as well as such other key employees of the Corporation or any of its subsidiaries as may be identified to the CGNC Committee by the Board.

The Corporation believes that by adding various performance-based compensation elements into its executive compensation structure, the Corporation will be able to better align executive compensation, including short- and long-term incentives, with pay-for-performance, the goals and strategies of the Corporation, and the creation of long-term Shareholder value, all while maintaining appropriate and competitive compensation as compared to its peers. See “Statement of Executive Compensation – Incentive Plan Awards – Equity-Based Incentive Plans”.

Base Salary

The Corporation pays base salaries, which are the fixed component of executive compensation paid in cash, in order to establish a pay foundation at competitive levels to attract and retain talented executives, and to fairly compensate them for the expected daily responsibilities. Base salaries are reviewed annually following an assessment of each executive’s experience, past performance, level of responsibility and importance of the position to the Corporation, individual performance and performance of the Corporation relative to the industries in which it currently operates, competitiveness of compensation relative to that paid to individuals holding equivalent positions at comparable companies, and any extraordinary events faced by the Corporation from time to time.

The CGNC Committee annually reviews the Position Description of the Chief Executive Officer, evaluates the performance of the Chief Executive Officer against such Position Description and sets the Chief Executive Officer’s base salary based on this evaluation.

The Chief Executive Officer may recommend base salary adjustments to the CGNC Committee for senior executives other than himself. The CGNC Committee recommends to the Board the base salary adjustment for the Chief Executive Officer and other senior executives taking into consideration, among other things, past performance, extraordinary events and the long-term goals of the Corporation.

Incentive Cash Bonus

The Corporation’s annual incentive cash bonus program is designed to motivate and reward executive officers for achieving short-term performance and strategic objectives. It is designed to encourage the attainment of superior results according to objectives approved annually by the Board and management. Subject to the terms of each executive’s employment agreement, including those of the NEOs described below under “Employment Agreements”, target bonuses are typically expressed as a percentage of base salary and are payable if and when the appropriate goals are met, and in some cases, with set minimum amounts depending on the particular executive’s employment agreement or other arrangement, and are typically paid in the calendar year following the year for which performance was measured. The key purposes of incentive bonuses are to (i) align and reward individual

 

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contributions to The Stars Group’s objectives to ensure execution of key elements of The Stars Group’s business plan, (ii) promote collaboration and teamwork while recognizing individual contributions and accomplishments, and (iii) provide a competitive target level of annual incentive compensation. The strategic objectives and incentive cash bonuses for each NEO are approved by the CGNC Committee and may not be identical, if even awarded, for any given period.

Under the Corporation’s current incentive cash bonus policy and procedures, which are applicable to all employees, an individual’s incentive cash bonus is based on a combination of his or her personal performance, actual Corporation performance as compared to specified growth (i.e., revenue of a specified dollar amount, certain key customer activity metrics and new initiatives) and profitability (i.e., Adjusted EBITDA of a specified dollar amount) targets and projections, and in some cases, the performance of the business unit in which the individual works. The weighting of these factors varies by individual, position and/or department, but for each of the NEOs, it is weighted 50% on personal performance and 50% on actual Corporation performance. As it relates to Corporation performance, the targets are weighted such that the growth and profitability targets comprise 60% and 40%, respectively, of the total Corporation performance portion, and these objective targets are closely correlated to the full year financial guidance ranges that the Corporation publicly reports from time to time. In 2017, if the Corporation achieved the midpoint of the publicly reported revenue and Adjusted EBITDA financial guidance ranges for that period, then that translates to NEOs achieving approximately 39% of the Corporation performance portion of the incentive cash bonus (this excludes the impact on the Corporation performance portion of the incentive cash bonus attributable to other specified growth targets and projections, such as certain key customer activity metrics and new initiatives). For performance falling above or below the midpoint of the relevant ranges, the percentage of the Corporation performance portion achieved will be calculated by linear interpolation. Calculations of a particular individual’s incentive cash bonus for a given year will be determined annually based on performance. The maximum incentive cash bonus potential for each NEO is currently 100% of his or her respective base salary. Notwithstanding, the Board, in its discretion, may approve an incentive cash bonus for any NEO in excess of 100% of his or her base salary. For the annual incentive cash bonus amounts paid to each of the NEOs, see “Statement of Executive CompensationSummary Compensation Table”. For minimum incentive cash bonuses, see “Employment Agreements” below. The Corporation’s other employees may also be entitled to participate in incentive cash bonuses at various levels, including maximum bonus potential levels as a percentage of his or her base salary ranging from 10% to 100%.

The CGNC Committee may in the future adjust the structure of the incentive cash bonuses for executives, including the NEOs, and other key employees to ensure that the purpose of and intention for providing appropriate and competitive incentives are met. For example, the Corporation continues to review and assess the importance of its key customer metrics as it relates to its evaluation of the business, its performance and the trends affecting the same, including, without limitation, customer engagement, gameplay, depositing activity, and various other customer trends, and may in the future determine that other metrics provide better measures and representations of performance for strategy and decision-making purposes.

Equity-Based Long-Term Incentive Awards

The Corporation maintains an equity-based long-term incentive award program to align the interests of its executives with those of its Shareholders by focusing its executives on long-term objectives over a multi-year period, with the value of the awards fluctuating based on stock price appreciation. Equity-based long-term incentive awards allow the Corporation to, among other things, promote the interests of the Corporation and its Shareholders by: (i) providing certain executives, including the NEOs, and key employees of the Corporation with greater incentives to further develop and promote the success of the Corporation, thus creating value for its Shareholders; (ii) further aligning the interests of its executives, including the NEOs, and key employees of the Corporation with those of its Shareholders generally through ownership of Common Shares or right to receive Common Shares; and (iii) assisting the Corporation in attracting, retaining and motivating its executives, including the NEOs, and key employees. More specifically, equity-based long-term incentive awards under the 2015 Equity Incentive Plan are granted to participants whose skill, performance and loyalty towards the Corporation are vital to its success, which currently includes the NEOs and certain other key executives and employees.

The Corporation currently makes its equity grants under the 2015 Equity Incentive Plan, which provides for grants of stock options (“Options”), RSUs, DSUs, PSUs, restricted shares, and other Common Share-based awards as the Board may determine. Prior to the 2015 Annual Meeting, equity-based awards were granted solely under the Corporation’s 2010 stock option plan, as amended from time to time (the “2010 Stock Option Plan”), and consisted only of Options. The Corporation no longer grants Options under the 2010 Stock Option Plan, but it remains in

 

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effect only to govern the terms of outstanding Options granted prior to the 2015 Annual Meeting.

In 2017, there were equity award grants made to executives, including the NEOs, under the 2015 Equity Incentive Plan. For equity awards held by the NEOs, see “Incentive Plan Awards – Outstanding Share-based Awards and Option-based Awards”.

As described above, based on its review of market practices and with the advice and assistance of FW Cook, the CGNC Committee redesigned the equity-based long-term incentive award program for the Corporation’s executives, including its NEOs, to further emphasize performance-based compensation. Effective for 2017, the CGNC Committee replaced the Options component of the long-term incentive program for its executive officers, including the NEOs, with a regular, annual grant program comprised of 67% PSUs and 33% RSUs (in each case based on grant date fair value). Effective for 2018, the regular, annual grant program for the NEOs will be comprised of 75% PSUs and 25% RSUs (in each case based on grant date fair value).

The RSUs vest in equal annual installments over a four-year period, generally subject to continued employment through each vesting date.

The PSUs will vest on the third anniversary of the grant date, provided the Corporation has attained its specified performance targets for the applicable three-year performance period and the individual remains employed by, or continues to provide services to, the Corporation. The CGNC Committee will determine whether the performance metrics are achieved. Half of the PSUs are earned based on average year-over-year growth percentages in revenue and half are earned based on average year-over-year growth percentages in “Plan Adjusted EBITDA,” in each case subject to equitable adjustment by the CGNC Committee to reflect the impact of (i) the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results; (ii) significant impacts from movements of at least five percent in foreign exchange; (iii) any purchase, acquisition, sale, disposition or write-down of a significant amount of assets or a significant business or joint venture; (iv) any uninsured catastrophic losses or extraordinary non-recurring items as described in applicable accounting standards or in management’s discussion and analysis of financial performance appearing in the Corporation’s annual report to shareholders or financial report for the applicable year; (v) materially adverse regulatory actions; or (vi) any other similar items. The intended result of any such adjustment would be to maintain the criteria for evaluating performance substantially the same following such event as it was prior to such event. “Plan Adjusted EBITDA” means net earnings (loss) from continuing operations before interest and financing costs (net of interest income), income taxes, depreciation and amortization, gaming duties, legal and lobbying expenses, termination payments, loyalty bonuses, and certain earnings and expenses related to certain immaterial arrangements related to the Corporation’s poker vertical.

At the threshold level for each metric, 0% of the granted PSUs will vest, at the target performance level for each metric, 100% of the granted PSUs will vest, and at the maximum performance level for each metric, 150% of the granted PSUs will vest (in each case determined separately for revenue and Plan Adjusted EBITDA). In addition, PSUs are subject to a total shareholder return condition (the “TSR Condition”) whereby the maximum number of PSUs that can vest is capped at 100% of the granted PSUs if the TSR Condition is not met when the CGNC Committee certifies achievement of the other goals. With respect to PSUs granted in 2017, the TSR Condition is the achievement of at least CAD$1.00 of appreciation to the applicable grant price measured at the end of the applicable three-year performance period. For performance falling between the levels, the actual amount vested will be calculated by linear interpolation. Following the end of the second year of the three-year performance period, the CGNC Committee will certify whether and to what extent the performance metrics were achieved as of the end of the second year of the full three-year performance period, and based on actual achievement as of that date, vest up to 50% of the total PSUs. If such PSUs are vested, they will settle following the conclusion of the three-year performance period. Following the conclusion of the full three-year performance period, the CGNC Committee will certify whether and to what extent the performance metrics were achieved during the full performance period, and based on actual achievement, the relative weighting and the TSR Condition, a total number of PSUs will be eligible to vest (taking into account the PSUs that may have already vested, if any, after the second year of the three-year performance period as described above) and be settled, subject to continued employment. Any unvested PSUs will be forfeited.

The CGNC Committee may in the future adjust the structure of the equity-based long-term incentive awards for the executives, including the NEOs, and other key employees to ensure that the purpose of and intention for providing appropriate and competitive long-term incentives is met.

 

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Anti-Hedging Policy

The Corporation has adopted a policy prohibiting its NEOs, directors and employees from purchasing financial instruments that are designed to hedge or offset a decrease in market value of equity securities. To the best of management’s knowledge, none of the NEOs, directors and employees have purchased such financial instruments.

Automatic Share Trading Policy

On November 1, 2017, the Corporation adopted an automatic share trading policy (the “ASTP”) to allow its directors, executive officers and employees the opportunity to implement plans to realize the value of their equity and equity-based awards by purchasing or selling, on an automatic basis through independent third-party securities brokers or dealers, certain of their equity and equity-based awards in accordance with the plan. Purchases and sales of equity and equity-based awards under the ASTP are made by brokers or dealers in accordance with pre-determined parameters and/or sales schedules and could include circumstances when participants would ordinarily not be permitted to purchase or sell their equity or equity-based awards due to restrictions under Canadian or U.S. securities laws or trading blackouts. Participants are subject to meaningful restrictions on their ability to implement, modify, suspend or terminate their participation in the ASTP.

 

Stock Ownership Guidelines

 

To better align the interests of the Corporation’s executives and non-employee directors with those of the Shareholders, the Corporation adopted Stock Ownership Guidelines (“Stock Ownership Guidelines”) on September 14, 2017. The Stock Ownership Guidelines require the Corporation’s executives, including the NEOs, and its non-employee directors to own Common Shares, RSUs or DSUs at different multiples of their respective base salary or annual retainer, as applicable, depending upon their position at the Corporation within five years of becoming subject to the Stock Ownership Guidelines. The Chief Executive Officer has ownership requirements of three times base salary; the other executives have ownership requirements of one times base salary; and the non-employee directors have ownership requirements of five times their respective annual Board retainer. Each executive and non-employee director is expected to maintain such level of ownership for the duration of his or her employment or service with the Corporation. Additionally, the Chief Executive Officer must maintain such level of ownership for a period of 12 months following his or her retirement (subject to the share re-purchase provisions in the Corporation’s by-laws).

Other Benefits

 

The Corporation provides benefits and limited perquisites to its NEOs on a basis that is competitive with market practices. NEOs resident in Canada can participate in the DPSP, NEOs resident in the United States can participate in the 401(k) Plan, NEOs resident in the Isle of Man can participate in the IoM Pension Plan and NEOs resident in the United Kingdom can participate in the UK Pension Plan (as each such term is defined under “Statement of Executive Compensation – Pension Plan Benefits”). See “Statement of Executive CompensationPension Plan Benefits”.

Rationale for and Risks Associated with the Corporation’s Compensation Policies and Practices

Executive compensation consists of both fixed and variable components. See “Statement of Executive Compensation – Basis and Structure of Executive Compensation”. The fixed component (i.e., base salary) of compensation is designed to provide a steady income so that executives do not feel pressured to focus primarily on short-term gains or annual stock price performance, which may be detrimental to long-term appreciation, creation of Shareholder value and other business metrics. The variable component (i.e., incentive cash bonuses and equity-based long-term incentive awards) of compensation is designed to reward both individual performance and overall corporate performance, as well as align the interests of the executives, Corporation and Shareholders. The Corporation believes that the variable component of compensation is consistent with pay-for-performance and sufficient to motivate executives to achieve short- and long-term corporate objectives while the fixed component is sufficient to discourage executives from taking unnecessary or excessive risks in doing so.

The CGNC Committee believes that the current performance metrics and performance period of its equity-based long-term incentive awards, and the current performance metrics of its incentive cash bonuses, tie to the Corporation’s long-term strategy and objectives in that such metrics are used by management as key metrics in

 

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evaluating the Corporation’s operating results and for long-term financial and operational decision-making purposes. These metrics also are used by the Shareholders in evaluating financial and operational performance, enable comparison of financial results between periods where certain items may vary independent of business performance, and enhance the overall understanding of the Corporation’s past performance and future prospects, as well as its performance against peers and competitors. In addition, as it relates to the key customer metrics used in the incentive cash bonus determinations, the Corporation uses such metrics to evaluate its business, measure performance, identify trends affecting the same, formulate business plans and make strategic decisions. The CGNC Committee also believes that despite some overlap between the metrics used for determining the equity-based long-term incentive awards and incentive cash bonus portions of total executive compensation, i.e., revenue, Adjusted EBITDA and Plan Adjusted EBITDA, given that such metrics are weighted differently, measured over a different time period, and in the case of Adjusted EBITDA and Plan Adjusted EBITDA, calculated slightly differently, and given that the incentive cash bonus portion also includes key customer metrics, there is a minimal risk of duplicative awards. Executives are prohibited under the Corporation’s anti-hedging policy from taking actions to reduce the alignment of their equity awards with long-term share performance.

Performance Graph

The Common Shares commenced trading on the TSX Venture Exchange on July 21, 2010 and, effective October 1, 2013, began trading on the TSX. On September 22, 2014, The Stars Group was added to the S&P/TSX Composite Index, and on June 8, 2015, the Common Shares began trading on NASDAQ. The Common Shares trade on the TSX under the symbol “TSGI” and on the NASDAQ under the symbol “TSG”. The following graph compares the total cumulative return on $100 invested on December 31, 2012 in Common Shares with the total cumulative return on the S&P/TSX Composite Total Return Index and the NASDAQ Composite Total Return, for the period from December 31, 2012 through December 31, 2017.

 

 

*

Source: Bloomberg

 

From December 31, 2012 to December 31, 2017 the compensation payable to the NEOs, including as disclosed in the summary compensation table, has fluctuated, due to changes in the number of executives and senior management from year to year as well as turnover in the executive ranks and the transformation of the Corporation’s business from a solely business-to-business provider to a predominantly business-to-consumer technology company initially focused on one product, online poker, and now further diversified among product offerings (e.g., casino and sportsbook) and geographies, following the Corporation’s acquisition of Stars Interactive Holdings (IOM) Limited and its subsidiaries and affiliates (collectively, “Stars Interactive Group”), in August 2014 (the “Stars Interactive

 

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Group Acquisition”). Compensation decisions are based upon, among other things, an individual’s performance, level of expertise, responsibilities and length of service to the Corporation, with incentive cash bonuses and equity-based long-term incentive awards granted as incentives for performance and contributions to the achievement of certain corporate targets and goals. Compensation values as disclosed in the summary compensation table are not directly related to share performance. However, share performance does directly affect the value to be realized by the NEOs from any long-term equity incentive awards. See “Basis and Structure of Executive Compensation” above.

