HomeMy WebLinkAboutBy-law 5514/99THE CORPORATION OF THE TOWN OF PICKERING
BY-LAW NUMBER 5514/99
Being a by-law to approve the merger of three Hydro-
Electric Commissions, the incorporation of corporation
and subsidiaries under the Business Corporations Act
(Ontario) pursuant to section 142 of the Electricity Act,
1998 and an agreement of the shareholders of the foregoing
parent corporation.
WHEREAS pursuant to section 142(1) of the Electricity Act, 1998 the Council of the
Corporation of the Town of Pickering (the 'Town") may cause a corporation to be
incorporated under the Business Corporations Act COBCA") for the purpose of generating,
transmitting, distributing or retailing electricity; and
WHEREAS the Town transmits, distributes and retails electricity through the Pickering Hydro
Electric Commission (the "Commi~ion'); and
WHEREAS pursuant to subsection 142(3) of the Electricity Act, 1998 two' or more municipal
corporations may incorporate a single corporation for the purpose of carrying on the business
of generating, transmitting, distributing or retailing electricity; and
WHEREAS the Town together with the Councils of the Corporation of the Town of Ajax and
the Corporation of the Municipality of Clarington (collectively the 'Other Municipalities")
have agreed to enter into a merger agreement (the 'Merger Agreement') to establish the
terms and conditions upon which the Town and the Other Municipalities will merge the
businesses of the Ajax Hydro-Electric Commission, Clarington Hydro-Electric Commission
and Picketing Hydro-Electric Commission (collectively the 'Predecessor Utilities"); and
WHEREAS the Town together with the Other Municipalities have authorized the incorporation
of a corporation (the 'Corporation') and certain subsidiaries (the "Subsidiaries")
(collectively the "Corporation and its Subsidiaries") to be incorporated under the OBCA
pursuant to section 142(1) of the Electricity Act, 1998 for the purpose of generating,
transmitting, distributing or retailing electricity; and
WHEREAS the Town and the Other Municipalities have agreed to enter into a shareholders'
agreement (the "Shareholders' Agreement') to provide for the conduct of certain affairs of
the Corporation and its Subsidiaries, to provide for certain restrictions on the transfer and
ownership of shares in the capital of the Corporation and to govern the mutual rights and
obligations of the Town and the Other Municipalities with respect to the Corporation and its
Subsidiaries and each other;
NOW THEREFORE THE COUNCIL OF THE CORPORATION OF THE TOWN OF
PICKERING HEREBY ENACTS AS FOLLOWS:
The Merger Agreement among the Town and the Other Municipalities, in substantially
the form attached hereto as Schedule 'A', forming part of this by-law is hereby
authorized and approved.
The incorporation, pursuant to section 142 of the Electricity Act, 1998 of the
Corporation under the OBCA on June 1, 1999 or such other date to be determined by
the Mayor and the Mayors of the Other Municipalities is hereby authorized and
approved, and Linda L. Bertoldi of the law firm of Borden & Elliot is hereby
authorized to act as the incorporator of the Corporation and its Subsidiaries and to file
articles of incorporation for the Corporation on such date in the form annexed hereto as
Schedule "B". The incorporation of Subsidiaries is also hereby authorized and
approved. The registered office of the Corporation and its Subsidiaries shall be the
head office of the Pickering Hydro-Electric Commission until otherwise determined by
the Town and the Other Municipalities pursuant to the OBCA and Shareholders'
Agreement.
The Shareholders' Agreement among the Town, the Other Municipalities, the
Corporation, in substantially the form attached hereto as Schedule "C', forming part of
this by-law is hereby authorized and approved.
The transfer of the assets, liabilities and employees of the Commission to the
Corporation and as appropriate, to one or more Subsidiaries shall be authorized by
Council pursuant to a transfer by-law in accordance with the Electricity Act, 1998 to be
submitted to Council for its consideration and enacted prior to November 1, 1999 or
such other date to be determined by the Mayor and the Mayors of the Other
Municipalities.
Any two of the Mayor, the Chief Administrative Officer, and the Clerk are hereby
authorized and directed, for and on behalf of the Town to execute and deliver the
Merger Agreement and Shareholders' Agreement (the 'Main Documents") with such
alterations, additions and amendments thereto as they may approve, the execution of
the Main Documents by such individuals being conclusive evidence of such approval
and to do all such acts and things and to execute and deliver all such other documents,
instruments and writings as may be necessary or desirable to give effect to the
provisions of this by-law and the Main Documents.
By-law read a first, second and third time and finally passed this 28th day of June, 1999.
Wayne Arthurs, Mayor
Bruce Taylor, Clerk
MERGER AGREEMENT
DRAFT: June 11, 1999
THIS AGREEMENT made as of the 29th day of June, 1999.
BETWEEN:
The Corporation of the Town of Ajax, a m;micipal corporation
existing under the laws of Ontario,
("Ajax")
OF THE FIRST PART
The Corporation of the Municipality of Clarington, a municipal
corporation existing under the laws of Ontario,
("Clarington")
OF THE SECOND PART
The Corporation of the Town of Picketing, a m~micipal
corporation existing under the laws of Ontario,
("Picketing")
OF THE THIRD PART
(Ajax, Clarington and Picketing are sometimes referred to
collectively as the "Municipalities" and individually as a
"Municipality")
RECITALS:
(4
the Mnn;cipalities, acting under the authority contained in the Electricity Act, 1998 (the
"Act"), have agreed to authorize the incorporation of a corporation ("HoldCo") under
the Business Corporations Act (Ontario) to be wholly-owned by the M, micipalities and as
appropriate, certa;- subsidiaries of HoldCo ("the Subsidiaries") for the purpose of
carrying on the business of each of Ajax Hydro-Electric Commission, Clarington
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Hydro-Electric Commission and Picketing Hydro-Electric Co mmi~ion (collectively the
"Predecessor Utilities" and individually a "Predecessor Utility");
the Municipalities, pursuant to the Act, have agreed to t~n~fer, by applicable transfer
by-laws, assets, liabilities and employees of the Predecessor Utilities to HoldCo and as
appropriate, certain of the Subsidiaries in exchange for shares in the capital of HoldCo
and/or the Subsidiaries, the ass:,mption of all liabilities of each of the Predecessor
Utilities by HoldCo and/or the Subsidiaries and the issue of promksory notes or other
evidence of indebtedness of HoldCo and/or the Subsidiaries to each of the Municipalities;
and
(c)
the M,mlcipalities, acting under'the authority of the Act, have agreed to effect such
transfers to HoldCo and as appropriate, cert=in Subsidiaries upon the terms and
conditions hereinafter set out.
NOW THEREFORE THIS AGBEEMENT wrrNESSES as follows:
Incorporation of HoldCo. Each of the M-nlclpalities agrees to incorporate HoldCo on
the Incorporation Date pursuant to articles of incorporation substantially in the form
attached hereto as Schedule "A". Each of the M, mldpalities further authorizes the
incorporation, after the Incorporation Date, of one,or more subsidiaries of HoldCo to
carry on businesses permitted by the Ontar/o Energy BoardAct, 1998 (the "OEB Act")
(collectively referred to herein after as the "HoldCo Subs").
Incorporation Date. For the purpose of this Agreement, the Incorporation Date shall
be Thursday, July 1, 1999 or such other date as the M,,-icipalities may unanimously
agree.
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Establishment of Board of Directors. Each of the Municipalities agrees to designate the
members of The commission of each Predecessor Utility as the Board of Directors of
HoldCo on the Incorporation Date. The Board of Directors of HoldCo may thereafter
establish the Board of Directors of each HoldCo Sub.
Shareholders Agreement. Each of the Municipalities agrees that, as of the Incorporation
Date, it shall enter into a shareholders' agreement with each of the other parties hereto
substantially in the form attached hereto as Schedule "B" (the "Shareholders
Agreement") to provide for the conduct of certain affairs of HoldCo, and as appropriate,
the HoldCo Subs, to provide for restrictions on the transfer and ownership of shares in
the capital of HoldCo and to govern the mutual rights and obligations of the shareholders
of HoldCo with respect to HoldCo and to each other shareholder.
Effective Date. For the purpose of this Agreement, the Effective Date shall be
Wednesday, November 1, 1999 or such date or dates as the Municipalities may
unanimously agree.
Transfer By-laWs. Each of the M, mlcipalities agrees that it shall cause a transfer by-law
pursuant to the Act (a "Transfer By-law") to be passed prior to the Effective Date
authorizing the transfer as of the Effective Date to HoldCo and as appropriate, to the
HoldCo Subs of the assets (not including Surplus Land)("the Transferred Assets"),
liabilities and employees of that M,mlcipality's respective Predecessor Utility and setting
out the terms and conditions upon which such transfer is to take place, including the
consideration to be paid by HoldCo and as appropriate, the HoldCo Subs.
Transfer Agreement. Each of the Munidpalides agrees that prior to the Effective Date
it shall, pursuant to the Tva"_~fer By-law enter into, and shall cause its respective
Predecessor Utility to enter into, a transfer agreement and such other documents (the
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"Transfer Agreement") with respect to the Transferred Assets, liabilities and employees
of the Predecessor Utility to be transferred to HoldCo and as appropriate, the HoldCo
Subs as may be necessary to effect the transfers contemplated by the Transfer By-law.
Lands Retained by Municipality. Each of the Municipalities agrees that it and each
other Municipality shall have the right and option to retain certain parcels of land of the
respective Municipality Which parcels of land are vacant and not used in the operations
of the respective Predecessor Utility ("Surplus Land"). Each Municipality shall designate
the Surplus Land which it wishes to ret:in and notify in writing each of the other
Municipalities thereof prlor to the enactment of that Municipality's Transfer By-law. For
the purposes of Section 10, any Surplus Land retained by a Municipality shall be valued
at its book value as recorded on the books of the Predecessor Utility as at the Effective
Date.
Assumption of Obligations and Liabilities. Pursuant to the Transfer By-laws and the
T~nsfer Agreements, HoldCo and the HoldCo Subs, as applicable, shall ass-me and
discharge all obligations and liabilities of all of the Predecessor Utilities, including,
without limitation, all obligations and liabilities under environmental laws with respect
to the Transferred Assets or otherwise.
10.
Valuation of Assets. Each of the Municipalities agrees that the Transferred Assets and
liabilities of each Predecessor Utility shall be transferred to HoldCo, or as applicable, the
HoldCo Subs, at their fair market value as at the Effective Date. The book value of each
Predecessor Utility shall be deemed to be its fair market value and shall be based on the
audited financial statements of each Predecessor Utility as at the Effective Date. Each
M,mlcipallty agrees t9 cause an audit of its Predecessor Utility to be conducted as at the
Effective Date. The audit shall be conducted in accordance with generally accepted
Canadian accounting principles on a basis consistent with prior periods, with such audit
.5¸.
to be completed and the audit report delivered by each Municipality to
auditors within 90 days after the Effective Date.
HoldCo's
11.
Principles of Equity Determination. Each of the M-nicipalities agrees that it shall
receive fully-paid and non-assessable common shares ("Common Shares") in the capital
of HoldCo and, as may be applicable, evidence of indebtedness of HoldCo on a pro rata
basis in exchange for the transfer pursuant to the Transfer Bylaw and the Transfer
Agreement, of the Transferred Assets, liabilities and employees of its respective
Predecessor Utility (the "Equity"). The Equity of each M, mlcipality shall be determined
as of the Effective Date on a pro rata basis by HoldCo's auditors based upon the values
for the Tra-~ferred Assets and liabilities reported on such Predecessor Utillty's audited
financial statements as at the Effective Date. HoldCo's auditors shall review and confirm
the Equity calculation which determl-ation shall be final and binding for all of the
M, tnlcipalities for all purposes of this Agreement and the Shareholders' Agreement.
12.
