HomeMy WebLinkAboutCS 39-09
eit'i REPORT TO
EXECUTIVE COMMITTEE
PICKERIN Report Number: CS 39-09
Date: October 13, 2009
s07
From: Gillis A. Paterson
Director, Corporate Services & Treasurer
Subject: Veridian Corporation - Promissory Notes Renewal
Recommendation:
1. That Report CS 39-09 of the Director, Corporate Services & Treasurer be
received;
2. That the maturity dates on the Promissory Notes in the amount of $7,095,000 to
Veridian Corporation and $17,974,000 to Veridian Connections Inc. be amended
to November 1, 2012 at their face value with the existing terms and conditions with
interest at 6% or the Ontario Energy Board Deemed Rate as indicated on the
respective notes;
3. That a By-law in the form attached providing for the approval and execution of a
Note Amending Agreement be passed;
4. That the Mayor and Clerk be authorized to execute the Note Amending Agreement
on behalf of the City of Pickering in the form attached;
5. That the Director, Corporate Services & Treasurer be authorized to undertake any
actions including negotiations or amendments to the terms and conditions
necessary in order to put the foregoing into effect; and
6. That the appropriate officials at the City of Pickering be given authority to give
effect thereto.
Executive Summary: Veridian Corporation, at its meeting of Wednesday,
September 16, 2009, approved renewing the existing Promissory Notes, totalling
$25,069,000 for the City of Pickering, with the existing terms and conditions, with the
exception of the interest rates, as discussed below. The new maturity date will be
November 1, 2012.
It is now appropriate for Council to approve the renewing of these notes and to provide
the Director, Corporate Services & Treasurer the necessary authority to give effect
thereto.
Report CS 39-09 October 13, 2009
Subject: Veridian Corporation - Promissory Notes Renewal Page 2
108
Financial Implications: Amending the Promissory Notes will take place with the
same terms and conditions as the existing notes over the last nine (9) years with the
exception of the interest rates.
If the Deemed Rate stays unchanged there will be no affects on the City's Current
Budget. However, should the Deemed Rate decrease, say to 6%, then the City would
loose approximately $400,000 in interest income annually with $35,000 being lost in
2009. This equates to an approximate 1 % tax impact.
It is hoped that Veridian's profitable situation continues and the decrease in interest paid
to Shareholders can be offset by using the savings to increase dividends.
Sustainability Implications: This report does not contain any sustainability
implications.
Background: Should the Council of the City of Pickering approve the
Recommendations, the amount of principal owing to the City of Pickering will remain
unchanged at $25,069,000. The notes will however be extended for a further three
years from October 31, 2009 to November 1, 2012 and the other terms and conditions
remain unchanged with the exception of the interest rates as noted above. According to
staff of Veridian Corporation, the extension will allow a level of comfort to other lenders
in that the notes will not have to be repaid until a later date, thereby providing a further
three years of assurance that there will not be a cash drain or a requirement for other
financing.
Given the world-wide decline in interest rates over the last year or so, it appeared that
the current interest rate of 7.6% should be reviewed. While this rate is still within the
range of appropriate rates, there is nothing directly comparable. Furthermore, Veridian
management is concerned as to whether the Ontario Energy Board (OEB) will approve
Veridian's rate applications with this interest rate. By coincidence the OEB's deemed
rate is currently 7.62% although some anticipate a downward revision soon. As
Veridian Connections is the regulated entity it was thought prudent to indicate that the
rate on these notes would be the Deemed Rate. However, as Veridian Corporation is
not regulated then a floor rate of 6% was included in addition to the Deemed Rate.
At the stated rate of interest, this investment provides the City's highest yielding rate of
return on corporate notes. At this time there is no other form of investment with the
same relatively low level of risk that would provide this level of return. The City also
owns approximately 41 % of Veridian providing a more than reasonable level of security.
Details of the foregoing may be found in the attachments.
Report CS 39-09 October 13, 2009
Subject: Veridian Corporation - Promissory Notes Renewal Page 3 109
Attachments:
1. Correspondence from D. Clark, Executive Vice President Corporate Services &
C.F.O., Veridian Corporation dated September 15, 2009.
