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HomeMy WebLinkAboutLEG 04-19-C1of-p](KER1NG From: Paul Bigioni Director, Corporate Services & City Solicitor Report to Council Report Number: LEG 04-19 Date: March 25, 2019 Subject: Veridian Corporation Merger with Whitby Hydro Energy Corporation Merger Closing File: L-1000-005-16 Recommendation: 1. That Report LEG 04-19 be received; 2. That the draft resolutions (Attachment Nos. 1 and 2 to this Report) regarding the nomination of Directors and the authorization of Pickering's representative to attend the first shareholders' meeting of Elexicon Corporation be approved; 3. That the City of Pickering's representative be authorized to execute the said resolutions on behalf of the City; 4. That a copy of this Report be sent to Veridian Corporation and to Whitby Hydro Energy Corporation; and 5. That the appropriate City of Pickering officials be authorized to take the necessary actions as indicated in this report. Executive Summary: In accordance with the Merger Participation Agreement and the Unanimous Shareholders Agreement approved by Council on June 18, 2018 (Report# CAO 05-18), Veridian Corporation will amalgamate with Whitby Hydro Energy Corporation as of April 1, 2019. The merged corporation will carry on operations under the name Elexicon Corporation. The City of Pickering, as a shareholder of Veridian Corporation, must nominate directors to the board of Elexicon Corporation. The shareholder resolutions (Attachment Nos. 1 and 2 to this Report) will give effect to Pickering's director nominations and will appoint Pickering's Chief Administrative Officer as the Authorized Representative to (i) attend the first shareholders' meeting of Elexicon Corporation on Pickering's behalf, and (ii) execute such documents as are required to elect the directors, set their compensation and otherwise give effect to the provisions of the Merger Participation Agreement. The attached resolutions are required by the provisions of the Merger Participation Agreement. Report LEG 04-19 Subject: Veridian Merger Closing March 25, 2019 Page 2 Financial Implications: There are no direct financial implications arising from this Report. Discussion: In accordance with the Merger Participation Agreement and the Unanimous Shareholders Agreement approved by Council on June 18, 2018 (Report# CAO 05-18), Veridian Corporation will amalgamate with Whitby Hydro Energy Corporation as of April 1, 2019. The merged corporation will carry on operations under the name Elexicon Corporation ("Elexicon"). Equity ownership of Elexicon is as follows (rounded): • Ajax-22% • Belleville -9% • Clarington - 9% • Pickering -28% • Whitby-32% Elexicon will own Elexicon Energy Inc., the Merged LDC that will be formed by the amalgamation of two current local distribution companies and any non-regulated affiliate companies (e.g., service providers, renewables companies, etc.). The Elexicon Board of Directors will consist of 11 directors, 5 of whom will be the shareholders' Mayors (or designates). The remaining 6 will be Independent Directors. The boards of Elexicon Energy Inc. and the affiliates will consist of independent directors. The following is a visual representation of the governance structure: legend • Mayor or Designate Nor>-Sharellolder lmfeyendent Board Manber Q lndepandent {no~ 1-ioldco ·Board} .. OEB requires that one thfrd or LDC directors not be directors of affiliates A •r-f{ WHITBY I/if!,,!£,. Ctu,I, rlarlnnf-nn ONTARIO. CANAOA --Pl CKE Rl NG ~l.U'.ll New Energy Services Company Holding Company I LDC Co. Non-regulated Board of Ofrecto1s (7) Bo•rd of DiJectors j5j 0 0 0 Board ol Dlrectors (11) ••••• Report LEG 04-19 Subject: Veridian Merger Closing March 25, 2019 Page 3 The Unanimous Shareholders Agreement states that the board of Elexicon shall consist of the Mayors of the 5 shareholder municipalities plus 6 independent (non-political) directors. Section 3.2(c) of the Unanimous Shareholders Agreement specifies that each municipal shareholder shall appoint its Mayor or Mayor's designate as a director of Elexicon. Section 3.2(c) further requires each Veridian shareholder municipality to nominate the slate of independent director candidates recommended by Veridian Corporation. By letter dated March 1, 2019, Veridian Corporation recommended the appointment of Ron Chatterton, Doug Parker, Jim Macpherson and Brian Mountford to the initial board of directors of Elexicon. The appointment of these individuals to the board of Elexicon is set out in Attachment Nos. 1 and 2 to this Report. The names of the additional independent directors were provided by resolution of Whitby Town Council dated February 25, 2019. Section 3.10 of the Unanimous Shareholders Agreement states that each shareholder shall