Initial Share Issuance. Each of the Municipalities agrees that it will not be possible to
determ;ne the Equity of each M,micipality as of the Effective Date for each Predecessor
Utility until the completion of an audit of each predecessor Utility after the Effective
Date as contemplated in Section 10 above. As a result, each Predecessor Utility shall
subscribe for Common Shares and HoldCo shall issue the following n,~mber of Common
Shares to the respective M, micipality on the Incorporation Date:
Ajax Hydro-Electric Corn mission shall pay $368 to HoldCo and Ajax Shall receive
368 Common Shares;
0,)
Clarington Hydro-Electric Commission shall pay $158 to HoldCo and Clarington
shall receive 158 Common Shares; and
(c)
-6-
· Picketing Hydro-Electric Commission shall pay $474 to HoldCo and Picketing
shall receive 474 Common Shares,
with the effect that on the Incorporation Date the issued and outstanding capital of
HoldCo shall be 1,000 Common Shares, and the Common Shares shall be held as follows
and the initial Equity of each Municipality shall be as follows:
shareholder
Number of
Common Shar~s
Initial Equity of
each Municipality
Ajax 368 36.8%
Clarington 158 15.8%
Pickering 474 47.4%
1,000 100%
13.
Equity Adjustment. Each of the Municipalities agrees that once the Equity for each
Mvnldpality has been determined, and reviewed and confirmed by HoldCo's auditors
pursuant to Section 11 that all adjustments which may be necessary to reflect the Equity
of each Munidpality as so determined shall be made, including without limitation, the
issuance of additional Common Shares of HoldCo, the issuance or reallocation of
indebtedness of HoldCo and any applicable HoldCo Subs and any amendments to the
Shareholders' Agreement which may be required as a result of such determination of
HoldCo's auditors.
14.
HoldCo and HoldCo Subs Expenses. Each of the M,m;cipallties agrees to cause its
respective Predecessor Utility to pay its pro rata share of the expenses of HoldCo and the
HoldCo Subs prior to the Effective Date based upon the Equity of each Municipality.
-7-
Each of the Municipalities further agrees to cause its respective Predecessor Utility to
contribute the amount set out below on or before the Incorporation Date in respect of
the initial start up expenses of HoldCo and the HoldCo Subs:
Predecessor Initial Start Up
U~;ility Payment
Ajax $36,800
Clarington $15,800
Picketing $47,400
$100,000
15.
Special Payment. Each of the Municipalities agrees that it shall cause HoldCo md/or
the HoldCo Subs to make two special payments tot=lli,g $12 million (individually called
a "Special Payment" and collectively called the "Special Payments") to each
Municipality. Each Spedal Payment shall be in an amount calculated by multiplying
$60,000 times the percentage Equity of each Munidpality. The first Special Payment shall
be made on the Effective Date and the second Special Payment shall be made on
September 1, 2000. The Special Payments shall be made in a tax efficient m:-ner taking
into account the capital structure and financing pl~-~ of HoldCo and the HoldCo Subs.
Schedule "C" hereto sets out an estimate of the Special Payments. As of the Effective
Date, the Equity of each M~mlcipality shall be as specified in Section 12.
On the Effective Date, HoldCo shall pay to each M, micipality the first Special Payment
set out on Schedule "C" hereto. Following the determination by HoldCo's auditors of
the Equity of each M~micipality pursuant to Section 13 after the Effective Date, the
second Special Payment set out in Schedule "C" shall be adjusted to reflect the final
Equity determination. The adjusted second Special Payment shall be paid on September
-8-
1, 2000. Any adiustment to reflect an overpayment or underpayment to a Municipality
on the first Special Payment shall be made without any provision for interest as a result
of any overpayment or underpayment to any Municipality on the first Special Payment
date. If any overpayment on the first Special Payment C=nnOt be recovered by adjustment
of the second Special Payment, the Municipality or M, mlcipalities receiving the
overpayment shall repay the =mount of the overpayment to HoldCo on the second
Special Payment date.
16.
Representations and Warranties of each Municipality. Each of the Municipalities
hereby represents and warrants with respect to itself and its Predecessor Utility to each
of the other parties hereto that as at the date hereof and as of the Effective Date:
the Mtmlcipality has the power to enter into this Agreement and to perform its
obligations under this Agreement and all doo,ments and agreements contemplated
by this Agreement;
this Agreement has been duly authorized, executed and delivered by the
Mnnlcipality and is a legal, valid and binding obligation of the Municipality,
enforceable against the Municipality in accordance with its terms;
each of the Transfer By-law, Transfer Agreement and Shareholders' Agreement
will be a legal, valid and binding obligation of the Mnnlcipality, enforceable
against the Mnnicipallty in accordance with its terms;
the M,,,icipality and/or its Predece~or Utility is the legal and beneficial owner
of all of the assets of the Predecessor Utility to be transferred pursuant to the
Transfer By-law and Tr=n~fer Agreement, with a good and marketable title
thereto, subject to the Eno,mbrances and except for the Eno,mbrances, there are
-9-
no outstanding agreements, options or other rights capable of becoming an
agreement or option to purchase such assets. For the purpose of this Agreement,
"Encumbrance" me~n~ a mortgage, charge, pledge, hypothecation, lien (statutory
or otherwise), security interest, adverse cl=im, assignment as security or
reservation of title of any kind which may affect the Transferred Assets
immediately prior to the Effective Date and shall be dlsdosed in writing by each
Municipality prior thereto;
except as disclosed in writing by each Mnnlcipality prior to the Effective Date,
there are no actions, suits or proceedings pending or, to the best of the
M:mldpality's knowledge, after due enquiry, threatened against or affecting the
assets of the Predecessor Utility to be transferred to HoldCo by the Transfer
By-law and Transfer Agreement at law or in equity or before or by any federal,
provindal, m, mlcipal or other gover-mental department, court, COmmission,
board, bureau, agency or instr~mentality, domestic or foreign, or before or by an
arbitrator or arbitration board. Except as disclosed in writing by each
M,mlcipality prior to the Effective Date, the M, mlcipality is not aware of any
ground on which any such action, suit or proceeding might be commenced with
any reasonable likelihood of success;
neither this Agreement nor any doc,,ment to be delivered by the Municipality nor
any certificate, report, statement or other document furnished by the
M,,n;cipality in connection with the negotiation of this Agreement cont=in~ or
will contain any untrue statement of a material fact or omits or will omit to state
a material fact necessary to make the statements contained herein or therein not
m;~leacllng; and
- 10-'
there has been no event, transaction or information that has come to the attention
of the Municipality that has not been disclosed to the other Municipalities in
writing that could reasonably be expected to have a material adverse effect on the
assets of the Predecessor Utility to be transferred to HoldCo pursuant to the
Transfer By-law and Transfer Agreement.
17.
Further Assurances. Each of the M, mlcipalities shall, at its expense, promptly and duly
execute and deliver such further doo~ments and promptly take such further action not
inconsistent with the terms hereof as may from time to time be reasonably required in
order to more effectively carry out the intent and purpose of this Agreement.
18.
Costs. All costs and expenses incurred or to be incurred by each Municipality and all
taxes incurred or payable in connection with the transfer of the Transferred Assets shall
be paid by that M,micipality.
19.
Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the federal laws of Canada applicable therein.
20.
Entire Agreement. This Agreement, the Shareholders Agreement, the Tr=n~fer
Agreement and the Schedules attached hereto constitute the entire agreement among the
parties relating to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, between the parties hereto with respect to the subject
matter hereof.
21.
Survival. All warranties, representations, covenants, provisions and terms contained in
this Agreement by the parties shall not merge but shall survive the completion of the
actions contemplated herein.
22.
-il-
Regulatory Approval. Completion of the transactions contemplated by this agreement
shall be conditional upon obtaln;ng all necessary regulatory approvals under the OEB Act
and other applicable laws on terms and conditions satisfactory to the M,m;cipalities.
IN WITNESS WHEREOF this Agreement has been duly executed by the parties under
their respective corporate seals as witnessed by the signatures of their proper officers in that
behalf.
THE CORPORATION OF THE
TOWN OF AJAX
Name: Mayor Steve Parish
By:.
Name: Marry deRond, Clerk
THE CORPORATION OF THE
MUNICIPALITY OF CLARINGTON
By:
Name: Mayor Diane Hamre
Name: Frank Wu, Chief Administrative
O~cer
- 12-
THE CORPORATION OF THE
TOWN OF PICKERING
By:.
Name:
Mayor Wayne Arthurs
c/s
By:
Name: Bruce Taylor, Clerk
ATTAC}-~.D.
SCHED~ "A"
ARTICLFS OF INCORPORATION
SCHEDULE "B"
SHAREHOLDERS' AGREEMENT
ATI'ACHF~r'J.
Party
Picketing
Ajax
Clarington
Total
SCHEDULE "C"
SPECIAL PAYMENTS
First Payment
$2,844,000*
$2,208,000*
$948,000*
$6,000,000
Second Payment
$2,844,000*
$2,208,000*
$948,000*
$6,000,000
Total
$5,688,000*
$4,416,000'
$1,896,000'
$12,000,000'*
This is an estimated amount only.
The $12 milllon total shall not change.
G:~I.B~PICKHYDR~)OCUM~NTkMERGJU~.'~/PD
For Ministry Use O~ly Ontado C-,omo~mn Numar
I'uSage exciuslf au mlntslbre Nun~fo cie I~ so.bib ~ Ontario
DRAFT
IONTARIO J
Form1
Act
Formule 1
La4 sur ~e~
1. The name of the corporation is:
ARTICLES OF INCORPORATION
STATUTS CONSTITUTIFS
D6nomination sociale de la soci&t6:
2. The address of the registered office is:
Adresse du siige social:
1920 Bayly Street
(Stme~ ma No. or n.h. No. mm, ~ rnum-omce t)ullamg, g~ve Room Na~)
(Flue .(nuff~m) oo numdwo de la R.R. eC ~'11 ~'~glt d'ua d, dlfk:e & I~ nuff~N'O du ~)
(Name ~ Mun~:q)~ty or Prat grace) (~etm Coae)
(Nora Oem munic~pam~ gu du ~umau ae poete) (Coee pome)
Number (or minimum and maximum number) of Nombre (gu hombres minimal et maximal)
directors is: d'administrateurs:
A minimum of 1 and a maximum of 30.
4. The first director(s) is/are:
Premier(s) administrateur(s):
First name, initials and sumame
Pr&nora, inifiales et nom de famille
See pages lA and lB.
Address for Servioe, giving Street and Ncx (or R.K N~),
Municipality and Postal Code
Domicile blu, y compris la rue et le numbro (gu le num&ro de la
FLR.), le norn de la municipalit~ et le code postal
Resident
Canadian
State
Yes or No
P~sident
canadlen
Oui/ Non
First Name,
Initials and Surname
Address for Service
Resident Canadian
lA
Wayne Arthurs
775 Aspen Road
Picketing, Ontario
L1Y lA2
Yes
Joe Atkinson
107 Bolland Crescent
Ajax, Ontario
LIS 3H1
Yes
Bruce Boyle
148 Lake Driveway West
Ajax, Ontario
LiS 4V7
Yes
Suzanne Elston
1604 Bloor Street
Courtice, Ontario
LIB 2S3
Yes
Diane Hamre
401 Concession Road 8
P.O. Box 361
Orono, Ontario
LOB 1M0
Yes
Linda A. Hodgins
1597 Geta Circle
Pickering, Ontario
L1V 3B5
Yes
Duncan Jewell.
57 Flowers Crescent
Ajax, Ontario
L1S 4B9
Yes
Rick Joh-~on
R.R. #5
Claremont, Ontario
L1W 1L9
Yes
James I. Mason
1734 Finch Avenue
Picketing, Ontario
L1V 1K4
Yes
Nancy Maxwell
76 Harlaud Crescent
Ajax, Ontario
LIS 1J9
Yes
First Name,
Initials and Surname
Address for Service.
Resident Canadian
lB
Steve Parish
67 Woodhouse Crescent
Ajax, Ontario
LiS 2N5
Yes
Paul Reesor
26 McCrlmmon Crescent
Bowmanville, Ontario
LlC 4N2
Yes
Pauline Storks
11 King Street East
Newcastle, Ontario
L1B 1H3
Yes
Ralph Sutton
1104 Timber Court
Pickering, Ontario
L1X 1T4
Yes
George Van Dyk
7 Maryleah Court
Bowmanville, Ontario
LlC 4H5
Yes
Bu$~n~M
Corporallon~
Act
FOnTIUlI 1
sCx:~Md)S par
actlon~
&M~Dmmmmm~ ~.~
~M~O~m m m ~m~mmm~ml m
~mm, ~m~m~m.
