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Home My WebLink AboutCS 14/00, G`,�OFP/C� 1.73 ►-� � Q �� REPORT TO COUNCIL FROM: Gillis A. Paterson DATE: June 6, 2000 Director, Corporate Services & Treasurer REPORT NUMBER: CS 1400 SUBJEC'I': Veridian Corporation RECOMMENDATION: That Report CS 14-00 of lhe Director, Corporate Services & Treasurer be received and that: 1. the Adjustment Agreement between the Corporation of the City of Pickering, the Town of Ajax, the Municipality of Clarington and Veridian Carporation, Veridian Connections Inc. Veridian Energy Inc. in a fortn as attached hereto, as may be amended to the satisfaction of the Director of Corporate Services, be approved; 2. tho Clerk nnd the Mayor be uuthorized to execute this agreemcnt; unJ 3. the nppropriate o�cials of the City of Pickering be given authority to give effect iherelo. ORIG[N: By-I.uw #5514/99,1unc 29, 1999 Council Resolution #226/99, Decembcr G, 1999 AUTHORITY: The Energy Competition Act (Bill 35), R.S.O. 1999, as amended The Electrical Act, R.S.O. 1998, as amendcd The Municipal Act, R.S.O. 1990, az amended Other relevant Legislation of the Province of Ontario FINANCIAL IMPLICATIONS: Though the Promissory Notes and Shares allocated to Pickering are being reduced slightly, to reflect the proper value bazed upon the audited statements of the three PUCs at the time of the amalgamation into Veridian. EXECUTNE SUMMARY: Not Applicablc BACKGROUND: On Deccmber 6, 1999 thc Council of the City of Pickering npproved Resolution H226/99 which provided the authority for, among other things, the execution of the Merger Purchese Price and Amending Agreement with Veridinn. This agrccment rotlectcd tha approval gra►►ted by Council . 1.� 4 Report to Council CS 14-00 Date: lune 6, 2000 ' SubJect: Veridian Corporation Page 2 at its meeting of Juna 29, 1999 to enter into the Merger Agreement. The former agrcemrnt provided for the issuance of Promissory Noles and Shazes based upon the estimated financial position of the predecessor Public Utilities Commissions as at October 31, 1999. Thc sudited finencial statements have now been prepazed nnd the value of the predecessor PUCs nwised slightly. This has resulted in the following adjustments to the Pickering notes: 1. Veridian Co�poration Promissory Note mduced by $15,000 to $7,095,000; 2. Veridian Connection Promissory Note reduced by $38,000 to $17,974,000; The Promissory Notes due Ajau were increased and those due Clarington reduced. The Share Capital equity allocalion has also been revised, based upon the revised PUC valuations and percentage share of ownership. Pickering's shnres will be reduced by 95 to 28,195; Clarington's by 14 to 9,416; and, Ajax's will increase by 109 to 22,073. As a result of the foregoing the "speciul paymcnts' of prepaid interest an the Promissory Notes also was adjusted to reflect the udjusted value of the Notes themsolves. Originally, two payments to Pickering of $2,844,000 wera contemplatcd. One payment was made on November 1, 1999. The second, due November I, 2000 will be reduced by $12,000 to 52,832,000. Similar adjustments were made to the final paymcnt oC the other two shazeholders with Clarington's being reduced and Ajax's increased. ATTACHMENTS: 1. Resolution of Board oCDirectors, Vcridian Corporation 2. Adjustment Agrcemcnt including Specimen Promissory Notes nnd Adjusted Special Payments Approved / Endorsed By: Gillis A. Paterson Director, Corporate Services & Treasurer GP:vw Attachments Recommended for the consideration of Pickering �iry Council ��_ � � . `c � r omas J. u C ef Adm' 'strativ Officer 135 ATTACHMENTM�TO It�01C��`i '0 0 " ' VERIDIAN CONNECTIONS INC. (the "Corporation°) RESOLUTiON OF DIRECTORS Adiustment Aereement RESO WED, 1. tlwt the ndjustmcnt agreemrnt (�c "AgrecmrnP� dated ]une 22, 2000 amongst the Corporation, Veridian Corporation, `leridian Energy Inc., Thc Corporation of lhe Town of Ajax, The Corporrtion of the City of Pickering end TMe Corporation of the Municipality of Clarington respecting various adjusdnrnts af the consideration for the Disuibudan Assets which were acquircd from the eaid Municipalitics and thcir respective Hydro Commissions as ofNovembcr 1,1999 pursuant to ihe board's authorization on Decembcr 16,1999, a wpy of thc Agroemrnt bcing attached hercto as Schcdule "A", is authorizcd nnd approvcd; 2. that John Wiersma, Praidrnt of thc Corporation and ]amcs I. Mason, a director of the Corporatian be and arc authoriud and directed for and on behalf of thc Corporation to c�cccute undcr the seal of Lhc Corporation or othcntise, and to deliver thc Agrament; and 3. that Jolui Wiersmn, Prcaidrnt of the Corporation and James f. Mason, a dircctor of the Corpor,�don be and are authorized and dircctal for and on bchalf ofthe Corporation W do all acU and things und to executc under thc swl of the Corporation or othcnvisc and to deliver all such dacumrnts or instrumcnts as rr�ay, in their opinion, bc necPSSary or desirable in connection with thc Agrcemrnt nnd the adjustment lhcrcin providcd for including, but not limited to, new promissory notes and transfcrs of shares. • • • THI: FOREGOIN!i RESOLUfION in writing is hereby consented to by nll the dircctors of the Corporation purnant W the provisions of the Businus Corporations Act (Ontario). DA7'ED the day of June, 2000. ' James 1. Mason (leorge Van Dyk Duncan Jewell r.00�uvcnoa�ccm�ani . 1�6 �n�ainavrr.e�.��oar�r!l,.�� -od SCHEDULE "A" ADNSTMENf AGREEMENT TFIIS ADJiJS1'MENT AGREEMENT made as of the 22nd day of June, 2000. BETWEEN: The Corporatton ot t6e Town o[ Ajaz, ("AJax") OF THE FIItST PART - and - The Corporallon of t6e Muntctpality ot Clarington, ("Clarington") OF THE SECOND PART _�d. The CorporaHon ot the City of Plckering, ("Pickeriag") OF THE THIRD PART (Ajax, Clarington and Pickering are sometimes refeRed to coliectively as the "Munfcipalities" and individually as a "Munic(pallty") -and- , � Veridtan Corporallon, , ��C�� QF THE FOURTH PART - and - Ver(dlan Connecdone Inc., ��y�n� OF THE FIbTEi PART .�d„ , : _ 137 , ' ' -2- Veridian Eoergy Inc., ("VEI") OF THE SIXTH PART (VC, VCI and VEI are sometimes referred to collcetively as the "�orporodons" and individually as a "Corporation") RECITALS: (a) The status of Pickering was changed from a"Town" to a"City"; (b) Pursuant to a merge�• agreement (the "Mergcr Agreement") among the Municipalities made as of June 29,1999 and acting undet the uuthority of the Electricity Acr,1998 (Ontario) (the "Act"), the Municipalities agreed to merge the businesses of the Hydro-Elcetric Commissions (the "Commissions") of each af Ajax, Pickering and Cl.vington; (c) iJnder the authorih� of the Act and pursuant to ihe Merger Agreement, the Municipalities agreed to incorporate the Corporations to receive assets (the "TransferredAssets"), liabilities and employees of the Commissions pursuant to hansfer by-laws (the "Transfer Bylaws") passed by each Municipality and a merger purchase price and amending agrecment (the "MPPAA") made as of November 1,1999 (lhe "Effectivo Date") by the Municipalities; (d) Each of the Municipalides passed a Transfer By-law transCerting the Transferred Assets, liabilities and employees ofthe Commissions tothe Co�porations ef%ctive es oftheEffective Date; (e) Pursuant to the Merger Agreement end the Iv1PPAA, the