designate its Chief Administrative Officer or an individual designated by the CAO as a legal representative of the shareholder for the purposes of providing any consent or approval required under the agreement or the Business Corporations Act (Ontario), and to attend and vote at any meeting of shareholders. The appointment of Pickering's Chief Administrative Officer as the City's authorized representative is set out in Attachment No. 2 to this Report. Attachment No. 2 also provides the City's authorized representative with the authority to execute and deliver such documents and agreements, and to all such other acts and things as may be necessary or advisable in connection with the election of directors to the board of Elexicon, and as may be necessary or advisable in connection with the first shareholders meeting of Elexicon, including the election of directors to the boards of Elexicon's subsidiaries, setting compensation of directors in dealing with any other matter contemplated by the Merger Participation Agreement or Unanimous Shareholders Agreement. The authority granted to Pickering's authorized representative is consistent with the Business Corporations Act (Ontario), and is needed in order to organize the newly merged corporation to carry on business. Attachments: 1. Draft Shareholders' Resolution re Nomination of Elexicon Directors. 2. Draft Shareholders' Resolution appointing the Chief Administrative Officer to be Pickering's authorized representative to attend Elexicon's first shareholders' meeting. orate Services & City Solicitor PB:ks S an Cassel City Clerk Report LEG 04-19 Subject: Veridian Merger Closing Recommended for the consideration of Pickering City Council TonyPrifJ Chief Administrative Officer March 25, 2019 Page 4 ATTACHMENT# / TO REPORT# )_ ~ 0 '-f-/ / . I .ot. o2-... MUNICIPAL RESOLUTIONS RE NOMINATION OF INDEPENDENT DIRECTORS RESOLUTIONS OF THE COUNCIL OF THE CORPORATION OF THE CITY OF PICKERING (THE "MUNICIPALITY") WHEREAS the Municipality is a party to a Merger Participation Agreement dated July 10, 2018 (the "MPA") with respect to the amalgamation (the "Amalgamation") of Whitby Hydro Energy Corporation and Veridian Corporation to form Elexicon Corporation ("Merged Holdco"), to which is attached a form of Unanimous Shareholder Agreement (the "USA") to be executed and come into force as at the date of the Amalgamation; AND WHEREAS, under the USA the Municipality and the municipalities of Ajax, Belleville and Clarington may nominate one director who shall, in its Mayor's sole discretion, be either its Mayor or its Mayor's designate; AND WHEREAS, under the USA the Municipality and the municipalities of Ajax, Belleville and Clarington may nominate certain Independent Directors (as defined below) of Merged Holdco following receipt of a recommendation by the board of directors of Veridian Corporation; AND WHEREAS, the Municipality has received such a recommendation and has received notice that Clarington has nominated Brian Mountford (the "Recommended Director") as Independent Director of the Merged Holdco; AND WHEREAS, Ajax and Belleville have not yet nominated Independent Directors of Merged Holdco; AND WHEREAS the USA defines an Independent Director in relation to a municipality, as an individual that, at the time of his or her appointment to a Board and throughout his or her term as a member of such Board is not: the Mayor of such municipality; a member of the municipal council of such municipality; a member of a "local board" (as defined in the Municipal Act, 2001) of such municipality; or an employee of such municipality or such local board; AND WHEREAS Recommended Directors would, if elected, be Independent Directors and otherwise fulfill the requirements to be directors of the Merged Holdco; BE IT RESOLVED THAT: 1. The Municipality nominates the Recommended Directors and Mayor David Ryan to the Board of Directors of the Merged Holdco effective as at the date of the Amalgamation; 2. The Municipality nominates as Independent Directors such individuals as Ajax and Belleville shall duly nominate in accordance with the USA; and 3. The Mayor, Chief Administrative Officer, or other duly authorized representative, of the Municipality (the "Authorized Representative") is authorized and directed, for and in the name of and on behalf of the Municipality, to provide notice to the other parties to the MPA of these resolutions and to execute and deliver all such other agreements, amendments, instruments, certificates, resolutions and other documents, and to do all such other acts and things as the Authorized Representative may determine to be necessary or advisable in connection with the nomination of the Recommended Directors as set out in paragraph 1, the execution and delivery of any such agreement, amendment, instrument, certificate, resolution or other document or the doing of any such other act or thing by the Authorized Representative being conclusive evidence of such determination. ATTACHMENT# d TO REPORT# ,l.