Summary Compensation Table

The following table provides a summary of the compensation earned by the NEOs of the Corporation, being its Chief Executive Officer, its Chief Financial Officer and the three other most highly compensated executive officers of the Corporation, including any of its subsidiaries, or those individuals acting in a similar capacity, who each earned total compensation that exceeded CDN$150,000 in 2017.

Name and
principal position

Year

Salary
($)

Share-
based long-term incentive
awards(1)
($)

Option-
based
awards(2)
($)

Non-equity
incentive plan
compensation
($)

Pension
value
($)

All other
compensation
($)(3)

Total
compensation
($)

Annual
incentive cash
bonus

Long-
term
incentive
plans

Rafael (Rafi) Ashkenazi,

Chief Executive Officer of The Stars Group and Chief Executive Officer of Stars Interactive Group(4)

2017

919,648

1,593,972

1,162,078

140,260

3,815,958

2016

670,144

674,653

140,578

1,485,375

2015

601,254

157,411

150,927

138,493

1,048,085

Brian Kyle,

Chief Financial Officer of The Stars Group(5)

2017

242,251

478,360

198,722

9,539

45,587

974,459

2016

2015

Marlon Goldstein,
Executive VP & Chief Legal Officer of The Stars Group

2017

600,000

628,255

450,000

18,000

15,936

1,712,191

2016

551,282

412,500

11,051

27,628

1,002,461

2015

446,953

314,823

270,000

17,865

1,049,641

Guy Templer, Chief Operating Officer of Stars Interactive Group(6)

2017

526,989

507,989

405,376

36,889

53,409

1,530,652

2016

427,325

427,325

29,913

69,570

954,133

2015

482,222

150,927

33,893

86,069

753,111

Robin Chhabra, Chief Corporate Development Officer of The Stars Group(7)

 

2017

157,643

775,393

202,688

11,027

108,100

1,254,851

2016

2015

Daniel Sebag,

Former Chief Financial Officer of The Stars Group(8)

2017

256,810

10,272

836,718(9)

1,103,800

2016

453,113

226,556

9,821

21,282

710,772

2015

469,300

314,823

211,185

16,108

1,011,416

 

Notes:

(1)

Comprised of RSUs and PSUs, which are calculated based on the target performance level for each metric being met, which would result in 100% of the granted PSUs vesting during the relevant periods. The number of Common Shares issuable upon vesting and settlement of those PSUs could be from 0% to 150% of the amount of granted PSUs depending on the achievement of certain metrics and conditions being met. For additional information, see “Basis and Structure of Executive Compensation – Equity-Based Long-Term Incentive Awards” below.  The applicable share price at the grant date was in Canadian dollars, therefore it was converted to U.S. dollars using an average exchange rate for the year ended December 31, 2017 of 0.794887.  

(2)

The fair value of each granted Option was determined using the Black-Scholes option pricing model, according to IFRS 2 of the CPA Canada Handbook. The Corporation believes that this method produces a meaningful and reasonable estimate of fair value. The key assumptions used in the Black-Scholes option pricing model for calculating the value of the Options granted under the 2010 Stock Option Plan and the 2015 Equity Incentive Plan are as follows: risk free rate of 1.07% per annum, expected life of 4.75 years, a volatility of 52 – 60% and no dividend yield. With respect to fiscal years 2015 and 2016, the Corporation previously reported in its management information circular for its 2017 Annual Meeting the dollar amounts in this column based on certain IFRS accounting values as opposed

 

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to the Black-Scholes option pricing model, which for the NEOs that were in their positions as of December 31, 2017 resulted in lower dollar values than what are presented above.

(3)

Comprised primarily of sign-on bonuses, termination or severance pay, and allowances for benefits, cars, investments and/or housing, as applicable.

(4)

Mr. Ashkenazi was paid in Great Britain Pound Sterling for his services as the Chief Executive Officer of The Stars Group and was paid in Canadian dollars for his services as the Chief Executive Officer of Stars Interactive Group. Therefore, each component of his compensation paid in Great Britain Pound Sterling or Canadian dollars was converted to U.S. dollars using an average exchange rate for the year ended December 31, 2017 of 1.351253 and 0.794887, respectively.  All other compensation includes $83,507 in benefits allowance paid by The Stars Group.

(5)

Mr. Kyle joined the Corporation as its Chief Financial Officer on June 19, 2017. Mr. Kyle was paid in Canadian dollars, therefore each element of his compensation paid in Canadian dollars was converted to U.S. dollars using an average exchange rate for the year ended December 31, 2017 of 0.794887

(6)

Mr. Templer was paid in Great Britain Pound Sterling, therefore each element of his compensation paid in Great Britain Pound Sterling was converted to U.S. dollars using an average exchange rate for the year ended December 31, 2017 of 1.351253.

(7)

Mr. Chhabra joined the Corporation as its Chief Corporate Development Officer on September 1, 2017. Mr. Chhabra was paid in Great Britain Pound Sterling, therefore each element of his compensation was converted to U.S. dollars using an average exchange rate for the year ended December 31, 2017 of 1.351253.

(8)

On June 19, 2017, Mr. Sebag retired as Chief Financial Officer of the Corporation. Mr. Sebag was paid in Canadian dollars, therefore each element of his compensation was converted to U.S. dollars using an average exchange rate for the year ended December 31, 2017 of 0.794887.

(9)

On January 19, 2017, Mr. Sebag entered into a separation agreement with the Corporation (the “Separation Agreement”) pursuant to which, among other things, the Corporation and Mr. Sebag agreed to transition terms leading up to his separation from the Corporation, including, among other things, the terms of certain separation payments for an aggregate amount of CDN$900,000 payable by the Corporation to Mr. Sebag in connection therewith. In accordance with the terms of the Separation Agreement, as of December 31, 2017, the Corporation had paid CDN$675,000, with the remaining CDN$225,000 paid on March 31, 2018. The terms of the Separation Agreement also provide for the acceleration of vesting of all of his unvested Options granted under the 2010 Stock Option Plan and 2015 Equity Incentive Plan, as applicable.

Employment Agreements

Set forth below are general summaries of the material terms of the employment agreements of each NEO in effect as at December 31, 2017, which are qualified in their entirety by the full text of their respective employment agreement.

Employment Agreement of Mr. Rafael (Rafi) Ashkenazi, Chief Executive Officer of the Corporation and Chief Executive Officer of Stars Interactive Group

Pursuant to the terms of his employment agreement, Mr. Ashkenazi was formerly employed as Chief Operating Officer of the Stars Interactive Group and is now currently employed as Chief Executive Officer of Stars Interactive Group for a term of two years, automatically renewing for subsequent one-year terms, unless terminated by either Mr. Ashkenazi or Stars Interactive Group upon six months’ prior notice, or unless sooner terminated in accordance with the terms of his employment agreement. In addition to his base salary, Mr. Ashkenazi is eligible to participate in the incentive cash bonus and equity-based long-term incentive awards programs set out above under “Basis and Structure of Executive Compensation” and any other incentive plan that the Corporation may from time to time adopt. Although Mr. Ashkenazi is eligible to participate in IoM Pension Plan (hereinafter defined), he has elected not to do so, and receives an “investment allowance” equal to an aggregate amount of 7% of his annual base salary, payable monthly, in lieu thereof pursuant to applicable law and subject to applicable taxes. Mr. Ashkenazi’s employment agreement contains standard non-competition and non-solicitation provisions which respectively survive six months and one year following termination of employment, and standard confidentiality obligations which survive indefinitely.

Employment Agreement of Mr. Brian Kyle, Chief Financial Officer

 

Pursuant to the terms of his employment agreement, Mr. Brian Kyle is the Chief Financial Officer of the Corporation for an indefinite term and his employment agreement shall continue unless sooner terminated in accordance with its terms. In addition to his base salary, Mr. Kyle is eligible to participate in the incentive cash bonus and equity-based long-term incentive awards programs set out above under “Basis and Structure of Executive Compensation” and any other incentive plan that the Corporation may from time to time adopt. During the year ended December 31, 2017, Mr. Kyle participated in the DPSP (hereinafter defined), and the value of Mr. Kyle’s benefits under the DPSP during that period are summarized under the “Pension Plan Benefits” heading below. Mr. Kyle’s employment agreement contains standard non-competition and non-solicitation provisions which each survive for one year following termination of employment, and standard confidentiality obligations which survive indefinitely.

 

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Employment Agreement of Mr. Marlon D. Goldstein, Executive Vice President and Chief Legal Officer & Secretary

 

Pursuant to the terms of his employment agreement, Mr. Marlon D. Goldstein is the Executive Vice President and Chief Legal Officer of the Corporation and his employment agreement is for an initial term of five years, automatically renewing for subsequent one-year terms, unless sooner terminated in accordance with its terms. In addition to his base salary, Mr. Goldstein is eligible to participate in the incentive cash bonus and equity-based long-term incentive awards programs set out above under “Basis and Structure of Executive Compensation” and any other incentive plan that the Corporation may from time to time adopt. Mr. Goldstein is entitled to a minimum annual cash bonus of not less than $200,000, which was negotiated in connection with his recruitment. During the year ended December 31, 2017, Mr. Goldstein participated in the 401(k) Plan (hereinafter defined), and the value of Mr. Goldstein’s benefits under the 401(k) Plan during that period are summarized under the “Pension Plan Benefits” heading below. Mr. Goldstein’s employment agreement contains non-solicitation provisions which survive for one year following termination of employment, and confidentiality obligations which survive indefinitely.

Employment Agreement of Mr. Guy Templer, Chief Operating Officer of Stars Interactive Group

Pursuant to the terms of his employment agreement, Mr. Templer is currently employed as Chief Operating Officer of Stars Interactive Group for a term of two years, automatically renewing for subsequent one-year terms, unless terminated by either Mr. Templer or Stars Interactive Group upon 12 months’ prior notice, or unless sooner terminated in accordance with the terms of his employment agreement. In addition to his base salary, Mr. Templer is eligible to participate in the incentive cash bonus and equity-based long-term incentive awards programs set out above under “Basis and Structure of Executive Compensation” and any other incentive plan that the Corporation may from time to time adopt. During the year ended December 31, 2017, Mr. Templer participated in the IoM Pension Plan (hereinafter defined), and the value of Mr. Templer’s benefits under the IoM Plan during that period are summarized under the “Pension Plan Benefits” heading below. Mr. Templer’s employment agreement contains standard non-competition and non-solicitation provisions which respectively survive six months and one year following termination of employment, and standard confidentiality obligations which survive indefinitely.

Employment Agreement of Mr. Chhabra Chief Corporate Development Officer

 

Pursuant to the terms of his employment agreement, Mr. Chhabra is the Chief Corporate Development Officer of the Corporation for an indefinite term and his employment agreement shall continue unless sooner terminated in accordance with its terms. In addition to his base salary, Mr. Chhabra is eligible to participate in the incentive cash bonus and equity-based long-term incentive awards programs set out above under “Basis and Structure of Executive Compensation” and any other incentive plan that the Corporation may from time to time adopt. During the year ended December 31, 2017, Mr. Chhabra participated in the UK Pension Plan (hereinafter defined), and the value of Mr. Chhabra’s benefits under the UK Pension Plan during that period are summarized under the “Pension Plan Benefits” heading below. Mr. Chhabra is entitled to a minimum annual cash bonus during his first year of employment of not less than £150,000, which was negotiated in connection with his recruitment. Mr. Chhabra’s employment agreement contains standard non-competition and non-solicitation provisions which each survive for one year following termination of employment, and standard confidentiality obligations which survive indefinitely.

Termination and Change of Control Benefits

In addition to standard termination provisions, including upon death or disability, the terms of the employment agreement of Mr. Ashkenazi with Stars Interactive Group provide his employment may be terminated by Stars Interactive Group upon six months’ prior notice, provided that Stars Interactive Group can also terminate Mr. Ashkenazi’s employment at any time without cause by paying to Mr. Ashkenazi an amount equal to one and a half (1.5) times his annual base salary in lieu of any required notice period, plus certain accrued holiday entitlements and the pro rata portion of any bonus to which Mr. Ashkenazi was entitled for the year most recently ended. Stars Interactive Group can also terminate Mr. Ashkenazi’s employment in connection with the occurrence of, or pursuant to, certain cause-related events set out in his employment agreement. If Mr. Ashkenazi’s employment agreement with Stars Interactive Group is terminated in connection with a change of control, Mr. Ashkenazi will be entitled to receive an amount equal to one and a half (1.5) times his annual base salary, plus certain accrued holiday entitlements and the pro rata portion of any bonus to which Mr. Ashkenazi was entitled for the year most recently ended.

 

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Mr. Kyle’s employment agreement provides that in addition to standard termination provisions, including upon death or disability, the Corporation may terminate his employment at any time for cause. His employment agreement also provides that the Corporation may terminate Mr. Kyle’s employment at any time without cause by paying to Mr. Kyle an amount equal to one (1) times his annual base salary, car allowance and target bonus to which he was eligible, and Mr. Kyle will continue to participate in certain of the Corporation’s benefits for a period of 12 months following the end of his employment. Mr. Kyle may terminate his employment without cause upon 60-days’ prior written notice.

Also, in addition to standard termination provisions, including upon death or disability, the terms of Mr. Goldstein’s employment agreement stipulate that his employment may be terminated at any time for cause, upon a decision of the Board made at a duly called meeting to which he was invited. His employment agreement also provides that he may terminate his employment either without cause or for good reason after providing the Corporation with 30-days’ prior written notice. If the Board terminates Mr. Goldstein’s employment without cause (as such term is defined in his employment agreement), or if Mr. Goldstein terminates his employment for good reason (as such term is defined in his employment agreement), he will be entitled to receive (i) an amount equal to three (3) times the sum of (a) his annual base salary, as in effect immediately prior to the date on which the term of employment ends, plus (b) the higher of (A) the target bonus to which he was eligible for any of the then three (3) preceding fiscal years, or (B) the actual bonus paid to him for any of the three (3) preceding fiscal years, and (ii) 100% of the then-unvested equity awards held by him will immediately vest (provided that if an outstanding equity award is to vest based on the achievement of performance criteria, then such equity award will vest as to 100% of the amount of the equity award assuming the relevant performance criteria had been achieved at the highest applicable target levels for the relevant performance period(s)) (collectively, the “Termination Benefits”). Under such scenarios, Mr. Goldstein would also be entitled to accrued obligations (as such term is defined in his employment agreement) as of the termination date of his employment agreement, as well as the continuation of certain health benefits. Under his agreement, Mr. Goldstein has the right to terminate his employment for good reason any time up to May 1, 2018 due to David Baazov ceasing to be Chief Executive Officer or Daniel Sebag ceasing to be Chief Financial Officer. Upon the occurrence of a change of control, Mr. Goldstein will be entitled to receive the same Termination Benefits provided if terminated without cause.

The employment agreement of Mr. Templer provides for substantially similar termination provisions as that of Mr. Ashkenazi, with the exception that the severance amount payable in connection with the termination of employment by Stars Interactive Group in lieu of the required prior notice is one (1) time his annual salary then in effect, plus certain accrued holiday entitlements and the pro rata portion of any bonus to which Mr. Templer was entitled for the year most recently ended. Also, Mr. Templer’s employment agreement is silent as it relates to severance amounts payable in connection with a change of control.

Mr. Chhabra’s employment agreement provides that in addition to standard termination provisions, the Corporation may terminate his employment at any time for cause. His employment agreement also provides that the Corporation may terminate Mr. Chhabra’s employment upon 12 months’ prior notice, provided that the Corporation can also terminate Mr. Chhabra’s employment at any time without cause by paying to Mr. Chhabra an amount equal to one (1) time his annual salary and benefits then in effect, plus certain accrued holiday entitlements.