2. By-law to approve and authorize the execution of a Note Amending Agreement.
3. Note Amending Agreement.
4. Third Amended and Restated Term Promissory Note
(a) Veridian Corporation $7,095,000;
(b) Veridian Connections $17,974,000.
Prepared By: Approved/Endorsed By:
Gillis A. Paterson Gillis A. Paterson
Director, Corporate Services & Treasurer Director, Corporate Services & Treasurer
GAP:ks
Copy: Chief Administrative Officer
Recommended for the consideration
of Pickering City Co
T m s J. Quinn, DMR MM
'_Ir~ ~Z7
Administrative Officer
I
I
ATTACHMENT# ~ TO REPORT#
10,
~MEM0RANDUM
VEfUDt N
CORPORATION
To: Marty de Rond, Clerk, Town of Ajax c: M. Angemeer
Julie Oram, Clerk, City of Belleville Gil Paterson, City of Pickering,
Patti Barrie, Clerk, Municipality of Rob Ford, Town of Ajax,
Clarington Marie Marano, Municipality of
Debi Bentley, Clerk, City of Pickering Clarington,
Nancy Taylor, Municipality of
Clarington,
From: David Clark, FCMA, C. Dir. Brian Cousins, City of Belleville
Executive Vice President
Corporate Services & CFO
Date: September 15, 2009
Re: Promissory Note Amendment and Restatement
PROMISSORY NOTE AMENDMENT AND RESTATEMENT
BACKGROUND
The shareholders of Veridian Corporation ("VC") currently hold promissory notes established
pursuant to transfer bylaws passed under the Electricity Act, 1998, and in connection with the
transfer of assets from the company's predecessor hydroelectric commissions. Each shareholder
holds a note payable from VC and a second note payable from VC's subsidiary, Veridian
Connections Inc. ("VCI") The current, second amended versions of the notes are dated October 1,
2006, and become due on November 1, 2009.
VC has requested that the Municipalities amend the promissory notes as set forth below.
TERMS OF THE OUTSTANDING NOTES
The attached table lists the specifics of the outstanding promissory notes ("the Outstanding Notes").
All of the Outstanding Notes contain the same provisions as to maturity date, payment of interest,
and conversion. They are otherwise identical in all respects, except for the principal amount.
Principal owing on the notes is proportional to the equity interest held by each shareholder.
Date: September 15, 2009 Page 2
Memo re: Promissory Note Amendment and Restatement
The principal amount of each Outstanding Note remains outstanding; all of the Outstanding Notes
mature on November 1, 2009 and the VC shareholders which hold all of the Outstanding Notes
have agreed to amend and restate them to, among other matters, extend the maturity date to
November 1, 2012. The VC shareholders have consulted with Veridian staff in connection with the
proposed amendments.
PROPOSED AMENDMENTS TO THE OUTSTANDING NOTES
The proposed amendments to the Outstanding Notes are as follows:
(i) the maturity date for all of the notes will be November 12012;
(ii) the interest rates for the VCI notes will be amended from a fixed 7.6% to a rate that
will vary with the deemed long-term debt rate that is set annually by the Ontario
Energy Board(OEB). The initial interest rates will be set to the current OEB
deemed rate of 7.62%;
(iii) the interest rates for the VC notes will be amended from a fixed 7.6% to a rate that
will vary with the deemed debt rate that is set annually by the OEB. Interest rates
for,these notes have the additional change of an interest rate floor of 6% in that
regardless of the deemed debt rate set by the OEB, the interest rate will not fall
below the rate floor of 6%. The initial interest rates will be set to the current OEB
deemed rate of 7.62%.
The OEB annually. sets a deemed long-term interest rate for use in establishing debt costs that may
be recovered from electricity distribution customers through regulated distribution rates. Veridian
recommends that the notes be amended to reflect these variable, deemed interest rates as this
approach will ensure a fair debt cost to customers while providing a fair return to shareholders.
Although the current deemed rate is 7.62%, this rate is likely to decline as economic conditions
improve.
Additionally Veridian has approved a dividend plan for total interest and dividend payments. For
the years 2007 to 2011, the plan provides for total interest and dividend payments of $49,001,720.