Municipalities agreed that each Municipality would receive shares and evidence of indebtedness from the Co�poradons in consideradon for the tcansfer of the Trenaferred Asaete to the Corparations; ,y �38 .,. (n Purm�nt to the MaQer A�eemcal and the MPPAA, �he Municipalitles ngreed that the buis for detarminiag the vaiue of the Trwsfated Aeseta md liabiUdes would be the vaua set out in the zudited Hnancia� stetemeats (the "Octoba 31,1999 Audited Finaneial Statemenu'� oftheCommissioqs u oftha 31"dnyofOctober,1999 and confitmed yythe audieors of VC; (� Upon We Itansfa of the T�anafemd Assots W the Coryontions, each of the Muaicipalidn held eommoa sharea (t�o "Shares'� in each of the Corpo�atiom di�ectly, (b) 10 otda' to aeaee the existing holding eompazry shuchue of VC aud its two subtidiary coryontioas, VCI md VEt, each of the Municipalides exchwgcd their Shazes ia VCI and VEI Cor additional Shazes of VC (the "Facchanged Shar�s"); (i) At the time of trarufa of the Transkrrod pssets, the OeWba 31, 1999 Audikd Financial Statemrnts were not available w the bluaicipalitica agrecd to use the 1998 uaaudited finaacid statemrnts (We "1998 Umudited Finaneial Statanmb'� of the Commissions to atimste the vilue ofthe Transfe�red Aaecta end liabilities contributedbyeach Municipaliry to the Corpotatiottt uid ihe equity�lloation in VC among thebiunicipalidcs a11 on thebasis t6at We v�lue of the TruuCare� Aasets and liabiGties bazed upon the 1998 Unaudited Fin�ncial 5latemen� would be adjusted bazed on We October 31, 1999 Audited Finencial Smtanrnts; , U) 1m m�tidmtion of the tcaa�fc of the Transfertcd Aa�eG md liabilitia to the Corpontions, the Munieipalltia received Shara and pmmiscory nales (the'Notu'� from yC and VCI beaed on the 1998 Unaudited Finarici�l Statements aad e� set fony in Schedule "A" ettuhed hcreto; (1�) The considendoa for the Exchaaged Shues w�y baaed on t�e value of the VCI and vE[ Shuv; 139 , � -4- (1) The Municipalities and the Co[potations wish to make adjustrnents to ihe consideration received for the Transfared Assets in accordance with the Merger Agreement and the MPPAA by increasing the stated capital of the Shares and adjusting and reissuing the Notes all as set out in Schedule "B" attached hereto; (m) The Municipalities and the Corporations wish to increase the stated capital oF each of the Corporetions by the difference betwern the estimated amount received by each Co�poration for its Shazes (based upon the 1998 Unaudited Financial Statements) and the amount teceived by each Corporation for its Shares (based upon the October 31, 1999 Audited Financial Statements) all as scc out in Schedule "B"attached hereto; (n) The Municipalities and the Corporations wish to adjust the balance of certain special paymcnts of prepaid interest from VC and VC[ to the Municipalities as contemplated by the Merger Agreemcnt; (o) The Municipalities and the Corpomtions wish to adjust the equity allocation among the Municipalitia in VC by transfemng 3hares of VC held by Pickering and Clarington to Aj ax, all as set out in Schedule "B" attached hereto; and (p) Pursuent to the Merger Agreement and the MPPAA, the Municipalities wish lhat !he adjustments contemplated by this Adjustment Agreement, the Merger Agreement and the MPPAA be made ef%ctive as of the Effective Date. NOW'!'HEREFORE THIS AGREEMENT WITNESSES as follows: 1. Recitals True. The recitals to this Adjusdnent Agreement ara We and correct and form en integral part of this Adjustmrnt AgreemenG . ; ; �:. � : , _ . 140 , � ,5. . 2• Tranafer of Sharea. Pickering shall transfer ninety-five (95) Shazes in the capital of VC to Ajax, Clarington shall trensfer fourteen (14) Shares in the capital of VC to Ajax. The calculations in respect of the transfer of Shares contemplated by this Section 2 are set out in more detail in Schedulc "B" attached hereto. 3. Increase to Stated Capital of the Shara and E:changed Sharu. B�ased upon the calculations set out in Schedule "B" attached hereto, each of the Carporations increase the stated capital of its Shares by the applicable amount set out in Schedule "B" attached hereto. For greater artainty, the stated capital ofthe Exchanged Shares shall bc increased as set out in Schedule "B" attached hereto. 4• Adjwtment to Nota. The amount oF the Notes shall be adjusted as set out in Schedule "B" attached hereto. The adjusted Notes in the form attached hereto as Schedule "C" shall be executed by the applicable Carporation and issued to the applicable Municipality, 5. Cancellation of Nota. The original Notes issued by VC and VCI to the Municipalities in the amounts set out in Schedule "A" attached hereto shall be cancelled and placed in the minute book of the issuing Corporadon. 6• Speclal PaymenU. The balena of the prepeid interest special payments contemplated by Section 15 and Schedule "C" ofthe Merger Agreement shall be peid . in accordance with Schedule "D" attached hereto. 7. Schedula. Tho Schedules attached to is Adjustment Agreemmt shall form an integal pert ofthis Adjustment Agreement. ,::_ :' ; - . : . .. --- . .., .. ._ . . . .,, _ , . ; ,. .,_ . 141 , , -6- 8. Retroactive Elfect, The adjustrnents contemplated by the Merger Agreement and the MPPAA and to be effected bythis Adjustrnent Agreement shall bemade effcctive as of November 1, 1999. 9. Further Assurancea. Each of the Municipalities and Cotporations shall, at its expense, promptly anddulyexceute anddeliversuch furtherdocuments andpromptly take such further action not inconsistent with the terms hereof es mey Crom time to time be rwsonably rcquired in order to more effectivcly cazry out the intent and purpose of this Adjustment Agrcemrnt. 10. Goveroing,Law. This AdjusUncnt Agreement shall be govemed by and construed in accordence with the laws of the Province of Ontario end the federsl laws of Canada applicable therein. IN WITNESS WHEREOF this Adjustment Agreement has been duly executcd bythe parties under their respective corporate seals as wimcssed by the signetures of their proper officers in that behalf. THE CORPORATION OF THE TOWN OF AJAX � , • g� Name: Mayor Steve Parish c/s By: _ _ . _ Name: Marry deRond, Clerk i . 142 ' ` .�- . THE CORPORATION OF THE MUMCIPALITY OF CLARINGTON BY. Name: Mayor Diane Hamre c/s By: N�ne: Patti Ba�rie, Clerk THE CORPORATION OF THE CITY OF PICKERING By: Name: Mayor Wayne Arthurs ds By: Nnme: Bruce Taylor, Clerk VERIDIAN CORPORATION BY , Name: John Wiersma, Prcsident c/s : By: Name: Jamcs I. Mason, Director VERIDIAN CONNECTIONS INC. By: Name; Jotw Wiersma, President , c/s �l � .;.� . , _ ... . : ,> ...,.. ,,.�3 • 143 ' -s sy: Name: James I. Mason, Director I VERIDIAN ENERGY INC. sr• Name: John Wiersma, Praident ds By: ' Name: James I. Mason, Director y �: , r � ;i. - r �`;:. `± ,r, t l - � . �.�4 ' � SCHEDULE"A° VERIDIAN GROUP NOTE AND SHARE ISSUANCE CALCULATIONS PREPARED NOVEMBER 11,1999 , 1. � Equity Contributed to VC based upon I998 Unaudited Financial'Statements as follows: 55,123,770 Ajax S1,577,728 Clarington E10.067.937 Pickering 516,769,435 Total Equity Contributed to VC Equirysplitbasedon 1998 UnauditedFinancial Statements fortheCommissionsas follows: Ajax - 36.8% Pickering - 47.4% Clarington - 15.8% VC Note Calculations S15,000,000 total debt issued to Municipalities by VC. Pickering Note (VC) = 47.4% x S15,000,000 = 57,1 t0,000 . � Ajax Note (VC) = 36.8% x 515,000,000 ; ' 55,510,000 Clarington Note (VC) =15.8% x 515,000,000 = 52,370�000 ?'4 \,\I x, .. . . . . . . .... , 145 � � .2_ VG Shares Issuance Calculations 516,769,435 Total equity contributed to VC - 5�.000.000 Purchase price paid by Dcbt 51,769,435 Ruidual equiry Pickering Shazes (VC) = 47.4% x 51,769,435 _ �838.712.19 51,000/share � 838.7 shares = 839 shares Ajax Shazes (VC) = 36.8% x 51,769,435 r 5651.152.08 . 