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HomeMy WebLinkAboutBy-law 5586/99CORPORATION OF THE TOWN OF PICKERING BY-LAW NUMBER 5586/99 To transfer the employees, assets, liabilities, tights and obligations of the Picketing Hydro-Electric Commission and of the Corporation of the Town of Picketing in respect of the generation, transmission, distribution and retailing of electricity to a corporation and its subsidiary corporations which have been incorporated under the Business Corporations Act (Ontario) pursuant to Section 142 of the Electricity Act, 1998 (Ontario). RECITALS Pursuant to Subsection 145(1) of the Electricity Act, 1998 the Council may make By-laws transferring employees, assets, liabilities, tights, and obligations of the Corporation of the Town of Picketing ("Town") or of a commission or other body through which the Town generates, transmits, distributes or retails electricity, to a corporation incorporated under the Business Corporations Act (Ontario) pursuant to Section 142 of the Electricity Act, 1998 (Ontario); The Town transmits, distributes and retails electricity through the Picketing Hydro- Electric Commission (the "Commission"); The Town together with the Corporation of the Town of Ajax and the Corporation of the Municipality of Clarington (the "Municipalities") have agreed pursuant to a merger agreement among the Town and the Municipalities dated June 29, 1999 (the "Merger Agreement") to merge the businesses of the Commission, the Ajax Hydro-Electric Commission and the Clarington Hydro-Electric Commission; The Council and each Municipality has authorized Veridian Corporation and the subsidiaries, Vetidian Connections Inc. and Vetidian Energy Inc. (the "Subsidiaries") (collectively referred to herein as the "Corporations"), to be incorporated under the Business Corporations Act (Ontario) pursuant to Subsection 142(1) of the Electricity Act, 1998 (Ontario) and Sections 71 and 73 of the Ontario Energy BoardAct, 1998, (Ontario) for the purpose of generating, transmitting, distributing or retailing electricity and other business activities permitted by the Ontario Energy Board Act, 1998, (Ontario) and the Town hereby authorizes the incorporation of such additional subsidiaries as may be necessary for conducting such business activities; Pursuant to Subsection 145(1) of the Electricity Act, 1998 (Ontario), the Council deems it appropriate to transfer the employees, assets, liabilities, rights and obligations of the Commission and of the Town to the Corporations on and subject to the terms and conditions set forth herein; NOW THEREFORE the Council of the Corporation of the Town of Pickering enacts as follows: ARTICLE I - INTERPRETATION 1.01 Definitions. Whenever used in this By-law, unless the context otherwise requires, the capitalized words and terms set out in Schedule "A" hereto have the respective meanings ascribed to them in Schedule "A". 1.02 Extended Meanings. In this By-law, words importing the singular number only include the plural and vice versa and words importing gender shall include all genders. 1.03 1.04 1.05 1.06 1.07 2.01 2.02 2.03 Schedules. The following Schedules attached to this By-law shall be construed with and are an integral part of this By-law to the same extent as if they had been set forth herein: Schedule "A" Schedule "B" Schedule "C" Schedule "D" Schedule "E" Schedule "F" Schedule "G" Schedule "H" Schedule 'T' Schedule "J" Schedule "K" Schedule "L" Schedule "M" Schedule "N" Schedule "O" Definitions Distribution Employees Retail Employees Holding Company Employees Distribution Assets Distribution Liabilities Collective Agreements Excluded Assets Excluded Liabilities Holding Company Assets Retail Assets Holding Company Liabilities Retail Liabilities Allocation of Purchase Price Merger Purchase Price and Amending Agreement Binding Effect. As provided in Section 145 of the Electricity Act, this By-law is binding on the Town, the Commission, Veridian Corporation, the Subsidiaries and all other Persons, despite any general or special act or any rule of law, including any act or rule of law which requires notice or registration of transfers and does not require the consent of the Town, the Commission, Veridian Corporation, the Subsidiaries or any other Person. Section 161 of the Electricity Act provides that Part XI of the Electricity Act, which includes Section 145, applies despite the Public Utilities Act (Ontario) and despite any other general or special act. Veridian Corporation or any of the Subsidiaries may register such documents, instruments and agreements, including, without limitation, certified copies of this By-law, as may be necessary or desirable in order to evidence or confirm such transfers. Successors and Assigns. This By-law shall enure to the benefit of and shall be binding on and enforceable by the Town, the Commission, Veridian Corporation, the Subsidiaries and their respective successors and assigns. Applicable Law. This By-law and all documents, instruments, agreements and transfers contemplated hereby shall be construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Severability. If any section of this By-law or part thereof is invalid or ultra vires the Town, such section or part shall not affect the remaining sections or part of this By-law. ARTICLE H - TRANSFERS Transfer of All Assets and Assumed Liabilities. As of the Effective Date, the Town hereby sells, assigns and transfers all the assets, obligations and liabilities of the Commission and of the Town relating to the transmission, distribution or retailing of electricity to the Corporations in accordance with this By-law including, without limitation, Article III. Transfer of Distribution Assets and Distribution Liabilities. As of the Effective Date, all of the Distribution Assets and Distribution Liabilities are hereby transferred to and assumed by Veridian Connections Inc. Transfer of Retail Assets and Retail Liabilities. As of the Effective Date, all of the Retail Assets and Retail Liabilities are hereby transferred to and assumed by Veridian Energy Inc. 2.04 2.05 Inc.; 2.06 2.07 2.08 2.09 Transfer of Holding Company Assets and Holding Company Liabilities. As of the Effective Date, all of the Holding Company Assets and Holding Company Liabilities are hereby transferred to and assumed by Veridian Corporation. Transfer of Employees and Employee Plans. On the Effective Date: a) the Employees listed in Schedule "B" are transferred to Veridian Connections b) the Employees listed in Schedule "C" are transferred to Veridian Energy Inc.; c) the Employees listed in Schedule "D" are transferred to Veridian Corporation; d) the Employee Plans (other than pension plans) and Assumed Liabilities related to a particular Employee shall be transferred to and assumed by the Corporations respectively and in accordance with the transfer of Employees pursuant to Subsections 2.05(a), (b) and (c); and e) the pension plans (which comprise part of the Employee Plans) relating to the Employees shall be dealt with in the manner set out in Sections 17 and 18 of the Merger Purchase Price and Amending Agreement. Effective Time of Transfer. The transfer of the Assets and Assumed Liabilities pursuant to this By-law shall be deemed to take effect as of the opening of business on the Effective Date, notwithstanding the date of receipt of any approvals referred to in Section 4.01, the actual date of the issuance of any consideration therefor or the date of enactment of this By-law. Excluded Assets and Excluded Liabilities. The transfer of the Assets and Assumed Liabilities pursuant to this By-law shall not include the Excluded Assets and Excluded Liabilities, which shall remain the assets and liabilities of the Town. Without derogating from the obligations of Veridian Connections Inc. to the Town with respect to any municipal or regional debentures as referred to in Schedule "F" hereto, the Town shall be solely responsible for the discharge of all Excluded Liabilities. Reserves. The reserve funds held by the Commission, which are transferred to Veridian Connections Inc., shall be used by such Subsidiary only to pay for capital costs in respect of electrical power services for which such reserve funds were collected. Non-Assignable Assets. Notwithstanding any other provision hereof, if, notwithstanding Subsections 145(3) and (5) of the Electricity Act, any of the Assets shall not be assignable, or shall only be assignable with the consent or approval of any other third party, the Town and/or the Commission shall: use all reasonable efforts in co-operation with but at the cost of the Transferee to secure the consent required in connection with the assignment thereof, and b) pending the effective transfer thereof, hold all rights or entitlements that the Town or Commission has thereto, in trust, for the exclusive benefit of the Transferee, provided that the Transferee shall pay, perform and discharge all obligations arising or accruing with respect thereto during such period and shall indemnify the Town and the Commission for such obligations. 