To the end of 2009, Veridian will have paid a total $30,261,032 towards this five year plan.
Except for the above amendments, the terms and provisions of the proposed promissory notes are
identical to the terms and provisions of the Outstanding Notes. The effective date of the
amendments will be October 31 st, being the last day prior to the date on which the Outstanding
Notes will mature. Each Outstanding Note will be surrendered and each VC shareholder will receive
a "Third Amended and Restated Term Promissory Note" in the applicable principal amount from
each of VC and VCI dated October 31. 2009. Copies of the proposed Third Amended and Restated
Term Promissory Note to be issued by VC and VCI are attached as well as the resolutions proposed
to be passed by VC and VCI respectively to authorize these notes.
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112
Date: September 15, 2009 Page 3
Memo re: Promissory Note Amendment and Restatement
NOTE AMENDING AGREEMENT
In addition to restated and amended promissory notes, the VC shareholders will enter into a note
amending agreement which will confirm the amendments to all of the promissory notes ("the Note
Amending Agreement").
MUNICIPAL AUTHORIZING BYLAWS
To approve and authorize the execution of the Note Amending Agreement as well as the amended
and restated promissory notes, it is proposed that each municipality will pass a bylaw confirming the
extension of the maturity date of the Outstanding Notes to November 1, 2012 and approving the
Note Amending Agreement and the form of the applicable Third Amended and Restated
Promissory Note.
;rr. i.
ATTACHMENT4 TO REPORT #_L5_3q -41
THE CORPORATION OF THE CITY OF PICKERING 113
BY-LAW NO. XXX/09
Being a by-law to approve and authorize the execution of a note amending
agreement made as of the 31 st day of October, 2009 in respect of second
amended and restated promissory notes dated October 1, 2006 issued by
Veridian Corporation and Veridian Connections Inc. in favour of The
Corporation of the Town of Ajax, The Corporation of the City of Belleville,
The Corporation of the Municipality of Clarington and The Corporation of
the City of Pickering, and to approve the issue of third amended and
restated promissory notes dated as of the 31 st day of October, 2009.
WHEREAS the Electricity Act, 1998 authorized a municipality to make by-laws
transferring employees, assets, liabilities, rights and obligations of the municipal
corporation and to receive securities as consideration therefor and Veridian Corporation
("VC") and Veridian Connections Inc. ("VCI") issued promissory notes (the "Original
Notes") dated September 28, 2001 in favour of The Corporation of the Town of Ajax
("Ajax), The Corporation of the City of Belleville ("Belleville"), The Corporation of the
Municipality of Clarington ("Clarington") and The Corporation of the City of Pickering
("Pickering") due on the 31 st day of October, 2006;
WHEREAS the Original Notes were amended and restated pursuant to a note
amending agreement dated as of October 1, 2006 and second amended and restated
promissory notes dated the 1 st day of October, 2006 due on the 1 st day of November,
2009 (the "Second Restated Notes");
WHEREAS VC and VCI have requested amendments to the Second Restated Notes
including an extension of the maturity date;
NOW THEREFORE THE COUNCIL OF THE CORPORATION OF THE CITY OF
PICKERING ENACTS AS FOLLOWS:
1. That Council approves the extension of the maturity date of the Second Restated
Notes to the 1 st day of November, 2012;
2. That Council approves and authorizes the note amending agreement (the
"Agreement") made as of the. 31 st day of October, 2009 amongst Ajax, Belleville,
Clarington and Pickering, as the holders of the Second Restated Notes and VC,
VCI and Veridian Energy Inc. in the form of the draft agreement presented to
Council and attached hereto as Schedule "A";
3. That Council approves the issue of the third amended and restated promissory
notes (each a "Third Restated Note") by VC and VCI pursuant to the Agreement.
By-law No. XXX/09 Page 2
4
-4.' , That the Mayor and the Clerk are authorized to execute the Agreement;
5. That the Clerk is authorized and directed to surrender to VC the Second
Restated Note in favour of this Municipality in. the principal amount of $7,095,000
and to receive a Third Restated Note pursuant to the Agreement;
6. That the Clerk is authorized and directed to surrender to VCI the Second
Restated Note in favour of this Municipality in the principal amount of
$17,974,000 and to receive a Third Restated Note pursuant to the Agreement;
7. That the Clerk is authorized to affix the Corporate Seal of The Corporation of the
City of Pickering to the Agreement.
