HomeMy WebLinkAboutCS 41/01
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REPORT TO COUNCIL
FROM:
Gillis A. Paterson
Director, Corporate Services & Treasurer
DATE: November 19, 2001
REPORT NUMBER: CS 41-01
SUBJECT: Veridian - Inter-Creditor Agreement
RECOMMENDATION:
1. It is recommended that Report CS 41-01 of the Director, Corporate Services & Treasurer
be received;
2. That the Mayor and Clerk be authorized to execute an Inter-Creditor Agreement in a form
as attached hereto between the Bank of Nova Scotia, the Town of Ajax, the City of
Belleville, the Municipality of Clarington, the City of Pickering, Veridian Corporation
and Veridian Connections Inc. confirming the subordinated ranking of municipality held
Promissory Notes to the senior debt financing to be issued by Veridian Corporation;
3. The Chief Administrative Officer and the Director, Corporate Services & Treasurer be
authorized to undertake any discussions, negotiations or amendments to agreements
necessary in order to put into effect the wishes of Council as expressed under these and
previous Resolutions regarding this matter; and,
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4.
That appropriate officials of the City of Pickering be given authority to gIve effect
thereto.
ORIGIN:
Director, Corporate Services & Treasurer
AUTHORITY:
Report CS 01-99
Resolution No. 226/99
FINANCIAL IMPLICATIONS:
None beyond that indicated in the original Merger and Shareholder Agreements
EXECUTIVE SUMMARY:
The Promissory Notes held by the Shareholders are debt subordinated to any other debt held by
Veridian Corporation and Veridian Connections Inc. Execution of this agreement between all
parties recognizes the fact, in a way that makes the Bank of Nova Scotia a party to the
subordination and ensures any amounts owing the Bank rank before such debt.
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Report to Council 41-01
Date: November 19,2001
Subject: Veridian - Inter-Creditor Agreement
Page 2
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BACKGROUND:
Veridian Corporation has arranged bank financing with the Bank of Nova Scotia. The five-year
agreement with the Bank for up to $48 million in lines of credit and up to $45 million in
guarantees provides re-financing for utility acquisitions, financing for capital expenditures and
investments and guarantees to be posted with the. Independent Market Operator in support of
electricity procurement.
The Bank requires an Inter-Creditor Agreement so that it is party to the agreement with the
municipal shareholders that the $60.8 million Promissory Notes held by the municipalities are
subordinated in rank to this Bank senior debt. You will recall from the terms of the Promissory
Notes recently passed by each Council, this subordination feature was included so that Veridian
could obtain necessary financing.
Municipal shareholder debt is protected by the Shareholders' Agreement. Veridian cannot place
debt, including Subordinated Promissory Notes, in excess of 70% of the total capitalization of
Veridian. Lending institutions deem this to be an acceptable debt to capitalization ratio.
Veridian's legal counsel has reviewed the Inter-Creditor Agreement.
It is requested by Veridian that the Council approve the Inter-Creditor Agreement and authorize
the Mayor and Clerk to execute this agreement.
ATTACHMENTS:
1. Inter-Creditor Agreement
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Prepared! Approved! Endorsed By:
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'--dillis A. Paterson
Director, Corporate Services & Treasurer
GAP:vw
Recommended for the consideration of Pickering
City Council
Thomas 1. Quinn, Chief Administrative Officer
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ATTACHMENT#L TO REPORT # C> "f1..O}
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INTER-CREDITOR AGREEMENT
THIS AGREEMENT made as of the _ day of November, 2001.
BETWEEN:
THE BANK OF NOVA SCOTIA, a Canadian chartered bank
(herein called the "Senior Creditor")
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THE CORPORATION OF THE MUNICIPALITY OF
CLARINGTON, a municipal corporation existing under the laws
of the Province of Ontario
(herein called "Clarington")
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THE CORPORATION OF THE TOWN OF AJAX, a municipal corporation
existing under the laws of the Province of Ontario
,.....