2.10 2.11 2.12 2.13 2.14 Transfer and Delivery of Assets.. Each of the Town and the Commission shall execute and deliver to Veridian Corporation and the Subsidiaries, as applicable, in form suitable for registration, recording and filing with such public authorities as may be reasonably required, all such bills of sale, assignments, instruments of transfer, assurances, consents and other documents as shall be necessary to effectively record the transfer, to Veridian Corporation and the Subsidiaries, of all the Town's and the Commission's right, title and interest in, to and under, 'or in respect of, the Assets and the Assumed Liabilities. Employees. As and from the Effective Date, the applicable Corporation set out in Section 2.05 shall employ, in accordance with Sections 145 and 147 of the Electricity Act, the Employees on terms and conditions which are substantially the same as those upon which such Employees are employed by the Commission immediately prior to the Effective Date, and without limiting the generality of the foregoing, shall be bound by, assume, pay, satisfy, discharge, observe, perform and fulfill all of the Employee Agreements and Employee Plans in the place and stead of the Commission to the same extent and with the same effect as if it were an original party thereto. The Employees transferred in accordance with Section 2.05 shall cease to be employees of the Commission from and including the Effective Date and shall thereupon be employees of one of the Corporations as set out in Section 2.05. Subsequent Transfers. Any of the Assets, Employees and Assumed Liabilities transferred under this By-law may, from time to time, subsequent to the Effective Date but prior to November 7, 2000, be transferred to the Corporation or any Subsidiary, as may be permitted by the Electricity Act, at such time, on such terms and for such consideration as the directors of the transferring corporation may determine, and any such subsequent transfer shall be made pursuant to the authority granted by this By-law and shall take effect in the sequence and at such times as so determined by the directors of the transferring corporation. Allocation of Assets and Assumed Liabilities. Following the transfer of the Assets, Employees and Assumed Liabilities but prior to the dissolution of the Commission, a certificate of the General Manager of the Commission shall be prepared to clarify and confirm the allocation of assets and assumed liabilities of the Commission as Distribution Assets, Distribution Liabilities, Retail Assets, Retail Liabilities, Holding Company Assets or Holding Company Liabilities pursuant to this By-law. Costs. All costs and expenses incurred or to be incurred by the Town or by the Commission and all taxes incurred or payable in connection with the transfer of the Assets shall be borne by Veridian Corporation and/or one or more of the Subsidiaries which shall reimburse the Town and the Commission on demand for any such costs, expenses or taxes. ARTICI,E nI- PURCHASE PRICE 3.01 3.02 Purchase Price. The Purchase Price payable by the Corporations for the Assets shall be equal to the fair market value of the Assets as determined in the Merger Purchase Price and Amending Agreement. Payment of the Purchase Price and any adjustment thereto shall be made as described in the Merger Purchase Price and Amending Agreement and the Merger Agreement. Allocation of Purchase Price. The Purchase Price shall be allocated among the Distribution Assets, the Holding Company Assets and the Retail Assets as determined in Schedule "N" which shall be prepared by the President of Veridian Corporation within 150 days of the Effective Date, or such other longer date as the President of Veridian Corporation may determine. 3.03 3.04 Transfer of Shares. All of the common shares of Veridian Connections Inc. and the common shares of Veridian Energy Inc. issued to the Town pursuant to the Merger Purchase Price and Amending Agreement (collectively "the Transferred Shares") shall be transferred to Veridian Corporation by the Town as of the Effective Date in consideration of the allotment and issuance by Veridian Corporation to the Town of fully paid and non assessable common shares of Veridian Corporation. Assumption of Liabilities. Each of the Corporations shall be bound by, assume, pay, satisfy, discharge, observe, perform and fulfil, and indemnify and save harmless the Town and the Commission from and against the Assumed Liabilities assumed by it. The transfer of the Assumed Liabilities under Part XI of the Electricity Act and this By-law releases the Town and the Commission from any liability or obligation in connection with the Assumed Liabilities pursuant to Section 153 of the Electricity Act. Pursuant to Subsection 145(2) of the Electricity Act, this By-law shall not transfer any liabilities or obligations arising under a debenture issued or authorized to be issued by the Town. However, Veridian Connections Inc. shall assume the obligation to make payment to the Town in amounts equal to those amounts due under any debenture referenced above, which includes, without limitation, the debentures set out on Schedule "I" hereto. ARTICLE IV - GENERAL MATTERS 4.01 4.02 4.03 4.04 4.05 Regulatory Aoorovais. The transfer of any of the Assets or of the Transferred Shares which are issued and outstanding shares of Veridian Connections Inc. pursuant to this By-law as of the Effective Date shall be subject to obtaining such regulatory approvals as may be required by law, including, without limitation, any approval of the OEB pursuant to the OEB Act, which approvals may be sought by the Town, the Commission, Veridian Corporation or the appropriate Subsidiary and following the receipt of any such approval the transfer shall be completed with effect as of the Effective Date pursuant to this By- law. Land Transfer Tax and Retail Sales Tax. The transactions contemplated by this By- law are exempt from Ontario land transfer tax pursuant to the Land Transfer Tax Act (Ontario) and retail sales tax pursuant to the Retail Sales Tax (Ontario) pursuant to Section 159 of the Electricity Act. Bulk Sales Compliance. The transactions contemplated by this By-law are exempt from the provisions of the Bulk Sales Act (Ontario) pursuant to Section 159 of the Electricity Act. Goods and Services Tax. The transfers of Assets pursuant to this By-law will constitute the transfers of all or substantially all of the Assets necessary for the Transferee to carry on the business transferred to it. The Town and each Transferee, being registered pursuant to the Excise Tax ~lct (Canada) with respect to goods and services tax, shall sign the election provided for in Section 167 of the Excise Tax Act (Canada) and the Transferee shall file the election in accordance with that Section 167 of the Excise Tax Act (Canada) so that the transfers are exempt from goods and services tax. Execution of Merger Purchase Price and Amending A~reement. The Mayor and the Clerk are hereby authorized and directed, for and on behalf of the Town, to execute and deliver the Merger Purchase Price and Amending Agreement and to do all such things and to execute and deliver all such other documents, instruments and writings as may be necessary or desirable to give effect to the provisions of this By-law and the Merger Purchase Price and Amending Agreement. 4.06 4.07 Further Assurances. Each of the Town and the Commission shall, at its expense, promptly and duly execute and deliver such further documents and promptly take such further action not inconsistent with the terms hereof as may from time to time be reasonably required to more effectively carry out the intent and purpose of this By-law or to perfect and protect the interest of Veridian Corporation and its Subsidiaries in the Assets. The Mayor and the Clerk are hereby authorized and directed, for and on behalf of the Town, to do all acts and things and execute and deliver such other documents, instruments, agreements and transfers as may be reasonably necessary or desirable to give effect to the provisions of this By-law. Amendment of By-law. In the event of any omission or error made in connection with the passage of this By-law, including, without limitation, the unintended transfer or failure to transfer any assets or liabilities of the Commission and/or the Town, the Town may amend this By-law in accordance with the procedures applicable to amend a by-law of the Town. By-law read a first, second and third time and finally passed this 6th day of December, 1999. Wayne Arthurs Mayor Bruce Taylor Clerk SCItEDULE "A" TO BY-LAW NO. 5586/99 OF Ti:IE TOWN OF PICKERING DEFINITIONS Whenever used in this By-law, unless the context otherwise requires, the following words and terms shall have the respective meanings