51,000/share = 651.15 shazes = 651 shares Clarington Shares (VC}=15.8% x 51,769,435 = 5279.570.73 S 1,000/sharc = 279.57 shares = 280 shares Debt/Equity Split (VC) 515.000.000 Debt 516,769,435 Total Equity _' 89.45% Debt 2. y.�j Equity Contributed to VCI besed upon 1998 Unaudited Finencial Stetements es follows: 534,629,262 Ajax S14,865,814 Clerington 539.816.988 Pickering 589,312,064 Total equity contributed to VCI Equlty split among Municipalides eeme as set out in #1. abova a,: �. 146 . , � .3_ . VCi Note Calculations 538,000,000 total debt issued to Municipalitia by VCI , Pickering Note (VCn = 47.4% x 538,000,000 - 318,012,000 Ajax Note (VCn = 36.8% x 538,000,000 = 513,984,000 Clarington Note (VCI}=15.8% x 538,000,000 = 56,00-5,000 VCI Sh�*' IssLance Galculetions 589,312,064 Total equity contributed to VCI - E38.000.000 Purehase price paid by Debt 351,312,U64 Residual equity ' Pickering Shar.s (VCn = 47.4% x 551,312,064 = 524.321.918.33 31,000/share � = 24,321.92 shares = 24,322 shazes Ajex Shazes (VCn = 36.8% x 551,312,064 = S 18.882.839.55 , � SI,000/share � =18,882,83 shares a 18,883 ahnres Clerington Shares (VCIN15.8% x 551,312,064 . = 58.107.306.12 51,000/ehere �= 8,107.30 shares � 8,107 sherw • , .n �.+. � Y S :4�� t_ i.�` 147 � � -4. Debt/Equity Split (VCn 538.000.000 Debt . 589,312,064 Total Equity =42.55% Debt 3. jij � Equiry Contributed to VEI based upon 1998 Unaudited Financial Statements as foilows: 52,075,996 Ajax 5565,649 Ciarington � 52,960•478 Pickering 55,602,123 Total equity contributed to VEI Equiry split among Municipalities same as set out in #1. abova �T $haTC �acnanr� ('8�C ��8►IOIIa � - as,6os,�ss� ��;ty Pickering Shares (VEn = 47.4% x 55,602,123 = 52.655.406.30 S1,000/share � = 2,655.41 shares . = 2,655 shares � Ajax Shares (VEn = 36.8% x 55,602,123 � =52.061.58�.26 51.000%harc = 2,061.58 ahares R 2,062 shares 148 : � . , _5. Clarington Shares (VE�=15.8% x 55,602,123 a CRR5,13j.¢'i 51�000/SUe[C = 885.14 shares ' = 885 sharcs No Debt issued. , � F,. - ,3 �i x }! , ,. - "' . ' _ � � 149 � f SCHEDULE "B" VERIDIAN GROUP NOTE AND SHARE ISSUANCE AD.iUSTMENT CALCULATIONS 1. �Otn7'Y AL.L•OGATION Initlal Share Percentage In VC Initial equiry allocation of VC among Ajax, Pickering and Clarington based on 1998 Unaudited Financial Statements of the Commissions, Ajax - 36.8% Pickering - 47.4% Clarington -15.8% New S6are Percentage tn VC Rtvised and adjusted equiry allocation of VC among Ajex, Pickering end Clazington bazed on October 31, 1999 Audited Financial Statements. � pjax - 37% Pickering -47.3% Clarington -15.7°/a SHARE ADJUSTM1IENT ' AJs: Clarington P(ckeriog Total No. of VC Shazes initially held 21,964 9,430 • � 28,290 59,684 Adjusted No. of VC Shazes held 22,Q73 9,416 28,195 59,684 Shans Transferred/ Rceeived 109 (14) (95) - . Ajax to receive 109 shares in the aggregate from Pickering and Clerington to nflect adjusted equity allocation. . • I _. . . .,, .o. + . 150 ,Z, 2, VC Nota �ed Lncnue to 3htcd Ctol_LI AdJdskd Pob Caleol�tlow . 515,000,000 toml debt Iuued by VC to Ajex, Yickering and Clecingwn. PickmiugNote(VC� � 47.3%xf15,000,000 =57,095,000 AjixNolt(VC� � 3T.0'/eXS15.000�000 =53�330�000 Clacington Note (V� � 15.7% x S15,000,000 = 52,333,000 Ineraue to VC Stated Capit�l 52,122,121 Aijjuatai Equiry Raeived for VC Shares - SI. 69.435 Initi�lEquiryRece{ved for VC 5hans S3S2,686 lncreue to Stated Capital of VC Shua AddlHond Inerea�e to VC Stattd Gpital rel�dng to Ezebtneed S6ara 54,611,322 Inaesse due to acchango of VCI Shnre+ for Exchanged Sharea " + S 667.370 Inctase duo to acchange of VEI Shan� for Exctungod Shara'* 55,2�8,892 Addidmul Increuo to VC Statad Capitel4v a rtsult o[IncRUe to Exchanged Shazes ' (sa increase to VCI Stated Capita� �• (aee increaae to VE[ Smted CapiW) Note: A� ut out fn the raitals to this Adjustrnmt Agreemcnt, the Municipalidea e�cchmged fheir Shues held diroctiy in VC[ ond VEI for Shazes of VC. The alculuioa directly �bove roDats tho required increase in the stated eapitil of the VC S6uec whtch �e t6o Exehanged Slurea. AdJosted DebNEqatry Spllt (VC� ,4Li.44�4� D�� . . 517,122,121 AdjwtalTolalEqwty(S1S,000,000+52,122,121) � 87.6%. Debt . . 151 , . � _3. 3. VGI Note aad increase to Stated Caoitsl Adjusted Note Calculadons (VC� 53g,000,000 total debt issue by VCI to Ajax, Pickering and Clarington Pickering Note (VCn = 47.3% x 538,000,000 = S17, 974,000 Ajax Note (VCn = 37% x 538,000,000 = 514,060,000 Clarington Note (VCn = 15.7%x 538,000,000 = 55,966,000 Increase to VCI Stated Capttal 555,923,386 Adjusted equity received for VCI Shares . SS1.312.064 , Initiel equityreceived for VCI Shazes 54,611,322 Incrcase to stated capital of VCI Shazes Adjusted Debt/Equity Split (VCn � B.U� 00.000 Debt ' 593,923,386 Adjusted Total Equity (338,000,000 + $55,923,386) 40% Debt 4. V�1 � • Incresse to VEI Stated Capital 56,269,693 ' Adjusted equity received for VEI Sh�res _�5.602.123 Initial equity received for VEI Shares 5667,570 ]ncreased ro stated capital of VEI Shares :� : :, � 152 , _ SCHEDULE"C" ADNSTED PROMISSORY NOTES 1. Note issued by VC to Pickering in the principal amount of 57,095,000 attached. 2. Note issued by VCI tu Pickering in the principal amount of 517,974,000 anached. , 3. Note issued by VCI to Ajax in the principal amount of S 14,060,000 attached. 4. Note issued by VC to Ajax in the principal amount of S5,550,000 attached. • 5. Note issued by VC to Clazington in the principal amowt of $2,355,000 anached. 6. Note issued by VCI to Clazington in the principal amount of 55,966,000 attached. � ; �: �� ,1 _ - r� t - "SPECIMEN" .0 ':�ul •; � M 153 Matnrity Date: November 1, 2003 Pdncipal Amount: 57,095,000 FOR VALUE RECENED, Veridiaa Co�poration (the "Coiporation"), hereby promises to pay to or to the order of the Cotporation of the Town of Pickaing (the "Holder"), in lawful money of Canada, on November 1, 2003 (the "Maturity Date") at the principal of�ce of the Holder, the principel amount of SEVEN MII..LION, T1IIJE1'Y-FIVE THOUSAND Dollars (57,095,000) (lhe "Principal Amount") togethu with interest on the unpaid Principal Amount calculated annually, not iu advance, from the dute hcreof at the rate of 0%per annum for the fust period ending October 31, 2000 and at a rate of 7.6% per annum on and eRer Novemba 1, 2000 untii tho Maturity Date. lnterest at tt�e said rate shall be payable on November 1 in each year up to and including the Maturity Date. � 1. AC��IQMH00 Op DtfAql� Upon default in the payment of anyprincipal or intaut due hereunda, or if the undersigned ahall bceome insolvent or banlaupt or make a proposal in banlauptcy, the entire unpaid principal indebtedness owing by the undersigned W ffie Holder evidcaced hereby and allinterest accrued thueon to the date of paymrnt shall forthwith become due and payable upon demand by We Holder subject to any subordinadon and postponement to any othec finsaciel iasdtudon or lender, Z, R■o Ine of this Note This Note shall rank equally in all respects av to the Payment of principal and intercst hereunda with promissory nota issued as of the dates hereof to the Co�poration of the Town of Ajex and to the Coiporation of the Muaicipality of Claringtan (collxtively "the Municipalides'� described in Schedule "A" hereW (the "Other Notes'�. , 3. SubordlnaHoo • The obligation of the Corpore6on to repaythe priacipal amount ofthiallote end oftheOther Notes is subordineted and postponed to the obligations of the Co:pora6on from time W time to aay othet Snancial tnstitution or lender. 