None.
6. The classes and a~y maximum number of share~
that the corporation is authorized to issu~
~ et hombre maximal, (il y a lieu, d'actions que
la soci~t6 ~ autoris~e a 6mettre:
The corporation is authorized to issue an unlimited number of common shares.
T~~
Ricjnts, ~r~vHege$. res~n¢~(3ns ana ¢or~ai;~¢~s ~;f any)
ar~act~,ng ~o each c~ass of snares anct airec~or$
&ufflorit~/w~t~ respect to any class of sl~ares
may De ~ssuect in series:
Bo
The holders of the common shares shall be entitled to receive notice of and to
attend and vote at all meetings of the shareholders of the corporation, and each
such share shall confer the right to one vote in person or by proxy at all
meetings of shareholders of the corporation.
The holders of the common shares shall be entitled to receive dividends as and
when declared by the directors from time to time out of moneys of the
corporation properly applicable to the payment of dividends, and the amount per
share of each such dividend shall be determined by the directors of the
corporation at the time of declaration.
Return of Caoitai
In the event of the Liquidation, dissolution or winding up of the corporation or
other distribution of its assets among the shareholders by way of repayment
capital, whether voluntary or involuntary, the holders oft he common shares
shall be entitled to receive the remaining property of the corporation.
ACt
Pormul~ I
The ~,~sue, transfer ar o~ersn~o of snares ,s ,s not L'emm~n, le ~s~ ou la Oro~M~ ~'~s ~ / n'~ ~
re~ct~ ~ ~e re~rmctlons (if ~y) ~e ~ bllo~: re~rei~. L~ re~ s'ii y a lie~ m~ I~ suiv~:
No shoe or sh~es of the colorlon sh~ at ~y rime ~ ~sfe~ to ~y ~r~n
wi~out eider (a) ~e con~nt of ~e d~to~ to ~ sig~fi~ by a r~lufion ~ b
· e~dorby~ins~mentor~s~ ' ' " · Y
. men~m~ s~ n~b ' '
d g g y a majon~ of ~e
~tO~, or ~).~e ~n~nt of ~e sh~eholde~ of ~e ~m~on m ~ si~mfi~ hv ~
~l~uyn ~ oy me sh~eholders or by ~ ~s~ment or ~m,~, ;; ~g' -
. m~ ~a~u~aa ~~g a majoH~ ot ~e
vot~ a~bumble to ~ of ~e issu~ ~d ou~d~g s~ of ~e ~mfion.
8us~n~.s
Act
Fo~nul~ 1
actloo~
9. Otl~e¢ I~'OwSlO~$, ~f ar~y. are:
Autres a~spcsltlOnS, sil y a ~eu
Ao
The number of shareholders of the corporation, exclusive of persons who are in
its employment and exclusive of persons who, having been formerly in the
employment of the corporation, were, while in that employment, and have
continued after the termination of that employment to be, shareholders of the
corporation, is limited to not more than fifty, two or more persons who are the
joint registered owners of one or more shares being counted as one shareholder.
Any invitation to the public to subscribe for securities of the corporation is
prohibited.
Co
Subject to the provisions of the Business Corporations Act, the corporation shsll
have a lien on the shares registered in the name of a shareholder or such
shareholder's legal representative for a debt of that shareholder to the
corporation.
Do
The board of directors may from time to time on behalf of the corporation,
without authorization of the shareholders:
(a) borrow money on the credit of the corporation;
(b)
issue, reissue, sell or pledge bonds, debentures, notes or other evidences
of indebtedness or guarantee of the corporation, whether secured or
un.~x:ured;
(c)
to the extent permitted by the Business Corporations Act, give a
guarantee on behalf of the corporation to secure performance of any
present or future indebtedness, liability or obligation of any person; and
(d)
mortgage, hypothecate, pledge or otherwise create a security interest in
aLl or any currently owned or subsequently acquired real or personal,
movable or immovable, property of the corporation including book
debts, rights, powers, franchises and undertakings, to secure any such
bonds, debentures, notes or other evidences of indebtedness or guarantee
or any other present or future indebtedness, liability or obligation of the
corporation.
The board of directors may from time to time delegate to such one or more of
the directors and officers of the corporation as may be designated by the board
all or any of the powers conferred on the board above to such extent and in
such manner as the board shall determine at the time of such delegation.
Firs1 name, initinls nncl surnm'ne or corDor&te ri&me
Prlnort~ initi~les et nora cie fnmille ou cl~tnomination soci~le
Linda L. Bertoldi
Nam et aaresse aes .'onaateur$:
Full acl~lrl~ for service, or a~rl~ of r~er~ offi~ or
of prin~p~ pl~ of Duane~, giving S~t & ~ or
R.R. ~ Munictp~i~ ~ ~s~ ~e
~mi~le ~lu, adre~ ~u ~ge ~N ou aOre~ de
I'&~li~ment prin~ y ~mpfis la me et le num~o ou
le numiro de la ~R, le nora de la muni~p~it~ et le ~e
41 Lascelles Blvd.
Toronto, Ontario
M5P 2C9
These articles are signed in duplicate.
Les presents s~atuts sont $ign&s en double exemplaire.
Linda L. Bertoldi
ON,t ~ 1 II!111
HOLDCO
SHAREHOLDERS' AGREEMENT
BORDEN & ELLIOT
Draft: June 11, 1999
TABLE OF CONTEI~rs
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
2.1
2.2
3.1
3.2
3.3
ARTICLE I
INTERPRETATION
Definitions ................................................. 3
Control
Headings .................................................. 10
.................... · '''''' ................ . ..... 11
Entire Agreement
Numberand Gen~ .......................................... 11
Accounting Principles ......................................... 11
Calculation of 71me ..........................................
Statutory References ..................................... · ..... 12
Reclassification of Shares ....................................... 12
12
Interpretation . .
GoverningLaw.iiiiiiiiill ................................. 13
13
Currency ................................................. 13
ARTICLE II
BUSINESS OF THE CORPORATIONS
Business of the Corporations .............
Corporations' Standard of Service ......... ii ...................... 13
14
ARTICLE II1
CORPORATE AFFAIRS OF HOLDCO
(0
(i)
O)
(k)
(1)
Board Committees
Assurances
16
(a) Shareholder Action ...................................... 16
(b) Initial Board
(c) The Board ............................................ 17
(d) Qualifications of Board ................................... 17
(e) Nominees of Transferee Shareholders ......................... 18
Term of Directors
...................................... 19
Vacancy ............................................. 19
Quorum ............................................. 19
Meetings of the Board .................................... 19
Decisions of the Directors
Board Duties .......................................... 20
Indemnification and Insurance for Directors and Officers ........... 20
Draft: June 11, 1999
-5-
"Council Appointees" has the meaning set out in Subsection 3.2(d);
"Debt" means, with respect to HoldCo and the Subsidiaries, without regard to any
uncapitalized interest component thereof (whether actual or imputed) that is not due and
payable, the aggregate of the following amounts, each calculated in accordance with generally
accepted accounting principles, unless the context otherwise requires:
(a)
indebtedness for money borrowed (including, without limitation, by way of
overdraft) or indebtedness represented by notes payable and drafts accepted
representing extensions of credit;
(b) the face amount of all bankers' acceptances and other similar instruments;
(c)
all obligations (whether or not with respect to the borrowing of money) that
are evidenced by bonds, debentures, notes or other similar instruments;
(d) all liabilities upon which interest charges are customarily paid by HoldCo;
any capkal stock of HoldCo (or of any subsidiary of HoldCo that is not held
by HoldCo or by a subsidiary of HoldCo that is wholly owned, directly or
indirectly), which capital stock, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date for cash or securities constituting debt;
Draft: J.nc 11, 1999
-6-
all capital lease obligations, synthetic lease obligations, obligations under sale
and leaseback transactions and purchase money obligations;
(g)
the full amount of any contingent liability under any guarantee (other than by
endorsement of negotiable instruments for collection or deposit in the ordinary
course of business) in any manner of any part or all of an obligation of another
person of the type included in items (a) through (/) above, including contingent
liabilities in respect of letters of credit, letters of guarantee and similar
instruments; and
contingent liabilities in respect of performance bonds and surety bonds, and any
other guarantee or other contingent liability of any part or all of an obligation
of a person, in each case only to the extent that the guarantee or other
contingent liability is required by generally accepted accounting principles to be
treated as a liability on a balance sheet of the guarantor or person contingently
liable,
>rovided that trade payables, operating leases and accrued liabilities that are current liabilities
incurred and deposits received in the ordinary course of business do not constitute Debt.
"Debt/Equity Ratio" means a ratio of Debt to Equity on a consolidated basis for HoldCo and
all Subsidiaries;
"Disputing Shareholder" has the meaning set out in Subsection 11.4(c);
"Electricity Act" means the Electricity Act, 1998 (Ontario);
Draft:June 11, 1999
-7-
"Encumbrance" means a mortgage, charge, pledge, hypothecation, lien (statutory or
otherwise), security interest, adverse claim, assignment as security or reservation of title of any
kind;
"Energy Board Act" means the Ontario Energy Board Act, 1998 (Ontario);
"Energy Legislation" means collectively the Electricity Act, the Energy Board Act, the market
rules established by the IMO and other Laws regulating the energy sector in Ontario;
"Equity" means the aggregate of the equity, capital stock and surplus as such amounts appear
on a consolidated balance sheet of HoldCo prepared in accordance with generally accepted
Canadian accounting principles and as determined by the Ontario Energy Board. In the event
there is a conflict between generally accepted Canadian accounting principles and the
determination of the Ontario Energy Board, the determination of the Ontario Energy Board
with respect to the conflict shall prevail;
"Fair Market Value" means the appraised value as determined by a registered appraiser
selected and paid for by HoldCo;
"Fiscal Year" means a 12-month period ending on December 31 in each year;
"Governmental Authority" means any government or political subdivision Cmduding without
limitation, any municipality or fediral or provincial ministry) or agency, authority,
commission, department or instrumentality of any government or political subdivision, or any
court or tribunal, and specifically includes the Ontario Energy Board and the IMO;
"Hold Period" has the meaning set out in Section 5.1;
DeaR: Juae 11, 1999
-8-
"IMO" means the Independent Electricity Market Operator established pursuant to the
Electricity Act; ·
"Initial Board" means the initial Board which holds office for the Initial Term;
"Initial Shareholder" means, at the date of this Agreement, each of Ajax, Clarington and
Pickering;
"Initial Teim" means the period from the date of this Agreement until December 31, 2000;
"Laws" means any law, inclUding common law, equitable principle, statute, ordinance,
regulation, rule, order, permit, decision, declaration, notice, demand, injunction, writ, policy,
decree or award of any Governmental Authority;
'"Majority Rule" has the meaning set out in Subsection 3.2(d);
"Merger Agreement" means the merger agreement dated June 30, 1999 among the Initial
Shareholders;
"Notice Period" has the meaning set out in Subsection 5.3(b);
"Offer" has the meaning set out in Subsection 5.3(a);
"Offered Shares" has the meaning set out in Subsection 5.3(a);
"Other Holders" has the meaning set out in Section 5.3;
Draft:June 11, 1999
-9-
"Person" means an individual, firm, partnership, unincorporated association, corporation,
bank, trust or other legal entity of any kind whatsoever;
"Predecessor Utility" means each of Ajax Hydro-Electric Commission, Clarington
Hydro-Electric Commission and Picketing Hydro-Electric Commission;
"Prospective Purchaser" has the meaning set out in Subsection 5.3(a);
"Purchase Notice" has the meaning set out in Subsection 5.3(c);
"Retiring Director" has the meaning set out in Subsection 3.2(g);
"Selling Notice" has the meaning set out in Subsection 5.3(a);
"Selling Shareholder~ has the meaning set out in Section 5.3;
"Shareholder" means any Person which is a registered holder of Shares;
"Shareholder Representative" has the meaning set out in Section 3.7;
"Shares" means common shares without par value in the capital of HoldCo;
"Subsidiary" means any subsidiary (as'this term is defined in the Act) of HoldCo;
"Surplus Assets" means any land or buildings owned by HoldCo or any Subsidiary that
HoldCo or any Subsidiary has determined to offer for sale;
"Third Party" means any Person with whom a Shareholder deals at Arm's Length;
Draft: ]~'"c 11, 1999
- 10-
''Transferee Shareholder" means any Person which acquires Shares from a Shareholder in
accordance with the provisions of this Agreement; and
"Vice-Chair" means the director elected by the Board to serve as its vice-chairperson from
time to time.