(herein called "Ajax")
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THE CORPORATION OF THE CITY OF PICKERING, a municipal
corporation existing under the laws of the Province of Ontario
(herein called "Pickering")
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THE CORPORATION OF THE CITY OF BELLEVILLE, a municipal
corporation existing under the laws of the Province of Ontario
(herein called "Belleville")
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VERIDIAN CORPORATION, a corporation amalgamated under
the laws of the Province of Ontario
(herein called the "Borrower")
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VERIDIAN CONNECTIONS INC., a corporation amalgamated
under the laws of the Province of Ontario
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(herein called "Connections")
WHEREAS the Obligors are or may become indebted to each of the Creditors and the
parties hereto desire to enter into this agreement in order to set out their respective rights and
obligations, including the respective priorities of the Creditors in connection with the
indebtedness of the Obligors to them;
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the
mutual covenants herein contained and other good and valuable consideration, given by each of
the parties hereto (the receipt and sufficiency of which are hereby acknowledged by all of the
parties hereto), the parties hereto hereby agree with each other as follows:
ARTICLE 1
INTERPRETATION
1.01 Definitions. The following defined terms shall for all purposes of this agreement, or
any amendment hereto, have the following respective meanings unless the context otherwise
specifies or requires or unless otherwise defined herein:
"Business Day" means any day other than a Saturday or Sunday on which banks are generally
open for business in Toronto, Ontario.
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"Credit Agreement" means the credit agreement made as of ., 2001 between the Borrower and
the Senior Creditor, as the same may be amended, modified, supplemented or replaced from time
to time.
"Creditors" means the Senior Creditor and the Subordinated Creditors and "Creditor" means
any of the Creditors.
"Default" means any of the events of default specified in any Loan Agreement entitling a
Creditor to demand or accelerate payment of any Obligations.
"Demand" means any notification by any of the Creditors to either Obligor of a demand for
payment under any Loan Agreement.
"Insolvency Legislation" means the Bankruptcy and Insolvency Act (Canada), the Companies'
Creditors Arrangement Act (Canada), the Bankruptcy Code (United States) and any similar
statute or law in any jurisdiction.
"Loan Agreements" means the Senior Loan Agreements and the Subordinated Loan
Agreements and "Loan Agreement" means anyone of the Loan Agreements.
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"Obligations" means Senior Obligations and the Subordinated Obligations.
"Obligors" means the Borrower and Connections.
"Senior Loan Agreements" means all documents, instruments and agreements evidencing the
Senior Obligations, including, without limitation, the Credit Agreement.
"Senior Obligations" means all indebtedness, obligations and liabilities, present or future, direct
or indirect, absolute or contingent, matured or not, at any time owing by the Borrower to the
Senior Creditor or remaining unpaid by the Borrower to the Senior Creditor under or in
connection with the Senior Loan Agreements.
"Subordinated Creditors" means Clarington, Ajax, Pickering and Belleville.
"Subordinated Loan Agreements" means any agreement entered into from time to time
between either Obligor and any of the Subordinated Creditors evidencing any Subordinated
Obligations, including, without limitation, the following:
(a) the first amended and restated term promissory note in the principal amount of
$5,966,000 dated September 28, 2001 and made by Connections in favour of
Clarington;
(b)
the first amended and restated term promissory note in the principal amount of
$5,588,000 dated September 28, 2001 and made by Connections in favour of
Belleville;
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(c) the first amended and restated term promissory note in the principal amount of
$14,060,000 dated September 28, 2001 and made by Connections in favour of
Ajax;
(d) the first amended and restated term promissory note in the principal amount of
$17,974,000 dated September 28, 2001 and made by Connections in favour of
Pickering;
( e) the first amended and restated term promissory note in the principal amount of
$2,206,000 dated September 28, 2001 and made by the Borrower in favour of
Belleville;
(f) the first amended and restated term promissory note in the principal amount of
$5,550,000 dated September 28, 2001 and made by the Borrower in favour of
Ajax;
(g) the first amended and restated term promissory note in the principal amount of
$7,095,000 dated September 28, 2001 and made by the Borrower in favour of
Pickering; and
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(h)
the first amended and restated term promissory note in the principal amount of
$2,355,000 dated September 28, 2001 and made by the Borrower in favour of
Clarington.