4. ronvenion of thie Note pll (yut not Iesa thea all) of tho Prtncipal Amount of tliis Noto Ia convertiblo iato lWly-peid and non-anseesabta common aharw oftha Corporation basaf on the acchange rado epeci6ed hasin at the apdon of the Holder, which apbon msy be oxaciaed by tho Holderby notico in wridng to the Corpocation on or beforo May 1, ?003. The opdon to convat ehall e�cpire if not aaa�ct�od on or before May 1, 2003. The exchenge rallo for the convenion of tha Princlpel Amoimt of t6ie Note - 154 -2- shall be on the basis that, for overy S1000 of Principal Amount, 1 fully-paid and non-assessable common share of the Co�pora6on shall be issued ro the Holder. The coaversion of the Priacipal Amount will be effected on the Maturity Date of tl�is Note. 5. E:tenaion of t6e Note In the event that the Holda does not conveR the Principal Amount of the Note on t6e Mahuity Date in accordance with Section 4 of this Nate, the Cotpora6oa may, at its option, exteud the Manuity Date of some or all of the Principal Amoant of the Note ("the Revised Priacipa! Amount'� for an additional two-year period to November 1, 2005 (the "Extended Tecm") with the rate of interest and terms of repayment to be agreed betwem the Holder end the Corpow6on. Aay Principal Amount for which the Corporation has not actrnded the Mahuity Date shap be paid to ihe Holda on the Mahuity Date. In the evrnt that the Corporation and the Holder cannot agra on the rate of interest and the tertns o[repayment of the Revised Principal Amount for the Eztrnded Tecm of the Note, the Rovised Principal Amount shall be due and payable on November 1, 2005 with interest at the rate speci5ed in the next paragiaph. If theHoldcr and the Corporation do not agree on the interesttate applicable forthe Extended Tam, then iaterest shal] be calculated and payable on the Revised Principal Amount from the Maturity Date at the lesserof(i) the cash of the Corporation available Corihe payment ofwterest and (ii) the rate paid for a Treasury Bill (issued within 5ve business days of tho Maturity Date by the Govemment of Canada with a tertn of 182 days), calculated and payable annually on Novembcr 1. 6. Sale of Shara Tn the event that the Holder transfecs its wmmon s6ares in the capital of the CoipoTa6on (in accordance with the tcmis of a ahareholdcrs' agreemeat among the Holda, the Municipalities and the Corporation dated July 1,1999) prior to the wnclusion of the Extrnded Te�m of the Note, the Note shall remain due in nccordance with its temns. If the Holder transfers its common s6ares in the capitnl ofthe Co�poration priorto the MaturiryDate, U�e Cocpora6on sbaU be endUed co se�-0S'aay amount owing to the Holda against any amount of pnpaid interest paid by the Cocpoiation to the Holda but not eamed by the Holder. 7. Nlote Non-neeoNable aod Noo-aseiQaAble T'he Note ahall be pon-negodable aad non-essignable. S, 3nrrender and ReQlacemeot Tha Note ie iseued pureuant to By-law No. 5586199 of the Holda and the Principal Amount � may be edjusted in accordauce wiW the By-1aw. Following such adjustment, at tho request of the Cmporation, the Holder ehall surrender this Nota to tho Cotporation for cancellation, without repayment of the Principal Amount, in exchange for tha iseuance of a rePlacanent promissory note -3- of the Cotpotadon payable to the Holda which nIlects such adjushmenG IIJ WTfNFSS WiiEREOF Veridian CorporaHon has caused this Note to be signed under its cotporate seai by its duly authorized of6cers as of tlas 1" day of Novanber,1999. VERIDIAN CORPORATION IIy. Nema Jama L Mason Title: Director BY Name: John Wiecsma Title: Preaidatt • � _ , ;, �+• :3 .. . , _ , ._ _ . . . . , . . ._.. 155 . 156 SCHEDULE°A" 1. PromicsoryNoteissuedbyVcridianConnectionsTnc.totheCorporationoftheMunicipaliry of Clarington in thc principal amonnt of 55,966,000. 2. Promiasory Note issued by Veridian ConnxGons Inc. to the Corpocadon of the Town of Ajex in the principal amount of S14,060,000. 3. Promissory Note issued by Veridiaz► Cocporation to the Cocpora6on of the Municipality of Clarington in the principal amount of S2,355,000. 4. PromisaoryNote issued by Veridian Corporation to the Corporadon of the Town of Ajax in the principal amount of SS,S50,000. :oa,uvwoa�anmrn� • , ; " 1 �" ',r, j. . . .,- � . . .� ., . ,.... , . . . . „ . . .e. +`..— . , . . ,. 157 "SPECIMEN" M :u "�u!. �' ►� Y Matnrity Date: November 1, 2003 Princlpal Amount: 517,974,000 FOR VAI.LTE RECEIVED, Vcridian Connections Inc. (thc "CorporaHon"), herebypromises to payto orto ffie order of the Corporudon ofthe Town of Pickering (the "Holder"), in lawful money of Canada, on November 1, 2003 (the "Maturity Date") at the principal of5ce of the Holdv, the principal amount of SEVENfEEN MILLION, NINE-HUNDRED AND SEVEIV'TY FOUR THOUSAND Dollars (S17,974,000) (the "Principal Amount") togetherwith interest on the unpaid Principal Amount calculated annually, not in advance, from the date hereof at thc rate of 0% per annum for the first period rnding October 31, 2000 and at a rate of 7.6% per annum on and after November 1, 2000 until the Mahuity Date. Interest at the said rate shall be payable on November 1 in each year up to and including the Mahuity Date. 1. Accelenttoe on Defaalt Upon default in the payment of anyprincipal or interest due hereunder, or if the undeisigned shell bxome insolvent or bazdaupt or make a proposal in banlauptcy, the entire unpnid principal iadebtedness owing by the undasigned to the Holda evidenced hereby and all intecest accrued ihcreon to the date of payment shall forthwith become due and payable upon demend by the Holder subject to eny subordination and postponement to any other Snancial institution or lender. � 2. RanktaE of t6is Note TUis Note shall rank equally in all respe; ts as to the paymrnt of principal and 'wterest heaunder with proaussory notea issued as of the dates hereof to the Carporadon of the Town of Ajax end to lhe Corpoiation of the Municipality of Clarington (collectively "the Municipalides'� descn'bed in Schedule "A" hcreto (the "Otha Notes'�. 