!.2 Control
For the purposes of this Agreement, a body corporate shall be deemed to be
"controlled" by another Person or by two or more Persons if such Person or Persons (either
individually or collectively and whether or not they act together jointly or in concert) directly
or indirectly own, legally and beneficially, and exercise the full voting rights over, shares of
such body corporate which:
have attached to them voting rights, exercisable in all circumstances, which
represent more than 50% of the votes attaching to all outstanding securities of
such body corporate;
have sufficient votes to elect a majority of the board of directors of such body
corporate; and
carry a right to receive, on a winding up or dissolution, more than 50% of the
remaining property of such body corporate after payment of all debts and
liabilities of the body corporate.
Draft: June 11, 1999
1.3 Headings
-11.-
The division of this Agreement into Articles, Sections and Subsections and the
insertion of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The Article and Section headings in this
Agreement are not intended to be full or precise descriptions of the text to which they refer
and shall not be considered part of this Agreement.
1.4 Entire Agreement
The execution of this Agreement has not been induced by, nor do any of the parties
rely upon or regard as material, any representations, warranties, conditions, other agreements
or acknowledgements not expressly made in this Agreement, in the agreements and other
documents to be delivered pursuant hereto or in the Merger Agreement.
1.5 Number and Gender
In this Agreement, words in the singular include the plural and vice-versa and words
in one gender include all genders.
1.6
Accounting Principles
Where the Canadian Institute of Chartered Accountants includes a recommendation
in its Handbook concerning the treatment of any accounting matter, such recommendation
shall be regarded as the only generally accepted accounting principle applicable to the
circumstances that it covets and references herein to "generally accepted' accounting principles"
shall be interpreted accordingly.
Draft: Ju~e II, 1999
- 12-
All accounting and financial terms used herein, unless specifically provided to the
contrary, shall be interpreted and applied in accordance 'with generally accepted accounting
principles in Canada.
1.7
Calculation of Time
In this Agreement, a period of days shall be deemed to begin on the first day after
the event which began the period and to end at 5:00 p.m. (Eastern Standard time) on the last
day of the period. If, however, the last day of the period does not fall on a Business Day, the
period shall terminate at 5:00 p.m. (Eastern Standard time) on the next Business Day.
1.8
Statutory References
A reference in this Agreement to a statute refers to that statute, and any regulations
or rules issued thereunder, as amended, supplemented or replaced from time to time.
1.9 Reclassification of Shares
The provisions of this Agreement shall apply, with any necessary changes to (a) any
shares or securities of any nature into which the Shares or any of them may be converted,
exchanged, reclassified, redivided, redesignated, subdivided or consolidated; (b) any shares or
securities of any nature that are received by a Shareholder as a stock dividend or distribution
payable in shares, securities, warrants, rights or options of any nature of HoldCo; (c) any
shares, securities, warrants, rights or options of any nature of HoldCo or any successor,
continuing company or corporation of HoldCo that may be received by a Shareholder on a
reorganization, amalgamation, arrangement, consolidation or merger, statutory or otherwise;
and (d) any shares,, securities, warrants, rights or options hereafter issued or allotted by
Draft: June 11, 1999
- 13-
HoldCo to a Shareholder, all of which shares, securities, warrants, fights or options shall be
deemed to be Shares for all purposes of this Agreement.
1.10 Interpretation
If any conflict shall appear between the by-laws and the articles of HoldCo and the
provisions of this Agreement, the provisions of this Agreement shall govern.
1.11 Governing Law
This Agreement shall be governed by and construed, interpreted and performed in
accordance with the laws of Ontario and the laws of Canada applicable therein and shall be
treated in all respects as an Ontario contract.
1.12 Currency
All dollar amounts referred to in this Agreement and all payments to be made
hereunder are in Canadian funds.
ARTICLE II
BUSINESS OF THE CORPORATIONS
2.1
Business oft he Coworations
The Corporations may engage in the following business activities and such other
business activities as may be permitted by Law and authorized by the Board from time to
time:
Draffa June 11, 1999
- 14-
transmitting or distributing electricity;
(b) owning and/or operating an electricity generation facility;
(c) retailing electricity;
distributing or retailing gas or any other energy product which is carried
through pipes or wires to the user;
business activities that enhance or develop the ability of any of the
Corporations to carry on any of the activities described in paragraphs (a), (b),
(c), or (d) alcove;
business activities the prindpal purpose of which is to use more effectively the
assets of any of the Corporations including providing meter installation and
reading services, providing billing services and business activities in the
telecommunications area;
renting, selling or maintaining equipment and appliances, including without
limitation, hot water heaters; and
(h) providing services related to improving energy efficiency.
2.2
Corporations' Standard of Service
k is the intention of the Initial Shareholders that: (a) the Corporations shall provide
service levels at least equivalent to the existing levels in the service areas of each of the
Predecessor Utilities mediately prior to the transfer of their assets to the Corporations; Co)
Dt~ft: Jtmc I I, 1999
- 15 -
new standards of service are established by the Board after the date of this Agreement so that
each service area will enjoy common standards and derive equal benefits, including but not
limited to, the following matters:
(a) distribution, energy services and tariffs;
(b) maintenance standards and schedules;
(c) emergency response capabilities;
(d) distribution system capacity;
(e) customer convenience and accessibility;
(f) power reliability and quality; and
marketing programmes and services.
ARTICLE III
CORPORATE AFFAIRS OF HOLDCO
3.1 Assurances
The Shareholders shall cause such meetings of Shareholders to be held, votes to be
cast, resolutions to be passed, by-laws to be made, confirmed and/or repealed, agreements and
other documents and instruments to be executed and all other acts and things to be done, to
ensure that at all times the provisions of this Article Ill are in effect, complied with or
implemented.
Draft: June I1, 1999
3.2
The Board
- 16-
Shareholder Action. Each of the Shareholders agrees to elect as members of
the Board the nominees put forward by each other Shareholder from time to
time in accordance with the provisions of this Agreement.
Initial Board. Subject to the provisions of this Agreement, the business and
affairs of HoldCo shall be managed or supervised for the Initial Term by the
Initial Board which shall consist of 15 directors. Each Initial Shareholder shall
nominate five members of the Initial Board. Each Initial Shareholder's five
nominees shall consist of the five commissioners of the applicable Predecessor
Utility. The following individuals, each being the nominee of the Initial
Shareholder listed opposite his name, shall comprise the Initial Board:
Director
Joe Atkinson
Bruce Boyle
Duncan Jewell
Nancy Maxwell
Steve Parish
Suzanne Elston
Diane Hamre
Paul Reesor
Pauline Storks
George Van Dyk
Wayne Arthurs
Linda A. Hodgins
Nominee of
Clarington
Clarington
Clarington
Clarington
Clarington
Pickering
Picketing
Dr~t: Ju~ II, 1999
Rick Johnson
James I. Mason
Ralph Sutton
- 17-
Picketing
'Pickering
Picketing
Any Initial Shareholder may replace any director nominated by it at any time
during the Initial Term and shall nominate a new member to the Board as
appropriate to replace the removed member.
The Board. Following the Initial Term, the business and affairs of HoldCo
shall be managed or supervised by the Board which shall consist of 12 directors
or such other number of directors as the Shareholders may determine from
time to time by special resolution in accordance with the Act. Each of the
Initial Shareholders shall nominate the number of members to the Board listed
opposite that Initial Shareholder's name below:
Number of Directors
Nominee of
4
3 Clatington
5 Picketing
The Board shall annually elect from its members a Chair and Vice-Chair.
Oualifications of Board. Each initial Shareholder shall nominate the Mayor
of the Initial Shareholder or the Mayor's designate as one of the Initial
Shareholder's nominees to the Board provided that if the Mayor ceases to hold
the office of Mayor, the appointing Initial Shareholder shall forthwith replace
such nominee. Each Initial Shareholder may nominate to the Board members
Dh/t: Jtme 11, 1999
- 18-
of its council ("Council Appointees") so long as the Council Appointees
Cmcluding the Mayor or the Mayor's designate) do not comprise a majority of
that Initial Shareholder's nominees to the Board (the "Majority Rule"). In
addition to the requirements of the Act, the qualifications of candidates for the
Board shall, where possible, include the following:
(i) business experience;
(ii) time availability;
(iii) financial 'skills;
(iv) marketing skills;
(v) industry knowledge;
(vi) independence of judgment;
(vii) integrity;
(viii) knowledge of public policy issues relating to the Corporations; and
(ix) knowledge and experience concerning environmental matters, labour
relations and occupational health and safety issues.
Nominees of Transferee Shareholders. Following the transfer of Shares to
a Transferee Shareholder, that Transferee Shareholder shall be entitled to
nominate one member of the Board for each whole block of Shares owned by
Draft:June 11, 1999
- 19-
the Transferee Shareholder representing 9% of the total issued and outstanding
Shares. A Transferee Shareholder owning less than 9% of the total issued and
outstanding Shares shall not be entitled to nominate any member of the Board
and a Transferee Shareholder owning less than 18% of the total issued and
outsianding Shares shall only be entitled to nominate one member of the
Board. An Amalgamated Shareholder shall not be considered a Transferee
Shareholder for the purpose of this Section 3.2(e) and shall retain its rights to
nominate members to the Board in the same manner as if it had not
amalgamated.
(0
Term of Directors.
term of three years.
Board.
Following the Initial Term, the Board shall serve for a
Members of the Board may serve successive terms on the
Vacancy. If a director ceases to be a director for any reason (a "Retiring
Director"), the Shareholders shall fill the vacancy thereby created as soon as
reasonably possible, provided that such vacancy shall be filled by an individual
nominated by the Shareholder who had nominated the Retiring Director.
Quorum. A quorum for a meeting of the Board shall be a majority of the
members of the Board. A meeting shall be adjourned for lack of a quorum and
a notice of the adjourned meeting shall be sent to all directors rescheduling the
meeting to a date at leist 15 days following the adjourned meeting.
Meetings of the Board. Meetings of the Board shall be held at least once in
every calendar quarter or at the request of the Chair or of a majority of the
members of the Board. Ail meetings of the Board shall be held in Ontario, or
by such telephone or electronic communication devices as permit all persons
De'aft: June 11, 1999
- 20 -
participating in the meeting to communicate with each other simultaneously
and instantaneously. At least 5 days' written notice of the time and place of
the meeting and of the business to be transacted at the meeting in sufficient
detail to enable each director to assess reasonably the importance of such
business to the affairs of HoldCo shall be given to each director.
0)
Decisions of the Directors. Decisions or resolutions of the Board shall
require the approval of the majority of the directors present at each meeting
thereof. The Chair shall not have a second or casting vote. A resolution in
writing signed by all of the directors entitled to vote on that resolution at a
meeting of the Board is as valid as if it had been passed at a meeting of the
Board.
Board Duties. Subject to those matters requiring Shareholder approval as set
out in Section 3.9 hereof, the Board shall supervise the management of the
business and affairs of HoldCo and, without limiting the generality of the
foregoing, the Board shall be responsible for, but not limited to, overseeing the
following specific matters:
the establishment of appropriate reserves and a dividend policy
consistent with sound financial principles, all with the intention of
providing the Shareholders with a reasonable rate of return on their
investment while maintaining reasonable rates for customers; and
declaration of any dividend or distribution of capital in respect of the
Shares.
Draft: Juae Il, 1999
-21 -
Indemnification and Insurance for Directors and Officers. Each of the
Corporations shall inderrmify and save its directors and officers harmless from
and against any and all liability, damages, costs (including any income tax
payable as a result of receiving such indemnity, reasonable counsel fees and
disbursements), charges and expenses arising out of or related to any act or
omission done or permitted by them to be done in connection with the
execution of the duties of their office as directors or officers of any one or
more of the corporations or by reason of their being or having been directors
of any one or more of the Corporations, substantially in the form of the
indemnification agreement annexed hereto as Schedule "A" and shall provide
liability insurance for directors and officers in such amounts as the Board may
determine from time to time.