As for the treatment of the Options or equity awards in connection with a change of control of the Corporation, see “Incentive Plan Awards – The 2010 Stock Option Plan – Termination of Options”, and “Incentive Plan Awards – The 2015 Equity Incentive Plan – Change in Control” sections below. A “change of control”, for the purpose of such employment agreements, generally means the occurrence of: (a) an amalgamation, arrangement, merger, takeover bid, consolidation or other transaction as a result of which the Corporation is not the surviving or continuing corporation or entity (subject to certain exceptions, including transactions with wholly owned subsidiaries, and transactions in which there is no substantial change in the Shareholders and the outstanding Options and/or other equity awards are assumed or replaced by the successor or continuing corporation); (b) a dissolution or liquidation of the Corporation; (c) the sale of all or substantially all of the assets of the Corporation; (d) a business combination (going private transaction); or (e) any other transaction or series of related transactions which does not result in the Shareholders immediately prior to such transaction or series of related transactions holding 50% or more of the voting power of the surviving or continuing entity following such transaction or series of related transactions.

If the employment of any of the NEOs is terminated without cause, the right to exercise any vested Options granted

 

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under the 2010 Stock Option Plan ends on the 90th day following the date when such NEO ceased being in the Corporation’s active service or employment. The NEO’s right to exercise any vested stock equity-based awards granted under the 2015 Equity Incentive Plan ends on the earlier of (i) 90 days after termination and (ii) the expiry date of the equity-based award. If a NEO’s employment is terminated for cause, any Options granted under the 2010 Stock Option Plan or the equity-based awards granted under the 2015 Equity Incentive Plan will be deemed to have been cancelled immediately on the date in which he/she is required to stop reporting to work. For further information on the treatment of Options granted under the 2010 Stock Option Plan and equity-based awards granted under the 2015 Equity Incentive Plan in similar circumstances, see “Statement of Executive Compensation – Equity-Based Incentive Plans”.

The foregoing descriptions of the 2015 Equity Incentive Plan would remain the same following the approval of the Proposed Amendment to the 2015 Equity Incentive Plan. For a discussion of the Proposed Amendment to the 2015 Equity Incentive Plan, see “C. Equity Incentive Plan Resolution – Summary of Proposed Amendment”.

No incremental amount is payable to any of the NEOs who continued to serve as a NEO as at December 31, 2017 in connection with the termination of the NEO’s employment for cause or retirement. The following chart shows the estimated incremental payments to each continuing NEO at, following or in connection with the NEO’s death or disability, termination without cause or for good reason, termination without cause or for good reason following a change of control, or resignation or retirement, in each case, assuming the triggering event took place on December 31, 2017 and based on the closing price of the Common Shares on such date:

 

NEOs

Category of Payment

Termination by Reason of Death or Disability

Termination Without Cause or For Good Reason

Termination Without Cause or For Good Reason Following a Change In Control

Resignation and/or Retirement

Rafael (Rafi) Ashkenazi,

Chief Executive Officer of The Stars Group and Chief Executive Officer of Stars Interactive Group(1)

Severance

$1,689,066

$2,424,297

$2,424,297

$0

Equity-based awards(2)

$0

$0

$0

$0

Total

$1,689,066

$2,424,297

$2,424,297

$0

Brian Kyle,
Chief Financial Officer of The Stars Group(3)

Severance

$198,722

$990,551

$990,551

$0

Equity-based awards(2)

$0

$0

$0

$0

Total

$198,722

$990,551

$990,551

$0

Marlon Goldstein,
Executive VP & Chief Legal Officer of The Stars Group

Severance

$100,000

$3,600,000

$3,600,000

$0

Equity-based awards(2)

$0

$1,571,293

$1, 571,293

$0

Total

$100,000

$5,171,293

$5,171,293

$0

Guy Templer, Chief Operating Officer of Stars Interactive Group(1)

Severance

$1,689,066

$1,108,703

$1,108,703

$0

Equity-based awards(2)

$0

$0

$0

$0

Total

$1,689,066

$1,108,703

$1,108,703

$0

Robin Chhabra, Chief Corporate Development Officer of The Stars Group(1)

Severance

$1,689,066

$991,352

$991,352

$0

Equity-based awards(2)

$0

$0

$0

$0

Total

$1,689,066

$991,352

$991,352

$0

 

Notes:

(1)

Messrs. Ashkenazi, Chhabra and Templer are paid in Great Britain Pound Sterling, therefore the calculation of their severance amount was converted to U.S. dollars using an average exchange rate for the year ended December 31, 2017 of 1.351253.

(2)

These amounts are calculated based on the difference between the closing price of Common Shares on the TSX of CDN$29.25 on December 29, 2017 and the exercise price of the Options. For the purposes of these calculations, the closing price of the Common Shares was converted from Canadian dollars to U.S. dollars using an exchange rate of 0.7971 as of December 29, 2017.

(3)

Mr. Kyle is paid in Canadian dollars, therefore the calculation of their severance amount was converted to U.S. dollars using an average exchange rate for the year ended December 31, 2017 of 0.794887.

 

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Incentive Plan Awards

Outstanding Share-based Awards and Option-based Awards

The following table sets forth information concerning all awards outstanding as of December 31, 2017 for each NEO under the 2010 Stock Option Plan and the 2015 Equity Incentive Plan. There is no share-based award plan offered strictly to executive officers.  

 

 

 

 

 

 

 

 

 

Name

Option-based Awards

Share-based Awards

 

Number of
securities
underlying
unexercised

Options

(#)

Option
exercise
price(1)
($)

Option
expiration date

Value of
unexercised
in-the-money
Options(1)
($)

Number of
shares or
units of
shares that
have not
vested
(#)

Market or
payout value of
share-based
awards that
have not vested
($)

Market or
payout value
of vested
share-based
awards not
paid out or
distributed
($)

Rafael (Rafi) Ashkenazi,

Chief Executive Officer of The Stars Group and Chief Executive Officer of Stars Interactive Group

225,000

15.94(2)

October 20, 2021

1,658,964

59,200 (PSUs)(3)

1,379,360

50,000

15.72

December 17, 2022

379,818

29,600 (RSUs)

689,680

Brian Kyle,

Chief Financial Officer of The Stars Group

17,532 (PSUs)(3)

408,496

8,768 (RSUs)

204,294

Marlon Goldstein,

Executive VP & Chief Legal Officer of The Stars Group

169,816

6.34

January 1, 2012

2,883,175

 

 

 

200,000

24.95

September 6, 2021

23,332 (PSUs)(3)

543,636

100,000

15.72

December 17, 2022

759,636

11,668 (RSUs)

271,864

 

 

 

 

 

 

 

Guy Templer, Chief Operating Officer of Stars Interactive Group

225,000

15.94

October 20, 2021

1,658,964

18,864 (PSUs)(3)

439,531

9,436 (RSUs)

219,859

Robin Chhabra,

Chief Corporate Development Officer of The Stars Group

30,664 (PSUs)(3)

714,471

 

15,336 (RSUs)

357,329

Daniel Sebag,

Former Chief Financial Officer of The Stars Group

300,000

0.74

July 21, 2017

4,020,643

 

100,000

3.13

September 4, 2019

1,102,086

75,000

23.29

September 8, 2021

100,000

14.67

December 17, 2022

Notes:

(1)

These amounts are calculated based on the difference between the closing price of Common Shares on the TSX of CDN$29.25 on December 29, 2017 and the exercise price of the respective Options. For the purposes of these calculations, the closing price of the Common Shares was converted from Canadian dollars to U.S. dollars using an exchange rate of 0.7971 as of December 29, 2017.

(2)

This grant of Options under the 2010 Stock Option Plan was approved by the TSX in connection with the Stars Interactive Group Acquisition. The exercise price of such Options is equal to a price per share that is lower than the fair market value of the Common Shares at the date of grant.

(3)

These amounts are calculated based on the target performance level for each metric being met, which would result in 100% of the granted PSUs vesting during the relevant periods. For additional information, see “Basis and Structure of Executive Compensation – Equity-Based Long-Term Incentive Awards” above.

Incentive Plan Awards – Value Vested or Earned During the Year

The following table sets forth information for each NEO concerning the value vested of the option-based awards, share-based awards and non-equity incentive plan compensation during the year ended December 31, 2017, as if such Options, share-based awards and non-equity incentive plan compensation were exercised, converted, redeemed or exchanged, as applicable, by the particular NEO as of each respective vesting date during such period.

 

 

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Name

Option-based awards
value vested
during the year
($)(1)

Share-based awards
value vested
during the year
($)

Non-equity incentive
plan compensation
value vested
during the year
($)

Rafael (Rafi) Ashkenazi,

Chief Executive Officer of The Stars Group and Chief Executive Officer of Stars Interactive Group

333,405

Brian Kyle,

Chief Financial Officer of The Stars Group

Marlon Goldstein,

Executive VP & Chief Legal Officer of The Stars Group

110,781

Guy Templer,

Chief Operating Officer of Stars Interactive Group

236,146

Robin Chhabra,

Chief Corporate Development Officer of The Stars Group

Daniel Sebag,

Former Chief Financial Officer of The Stars Group

199,971(2)

 

Notes:

(1)

These amounts are calculated based on the difference between the closing price of Common Shares on the TSX on the respective vesting dates during the year ended December 31, 2017 and the exercise price of the respective Options as if such options had been exercised on such vesting dates.

(2)

On January 19, 2017, Mr. Sebag entered into the Separation Agreement pursuant to which, among other things, the Corporation and Mr. Sebag agreed to transition terms leading up to his separation from the Corporation, which included the acceleration of vesting of all of his unvested Options granted under the 2015 Equity Incentive Plan.

Equity-Based Incentive Plans

On May 14, 2015, upon a recommendation of the CGNC Committee, the Board passed a resolution adopting the 2015 Equity Incentive Plan and amendments to the 2010 Stock Option Plan (the “2010 Stock Option Plan Amendments”), each of which was approved by the Shareholders at the 2015 Annual Meeting. The purpose of the 2015 Equity Incentive Plan is to provide flexibility to the Corporation to grant, in addition to Options, other forms of equity-based incentive awards to attract, retain and motivate qualified directors, employees and consultants of the Corporation and its affiliates (as defined therein). The 2010 Stock Option Plan Amendments limit the number of shares issuable under the 2010 Stock Option Plan to the number of Options outstanding as of the 2015 Annual Meeting and extend the expiry date of certain outstanding Options issued under the 2010 Stock Option Plan for twenty-four (24) months from their original expiry dates. Since the 2015 Annual Meeting, all grants of equity-based awards by the Corporation have been made pursuant to the 2015 Equity Incentive Plan only, and the 2010 Stock Option Plan, as amended by the 2010 Stock Option Plan Amendments, has remained in effect exclusively in respect of outstanding Options granted thereunder. For information on vesting value of equity-based awards granted by the Corporation to the NEOs, see above “Incentive Plan Awards – Value Vested or Earned During the Year”.

 The 2010 Stock Option Plan

The Board may no longer grant Options under the 2010 Stock Option Plan but outstanding Options still remain governed by its terms. Prior to the effective date of the 2010 Stock Option Plan Amendments, the Board was able, from time to time, in its discretion, and in accordance with the requirements of the TSX, to grant non-transferable Options to purchase Common Shares. The 2010 Stock Option Plan was a “10% rolling” stock option plan pursuant to which unallocated Options thereunder had to be re-approved by Shareholders by ordinary resolution every three years. Set forth below is a summary of certain key terms of the 2010 Stock Option Plan.

 

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Eligibility

Prior to the 2010 Stock Option Plan Amendments, all directors, officers, employees and consultants of the Corporation or any of its subsidiaries were eligible to receive Options under the 2010 Stock Option Plan. Under the terms of the 2010 Stock Option Plan, the aggregate number of Common Shares issued to insiders of the Corporation within any one-year period, or issuable to insiders of the Corporation at any time, under all security-based compensation arrangements of the Corporation, could not exceed 10% of the total number of issued and outstanding Common Shares at such time. The number of Common Shares that were, at any time, issuable within any 12-month period under the 2010 Stock Option Plan on the exercise of Options or pursuant to other security-based compensation arrangements of the Corporation, (i) to any one participant were not to exceed 5% of the then issued and outstanding Common Shares, (ii) to any consultant were not to exceed 2% of the then issued and outstanding Common Shares, and (iii) to any employee conducting investor relations activities were not to exceed an aggregate of 2% of the then issued and outstanding Common Shares to all employees conducting investor relations activities.

Term, Vesting and Exercise Price of Options

All outstanding Options granted pursuant to the terms of the 2010 Stock Option Plan originally had five-year terms to expiry. However, pursuant to the 2010 Stock Option Plan Amendments, the expiry date of certain outstanding Options was extended for twenty-four (24) months from their original expiry dates. The extension was automatic for Canadian Taxpayers, but Foreign Taxpayers (as such terms are defined in the 2010 Stock Option Plan Amendments) had to elect to have such extension apply to any or all of their Options by giving written notice to the Corporation of such election. In the case of Foreign Taxpayers, the extension was also subject to Board approval.

The exercise price of the Options issued under the 2010 Stock Option Plan is fixed at the date of grant and is based on the closing price of the Common Shares on the TSX on the day prior to the date of grant. Generally, and unless otherwise determined by the Board in its discretion, such Options vest in equal annual amounts on each of the first, second, third and fourth anniversaries of the date of grant.

Termination of Options

If an optionee ceases to be in active employment or service with the Corporation or one of its subsidiaries (for any reason other than death, disability or termination for cause), the rights of such optionee to exercise any vested Options granted to him or her under the 2010 Stock Option Plan shall cease on the 90th day following the date when such optionee ceased to be in active employment or service with the Corporation or any of its subsidiaries, provided that, within such 90-day period, the optionee may only exercise such Options to the extent that he or she was entitled to exercise them on the day immediately preceding the date he or she ceased to be in active employment or service with the Corporation or one of its subsidiaries.

If an optionee is terminated for cause, such optionee’s right to exercise any Options granted to him or her under the 2010 Stock Option Plan shall be deemed to have ceased and the Options shall be deemed to have been cancelled on the day immediately preceding the earlier of the date on which the Corporation gives the participant notice of his or her termination or the date on which the Corporation requires the participant to stop reporting to work.

Upon the death of an optionee, all unvested Options shall vest immediately provided that such optionee was in active employment or service with the Corporation or under disability at the time of such death. Any Options granted to such optionee under the 2010 Stock Option Plan will be exercisable for a period of up to one year following death. In the event of the disability of an optionee, any Options granted to such optionee under the 2010 Stock Option Plan will continue to vest and all vested Options will be exercisable in accordance with the terms of such Options.

Upon the occurrence of a “change of control” event (as defined in the 2010 Stock Option Plan), at the option of the Corporation, any or all outstanding Options may be assumed by the successor or continuing entity (if any), or the successor or continuing entity may provide substantially similar consideration to optionees as was provided to Shareholders at the time of the occurrence of the “change of control”. In the event that the successor or continuing entity refuses to assume or substitute any outstanding Options, the Corporation will so notify the optionees in writing and the optionees will have ten business days following the date of such notice was given to exercise the vested Options as at the date of such notice, failing which all vested and unvested Options will be deemed to expire. Notwithstanding the foregoing, (i) in the case of a takeover bid, the optionees may elect to exercise all or any of the Options (whether vested or not at the time) for the purposes of tendering such Common Shares under such formal

 

27


 

bid, and (ii) in the case of a business combination (going private transaction), the Corporation may terminate, subject to the completion of such business combination, all of the then outstanding Options by giving at least ten days prior written notice of such termination to each of the optionees and paying to each of the optionees at the time of the completion of the business combination an amount equal to the fair market value of the Options.

Amendment and Termination of the 2010 Stock Option Plan

Subject to applicable law, the Board may at any time suspend or terminate the 2010 Stock Option Plan, provided that no such termination may cause prejudice to any Options granted prior to the termination of the 2010 Stock Option Plan. The Board may not make the following amendments to the 2010 Stock Option Plan without shareholder approval (a) an increase in the number of reserved Common Shares, (b) a reduction in the exercise price or a cancellation of Options for the purpose of re-issuing new Options in replacement thereof, (c) an extension to the term of an Option beyond its original expiration date, (d) an amendment to the class of eligible participants allowing the introduction or re-introduction of non-employee directors of the Corporation on a discretionary basis, and (e) an amendment allowing Options to be transferable or assignable other than for ordinary estate settlement purposes. The Board may not reduce the exercise price of Options held by an insider of the Corporation at the time of the proposed amendment without disinterested Shareholder approval.