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"Subordinated Obligations" means all indebtedness, obligations and liabilities, present or
future, direct or indirect, absolute or contingent, matured or not, at any time owing by either
Obligor to any of the Subordinated Creditors or remaining unpaid by either Obligor to any of the
Subordinated Creditors under or in connection with the Subordinated Loan Agreements, but
excluding any indebtedness in respect of municipal debentures of which $1,380,550.16 of
principal is currently outstanding.
1.02 Other Usages. References to "this agreement", "the agreement", "hereof', "herein",
"hereto" and like references refer to this Inter-Creditor Agreement and not to any particular
Article, Section or other subdivision of this Inter-Creditor Agreement. Any references to "this
agreement", "the agreement", "hereof', "herein", "hereto" and like references refer to this Inter-
Creditor Agreement as amended, supplemented or otherwise modified from ti.me to time in
accordance with the terms hereof.
1.03 Plural and Singular. Where the context so requires, words importing the singular
number shall include the plural and vice versa.
1.04 Headings. The division of this agreement into Articles, Sections and the insertion of
headings in this agreement are for convenience of reference only and shall not affect the
construction or interpretation of this agreement.
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1.05 Applicable Law. This agreement shall be governed by and construed and interpreted
in accordance with the laws of the Province of Ontario and the laws of Canada applicable
therein. Any legal action or proceeding with respect to this agreement may be brought in the
courts of the Province of Ontario and, by execution and delivery of this agreement, the parties
hereby accept for themselves and in respect of their property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts. Each party irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to such party to the
address prescribed by Section 6.10, such service to become effective five Business Days after
such mailing. Nothing herein shall limit the right of any party to serve process in any manner
permitted by law or to commence legal proceedings or otherwise proceed against any other party
in any other jurisdiction.
1.06 Time of the Essence. Time shall in all respects be of the essence of this agreement.
1.07 Paramountcy. In the event of any conflict or inconsistency between the provisions of
this agreement and the provisions of any other agreement which is referred to herein or delivered
pursuant hereto, the provisions of this agreement shall prevail and be paramount.
1.08 No Rights Conferred on the Obligors. Nothing in this agreement shall be construed
as conferring any rights upon the Obligors or any third party. The terms and conditions hereof
are and shall be for the sole and exclusive benefit of the Creditors.
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ARTICLE 2
CONSENT
2.01 Consent of Creditors. Each Creditor consents to the incurring of the Obligations by
the Obligors and waives any Default that the incurring of the Obligations may have constituted
under the terms of the Loan Agreements.
ARTICLE 3
PRIORITY OF OBLIGATIONS
3.01 Priority of Obligations. Except as otherwise expressly provided in Section 3.03, the
Subordinated Obligations shall be and are hereby postponed and made subordinate in right of
payment to the prior payment in full in cash of the Senior Obligations.
3.02 Prohibited Payments to Subordinated Creditors. Except as otherwise expressly
provided in Section 3.03, the Obligors shall not make nor be entitled to make, and the
Subordinated Creditors shall not accept and shall not be entitled to accept, any payment or
prepayment of principal, interest or other amount under the Subordinated Loan Agreements,
whether in the form of cash, securities or otherwise and whether by way of payment, set off or
otherwise.
3.03 Permitted Payments to the Subordinated Creditors. The Obligors may make, and
the Subordinated Creditors may receive, payments (but not prepayments) on account of interest
"".... owing by the Obligors to the Subordinated Creditors in accordance with the terms of the
Subordinated Loan Agreements at the maximum rate of 7.6 percent per annum, provided no
Default under the Credit Agreement exists at the time of such payment and no Default would
arise as a result of such payment. Notwithstanding the foregoing, the Senior Creditor
acknowledges that certain prepayments of interest were previously made under the Subordinated
Loan Agreements.