3.3
Board Commi.ee$
The Board may establish Board Committees from time to time and delegate certain
duties to them as follows:
(a) Executive Committee.
The Executive Committee shall be appointed by the Board from time to
time and shall be responsible for supervising the management of the day
to day operations of the Corporations;
For the Initial Term, the Executive Committee shall be comprised of
12 directors on the following basis:
Dmtt: Jtm~ 11, 1999
- 22 -
Number of Members ~
4 Ajax
3 Clatington
5 Picketing
(iii)
Following the Initial Term, the Executive Committee shall be
reconstituted by the Board and shall be comprised of 6 directors on the
following basis:
Number of Members
Nominee(s) of
2
1 Clatington
3 Picketing
(iv) The Chair and the Vice-Chair shall be a member of the Executive
Committee.
The members of the Executive Committee shall meet at least once a
month or as otherwise determined by the Executive Committee.
Members of the Executive Committee my serve for a term not to
exceed 3 years and shall be replaced by nominees of the Initial
Shareholders on the same basis as they were elected. Members of the
Executive Committee may serve successive terms on the Executive
Committee.
Drlft:Juae 11, 1999
(b)
- 23 -
Finance and Human Resources Committee. The Board shall appoint
members to the Finance and I-Iuman Resources Committee. During the Initial
Term, the Finance and I-Iuman Resources Committee shall be comprised of 6
directors and following the Initial Term shall be comprised of 3 directors. The
duties of the Finance and Human Resources Committee will be to oversee the
work of the Auditors, the prepaxation of I-IoldCo budgets (which shall include
details of all management salaries and bonuses, together with such other
information as may reasonably be requested by any director of HoldCo), the
establishment and enforcement of guidelines for employee relations, the
establishment and alteration of any salary, bonus or other compensation paid
or payable to employees, the establishment of guidelines for the approval of
any collective agreement and to report and make recommendations to the
Board.
Nominating Committee. The Board shall appoint members to the
Nominating Committee. During the Initial Term and for any period
thereafter in which the Initial Shareholders remain the Shareholders, the
Nominating Committee shall be comprised of 3 directors and each of the
3 direCtors shall be a nominee to the Board of each Initial Shareholder. In the
event that one or more Initial Shareholders amalgamate but the Shareholders
are still the Initial Shareholders only but in their amalgamated form, the
Nominating Committee shall remain comprised of 3 directors and the directors
shall be nominees of each Shareholder in the same manner as if there was no
amalgamation. For greater certainty, if Pickering and Ajax amalgamated, the
new entity would be entitled to have two Board nominees appointed to the
Nominating Committee. The purpose of the Nominating Committee shall be
to make recommendations to the Shareholders concerning candidates for the
Draft: June 11, 1999
- 24 -
Board and the compensation for members of the Board, the Chair, Vice-Chair
and Board Committee members, and chairpersons.
General Provisions Relating to Board Committees. The quorum for
meetings of Board Committees shall be a majority of the members from time
to time of each Board Committee. Decisions of all Board Committees shall be
made by a majority of the members of the respective Board Committee.
Except as otherwise provided in this Section 3.3 and subject to the supervision
of the Board, each Board Committee shall establish its own rules of 'procedure
for operating in an efficient and expeditious manner. A Transferee Shareholder
shall not acquire the rights of any Initial Shareholder to designate nominees to
any Board Committee except with the agreement of all of the other
Shareholders. An Amalgamated Shareholder shall retain its rights to designate
nominees to the Board Committees, as applicable in the same manner as if it
had not amalgamated.
3.4
Shareholders' Meetings
A quorum for a meeting of Shareholders shall be at least two individuals representing,
by proxy or as otherwise permitted by the Act, both (i) a majority in number of the
Shareholders; and (ii) not less than 51% of the Shares then issued and outstanding.
In the event that the Initial Sh'areholders amalgamate such that only two Shareholders
in number remain, the quorum for a meeting of shareholders shall be all the Shareholders
represented by proxy or as otherwise permitted by the Act.
The chair of any meeting of the Shareholders of HoldGo shall be the' Chair or, in the
absence of the Chair, the Vice-Chair, or in the absence of the Vice-Chair, the President of
Draft: June 11, 1999
- 25 -
HoldCo or, in the absence of the President, such individual as the Shareholders represented
at such meeting shall determine.
3.5
Regular Shareholders Meetings
Unless the Shareholders otherwise determine, the Shareholders shall meet at least
annually at the registered office of HoldCo or at such other times or pl~_c~ as the Shareholders
may determine.
3.6 Decisions of the Shareholders
All decisions or resolutions of the Shareholders shall require, and shall be deemed to
be effective upon, the approval of at least two thirds of the votes cast at a meeting of
Shareholders. A Shareholders' resolution in writing signed by all of the Shareholders entitled
to vote on that resolution at a meeting of the Shareholders is as valid as if it had been passed
at a meetin.g of the Shareholders.
3.7 Shareholder Representative
Each Initial Shareholder shall designate the Mayor as the legal representative of that
Initial Shareholder (the "Shareholder Representative") for purposes of providing any consent
or approval required by this Agreement or by the Act. In the event that the Mayor is unable
or unwilling to act as the Shareholder Representative, the Chief Administrative Officer (or the
individual who performs the equivalent duties) shall be the Shareholder Representative for
purposes of this Agreement and of the Act unless the Initial Shareholder determines otherwise.
An Initial Shareholder shall designate its Shareholder Representative (by proxy duly completed
in accordance with the Act) as its representative to attend and vote at any meeting of
Shareholders.
Draft:June 11, 1999
3.8
- 26 -
The officers of HoldCo shall include a President and such other officers as the
Board may determine from time to time. The Board shall appoint the officers
of HoldCo from time to time.
For greater certainty the parties recognize that in carrying on the ordinary
course of Business, it is not practicable for the Board to be involved in the day
to day affairs of HoldCo. The Board will delegate responsibilities to the
officers, who will report to the Board and the Board Committees from time
to time as required.
3.9 Matters Requiring Shareholder Appro~,al
The Shareholders agree that, without Shareholder approval given in accordance with
Section 3.6, HoldCo shall not:
amend its articles (within the meaning of the Act) or enact, revoke, or amend
any by-law of HoldCo;
issue, or enter into any agreement to issue, any shares of HoldCo of any class,
or any securities convertible into any shares of any class, or grant any option
or other right to purchase any such shares 'or securities convertible into such
shares;
redeem, purchase for cancellation or otherwise retire any of its outstanding
Shares;
Draft:June 11, 1999
- 27 -
sell or otherwise dispose of, by conveyance, transfer, lease, sale and leaseback,
merger or other reorganization or transiction, mortgage, pledge, charge or
othei'wise grant a security interest in, all or substantially all of the assets or
undertaking of HoldCo;
enter into any contracts, commitments or transactions that would increase the
Debt/Equity Ratio to greater than 60% Debt;
(0
grant security for or guarantee, or otherwise become liable for any debt,
liability or obligation of any Person other than a Subsidiary;
take or institute the proceedings for any winding up, reorganization or
dissolution;
(h) enter into any amalgamation, arrangement or consolidation; and
(i) apply to continue as a corporation under the laws of another jurisdiction.
3.10 Unanimous Shareholder Agreement
Each of the Shareholders acknowledges that this Agreement is intended to operate
as a unanimous shareholder agreement with respect to HoldCo within the meaning of the Act.
Pursuant to Section 108(2) of the Act, the discretion and powers of the Board to manage or
supervise the management of the business and affairs of HoldCo are hereby restricted to the
extent of the provisions of Section 3.9 of this Agreement.
Draft: June 11, 1999
3.11
- 28 -
Agreement Binds HoldCo and Subsidiaries
HoldCo and the Subsidiaries, by their execution of or acknowledgement to be bound
by this Agreement, acknowledges that they have actual notice of the terms of this Agreement,
consent to this Agreement and by this Agreement covenant with each of the Shareholders that
they will at all times during the term of this Agreement:
(a)
give or cause to be given such notices, execute or cause to be executed such
deeds, transfers and documents as may from time to time be necessary or
conducive to the carrying out of the terms and intent of this Agreement;
do or cause to be done all such acts, matters and things as may from time to
time be necessary or conducive to the carrying out of the terms and intent of
this Agreement; and
(c)
take no action that would constitute a contravention of any of the terms and
provisions of this Agreement.
3.12 Auditors
The Auditors shall be appointed by the Shareholders from time to time.
3.13 Banking
HoldCo's bankers shall be such financial institution as the Board shall from time to
time determine. All resolutions respecting banking authority, the opening of bank accounts
and the drawing on such accounts shall require the consent of the Board before becoming
effective.
Deafta Ju~ 11, 1999
3.14
Financial Statements
- 29 -
HoldCo shall cause to be prepared and delivered as soon as reasonably
practicable and in no event later than 120 days after the end of each fiscal year
of HoldCo annual audited financial statements for such fiscal year prepared in
accordance with generally accepted accounting principles and accompanied by
a report of the Auditors.
HoldCo shall cause to be prepared and delivered as soon as reasonably
practicable and in no event later than 45 days after the end of the sixth month
of HoldCo's fiscal year an unaudited balance sheet and a statement of profit
and loss for such preceding six months prepared in accordance with generally
accepted accounting principles without adjusting entries or review by
accountants and signed by an authorized officer of HoldCo, and such other
information as may be reasonably requested by the Shareholders.
ARTICIF IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1
Representations and Warranties
Each of the Shareholders represents and warrants as follows and acknowledges that
each of the Other parties hereto are relying on such representations and warranties in
connection with the entering into of this Agreement:
it is the registered and beneficial owner of the Shares stated to be owned by
such Shareholder in the recitals hereto, free and clear of all Encumbrances and
Draft: Juae 11, 1999
- 30 -
there are no outstanding agreements, options, warrants or other rights capable
of becoming an agreement, option or warrant to purchase such Shares;
Co)
it has the power and capacity to own its assets and to enter into and perform
its obligations hereunder and has taken all necessary action to authorize the
execution and delivery of this Agreement;
this Agreement and the transactions contemplated herein have been duly
authorized by it and constitutes a valid and binding obligation of it enforceable
against it in accordance with its terms subject to the laws of bankruptcy and
the availability of equitable remedies;
the execution, delivery and performance of this Agreement does not and will
not contravene the provisions of its articles, by-laws, constating documents or
the provisions of any agreement or other instrument to which it is a parry or
may be bound.
4.2 Covenants
Each of the Shareholders covenants and agrees with each other party hereto that all
of the foregoing representations and warranties pertaining to it set forth in Article 4.1 will
continue to be true and correct during the continuance of this Agreement.
Draft~ Ju~e 11, 1999
-31-
ARTICLE V
TRANSFER OF SHARES
5.1
General Restriction on Transfer
No right, title, benefit or interest in any Shares may be sold, transferred, assigned,
made subject to any Encumbrance or otherwise disposed of by any Shareholder for the two
(2) year period from the date of this Agreement ending on the second anniversary of the
incorporation of HoldCo (the "Hold Period") except with the prior written approval of a
majority of the Shareholders in number holding not less than 66%% of the Shares or in the
event that the Initial Shareholders amalgamate such that only two Shareholders in number
remain, with the prior written consent of all Shareholders.
Following the Hold Period, save and except for transfers made pursuant to and in
accordance with Sections 5.3 and 5.4 of this Agreement, no Shares, nor the whole or any item
or part of any right, title, benefit or interest therein or thereto, may be sold, transferred,
assigned, made subject to any Encumbrance or otherwise disposed. No Shareholder shall be
entitled to create or grant an Encumbrance on its Shares.
5.2 Legend on Shares
All share certificates representing Shares of HoldCo shall bear on their face the
following notation:
"The shares represented by this certificate are subject to the
provisions of the Shareholders' Agreement made as of August
1, 1999 among all of the shareholders of the Corporation as at
that date, which agreement contains restrictions on the right to
sell, transfer, pledge, mortgage, assign, vote or otherwise deal
with or encumber such shares. Notice of such restrictions and
Dr'af'ta lu~e 11, 1~
- 32 -
the other provisions of such agreement is hereby given. A
copy of such agreement is available for .inspection from the
Secretary of the Corporation on request."