The Board may also at any time and from time to time make certain amendments to the 2010 Stock Option Plan without Shareholder approval, including amendments to (a) the eligibility criteria and the limits for participating in the 2010 Stock Option Plan, (b) the conditions for granting and exercising Options, (c) comply with the legislation governing the 2010 Stock Option Plan or the requirements of a regulatory body or stock exchange, (d) correct or rectify any ambiguity, incorrect stipulation or omission in the text of the 2010 Stock Option Plan, (e) improve plan administration, (f) change the vesting period, provided that such amendment does not accelerate the vesting of previously granted Options, (g) change the content of a grant agreement, (h) change the conditions governing the cancellation of Options, (i) change the conditions for the adjustment of Options, (j) adjust provisions governing the tax treatment of Options granted, and (k) change the provisions regarding the legislation applicable to the 2010 Stock Option Plan.

The 2015 Equity Incentive Plan

Below is a summary of the key terms of the 2015 Equity Incentive Plan.

Common Shares Subject to the 2015 Equity Incentive Plan

Subject to the adjustment provisions in the 2015 Equity Incentive Plan and the rules of any applicable stock exchange, the total number of Common Shares reserved for issuance pursuant to awards granted under the 2015 Equity Incentive Plan and the 2010 Stock Option Plan shall not exceed 10% of the issued and outstanding Common Shares from time to time. To the extent any awards under the 2015 Equity Incentive Plan or the 2010 Stock Option Plan are cancelled for any reason prior to exercise in full or are surrendered to the Corporation, except surrenders relating to the payment of the purchase price of any such award or the satisfaction of the tax withholding obligations relating to any such award, the Common Shares subject to such awards (or portion(s) thereof) shall be added back to the number of shares reserved for issuance under the 2015 Equity Incentive Plan. The number of Common Shares issuable to insiders under the 2015 Equity Incentive Plan and all other security-based compensation arrangements cannot exceed 10% of the issued and outstanding Common Shares at any time. The number of Common Shares issued to insiders within any one-year period and all other security-based compensation arrangements, including, but not limited to, the 2015 Equity Incentive Plan, cannot exceed 10% of the issued and outstanding Common Shares. Furthermore, the aggregate number of Common Shares issuable to eligible persons who are directors but not otherwise employees of the Corporation, including its affiliates (as defined therein), under all of the Corporation’s security based compensation arrangements shall not exceed 1% of the issued and outstanding Common Shares, and within any one financial year of the Corporation, the aggregate fair value on the date of grant of all awards granted to any director under all of the Corporation’s security based compensation arrangements shall not exceed CDN$100,000; provided, however, that if the Proposed Amendment is approved by the Shareholders at the Meeting, this amount shall be increased to CDN$150,000, of which no more than CDN$100,000 shall be granted in the form of Options.  The foregoing limits shall not apply to DSUs granted to a director in lieu of any cash retainer or meeting fees, provided that DSUs shall not be included in determining the aggregate fair value on the date of grant of DSUs granted within any one financial year.

 

28


 

Administration of the 2015 Equity Incentive Plan

The plan administrator of the 2015 Equity Incentive Plan (the “Plan Administrator”) will be determined by the Board, and will initially be the CGNC Committee, but may in the future be administered by the Board itself or delegated to such other committee as may be established by the Board from time to time. The Plan Administrator will determine which employees, directors, officers or consultants are eligible to receive awards under the 2015 Equity Incentive Plan. In addition, the Plan Administrator will interpret the 2015 Equity Incentive Plan and may adopt administrative rules, regulations, procedures and guidelines governing the 2015 Equity Incentive Plan or any awards granted under the 2015 Equity Incentive Plan as it deems to be appropriate.

Types of Awards

The following types of awards may be made under the 2015 Equity Incentive Plan: Options, RSUs, PSUs, DSUs, restricted shares and other share-based awards. All the awards described below are subject to the conditions, limitations, restrictions, exercise price, vesting and forfeiture provisions determined by the Plan Administrator, in its sole discretion, subject to such limitations provided in the 2015 Equity Incentive Plan, and will generally be evidenced by an award agreement. In addition, subject to the limitations provided in the 2015 Equity Incentive Plan and in accordance with applicable law, the Plan Administrator may accelerate or defer the vesting or payment of awards, cancel or modify outstanding awards, and waive any condition imposed with respect to awards or Common Shares issued pursuant to awards.

Stock Options

A stock option is a right to purchase Common Shares upon the payment of a specified exercise price as determined by the Plan Administrator at the time the stock option is granted. Subject to certain adjustments and whether the Common Shares are then trading on any stock exchange, the exercise price shall not be less than the highest closing price of the Common Shares on any stock exchange on which the Common Shares are then listed on the date of grant (the “Market Price”). Subject to the discretion of the Plan Administrator, stock options granted under the 2015 Equity Incentive Plan will vest in four equal amounts annually over the four years following the grant date. Subject to any accelerated termination as set forth in the 2015 Equity Incentive Plan, each stock option expires on the date that is the earlier of ten years from the date of grant or such earlier date as may be set out in the participant’s award agreement.

Unless otherwise specified by the Plan Administrator at the time of granting a stock option, the exercise notice of such option must be accompanied by payment in full of the purchase price for the Common Shares to be purchased underlying the options. The exercise price must be fully paid by certified cheque, bank draft or money order payable to the Corporation or by such other means as might be specified from time to time by the Plan Administrator, which may include (i) through an arrangement with a broker approved by the Corporation (or through an arrangement directly with the Corporation) whereby payment of the exercise price is accomplished with the proceeds of the sale of Common Shares deliverable upon the exercise of the stock option, (ii) through any cashless exercise process as may be approved by the Plan Administrator, (iii) such other consideration and method of payment for the issuance of Common Shares to the extent permitted by applicable securities laws, or (iv) any combination of the foregoing methods of payment. No Common Shares will be issued or transferred upon the exercise of stock options in accordance with the terms of the grant until the Corporation receives full payment therefor.

Restricted Share Units

An RSU is a unit equivalent in value to a Common Share credited by means of a bookkeeping entry in the books of the Corporation that entitles the holder to receive Common Shares after a specified vesting period determined by the Plan Administrator, in its sole discretion. Upon settlement, holders will receive one fully paid and non-assessable Common Share in respect of each vested RSU.

 

29


 

Performance Share Units

A PSU is a unit equivalent in value to a Common Share credited by means of a bookkeeping entry in the books of the Corporation that entitles the holder to receive Common Shares based on the achievement of performance goals established by the Plan Administrator over a performance period. The performance goals may be based upon the achievement of corporate, divisional or individual goals, and may be applied relative to performance of an index or comparator group, in each case as determined by the Plan Administrator. The Plan Administrator may modify the performance goals as necessary to align them with the corporate objectives of the Corporation. The performance goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur). Upon settlement, holders will receive fully paid and non-assessable Common Shares in proportion to the number of vested PSUs held and the level of performance achieved.

Restricted Shares

A restricted share is a fully paid and non-assessable Common Share that is subject to restrictions on transfer and a risk of forfeiture for a period of time, and which shall be held by the Corporation or its designee in escrow until such time as the restricted period lapses. The Plan Administrator shall have the authority to determine at the time of grant, in its sole discretion, the duration of the restricted period and other restrictions applicable to the restricted Common Shares. Except for the restrictions applicable to the restricted Common Shares, during the restricted period, the holder shall have all the rights and privileges of a holder of Common Shares as to the restricted Common Shares, including the right to vote.

Deferred Share Units

A DSU is a unit equivalent in value to a Common Share credited by means of a bookkeeping entry in the books of the Corporation that entitles the holder to receive Common Shares on a future date, generally upon termination of service with the Corporation. Upon settlement, holders will receive one fully paid and non-assessable Common Share in respect of each vested DSU.

Other Share-Based Awards

The Plan Administrator may, subject to the provisions of the 2015 Equity Incentive Plan and applicable law, grant other share-based awards to any director, officer, employee or consultant, other than those described above. Such awards are to be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Common Shares (including securities convertible into Common Shares).

Dividend Equivalents

RSUs, PSUs, DSUs and, if so determined by the Plan Administrator in its discretion, other Common Share-based awards, may be credited with dividend equivalents in the form of additional RSUs, PSUs, DSUs and other share-based awards, as applicable. Dividend equivalents shall vest in proportion to the awards to which they relate. Such dividend equivalents shall be computed by dividing: (i) the amount obtained by multiplying the amount of the dividend declared and paid per Common Share by the number of RSUs, PSUs, DSUs or other share-based awards, as applicable, held by the participant on the record date for the payment of such dividend, by (ii) the Market Price at the close of the first business day immediately following the dividend record date, with fractions computed to three decimal places.

Black-out Periods

If an award expires during, or within five business days after, a trading black-out period imposed by the Corporation to restrict trades in its securities, then, notwithstanding any other provision of the 2015 Equity Incentive Plan, unless the delayed expiration would result in tax penalties, the award shall expire ten business days after the trading black-out period is lifted by the Corporation.

 

30


 

Expiration

All awards granted under the 2015 Equity Incentive Plan will expire on the date set out in the applicable award agreement, subject to early expiry in certain circumstances, provided that in no circumstances will the duration of an award granted under the 2015 Equity Incentive Plan exceed 10 years from its date of grant.

Termination of Employment or Services

The following table describes the impact of certain events that may, unless otherwise specified by the Plan Administrator at the grant date or otherwise set forth in an employment or written agreement, lead to the acceleration or early expiry of awards granted under the 2015 Equity Incentive Plan:

 

Event

 

Provisions

For all Participants – in the case of death or disability

 

•   Acceleration of portion of next instalment due to vest

 

•   Forfeiture of all remaining unvested awards 30 days after the date of death or disability

 

 

 

Employees

 

 

 

 

 

Termination for cause

 

•   Forfeiture of all unvested and vested awards

 

 

 

Termination other than for cause

 

•   Forfeiture of all unvested awards

 

•   Exercise of vested options until the earlier of (i) 90 days after termination and (ii) expiry date

 

 

 

Voluntary resignation

 

•   Forfeiture of all unvested awards

 

•   Exercise of vested options until the earlier of (i) 90 days after resignation and (ii) expiry date

 

 

 

Consultants

 

 

 

 

 

Voluntary resignation or termination due to breach of consulting agreement or arrangement

 

•   Forfeiture of all unvested and vested awards

 

 

 

Termination other than for breach of consulting agreement or arrangement

 

•   Forfeiture of all unvested awards

 

•   Exercise of vested options until the earlier of (i) 90 days after termination and (ii) expiry date

 

 

 

Directors – ceasing to hold office other than due to death or disability

 

•   Forfeiture of all unvested awards

 

•   Exercise of vested options until the earlier of (i) 90 days following cessation and (ii) expiry date

 

Change in Control

Except as specified by the Plan Administrator at the grant date or otherwise set forth in an employment or written agreement, if an employee is terminated within 12 months following a “change in control”, all awards vest and options may be exercised until the earlier of (i) 90 days after termination and (ii) the expiry date of the option. However, the 2015 Equity Incentive Plan provides that in connection with a “change in control”, the Plan Administrator may (i) cause awards to be converted or exchanged into or for rights or other securities in any entity participating in or resulting from the “change in control”, (ii) cause any unvested or unearned awards to become fully vested or earned or free of restriction upon or immediately prior to the occurrence of such “change in control”, or (iii) replace the awards with other rights. Subject to certain exceptions, a “change in control” means (i) any transaction pursuant to which a person or group acquires more than 50% of the outstanding Common Shares, (ii) the sale of all or substantially all of the assets or the dissolution of the Corporation, (iii) the acquisition of the Corporation via consolidation, merger, exchange of securities, purchase of assets, amalgamation, statutory arrangement or otherwise, (iv) individuals who comprise the Board at the last annual meeting of Shareholders (the “Incumbent Board”) cease to constitute at least a majority of the Board, unless the election, or nomination for election by the Shareholders, of any new director was approved by a vote of at least a majority of the Incumbent Board, in which case such new director shall be considered as a member of the Incumbent Board, or (v) such event the Board determines as being a “change in control”.

 

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Non-Transferability of Awards

Subject to certain exceptions provided under the 2015 Equity Incentive Plan (including the assignment of awards to certain Permitted Assigns (as defined under National Instrument 45-106 Prospectus Exemptions, as amended from time to time)), and unless otherwise provided by the Plan Administrator, no assignment or transfer of awards granted under the 2015 Equity Incentive Plan, whether voluntary, involuntary, by operation of law or otherwise, is permitted.

Amendments to the 2015 Equity Incentive Plan

The Plan Administrator may also from time to time, without notice and without approval of the holders of voting shares, amend, modify, change, suspend or terminate the 2015 Equity Incentive Plan or any awards granted pursuant thereto as it, in its discretion, determinates appropriate, provided that (i) no such amendment, modification, change, suspension or termination of the 2015 Equity Incentive Plan or any award granted pursuant thereto may materially impair any rights of a holder or materially increase any obligations of a holder under the 2015 Equity Incentive Plan without the consent of such holder, unless the Plan Administrator determines such adjustment is required or desirable in order to comply with any applicable securities laws or stock exchange requirements, and (ii) any amendment that would cause an award held by a Foreign Taxpayer (as such term is defined in the 2015 Equity Incentive Plan) to be subject to the additional tax penalty under Section 409A(1)(b)(i)(ii) of the U.S. Internal Revenue Code of 1986, as amended, shall be null and void ab initio.

Notwithstanding the above, none of the following amendments shall be made to the 2015 Equity Incentive Plan without the approval of the Shareholders:

 

(a)

increasing the percentage of Common Shares reserved for issuance under the 2015 Equity Incentive Plan, except pursuant to the provisions in the 2015 Equity Incentive Plan, which permit the Plan Administrator to make equitable adjustments in the event of transactions affecting the Corporation or its capital;

 

(b)

increasing or removing the 10% limits on Common Shares issuable or issued to insiders;

 

(c)

reducing the exercise price of an award except pursuant to the provisions in the 2015 Equity Incentive Plan, which permit the Plan Administrator to make equitable adjustments in the event of transactions affecting the Corporation or its capital;

 

(d)

extending the term of an award beyond the original expiry date (except in connection with a black-out period as described above);

 

(e)

permitting an award to be exercisable beyond 10 years from the date of grant (except in connection with a black-out period as described above);

 

(f)

increasing or removing the limits on the participation of non-employee directors;

 

(g)

permitting awards to be transferred to a person other than a Permitted Assign (as defined under National Instrument 45-106 Prospectus Exemptions, as amended from time to time) or for normal estate settlement purposes; or

 

(h)

deleting or otherwise limiting the amendments that require approval of the Shareholders.

Except for the items listed above, amendments to the 2015 Equity Incentive Plan do not require Shareholder approval. Such amendments include, without limitation: (i) amending the general vesting provisions or restricted period of an award; (ii) amending the provisions for early termination of awards in connection with a termination of employment or service; (iii) adding covenants of the Corporation for the protection of the participants; (iv) amendments that are desirable as a result of changes in law in any jurisdiction where a participant resides; and (v) curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error.

Burn Rate under Security-Based Compensation Arrangements

The table below sets out the burn rate for each of the Corporation’s equity compensation plans as of December 31

 

32


 

for each of the last three years. The burn rate represents the total number of Options, RSUs, PSUs and DSUs granted during the last financial year of the Corporation, including additional RSUs, PSUs and DSUs granted as dividend equivalents, divided by the weighted average number of Common Shares outstanding, in each case, during the last financing year.

Security-Based Compensation Arrangements

2017

2016

2015

2015 Equity Incentive Plan

0.51%

0.03%

2.35%

2010 Stock Option Plan

0.00%

0.00%

0.69%

Pension Plan Benefits

The Corporation had no deferred compensation plans, defined benefit plans or defined contribution plans (collectively, the “Plans”) in place at any time during the year ended December 31, 2017, other than the deferred profit sharing plan of the Corporation (the “DPSP”) described below. During the same period, Stars Interactive Group had a number of Plans in place, including a defined contribution plan for Isle of Man-located employees (the “IoM Pension Plan”), and a defined contribution plan for United Kingdom-located employees (the “UK Pension Plan”), and a wholly owned U.S. subsidiary of the Corporation (“The Stars Group US”) had a 401(k) plan (the “401(k) Plan”) for U.S.-located employees. Messrs. Ashkenazi and Templer were eligible to participate in the IoM Pension Plan during the year ended December 31, 2017 but only Mr. Templer elected to participate. Mr. Ashkenazi instead elected to receive an “investment allowance” equal to an aggregate amount of 7% of his annual base salary, payable monthly. During the year ended December 31, 2017, Mr. Kyle participated in the DPSP as did Mr. Sebag until his retirement on June 19, 2017, Mr. Goldstein participated in the 401(k) Plan, and Mr. Chhabra participated in the UK Pension Plan.