3. SubordinaUon The obligation ofthe Corporation to repaythc principal amount ofUus Notc and of the Other Notea ia subordinated and postponai to the obligsdons of the Corporation &om time to time to any other 6neacial institution or ]mda. A. Conventon of tbL Note All (but not less t6an al� of tho Princtpal Amount of this Note is convatible tnto liilly-paid end non-asseasable common shares of the Corporadon based on the exchenge ratio speci6ed haein at the option ofthe Holder, which opdon meybo oxerci,•ed byt6o Holderby nodce in writing to the Co�poration on or beforo May 1, 2003. Tho opdon to convert ehall expire if not exercieed an or beforo May 1, 2003. The exchenga ratlo for We converston of the Priucipal Amount of tl�iie Note ' 158 .x. shall be on the basis lhat, for every 51000 of Pcincipal Amount, 1 fully-paid and non-assessable common shere of the Coiporation shall be issued to the Holdcr. The conve�sion of t6e Principal Amount will be effected on the Maturiry Date of this Note. S. Etteoalon of the Note In the event that the Holda does not wnvert the Principal Amount of the Note on the Mahuiry Date in accordance wi�� Sadon 4 of this Note, the Co�poration may, at its opdon, actend the Meturiry Date of some or all of the Principal Amount of the Note ("the Rovised Principal Amount'� for an additional two-year period to Novemba 1, 2005 (the "Extended Term") with ihe tate of interest and trnns of rcpaymrnt to be agreed between the Holder and the Cocporadon. Any Principal Amount forwhich tho Corporation has not cxtended the MaturityDate ahall be paid to ihe Holder on ihe Mahuity Date. In the event that the Corporation and ihe Holder cannot aga on the rate of interest and the terms of repaymrnt oCthe Revised Ptincipal Amount for ihe Extrnded Term of the Note, the Reviaed Principal Amount shall be due and payablo on November 1, 2005 with interut at the rate specified in the nact pazagraph Ifthe Holderand the Corporation do not egree on thc interest nte appiicable forthcExtended Term, then intcrest shall be calculated and payable on the Revised Yrincipal Amount from the MaturityDate at the lesser of(i) the cash of the Corpora6on avaitable forthe payment oFinterest and (ii) the rate paid for a Treasury Bill (issued within Bve business days of t6e Nf lturiry Date by the Govertvnent of Cenada with a term of 182 days), calculated and payable annualiy on November 1. 6. Sale of Shara In the eveat that the Holder transfers its common shares in the capital of the Coiporation (in accordance wi�h the terms of a shareholders' agreement among the Holder, the Municipali6es and the Corporation dated July 1,1999) prior to the conclusion of the Extrnded Tetm of the Note, the Note ahall remein due in nccordance with its tecros. If the Holder transfefs its common ahazes in t6e capital ofthe Corpoiation priorto the MahuityDate, the Cotporntion ahell be cndtled to set-o@'any amount owing to the Holda against any amount of pnpaid intcrest paid by the Corporadoa ro tke Holder but not eamed by the Holda. 7. Note Non-ne¢oHable and Noo-assignable The Nota ahell bc non-negotiable and non•assignabla 8. Sarrender �ad Repincemeat Tho Note is iesued pursuant to By-law No. 5586/99 of the Holder end We Principal Amount may be adjneted in eccordaace with the By-law. Following euch adjustment, at the request of t6e Corporadon, the Holder ahell surrender t}un Note ro the Calporation for cancellation, without repayment of the Principal Amouat, in exchange for tho isauenco of a replacunoat prowtssorynote . � � 159 -3- of the Co:poration payable to the Holder which retlxts such adjustrnenG IN WITNESS Wf�REOF Veridien Cannxdons Tnc. has causedthisNotetobe signedunder its cotporate seal by its duly authorized of5cers as of Qua 1" day of November,1999. VERIDIAN CONNECITONS INC. By: Natne: James L Mason Title: Director By: Name: John Wie�sma Title: President , � 1; ::: . : , > , , �:h - � �, '� � . ' � � � � . 160 ' : , � SCHEDULE"A" 1. PromissoryNoteiasuedbyVeridianConnectionslnc.totheCorporationoftheMunicipality of Clarington in We principal amount of S5,966,000. 2. Promissory Note issued by Veridien Connxtions Inc. to the Cocpoiadon of the Town of Ajax in the principal amount of 514,060,000. 3. Promissory Nota issued by Veridien Cotporation to the Corporadoa of the Municipality of Clarington in the principal amount of 52,355,000. 4. Promissory Note issued by Vmdian Corporation W the Corporadon ofthe Town ofAjax in the principal amount of 55,550,000. �o�uvcnoa�ccmm�� isl "SPECIMEN" r_ ,� �:•U� �: i�� r_ Moturity Date: November 1, 2003 Principal Amount: 514,060,000 FOR VALUE RECENED, Veridian Connections Inc. (the "Corporation"), hcrcbypromises to pay to or to the order ofthe Corporntion of the Town of Ajax (the "Holder"), in lawful money of Canada, on November 1, 2003 (the "Mahrciry Date") at the principal oEiice of We Holder, We principal amount ofFOURTEENMII.LIONAND SIX1'Y THOUSAND Dollars (514,060,000) (the "Principal Amount") togetherwith intcrcst on the unpaid Principal Amount calculated annually, not in advance, from ihe date hetoof at the rate of 0% ptt annum for the first period cnding October 31, 2000 and at a rate of 7.6% pa annum on end aRer Novemba 1, 2000 unHl the Mahuity Date. Intenst at the said rate sha11 be payable on November 1 in each year up to and including the Mahuity Date. AcceleraHon oa Defaalt Upon default in the paymcnt of anyprincipal or interut due hereunder, or if the undersigned shall become insolvent or banlaupt or make a proposal in banlm�ptcy, the entire unpaid principal indebtedness owiag by the undersigned to the Holder evidenced hcreby and all interest eccrued thereon to the deto ofpaymrnt shall forihwith become due and peyable upon demand by the Holder subjcet to any subordination and postponement to any other financial institution or lenda. Rankine of thta Note This Note ahall rank equally in all respects as to lhe payment of principal and intenst haeunder with promissory notes issued as of the dntes hereof to the Cocpora6on of the Town of Pickering and to the Corporadon of the Municipality of Clerington (collecdvely "the Municipalities'� descdbed in Schedulc "A" hereto (the "Other Notes'�. Snbordinallon The obligation ofthe Cocporation to repay the principal amount of this Note and of the Other Notes is subordineted and postponed to the obligadoas of the Coiporatioa from time to rime to any other financial insdtution or icnder. Convenlan of thla Note All (but not leaa than all) of tho Principal Amount of thie Notc is wnvuq'ble into ful�y-paid end non-asaessable common aheres of tho Corporation besed on tho oxchango raflo speciSai haein at the option of the Holder, which op6on may be exerciaed by the Holder by nodce ia writing to the Corporadon on or before May 1, 2003. Tho opdon to canvert shell expire if not exaciaed on or befon May 1, 2003. The exchango rado for the conveision of the Principal Amount of thia Note 162 -2- shall be on the basis that, for every 51000 of Principal Amount, 1 fuIly-paid and non-assessable common sharo of the Coiporation shail 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 evrnt that the Holdtt does not convcrt the Principal Amowt of the Note on the Maturity Date in accordance with Scetioa 4 of this Note, the Co�poration may, at its option, extend the Maturiry Date of somc or all of the Principal Amount of the Note ("the Revised Principal AmounP� for an additional two-year period to November 1, 2005 (the "Extended Tertn") with ihe rate of intcrest and tertns of rcpaymrnt to be agreed between the Holda and the Corporation. Any Principal Amount forwhich ti�e Corporation has not extcnded the Matwity Date shall be paid lo the Holder on lhe Maturity Date. In the event that the Corporation and the Holder cannot agree on the rate of interest and the temis of repayment of the Revised Principel Amount for the Extrnded Term of the Note, the Revised Principal Amount shall be due and payable on Novembec l, 2005 with intcrest at the rate apecified in the nact paragrap6. ICthe Holderand the Corporation do not agree on the intcrest rate applicable forthe Extended Term, then interest shall be calculated and payable on the Revised Principal Amount from the MaturityDate at the lesser of (i) the cash of thc Corporation available for the payment of interest and (ii) the mte paid fot a Treasury Bill (issued withit► five business days of the Mahuiry Date by the Govcrnmrnt of Canada with a tertn of 182 days), calculated and payuble annually an Novcmber 1. 