5.3 Rigbts of First Refusal
If any Shareholder (in this Article V called the "Selling Shareholder"), after the Hold
Period, wishes to sell all, but not less than all, of its Shares (subject to Section 5.5) to a Person
with whom it deals at Arm's Length, the other Shareholders and HoldCo (in this Article V
called the "Other Holders") shall have the prior right to purchase such Shares in accordance
with the following provisions:
Notice of Offer. A Selling Shareholder shall give to the Secretary of HoldCo
and to each Other Holder notice in writing of its desired intention to sell all,
but not less than all, of its Shares (in this Article V called the "Offered
Shares"). The notice (in this Article called the "Selling Notice") shall have
annexed thereto a true copy of the offer, agreement or similar document (the
"Offer") containing the terms and conditions pursuant to which the Selling
Shareholder wishes to sell the Offered Shares to the prospective purchaser (in
this Article V called the "Prospective Purchaser"), who shall be identified, and
the price and terms of payment which the Selling Shareholder is willing to
accept for the Offered Shares which shall be the same as set forth in the Offer;
Offer Oven During Notice Period. The Secretary of HoldCo shall
thereupon be deemed to be the agent of the Selling Shareholder for the
purposes of offering the Offered Shares to the Other Holders on the terms of
payment and for the price contained in the Selling Notice and the offer by the
Secretary shall be irrevocable and remain open for acceptance, as hereinafter
Dr'M~: Juae !1, 1999
- 33 -
provided, for a period of 60 days Cm this Article V called the
after receipt of the Selling Notice by the Secretary;
"Notice Period")
Acceptance of Offer. Within 15 Business Days after receipt of the Selling
Notice by the Secretary, the Secretary shall offer the Offered Shares for sale
to the Other Holders as nearly may be in proportion to the number of Shares
held by each such Other Holder respectively as at the date of such offer. The
offer by the Secretary shall state that any Other Holder desiring to purchase
a number of Offered Shares less than or in excess of its proportion shall
indicate in its notice to the Secretary (in this Article V called the "Purchase
Notice") stating the number of Offered Shares it desires to purchase. If, within
the Notice Period, a Purchase Notice has not been received by the Secretary
of HoldCo from an Other Holder, such Other Holder shall be deemed to have
declined to purchase the Offered Shares being offered;
Excess Shares. If the Other Holders do not daim their respective proportions,
any unclaimed Offered Shares shall be used to satisfy the claims of such Other
Holders for Offered Shares in excess of their proportions. If the claims in
excess are more than sufficient to exhaust such unclaimed Offered Shares, the
undaimed Offered Shares shall be divided pro rata among such Other Holders
desiring Offered Shares in excess of their proportion, in proportion to the
number of Shares held by them respectively as at the date of such offer,
provided that any unclaimed Offered Shares after such pro rata division shall
be divided pro rata among Other Holders in proportion to their claims in
excess of their respective proportions determined as aforesaid. Notwithstanding
anything to the contrary, no Other Holder shall be bound to purchase any
Offered Shares in excess of the amount indicated in its Purchase Notice;
Draft: June 11, 1999
- 34 -
No Fractions. If the Offered Shares are not capable, without division into
fractions of Shares, of being offered to or being divided among the Other
Holders in the proportions above mentioned, the same shall be offered to or
divided among the Other Holders as nearly as may be in the proportions
hereinbefore mentioned and any balance shall be offered to or divided among
the Other Holders or some of them in such equitable manner as may be
determined by the Board;
Sale. If all, but not less than all, of the Offered Shares are accepted by the
Other Holders pursuant to the provisions of this Section 5.3, the Offered
Shares shall be sold to the Other Holders for the price and for the terms
contained in the Selling Notice;
Deemed Refusal. If Purchase Notices have not been received by the Secretary
in respect of all of the Offered Shares within the Notice Period, the Other
Holders, and each of them, shall be deemed to have declined to purchase the
Offered Shares and, subject to the provisions of paragraph (h), the Selling
Shareholder may within 60 days after the expiration of the Notice Period sell
all, but not less than all, of the Offered Shares to the Prospective Purchaser at
the price and upon terms of payment which are not more favourable than
those specified in the Selling Notice; and
Prospective Purchaser Bound. The Selling Shareholder shall sell the Offered
Shares to a Person who is not a party hereto only if such other Person
simultaneously with any such sale executes and delivers to each of the other
parties hereto a counterpart of this Agreement in which case such Person shall
have the rights of a Transferee Shareholder and shall be subject to the same
obligations as a parry to this Agreement as if it were an original signatory in
Dra~c June 11, 1999
- 35 -
place of the Selling Shareholder or its predecessor in title originally party to
this Agreement, as applicable. Without limiting the generality of the
foregoing, a Transferee Shareholder shall agree to be bound by the provisions
of Section 7.1.
(i)
HoldCo as Purchaser. The Other Holders, except HoldCo, may cause
HoldCo to act as an Other Holder.
5.4 Piggyback Right
In the event one or more Selling Shareholders receives an Offer and, in accordance
with the procedures set forth in Section 5.3, the Other Holders decline to purchase the
Offered Shares from the Selling Shareholder(s), and the Shares which the Selling Shareholder(s)
wish to sell under the Offer(s) would result in a Person owning more than 49% of all of the
issued and outstanding Shares, then each Other Holder except HoldCo shall have the right to
require that all, but not less than all, of its Shares be sold to the Prospective Purchaser, on the
same terms and conditions as those set out in the Offer; provided that, if the Prospective
Purchaser will not purchase the aggregate amount of Shares which the Selling Shareholder(s)
and the Other Holders except HoldCo requested to be sold pursuant to the immediately
preceding sentence, the number of Shares which the Selling Shareholder(s) and the Other
Holders except HoldCo shall be permitted to sell to the Prospective Purchaser shall be
proportionately reduced so that each may sell the same percentage of its Shares. The Other
Holders except HoldCo may only exercise their right under this Section 5.4 by. written notice
given to the Secretary of HoldCo within the Notice Period.
Draft: June 11, 1999
5.5
Amalgamated Shareholder
- 36 -
An Amalgamated Shareholder is entitled to sell its Shares in accordance with this
Agreement in the same manner as if the Amalgamated Shareholder had not been amalgamated
and, may for the purposes of Section 5.3 offer to sell less than all of its Shares (only if such
Amalgamated Shareholder sells its Shares in the original blocks held by it prior to
amalgamation) provided that each offer is otherwise made in compliance with Section 5.3.
ARTICLE VI
CLOSING OF PURCHASE TRANSACTION
6.1
Time and Place of Closing
The closing of any purchase and sale of Shares contemplated by Sections 5.3 or 5.4
of this Agreement shall unless otherwise agreed upon by the parties to such transaction, take
place at the registered office of HoldCo on the date specified in the Selling Notice.
6.2 Documents to be delivered by the Vendor
On or before the closing of a purchase and sale of Shares contemplated hereunder,
the vendor shall deliver to the purchaser the following (each in form and substance satisfactory
to the purchaser):
a share certificate or certificates representing the Shares being .sold, duly
endorsed in blank for transfer or newly issued in the name of the purchaser;
Draft: Juae 11, 1999
- 37 -
a certificate of a senior officer certifying that any representations and
warranties made by such vendor in this Agreement are true and correct as of
the Closing Date;
the written resignation of such vendor's nominee(s) to the Board and a release
by such nominee(s) of all claims against HoldCo with respect to any matter or
thing arising as a result of being a director;
the written release of the vendor of all claims against HoldCo and the
Subsidiaries, any of the other Shareholders with respect to any matter or thing
arising up to and induding the Closing Date as a result of being a Shareholder;
and
such other documents as may be reasonably required by any party to such
purchase and sale to properly complete the purchase and sale of the Shares.
6.3 Documents to be delivered by the Purchaser
On or before the closing of a purchase and sale of Shares contemplated hereunder,
the purchaser shall deliver to the vendor the following:
a certified cheque or bank draft in an amount equal to the purchase price for
the Shares being purchased;
in the event Shares are sold to a Person who is not a Shareholder pursuant to
Sections 5.3 or 5.4 hereof, a duly executed counterpart of this Agreement or
other agreement pursuant to which such Person agrees to be bound by the
provisions hereof; and
Draft:June 11, 1999
(c)
- 38 -
such other documents as may be reasonably required by any parry to such
purchase and sale to properly complete the purchase and sale of the Shares.
6.4
Failure to Complete Sale
In the event the vendor fails to complete the subject purchase and sale transaction,
the purchaser shall have the right to deposit the purchase price for the subject Shares for the
account of the vendor in an interest-bearing account at a branch of HoldCo's bankers.
Thereafter, notwithstanding that the documents required pursuant to Section 6.2 have not been
delivered by the vendor, the purchase and sale of the subject Shares shall be deemed to be fully
completed and all right, title, benefit and interest, both at law and in equity, in and to the
subject Shares shall be deemed to have been transferred and assigned to and become vested in
the purchaser and all right, title, benefit and interest, both at law and in equity, of the vendor
or any other Person having an interest in and to the subject Shares shall cease and the records
of HoldCo shall be amended accordingly.
ARTICLE VII
NON-COMPETITION AND CONFIDENTIALITY
7.1 Non-Competition
Each Shareholder covenants and agrees that it shall not, except through
HoldCo or otherwise with the consent of all Shareholders, or as provided in
Section 7.1CO), directly or indirectly, from the date hereof until 2 years after
the parry ceases to be a Shareholder, compete within (a) Ontario; Co) South
Central Ontario; or (c) Durham Region with the Business, whether by
carrying on or engaging in or being concerned with or interested in or
advising, Ich.ding money to, guaranteeing the debts or obligations of or
Drdt: J~e 11, 1999
- 39 -
permitting the party's name or any part thereof to be used or employed by
any Person engaged in or concerned with or interested in any business within
(d) Ontario; (e) South Central Ontario; or (f) Durham Region that is
competitive with the Business, or otherwise.
The parties acknowledge that (i).a municipality other than the Shareholder
which is a shareholder of one or more corporations incorporated under the
Act for the purposes of generating, transmitting, distributing or retailing
electfidty, and (ii) a person which holds a portfolio investment of less' than 5%
of the shares of a corporation whose shares are publidy traded which competes
with the Business is permitted to become a Shareholder in accordance with the
provisions of this Agreement.
7.2 Confidentiality
Each Shareholder shall not use or disclose to any Person other than in the ordinary
course of the Business of the Corporations, directly or indirectly, any Confidential
Information at any time other than to employees, officers or directors of such Shareholder
provided that all such Persons shall treat such information as confidential and not disclose
same to any Third Parry nor use the same for any purpose other than for the purposes of the
Corporations or in respect of a Shareholder's investment in the Corporations, provided,
however, that nothing in this Article 7 shall preclude a Shareholder from disclosing or using
Confidential Information if:
the Confidential Information is available to the public or in the public domain
at the time of such disclosure or use, without breach of this Agreement;
Draft: June 11, 1999
- 40 -
disclosure of Confidential Information is required to be made by any law,
regulation, governmental body or authority or by court order;
(c)
disclosure of Confidential Information is made in connection with any
arbitration pursuant to Section 10.3;
(d)
disclosure of Confidential Information is made to a court which is determining
the fights of the parties under this Agreement;
the Confidential Information is properly within the legitimate possession of a
Shareholder prior to its disclosure hereunder and without any obligation of
confidentiality;
(0
after disclosure, the Confidential Information is lawfully received by a
Shareholder from another Person who is lawfully in possession of such
information and such other Person is not restricted from disclosing the
information to the Shareholder;,
the disclosure of Confidential Information is necessary to complete a transfer
of Shares in accordance with this Agreement;
(h)
the Confidential Information is independently developed by a Shareholder
through Persons who have not had access to, or knowledge of, the
Confidential Information, other than as permitted in (a) through (g) above or
(i) below; or
(i)
the Confidential Information is approved by the Corporations for disclosure
prior to its actual disclosure.
Dra/t: Jtm¢ 11, 1999
-41 -
Each Shareholder acknowledges and agrees that the obligations under this Section 7.2 shall
remain in effect for the period of two (2) years after it ceases to be a Shareholder.