The IoM Pension Plan

Stars Interactive Group adopted the IoM Pension Plan to provide certain employees located in the Isle of Man with the opportunity to save for retirement on a tax-advantaged basis. The plan is accessible to all employees of Stars Interactive Group located in the Isle of Man from the first day of employment, and each such employee can leave membership of the plan without penalty. Upon becoming a member of the IoM Pension Plan, each eligible participant is issued a personal policy, and all payments into the IoM Pension Plan are held exclusively in the relevant employee’s name. The relevant participant’s pension fund grows to retirement and the growth level through time will depend on a number of factors, including, but not limited to: (i) the amount of contributions the relevant employee and Stars Interactive Group make to the IoM Pension Plan, and (ii) the performance of the relevant fund(s) in which the participant’s contributions are invested. Participation in the IoM Pension Plan is voluntary. The plan provides that each eligible participant can contribute up to a maximum of 100% of his or her net earnings, subject to a maximum of £300,000. On the other hand, Stars Interactive Group annually contributes an aggregate amount of 7% of the annual base salary of the relevant eligible employee, subject to certain limits imposed by applicable law.

There is a range of funds available to eligible participants under the IoM Pension Plan, which include the default investment option, as well as unit-linked funds and other options that can be selected by the participants based on their respective requirements and risk tolerance, as well as other elements determined from time to time by the participant and the fund administrator.

The administrator of the IoM Pension Plan charges a yearly fee equal to 1% of the fund value in order to manage the fund, without any other charges or penalties being imposed by the administrator. Participants may incur additional annual charges depending on the funds chosen by the participant, and the participant is advised of any such additional fees at the time of selecting the funds. Under the IoM Pension Plan, the retirement age is 65; it being understood that a participant under the plan may be eligible for benefits thereunder from and after age 50 until the age of 75, subject to the terms and limitations set out in the IoM Pension Plan, irrespective of whether such participant has retired.

Eligible participants have the option of taking up to thirty percent (30%) of the accumulated fund(s) as a tax-free cash sum. The remainder of the fund(s) must be used to provide a pension, to be allocated in accordance with the relevant participant’s needs and wishes at the relevant time, subject to the policies of the IoM Pension Plan and applicable laws. The amount of pension an eligible participant will receive will be determined by the value of the

 

33


 

fund(s) upon such participant’s retirement, the type of pension chosen, as well as the prevailing annuity rates. In addition, pursuant to recent amendments to applicable pension legislation, certain additional funds (currently up to approximately £70,000) may be accessed as a one-off payment at favorable tax rates for members who are age 55 or older, subject to certain limitations and restrictions. To the extent a participant leaves employment with Stars Interactive Group, such participant will have the option to: (i) leave his or her benefits within the IoM Pension Plan where they will continue to grow in line with investment performance, (ii) continue to pay contributions going forward, or (iii) transfer the value of the investment in the plan to another arrangement or plan. If the eligible participant dies before retirement, the full value of the employee’s fund will be paid either as a cash sum or dependant’s pension, depending the circumstances. The IoM Pension Plan accepts transfers from other pension arrangements and may be assigned in certain circumstances.

 

In February 2018, new pension legislation in the Isle of Man was passed giving pension plan providers the ability to offer a new type of pension (“Pension Freedom Plan”), which will, among other things, (i) permit full access to pension funds if certain conditions are met, (ii) increase the retirement age to 55 but remove the maximum retirement age limit, and (iii) reduce the annual contribution limit to £50,000.  As of the date of this Information Circular, the Corporation’s pension plan provider in the Isle of Man is currently reviewing the new pension legislation, which took effect on April 6, 2018, to determine whether it will offer the Pension Freedom Plan to the Corporation’s employees located in the Isle of Man.

 

UK Pension Plan

 

Stars Interactive Group adopted the UK Pension Plan to provide certain employees located in the United Kingdom with the opportunity to save for retirement on a tax-advantaged basis in accordance with United Kingdom Auto Enrolment Legislation. To be eligible to participate in the UK Pension Plan, the employee must be between 22 years old and the current state pension age, which is 65 as of the date of this Information Circular, and earn more than £10,000 per annum. On the first day of eligibility, an eligible employee is automatically enrolled in the UK Pension Plan and contributions applied accordingly. The employee may opt out of this automatic enrolment within 30 days of enrollment and receive a full refund of contributions. In the event that the employee opts out after this 30-day period, no future contributions will be made and any contributions received by the plan will remain invested on the employee’s behalf until the employee chooses to transfer to an alternative arrangement or commence payment of benefits (which generally occurs at age 55 under normal circumstances). In accordance with the United Kingdom Auto Enrollment Legislation, the Corporation must, among other things, review its plan membership every three years.

 

The UK Pension Plan is also accessible to other employees of Stars Interactive Group located in the United Kingdom if they do not meet the eligibility criteria above, but enrollment is not automatic and participation must be requested by the employee. The Corporation may not and does not coerce any of its employees to leave or not elect to join the UK Pension Plan.

 

Upon becoming and remaining a participant under the UK Pension Plan, each participant is issued a personal policy, and all payments into the UK Pension Plan are held exclusively in that eligible participant’s name. Each participant’s personal policy continues to retirement and the growth level through such time will depend on a number of factors, including, but not limited to: (i) the amount of contributions the employee and Stars Interactive Group make to the UK Pension Plan, and (ii) the performance of the fund(s) in which the participant’s contributions are invested. The plan provides that each participant can contribute up to a maximum of £40,000 per annum and may carry forward any unused annual allowance from the previous three tax years to potentially increase this amount. Further contribution limitations exist where a participant has accessed any benefits under the pension flexibility rules that came in to force on April 6, 2015. Under current legislation, Stars Interactive Group is required to pay a minimum contribution of 2% of a participant’s annual base salary with an overall minimum total contribution amount of 5%. Effective April 6, 2019, Stars Interactive Group will be required to pay a minimum contribution of 3% of a participant’s annual base salary with an overall minimum total contribution amount of 8%. Currently, Stars Interactive Group annually contributes an aggregate amount of 7% of each participant’s annual base salary, subject to certain limits imposed by applicable law.

 

There is a range of funds available to eligible participants under the UK Pension Plan, which include the default investment option, as well as unit-linked funds and other options that can be selected by the participants based on their respective requirements and risk tolerance, as well as other elements determined from time to time by the

 

34


 

participant and the fund administrator.

 

The administrator of the UK Pension Plan charges a yearly fee, which varies depending on the underlying investment strategy and ranges between 0.004% and 1.080% of the fund value in order to manage the fund, without any other charges or penalties being imposed by the administrator. Under the UK Pension Plan, the retirement age is 65; it being understood that a participant under the plan may be eligible for benefits thereunder from age 55 until age 75, subject to the terms and limitations set out in the UK Pension Plan, irrespective of whether such participant has retired. The minimum retirement age, which is currently age 55, is scheduled to move in line with (but remain 10 years earlier than) any future changes to the United Kingdom state pension age.

 

Eligible participants have the option of taking up to twenty five percent (25%) of the accumulated fund(s) as a tax-free cash sum. The remainder of the fund(s) can then be used to provide an income or be paid as a single, taxable lump sum, to be allocated in accordance with the relevant participant’s needs and wishes at that time, subject to the policies of the UK Pension Plan and applicable laws. The amount of pension an eligible participant will receive will be determined by the value of the fund(s) upon such participant’s retirement and the type of pension chosen, which may involve the prevailing annuity rates.

 

To the extent a participant leaves employment with Stars Interactive Group, such participant will have the option to: (i) leave his or her benefits within the UK Pension Plan where they will continue to grow in line with investment performance, (ii) continue to pay contributions going forward, or (iii) transfer the value of the investment in the plan to another arrangement or plan. If the eligible participant dies before retirement, the full value of the participant’s fund(s) will be paid as a cash sum or dependant’s pension, depending the circumstances. The UK Pension Plan accepts transfers from other pension arrangements and may be assigned in certain circumstances.

The 401(k) Plan

The Stars Group US adopted the 401(k) Plan to provide certain U.S.-based employees with the opportunity to save for retirement on a tax-advantageous basis. All employees of The Stars Group US resident in the United States are eligible to participate in the 401(k) Plan as of their date of hire. Eligible participants in the 401(k) Plan may elect to contribute up to 100% of their gross wages into the 401(k) Plan to a regular 401(k) account or on an after-tax basis to a Roth 401(k) account, subject to maximum yearly amounts of deferrals, which were $18,000 for the 2017 fiscal year ($24,000 for employees over the age of 50). The Stars Group US contributes an amount equal to the sum of 100% of the contributions of an eligible participant, not to exceed 6% of the participant’s yearly compensation (excluding fringe benefits and bonuses); provided, however, that the recognized annual compensation in respect of a participant for the purpose of the 401(k) plan is capped, by law, at $270,000 for the 2017 fiscal year. Employer matching contributions vest immediately upon disbursement. The Stars Group US may also make a discretionary contribution in respect of participants that are employed at the end of each relevant fiscal year.

Participants can elect to invest their 401(k) Plan assets among the list of available investment options. Under the plan, withdrawals prior to termination of employment are permitted if the participant has attained the age of 59 ½ and in prescribed cases of financial hardship. Participants also receive the value of their account when they leave employment.

The DPSP

 

The Corporation adopted the DPSP to allow Canadian-based employees to share in the profits of the Corporation and to accumulate these savings under a tax-deferred arrangement. All full-time permanent employees of the Corporation, other than certain related-parties of the Corporation identified under applicable Canadian law, with at least three months of continuous employment are eligible to participate in the DPSP; provided, however, that the Corporation has the discretion to waive the employment grace period requirement. Under the DPSP, the Corporation will make contributions from profits generated during the then current year or prior years that have not yet been allocated, while eligible participants do not contribute to the DPSP. The contributions of the Corporation are limited to the maximum contribution for deferred profit sharing plans under applicable Canadian law, being of $13,115 for the fiscal year ended December 31, 2017. All contributions made by the Corporation under the DPSP vest immediately upon disbursement. Under the DPSP, the Corporation contributes an amount equal to the sum of 100% of the contributions of an eligible participant to his or her Registered Retirement Savings Plan, which is a specific retirement savings plan to which the eligible participant contributes, not to exceed 4% of the participant’s yearly

 

35


 

compensation (excluding taxable benefits and bonuses).

 

In the event of an eligible participant’s termination of employment, retirement, death or disability (as defined under the DPSP), or if the DPSP is terminated, the eligible participant will be entitled to the vested value of his or her account accumulated until the relevant trigger date. During the year ended December 31, 2017, Mr. Sebag contributed to a non-registered plan, and the Corporation matched those contributions to those plans.

 

The following table presents certain information regarding the benefits received by Mr. Templer pursuant to the IoM Pension Plan, Mr. Goldstein under the 401(k) Plan, and Messrs. Kyle and Sebag under the DPSP, and Mr. Chhabra under the UK Pension Plan, in each case for the year ended December 31, 2017:

 

 

 

 

 

Name

Accumulated value

at start of year(1)

Compensatory(2)

 

Accumulated value

at year end(3)

Brian Kyle,

Chief Financial Officer of The Stars Group

$0

$9,539

$20,358

Guy Templer,
Chief Operating Officer of Stars Interactive Group

$295,201

$36,889

$421,718

Marlon Goldstein,

Executive VP & Chief Legal Officer of The Stars Group

$19,726

$18,000

$64,763

Robin Chhabra,

Chief Corporate Development Officer of The Stars Group

$0

$11,027

$11,027

Daniel Sebag,

Former Chief Financial Officer of The Stars Group

$19,660

$10,272

 

Notes:

(1)

The benefits accumulated at the start of the year by Mr. Templer under the IoM Pension Plan are computed in Great Britain Pound Sterling, therefore the amounts were converted into U.S. dollars using an exchange rate as of the start of the year of 1.2339.

(2)

The benefits accumulated as “compensatory” by (i) Messrs. Templer and Chhabra under the IoM Pension Plan and UK Pension Plan, respectively, are computed in Great Britain Pound Sterling, therefore the amounts were converted into U.S. dollars using an average exchange rate of 1.351253, and (ii) Messrs. Kyle and Sebag under the DPSP are computed in Canadian dollars, therefore the amounts were converted into U.S. dollars using an average exchange rate of 0.794887.

(3)

The benefits accumulated at the end of the year by (i) Messrs. Templer and Chhabra under the IoM Pension Plan and UK Pension Plan, respectively, are computed in Great Britain Pound Sterling, so the amounts were converted into U.S. dollars using a closing exchange rate of 1.350291, and (ii) Messrs. Kyle and Sebag under the DPSP are computed in Canadian dollars, therefore the amounts were converted into U.S. dollars using a closing exchange rate of 0.795343.


 

36


 

Director Compensation

Director Compensation Table

The following table sets forth information concerning all amounts of compensation provided to the directors of the Corporation who are not members of the management of the Corporation for the year ended December 31, 2017.

 

Name

Fees earned ($)

Share-based awards

($)(9)

Option- based awards
($)

Non-equity incentive plan compensation ($)

Pension value
($)

All other compensation ($)

Total
($)

Received in Cash

Received in DSUs

Total
Fees

Divyesh (Dave) Gadhia(1)

363,331

750,000

1,113,331

65,000

1,178,331

Harlan Goodson(2)(8)

119,732

175,000

294,732

65,000

359,732

Alfred F. Hurley, Jr.(3)(8)

98,610

175,000

273,610

65,000

338,610

David Lazzarato(4)(8)

94,716

175,000

269,716

65,000

334,716

Peter E. Murphy(5)(6)(8)

37,411

175,000

212,411

212,411

Mary Turner(6)(8)

37,411

175,000

212,411

212,411

Wesley K. Clark(7)

30,000

30,000

65,000

95,000

Aubrey Zidenberg(7)

55,403

55,403

65,000

120,403

 

 

Notes:

(1)

Mr. Gadhia is the Chairman of the Board, Chairman of the Special Committee and a member of the CGNC Committee. With respect to Mr. Gadhia’s compensation, the Board considered his extraordinary contributions and efforts throughout 2017, much of which the Board believed to be above and beyond the scope of his responsibilities as Chairman of the Board, and the significant time and effort he expended on behalf of the Corporation, including without limitation, overseeing the Board’s review of certain legacy matters, assisting with respect to certain strategic initiatives and opportunities, mentoring certain members of management and chairing the Special Committee. Based on the recommendation of the CGNC Committee and upon consultation with FW Cook, as well as consideration of other applicable factors, including the recognition and feedback from various stakeholders, the Board determined it appropriate to pay Mr. Gadhia this compensation, including a one-time $500,000 additional retainer, which was paid in the form of immediately vested DSUs. Mr. Gadhia does not receive any additional fees for his service as a member of the CGNC Committee. Of the Board Chairman retainer paid on June 30, 2017, $250,000 was paid in lieu of cash in the form of DSUs subject to vesting on the day immediately preceding the Meeting. See note 9 below for additional information regarding the $65,000 share-based award noted in the table above.

(2)

Following the 2017 Annual Meeting, Mr. Goodson was replaced as a member of the Audit Committee. Mr. Goodson is a member of the CGNC Committee and the Special Committee.

(3)

Mr. Hurley was a member of the Audit Committee until December 31, 2017. Mr. Hurley is the Chairman of the CGNC Committee and a member of the Special Committee.

(4)

Mr. Lazzarato is the Chairman of the Audit Committee and a member of the Special Committee.

(5)

Mr. Murphy will not be standing for re-election as a director at the Meeting.

(6)

Ms. Turner and Mr. Murphy each became a member of the Board and the Audit Committee in June 2017 following the 2017 Annual Meeting.

(7)

Messrs. Clark and Zidenberg did not stand for re-election as a director at the 2017 Annual Meeting.