6. Sale of Shares In the event that the Holder hznsfers its common shares in the capital of the Corporation (in accordence with the teims of a shareholders' agreement among the Holder, the Municipalities and the Corporation dated July 1,1999) prior to the conclusion of the Extended Tem� of the Notc, the Note shall remain due in accordance with its terms. ff the Holder tmnsfers its common shares in the capital of the Corporadon prior to the Maturity Date, the Corporation shall be entitled to set-offany amount owing ta the Holder against eny amount of prepeid intenst paid by the Cotporation to the Holder but not eamed by the Holder. 7, lYote Non-aeeoHable and Non-asstenable The Note ahall be non-negotieble end non-assignable. 8. 3urreoder snd Replecement The Note is isaued putsuant to By-law No.115•99 of the Hoida and the Principal.Amonnt may bo adjnsted in accordance with the By-lew. Following such adjustment, at tho roquest of tho Coiporadon, We Holder ehall surrender thta Note to the Cotporation far cazcelladon, without repayment of the Principal Amount, ia exchange for the Iseuanco of a replecaneat promissory noto � -3- of the Cosporation payable to the Holda which reflects such adjustmen� IN WTTNESS WHEREOF VeridianConnectionslnc.has caused thisNote tobe signed under its corporate seal by its duly authorized o�cers as of this 1" day of November, 1999. VERIDIAN CONNECTIONS INC. By: Name: Jama I. Mason Tide: Director 163 By: Name: John Wiecsma Title: President ' _ . I � � s � ;; . � ��' � � Y' t.�4'. .rf., •2° l � f L�'•' V'' 164 SCHEDULE"A" 1. PromiasoryNote issucdbyVeridian Connecdons Inc. to the Corporation of theMunicipality of Clarington in the principal emount of S5,966,000. 2. Promissory Note issued by Veridian Connxdons Tnc, to the Corpo�adon of the Town of Pickering in the principal amount ofS17,974,000. 3. Promisaory Note issucd by Vmdian CorporaHon to the Corporation of the Munic;paliry of Clarington in t6e principal amount of 52,355,000. •4. PromissoryNoteissuedbyVeridianCorporationtotheCorporationoftheTownofPickering in the principal amount of 57,095,000. �o�uvcuocmnimw , _ ; _{ : '�:. :r; : �: �: . : • . : � 1.. , ; ^r ' �. � � "SPECIMEN" 165 MatuNty Date: November 1, 2003 Principal Amount: 55,550,000 FOR VALUE RECEIVED, Vcridian Cotporadon (lhe "Corpo�adon"), hereby proarises to pay W or w the order of the Cocporation of the Town of Ajex (the "Aolder"), in lawful money of Ceneda, on November 1, 2003 (the "Matutity Date") at the principal ofiice of the Holder, the principal amount of FIVE MII.IdON, FIVE HUNDRED AND FIE�TY THOUSAND Dallazs (S5,550,000) (the "Principal Amount") togotha with interest on the unpaid Principal Amount calculated ennually, not in advance, from the date hrnrof at the rate of 0% per annum for the fust period ending Octoba 3l, 2000 and at a rate of 7.6%per annum on and aftallovember 1, 2000 undl ' the Maturity Date. Interest at the said rate shall be payable on Novemba 1 in each year up to end including the Maturity Date. 1. Accderatloo 0o Defaalt Upondefaultinthepaymentofanyprincipatorinterestduehereunder,oriftheundersigned . shall bxome insolvent or banlwpt or make a proposal in banlauptcy, the rnt've unpaid principal indebtedaess owing by the undersigued to the Holder evidenced hereby and all interest accrued ffiereon to the dete ofpaymrnt ahall forthwith become due and paya�le upon demand by the Holder subjxt to any subordination and postponemrnt to any otlur 6nancial institution or lender. 2. RankiaE oith(s Note This Note shall rank equally w all nspects as to the payment of principal and intuesi hereundcr with promissory notes issued as of the data hereof to the Co�poration of the Town of Pickering and to the Coiporation of the Municipality of Clerington (collectively "the Municipalida'� decccrib� in Schedule "A" hereto (the "Other Notes"). 3. SabordtnaHon . The obligation of the Corporadon to repay the principal amount of this Note and of tho Othu Notea is aubordineted and postponed to tho obligations of the Coiporadon &om time to time to eny ot6er Snancial inatitution or lender. 4. Convenlon ot t6b Nota All (but not leee thm all) of the Principel Amount of thte Note ta comorNble into liilly�paid andnon•meessable commonsharwoftheCotporadonbasedoatheexchangeratioapeci6edhetr.in at Wc option af t�o Hotdu, whIch option may bo oxcTCieed by the Holda by notico ia writiag to t6o Cocporallon on ur bofore May 1, 2003. The opHon to conve�t shall expiro if not acercised on or beforo May 1, 2003. The acchange rado for tho convcBion of the PrIncipal Amount of thia Note , lfi6 -2- shall be on the basis that, for cvery 51000 of Principal Amount, 1 fuUy-paid and non-assessab�a common share of the Corporadon shaU 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 Mahuity Date in accordance with Section 4 of this Note, the Corporadon may, at its opdon, extend the Maturity Date of some or all of the Principal Atnount of the Note ("the Revised Principal AmounP� for an edditional twayear period to November 1, 2005 (the "Ext�nded Tem►") with the rate of interest and trnns of rcpaymrnt to be agroed benveen the Holder and the Co�poration. Any Principal Amount for which the Corporation has not extended thc MaturityDate ahall be paid to the Holder on the Maturity Date. In the evrnt that the Corporadon and the Holder cannot agra on the rate of interest and the ttrms of repaymrnt of the Revised Principal Amount for the Factended Term of the Note, the Revis�d Principal Amount shall be due and payable on November 1, 2005 with interest at the rate specified'in the ncxt paragraph. Ifthe Holderand the Cocporation do not agra on the intercst cate applicable forthe Extrnded Term, thrn interest shall be calculated and payable on the Revised Principat Amount Cram the MaturityDate at the lesserof (i) the cash of the Corporation available forthepaymcnt ofinterest and (ii) thc rate paid for a Treasury Hill (iasued within 5ve businesa days of the Maturity Date by the Govemment ef Canada with a term of 182 days), calculated and payable annually on November 1. 6. Sale of Sdara In tho event that the Holder transfers is common shares in the capital of the Coipotation (in eccordance with the tecros of a shareholdera' agseement among the Holder, the Municipalities aad the Cotporation dated July 1,1999) prior to the conclusion of We Extended Tecm of the Note, the Note shall remain due in accordance with its terms, ffthe Fiolder transfers its common sharu in the capital of the Corpocallon prior to 1Le Mahttity Datq the Cocporation ahall be rndUed to set-o@'sny amount owing to the Holder against any aadount ofprcpaid interest paid by the Cocporation to the Holder but not eamed by the Holder. 