Notwithstanding the foregoing restrictions, the nominees of the Shareholders on the Board
shall be entitled to discuss the affairs of the Corporations with the officers, directors,
employees and representatives of such Shareholder.
7.3 Injunctive Relief
Each Shareholder understands and agrees that HoldCo, and consequently the other
parties, will suffer irreparable harm in the event that the Shareholder breaches any of the
obligations set out in this Article VII and that monetary damages shall be inadequate to
compensate for the breach. Accordingly, each Shareholder agrees that, in the event of a breach
or threatened breach by it of any of the provisions of this Article VII, HoldCo and the other
parties hereto, in addition to and not in limitation of any other rights, remedies or damages
available to them at law or in equity, shall be entitled to an interim injunction, interlocutory
injunction and permanent injunction in order to prevent or to restrain any such breach by the
Shareholder.
7.4 Accounting for Profits
Each Shareholder agrees that in the event of a violation of any of its covenants or
agreements under this Article VII, HoldCo shall be entitled to an accounting and repayment
of all profits, compensation, royalties, commissions, remunerations or benefits which the
Shareholder directly or indirectly shall have realized or may realiTe relating to, growing out
of, or in connection with any such violation(s); this remedy shall be in addition to and not
in limitation of any injunctive relief or other rights or remedies to which HoldCo and the
other parties are or may be entitled at law or in equity or otherwise under this Article VII.
Draffa June I1, 1999
7.5
Reasonableness of Restrictions
- 42 -
Each Shareholder acknowledges that it has given careful consideration to the
provisions of Articles 7.1 to 7.4 above and, having done so, agrees that the restrictions set
forth in those sections are fair and reasonable and are reasonably required for the protection
of the other Shareholders' investments in HoldCo and for the protection of the interests of
HoldCo and its business, and that it is being reasonably compensated for the imposition of
such restrictions.
ARTICLE VIII
SALE OF SURPLUS ASSETS
8.1
Right of First Refusal
In the event that HoldCo or any Subsidiary intends to sell any Surplus Assets, the
municipal Shareholder in whose legal boundaries the Surplus Assets are located shall have a
first right of refusal to purchase the Surplus Assets at their Fair Market Value. Such municipal
Shareholder shall be entitled to receive written notice of any proposed disposition 90 days
from the date of such notice to exercise its right to purchase, failing which the Surplus Assets
may be sold by HoldCo or any Subsidiary as the case may be.
Dra~ Jtme 11, 1999
- 43 -
ARTICLE IX
BOOKS, RECORDS AND RIGHT TO INFORMATION
9.1 Books and Records
HoldCo shall at all times maintain at its registered office proper books of account,
which shall contain accurate and complete records of all transactions, receipts, expenses, assets
and liabilities of HoldCo.
9.2 Right to Information
The parties covenant and agree that each Shareholder of HoldCo shall have rights of
inspection as set out in Sections 140, 141, 144 and 145 of the Act.
ARTICLE X
TERM
10.1 Term and Automatic Renewal
'This Agreement shall come into force and effect as at and from the date of this
Agreement and shall continue in force for five (5) years at which time this Agreement shall
be automatically renewed for further successive terms of five (5) years each.
Draft: Ju~ Il, 1999
- 44 -
ARTICLE XI
GENERAL
11.1 Notices
All notices, requests, demands, consents or other communications required to be
given or made or provided for in this Agreement shall be in writing and shall be deemed to
have been given if delivered, if sent by registered mail or if sent by telecopier or other means
of electronic transmission to:
Corporation of the Town of Ajax
65 Harwood Avenue South
Ajax, ON LIS 2H9
Fax Number: 905-683-1061
Attention: Mayor
Clarington to:
Corporation of the Municipality of Clarington
40 Temperance Street
Bowmanville, ON LlC 3A6
Fax Number:. 905-623-5717
Attention: Mayor
Picketing to:
Corporation of the Town of Picketing
· 1 The Esplanade
Picketing, ON L1V 3P4
Fax Number: 905420-9695
Attention: Mayor
Draft: Juac 11, 1999
HoldCo to:
1920 Bayly Street
Pickering, ON L1W 3R6
Fax Number: 905-427-6827
Attention: President
or at such other addresses as the party to whom such notice is to be given may have
designated by notice so given to the other parties. Any notice so mailed shall be deemed to
have been given on the frith Business Day following the date of the mailing of the same or if
delivered, on the date of delivery and any notice given by telecopier or other means of
electronic communication shall be deemed to have been received on the Business Day
following the date on which such transmission is completed and the appropriate confirmation
received.
11.2 Assignment and Binding Effect
This Agreement is not assignable by any party except insofar as its benefit and burden
pass with the Shares transferred in accordance with its provisions. This Agreement shall be
binding on and enure to the benefit of the parties hereto and their respective successors and
permitted assigns. Reference in this Agreement to any party shall be deemed to include
reference to such party and its respective successors and assigns as permitted hereunder.
11.3 Amalgamation of Municipal Shareholder3
Two or more Initial Shareholders that amalgamate ("Amalgamated Shareholder") shall
retain the same rights granted under this Agreement as if the respective Initial Shareholders
had not amalgamated except as otherwise provided herein.
Dr'~ft: J--e 11, 1999
11.4
Arbitration
- 46 -
(4
Selection of Single Arbitrator. The Shareholders agree that any controversy,
dispute or claim between them or any of them arising out of or relating to this
Agreement or the performance, enforcement, breach, termination or validity
of it, including the determination of the scope of the Agreement to arbitrate,
shall be determined by arbitration before a single arbitrator (the "Arbitrator")
agreed to by all of the Shareholders. If the Shareholders are unable to agree
on the Arbitrator, then, an application may be made under the Arbitration Act
to a judge for the appointment.
(b)
Referring Dispute. Any Shareholder may refer a dispute to the Arbitrator by
providing notice in writing to the Arbitrator and to all of the shareholders
hereto expressing its intention to refer the dispute to arbitration and briefly
describing the nature of the dispute.
(c)
Attempted Settlement. Upon service of the notice referred to above, the
Shareholders who are party to the dispute (the "Disputing Shareholders") will
attempt to negotiate a settlement of the dispute amongst themselves. In the
event that the parties are unable to reach settlement by themselves within 10
days of the service of the notice referred to above, the Shareholders will
proceed with the arbitration and any Disputing Shareholders shall be free to
apply to the Arbitrator for directions as t6 the scheduling of the arbitration
itself and the pre-hearing procedures.
(d)
Decision Final and Binding. The Shareholders agree that the award of the
Arbitrator shall be final and binding without any right of appeal and shall be
Draft: Juae 11, 1999
- 47 -
the sole and exclusive remedy between them regarding
counterclaims, issues or disputes referred io the Arbitrator.
any claims,
Place of Arbitration. The arbitration shall take place in Toronto, and shall
be governed by the laws of the Province of Ontario.
(0
Powers of Arbitrator. The Shareholders agree that the Arbitrator shall have
the powers and jurisdiction of an arbitrator pursuant to the Arbitration Act
and such power shall include the power to award interim and interlocutory
injunctions and other equitable relief.
Costs. The Arbitrator shall have the power to award the costs of the
Arbitrator's services and related costs against either party, however, each party
will bear the costs of their own counsel and witness fees.
(h)
Written Notices. All notices by one Shareholder to the other in connection
with the arbitration shall be in writing and shall be deemed to have been duly
given or made if delivered or sent by facsimile transmission to the addresses
provided in this Agreement.
11.5 Further Assurances
Each party hereto shall do such acts and shall execute such further documents,
conveyances, deeds, assignments, transfers and the like, and will cause the doing of such acts
and will cause the execution of such further documents as are wkhin its power as any other
party may in writing at any time and from time to time reasonably request be done and or
executed, in order to give full effect to the provisions of this Agreement.
Draft: }une 11, 1990
11.6 Severability
- 48 -
If any provision of this Agreement is determined to be invalid or unenforceable by
a court of competent jurisdiction from which no further appeal lies or is taken, that provision
shall be deemed to be severed herefrom, and the remaining provisions of this Agreement shall
not be affected thereby and shall remain valid and enforceable.
11.7 Amendment, Modification and Waiver
This Agreement may not be modified, amended, terminated or supplemented except
as agreed, in writing, by Shareholders both comprising a majority in number of the
Shareholders and holding not less than 51% of the Shares then issued and outstanding. In the
event that the Initial Shareholders amalgamate such that only two Shareholders remain, this
Agreement may not be modified, amended, terminated or supplemented except as agreed, in
writing, by all the Shareholders. Any waiver of, or consent to depart from, the requirements
of any provision of this Agreement shall be effective only if it is in writing and signed by the
party giving it, and only in the specific instance and for the specific purpose for which it has
been given. No failure on the part of any party to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver of such right. No single or partial
exercise of any such right shall preclude any other or further exercise of such right or the
exercise of any other right.
11.8 Time of Essence
Time is of the essence of this Agreement.
Draft: Jua~ I1, 1999
11.9 Counterparts
- 49 -
This Agreement may be executed in any number of counterparts, each of which shall
be deemed to be an original and all of which taken together shall constitute one agreement.
11.10 No Partnership
Nothing in this Agreement shall be deemed in any way or for any purpose to
constitute any party a partner of or a joint venture with any other party.
11.11 Proceedings
The covenants, agreements and obligations herein expressed to be observed and
performed by the parties hereto may be enforced by any of the parties hereto pursuant to
Section 11.4 without joining the remaining parties as parties in any proceedings.
IN WITNESS Wt-IF~OF the parties hereto have duly executed this Agreement as
of the date first above written.
THE CORPORATION OF THE TOWN OF
AJAX
By:. c/s
Steve Parish, Mayor
By: c/s
Marry' deRond, Clerk
Draft: June 11, 1999
- 50 -
THE MUNICIPALITY OF CLARINGTON
By: . c/s
Diane Hamre, Mayor
By: c/s
Frank Wu, Chief Administrative Officer
THE CORPOItATION OF THE TOWN OF
PICKERING
By:, c/s
Wayne Arthurs, Mayor
By: c/s
Bruce Taylor, Clerk
[NUMBER] ONTARIO INC.
By:. c/s
N~Jlle:
Authorized Signing Officer
Drafta June 11, 1999
SCHEDULE "A"
DIRECTOR'S INDEMNITY
THIS AGREEMENT made as of the *
BETWEEN:
(hereinafter called the "Director"),
OF THE FII/,ST PART,
(hereinafter called the "Corporation"),
OF THE SECOND PART.
Recitals
WHEREAS pursuant to By-law No. 1 of the Corporation, the Corporation is
required to indemnify a director or officer, a former director or officer, or a person who acts
or acted at the request of the Corporation as a director or officer of a body corporate of which
the Corporation is or was a shareholder or creditor, and his heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to settle an action or satisfy
a judgment, reasonably incurred by him in respect of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of having been a director or
officer of the Corporation or such body corporate, if (a) he acted honestly and in good faith
with a view to the best interests of the Corporation, and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a mgnetary penalty, he had reasonable
grounds for believing that his conduct was lawful;
AND WHEREAS pursuant to By-Law No. 1 of the CorpOration, the
Corporation is authorized to execute an agreement evidencing its indezrmity of the Director
to the full extent permitted by law;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in
consideration of the sum of $1.00 paid by the Director to the Corporation (the receipt and
Draft: June 11, 1999
-2-
adequacy of which is hereby acknowledged) and for other good and valuable consideration,
it is agreed between the parties hereto as follows:
Agreement to Indernnif'y
1. Except in respect of an action by or on behalf of the Corporation to procure
a judgment in its favour, the Corporation shall indemnify and save harmless the Director, her
heirs and legal representatives, against all costs, charges and expenses, including an amount paid
to settle an action or to satisfy a judgment reasonably incurred by her in respect of any civil,
criminal or administrative action or proceeding to which she is made a party by reason of
being or having been a director of the Corporation or a director of a body corporate of which
the Corporation is a shareholder or creditor, provided she is or was so acting as a director of
such body corporate at the request of the Corporation, if (a) the Director acted honestly and
in good faith with a view to the best interests of the Corporation, and (b) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary penalty, the
Director had reasonable grounds for believing that her conduct was lawful.