8. This By-law comes into force on the date of its final passing.
BY-LAW read a first, second and third time and finally passed this 19th day of October,
2009.
Dave Ryan, Mayor
Debi Wilcox, City Clerk
ATTACHMENT#_ TO REPORT# a 3q
SCHEDULE "A" ~I 15
NOTE AMENDING AGREEMENT
THIS AGREEMEN'T' made as of the 31 S` day of October, 2009.
BETWEEN:
The Corporation of the Town of Ajax ("Ajax")
- and -
The Corporation of the Municipality of Clarington ("Clarington")
- and -
The Corporation of the City of Pickering ("Pickering")
- and
The Corporation of the City of Belleville ("Belleville")
(Ajax, Belleville, Clarington and Pickering are referred to collectively herein
as the "Veridian Shareholders")
- and. -
Veridian Corporation, a corporation existing under the laws of
Ontario ("VC")
- and -
Veridian Connections Inc., a corporation existing under the laws of
Ontario ("VCI")
and -
Veridian Energy Inc., a corporation existing under the laws of
Ontario ("VEI")
(VC, VCI and VEI are referred to collectively herein as the "Veridian
Group")
116 -2-
RECITALS:
A. VCI has previously issued one promissory note to each of the Veridian Shareholders .
(collectively the "VCI Notes") issued pursuant to the applicable transfer by-laws enacted
pursuant to the authority granted under the Electricity Act, 1998, which VCI Notes are
outstanding as of the date hereof;
B. VC has previously issued one promissory note to each of the Veridian Shareholders
(collectively the "VC Notes") issued pursuant to the applicable transfer by-laws enacted
pursuant to the authority granted under the Electricity Act, 1998, which VC Notes are
outstanding as of the date hereof;
C. The Veridian Shareholders wish to amend the VCI Notes and the VC Notes as provided
herein;
D. The Veridian Shareholders have consulted with the Veridian Group in connection with
the proposed amendments to the VC Notes and the VCI Notes;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the respective covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Amendment: The Veridian Shareholders will surrender forthwith to VC and VCI the
existing VC Notes and VCI Notes (the VC Notes and VCI Notes hereinafter collectively, the
"Predecessor Notes") (descriptions of such Predecessor Notes being set out in Appendix "A"
attached hereto) and VC and VC.I will forthwith issue amended and restated promissory notes in
the form attached hereto as Appendix B". There shall be eight amended and restated
promissory notes (the "Amended and Restated Promissory Notes") in total. Four promissory
notes will be issued by each of VC and VCI to each of the four Veridian Shareholders in the
same.principal amounts as the VC Notes and VC.I Notes. For greater clarity, the amendment and
restatement of the Predecessor Notes shall not extinguish the debt created pursuant to the transfer
by-laws and Predecessor Notes and such debt is continued as amended and restated in the
Amended and Restated Promissory Notes.
2. Counterparts: This Note Amending Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original and all of which taken together will
be deemed to constitute one and the same agreement.
-3 - I17
IN WITNESS WHEREOF the parties hereto have duly authorized and executed
this Note Amending Agreement as of the day and year first above written.
THE CORPORATION OF THE TOWN OF AJAX
By: c/s
Name: Steve Parish
Title: Mayor
By: c/s
Name: Marty de Rond
Title: Clerk
THE CORPORATION OF THE CITY OF
BELLEVILLE
By: c/s
Name: Neil Ellis
Title:. Mayor
By: c/s
Name: Julie C. Oram
Title: Clerk
THE CORPORATION OF THE MUNICIPALITY OF
CLARINGTON
By: c/s
Name: Jim Abernethy
Title: Mayor
By: CA
Name: Patti L. Barrie
Title: Clerk
-4-
THE CORPORATION OF THE CITY OF
PICKERING
By: c/s
Name: Dave Ryan
Title: Mayor
By: c/s
Name: Debi A. Bentley
Title: Clerk
VERIDIAN CORPORATION
By: c/s
Name: Michael Angemeer
Title: President
By: c/s
Name: Glenn Rainbird
Title: Chair
VERIDIAN CONNECTIONS INC.