3.04 Certain Covenants of Subordinated Creditors. The Subordinated Creditors shall not
and shall not be entitled to:
(a) accelerate the time for payment of any of the Subordinated Obligations or
otherwise enforce or take any action to enforce payment of all or any part of the
Subordinated Obligations, whether by way of set off or otherwise, unless and until
all indebtedness of the Borrower to the Senior Creditor under or in connection
with the Credit Agreement has become immediately due and payable pursuant to
the terms thereof;
(b)
petition either of the Obligors into bankruptcy or initiate any similar proceeding
under any applicable Insolvency Legislation or, unless and until the Senior
Creditor or any other person files a petition in bankruptcy against the Borrower
and such petition is not stayed or dismissed within 60 days of such filing,
participate in such. bankruptcy or any similar proceeding under any applicable
Insolvency Legislation. For certainty, in no event shall any Subordinated Creditor
vote in any proceedings under any applicable Insolvency Legislation except as
directed in writing by the Senior Creditor;
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( c) amend, alter or otherwise modify the Subordinated Loan Agreements; or
(d) hold or obtain any security from the Obligors or any person on their behalf, for
payment or performance of the Subordinated Obligations.
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3.05 Distributions.
(a) To the extent not otherwise permitted under the Credit Agreement, the Obligors
shall not make nor be entitled to make, and the Subordinated Creditors shall not
accept nor be entitled to accept the payment of any dividends or other distribution
on or in respect of any shares in the capital of the Obligors.
(b) The Obligors shall not make nor be entitled to make, and th(;~ Subordinated
Creditors shall not accept nor be entitled to accept the redemption, retraction,
purchase, retirement or other acquisition, in whole or in part, of any shares in the
capital of the Obligors or any securities, instruments or contractual rights capable
of being converted into, exchanged or exercised for shares in the capital of the
Obligors, including, without limitation, options, warrants, conversion or exchange
privileges and similar rights. Notwithstanding the foregoing, the Subordinated
Creditors shall be entitled to convert their interest under the Subordinated Loan
Agreements as provided for therein.
3.06 Effect of Non-Compliance.
(a) In the event any prepayments or other payments are made to or received by the
Subordinated Creditors in contravention of this agreement, the Subordinated Creditors shall hold
such prepayments or payments in trust for the Senior Creditor and shall not commingle such
proceeds with any of their own funds and shall forthwith pay such prepayments or payments to
the Senior Creditor for application to the payment or prepayment of the Senior Obligations as the
Senior Creditor sees fit.
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(b) Any action taken or thing done by any Subordinated Creditors in contravention
of this agreement shall be null and void and of no effect.
ARTICLE 4
REMEDIES
4.01 Remedies. The Obligors and the Subordinated Creditors hereby agree that all
covenants, provisions and restrictions contained herein are necessary and fundamental in order to
establish the respective priorities of the Creditors in connection with the Obligations, and that a
breach by any of the Obligors or the Subordinated Creditors of any such covenant, provision or
restriction would result in damages to the Senior Creditor that could not adequately be
compensated by monetary award. Accordingly, it is expressly agreed by the Obligors and the
Subordinated Creditors that in addition to all other remedies available to it including, without
limitation, any action for damages, the Senior Creditor shall be entitled to the immediate remedy
of a restraining order, interim injunction, injunction or other form of injunctive or other relief as
may be decreed or issued by any court of competent jurisdiction to restrain or enjoin the Obligors
or the Subordinated Creditors from breaching any such covenant, provision or restIiction.
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4.02 Default Notice. Each Creditor agrees to give written notice to each other Creditor
simultaneously with or immediately after the delivery to either of the Obligors of any written
notice of a Demand or a Default. Failure of a Creditor to give notice as provided in this Section
4.02 shall not affect the priorities established or other agreements provided for herein, nor shall
such Creditor be liable for failure to give any such notice nor shall any such failure in any way
limit or derogate from the obligations of the other Creditors.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SUBORDINATED CREDITORS
5.01 Representations and Warranties of the Subordinated Creditors. Each of the
Subordinated Creditors hereby represents and warrants to the Senior Creditor as follows and
acknowledges and confirms that the Senior Creditor is relying upon such representations and
warranties in extending credit to the Borrower under the Senior Loan Agreements:
(a) Each Subordinated Creditor is a municipal corporation duly incorporated and
organized and validly subsisting under the laws of its jurisdiction of
incorporation. Each Subordinated Creditor has all requisite corporate capacity,
power and authority to enter into, and carry out the transactions contemplated by,
this agreement.