No Presumption
2. For the purposes of section 1, the termination of any civil, criminal or
administrative action or proceeding by judgment, order, settlement, conviction or similar or
other result shall not, of itself, create a presumption either that the Director did not act
honestly and in good faith with a view to the best interests of the Corporation or that, in the
case of a criminal or administrative action or proceeding that is enforced by a monetary
penalty, the Director did not have reasonable grounds for believing that her conduct was
lawful.
Application for Court Approval of Indemni _ty
3. In respect of an action by or on behalf of the Corporation or a body corporate
of which the Corporation is or was a shareholder or creditor to procure judgment in its favour
to which the Director is made a party by reason of being or having been a director of the
Corporation or a director of the body corporate 'at the Corporation's request, the Corporation
shall make application for approval of the Ontario Court of Justice to indemnify the Director,
her heirs and legal representatives, against all costs, charges and expenses reasonably incurred
by her in connection with such action if (a) the Director acted honestly and in good faith with
a view to the best interests of the Corporation, and (b) in the case of a criminal or
admires' trative action or proceeding that is enforced by a monetary penalty, the Director had
reasonable grounds for believing that her conduct was lawful.
Draft: June 11, 1999
-3-
Indemnity for Costs, Charges and Expenses
4. Notwithstanding anything in this agreement the Corporation shall indemnify
the Director in respect of all costs, charges and expenses reasonably incurred by her in
connection with the defence of any civil, criminal or administrative action or proceeding to
which she is made a party by reason of being or having been a director of the Corporation
'or a director of a body corporate of which the Corporation is or was a shareholder or
creditor, provided she is or was so acting as a director of such body corporate at the request
of the Corporation, if (a) the Director was substantially successful on the merits in her defence
of the action or proceeding, (b) the Director acted honestly and in good faith with a view to
the best interests of the Corporation, and (c) in the case of a criminal or administrative action
or proceeding that is enforced by a monetary penalty, the Director had reasonable grounds
for believing that her conduct was lawful.
Expenses for Defence of Legal Action
5. Subject as hereinafter provided, the Corporation will pay all expenses covered
by this indemnity agreement and incurred by the Director, her heirs and legal representatives,
in defending any civil, criminal or administrative action or proceeding to which the Director
or her heirs and legal representatives are made a party by reason of the Director being or
having been a director of the Corporation or a director of a body corporate of which the
Corporation is a shareholder or creditor, if she is or was so acting as a director of such body
corporate at the request of the Corporation, in advance of the final disposition of such action
or proceeding. In respect of an action by or on behalf of the Corporation to procure
judgment in its favour and in respect of which the Corporation is obligated by section 3
hereof to make application for approval of the Ontario Court of Justice to indemnify the
Director, or her heirs and legal representatives, the Corporation shall pay all such expenses in
advance upon the final disposition of such action or proceeding only upon receipt of an
undertaking satisfactory to the Corporation by or on behalf of the Director, or her heirs and
legal representatives, to repay such amount if the Court determines that the Director, or her
heirs and legal representatives, is not entitled to be indemnified.
Director's Liability Insurance
6. The Corporation represents and warrants to the Director that the Corporation
has purchased liability insurance for the directors of the Corporation, with the aggregate
insurance coverage under the policy of at least $5,000,000 per policy year and no deductible
payable by any director making a claim under the policy. The Corporation agrees to use its
best efforts to maintain appropriate liability insurance for the directors in an amount at least
as favourable to the directors as the existing policy and further agrees to advise each director
in advance if the Corporation knows that any .liability policy is being terminated or if a
liability policy is expiring without an equivalent policy replacing it.
Draffa June I1, 1999
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Non-Exclusion of Other Rights
7. This agreement shall not operate to abridge or exclude any other rights, in law
or in equity, to which the Director may be entitled by operation of law or under any statute,
by-law of the Corporation, agreement, vote of shareholders of the Corporation, vote of
disinterested directors of the Corporation or otherwise.
Governin~ Law and Attornment
8. This agreement shall be deemed to have been made in and shall be construed
in accordance with the laws of the Province of Ontario and the federal laws of Canada
applicable therein and the parties hereby agree that any claims, disputes or questions arising
out of or in relation to this agreement may be submitted to the jurisdiction of the courts of
the Province of Ontario. Each of the parties hereto irrevocably attorns to the jurisdiction of
the courts of the Province of Ontario in respect of the interpretation and enforcement of this
agreement.
Enurement
9. This agreement and the benefit and obligation of all covenants herein contained
shall enure to the benefit of and be binding upon the heirs, executors, administrators, legal
personal representatives and successors and assigns of each of the parties hereto.
hereto.
IN WITNESS WHEREOF this agreement has been executed by the parties
SIGNED, SEALED & DELIVERED
in the presence of
G:XRJM~ICKERII'q~OGUM~20.AGR
Draba June 11, 1999
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
3.14
4.1
4.2
5.1
5.2
5.3
5.4
5.5
Page No.
(a) Executive Committee .................................... 21
(b) Finance and Human Resources Comm_ittee .... ~ ................ 23
(c) Nominating Committee .................................. 23
(d) General Provisions Relating to Board Committees ................ 24
Shareholder~' Meetings ......................................... 24
Regular Shareholders Meetings ................................... 25
Decisions of the Shareholders .................................... 25
Shareholder Representative ...................................... 25
Officers 26
Matters Requiring Shareholder Approval ............................ 26
Unanimous Shareholder Agreement ................................ 27
Agreement Binds HoldCo and Subsidiaries ........................... 28
Auditors .................................................. 28
Banking .................................................. 28
Financial Statements ......................................... 29
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
Representations and Warranties .................................. 29
Covenants ................................................ 30
ARTICLE V
TRANSFER OF SHARES
General Restriction on Tranffer .................................. 31
Legend on Shares ............................................ 31
Rights of First Refusal ......................................... 32
(a) Notice of Offer ........................................ 32
(b) Offer Open During Notice Period ........................... 32
(c) Acceptance of Offer ..................................... 33
(d) Excess Shares .......................................... 33
(e) No Fractions .......................................... 34
(f) Sale ................................................. 34
(g) Deemed Refusal ........................................ 34
(h) Prospective Purchaser Bound ............................... 34
(i) HoldCo as Purchaser .................................... 35
Piggyback Right ............................................. 35
Amalgamated Shareholder ...................................... 36
ii) Draf~ June 11, 1999
6.1
6.2
6.3
6.4
7.1
7.2
7.3
7.4
7.5
8.1
9.1
9.2
10.1'
11.1
11.2
11.3
11.4
Page No.
ARTICLE VI
CLOSING OF PURCHASE TRANSACTION
Time and Place of Closing ...................................... 36
Documents to be delivered by the Vendor ........................... 36
Documents to be delivered by the Purchaser .......................... 37
Failure to Complete Sale ....................................... 38
ARTICLE VII
NON-COMPETITION AND CONFIDENTIALITY
Non-Competition ............................................ 38
Confidentiality ............................................. 39
Injunctive Relief ............................................ 41
Accounting for Profits ......................................... 41
Reasonableness of Restrictions ................................... 42
ARTICLE VIII
SALE OF SURPLUS ASSETS
Right of First Refusal ......................................... 42
ARTICLE IX
BOOKS, RECORDS AND RIGHT TO INFORMATION
Books and Records ........................................... 43
Right to Information .................................... : .... 43
ARTICLE X
TERM
Term and Automatic Renewal ................................... 43
ARTICLE XI
GENERAL
Notices ................................................... 44
Assignment and Binding Effect .................................. 45
Amalgamation of Municipal Shareholders ............................ 45
Arbitration .............................. ' .................. 46
(a) Selection of Single Arbitrator .............................. 46
(b) Referring Dispute ....................................... 46
fiji) Draaata Jun~ 11, 1999
11.5
11.6
11.?
11.8
11.9
11.10
11.11
Page No.
(c) Attempted Settlement .................................... 46
(d) Decision Final and Binding ........ . ....................... 46
(e) Place of Arbitration .................................... 47
(f) Powers of Arbitrator ..................................... 47
(g) Costs ........................................... :... 47
(h) Written Notices ........................................ 47
Further Assurances ........................................... 47
Severabiliry ................................................ 48
Amendment, Modification and Waiver ............................. 48
Time of Essence ............................................. 48
Counterpart~ ............................................... 49
No Partnership ............................................. 49
Proceedings ................................................ 49
SCHEDULE "A"
DIRECTOR'S INDEMNITY
G:XRJMXPICKER~IXDOC~20.AGR
(iv)
BETWEE
Recitals:
THIS AGREEMENT made as of the 1st day of July, 1999.
N:
The Corporation of the Town of Ajax, a municipal corporation
existing under the laws of
("Ajax")
Ontario
The Municipality of Clarington, a municipal corporation
existing under the laws of Ontario
("Clarington")
The Corporation of the Town of Pickering, a municipal
corporation existing under the laws of Ontario
("Pickering")
- and -
[Number] Ontario Inc., a corporation existing under the laws of
Ontario
("HoldCo")
1. HoldCo is a corporation existing under the laws of Ontario;
The authorized capital of HoldCo consists of an unlimited number of Shares of which
1,000 are issued and outstanding as fully paid and non-assessable;
Draft: Juae 11, 1999
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Ajax, Clarington and Pickering (collectively the "Shareholders" and each a
"Shareholder") are the sole registered and beneficial shareholders of HoldCo holding
the following numbers of Shares, respectively:
NAME OF NUMBER PERCENTAGE
SHAREHOLDER OF SHARES TOTAL
Ajax 368 36.8%
Clarington 158 15.8%
Pickering 474 47.4%
Pursuant to the Electricity Act, each of the Shareholders shall transfer to the
Corporations, by applicable transfer by-laws, assets, liabilities and employees of the
Predecessor Utilities; and
The parties wish to enter into this Agreement to provide for the conduct of certain
affairs of HoldCo, to provide for certain restrictions on the transfer and ownership of
Shares in the capkal of HoldCo, and to govern the mutual rights and obligations of the
Shareholders with respect to HoldCo and each other Shareholder;
NOW THEREFORE in consideration of the premises, the mutual promises herein
contained and other good and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged) each of the parties agrees with each other party as follows:
Draft: June 11, 1999
-3-
ARTICLE I
INTERPRETATION
1.1 Definitions
In this Agreement the following terms shall have the following meanings unless the
subject matter or context otherwise requires:
"Act" means the Business Corporations Act (Ontario);
"Agreement" means this Agreement, all schedules attached hereto and any agreement or
schedule supplementing or amending this Agreement. All uses of the words "hereto",
"herein", "hereof", "hereby" and "hereunder" and similar expressions refer to this Agreement
and not to any particular section or portion of it. References to an Article, Section,
Subsection or Schedule refer to the applicable article, section, subsection or schedule of this
Agreement;
"Amalgamated Shareholder" has the meaning set out in Section 11.3;
"Arbitration Act" means the Arbitration Act, S.O., 1991;
"Arbitrator" has the meaning set out in Subsection ll.4(a);
"Arm's Length" has the meaning attributed thereto in the Income Tax Act (Canada) provided
that, for the purposes of Section 5.3, each Shareholder shall be deemed to be acting at Arm's
Length with each other Shareholder and HoldCo;
Dra~ Jtme 11, 1999
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"Auditors" means the firm of chartered accountants appointed as auditor of the Corporations
from time to time;
"Board" means the Board of Directors of HoldCo;
"Board Committees" means committees created by the Board from time to time for the
purpose of overseeing specific tasks and reporting to the Board and includes the committees
referred to in ~ection 3.3;
'/Business" means the business of the Corporations as described in Section 2.1 or as may
otherwise be conducted by the Corporations from time to time;
"Business Day" means any day othei; than a Saturday, Sunday, or statutory holiday in
Ontario;
"Chair" means the director elected by the Board to serve as its chairperson from time to time;
"Closing Date" means the date on which the purchase and sale of Shares is to be completed;
"Confidential Information" means any and all information and data relating in any manner
to the Business and any activities, plans, ideas, products, se~ices, policies or intentions
(including without limitation, information of an operational, business, marketing, financial or
economic nature), whether or not proprietary in nature, that is of value to the Corporations
and is held by the Corporations as a trade secret and is not generally known to competitors
of the Corporations or to the public;
"Corporations" means collectively HoldCo and any Subsidiary;
Drmtt: Juue 11, 1999