ascribed to them below: "Assets" means all of the Distribution Assets, Retail Assets and Holding Company Assets; b) "Assumed Liabilities" means all of the Distribution Liabilities, Retail Liabilities and Holding Company Liabilities; c) "By-law" means this By-law all schedules and all documents, instruments, agreements and transfers supplemental hereto or in amendment or confirmation hereof; d) "Commission" shall have the meaning set out in the recitals hereto; e) "Corporations" shall have the meaning set out in the recitals hereto; f) "Distribution Assets" means all assets, interests, property, rights and undertaking, registered or unregistered, secured or unsecured, other than the Excluded Assets, the Retail Assets and the Holding Company Assets, of the Commission and of the Town held or used by either of them as at the Effective Date which relate to or have been used in connection with the transmission and distribution of electricity including, without limitation, the distribution system of the Commission and the assets listed in Schedule "E" hereto; g) "Distribution Liabilities" means all of the debts, liabilities and obligations of the Commission and of the Town related to, incurred or assumed by either of them as at the Effective Date in connection with the transmission and distribution of electricity, the distribution system of the Commission and the Distribution Assets including, without limitation, all environmental, reclamation and decommissioning liabilities of the Commission and the liabilities listed in Schedule "F" hereto, but other than the Excluded Liabilities, the Retail Liabilities and the Holding Company Liabilities. h) "Effective Date" means November 1, 1999; i) "Electricity Act" means the Electricity Act, 1998 (Ontario) and all regulations thereunder; J) "Employees" means all full-time and part-time, union and non-union, employees and officers of the Commission (including all trainees and probationary employees) as at the Effective Date; "Employee Agreements" means all contracts, agreements, and commitments written or oral, in respect of Employees as at the Effective Date to which the Commission is a party or by which it is bound, including, without limitation, i) all collective agreements as set out in Schedule "G" hereto; and ii) ii) all contracts of employment; l) "Employee Plans" means all employee benefit plans, pension plans, bonus or incentive plans, employee medical insurance and disability plans and savings plans relating to Employees; m) "Excluded Assets" means those assets of the Commission or of the Town described in Schedule "H" hereto; "Excluded Liabilities" means those liabilities of the Commission or of the Town described in Schedule 'T' hereto; o) "Holding Company Assets" means all assets, interests, rights and undertaking, registered or unregistered, secured or unsecured, other than the Excluded Assets, the Distribution Assets and the Retail Assets, of the Commission and of the Town held or used by either of them as at the Effective Date which related to, have been or would be used by either of them in connection with the provision of general administrative support services including, without limitation, accommodation, fleet, information technology services, warehousing and the assets listed in Schedule "J" hereto; p) "Holding Company Liabilities" means all of the debts, liabilities and obligations of the Commission and the Town related to, incurred or assumed by either of them as at the Effective Date in connection with the provision of general administrative support services and the Holding Company Assets including, without limitation, accommodation, fleet, information technology services, warehousing and the liabilities listed in Schedule "L" hereto, but other than the Excluded Liabilities, the Distribution Liabilities and the Retail Liabilities; q) "Merger Agreement" shall have the meaning set out in the recitals; "Merger Purchase Price and Amending Agreement" means an agreement among the Municipalities and the Corporations relating to the payment of the Purchase Price among other things dated as of November 1, 1999 in the form annexed as Schedule "O" hereto; s) "Municipalities" shall have the meaning set out in the recitals; t) "OBCA" means the Business Corporations Act (Ontario) and all regulations thereunder; u) "OEB" means the Ontario Energy Board; v) "OEB Act" means the Ontario Energy Board Act, 1998 (Ontario) and all regulations thereunder; w) "Person" means any individual, corporation, partnership, trust, unincorporated association or joint venture; x) "Purchase Price" means the amounts payable for the Assets as set out in Section 3.01; y) "Retail Assets" means all assets, interests, property, rights and undertaking, registered or unregistered, secured or unsecured, other than the Excluded Assets, the Distribution Assets and the Holding Company Assets, of the Commission and of the Town held or used by either of them as at the Effective Date which related to, have been or would be used in connection with the retailing of electricity, other related activities including, without limitation, the assets listed in Schedule "K" hereto; z) "Retail Liabilities" means all of the debts, liabilities and obligations of the Commission and of the Town related to, incurred or assumed by either of them as at the Effective Date in connection with the retailing of electricity, other related activities and the Retail Assets including, without limitation, the liabilities listed in Schedule "M" hereto, but other than the Excluded Liabilities, the Distribution Liabilities and the Holding Company Liabilities; aa) "Subsidiary" shall have the meaning set out in the recitals hereto; bb) cc) dd) "Town" shall have the meaning set out in the recitals hereto; "Transferred Shares" means the common shares of Veridian Connections Inc. and Veridian Energy Inc. referred to in Section 3.03; and "Transferee" means, with respect to any particular Asset, Employee or Assumed Liability, Veridian Corporation or the Subsidiary which has received the transfer of such Asset, Employee or Assumed Liability pursuant to Sections 2.01, 2.02, 2.03 or 2.04. SCHEDULE "B" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING VERIDIAN CONNECTIONS INC. EMPLOYEES Attached hereto. z z z z z z z z z z z z z z z SCHEDULE "C" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING VERIDIAN ENERGY INC. EMPLOYEES Attached hereto. LU Z U,,! Z Z Z Z Z Z Z Z Z Z SCHEDULE "D" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING VER1DIAN CORPORATION EMPLOYEES Attached hereto. Z Z ~ '~ ~' Z Z Z *~ Z Z Z Z Z Z Z Z Z ~- Z SCHEDULE "E" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKER1NG DISTRIBUTION ASSETS Real Property Interests: except as specified in Schedules "H", "J" and "K", all lands, premises, freehold and leasehold property, interests, easements, rights of way, licences, and rights to use or occupy real property whether registered or unregistered, liens, mortgages, charges, agreements, notice of agreements, debentures and security interests which create an interest in land and all other rights or interests therein, and fixtures thereon, including, without limitation, the following lands, leases, easements and rights: Location Legal Description Legal Interest (1) Valley Farm (1) Parcel 2-1, Section 40M1231; Part of Block 2, Licence Road Plan 40M1231, Parts 1, 4, 7 and 10 on Plan expiring April T. Centre 40R6884. 30, 2081 from The (2) Part of the Road Allowance between Lots 20 and Corporation of 21, Concession 1, Pickering (as closed by By- the Town of law D139182), Parts 2, 3, 5, 6, 8, 9 and 11, Plan Pickering 40R6884 (2) 525 Highway Part of Lot 30, Concession 5, Picketing, Part 8 on Fee Simple 7, Greenriver Plan 40R5675 (3) Westney Part of Lot 10, Concession 5, Pickering, Parts 1 and Fee Simple Road, 2 on Plan 40R886 Greenwood (4) Dunchurch Part of Lot 25, Concession 1, Picketing, Part 2 on Fee Simple Street Plan 40113163 (5) Dunbarton, Part of Lots 27 and 28, Broken Front Concession, Fee Simple South Side Pickering, as in D259209 Kingston Road (6) Administra- Parcel Picketing Con 1-16-3, Section Picketing; Part Fee Simple tion - Service of Lot 16, Concession 1, Picketing, Part 2 on plan of Centre, 1920 survey prepared by Horton, Wallace & Davies Bayly Street Limited, O.L.S., Project no. 21784 (7) Bay Ridges, Part of Lot 22, Concession 1, Picketing, as in Fee Simple 1338- 1342 D259212 Bayly Street ii. Plant, Building, Fixtures: all plant, buildings, structures, erections, improvements, appurtenances and fixtures (including fixed machinery and fixed equipment), transformer stations, substations, transformers, vaults, transmission lines, distribution lines, conduits, ducts, pipes, wires, rods, cables, fibres and other apparatus, devices, appliances and equipment, materials, works, poles, pipelines and fittings, excluding all meters, wherever situate including, without limitation, situate on any of the