__E~ o <-f_ r--{ 9 I .ot. ;;;z__ MUNICIPAL RESOLUTIONS RE AUTHORIZING ITS REPRESENTATIVE TO ELECT THE DIRECTORS OF ELEXICON CORPORATION RESOLUTIONS OF THE COUNCIL OF THE CORPORATION OF THE CITY OF PICKERING (THE "MUNICIPALITY") WHEREAS The Corporation of the City of Pickering (the "Municipality") is a party to a Merger Participation Agreement dated July 10, 2018 (the "MPA") with respect to the amalgamation (the "Amalgamation") of Whitby Hydro Energy Corporation and Veridian Corporation to form Elexicon Corporation ("Merged Holdco"), to which is attached a form of Unanimous Shareholder Agreement (the "USA") to be executed and come into force as at the date of the Amalgamation; AND WHEREAS the USA provides that the initial board of Merged Holdco shall consist of six independent directors (each, an "Independent Director") and five directors that are the mayors of the municipal shareholders of the Merged Holdco or such mayor's designate; AND WHEREAS the Municipality has received notice of such nominated Independent Directors and mayors or designates and wishes to elect such persons as directors of the Merged Holdco; BE IT RESOLVED THAT: 1. The Municipality authorizes the Chief Administrative Officer of the Municipality or an individual designated by the Chief Administrative Officer as the legal representative of the Municipality (the "Authorized Representative") to elect the following persons as directors of Merged Holdco effective as of the date of the Amalgamation for an initial term as indicated: • Patrick McNeil (Independent Director) to hold office for two (2) years; • Brian Mountford (Independent Director) to hold office for two (2) years; • Ron Chatterton (Independent Director) to hold office for three (3) years; • Lesley Rose (Independent Director) to hold office for three (3) years; • Shaun Collier (Mayor) to hold office concurrent with the municipal term of the Mayor for the Town of Ajax; • Mitch Panciuk (Mayor) to hold office concurrent.with the municipal term of. the Mayor for the City of Belleville; • Adrian Foster (Mayor) to hold office concurrent with the municipal term of the Mayor for the Municipality of Clarington; • David Ryan (Mayor) to hold office concurrent with the municipal term of the Mayor for the City of Pickering; and, • Don Mitchell (Mayor) to hold office concurrent with the municipal term of the Mayor for the Town of Whitby. 2. The Municipality authorizes the Chief Administrative Officer of the Municipality or an individual designated by the Chief Administrative Officer as the legal representative of the Municipality to elect the following persons as directors of Merged Holdco effective as of the date of the Amalgamation: such individuals as Ajax and Belleville shall duly nominate in accordance with the USA to hold office for a two (2) or three (3) year initial term; and 3. The Authorized Representative is authorized and directed, for and in the name of and on behalf of the Municipality: a. to provide notice to the other parties to the MPA of these resolutions and to vote at a meeting of shareholders of Mergeco Holdco, to execute a written resolution of the shareholders of Mergeco Holdco, to execute and deliver all such other agreements, amendments, instruments, certificates, resolutions and other documents, and to do all such other acts and things as the Authorized Representative may determine to be necessary or advisable in connection with the election of the directors as set out in paragraphs 1 and 2, the execution and delivery of any such agreement, amendment, instrument, certificate, resolution or other document or the doing of any such other act or thing by the Authorized Representative being conclusive evidence of such determination; and b. to execute and deliver all such other agreements, amendments, instruments, certificates, resolutions and other documents, and to do all such other acts and things as the Authorized Representative may determine to be necessary or advisable in connection with the first shareholder meeting of Merged Holdco, including without limitation the election of the directors of the subsidiaries of Merged Holdco, setting the compensation of such directors and dealing with matters to be decided by the shareholders of Merged Holdco as contemplated in the MPA or USA, the execution and delivery of any such agreement, amendment, instrument, certificate, resolution or other document or the doing of any such other act or thing by the Authorized Representative being conclusive evidence of such determination.