Corporate Governance Practices

Instilling a high level of trust and confidence in all areas of our business is of the utmost importance to Indigo. We believe that strong corporate governance practices are vital to both achieving and maintaining this level of trust and confidence with our employees, customers, and investors. Our corporate governance practices have been reviewed to ensure that they meet the new requirements adopted by the Ontario Securities Commission in 2005 and also reflect our dedication to conducting business with the integrity our employees, customers, and investors demand.

Board Responsibilities and Composition
The Board of Directors is responsible for the supervision of our management and for approving our overall direction in a manner which is in our best interests. The Board of Directors participates fully in assessing and approving strategic plans and prospective decisions proposed by management. To ensure that the principal business risks that are borne by Indigo are appropriate, the Board of Directors receives periodic reports from management of its assessment and management of such risks. The Board of Directors regularly monitors our financial performance. This monitoring function often entails review and comment by the Board of Directors on various management reports. Our internal accounting and control procedures are monitored by the Audit Committee of the Board of Directors on behalf of the Board of Directors. The Audit Committee reviews detailed financial information contained in management reports and hears and acts upon the recommendations of Indigo’s auditors. In respect of senior management succession planning, the Board of Directors is involved in identifying candidates from within and outside Indigo to fill senior management positions.

As a practice, the Board of Directors approves significant corporate communications with shareholders. The Board of Directors currently consists of ten members. Indigo has historically endeavoured to have a sufficient number of directors to encourage a variety of opinions on matters which come before the Board of Directors, while at the same time limiting its membership to a number of directors that facilitates effective and efficient decision making. We seek to attract directors with a wealth of business knowledge and a diversity of business experience.

A number of our Directors sit on the boards of other reporting issuers. For each such Director, the following table lists the name of the reporting issuer on whose board of directors the Director currently serves.

Director	Reporting Issuer
Heather Reisman……………...….	Onex Corporation J. Crew Group Inc.
Frank Clegg……………….....	Advanced Micro Devices, Inc.
Mitchell Goldhar…………………..	Calloway Real Estate Investment Trust
James Hall…………………………	Global Credit Pref Corp.
Michael Kirby……………….……..	The Bank of Nova Scotia Brainhunter Inc. Extendicare REIT MDC Partners Inc. Energy Savings Income Fund
Gerald Schwartz…………………..	Onex Corporation Celestica Inc.

Of the Board of Directors, Ms. Brooks and Messrs. Clegg, Deitcher, Goldhar, Hall, Kirby, Lantos, and Mau are considered by the Board of Directors to be "independent directors" within the meaning of the Multilateral Instrument 52-110. The remaining members are not independent within the meaning of the Multilateral Instrument, Ms. Reisman being a member of management, and Mr. Schwartz being Ms. Reisman's spouse. The Board of Directors therefore has a majority of independent directors. A number of directors possess an extensive knowledge of the retailing and distribution businesses in Canada, and their participation as directors contributes to the effectiveness of the Board of Directors.

The Board of Directors believes that eight of the ten directors are independent directors who are free from any interests in or relationships with the significant shareholder or any of its affiliates. The Board of Directors believes that the membership on the Board of Directors of these eight directors fairly reflects the investment in Indigo by minority shareholders.

Indigo is controlled by Trilogy which, directly or indirectly, owns approximately 61.27% of the total number of our outstanding common shares and is a "significant security holder" within the meaning of the National Instrument. Mr. Schwartz controls Trilogy.

Board Functioning and Independence
The Board of Directors adopted a corporate governance policy which, among other things, sets out those matters, in addition to those required by statute, which must be brought by the CEO or other senior management to the Board of Directors for approval. Our corporate governance policies ensure that all major strategic decisions, including any change in our strategic direction and acquisitions and/or divestitures of a material nature, will be presented by management to the Board of Directors for approval. As part of its ongoing activity, the Board of Directors regularly receives and comments upon reports of management as to the performance of Indigo’s business and management’s expectations and planned actions in respect thereto.

Ms. Reisman is Chair of the Board of Directors and CEO of Indigo. In the view of the Board of Directors, the fact that Ms. Reisman occupies both offices does not impair the ability of the Board of Directors to act independently of management. They have reached this conclusion for the following reasons:

• eight of the Corporation's ten directors are independent;
• the Audit Committee is comprised solely of independent directors and meets on a regular basis; and
• all of the Board's Committees are comprised exclusively of independent directors.

On May 18, 2006, the Board approved the appointment of Michael Kirby, a Director, as our independent lead director (the "Lead Director") who is responsible for ensuring that the Board functions independently of management. On May 18, 2006, the Board also adopted the following governance practices:

• at each regular meeting, the Board shall routinely meet with Ms. Reisman and the Corporation's Chief Financial Officer without the presence of other members of management to consider any matter not easily or appropriately discussed in the larger forum. The topics discussed may include the effectiveness of the meeting just concluded, the performance of any individual member of management or the Board, the performance of the Board itself, or, indeed, any matter of concern to any director;
• the Board, at each meeting other than unscheduled meetings called for the sole purpose of approving specific transactions, shall have a session in the absence of Ms. Reisman, or any other member of management;
• the performance of Ms. Reisman will be considered in the absence of Ms. Reisman and Mr. Schwartz at least once a year when her compensation is settled; and
• any member of the Board may provide to the Lead Director agenda items for discussion at any meeting and the Lead Director has the right to place items on the Board's agenda at his or her discretion.