lands, premises, leaseholds, easements, fights of way or interests whether registered or unregistered described in (i) above or forming part thereof or otherwise, or located on property owned by the Commission, or the Town, private property or public property except as specified in Schedules "H", "J" and "K"; iii. iv. vii. VIII. ix. Machinery and Equipment: except as specified in Schedules "H", "J" and "K", all machinery and equipment (except for all vehicles including, without limitation, trailers and related vehicle equipment), all goods and chattels and other personal property, tools, handling equipment, furniture, furnishings and accessories relating to the distribution business of the Commission; Accounts Receivable: all accounts receivable of the Commission including, without limitation, all customer and trade accounts, notes receivable, book debts and other debts due or accruing to the Commission and the benefit of all security and security deposits for such accounts and debts; Cash: $5,000,000 Reserves: The portion of any reserve fund established under Section 33 of the Development Charges Act, 1997 that relates to development charges collected in respect of electrical power services, and the portion of any reserve fund referred to in Section 63 of the Development Charges Act, 1997 that relates to development charges collected in respect of electrical power services as follows; Contracts, Rights: except as specified in Schedules "H", "J" and "K", the full benefit of all franchise, licence or management agreements and all other contracts, commitments, rights, choses in action, benefits, arrangements, understandings, and agreements, written or oral, to which the Town or the Commission is a party or otherwise relating to the distribution business of the Commission including, with limitation the following: a) all written or oral contracts, agreements, commitments, undertakings, rights and arrangements; b) all forward commitments to the Commission for supplies or materials entered into in the usual and ordinary course of business whether or not there are any written contracts with respect thereto; Goodwill: the goodwill of the Commission including, without limiting the generality of the foregoing: a) the exclusive right of Veridian Corporation or any of the Subsidiaries to represent itself as carrying on any business in continuation of and in succession to the Commission and the right to use any words indicating that its business is so carded on; and b) all records of sales, customer lists, customer data and supplier lists of or used by the Commission; Licences and Permits: the full benefit of all licences, registrations, permits, consents, quotas, approvals, certificates, and other authorizations including, without limitation, the following: a) Radio Licence account no. 42-080409522 issued to the Commission by Industry Canada; b) Waste Generator Licence No. 0N0 415300 issued to the Commission by the Ministry of the Environment; and c) Interim Distributer Licence issued to Picketing Hydro-Electric Commission pursuant to Section 129 of the Ontario Energy BoardAct, 1998 (Ontario); Xo xi. xii. ooo XII1. xiv. XV. xvi. Know How: except as specified in Schedules "H", "J" and "K", all patterns, plans, designs, research data, copyrights, trade secrets and other proprietary know-how, processes, drawings, technology, unpatented blueprints, flow_sheets, equipment and parts lists and descriptions and related instructions, manuals, data, records and procedures relating to the distribution business of the Commission and any and all data owned or used by the Commission, and all licences, agreements and other contracts and commitments relating to any of the foregoing; Prepaid Expenses: except as specified in Schedules "H", "J" and "K", all pre-paid expenses and deposits relating to the distribution business of the Commission the benefit of which will accrue to Veridian Connections Inc.; Warranties: except as specified in Schedules "H", "J" and "K", the full benefit of all warranties and warranty rights (implied, express or otherwise) against manufacturers, suppliers or sellers which apply to any of the Distribution Assets and the net realizable value of any warranty claims relating to the Distribution Assets outstanding as of the Effective Date; Insurance Policies: the full benefit of all policies of insurance of the Commission relating to the Distribution Assets; Records: all personnel records, inspection records and all other records, books, documents and data bases relating to Distribution Employees, the Distribution Liabilities, or the other Distribution Assets as are in the possession or under the control of the Commission; Computer Hardware and Software: all computer hardware and software, including, without limitation, all computer monitoring equipment and all rights under licences and other agreements or instruments relating to the distribution system of the Commission; and Equity in Ontario Hydro: all equity in the former Ontario Hydro and any successor or assign thereto accrued up to and including the Effective Date. SCHEDULE "F" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING DISTRIBUTION LIABILITIES i) ii) All customer deposits of the Commission; All obligations of the Commission to the Town with respect to the outstanding debentures issued by the Regional Municipality of Durham as set out directly below for the benefit of the Commission: By-Law # Original Principal Outstanding Maturity Date Principal ~Dec31/98 224- 89 $2,200,000.00 $331,100.00 Nov/1999 45-91 $2,000,000.00 $814,000.00 April/2001 5-92 $2,300,000.00 $1,155,000.00 Feb/2002 (iii) (iv) (v) All obligations relating to a class action proceeding commenced against all municipal electric utilities in Ontario which have charged late payment charges on overdue utility bills at any time after April 1, 1981. The action was initiated against Toronto Hydro as the representative of the defendant class of municipal electric utilities in Ontario. The Municipal Electric Association is undertaking the defence of this class action; All obligations related to the proceedings associated with Court File No. 98-CV-154613, Mercer v. Picketing Hydro Electric Commission et. al.; and All obligations of the Town and the .Commission arising out of the Employee Plans in respect of the Employees listed in Schedule "B". 2 SCHEDULE "G" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING COLLECTIVE AGREEMENT Collective Agreement between the Pickering Hydro-Electric Commission and Local #636, Unit ~40 of the International Brotherhood of Electrical Workers having a term commencing on May 1, 1999 to April 30, 2000. SCl~EDULE "H" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING EXCLUDED ASSETS Location Legal Description Legal Interest (1) BrockRoad Part of Lot 19, Concession 3, Picketing, Parts 2 and Fee Simple 3 on Plan 40R-7012 (2) Sheppard Part of Lot 28, Range 3, Broken Front Concession, Fee Simple Avenue and Picketing, Part 1 on Plan 40R2767 Whites Road SCHEDULE "I" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING EXCLUDED LIABILITIES (i) Municipal or regional debentures issued pursuant to the by-laws set out below for the benefit of the Commission: By-Law # Original Principal Outstanding Maturity Date Principal ~Dec31/98 224-89 $2,200,000.00 $331,100.00 Nov/1999 45-91 $2,000,000.00 $814,000.00 April/2001 5-92 $2,300,000.00 $1,155,000.00 Feb/2002 SCHEDULE "J" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING HOI,DING COMPANY ASSETS i) Real Property Interests: the following lands including all related easements, rights or way, licences, and rights to use or occupy the land whether registered or unregistered, secured or unsecured: Location Legal Description Legal Interest 1. Administratio Parcel Picketing Con 1-16-3, Section Picketing; Part Fee Simple n Service of Lot 16, Concession 1, Picketing, Part 1 on plan of Centre, 1920 survey prepared by Horton, Wallace & Davies Bayly Street Limited, O.L.S., Project no. 21784 (vii) (viii) (ix) (×) (xi) (vii) (viii) Plant, Building, Fixtures: all plant, buildings, structures, erections, improvements, appurtenances and fixtures (including fixed machinery and fixed equipment) on the lands described in (i) above; Vehicles: all trucks, cars, trailers, vehicles and rolling stock of all kinds of the Commission; Inventories: except as specified in Schedule "K", all inventories and supplies including, without limitation, production and shipping supplies, maintenance items and all other materials and supplies on hand to be used or consumed in the business of Veridian Corporation; Cash: all cash on hand of the Commission except as specified in Schedules "E" and "K"; Contracts, Rights: the full benefit of all franchise, licence or management agreements and all other contracts, commitments, rights, choses in action, benefits, arrangements, understandings, and agreements, written or oral, relating to the general