(8)

Of the Board retainer paid on June 30, 2017, $75,000 was paid in lieu of cash in the form of DSUs subject to vesting on the day immediately preceding the Meeting and $100,000 was paid in lieu of cash in the form of DSUs subject to vesting in equal installments over (a) a two-year period with the first installment vesting on the day immediately preceding the Meeting and the second instalment vesting on the day immediately preceding the annual general meeting in 2019 for Messrs. Goodson, Hurley and Lazzarato, and (b) a three-year period with the first installment vesting on the day immediately preceding the Meeting and the second and third instalments vesting on the day immediately preceding the annual general meeting in 2019 and 2020, respectively, for Mr. Murphy and Ms. Turner.

(9)

Represents the annual equity-based award grant of RSUs or restricted stock of $65,000 in respect of service as a director in 2016, the granting of which award was delayed until March 2017 as the Corporation was in a trading black-out period as a result of the combination of a strategic alternatives review and routine quarterly blackouts during the course of 2016 through to early 2017.

 

 

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The aggregate cash compensation paid to the current directors of the Corporation, excluding DSUs granted in lieu of cash, for services rendered in their capacities as directors during the financial year ended December 31, 2017 was approximately $751,211.

Narrative Discussion

The CGNC Committee recommends director compensation levels to the Board, including compensation to be paid to the Chair of the Board and those acting as committee chairs, and sets compensation levels that adequately reflect the applicable responsibilities being assumed. In August 2016, the CGNC Committee formally engaged FW Cook to assist in establishing policies and performing benchmarking and market analysis and to make recommendations with respect to director compensation. Such assistance and recommendations were considered and factored into the adjustments to director compensation during 2017 referenced below.

 

Based on a compensation review and advice provided by FW Cook, the CGNC Committee approved a director compensation peer group during 2017 consisting of: Electronic Arts Inc., Scientific Games Corporation, Caesars Acquisition Company (which was acquired by Caesars Entertainment Corporation in late 2017), Akamai Technologies, Inc., Nuance Communications, Take-Two Interactive Software, Inc., Match Group, Inc., VeriSign, Inc., ACI Worldwide, Inc., ANSYS, Inc., Fair Isaac Corporation, j2 Global, Inc., Zynga Inc., Zillow Group, Inc., Synchronoss Technologies, Inc., TiVo Corporation, Open Text Corporation, Mitel Networks Corporation, and Shopify Inc. The peer group consists of North American listed companies in the gaming, interactive entertainment and software industries with revenues between 0.33 to 3 times that of The Stars Group’s revenue and enterprise value between 0.2 to 5 times that of The Stars Group. Other key factors considered in determining the peer group include the scope of international operations, business-to-consumer products or services, and EBITDA margin. For 2018, the director compensation peer group is expected to consist of the same or substantially similar peer group as used in 2017.

 

From July 1, 2016 through June 30, 2017, the retainers, meeting fees and other compensation for the non-management directors were as follows: (i) annual cash retainer of $60,000; (ii) annual equity-based award grant of RSUs or restricted stock, as applicable, of $65,000 (the granting of such awards was delayed until March 2017 as the Corporation was in a trading black-out period as a result of a combination of a strategic alternatives review and routine quarterly blackouts during the course of 2016 through to early 2017, such that these awards vested immediately prior to the date of the 2017 Annual Meeting); (iii) Chairman of the Board annual cash fee of $180,000; (iv) Chairman of the Audit Committee annual cash fee of $30,000; (v) Chairman of the CGNC Committee annual cash fee of $25,000; (vi) member of the Audit Committee annual cash fee of $15,000; and (vii) member of the CGNC Committee annual cash fee of $12,500. In addition, any director of the Board who is also a member of the Compliance Committee (as defined below under “Statement of Corporate Governance Practices—Ethical Business Conduct”), received a Compliance Committee annual cash liaison fee of $12,500.

For the period July 1, 2017 through the Meeting, the retainers, meeting fees and other compensation for the non-management directors were adjusted as follows: (i) annual cash retainer of $60,000 for each director of the Board other than the Chairman of the Board; (ii) an initial equity-based award grant of DSUs in lieu of cash fees of $150,000 for each director of the Board other than the Chairman of the Board, vesting annually in equal installments over a (a) two-year period for Messrs. Goodson, Hurley and Lazzarato, and (b) three-year period for Ms. Turner and Mr. Murphy (50% of such DSUs were issued on June 30, 2017 and the remaining 50% were issued on January 2, 2018); (iii) an annual equity-based award grant of DSUs in lieu of cash fees of $200,000 for each director of the Board other than the Chairman of the Board, which vested on the day immediately preceding the Meeting (50% of such DSUs were issued on June 30, 2017 and the remaining 50% were issued on January 2, 2018), (iv) a cash fee of $1,000 per meeting for each Board meeting in excess of 12 meetings for each director of the Board other than the Chairman of the Board; (v) Chairman of the Board annual cash fee of $300,000; (vi) an annual equity-based award grant of DSUs in lieu of cash fees of $500,000 for the Chairman of the Board, which will vest on the day immediately preceding the Meeting (50% of such DSUs were issued on June 30, 2017 and the remaining 50% were issued on January 2, 2018); (vii) annual cash fee of $35,000 for each of the Chairman of the Audit Committee and the Chairman of the CGNC Committee; and (viii) annual cash fee of $15,000 for each member of the Audit Committee and CGNC Committee except the Chairman of the Board. In addition, any director of the Board who is also a member of the Compliance Committee (as defined below under “Statement of Corporate Governance Practices—Ethical Business Conduct”), received a Compliance Committee annual cash liaison fee of $15,000 (effective January 1, 2018, this amount was increased to $20,000).

 

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In February 2018, based on the recommendation of the CGNC Committee, the Board approved the following additional retainers, each payable in fully vested DSUs in lieu of cash: (i) $200,000 to Mr. Gadhia for his extraordinary contributions and efforts throughout 2017, including without limitation, with respect to his mentorship of certain members of management, chairing the Special Committee and overseeing the Board’s review of certain legacy matters, assistance with respect to certain strategic initiatives and opportunities, and overseeing the negotiation and implementation of the Nominee Agreement (seeBusiness of the Meeting – Election of Directors – Appointment of Observer to the Board”), (ii) $20,000 to Mr. Goodson for the extensive and greater than expected level of work that he contributed with respect to his work with the Compliance Committee, (iii) $100,000 to each of Messrs. Hurley and Murphy to recognize their contributions and work performed from mid-2017 through December 2017 related to their review and evaluation of certain potential opportunities and transactions, and in connection with the Nominee Agreement (seeBusiness of the Meeting – Election of Directors – Appointment of Observer to the Board”), (iv) $30,000 to Mr. Lazzarato for the extensive and greater than expected level of work that he contributed with respect to the successful search for and integration of Mr. Kyle as the Corporation’s Chief Financial Officer, and (v) $20,000 to Ms. Turner for the extensive and greater than expected level of work that she contributed with respect to her work related to the Corporation’s internal compliance and governance processes. These amounts were in addition to the other compensation previously paid to each of the respective directors of the Corporation. As of the date of this Information Circular, the foregoing DSUs have not yet been issued.

Except as set forth above, no additional fees were otherwise paid to the directors for attendance at meetings, whether in person or telephonically. Additional fees may, however, be paid to the directors of the Corporation in connection with certain specific projects or mandates, including in connection with their role on certain committees formed from time to time, such as the Special Committee or any other committee formed to consider, evaluate or review certain transactions, developments or special matters. All directors are entitled to be reimbursed for reasonable travel expenses incurred with respect to their attendance at meetings of the Board. Furthermore, each director is eligible to receive awards under the 2015 Equity Incentive Plan. However, the directors are not otherwise eligible for or to participate in the executive compensation structure and practices set forth for the NEOs above under “Statement of Executive Compensation”.

Stock Ownership Guidelines

 

The Corporation adopted the Stock Ownership Guidelines on September 14, 2017, which requires the non-employee directors of the Corporation to own Common Shares, RSUs or DSUs equal to five times their respective annual Board retainer within five years of becoming subject to the Stock Ownership Guidelines. Each non-employee director is expected to maintain such level of ownership for the duration of his or her service with the Corporation. See “Statement of Executive Compensation – Compensation Discussion and Analysis – Stock Ownership Guidelines” above.

 

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Incentive Plan Awards

Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth information concerning all awards outstanding as of December 31, 2017 for each individual who acted as director of the Corporation but who was not a member of the management of the Corporation for the year ended December 31, 2017.

 

 

 

 

 

 

 

 

 

Name

Option-based Awards

Share-based Awards

 

Number of
securities
underlying
unexercised
Options
(#)

Option
exercise
price(1)
($)

Option expiration date

Value of

unexercised

in-the-money

Options(1)(2)
($)

Number of

shares or

units of

shares that

have not

vested

(#)

Market or

payout value

of share-based

awards that

have not
vested

($)

Market or

payout value

of vested

share-based

awards not

paid out or

distributed

($)

Divyesh (Dave) Gadhia

 

 

 

 

 

 

 

12,500

3.35

September 4, 2019

249,592

13,697

319,348

695,981

6,000

24.95

September 8, 2021

6,000

21.73

September 18, 2022

9,517

Harlan Goodson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,000

24.95

September 8, 2021

9,777

227,952

6,000

21.73

September 18, 2022

9,517

Alfred F. Hurley, Jr.

9,777

227,952

Dave Lazzarato

9,777

227,952

Peter E. Murphy(3)(4)

9,777

227,952

Mary Turner(4)

9,777

227,952

Aubrey Zidenberg(5)

10,000

3.91

January 10, 2020

194,094

 

6,000

24.95

September 8, 2021

 

6,000

21.73

September 18, 2022

9,517

Wesley K. Clark(5)

 

 

 

 

 

 

 

 

Notes:

(1)

For the purposes of the calculations, the price of the Common Shares was converted from Canadian dollars to U.S. dollars using an exchange rate as of December 29, 2017 of 0.7971.

(2)

These amounts are calculated based on the difference between the closing price of Common Shares on the TSX of CDN$29.25 on December 29, 2017 and the exercise price of the respective Options.

(3)

Mr. Murphy will not be standing for re-election as a director at the Meeting.

(4)

Mr. Murphy and Ms. Turner were each elected as a director at the 2017 Annual Meeting.  

(5)

Mr. Zidenberg and General Clark did not stand for re-election as directors at the 2017 Annual Meeting.

 

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Incentive Plan Awards – Value Vested or Earned During the Year

The following table sets forth information for each individual who acted as director of the Corporation but who was not a member of the management of the Corporation concerning the value vested of the options-based awards and share-based awards during the year ended December 31, 2017.

 

 

 

 

 

Name

Option-based awards

Value vested during the year(1)

($)

Share-based awards

Value vested during the year(2)

($)

Non-equity incentive plan compensation

Value vested during the year

($)

Divyesh (Dave) Gadhia

570,576

Harlan Goodson

70,576

Alfred F. Hurley, Jr.

70,576

Dave Lazzarato

70,576

Peter E. Murphy(3)(4)

Mary Turner(4)

Aubrey Zidenberg(5)

26,250

70,576

Wesley K. Clark(5)

70,576

 

Notes:

(1)

These amounts are calculated based on the difference between the closing price of Common Shares on the TSX on the respective vesting dates during the year ended December 31, 2017 and the exercise price of the respective Options as if such Options had been exercised on such vesting dates.

(2)

These amounts are calculated based on the closing price of Common Shares on the TSX on the respective vesting dates during the year ended December 31, 2017.

(3)

Mr. Murphy will not be standing for re-election as a director at the Meeting.

(4)

Mr. Murphy and Ms. Turner were each elected as a director at the 2017 Annual Meeting.  

(5)

Mr. Zidenberg and General Clark did not stand for re-election as directors at the 2017 Annual Meeting.

Securities Authorized for Issuance Under Equity Compensation Plans

The table below summarizes information in relation to the Common Shares reserved for issuance under each of the 2010 Stock Option Plan and the 2015 Equity Incentive Plan as of December 31, 2017. The 2010 Stock Option Plan and the 2015 Equity Incentive Plan are the only equity-based incentive plans of the Corporation under which equity securities are currently authorized for issuance.

 

Plan

Number of securities to be issued upon exercise of outstanding Options or other equity-based awards

Percentage of issued and outstanding Common Shares represented by outstanding Options(1)

Weighted average exercise price of outstanding Options and other equity-based awards(2)

Number of securities remaining available for future issuance under each of the 2010 Stock Option Plan and the 2015 Equity Incentive Plan
(excluding securities reflected in the first column)

2010 Stock Option Plan

4,495,166

3.04%

20.67

0

2015 Equity Incentive Plan

2,380,450 Options

739,543 other equity-based awards(3)

1.61%

19.08 (Options)

17.20 (other equity-based awards)

7,179,628

 

Notes:

(1)

For the purposes of the calculations, the number of issued and outstanding Common Shares as of December 31, 2017 was 147,947,874.

(2)

For the purposes of the calculations, weighted average exercise price of outstanding Options and other equity-based awards was converted from Canadian dollars to U.S. dollars using an exchange rate as of December 29, 2017 of 0.7971.

(3)

Comprised of RSUs, DSUs and PSUs, which are calculated based on the highest target performance level for each metric being met, which would result in 150% of the granted PSUs vesting during the relevant periods. As of December 31, 2017, 291,968 PSUs were awarded under the 2015 Equity Incentive Plan, but the number of Common Shares issuable upon vesting and settlement of those PSUs could be from 0% to 150% of that amount depending on the achievement of certain metrics and conditions being met.  For additional information, see “Basis and Structure of Executive Compensation – Equity-Based Long-Term Incentive Awards” below.

 

 

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Directors’ and Officers’ Liability Insurance

The Corporation maintains liability insurance for the Corporation’s and its subsidiaries’ directors and officers in order to cover certain liabilities to which they may be exposed in the course of their duties. The Corporation paid a gross premium of $1,954,305 for the financial year ended December 31, 2017, in its entirety. The maximum liability insurance coverage for directors and officers of the Corporation and its subsidiaries as a group is $150,000,000, subject to a deductible from $0 to $2,500,000 per claim, depending of the type of claim, as well as an additional $75,000,000 in coverage under a separate civil liability insurance policy. The separate policy is not subject to any deductible and covers directors and officers when the general directors and officers civil liability insurance policy has been depleted and in certain other pre-determined circumstances. Subject to certain terms and conditions, the general directors and officers civil liability insurance policy provides directors and officers with compensation in circumstances where they have not been compensated by the Corporation or where the Corporation is not authorized by law to do so. No portion of the premium has or will be paid by directors or officers. Moreover, the Corporation has entered into indemnification agreements with its directors and officers for liabilities and costs in respect of any action or suit against them in connection with the execution of their duties, subject to customary limitations prescribed by applicable law.

The CGNC Committee is responsible for assessing the directors and officers insurance policy of the Corporation and making recommendations to the Board for its renewal or amendment or the replacement of the insurer. In addition, the Audit Committee at least annually reviews and discusses with management the adequacy of the Corporation’s overall insurance coverage.

Indebtedness of Directors and Officers

As of April 10, 2018, no executive officer, director, proposed nominee for election as a director or employee, former or present, of the Corporation was indebted to the Corporation including in respect of indebtedness to others where the indebtedness is the subject of a guarantee, support agreement, letter of credit or other similar arrangement provided by the Corporation.

Management Contracts

Management functions of the Corporation and its subsidiaries are not, to any degree, performed by a person or persons other than the directors or executive officers of the Corporation or its subsidiaries.

Interest of Informed Persons in Material Transactions

To the Corporation’s knowledge and other than as set forth herein, there are no material interests, direct or indirect, of directors, executive officers, any shareholder who beneficially owns, directly or indirectly, more than 10% of any class or series of voting securities of the Corporation, or any associate or affiliate of such persons, in any transaction within the last three most recently completed fiscal years or in any proposed transaction which has materially affected or would reasonably be expected to materially affect the Corporation.

Statement of Corporate Governance Practices

The Board believes that maintaining effective corporate governance practices is an important factor that contributes to the general success of the Corporation. The Board has adopted specific policies regarding corporate governance, including, without limitation, a mandate for the Board (the “Board Mandate”), and charters for each of its committees (the “Charters”), position descriptions for the roles of Chief Executive Officer and Chair of the Board (the “Position Descriptions”), a code of business conduct (the “Code of Conduct”), corporate governance guidelines (the “Guidelines”) and a whistleblower policy. Copies of the Board Mandate, Charters, Position Descriptions, Code of Conduct and Guidelines, in each case as amended from time to time, as well as such other policies that may be adopted and amended by the Corporation from time to time, may be, in each case as required by applicable law or as the Corporation otherwise determines, available on the Corporation’s website at www.starsgroup.com, and the disclosure provided under this section of this Information Circular pertaining to these matters, is qualified in its entirety by reference to the full text thereof.