7. Note Non-ne¢otlable and Non-aealeoahle Tho Notc shall be non•ncgo6eble end non-assignable. 8. e d r and Replacement The Noto ia iaaued pursuant to By-law No. l l 5-99 of tho Holda and tho Principal Amount may be edjueted in accordenco with We By-law. Following euch adjuatrnent, tt the request of the Corporadoa, the Holder ahall sutrender tkda Note to the Corporadoa for caacellation, withoui repayment of the Pcincipal Amouat, in exchenge for tho issuanco of a repleeanent promtssory noto 167 .3. of the Cotpocation payable to the Holder which reflects such adjushment IN WfINESS Wi�REOF Veridian Coiporadon has caused ttus Note to be signed under its corporate seal by ita duly authorized officecs as of tiris t' day of November, 1999. VERIDUW CORPORATION By. Name: Jama I. Masoa . Title: Director By. Nazno: John Wiecsma Title: Presidont I i ;. �: ., � , ' 168 SCSEDULE"A" 1. PromiasoryNoteissuedbyVaidienConnectionsInc.totheCorporationoftheMunicipality of Clarington in thc principal amount of S5,966,000. 2. Promissary Note issued by Veridiaa Connxdons Inc. to the Corporation of the Town of Pickering in tho principal emount of S 17,974,000. 3. Promissory Note issued by Vmdian Coiporation to the Coiporadon of the Municipality of Clarington ia the principal amount of 52,355,000. 4. PromissoryNoteissuedbyVeridianCo�potariontotheCorporatioaoftheTownofPickering in We principal amount of 57,095,000. �ownvcoocsxcn�rn� • �r s. � � "SPECIMEN" Y_.0 ':�ul �: ►� M 169 M�tarUy Date: November 1, 2003 Principal Amount: S2,355,000 FOR VAI.UE RECEIVED, Veridien Corporation (the "Cocporation"), hereby promises w pay W or to the order of the Co�poration of the Municipaliry of Clarington (the "Holder"), in lawful moneyof Caneda, on Novemba 1, 2003 (the "Maturity Dete'� at the principal of5ce of the Holda, the principal amount of 1'WO MII.LION, T'HFLEE HUNDRED AND FIFTY-FIVE THOUSAND Dollazs (S2,355,000) (the "PcincipalAmouat`� togetherwith interest on theunpaid Principal Amount calculated annually, not in advaace, from the date hcroof et the rate of 0°/a per ennum for We first period ending October 31, 2000 and et a rate of 7.6%per ennwn on and aftcrNovember 1, 2000 undl the Maturity Date. Intercst at the said rate shall be payable on Novcmba 1 in each yeaz up to and including the Maturiry Daze. 1. AccelenNoo 0o Def�alt Upon default in the peyment of any principal oc interest due hereunder, or if the undersigned shall become insolvent or bacilvupt or make a proposal in banlvuptcy, the entire unpaid principal indebtedness owing by the undersigned to the Holder evidenced hereby and all interest accrued thereon to the date ofpaymcnt shall lorihwith become due nnd payable upon deraand bythe Holder subject to any aubordiaation and postponemmt to any other financial institu6on or lenda. 2. Rankine of t6ls Note This Note shell rank equally in all respects as to the paymrnt of principal and intcrest hereunda with pmmissory aotes issued as of the dates hcreof to the Coiporadon of tho Town of Ajax end to the Corporation of the Town of Pickering (collxtively "the Municipalides'� descn'bed in Schedule "A" hercto (the "OthttNotes'�. 3. SubordtoaHon � The obligation of the Cocpora6on to repaythe principal amaunt of thia Note and of the Otha ' Notes ie subotdineted end postponai to Wo obligationa of the Cotpara6on 5rom time to time to my otha 5uenciat inatitution or lendet. 4. Coevenlon o[ thi� Note . .All (but not Iwa thaa ell) of the Pdacipal Amount of thIe Noto ie convertiblo into ft�lly�pdd mdnon•aasenaable commonehareaoftheCoiporedonbesedontheacchengeradoapeciHedhaein at the opdon of the Holder, which ap8on may bo o�cerciaat by the Holder by nodca in writiang to the Coiporation on or bafore May 1� 2003. The optlon to wnvat ehatl expiro if not o�cercieed on or before May 1, 2003. The axchnnge ratio fot tha conveiston of t}ie Principal Amooat of thia Note - - �� F «�� ,..� . ,� .. i�o -2- shall be on the basis that, for every 51000 of Principa! Amount, 1 fiillypaid and non-assessable common share of the Coiporation shnll ba issued to lhe Holder. The conversion of the Principal Amount will be efTxted on the Maturiry Date of this Note. 5. Ezteoaloo o(the Note In tho event that the Holda does not convcrt the Principal Amount of the Note on the Maturity Date in accordance with Scetion 4 of this Note, the Corpotation may, at its opdon, extrnd the Mahuity Date of some or all of the Principal Amount of the Note ("the Rovised Principal AmawY� for an additional twayear period to November 1, 2005 (the "Extended Term") with the rate of interest and terms of rcpayment to be agreed botween the Holder and the Corporation. My Principal Amount for which the Corporation has not oxtended the Maturity Date ahall bepaid to ihe Holda on ihe Maturity Data In the event that the Corporation and the Holder cannot agee on the rate of interest and the tcrms of rcpeyment of the Revised Principal Amount for the Extended Term of the Note, the Revised Principa! Amount shall be due and peyable on November 1, 2005 with interest at the rate speci5ed in the next parsgraph. IftheHoldcrand the Corporadon do not agree on the interest rate applicable forthe Extended Term, then intaest shall be calculated and payable on the Revised Principal Amount from the Maturity Date at thc lesser of (i) the cazh of the Co�pontion available for the payment of inlaest and (ii) the rate paid for a Treasury Bill (issued within five business days of the Maturity Date by the Govemment of Canada with a term of 182 days), calculated and payable annually on November 1. 6. SaleotShares Ia the evrnt that the Holder transfers its common shazes in the capital of the Coipotation (in accotdance with the terais of a shareholders' agreemeot among the Holdcr, the Municipali6es and the Coipora6on dated July 1,1999) prior to the conclusion of the Extrnded Term of the Note, the Note ahall remain due in accordance with its terms. If the Holder hansfers its common shares in the capital of tho Corporation prior to the Matircity Date, the Corporadon ahall be endtled to set-off eny amount owing to t6e Holda against any aatount of prepaid interest puid by ffie Corporation to the Holder but not eamed by the Holder. , ��, ,� ��:� � �„ ��. The Note ehall be non-negodable end non-ensignable. 8. Surrender and Reolpcement The Note ie iesued pureuant to Bylaw No. 99-173 of the Holder aad the Principel Amount may be adjuated in accordw�ce wlth t6e By-law. Following euch adjustrnent, et the roquest of the Cocporadon, tho Holda sUall eutrender this Noto to the Cocporation for cancellation, without repayment of the Principel Amount, in exchange for tho iaeuanco of a ieplacemeat pmmissorynote • 17I -3- of the CoiporaGon payable to thc Holder which nflects such adjustment 1N WTINESS WEIEREOF Veridian Coiporation has caused tlus Note to be signed under its wrporate seal by its duly authoriud of5cers as of this 1" day of November,1999. VERIDIAN CORPORATION By. Name: Jemes L Mason TiUe: Director � By. Neme: Jotm Wiersma ' Tiqe: Pnsident �nvcuors�ccnro�w , . i i . 172 SCHEDULE"A" 1• Promissory Nate issued by Veridien Connec6ons Inc. to the Corporation of the Town of Ajax in the principal amount of 514,060,000. 2. Promissory Note issued by Veridian Connec4ons 1nc. to the Cocporation of the Town of Pickering in the principal emount of S 17,974,000. 