(b)
All necessary action, corporate or otherwise, has been taken to authorize the
execution, delivery and performance of this agreement by each Subordinated
Creditor and each Subordinated Creditor has duly executed and delivered this
agreement. This agreement is a legal, valid and binding obligation of the
Subordinated Creditor, enforceable against each Subordinated Creditor by the
Senior Creditor in accordance with its terms.
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ARTICLE 6
MISCELLANEOUS
6.01 Consent of the Obligors. Each Obligor, by its execution hereof, hereby agrees to be
bound by, and shall act in accordance with, the terms, provisions and intent of this agreement.
6.02 Information Exchange. Each Creditor agrees to disclose to each other Creditor upon
reasonable request from time to time the aggregate amounts then owing by the Obligors to it and
whether it has any actual knowledge or' any Default. Each Obligor hereby consents to each
Creditor providing the other Creditor with such information, [mancial or otherwise, regarding the
Obligors and the Creditors' respective Obligations as may be deemed advisable by the Creditors
from time to time.
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6.03 Non-Impairment oqhe Senior Creditors' Rights. No right of the Senior Creditor to
enforce its rights hereunder shall at any time or in any way be prejudiced or impaired by any act
or failure to act on the part of the Obligors or by any act or failure to act by the Senior Creditor,
or by any non-compliance by the Obligors or the Subordinated Creditors with the terms of this
agreement, regardless of any knowledge thereof which the Senior Creditor may have or be
otherwise charged with. Without the Subordinated Creditors' consent, the Senior Creditor may
extend, renew, modify, or increase the Senior Obligations or amend or waive the terms of the
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Senior Loan Agreements and otherwise deal freely with the Borrower, all without affecting the
liabilities and obligations of the Obligors and the Subordinated Creditors hereunder and without
causing or constituting a breach of or default under any of the Subordinated Obligations.
.....,,;
6.04 Waivers and Amendments. No failure or delay by the Senior Creditor in exercising
any right hereunder shall operate as a waiver of such right nor shall any single or partial exercise
of any power or right preclude its further exercise or the exercise of any other power or right.
Any term, covenant, condition or obligation of this agreement may only be amended with the
written consent of all of the parties hereto or compliance therewith may only be waived (either
generally or in a particular instance and either retroactively or prospectively) by the Senior
Creditor in writing and in any such event the failure to observe, perform or discharge any such
term, covenant, condition or obligation, so amended or waived (whether such amendment is
executed or such consent or waiver is given before or after such failure), shall not be construed
as a breach of such term, covenant, condition or obligation.
6.05 Severability. Each provision of this agreement is intended to be severable and if any
provision is illegal, invalid or unenforceable, such illegality, unenforceability or invalidity shall
not affect the validity of this agreement or the remaining provisions.
6.06 Counterparts. This agreement may be executed in any number of counterparts, all of
which shall be deemed to be an original and such counterparts taken together shall constitute one
agreement, and any of the parties hereto may execute this agreement by signing any such
counterpart.
6.07 Further Assurances. The parties hereto agree to execute and deliver such further and --"
other documents and perform and cause to be performed such further and other acts and things as
may be necessary or desirable in order to give full effect to this agreement and every part thereof.
No party to this agreement shall take any action whereby the priorities and rankings set out in
this agreement might be impaired or defeated.
6.08 Assignment. This agreement shall enure to the benefit of and shall be binding upon the.
respective successors (including, without limitation, any trustee in bankruptcy or liquidator) and
permitted assigns of the parties hereto. The Subordinated Creditors shall not assign any of their
rights and obligations hereunder or under the Subordinated Loan Agreements. The rights and the
obligations of the Senior Creditor hereunder may be assigned by the Senior Creditor in whole or
in part without the consent of the other parties hereto but only in connection with or as part of an
assignment by the Senior Creditor of its rights under the Credit Agreement.