 

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Board

Pursuant to the Board Mandate, the Board is to be constituted at all times of a majority of individuals who meet or exceed the independence requirements of the NASDAQ Stock Market LLC (the “NASDAQ Rules”) and who are “independent” within the meaning of National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”). The Board considers all relevant facts and circumstances in making a determination of independence for each director and, as appropriate, imposes independence requirements more stringent than those provided for by NASDAQ Rules and/or NI 58-101 to the extent required by Canadian or U.S. securities laws, including rules and policies promulgated by the U.S. Securities and Exchange Commission and the TSX. Generally, pursuant to such requirements, a director is considered “independent” of the issuer if he or she has no direct or indirect relationship with the issuer which could, in the view of the issuer’s board of directors, be reasonably expected to interfere with the exercise of the director’s independent judgment, provided that if certain relationships specified in such requirements are in effect the individual is deemed to be not independent. Currently, the Board is comprised of six directors, namely Messrs. Gadhia, Hurley, Lazzarato, Goodson and Murphy and Ms. Turner, all of whom are independent for the purposes of the NASDAQ Rules and NI 58-101. Assuming that all persons proposed to be nominated for election in this Information Circular are elected at the Meeting, the Board will be comprised of six directors, five of whom, namely, Messrs. Gadhia, Hurley, Lazzarato and Goodson and Ms. Turner, are independent for the purposes of the NASDAQ Rules and NI 58-101.  Mr. Ashkenazi is not considered independent as he is an executive officer of the Corporation.  As Mr. Murphy will not be standing for re-election as a director at the Meeting, the Board nominated Mr. Ashkenazi to fill the resulting vacancy, as referenced under the “Business of the Meeting – Election of Directors” heading above.

The Board is of the opinion that its current size is adequate and facilitates the efficiency of its deliberations, while ensuring a diversity of opinion and experience. The Corporation believes that each proposed director is eager to fulfil his or her obligations and assume his or her responsibilities in the best interests of the Corporation and the Shareholders. The independent directors of the Board shall meet independently of management, including after Board meetings on an as-needed basis during the year.

The Board has considered the compensation paid and payable to Mr. Gadhia, as Chairman of the Board, and has determined that in the circumstances such compensation could not be reasonably expected to interfere with his independent judgement.

In addition to the separation of the Chairman and Chief Executive Officer roles, the Board also provides leadership for its independent directors by holding formal Board meetings, encouraging independent directors to bring forth agenda items, and providing independent directors with access to senior management and outside advisors, and granting unfettered access to information regarding the Corporation’s activities. The current size of the Board facilitates this process. As of the date of this Information Circular, both committees of the Board are composed of all independent directors.

Directorships

Listed in the table below are the current directors and director nominees of the Corporation who serve on the boards of directors of other reporting issuers (or the equivalent, including public companies of the United States):

 

 

 

 

Name of Director or Nominee

Current Role with the Corporation

Other Current Directorships

Alfred F. Hurley, Jr.

•   Director

•   New Mountain Finance Corporation (NYSE: NMFC)

David Lazzarato

•   Director

•   Yellow Pages Limited (TSX: Y)

Peter E. Murphy(1)

•   Director

•   Tribune Media Company (NYSE: TRCO)

•   Malibu Boats, Inc. (Nasdaq: MBUU)

 

Note:

(1)

Mr. Murphy will not be standing for re-election at the Meeting.

 

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Position Descriptions

The Corporation has adopted formal Position Descriptions for the Chair of the Board and the Chief Executive Officer.

Chair of the Board

The primary responsibility of the Chair of the Board is to provide leadership to the Board to enhance Board effectiveness, including supervising management of the Corporation and overseeing the relationships between the Board, Shareholders and other stakeholders of the Corporation.

In general, the Chair fulfills his or her responsibility by, among other things: (i) overseeing the Board’s discharge of its duties and the delegation of responsibilities to all Board committees, (ii) organizing and presenting the agenda for Board meetings, (iii) assisting in the Board in its oversight of the long-term business plan, strategies and policies of the Corporation and the achievement of its objectives, (iv) presiding over meetings of the Board, (v) liaising and working with all Board committees, and (vi) facilitating appropriate communication with management, senior officers and Shareholders.

Chief Executive Officer

The primary responsibility of the Chief Executive Officer is to lead the Corporation by providing a strategic direction for the growth and profitable operation of the Corporation.

The Chief Executive Officer will be expected, in fulfilling his or her primary responsibilities, to: (i) oversee the appropriate management of day-to-day business affairs of the Corporation and be ultimately accountable for the same, (ii) develop and implement the Corporation’s business plan and strategies, (iii) keep the Board informed in a timely and candid manner of the progress of the Corporation towards the achievement of its established goals, objectives, plans and policies, and of all material deviations from such goals, objectives, plans and policies, (iv) identify, assess, monitor and manage the principal risks of the Corporation, including in conjunction with the Board and applicable Board committees, (v) take steps to build an effective management team, (vi) build an appropriate business control environment, and (vii) foster and convey the importance of ethical practices, integrity and compliance with laws.

Orientation and Continuing Education

The CGNC Committee is currently responsible for overseeing the orientation of new directors to familiarize them with the Corporation’s business and operations, including the Corporation’s reporting structure, strategic plans, significant financial, accounting and risk issues, compliance programs and policies, management and the external auditors, as well as ongoing educational opportunities for all directors.

The Board believes that it is important to orient new directors to the operations of the Corporation’s business and their role as a director and committee member, if applicable. To this end, management provides new members with, among other things, past board materials and other private and public documents concerning the Corporation, provides for tours of its facilities, and meetings with senior executives. Management also provides new directors with access to all the Corporation’s background documents and records, including articles, by-laws, corporate policies (including, but not limited to, the Code of Conduct, whistleblower policy, confidentiality, disclosure and trading policy, the Board Mandate, the Charters, the Guidelines and Position Descriptions), organization structure and prior Board and committee minutes. In addition, management makes a presentation to new directors regarding the nature and operations of its business.

To facilitate ongoing education, the directors are encouraged to communicate with management and the auditors, to keep themselves current with industry trends and developments and changes in legislation with the Corporation’s assistance, to attend industry seminars and to observe the Corporation’s operations first-hand. Although the Board oversees ongoing educational opportunities, no formal continuing education program currently exists for the Corporation’s directors; however, the Corporation encourages its directors to attend, enroll or participate in courses and/or seminars dealing with financial literacy, corporate governance and related matters and has agreed to pay the cost of such courses and seminars. Each of the Corporation’s directors also has the responsibility for ensuring that he or she maintains the skill and knowledge necessary to meet his or her obligations as a director. Individual directors

 

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are encouraged to identify their continuing education needs through a variety of means, including discussions with management and at Board and committee meetings. In addition, independent directors Messrs. Gadhia, Goodson and director nominee Mr. Ashkenazi, have extensive experience in the gaming industry.

The Corporation’s management ensures that the Board has timely access to the information it needs to carry out its duties. Directors receive a comprehensive package of information prior to each Board and committee meeting.

Ethical Business Conduct

The Corporation has adopted the Code of Conduct for its directors, officers and employees. The Corporation is committed to operating in accordance with the highest ethical standards and conducting business in an honest and transparent manner that is in compliance with applicable law, the Code of Conduct and applicable internal policies. The Code of Conduct constitutes written standards that are designed to deter wrongdoing and promote, among other things: (i) honest and ethical conduct, including the handling of actual or apparent conflicts of interest between personal and professional relationships, (ii) avoidance of conflicts of interest, including disclosure to the Corporation of any material transaction or relationship that reasonably could be expected to give rise to a conflict of interest, (iii) safeguarding of the Corporation’s confidential information and integrity and protection of business information, (iv) maintaining a healthy and safe work environment that is free of discrimination and harassment, (v) protection of employee privacy and personal information, (vi) dealing responsibly with persons outside the Corporation, including compliance with anti-corruption laws and lobbying legislation, (vii) compliance with other applicable governmental laws, rules and regulations, (viii) the prompt reporting to a supervisor, director or officer (or if appropriate, to the appropriate authorities) of violations of the Code of Conduct, and (ix) accountability and responsibility by all directors, officers and employees for adherence to the Code of Conduct.

The Corporation monitors compliance with the Code of Conduct and recommends disclosures as and when appropriate and required in accordance therewith. In addition, the Corporation reviews the Code of Conduct with a view of complying with all applicable rules and regulations, receiving reports from management with respect to compliance with the Code of Conduct when necessary and appropriate, and satisfying itself that management has established a system to disclose the Code of Conduct (and any amendments thereto) to the extent required. The Corporation monitors compliance with the Code of Conduct by, among other things, reserving the right to audit such compliance and through the Corporation’s existing “whistleblower” policy, which provides a procedure for the submission of information by persons relating to, among other things, possible violations of the Code of Conduct. In addition to the Code of Conduct, The Stars Group has adopted a number of other policies and practices related to appropriate business conduct, including, without limitation, an Anti-Bribery Policy and Anti-Fraud Policy for all employees, directors and officers of the Corporation.

On April 28, 2017, The Stars Group amended its Code of Conduct. The substantive amendments made to the Code of Conduct: (i) clarify that it is The Stars Group’s policy to operate in compliance with all laws including anti-corruption laws, and that compliance with laws always take precedence over customs or social requirements, (ii) more explicitly caution employees, officers and directors that there are special legal and ethical considerations that apply to the provision of gifts, benefits and entertainment to public officials, (iii) provide that gifts shall not be made to public officials without express authorization from the Corporation’s legal department and that such legal department shall be consulted prior to hiring family members of current or former public officials, (iv) caution that certain jurisdictions strictly prohibit gaming companies and their employees from engaging in political activities, and (v) provide that reports of violations or possible violations of the Code of Conduct can be made anonymously through the Corporation’s whistleblower hotline. The Code of Conduct, as amended, is available on SEDAR at www.sedar.com, EDGAR at www.sec.gov and the Corporation’s website at www.starsgroup.com.

Moreover, The Stars Group has a formal compliance committee (the “Compliance Committee”) comprised of current and/or former independent directors and external advisors, including formal law enforcement and regulatory professionals. The Compliance Committee is charged with overseeing all aspects of compliance with gaming regulatory and other corporate compliance matters. The Compliance Committee strives to ensure the good character, honesty and integrity of The Stars Group, its subsidiaries and employees, and that it conducts its business affairs in an honest, moral and ethical fashion and in compliance with applicable laws, rules, regulations and other conditions imposed by applicable gaming and related regulatory authorities. The Compliance Committee also strives to protect The Stars Group’s reputation and prevent it from taking any action that could jeopardize its existing licenses and approvals or its ability to obtain any additional licenses or approvals. The members of the Compliance Committee are listed on the Corporation’s website at www.starsgroup.com.

 

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Nomination of Directors and Succession

The CGNC Committee, which is composed entirely of independent directors (as determined based on the standards set forth under “Statement of Corporate Governance Practices – Board”), is responsible for, among other things, identifying, recruiting and recommending to the Board qualified nominees for election as directors of the Corporation, reviewing the size of the Board from time to time and reviewing on an annual basis the competencies, skills and personal qualities of each existing director, and those competencies, skills and personal qualities that are required of directors in order to add value to the Corporation in light of the opportunities and risks facing the Corporation, the Corporation’s proposed strategy, the independence of the Board and the Corporation’s other corporate governance guidelines and policies. See also below under “Assessments”.

In considering potential nominees for election as directors, the CGNC Committee considers a number of factors, including those set out above, together with the independence, background, gender, employment and qualifications of potential nominees and the alignment of such potential nominees’ competencies, skills and personal qualities with the Corporation’s needs. The CGNC Committee recommends to the Board a proposed list of nominees for election as directors by the Shareholders in connection with each meeting of Shareholders at which directors are to be elected.

The Corporation’s Corporate Governance Guidelines provide that no person shall be appointed or elected as a director after reaching age 75. However, the Board has decided not to adopt term limits for the directors, believing that such a policy would have the effect of forcing directors off the Board who have developed, over a period of service, increased insight of the Corporation and therefore can be expected to provide an increasing contribution to the Board. The Board recognizes the value of some turnover in Board membership and the CGNC Committee is mandated to annually consider and recommend changes the composition of the Board.

The CGNC Committee also has responsibility for reviewing, with the Chair of the Board and the Chief Executive Officer, the succession plans relating to the position of Chief Executive Officer and generally with respect to other senior positions, and making recommendations to the Board with respect to the selection of individuals to occupy these positions, including reviewing plans in respect of an unexpected incapacitation of the Chief Executive Officer.

 

As previously disclosed, in January 2018 the Corporation entered into the Nominee Agreement with Mr. Tang Hao and his affiliated entity Discovery Key Investments Limited, pursuant to which Mr. Tang appointed Mr. Melvin Zhang as his nominee to be an observer to the Board. See “Business of the Meeting – Election of Directors – Appointment of Observer to the Board”.

Board Mandate

The Board is responsible for the stewardship of the business and affairs of the Corporation, including, without limitation, the appointment of management, strategic planning, monitoring of financial performance, financial reporting and risk management.

The Board is responsible for, among other things: (i) approving the appointment of the Chief Executive Officer and all other executive officers, and approving their compensation, (ii) satisfying itself as to the integrity of the management team and that they create a culture of integrity throughout the Corporation, (iii) approving its composition and size, selection of the Chair of the Board, candidates nominated for election to the Board, committee and committee chair appointments, committee Charters and director compensation, and (iv) reviewing, questioning and approving the mission of the Corporation and its strategy, objectives and goals. In addition, the Board is responsible for: (i) monitoring the Corporation’s performance and progress towards its strategic and operational goals, (ii) overseeing the identification and management of the Corporation’s principal business risks, (iii) promoting ethical business practices and approving and monitoring compliance with significant policies, procedures and programs, (iv) fostering and conveying the importance of ethical practices, integrity and compliance with laws, (v) overseeing communications with Shareholders, other securityholders, employees, financial analysts, governments, regulatory authorities, media and other stakeholders, including the Canadian and international communities, (vi) overseeing the accurate, timely and complete disclosure and reporting of all financial and other information or developments that have a significant and material impact on the Corporation, (vii) overseeing the Corporation’s internal controls and management information systems, and (viii) overseeing succession planning for the Board, orientation and educational opportunities for directors and the regular assessment of the effectiveness of the Board as a whole, the chair of the Board, each committee, the chair of each committee and each individual director.

 

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Compensation

In addition to the items listed above under “Statement of Corporate Governance Practices – Nomination of Directors and Succession”, the Board, after reviewing recommendations of the CGNC Committee, is responsible for approving executive and director compensation, including with respect to: (i) compensation of the Corporation’s Chief Executive Officer and other members of senior management, and (ii) compensation disclosure in the annual report on executive compensation for inclusion in the Corporation’s management information circular. The CGNC Committee has authority to retain independent compensation advisors and considers the independence of its external compensation advisors. Refer to section “Statement of Executive Compensation – Compensation Discussion and Analysis” for additional details regarding the role and activities of the CGNC Committee.

Other Board Committees

The Board has two standing committees: the Audit Committee and the CGNC Committee. The Board has established these committees to assist it in fulfilling its mandate and to satisfy various regulatory obligations. The Board oversees the establishment and operation of all its committees and the appointment, compensation and conduct of their members. In addition to these regular committees, the Board may appoint ad hoc committees periodically to address certain issues as well as form additional standing committees in the future as it deems necessary. Refer to section “Audit Committee Information” for a description of the function of the Audit Committee.

Assessments

The CGNC Committee is responsible for making an annual assessment of the overall performance and effectiveness of the Board and each committee, the Chair of the Board, each committee chair and each director and reporting on such assessments to the Board. The objective of the assessments is to ensure the continued effectiveness of the Board in the execution of its responsibilities and to contribute to a process of continuing improvement. This process takes into consideration: (i) the solicitation and receipt of comments from directors, (ii) the Board Mandate, (iii) the Charters, and (iv) the performance of each individual director. The CGNC Committee considers the performance of directors in determining whether to recommend that they be nominated for re-election. To assist the CGNC Committee in this process, it requires the completion of extensive annual director and officer questionnaires and annually conducts a formal evaluation of the performance and effectiveness of the Board, each Board committee and each committee chair through the mandatory completion of additional assessment questionnaires. The CGNC Committee reviews the responses provided in the director and officer questionnaires and evaluates the final results of the performance and effectiveness assessments, which are compiled by an independent third party and includes summaries of the results and identifies strengths and areas for improvement.