administrative and support services provided by the Commission, to which the Town or the Commission is a party or otherwise including, with limiting the generality of the foregoing: (a) all written or oral contracts, agreements, commitments, undertakings, rights and arrangements; (b) all forward commitments to the Commission for supplies or materials entered into in the usual and ordinary course of business whether or not there are any written contracts with respect thereto; Intellectual Property: all of the right, title, benefit and interest of the Commission in and to all registered trade marks, trade names, brand names, patents and copyrights, all unregistered trade marks, trade names and copyrights and all patent applications, trade mark registration applications and copyright registration applications, both domestic and foreign, owned or made by the Commission, including, without limitation, the Picketing Hydro Trademark; Know How: all patterns, plans, designs, research data, copyrights, trade secrets and other proprietary know-how, processes, drawings, technology, unpatented blueprints, flow_sheets, equipment and parts lists and descriptions and related instructions, manuals, data, records and procedures and any and all data owned or used by the Commission that relate to the general administrative and support services provided by the Commission, and all licences, agreements and other contracts and commitments relating to any of the foregoing; (ix) (x) (xi) (xii) (xiii) Computer Hardware and Soft. yarc: except as specified in Schedule "E", all computer hardware and soRware, including all fights under licences and other agreements or instruments relating thereto; Prepaid Expenses: all pre-paid expenses and deposits relating to the Holding Company Assets the benefit of which will accrue to Veridian Corporation; Warranties: the full benefit of all warranties and warranty rights (implied, express or otherwise) against manufacturers, suppliers or sellers which apply to any of the Holding Company Assets and the net realizable value of any warranty claims relating to the Holding Company Assets outstanding as of the Effective Date; Insurance Policies: the full benefit of all policies of insurance of the Commission relating to the Holding Company Assets; and Records: all personnel records, inspection records and all other records, books, documents and data bases relating to the Holding Company Employees, the Holding Company Liabilities, or the Holding Company Assets as are in the possession or under the control of the Commission. SCHEDULE "K" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING RETAIL ASSETS (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Inventories: all meter, hot water heaters and appliance inventory; Equipment: all metering and measurement devices; Cash: $1,000,000; Contracts, Rights: the full benefit of all franchise, licence or management agreements and all other contracts, commitments, rights, choses in action, benefits, arrangements, understandings, and agreements, written or oral, not contained in Schedule "E" or "J" to which the Town or the Commission is a party or otherwise including, with limiting the generality of the foregoing: (a) (b) all written or oral contracts, agreements, commitments, undertakings, rights and arrangements; all forward commitments to the Commission for supplies or materials entered into in the usual and ordinary course of business whether or not there are any written contracts with respect thereto; Know How: all patterns, plans, designs, research data, copyrights, trade secrets and other proprietary know-how, processes, drawings, technology, unpatented blueprints, flow sheets, equipment and parts lists and descriptions and related instructions, manuals, data~-records and procedures and any and all data owned or used by the Commission that are not contained in Schedules "E" or "J" and all licences, agreements and other contracts and commitments relating to any of the foregoing; Prepaid Expenses: all pre-paid expenses and deposits the benefit of which will accrue to the Veridian Energy Inc.; Warranties: the full benefit of all warranties and warranty rights (implied, express or i)therwise) against manufacturers, suppliers or sellers which apply to any of the Retail Assets and the net realizable value of any warranty claims relating' to the Retail Assets outstanding as of the Effective Date; Insurance Policies: the full benefit of 'all policies of insurance of the Commission relating to the Retail Assets; and Records: all personnel records, inspection records and all other records, books, documents and data bases relating to Retail Employees, the Retail Liabilities or to the Retail Assets as are in the possession or under the control of the Commission. SCHEDULE "L" TO BY-LAW NO. 5586/99 OF Tl~E TOWN OF PICKERING HOLDING COMPANY LIABILITIES All obligations of the Town and the Commission arising out of the Employee Plans in respect of the Employees listed in Schedule "D". SCHEDULE "M" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING RETAIL LIABILITIES (i) All obligations of the Town and the Commission arising out of the Employee Plans in respect of the Employees listed in Schedule "C". SCHEDULE "N" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING AI,I,OCATION OF PURCHASE PRICE To be prepared in accordance with Section 3.02. SCHEDULE "O" TO BY-LAW NO. 5586/99 OF THE TOWN OF PICKERING MERGER PURCHASE PRICE AND AMENDING AGREEMENT Attached hereto. BETWEEN: MERGER PURCHASE PRICE AND AMENDING AGREEMENT THE CORPORATION OF THE TOWN OF AJAX ("Ajax") - and - THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON ("Clarington") THE CORPORATION OF THE TOWN OF PICKERING ("Picketing") (Ajax, Clarington and Picketing collectively referred to herein as the "Municipalities" and individually as a "Municipality") - and - AJAX HYDRO-ELECTRIC COMMISSION ("Ajax Hydro") - and - CLARINGTON HYDRO-ELECTRIC COMMISSION ("Clarington Hydro") - and - PICKERINH HYDRO-ELECTRIC COMMISSION ("Picketing Hydro") (Ajax Hydro, Clarington Hydro and Picketing Hydro collectively referred to herein as thc "Commissions" or individually as a "Commission") - and - VERIDIAN CORPORATION ("HoldCo") - and - -2- VERIDIAN CONNECTIONS INC. ("Connections") - and - VERIDIAN ENERGY INC. CVeridian Energy") (HoldCo, Veridian Energy and Connections collectively referred to herein as the "Corporations" and individually as a "Corporation") RECITALS: The Municipalities have agreed pursuant to a merger agreement among each of Ajax, Picketing and Clarington dated June 29, 1999 (the "Merger Agreement") to merge the businesses of Ajax Hydro, Picketing Hydro and Clarington Hydro; Pursuant to Section 142 of the Electricity Act, 1998 (Ontario), Sections 71 and 73 of the Ontario Energy Board Act, 1998 (Ontario), and the Merger Agreement, the Municipalities have agreed to incorporate the Corporations; The Municipalities and HoldCo entered into a shareholders' agreement dated July 1, 1999 (the "Shareholders' Agreement") to provide for the conduct of certain affairs of HoldCo, to provide for certain restrictions on the transfer and ownership of shares of HoldCo and to govern the mutual fights and obligations of the Municipalities with respect to HoldCo and each other Municipality; The Shareholders' Agreement provides certain restrictions on HoldCo, including, without limitation, that HoldCo shall not enter into any commitments that would increase the Debt/Equity Ratio (as defined in the Shareholders' Agreement) to greater than 60% Debt (as defined in the Shareholders' Agreement) or issue any securities convertible into shares in.the capital of HoldCo; Each of the Municipalities shall pass a by-law (a "By-law"), with an effective date as of the date hereof, transferring the assets, liabilities and employees of its respective Commission to the Corporations for consideration, to be determined in accordance with the By-law, which shall include the issuance to each Municipality ofa HoldCo Note and Connections Note (the "Notes"); o The Municipalities desire to set out herein certain terms relating to the payment of the purchase price (the "Purchase Price") by the Corporations for the transfer of the Assets to the Corporations; -3- It is the desire of each Municipality that the Notes rank equally and that each Municipality act in the same manner with respect to its Notes as each other Municipality with respect to its Notes; NOW THEREFORE, in consideration of the premises, the mutual promises herein contained and other good and valuable consideration, (the receipt and sufficiency of which are hereby acknowledged) each of the parties agrees with each other party as follows: e Interpretation. Whenever used in this Agreement, unless the context otherwise requires, the capitalized terms set out in Schedule "A" have the respective meanings ascribed to them in Schedule "A". Purchase Price. The Purchase Price payable by the