By: c/s
Name: Michael Angemeer
Title: President
By: c/s
Name: Glenn Rainbird
Title: Chair
119
-5-
VERIDIAN ENERGY INC.
By: c/s
Name: Michael Angemeer
Title: President
By: c/s
Name: Glenn Rainbird
Title: Chair
120
Appendix "A"
Eight (8) Veridian Group Predecessor Notes described below.
Issuer Holder Date Principal Amount
I. Veridian Corporation The Corporation of the October 1", $5,550,000
Town of Ajax 2006
2. Veridian Corporation The Corporation of the October 1", $2,355,000
Municipality of 2006
Clarington
3. Veridian Corporation The Corporation of the October 1", $7,095,000
City of Pickering 2006
4. Veridian Corporation The Corporation of the October 1st, $2,206,000
City of Belleville 2006
5. Veridian Connections Inc. The Corporation of the October 1", $14,060,000
Town of Ajax 2006
6. Veridian Connections Inc. The Corporation of the October 1st, $5,966,000
Municipality of 2006
Clarington
7. Veridian Connections Inc. The Corporation of the October 1", $17,974,000
City of Pickering 2006
8. Veridian Connections Inc. The Corporation of the October 1st, $5,588,000
City of Belleville 2006
121
Appendix "B"
Eight (8) Veridian Group Amended and Restated Promissory Notes attached hereto.
::O DM A\PC DOCS\TO RO 114158608\4
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ATTACHMENT #__~_TO REPORT # ~ -3q "09
122
THIRD AMENDED AND RESTATED TERM PROMISSORY NOTE
Maturity Date: November 1St, 2012
Principal Amount: $7,095,000
This note amends and restates a Second Amended and Restated Promissory Note
(the "Predecessor Note") issued by Veridian Corporation to the Corporation of the City
of Pickering (the "Holder") on October 1", 2006 for the Principal Amount. The
Predecessor Note was issued pursuant to By-law No. 6706/06 of the Holder.
This note amends the terms of repayment of, and does not extinguish, the debt
created pursuant to the transfer by-law (enacted pursuant to the authority granted under
the Electricity Act, 1998) as set forth originally in By-Law 5586/99 of the Holder, as
amended by By-Law 6706/06, and the Predecessor Note.
FOR VALUE RECEIVED, Veridian Corporation (the "Corporation"), hereby
promises to pay to or to the order of the Corporation of the City of Pickering, in lawful
money of Canada, on November 1, 2012 (the "Maturity Date") at the principal office of
the Holder, the principal amount of SEVEN MILLION NINETY-FIVE THOUSAND
Dollars ($7,095,000) (the "Principal Amount") together with interest on the unpaid
Principal Amount.
1. Interest Rate. Interest on the Principal Amount shall be calculated annually, not
in advance, for the period from November 1St, 2009 until the Maturity Date, at a
rate equal to the greater of (a) six percent (60/o), and (b) a rate equal to the
Ontario Energy Board ("OEB") deemed long-term debt rate as set forth on an
annual basis in the OEB's Cost of Capital Parameter Updates for Cost of Service
Applications, or as the deemed long-term debt rate may otherwise be established
by the OEB (the "Interest Rate"). Interest at the Interest Rate shall be payable
on November 1 in each year up to and including the Maturity Date. The
Corporation acknowledges that the Interest Rate payable pursuant to this note
shall be. automatically amended from time to time to reflect the deemed rate
established by the OEB from time to time and this note shall be automatically
amended from time to time to reflect any change to the Interest Rate as
determined by the OEB provided that such deemed rate is greater than six percent
(6%0). Notwithstanding that the Interest Rate pursuant to this note shall be
amended, the effective date of any change in the Interest Rate pursuant to this
note will be as of May I" each year with interest payable on the previous Interest
Rate from November I" of the previous year to April 301h of the next year, and
interest payable at the amended Interest Rate from May 1".to October 31' of the
current year.