The Board of Directors has approved a formal position description for the office of the CEO. The Board of Directors has approved formal corporate objectives which the CEO is responsible for achieving. The Board of Directors, the Human Resources and Compensation Committee and the CEO engage in regular ongoing dialogue regarding the performance of the senior management team in achieving Indigo's strategic objectives as recommended by management and approved by the Board of Directors.

Board Committees
The Board of Directors has an Audit Committee, a Human Resources and Compensation Committee and a Corporate Governance Committee. Each committee has a formal mandate outlining its responsibilities and its obligations to report its recommendations and decisions to the Board of Directors, as well as a written position description of each committee chair.

AUDIT COMMITTEE
The Audit Committee is composed solely of independent directors. The Audit Committee is responsible for the oversight of Indigo’s internal accounting and control systems. It receives and reviews the financial statements, annual and special meeting materials and other disclosure documents of Indigo and makes recommendations thereon to the Board of Directors before such statements, materials and documents are approved by the Board of Directors. The Audit Committee communicates directly with Indigo's auditors in order to discuss audit and related matters whenever appropriate. The Audit Committee is comprised of Mr. Michael Kirby, Mr. Jim Hall, and Mr. Frank Clegg. Mr. Kirby is the Chair of the Audit Committee.

HUMAN RESOURCES AND COMPENSATION COMMITTEE
The Human Resources and Compensation Committee is composed solely of independent directors. The Human Resources and Compensation Committee has been charged by the Board of Directors with the responsibility of reviewing and making recommendations to the Board of Directors regarding compensation policies and practices. Specifically, the Committee's charter provides that the Committee shall: obtain appropriate information about compensation policies and payments by Canadian companies of a comparable size to Indigo; establish objectives, evaluate performance, recommend compensation, and develop a process for succession planning; review and approve appointments, promotions, terminations of senior management; and recommend grants of stock options subject to Board of Directors’ subsequent ratification. The Human Resources and Compensation Committee is comprised of Mr. Jim Hall, Mr. Michael Kirby, and Mr. Frank Clegg. Mr. Hall is the Chair of the Human Resources and Compensation Committee.

CORPORATE GOVERANCE COMMITTEE
The Corporate Governance Committee is composed of three outside directors, all of whom are independent. It is responsible for proposing to the full Board of Directors new nominees to the Board of Directors and for assessing directors on an ongoing basis. The Committee uses an annual questionnaire of Board members on corporate governance and the effectiveness of the Board as a tool to assess individual directors and the Board as a whole. The Committee establishes qualifications for new directors, and evaluates proposed directors against this framework. This Committee performs the role which might otherwise be served by a nominating committee, and serves to educate new board members by providing an information package of all relevant governance material, and by inviting new members to conduct due diligence on the Corporation, and to interview existing independent Directors. The Committee promotes continuing education for existing Board members by providing informative material to the Board in advance of regular Board meetings and by regularly holding periodic educational sessions for Directors, at which senior management make presentations. These educational sessions, which coincide with regular Board meetings, cover one or more aspects of the business, and typically follow an informal presentation and open discussion format. The Corporate Governance Committee is comprised of Mr. Michael Kirby, Mr. Jim Hall, and Mr. Jonathan Deitcher. Mr. Kirby is the Chair of the Corporate Governance Committee.

Committees are empowered to engage, or to request that management engage, outside advisors at the Company’s expense. The Board of Directors would consider any such request by an individual member of the Board of Directors on its merits at the time it was made.

Ethical Business Conduct
The Board of Directors has approved the Corporation's written code of conduct (the "Code"), which is intended to be observed by all directors and employees of Indigo. The Code is a set of standards and expectations that serves as a guideline for all employees to follow. A copy of the Code is available in the Corporate Governance Policies section of the Indigo web site. The Corporation also has a whistleblower policy pursuant to which directors, officers and employees are encouraged to report violations of the Code. The Board has concluded that such measures are appropriate and sufficient to ensure compliance with the Code.

The Board encourages and expects Directors to disclose any perceived conflicts and to abstain from voting on any such matters.

Shareholder Communications
We endeavour to keep all shareholders well informed as to our financial performance, primarily by means of our annual and quarterly reports.

We shall provide to any person, upon request, a copy of: (i) the Annual Information Form; and (ii) the comparative financial statements for our most recently completed financial year together with the accompanying report of the auditor and related management's discussion and analysis ("MD&A"), and (iii) one copy of any of our interim financial statements and related MD&A for any subsequent fiscal periods, provided that we may require payment of a reasonable charge if the request is made by a person who is not one of our security holders.

With the approval of the Board of Directors, management has appointed Ms. Heather Reisman, our Chief Executive Officer, as the individual responsible for receiving shareholder inquiries and dealing with shareholder concerns. While being guided by regulatory requirements and Indigo's policies with respect to confidentiality and disclosure, Ms. Reisman is available for interviews by stakeholders, including analysts, the media, and investors. Ms. Reisman endeavours to respond promptly and appropriately to all such requests and/or inquiries.