Corporations for the Assets shall be the fair market value of the Assets. An independent valuator selected by the President of HoldCo shall determine the fair market value of the Assets as of the Effective Date in accordance with the terms of this Agreement. For the purpose of the initial recording of the transfer of Assets contemplated by each By-law on the books of the Corporations, as at the date of this Agreement, the fair market value of the Assets shall be estimated to be the book value of the Assets as of the Effective Date determined in accordance with the Merger Agreement and this Agreement. The fair market value will be determined in accordance with Section 3 of this Agreement. Adjustment of Purchase Price by president of HoldCo. (a) It is the intention of the Municipalities that the Assets shall be transferred at their fair market value aa at the Effective Date and the Purchase Price may be adjusted as a result of any audit or valuation conducted at, er the Effective Date with respect to the Assets as at the Effective Date. (b) The basis for the fair market value of the Distribution Assets are estimates of value which involve a consideration of the permitted rate of return on-equity and the distribution rates which the OEB will allow Connections to charge for the distribution of electricity pursuant to the OEB Act. Since a final determination of the fair market value of the Distribution Assets as at the Effective Date cannot be made until the OEB determines the permitted rates under the OEB Act for the years 2000 and following, the Purchase Price of the Distribution Assets may be adjusted to reflect a revised determination of fair market value of the Distribution Assets as at the Effective Date which takes account of the OEB permitted rates. (c) The adjustments to the Purchase Price contemplated by this Section C may be effected as determined by the President of HoldCo based on an audit or valuation by an independent valuator or auditor and as approved by the Board of Directors of -4.- HoldCo. For greater certainty, all necessary adjustments to the Purchase Price shall have the same effect as if they were made on the Effective Date. Satisfaction of Purchase Price. (a) Distribution Assets and Distribution Liabilities - The Purchase Price for the Distribution Assets shall be satisfied by: (i) the assumption by Connections of the Distribution Liabilities; and (ii) as to the balance (the "Distribution Equity Price"): as to 57% of such balance, by the allotment and issuance by Connections to each Municipality of fully paid and non-assessable common shares, which amount shall be added to the stated capital account for such class of shares; and as to 43% of such balance, by the issuance by Connections to each Municipality ora form of promissory note (the "Connections Note"). The Connections Note shall be in the form attached hereto as Schedule "B"; and (b) Retail Assets and Retail Liabilities - The Purchase Price for the Retail Assets shall be satisfied by: (i) the assumption by Veridian Energy of the Retail Liabilities; and (ii) as to 100% of the balance (the "Retail Equity Price"), by the allotment and issuance by Veridian Energy to each Municipality of fully paid and non- assessable common shares, which amount shall be added to the stated capital account for such class of shares; and (c) Holding Company Assets and Holding (~ompan'y Liabilities - The Purchase Price for the Holding Company Assets shall be satisfied by: (i) the assumption by HoldCo of the Holding Company Liabilities; and (ii) as to the balance (the "Holding Company Equity Price"): as to 11% of the balance, by the allotment and issuance by HoldCo to each Municipality of fully paid and non-assessable common shares, which amount shall be added to the stated capital account for such class of shares; and e o 0 -5- bo as to 89% of such balance, .by the issuance by HoldCo to each Municipality of a form of promissory note (the "HoldCo Note"). The HoldCo Note shall be in the form attached hereto as Schedule "C". Allocation of Equi~. The Merger Agreement provides the basis for the determination of the percentage equity allocation (the "Equity Allocation") in HoldCo among the Municipalities. Pursuant to the Merger Agreement, the Equity Allocation for each Municipality shall be determined based upon the proportionate book value of the Assets contributed to the Corporations by each Municipality as at the Effective Date, which is estimated, as set out in the Merger Agreement, as follows: Picketing 47.4% Ajax 36.8% Clarington 15.8%. The above Equity Allocation will be subsequently adjusted based on the audited financial statements of each Commission as at November 1, 1999 in accordance with the Merger Agreement. Payment of Purchase Price. Each of the Municipalities shall receive a proportionate share of the Distribution Equity Price, Holding Company Equity Pr/ce and Retail Equity Pr/ce based upon each Municipality's Equity Allocation as at the Effective Date, as adjusted pursuant to Section 5 above. Notes Considered Equity for Purpose of Shareholders' Aereement. Each Note, or any replacement thereof, shall be considered Equity (as defined in the Shareholders' Agreement) for the purpose of determining whether shareholder approval is required pursuant to Subsection 3.9(e) of the Shareholders' Agreement. Acknowledement respecting Mer~er Agreement. Notwithstanding that Section 7 of the Merger Agreement contemplates the use of a "Transfer Agreement" in connection with the transfer of the Assets, Liabilities and Employees, a Transfer Agreement shall not be required to effect the transfer of the Assets, Liabilities and Employees for any Municipality. Amendment to Merger Agreement. Section 10 of the Merger Agreement shall be deleted in its entirety and replaced with the following: "Valuation of Assets. Each of the Municipalities agrees that the Transferred Assets and liabilities of each Predecessor Utility shall be transferred to HoldCo, or as applicable, the HoldCo Subs, at their fair market value as at the Effective Date. For the initial transfer, it shall be assumed that the book value of each respective Predecessor Utility equals the fair market value and shall be based on the audited financial statements of each Predecessor Utility as at the Effective Date. Each Mumcip. ality agrees to cause an audit of its Predecessor Utility to be conducted as at the Effective Date. The audit shall be conducted in accordance with generally accepted Canadian accounting principles on a basis consistent with prior 10. 11. 12.' 13. 14. 15. -6- periods, with such audit to be completed and the audit report delivered by each Municipality to HoldCo's auditors with 90 days after the Effective Date. The value of the Assets shall be subsequently adjusted to the fair market value of the Transferred Assets and liabilities of the Predecessor Utilities. The fair market value of the Transferred Assets and liabilities of each Predecessor Utility shall be deemed to be the proportionate share (on the basis of the Equity Allocation as described in Section 11) of the fair market value of all of the Transferred Assets and liabilities." Amendment to Merger Agreement. Section 13 of the Merger Agreement shall be amended by adding to the fifth.line after the word "HoldCo," the following: "the transfer of Common Shares of HoldCo,". Amendment to Merger Agreement. Section 18 of the Merger Agreement should be amended by deleting the section in its entirety. Commissions Bound by Merger Agreement. Each of the Commissions shall be bound by the terms and conditions of the Merger Agreement as amended by this Agreement as if it were an original party to the Merger Agreement. Oblillations in By-laws Binding and Enforceable by Parties. Where a By-law refers to · obligations of any party hereto (an "Obligor"), that Obligor shall be required to perform or fulfill the obligations as if they were covenants of the Obligor under this Agreement to each other party hereto (the "Other Parties"). Accordingly, each Other Party shall have the right to enforce the performance or fulfilment of the obligations under the respective By-law against the Obligor in the event of a failure to perform or fulfill such obligations as if they were covenants of the Obligor under this Agreement. The terms of each By-law shall be incorporated by reference into this Agreement. Municipalities and Commissions Consent to By-laws. Each Municipality (the "Consenting Mtmicipality") and its respective Commission consent to the passage of each other Municipality's By-law in a form substantially the same as the Consenting Municipality's own By-law and as set out in the Merger Agreement. Inter Creditor Agreement. Each of the Notes shall rank equally. No Municipality may take any step to amend, convert, exchange, or enforce its Notes without the agreement of each other Municipality which holds Notes to amend, convert, exchange or enforce its own Notes on the identical terms and conditions. A Municipality which proposes such a step shall give notice in writing of its proposal and the agreement of a Municipality to such proposal shall be given in writing by the Treasurer of that Municipality. In the event that all Municipalities do not agree with the proposal, no Municipality shall proceed with the proposed action. 