2. 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
-2- 123
Holder subject to any subordination and postponement to any other financial
institution or lender.
3. 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 Ajax, to the Corporation of the
Municipality of Clarington and to the Corporation of the City of Belleville
(collectively the "Municipalities") described in Schedule "A" hereto (together the
"Other Notes").
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 the Maturity Date. The exchange ratio for the
conversion of the Principal Amount of this Note shall be on the basis that, for
every $1,000.00 of Principal Amount, I 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 date detennined by the Holder following
'consultation with the Corporation.
5. Subordination. The Holder acknowledges and agrees that the obligation of the
Corporation to repay the Principal Amount and the principal amount 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. The Holder will execute,
promptly do, deliver or cause to be done, executed and delivered all further acts,
documents and things as may be required to provide for the subordination and
postponement of the Holder's rights evidenced by this Note.
6. Revisions and Replacement. At the sole option of the Holder, the Maturity Date
and any of the teens of this Note may be revised, changed or restated by the
Holder following consultation with the Corporation. If this Note is revised,
changed or restated, the Corporation may cancel and replace this Note in which
case, the Holder shall forthwith surrender this Note for cancellation.
7. 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, Veridian Connections Inc.,
Veridian Energy Inc. and the Corporation dated September 28, 2001, as amended
and/or restated from time to time) prior to the Maturity Date, the Note shall
remain due to the Holder in accordance with its terms.
8. Note Non-negotiable and Non-assignable. The Note shall be non-negotiable and
non-assignable.
124 _3_
IN WITNESS WHEREOF Veridian Corporation has caused this Note to be
signed under its corporate seal by its duly authorized officers as of this 31st day of
October, 2009.
VERIDIAN CORPORATION
By:
Glenn Rainbird, Chair
By:
Michael Angemeer, President
-4- 1 25
SCHEDULE "A"
1. Third Amended and Restated Term Promissory Note issued by Veridian
Connections Inc. to the Corporation of the Municipality of Clarington in the
principal amount of $5,966,000 and dated October 31, 2009.
2. Third Amended and Restated Term Promissory Note issued by Veridian
Connections Inc. to the Corporation of the Town of Ajax in the principal amount
of $14,060,000 and dated October 31, 2009.
3. Third Amended and Restated Term Promissory Note issued by Veridian
Corporation to the Corporation of the Municipality of Clarington in the principal
amount of $2,355,000 and dated October 31, 2009.
4. Third Amended and Restated Term Promissory Note issued by Veridian
Corporation to the Corporation 'of the Town of Ajax in the principal amount of
$5,550,000 and dated October 31, 2009.
5. Third Amended and Restated Term Promissory Note issued by Veridian
Corporation to the Corporation of the City of Belleville in the principal amount of
$2,206,000 and dated October 31, 2009.
6. Third Amended and Restated Term Promissory Note issued by Veridian
Connections Inc. to the Corporation of the City of Belleville in the principal
amount of $5,588,000 and dated October 31, 2009.
::ODM A'TCDOMTORU 1 \4158658\3
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2.6
THIRD AMENDED AND RESTATED TERM PROMISSORY NOTE
Maturity Date: November 1st, 2012
Principal Amount: $17,974,000
This note amends and restates a Second Amended and Restated Promissory Note
(the "Predecessor Note") issued by Veridian Connections Inc. to the Corporation of the
City of Pickering (the "Holder") on October l s`, 2006 for the Principal Amount. The
Predecessor Note was issued pursuant to By-law No. 6706/06 of the Holder.
This note amends the terms of repayment of, and does not extinguish, the debt
created pursuant to the transfer by-law (enacted pursuant to the authority granted under
the F_lectricity Act, 1998) as set forth originally in By-Law 5586/99 of the Holder, as
amended by By-Law 6706/06, and the Predecessor Note.
FOR VALUE RECEIVED, Veridian Connections Inc. (the "Corporation"),
hereby promises to pay to or to the order of the Corporation of the City of Pickering, in
lawful money of Canada, on November 1, 2012 (the "Maturity Date") at the principal
office of the Holder, the principal amount of SEVENTEEN MILLION NINE
IJUNDRED AND SEVENTY-FOUR THOUSAND Dollars ($17,974,000) (the
"Principal Amount") together with interest on the unpaid Principal Amount.