Diversity

The Corporation values the benefits diversity can bring to the Board, including diversity of personal characteristics such as age, gender, character, geographic residence, business experience (including financial skills and literacy), functional expertise, demonstrated leadership, stakeholder expectations and culture. The Corporation believes that board diversity promotes the inclusion of different perspectives and ideas, and ensures that the Corporation has the opportunity to benefit from all available talent. In 2016, the Corporation adopted a written diversity policy (the “Diversity Policy”) that makes diversity of the Board one of the criteria for the CGNC Committee to consider in recruiting and recommending directors for election. In 2018, the Diversity Policy was revised to state that that the Corporation aspires to attain by its annual meeting in 2022, and thereafter maintain, a Board composition in which at least 25% of the directors are women. The Diversity Policy specifies that in identifying and nominating directors, the CGNC Committee and the Board shall consider the need to increase the number of women directors on the Board to meet the Corporation’s goal.

The CGNC Committee annually assesses the skills, experience, knowledge and background of its directors in light of the needs of the Board, including the extent to which the current composition of the Board reflects a diverse mix of skills, experience, knowledge and backgrounds, including an appropriate number of women directors. The CGNC Committee is committed to a merit-based system for Board composition, which requires a diverse and inclusive culture where directors believe that their views are heard, their concerns are attended to and they serve in an environment where bias, discrimination and harassment on any matter is not tolerated. When identifying suitable candidates for appointment to the Board, the CGNC Committee will consider candidates on merit against objective criteria and the needs of the Board and will consider the need to increase the number of women directors on the

 

47


 

Board to meet the Corporation’s goal. When recruiting new candidates for appointment, search protocols go beyond the networks of existing Board members and incorporate diversity, including identification of female candidates, as a component. Any search firm engaged to assist the Board or the CGNC Committee in identifying candidates for appointment to the Board shall be directed to include women candidates, and women candidates will be included in the Board’s evergreen list of potential Board nominees. The CGNC Committee reviews the Diversity Policy annually and assesses its effectiveness in promoting a diverse Board which includes an appropriate number of women directors.

Currently, the Board includes one female director, representing 16⅔% of the Board. In addition, the Board includes one director who is a member of a visible minority, also representing 16⅔% of the Board, and the observer to the Board is a member of a visible minority.

At the executive level, the Corporation has been focused on finding talent to grow and expand its business. It has focused on recruiting and retaining executive talent needed to develop and implement the Corporation’s strategy, objectives and goals. Women represent approximately 32% of the Corporation’s workforce as of April 10, 2018. Although the Corporation has two women in key senior management positions, currently none of the Corporation’s executive officers are women, and as of the date of this Information Circular it has not adopted a target for female executive officers. The Corporation has identified a need to increase the number of women employees in the organization and to include diversity, including gender diversity, in its talent management programs, particularly for its senior management. As a result, the Corporation has begun identifying and reporting to senior management and the CGNC Committee on the diversity of its workforce with a view to identifying diversity gaps, workplace policies to better recruit and retain female and minority employees and the Corporation’s progress in increasing the number and proportion of female and minority officers and executive officers.

Audit Committee Information

Purpose

The Audit Committee is established to fulfil applicable public company obligations respecting audit committees and to assist the Board in discharging its oversight responsibilities with respect to financial reporting to ensure the transparency and integrity of the Corporation’s published financial information. The Audit Committee’s responsibilities include overseeing: (i) the integrity of the Corporation’s financial statements and financial reporting process, including the audit process and the Corporation’s internal controls over financial reporting, disclosure controls and procedures, and compliance with other related legal and regulatory requirements, (ii) the qualifications, independence, retention, compensation and work of the Corporation’s external auditors, (iii) the work of the Corporation’s financial management, internal auditors and external auditors, (iv) enterprise risk management, privacy and data and information security, and to monitor the same, and (v) the auditing, accounting and financial reporting process generally. The Audit Committee is also responsible for pre-approving all non-audit services to be provided by the Corporation’s independent external auditor, procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters and the confidential anonymous submission by employees of the Corporation and its subsidiaries of concerns regarding questionable accounting or auditing matters and for any additional matters delegated to the Audit Committee by the Board.

The Audit Committee has the right, for the purposes of performing its duties, to maintain direct communication with the Corporation’s external auditor and the Board, to inspect all books and records of the Corporation and its subsidiaries, to seek any information it requires from any employee of the Corporation and its subsidiaries or the chairperson or other designated member of the Compliance Committee, and to retain independent outside counsel or other advisors.

The Audit Committee is required to be comprised of a minimum of three directors, each of whom must be “independent”, “financially literate” (within the meaning of the applicable Canadian securities laws) and otherwise qualified within the meaning of applicable securities law and the rules of any applicable stock exchange. At least one member of the Audit Committee must be financially sophisticated (within the meaning of the applicable NASDAQ Rules) and at least one member must qualify as an “audit committee financial expert” (within the meaning of the applicable rules of the U.S. Securities and Exchange Commission). A member who is an “audit committee financial expert” is presumed to qualify as “financially sophisticated”. The Audit Committee meets

 

48


 

regularly and as often as it deems necessary to perform the duties and discharge its responsibilities in a timely manner, but is required to meet at least four times a year. The Audit Committee also conducts a self-evaluation at least annually to determine whether it and its members are functioning effectively, and reports its conclusion to the Board.

Audit Committee Charter

The current Audit Committee Charter was adopted on February 2, 2018. The full text of the Audit Committee Charter is available on the Corporation’s website at www.starsgroup.com, and the disclosure provided under this section of this Information Circular, i.e., “Audit Committee Information”, is qualified in its entirety by reference to the full text thereof.

Composition

The Audit Committee is currently composed of Messrs. Lazzarato and Murphy and Ms. Turner, each of whom is “independent” and “financially literate”. Mr. Lazzarato is the “audit committee financial expert” and is “financially sophisticated”.  Immediately following the Meeting, Mr. Murphy will be replaced as a member of the Audit Committee by a duly qualified and appointed independent director.

Relevant Education and Experience

Each member of the Audit Committee has an understanding of the generally accepted accounting principles applicable to the Corporation, i.e., International Financial Reporting Standards (as issued by the International Accounting Standards Board), and has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Corporation’s financial statements.

All three members of the Corporation’s Audit Committee serve or have served on a number of other boards of directors and have acquired financial education and/or experience that would result in them being qualified as set forth above.

 

 

 

 

Name of Director

Relevant Financial Education

and Experience

Other Current Public Company Directorships

David Lazzarato

Chair of Yellow Pages Limited’s audit committee

Former chair of LED Roadway Lighting’s audit committee

Former Chief Financial Officer of Allstream Inc. (formerly, AT&T Canada Inc.) and Alliance Atlantis Communications Inc.

Chartered Accountant and FCA

 

Yellow Pages Limited (TSX: Y)

Peter E. Murphy(1)

Founder and Chairman of a private investment and venture capital firm

Current audit committee chairman of an NYSE-listed company and former audit committee member of a public company

MBA

Tribune Media Company (NYSE: TRCO)

Malibu Boats, Inc. (Nasdaq: MBUU)

 

Mary Turner

Former President and CEO of a subsidiary of Canadian Tire Corporation (TSX: CTC)

Former partner at Deloitte & Touche (now Deloitte LLP)

Chartered Accountant and FCA

None

 

Note:

(1)

Mr. Murphy will not be standing for re-election at the Meeting.  Immediately following the Meeting, Mr. Murphy will be replaced as a member of the Audit Committee by a duly qualified and appointed independent director.

Pre-approval Policies and Procedures

 

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The Audit Committee has established a practice of pre-approving all audit, audit-related, non-audit, tax and certain other services provided by the external auditor, in each case in compliance with applicable rules and guidance on the qualification and independence of external auditors. This practice is also set forth in a pre-approval policy adopted by the Audit Committee. In accordance with the Audit Committee’s pre-approval practice and policy, before the Corporation or any of its subsidiaries engages the external auditor to render a service, the engagement must be either (i) specifically approved by the Audit Committee, or (ii) entered into pursuant to the pre-approval policy. This is intended to ensure, among other things, that the provision of such services does not impair the external auditor’s independence. The Audit Committee has delegated to its Chairman, Mr. Lazzarato, the authority, between regularly scheduled meetings of the Audit Committee, to pre-approve such services to the extent they were not previously presented at a meeting of the Audit Committee. All such pre-approvals by the Chairman of the Audit Committee are reported by him at the next meeting of the Audit Committee following the pre-approval. The Audit Committee may not delegate to management the Audit Committee’s responsibilities to pre-approve services performed by the external auditor.

External Auditor Service Fees

The Corporation’s current independent external auditor is Deloitte.

The aggregate fees billed by Deloitte and all its affiliates for the fiscal years ended December 31, 2017 and 2016, respectively, were as follows:

 

Description

2017

2016

Audit Fees(a)

$4,908,000

$2,894,000

Audit – Related Fees(b)

$149,000

$377,000

Tax Fees and Tax Compliance and Advisory Services(c)

$358,000

$229,000

All Other Fees(d)

$15,000

$835,000

 

Notes:

(a)

Audit Fees” means the aggregate fees billed by the Corporation’s independent external auditor for audit services related to the annual financial statements of the Corporation and its consolidated subsidiaries, and for services provided in connection with statutory and regulatory filings or similar engagements. In addition, audit fees include the aggregate fees billed by the Corporation’s independent external auditor for review services related to the interim financial statements of the Corporation and its consolidated subsidiaries, as well as the cost of translation of various continuous disclosure documents of the Corporation.

(b)

Audit-Related Fees” means the aggregate fees billed for assurance and related services by the Corporation’s independent external auditor that are reasonably related to the performance of the audit or review of the Corporation’s financial statements and are not reported as “Audit Fees”, including, without limitation, other attest services not required by statute or regulation.

(c)

Tax Fees” and “Tax Compliance and Advisory Services” means the aggregate fees billed for professional services rendered by the Corporation’s external auditor for tax compliance, tax advice, tax planning and assistance with various other tax related questions.

(d)

All Other Fees” means the aggregate fees billed in the applicable fiscal year for products and services provided by the Corporation’s independent external auditor other than the services reported under clauses (a), (b) and (c), above.

Receipt of Shareholder Proposals for Next Annual Meeting

Under the OBCA, a registered holder or beneficial owner of Common Shares that will be entitled to vote at the next annual meeting of Shareholders may submit to the Corporation, before March 22, 2019, a proposal in respect of any matter to be raised at such meeting.

Additional Information

Additional information relating to the Corporation is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov under the Corporation’s profile. Copies of the Corporation’s latest consolidated audited financial statements and any interim consolidated financial statements as well as any management’s discussion and analysis thereon are also available on request from the Secretary of the Corporation.

In addition to press releases, securities filings and public conference calls and webcasts, The Stars Group intends to

 

50


 

use its investor relations page on its website at www.starsgroup.com as a means of disclosing material information to its investors and others and for complying with its disclosure obligations under applicable securities laws. Accordingly, investors and others should monitor the website in addition to following The Stars Group’s press releases, securities filings and public conference calls and webcasts. This list may be updated from time to time.

Approval Of the Information Circular

The content and transmission of this Information Circular have been approved by the Board.

Toronto, Ontario, April 10, 2018.

 

(s) Divyesh (Dave) Gadhia

Chairman of the Board of Directors

 

 

 

 

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SCHEDULE “A”

EQUITY INCENTIVE PLAN RESOLUTION

“BE IT RESOLVED AS AN ORDINARY RESOLUTION OF THE SHAREHOLDERS THAT:

 

1.

The amendment to the equity incentive plan of The Stars Group Inc. (the “Corporation”) dated June 22, 2015 (the “2015 Equity Incentive Plan”) in order to increase the cap on the value of awards granted under the 2015 Equity Incentive Plan to any director per year from CDN$100,000 to CDN$150,000, of which no more than CDN$100,000 shall be granted in the form of stock options, as qualified in its entirety by reference to the full text of the amended 2015 Equity Incentive Plan appended as Exhibit “A” to the management information circular of the Corporation dated April 10, 2018 (the “Equity Incentive Plan”), be and is hereby approved.

 

2.

All unallocated awards under the 2015 Equity Incentive Plan be and are hereby approved.

 

3.

The Corporation shall have the ability to continue granting awards under the Equity Incentive Plan until May 10, 2021, which is the date that is three (3) years from the date of the shareholder meeting at which shareholder approval is being sought.

 

4.

Any director or officer of the Corporation be and each of them is hereby authorized and directed, for and in the name of and on behalf of the Corporation, to execute and deliver or cause to be executed and delivered all documents, and to take any action, which, in such director’s or officer’s own discretion, is necessary or desirable to give effect to this resolution.”

 

 

 

 

 

 

 

A-1


 

 

EXHIBIT “A”

EQUITY INCENTIVE PLAN

 

 

 

 

AMAYATHE STARS GROUP INC.

 

 

EQUITY INCENTIVE PLAN
JUNE 22, 2015

AS AMENDED AND RESTATED
MARCH ●, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


TABLE OF CONTENTS

Page

ARTICLE 1 PURPOSE

1

 

1.1

Purpose1

 

ARTICLE 2 INTERPRETATION

1

 

2.1

Definitions1

 

 

2.2

Interpretation7

 

ARTICLE 3 ADMINISTRATION

8

 

3.1

Administration8

 

 

3.2

Delegation to Committee9

 

 

3.3

Determinations Binding9

 

 

3.4

Eligibility10

 

 

3.5

Board Requirements10

 

 

3.6

Total Shares Subject to Awards10

 

 

3.7

Limits on Grants of Awards10

 

 

3.8

Award Agreements11

 

 

3.9

Permitted Assigns11

 

 

3.10

Non-transferability of Awards12

 

ARTICLE 4 OPTIONS

12

 

4.1

Grant of Options12

 

 

4.2

Exercise Price12

 

 

4.3

Term of Options12

 

 

4.4

Vesting and Exercisability12

 

 

4.5

Payment of Exercise Price13

 

ARTICLE 5 RESTRICTED SHARE UNITS

13

 

5.1

Grant of RSUs13

 

 

5.2

Vesting of RSUs13

 

 

5.3

Delivery of Shares1314

 

ARTICLE 6 PERFORMANCE SHARE UNITS

14

 

6.1

Grant of PSUs14

 

 

6.2

Terms of PSUs14

 

 

6.3

Performance Goals14

 

 

6.4

Delivery of Shares14

 

ARTICLE 7 RESTRICTED SHARES

1415

 

7.1

Grant of Restricted Shares1415

 

 

7.2

Restrictions on Transfer15

 

 

7.3

Effect of Termination of Employment or Services15

 

ARTICLE 8 DEFERRED SHARE UNITS

1516

 

8.1

Grant of Deferred Share Units1516

 

 

8.2

Settlement of DSUs16

 

ARTICLE 9 OTHER SHARE-BASED AWARDS

16

 

9.1

Grant of Other Share-Based Awards16

 

ARTICLE 10 ADDITIONAL AWARD TERMS

1617

 

10.1

Dividend Equivalents1617

 

 

- i -

 


TABLE OF CONTENTS
(continued)

Page

 

10.2

Black-out Period17

 

 

10.3

Withholding Taxes17

 

 

10.4

Recoupment18

 

ARTICLE 11 TERMINATION OF EMPLOYMENT OR SERVICES

18

 

11.1

Death or Disability18

 

 

11.2

Termination of Employment or Services1819

 

 

11.3

Discretion to Permit Acceleration20

 

 

11.4

Participants’ Entitlement20

 

ARTICLE 12 EVENTS AFFECTING THE CORPORATION

2021

 

12.1

General2021

 

 

12.2

Change in Control21

 

 

12.3

Reorganization of Corporation’s Capital22

 

 

12.4

Other Events Affecting the Corporation22

 

 

12.5

Immediate Acceleration of Awards22

 

 

12.6

Issue by Corporation of Additional Shares2223

 

 

12.7

Fractions2223

 

ARTICLE 13 U.S. TAXPA