16. 17. 18. -7- Prepayment of Interest under the Notes. The interest payable pursuant to the Notes shall be prepaid to the holder in two installments as follows: November 1, 1999 and September 1, 2000. Interest prepaid under the Notes shall comprise the Special Payment (as defined in the Merger Agreement) and shall constitute full payment thereof. Representations of Municipalities and Commissions.. Each Municipality and its respective Commission hereby represent and warrant that: (a) they are participants in OMERS; and (b) each Employee of each Commission is a member of OMERS. Representations of Corporations Regardin~ Pension Plans. Each of the Corporations hereby represents warrants and covenants that: (a) (b) i.t is an associated employer within the meaning of the OMERS Act; Veridian Connections Inc. shall elect to participate in OMERS in respect of the Employees of each Commission listed in Schedule "B" of each respective By-law and shall .perform and assume all of the obligations and duties of an associated employer under the OMERS Act with respect to the Employees of each Commission listed in Schedule "B" of each respective By-law in each case effective the Effective Date; (c) Veridian Energy Inc. shall elect to participate in OMERS in respect of the Employees of each Commission listed in Schedule "C" of each respective By-law and shall perform and assume all of the obligations and duties o fan associated employer under the OMERS Act with respect to the Employees of each Commission listed in Schedule "C" of each respective By-law in each case effective the Effective Date; and (d) Veridian Corporation shall elect to participate in OMERS in respect of 'the Employees of each Commission listed in Schedule "D" of each respective By-law and shall perform and assume all of the obligations and duties of an associated employer under the OMERS Act with respect to the Employees of each Commission listed in Schedule "D" of each respective By-law in each case effective the Effective Date. -8- 19. Effective Date. This Agreement is made effective as of November 1, 1999 notwithstanding the date of execution. IN WITNESS WHEREOF this Agreement has been duly executed by the parties under their respective corporate seals as witnessed by the signatures of their proper officers in that behalf. DATED as of the 1st day of November, 1999. THE CORPO .RATION OF THE TOWN OF AJAX By: c/s Steve Parish, Mayor By: c/s Many de Rond, Clerk THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON By: c/s Diane Hamre, Mayor By: c/s Patti Bame, Clerk THE CORPORATION OF THE TOWN OF PICKERING By: c/s Wayne Arthurs, Mayor By: c/s Brace Taylor, Clerk -9- AJAX HYDRO-ELECTRIC COMMISSION By:. Name: Duncan Jewell Title: Chair By: Name: Axel Starck Title: General Manager CLARINGTON HYDRO-ELECTRIC COMMISSION By: Name: George Van Dyk Title: Chair By: Name: David Clark Title: General Manager PICKERING HYDRO-ELECTRIC COMMISSION By: Name: Jame~ Mason Title: Chair By: Name: John Wiersma Title: General Manager -10- VERIDIAN CORPORATION By: Name: James I. Mason Title: Director c/s By: Name: John Wiersma Title: President C,/S VERIDIAN CONNECTIONS INC. By: Name: James I. Mason Title: Director c/s By: Name: John Wiersma Title: President C,/S VEKIDIAN ENERGY INC. By: Name: James I. Mason Title: Director c/s By: Name: John Wiersma Title: President 'c/s SCHEDULE "A" DEFINITIONS Whenever used in this By-law, unless the context otherwise requires, the following words and terms shall have the respective meanings ascribed to them below: '"Agreement" means this merger purchase price and amending agreement among the Municipalities and the Corporations; "Assets" means all of the Distribution Assets, Retail Assets and Holding Company Assets; "By-law" shall have the meaning set out in the recitals; "Connections Note" shall have the meaning set out in Subparagraph 4(a)(ii)(b); "Consenting Municipality" shall have the meaning set out in Section 14; "Distribution Assets" means all of the distribution assets of the Commissions and the Municipalities as defined in each respective By-law; "Distribution Equity Price" shall have the meaning set out in Paragraph 4(a)(ii); "Distribution Liabilities" means all distribution Liabilities of the Commissions and the Municipalities as defined in each respective By-law; "Effective Date" means November 1, 1999; "Employees" shall have the meaning ascribed thereto in Section (k) of Schedule "A" o feach By-law; "Equity Allocation" shall have the meaning set out in Section 5; "HoldCo Note" shall have the meaning set out in Subparagraph 4(c)(ii)(b); "Holding Company Assets" means all of the holding company assets of the Commissions and the Municipalities as defined in each respective By-law; "Holding Company Equity Price" shall have the meaning set out in Paragraph 4(c)(ii); "Holding Company Liabilities" means all of the holding company liabilities of the Commissions and the Municipalities as defined in each respective By-law; "Merger Agreement" shall have the meaning set out in the recitals; "Notes" shall have the meaning of set out in the recitals; -2- ''Obligor'' shall have the meaning set out in Section ! 3; "OEB" means the Ontario Energy Board; "OEB Act" means the Ontario Energy Board Act, 1998 (Ontario) and all regulations related thereto, as amended from time to time; "OMERS" means the Ontario Municipal Employees Retirement Systems; "OMERS Act" means the Ontario Municipal Employees Retirement Systems Act; "Other Parties" shall have the meaning set out in Section 13; "Purchase Price" shall have the meaning set out in the recitals; "Retail Assets" means all of the retail assets of the Commissions and the Municipalities as defined in each respective By-law; "Retail Equity Price" shall have the meaning set out in Paragraph 4(b)(ii); "Retail Liabilities" means all of the retail liabilities of the Commissions and the Municipalities as defined in each respective By-law; and "Shareholders' Agreement" shall have the meaning set out in the recitals. SCHEDULE "B" CONNECTIONS NOTE Attached hereto. TERM PROMISSORY NOTE Maturity Date: November 1, 2003 Principal Amount: $! FOR VALUE RECEIVED, Veridian Connections Inc. (the "Corporation"), hereby promises to pay to or to the order of the Corporation of the[ Town of Ajax, the Town of Picketing or the Municipality of Clarington] (the "Holder"), in lawful money of Canada, on November 1, 2003 (the "Maturity Date") at the principal office of the Holder, the principal amount of! Dollars ($!) (the "Principal Amount") together with interest on the unpaid'Principal Amount calculated annually, not in advance, from the date hereof at the rate of 0% per annum for the .first period ending October 31, 2000 and at a rate of 7.6% per annum on and after November 1, 2000 until the Maturity Date. Interest at the said rate shall be payable on November 1 in each year up to and including the Maturity Date. 1. Acceleration on Default Upon default in the payment of any principal or interest due hereunder, or if the undersigned shall become insolvent or bankrupt or make a proposal in bankruptcy, the entire unpaid principal indebtedness owing by the undersigned to the Holder evidenced hereby and all interest accrued thereon to the date of payment shall forthwith become due and payable upon demand by the Holder subject to any subordination and postponement to any other financial institution or lender. 2. Ranking of this Note This Note shall rank equally in all respects as to the payment of principal and interest hereunder with promissory notes issued as of the dates hereof to the [Corporation of the Town of Picketing and to the Corporation of the Municipality of Clarington and to the Corporation of the Town of Ajaxl (collectively "the Municipalities") described in Schedule "A" hereto (the "Other Notes"). 3. Subordination The obligation of the Corporation to repay the principal amount of this Note and of the Other Notes is subordinated and postponed to the obligations of the Corporation from time to time to any other financial institution or lender. 