3• PromissoryNote issued by Veridien CorpoTation to the Corporation ofthe Town ofAjax in thc principal amount of 55,550,000. 4• PromissoryNoteissuedbyVeridianCorporadontotheCorporadonoftheTownofPickmng in lhe principal amount of 5�,095,000. �o�uvcnacsccn�am� ,- � "SPECIMEN" 1_�u ';• ! �' . ►� Y Matarity Date: Novembcr ], 2003 Prlocipal Amount: S5,966,Q00 FORVAI.UERECEIVED,VcridiaaConnecdonsInc. (the"Corpora6on'�,hetebypromises to pay to or to the order of the Corporation of the Municipality of Clarington (the "Holdet"), in lawful money of Canade, on November 1, 2003 (the "Maturity Date") at the principal office of the Holda, the principal amount of FIVE MII.LION, NINE HUNDRED AND SIXTY-SIX THOUSAND Dollars (55,966,000) (the "Principa! Amount'� together with interest on the unpaid Principal Amount calculeted annually, not in advance, 5rom 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 afta November 1, 2000 wtil the Maturity Date. Intenst et the said rate shalt be payable on November t in eaah year up to and inclading the Maturity Date. 1. AcceleraHoo on DeGnit Upon default in the payment of anyptincipal or intecest due hereunder, or if the undersigned shall bxome insolvent or banlQUpt or make a proposal in bazilwptcy, the entire unpaid principal indebtedness owing by ihe undersigoai W ihe Holder evidrnced hercby and all interest accrued thecean to the date ofpaymeat shall forihwith become due and payable upon demand by the Holda subjxt to any subordination and postponement to any other 6nancial inatitution or lender. 2. Rankiae of tble Note This Note shall rank equally in all respects aa to the paymcnt of principal and interest hcreunder with promissory nota issued as of tha dates hereaf to the Cotporation of We Town of Ajax and to the Corpondon of the Town of Pickering (collectively "the Municipalida'� described in Schalule "A" hereto (t'ie "Othallotes'�. • 3. Sabordtaatlon • The obligadon offfie Corporation to repaythe principal emount oCthia Note end ofthc Otha Notea ia subordinated and postponed to the obligations of the Corporadon trom time W time to any otha 5nencial institution or lenda. 4. Cooventon of this Note All (but not less then ell) of the Principel Amouat of this Note ie canverh'ble iaW Rd(y�paid aadnon-easesaable cammoneharcaofthoCorporationbasedontheacchengeratioapxifiedhereia at the option of tho Holder, wluch option may be acerciaed by tho Holdc by nodce in writing W tho CocporaHon on or befaro May 1, 2003. The opdon to conveR e1�a11 axpire if not oxacised on or before May 1, 2003. T6o acchengo ratio for the convasion of the Principal Amount of d�is 1Vote 173 174 .2_ ahall be on the basis that, for every S1000 of Principal Amount, 1 fully-paid and non-assessable common share of the Co�pora6oa shali be issued W the Holder. The conversion of the Principal Amount will be efi'xted on the Maturity Date of this Note. � S. F.�easlon ot the Note In the evrnt that the Holda does not convert the Principal Amount of the Note on the Meturity Date in accordaace with Sa�tion 4 of this Note, the Co�poration may, at its opdon, extend the Maturity Date of some or all of the Principal Amount of the Note ("the Revised Principal Amaunt'� for an addidonal twayear period to November 1, 2005 (tho "Extended Tem�") with the rnte of interest and terms of repaymrnt to be agreed between the Holder and the Cocporadon. Aay Principal Amount for whic6 the Corporation has not extended the Mahuity Date shall be paid to thc Holder on the Meturiry Date. In the evrnt that the Corporadon and the Holder cannot agae on the rate of interest and the terms of repayment of ihe Revised Principal Atnount for the Extrnded Te�m of the Notc, the Revised Ptincipal Amount shall be due and payable on Novemba 1, 2005 with inter�t at the rate speci6ed in the nact paragraph. IftheHolder and the Corpora8oa do not agrc- on the interest rate applicable fortheExtrnded Trnn, lhen intenst shall be calculated and payable on the Revised. Principal Amount from the MaturityDete at the lesser of (i) the cash of lhe Corporatioa available for the payment of interest and (ii) the mte paid tor a Treasury Bill (issued within five business days of the Maturiry Date by thc Govemment of Cenada with a t«m of 182 days), calculated and payable annually oa Novemb« 1. 6. Sale of S6ares In the event that the Iiolda transfers its common shares in the capital of the Corpondon (in accordance with the temis of a shareholders' agrecmeat emong the Holder, the Municipalities aad the Coroorstion dated July 1,1999) prior w t6e conclusion of the Exteaded Tecm of the Note, the Note shall ranain due in sccordance with its tams. If the Holder transfers its common ahaces in the capital of tho Cocporarian prior W the Mahuity Date, the Corporation shall be eaHUed to setoffury amount owing to the Holder against any amount of prepsud interest paid by the Cofporation to the Holda but nol effined by the Holder. 7. Note Non-oeQOtiable aod Noo-sa�ienoble The Note shall ba non-negodable and non-asai�sble. , 8. SnrreodereedReplaceroent The Note ie Ieaucd purauent w By-]aw No. 99•173 of the Holda aad the Principal Amo�mt may be edjaeted in accordanco wiW the B}Rlaw. FoUowic�q such ac,jjuahneat, at the roquat of tho . Cocporallon, t6e Holder 46ell aurreada thii Noto W tHe Corpontion for cmcellatioo, wit6out repaymad of tho Principai Amoimt, in exchange for the i�auaace of n rcpl�cement promiao.y�te r'( _; l ' . _ ' . . . . 175 -3- of the Cospotarion payable to the Holder wlach nAcctv such adjustmeaG 1NVVTTNESS Wf�REOF VaidienConnxtionaInc. has causedlhisNote W be signed under its co�poiate seal by its duly authoriud officera as of tLis 1° dey of Novembc,1999. VPRIDIAN CONNECI70NS INC. By: Name: James L Mason '�iAe: Diroctor B�:_ Name: John Wiaama Tide: P�esident �a.uvcooamv��nu � � ' r . s x � E : ; �.,�� 4 ; } J �� C _ _� ... �. , rfiv� � ,.. , r,l.: . �. .,��„i . i, 1;. �. 1. ._ �.w . ..�f.`��. � � � . � . _ i7� SCHEDULE°A" 1. Promissory Note issued by Veridian Connxtions Iac. to the Coiporation of the Town of Ajex in ffie principal amouat of 514,060,000. 2. Promissory Note issued by Veridian Connectiotu 1nc. to the Coiporadon of the Town of Pickecing ia the principal amount of 517,974,000. 3. Promissory Note issued by Veridian Cocporation to the Corporation of the Town of Ajax w the principa! amount of 55,550,000. 4. PromiasoryNoteissuedbyVeridianCorporatioatotheCorporationoftheTownofPickering in the principal amount of 57,095,000. �oNnvcnocsa�nu�taz � . .� _ i . ;y � ,, .., . .s : , — . , .�, . �_� �;:, ,,,,��. . . .. . . � . . .. . . 1. Party Pickering Ajax Claringtoa Total SCHEDULE"D" ADJUSTED SPECIAL PAYMENTS First Paymeut Rece(ved ax,saa,000 52,208,000 5948•Q00 56,000,000 Z, party Total Special Payment Entttlement Pickcring 55,676,000 pjax 54,440,000 Clarington S1.684.000 Total $t2,000,000 Note: Thc total spceial payment amount obtained by multipiying each Municipality's equiry percentage in VC times twelve (12) million dollers. 3. Party • Balance of Special Payment Due , Pickering 32,832,000 pjax � S2,232,000 Clarington 5936.000 Total 56,000,000 Note: Balence of spxial payment due W each Municipaliry obtained by applying the follow.ng formula: Totel Spxial Peyment En6tlement - Firat Payment Received � Balence of Spxial Payment Auo _ �o�uvc�ocsccna�� 177