1. Interest Rate. Interest on the Principal Amount shall be calculated annually, not
in advance, for the period from November l s`, 2009 until the Maturity Date, at a
rate equal to the Ontario Energy Board ("OEB") deemed long-term debt rate as
set forth on an annual basis in the OEB's Cost of Capital Parameter Updates for
Cost of Service Applications, or as the deemed long-term debt rate may otherwise
be established by the OEB (the "Interest Rate"). Interest at the Interest Rate
shall be payable on November I in each year up to and including the Maturity
Date. The Corporation acknowledges that the Interest Rate payable pursuant to
this note shall be automatically amended from time to time to reflect the deemed
rate established by the OEB from time to time and this note shall be automatically
amended from time to time to reflect any change to the Interest Rate as
determined by the OEB. Notwithstanding that the Interest Rate pursuant to this
note shall be amended, the effective date of any change in the Interest Rate
pursuant to this note will be as of May 1st each year with interest payable on the
previous Interest Rate.from November IS` of the previous year to April 30`h of the
next year, and interest payable at the amended Interest Rate from May 0 to
October 31st of the current year.
2. 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- 1 2 7
3. 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 Ajax, to the Corporation of the
Municipality of Clarington and to the Corporation of the City of Belleville
(collectively the "Municipalities') described in Schedule "A" hereto (together the
"Other Notes").
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 the Maturity Date. The exchange ratio for the
conversion of the Principal Amount of this Note shall be on the basis that, for
every $1,000.00 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 date determined by the Holder following
consultation with the Corporation.
5. Subordination. The Holder acknowledges and agrees that the obligation of the
Corporation to repay the Principal Amount and the principal amount 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. The Holder will execute,
promptly do, deliver or cause to be done, executed and delivered all further acts,
documents and things as may be required to provide for the subordination and
postponement of the Holder's rights evidenced by this Note.
6. Revisions and Replacement. At the sole option of the Holder, the Maturity Date
and any of the terms of this Note may be revised, changed or restated by the
Holder following consultation with the Corporation. If this Note is revised,
changed or restated, the Corporation may cancel and replace this Note in which
case, the Holder shall forthwith surrender this Note for cancellation.
7. 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, Veridian Corporation, Veridian
Energy Inc. and the Corporation dated September 28, 2001, as amended and/or
restated from time to time) prior to the Maturity Date, the Note shall remain due
to the Holder in accordance with its terms.
8. Note Non-negotiable and Non-assignable. The Note shall be non-negotiable and
non-assignable.
1 28 -3-
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 31st day of
October, 2009.
VERIDIAN CONNECTIONS INC.
By:
Glenn Rainbird, Chair
By:
Michael Angemeer, President
i
I
-4- 1 29
SCHEDULE "A"
1. Third Amended and Restated Term Promissory Note issued by Veridian
Connections Inc. to the Corporation of the Municipality of Clarington in the
principal amount of $5,966,000 and dated October 31, 2009.
2. Third Amended and Restated Term Promissory Note issued by Veridian
Connections Inc. to the Corporation of the Town of Ajax in the principal amount
of $14,060,000 and dated October 31, 2009.
3. 'T'hird Amended and Restated Term Promissory Note issued by Veridian
Corporation to the Corporation of the Municipality of Clarington in the principal
amount of $2,355,000 and dated October 31, 2009.
4. Third Amended and Restated Term Promissory Note issued by Veridian
Corporation to the Corporation of the Town of Ajax in the principal amount of
$5,550,000 and dated October 31, 2009.
5. Third Amended and Restated Term Promissory Note issued by Veridian
Corporation to the Corporation of the City of Belleville in the principal amount of
$2,206,000 and dated October 31, 2009.
6. Third Amended and Restated Tenn Promissory Note issued by Veridian
Connections Inc. to the Corporation of the City of Belleville in the principal
amount of $5,588,000 and dated October 31, 2009.
::ODM A\YCDOCS\TORO 1\4158694\7