4. Conversion of this Note All (but not less than all) of the Principal Amount of this Note is convertible into fully- paid and non-assessable common shares of the Corporation based on the exchange ratio specified herein at the option of the Holder, which option may be exercised by the Holder by notice in writing to the Corporation on or before May 1, 2003. The option to convert shall expire if not exercised on or before November 1, 2003. The exchange ratio for the conversion of the Principal Amount of this Note shall be on the basis that, for every $1000 of Principal Amount, 1 fully-paid and non-assessable common share of the Corporation shall be issued to the Holder. The conversion of the Principal Amount will be effected on the Maturity Date of this Note. 5. Extension of the Note In the event that the Holder does not convert the Principal Amount of the Note on the Maturity Date in accordance with Section 4 of this Note, the Corporation may, at its option, extend the Maturity Date of some or all of the Principal Amount of the Note ("the Revised Principal Amount") for an additional two-year period to November 1, 2005 (the "Extended Term") with the rate of interest and terms of repayment to be agreed between the Holder and the Corporation. Any Principal Amount for which the Corporation has not extended the Maturity Date shall be paid to the Holder on the Maturity Date. In the event that the Corporation and the Holder cannot agree on the rate of interest and the terms of repayment of the Revised Principal Amount for the Extended Term of the Note, the Revised Principal Amount shall be due and payable on November 1, 2005 with interest at the rate specified in the next paragraph. If the Holder and the Corporation do not agree on the interest rate applicable for the Extended Term, then interest shall be calculated and payable on the Revised Principal Amount from the Maturity Date at the lesser of (i) the cash of the Corporation available for the payment of interest and (ii) the rate paid for a Treasury Bill (issUed within five business days of the Maturity Date by the Government of Canada with a term of 182 days), calculated and payable annually on November 1. 6. Sale of Shares In the event that the Holder transfers its common shares in the capital of the Corporation (in accordance with the terms of a shareholders' agreement among the Holder, the Municipalities and the Corporation dated July 1, 1999) prior to the conclusion of the Extended Term of the Note, the Note shall remain due in accordance with its terms. If the Holder transfers its common shares in the capital of the Corporation prior to the Maturity Date, the Corporation shall be entitled to set-off any amount owing to the Holder against any amount of prepaid interest paid by the Corporation to the Holder but not earned by the Holder. Note Non-negotiable and Non-assignable The Note shall be non-negotiable and non-assignable. 8. Surrender and Replacement The Note is issued pursuant to By-law No. of the Holder and the Principal Amount may be adjusted in accordance with the By-law. Follo~ng such adjustment, at the request of the Corporation, the Holder shall surrender this Note to the Corporation for cancellation, without repayment of the Principal Amount, in exchange for the issuance of a replacement promissory note of the Corporation payable to the Holder which reflects such adjustment. IN WITNESS WHEREOF Veridian Connections Inc. has caused this Note to be signed under its corporate seal by its duly authorized officers as of this 1~t day of November, 1999. VERIDIAN CONNECTIONS INC. By: Name: James I. Mason Title: Director By: Name: John Wiersma Title: President SCHEDULE "A" [Details of Other Notes to be inserted.] TERM PROMISSORY NOTE Maturity Date: November 1, 2003 Principal Amount: $! FOR VALUE RECEIVED, Veridian Connections Inc. (the "Corporation"), hereby promises to pay to or to the order of the Corporation of the[ Town of Ajax, the Town of Picketing or the Municipality of Claringtonl (the "Holder"), in lawful money of Canada, on November 1, 2003 (the "Maturity Date") at the principal office of the Holder, the principal amount of ! Dollars ($!) (the "Principal Amount") together with interest on the unpaid Principal Amount calculated annually, not in advance, from the date hereof at the rate of 0% per annum for the first period ending October 31, 2000 and at a rate of 7.6% per annum on and after November 1, 2000 until the Maturity Date. Interest at the said rate shall be payable on November 1 in each year up to and including the Maturity Date. 1. Acceleration on Default Upon default in the payment of any principal or interest due hereunder, or if the undersigned shall become insolvent or bankrupt or make a proposal in bankruptcy, the entire unpaid principal indebtedness owing by the undersigned to the Holder evidenced hereby and all interest accrued thereon to the date of payment shall forthwith become due and payable upon demand by the Holder subject to any subordination and postponement to any other financial institution or lender. 2. Ranking of this Note This Note shall rank equally in all respects as to the payment of principal and interest hereunder with promissory notes issued as of the dates hereof to the [Corporation of the Town of Pickering and to the Corporation of the Municipality of Clarington and to the Corporation of the Town of Ajaxl (collectively "the Municipalities") described in Schedule "A" hereto (the "Other Notes"). 3. Subordination The obligation of the Corporation to repay the principal amount of this Note and of the Other Notes is subordinated and postponed to the obligations of the Corporation from time to time to any other financial institution or lender. 4. Conversion of this Note All (but not less than all) of the Principal Amount of this Note is convertible into fully- paid and non-assessable common shares of the Corporation based on the exchange ratio specified herein at the option of the Holder, which option may be exercised by the Holder by notice in writing to the Corporation on or before May 1, 2003. The option to convert shall expire if not exercised on or before November 1, 2003. The exchange ratio for the conversion of the Principal Amount of this Note shall be on the basis that, for every $1000 of Principal Amount, 1 fully-paid and non-assessable common share of the Corporation shall be issued to the Holder. The conversion of the Principal Amount will be effected on the Maturity Date of this Note. 5. Extension of the Note In the event that the Holder does not convert the Principal Amount of the Note on the Maturity Date in accordance with Section 4 of this Note, the Corporation may, at its option, extend the Maturity Date of some or all of the Principal Amount of the Note ("the Revised Principal Amount") for an additional two-year period to November 1, 2005 (the "Extended Term") with the rate of interest and terms of repayment to be agreed between the Holder and the Corporation. Any Principal Amount for which the Corporation has not extended the Maturity Date shall be paid to the Holder on the Maturity Date. In the event that the Corporation and the Holder cannot agree on the rate of interest and the terms of repayment of the Revised Principal Amount for the Extended Term of the Note, the Revised Principal Amount shall be due and payable on November 1, 2005 with interest at the rate specified in the next paragraph. If the Holder and the Corporation do not agree on the interest rate applicable for the Extended Term, then interest shall be calculated and payable on the Revised Principal Amount from the Maturity Date at the lesser of (i) the cash of the Corporation available for the payment of interest and (ii) the rate paid for a Treasury Bill (issued within five business days of the Maturity Date by the Government of Canada with a term of 182 days), calculated and payable annually on November 1. 6. Sale of Shares In the event that the Holder transfers its common shares in the capital of the Co?potation (in accordance with the terms of a shareholders' agreement among the Holder, the Municipalities and the Corporation dated July 1, 1999) prior to the conclusion of the Extended Term of the Note, the Note shall remain due in accordance with its terms. If the Holder transfers its common shares in the capital of the Corporation prior to the Maturity Date, the Corporation shall be entitled to set-off any amount owing to the Holder against any amount of prepaid interest paid by the Corporation to the Holder but not earned by the Holder. Note Non-negotiable and Non-assienable The Note shall be non-negotiable and non-assignable. 8. Surrender and Replacement The Note is issued pursuant to By-law No.__ of the Holder and the Principal Amount may be adjusted in accordance with the By-law. Following such adjustment, at the request of the Corporation, the Holder shall surrender this Note to the Corporation for cancellation, without repayment of the Principal Amount, in exchange for the issuance of a replacement promissory note of the Corporation payable to the Holder which reflects such adjustment. IN WITNESS WHEREOF Veridian Connections Inc. has caused this Note to be signed under its corporate seal by its duly authorized officers as of this 1~t day of November, 1999. VERIDIAN CONNECTIONS INC. By: Name: James I. Mason Title: Director By: Name: John Wiersma Title: President SCHEDULE "A" [Details of Other Notes to be inserted.]