6.09 Entire Agreement. This agreement contains the entire understanding of the parties
with respect to the priority of the Obligations and supersedes any prior agreements, undertakings,
declarations, representations and understandings, both written and verbal, in respect of the
priority of the Obligations. There are no restrictions, agreements, promises, warranties,
covenants or undertakings relating to the priority of the Obligations other than those set forth in
this agreement.
6.10 Notices. Except as otherwise provided herein, all notices and other communications
provided for herein shall be in writing and shall be personally delivered to an officer or other
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responsible employee of the addressee or sent by telefacsimile, charges prepaid, at or to the
applicable addresses or telefacsimile numbers, as the case may be, set out opposite the relevant
party's name below or at or to such other address or addresses, telefacsimile number or numbers
as any party hereto may from time to time designate to the other parties in such manner. Any
communication which is personally delivered as aforesaid shall be deemed to have been validly
and effectively given on the date of such delivery if such date is a Business Day and such
delivery was made during normal business hours of the recipient; otherwise, it shall be deemed
to have been validly and effectively given on the Business Day next following such date of
delivery. Any communication which is transmitted by telefacsimile as aforesaid shall be deemed
to have been validly and effectively given on the date of transmission if such date is a Business
Day and such transmission was made during normal business hours of the recipient; otherwise, it
shall be deemed to have been validly and effectively given on the Business Day next following
such date of transmission.
In the case of the Senior Creditor: The Bank of Nova Scotia
Corporate Banking
44 King Street West, 16th Floor
Toronto, Ontario M5H IHl
Attention:
Telefax:
Director, Corporate Banking
(416) 933-7399
Veridian CorporationIV eridian Connections Inc.
55 Taunton Road East
Ajax, Ontario
LIT 3V3
In the case of the Obligors:
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Attention:
Telefax:
In the case of Clarington:
Vice President, Corporate Affairs and
Secretary Treasurer
(905) 619-0210
The Corporation of the Municipality of CIa ring ton
40 Temperance Street
Bowmanville, Ontario
LIC 3A6
Attention:
Telefax:
In the case of Ajax:
Mayor
(905) 623-5717
The Corporation ofthe Town of Ajax
65 Harwood Avenue South
Aj ax, Ontario
L 1 S 2H9
Attention:
Telefax:
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Mayor
(905) 683-1061
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In the case of Pickering:
The Corporation of the City of Pickering
1 The Esplanade
Pickering, Ontario
L 1 V 3P4
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Attention:
Te1efax:
Mayor
(905) 420-9695
In the case of Belleville:
The Corporation of the City of Belleville
459 Sidney Street
Belleville, Ontario
K8N 2Y7
Attention:
Telefax:
Mayor
(613) 967-3209
6.11 Termination of Agreement. This agreement shall terminate and shall be of no further
force or effect upon the earlier to occur of:
(a) all Senior Obligations being repaid in full and all commitments of the Senior
Creditor under the Senior Loan Documents having been terminated; and
(b) the written agreement of the Senior Creditor to such effect.
IN WITNESS WHEREOF the parties hereto have executed this agreement.
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THE BANK OF NOVA SCOTIA
By:
Name:
Title:
By:
Name:
Title:
THE CORPORATION OF THE
MUNICIPALITY OF CLAIUNGTON
By:
John Mutton
Mayor
By:
Patti Barrie
Clerk
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THE CORPORATION OF THE TOWN
OF AJAX
By:
By:
Steve Parish
Mayor
Marty de Rond
Clerk
THE CORPORATION OF THE CITY
OF PICKERING
By:
By:
Wayne Arthurs
Mayor
Bruce Taylor
Clerk
THE CORPORATION OF THE CITY
OF BELLEVILLE
By:
By:
George Zegouras
Mayor
J ary Plamondon
Clerk
VERIDIAN CORPORATION
By:
By:
John Wiersma
President
James I Mason
Director
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::ODMA \PCDOCS\DOCS\ 1093447\3
VERIDIAN CONNECTIONS INC.
By:
By:
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John Wiersma
President
James 1. Mason
Director
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